UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



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

For the Quarterly Period Ended June 30, ~~2021~~2022

OR

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

Commission File Number: 001-39325

ATLANTIC UNION BANKSHARES CORPORATION

(Exact name of registrant as specified in its charter)


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

1051 East Cary Street

Suite 1200

Richmond, Virginia 23219

(Address of principal executive offices) (Zip Code)

(804) 633-5031

(Registrant’s telephone number, including area code)

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



Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock, par value $1.33 per share	AUB	The NASDAQ Global Select Market
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 ☒ No ☐

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

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


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

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

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


	Yes ☐ No ☒

The number of shares of common stock outstanding as of July ~~29, 2021~~28, 2022 was ~~76,904,963.~~74,703,474.

Table of Contents

ATLANTIC UNION BANKSHARES CORPORATION

FORM 10-Q

INDEX


ITEM		PAGE

	PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements

	Consolidated Balance Sheets as of ~~June~~June 30, ~~2021~~2022 (unaudited) and December 31, ~~2020~~2021 (audited)	2

	Consolidated Statements of Income (unaudited) for the three and ~~six~~six months ended ~~June~~June 30, ~~2021~~2022 and ~~2020~~2021	3

	Consolidated Statements of Comprehensive (Loss) Income (unaudited) for the three and ~~six~~six months ended ~~June~~June 30, ~~2021~~2022 and ~~2020~~2021	4

	Consolidated Statements of Changes in Stockholders’ Equity (unaudited) for the three and ~~six~~six months ended June 30, ~~2021~~2022 and ~~2020~~2021	5

	Consolidated Statements of Cash Flows (unaudited) for the six months ended June 30, ~~2021~~2022 and ~~2020~~2021	6

	Notes to Consolidated Financial Statements (unaudited)	8

	Review Report of Independent Registered Public Accounting Firm	5047

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	5148

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	8275

Item 4.	Controls and Procedures	8477

	PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	8678

Item 1A.	Risk Factors	8678

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	8678

Item 6.	Exhibits	8779

	Signatures	8880

Table of Contents

Glossary of Acronyms and Defined Terms


~~2020~~2021 Form 10-K	–	Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021
Access	–	Access National Corporation and its subsidiaries
ACL	–	Allowance for credit losses
AFS	–	Available for sale
ALCO	–	Asset Liability Committee
ALLL	–	Allowance for loan and lease losses, a component of ACL
AOCI	–	Accumulated other comprehensive income (loss)
ASC	–	Accounting Standards Codification
ASC ~~326~~	–	~~ASU 2016-13,~~ ~~Financial Instruments and Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments~~
~~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
CSP	–	Cary Street Partners Financial LLC
depositary shares	–	Depositary shares, each representing a 1/400th ownership interest in a share of the Company’s Series A preferred stock, with a liquidation preference of $10,000 per share of Series A preferred stock (equivalent to $25 per depositary share)
DHFB	–	Dixon, Hubard, Feinour & Brown, Inc.
EPS	–	Earnings per common share
Exchange Act	–	Securities Exchange Act of 1934, as amended
FASB	–	Financial Accounting Standards Board
FCMs	–	Futures Commission Merchants
FDIC	–	Federal Deposit Insurance Corporation
Federal Reserve	–	Board of Governors of the Federal Reserve System
~~Federal Reserve Act~~	–	~~Federal Reserve Act of 1913, as amended~~
~~Federal Reserve Bank or~~ FRB	–	Federal Reserve Bank of Richmond
FHLB	–	Federal Home Loan Bank of Atlanta
FHLMC	–	Federal Home Loan Mortgage Corporation
FNB	–	FNB Corporation
FNMA	–	Federal National Mortgage Association
FOMC	–	Federal Open Markets Committee
FR Y9-C	–	Consolidated financial statements for a U.S. bank holding company, a savings and loan holding company, a U.S. intermediate holding company, and a securities holding company
FTE	–	Fully taxable equivalent
GAAP or U.S. GAAP	–	Accounting principles generally accepted in the United States
GNMA	–	Government National Mortgage Association
HTM	–	Held to maturity
ICE ~~Data Services~~	–	Intercontinental Exchange Data Services
the Joint Guidance	–	The five federal bank regulatory agencies and the Conference of State Bank Supervisors guidance ~~issued~~
		Issued on March 22, 2020 (subsequently revised on April 7, 2020)

Table of Contents

LHFI	–	Loans held for investment
LHFS	–	Loans held for sale
LIBOR	–	London Interbank Offered Rate
~~MD&A~~MBS	–	~~Management’s Discussion and Analysis~~Mortgage-Backed Securities
MFC	–	Middleburg Financial Corporation
NASDAQ	–	National Association of ~~Financial Condition and Results of Operations~~Securities Dealers Automated Quotation exchange
NOW	–	Negotiable order of withdrawal
NPA	–	Nonperforming assets
~~NSF~~	–	~~Nonsufficient funds~~

~~Table of Contents~~

OCI	–	Other comprehensive income
OREO	–	Other real estate owned
OTC	–	Over-the-counter
~~PCD~~	–	~~Purchased credit deteriorated~~
PD/LGD	–	Probability of default/loss given default
~~PPPLF~~	–	~~Paycheck Protection Program Liquidity Facility~~
PPP	–	Paycheck Protection Program
~~PPP Round One~~	–	~~Paycheck Protection Program under the Coronavirus Aid, Relief, and Economic Security Act~~
~~PPP Round Two~~	–	~~Paycheck Protection Program under the Coronavirus Aid, Relief, and Economic Security Act, as amended by the Consolidated Appropriations Act, 2021~~
Quarterly Report	–	Quarterly Report on Form 10-Q for the quarter ended June 30, ~~2021~~2022
Repurchase Program	–	The share repurchase program, approved on ~~May 4,~~December 10, 2021 by the Company’s Board of Directors, which authorizes the Company to purchase up to ~~$125~~$100.0 million worth of the Company’s common stock
~~ROA~~	–	~~Return on average assets~~
~~ROE~~	–	~~Return on average common equity~~
ROU ~~Asset~~asset	–	Right of Use Asset
RUC	–	Reserve for unfunded commitments
RVI	–	Residual value insurance
SBA	–	Small Business Administration
SEC	–	Securities and Exchange Commission
Series A preferred stock	–	6.875% Perpetual Non-Cumulative Preferred Stock, Series A, par value $10.00 per share
SOFR	–	Secured Overnight Financing Rate
SSFA	–	Simplified supervisory formula approach
TDR	–	Troubled debt restructuring
Topic 606	–	ASU No. 2014-09, “Revenue from Contracts with Customers: Topic 606”
Topic ~~740~~	–	~~ASU 2019-12, “~~~~Income Taxes: Simplifying the Accounting for Income Taxes”~~
~~Topic~~ 848	–	ASU 2020-04, “Reference Rate Reform: Facilitation of the Effects of Reference Rate Reform on Financial Reporting”
~~Xenith~~VFG	–	~~Xenith Bankshares,~~Virginia Financial Group, Inc. ~~and its subsidiaries~~
2031 Notes	–	$250.0 million of 2.875% fixed-to-floating rate subordinate notes issued by the Company during the fourth quarter of 2021 with a maturity date of December 15, 2031

Table of Contents

PART I – FINANCIAL INFORMATION

ITEM 1 – FINANCIAL STATEMENTS

ATLANTIC UNION BANKSHARES CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

AS OF JUNE 30, 2022 AND DECEMBER 31, 2021

(Dollars in thousands, except share data)


	June 30,		December 31,		June 30,		December 31,
	2021		2020		2022		2021
ASSETS		(unaudited)		(audited)		(unaudited)		(audited)
Cash and cash equivalents:
Cash and due from banks	$	268,682	$	172,307	$	158,902	$	180,963
Interest-bearing deposits in other banks		593,271		318,974		82,086		618,714
Federal funds sold		3,217		2,013		388		2,824
Total cash and cash equivalents		865,170		493,294		241,376		802,501
Securities available for sale, at fair value		2,873,405		2,540,419		2,951,421		3,481,650
Securities held to maturity, at carrying value		541,439		544,851		780,749		628,000
Restricted stock, at cost		76,825		94,782		87,908		76,825
Loans held for sale, at fair value		32,726		96,742		15,866		20,861
Loans held for investment, net of deferred fees and costs		13,697,929		14,021,314		13,655,408		13,195,843
Less allowance for loan and lease losses		118,261		160,540
Less: allowance for loan and lease losses						104,184		99,787
Total loans held for investment, net		13,579,668		13,860,774		13,551,224		13,096,056
Premises and equipment, net		161,114		163,829		128,661		134,808
Goodwill		935,560		935,560		925,211		935,560
Amortizable intangibles, net		49,917		57,185		31,621		43,312
Bank owned life insurance		427,727		326,892		436,703		431,517
Other assets		445,805		514,121		511,059		413,706
Total assets	$	19,989,356	$	19,628,449	$	19,661,799	$	20,064,796
LIABILITIES
Noninterest-bearing demand deposits	$	5,222,572	$	4,368,703	$	5,361,538	$	5,207,324
Interest-bearing deposits		11,436,647		11,354,062		10,767,097		11,403,744
Total deposits		16,659,219		15,722,765		16,128,635		16,611,068
Securities sold under agreements to repurchase		89,749		100,888		118,658		117,870
Other short-term borrowings		0		250,000		290,000		0
Long-term borrowings		290,330		489,829		389,290		388,724
Other liabilities		202,461		356,477		343,740		237,063
Total liabilities		17,241,759		16,919,959		17,270,323		17,354,725
Commitments and contingencies (Note 7)
STOCKHOLDERS' EQUITY
Preferred stock, $10.00 par value		173		173		173		173
Common stock, $1.33 par value		103,091		104,169		98,822		100,101
Additional paid-in capital		1,881,395		1,917,081		1,767,063		1,807,368
Retained earnings		709,866		616,052		841,701		783,794
Accumulated other comprehensive income (loss)		53,072		71,015
Accumulated other comprehensive (loss) income						(316,283)		18,635
Total stockholders' equity		2,747,597		2,708,490		2,391,476		2,710,071
Total liabilities and stockholders' equity	$	19,989,356	$	19,628,449	$	19,661,799	$	20,064,796

Common shares outstanding		77,928,948		78,729,212		74,688,314		75,663,648
Common shares authorized		200,000,000		200,000,000		200,000,000		200,000,000
Preferred shares outstanding		17,250		17,250		17,250		17,250
Preferred shares authorized		500,000		500,000		500,000		500,000

See accompanying notes to consolidated financial statements.

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Table of Contents

ATLANTIC UNION BANKSHARES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND 2021

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


	Three Months Ended				Six Months Ended				Three Months Ended				Six Months Ended
	June 30,		June 30,		June 30,		June 30,		June 30,		June 30,		June 30,		June 30,
	2021		2020		2021		2020		2022		2021		2022		2021
Interest and dividend income:
Interest and fees on loans	$	130,570	$	143,234	$	258,576	$	294,361	$	123,266	$	130,570	$	237,466	$	258,576
Interest on deposits in other banks		86		155		163		1,017		157		86		288		163
Interest and dividends on securities:
Taxable		10,519		11,267		20,872		22,895		14,695		10,519		28,361		20,872
Nontaxable		9,677		8,211		18,914		15,920		10,637		9,677		21,097		18,914
Total interest and dividend income		150,852		162,867		298,525		334,193		148,755		150,852		287,212		298,525
Interest expense:
Interest on deposits		7,238		19,861		16,366		48,375		6,097		7,238		10,580		16,366
Interest on short-term borrowings		21		186		69		1,526		555		21		576		69
Interest on long-term borrowings		3,045		5,515		6,644		11,979		3,336		3,045		6,358		6,644
Total interest expense		10,304		25,562		23,079		61,880		9,988		10,304		17,514		23,079
Net interest income		140,548		137,305		275,446		272,313		138,767		140,548		269,698		275,446
Provision for credit losses		(27,414)		34,200		(41,037)		94,396		3,559		(27,414)		6,359		(41,037)
Net interest income after provision for credit losses		167,962		103,105		316,483		177,917		135,208		167,962		263,339		316,483
Noninterest income:
Service charges on deposit accounts		6,607		4,930		12,116		12,508		8,040		6,607		15,637		12,116
Other service charges, commissions and fees		1,735		1,354		3,436		2,978		1,709		1,735		3,364		3,436
Interchange fees		2,203		1,697		4,050		3,321		2,268		2,203		4,078		4,050
Fiduciary and asset management fees		6,819		5,515		13,294		11,499		6,939		6,819		14,194		13,294
Mortgage banking income		4,619		5,826		12,874		7,847		2,200		4,619		5,317		12,874
Gains on securities transactions		0		10,339		78		12,275
Bank owned life insurance income		3,209		2,027		5,475		4,076		2,716		3,209		5,413		5,475
Loan-related interest rate swap fees		1,321		5,484		3,075		9,432		2,600		1,321		6,460		3,075
Other operating income		1,953		(1,240)		5,053		902		11,814		1,953		13,976		5,131
Total noninterest income		28,466		35,932		59,451		64,838		38,286		28,466		68,439		59,451
Noninterest expenses:
Salaries and benefits		50,766		49,896		103,426		100,013		55,305		50,766		113,603		103,426
Occupancy expenses		7,140		7,224		14,454		14,357		6,395		7,140		13,278		14,454
Furniture and equipment expenses		3,911		3,406		7,880		7,147		3,590		3,911		7,187		7,880
Technology and data processing		7,219		6,454		14,123		12,623		7,862		7,219		15,658		14,123
Professional services		4,408		2,989		9,369		6,297		4,680		4,408		8,770		9,369
Marketing and advertising expense		2,738		2,043		4,782		4,782		2,502		2,738		4,665		4,782
FDIC assessment premiums and other insurance		2,319		2,907		4,626		5,768		2,765		2,319		5,250		4,626
Other taxes		4,435		4,120		8,871		8,240
Franchise and other taxes										4,500		4,435		8,999		8,871
Loan-related expenses		1,909		2,501		3,786		5,198		1,867		1,909		3,643		3,786
Amortization of intangible assets		3,568		4,223		7,298		8,624		2,915		3,568		5,954		7,298
Loss on debt extinguishment		0		10,306		14,695		10,306		0		0		0		14,695
Other expenses		3,558		6,745		10,598		15,104		6,387		3,558		17,082		10,598
Total noninterest expenses		91,971		102,814		203,908		198,459		98,768		91,971		204,089		203,908
Income from continuing operations before income taxes		104,457		36,223		172,026		44,296		74,726		104,457		127,689		172,026
Income tax expense		19,073		5,514		30,453		6,498		12,500		19,073		21,773		30,453
Net income		85,384		30,709		141,573		37,798		62,226		85,384		105,916		141,573
Dividends on preferred stock		2,967		0		5,934		—		2,967		2,967		5,934		5,934
Net income available to common shareholders	$	82,417	$	30,709	$	135,639	$	37,798	$	59,259	$	82,417	$	99,982	$	135,639

Basic earnings per common share	$	1.05	$	0.39	$	1.72	$	0.48	$	0.79	$	1.05	$	1.33	$	1.72
Diluted earnings per common share	$	1.05	$	0.39	$	1.72	$	0.48	$	0.79	$	1.05	$	1.33	$	1.72
Dividends declared per common share	$	0.28	$	0.25	$	0.53	$	0.50	$	0.28	$	0.28	$	0.56	$	0.53
Basic weighted average number of common shares outstanding		78,819,697		78,711,765		78,841,462		79,001,058		74,847,899		78,819,697		75,194,347		78,841,462
Diluted weighted average number of common shares outstanding		78,843,724		78,722,690		78,863,859		79,020,036		74,849,871		78,843,724		75,201,326		78,863,859

See accompanying notes to consolidated financial statements.

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Table of Contents

ATLANTIC UNION BANKSHARES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (UNAUDITED)

THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND 2021

(Dollars in thousands)


	Three Months Ended				Six Months Ended				Three Months Ended				Six Months Ended
	June 30,				June 30,				June 30,				June 30,
	2021		2020		2021		2020		2022		2021		2022		2021
Net income	$	85,384	$	30,709	$	141,573	$	37,798	$	62,226	$	85,384	$	105,916	$	141,573
Other comprehensive income (loss):
Other comprehensive (loss) income:
Cash flow hedges:
Change in fair value of cash flow hedges		2,607		0		1,179		(699)
Reclassification adjustment for losses (gains) included in net income (net of tax, $0 and $0 for the three months and $12 and $394 for the six months ended June 30, 2021 and 2020, respectively) ⁽¹⁾		0		0		(47)		1,481
Change in fair value of cash flow hedges (net of tax, $3,076 and $693 for the three months and $9,273 and $313 for the six months ended June 30, 2022 and 2021, respectively)										(11,572)		2,607		(34,885)		1,179
Reclassification adjustment for (gains) included in net income (net of tax, $0 and $0 for the three months and $0 and $12 for the six months ended June 30, 2022 and 2021, respectively) ⁽¹⁾										0		0		0		(47)
AFS securities:
Unrealized holding gains (losses) arising during period (net of tax, $3,673 and $5,587 for the three months and $5,132 and $9,492 for the six months ended June 30, 2021 and 2020, respectively)		13,818		21,019		(19,307)		35,706
Reclassification adjustment for gains included in net income (net of tax, $0 and $2,171 for the three months and $16 and $2,578 for the six months ended June 30, 2021 and 2020, respectively) ⁽²⁾		0		(8,168)		(62)		(9,697)
Unrealized holding gains (losses) arising during period (net of tax, $30,137 and $3,673 for the three months and $79,837 and $5,132 for the six months ended June 30, 2022 and 2021, respectively)										(113,374)		13,818		(300,341)		(19,307)
Reclassification adjustment for (gains) losses included in net income (net of tax, $0 and $0 for the three months and $0 and $16 for the six months ended June 30, 2022 and 2021, respectively) ⁽²⁾										1		0		1		(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 and $3 and $3 for the six months ended June 30, 2021 and 2020, respectively) ⁽³⁾		(5)		(5)		(10)		(10)
Reclassification adjustment for accretion of unrealized (gain) on AFS securities transferred to HTM (net of tax, $1 and $1 for the three months and $3 and $3 for the six months ended June 30, 2022 and 2021, respectively) ⁽³⁾										(5)		(5)		(10)		(10)
Bank owned life insurance:
Unrealized holding losses arising during the period		0		0		0		(1,289)
Reclassification adjustment for losses included in net income ⁽⁴⁾		151		129		304		237		150		151		317		304
Other comprehensive income (loss)		16,571		12,975		(17,943)		25,729
Comprehensive income	$	101,955	$	43,684	$	123,630	$	63,527
Other comprehensive (loss) income:										(124,800)		16,571		(334,918)		(17,943)
Comprehensive (loss) income									$	(62,574)	$	101,955	$	(229,002)	$	123,630

⁽¹⁾ The gross amounts ~~reclassified into earnings for the six months ended June 30, 2020 included a~~ ~~$1.8~~ million loss related to the termination of a cash flow hedge that is reported in “Other operating income” with the corresponding income tax effect being reflected as a component of income tax expense. The remaining 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"~~"Other operating income" on the Company’s Consolidated Statements of Income with the corresponding income tax effect being reflected as a component of income tax expense.

⁽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.

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Table of Contents

ATLANTIC UNION BANKSHARES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)

SIX MONTHS ENDED JUNE 30, 2022 AND 2021 ~~and 2020~~

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

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

Net Income

62,226

Other comprehensive loss (net of taxes of $33,214)

��

(124,800)

Dividends on common stock ($0.28 per share)

(20,912)

Dividends on preferred stock ($171.88 per share)

(2,967)

Stock purchased under stock repurchase plan (649,208 shares)

(863)

(22,350)

(23,213)

Issuance of common stock under Equity Compensation Plans, stock issuance for services rendered, and vesting of restricted stock, net of shares held for taxes (25,955 shares)

(154)

(120)

Stock-based compensation expense

2,927

Balance - June 30, 2022

98,822

173

1,767,063

841,701

(316,283)

2,391,476


									Accumulated
					Additional				Other
	Common		Preferred		Paid-In		Retained		Comprehensive
	Stock		Stock		Capital		Earnings		Income		Total
Balance - December 31, 2020	$	104,169	$	173	$	1,917,081	$	616,052	$	71,015	$	2,708,490	$	104,169	$	173	$	1,917,081	$	616,052	$	71,015	$	2,708,490
Net Income								56,189				56,189								56,189				56,189
Other comprehensive loss (net of taxes of $8,835)										(34,514)		(34,514)										(34,514)		(34,514)
Dividends on common stock ($0.25 per share)								(19,700)				(19,700)								(19,700)				(19,700)
Dividends on preferred stock ($171.88 per share)								(2,967)				(2,967)								(2,967)				(2,967)
Issuance of common stock under Equity Compensation Plans, for services rendered, and vesting of restricted stock, net of shares held for taxes (243,884 shares)		324				(289)						35
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						2,199						2,199
Balance - March 31, 2021	$	104,493	$	173	$	1,918,991	$	649,574	$	36,501	$	2,709,732	$	104,493	$	173	$	1,918,991	$	649,574	$	36,501	$	2,709,732
Net Income								85,384				85,384								85,384				85,384
Other comprehensive gain (net of taxes of $3,672)										16,571		16,571
Other comprehensive income (net of taxes of $3,672)																						16,571		16,571
Dividends on common stock ($0.28 per share)								(22,125)				(22,125)								(22,125)				(22,125)
Dividends on preferred stock ($171.88 per share)								(2,967)				(2,967)								(2,967)				(2,967)
Stock purchased under stock repurchase plan (1,090,169 shares)		(1,450)				(40,913)						(42,363)		(1,450)				(40,913)						(42,363)
Issuance of common stock under Equity Compensation Plans, for services rendered, and vesting of restricted stock, net of shares held for taxes (35,693 shares)		48				663						711
Issuance of common stock under Equity Compensation Plans, stock issuance for services rendered, and vesting of restricted stock, net of shares held for taxes (35,693 shares)														48				663						711
Stock-based compensation expense						2,654						2,654						2,654						2,654
Balance- June 30, 2021	$	103,091	$	173	$	1,881,395	$	709,866	$	53,072	$	2,747,597

									Accumulated
					Additional				Other
	Common		Preferred		Paid-In		Retained		Comprehensive
	Stock		Stock		Capital		Earnings		Income		Total
Balance - December 31, 2019	$	105,827	$	0	$	1,790,305	$	581,395	$	35,575	$	2,513,102
Net Income								7,089				7,089
Other comprehensive income (net of taxes of $3,890)										12,754		12,754
Dividends on common stock ($0.25 per share)								(19,825)				(19,825)
Stock purchased under stock repurchase plan (1,493,472 shares)		(1,985)				(47,894)						(49,879)
Issuance of common stock under Equity Compensation Plans, for services rendered, and vesting of restricted stock, net of shares held for taxes (183,750 shares)		244				(1,273)						(1,029)
Impact of adoption of ASC 326								(39,053)				(39,053)
Stock-based compensation expense						2,291						2,291
Balance- March 31, 2020	$	104,086	$	0	$	1,743,429	$	529,606	$	48,329	$	2,425,450
Net Income								30,709				30,709
Other comprehensive income (net of taxes of $3,415)										12,975		12,975
Issuance of preferred stock (17,250 shares)				173		166,190						166,363
Dividends on common stock ($0.25 per share)								(19,677)				(19,677)
Issuance of common stock under Equity Compensation Plans, for services rendered, and vesting of restricted stock, net of shares held for taxes (30,120 shares)		40				5						45
Stock-based compensation expense						2,361						2,361
Balance - June 30, 2020	$	104,126	$	173	$	1,911,985	$	540,638	$	61,304	$	2,618,226
Balance - June 30, 2021													$	103,091	$	173	$	1,881,395	$	709,866	$	53,072	$	2,747,597

See accompanying notes to consolidated financial statements.

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Table of Contents

ATLANTIC UNION BANKSHARES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

SIX MONTHS ENDED JUNE 30, ~~2021~~2022 AND ~~2020~~2021

(Dollars in thousands)


(Dollars in thousands)	2021		2020
					2022		2021
Operating activities:
Net income	$	141,573	$	37,798	$	105,916	$	141,573
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of premises and equipment		7,966		7,517		7,119		7,966
Writedown of foreclosed properties and former bank premises		1,065		95
Writedown of ROU assets and equipment						4,570		1,065
Amortization, net		15,928		12,749		16,093		15,928
Accretion related to acquisitions, net		(1,056)		(7,591)
Amortization (accretion) related to acquisitions, net						1,014		(1,056)
Provision for credit losses		(41,037)		94,396		6,359		(41,037)
Gains on securities transactions, net		(78)		(12,275)
Losses (gains) on securities transactions, net						2		(78)
Gain on sale of DHFB						(9,082)		0
BOLI income		(5,475)		(4,076)		(5,413)		(5,475)
Originations and purchases of loans held for sale		(348,138)		(293,629)		(191,470)		(348,138)
Proceeds from sales of loans held for sale		409,809		292,883		196,381		409,809
Losses (gains) on sales of foreclosed properties and former bank premises, net		(1,810)		10
Gains on sales of foreclosed properties and former bank premises, net						(631)		(1,810)
Losses on debt extinguishment		14,695		10,306		0		14,695
Stock-based compensation expenses		4,853		4,652		5,336		4,853
Issuance of common stock for services		188		404		409		188
Net (increase) decrease in other assets		64,826		(173,045)
Net decrease in other assets						25,875		64,826
Net increase (decrease) in other liabilities		(125,899)		151,970		36,751		(125,899)
Net cash provided by operating activities		137,410		122,164		199,229		137,410
Investing activities:
Purchases of AFS securities and restricted stock		(651,254)		(403,272)
Purchases of AFS securities, restricted stock, and other investments						(88,244)		(651,254)
Purchases of HTM securities						(158,445)		0
Proceeds from sales of AFS securities and restricted stock		45,436		228,271		12,469		45,436
Proceeds from maturities, calls and paydowns of AFS securities		256,903		171,345		207,279		256,903
Proceeds from maturities, calls and paydowns of HTM securities		1,730		5,927		3,400		1,730
Net decrease (increase) in loans held for investment		305,615		(1,686,449)
Net (increase) decrease in loans held for investment						(452,948)		305,615
Net increase in premises and equipment		(6,836)		(10,884)		(1,931)		(6,836)
Proceeds from BOLI settlements		3,152		0		2,068		3,152
Purchases of BOLI policies		(100,000)		0		0		(100,000)
Proceeds from sales of foreclosed properties and former bank premises		8,632		2,452		3,001		8,632
Net cash used in investing activities		(136,622)		(1,692,610)		(473,351)		(136,622)
Financing activities:
Net increase in noninterest-bearing deposits		853,869		1,375,821		154,214		853,869
Net increase in interest-bearing deposits		82,617		924,421
Net decrease in short-term borrowings		(261,139)		(359,037)
Proceeds from issuance of long-term debt		0		189,941
Net (decrease) increase in interest-bearing deposits						(636,667)		82,617
Net increase (decrease) in short-term borrowings						290,788		(261,139)
Repayments of long-term debt		(214,695)		(230,306)		0		(214,695)
Cash dividends paid - common stock		(41,825)		(39,502)		(42,075)		(41,825)
Cash dividends paid - preferred stock		(5,934)		0		(5,934)		(5,934)
Repurchase of common stock		(42,363)		(49,879)		(48,231)		(42,363)
Issuance of common stock		2,876		801		3,813		2,876
Issuance of preferred stock, net		0		166,363
Vesting of restricted stock, net of shares held for taxes		(2,318)		(2,189)		(2,911)		(2,318)
Net cash provided by financing activities		371,088		1,976,434
Increase in cash and cash equivalents		371,876		405,988
Cash, cash equivalents, and restricted cash at beginning of the period		493,294		436,032
Cash, cash equivalents, and restricted cash at end of the period	$	865,170	$	842,020
Net cash (used in) provided by financing activities						(287,003)		371,088
(Decrease) increase in cash and cash equivalents						(561,125)		371,876
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					$	241,376	$	865,170

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Table of Contents

ATLANTIC UNION BANKSHARES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

SIX MONTHS ENDED JUNE 30, ~~2021~~2022 AND ~~2020~~2021

(Dollars in thousands)


	2021		2020		2022		2021
Supplemental Disclosure of Cash Flow Information
Cash payments for:
Interest	$	23,859	$	63,198	$	16,511	$	23,859
Income taxes		1,221		106		935		1,221

Supplemental schedule of noncash investing and financing activities
Transfers from loans to foreclosed properties		14		615		382		14
Transfers from bank premises to OREO		1,109		—		0		1,109
Transfers from LHFS to LHFI		0		1,050

See accompanying notes to consolidated financial statements.

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Table of Contents

ATLANTIC UNION BANKSHARES CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

1.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Company

Headquartered in Richmond, Virginia, Atlantic Union Bankshares Corporation (Nasdaq: AUB) is the holding company for Atlantic Union Bank. Atlantic Union Bank has ~~130~~114 branches and approximately ~~150~~130 ATMs located throughout Virginia, and in portions of Maryland and North ~~Carolina.~~Carolina as of June 30, 2022. Certain non-bank financial services affiliates of Atlantic Union Bank include: Atlantic Union Equipment Finance, Inc., which provides equipment financing; ~~Old Dominion Capital Management, Inc., and its subsidiary, Outfitter Advisors, Ltd., and Dixon, Hubard, Feinour, & Brown, Inc., which provide investment advisory services;~~ Atlantic Union Financial Consultants, LLC, which provides brokerage services; and Union Insurance Group, LLC, which offers various lines of insurance products.

Effective ~~March 1, 2021, Middleburg Financial,~~June 30, 2022, the ~~Bank’s wealth management division~~Company completed the sale of DHFB, which was ~~rebranded to Atlantic Union Bank Wealth Management, and Middleburg Investment Services, LLC changed its name to Atlantic Union Financial Consultants, LLC.~~formerly a subsidiary of the Bank.

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

The unaudited consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in the Company’s ~~2020~~2021 Form 10-K. Certain prior period amounts have been reclassified to conform to current period presentation.

~~Adoption of New Accounting Standards~~

In March 2020, the FASB issued Topic 848. This guidance provides temporary, optional guidance to ease the potential burden in accounting for reference rate reform associated with the LIBOR transition. LIBOR and other interbank offered rates are widely used benchmark or reference rates that have been used in the valuation of loans, derivatives, and other financial contracts. Topic 848 provides optional expedients and exceptions for applying GAAP to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued. 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 hedged interest, regardless of any expected modification in terms related to reference rate reform for the newly executed cash flow hedges. The Company expects to incorporate other components of Topic 848 at a later date. This amendment does not have a material impact on the consolidated financial statements.

On January 1, 2021, the Company adopted Topic 740. This guidance was issued to simplify accounting for income taxes by removing specific technical exceptions that often produce information difficult for users of financial statements to understand. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. The Company’s adoption of Topic 740 did 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 ~~Federal Reserve Bank~~FRB based on the type and amount of deposits; however, on March 15, 2020 the Federal Reserve ~~Board~~

~~-8-~~

~~Table of Contents~~

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 June 30, 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 ~~$51.1~~$44.5 million and ~~$56.7~~$43.3 million on ~~loans held for investment, $6.7~~LHFI, $8.2 million and ~~$6.8~~$7.0 million on HTM securities, and ~~$12.9~~$14.4 million and ~~$11.9~~$14.5 million on AFS securities at June 30, ~~2021~~2022 and December 31, ~~2020, respectfully,~~2021, respectively, and is included in “Other ~~Assets”~~assets” on the Company’s Consolidated Balance Sheets. The Company’s policy is to write off accrued interest receivable through reversal of interest income when it becomes probable the Company will not be able to collect the accrued interest. For the quarters ended June 30, ~~2021~~2022 and June 30, ~~2020,~~2021, accrued interest receivable write offs were not material to the Company’s consolidated financial statements.

Segment Reporting

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

~~-9-~~-8-

Table of Contents

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 June 30, ~~2021~~2022 and December 31, ~~2020.~~2021.

The amortized cost, gross unrealized gains and losses, and estimated fair values of AFS securities as of June 30, ~~2021~~2022 are summarized as follows (dollars in thousands):

Amortized

Gross Unrealized

Estimated

Amortized

Gross Unrealized

Estimated

Cost

Gains

(Losses)

Fair Value

Cost

Gains

(Losses)

Fair Value

June 30, 2021

June 30, 2022

U.S. government and agency securities

75,554

1,099

(44)

76,609

71,665

(5,925)

65,740

Obligations of states and political subdivisions

899,117

44,105

(751)

942,471

964,651

578

(142,802)

822,427

Corporate and other bonds ⁽¹⁾

148,774

4,156

(45)

152,885

184,304

(6,484)

177,892

Commercial mortgage-backed securities

Commercial MBS

Agency

315,274

11,443

(1,119)

325,598

326,117

(27,246)

298,961

Non-agency

95,254

276

(281)

95,249

104,465

(3,591)

100,874

Total commercial mortgage-backed securities

410,528

11,719

(1,400)

420,847

Residential mortgage-backed securities

Total commercial MBS

430,582

(30,837)

399,835

Residential MBS

Agency

1,190,087

24,025

(9,035)

1,205,077

1,571,036

665

(161,629)

1,410,072

Non-agency

73,010

1,137

(263)

73,884

78,888

(5,083)

73,806

Total residential mortgage-backed securities

1,263,097

25,162

(9,298)

1,278,961

Total residential MBS

1,649,924

666

(166,712)

1,483,878

Other securities

1,632

1,649

Total AFS securities

2,798,702

86,241

(11,538)

2,873,405

3,302,775

1,406

(352,760)

2,951,421

⁽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, ~~2020~~2021 are summarized as follows (dollars in thousands):


	Amortized		Gross Unrealized				Estimated		Amortized		Gross Unrealized				Estimated
	Cost		Gains		(Losses)		Fair Value		Cost		Gains		(Losses)		Fair Value
December 31, 2020
December 31, 2021
U.S. government and agency securities	$	13,009	$	437	$	(52)	$	13,394	$	73,830	$	179	$	(160)	$	73,849
Obligations of states and political subdivisions		786,466		50,878		(18)		837,326		971,126		39,343		(2,073)		1,008,396
Corporate and other bonds ⁽¹⁾		148,747		2,430		(99)		151,078		150,201		3,353		(178)		153,376
Commercial mortgage-backed securities
Commercial MBS
Agency		321,015		16,277		(2)		337,290		361,806		6,761		(4,215)		364,352
Non-agency		51,244		167		(17)		51,394		107,087		139		(421)		106,805
Total commercial mortgage-backed securities		372,259		16,444		(19)		388,684
Residential mortgage-backed securities
Total commercial MBS										468,893		6,900		(4,636)		471,157
Residential MBS
Agency		1,012,237		31,816		(1,946)		1,042,107		1,691,651		15,180		(24,337)		1,682,494
Non-agency		104,904		1,507		(206)		106,205		91,443		243		(948)		90,738
Total residential mortgage-backed securities		1,117,141		33,323		(2,152)		1,148,312
Total residential MBS										1,783,094		15,423		(25,285)		1,773,232
Other securities		1,625		0		0		1,625		1,640		0		0		1,640
Total AFS securities	$	2,439,247	$	103,512	$	(2,340)	$	2,540,419	$	3,448,784	$	65,198	$	(32,332)	$	3,481,650

⁽¹⁾ Other bonds include asset-backed securities

~~-10-~~-9-

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The following table shows the gross unrealized losses and fair value of the Company’s AFS securities with unrealized losses for which an ACL has not been recorded at June 30, ~~2021~~2022 and December 31, ~~2020~~2021 and that are not deemed to be impaired as of those dates. These are aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position (dollars in thousands).


	Less than 12 months				More than 12 months				Total				Less than 12 months				More than 12 months				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized		Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses		Value		Losses		Value		Losses		Value		Losses
June 30, 2021
June 30, 2022
U.S. government and agency securities	$	0	$	0	$	4,607	$	(44)	$	4,607	$	(44)	$	62,470	$	(5,882)	$	3,199	$	(42)	$	65,669	$	(5,924)
Obligations of states and political subdivisions		92,775		(751)		0		0		92,775		(751)		686,807		(131,328)		28,077		(11,474)		714,884		(142,802)
Corporate and other bonds⁽¹⁾		5,660		(40)		3,344		(5)		9,004		(45)		162,871		(6,484)		0		0		162,871		(6,484)
Commercial mortgage-backed securities
Commercial MBS
Agency		89,240		(1,118)		348		(1)		89,588		(1,119)		237,590		(19,318)		48,976		(7,928)		286,566		(27,246)
Non-agency		31,437		(281)		0		0		31,437		(281)		84,220		(2,604)		16,654		(987)		100,874		(3,591)
Total commercial mortgage-backed securities		120,677		(1,399)		348		(1)		121,025		(1,400)
Residential mortgage-backed securities
Total commercial MBS														321,810		(21,922)		65,630		(8,915)		387,440		(30,837)
Residential MBS
Agency		591,860		(8,805)		11,485		(230)		603,345		(9,035)		1,002,897		(110,921)		346,933		(50,708)		1,349,830		(161,629)
Non-agency		22,869		(262)		177		(1)		23,046		(263)		61,820		(3,981)		11,868		(1,103)		73,688		(5,084)
Total residential mortgage-backed securities		614,729		(9,067)		11,662		(231)		626,391		(9,298)
Total residential MBS														1,064,717		(114,902)		358,801		(51,811)		1,423,518		(166,713)
Total AFS securities	$	833,841	$	(11,257)	$	19,961	$	(281)	$	853,802	$	(11,538)	$	2,298,675	$	(280,518)	$	455,707	$	(72,242)	$	2,754,382	$	(352,760)

December 31, 2020
December 31, 2021
U.S. government and agency securities	$	0	$	0	$	5,456	$	(52)	$	5,456	$	(52)	$	64,474	$	(115)	$	3,900	$	(45)	$	68,374	$	(160)
Obligations of states and political subdivisions		5,091		(18)		0		0		5,091		(18)		249,701		(2,020)		2,123		(53)		251,824		(2,073)
Corporate and other bonds⁽¹⁾		17,946		(52)		10,698		(47)		28,644		(99)		21,134		(177)		703		(1)		21,837		(178)
Commercial mortgage-backed securities
Commercial MBS
Agency		5,893		(2)		376		0		6,269		(2)		175,588		(4,053)		3,172		(162)		178,760		(4,215)
Non-agency		17,654		(17)		0		0		17,654		(17)		33,759		(313)		11,029		(108)		44,788		(421)
Total commercial mortgage-backed securities		23,547		(19)		376		0		23,923		(19)
Residential mortgage-backed securities
Total commercial MBS														209,347		(4,366)		14,201		(270)		223,548		(4,636)
Residential MBS
Agency		219,388		(1,944)		1,055		(2)		220,443		(1,946)		1,140,701		(21,147)		106,104		(3,190)		1,246,805		(24,337)
Non-agency		36,942		(206)		0		0		36,942		(206)		48,392		(584)		12,716		(364)		61,108		(948)
Total residential mortgage-backed securities		256,330		(2,150)		1,055		(2)		257,385		(2,152)
Total residential MBS														1,189,093		(21,731)		118,820		(3,554)		1,307,913		(25,285)
Total AFS securities	$	302,914	$	(2,239)	$	17,585	$	(101)	$	320,499	$	(2,340)	$	1,733,749	$	(28,409)	$	139,747	$	(3,923)	$	1,873,496	$	(32,332)

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

~~-11-~~

~~Table of Contents~~

As of June 30, ~~2021,~~2022, there were ~~$20.0~~$445.7 million ~~or 13 instances,~~AFS securities, comprised of 113 individual ~~AFS~~ securities that had been in a continuous loss position for more than 12 months and had an aggregate unrealized loss of approximately ~~$281,000.~~$72.2 million. As of December 31, ~~2020,~~2021, there were ~~$17.6~~$139.7 million ~~or 15 instances,~~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 ~~$101,000.~~$3.9 million.

The Company has evaluated AFS securities in an unrealized loss position for credit related impairment at June 30, ~~2021~~2022 and December 31, ~~2020~~2021 and concluded 0 impairment existed based on several factors which included: (1) the majority of these securities are of high credit quality, (2) unrealized losses are primarily the result of market volatility and increases in market interest rates, (3) the contractual terms of the investments do not permit the issuer(s) to settle the securities at a price less than the cost basis of each investment, (4) issuers continue to make timely principal and interest payments, and (5) the Company does not intend to sell any of the investments and the accounting standard of “more likely than not” has not been met for the Company to be required to sell any of the investments before recovery of its amortized cost basis.

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

The following table presents the amortized cost and estimated fair value of AFS securities as of June 30, 2021 and December 31, 2020, by contractual maturity. 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 (dollars in thousands).

June 30, 2021

December 31, 2020


Amortized

Estimated

Amortized

Estimated

Cost

Fair Value

Cost

Fair Value
Due in one year or less

$
16,586

$
16,738

$
19,875

$
19,997
Due after one year through five years

180,322

186,429

161,448

169,103
Due after five years through ten years

306,429

316,325

235,021

242,791
Due after ten years

2,295,365

2,353,913

2,022,903

2,108,528
Total AFS securities

$
2,798,702

$
2,873,405

$
2,439,247

$
2,540,419

Refer to Note 7 "Commitments and Contingencies" for information regarding the estimated fair value of AFS securities that were pledged to secure public deposits, repurchase agreements, and for other purposes as permitted or required by law as of June 30, 2021 and December 31, 2020.

~~Held to Maturity~~

The Company’s HTM investment portfolio primarily consists of highly-rated municipal securities and the estimated credit loss inherent in the portfolio is currently immaterial. The Company’s HTM securities were all current, with 0 securities past due or on non-accrual at June 30, 202~~1 and December 31, 2020.~~

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

~~-12-~~

~~Table of Contents~~

~~The carrying value, gross unrealized gains and losses, and estimated fair values of HTM securities as of June 30, 2021 are summarized as follows (dollars in thousands):~~

Carrying

Gross Unrealized

Estimated


Value

Gains

(Losses)

Fair Value
June 30, 2021








U.S. government and agency securities

$
2,657

$
0

$
(10)

$
2,647
Obligations of states and political subdivisions

533,733

70,091

0

603,824
Commercial mortgage-backed securities

Agency

5,049

3

(47)

5,005
Non-agency

0

0

0

0
Total commercial mortgage-backed securities

5,049

3

(47)

5,005
Total held-to-maturity securities

$
541,439

$
70,094

$
(57)

$
611,476

~~The carrying value, gross unrealized gains and losses, and estimated fair values of HTM securities as of December 31, 2020 are summarized as follows (dollars in thousands):~~

Carrying

Gross Unrealized

Estimated


Value

Gains

(Losses)

Fair Value
December 31, 2020








U.S. government and agency securities

$
2,751

$
0

$
(18)

$
2,733
Obligations of states and political subdivisions

536,767

74,978

0

611,745
Commercial mortgage-backed securities

Agency

5,333

4

(50)

5,287
Non-agency

0

0

0

0
Total commercial mortgage-backed securities

5,333

4

(50)

5,287
Total held-to-maturity securities

$
544,851

$
74,982

$
(68)

$
619,765

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

For HTM securities, the Company evaluates the credit risk of its securities on at least a quarterly basis. The Company estimates expected credit losses on HTM debt securities on an individual basis based on the PD/LGD methodology primarily using security-level credit ratings. The Company’s HTM securities ACL was immaterial at ~~June 30, 2021 and December 31, 2020.~~ The primary indicators of credit quality for the Company’s HTM portfolio are security type and credit rating, which is influenced by a number of factors including obligor cash flow, geography, seniority, and others. The Company’s only HTM securities with credit risk are obligations of states and political subdivisions.

~~-13-~~-10-

Table of Contents

The following table presents the amortized cost and estimated fair value of AFS securities as of June 30, 2022 and December 31, 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.


	June 30, 2022				December 31, 2021
	Amortized		Estimated		Amortized		Estimated
	Cost		Fair Value		Cost		Fair Value
Due in one year or less	$	32,481	$	32,235	$	18,247	$	18,317
Due after one year through five years		167,808		165,280		180,080		183,981
Due after five years through ten years		346,288		329,509		324,615		331,215
Due after ten years		2,756,198		2,424,397		2,925,842		2,948,137
Total AFS securities	$	3,302,775	$	2,951,421	$	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 AFS securities that were pledged to secure public deposits, repurchase agreements, and for other purposes as permitted or required by law as of June 30, 2022 and December 31, 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 June 30, 2022 and December 31, 2021.

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

The carrying value, gross unrealized gains and losses, and estimated fair values of HTM securities as of June 30, 2022 are summarized as follows (dollars in thousands):

Carrying

Gross Unrealized

Estimated

Value

Gains

(Losses)

Fair Value

June 30, 2022

U.S. government and agency securities

2,178

(80)

2,098

Obligations of states and political subdivisions

693,070

3,125

(33,413)

662,782

Commercial Agency MBS

29,404

(3,193)

26,211

Residential MBS

Agency

38,514

(3,833)

34,681

Non-agency

17,583

(136)

17,447

Total residential MBS

56,097

(3,969)

52,128

Total held-to-maturity securities

780,749

3,125

(40,655)

743,219

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


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

-11-

Table of Contents

Credit Quality Indicators & Allowance for Credit Losses - HTM

For HTM securities, the Company evaluates the credit risk of its securities on at least a quarterly basis. The Company estimates expected credit losses on HTM debt securities on an individual basis based on the PD/LGD methodology primarily using security-level credit ratings. The Company’s HTM securities ACL was immaterial at June 30, 2022 and December 31, 2021. The primary indicators of credit quality for the Company’s HTM portfolio are security type and credit rating, which is influenced by a number of factors including obligor cash flow, geography, seniority, and others. Substantially all of the Company’s HTM securities with credit risk are obligations of states and political subdivisions.

The following table presents the amortized cost of HTM securities as of June 30, ~~2021~~2022 and December 31, ~~2020~~2021 by security type and credit rating (dollars in thousands):


	U.S. Government and Agency		Obligations of states and political		Mortgage-backed		Total HTM		U.S. Government and Agency		Obligations of states and political		Mortgage-backed		Total HTM
	securities		subdivisions		securities		securities		securities		subdivisions		securities		securities
June 30, 2021
June 30, 2022
Credit Rating:
AAA/AA/A	$	0	$	529,301	$	0	$	529,301	$	0	$	693,070	$	0	$	693,070
Not Rated - Agency⁽¹⁾		2,657		0		5,049		7,706		2,178		0		67,918		70,096
Not Rated - Non-Agency		0		4,432		0		4,432		0		0		17,583		17,583
Total	$	2,657	$	533,733	$	5,049	$	541,439	$	2,178	$	693,070	$	85,501	$	780,749
December 31, 2020
December 31, 2021
Credit Rating:
AAA/AA/A	$	0	$	532,157	$	0	$	532,157	$	0	$	620,873	$	0	$	620,873
Not Rated - Agency⁽¹⁾		2,751		0		5,333		8,084		2,604		0		4,523		7,127
Not Rated - Non-Agency		0		4,610		0		4,610
Total	$	2,751	$	536,767	$	5,333	$	544,851	$	2,604	$	620,873	$	4,523	$	628,000

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

The following table presents the amortized cost and estimated fair value of HTM securities as of June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, by contractual ~~maturity.~~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 (dollars in thousands).~~penalties.


	June 30, 2021				December 31, 2020				June 30, 2022				December 31, 2021
	Carrying		Estimated		Carrying		Estimated		Carrying		Estimated		Carrying		Estimated
	Value		Fair Value		Value		Fair Value		Value		Fair Value		Value		Fair Value
Due in one year or less	$	440	$	443	$	1,443	$	1,460	$	5,023	$	4,971	$	3,034	$	3,027
Due after one year through five years		8,459		8,711		8,577		8,893		19,746		20,087		5,852		6,065
Due after five years through ten years		1,672		1,722		1,744		1,805		15,838		16,130		14,019		15,984
Due after ten years		530,868		600,600		533,087		607,607		740,142		702,031		605,095		668,698
Total HTM securities	$	541,439	$	611,476	$	544,851	$	619,765	$	780,749	$	743,219	$	628,000	$	693,774

Refer to Note 7 "Commitments and Contingencies" in Part I, Item I of this Quarterly Report for information regarding the estimated fair value of HTM securities that were pledged to secure public deposits as permitted or required by law as of June 30, ~~2021~~2022 and December 31, ~~2020.~~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. ~~The FHLB required the Bank to maintain~~Restricted stock ~~in an amount equal to 3.75% and 4.25%~~consists of outstanding borrowings at June 30, 2021 and December 31, 2020, respectively, as well as 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 the Bank’s outstanding capital at both June 30, 2021 and December 31, 2020. Restricted equity securities consist of Federal Reserve BankFRB stock in the amount of $67.0 million for June 30, ~~2021~~2022 and December 31, ~~2020~~2021 and FHLB stock in the amount of ~~$9.8~~$20.9 million and $~~27.8~~$9.8 million as of June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively.

~~-14-~~-12-

Table of Contents

Realized Gains and Losses

The following table presents the gross realized gains and losses on and the proceeds from the sale of securities during the three and six months ended June 30, ~~2021~~2022 and ~~2020~~2021 (dollars in thousands):


	Three Months Ended		Six Months Ended		Three Months Ended		Six Months Ended
	June 30, 2021		June 30, 2021		June 30, 2022		June 30, 2022
Realized gains (losses):
Realized gains (losses)⁽¹⁾:
Gross realized gains	$	0	$	138	$	0	$	0
Gross realized losses		0		(60)		(2)		(2)
Net realized gains	$	0	$	78	$	(2)	$	(2)

Proceeds from sales of securities	$	0	$	45,436	$	12,469	$	12,469


	Three Months Ended		Six Months Ended		Three Months Ended		Six Months Ended
	June 30, 2020		June 30, 2020		June 30, 2021		June 30, 2021
Realized gains (losses):
Realized gains (losses)⁽¹⁾:
Gross realized gains	$	10,339	$	12,503	$	0	$	138
Gross realized losses		0		(228)		0		(60)
Net realized gains	$	10,339	$	12,275	$	0	$	78

Proceeds from sales of securities	$	107,570	$	228,271	$	0	$	45,436

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

~~-15-~~-13-

Table of Contents

3. LOANS AND ALLOWANCE FOR LOAN AND LEASE LOSSES

The information included below reflects the impact of the CARES Act, as amended by the CAA, and the Joint Guidance. See Note 1 “Summary of Significant Accounting Policies” in the “Notes to the Consolidated Financial Statements” contained in Item 8 “Financial Statements and Supplementary Data” in the Company’s ~~2020~~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 June 30, ~~2021~~2022 and December 31, ~~2020~~2021 (dollars in thousands):


	June 30, 2021		December 31, 2020		June 30, 2022		December 31, 2021
Construction and Land Development	$	838,722	$	925,798	$	988,379	$	862,236
Commercial Real Estate - Owner Occupied		2,069,658		2,128,909		1,965,702		1,995,409
Commercial Real Estate - Non-Owner Occupied		3,712,607		3,657,562		3,860,819		3,789,377
Multifamily Real Estate		860,081		814,745		762,502		778,626
Commercial & Industrial⁽¹⁾		2,990,622		3,263,460		2,595,891		2,542,243
Residential 1-4 Family - Commercial		637,485		671,949		553,771		607,337
Residential 1-4 Family - Consumer		823,355		822,866		865,174		816,524
Residential 1-4 Family - Revolving		559,014		596,996		583,073		560,796
Auto		411,073		401,324		525,301		461,052
Consumer		195,036		247,730		180,045		176,992
Other Commercial⁽²⁾		600,276		489,975		774,751		605,251
Total loans held for investment, net of deferred fees and costs⁽³⁾		13,697,929		14,021,314
Total LHFI, net of deferred fees and costs⁽³⁾						13,655,408		13,195,843
Allowance for loan and lease losses		(118,261)		(160,540)		(104,184)		(99,787)
Total loans held for investment, net	$	13,579,668	$	13,860,774
Total LHFI, net					$	13,551,224	$	13,096,056

⁽¹⁾ Commercial & industrial loans include approximately $~~842.0~~21.7 million and $~~1.2~~145.3 ~~billion~~million in loans from the PPP at June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively.

⁽²⁾ Other commercial loans include an insignificant amount of loans from the PPP at June 30, 2022 and included approximately $~~17.4~~ ~~million and~~ ~~$11.3~~5.1 million in loans from the PPP at ~~June 30, 2021 and~~ December 31, ~~2020, respectively.~~2021.

⁽³⁾Total loans include unamortized premiums and discounts, and unamortized deferred fees and costs totaling $~~73.7~~44.8 million and $~~69.7~~49.3 million as of June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively.

~~-16-~~-14-

Table of Contents

The following table shows the aging of the Company’s loan portfolio, by class, at June 30, ~~2021~~2022 (dollars in thousands):

Greater than

30-59 Days

60-89 Days

90 Days and

30-59 Days

60-89 Days

90 Days and

Current

Past Due

still Accruing

Nonaccrual

Total Loans

Current

Past Due

still Accruing

Nonaccrual

Total Loans

Construction and Land Development

834,743

798

310

186

2,685

838,722

987,152

645

581

988,379

Commercial Real Estate - Owner Occupied

2,056,955

1,450

2,008

2,276

6,969

2,069,658

1,957,733

1,374

807

792

4,996

1,965,702

Commercial Real Estate - Non-Owner Occupied

3,707,175

1,501

827

3,026

3,712,607

3,856,365

511

642

3,301

3,860,819

Multifamily Real Estate

859,812

156

113

860,081

762,502

Commercial & Industrial

2,984,945

948

1,733

1,088

1,908

2,990,622

2,589,714

2,581

546

322

2,728

2,595,891

Residential 1-4 Family - Commercial

631,251

710

565

759

4,200

637,485

549,138

1,944

474

184

2,031

553,771

Residential 1-4 Family - Consumer

805,385

764

992

2,725

13,489

823,355

849,738

594

1,646

1,112

12,084

865,174

Residential 1-4 Family - Revolving

553,130

919

678

561

3,726

559,014

576,908

1,368

731

997

3,069

583,073

Auto

409,228

1,333

165

168

179

411,073

522,834

1,841

213

134

279

525,301

Consumer

193,934

545

297

156

104

195,036

179,394

361

210

180,045

Other Commercial

599,901

375

600,276

774,411

329

774,751

Total loans held for investment

13,636,459

9,499

6,826

8,746

36,399

13,697,929

Total LHFI

13,605,889

11,230

4,627

4,592

29,070

13,655,408

% of total loans

99.55

0.07

0.05

0.06

0.27

100.00

99.65

0.08

0.03

0.21

100.00

The following table shows the aging of the Company’s loan portfolio, by class, at December 31, ~~2020~~2021 (dollars in thousands):


										Greater than																		Greater than
				30-59 Days			60-89 Days			90 Days and												30-59 Days			60-89 Days			90 Days and
	Current			Past Due			Past Due			still Accruing			Nonaccrual			Total Loans			Current			Past Due			Past Due			still Accruing			Nonaccrual			Total Loans
Construction and Land Development	$	920,276		$	1,903		$	547		$	0		$	3,072		$	925,798		$	857,883		$	1,357		$	0		$	299		$	2,697		$	862,236
Commercial Real Estate - Owner Occupied		2,114,804			1,870			1,380			3,727			7,128			2,128,909			1,987,133			1,230			152			1,257			5,637			1,995,409
Commercial Real Estate - Non-Owner Occupied		3,651,232			2,144			1,721			148			2,317			3,657,562			3,783,211			1,965			127			433			3,641			3,789,377
Multifamily Real Estate		814,095			617			0			0			33			814,745			778,429			84			0			0			113			778,626
Commercial & Industrial		3,257,201			1,848			1,190			1,114			2,107			3,263,460			2,536,100			1,161			1,438			1,897			1,647			2,542,243
Residential 1-4 Family - Commercial		657,351			2,227			818			1,560			9,993			671,949			601,946			1,844			272			990			2,285			607,337
Residential 1-4 Family - Consumer		792,852			10,182			1,533			5,699			12,600			822,866			795,821			3,368			2,925			3,013			11,397			816,524
Residential 1-4 Family - Revolving		587,522			2,975			1,044			826			4,629			596,996			554,652			1,493			363			882			3,406			560,796
Auto		398,206			2,076			376			166			500			401,324			458,473			1,866			249			241			223			461,052
Consumer		245,551			1,166			550			394			69			247,730			175,943			689			186			120			54			176,992
Other Commercial		489,959			16			0			0			0			489,975			605,214			37			0			0			0			605,251
Total loans held for investment	$	13,929,049		$	27,024		$	9,159		$	13,634		$	42,448		$	14,021,314
Total LHFI																			$	13,134,805		$	15,094		$	5,712		$	9,132		$	31,100		$	13,195,843
% of total loans		99.34	%		0.19	%		0.07	%		0.10	%		0.30	%		100.00	%		99.54	%		0.11	%		0.04	%		0.07	%		0.24	%		100.00	%

~~-17-~~-15-

Table of Contents

The following table shows the Company’s amortized cost basis of loans on nonaccrual status ~~as of January 1, 2021, as well as amortized cost basis of loans on nonaccrual status~~ and loans past due 90 days and still accruing as of June 30, ~~2021~~2022 (dollars in thousands):

Nonaccrual

June 30, 2022

January 1, 2021

June 30, 2021

Nonaccrual With No ALLL

90 Days and still Accruing

Nonaccrual

Nonaccrual With No ALLL

90 Days Past due and still Accruing

Construction and Land Development

3,072

2,685

1,985

186

581

Commercial Real Estate - Owner Occupied

7,128

6,969

1,994

2,276

4,996

955

792

Commercial Real Estate - Non-Owner Occupied

2,317

3,026

827

3,301

642

Multifamily Real Estate

113

Commercial & Industrial

2,107

1,908

1,088

2,728

322

Residential 1-4 Family - Commercial

9,993

4,200

1,736

759

2,031

184

Residential 1-4 Family - Consumer

12,600

13,489

1,069

2,725

12,084

1,112

Residential 1-4 Family - Revolving

4,629

3,726

561

3,069

997

Auto

500

179

168

279

134

Consumer

104

156

Total loans held for investment

42,448

36,399

6,845

8,746

Other Commercial

329

Total LHFI

29,070

956

4,592

The following table shows the Company’s ~~amortized cost basis of loans on nonaccrual status as of January 1, 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, ~~2020~~2021 (dollars in thousands):


	Nonaccrual								December 31, 2021
	January 1, 2020		December 31, 2020		Nonaccrual With No ALLL		90 Days and still Accruing		Nonaccrual		Nonaccrual With No ALLL		90 Days Past due and still Accruing
Construction and Land Development	$	4,060	$	3,072	$	1,985	$	0	$	2,697	$	1,985	$	299
Commercial Real Estate - Owner Occupied		13,889		7,128		1,994		3,727		5,637		970		1,257
Commercial Real Estate - Non-Owner Occupied		1,368		2,317		0		148		3,641		1,089		433
Multifamily Real Estate		0		33		0		0		113		0		0
Commercial & Industrial		3,037		2,107		1		1,114		1,647		1		1,897
Residential 1-4 Family - Commercial		6,492		9,993		6,388		1,560		2,285		0		990
Residential 1-4 Family - Consumer		13,117		12,600		1,069		5,699		11,397		0		3,013
Residential 1-4 Family - Revolving		2,490		4,629		60		826		3,406		0		882
Auto		565		500		0		166		223		0		241
Consumer		88		69		0		394		54		0		120
Other Commercial		98		0		0		0
Total loans held for investment	$	45,204	$	42,448	$	11,497	$	13,634
Total LHFI									$	31,100	$	4,045	$	9,132

There was 0 interest income recognized on nonaccrual loans during the three and six months ended June 30, ~~2021~~2022 and ~~2020.~~2021. See Note 1 “Summary of Significant Accounting Policies” in the “Notes to the Consolidated Financial Statements” contained in Item 8 “Financial Statements and Supplementary Data” in the Company’s ~~2020~~2021 Form 10-K for additional information on the Company’s policies for nonaccrual loans.

~~-18-~~-16-

Table of Contents

Troubled Debt Restructurings

As of June 30, ~~2021,~~2022, the Company has TDRs totaling ~~$19.3~~$18.0 million with an estimated ~~$800,000~~$872,000 of allowance for those ~~loans for the current period.~~loans. As of December 31, ~~2020,~~2021, the Company had TDRs totaling ~~$20.6~~$18.0 million with an estimated ~~$1.6 million~~$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 credit losses in accordance with the Company’s ALLL methodology. For the three and six months ended June 30, ~~2021~~2022 and June 30, ~~2020,~~2021, the recorded investment in TDRs prior to modifications was not materially impacted by the modifications.

The following table provides a summary, by class, of TDRs that continue to accrue interest under the terms of the applicable restructuring agreement, which are considered to be performing, and TDRs that have been placed on nonaccrual status, which are considered to be nonperforming, as of June 30, ~~2021~~2022 and December 31, ~~2020~~2021 (dollars in thousands):


	June 30, 2021					December 31, 2020					June 30, 2022					December 31, 2021
	No. of	Recorded		Outstanding		No. of	Recorded		Outstanding		No. of	Recorded		Outstanding		No. of	Recorded		Outstanding
	Loans	Investment		Commitment		Loans	Investment		Commitment		Loans	Investment		Commitment		Loans	Investment		Commitment
Performing
Construction and Land Development	4	$	208	$	0	4	$	215	$	0	3	$	162	$	0	4	$	201	$	0
Commercial Real Estate - Owner Occupied	4		1,009		0	6		2,033		176	2		1,004		0	3		572		0
Commercial Real Estate - Non-Owner Occupied	1		1,089		0	1		1,089		0
Commercial & Industrial	2		434		0	4		727		0
Residential 1-4 Family - Commercial	0		—		0	3		245		0	1		1,334		0	0		0		0
Residential 1-4 Family - Consumer	80		9,641		0	77		8,943		0	78		7,654		0	75		9,021		0
Residential 1-4 Family - Revolving	3		271		3	3		277		0	3		260		5	3		265		4
Consumer	3		26		0	3		22		0	2		14		0	2		15		0
Other Commercial	1		375		0	1		410		0	1		234		0	1		239		0
Total performing	98	$	13,053	$	3	102	$	13,961	$	176	90	$	10,662	$	5	88	$	10,313	$	4
Nonperforming
Commercial Real Estate - Owner Occupied	2	$	832	$	0	1	$	20	$	0	1	$	17	$	0	2	$	830	$	0
Commercial Real Estate - Non-Owner Occupied	1		123		0	1		134		0	3		1,206		0	3		1,357		0
Commercial & Industrial	4		402		0	3		237		0	3		634		0	3		729		0
Residential 1-4 Family - Commercial	3		399		0	4		1,296		0	3		377		0	3		388		0
Residential 1-4 Family - Consumer	24		4,373		0	23		4,865		0	25		4,966		0	24		4,239		0
Residential 1-4 Family - Revolving	3		102		0	3		103		0	3		98		0	3		99		0
Total nonperforming	37	$	6,231	$	0	35	$	6,655	$	0	38	$	7,298	$	0	38	$	7,642	$	0
Total performing and nonperforming	135	$	19,284	$	3	137	$	20,616	$	176	128	$	17,960	$	5	126	$	17,955	$	4

The Company considers a default of a TDR to occur when the borrower is 90 days past due following the restructure or a foreclosure and repossession of the applicable collateral occurs. During the three and six months ended June 30, ~~2021~~2022 and ~~2020,~~2021, the Company did not have any material loans that went into default that had been restructured in the twelve-month period prior to the time of default.

~~-19-~~-17-

Table of Contents

The following table shows, by class and modification type, TDRs that occurred during the three and six months ended June 30, 2022 and 2021 (dollars in thousands):


	Three Months Ended June 30, 2021			Six Months Ended June 30, 2021			Three Months Ended June 30, 2022			Six Months Ended June 30, 2022
		Recorded			Recorded			Recorded			Recorded
	No. of	Investment at		No. of	Investment at		No. of	Investment at		No. of	Investment at
	Loans	Period End		Loans	Period End		Loans	Period End		Loans	Period End
Modified to interest only, at a market rate
Residential 1-4 Family - Commercial							0	$	0	1	$	1,334
Total interest only at market rate of interest	0	$	0	0	$	0	0	$	0	1	$	1,334

Term modification, at a market rate
Residential 1-4 Family - Consumer	0	$	0	2	$	104
Commercial Real Estate - Owner Occupied							0	$	0	1	$	766
Total loan term extended at a market rate	0	$	0	2	$	104	0	$	0	1	$	766

Term modification, below market rate
Residential 1-4 Family - Consumer	3	$	1,382	11	$	1,824	6		259	12		1,111
Consumer	0		0	1		15
Total loan term extended at a below market rate	3	$	1,382	12	$	1,839	6	$	259	12	$	1,111

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	3	$	1,382	15	$	1,988	6	$	259	14	$	3,211

~~The following table shows, by class and modification type, TDRs that occurred during the three and six months ended June 30, 2020 (dollars in thousands):~~


	Three Months Ended June 30, 2020			Six Months Ended June 30, 2020			Three Months Ended June 30, 2021			Six Months Ended June 30, 2021
		Recorded			Recorded			Recorded			Recorded
	No. of	Investment at		No. of	Investment at		No. of	Investment at		No. of	Investment at
	Loans	Period End		Loans	Period End		Loans	Period End		Loans	Period End
Modified to interest only, at a market rate
Total interest only at market rate of interest	0	$	0	0	$	0	0	$	0	0	$	0

Term modification, at a market rate
Commercial & Industrial	4	$	353	4	$	353
Residential 1-4 Family - Consumer	3		326	3		326	0	$	0	2	$	104
Consumer	1		10	1		10
Total loan term extended at a market rate	8	$	689	8	$	689	0	$	0	2	$	104

Term modification, below market rate
Construction and Land Development	0	$	0	1	$	35
Residential 1-4 Family - Consumer	3		172	13		1,937	3	$	1,382	11	$	1,824
Residential 1-4 Family - Revolving	1		52	1		52
Consumer							0		0	1		15
Total loan term extended at a below market rate	4	$	224	15	$	2,024	3	$	1,382	12	$	1,839

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	0	$	0	0	$	0	1	$	45

Total	12	$	913	23	$	2,713	3	$	1,382	15	$	1,988

~~-20-~~-18-

Table of Contents

Allowance for Loan and Lease Losses

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

●

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

●

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

The following tables show the ALLL activity by loan segment for the three and six months ended June 30, ~~2021~~2022 and ~~2020~~2021 (dollars in thousands):

Three Months Ended June 30, 2021

Six Months Ended June 30, 2021

Three Months Ended June 30, 2022

Six Months Ended June 30, 2022

Commercial

Consumer

Total

Commercial

Consumer

Total

Commercial

Consumer

Total

Commercial

Consumer

Total

Balance at beginning of period

106,432

36,479

142,911

117,403

43,137

160,540

79,771

22,820

102,591

77,902

21,885

99,787

Loans charged-off

(891)

(1,054)

(1,945)

(2,865)

(2,721)

(5,586)

(1,007)

(950)

(1,957)

(1,766)

(1,700)

(3,466)

Recoveries credited to allowance

1,042

834

1,876

2,648

1,697

4,345

392

626

1,018

1,118

1,413

2,531

Provision charged to operations

(16,746)

(7,835)

(24,581)

(27,349)

(13,689)

(41,038)

(1,743)

4,275

2,532

159

5,173

5,332

Balance at end of period

89,837

28,424

118,261

89,837

28,424

118,261

77,413

26,771

104,184

77,413

26,771

104,184


	Three Months Ended June 30, 2020						Six Months Ended June 30, 2020						Three Months Ended June 30, 2021						Six Months Ended June 30, 2021
	Commercial		Consumer		Total		Commercial		Consumer		Total		Commercial		Consumer		Total		Commercial		Consumer		Total
Balance at beginning of period	$	77,843	$	63,200	$	141,043	$	30,941	$	11,353	$	42,294	$	106,432	$	36,479	$	142,911	$	117,403	$	43,137	$	160,540
Impact of ASC 326 adoption on non-PCD loans		—		—		—		4,432		40,666		45,098
Impact of ASC 326 adoption on PCD loans		—		—		—		1,752		634		2,386
Impact of adopting ASC 326		—		—		—		6,184		41,300		47,484
Loans charged-off		(1,590)		(3,087)		(4,677)		(4,558)		(7,270)		(11,828)		(891)		(1,054)		(1,945)		(2,865)		(2,721)		(5,586)
Recoveries credited to allowance		708		703		1,411		1,862		1,709		3,571		1,042		834		1,876		2,648		1,697		4,345
Provision charged to operations		34,993		(2,793)		32,200		77,525		10,931		88,456		(16,746)		(7,835)		(24,581)		(27,349)		(13,689)		(41,038)
Balance at end of period	$	111,954	$	58,023	$	169,977	$	111,954	$	58,023	$	169,977	$	89,837	$	28,424	$	118,261	$	89,837	$	28,424	$	118,261

~~-21-~~-19-

Table of Contents

Credit Quality Indicators

Credit quality indicators are utilized to help estimate the collectability of each loan class within the Commercial and Consumer loan segments. For classes of loans within the Commercial segment, the primary credit quality indicator used for evaluating credit quality and estimating the ALLL is risk rating categories of Pass, Watch, Special Mention, Substandard, and Doubtful. For classes of loans within the Consumer segment, the primary credit quality indicator used for evaluating credit quality and estimating the ALLL is delinquency bands of Current, 30-59, 60-89, 90+, and Nonaccrual. While other credit quality indicators are evaluated and analyzed as part of the Company’s credit risk management activities, these indicators are primarily used in estimating the ALLL. The Company evaluates the credit risk of its loan portfolio on at least a quarterly basis.

Commercial Loans

The Company uses a risk rating system as the primary credit quality indicator for classes of loans within the Commercial segment. The risk rating system on a scale of 0 through 9 is used to determine risk level as used in the calculation of the ~~allowance for credit loss.~~ACL. The risk levels, as described below, do not necessarily follow the regulatory definitions of risk levels with the same name. A general description of the characteristics of the risk levels follows:

Pass is determined by the following criteria:

●

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

●

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

●

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

●

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

●

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

Watch is determined by the following criteria:

●

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

Special Mention is determined by the following criteria:

●

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

Substandard is determined by the following criteria:

●

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

Doubtful is determined by the following criteria:

●

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

●

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

~~-22-~~-20-

Table of Contents

The table below details the amortized cost of the classes of loans within the Commercial segment by risk level and year of origination as of June 30, 2022 (dollars in thousands):

June 30, 2022

Term Loans Amortized Cost Basis by Origination Year

2022

2021

2020

2019

2018

Prior

Revolving Loans

Total

Construction and Land Development

Pass

156,570

471,758

195,617

36,189

33,898

44,691

21,766

960,489

Watch

674

11,532

395

2,263

14,864

Special Mention

525

2,423

280

714

3,942

Substandard

1,252

2,841

215

1,367

3,368

9,084

Total Construction and Land Development

158,347

477,696

195,938

47,936

35,660

51,036

21,766

988,379

Commercial Real Estate - Owner Occupied

Pass

129,426

208,347

272,284

296,721

239,188

691,413

23,338

1,860,717

Watch

1,078

180

2,213

9,010

12,733

43,770

850

69,834

Special Mention

645

275

5,862

923

8,717

16,468

Substandard

200

2,096

1,629

14,159

599

18,683

Total Commercial Real Estate - Owner Occupied

131,149

208,727

274,772

313,689

254,473

758,059

24,833

1,965,702

Commercial Real Estate - Non-Owner Occupied

Pass

238,369

662,586

396,206

491,364

384,359

1,437,218

46,811

3,656,913

Watch

2,151

826

31,352

22,785

36,046

93,171

Special Mention

545

10,541

13,172

20,652

9,326

54,236

Substandard

22,979

19,084

14,284

152

56,499

Total Commercial Real Estate - Non-Owner Occupied

238,914

664,737

407,573

558,867

446,880

1,496,874

46,974

3,860,819

Commercial & Industrial

Pass

326,629

600,456

341,948

202,253

98,356

156,743

767,050

2,493,435

Watch

1,279

1,101

16,474

1,679

13,438

3,222

25,714

62,907

Special Mention

190

1,250

6,748

392

802

4,216

13,598

Substandard

565

217

4,210

14,958

1,827

4,174

25,951

Total Commercial & Industrial

327,908

602,312

359,889

214,890

127,144

162,594

801,154

2,595,891

Multifamily Real Estate

Pass

49,869

79,460

208,827

75,029

77,680

265,181

2,297

758,343

Watch

355

450

429

1,234

Special Mention

2,223

613

2,925

Total Multifamily Real Estate

49,869

79,460

211,050

75,997

78,130

265,699

2,297

762,502

Residential 1-4 Family - Commercial

Pass

27,352

103,370

82,187

56,185

39,218

216,212

1,105

525,629

Watch

625

870

3,002

5,947

115

10,559

Special Mention

1,495

4,807

3,629

9,931

Substandard

2,764

482

4,016

299

7,652

Total Residential 1-4 Family - Commercial

27,352

103,461

84,307

59,819

47,509

229,804

1,519

553,771

Other Commercial

Pass

152,527

218,874

162,699

119,323

3,745

75,548

35,913

768,629

Watch

558

5,235

5,793

Substandard

234

329

Total Other Commercial

152,527

218,874

162,699

119,323

4,303

81,017

36,008

774,751

Total Commercial

Pass

1,080,742

2,344,851

1,659,768

1,277,064

876,444

2,887,006

898,280

11,024,155

Watch

2,357

4,106

20,138

54,798

53,361

96,912

26,690

258,362

Special Mention

1,715

2,613

16,064

26,395

26,774

23,277

4,262

101,100

Substandard

1,252

3,697

258

32,264

37,520

37,888

5,319

118,198

Total Commercial

1,086,066

2,355,267

1,696,228

1,390,521

994,099

3,045,083

934,551

11,501,815

-21-

Table of Contents

The table below details the amortized cost of the classes of loans within the Commercial segment by risk level and year of origination as of ~~June 30,~~December 31, 2021 (dollars in thousands):


																		December 31, 2021
																		Term Loans Amortized Cost Basis by Origination Year
		June 30, 2021
		Term Loans Amortized Cost Basis by Origination Year
	2021		2020		2019		2018		2017		Prior		Revolving Loans		Total		2021		2020		2019		2018		2017		Prior		Revolving Loans		Total
Construction and Land Development
Pass	$	169,737	$	284,804	$	136,881	$	79,204	$	19,754	$	54,558	$	14,405	$	759,343	$	430,764	$	218,672	$	39,937	$	40,128	$	11,299	$	50,908	$	22,996	$	814,704
Watch		2,991		3,168		27,862		1,201		339		6,870		0		42,431		395		185		12,923		129		349		4,026		0		18,007
Special Mention		0		0		629		132		0		1,102		0		1,863		0		0		0		0		0		735		0		735
Substandard		0		0		524		29,101		7		5,453		0		35,085		3,541		1		221		19,264		198		5,565		0		28,790
Total Construction and Land Development	$	172,728	$	287,972	$	165,896	$	109,638	$	20,100	$	67,983	$	14,405	$	838,722	$	434,700	$	218,858	$	53,081	$	59,521	$	11,846	$	61,234	$	22,996	$	862,236

Commercial Real Estate - Owner Occupied
Pass	$	107,413	$	282,904	$	318,170	$	275,683	$	214,996	$	634,229	$	24,428	$	1,857,823	$	222,079	$	279,165	$	321,503	$	263,422	$	179,994	$	555,540	$	19,705	$	1,841,408
Watch		113		13,848		16,318		16,499		14,099		47,956		675		109,508		185		18		7,959		10,875		14,648		57,466		702		91,853
Special Mention		0		960		29,741		1,493		1,121		38,305		2,157		73,777		0		932		11,826		610		1,052		19,480		507		34,407
Substandard		0		0		4,906		1,711		1,974		19,159		800		28,550		200		153		7,455		2,538		1,935		14,834		626		27,741
Total Commercial Real Estate - Owner Occupied	$	107,526	$	297,712	$	369,135	$	295,386	$	232,190	$	739,649	$	28,060	$	2,069,658	$	222,464	$	280,268	$	348,743	$	277,445	$	197,629	$	647,320	$	21,540	$	1,995,409

Commercial Real Estate - Non-Owner Occupied
Pass	$	225,833	$	436,594	$	457,142	$	373,263	$	390,212	$	1,096,953	$	53,293	$	3,033,290	$	642,386	$	421,063	$	520,035	$	377,176	$	374,949	$	1,102,193	$	36,568	$	3,474,370
Watch		12,557		8,991		104,690		65,828		39,917		205,843		384		438,210		2,152		841		35,721		39,356		18,242		101,797		14		198,123
Special Mention		0		693		70,587		42,248		18,436		42,236		218		174,418		0		10,609		25,691		20,119		12,741		4,775		0		73,935
Substandard		0		11,245		0		13,170		9,318		32,956		0		66,689		0		0		23,376		11,369		0		7,952		252		42,949
Total Commercial Real Estate - Non-Owner Occupied	$	238,390	$	457,523	$	632,419	$	494,509	$	457,883	$	1,377,988	$	53,895	$	3,712,607	$	644,538	$	432,513	$	604,823	$	448,020	$	405,932	$	1,216,717	$	36,834	$	3,789,377

Commercial & Industrial
Pass	$	735,552	$	814,028	$	302,050	$	161,183	$	49,690	$	187,496	$	610,304	$	2,860,303	$	770,662	$	450,478	$	287,926	$	110,710	$	38,395	$	170,857	$	619,583	$	2,448,611
Watch		193		12,537		24,828		19,606		5,032		5,377		24,102		91,675		1,233		9,641		2,766		31,635		1,370		4,405		17,220		68,270
Special Mention		637		1,205		5,865		3,388		975		1,573		11,454		25,097		206		935		8,477		1,023		564		561		3,249		15,015
Substandard		0		56		4,602		1,216		274		2,223		5,176		13,547		379		575		3,636		1,965		463		1,639		1,690		10,347
Total Commercial & Industrial	$	736,382	$	827,826	$	337,345	$	185,393	$	55,971	$	196,669	$	651,036	$	2,990,622	$	772,480	$	461,629	$	302,805	$	145,333	$	40,792	$	177,462	$	641,742	$	2,542,243

Multifamily Real Estate
Pass	$	36,278	$	142,330	$	131,106	$	145,985	$	101,098	$	259,262	$	7,236	$	823,295	$	63,431	$	187,616	$	108,402	$	114,077	$	66,562	$	228,013	$	1,548	$	769,649
Watch		0		0		4,367		465		0		24,438		42		29,312		0		0		359		459		0		522		0		1,340
Special Mention		0		2,273		634		4,361		0		93		0		7,361		44		2,248		624		4,517		0		91		0		7,524
Substandard		0		0		0		0		0		113		0		113		0		0		0		0		0		113		0		113
Total Multifamily Real Estate	$	36,278	$	144,603	$	136,107	$	150,811	$	101,098	$	283,906	$	7,278	$	860,081	$	63,475	$	189,864	$	109,385	$	119,053	$	66,562	$	228,739	$	1,548	$	778,626

Residential 1-4 Family - Commercial
Pass	$	56,120	$	100,940	$	75,069	$	54,133	$	66,745	$	236,341	$	1,233	$	590,581	$	108,259	$	94,184	$	65,682	$	46,267	$	55,995	$	196,052	$	550	$	566,989
Watch		0		2,153		3,813		8,760		3,667		9,597		195		28,185		0		2,041		4,887		7,483		2,415		7,573		311		24,710
Special Mention		163		0		0		450		426		6,124		0		7,163		0		96		0		436		391		4,126		0		5,049
Substandard		0		0		3,484		773		1,390		5,421		488		11,556		93		0		3,494		536		1,291		4,876		299		10,589
Total Residential 1-4 Family - Commercial	$	56,283	$	103,093	$	82,366	$	64,116	$	72,228	$	257,483	$	1,916	$	637,485	$	108,352	$	96,321	$	74,063	$	54,722	$	60,092	$	212,627	$	1,160	$	607,337

Other Commercial
Pass	$	147,863	$	206,752	$	108,972	$	6,247	$	26,650	$	53,072	$	16,252	$	565,808	$	226,595	$	167,497	$	98,848	$	5,620	$	25,723	$	44,114	$	30,445	$	598,842
Watch		0		0		0		597		1,273		5,071		800		7,741		0		0		0		581		1,246		4,341		0		6,168
Special Mention		0		0		0		0		4		204		26,144		26,352		0		0		0		0		2		0		0		2
Substandard		0		0		0		0		0		375		0		375		0		0		0		0		0		239		0		239
Total Other Commercial	$	147,863	$	206,752	$	108,972	$	6,844	$	27,927	$	58,722	$	43,196	$	600,276	$	226,595	$	167,497	$	98,848	$	6,201	$	26,971	$	48,694	$	30,445	$	605,251

Total Commercial
Pass	$	1,478,796	$	2,268,352	$	1,529,390	$	1,095,698	$	869,145	$	2,521,911	$	727,151	$	10,490,443	$	2,464,176	$	1,818,675	$	1,442,333	$	957,400	$	752,917	$	2,347,677	$	731,395	$	10,514,573
Watch		15,854		40,697		181,878		112,956		64,327		305,152		26,198		747,062		3,965		12,726		64,615		90,518		38,270		180,130		18,247		408,471
Special Mention		800		5,131		107,456		52,072		20,962		89,637		39,973		316,031		250		14,820		46,618		26,705		14,750		29,768		3,756		136,667
Substandard		0		11,301		13,516		45,971		12,963		65,700		6,464		155,915		4,213		729		38,182		35,672		3,887		35,218		2,867		120,768
Total Commercial	$	1,495,450	$	2,325,481	$	1,832,240	$	1,306,697	$	967,397	$	2,982,400	$	799,786	$	11,709,451	$	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~~

~~The table below details the amortized cost of the classes of loans within the Commercial segment by risk level and year of origination as of December 31, 2020 (dollars in thousands):~~

December 31, 2020

Term Loans Amortized Cost Basis by Origination Year

2020

2019

2018

2017

2016

Prior

Revolving Loans

Total
Construction and Land Development

Pass

$
316,585

$
277,142

$
116,800

$
24,770

$
42,970

$
54,023

$
23,324

$
855,614
Watch

1,873

18,181

8,434

344

2,355

6,372

412

37,971
Special Mention

0

5,532

135

0

0

2,655

0

8,322
Substandard

0

0

17,780

64

2,037

4,010

0

23,891
Total Construction and Land Development

$
318,458

$
300,855

$
143,149

$
25,178

$
47,362

$
67,060

$
23,736

$
925,798

Commercial Real Estate - Owner Occupied

Pass

$
286,522

$
375,541

$
300,583

$
233,359

$
128,261

$
570,361

$
18,838

$
1,913,465
Watch

1,942

14,611

22,224

15,623

24,979

41,361

1,648

122,388
Special Mention

988

6,052

5,749

4,198

9,907

30,455

1,121

58,470
Substandard

0

4,858

5,159

914

1,555

21,101

999

34,586
Total Commercial Real Estate - Owner Occupied

$
289,452

$
401,062

$
333,715

$
254,094

$
164,702

$
663,278

$
22,606

$
2,128,909

Commercial Real Estate - Non-Owner Occupied

Pass

$
381,849

$
455,427

$
433,183

$
403,677

$
336,630

$
850,035

$
30,421

$
2,891,222
Watch

28,354

142,279

76,838

59,451

79,533

224,944

16,870

628,269
Special Mention

702

11,072

34,905

18,073

40,771

11,211

723

117,457
Substandard

246

0

13,357

0

25

6,986

0

20,614
Total Commercial Real Estate - Non-Owner Occupied

$
411,151

$
608,778

$
558,283

$
481,201

$
456,959

$
1,093,176

$
48,014

$
3,657,562

Commercial & Industrial

Pass

$
1,730,876

$
350,618

$
199,489

$
67,035

$
71,799

$
140,461

$
590,701

$
3,150,979
Watch

4,872

32,028

13,073

6,500

3,182

4,906

19,972

84,533
Special Mention

1,009

2,178

3,890

1,150

724

1,234

4,755

14,940
Substandard

534

4,269

1,274

309

560

2,676

3,386

13,008
Total Commercial & Industrial

$
1,737,291

$
389,093

$
217,726

$
74,994

$
76,265

$
149,277

$
618,814

$
3,263,460

Multifamily Real Estate

Pass

$
144,805

$
85,740

$
150,724

$
117,881

$
67,984

$
231,113

$
2,311

$
800,558
Watch

0

5,074

475

0

617

560

0

6,726
Special Mention

2,280

0

4,388

0

0

760

0

7,428
Substandard

0

0

0

0

0

33

0

33
Total Multifamily Real Estate

$
147,085

$
90,814

$
155,587

$
117,881

$
68,601

$
232,466

$
2,311

$
814,745

Residential 1-4 Family - Commercial

Pass

$
104,630

$
89,332

$
70,310

$
79,156

$
68,915

$
201,492

$
2,236

$
616,071
Watch

666

6,665

8,252

4,141

4,067

9,307

195

33,293
Special Mention

0

0

601

663

468

5,923

0

7,655
Substandard

644

793

4,913

1,995

986

5,111

488

14,930
Total Residential 1-4 Family - Commercial

$
105,940

$
96,790

$
84,076

$
85,955

$
74,436

$
221,833

$
2,919

$
671,949

Other Commercial

Pass

$
223,490

$
112,045

$
9,549

$
30,314

$
16,494

$
42,158

$
44,180

$
478,230
Watch

0

0

613

1,299

1,189

3,934

0

7,035
Special Mention

10

0

0

7

0

4,591

102

4,710
Total Other Commercial

$
223,500

$
112,045

$
10,162

$
31,620

$
17,683

$
50,683

$
44,282

$
489,975

Total Commercial

Pass

$
3,188,757

$
1,745,845

$
1,280,638

$
956,192

$
733,053

$
2,089,643

$
712,011

$
10,706,139
Watch

37,707

218,838

129,909

87,358

115,922

291,384

39,097

920,215
Special Mention

4,989

24,834

49,668

24,091

51,870

56,829

6,701

218,982
Substandard

1,424

9,920

42,483

3,282

5,163

39,917

4,873

107,062
Total Commercial

$
3,232,877

$
1,999,437

$
1,502,698

$
1,070,923

$
906,008

$
2,477,773

$
762,682

$
11,952,398

~~-24-~~-22-

Table of Contents

Consumer Loans

For Consumer loans, the Company evaluates credit quality based on the delinquency status of the loan. The following table details the amortized cost of the classes of loans within the Consumer segment based on their delinquency status and year of origination as of June 30, ~~2021~~2022 (dollars in thousands):


		June 30, 2021																June 30, 2022
		Term Loans Amortized Cost Basis by Origination Year																Term Loans Amortized Cost Basis by Origination Year


	2021		2020		2019		2018		2017		Prior		Revolving Loans		Total		2022		2021		2020		2019		2018		Prior		Revolving Loans		Total
Residential 1-4 Family - Consumer
Current	$	129,493	$	198,964	$	68,060	$	45,005	$	55,929	$	307,923	$	11	$	805,385	$	124,295	$	246,560	$	165,049	$	39,693	$	24,195	$	249,933	$	13	$	849,738
30-59 Days Past Due		0		0		89		0		44		631		0		764		0		0		0		65		152		377		0		594
60-89 Days Past Due		0		0		117		0		307		568		0		992		0		0		0		40		225		1,381		0		1,646
90+ Days Past Due		0		161		194		20		0		2,350		0		2,725		0		0		0		45		0		1,067		0		1,112
Nonaccrual		0		0		85		908		887		11,609		0		13,489		0		436		0		270		854		10,524		0		12,084
Total Residential 1-4 Family - Consumer	$	129,493	$	199,125	$	68,545	$	45,933	$	57,167	$	323,081	$	11	$	823,355	$	124,295	$	246,996	$	165,049	$	40,113	$	25,426	$	263,282	$	13	$	865,174

Residential 1-4 Family - Revolving
Current	$	2,639	$	10,741	$	2,660	$	1,256	$	0	$	486	$	535,348	$	553,130	$	52,236	$	15,442	$	6,011	$	1,762	$	851	$	480	$	500,126	$	576,908
30-59 Days Past Due		0		0		0		0		0		0		919		919		0		0		0		0		0		0		1,368		1,368
60-89 Days Past Due		0		0		0		0		0		0		678		678		0		0		0		0		0		0		731		731
90+ Days Past Due		0		0		0		0		0		0		561		561		0		0		0		0		0		0		997		997
Nonaccrual		0		73		0		20		0		227		3,406		3,726		0		0		60		0		16		0		2,993		3,069
Total Residential 1-4 Family - Revolving	$	2,639	$	10,814	$	2,660	$	1,276	$	0	$	713	$	540,912	$	559,014	$	52,236	$	15,442	$	6,071	$	1,762	$	867	$	480	$	506,215	$	583,073

Auto
Current																	$	146,027	$	183,137	$	100,055	$	57,027	$	22,705	$	13,883	$	0	$	522,834
30-59 Days Past Due																		189		631		267		339		176		239		0		1,841
60-89 Days Past Due																		24		54		55		53		0		27		0		213
90+ Days Past Due																		26		10		54		41		0		3		0		134
Nonaccrual																		0		32		92		93		21		41		0		279
Total Auto																	$	146,266	$	183,864	$	100,523	$	57,553	$	22,902	$	14,193	$	0	$	525,301

Consumer
Current	$	6,922	$	20,354	$	50,736	$	46,063	$	16,716	$	19,881	$	33,262	$	193,934	$	31,089	$	19,340	$	13,178	$	30,036	$	22,274	$	23,930	$	39,547	$	179,394
30-59 Days Past Due		0		21		104		154		51		201		14		545		6		3		48		107		115		56		26		361
60-89 Days Past Due		0		9		148		65		28		31		16		297		52		0		13		70		70		5		0		210
90+ Days Past Due		0		0		21		126		7		1		1		156		0		45		1		1		31		0		1		79
Nonaccrual		0		0		0		0		0		104		0		104		0		0		0		0		0		1		0		1
Total Consumer	$	6,922	$	20,384	$	51,009	$	46,408	$	16,802	$	20,218	$	33,293	$	195,036	$	31,147	$	19,388	$	13,240	$	30,214	$	22,490	$	23,992	$	39,574	$	180,045

Auto
Current	$	85,151	$	151,237	$	92,687	$	42,811	$	23,624	$	13,718	$	0	$	409,228
30-59 Days Past Due		30		419		387		184		166		147		0		1,333
60-89 Days Past Due		50		19		26		52		10		8		0		165
90+ Days Past Due		0		3		132		0		18		15		0		168
Nonaccrual		0		28		27		30		32		62		0		179
Total Auto	$	85,231	$	151,706	$	93,259	$	43,077	$	23,850	$	13,950	$	0	$	411,073

Total Consumer
Current	$	224,205	$	381,296	$	214,143	$	135,135	$	96,269	$	342,008	$	568,621	$	1,961,677	$	353,647	$	464,479	$	284,293	$	128,518	$	70,025	$	288,226	$	539,686	$	2,128,874
30-59 Days Past Due		30		440		580		338		261		979		933		3,561		195		634		315		511		443		672		1,394		4,164
60-89 Days Past Due		50		28		291		117		345		607		694		2,132		76		54		68		163		295		1,413		731		2,800
90+ Days Past Due		0		164		347		146		25		2,366		562		3,610		26		55		55		87		31		1,070		998		2,322
Nonaccrual		0		101		112		958		919		12,002		3,406		17,498		0		468		152		363		891		10,566		2,993		15,433
Total Consumer	$	224,285	$	382,029	$	215,473	$	136,694	$	97,819	$	357,962	$	574,216	$	1,988,478	$	353,944	$	465,690	$	284,883	$	129,642	$	71,685	$	301,947	$	545,802	$	2,153,593

The Company did not have any material revolving loans convert to term during the six months ended June 30, ~~2021.~~2022.

~~-25-~~-23-

Table of Contents

The following table details the amortized cost of the classes of loans within the Consumer segment based on their delinquency status and year of origination as of December 31, ~~2020~~2021 (dollars in thousands):


		December 31, 2020																December 31, 2021
		Term Loans Amortized Cost Basis by Origination Year																Term Loans Amortized Cost Basis by Origination Year


	2020		2019		2018		2017		2016		Prior		Revolving Loans		Total		2021		2020		2019		2018		2017		Prior		Revolving Loans		Total
Residential 1-4 Family - Consumer
Current	$	213,763	$	75,133	$	64,299	$	68,320	$	102,123	$	269,203	$	11	$	792,852	$	248,904	$	174,459	$	47,905	$	33,809	$	44,179	$	246,554	$	11	$	795,821
30-59 Days Past Due		678		181		2,243		516		457		6,107		0		10,182		0		157		143		807		460		1,801		0		3,368
60-89 Days Past Due		156		0		57		679		0		641		0		1,533		0		0		0		624		107		2,194		0		2,925
90+ Days Past Due		608		1,696		23		0		1,246		2,126		0		5,699		0		0		46		20		304		2,643		0		3,013
Nonaccrual		0		0		696		851		887		10,166		0		12,600		444		0		117		884		1,330		8,622		0		11,397
Total Residential 1-4 Family - Consumer	$	215,205	$	77,010	$	67,318	$	70,366	$	104,713	$	288,243	$	11	$	822,866	$	249,348	$	174,616	$	48,211	$	36,144	$	46,380	$	261,814	$	11	$	816,524

Residential 1-4 Family - Revolving
Current	$	13,217	$	3,916	$	1,593	$	300	$	0	$	636	$	567,860	$	587,522	$	16,546	$	9,511	$	2,230	$	1,056	$	0	$	484	$	524,825	$	554,652
30-59 Days Past Due		70		0		0		0		0		0		2,905		2,975		0		0		0		0		0		0		1,493		1,493
60-89 Days Past Due		53		0		0		0		0		0		991		1,044		0		0		0		0		0		0		363		363
90+ Days Past Due		0		0		0		0		0		0		826		826		0		0		0		0		0		0		882		882
Nonaccrual		0		0		21		0		0		227		4,381		4,629		0		63		0		18		0		0		3,325		3,406
Total Residential 1-4 Family - Revolving	$	13,340	$	3,916	$	1,614	$	300	$	0	$	863	$	576,963	$	596,996	$	16,546	$	9,574	$	2,230	$	1,074	$	0	$	484	$	530,888	$	560,796

Auto
Current																	$	207,229	$	123,848	$	72,427	$	31,745	$	16,020	$	7,204	$	0	$	458,473
30-59 Days Past Due																		299		382		518		259		245		163		0		1,866
60-89 Days Past Due																		45		29		95		33		36		11		0		249
90+ Days Past Due																		55		101		42		20		23		0		0		241
Nonaccrual																		0		81		55		27		27		33		0		223
Total Auto																	$	207,628	$	124,441	$	73,137	$	32,084	$	16,351	$	7,411	$	0	$	461,052

Consumer
Current	$	26,498	$	68,208	$	67,041	$	22,464	$	9,997	$	15,893	$	35,450	$	245,551	$	25,084	$	16,059	$	38,594	$	30,890	$	12,853	$	16,929	$	35,534	$	175,943
30-59 Days Past Due		35		252		504		98		15		143		119		1,166		31		94		201		186		63		26		88		689
60-89 Days Past Due		28		176		317		23		0		3		3		550		11		13		62		60		34		0		6		186
90+ Days Past Due		5		84		242		4		0		56		3		394		1		4		33		72		8		0		2		120
Nonaccrual		0		0		0		0		0		69		0		69		0		0		0		0		0		54		0		54
Total Consumer	$	26,566	$	68,720	$	68,104	$	22,589	$	10,012	$	16,164	$	35,575	$	247,730	$	25,127	$	16,170	$	38,890	$	31,208	$	12,958	$	17,009	$	35,630	$	176,992

Auto
Current	$	171,051	$	115,319	$	55,886	$	32,555	$	17,081	$	6,314	$	0	$	398,206
30-59 Days Past Due		239		467		543		478		197		152		0		2,076
60-89 Days Past Due		124		150		0		59		26		17		0		376
90+ Days Past Due		6		23		53		58		15		11		0		166
Nonaccrual		30		93		126		101		88		62		0		500
Total Auto	$	171,450	$	116,052	$	56,608	$	33,251	$	17,407	$	6,556	$	0	$	401,324

Total Consumer
Current	$	424,529	$	262,576	$	188,819	$	123,639	$	129,201	$	292,046	$	603,321	$	2,024,131	$	497,763	$	323,877	$	161,156	$	97,500	$	73,052	$	271,171	$	560,370	$	1,984,889
30-59 Days Past Due		1,022		900		3,290		1,092		669		6,402		3,024		16,399		330		633		862		1,252		768		1,990		1,581		7,416
60-89 Days Past Due		361		326		374		761		26		661		994		3,503		56		42		157		717		177		2,205		369		3,723
90+ Days Past Due		619		1,803		318		62		1,261		2,193		829		7,085		56		105		121		112		335		2,643		884		4,256
Nonaccrual		30		93		843		952		975		10,524		4,381		17,798		444		144		172		929		1,357		8,709		3,325		15,080
Total Consumer	$	426,561	$	265,698	$	193,644	$	126,506	$	132,132	$	311,826	$	612,549	$	2,068,916	$	498,649	$	324,801	$	162,468	$	100,510	$	75,689	$	286,718	$	566,529	$	2,015,364

The Company did not have any material revolving loans convert to term during the year ended December 31, ~~2020.~~2021.

~~-26-~~-24-

Table of Contents

4. GOODWILL AND INTANGIBLE ASSETS

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

COVID-19 has disrupted and adversely impacted the economy and created significant volatility in the financial markets. The volatility in the financial markets adversely affected the Company’s expected future cash flows, due to the lower interest rate environment and other factors. The forecasted impact from COVID-19 was included in the Company’s annual goodwill impairment test in the second quarter of 2021 and the Company determined that there was 0 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 June 30, 2021 and concluded~~ determined that there was 0 impairment ~~existed~~to its goodwill or intangible assets as of the balance sheet date.

Effective June 30, 2022, the Company, the Bank, and CSP completed the sale of DHFB, which was formerly a subsidiary of the Bank, resulting in a reduction in both the Company’s goodwill of $10.3 million and intangible assets of $5.7 million.

Amortization expense of intangibles for the three and six months ended June 30, 2022 and 2021 totaled $2.9 million and ~~2020 totaled~~$6.0 million, and $3.6 million and $7.3 ~~million, and $4.2 million and $8.6~~ million, respectively.

As of June 30, ~~2021,~~2022, the estimated remaining amortization expense of intangibles is as follows for the years ending (dollars in thousands):


For the remaining six months of 2021	$	6,605
2022		11,490
For the remaining six months of 2022			$	4,860
2023		9,688		8,518
2024		7,818		6,753
2025		6,221		5,154
2026				3,559
Thereafter		8,095		2,777
Total estimated amortization expense	$	49,917	$	31,621

~~-27-~~-25-

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 3114 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 June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the carrying value of residual assets covered by residual value guarantees and RVI was ~~$18.9~~$31.8 million and ~~$14.7~~$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~~“Loans held for ~~Investment (net~~investment, net of deferred fees and ~~costs)~~costs” on the Company’s Consolidated Balance Sheets. Lease income is recorded ~~within Interest Income~~in “Interest and fees on loans” on the Company’s Consolidated Statements of Income. ~~There were no significant changes in the balance of the Company’s unguaranteed residual assets for the periods ending June 30, 2021 and December 31, 2020.~~

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


	June 30, 2021		December 31, 2020		June 30, 2022		December 31, 2021
Sales-type and direct financing leases:
Lease receivables, net of unearned income and deferred selling profit	$	166.8	$	141.2	$	244,356	$	199,423
Unguaranteed residual values, net of unearned income and deferred selling profit		6.3		4.8		11,414		8,911
Total net investment in sales-type and direct financing leases	$	173.1	$	146.0	$	255,770	$	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 ~~25 years~~.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~~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~~assets within ~~Other Assets~~“Other assets” and lease liabilities within ~~Other Liabilities.~~“Other liabilities.” ROU ~~Assets~~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~~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~~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~~assets and lease liabilities.

~~-28-~~-26-

Table of Contents

Lease expense for operating lease payments is recognized on a straight-line basis over the lease term and recorded in ~~Occupancy Expense within noninterest expense~~“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~~assets are recorded in ~~Occupancy Expense within noninterest expense~~“Occupancy expenses” on the Company’s Consolidated Statements of Income and interest expense on the finance lease liability is recorded in ~~Interest Expense~~“Interest on ~~Long-Term Borrowings within total interest expense~~long-term borrowings” on the Company’s Consolidated Statements of Income.

~~As of June 30, 2021, the Company had 0 sales leaseback transactions or leases that have 0t yet commenced that create significant rights and obligations.~~

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


	June 30, 2021						December 31, 2020						June 30, 2022						December 31, 2021
	Operating			Finance			Operating			Finance			Operating			Finance			Operating			Finance
Right-of-use-assets	$	45,277		$	6,965		$	48,051		$	7,425
ROU assets													$	32,947		$	6,047		$	40,653		$	6,506
Lease liabilities		55,151			10,055			58,901			10,621			45,769			8,888			50,742			9,477
Lease Term and Discount Rate of Operating leases:
Weighted-average remaining lease term (years)		6.98			7.58			7.27			8.08			6.56			6.58			6.75			7.08
Weighted-average discount rate ⁽¹⁾		2.60	%		1.17	%		2.66	%		1.17	%		2.60	%		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.~~date


	Six months ended June 30,				Six months ended June 30,
	2021		2020		2022		2021
Cash paid for amounts included in measurement of lease liabilities:
Operating Cash Flows from Finance Leases	$	60	$	10	$	53	$	60
Operating Cash Flows from Operating Leases		5,988		6,893		5,756		5,988
Financing Cash Flows from Finance Leases		566		0		589		566
Right-of-use assets obtained in exchange for lease obligations:
ROU assets obtained in exchange for lease obligations:
Operating leases		2,164		3,183	$	424	$	2,164
Finance leases		0		10,549


	Three months ended June 30,				Six months ended June 30,				Three months ended June 30,				Six months ended June 30,
		2021		2020		2021		2020		2022		2021		2022		2021
Net Operating Lease Cost	$	2,532	$	2,928	$	5,081	$	5,847	$	2,230	$	2,532	$	4,542	$	5,081
Finance Lease Cost:
Amortization of right-of-use assets		230		77		459		77		230		230		459		459
Interest on lease liabilities		30		10		60		10		26		30		53		60
Total Lease Cost	$	2,792	$	3,015	$	5,600	$	5,934	$	2,486	$	2,792	$	5,054	$	5,600

~~-29-~~

~~Table of Contents~~

The maturities of lessor and lessee arrangements outstanding at June 30, ~~2021~~2022 are presented in the ~~tables~~table below (dollars in thousands):

June 30, 2021

June 30, 2022

Lessor

Lessee

Lessor

Lessee

Sales-type and Direct Financing

Operating

Finance

Sales-type and Direct Financing

Operating

Finance

For the remaining six months of 2021

18,792

5,928

634

2022

38,888

11,293

1,292

For the remaining six months of 2022

32,605

5,560

650

2023

36,922

10,154

1,325

60,499

10,313

1,325

2024

36,611

9,135

1,358

57,677

9,206

1,358

2025

24,815

6,810

1,392

43,809

7,055

1,392

2026

29,998

4,640

1,427

Thereafter

25,420

17,503

4,516

42,578

13,449

3,088

Total undiscounted cash flows

181,448

60,823

10,517

267,166

50,223

9,240

Less: Adjustments ⁽¹⁾

14,695

5,672

462

22,810

4,454

352

Total ⁽²⁾

166,753

55,151

10,055

244,356

45,769

8,888

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

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

~~-30-~~-27-

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 June 30, ~~2021~~2022 and December 31, ~~2020~~2021 (dollars in thousands):


	June 30,			December 31,			June 30,			December 31,
	2021			2020			2022			2021
Securities sold under agreements to repurchase	$	89,749		$	100,888		$	118,658		$	117,870
Federal Funds Purchased		0			150,000
FHLB Advances		0			100,000			290,000			0
Total short-term borrowings	$	89,749		$	350,888		$	408,658		$	117,870

Average outstanding balance during the period	$	124,437		$	213,932		$	241,289		$	113,030
Average interest rate during the period		0.11	%		0.79	%		0.48	%		0.10	%
Average interest rate at end of period		0.08	%		0.13	%		0.90	%		0.07	%

The Bank maintains federal funds lines with several correspondent banks, the ~~remaining~~ available balance was ~~$997.0 million~~$1.0 billion and ~~$847.0~~$997.0 million at June 30, ~~2021~~2022 and December 31, ~~2020,~~2021 respectively. The Company maintains an alternate line of credit at a correspondent ~~bank, which had an~~bank; the available balance ofwas $25.0 million at both June 30, ~~2021~~2022 and December 31, ~~2020.~~2021. The Company has certain restrictive covenants related to certain asset quality, capital, and profitability metrics associated with these lines and is in compliance with ~~such~~these covenants as of June 30, ~~2021~~2022 and December 31, ~~2020.~~ 2021. Additionally, the Company had a collateral dependent line of credit with the FHLB of up to ~~$5.9~~$5.9 billion and $6.0 billion at June 30, ~~2021~~2022 and December 31, ~~2020,~~2021 respectively.

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 ~~response to the current interest rate environment,~~connection with several previous bank acquisitions, the Company ~~prepaid a $200.0~~issued $58.5 million ~~long-term FHLB advance~~and acquired $87.0 million of trust preferred capital notes. Most recently, in connection with the acquisition of Access on February ~~26, 2021 and $550.0 million of long-term FHLB advances in 2020, which resulted in prepayment penalties of $14.7~~1, 2019, the Company acquired additional trust preferred capital notes totaling $5.0 million. The remaining fair value discount on all acquired trust preferred capital notes was $12.9 million and ~~$31.2~~$13.3 million ~~respectively. In addition, on November~~at June 30, ~~2020, the Company redeemed $8.5 million in subordinated debt originally acquired as part of the Xenith acquisition.~~2022 and December 31, 2021, respectively.

~~-31-~~-28-

Table of Contents

Total long-term borrowings consist of the following as of June 30, ~~2021~~2022 (dollars in thousands):

Spread to

Principal

3-Month LIBOR

Rate ⁽¹⁾

Maturity

Investment ⁽²⁾

Principal

3-Month LIBOR

Rate ⁽¹⁾

Maturity

Investment ⁽²⁾

Trust Preferred Capital Securities

Trust Preferred Capital Note - Statutory Trust I

22,500

2.75

2.90

6/17/2034

696

22,500

2.75

5.04

6/17/2034

696

Trust Preferred Capital Note - Statutory Trust II

36,000

1.40

1.55

6/15/2036

1,114

36,000

1.40

3.69

6/15/2036

1,114

VFG Limited Liability Trust I Indenture

20,000

2.73

2.88

3/18/2034

619

20,000

2.73

5.02

3/18/2034

619

FNB Statutory Trust II Indenture

12,000

3.10

3.25

6/26/2033

372

12,000

3.10

5.39

6/26/2033

372

Gateway Capital Statutory Trust I

8,000

3.10

3.25

9/17/2033

248

8,000

3.10

5.39

9/17/2033

248

Gateway Capital Statutory Trust II

7,000

2.65

2.80

6/17/2034

217

7,000

2.65

4.94

6/17/2034

217

Gateway Capital Statutory Trust III

15,000

1.50

1.65

5/30/2036

464

15,000

1.50

3.79

5/30/2036

464

Gateway Capital Statutory Trust IV

25,000

1.55

1.70

7/30/2037

774

25,000

1.55

3.84

7/30/2037

774

MFC Capital Trust II

5,000

2.85

3.00

1/23/2034

155

5,000

2.85

5.14

1/23/2034

155

Total Trust Preferred Capital Securities

150,500

4,659

150,500

4,659

Subordinated Debt⁽³⁾⁽⁴⁾

2026 Subordinated Debt⁽⁵⁾

150,000

5.00

12/15/2026

2031 Subordinated Debt

250,000

2.875

12/15/2031

Total Subordinated Debt(5)

150,000

250,000

Fair Value Premium (Discount)⁽⁶⁾

(14,829)

Fair Value Discount⁽⁶⁾

(15,869)

Investment in Trust Preferred Capital Securities

4,659

Total Long-term Borrowings

290,330

389,290

⁽¹⁾Rate as of June 30, ~~2021.~~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 junior subordinated debt securities with like maturities and like interest rates to the capital securities. The Company’s investment in the trusts is reported in "Other ~~Assets"~~assets" on the Company’s Consolidated Balance Sheets.

⁽³⁾The remaining issuance discount as of June 30, ~~2021~~2022 is $~~1.1~~3.0 million.

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

⁽⁵⁾Fixed-to-floating rate notes. On December 15, 2026, the interest rate changes to a floating rate of the then current Three-Month Term SOFR plus a spread of 186 bps through its maturity date. The notes ~~are redeemable, at the Company’s option,~~may be redeemed before maturity on or after December 15, ~~2021, at which time the interest rate will change to a floating rate of LIBOR plus~~ ~~3.175%~~ ~~through its maturity date.~~2026.

⁽⁶⁾~~Includes discount~~Remaining discounts of $12.9 million and $3.0 million on ~~issued subordinated notes.~~Trust Preferred Capital Securities and Subordinated Debt, respectively.

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Total long-term borrowings consist of the following as of December 31, ~~2020~~2021 (dollars in thousands):


			Spread to									Spread to
	Principal		3-Month LIBOR		Rate ⁽¹⁾		Maturity	Investment ⁽²⁾		Principal		3-Month LIBOR		Rate ⁽¹⁾		Maturity	Investment ⁽²⁾
Trust Preferred Capital Securities
Trust Preferred Capital Note - Statutory Trust I	$	22,500	2.75	%	2.99	%	6/17/2034	$	696	$	22,500	2.75	%	2.96	%	6/17/2034	$	696
Trust Preferred Capital Note - Statutory Trust II		36,000	1.40	%	1.64	%	6/15/2036		1,114		36,000	1.40	%	1.61	%	6/15/2036		1,114
VFG Limited Liability Trust I Indenture		20,000	2.73	%	2.97	%	3/18/2034		619		20,000	2.73	%	2.94	%	3/18/2034		619
FNB Statutory Trust II Indenture		12,000	3.10	%	3.34	%	6/26/2033		372		12,000	3.10	%	3.31	%	6/26/2033		372
Gateway Capital Statutory Trust I		8,000	3.10	%	3.34	%	9/17/2033		248		8,000	3.10	%	3.31	%	9/17/2033		248
Gateway Capital Statutory Trust II		7,000	2.65	%	2.89	%	6/17/2034		217		7,000	2.65	%	2.86	%	6/17/2034		217
Gateway Capital Statutory Trust III		15,000	1.50	%	1.74	%	5/30/2036		464		15,000	1.50	%	1.71	%	5/30/2036		464
Gateway Capital Statutory Trust IV		25,000	1.55	%	1.79	%	7/30/2037		774		25,000	1.55	%	1.76	%	7/30/2037		774
MFC Capital Trust II		5,000	2.85	%	3.09	%	1/23/2034		155		5,000	2.85	%	3.06	%	1/23/2034		155
Total Trust Preferred Capital Securities	$	150,500						$	4,659	$	150,500						$	4,659
FHLB Advances
Fixed Rate Convertible		200,000	-	%	1.78	%	10/26/2028
Total FHLB Advances	$	200,000
Subordinated Debt⁽³⁾⁽⁴⁾
2026 Subordinated Debt⁽⁵⁾		150,000	-	%	5.00	%	12/15/2026
Total Subordinated Debt	$	150,000
Fair Value Premium (Discount)⁽⁶⁾		(15,330)
2031 Subordinated Debt											250,000	0	%	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									4,659
Total Long-term Borrowings	$	489,829								$	388,724

⁽¹⁾ Rate as of December 31, ~~2020.~~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 securities with like maturities and like interest rates to the capital securities. The Company’s investment in the trusts is reported in "Other ~~Assets"~~assets" on the Company’s Consolidated Balance Sheets.

⁽³⁾The remaining issuance discount as of December 31, ~~2020~~2021 is $~~1.2~~3.1 million.

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

⁽⁵⁾Fixed-to-floating rate notes. On December 15, 2026, the interest changes to a floating rate of the then current Three-Month Term SOFR plus a spread of 186 bps through its maturity date. The notes ~~are redeemable, at the Company’s option,~~may be redeemed before maturity on or after December 15, ~~2021, at which time the interest rate will change to a floating rate of LIBOR plus~~ ~~3.175%~~ ~~through its maturity date.~~2026.

⁽⁶⁾ ~~Includes discount~~Remaining discounts of $13.3 million and $3.1 million on ~~issued subordinated notes.~~Trust Preferred Capital Securities and Subordinated Debt, respectively.

As of June 30, ~~2021,~~2022, the contractual maturities of long-term debt are as follows for the years ending (dollars in thousands):

Trust

Preferred

Fair Value

Total

Preferred

Total

Capital

Subordinated

Premium

Long-term

Capital

Subordinated

Fair Value

Long-term

Notes

Debt

(Discount) ⁽¹⁾

Borrowings

Notes

Debt

Discount ⁽¹⁾

Borrowings

For the remaining six months of 2021

(507)

2022

(1,030)

For the remaining six months of 2022

(573)

2023

(1,053)

(1,162)

2024

(1,078)

(1,187)

2025

(1,102)

(1,211)

2026

(1,236)

Thereafter

155,159

150,000

(10,059)

295,100

155,159

250,000

(10,500)

394,659

Total long-term borrowings

155,159

150,000

(14,829)

290,330

155,159

250,000

(15,869)

389,290

⁽¹⁾ Includes discount on issued subordinated notes.

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7. COMMITMENTS AND CONTINGENCIES

Litigation Matters

In the ordinary course of its operations, the Company and its subsidiaries are ~~parties to~~involved in various legal and regulatory proceedings. ~~Based~~The amount, if any, of the ultimate liability with respect to such matters cannot be determined. Despite the uncertainties of such litigation and investigations, and based on the information presently available, and after consultation with legal counsel, management believes that the ultimate outcome in such proceedings in the aggregate will not have a material adverse effect on the business, financial condition, or results of operations 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 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 and funding information, current and future economic conditions, risk ratings, and past due status among other factors in the consideration of expected credit losses in the Company’s off-balance sheet commitments to extend credit. The Company also records an indemnification reserve ~~that includes balances relating to mortgage loans previously sold~~ based on historical statistics and loss ~~rates.~~

rates related to mortgage loans previously sold. As of June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the Company’s ~~reserves for unfunded commitments~~RUC and indemnification ~~were $10.7~~reserve was $9.4 million and ~~$10.8~~$8.4 million, respectively.

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


	June 30, 2021		December 31, 2020		June 30, 2022		December 31, 2021
Commitments with off-balance sheet risk:
Commitments to extend credit ⁽¹⁾	$	5,939,757	$	4,722,412	$	5,253,798	$	5,825,557
Letters of credit		159,029		161,827		154,241		152,506
Total commitments with off-balance sheet risk	$	6,098,786	$	4,884,239	$	5,408,039	$	5,978,063
⁽¹⁾ Includes unfunded overdraft protection.

As of June 30, 2022, the Company had approximately $204.2 million in deposits in other financial institutions of which $180.8 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 $20.0 million and $102.0 million in deposits in other financial institutions that were uninsured at June 30, 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 contracts to hedge various exposures or to modify the interest rate characteristics of various balance sheet accounts. For the OTC derivatives cleared with the central clearinghouses,

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~~As of June 30, 2021, the Company had approximately $205.5 million in deposits in other financial institutions, of which $73.3~~ million served as collateral for cash flow and loan swap derivatives. As of December 31, 2020, the Company had approximately $290.5 million in deposits in other financial institutions, of which $251.0 million served as collateral for cash flow and loan swap derivatives. For the OTC derivatives cleared with the central clearinghouses, the variation margin is treated as a settlement of the related derivatives fair values. ~~The Company had approximately $129.1~~ ~~million and $36.4 million in deposits in other financial institutions that were uninsured at~~ ~~June 30, 2021~~ ~~and December 31, 2020, 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 to hedge various exposures or to modify the interest rate characteristics of various balance sheet accounts.~~ Refer to Note 8 “Derivatives” in Part I, Item I of this Quarterly Report for additional information.

~~As part of the Company’s liquidity management strategy, it~~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 June 30, ~~2021~~2022 and December 31, ~~2020~~2021 (dollars in thousands):


	Pledged Assets as of June 30, 2021										Pledged Assets as of June 30, 2022
			AFS		HTM								AFS		HTM
	Cash		Securities ⁽¹⁾		Securities ⁽¹⁾		Loans ⁽²⁾		Total		Cash		Securities ⁽¹⁾		Securities ⁽¹⁾		Loans ⁽²⁾		Total
Public deposits	$	0	$	506,490	$	430,264	$	0	$	936,754	$	0	$	579,459	$	498,568	$	0	$	1,078,027
Repurchase agreements		0		146,847		0		0		146,847		0		124,242		0		0		124,242
FHLB advances		0		48,520		0		4,389,787		4,438,307		0		38,944		0		2,592,215		2,631,159
Derivatives		73,274		65,978		0		0		139,252		180,786		59,353		0		0		240,139
Fed Funds		0		0		0		352,188		352,188		0		0		0		435,262		435,262
Other purposes		0		23,022		990		0		24,012		0		27,610		869		0		28,479
Total pledged assets	$	73,274	$	790,857	$	431,254	$	4,741,975	$	6,037,360	$	180,786	$	829,608	$	499,437	$	3,027,477	$	4,537,308

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


	Pledged Assets as of December 31, 2020										Pledged Assets as of December 31, 2021
			AFS		HTM								AFS		HTM
	Cash		Securities ⁽¹⁾		Securities ⁽¹⁾		Loans ⁽²⁾		Total		Cash		Securities ⁽¹⁾		Securities ⁽¹⁾		Loans ⁽²⁾		Total
Public deposits	$	0	$	469,864	$	436,449	$	0	$	906,313	$	0	$	703,489	$	472,243	$	0	$	1,175,732
Repurchase agreements		0		116,876		0		0		116,876		0		130,217		0		0		130,217
FHLB advances		0		52,323		0		4,374,383		4,426,706		0		43,722		0		4,263,259		4,306,981
Derivatives		251,047		785		0		0		251,832		82,299		65,053		0		0		147,352
Fed Funds		0		0		0		340,847		340,847		0		0		0		392,067		392,067
Other purposes		0		123,388		8,634		0		132,022		0		22,003		985		0		22,988
Total pledged assets	$	251,047	$	763,236	$	445,083	$	4,715,230	$	6,174,596	$	82,299	$	964,484	$	473,228	$	4,655,326	$	6,175,337

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

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8. DERIVATIVES

The Company is exposed to economic risks arising from its business operations and uses derivatives primarily to manage risk associated with changing interest rates, and to assist customers with their risk management objectives. The Company designates certain derivatives as hedging instruments in a qualifying hedge accounting relationship (cash flow or fair value hedge). The remaining are classified as free-standing 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 ~~requirement,~~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 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. Amounts receivable or payable are recognized as accrued under the terms of the agreements.

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

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

~~During the six months ended~~At June 30, 2022 and December 31, 2021, the Company ~~entered into two~~had interest rate swaps ~~with notional amounts totaling $200~~ ~~million~~ designated and qualifying as cash flow hedges of the Company’s forecasted variable interest receipts on variable rate ~~loans. The Company did not have any derivatives designated as cash flow hedges at December 31, 2020.~~loans due to changes in the interest rate with a notional amount of $500 million. For each agreement, the Company receives interest at a fixed rate and pays at a variable rate.

Fair Value ~~Hedge~~Hedges

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

Loans: During the normal course of business, the Company enters into swap agreements to convert certain long-term fixed-rate loans to floating rates to hedge the Company’s exposure to interest rate risk. The Company pays a fixed interest rate to the counterparty and receives a floating rate from the same counterparty calculated on the aggregate notional amount. At June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the aggregate notional amount of the related hedged items for certain long-term fixed rate loans totaled ~~$91.2~~$86.2 million and ~~$74.7~~$88.6 million, respectively, and the fair value of the swaps associated with the derivative related to hedged items was an unrealized gain of $7.8 million and an unrealized loss of ~~$1.6 million and $5.1 million,~~$620,000, respectively.

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AFS Securities: The Company has entered into a swap agreement to hedge the interest rate risk on a portion of its fixed rate ~~available for sale~~AFS securities. At June 30, ~~2021~~2022 and December 31, 2020,2021, the aggregate notional amount of the related hedged items of the AFS securities totaled ~~$50~~$50.0 million and the fair value of the swaps associated with the derivative related to hedged items was an unrealized loss of ~~$5.4 million~~$23,000 and ~~$7.3~~$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. The Company assesses the effectiveness of each hedging relationship by comparing the changes in fair value or cash flows on the derivative hedging instrument with the changes in fair value or cash flows on the designated hedged item or transactions for the risk being hedged. If a hedging relationship ceases to qualify for hedge accounting, the relationship is discontinued and future changes in the fair value of the derivative instrument are recognized in current period earnings. For a discontinued or terminated fair value hedging relationship, all remaining basis adjustments to the carrying amount of the hedged item are amortized to interest income or expense over the remaining life of the hedged item consistent with the amortization of other discounts or premiums. Previous balances deferred in AOCI from discontinued or terminated cash flow hedges are reclassified to interest income or expense as the hedged transactions affect earnings or over the originally specified term of the hedging relationship. The Company’s hedges continue to be highly effective and had no material impact on the Consolidated Statements of Income.

~~Loan Swaps~~Interest Rate Contracts

During the normal course of business, the Company ~~offers~~enters into interest rate ~~swap loan relationships (“loan swaps”) to its~~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.

The following table summarizes key elements of the Company’s derivative instruments as of June 30, ~~2021~~2022 and December 31, 2020,2021, segregated by derivatives that are considered accounting hedges and those that are not (dollars in thousands):


	June 30, 2021						December 31, 2020						June 30, 2022						December 31, 2021
			Derivative ⁽²⁾						Derivative ⁽²⁾						Derivative ⁽²⁾						Derivative ⁽²⁾
	Notional or						Notional or						Notional or						Notional or
	Contractual						Contractual						Contractual						Contractual
	Amount ⁽¹⁾		Assets		Liabilities		Amount ⁽¹⁾		Assets		Liabilities		Amount ⁽¹⁾		Assets		Liabilities		Amount ⁽¹⁾		Assets		Liabilities
Derivatives designated as accounting hedges:
Interest rate contracts: ⁽³⁾
Cash flow hedges	$	200,000	$	0	$	—	$	0	$	0	$	0	$	500,000	$	0	$	0	$	500,000	$	0	$	0
Fair value hedges		141,178		0		7,292		124,726		0		12,483		136,220		1,171		37		138,606		0		5,387
Derivatives not designated as accounting hedges:
Loan Swaps:⁽³⁾
Pay fixed - receive floating interest rate swaps		2,400,239		824		45,273		2,356,453		212		163,148
Pay floating - receive fixed interest rate swaps		2,400,239		102,317		9,180		2,356,453		163,148		212
Interest rate contracts⁽³⁾														5,222,073		34,354		146,260		5,017,574		73,696		49,051

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

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

⁽³⁾The Company’s cleared derivatives are classified as a single-unit of accounting, resulting in the fair value of the designated swap being reduced by the variation margin, which is treated as settlement of the related derivatives fair value for accounting ~~purposes and is reported on a net basis at June 30, 2021. The previous periods presented do not include the offsetting impact of variation margin.~~purposes.

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The following table summarizes the carrying value of the Company’s hedged assets in fair value hedges and the associated cumulative basis adjustments included in those carrying values as of June 30, ~~2021~~2022 and December 31, ~~2020~~2021 (dollars in thousands):

June 30, 2021

December 31, 2020

June 30, 2022

December 31, 2021

Cumulative

Amount of Basis

Adjustments

Included in the

Carrying Amount

Carrying

Carrying Amount

Carrying

Carrying Amount

Carrying

Carrying Amount

Carrying

of Hedged

Amount of the

of Hedged

Amount of the

of Hedged

Amount of the

of Hedged

Amount of the

Assets/(Liabilities)

Hedged

Assets/(Liabilities)

Hedged

Assets/(Liabilities)

Hedged

Assets/(Liabilities)

Hedged

Amount ⁽¹⁾

Assets/(Liabilities)

Amount ⁽¹⁾

Assets/(Liabilities)

Amount ⁽¹⁾

Assets/(Liabilities)

Amount ⁽¹⁾

Assets/(Liabilities)

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

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

134,943

5,345

166,413

7,297

96,577

112,562

4,051

Loans

91,178

1,532

74,726

5,088

86,220

(7,787)

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 June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the amortized cost basis of this portfolio was $~~135~~97 million and $~~166~~113 million, respectively, and the cumulative basis adjustment associated with this hedge was $~~5.3~~9,000 ~~million~~ and $~~7.3~~4.1 million, respectively. The amount of the designated hedged item at June 30, ~~2021~~2022 and December 31, ~~2020~~2021 totaled $50 million.

⁽²⁾Carrying value represents amortized cost.

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9. STOCKHOLDERS’ EQUITY

~~Series A Preferred Stock~~Repurchase Programs

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 Program~~

~~On July~~December 10, 2019, the Company announced that its Board of Directors has authorized a share repurchase program to purchase up to $150.0 million of the Company’s common stock through June 30, 2021 in open market transactions or privately negotiated transactions. On March 20, 2020, the Company suspended its share repurchase program, which had approximately $20 million remaining in authorization at the time. The Company repurchased an aggregate of approximately 3.7 million shares, at an average price of $35.48 per share, under the authorization prior to suspension. On May 4, 2021, the Company’s Board of Directors authorized a new share ~~repurchase program (the “Repurchase Program”)~~Repurchase Program to purchase up to ~~$125~~$100.0 million ~~worth~~ 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/~~and / or Rule 10b-18 under the Exchange Act. ~~The Repurchase Program expires on June 30, 2022 and replaced the prior repurchase program that was due to expire on June 30, 2021.~~ As part of the Repurchase Program, ~~1.1~~approximately 1.3 million shares (or ~~$42.3~~$48.2 million) were repurchased during the ~~quarter~~six months ended June 30, ~~2021. As~~2022, and of ~~June 30, 2021,~~these shares approximately 649,000 shares (or $23.2 million) were repurchased during the ~~Company is authorized~~second quarter of 2022. Approximately $51.8 million of share repurchases remain available under the Repurchase Program ~~to repurchase approximately~~ at June 30, 2022.

~~$82.7 million of the Company’s common stock.~~

Accumulated Other Comprehensive Income (Loss)

The change in ~~accumulated other comprehensive income (loss)~~AOCI for the three and six months ended June 30, ~~2021~~2022 is summarized as follows, net of tax (dollars in thousands):

Unrealized Gains

(Losses)

Unrealized

for AFS

Unrealized

for AFS

Unrealized

Gains (Losses)

Securities

Change in Fair

Gains

Gains (Losses)

Securities

Change in Fair

Gains

on AFS

Transferred to

Value of Cash

(Losses) on

on AFS

Transferred to

Value of Cash

(Losses) on

Securities

HTM

Flow Hedge

BOLI

Total

Securities

HTM

Flow Hedge

BOLI

Total

Balance - March 31, 2021

40,974

(1,475)

(3,048)

36,501

Other comprehensive income (loss):

Other comprehensive income (loss) before reclassification

13,818

2,607

16,425

Balance - March 31, 2022

(164,204)

(24,880)

(2,429)

(191,483)

Other comprehensive (loss) income:

Other comprehensive loss before reclassification

(113,374)

(11,572)

(124,946)

Amounts reclassified from AOCI into earnings

(5)

151

146

(5)

150

146

Net current period other comprehensive income (loss)

13,818

(5)

2,607

151

16,571

Balance - June 30, 2021

54,792

1,132

(2,897)

53,072

Net current period other comprehensive (loss) income

(113,373)

(5)

(11,572)

150

(124,800)

Balance - June 30, 2022

(277,577)

(36,452)

(2,279)

(316,283)

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, 2020

$
74,161

$
55

$
0

$
(3,201)

$
71,015
Other comprehensive income (loss):


Other comprehensive income (loss) before reclassification

(19,307)

0

1,179

0

(18,128)
Amounts reclassified from AOCI into earnings

(62)

(10)

(47)

304

185
Net current period other comprehensive income (loss)

(19,369)

(10)

1,132

304

(17,943)
Balance - June 30, 2021

$
54,792

$
45

$
1,132

$
(2,897)

$
53,072

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 (loss) income:

Other comprehensive loss before reclassification

(300,341)

(34,885)

(335,226)

Amounts reclassified from AOCI into earnings

(10)

317

308

Net current period other comprehensive (loss) income

(300,340)

(10)

(34,885)

317

(334,918)

Balance - June 30, 2022

(277,577)

(36,452)

(2,279)

(316,283)

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Table of Contents

The change in ~~accumulated other comprehensive income (loss)~~AOCI for the three ~~months~~ and six months ended June 30, ~~2020~~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 - March 31, 2020

$
51,035

$
70

$
0

$
(2,776)

$
48,329
Other comprehensive income (loss):

Other comprehensive income (loss) before reclassification

21,019

0

0

0

21,019
Amounts reclassified from AOCI into earnings

(8,168)

(5)

0

129

(8,044)
Net current period other comprehensive income (loss)

12,851

(5)

0

129

12,975
Balance - June 30, 2020

$
63,886

$
65

$
0

$
(2,647)

$
61,304


			Unrealized Gain										Unrealized Gain
			(Losses)										(Losses)
	Unrealized		for AFS				Unrealized				Unrealized		for AFS				Unrealized
	Gains (Losses)		Securities		Change in Fair		Gains				Gains (Losses)		Securities		Change in Fair		Gains
	on AFS		Transferred to		Value of Cash		(Losses)				on AFS		Transferred to		Value of Cash		(Losses)
	Securities		HTM		Flow Hedge		on BOLI		Total		Securities		HTM		Flow Hedge		on BOLI		Total
Balance - December 31, 2019	$	37,877	$	75	$	(782)	$	(1,595)	$	35,575
Other comprehensive income (loss):
Other comprehensive income (loss) before reclassification		35,706		0		(699)		(1,289)		33,718
Balance - March 31, 2021											$	40,974	$	50	$	(1,475)	$	(3,048)	$	36,501
Other comprehensive (loss) income:
Other comprehensive income before reclassification												13,818		0		2,607		0		16,425
Amounts reclassified from AOCI into earnings		(9,697)		(10)		1,481		237		(7,989)		0		(5)		0		151		146
Net current period other comprehensive income (loss)		26,009		(10)		782		(1,052)		25,729
Balance - June 30, 2020	$	63,886	$	65	$	0	$	(2,647)	$	61,304
Net current period other comprehensive (loss) income												13,818		(5)		2,607		151		16,571
Balance - June 30, 2021											$	54,792	$	45	$	1,132	$	(2,897)	$	53,072


			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
Other comprehensive (loss) income:
Other comprehensive (loss) income before reclassification		(19,307)		0		1,179		0		(18,128)
Amounts reclassified from AOCI into earnings		(62)		(10)		(47)		304		185
Net current period other comprehensive (loss) income		(19,369)		(10)		1,132		304		(17,943)
Balance - June 30, 2021	$	54,792	$	45	$	1,132	$	(2,897)	$	53,072

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Table of Contents

10. FAIR VALUE MEASUREMENTS

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

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

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

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

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

Assets and Liabilities Measured at Fair Value on a Recurring Basis

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

Derivative Instruments

As discussed in Note 8 “Derivatives”, 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 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 June 30, ~~2021~~2022 and December 31, ~~2020.~~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. Mortgage banking derivatives as of June 30, ~~2021~~2022 and December 31, ~~2020~~2021 did not have a material impact on the Company’s Consolidated Financial Statements.

AFS Securities

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

The Company’s investment portfolio is primarily valued using fair value measurements that are considered to be Level 2. The Company has contracted with a third-party portfolio accounting service vendor for valuation of its securities portfolio. The vendor’s primary source for security valuation is ICE, ~~Data Services,~~ which evaluates securities based on market data. ICE ~~Data Services~~ 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.

~~-41-~~-38-

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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 June 30, ~~2021~~2022 and December 31, ~~2020.~~2021.

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

Loans Held for Sale

~~Loans held for sale are carried at fair value. These loans currently consist of residential~~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 in current period earnings as a component of "Mortgage banking income" on the Company’s Consolidated Statements of Income.

The following table presents the balances of financial assets and liabilities measured at fair value on a recurring basis at June 30, ~~2021~~2022 and December 31, ~~2020~~2021 (dollars in thousands):

Fair Value Measurements at June 30, 2021 using

Fair Value Measurements at June 30, 2022 using

Significant

Quoted Prices in

Other

Significant

Quoted Prices in

Other

Significant

Active Markets for

Observable

Unobservable

Active Markets for

Observable

Unobservable

Identical Assets

Inputs

Identical Assets

Inputs

Level 1

Level 2

Level 3

Balance

Level 1

Level 2

Level 3

Balance

ASSETS

AFS securities:

U.S. government and agency securities

76,609

58,817

6,923

65,740

Obligations of states and political subdivisions

942,471

822,427

Corporate and other bonds⁽¹⁾

152,885

177,892

Mortgage-backed securities

1,699,808

MBS

1,883,713

Other securities

1,632

1,649

Loans held for sale

32,726

LHFS

15,866

Derivatives:

Interest rate swap

103,141

Interest rate contracts

34,354

Fair value hedges

1,171

LIABILITIES

Derivatives:

Interest rate swap

54,453

Interest rate contracts

146,260

Fair value hedges

7,292

⁽¹⁾ Other bonds include asset-backed securities.

~~-42-~~-39-

Table of Contents

Fair Value Measurements at December 31, 2020 using




Significant




Quoted Prices in

Other

Significant

Active Markets for

Observable

Unobservable

Identical Assets

Inputs

Inputs

Level 1

Level 2

Level 3

Balance
ASSETS








AFS securities:








U.S. government and agency securities

$
0

$
13,394

$
0

$
13,394
Obligations of states and political subdivisions

0

837,326

0

837,326
Corporate and other bonds⁽¹⁾

0

151,078

0

151,078
Mortgage-backed securities

0

1,536,996

0

1,536,996
Other securities

0

1,625

0

1,625
Loans held for sale

0

96,742

0

96,742
Derivatives:








Interest rate swap

0

163,360

0

163,360

LIABILITIES








Derivatives:








Interest rate swap

$
0

$
163,360

$
0

$
163,360
Fair value hedges

0

12,483

0

12,483


	Fair Value Measurements at December 31, 2021 using
			Significant
	Quoted Prices in		Other		Significant
	Active Markets for		Observable		Unobservable
	Identical Assets		Inputs		Inputs
	Level 1		Level 2		Level 3		Balance
ASSETS
AFS securities:
U.S. government and agency securities	$	64,474	$	9,375	$	0	$	73,849
Obligations of states and political subdivisions		0		1,008,396		0		1,008,396
Corporate and other bonds⁽¹⁾		0		153,376		0		153,376
MBS		0		2,244,389		0		2,244,389
Other securities		0		1,640		0		1,640
LHFS		0		20,861		0		20,861
Derivatives:
Interest rate contracts		0		73,696		0		73,696

LIABILITIES
Derivatives:
Interest rate contracts	$	0	$	49,051	$	0	$	49,051
Fair value hedges		0		5,387		0		5,387

⁽¹⁾Other bonds include asset-backed securities.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Certain assets are measured at fair value on a nonrecurring basis in accordance with U.S. GAAP. Adjustments to the fair value of these assets usually result from the application of lower-of-cost-or-market accounting or write-downs of individual assets after they are evaluated for impairment. The primary assets accounted for at fair value on a nonrecurring basis are related to foreclosed properties, former bank premises, and collateral-dependent loans that are individually assessed. When the asset is secured by real estate, the Company measures the fair value utilizing an income or market valuation approach based on an appraisal conducted by an independent, licensed appraiser using observable market data. Management may discount the value from the appraisal in determining the fair value if, based on its understanding of the market conditions, the collateral had been impaired below the appraised value (Level 3). The assets for which a nonrecurring fair value measurement was recorded were $9.4 million and $11.3 million during the ~~period~~periods ended June 30, ~~2021~~2022 and December 31, ~~2020 was~~ ~~$6.8 million and $12.7~~ ~~million,~~2021 respectively. The nonrecurring valuation adjustments for these assets did not have a material impact on the Company’s consolidated financial statements.

Fair Value of Financial Instruments

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

Cash and Cash Equivalents

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

HTM Securities

~~-43-~~-40-

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 June 30, ~~2021~~2022 and December 31, ~~2020.~~2021. The Company’s ~~level~~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 June 30, ~~2021~~2022 and December 31, ~~2020.~~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 and leases were estimated through use of discounted cash flows. Credit loss assumptions were based on market PD/LGD for loan and lease cohorts. The discount rate was based primarily on recent market origination rates. Fair value of loans and leases individually assessed and their respective levels within the fair value hierarchy are described in the previous section related to fair value measurements of assets that are measured on a nonrecurring basis.

Bank Owned Life Insurance

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

Deposits

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

Accrued Interest

The carrying amounts of accrued interest approximate fair value.

~~-44-~~-41-

Table of Contents

The carrying values and estimated fair values of the Company’s financial instruments at June 30, ~~2021~~2022 and December 31, ~~2020~~2021 are as follows (dollars in thousands):

Fair Value Measurements at June 30, 2021 using

Fair Value Measurements at June 30, 2022 using

Quoted Prices

Significant

Quoted Prices

Significant

in Active

Other

Significant

in Active

Other

Significant

Markets for

Observable

Unobservable

Total Fair

Markets for

Observable

Unobservable

Total Fair

Identical Assets

Inputs

Value

Identical Assets

Inputs

Value

Carrying

Value

Level 1

Level 2

Level 3

Balance

Value

Level 1

Level 2

Level 3

Balance

ASSETS

Cash and cash equivalents

865,170

241,376

AFS securities

2,873,405

2,951,421

58,817

2,892,604

2,951,421

HTM securities

541,439

598,824

12,652

611,476

780,749

738,397

4,822

743,219

Restricted stock

76,825

87,908

Loans held for sale

32,726

LHFS

15,866

Net loans

13,579,668

13,379,723

13,551,224

13,058,756

Derivatives:

Interest rate swap

103,141

Interest rate contracts

34,354

Fair value hedges

1,171

Accrued interest receivable

70,818

67,231

BOLI

427,727

436,703

LIABILITIES

Deposits

16,659,219

16,684,998

16,128,635

16,142,580

Borrowings

380,079

361,145

797,948

466,601

Accrued interest payable

1,267

1,349

Derivatives:

Interest rate swap

54,453

Interest rate contracts

146,260

Fair value hedges

7,292


	Fair Value Measurements at December 31, 2020 using										Fair Value Measurements at December 31, 2021 using
			Quoted Prices		Significant								Quoted Prices		Significant
			in Active		Other		Significant						in Active		Other		Significant
			Markets for		Observable		Unobservable		Total Fair				Markets for		Observable		Unobservable		Total Fair
			Identical Assets		Inputs		Inputs		Value				Identical Assets		Inputs		Inputs		Value
	Carrying										Carrying
	Value		Level 1		Level 2		Level 3		Balance		Value		Level 1		Level 2		Level 3		Balance
ASSETS
Cash and cash equivalents	$	493,294	$	493,294	$	0	$	0	$	493,294	$	802,501	$	802,501	$	0	$	0	$	802,501
AFS securities		2,540,419		0		2,540,419		0		2,540,419		3,481,650		64,474		3,417,176		0		3,481,650
HTM securities		544,851		0		606,496		13,269		619,765		628,000		0		686,733		7,041		693,774
Restricted stock		94,782		0		94,782		0		94,782		76,825		0		76,825		0		76,825
Loans held for sale		96,742		0		96,742		0		96,742
LHFS												20,861		0		20,861		0		20,861
Net loans		13,860,774		0		0		13,710,640		13,710,640		13,096,056		0		0		12,861,274		12,861,274
Derivatives:
Interest rate swap		163,360		0		163,360		0		163,360
Interest rate contracts												73,696		0		73,696		0		73,696
Accrued interest receivable		75,757		0		75,757		0		75,757		65,015		0		65,015		0		65,015
BOLI		326,892		0		326,892		0		326,892		431,517		0		431,517		0		431,517

LIABILITIES
Deposits	$	15,722,765	$	0	$	15,763,991	$	0	$	15,763,991	$	16,611,068	$	0	$	16,630,087	$	0	$	16,630,087
Borrowings		840,717		0		821,516		0		821,516		506,594		0		488,796		0		488,796
Accrued interest payable		2,516		0		2,516		0		2,516		933		0		933		0		933
Derivatives:
Interest rate swap		163,360		0		163,360		0		163,360
Interest rate contracts												49,051		0		49,051		0		49,051
Fair value hedges		12,483		0		12,483		0		12,483		5,387		0		5,387		0		5,387

~~-45-~~-42-

Table of Contents

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

~~-46-~~-43-

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 mortgage banking~~ 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 ~~loans held for sale~~LHFS prior to being sold. Additionally, the changes in fair value of the ~~loans held for sale,~~LHFS, loan commitments, and related derivatives are included in mortgage banking income.

Noninterest income disaggregated by major source for the three and six months ended June 30, ~~2021~~2022 and ~~2020,~~2021, consisted of the following (dollars in thousands):


	Three Months Ended				Six Months Ended				Three Months Ended				Six Months Ended
	June 30,		June 30,		June 30,		June 30,		June 30,		June 30,		June 30,		June 30,
	2021		2020		2021		2020		2022		2021		2022		2021
Noninterest income:
Deposit Service Charges ⁽¹⁾:
Overdraft fees	$	4,136	$	3,245	$	7,217	$	9,010	$	5,305	$	4,136	$	10,299	$	7,217
Maintenance fees & other		2,471		1,685		4,899		3,498		2,735		2,471		5,338		4,899
Other service charges, commissions, and fees ⁽¹⁾		1,735		1,354		3,436		2,978		1,709		1,735		3,364		3,436
Interchange fees⁽¹⁾		2,203		1,697		4,050		3,321		2,268		2,203		4,078		4,050
Fiduciary and asset management fees ⁽¹⁾:
Trust asset management fees		2,985		2,470		5,893		5,298		3,299		2,985		6,690		5,893
Registered advisor management fees		2,463		2,091		4,790		4,178		2,438		2,463		5,088		4,790
Brokerage management fees		1,371		954		2,611		2,023		1,202		1,371		2,416		2,611
Mortgage banking income		4,619		5,826		12,874		7,847		2,200		4,619		5,317		12,874
Gains on securities transactions		—		10,339		78		12,275
Bank owned life insurance income		3,209		2,027		5,475		4,076		2,716		3,209		5,413		5,475
Loan-related interest rate swap fees		1,321		5,484		3,075		9,432		2,600		1,321		6,460		3,075
Other operating income ⁽²⁾		1,953		(1,240)		5,053		902		11,814		1,953		13,976		5,131
Total noninterest income	$	28,466	$	35,932	$	59,451	$	64,838	$	38,286	$	28,466	$	68,439	$	59,451

⁽¹⁾ Income within scope of Topic 606.

⁽²⁾ ~~For~~Includes a $9.1 million gain related to the sale of DHFB, for the three and six months ended June 30, ~~2020, the remaining balance outside the scope of Topic 606 includes a~~ ~~$1.8~~ ~~million loss related to the termination of a cash flow hedge.~~2022.

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12. EARNINGS PER SHARE

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

The following table presents basic and diluted EPS calculations for the three and six months ended June 30, ~~2021~~2022 and ~~2020~~2021 (dollars in thousands except per share data):


	Three Months Ended				Six Months Ended				Three Months Ended				Six Months Ended
	June 30,				June 30,				June 30,				June 30,
	2021		2020		2021		2020		2022		2021		2022		2021
Net Income:
Net Income	$	85,384	$	30,709	$	141,573	$	37,798	$	62,226	$	85,384	$	105,916	$	141,573
Less: Preferred Stock Dividends		2,967		0		5,934		0		2,967		2,967		5,934		5,934
Net income available to common shareholders	$	82,417	$	30,709	$	135,639	$	37,798	$	59,259	$	82,417	$	99,982	$	135,639


Weighted average shares outstanding, basic		78,820		78,712		78,842		79,001		74,848		78,820		75,194		78,842
Dilutive effect of stock awards		24		11		22		19		2		24		7		22
Weighted average shares outstanding, diluted		78,844		78,723		78,864		79,020		74,850		78,844		75,201		78,864

Earnings per common share, basic	$	1.05	$	0.39	$	1.72	$	0.48	$	0.79	$	1.05	$	1.33	$	1.72
Earnings per common share, diluted	$	1.05	$	0.39	$	1.72	$	0.48	$	0.79	$	1.05	$	1.33	$	1.72

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13. SUBSEQUENT EVENTS

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

On July ~~29, 2021,~~28, 2022, the Company’s Board of Directors declared a quarterly dividend of $0.28 per share of common stock. The common stock dividend amount is the same as the prior quarter and an increase of $0.03, or 12.0%, from the dividend paid in the third quarter of 2020. The common stock dividend is payable on August 27, 2021 to common shareholders of record as of August 13, 2021.

~~The Board also~~ declared a quarterly dividend on the outstanding shares of its Series A preferred stock. The Series A preferred stock is represented by depositary shares, each representing a 1/400^th ownership interest in a share of Series A preferred stock. The dividend of $171.88 per share (equivalent to $0.43 per outstanding depositary share) is ~~consistent with the prior quarter. The preferred stock dividend is~~ payable on September 1, ~~2021~~2022 to preferred shareholders of record as of August 17, ~~2021.~~2022.

~~As discussed in Note 9 “Stockholders’ Equity”, the Company repurchased certain shares~~The Company’s Board of Directors also declared a quarterly dividend of $0.30 per share of common stock. The common stock dividend is payable on August 26, 2022 to common shareholders of ~~the Company under the Repurchase Program. Additionally, subsequent to the quarter ended June 30, 2021,~~record as ~~part of the Repurchase Program, 1.5 million shares (or $54.0 million) were repurchased between July 1, 2021 and August 3, 2021. As~~ of August ~~3, 2021, the Company is authorized under the Repurchase Program to repurchase approximately $28.7 million of the Company’s common stock.~~12, 2022.

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Report of Independent Registered ~~Publ~~icPublic Accounting Firm

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

Results of Review of Interim Financial Statements

We have reviewed the accompanying consolidated balance sheet of Atlantic Union Bankshares Corporation (the Company) as of June 30, ~~2021,~~2022, the related consolidated statements of income, ~~and~~ comprehensive income, and stockholders’ equity for the three and six-month periods ended June 30, ~~2021~~2022 and ~~2020,~~2021, the consolidated statements of changes in ~~stockholders’ equity and~~ cash flows for the six-month periods ended June 30, ~~2021~~2022 and ~~2020,~~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 for them to be in conformity with U.S. generally accepted accounting principles.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Company as of December 31, ~~2020,~~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 ~~26, 2021,~~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, ~~2020,~~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 statements consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

/s/ Ernst & Young LLP

Richmond, Virginia

August ~~5, 2021~~4, 2022

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

Management’s discussion and analysis is presented to aid the reader in understanding and evaluating the financial condition and results of operations of the 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 ~~2020~~2021 Form 10-K, including the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section therein. Highlighted in the discussion are material changes from prior reporting periods and identifiable trends materially affecting the Company. Results of operations for the interim periods are not necessarily indicative of results that may be expected for the full year or for any other period. Amounts are rounded for presentation purposes; however, some of the percentages presented are computed based on unrounded amounts.

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

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 ~~including~~are statements that include, without limitation, statements regarding ~~the future impacts of debt prepayments, future impacts of PPP fee accretion,~~ future interest rate environments and potential impacts on the Company’s net interest margin, future economic conditions, and loan and securities portfolios, and the impacts of ~~cost reduction initiatives, may~~the COVID-19 pandemic, and statements that include other projections, predictions, expectations, or beliefs about future events or results ~~that~~or otherwise are not statements of historical fact. Such forward-looking statements are based on ~~various~~certain assumptions as of the time they are made, and are inherently subject to known and unknown risks, uncertainties, and other factors, some of which cannot be predicted or quantified, that may cause actual results, performance, or achievements to be materially different from those expressed or implied by such forward-looking statements. Forward-looking statements are often ~~accompanied~~characterized by the use of qualified words ~~that convey projected future events or outcomes~~(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, performance, achievements or trends may differ materially from historical results or those anticipated depending on a variety of factors, including, but not limited to the effects of or changes in:

●

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

●

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

●

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,~~growth;

●

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

●

the quality or composition of the 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;

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●

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;

●

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

●

real estate values in the Bank’s lending area;

●

an insufficient ACL;

●

changes in accounting ~~principles;~~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;

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●

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 the COVID-19 pandemic, 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 ~~mortgage-backed securities;~~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;~~requirements;

●

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, the CARES Act, as amended by the CAA, and other legislative and regulatory reactions to COVID-19;actions;

●

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 “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of the ~~2020~~2021 Form 10-K and related disclosures in other filings, ~~including the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2021,~~ which have been filed with the SEC and are available on the SEC’s website at www.sec.gov. All risk factors and uncertainties described herein 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.~~Report, and undue reliance should not be placed on such forward-looking statements. Forward-looking statements speak only as of the date they are made, and the Company does not ~~undertake~~intend or assume any obligation to update, revise or clarify ~~these~~any forward-looking statements that may be made from time to time by or on behalf of the Company, whether as a result of new information, future events or otherwise.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The 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 assets and liabilities and amounts reported for revenues, expenses, and related disclosures. Different assumptions in the

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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 of the Company.

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The critical accounting and reporting policies include the Company’s accounting for the ~~ACL,~~ALLL, acquired loans, ~~business combinations~~ and ~~divestitures, 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 ~~2020~~2021 Form 10-K.

The Company provides additional information on its critical accounting policies and estimates ~~listed above~~ under “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies” in its ~~2020~~2021 Form 10-K and in Note 1 “Summary of Significant Accounting Policies” ~~within~~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, ~~subject to meeting certain criteria,~~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 ~~interested~~interest as detailed in Note 1 “Summary of Significant Accounting Policies” in the “Notes to the Consolidated Financial Statements” contained in Item 8 ~~"Financial~~“Financial Statements and Supplementary ~~Data"~~Data” of the Company’s ~~2020~~2021 Form 10-K. The Company may incorporate other components of Topic 848 at a later date ~~and is continuing~~as it continues to evaluate the remaining components of Topic 848 and its impact to the Company.

ABOUT ATLANTIC UNION BANKSHARES CORPORATION

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Union Bank include: Atlantic Union Equipment Finance, Inc., which provides equipment financing; ~~Old Dominion Capital Management, Inc., and its subsidiary, Outfitter Advisors, Ltd., and Dixon, Hubard, Feinour, & Brown, Inc., which provide investment advisory services;~~ Atlantic Union Financial Consultants, LLC, which provides brokerage services; and Union Insurance Group, LLC, which offers variouslines of insurance products.

Effective June 30, 2022, the Company completed the sale of DHFB, which was formerly a subsidiary of the Bank.

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

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RESULTS OF OPERATIONS

~~Executive Overview~~

The Company’s financial condition and results of operations as of and for the three and six-months ended June 30, 2021 have been impacted by COVID-19 and governmental programs and initiatives that have responded to COVID-19, including the PPP.

The Company participated in PPP Round One under the CARES Act, which was intended to provide economic relief to small businesses that have been adversely impacted by COVID-19. The Company processed over 11,000 PPP loans totaling $1.7 billion in 2020 pursuant to the CARES Act. The loans carry a 1% interest rate. As of June 30, 2021, PPP Round One loans have a recorded investment of $337.7 million and unamortized deferred fees of $2.0 million.SIGNIFICANT ACTIVITIES

Certain provisions of the CARES Act, including additional PPP funding, were extended during December 2020 and expired on May 31, 2021. The Company processed over 5,000 loans pursuant to PPP Round Two, with a recorded investment of $546.1 million and unamortized deferred fees of $22.4 million as of June 30, 2021. The loans carry a 1% interest rate.

In addition to an insignificant amount of PPP loan pay offs, the Company has processed $1.3 billion(*) of loan forgiveness on 9,800 PPP loans(*) through June 30, 2021 with $165.0 million(*) on 2,500 loans(*) occurring in the first quarter of 2021 and $705.0 million(*) on 5,000 loans(*) occurring in the second quarter of 2021.

During 2020, the Company launched several initiatives to reduce expenses in light of the current and expected operating environment, including the consolidation of certain branch locations. The Company completed the consolidation of 15 branches in 2020, and five additional branches were consolidated in February 2021. These actions resulted in branch closure costs of approximately $1.1 million in the first quarter of 2021 primarily related to lease termination costs, severance costs, and real estate write-downs.Share Repurchase Program

On ~~May 4,~~December 10, 2021, the Company’s Board of Directors authorized ~~the Repurchase Program~~a share repurchase program to purchase up to ~~$125~~$100.0 million ~~worth~~ 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/~~and / or Rule 10b-18 under the Exchange Act. ~~The~~As part of the Repurchase Program, ~~expires on~~approximately 1.3 million shares (or $48.2 million) were repurchased during the six months ended June 30, 2022, and ~~replaced~~of these shares approximately 649,000 shares (or $23.2 million) were repurchased during the ~~prior repurchase program that was due to expire on~~second quarter of 2022. At June 30, ~~2021. Under the Repurchase Program, 1.1~~2022, approximately $51.8 million ~~shares were repurchased for $42.3 million in the aggregate during the quarter ended June 30, 2021. As~~ of ~~June 30, 2021, the Company has remaining repurchase authorization of $82.7 million~~share repurchases remain available under the Repurchase Program.

~~Second Quarter Net Income and Performance Metrics~~Strategic Initiatives

●

~~Net income available to common shareholders was $82.4 million and basic and diluted EPS was $1.05 for the second quarter of 2021, compared to $30.7 million and $0.39~~ ~~for the second quarter of 2020, respectively.~~

●

~~Pre-tax pre-provision adjusted operating earnings~~⁽⁺⁾, which exclude provision for credit losses, gains on sales of securities, net loss on balance sheet repositioning, and income tax expense totaled $77.0 million for the second quarter of 2021, compared to $70.4 million for the second quarter of 2020.

~~Six Month Net Income~~During the fourth quarter of 2021, the Company took certain actions to reduce expenses in light of the period's prevailing and ~~Performance Metrics~~

●

~~Net income available to common shareholders was $135.6 million and basic and diluted EPS was $1.72~~ ~~for the six months ended June 30, 2021, compared to $37.8 million and $0.48~~ ~~for the six months ended June 30, 2020, respectively.~~

●

~~Adjusted operating earnings available to common shareholders~~⁽⁺⁾, which exclude gains on sales of securities and net loss on balance sheet repositioning, totaled $147.2 million for the six months ended June 30, 2021, compared to $37.6 million for the six months ended June 30, 2020.

●

~~Pre-tax pre-provision adjusted operating earnings~~⁽⁺⁾, which exclude provision for credit losses, gains on sales of securities, net loss on balance sheet repositioning, and income tax expense, totaled $145.6 million for the six months ended June 30, 2021, compared to $138.5 million for the six months ended June 30, 2020.

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~~Table~~expected operating environment, including the closure of ~~Contents~~

~~Balance Sheet~~

●

~~Cash and cash equivalents were $865.2 million at June 30, 2021, an increase of $371.9 million or 152.0% (annualized) from December 31, 2020.~~

●

~~AFS securities were $2.9 billion at June 30, 2021, an increase of $333.0 million or 26.4% (annualized) from December 31, 2020.~~

●

~~Loans held for investment (net of deferred fees and costs) were $13.7~~ ~~billion, including $859.4 million in PPP loans at June 30, 2021, a decrease of $323.4 million or 4.7% (annualized) from December 31,~~ ~~2020. Excluding the impact of the PPP~~⁽⁺⁾~~, loans held for investment decreased $3.2 million or 0.1% (annualized) during this period.~~

●

~~Total deposits were $16.7~~ ~~billion at June 30, 2021, an increase of $936.5 million or 12.0% (annualized) from December 31, 2020.~~

~~(*) PPP forgiveness values are rounded~~the Company’s operations center and ~~approximate values~~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, primarily related to lease and other asset write downs, as well as severance costs. There were no significant branch closing and facility consolidation costs for the quarter ended June 30, 2022.

COVID-19 UPDATE

The Company’s financial performance generally, and in particular the ability of its borrowers to repay their loans, the value of collateral securing those loans, as well as demand for loans and other products and services the Company offers, is highly dependent on the business environment in its primary markets where it operates and in the United States as a whole.

COVID-19 has had, and may have in the future, a wide range of economic impacts nationally and in the ~~event of a resurgence that leads~~Company’s primary markets. The Company will carefully monitor any future economic impacts attributable to ~~significant restrictions~~the COVID-19 pandemic and potential impact on ~~economic activity, may still present~~ the ~~possibility of an extended economic recession.~~ Company’s borrowers and their ability to repay loans.

Since the ~~first quarter~~start of ~~2020, COVID-19 has severely disrupted supply chains and adversely affected production, demand, sales, and employee productivity across a range of industries, and has increased unemployment in~~ the Company’s areas of operation and nationally. The national economy and economies in the Company’s areas of operations continue to be impacted into 2021, despite the fact that many businesses have re-opened at full capacity. In addition, COVID-19 may have social and other impacts that are not yet known but may affect the Company’s customers, employees, and vendors.

~~During 2020 and into 2021,~~pandemic, the Company has taken and is continuing to take precautions to protect the safety and well-being of the Bank’s employees and customers during COVID-19. The Bank ~~has implemented additional safety policies and procedures and follows~~continues to follow guidance issued by the Centers for Disease Control and Prevention, state health authorities, and state and local executive orders where our branches and corporate offices are located. The Bank remains ~~very~~ focused on the safety and well-being of its employees and customers during COVID-19 and is committed to safely and responsibly operating its branch network and maintaining appropriate staffing in each branch.

COVID-19 has adversely affected the Company’s business, financial condition, and results of operations since the first quarter of 2020. The duration, nature and severity of future impacts of COVID-19 on the Company’s operational and financial performance will depend on future developments with respect to COVID-19, ~~all~~many of which remain highly uncertain and cannot be predicted, and new information may emerge concerning the nature and severity of the outbreak, the emergence of COVID-19 variants, short- and long-term health impacts, the actions to contain the outbreak or treat its impact (including the efficacy of vaccine and treatment developments and the success of vaccination programs), and unforeseen effects of the pandemic, among others. Other national health concerns, including the outbreak of other contagious diseases or pandemics, may adversely affect the Company in the future.predicted.

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SUMMARY OF QUARTERLY FINANCIAL RESULTS

Second Quarter Net Income and Performance Metrics

●

Net income available to common shareholders was $59.3 million and basic and diluted EPS was $0.79 for the second quarter of 2022, compared to $82.4 million and $1.05 for the second quarter of 2021.

●

Adjusted operating earnings available to common shareholders⁽⁺⁾ totaled $51.3 million and diluted adjusted operating EPS⁽⁺⁾ was $0.69 for the second quarter of 2022, compared to adjusted operating earnings available to common shareholders⁽⁺⁾ of $82.4 million and diluted adjusted operating EPS⁽⁺⁾ of $1.05 for the second quarter of 2021.

Six Month Net Income and Performance Metrics

●

Net income available to common shareholders was $100.0 million and basic and diluted EPS was $1.33 for the first six months of 2022, compared to $135.6 million and $1.72 for the first six months of 2021.

●

Adjusted operating earnings available to common shareholders⁽⁺⁾ totaled $96.4 million and diluted adjusted operating EPS⁽⁺⁾ was $1.28 for the first six months of 2022, compared to adjusted operating earnings available to common shareholders⁽⁺⁾ of $147.9 million and diluted adjusted operating EPS⁽⁺⁾ of $1.88 for the first six months of 2021.

Sale of Dixon, Hubard, Feinour & Brown, Inc.

●

Effective June 30, 2022, the Company transferred its ownership interest in DHFB, which was formerly a subsidiary of the Bank to CSP in exchange for a minority ownership interest in CSP, resulting in a $9.1 million pre-tax gain.

Balance Sheet

●

At June 30, 2022, total assets were $19.7 billion, a decrease of $403.0 million or approximately 4.1% (annualized) from December 31, 2021. The decrease in total assets was primarily due to a decline in the investment securities portfolio of $366.4 million primarily due to the impact of market interest rate increases on the market value of the AFS securities portfolio, partially offset by the net impact of the decrease in cash and cash equivalents of $561.1 million, which was deployed primarily to fund loans which increased by $460.0 million from December 31, 2021, but also reflects the impact of net deposit outflows. The Company may experience additional declines in the market value of the AFS securities portfolio if market interest rates continue to increase through the remainder of 2022.

●

LHFI (net of deferred fees and costs) were $13.7 billion, including $21.7 million in PPP loans at June 30, 2022, an increase of $460.0 million or 7.0% (annualized) from December 31, 2021. Excluding the impact of the PPP⁽⁺⁾, LHFI (net of deferred fees and costs) increased $588.2 million or 9.1% (annualized) during this period.

●

Total deposits were $16.1 billion at June 30, 2022, a decrease of $482.4 million or 5.9% (annualized) from December 31, 2021.

-52-

Table of Contents

Net Interest Income


	For the Three Months Ended									For the Three Months Ended
	June 30,									June 30,
	2021			2020			Change			2022			2021			Change

	(Dollars in thousands)									(Dollars in thousands)
Average interest-earning assets	$	17,868,938		$	17,106,132		$	762,806		$	17,646,470		$	17,868,938		$	(222,468)
Interest and dividend income	$	150,852		$	162,867		$	(12,015)		$	148,755		$	150,852		$	(2,097)
Interest and dividend income (FTE) ⁽¹⁾	$	153,996		$	165,672		$	(11,676)
Interest and dividend income (FTE) ⁽⁺⁾										$	152,332		$	153,996		$	(1,664)
Yield on interest-earning assets		3.39	%		3.83	%		(44)	bps		3.38	%		3.39	%		(1)	bps
Yield on interest-earning assets (FTE) ⁽¹⁾		3.46	%		3.90	%		(44)	bps
Yield on interest-earning assets (FTE) ⁽⁺⁾											3.46	%		3.46	%		—	bps
Average interest-bearing liabilities	$	11,846,623		$	12,286,362		$	(439,739)		$	11,590,351		$	11,846,623		$	(256,272)
Interest expense	$	10,304		$	25,562		$	(15,258)		$	9,988		$	10,304		$	(316)
Cost of interest-bearing liabilities		0.35	%		0.84	%		(49)	bps		0.35	%		0.35	%		—	bps
Cost of funds		0.23	%		0.61	%		(38)	bps		0.22	%		0.23	%		(1)	bps
Net interest income	$	140,548		$	137,305		$	3,243		$	138,767		$	140,548		$	(1,781)
Net interest income (FTE) ⁽¹⁾	$	143,692		$	140,110		$	3,582
Net interest income (FTE) ⁽⁺⁾										$	142,344		$	143,692		$	(1,348)
Net interest margin		3.15	%		3.23	%		(8)	bps		3.15	%		3.15	%		—	bps
Net interest margin (FTE) ⁽¹⁾		3.23	%		3.29	%		(6)	bps
Net interest margin (FTE) ⁽⁺⁾											3.24	%		3.23	%		1	bps

⁽¹⁾ Refer to the “Non-GAAP Financial Measures” section within this Item 2 for more information about these measures, including a reconciliation of these measures to the most directly comparable financial measures calculated in accordance with GAAP.

For the second quarter of ~~2021,~~2022, net interest income was ~~$140.5~~$138.8 million, ~~an increase~~a decrease of ~~$3.2~~$1.8 million from the second quarter of ~~2020.~~2021. For the second quarter of ~~2021,~~2022, net interest income (FTE)⁽⁺⁾ was ~~$143.7~~$142.3 million, ~~an increase~~a decrease of ~~$3.6~~$1.3 million from the second quarter of ~~2020.~~2021. In the second quarter of 2022, net interest margin was consistent with the second quarter of 2021, and net interest margin (FTE)⁽⁺⁾increased 1 basis point to 3.24% from 3.23% compared to the second quarter of 2021. The ~~increases~~declines in ~~both~~ net interest income and net interest income (FTE)⁽⁺⁾ were primarily ~~driven by loan accretion recognized on~~the result of lower PPP ~~loans~~interest income and a decline in interest expense due to a favorable funding mix. In the second quarter of 2021, net interest margin decreased 8 basis points to 3.15% from 3.23% in the second quarter of 2020, and net interest margin (FTE) decreased 6 basis points compared to the second quarter of 2020. The net decline in net interest margin and net interest margin (FTE) measures were primarily driven by a decrease in the yield on interest-earning assets,fees, partially offset by ~~a decrease in the cost of funds. The decline in the Company’s earning asset yields was primarily driven by declines in loan and investment securities yields,~~higher interest income as a result of adjusted loan growth⁽⁺⁾, and higher investment interest income due to growth in the ~~decrease in market interest rates. The cost~~average balance of ~~funds decline was driven by lower deposit costs and wholesale borrowing costs driven by lower market interest rates and a favorable funding mix.~~the investment portfolio.


	For the Six Months Ended
	June 30,
	2022			2021			Change

	(Dollars in thousands)
Average interest-earning assets	$	17,765,085		$	17,781,005		$	(15,920)
Interest and dividend income	$	287,212		$	298,525		$	(11,313)
Interest and dividend income (FTE) ⁽⁺⁾	$	294,124		$	304,722		$	(10,598)
Yield on interest-earning assets		3.26	%		3.39	%		(13)	bps
Yield on interest-earning assets (FTE) ⁽⁺⁾		3.34	%		3.46	%		(12)	bps
Average interest-bearing liabilities	$	11,693,601		$	11,955,610		$	(262,009)
Interest expense	$	17,514		$	23,079		$	(5,565)
Cost of interest-bearing liabilities		0.30	%		0.39	%		(9)	bps
Cost of funds		0.20	%		0.27	%		(7)	bps
Net interest income	$	269,698		$	275,446		$	(5,748)
Net interest income (FTE) ⁽⁺⁾	$	276,610		$	281,643		$	(5,033)
Net interest margin		3.06	%		3.12	%		(6)	bps
Net interest margin (FTE) ⁽⁺⁾		3.14	%		3.19	%		(5)	bps

For the first six months of 2022, net interest income was $269.7 million, a decrease of $5.7 million from the same period of 2021. For the first six months of 2022, net interest income (FTE)

⁽⁺⁾ was $276.6 million, a decrease of $5.0 million from the same period of 2021. In the first six months of 2022, net interest margin decreased 6 bps to 3.06% from 3.12% in the first six months of 2021, and net interest margin (FTE)

⁽⁺⁾ decreased 5 bps to 3.14% from 3.19% in the first six months of 2021. The declines in net interest margin and net interest margin (FTE)

⁽⁺⁾

were primarily the result of lower PPP interest income and fees,

~~-56-~~-53-

Table of Contents

For the Six Months Ended

June 30,


2021

2020

Change


(Dollars in thousands)

Average interest-earning assets

$
17,781,005

$
16,334,901

$
1,446,104


Interest and dividend income

$
298,525

$
334,193

$
(35,668)


Interest and dividend income (FTE) ⁽¹⁾

$
304,722

$
339,755

$
(35,033)


Yield on interest-earning assets

3.39
%

4.11
%

(72)

bps
Yield on interest-earning assets (FTE) ⁽¹⁾

3.46
%

4.18
%

(72)

bps
Average interest-bearing liabilities

$
11,955,610

$
12,076,932

$
(121,322)


Interest expense

$
23,079

$
61,880

$
(38,801)


Cost of interest-bearing liabilities

0.39
%

1.03
%

(64)

bps
Cost of funds

0.27
%

0.76
%

(49)

bps
Net interest income

$
275,446

$
272,313

$
3,133


Net interest income (FTE) ⁽¹⁾

$
281,643

$
277,875

$
3,768


Net interest margin

3.12
%

3.35
%

(23)

bps
Net interest margin (FTE) ⁽¹⁾

3.19
%

3.42
%

(23)

bps

For the first six months of 2021, net interest income was $275.4 million, an increase of $3.1 million from the same period of 2020. For the first six months of 2021, net interest income (FTE) was $281.6 million, an increase of $3.8 million from the same period of 2020. The increases in both net interest income and net interest income (FTE) were primarily driven by loan accretion recognized on PPP loans and a decline in interest expense due to a favorable funding mix. In the first six months of 2021, net interest margin decreased 23 basis points to 3.12% from 3.35% in the first six months of 2020, and net interest margin (FTE) decreased 23 basis points compared to the first six months of 2020. The net decline in net interest margin and net interest margin (FTE) measures were primarily driven by a decrease in the yield on interest-earning assets, partially offset by ~~a decrease in the cost of funds. The decline in the Company’s earning asset yields was primarily driven by declines in loan and investment securities yields,~~higher interest income as a result of adjusted loan growth⁽⁺⁾, and higher investment interest income due to growth in the ~~decrease in market interest rates. The~~average balance of the investment portfolio, and lower cost of ~~funds decline was driven by lower deposit costs and wholesale borrowing costs driven by lower market interest rates and a favorable funding mix.~~funds.

~~In response to the COVID-19,~~On March 16, 2022, the FOMC ~~reduced~~began to increase its Federal Funds target rates to a range of 0.25% to 0.50%, which was the first increase since December 2018. The FOMC further increased the target rates in May, June, and July 2022 to its current range of 0%2.25% to ~~0.25%, compared~~2.5%. The FOMC also foreshadowed potential further increases to ~~an upper bound in~~the target rates throughout the year and also confirmed the continued reduction to the Federal ~~Funds target rate~~Reserve’s holdings of ~~1.75% during the first quarter of 2020. As a consequence of reduced short-term rates, the~~U.S. Treasury securities and agency debt and agency mortgage-backed securities. The Company ~~has seen compression~~anticipates that these FOMC actions will result in an expansion on its net interest margin ~~as earning asset yields have decreased by more than the decrease in~~due to the Company’s ~~cost~~asset-sensitive position at June 30, 2022. Refer to “Quantitative and Qualitative Disclosures about Market Risk” in Part II, Item 3 of ~~funds. The Company expects its net~~this Quarterly Report for additional information about the Company’s interest ~~margin to be stable throughout 2021, as short-term rates are projected to remain low.~~rate sensitivity.

~~-57-~~-54-

Table of Contents

The following tables show 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 June 30,												For the Three Months Ended June 30,
	2021						2020						2022						2021
			Interest						Interest						Interest						Interest
	Average		Income /		Yield /		Average		Income /		Yield /		Average		Income /		Yield /		Average		Income /		Yield /
	Balance		Expense ⁽¹⁾		Rate ⁽¹⁾⁽²⁾		Balance		Expense⁽¹⁾		Rate ⁽¹⁾⁽²⁾		Balance		Expense ⁽¹⁾		Rate ⁽¹⁾⁽²⁾		Balance		Expense⁽¹⁾		Rate ⁽¹⁾⁽²⁾

	(Dollars in thousands)												(Dollars in thousands)
Assets:
Securities:
Taxable	$	2,028,637	$	10,519	2.08	%	$	1,626,426	$	11,267	2.79	%	$	2,322,024	$	14,695	2.54	%	$	2,028,637	$	10,519	2.08	%
Tax-exempt		1,391,692		12,249	3.53	%		1,022,541		10,394	4.09	%		1,608,888		13,465	3.36	%		1,391,692		12,249	3.53	%
Total securities		3,420,329		22,768	2.67	%		2,648,967		21,661	3.29	%		3,930,912		28,160	2.87	%		3,420,329		22,768	2.67	%
Loans, net ^{(3) (4)}		13,971,939		130,840	3.76	%		13,957,711		143,339	4.13	%
Loans, net ⁽³⁾														13,525,529		123,764	3.67	%		13,971,939		130,840	3.76	%
Other earning assets		476,670		388	0.33	%		499,454		672	0.54	%		190,029		408	0.86	%		476,670		388	0.33	%
Total earning assets		17,868,938	$	153,996	3.46	%		17,106,132	$	165,672	3.90	%		17,646,470	$	152,332	3.46	%		17,868,938	$	153,996	3.46	%
Allowance for credit losses		(137,997)						(150,868)						(103,211)						(137,997)
Total non-earning assets		2,192,037						2,201,974						2,176,143						2,192,037
Total assets	$	19,922,978					$	19,157,238					$	19,719,402					$	19,922,978
Liabilities and Stockholders' Equity:
Interest-bearing deposits:
Transaction and money market accounts	$	8,159,890	$	1,809	0.09	%	$	7,474,210	$	7,303	0.39	%	$	7,987,888	$	3,082	0.15	%	$	8,159,890	$	1,809	0.09	%
Regular savings		1,016,661		55	0.02	%		799,890		123	0.06	%		1,169,199		55	0.02	%		1,016,661		55	0.02	%
Time deposits ⁽⁵⁾		2,270,217		5,374	0.95	%		2,667,268		12,435	1.88	%		1,667,378		2,960	0.71	%		2,270,217		5,374	0.95	%
Total interest-bearing deposits		11,446,768		7,238	0.25	%		10,941,368		19,861	0.73	%		10,824,465		6,097	0.23	%		11,446,768		7,238	0.25	%
Other borrowings ⁽⁶⁾		399,855		3,066	3.08	%		1,344,994		5,701	1.70	%		765,886		3,891	2.04	%		399,855		3,066	3.08	%
Total interest-bearing liabilities		11,846,623	$	10,304	0.35	%		12,286,362	$	25,562	0.84	%		11,590,351	$	9,988	0.35	%		11,846,623	$	10,304	0.35	%
Noninterest-bearing liabilities:
Demand deposits		5,053,773						4,019,018						5,366,591						5,053,773
Other liabilities		274,718						361,889						317,415						274,718
Total liabilities		17,175,114						16,667,269						17,274,357						17,175,114
Stockholders' equity		2,747,864						2,489,969						2,445,045						2,747,864
Total liabilities and stockholders' equity	$	19,922,978					$	19,157,238					$	19,719,402					$	19,922,978
Net interest income			$	143,692					$	140,110					$	142,344					$	143,692
Interest rate spread					3.11	%					3.06	%					3.11	%					3.11	%
Cost of funds					0.23	%					0.61	%					0.22	%					0.23	%
Net interest margin					3.23	%					3.29	%					3.24	%					3.23	%

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

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

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

⁽⁴⁾ Interest income on loans includes $4.1 million and $6.4 million for the three months ended June 30, 2021 and 2020, respectively, in accretion of the fair market value adjustments related to acquisitions.

⁽⁵⁾ Interest expense on time deposits includes $12,000 and $34,000 for the three months ended June 30, 2021 and 2020, respectively, in accretion of the fair market value adjustments related to acquisitions.

⁽⁶⁾ Interest expense on borrowings includes $202,000 and $140,000 for the three months ended June 30, 2021 and 2020, respectively, in amortization of the fair market value adjustments related to acquisitions.

~~-58-~~-55-

Table of Contents

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


	For the Six Months Ended June 30,												For the Six Months Ended June 30,
	2021						2020						2022						2021
			Interest						Interest						Interest						Interest
	Average		Income /		Yield /		Average		Income /		Yield /		Average		Income /		Yield /		Average		Income /		Yield /
	Balance		Expense ⁽¹⁾		Rate ⁽¹⁾⁽²⁾		Balance		Expense⁽¹⁾		Rate ⁽¹⁾⁽²⁾		Balance		Expense ⁽¹⁾		Rate ⁽¹⁾⁽²⁾		Balance		Expense⁽¹⁾		Rate ⁽¹⁾⁽²⁾

	(Dollars in thousands)												(Dollars in thousands)
Assets:
Securities:
Taxable	$	1,967,948	$	20,872	2.14	%	$	1,645,438	$	22,895	2.80	%	$	2,468,775	$	28,361	2.32	%	$	1,967,948	$	20,872	2.14	%
Tax-exempt		1,347,487		23,941	3.58	%		989,764		20,152	4.09	%		1,595,232		26,704	3.38	%		1,347,487		23,941	3.58	%
Total securities		3,315,435		44,813	2.73	%		2,635,202		43,047	3.29	%		4,064,007		55,065	2.73	%		3,315,435		44,813	2.73	%
Loans, net ^{(3) (4)}		14,017,777		258,962	3.73	%		13,275,817		294,652	4.46	%
Loans, net ⁽³⁾														13,413,780		238,365	3.58	%		14,017,777		258,962	3.73	%
Other earning assets		447,793		947	0.43	%		423,882		2,056	0.98	%		287,298		694	0.49	%		447,793		947	0.43	%
Total earning assets		17,781,005	$	304,722	3.46	%		16,334,901	$	339,755	4.18	%		17,765,085	$	294,124	3.34	%		17,781,005	$	304,722	3.46	%
Allowance for credit losses		(147,844)						(120,505)						(101,784)						(147,844)
Total non-earning assets		2,172,408						2,144,183						2,156,029						2,172,408
Total assets	$	19,805,569					$	18,358,579					$	19,819,330					$	19,805,569
Liabilities and Stockholders' Equity:
Interest-bearing deposits:
Transaction and money market accounts	$	8,110,384	$	3,961	0.10	%	$	7,203,777	$	21,824	0.61	%	$	8,181,253	$	4,406	0.11	%	$	8,110,384	$	3,961	0.10	%
Regular savings		978,726		114	0.02	%		766,232		281	0.07	%		1,156,099		111	0.02	%		978,726		114	0.02	%
Time deposits ⁽⁵⁾		2,379,716		12,291	1.04	%		2,711,384		26,270	1.95	%		1,716,743		6,063	0.71	%		2,379,716		12,291	1.04	%
Total interest-bearing deposits		11,468,826		16,366	0.29	%		10,681,393		48,375	0.91	%		11,054,095		10,580	0.19	%		11,468,826		16,366	0.29	%
Other borrowings ⁽⁶⁾		486,784		6,713	2.78	%		1,395,539		13,505	1.95	%		639,506		6,934	2.19	%		486,784		6,713	2.78	%
Total interest-bearing liabilities		11,955,610	$	23,079	0.39	%		12,076,932	$	61,880	1.03	%		11,693,601	$	17,514	0.30	%		11,955,610	$	23,079	0.39	%
Noninterest-bearing liabilities:
Demand deposits		4,819,946						3,472,228						5,297,727						4,819,946
Other liabilities		296,033						321,612						275,584						296,033
Total liabilities		17,071,589						15,870,772						17,266,912						17,071,589
Stockholders' equity		2,733,980						2,487,807						2,552,418						2,733,980
Total liabilities and stockholders' equity	$	19,805,569					$	18,358,579					$	19,819,330					$	19,805,569
Net interest income			$	281,643					$	277,875					$	276,610					$	281,643
Interest rate spread					3.07	%					3.15	%					3.04	%					3.07	%
Cost of funds					0.27	%					0.76	%					0.20	%					0.27	%
Net interest margin					3.19	%					3.42	%					3.14	%					3.19	%

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

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

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

⁽⁴⁾ Interest income on loans includes $8.4 million and $16.0 million for the six months ended June 30, 2021 and 2020, respectively, in accretion of the fair market value adjustments related to acquisitions.

⁽⁵⁾ Interest expense on time deposits includes $32,000 and $84,000 for the six months ended June 30, 2021 and 2020, respectively, in accretion of the fair market value adjustments related to acquisitions.

⁽⁶⁾ Interest expense on borrowings includes $400,000 and $278,000 for the six months ended June 30, 2021 and 2020, respectively, in amortization of the fair market value adjustments related to acquisitions.

~~-59-~~-56-

Table of Contents

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

Three Months Ended

Six Months Ended

June 30, 2021 vs. June 30, 2020

June 30, 2021 vs. June 30, 2020

Increase (Decrease) Due to Change in:

Increase (Decrease) Due to Change in:


Volume

Rate

Total

Volume

Rate

Total
Earning Assets:

Securities:

Taxable

$
2,439

$
(3,187)

$
(748)

$
4,005

$
(6,028)

$
(2,023)
Tax-exempt

3,385

(1,530)

1,855

6,598

(2,809)

3,789
Total securities

5,824

(4,717)

1,107

10,603

(8,837)

1,766
Loans, net ⁽¹⁾

146

(12,645)

(12,499)

15,777

(51,467)

(35,690)
Other earning assets

(30)

(254)

(284)

110

(1,219)

(1,109)
Total earning assets

$
5,940

$
(17,616)

$
(11,676)

$
26,490

$
(61,523)

$
(35,033)
Interest-Bearing Liabilities:












Interest-bearing deposits:












Transaction and money market accounts

$
615

$
(6,109)

$
(5,494)

$
2,446

$
(20,309)

$
(17,863)
Regular savings

27

(95)

(68)

63

(230)

(167)
Time Deposits ⁽²⁾

(1,640)

(5,421)

(7,061)

(2,902)

(11,077)

(13,979)
Total interest-bearing deposits

(998)

(11,625)

(12,623)

(393)

(31,616)

(32,009)
Other borrowings ⁽³⁾

(5,512)

2,877

(2,635)

(11,056)

4,264

(6,792)
Total interest-bearing liabilities

(6,510)

(8,748)

(15,258)

(11,449)

(27,352)

(38,801)
Change in net interest income

$
12,450

$
(8,868)

$
3,582

$
37,939

$
(34,171)

$
3,768

Three Months Ended

Six Months Ended

June 30, 2022 vs. June 30, 2021

Increase (Decrease) Due to Change in:

Volume

Rate

Total

Volume

Rate

Total

Earning Assets:

Securities:

Taxable

1,654

2,522

4,176

5,645

1,844

7,489

Tax-exempt

1,840

(624)

1,216

4,208

(1,445)

2,763

Total securities

3,494

1,898

5,392

9,853

399

10,252

Loans, net

(4,125)

(2,951)

(7,076)

(10,933)

(9,664)

(20,597)

Other earning assets

(337)

357

(373)

120

(253)

Total earning assets

(968)

(696)

(1,664)

(1,453)

(9,145)

(10,598)

Interest-Bearing Liabilities:

Interest-bearing deposits:

Transaction and money market accounts

(39)

1,312

1,273

410

445

Regular savings

(8)

—

(22)

(3)

Time Deposits

(1,243)

(1,171)

(2,414)

(2,917)

(3,311)

(6,228)

Total interest-bearing deposits

(1,274)

133

(1,141)

(2,863)

(2,923)

(5,786)

Other borrowings

2,114

(1,289)

825

1,839

(1,618)

221

Total interest-bearing liabilities

840

(1,156)

(316)

(1,024)

(4,541)

(5,565)

Change in net interest income (FTE)⁽⁺⁾

(1,808)

460

(1,348)

(429)

(4,604)

(5,033)

⁽¹⁾The rate-related change in interest income on loans includes the impact of lower accretion of the acquisition-related fair market value adjustments of $2.3 million and $7.6 million for the three-and-six-month change, respectively.

⁽²⁾The rate-related change in interest expense on deposits includes the impact of lower accretion of the acquisition-related fair market value adjustments of $22,000 and $52,000 for the three-and-six-month change, respectively.

⁽³⁾The rate-related change in interest expense on other borrowings includes the impact of higher amortization of the acquisition-related fair market value adjustments of $62,000 and $122,000 for the three-and-six-month change, respectively.

The Company’s net interest margin (FTE)⁽⁺⁾ includes the impact of acquisition accounting fair value adjustments. The impact of net accretion related to acquisition accounting fair value adjustments for the first and second quarters of ~~2020,~~2021, and the first and second quarters of ~~2021~~2022 are reflected in the following table (dollars in thousands):



	Loan		Deposit		Borrowings				Loan		Deposit		Borrowings
	Accretion		Accretion		Amortization		Total		Accretion		Accretion (Amortization)		Amortization		Total
For the quarter ended March 31, 2020	$	9,528	$	50	$	(138)	$	9,440
For the quarter ended June 30, 2020		6,443		34		(140)		6,337
For the quarter ended March 31, 2021		4,287		20		(198)		4,109	$	4,287	$	20	$	(198)	$	4,109
For the quarter ended June 30, 2021		4,132		12		(202)		3,942		4,132		12		(202)		3,942
For the quarter ended March 31, 2022										2,253		(10)		(203)		2,040
For the quarter ended June 30, 2022										2,879		(11)		(207)		2,661

~~-60-~~-57-

Table of Contents

Noninterest Income

For the Three Months Ended

June 30,

Change


2021

2020

$

%

(Dollars in thousands)

Noninterest income:

Service charges on deposit accounts

$
6,607

$
4,930

$
1,677

34.0
%
Other service charges, commissions, and fees

1,735

1,354

381

28.1
%
Interchange fees

2,203

1,697

506

29.8
%
Fiduciary and asset management fees

6,819

5,515

1,304

23.6
%
Mortgage banking income

4,619

5,826

(1,207)

(20.7)
%
Gains on securities transactions

—

10,339

(10,339)

(100.0)
%
Bank owned life insurance income

3,209

2,027

1,182

58.3
%
Loan-related interest rate swap fees

1,321

5,484

(4,163)

(75.9)
%
Other operating income

1,953

(1,240)

3,193

(257.5)
%
Total noninterest income

$
28,466

$
35,932

$
(7,466)

(20.8)
%


	For the Three Months Ended
	June 30,				Change
	2022		2021		$		%

	(Dollars in thousands)
Noninterest income:
Service charges on deposit accounts	$	8,040	$	6,607	$	1,433	21.7	%
Other service charges, commissions, and fees		1,709		1,735		(26)	(1.5)	%
Interchange fees		2,268		2,203		65	3.0	%
Fiduciary and asset management fees		6,939		6,819		120	1.8	%
Mortgage banking income		2,200		4,619		(2,419)	(52.4)	%
Bank owned life insurance income		2,716		3,209		(493)	(15.4)	%
Loan-related interest rate swap fees		2,600		1,321		1,279	96.8	%
Other operating income		11,814		1,953		9,861	504.9	%
Total noninterest income	$	38,286	$	28,466	$	9,820	34.5	%

Noninterest income ~~decreased $7.5~~increased $9.8 million or ~~20.8%~~34.5% to $38.3 million for the quarter ended June 30, 2022, compared to $28.5 million for the quarter ended June 30, 2021, ~~compared~~primarily driven by the pre-tax gain of $9.1 million related to ~~$35.9 million for~~ the ~~quarter ended June 30, 2020.~~sale of DHFB. Excluding ~~gains~~the gain on sale of DHFB and loss on securities, ~~transactions,~~ adjusted operating noninterest income⁽⁺⁾ for the quarter ended June 30, ~~2021~~2022 increased ~~$2.9 million~~$740,000 or ~~11.2% compared to~~2.6% from the ~~quarter ended June 30, 2020. This~~prior year quarter. The increase was primarily driven by ana $1.4 million increase ~~of $1.7 million~~ in service charges on deposit accounts anand a $1.3 million increase in ~~bank owned life insurance~~loan-related interest swap fee income ~~of $1.2 million primarily~~ due to ~~life insurance proceeds received during the quarter, an increase of $1.3 million in fiduciary and asset management fees due to growth in assets under management,~~higher transaction volumes and an increase in ~~other operating~~average swap fees. These noninterest income ~~primarily driven~~increases were partially offset by ~~unrealized gains on equity method investments of approximately $3.1 million. Partially offsetting these increases was~~ a $2.4 million decrease in mortgage banking income ~~of $1.2 million~~ due to ~~lower~~a decline in mortgage loan origination volumes resulting from the higher interest rate environment and ~~a decrease in loan-related interest swap income of $4.2 million due to lower transaction volumes.~~declining gain on sale margins.


	For the Six Months Ended								For the Six Months Ended
	June 30,				Change				June 30,				Change
	2021		2020		$		%		2022		2021		$		%

	(Dollars in thousands)								(Dollars in thousands)
Noninterest income:
Service charges on deposit accounts	$	12,116	$	12,508	$	(392)	(3.1)	%	$	15,637	$	12,116	$	3,521	29.1	%
Other service charges, commissions, and fees		3,436		2,978		458	15.4	%		3,364		3,436		(72)	(2.1)	%
Interchange fees		4,050		3,321		729	22.0	%		4,078		4,050		28	0.7	%
Fiduciary and asset management fees		13,294		11,499		1,795	15.6	%		14,194		13,294		900	6.8	%
Mortgage banking income		12,874		7,847		5,027	64.1	%		5,317		12,874		(7,557)	(58.7)	%
Gains on securities transactions		78		12,275		(12,197)	(99.4)	%
Bank owned life insurance income		5,475		4,076		1,399	34.3	%		5,413		5,475		(62)	(1.1)	%
Loan-related interest rate swap fees		3,075		9,432		(6,357)	(67.4)	%		6,460		3,075		3,385	110.1	%
Other operating income		5,053		902		4,151	460.2	%		13,976		5,131		8,845	172.4	%
Total noninterest income	$	59,451	$	64,838	$	(5,387)	(8.3)	%	$	68,439	$	59,451	$	8,988	15.1	%

Noninterest income ~~decreased $5.4~~increased $9.0 million or ~~8.3%~~15.1% to $68.4 million for the six months ended June 30, 2022, compared to $59.5 million for the six months ended June 30, 2021, ~~compared to $64.8~~primarily driven by the pre-tax gain of $9.1 million ~~for the six months ended June 30, 2020. Excluding gains on securities transactions and losses~~ related to ~~balance sheet repositioning,~~the sale of DHFB in the second quarter of 2022. Excluding the losses and gains from securities and the gain resulting from the sale of DHFB, adjusted operating noninterest income⁽⁺⁾ for the six months ended June 30, ~~2021 increased $5.0 million or 9.3% compared to~~2022 did not significantly change from the six months ended June 30, ~~2020. This was primarily driven by an increase of $5.0~~2021. The $7.6 million decrease in mortgage banking ~~income driven by higher~~is due to a decline in mortgage loan origination volumes resulting from the ~~lower~~higher interest rate environment and declining gain on sale margins, and was offset by a $3.5 million increase in service charges on deposit accounts, a $3.4 million increase in loan-related interest swap fee income due to higher transaction volumes and an increase ~~of $1.8 million~~in average swap fees, and a $900,000 increase in fiduciary and asset management fees due to growth in assets under management, an increase in bank owned life insurance income of $1.4 million primarily due to life insurance proceeds received in 2021, and an increase in other operating income primarily driven by unrealized gains on equity method investments of approximately $4.2 million. Partially offsetting these increases was a decrease in loan-related interest swap income of $6.4 million due to lower transaction volumes.management.

~~-61-~~-58-

Table of Contents

Noninterest Expense


		For the Three Months Ended								For the Three Months Ended
		June 30,				Change				June 30,				Change
		2021		2020		$		%		2022		2021		$		%

		(Dollars in thousands)								(Dollars in thousands)
Noninterest expense:
Salaries and benefits		$	50,766	$	49,896	$	870	1.7	%	$	55,305	$	50,766	$	4,539	8.9	%
Occupancy expenses			7,140		7,224		(84)	(1.2)	%		6,395		7,140		(745)	(10.4)	%
Furniture and equipment expenses			3,911		3,406		505	14.8	%		3,590		3,911		(321)	(8.2)	%
Technology and data processing			7,219		6,454		765	11.9	%		7,862		7,219		643	8.9	%
Professional services			4,408		2,989		1,419	47.5	%		4,680		4,408		272	6.2	%
Marketing and advertising expense			2,738		2,043		695	34.0	%		2,502		2,738		(236)	(8.6)	%
FDIC assessment premiums and other insurance			2,319		2,907		(588)	(20.2)	%		2,765		2,319		446	19.2	%
Other taxes			4,435		4,120		315	7.6	%
Franchise and other taxes											4,500		4,435		65	1.5	%
Loan-related expenses			1,909		2,501		(592)	(23.7)	%		1,867		1,909		(42)	(2.2)	%
Amortization of intangible assets			3,568		4,223		(655)	(15.5)	%		2,915		3,568		(653)	(18.3)	%
Loss on debt extinguishment	��		—		10,306		(10,306)	(100.0)	%
Other expenses			3,558		6,745		(3,187)	(47.2)	%		6,387		3,558		2,829	79.5	%
Total noninterest expense		$	91,971	$	102,814	$	(10,843)	(10.5)	%	$	98,768	$	91,971	$	6,797	7.4	%

Noninterest expense ~~decreased $10.8~~increased $6.8 million or ~~10.5%~~7.4% to $98.8 million for the quarter ended June 30, 2022, compared to $92.0 million for the quarter ended June 30, ~~2021 compared to $102.8 million~~2021. Excluding amortization of intangible assets and branch closing and facility consolidation costs, adjusted operating noninterest expense⁽⁺⁾ for the quarter ended June 30, ~~2020. Excluding amortization~~2022 increased by $7.4 million or 8.4% from the prior year quarter. The increase from the prior year quarter was mainly due to an increase of ~~intangible assets~~$4.5 million in salaries and benefits primarily driven by an increase in salaries, wages, and variable incentive compensation, an increase of $1.2 million in non-credit related losses on debt extinguishment, adjusted operating noninterest expense(+) for the quarter ended June 30, 2021 did not significantly change from the second quarter of 2020. Other expenses decreased $3.2 million, primarily due to a decreasecustomer transactions, $626,000 in OREO and credit-related expenses, ~~of $1.3 million,~~$506,000 in teammate training and travel costs, $361,000 in deferred compensation expenses, $643,000 in technology and data processing expenses primarily driven by ~~a $930,000 gain on the sale of closed branches. This decrease was~~an increase in software licensing and maintenance expenses, and $446,000 in FDIC assessment premiums. These increases were partially offset by ~~an increase~~decreases of ~~$1.4 million~~$745,000 in ~~professional services costs due to an increase~~occupancy expenses and $321,000 in ~~legal fees~~furniture and ~~costs related to strategic projects. Noninterest expense for~~equipment expenses, partially reflecting the ~~second quarter~~impact of ~~2021 also included approximately $200,000 in costs related to~~ the Company’s ~~response to COVID-19, compared to approximately $620,000 for the quarter ended June 30, 2020, and approximately $250,000~~consolidation of 16 branches that was completed in expenses related to PPP loan forgiveness processing incurred during the second quarter of 2021. Noninterest expense for the second quarter of 2020 included approximately $1.6 million in real estate and branch closure costs and approximately $1.8 million in severance expenses related to the Company’s expense reduction plans, neither of which were incurred during the second quarter of 2021.March 2022.

For the Six Months Ended

June 30,

Change


2021

2020

$

%

(Dollars in thousands)

Noninterest expense:

Salaries and benefits

$
103,426

$
100,013

$
3,413

3.4
%
Occupancy expenses

14,454

14,357

97

0.7
%
Furniture and equipment expenses

7,880

7,147

733

10.3
%
Technology and data processing

14,123

12,623

1,500

11.9
%
Professional services

9,369

6,297

3,072

48.8
%
Marketing and advertising expense

4,782

4,782

—

—
%
FDIC assessment premiums and other insurance

4,626

5,768

(1,142)

(19.8)
%
Other taxes

8,871

8,240

631

7.7
%
Loan-related expenses

3,786

5,198

(1,412)

(27.2)
%
Amortization of intangible assets

7,298

8,624

(1,326)

(15.4)
%
Loss on debt extinguishment

14,695

10,306

4,389

42.6
%
Other expenses

10,598

15,104

(4,506)

(29.8)
%
Total noninterest expense

$
203,908

$
198,459

$
5,449

2.7
%

~~-62-~~-59-

Table of Contents


	For the Six Months Ended
	June 30,				Change
	2022		2021		$			%

	(Dollars in thousands)
Noninterest expense:							��
Salaries and benefits	$	113,603	$	103,426	$	10,177		9.8	%
Occupancy expenses		13,278		14,454		(1,176)		(8.1)	%
Furniture and equipment expenses		7,187		7,880		(693)		(8.8)	%
Technology and data processing		15,658		14,123		1,535		10.9	%
Professional services		8,770		9,369		(599)		(6.4)	%
Marketing and advertising expense		4,665		4,782		(117)		(2.4)	%
FDIC assessment premiums and other insurance		5,250		4,626		624		13.5	%
Franchise and other taxes		8,999		8,871		128		1.4	%
Loan-related expenses		3,643		3,786		(143)		(3.8)	%
Amortization of intangible assets		5,954		7,298		(1,344)		(18.4)	%
Loss on debt extinguishment		—		14,695		(14,695)		(100.0)	%
Other expenses		17,082		10,598		6,484		61.2	%
Total noninterest expense	$	204,089	$	203,908	$	181		0.1	%

Noninterest expense ~~increased $5.4 million or 2.7% to $203.9 million~~ for the six months ended June 30, ~~2021, compared to $198.5 million for~~2022 did not significantly change from the six months ended June 30, ~~2020.~~2021. Excluding amortization of intangible assets, losses related to balance sheet repositioning, and ~~losses on debt extinguishment,~~branch closing and facility consolidation costs adjusted operating noninterest expense⁽⁺⁾ for the six months ended June 30, ~~2021~~2022 increased ~~$2.4~~by $11.6 million or ~~1.3%~~6.4% compared to the six months ended June 30, ~~2020. This~~2021. The increase from the prior year quarter was ~~primarily driven by~~mainly due to an increase of ~~$3.4~~$10.2 million in salaries and benefits primarily ~~due to increases~~driven by an increase in ~~performance based~~salaries, wages, and variable incentive compensation, an increase of $879,000 in OREO and ~~increased contract labor~~credit-related expenses, an increase of $758,000 in teammate training and travel costs, an increase of $1.5 million in technology and data processing expense driven by an increase in software licensing and maintenance expenses, and an increase of ~~$3.1~~$624,000 in FDIC assessment premiums. Partially offsetting these expense increases were declines of $1.2 million in occupancy expenses and $693,000 in furniture and equipment expenses, reflecting the impact of the Company’s consolidation of 16 branches that was completed in March 2022, and a decline of $599,000 in professional services costs due to an increase in legal and audit fees and costs related to strategic projects. These increases were partially offset by a decrease in other operating expenses primarily driven by a decrease in FDIC assessment premiums of $1.1 million, a decrease in loan-related expenses of $1.4 million, primarily driven by lower third-party lending costs, and a decrease of $2.1 million in OREO and credit-related expenses, primarily driven by a $1.5 million gain on the sale of closed branches.

Noninterest expense for the six months ended June 30, 2021 included $1.1 million in real-estate related branch closure costs, compared to $1.7 million during the first half of 2020. Noninterest expense for the six months ended June 30, 2020 also included approximately $1.8 million in severance expenses related to the Company’s expense reduction plans.

Noninterest expense for the six months ended June 30, 2021 included approximately $500,000 in costs related to the Company’s response to the COVID-19 pandemic, compared to $996,000 during the first half of 2020, and approximately $750,000 in expenses associated with PPP loan forgiveness processing and PPP Round Two loan set-up costs.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.

The effective tax rate for the three months ended June 30, 2022 and 2021 was 16.7% and ~~2020 was~~ 18.3% ~~and 15.2%~~, respectively. The effective tax rate for the six months ended June 30, 2022 and 2021 was 17.1% and ~~2020 was~~ 17.7% ~~and 14.7%~~, respectively. The ~~increase~~decrease in the effective tax rates ~~is primarily due~~reflects the impacts of the current quarter’s discrete items related to the ~~lower~~sale of DHFB and a higher proportion of tax-exempt income to pre-tax income in the ~~2021 periods.~~2022 period.

~~-63-~~-60-

Table of Contents

DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

Overview

Assets

At June 30, ~~2021,~~2022, total assets were ~~$20.0~~$19.7 billion, ~~an increase~~a decrease of ~~$360.9~~$403.0 million or approximately ~~3.7%~~4.1% (annualized) from ~~$19.6~~$20.1 billion at December 31, ~~2020.~~2021. The ~~increase~~decrease in total assets was ~~primarily~~ driven by ~~an increase in cash and cash equivalents, as well as net growth in~~the investment securities portfolio decrease of $366.4 million mainly due to the decline in the AFS portfolio’s fair value, reflecting the impact of market interest rate increases, partially offset by a decrease in cash and cash equivalents of $561.1 million, which was deployed primarily to fund loans ~~due to PPP loan forgiveness.~~which increased by $460.0 million from December 31, 2021, but also reflects the impact of net deposit outflows.

~~Loans held for investment~~LHFI (net of deferred fees and costs) were $13.7 billion, including ~~$859.4~~$21.7 million in PPP loans, at June 30, ~~2021, a decrease~~2022, an increase of ~~$323.4~~$460.0 million or ~~4.7%~~7.0% (annualized) from December 31, ~~2020.~~2021. Excluding the effects of the PPP ~~loans held for investment~~⁽⁺⁾, LHFI (net of deferred fees and costs) ~~decreased $3.2~~at June 30, 2022 increased $588.2 million or ~~0.1%~~9.1% (annualized) ~~during this period. For the quarter ended~~from December 31, 2021. At June 30, ~~2021,~~2022, quarterly average loans ~~increased $14.2~~decreased $446.4 million or ~~0.1%, compared to~~3.2% from the ~~quarter ended June 30, 2020.~~same period in the prior year. Excluding the effects of the PPP⁽⁺⁾, the adjusted quarterly average ~~loans for the quarter ended~~loan balance at June 30, ~~2021~~2022 increased ~~$100.5~~$697.8 million or ~~0.8%~~5.5% from ~~the quarter ended~~ June 30, ~~2020.~~2021. Refer to "Loan Portfolio" within Item 2 and Note 3 "Loans and Allowance for Loan and Lease Losses" in Part I, Item 1 of this Quarterly Report for additional information on the Company’s loan activity. Refer to "Non-GAAP Financial Measures" within Item 2 for additional information on PPP adjusted impacts, including a reconciliation of these non-GAAP financial measures to the most directly comparable financial measures calculated in accordance with GAAP.

Liabilities and Stockholders’ Equity

At June 30, ~~2021,~~2022, total liabilities were ~~$17.2~~$17.3 billion, ~~an increase~~a decrease of ~~$321.8~~$84.4 million from ~~$16.9~~$17.4 billion at December 31, ~~2020.~~2021.

Total deposits ~~were $16.7 billion~~ at June 30, ~~2021, an increase~~2022 were $16.1 billion, a decrease of ~~$936.5~~$482.4 million or approximately ~~12.0%~~5.9% (annualized) from December 31, ~~2020.~~2021. For the quarter ended June 30, ~~2021,~~2022, quarterly average deposits ~~increased $1.5 billion~~decreased $309.5 million or ~~10.3%~~1.9% compared to the quarter ended June 30, ~~2020 primarily due~~2021. The declines in deposits relate to declines in money market account balances and maturing time deposits, as well as a public funds client that used available deposit funds to repay higher cost, longer-term debt obligations during the ~~impacts of government stimulus and further impacts customer spending behavior.~~second quarter. Refer to “Deposits” within this Item 2 for further discussion on this topic.

Total short-term and long-term borrowings ~~decreased from $840.7~~at June 30, 2022 were $798.0 million, an increase of $291.4 million or 57.5% when compared to $506.6 million at December 31, ~~2020 to $380.1 million at June 30,~~ 2021. The Company prepaid a $200.0 million long-term FHLB advance during the first quarter of 2021. At June 30, 2021, the Company no longer has any federal funds purchased or short-term advances with the FHLB as compared to $150.0 million and $100.0 million at December 31, 2020, respectively. Refer to Note 6 “Borrowings” in Part I, of Item I of this Quarterly Report for further discussion on this topic.

At June 30, ~~2021,~~2022, stockholders’ equity was ~~$2.7~~$2.4 billion, ~~an increase~~a decrease of ~~$39.1~~$318.6 million from December 31, ~~2020.~~2021. Refer to “Capital Resources” within this Item 2, as well as Note 9 "Stockholders’ Equity" in Part I, Item 1 of this Quarterly Report for additional information on the Company’s capital ~~ratios.~~resources.

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

~~The Company declared and paid a cash dividend of $0.28 per common share during the second quarter of 2021, an increase~~ ~~of $0.03 per share, or approximately 12.0%, compared~~ ~~to the second quarter of 2020. Dividends for the six months ended June 30, 2021 were $0.53, an increase of $0.03 per common share, or 6.0% compared to the six months ended June 30, 2020.~~ During the second quarter of ~~2021,~~2022, the ~~Board also~~Company declared and paid a quarterly dividend on the outstanding shares of Series A ~~Preferred Stock~~preferred stock of $171.88 per share (equivalent to $0.43 per outstanding depositary share)~~. Dividends~~, consistent with the first quarter of 2022 and the second quarter of 2021. During the second quarter of 2022, the Company also declared and paid ona cash dividend of $0.28 per common share, consistent with the ~~outstanding shares~~first quarter of ~~Series A Preferred Stock for~~2022 and the ~~six months ended June 30, 2021 were $343.76 per share (equivalent to $0.86 per outstanding depositary share).~~second quarter of 2021.

~~-64-~~-61-

Table of Contents

Securities

At June 30, ~~2021,~~2022, the Company had total investments in the amount of ~~$3.5~~$3.8 billion, or ~~17.5%~~19.4% of total assets, as compared to ~~$3.2~~$4.2 billion, or ~~16.2%~~20.9% of total assets, at December 31, ~~2020.~~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 securities~~MBS are agency-backed securities, which have a government guarantee. ~~The investment portfolio has a high percentage of municipal securities; therefore, the Company earns a higher taxable equivalent yield on its portfolio as compared to many of its peers.~~ For information regarding the hedge transaction related to ~~available for sale~~AFS securities, see Note 8 "Derivatives" in Part I, Item 1 of this Quarterly Report.

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

June 30,

December 31,

June 30,

December 31,

2021

2020

2022

2021

Available for Sale:

U.S. government and agency securities

76,609

13,394

65,740

73,849

Obligations of states and political subdivisions

942,471

837,326

822,427

1,008,396

Corporate and other bonds

152,885

151,078

177,892

153,376

Mortgage-backed securities

MBS

Commercial

420,847

388,684

399,835

471,157

Residential

1,278,961

1,148,312

1,483,878

1,773,232

Total mortgage-back securities

1,699,808

1,536,996

Total MBS

1,883,713

2,244,389

Other securities

1,632

1,625

1,649

1,640

Total AFS securities, at fair value

2,873,405

2,540,419

2,951,421

3,481,650

Held to Maturity:

U.S. government and agency securities

2,657

2,751

2,178

2,604

Obligations of states and political subdivisions

533,733

536,767

693,070

620,873

Mortgage-backed securities

MBS

Commercial

5,049

5,333

29,404

4,523

Residential

—

56,097

—

Total mortgage-back securities

5,049

5,333

Total MBS

85,501

4,523

Total held to maturity securities, at carrying value

541,439

544,851

780,749

628,000

Restricted Stock:

Federal Reserve Bank stock

67,032

67,032

FRB stock

67,032

67,032

FHLB stock

9,793

27,750

20,876

9,793

Total restricted stock, at cost

76,825

94,782

87,908

76,825

Total investments

3,491,669

3,180,052

3,820,078

4,186,475

~~-65-~~-62-

Table of Contents

The following table summarizes the ~~contractual maturity of AFS securities at fair value and their~~ weighted average yields⁽¹⁾ for AFS securities by contractual maturity date of the underlying securities as of June 30, ~~2021 (dollars in thousands):~~2022:

1 Year or



5 – 10

Over 10


Less

1 - 5 Years

Years

Years

Total

U.S. government and agency securities











Amortized cost

$
—

$
—

$
75,554

$
—

$
75,554

Fair value

—

—

76,609

—

76,609

Weighted average yield ⁽¹⁾

—
%

—
%

1.50
%

—
%

1.50
%

Obligations of states and political subdivisions:

Amortized cost

$
1,207

$
17,385

$
43,348

$
837,177

$
899,117

Fair value

1,229

18,140

45,623

877,479

942,471

Weighted average yield ⁽¹⁾

4.85
%

2.93
%

2.66
%

2.84
%

2.83
%

Corporate bonds and other securities:

Amortized cost

$
1,632

$
17,381

$
105,074

$
26,319

$
150,406

Fair value

1,632

17,765

108,587

26,533

154,517

Weighted average yield ⁽¹⁾

0.47
%

4.31
%

4.18
%

1.81
%

3.74
%

Mortgage backed securities:

Commercial

Amortized cost

$
13,695

$
133,126

$
24,118

$
239,589

$
410,528

Fair value

13,825

137,968

24,805

244,249

420,847

Weighted average yield ⁽¹⁾

2.25
%

3.18
%

2.44
%

2.42
%

2.66
%
Residential

Amortized cost

$
52

$
12,430

$
58,335

$
1,192,280

$
1,263,097

Fair value

52

12,556

60,701

1,205,652

1,278,961

Weighted average yield ⁽¹⁾

2.67
%

2.52
%

2.92
%

1.86
%

1.91
%
Total mortgage-backed securities

Amortized cost

$
13,747

$
145,556

$
82,453

$
1,431,869

$
1,673,625

Fair value

13,877

150,524

85,506

1,449,901

1,699,808

Weighted average yield ⁽¹⁾

2.25
%

3.12
%

2.78
%

1.95
%

2.10
%

Total AFS securities:

Amortized cost

$
16,586

$
180,322

$
306,429

$
2,295,365

$
2,798,702

Fair value

16,738

186,429

316,325

2,353,913

2,873,405

Weighted average yield ⁽¹⁾

2.26
%

3.22
%

2.93
%

2.27
%

2.40
%

1 Year or

5 – 10

Over 10

Less

1 - 5 Years

Years

Total

U.S. government and agency securities

—

2.64

1.43

—

1.46

Obligations of states and political subdivisions

4.21

2.77

2.66

2.77

Corporate bonds and other securities

3.70

5.39

3.87

2.52

3.85

MBS:

Commercial

3.99

3.31

2.46

2.18

2.57

Residential

2.42

2.23

2.51

2.09

2.10

Total MBS

3.39

3.22

2.50

2.10

2.20

Total AFS securities

3.54

3.31

2.90

2.32

2.44

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

~~-66-~~

~~Table of Contents~~

The following table summarizes the ~~contractual maturity of HTM securities at carrying value and their~~ weighted average yields⁽¹⁾ for HTM securities by contractual maturity date of the underlying securitiesas of June 30, ~~2021 (dollars in thousands):~~2022:

1 Year or



5 – 10

Over 10


Less

1 - 5 Years

Years

Years

Total

U.S. government and agency securities

Carrying value

$
—

$
1,540

$
1,117

$
—

$
2,657

Fair value

—

1,531

1,116

—

2,647

Weighted average yield ⁽¹⁾

—
%

4.37
%

4.05
%

—
%

4.24
%

Obligations of states and political subdivisions:

Carrying value

$
440

$
6,919

$
555

$
525,819

$
533,733

Fair value

443

7,180

606

595,595

603,824

Weighted average yield ⁽¹⁾

2.74
%

2.47
%

3.16
%

4.10
%

4.07
%

Mortgage backed securities:

Commercial

Amortized cost

$
—

$
—

$
—

$
5,049

$
5,049

Fair value

—

—

—

5,005

5,005

Weighted average yield ⁽¹⁾

—
%

—
%

—
%

4.95
%

4.95
%
Residential

Amortized cost

$
—

$
—

$
—

$
—

$
—

Fair value

—

—

—

—

—

Weighted average yield ⁽¹⁾

—
%

—
%

—
%

—
%

—
%
Total mortgage-backed securities

Amortized cost

$
—

$
—

$
—

$
5,049

$
5,049

Fair value

—

—

—

5,005

5,005

Weighted average yield ⁽¹⁾

—
%

—
%

—
%

4.95
%

4.95
%

Total HTM securities:

Carrying value

$
440

$
8,459

$
1,672

$
530,868

$
541,439

Fair value

443

8,711

1,722

600,600

611,476

Weighted average yield ⁽¹⁾

2.74
%

2.82
%

3.75
%

4.10
%

4.08
%

1 Year or

5 – 10

Over 10

Less

1 - 5 Years

Years

Total

U.S. government and agency securities

4.08

3.98

—

4.05

Obligations of states and political subdivisions

2.31

3.87

3.85

3.64

MBS:

Commercial

—

2.29

Residential

—

4.21

—

2.78

3.03

Total MBS

—

4.21

—

2.59

2.77

Total HTM securities

2.83

4.04

3.85

3.53

3.55

~~(1)~~

~~Yields on tax-exempt securities have been computed on a tax-equivalent basis.~~

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

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

As of June 30, ~~2021,~~2022, the Company maintained a diversified municipal bond portfolio with approximately ~~63%~~65% of its holdings in general obligation issues and the majority of the remainder primarily backed by revenue bonds. Issuances within the ~~state~~State of Texas represented ~~20%~~18% of the total municipal portfolio; no other state had a concentration above 10%. Substantially all municipal holdings are considered investment grade. When purchasing municipal securities, the Company focuses on strong underlying ratings for general obligation issuers or bonds backed by essential service revenues.

~~-67-~~-63-

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, corporate line of credit with a large correspondent 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.

~~On June 9, 2020, the~~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.

Ashas seen increased customer deposit balances as a result of ~~adverse market conditions including~~ the impacts of COVID-19, ~~the Company has continued to see elevated customer deposit balances. These increased balances are due primarily to the combination~~including as a result of government stimulus programs, and customer expense and savings habits in response to the pandemic. As a result of the increases in customer deposits, the Company has reduced its wholesale borrowings during 2020 and in the first half of 2021.programs. The Company ~~considers~~considered a portion of the ~~increases~~elevated levels in customer deposits to be temporary ~~which it expects~~and is starting to see declines from prior elevated periods; however, the Company will ~~result~~use other means of borrowings to fund any liquidity needs based on declines in ~~outflows in subsequent quarters.~~deposit balances.

Under the terms of the PPPLF, prior to that program’s expiration, the Company could borrow funds which are secured by the Company’s PPP loans. During 2020, the Company’s borrowings pursuant to the PPPLF fluctuated; however, at its peak, the Company borrowed $200.5 million. As of June 30, 2021, the Company had no outstanding advances under the PPPLF. The Company’s available borrowing capacity under the PPPLF as of June 30, 2021 was $883.8 million. The PPPLF expired on July 30, 2021, following an extension by the Federal Reserve from the previously scheduled expiration date of June 30, 2021.

~~In response to the low market interest rate environment, in February 2021 the Company prepaid a $200.0 million long-term FHLB advance, which resulted in a pre-tax prepayment penalty of $14.7 million.~~

As of June 30, ~~2021,~~2022, liquid assets totaled ~~$6.6~~$5.5 billion or ~~33.2%~~28.0% of total assets, and liquid earning assets totaled ~~$6.4~~$5.4 billion or ~~35.8~~%30.5% of total earning assets. Asset liquidity is also provided by managing loan and securities maturities and cash flows. As of June 30, ~~2021,~~2022, loan payments of approximately ~~$5.4~~$4.9 billion or 3~~9.1~~%36.1% of total loans are ~~scheduled to mature~~expected within one year based on contractual ~~maturity,~~terms, adjusted for expected prepayments, and approximately ~~$384.1~~$320.3 million or 1~~1.0~~%8.4% of total securities are scheduled to ~~mature~~be paid down within one ~~year.~~year based on contractual terms, adjusted for expected prepayments.

For additional information and the available balances on various lines of credit, please refer to Note 6 “Borrowings” in ~~the “Notes to the Consolidated Financial Statements” contained in~~ Part I, of Item 1 of this Quarterly Report. In addition to lines of credit, the Bank may also borrow additional funds by purchasing certificates of deposit through a nationally recognized network of financial institutions. For additional information and outstanding balances on purchased certificates of deposits, please refer to “Deposits” within this Item 2.

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 June 30, 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⁾		267,166		32,605		234,561
Repurchase agreements		118,658		118,658		—
Total contractual obligations	$	790,983	$	151,263	$	639,720

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

(2)	Represents lease payments due on non-cancellable operating leases at June 30, 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.

~~-68-~~-64-

Table of Contents

Loan Portfolio

~~Loans held for investment,~~LHFI, net of deferred fees and costs, were $13.7 billion at June 30, ~~202~~1~~, $14.0~~2022, and $13.2 billion at December 31, ~~2020, and $14.3 billion at June 30, 2020.~~2021. Commercial & industrial loans and commercial real estate-non-owner occupied loans represented the Company’s largest categories at June 30, ~~2021.~~2022. Commercial and industrial loans included approximately ~~$842.0~~$21.7 million and $145.3 million in loans from the PPP loan program as of June 30, ~~2021.~~2022 and December 31, 2021, respectively.

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 as of and for the quarters ended (dollars in thousands):

June 30, 2021

March 31, 2021

December 31, 2020

September 30, 2020

June 30, 2020

Commercial loans:

Construction and Land Development

$
838,722

6.1
%
$
884,303

6.2
%
$
925,798

6.6
%
$
1,207,190

8.4
%
$
1,247,939

8.7
%
Commercial Real Estate - Owner Occupied

2,069,658

15.1
%

2,083,155

14.6
%

2,128,909

15.2
%

2,107,333

14.7
%

2,067,087

14.4
%
Commercial Real Estate - Non-Owner Occupied

3,712,607

27.1
%

3,671,471

25.7
%

3,657,562

26.1
%

3,497,929

24.3
%

3,455,125

24.1
%
Multifamily Real Estate

860,081

6.3
%

842,906

5.9
%

814,745

5.8
%

731,582

5.1
%

717,719

5.0
%
Commercial & Industrial

2,990,622

21.8
%

3,599,884

25.2
%

3,263,460

23.3
%

3,536,249

24.6
%

3,555,971

24.9
%
Residential 1-4 Family - Commercial

637,485

4.7
%

658,051

4.6
%

671,949

4.8
%

696,944

4.8
%

715,384

5.0
%
Other Commercial

600,276

4.4
%

529,748

3.7
%

489,975

3.5
%

494,084

3.4
%

389,190

2.7
%
Total Commercial Loans

$
11,709,451

85.5
%
$
12,269,518

85.9
%
$
11,952,398

85.3
%
$
12,271,311

85.3
%
$
12,148,415

84.8
%
Consumer loans:

Residential 1-4 Family - Consumer

$
823,355

6.0
%
$
816,916

5.7
%
$
822,866

5.8
%
$
830,144

5.8
%
$
841,051

5.9
%
Residential 1-4 Family - Revolving

559,014

4.1
%

563,786

4.0
%

596,996

4.2
%

618,320

4.3
%

627,765

4.4
%
Auto

411,073

3.0
%

406,349

2.9
%

401,324

2.9
%

387,417

2.7
%

380,053

2.7
%
Consumer

195,036

1.4
%

215,711

1.5
%

247,730

1.8
%

276,023

1.9
%

311,362

2.2
%
Total Consumer Loans

$
1,988,478

14.5
%
$
2,002,762

14.1
%
$
2,068,916

14.7
%
$
2,111,904

14.7
%
$
2,160,231

15.2
%
Total loans held for investment

$
13,697,929

100.0
%
$
14,272,280

100.0
%
$
14,021,314

100.0
%
$
14,383,215

100.0
%
$
14,308,646

100.0
%

~~-69-~~

~~Table of Contents~~

The following table presents the remaining maturities, based on contractual maturity, by loan type and by rate type (variable or fixed), as of June 30, ~~202~~12022 (dollars in thousands):

Variable Rate

Fixed Rate

Variable Rate

Fixed Rate

Total

Less than 1

More than 5

Total

Less than 1

More than

Maturities

year

Total

1-5 years

years

Total

1-5 years

years

Maturities

year

Total

1-5 years

5-15 years

15 years

Total

1-5 years

5-15 years

15 years

Construction and Land Development

838,722

357,132

321,456

258,760

62,696

160,134

97,123

63,011

988,379

318,369

523,512

468,177

54,113

1,222

146,498

73,700

33,611

39,187

Commercial Real Estate - Owner Occupied

2,069,658

180,568

656,442

121,468

534,974

1,232,648

548,815

683,833

1,965,702

166,915

617,084

122,906

478,475

15,703

1,181,703

491,045

660,363

30,295

Commercial Real Estate - Non-Owner Occupied

3,712,607

426,384

1,829,681

717,507

1,112,174

1,456,542

1,091,121

365,421

3,860,819

418,158

2,055,666

919,977

1,125,137

10,552

1,386,995

985,214

345,039

56,742

Multifamily Real Estate

860,081

151,567

492,726

141,474

351,252

215,788

151,187

64,601

762,502

78,845

449,209

86,166

363,043

—

234,448

172,714

61,734

—

Commercial & Industrial

2,990,622

701,955

1,093,747

917,927

175,820

1,194,920

886,249

308,671

2,595,891

437,472

1,324,374

1,141,296

176,072

7,006

834,045

512,442

313,484

8,119

Residential 1-4 Family - Commercial

637,485

94,053

138,874

28,504

110,370

404,558

309,393

95,165

553,771

73,273

112,680

30,333

74,298

8,049

367,818

267,766

88,560

11,492

Residential 1-4 Family - Consumer

823,355

2,255

255,289

2,088

253,201

565,811

11,876

553,935

865,174

5,325

164,121

1,907

27,651

134,563

695,728

7,999

73,885

613,844

Residential 1-4 Family - Revolving

559,014

38,116

505,213

44,658

460,555

15,685

1,207

14,478

583,073

28,084

481,906

31,661

135,479

314,766

73,083

3,171

23,526

46,386

Auto

411,073

3,102

—

407,971

175,155

232,816

525,301

3,064

—

522,237

200,474

321,763

—

Consumer

195,036

13,664

26,634

23,397

3,237

154,738

59,958

94,780

180,045

14,367

26,462

23,266

2,293

903

139,216

65,669

49,203

24,344

Other Commercial

600,276

55,949

84,415

9,695

74,720

459,912

198,881

261,031

774,751

70,411

108,948

18,164

57,867

32,917

595,392

190,889

268,600

135,903

Total loans held for investment

13,697,929

2,024,745

5,404,477

2,265,478

3,138,999

6,268,707

3,530,965

2,737,742

Total LHFI

13,655,408

1,614,283

5,863,962

2,843,853

2,494,428

525,681

6,177,163

2,971,083

2,239,768

966,312

The Company remains committed to originating soundly underwritten loans to qualifying borrowers within its markets. As reflected in the loan table, at June 30, ~~202~~1,2022, the largest components of the Company’s loan portfolio consisted of commercial real estate and commercial & industrial ~~and multifamily real estate~~ 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.

~~Total~~The Company had no short-term loan modifications related to ~~the~~ COVID-19 ~~pandemic are immaterial to the Company~~ as ~~a whole at~~of June 30, 2022 and had insignificant short-term loan modifications related to COVID-19 as of December 31, 2021.

~~-70-~~-65-

Table of Contents

Asset Quality

Overview

At June 30, ~~2021,~~2022, the Company experienced decreases in NPAs ~~compared to December 31, 2020. Accruing~~and decreases in accruing past due loan levels as a percentage of total ~~loans held for investment at June 30, 2021 were down from total past due loan levels at~~LHFI compared to December 31, ~~2020 and June 30, 2020.~~

2021. Net charge-offs ~~decreased~~ for the six months ended June 30, ~~2021~~2022 decreased $306,000 compared to the six months ended June 30, ~~2020. Total net charge-offs as a percentage of total average loans on an annualized basis also decreased for the six months ended~~2021. The ACL at June 30, ~~2021 compared to the six months ended June 30, 2020. The allowance for credit losses decreased~~2022 increased from December 31, ~~2020~~2021 primarily due to ~~lower expected losses than previously estimated as a result of benign credit quality metrics to date and an improved economic~~increased uncertainty in the macroeconomic outlook ~~due to the roll-out of COVID-19 vaccines~~ and the impact of ~~government stimulus inclusive~~loan growth in the first six months of ~~PPP loan funding.~~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 in 2021 as a result of COVID-19, 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.

As discussed under “Executive Overview” within this Item 2, COVID-19 has had a wide range of economic impacts, including impacts in the Company’s area of operations and on the Company’s clients and borrowers. The Company has not yet experienced material deterioration in asset quality as compared to asset quality before COVID-19. The Company’s asset quality may in the future be adversely impacted to some degree due to the effects of COVID-19 (including the emergence of new COVID-19 variants), although at this time it is impossible for the Company to estimate either the timing or the magnitude of any such adverse changes in asset quality. The Company continues to monitor asset quality trends and economic and market conditions for indications that COVID-19 may have more significant impacts on the Company’s asset quality than experienced to date. As of June 30, 2021, the Company’s management believes that the ultimate impact of COVID-19 on the Company’s asset quality will be less severe than initially projected at the start of the pandemic.

Nonperforming Assets

At June 30, ~~2021,~~2022, NPAs totaled ~~$38.1~~$31.1 million, a decrease of ~~$7.1~~$1.7 million or 5.1% from December 31, ~~2020.~~2021. NPAs as a percentage of total outstanding loans at June 30 ~~2021~~, 2022 were ~~0.28%~~0.23%, a decrease of ~~4 basis points~~2 bps from ~~0.32% at~~ December 31, ~~2020.~~2021.

~~-71-~~

~~Table of Contents~~

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

June 30,

March 31,

December 31,

September 30,

June 30,

2021

2021

2020

2020

2020

Nonaccrual loans

$
36,399

$
41,866

$
42,448

$
39,023

$
39,624

Foreclosed properties

1,696

2,344

2,773

4,159

4,397

Total NPAs

38,095

44,210

45,221

43,182

44,021

Loans past due 90 days and accruing interest

8,746

9,776

13,634

15,661

19,255

Total NPAs and loans past due 90 days and accruing interest

$
46,841

$
53,986

$
58,855

$
58,843

$
63,276

Performing TDRs

$
13,053

$
13,670

$
13,961

$
14,515

$
15,303

Balances











Allowance for loan and lease losses

$
118,261

$
142,911

$
160,540

$
174,122

$
169,977

Average loans, net of deferred fees and costs

13,971,939

14,064,123

13,777,467

14,358,666

13,957,711

Loans, net of deferred fees and costs

13,697,929

14,272,280

14,021,314

14,383,215

14,308,646

Ratios











Nonaccrual loans to total loans

0.27
%

0.29
%

0.30
%

0.27
%

0.28
%
NPAs to total loans

0.28
%

0.31
%

0.32
%

0.30
%

0.31
%
NPAs to total adjusted loans⁽¹⁾

0.30
%

0.35
%

0.35
%

0.34
%

0.35
%
NPAs & loans 90 days past due to total loans

0.34
%

0.38
%

0.42
%

0.41
%

0.44
%
NPAs to total loans & foreclosed property

0.28
%

0.31
%

0.32
%

0.30
%

0.31
%
NPAs & loans 90 days past due to total loans & foreclosed property

0.34
%

0.38
%

0.42
%

0.41
%

0.44
%
ALLL to nonaccrual loans

324.90
%

341.35
%

378.20
%

446.20
%

428.97
%
ALLL to nonaccrual loans & loans 90 days past due

261.96
%

276.73
%

286.26
%

318.41
%

288.69
%

⁽¹⁾ 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.


	June 30,			December 31,
	2022			2021
Nonaccrual loans	$	29,070		$	31,100
Foreclosed properties		2,065			1,696
Total NPAs		31,135			32,796
Loans past due 90 days and accruing interest		4,592			9,132
Total NPAs and loans past due 90 days and accruing interest	$	35,727		$	41,928
Performing TDRs	$	10,662		$	10,313

Balances
Allowance for loan and lease losses	$	104,184		$	99,787
Allowance for credit losses		113,184			107,787
Average loans, net of deferred fees and costs		13,525,529			13,082,412
Loans, net of deferred fees and costs		13,655,408			13,195,843

Ratios
Nonaccrual loans to total loans		0.21	%		0.24	%
NPAs to total loans		0.23	%		0.25	%
NPAs & loans 90 days past due and accruing interest to total loans		0.26	%		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		0.26	%		0.32	%
ALLL to nonaccrual loans		358.39	%		320.86	%
ALLL to nonaccrual loans & loans 90 days past due and accruing interest		309.50	%		248.03	%
ACL to nonaccrual loans		389.35	%		346.58	%

~~-72-~~-66-

Table of Contents

NPAs at June 30, 2022 included $29.0 million in nonaccrual loans, a net decrease of $2.0 million or 6.5% from December 31, 2021. The following table shows the activity in nonaccrual loans for the quarters ended (dollars in thousands):

June 30,

March 31,

December 31,

September 30,

June 30,

2021

2021

2020

2020

2020
Beginning Balance

$
41,866

$
42,448

$
39,023

$
39,624

$
44,022
Additions

4,162

3,821

8,211

2,790

3,206
Net customer payments

(9,307)

(4,133)

(4,640)

(2,803)

(6,524)
Charge-offs

(183)

(270)

(146)

(588)

(1,088)
Loans returning to accruing status

(153)

—

—

—

8
Transfers to foreclosed property

14

—

—

—

—
Ending Balance

$
36,399

$
41,866

$
42,448

$
39,023

$
39,624


	June 30,		December 31,
	2022		2021
Beginning Balance	$	29,032	$	35,472
Net customer payments		(2,472)		(5,068)
Additions		3,203		1,294
Charge-offs		(311)		(598)
Transfers to foreclosed property		(382)		—
Ending Balance	$	29,070	$	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):

June 30,

March 31,

December 31,

September 30,

June 30,

2021

2021

2020

2020

2020
Construction and Land Development

$
2,685

$
2,637

$
3,072

$
3,520

$
3,977
Commercial Real Estate - Owner Occupied

6,969

7,016

7,128

9,267

8,924
Commercial Real Estate - Non-owner Occupied

3,026

1,958

2,317

1,992

1,877
Multifamily Real Estate

113

—

33

33

33
Commercial & Industrial

1,908

2,023

2,107

1,592

2,708
Residential 1-4 Family - Commercial

4,200

9,190

9,993

5,743

5,784
Residential 1-4 Family - Consumer

13,489

14,770

12,600

12,620

12,029
Residential 1-4 Family - Revolving

3,726

3,853

4,629

3,664

3,626
Auto

179

303

500

517

584
Consumer

104

116

69

75

81
Other Commercial

—

—

—

—

1
Total

$
36,399

$
41,866

$
42,448

$
39,023

$
39,624


	June 30,			December 31,
	2022			2021
Construction and Land Development	$	581		$	2,697
Commercial Real Estate - Owner Occupied		4,996			5,637
Commercial Real Estate - Non-owner Occupied		3,301			3,641
Multifamily Real Estate		—			113
Commercial & Industrial		2,728			1,647
Residential 1-4 Family - Commercial		2,031			2,285
Residential 1-4 Family - Consumer		12,084			11,397
Residential 1-4 Family - Revolving		3,069			3,406
Auto		279			223
Consumer		1			54
Total	$	29,070		$	31,100
Coverage Ratio⁽¹⁾		358.39	%		320.86	%

⁽¹⁾Represents the ALLL divided by nonaccrual loans.

~~NPAs at June 30, 2021 also includes $1.7 million in foreclosed property, a decrease of $1.1 million or 38.8% from December 31, 20~~20~~. The following table shows the activity in foreclosed property for the quarters ended (dollars in thousands):~~

June 30,

March 31,

December 31,

September 30,

June 30,

2021

2021

2020

2020

2020
Beginning Balance

$
2,344

$
2,773

$
4,159

$
4,397

$
4,444
Additions of foreclosed property

14

—

—

—

—
Valuation adjustments

—

—

(35)

—

—
Proceeds from sales

(572)

(419)

(1,357)

(254)

(55)
Gains (losses) from sales

(90)

(10)

6

16

8
Ending Balance

$
1,696

$
2,344

$
2,773

$
4,159

$
4,397

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

June 30,

March 31,

December 31,

September 30,

June 30,

2021

2021

2020

2020

2020
Land

$
728

$
1,227

$
1,227

$
1,238

$
1,245
Land Development

894

894

1,323

1,965

1,965
Residential Real Estate

74

60

60

793

793
Commercial Real Estate

—

163

163

163

394
Total

$
1,696

$
2,344

$
2,773

$
4,159

$
4,397

~~-73-~~

~~Table of Contents~~

Past Due Loans

At June 30, 2021, total accruing past due loans were $25.1 million or 0.18% of total loans held for investment, compared to $49.8 million or 0.36% of total loans held for investment at December 31, 2020, and $40.5 million or 0.28% of total loans held for investment at June 30, 2020. Excluding the impact of the PPP loans⁽⁺⁾,2022, past due loans still accruing interest ~~were 0.20%~~totaled $20.4 million or 0.15% of total ~~adjusted loans held for investment at June 30, 2021,~~LHFI, compared to ~~0.39%~~$29.9 million or 0.23% of total ~~adjusted loans held for investment~~LHFI at December 31, ~~2020, and 0.32% of total adjusted loans held for investment at June 30, 2020.~~2021. Of the total past due loans still accruing interest, ~~$8.7~~$4.6 million or ~~0.06%~~0.03% of total ~~loans held for investment~~LHFI were past due 90 days or more at June 30, ~~2021,~~2022, compared to ~~$13.6~~$9.1 million or ~~0.10%~~0.07% of total ~~loans held for investment~~LHFI at December 31, ~~2020 and $19.3 million or 0.13% of total loans held for investment at June 30, 2020.~~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 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 both June 30, ~~2021 was $19.3 million, a decrease of $1.3 million or 6.5% from $20.6 million at~~2022 and December 31, ~~2020.~~2021 totaled $18.0 million. Of the ~~$19.3~~$18.0 million of TDRs at June 30, ~~2021, $13.1~~2022, $10.7 million or ~~67.7%~~59.4% were considered performing, while the remaining ~~$6.2~~$7.3 million were considered nonperforming. Of the ~~$20.6~~$18.0 million of TDRs at December 31, ~~2020, $14.0~~2021, $10.3 million or ~~68.0%~~57.4% were considered performing while the remaining ~~$6.6~~$7.6 million were considered nonperforming. Loans are removed from TDR status in accordance with the established policy described in Note 1 “Summary of Significant Accounting Policies” in Item 8 “Financial Statements and Supplementary Data” in the Company’s ~~2020~~2021 Form 10-K.

-67-

Table of Contents

Net Charge-offs

For the quarter ended June 30, ~~2021,~~2022, net charge-offs were ~~$69,000~~$939,000 or 0.03% of total average loans on an annualized basis, compared to net charge-offs of less than 0.01% for the same quarter last year. For the six months ended June 30, 2022, net charge-offs were $935,000 or 0.01% of total average loans on an annualized basis, compared to ~~$3.3 million or 0.09% for the same quarter last year. Excluding the impact of the PPP loans~~⁽⁺⁾, net charge-offs were less than 0.01% of total adjusted average loans on an annualized basis at June 30, 2021, compared to 0.10% of total adjusted average loans on an annualized basis at June 30, 2020. For the six months ended June 30, 2021, net charge-offs were $1.2 million or 0.02% ~~of total average loans on an annualized basis, compared to $8.3 million or 0.13%~~ for the same period last year. ~~Excluding the impact of the PPP loans~~⁽⁺⁾,The net charge-offs ~~were 0.02%~~ of ~~total adjusted average~~ loans ~~on an annualized basis for the six months ended June 30, 2021, compared~~continue to ~~0.14% of total adjusted average loans on an annualized basis for the six months ended June 30, 2020.~~be insignificant, driven by benign credit impacts since COVID-19 began.

Provision for Credit Losses

The Company recorded a provision for credit losses of $3.6 million for the quarter ended June 30, 2022, an increase of $31.0 million compared to the negative provision for credit losses of $27.4 million ~~for the quarter ended June 30, 2021, a decrease of $61.6 million compared to the provision for credit losses of $34.2 million~~ recorded during the same quarter of ~~2020. For~~2021. The provision for credit losses for the second quarter of 2022 reflected a provision of $2.6 million for loan and securities losses and a $1.0 million provision for unfunded commitments. The Company recorded a provision for credit losses of $6.4 million for the six months ended June 30, ~~2021, the Company recorded a negative $41.0 million provision for credit losses, a decrease~~2022, an increase of ~~$135.4~~$47.4 million compared to the negative provision for credit losses of ~~$94.4~~$41.0 million recorded during the same period last year. The provision for credit losses for the ~~second quarter of 2021~~six months ended June 30, 2022 reflected a ~~negative~~ provision of ~~$24.6~~$5.4 million infor loan and securities losses and a $1.0 million provision for unfunded commitments. The Company released provisions for loan losses during the three and ~~negative $2.8 million~~six month periods ended June 30, 2021 in ~~provision for unfunded commitments.The decrease in~~light of improved economic and market conditions, compared to those that were incorporated into the Company’s ACL and provision for credit losses as compared to the same quarter in 2020 was driven by the benign credit impacts since the pandemic began, the significant recovery in the economy since last year, as well as the improvement in the economic forecast utilized in estimating the ACL as of June 30, 2021.during 2020.

Allowance for Credit Losses

At June 30, ~~2021,~~2022, the ACL was ~~$128.3~~$113.2 million and included an ALLL of ~~$118.3~~$104.2 million and an RUC of ~~$10.0~~$9.0 million. The ACL ~~decreased $42.3~~increased $5.4 million from December 31, ~~2020,~~2021, primarily due to ~~lower expected losses than previously estimated as a result~~increased uncertainty in the macroeconomic outlook and the impact of ~~benign credit quality metrics to date and an improved economic outlook due to~~loan growth in the ~~roll-out~~first six months of ~~COVID-19 vaccines, as well as additional government stimulus inclusive of more PPP funding.~~2022.

~~-74-~~

~~Table of Contents~~

The ACL as a percentage of the total loan portfolio ~~was 0.94%~~increased slightly to 0.83% at June 30, 2021, ~~and 1.22%~~compared to 0.82% at December 31, ~~2020. The ACL as a percentage of total adjusted loans~~⁽⁺⁾ ~~decreased 33 bps from December 31, 2020 to 1.00% at June 30,~~ 2021.

~~The ALLL decreased $42.3 million from December 31, 2020. The ALLL as a percentage of the total loan portfolio was 0.86% at June 30, 2021 and 1.14% at December 31, 2020. When excluding PPP loans~~⁽⁺⁾, which are 100% guaranteed by the SBA, the ALLL as a percentage of total adjusted loans decreased 33 bps to 0.92% from December 31, 2020. The ratio of the ALLL to nonaccrual loans was 324.9% at June 30, 2021 and 378.2% at December 31, 2020.

~~The RUC at June 30, 2021 remained consistent with December 31, 2020 at $10.0 million, primarily due to the improved economic outlook and less uncertainty related to COVID-19.~~

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

June 30,

March 31,

December 31,

September 30,

June 30,

2021

2021

2020

2020

2020

ALLL Balance, beginning of period

$
142,911

$
160,540

$
174,122

$
169,977

$
141,043

Less: Loans charged-off:











Commercial

891

1,974

1,118

995

1,590

Consumer

1,054

1,667

2,268

1,983

3,087

Total loans charged-off

1,945

3,641

3,386

2,978

4,677

Add: Recoveries:











Commercial

1,042

1,606

937

718

708

Consumer

834

863

680

848

703

Total recoveries

1,876

2,469

1,617

1,566

1,411

Net charge-offs

69

1,172

1,769

1,412

3,266

Add: Provision for loan losses

(24,581)

(16,457)

(11,813)

5,557

32,200

ALLL Balance, end of period

$
118,261

$
142,911

$
160,540

$
174,122

$
169,977

Total RUC

$
10,000

$
12,833

$
10,000

$
12,000

$
11,000

Total ACL

$
128,261

$
155,744

$
170,540

$
186,122

$
180,977

ALLL to loans

0.86
%

1.00
%

1.14
%

1.21
%

1.19
%
ALLL to adjusted loans⁽¹⁾

0.92
%

1.12
%

1.25
%

1.36
%

1.34
%
ACL to loans

0.94
%

1.09
%

1.22
%

1.29
%

1.26
%
ACL to adjusted loans⁽¹⁾

1.00
%

1.22
%

1.33
%

1.46
%

1.42
%
Net charge-offs to average loans

0.00
%

0.03
%

0.05
%

0.04
%

0.09
%
Net charge-offs to adjusted average loans⁽¹⁾

0.00
%

0.04
%

0.06
%

0.04
%

0.10
%
Provision for loan losses to average loans

(0.71)
%

(0.47)
%

(0.33)
%

0.15
%

0.93
%
Provision for loan losses to adjusted average loans⁽¹⁾

(0.77)
%

(0.52)
%

(0.37)
%

0.17
%

1.02
%


	June 30,			December 31,
	2022			2021
Total ALLL	$	104,184		$	99,787
Total RUC		9,000			8,000
Total ACL	$	113,184		$	107,787

ALLL to total loans		0.76	%		0.76	%
ACL to total loans		0.83	%		0.82	%

~~-75-~~-68-

Table of Contents

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


	Three months ended,									Six months ended,
	June 30, 2022									June 30, 2022
	Commercial			Consumer			Total			Commercial			Consumer			Total
Loans charged-off	$	(1,007)		$	(950)		$	(1,957)		$	(1,766)		$	(1,700)		$	(3,466)
Recoveries		392			626			1,018			1,118			1,413			2,531
Net charge-offs	$	(615)		$	(324)		$	(939)		$	(648)		$	(287)		$	(935)
Net charge-offs to average loans⁽¹⁾		0.02	%		0.06	%		0.03	%		0.01	%		0.03	%		0.01	%

	Three months ended,									Six months ended,
	June 30, 2021									June 30, 2021
	Commercial			Consumer			Total			Commercial			Consumer			Total
Loans charged-off	$	(891)		$	(1,054)		$	(1,945)		$	(2,865)		$	(2,721)		$	(5,586)
Recoveries		1,042			834			1,876			2,648			1,697			4,345
Net charge-offs	$	151		$	(220)		$	(69)		$	(217)		$	(1,024)		$	(1,241)
Net charge-offs to average loans⁽¹⁾		NM			0.04	%		0.00	%		0.00	%		0.10	%		0.02	%

⁽¹⁾Annualized

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

June 30,

March 31,

December 31,

September 30,

June 30,

2021

2021

2020

2020

2020


$

% ⁽¹⁾

$

% ⁽¹⁾

$

% ⁽¹⁾

$

% ⁽¹⁾

$

% ⁽¹⁾

Commercial

$
89,837

85.5
%
$
106,432

85.9
%
$
117,403

85.3
%
$
126,655

85.3
%
$
111,954

84.8
%
Consumer

28,424

14.5
%

36,479

14.1
%

43,137

14.7
%

47,467

14.7
%

58,023

15.2
%
Total

$
118,261

100.0
%
$
142,911

100.0
%
$
160,540

100.0
%
$
174,122

100.0
%
$
169,977

100.0
%


	June 30,									December 31,
	2022									2021
	Commercial			Consumer			Total			Commercial			Consumer			Total
ACL	$	85,692		$	27,492		$	113,184		$	85,323		$	22,464		$	107,787
Loan %⁽¹⁾		84.2	%		15.8	%		100.0	%		84.7	%		15.3	%		100.0	%
ACL to total loans		0.75	%		1.28	%		0.83	%		0.76	%		1.11	%		0.82	%

~~(1)~~

~~Represents the loan balance divided by total loans held for investment~~.

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

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

-69-

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Deposits

As of June 30, ~~2021,~~2022, total deposits were ~~$16.7~~$16.1 billion, ~~an increase~~a decrease of ~~$936.5~~$482.4 million or ~~12.0%~~5.9% annualized from December 31, ~~2020.~~2021. Total interest-bearing deposits consist of NOW, money market, savings, and time deposit account balances. Total time deposit balances of ~~$2.2~~$1.7 billion accounted for ~~19.0%~~15.8% of total interest-bearing deposits at June 30, 2022, compared to $1.9 billion and 16.3% at December 31, 2021.

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


	June 30, 2021				December 31, 2020				June 30, 2022				December 31, 2021
			% of total				% of total				% of total				% of total
Deposits:	Amount		deposits		Amount		deposits		Amount		deposits		Amount		deposits
Non-interest bearing	$	5,222,572	31.3	%	$	4,368,703	27.8	%	$	5,361,538	33.3	%	$	5,207,324	31.3	%
NOW accounts		3,777,540	22.7	%		3,621,181	23.0	%		3,943,303	24.4	%		4,176,032	25.1	%
Money market accounts		4,450,724	26.7	%		4,248,335	27.0	%		3,956,050	24.6	%		4,249,858	25.6	%
Savings accounts		1,032,171	6.2	%		904,095	5.8	%		1,165,577	7.2	%		1,121,297	6.8	%
Time deposits of $100,000 and over⁽¹⁾		1,256,177	7.6	%		1,532,082	9.7	%
Time deposits of $250,000 and over										360,158	2.2	%		452,193	2.7	%
Other time deposits		920,035	5.5	%		1,048,369	6.7	%		1,342,009	8.3	%		1,404,364	8.5	%
Total Deposits(1)	$	16,659,219	100.0	%	$	15,722,765	100.0	%	$	16,128,635	100.0	%	$	16,611,068	100.0	%

⁽¹⁾ Includes ~~time~~uninsured deposits of ~~$250,000~~$5.6 billion and ~~over of $566.2 million and $654.2 million~~$5.9 billion as of June 30, ~~2021~~2022 and December 31, ~~2020,~~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 June 30, 2021 and December 31, 2020, there were $0 and $145.9 million, respectively, purchased certificates of deposit included in certificates of deposit on~~sources; however, it had reduced the ~~Company’s Consolidated Balance Sheets. The reduced~~ usage of purchased certificates of deposit, ~~in 2021 is~~as compared to historical levels, due to increased customer deposit balances since the ~~increase~~beginning of COVID-19. As of June 30, 2022, customer deposits have begun to decline, resulting in ~~customer deposits.~~the Company purchasing $58.7 million of certificates of deposit. At December 31, 2021 the Company had no purchased certificates of deposit.

Maturities of uninsured time deposits in excess of ~~$100,000 or more~~FDIC limits as of June 30, 2022 and December 31, 2021 were as follows (dollars in thousands):



	Amount		June 30, 2022		December 31, 2021
Within 3 Months	$	258,731	$	18,957	$	42,696
3 - 6 Months		275,398		50,701		30,313
6 - 12 Months		351,809		47,560		101,942
Over 12 Months		370,239		90,690		104,242
Total	$	1,256,177	$	207,908	$	279,193

~~-76-~~-70-

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Capital Resources

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

On ~~June~~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, ~~2020, the Company issued and sold 6,900,000 depositary shares, each representing a 1/400th ownership interest~~2022 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),~~open market transactions or privately negotiated transactions, including ~~900,000 depositary shares~~ pursuant to a trading plan in accordance with Rule 10b5-1 and /or Rule 10b-18 under the ~~exercise~~Exchange Act. As part of the Repurchase Program, approximately 1.3 million shares (or $48.2 million) were repurchased during the six months ended June 30, 2022, and of these shares, approximately 649,000 shares (or $23.2 million) were repurchased during the second quarter of 2022. Approximately $51.8 million of share repurchases remain available under the Repurchase Program at June 30, 2022.

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

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

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. The actual means and timing of any shares of the Company’s common stock 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, the Company’s working capital and investment requirements, and applicable legal and regulatory requirements. The Repurchase Program does not obligate the Company to purchase any particular number of shares and may be modified, discontinued, or suspended at any time without prior notice. The Company anticipates funding for the Repurchase Program to come from available sources of liquidity, including cash on hand and future cash flows.

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~~began to impact regulatory capital by phasing it in over a three-year period ending in 2024.

~~-77-~~-71-

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The table summarizes the Company’s regulatory capital and related ratios for the periods presented ⁽³⁾⁽²⁾(dollars in thousands):


	June 30,	December 31,	June 30,	June 30,	December 31,	June 30,
	2021	2020	2020	2022	2021	2021
Common equity Tier 1 capital	$ 1,574,570	$ 1,512,507	$ 1,422,004	$ 1,592,401	$ 1,569,752	$ 1,574,570
Tier 1 capital	1,740,926	1,678,863	1,588,367	1,758,758	1,736,108	1,740,926
Tier 2 capital	354,132	384,494	399,260	456,853	437,435	354,132
Total risk-based capital	2,095,059	2,063,356	1,987,627	2,215,611	2,173,543	2,095,059
Risk-weighted assets	14,913,244	14,739,253	14,397,049	15,995,009	15,336,432	14,913,244
Capital ratios:
Common equity Tier 1 capital ratio	10.56%	10.26%	9.88%	9.96%	10.24%	10.56%
Tier 1 capital ratio	11.67%	11.39%	11.03%	11.00%	11.32%	11.67%
Total capital ratio	14.05%	14.00%	13.81%	13.85%	14.17%	14.05%
Leverage ratio (Tier 1 capital to average assets)	9.20%	8.95%	8.82%	9.26%	9.01%	9.20%
Capital conservation buffer ratio ⁽¹⁾	5.67%	5.39%	5.03%	5.00%	5.32%	5.67%
Common equity to total assets	12.91%	12.95%	12.41%	11.32%	12.68%	12.91%
Tangible common equity to tangible assets ⁽²⁾	8.40%	8.31%	7.74%
Tangible common equity to tangible assets ⁽⁺⁾				6.78%	8.20%	8.40%

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

⁽²⁾All ratios and amounts at June 30, 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.

⁽³⁾ ~~All ratios and amounts at June 30, 2021~~~~are estimates and subject to change pending the Company’s filing of its FR Y9-C. All other periods are presented as filed~~

NON-GAAP FINANCIAL MEASURES

In this ~~Form 10-Q,~~Quarterly Report, the Company has provided supplemental performance measures on a tax-equivalent, tangible, operating, adjusted ~~and/~~or pre-tax pre-provision basis. These non-GAAP financial measures are a supplement to GAAP, which is used to prepare the Company’s financial statements and should not be considered in isolation or as a substitute for comparable measures calculated in accordance with GAAP. In addition, the Company’s non-GAAP financial measures may not be comparable to non-GAAP financial measures of other companies. The Company uses the non-GAAP financial measures discussed herein in its analysis of the Company’s performance. The Company’s management believes that these non-GAAP financial measures provide additional understanding of ongoing operations, enhance comparability of results of operations with prior periods and show the effects of significant gains and charges in the periods presented without the impact of items or events that may obscure trends in the Company’s underlying performance.

Net interest income (FTE), ~~total revenue (FTE) and total adjusted revenue (FTE),~~ which ~~are~~is used in computing net interest margin (FTE) ~~and adjusted operating efficiency ratio (FTE)~~, ~~respectively, provide~~provides valuable additional insight into the net interest margin ~~and the efficiency ratio~~ by adjusting for differences in 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.

~~-78-~~-72-

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


	Three Months Ended						Six Months Ended						Three Months Ended						Six Months Ended
	June 30,						June 30,						June 30,						June 30,
	2021			2020			2021			2020			2022			2021			2022			2021
Interest Income (FTE)
Interest and dividend income (GAAP)	$	150,852		$	162,867		$	298,525		$	334,193		$	148,755		$	150,852		$	287,212		$	298,525
FTE adjustment		3,144			2,805			6,197			5,562			3,577			3,144			6,912			6,197
Interest and dividend income FTE (non-GAAP)	$	153,996		$	165,672		$	304,722		$	339,755
Interest and dividend income (FTE) (non-GAAP)													$	152,332		$	153,996		$	294,124		$	304,722
Average earning assets	$	17,868,938		$	17,106,132		$	17,781,005		$	16,334,901		$	17,646,470		$	17,868,938		$	17,765,085		$	17,781,005
Yield on interest-earning assets (GAAP)		3.39	%		3.83	%		3.39	%		4.11	%		3.38	%		3.39	%		3.26	%		3.39	%
Yield on interest-earning assets (FTE) (non-GAAP)		3.46	%		3.90	%		3.46	%		4.18	%		3.46	%		3.46	%		3.34	%		3.46	%
Net Interest Income (FTE)
Net interest income (GAAP)	$	140,548		$	137,305		$	275,446		$	272,313		$	138,767		$	140,548		$	269,698		$	275,446
FTE adjustment		3,144			2,805			6,197			5,562			3,577			3,144			6,912			6,197
Net interest income FTE (non-GAAP)	$	143,692		$	140,110		$	281,643		$	277,875
Net interest income (FTE) (non-GAAP)													$	142,344		$	143,692		$	276,610		$	281,643
Noninterest income (GAAP)		28,466			35,932			59,451			64,838			38,286			28,466			68,439			59,451
Total revenue (FTE) (non-GAAP)	$	172,158		$	176,042		$	341,094		$	342,713		$	180,630		$	172,158		$	345,049		$	341,094
Average earning assets	$	17,868,938		$	17,106,132		$	17,781,005		$	16,334,901		$	17,646,470		$	17,868,938		$	17,765,085		$	17,781,005
Net interest margin (GAAP)		3.15	%		3.23	%		3.12	%		3.35	%		3.15	%		3.15	%		3.06	%		3.12	%
Net interest margin (FTE) (non-GAAP)		3.23	%		3.29	%		3.19	%		3.42	%		3.24	%		3.23	%		3.14	%		3.19	%

The Company believes tangible common equity is an important indication of its ability to grow organically and through business combinations as well as its ability to pay dividends and to engage in various capital management strategies. Tangible common equity is used in the calculation of certain profitability, capital, and per share ratios. The Company believes tangible common equity and related ratios are meaningful measures of capital adequacy because they provide a meaningful ~~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.

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


	Three Months Ended									Three Months Ended
	June 30,			December 31,			June 30,			June 30,			December 31,			June 30,
	2021			2020			2020			2022			2021			2021
Tangible Assets
Ending Assets (GAAP)	$	19,989,356		$	19,628,449		$	19,752,317		$	19,661,799		$	20,064,796		$	19,989,356
Less: Ending goodwill		935,560			935,560			935,560			925,211			935,560			935,560
Less: Ending amortizable intangibles		49,917			57,185			65,105			31,621			43,312			49,917
Ending tangible assets (non-GAAP)	$	19,003,879		$	18,635,704		$	18,751,652		$	18,704,967		$	19,085,924		$	19,003,879
Tangible Common Equity
Ending Equity (GAAP)	$	2,747,597		$	2,708,490		$	2,618,226		$	2,391,476		$	2,710,071		$	2,747,597
Less: Ending goodwill		935,560			935,560			935,560			925,211			935,560			935,560
Less: Ending amortizable intangibles		49,917			57,185			65,105			31,621			43,312			49,917
Less: Perpetual preferred stock		166,357			166,357			166,364			166,357			166,357			166,357
Ending tangible common equity (non-GAAP)	$	1,595,763		$	1,549,388		$	1,451,197		$	1,268,287		$	1,564,842		$	1,595,763
Average equity (GAAP)	$	2,747,864		$	2,679,170		$	2,489,969		$	2,445,045		$	2,715,610		$	2,747,864
Less: Average goodwill		935,560			935,560			935,560			935,446			935,560			935,560
Less: Average amortizable intangibles		51,637			59,031			67,136			38,707			44,866			51,637
Less: Average perpetual preferred stock		166,356			166,356			40,325			166,356			166,356			166,356
Average tangible common equity (non-GAAP)	$	1,594,311		$	1,518,223		$	1,446,948		$	1,304,536		$	1,568,828		$	1,594,311
Common equity to total assets (GAAP)											11.32	%		12.68	%		12.91	%
Tangible common equity to tangible assets (non-GAAP)		8.40	%		8.31	%		7.74	%		6.78	%		8.20	%		8.40	%
Book value per share (GAAP)										$	29.95		$	33.80		$	33.30

Adjusted operating measures exclude the ~~gains or~~ losses related to balance sheet repositioning (principally composed of ~~gains and~~ losses on debt extinguishment) ~~and~~, gains or losses on sale of ~~securities.~~securities, gain on the sale of DHFB, as well as branch closing and facility consolidation costs (principally composed of real estate, leases and other assets write downs, as well as severance associated with branch closing and corporate expense reduction initiatives). The Company believes these non-GAAP adjusted measures ~~are useful to~~provide investors ~~as they exclude certain costs resulting from acquisition activity as well as~~with important information about the ~~impact of the Tax Act and allow investors to more clearly see 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.

~~-79-~~-73-

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, except per share amounts):


	Three Months Ended						Six Months Ended						Three Months Ended				Six Months Ended
	June 30,						June 30,						June 30,				June 30,
	2021			2020			2021			2020			2022		2021		2022		2021
Adjusted Operating Earnings & EPS
Net income (GAAP)	$	85,384		$	30,709		$	141,573		$	37,798		$	62,226	$	85,384	$	105,916	$	141,573
Plus: Net loss related to balance sheet repositioning, net of tax		—			8,141			11,609			9,539			—		—		—		11,609
Less: Gain on sale of securities, net of tax		—			8,168			62			9,697
Less: (Loss) gain on sale of securities, net of tax														(2)		—		(2)		62
Less: Gain on sale of DHFB, net of tax														7,984		—		7,984		—
Plus: Branch closing and facility consolidation costs, net of tax														—		(17)		4,351		713
Adjusted operating earnings (non-GAAP)	$	85,384		$	30,682		$	153,120		$	37,640		$	54,244	$	85,367	$	102,285	$	153,833
Less: Dividends on preferred stock		2,967			—			5,934			—			2,967		2,967		5,934		5,934
Adjusted operating earnings available to common shareholders (non-GAAP)	$	82,417		$	30,682		$	147,186		$	37,640		$	51,277	$	82,400	$	96,351	$	147,899

Weighted average common shares outstanding, diluted		78,843,724			78,722,690			78,863,859			79,020,036			74,849,871		78,843,724		75,201,326		78,863,859
Earnings per common share, diluted (GAAP)	$	1.05		$	0.39		$	1.72		$	0.48		$	0.79	$	1.05	$	1.33	$	1.72
Adjusted operating earnings per common share, diluted (non-GAAP)	$	1.05		$	0.39		$	1.87		$	0.48		$	0.69	$	1.05	$	1.28	$	1.88

Average assets (GAAP)	$	19,922,978		$	19,157,238		$	19,805,569		$	18,358,579
ROA (GAAP)		1.72	%		0.64	%		1.44	%		0.41	%
Adjusted operating ROA (non-GAAP)		1.72	%		0.64	%		1.56	%		0.41	%

Average common equity (GAAP)	$	2,747,864		$	2,489,969		$	2,733,980		$	2,487,807
ROE (GAAP)		12.46	%		4.96	%		10.44	%		3.06	%
Adjusted operating ROE (non-GAAP)		12.46	%		4.96	%		11.29	%		3.04	%

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

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


	Three Months Ended						Six Months Ended						Three Months Ended				Six Months Ended
	June 30,						June 30,						June 30,				June 30,
	2021			2020			2021			2020			2022		2021		2022		2021
Adjusted Operating Noninterest Expense, Noninterest Income & Efficiency Ratio
Adjusted Operating Noninterest Expense & Noninterest Income
Noninterest expense (GAAP)	$	91,971		$	102,814		$	203,908		$	198,459		$	98,768	$	91,971	$	204,089	$	203,908
Less: Amortization of intangible assets		3,568			4,223			7,298			8,624			2,915		3,568		5,954		7,298
Less: Losses related to balance sheet repositioning		—			10,306			14,695			10,306			—		—		—		14,695
Less: Branch closing and facility consolidation costs														—		(22)		5,508		902
Adjusted operating noninterest expense (non-GAAP)	$	88,403		$	88,285		$	181,915		$	179,529		$	95,853	$	88,425	$	192,627	$	181,013
Noninterest income (GAAP)	$	28,466		$	35,932		$	59,451		$	64,838		$	38,286	$	28,466	$	68,439	$	59,451
Less: Losses related to balance sheet repositioning		—			—			—			(1,769)
Less: Gains on sale of securities		—			10,339			78			12,275
Less: (Loss) gain on sale of securities														(2)		—		(2)		78
Less: Gain on sale of DHFB														9,082		—		9,082		—
Adjusted operating noninterest income (non-GAAP)	$	28,466		$	25,593		$	59,373		$	54,332		$	29,206	$	28,466	$	59,359	$	59,373
Net interest income (FTE) (non-GAAP)	$	143,692		$	140,110		$	281,643		$	277,875
Adjusted operating noninterest income (non-GAAP)		28,466			25,593			59,373			54,332
Total adjusted revenue (FTE)(non-GAAP)	$	172,158		$	165,703		$	341,016		$	332,207
Efficiency ratio (GAAP)		54.42	%		59.35	%		60.89	%		58.86	%
Adjusted operating efficiency ratio (FTE) (non-GAAP)		51.35	%		53.28	%		53.34	%		54.04	%

Pre-tax pre-provision adjusted operating earnings exclude the provision for credit losses, which can fluctuate significantly from period-to-period under the recently adopted CECL methodology, income tax expense, gains or losses related to balance sheet repositioning (principally composed of gains and losses on debt extinguishment), and gains or losses 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.

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PPP adjustment impact excludes the ~~SBA guaranteed~~unforgiven portion of PPP ~~loans funded during the first six months of 2021.~~loans. The Company believes ~~loans held for investment~~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 Company also believes that the related non-GAAP financial measures of past due loans still accruing interest as a percentage of total loans held for investment (net of deferred fees and costs), provision for credit losses as a percentage of average loans held for investment, and net charge-offs as a percentage of average loans held for investment (net of deferred fees and costs), in each case excluding impacts from the PPP, are useful to investors as loans originated under the PPP carry an SBA guarantee. The Company believes that the ALLL and the ACL, each as a percentage of loans held for investment (net of deferred fees and costs), and each excluding impacts from the PPP, are useful to investors because of the size of the Company’s PPP loan originations and the impact of the embedded credit enhancement provided by the SBA guarantee.

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

Three Months Ended

Six Months Ended

June 30,

June 30,


2021

2020


2021

2020

Pre-tax pre-provision adjusted operating earnings

Net Income (GAAP)

$
85,384

$
30,709

$
141,573

$
37,798

Plus: Provision for credit losses

(27,414)

34,200

(41,037)

94,396

Plus: Income tax expenses

19,073

5,514

30,453

6,498

Plus: Net loss related to balance sheet repositioning

—

10,306

14,695

12,075

Less: Gain on sale of securities

—

10,339

78

12,275

Pre-tax pre-provision adjusted operating earnings (non-GAAP)

$
77,043

$
70,390

$
145,606

$
138,492

Less: Dividends on preferred stock

2,967

—

5,934

—

Pre-tax pre-provision operating earnings available to common shareholders (non-GAAP)

$
74,076

$
70,390

$
139,672

$
138,492

Weighted average common shares outstanding, diluted

78,843,724

78,722,690

78,863,859

79,020,036

Pre-tax pre-provision operating earnings per share available to common shareholders, diluted (non-GAAP)

$
0.94

$
0.89

$
1.77

$
1.75

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Three Months Ended

Six Months Ended

June 30,

March 31,

December 31,

September 30,

June 30,

June 30,

June 30,

2021

2020

2020

2020

2020

2021

2020

Adjusted Loans

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

$
13,697,929

$
14,272,280

$
14,021,314

$
14,383,215

$
14,308,646

$
13,697,929

$
14,308,646

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

859,386

1,512,714

1,179,522

1,600,577

1,598,718

859,386

1,598,718

Total adjusted loans (non-GAAP)

$
12,838,543

$
12,759,566

$
12,841,792

$
12,782,638

$
12,709,928

$
12,838,543

$
12,709,928

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

$
13,971,939

$
14,064,123

$
14,188,661

$
14,358,666

$
13,957,711

$
14,017,777

$
13,275,817

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

1,187,641

1,309,326

1,445,602

1,638,204

1,273,883

1,248,147

1,273,883

Total adjusted average loans (non-GAAP)

$
12,784,298

$
12,754,797

$
12,743,059

$
12,720,462

$
12,683,828

$
12,769,630

$
12,001,934

Asset Quality

Provision for loan losses

$
(24,581)

$
(16,457)

$
(11,813)

$
5,557

$
32,200

$
(41,038)

$
88,456

Net charge-offs

$
69

$
1,172

$
1,769

$
1,412

$
3,266

$
1,241

$
8,257

Allowance for loan and lease losses

$
118,261

$
142,911

$
160,540

$
174,122

$
169,977

$
118,261

$
169,977

Allowance for credit losses

$
128,261

$
155,744

$
170,540

$
186,122

$
180,977

$
128,261

$
180,977

Total NPAs

$
38,095

$
44,210

$
45,221

$
43,182

$
44,021

$
38,095

$
44,021

Loans past due ≥ 90 days and still accruing

$
8,746

$
9,776

$
13,634

$
15,661

$
19,255

$
8,746

$
19,255

ALLL/total outstanding loans

0.86
%

1.00
%

1.14
%

1.21
%

1.19
%

0.86
%

1.19
%
ALLL/total adjusted loans

0.92
%

1.12
%

1.25
%

1.36
%

1.34
%

0.92
%

1.34
%
ACL/total outstanding loans


0.94
%

1.09
%

1.22
%

1.29
%

1.26
%

0.94
%

1.26
%
ACL/total adjusted loans

1.00
%

1.22
%

1.33
%

1.46
%

1.42
%

1.00
%

1.42
%
NPAs/total outstanding loans

0.28
%

0.31
%

0.32
%

0.30
%

0.31
%

0.28
%

0.31
%
NPAs/total adjusted loans

0.30
%

0.35
%

0.35
%

0.34
%

0.35
%

0.30
%

0.35
%
Past due loans still accruing interest/total outstanding loans

0.18
%

0.25
%

0.36
%

0.35
%

0.28
%

0.18
%

0.28
%
Past due loans still accruing interest/total adjusted loans

0.20
%

0.28
%

0.39
%

0.40
%

0.32
%

0.20
%

0.32
%
Net charge-offs/total average loans

—
%

0.03
%

0.05
%

0.04
%

0.09
%

0.02
%

0.13
%
Net charge-offs/total adjusted average loans

—
%

0.04
%

0.06
%

0.04
%

0.10
%

0.02
%

0.14
%
Provision for loan losses/total average loans

(0.71)
%

(0.47)
%

(0.33)
%

0.15
%

0.93
%

(0.59)
%

1.34
%
Provision for loan losses/total adjusted average loans

(0.77)
%

(0.52)
%

(0.37)
%

0.17
%

1.02
%

(0.65)
%

1.48
%


	Three Months Ended						Six Months Ended
	June 30,		December 31,		June 30,		June 30,		June 30,
	2022		2021		2021		2022		2021
Adjusted Loans
Loans held for investment (net of deferred fees and costs)(GAAP)	$	13,655,408	$	13,195,843	$	13,697,929	$	13,655,408	$	13,697,929
Less: PPP adjustments (net of deferred fees and costs)		21,749		150,363		859,386		21,749		859,386
Total adjusted loans (non-GAAP)	$	13,633,659	$	13,045,480	$	12,838,543	$	13,633,659	$	12,838,543

Average loans held for investment (net of deferred fees and costs) (GAAP)	$	13,525,529	$	13,082,412	$	13,971,939	$	13,413,780	$	14,017,777
Less: Average PPP adjustments (net of deferred fees and costs)		43,391		288,204		1,187,641		73,052		1,248,147
Total adjusted average loans (non-GAAP)	$	13,482,138	$	12,794,208	$	12,784,298	$	13,340,728	$	12,769,630

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

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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

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-backed securities~~MBS prepayment assumptions are based on industry estimates of prepayment speeds for portfolios with similar coupon ranges and seasoning.

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Different interest rate scenarios and yield curves are used to measure the sensitivity of earnings to changing interest rates. Interest rates on different asset and liability accounts move differently when the prime rate changes and are reflected in the different rate scenarios.

The Company uses its simulation model to estimate earnings in rate environments where rates are instantaneously shocked up or down around a “most likely” rate scenario, based on implied forward rates and futures curves. The analysis assesses the impact on net interest income over a 12-month time horizon after an immediate increase or “shock” in rates, of 100 ~~basis points~~bps up to 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 June 30, 2022, December 31, 2021, and ~~2020:~~June 30, 2021:

Change In Net Interest Income

June 30,

2021

2020


%

%
Change in Yield Curve:




+300 basis points

20.74

9.03
+200 basis points

13.82

6.21
+100 basis points

6.81

3.01
Most likely rate scenario

—

—
-100 basis points

(4.58)

(1.16)
-200 basis points

(5.48)

(1.28)


	Change In Net Interest Income
	June 30,	December 31,	June 30,
	2022	2021	2021
	%	%	%
Change in Yield Curve:
+300 basis points	19.04	30.15	20.74
+200 basis points	12.81	20.39	13.82
+100 basis points	6.54	10.33	6.81
Most likely rate scenario	—	—	—
-100 basis points	(7.33)	(9.20)	(4.58)
-200 basis points	(16.45)	(13.62)	(5.48)

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.

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From a net interest income perspective, the Company was ~~more~~generally less asset sensitive as of June 30, ~~2021,~~2022, compared to its position as of June 30, ~~2020.~~2021. This shift is in part due to the ~~increase in customer deposits, the~~ changing market characteristics of certain loan and deposit products and in part due to various other balance sheet strategies. The Company would expect net interest income to increase with an immediate increase or shock in market rates. In the decreasing interest rate environments, the Company would expect a decline in net interest income as interest-earning assets re-price at lower rates and interest-bearing deposits remain at or near their floors.

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.

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The following chart reflects the estimated change in net economic value over different rate environments using economic value simulation for the balances at the quarterly periods ended June 30, 2022, December 31, 2021, and ~~2020:~~June 30, 2021:

Change In Economic Value of Equity

June 30,

2021

2020


%

%
Change in Yield Curve:




+300 basis points

3.06

1.83
+200 basis points

2.77

2.13
+100 basis points

2.03

1.82
Most likely rate scenario

—

—
-100 basis points

(3.84)

(5.34)
-200 basis points

(4.12)

(3.00)


	Change In Economic Value of Equity
	June 30,	December 31,	June 30,
	2022	2021	2021
	%	%	%
Change in Yield Curve:
+300 basis points	(8.07)	(6.85)	3.06
+200 basis points	(5.43)	(3.55)	2.77
+100 basis points	(2.07)	(1.22)	2.03
Most likely rate scenario	—	—	—
-100 basis points	0.97	(4.82)	(3.84)
-200 basis points	(2.45)	(12.89)	(4.12)

As of June 30, ~~2021,~~2022, the Company’s economic value of equity is generally ~~more~~less asset sensitive in a rising interest rate environment compared to its position as of June 30, ~~2020~~2021 primarily due to the composition of the Consolidated Balance Sheets ~~that has been impacted by~~and due in part to the ~~increase in customer deposits, the changing~~pricing characteristics and assumptions of certain ~~loan and deposit products, and other balance sheet strategies.~~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 June 30, ~~2021.~~2022. The term “disclosure controls and procedures,” as defined in Rule 13a-15(e) under the Exchange Act, means controls and other procedures that are designed to ~~provide reasonable assurance~~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 June 30, ~~2021,~~2022, the Company’s disclosure controls and procedures were effective at the reasonable assurance level.

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

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~~Table of Contents~~

Changes in Internal Control Over Financial Reporting

Management has taken measures to maintain the internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended June 30, 2022~~2021.~~. There have been no changes during the quarter ended June 30, 2022 that have materially affected, or are reasonably likely to materially affect, the internal control over financial reporting.

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Table of Contents

PART II - OTHER INFORMATION

ITEM 1 – LEGAL PROCEEDINGS

In the ordinary course of its operations, the Company and its subsidiaries are parties to various legal proceedings. Based on the information presently available, and after consultation with legal counsel, management believes that the ultimate outcome in such proceedings, in the aggregate, will not have a material adverse effect on the business or the financial condition or results of operations of the ~~Company.~~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 June 30, ~~2021,~~2022, there have been no material changes from the risk factors previously disclosed under Part I, Item 1A. “Risk Factors” in the Company’s ~~2020~~2021 Annual Report.

An investment in the Company’s securities involves risks. In addition to the other information set forth in this Quarterly Report, including the information addressed under “Forward-Looking Statements,” investors in the Company’s securities should carefully consider the factors discussed ~~below, as well as the factors discussed~~ in the Company’s ~~2020~~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

(b) Use of Proceeds – Not Applicable.

Stock Repurchase Program; Other Repurchases

On July 8, 2019, the Company’s Board of Directors authorized a share repurchase program to purchase up to $150 million worth of the Company’s common stock through June 30, 2021, and subsequently suspended the program on March 20, 2020.

~~On May 4,~~December 10, 2021, the Company’s Board of Directors authorized a new share repurchase program ~~(or the~~(the “Repurchase Program”) to purchase up to ~~$125~~$100.0 million ~~worth~~ 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~~and /or Rule 10b-18 under the Exchange Act. The Repurchase Program ~~expires~~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 ~~June 30, 2022~~a variety of factors, including the market price of the Company’s common stock, general market and ~~replaced~~economic conditions, and applicable legal and regulatory requirements. The Repurchase Program does not obligate the ~~prior repurchase program that was due~~Company to ~~expire on June 30, 2021.~~purchase any particular number of shares.

The following information describes the Company’s common stock repurchases for the three months ended June 30, ~~2021:~~2022:

Period

Total number of shares purchased⁽¹⁾

Average price paid per share ($)

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

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

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⁾

April 1 - April 30, 2021

1,288

38.59

19,951,000

May 1 - May 31, 2021

157,366

40.93

156,273

118,601,837

June 1 - June 30, 2021

935,970

38.47

933,896

82,669,293

April 1 - April 30, 2022

450,774

36.26

449,275

58,689,927

May 1 - May 31, 2022

201,046

34.62

199,933

51,767,233

June 1 - June 30, 2022

6,732

33.92

—

51,767,233

Total

1,094,624

38.83

1,090,169

658,552

35.74

649,208

^{_________________________________________}

⁽¹⁾For the three months ended June 30, ~~2021, 4,455~~2022, 9,344 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.

~~-86-~~-78-

Table of Contents

ITEM 6 – EXHIBITS

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


Exhibit No.		Description

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

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

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

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

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

~~10.23~~		~~Atlantic Union Bankshares Corporation Stock and Incentive Plan, as amended and restated May 4, 2021 (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on May 6, 2021)~~

15.1		Letter regarding unaudited interim financial information.

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

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

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

101		Interactive data files formatted in Inline eXtensible Business Reporting Language for the quarter ended June 30, ~~2021~~2022 pursuant to Rule 405 of Regulation S-T (1): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Income (unaudited), (iii) the Consolidated Statements of Comprehensive Income (unaudited), (iv) the Consolidated Statements of Changes in Stockholders’ Equity (unaudited), (v) the Consolidated Statements of Cash Flows (unaudited) and (vi) the Notes to Consolidated Financial Statements (unaudited).

104		The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, ~~2021,~~2022, formatted in Inline eXtensible Business Reporting Language (included with Exhibit 101).

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Table of Contents

SIGNATURES

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


	Atlantic Union Bankshares Corporation

	(Registrant)

Date: August ~~5, 2021~~4, 2022	By:	/s/ John C. Asbury
		John C. Asbury,
		President and Chief Executive Officer
		(principal executive officer)

Date: August ~~5, 2021~~4, 2022	By:	/s/ Robert M. Gorman
		Robert M. Gorman,
		Executive Vice President and Chief Financial Officer
		(principal financial and accounting officer)

~~-88-~~-80-


	June 30, 2021				March 31, 2021				December 31, 2020				September 30, 2020				June 30, 2020
Commercial loans:
Construction and Land Development	$	838,722	6.1	%	$	884,303	6.2	%	$	925,798	6.6	%	$	1,207,190	8.4	%	$	1,247,939	8.7	%
Commercial Real Estate - Owner Occupied		2,069,658	15.1	%		2,083,155	14.6	%		2,128,909	15.2	%		2,107,333	14.7	%		2,067,087	14.4	%
Commercial Real Estate - Non-Owner Occupied		3,712,607	27.1	%		3,671,471	25.7	%		3,657,562	26.1	%		3,497,929	24.3	%		3,455,125	24.1	%
Multifamily Real Estate		860,081	6.3	%		842,906	5.9	%		814,745	5.8	%		731,582	5.1	%		717,719	5.0	%
Commercial & Industrial		2,990,622	21.8	%		3,599,884	25.2	%		3,263,460	23.3	%		3,536,249	24.6	%		3,555,971	24.9	%
Residential 1-4 Family - Commercial		637,485	4.7	%		658,051	4.6	%		671,949	4.8	%		696,944	4.8	%		715,384	5.0	%
Other Commercial		600,276	4.4	%		529,748	3.7	%		489,975	3.5	%		494,084	3.4	%		389,190	2.7	%
Total Commercial Loans	$	11,709,451	85.5	%	$	12,269,518	85.9	%	$	11,952,398	85.3	%	$	12,271,311	85.3	%	$	12,148,415	84.8	%
Consumer loans:
Residential 1-4 Family - Consumer	$	823,355	6.0	%	$	816,916	5.7	%	$	822,866	5.8	%	$	830,144	5.8	%	$	841,051	5.9	%
Residential 1-4 Family - Revolving		559,014	4.1	%		563,786	4.0	%		596,996	4.2	%		618,320	4.3	%		627,765	4.4	%
Auto		411,073	3.0	%		406,349	2.9	%		401,324	2.9	%		387,417	2.7	%		380,053	2.7	%
Consumer		195,036	1.4	%		215,711	1.5	%		247,730	1.8	%		276,023	1.9	%		311,362	2.2	%
Total Consumer Loans	$	1,988,478	14.5	%	$	2,002,762	14.1	%	$	2,068,916	14.7	%	$	2,111,904	14.7	%	$	2,160,231	15.2	%
Total loans held for investment	$	13,697,929	100.0	%	$	14,272,280	100.0	%	$	14,021,314	100.0	%	$	14,383,215	100.0	%	$	14,308,646	100.0	%


	June 30,			March 31,			December 31,			September 30,			June 30,
	2021			2021			2020			2020			2020
Nonaccrual loans	$	36,399		$	41,866		$	42,448		$	39,023		$	39,624
Foreclosed properties		1,696			2,344			2,773			4,159			4,397
Total NPAs		38,095			44,210			45,221			43,182			44,021
Loans past due 90 days and accruing interest		8,746			9,776			13,634			15,661			19,255
Total NPAs and loans past due 90 days and accruing interest	$	46,841		$	53,986		$	58,855		$	58,843		$	63,276

Performing TDRs	$	13,053		$	13,670		$	13,961		$	14,515		$	15,303

Balances
Allowance for loan and lease losses	$	118,261		$	142,911		$	160,540		$	174,122		$	169,977
Average loans, net of deferred fees and costs		13,971,939			14,064,123			13,777,467			14,358,666			13,957,711
Loans, net of deferred fees and costs		13,697,929			14,272,280			14,021,314			14,383,215			14,308,646

Ratios
Nonaccrual loans to total loans		0.27	%		0.29	%		0.30	%		0.27	%		0.28	%
NPAs to total loans		0.28	%		0.31	%		0.32	%		0.30	%		0.31	%
NPAs to total adjusted loans⁽¹⁾		0.30	%		0.35	%		0.35	%		0.34	%		0.35	%
NPAs & loans 90 days past due to total loans		0.34	%		0.38	%		0.42	%		0.41	%		0.44	%
NPAs to total loans & foreclosed property		0.28	%		0.31	%		0.32	%		0.30	%		0.31	%
NPAs & loans 90 days past due to total loans & foreclosed property		0.34	%		0.38	%		0.42	%		0.41	%		0.44	%
ALLL to nonaccrual loans		324.90	%		341.35	%		378.20	%		446.20	%		428.97	%
ALLL to nonaccrual loans & loans 90 days past due		261.96	%		276.73	%		286.26	%		318.41	%		288.69	%