Atlantic Union Bankshares (AUB) 10-Q 2023 Q3 Quarterly report

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 September 30, 2023
OR
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 001-39325

ATLANTIC UNION BANKSHARES 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.)

4300 Cox Road

Glen Allen, Virginia 23060

(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 New York Stock Exchange
Depositary Shares, Each Representing a 1/400th Interest in a Share of 6.875% Perpetual Non-Cumulative Preferred Stock, Series A	AUB.PRA	The New York Stock Exchange

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

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

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

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

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

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

Yes ☐ No ☒

The number of shares of common stock outstanding as of October 26, 2023 was 75,016,179.

ATLANTIC UNION BANKSHARES CORPORATION

FORM 10-Q

INDEX

ITEM		PAGE
	PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Balance Sheets as of September 30, 2023 (unaudited) and December 31, 2022 (audited)	2
	Consolidated Statements of Income (unaudited) for the three and nine months ended September 30, 2023 and 2022	3
	Consolidated Statements of Comprehensive Income (Loss) (unaudited) for the three and nine months ended September 30, 2023 and 2022	4
	Consolidated Statements of Changes in Stockholders’ Equity (unaudited) for the nine months ended September 30, 2023 and 2022	5
	Consolidated Statements of Cash Flows (unaudited) for the nine months ended September 30, 2023 and 2022	7
	Notes to Consolidated Financial Statements (unaudited)	9
	Report of Independent Registered Public Accounting Firm	52
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	53
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	86
Item 4.	Controls and Procedures	88
	PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	89
Item 1A.	Risk Factors	89
Item 2.	Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities	90
Item 5.	Other Information	90
Item 6.	Exhibits	91
	Signatures	92

Glossary of Acronyms and Defined Terms

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

2022 Form 10-K	–	Annual Report on Form 10-K for the year ended December 31, 2022
ACL	–	Allowance for credit losses
AFS	–	Available for sale
ALCO	–	Asset liability management committee
ALLL	–	Allowance for loan and lease losses, a component of ACL
American National	–	American National Bankshares Inc.
AOCI	–	Accumulated other comprehensive income (loss)
ASC	–	Accounting Standards Codification
ASU	–	Accounting Standards Update
AUB	–	Atlantic Union Bankshares Corporation
the Bank	–	Atlantic Union Bank
BOLI	–	Bank-owned life insurance
bps	–	Basis points
BTFP	–	Bank Term Funding Program
CECL	–	Current expected credit losses
CFPB	–	Consumer Financial Protection Bureau
CME SOFR	–	Chicago Mercantile Exchange Secured Overnight Financing Rate
the Company	–	Atlantic Union Bankshares Corporation and its subsidiaries
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
FDIC	–	Federal Deposit Insurance Corporation
Federal Reserve	–	Board of Governors of the Federal Reserve System
FHLB	–	Federal Home Loan Bank of Atlanta
FHLMC	–	Federal Home Loan Mortgage Corporation
FNB	–	FNB Corporation
FNMA	–	Federal National Mortgage Association
FOMC	–	Federal Open Market Committee
FRB	–	Federal Reserve Bank of Richmond
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	–	Accounting principles generally accepted in the United States
GNMA	–	Government National Mortgage Association
HTM	–	Held to maturity
ICE	–	Intercontinental Exchange Data Services
LHFI	–	Loans held for investment
LHFS	–	Loans held for sale
LIBOR	–	London Interbank Offered Rate
MBS	–	Mortgage-Backed Securities
merger agreement	–	Agreement and Plan of Merger dated July 24, 2023 by and between Atlantic Union Bankshares Corporation and American National Bankshares Inc.

merger	–	Proposed merger of American National Bankshares Inc. with and into Atlantic Union Bankshares Corporation pursuant to the merger agreement
MFC	–	Middleburg Financial Corporation
NPA	–	Nonperforming assets
NYSE	–	New York Stock Exchange
OCI	–	Other comprehensive (loss) income
PD/LGD	–	Probability of default/loss given default
ROU asset	–	Right of Use Asset
RPAs	–	Risk Participation Agreements
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
TLM	–	Troubled loan modification
TDR	–	Troubled debt restructuring
VFG	–	Virginia Financial Group, Inc.

PART I – FINANCIAL INFORMATION

ITEM 1 – FINANCIAL STATEMENTS

ATLANTIC UNION BANKSHARES CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

AS OF SEPTEMBER 30, 2023 AND DECEMBER 31, 2022

(Dollars in thousands, except share data)

	September 30,		December 31,
	2023		2022
ASSETS		(unaudited)		(audited)
Cash and cash equivalents:
Cash and due from banks	$	233,526	$	216,384
Interest-bearing deposits in other banks		159,718		102,107
Federal funds sold		5,701		1,457
Total cash and cash equivalents		398,945		319,948
Securities available for sale, at fair value		2,084,928		2,741,816
Securities held to maturity, at carrying value		843,269		847,732
Restricted stock, at cost		104,785		120,213
Loans held for sale		6,608		3,936
Loans held for investment, net of deferred fees and costs		15,283,620		14,449,142
Less: allowance for loan and lease losses		125,627		110,768
Total loans held for investment, net		15,157,993		14,338,374
Premises and equipment, net		94,510		118,243
Goodwill		925,211		925,211
Amortizable intangibles, net		21,277		26,761
Bank owned life insurance		449,452		440,656
Other assets		649,258		578,248
Total assets	$	20,736,236	$	20,461,138
LIABILITIES
Noninterest-bearing demand deposits	$	4,144,949	$	4,883,239
Interest-bearing deposits		12,641,556		11,048,438
Total deposits		16,786,505		15,931,677
Securities sold under agreements to repurchase		134,936		142,837
Other short-term borrowings		495,000		1,176,000
Long-term borrowings		390,733		389,863
Other liabilities		540,261		448,024
Total liabilities		18,347,435		18,088,401
Commitments and contingencies (Note 7)
STOCKHOLDERS' EQUITY
Preferred stock, $10.00 par value		173		173
Common stock, $1.33 par value		99,120		98,873
Additional paid-in capital		1,779,281		1,772,440
Retained earnings		988,133		919,537
Accumulated other comprehensive loss		(477,906)		(418,286)
Total stockholders' equity		2,388,801		2,372,737
Total liabilities and stockholders' equity	$	20,736,236	$	20,461,138
Common shares outstanding		74,997,132		74,712,622
Common shares authorized		200,000,000		200,000,000
Preferred shares outstanding		17,250		17,250
Preferred shares authorized		500,000		500,000

See accompanying notes to consolidated financial statements.

-2-

ATLANTIC UNION BANKSHARES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022

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

	Three Months Ended				Nine Months Ended
	September 30,		September 30,		September 30,		September 30,
	2023		2022		2023		2022
Interest and dividend income:
Interest and fees on loans	$	221,380	$	144,673	$	616,544	$	382,139
Interest on deposits in other banks		1,309		941		3,815		1,229
Interest and dividends on securities:
Taxable		16,055		14,750		48,373		43,110
Nontaxable		8,415		10,792		26,220		31,889
Total interest and dividend income		247,159		171,156		694,952		458,367
Interest expense:
Interest on deposits		83,590		15,386		200,690		25,966
Interest on short-term borrowings		6,499		1,229		22,106		1,805
Interest on long-term borrowings		5,129		3,826		14,687		10,183
Total interest expense		95,218		20,441		237,483		37,954
Net interest income		151,941		150,715		457,469		420,413
Provision for credit losses		4,991		6,412		22,911		12,771
Net interest income after provision for credit losses		146,950		144,303		434,558		407,642
Noninterest income:
Service charges on deposit accounts		8,557		6,784		24,577		22,421
Other service charges, commissions and fees		2,632		1,770		6,071		5,134
Interchange fees		2,314		2,461		7,098		6,539
Fiduciary and asset management fees		4,549		4,134		13,169		18,329
Mortgage banking income		666		1,390		1,969		6,707
Loss on sale of securities		(27,594)		—		(40,992)		(2)
Bank owned life insurance income		2,973		3,445		8,671		8,858
Loan-related interest rate swap fees		2,695		2,050		6,450		8,510
Other operating income		30,302		3,550		33,905		17,527
Total noninterest income		27,094		25,584		60,918		94,023
Noninterest expenses:
Salaries and benefits		57,449		56,600		179,996		170,203
Occupancy expenses		6,053		6,408		18,503		19,685
Furniture and equipment expenses		3,449		3,673		10,765		10,860
Technology and data processing		7,923		8,273		24,631		23,930
Professional services		3,291		3,504		11,138		12,274
Marketing and advertising expense		2,219		2,343		7,387		7,008
FDIC assessment premiums and other insurance		4,258		3,094		12,231		8,344
Franchise and other taxes		4,510		4,507		13,508		13,506
Loan-related expenses		1,388		1,575		4,560		5,218
Amortization of intangible assets		2,193		2,480		6,687		8,434
Other expenses		15,775		7,466		33,036		24,550
Total noninterest expenses		108,508		99,923		322,442		304,012
Income before income taxes		65,536		69,964		173,034		197,653
Income tax expense		11,519		11,894		28,123		33,667
Net income		54,017		58,070		144,911		163,986
Dividends on preferred stock		2,967		2,967		8,901		8,901
Net income available to common shareholders	$	51,050	$	55,103	$	136,010	$	155,085
Basic earnings per common share	$	0.68	$	0.74	$	1.81	$	2.07
Diluted earnings per common share	$	0.68	$	0.74	$	1.81	$	2.07
Dividends declared per common share	$	0.30	$	0.30	$	0.90	$	0.86
Basic weighted average number of common shares outstanding		74,999,128		74,703,699		74,942,851		75,029,000
Diluted weighted average number of common shares outstanding		74,999,128		74,705,054		74,943,999		75,034,084

See accompanying notes to consolidated financial statements.

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ATLANTIC UNION BANKSHARES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (UNAUDITED)

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022

(Dollars in thousands)

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2023		2022		2023		2022
Net income	$	54,017	$	58,070	$	144,911	$	163,986
Other comprehensive (loss) income:
Cash flow hedges:
Change in fair value of cash flow hedges (net of tax, $2,547 and $6,417 for the three months and $3,241 and $15,691 for the nine months ended September 30, 2023 and 2022, respectively)		(9,581)		(24,142)		(12,192)		(59,027)
AFS securities:
Unrealized holding losses arising during period (net of tax, $21,051 and $32,388 for the three months and $21,178 and $112,226 for the nine months ended September 30, 2023 and 2022, respectively)		(79,193)		(121,841)		(79,669)		(422,183)
Reclassification adjustment for losses included in net income (net of tax, $5,795 and $0 for the three months and $8,609 and $0 for the nine months ended September 30, 2023 and 2022, respectively) (1)		21,799		—		32,383		2
HTM securities:
Reclassification adjustment for accretion of unrealized gain on AFS securities transferred to HTM (net of tax) (2)		(2)		(4)		(7)		(14)
Bank owned life insurance:
Unrealized holding gains arising during the period		—		—		10		—
Reclassification adjustment for (gains) losses included in net income (3)		(62)		151		(145)		468
Other comprehensive (loss) income:		(67,039)		(145,836)		(59,620)		(480,754)
Comprehensive (loss) income	$	(13,022)	$	(87,766)	$	85,291	$	(316,768)

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

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

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

See accompanying notes to consolidated financial statements.

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ATLANTIC UNION BANKSHARES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)

NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022

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

									Accumulated
					Additional				Other
	Common		Preferred		Paid-In		Retained		Comprehensive
	Stock		Stock		Capital		Earnings		Income (Loss)		Total
Balance - December 31, 2022	$	98,873	$	173	$	1,772,440	$	919,537	$	(418,286)	$	2,372,737
Net Income								35,653				35,653
Other comprehensive income (net of taxes of $14,983)										56,353		56,353
Dividends on common stock ($0.30 per share)								(22,417)				(22,417)
Dividends on preferred stock ($171.88 per share)								(2,967)				(2,967)
Issuance of common stock under Equity Compensation Plans, stock issuance for services rendered, and vesting of restricted stock, net of shares held for taxes (149,684 shares)		199				(1,654)						(1,455)
Stock-based compensation expense						2,332						2,332
Balance - March 31, 2023	$	99,072	$	173	$	1,773,118	$	929,806	$	(361,933)	$	2,440,236
Net Income								55,241				55,241
Other comprehensive loss (net of taxes of $12,992)										(48,934)		(48,934)
Dividends on common stock ($0.30 per share)								(22,498)				(22,498)
Dividends on preferred stock ($171.88 per share)								(2,967)				(2,967)
Issuance of common stock under Equity Compensation Plans, stock issuance for services rendered, and vesting of restricted stock, net of shares held for taxes (11,822 shares)		16				89						105
Stock-based compensation expense						3,287						3,287
Balance - June 30, 2023	$	99,088	$	173	$	1,776,494	$	959,582	$	(410,867)	$	2,424,470
Net Income								54,017				54,017
Other comprehensive loss (net of taxes of $17,804)										(67,039)		(67,039)
Dividends on common stock ($0.30 per share)								(22,499)				(22,499)
Dividends on preferred stock ($171.88 per share)								(2,967)				(2,967)
Issuance of common stock under Equity Compensation Plans, stock issuance for services rendered, and vesting of restricted stock, net of shares held for taxes (24,477 shares)		32				59						91
Stock-based compensation expense						2,728						2,728
Balance - September 30, 2023	$	99,120	$	173	$	1,779,281	$	988,133	$	(477,906)	$	2,388,801

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ATLANTIC UNION BANKSHARES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)

NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022

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

									Accumulated
					Additional				Other
	Common		Preferred		Paid-In		Retained		Comprehensive
	Stock		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				43,690
Other comprehensive loss (net of taxes of $49,701)										(210,118)		(210,118)
Dividends on common stock ($0.28 per share)								(21,163)				(21,163)
Dividends on preferred stock ($171.88 per share)								(2,967)				(2,967)
Stock purchased under stock repurchase plan (629,691 shares)		(837)				(24,181)						(25,018)
Issuance of common stock under Equity Compensation Plans, stock issuance for services rendered, and vesting of restricted stock, net of shares held for taxes (291,723 shares)		387				1,044						1,431
Stock-based compensation expense						2,409						2,409
Balance - March 31, 2022	$	99,651	$	173	$	1,786,640	$	803,354	$	(191,483)	$	2,498,335
Net Income								62,226				62,226
Other comprehensive loss (net of taxes of $33,214)										(124,800)		(124,800)
Dividends on common stock ($0.28 per share)								(20,912)				(20,912)
Dividends on preferred stock ($171.88 per share)								(2,967)				(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)		34				(154)						(120)
Stock-based compensation expense						2,927						2,927
Balance - June 30, 2022	$	98,822	$	173	$	1,767,063	$	841,701	$	(316,283)	$	2,391,476
Net Income								58,070				58,070
Other comprehensive loss (net of taxes of $38,806)										(145,836)		(145,836)
Dividends on common stock ($0.30 per share)								(22,411)				(22,411)
Dividends on preferred stock ($171.88 per share)								(2,967)				(2,967)
Issuance of common stock under Equity Compensation Plans, stock issuance for services rendered, and vesting of restricted stock, net of shares held for taxes (17,048 shares)		23				66						89
Stock-based compensation expense						2,729						2,729
Balance - September 30, 2022	$	98,845	$	173	$	1,769,858	$	874,393	$	(462,119)	$	2,281,150

See accompanying notes to consolidated financial statements.

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ATLANTIC UNION BANKSHARES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022

(Dollars in thousands)

	2023		2022
Operating activities:
Net income	$	144,911	$	163,986
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of premises and equipment		9,897		10,652
Writedown of ROU assets, foreclosed properties and equipment		1,929		4,768
Amortization, net		18,215		23,838
Amortization related to acquisitions, net		3,530		2,271
Provision for credit losses		22,911		12,771
Losses on securities transactions		40,992		2
Gain on sale of DHFB		—		(9,082)
BOLI income		(8,671)		(8,858)
Originations and purchases of LHFS		(109,934)		(263,162)
Proceeds from sales of LHFS		107,264		270,853
Gains on sales of foreclosed properties and former bank premises, net		(798)		(507)
Gain on sale-leaseback transaction		(27,700)		—
Stock-based compensation expenses		8,347		8,065
Issuance of common stock for services		561		611
Net increase in other assets		(74,154)		(6,491)
Net increase in other liabilities		78,276		117,188
Net cash provided by operating activities		215,576		326,905
Investing activities:
Purchases of AFS securities, restricted stock, and other investments		(425,431)		(97,518)
Purchases of HTM securities		(13,826)		(225,026)
Proceeds from sales of AFS securities and restricted stock		856,881		29,719
Proceeds from maturities, calls and paydowns of AFS securities		133,947		281,542
Proceeds from maturities, calls and paydowns of HTM securities		15,453		8,223
Net increase in LHFI		(839,536)		(717,591)
Net purchases in premises and equipment		(3,835)		(3,054)
Proceeds from BOLI settlements		353		2,876
Proceeds from sale-leaseback transaction		45,805		—
Proceeds from sales of foreclosed properties and former bank premises		5,846		5,965
Net cash used in investing activities		(224,343)		(714,864)
Financing activities:
Net (decrease) increase in noninterest-bearing deposits		(738,290)		83,614
Net increase (decrease) in interest-bearing deposits		1,593,090		(148,497)
Net (decrease) increase in short-term borrowings		(688,901)		162,112
Cash dividends paid - common stock		(67,414)		(64,486)
Cash dividends paid - preferred stock		(8,901)		(8,901)
Repurchase of common stock		—		(48,231)
Issuance of common stock		563		3,849
Vesting of restricted stock, net of shares held for taxes		(2,383)		(3,060)
Net cash provided by (used in) financing activities		87,764		(23,600)
Increase (decrease) in cash and cash equivalents		78,997		(411,559)
Cash, cash equivalents and restricted cash at beginning of the period		319,948		802,501
Cash, cash equivalents and restricted cash at end of the period	$	398,945	$	390,942

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ATLANTIC UNION BANKSHARES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022

(Dollars in thousands)

	2023		2022
Supplemental Disclosure of Cash Flow Information
Cash payments for:
Interest	$	224,809	$	34,099
Income taxes		15,501		1,224
Supplemental schedule of noncash investing and financing activities
Transfers from loans to foreclosed properties		—		404

See accompanying notes to consolidated financial statements.

-8-

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 (NYSE: AUB) is the holding company for Atlantic Union Bank. Atlantic Union Bank had 109 branches and 123 ATMs located throughout Virginia and in portions of Maryland and North Carolina as of September 30, 2023. Certain non-bank financial services affiliates of Atlantic Union Bank include: Atlantic Union Equipment Finance, Inc., which provides equipment financing; Atlantic Union Financial Consultants, LLC, which provides brokerage services; and Union Insurance Group, LLC, which offers various lines of insurance products.

The unaudited consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. The unaudited consolidated financial statements have been prepared in accordance with 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 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 2022 Form 10-K. Certain prior period amounts have been reclassified to conform to current period presentation.

Adoption of New Accounting Standards

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

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

-9-

In March 2020, the FASB issued ASC 848, Reference Rate Reform. This guidance provides temporary, optional guidance to ease the potential burden in accounting for reference rate reform associated with the LIBOR transition. LIBOR and other interbank offered rates are widely used benchmark or reference rates that have been used in the valuation of loans, derivatives, and other financial contracts. ASC 848 provides optional expedients and exceptions for applying GAAP to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued. ASC 848 is intended to help stakeholders during the global market-wide reference rate transition period. The LIBOR cessation date for U.S. dollar settings was June 30, 2023. The amendments are effective as of March 12, 2020 through December 31, 2024 and can be adopted at an instrument level. The Company has elected the practical expedients provided in ASC 848 related to (1) accounting for contract modifications on its loans and securities tied to LIBOR and (2) asserting probability of the hedged item occurring, regardless of any expected modification in terms related to reference rate reform for the newly executed cash flow hedges. This amendment did not have a significant impact on the Company’s consolidated financial statements.

Loan Modifications

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

The Company adopted the accounting guidance in ASU No. 2022-02 on January 1, 2023 that eliminates the recognition and measurement of TDRs. Upon adoption of this guidance, the Company no longer applies its TDR accounting policy and instead accounts for modifications in accordance with its loan modifications policy stated in the preceding paragraph. For the Company’s policy for accounting for TDRs prior to the adoption of ASU No. 2022-02, see Note 1 “Summary of Significant Accounting Policies” of the Company’s 2022 Form 10-K.

Effective January 1, 2023, the Company refers to modifications to loans where the borrower is experiencing financial difficulty and the modification is in the form of principal forgiveness, interest rate reductions, term extensions, other-than-insignificant payment delays, or a combination of the above modifications, as troubled loan modifications, or TLMs. The Company accounts for TLMs consistently with its accounting policy for accounting for loan modifications. The ALLL on TLMs is measured using the same method as all other LHFI. Refer to Note 3 “Loans and Allowance for Loan and Lease Losses” within this Item 1 of this Quarterly Report for additional disclosures related to TLMs.

Accrued Interest Receivable

The Company has elected to exclude accrued interest from the amortized cost basis in its determination of the ALLL, as well as the ACL reserve for securities. Accrued interest receivable totaled $68.5 million and $58.9 million on LHFI, $6.7 million and $8.6 million on HTM securities, and $9.0 million and $14.2 million on AFS securities at September 30, 2023 and December 31, 2022, respectively, and is included in “Other assets” on the Company’s Consolidated Balance Sheets. The Company’s policy is to write off accrued interest receivable through reversal of interest income when it becomes probable the Company will not be able to collect the accrued interest. For the quarters ended September 30, 2023 and September 30, 2022, accrued interest receivable write offs were not material to the Company’s consolidated financial statements.

Allowance for Loan and Lease Losses

The provision for loan losses is an amount sufficient to bring the ALLL to an estimated balance that management considers adequate to absorb expected losses in the loan portfolio over its expected contractual life.

The Company periodically reviews its internal policies and practices to enhance the process for estimating the ALLL. Effective September 30, 2023, the Company implemented certain changes to its ALLL estimation methodology, as described below. These changes did not have a significant impact on the overall ALLL estimate. For information regarding the Company’s ALLL methodology before September 30, 2023, as well as the components of the ALLL methodology that did not change, see Note 1 “Summary of Significant Accounting Policies” in the “Notes to Consolidated Financial Statements” contained in Item 8 “Financial Statements and Supplementary Data” of the Company’s 2022 Form 10-K.

-10-

Effective September 30, 2023, the Company now uses a loan-level PD/LGD method for all loan portfolios, eliminating the use of vintage and loss rate methods used for the auto and third-party consumer lending portfolios. In addition, the Company now considers various national economic variables in developing the ALLL and no longer uses the Virginia unemployment rate as its most significant economic variable. The national unemployment rate is used for all cohort models, regardless of portfolio type, and a second economic variable, such as national gross domestic product, national CRE pricing index, national home price index, and national retail sales, is used for each model depending on the portfolio type. The ALLL quantitative estimate is sensitive to changes in the economic variable forecasts during the two-year reasonable and supportable period. In determining forecasted expected losses, the Company uses Moody’s economic variable forecasts and applies probability weights to the related economic scenarios.

The estimated loan losses that are forecasted using the methodology described above are then adjusted for changes in qualitative factors not inherently considered in the quantitative analysis. The qualitative factors include, among others, industry concentrations of the loan portfolio, expected changes to the economic forecasts, model imprecision, factors related to credit administration.

Because current economic conditions and forecasts can change and future events are inherently difficult to predict, the anticipated amount of estimated credit losses on loans, and therefore the appropriateness of the ALLL, could change significantly. It is difficult to estimate how potential changes in any one economic factor or input might affect the overall allowance because a wide variety of factors and inputs are considered in estimating the allowance and changes in those factors and inputs considered may not occur at the same rate and may not be consistent across all loan types. Additionally, changes in factors and inputs may be directionally inconsistent, such that improvement in one factor may offset deterioration in others.  

-11-

2. SECURITIES

Available for Sale

The Company’s AFS investment portfolio is generally highly-rated or agency backed. All AFS securities were current with no securities past due or on non-accrual as of September 30, 2023 and December 31, 2022.

The amortized cost, gross unrealized gains and losses, and estimated fair values of AFS securities as of September 30, 2023 are summarized as follows (dollars in thousands):

	Amortized		Gross Unrealized				Estimated
	Cost		Gains		(Losses)		Fair Value
September 30, 2023
U.S. government and agency securities	$	62,221	$	—	$	(383)	$	61,838
Obligations of states and political subdivisions		587,340		—		(169,880)		417,460
Corporate and other bonds (1)		267,816		—		(24,998)		242,818
Commercial MBS
Agency		215,203		307		(50,289)		165,221
Non-agency		72,057		—		(2,575)		69,482
Total commercial MBS		287,260		307		(52,864)		234,703
Residential MBS
Agency		1,319,987		1		(268,152)		1,051,836
Non-agency		81,677		—		(7,131)		74,546
Total residential MBS		1,401,664		1		(275,283)		1,126,382
Other securities		1,727		—		—		1,727
Total AFS securities	$	2,608,028	$	308	$	(523,408)	$	2,084,928

⁽¹⁾ Other bonds include asset-backed securities.

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

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

⁽¹⁾ Other bonds include asset-backed securities.

-12-

The following table shows the gross unrealized losses and fair value of the Company’s AFS securities with unrealized losses. These are aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position (dollars in thousands).

	Less than 12 months				More than 12 months				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value(2)		Losses		Value		Losses
September 30, 2023
U.S. government and agency securities	$	59,568	$	(349)	$	2,169	$	(34)	$	61,737	$	(383)
Obligations of states and political subdivisions		16,023		(3,567)		399,438		(166,313)		415,461		(169,880)
Corporate and other bonds(1)		100,231		(776)		142,587		(24,222)		242,818		(24,998)
Commercial MBS
Agency		15,074		(709)		135,725		(49,580)		150,799		(50,289)
Non-agency		—		—		69,482		(2,575)		69,482		(2,575)
Total commercial MBS		15,074		(709)		205,207		(52,155)		220,281		(52,864)
Residential MBS
Agency		55,550		(461)		972,755		(267,691)		1,028,305		(268,152)
Non-agency		19,776		(90)		45,745		(7,041)		65,521		(7,131)
Total residential MBS		75,326		(551)		1,018,500		(274,732)		1,093,826		(275,283)
Total AFS securities	$	266,222	$	(5,952)	$	1,767,901	$	(517,456)	$	2,034,123	$	(523,408)
December 31, 2022
U.S. government and agency securities	$	2,594	$	(166)	$	59,269	$	(8,087)	$	61,863	$	(8,253)
Obligations of states and political subdivisions		588,668		(86,895)		187,375		(65,806)		776,043		(152,701)
Corporate and other bonds(1)		206,861		(15,019)		17,121		(2,580)		223,982		(17,599)
Commercial MBS
Agency		73,362		(7,024)		127,193		(32,244)		200,555		(39,268)
Non-agency		66,618		(2,231)		28,550		(2,013)		95,168		(4,244)
Total commercial MBS		139,980		(9,255)		155,743		(34,257)		295,723		(43,512)
Residential MBS
Agency		328,590		(27,769)		929,581		(206,192)		1,258,171		(233,961)
Non-agency		18,939		(1,288)		43,064		(5,524)		62,003		(6,812)
Total residential MBS		347,529		(29,057)		972,645		(211,716)		1,320,174		(240,773)
Total AFS securities	$	1,285,632	$	(140,392)	$	1,392,153	$	(322,446)	$	2,677,785	$	(462,838)

⁽¹⁾ Other bonds include asset-backed securities.

⁽²⁾ Comprised of 761 and 363 individual securities as of September 30, 2023 and December 31, 2022, respectively.

The Company has evaluated AFS securities in an unrealized loss position for credit related impairment at September 30, 2023 and December 31, 2022 and concluded no impairment existed based on several factors which included: (1) the majority of these securities are of high credit quality, (2) unrealized losses are primarily the result of market volatility and increases in market interest rates, (3) the contractual terms of the investments do not permit the issuer(s) to settle the securities at a price less than the cost basis of each investment, (4) issuers continue to make timely principal and interest payments, and (5) the Company does not intend to sell any of the investments and the accounting standard of “more likely than not” has not been met for the Company to be required to sell any of the investments before recovery of its amortized cost basis.

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

-13-

The following table presents the amortized cost and estimated fair value of AFS securities as of September 30, 2023 and December 31, 2022, by contractual maturity (dollars in thousands). Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	September 30, 2023				December 31, 2022
	Amortized		Estimated		Amortized		Estimated
	Cost		Fair Value		Cost		Fair Value
Due in one year or less	$	56,948	$	56,120	$	42,447	$	41,735
Due after one year through five years		138,070		135,530		158,063		152,523
Due after five years through ten years		262,259		236,096		343,303		312,935
Due after ten years		2,150,751		1,657,182		2,660,548		2,234,623
Total AFS securities	$	2,608,028	$	2,084,928	$	3,204,361	$	2,741,816

Refer to Note 7 “Commitments and Contingencies” within this Item 1 of this Quarterly Report for information regarding the estimated fair value of AFS securities that were pledged to secure public deposits, repurchase agreements, and for other purposes as permitted or required by law as of September 30, 2023 and December 31, 2022.

Held to Maturity

The Company’s HTM investment portfolio primarily consists of highly-rated municipal securities. The Company’s HTM securities were all current, with no securities past due or on non-accrual at September 30, 2023 and December 31, 2022.

The Company reports HTM securities on the Company’s Consolidated Balance Sheets at carrying value. Carrying value is amortized cost, which includes any unamortized unrealized gains and losses recognized in AOCI prior to reclassifying the securities from AFS securities to HTM securities.

The carrying value, gross unrealized gains and losses, and estimated fair values of HTM securities as of September 30, 2023 are summarized as follows (dollars in thousands):

	Carrying		Gross Unrealized				Estimated
	Value		Gains		(Losses)		Fair Value
September 30, 2023
Obligations of states and political subdivisions	$	700,400	$	49	$	(64,625)	$	635,824
Corporate and other bonds(1)		4,536		—		(170)		4,366
Commercial MBS
Agency		27,568		—		(6,788)		20,780
Non-agency		24,930		—		(904)		24,026
Total commercial MBS		52,498		—		(7,692)		44,806
Residential MBS
Agency		40,992		—		(7,865)		33,127
Non-agency		44,843		—		(920)		43,923
Total residential MBS		85,835		—		(8,785)		77,050
Total HTM securities	$	843,269	$	49	$	(81,272)	$	762,046

⁽¹⁾ Other bonds include asset-backed securities.

-14-

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

	Carrying		Gross Unrealized				Estimated
	Value		Gains		(Losses)		Fair Value
December 31, 2022
U.S. government and agency securities	$	687	$	—	$	(56)	$	631
Obligations of states and political subdivisions		705,990		2,218		(35,957)		672,251
Corporate and other bonds(1)		5,159		—		(10)		5,149
Commercial MBS
Agency		29,025		—		(4,873)		24,152
Non-agency		13,736		—		(126)		13,610
Total commercial MBS		42,761		—		(4,999)		37,762
Residential MBS
Agency		42,699		—		(6,427)		36,272
Non-agency		50,436		—		(614)		49,822
Total residential MBS		93,135		—		(7,041)		86,094
Total HTM securities	$	847,732	$	2,218	$	(48,063)	$	801,887

⁽¹⁾ Other bonds include asset-backed securities.

Credit Quality Indicators & Allowance for Credit Losses – HTM

For HTM securities, the Company evaluates the credit risk of its securities on at least a quarterly basis. The Company estimates expected credit losses on HTM debt securities on an individual basis based on the PD/LGD methodology primarily using security-level credit ratings. The Company’s HTM securities ACL was insignificant at September 30, 2023 and December 31, 2022. The primary indicators of credit quality for the Company’s HTM portfolio are security type and credit rating, which is influenced by a number of factors including obligor cash flow, geography, seniority, and others. The majority of the Company’s HTM securities with credit risk are obligations of states and political subdivisions.

-15-

The following table presents the amortized cost of HTM securities as of September 30, 2023 and December 31, 2022 by security type and credit rating (dollars in thousands):

	U.S. Government and Agency		Obligations of states and political		Corporate and other		Mortgage-backed		Total HTM
	securities		subdivisions		bonds		securities		securities
September 30, 2023
Credit Rating:
AAA/AA/A	$	—	$	689,699	$	—	$	9,471	$	699,170
BBB/BB/B		—		1,171		—		—		1,171
Not Rated – Agency(1)		—		—		—		68,561		68,561
Not Rated – Non-Agency(2)		—		9,530		4,536		60,301		74,367
Total	$	—	$	700,400	$	4,536	$	138,333	$	843,269
December 31, 2022
Credit Rating:
AAA/AA/A	$	—	$	704,803	$	—	$	2,702	$	707,505
BBB/BB/B		—		1,187		—		—		1,187
Not Rated – Agency(1)		687		—		—		71,725		72,412
Not Rated – Non-Agency(2)		—		—		5,159		61,469		66,628
Total	$	687	$	705,990	$	5,159	$	135,896	$	847,732

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

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

The following table presents the amortized cost and estimated fair value of HTM securities as of September 30, 2023 and December 31, 2022, by contractual maturity (dollars in thousands). Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	September 30, 2023				December 31, 2022
	Carrying		Estimated		Carrying		Estimated
	Value		Fair Value		Value		Fair Value
Due in one year or less	$	2,759	$	2,735	$	2,010	$	2,006
Due after one year through five years		36,604		36,272		35,044		35,014
Due after five years through ten years		43,652		41,057		19,941		20,239
Due after ten years		760,254		681,982		790,737		744,628
Total HTM securities	$	843,269	$	762,046	$	847,732	$	801,887

Refer to Note 7 Commitments and Contingencies within this Item 1 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 September 30, 2023 and December 31, 2022.

Restricted Stock, at cost

Due to restrictions placed upon the Bank’s common stock investment in the FRB and the FHLB, these securities have been classified as restricted equity securities and carried at cost. These restricted securities are not subject to the investment security classifications and are included as a separate line item on the Company’s Consolidated Balance Sheets. At September 30, 2023 and December 31, 2022, restricted stock consists of FRB stock in the amount of $67.0 million, respectively, and FHLB stock in the amount of $37.8 million and $53.2 million, respectively.

-16-

Realized Gains and Losses

The following table presents the gross realized gains and losses on and the proceeds from the sale of securities during the three and nine months ended September 30, 2023 and 2022 (dollars in thousands):

	Three Months Ended		Nine Months Ended
	September 30, 2023		September 30, 2023
Realized gains (losses)(1):
Gross realized gains	$	4	$	1,352
Gross realized losses		(27,598)		(42,344)
Net realized losses	$	(27,594)	$	(40,992)
Proceeds from sales of securities	$	256,780	$	856,881
	Three Months Ended		Nine Months Ended
	September 30, 2022		September 30, 2022
Realized losses(1):
Gross realized losses		(2)		(2)
Net realized losses	$	(2)	$	(2)
Proceeds from sales of securities	$	12,469	$	12,469

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

-17-

3. LOANS AND ALLOWANCE FOR LOAN AND LEASE LOSSES

The following tables exclude LHFS. The Company’s LHFI are stated at their face amount, net of deferred fees and costs, and consisted of the following at September 30, 2023 and December 31, 2022 (dollars in thousands):

	September 30, 2023		December 31, 2022
Construction and Land Development	$	1,132,940	$	1,101,260
Commercial Real Estate – Owner Occupied		1,975,281		1,982,608
Commercial Real Estate – Non-Owner Occupied		4,148,218		3,996,130
Multifamily Real Estate		947,153		802,923
Commercial & Industrial		3,432,319		2,983,349
Residential 1-4 Family – Commercial		517,034		538,063
Residential 1-4 Family – Consumer		1,057,294		940,275
Residential 1-4 Family – Revolving		599,282		585,184
Auto		534,361		592,976
Consumer		126,151		152,545
Other Commercial		813,587		773,829
Total LHFI, net of deferred fees and costs(1)		15,283,620		14,449,142
Allowance for loan and lease losses		(125,627)		(110,768)
Total LHFI, net	$	15,157,993	$	14,338,374

⁽¹⁾ Total loans included unamortized premiums and discounts, and unamortized deferred fees and costs totaling $58.4 million and $50.4 million as of September 30, 2023 and December 31, 2022, respectively.

The following table shows the aging of the Company’s LHFI portfolio, by class, at September 30, 2023 (dollars in thousands):

										Greater than
				30-59 Days			60-89 Days			90 Days and
	Current			Past Due			Past Due			still Accruing			Nonaccrual			Total Loans
Construction and Land Development	$	1,132,174		$	—		$	386		$	25		$	355		$	1,132,940
Commercial Real Estate – Owner Occupied		1,963,601			3,501			1,902			2,395			3,882			1,975,281
Commercial Real Estate – Non-Owner Occupied		4,134,014			4,573			797			2,835			5,999			4,148,218
Multifamily Real Estate		947,003			—			150			—			—			947,153
Commercial & Industrial		3,425,646			3,049			576			792			2,256			3,432,319
Residential 1-4 Family – Commercial		513,573			744			67			817			1,833			517,034
Residential 1-4 Family – Consumer		1,040,519			1,000			1,775			3,632			10,368			1,057,294
Residential 1-4 Family – Revolving		591,748			2,326			602			1,034			3,572			599,282
Auto		530,729			2,703			339			229			361			534,361
Consumer		125,373			517			164			97			—			126,151
Other Commercial		810,027			3,545			—			15			—			813,587
Total LHFI, net of deferred fees and costs	$	15,214,407		$	21,958		$	6,758		$	11,871		$	28,626		$	15,283,620
% of total loans		99.55	%		0.14	%		0.04	%		0.08	%		0.19	%		100.00	%

-18-

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

										Greater than
				30-59 Days			60-89 Days			90 Days and
	Current			Past Due			Past Due			still Accruing			Nonaccrual			Total Loans
Construction and Land Development	$	1,099,555		$	1,253		$	45		$	100		$	307		$	1,101,260
Commercial Real Estate – Owner Occupied		1,970,323			2,305			635			2,167			7,178			1,982,608
Commercial Real Estate – Non-Owner Occupied		3,993,091			1,121			48			607			1,263			3,996,130
Multifamily Real Estate		801,694			1,229			—			—			—			802,923
Commercial & Industrial		2,980,008			824			174			459			1,884			2,983,349
Residential 1-4 Family – Commercial		534,653			1,231			—			275			1,904			538,063
Residential 1-4 Family – Consumer		919,833			5,951			1,690			1,955			10,846			940,275
Residential 1-4 Family – Revolving		577,993			1,843			511			1,384			3,453			585,184
Auto		589,235			2,747			450			344			200			592,976
Consumer		151,958			351			125			108			3			152,545
Other Commercial		773,738			—			—			91			—			773,829
Total LHFI, net of deferred fees and costs	$	14,392,081		$	18,855		$	3,678		$	7,490		$	27,038		$	14,449,142
% of total loans		99.60	%		0.13	%		0.03	%		0.05	%		0.19	%		100.00	%

The following table shows the Company’s amortized cost basis of loans on nonaccrual status, including those on nonaccrual status with no related ALLL, as of September 30, 2023 and December 31, 2022 (dollars in thousands):

	September 30, 2023				December 31, 2022
	Nonaccrual		Nonaccrual With No ALLL		Nonaccrual		Nonaccrual With No ALLL
Construction and Land Development	$	355	$	—	$	307	$	—
Commercial Real Estate – Owner Occupied		3,882		—		7,178		908
Commercial Real Estate – Non-Owner Occupied		5,999		4,935		1,263		—
Commercial & Industrial		2,256		1		1,884		1
Residential 1-4 Family – Commercial		1,833		—		1,904		—
Residential 1-4 Family – Consumer		10,368		—		10,846		—
Residential 1-4 Family – Revolving		3,572		—		3,453		—
Auto		361		—		200		—
Consumer		—		—		3		—
Other Commercial		—		—		—		—
Total LHFI	$	28,626	$	4,936	$	27,038	$	909

There was no interest income recognized on nonaccrual loans during the three and nine months ended September 30, 2023 and 2022. See Note 1 “Summary of Significant Accounting Policies” in the “Notes to the Consolidated Financial Statements” contained in Item 8 “Financial Statements and Supplementary Data” in the Company’s 2022 Form 10-K for additional information on the Company’s policies for nonaccrual loans.

-19-

Troubled Loan Modifications

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

As of September 30, 2023, the Company had TLMs with an amortized cost basis of $29.4 million with an estimated $155,000 in allowance for those loans. As of September 30, 2023, there was $1.5 million of unfunded commitments on loans modified and designated as TLMs since January 1, 2023.

The following tables present the amortized cost basis as of September 30, 2023 of TLMs modified during the three and nine months ended September 30, 2023 since January 1, 2023 (dollars in thousands):

	Three Months Ended September 30, 2023				Nine Months Ended September 30, 2023
	Amortized Cost		% of Total Class of Financing Receivable		Amortized Cost		% of Total Class of Financing Receivable
Term Extension
Commercial and Industrial	$	97	NM		$	2,008	0.06	%
Commercial Real Estate – Non-Owner Occupied		—	0.00	%		20,133	0.49	%
Commercial Real Estate – Owner Occupied		766	0.04	%		766	0.04	%
Residential 1-4 Family – Consumer		29	NM			603	0.06	%
Total Term Extension	$	892			$	23,510
Combination - Term Extension and Interest Rate Reduction
Residential 1-4 Family – Consumer	$	127	0.01	%	$	959	0.09	%
Residential 1-4 Family – Revolving		—	0.00	%		15	NM
Total Combination - Term Extension and Interest Rate Reduction	$	127			$	974
Principal Forgiveness
Commercial Real Estate – Non-Owner Occupied		—	0.00	%		4,935	0.12	%
Total Principal Forgiveness	$	—			$	4,935
Total	$	1,019			$	29,419

NM= Not Meaningful

-20-

The following table describes the financial effects of TLMs on a weighted average basis for TLMs within that loan type for the three and nine months ended September 30, 2023:

Three Months Ended September 30, 2023
Term Extension
Loan Type	Financial Effect
Commercial Real Estate – Owner Occupied	Added a weighted-average 0.2 years to the life of loans.

Nine Months Ended September 30, 2023
Term Extension
Loan Type	Financial Effect
Commercial and Industrial	Added a weighted-average 0.2 years to the life of loans.
Commercial Real Estate – Owner Occupied	Added a weighted-average 0.2 years to the life of loans.
Commercial Real Estate – Non-Owner Occupied	Added a weighted-average 0.5 years to the life of loans.
Residential 1-4 Family – Consumer	Added a weighted-average 10.7 years to the life of loans.
Combination - Term Extension and Interest Rate Reduction
Loan Type	Financial Effect
Residential 1-4 Family – Consumer	Added a weighted-average 20.3 years to the life of loans and reduced the weighted average contractual interest rate from 8.2% to 7.6%.
Residential 1-4 Family – Revolving	Added a weighted-average 19.1 years to the life of loans and reduced the weighted average contractual interest rate from 10.5% to 7.3%.
Principal Forgiveness
Loan Type	Financial Effect
Commercial Real Estate – Non-Owner Occupied	Reduced the amortized cost basis of loans by $3.5 million.

The Company considers a default of a TLM to occur when the borrower is 90 days past due following the modification or a foreclosure and repossession of the applicable collateral occurs. During the three and nine months ended September 30, 2023, the Company did not have any significant loans either individually or in the aggregate that went into default that have been modified and designated as TLMs.

The Company monitors the performance of TLMs in order to determine the effectiveness of the modifications. As of September 30, 2023, no loans that have been modified and designated as TLMs are past due.

-21-

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 nine months ended September 30, 2023 and 2022 (dollars in thousands):

	Three Months Ended September 30, 2023						Nine Months Ended September 30, 2023
	Commercial		Consumer		Total		Commercial		Consumer		Total
Balance at beginning of period	$	92,970	$	27,713	$	120,683	$	82,753	$	28,015	$	110,768
Loans charged-off		(788)		(841)		(1,629)		(7,589)		(2,368)		(9,957)
Recoveries credited to allowance		878		457		1,335		1,911		1,626		3,537
Provision charged to operations		5,880		(642)		5,238		21,865		(586)		21,279
Balance at end of period	$	98,940	$	26,687	$	125,627	$	98,940	$	26,687	$	125,627

	Three Months Ended September 30, 2022						Nine Months Ended September 30, 2022
	Commercial		Consumer		Total		Commercial		Consumer		Total
Balance at beginning of period	$	77,413	$	26,771	$	104,184	$	77,902	$	21,885	$	99,787
Loans charged-off		(1,086)		(715)		(1,801)		(2,852)		(2,415)		(5,267)
Recoveries credited to allowance		605		609		1,214		1,723		2,022		3,745
Provision charged to operations		6,969		(2,557)		4,412		7,128		2,616		9,744
Balance at end of period	$	83,901	$	24,108	$	108,009	$	83,901	$	24,108	$	108,009

The increase in net charge offs for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 is primarily due to charge-offs associated with two commercial loans.

Credit Quality Indicators

The Company’s primary credit quality indicator for the Commercial segment is risk rating categories of Pass, Watch, Special Mention, Substandard, and Doubtful. The primary credit quality indicator for the Consumer segment is delinquency bands of Current, 30-59, 60-89, 90+, and Nonaccrual. See Note 3 “Loans and Allowance for Loan and Lease Losses” in the “Notes to the Consolidated Financial Statements” contained in Item 8 “Financial Statements and Supplementary Data” in the Company’s 2022 Form 10-K for additional information on the Company’s policies and for further information on the Company’s credit quality indicators.

Commercial Loans

The table below details the amortized cost and gross write-offs of the classes of loans within the Commercial segment by risk level and year of origination as of September 30, 2023 (dollars in thousands):

-22-

		September 30, 2023
		Term Loans Amortized Cost Basis by Origination Year											Revolving
	2023		2022		2021		2020		2019		Prior		Loans		Total
Construction and Land Development
Pass	$	168,844	$	459,943	$	329,757	$	22,020	$	12,638	$	42,963	$	45,247	$	1,081,412
Watch		106		4,432		16,493		—		—		836		—		21,867
Special Mention		168		—		4,514		—		—		350		—		5,032
Substandard		23		1,244		1,824		21,208		205		125		—		24,629
Total Construction and Land Development	$	169,141	$	465,619	$	352,588	$	43,228	$	12,843	$	44,274	$	45,247	$	1,132,940
Current period gross writeoff	$	—	$	—	$	—	$	—	$	—	$	(11)	$	—	$	(11)
Commercial Real Estate – Owner Occupied
Pass	$	123,946	$	261,768	$	196,135	$	246,359	$	264,095	$	763,587	$	23,835	$	1,879,725
Watch		—		1,325		4,021		2,815		9,671		26,719		847		45,398
Special Mention		788		859		251		—		992		10,312		464		13,666
Substandard		370		—		—		337		4,196		31,589		—		36,492
Total Commercial Real Estate – Owner Occupied	$	125,104	$	263,952	$	200,407	$	249,511	$	278,954	$	832,207	$	25,146	$	1,975,281
Current period gross writeoff	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Commercial Real Estate – Non-Owner Occupied
Pass	$	310,417	$	526,072	$	714,965	$	342,131	$	483,006	$	1,494,449	$	23,728	$	3,894,768
Watch		—		—		1,691		7,754		27,825		76,136		4		113,410
Special Mention		—		—		—		—		18,980		57,063		11,855		87,898
Substandard		4,936		—		2,139		11,298		5,939		27,830		—		52,142
Total Commercial Real Estate – Non-Owner Occupied	$	315,353	$	526,072	$	718,795	$	361,183	$	535,750	$	1,655,478	$	35,587	$	4,148,218
Current period gross writeoff	$	—	$	—	$	—	$	—	$	—	$	(3,528)	$	—	$	(3,528)
Commercial & Industrial
Pass	$	730,110	$	677,320	$	449,135	$	213,937	$	131,347	$	160,071	$	887,127	$	3,249,047
Watch		596		23,517		186		1,346		18,017		4,814		25,128		73,604
Special Mention		1,809		21,723		1,094		6,890		2,753		1,848		23,984		60,101
Substandard		—		150		468		2,109		3,853		3,438		39,549		49,567
Total Commercial & Industrial	$	732,515	$	722,710	$	450,883	$	224,282	$	155,970	$	170,171	$	975,788	$	3,432,319
Current period gross writeoff	$	—	$	—	$	(6)	$	—	$	—	$	(18)	$	(1,813)	$	(1,837)
Multifamily Real Estate
Pass	$	14,082	$	117,935	$	244,089	$	223,382	$	46,431	$	254,568	$	28,521	$	929,008
Watch		—		—		—		—		—		395		—		395
Special Mention		—		—		—		250		3,734		232		—		4,216
Substandard		—		—		—		13,534		—		—		—		13,534
Total Multifamily Real Estate	$	14,082	$	117,935	$	244,089	$	237,166	$	50,165	$	255,195	$	28,521	$	947,153
Current period gross writeoff	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Residential 1-4 Family – Commercial
Pass	$	29,169	$	63,380	$	78,926	$	71,358	$	46,347	$	212,109	$	1,070	$	502,359
Watch		49		390		586		223		765		6,124		109		8,246
Special Mention		48		—		—		—		—		1,323		—		1,371
Substandard		—		—		618		182		604		3,401		253		5,058
Total Residential 1-4 Family – Commercial	$	29,266	$	63,770	$	80,130	$	71,763	$	47,716	$	222,957	$	1,432	$	517,034
Current period gross writeoff	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Other Commercial
Pass	$	235,254	$	126,200	$	149,863	$	84,078	$	123,799	$	65,234	$	24,947	$	809,375
Watch		—		—		—		32		8		3,410		—		3,450
Special Mention		98		—		—		—		—		649		—		747
Substandard		—		—		—		—		—		—		15		15
Total Other Commercial	$	235,352	$	126,200	$	149,863	$	84,110	$	123,807	$	69,293	$	24,962	$	813,587
Current period gross writeoff	$	—	$	—	$	—	$	—	$	—	$	(2,213)	$	—	$	(2,213)
Total Commercial
Pass	$	1,611,822	$	2,232,618	$	2,162,870	$	1,203,265	$	1,107,663	$	2,992,981	$	1,034,475	$	12,345,694
Watch		751		29,664		22,977		12,170		56,286		118,434		26,088		266,370
Special Mention		2,911		22,582		5,859		7,140		26,459		71,777		36,303		173,031
Substandard		5,329		1,394		5,049		48,668		14,797		66,383		39,817		181,437
Total Commercial	$	1,620,813	$	2,286,258	$	2,196,755	$	1,271,243	$	1,205,205	$	3,249,575	$	1,136,683	$	12,966,532
Total current period gross writeoff	$	—	$	—	$	(6)	$	—	$	—	$	(5,770)	$	(1,813)	$	(7,589)

-23-

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

		December 31, 2022
		Term Loans Amortized Cost Basis by Origination Year
	2022		2021		2020		2019		2018		Prior		Revolving Loans		Total
Construction and Land Development
Pass	$	357,688	$	499,738	$	107,559	$	17,191	$	33,801	$	36,335	$	34,345	$	1,086,657
Watch		242		1,637		—		—		115		1,669		—		3,663
Special Mention		2,843		411		—		—		—		93		—		3,347
Substandard		1,254		3,148		40		211		1,345		1,595		—		7,593
Total Construction and Land Development	$	362,027	$	504,934	$	107,599	$	17,402	$	35,261	$	39,692	$	34,345	$	1,101,260
Commercial Real Estate – Owner Occupied
Pass	$	258,953	$	215,414	$	257,740	$	282,110	$	228,410	$	624,238	$	17,190	$	1,884,055
Watch		1,060		176		2,437		9,567		9,736		31,331		916		55,223
Special Mention		—		256		—		93		1,332		18,766		132		20,579
Substandard		—		2,565		474		4,728		1,591		12,979		414		22,751
Total Commercial Real Estate – Owner Occupied	$	260,013	$	218,411	$	260,651	$	296,498	$	241,069	$	687,314	$	18,652	$	1,982,608
Commercial Real Estate – Non-Owner Occupied
Pass	$	496,079	$	661,977	$	385,084	$	517,834	$	373,126	$	1,389,507	$	34,804	$	3,858,411
Watch		—		2,151		2,091		11,915		19,550		20,683		2		56,392
Special Mention		232		—		—		25,578		702		7,381		—		33,893
Substandard		—		—		10,460		3,083		29,012		4,879		—		47,434
Total Commercial Real Estate – Non-Owner Occupied	$	496,311	$	664,128	$	397,635	$	558,410	$	422,390	$	1,422,450	$	34,806	$	3,996,130
Commercial & Industrial
Pass	$	849,547	$	536,982	$	262,093	$	182,263	$	67,648	$	120,326	$	846,059	$	2,864,918
Watch		1,399		1,305		18,682		5,039		12,843		1,984		41,836		83,088
Special Mention		—		222		393		2,145		354		1,773		12,380		17,267
Substandard		94		513		112		2,911		1,449		1,339		11,658		18,076
Total Commercial & Industrial	$	851,040	$	539,022	$	281,280	$	192,358	$	82,294	$	125,422	$	911,933	$	2,983,349
Multifamily Real Estate
Pass	$	111,798	$	90,952	$	204,159	$	47,240	$	59,883	$	231,745	$	52,025	$	797,802
Watch		—		—		—		350		442		416		—		1,208
Special Mention		—		—		—		3,826		—		87		—		3,913
Total Multifamily Real Estate	$	111,798	$	90,952	$	204,159	$	51,416	$	60,325	$	232,248	$	52,025	$	802,923
Residential 1-4 Family – Commercial
Pass	$	58,534	$	86,881	$	77,110	$	50,721	$	38,090	$	199,783	$	803	$	511,922
Watch		500		—		539		852		1,532		5,378		113		8,914
Special Mention		—		—		94		7,771		582		2,630		—		11,077
Substandard		—		632		1,400		463		473		2,883		299		6,150
Total Residential 1-4 Family – Commercial	$	59,034	$	87,513	$	79,143	$	59,807	$	40,677	$	210,674	$	1,215	$	538,063
Other Commercial
Pass	$	197,454	$	211,438	$	149,567	$	119,795	$	3,522	$	69,243	$	14,177	$	765,196
Watch		5,095		—		—		12		—		3,435		—		8,542
Substandard		—		—		—		—		—		—		91		91
Total Other Commercial	$	202,549	$	211,438	$	149,567	$	119,807	$	3,522	$	72,678	$	14,268	$	773,829
Total Commercial
Pass	$	2,330,053	$	2,303,382	$	1,443,312	$	1,217,154	$	804,480	$	2,671,177	$	999,403	$	11,768,961
Watch		8,296		5,269		23,749		27,735		44,218		64,896		42,867		217,030
Special Mention		3,075		889		487		39,413		2,970		30,730		12,512		90,076
Substandard		1,348		6,858		12,486		11,396		33,870		23,675		12,462		102,095
Total Commercial	$	2,342,772	$	2,316,398	$	1,480,034	$	1,295,698	$	885,538	$	2,790,478	$	1,067,244	$	12,178,162

-24-

Consumer Loans

The following table details the amortized cost of the classes of loans within the Consumer segment based on their delinquency status and year of origination as of September 30, 2023 (dollars in thousands):

		September 30, 2023
		Term Loans Amortized Cost Basis by Origination Year
	2023		2022		2021		2020		2019		Prior		Revolving Loans		Total
Residential 1-4 Family – Consumer
Current	$	101,653	$	255,179	$	270,580	$	155,239	$	33,221	$	224,635	$	12	$	1,040,519
30-59 Days Past Due		47		97		33		173		—		650		—		1,000
60-89 Days Past Due		—		427		149		—		—		1,199		—		1,775
90+ Days Past Due		49		—		1,719		—		—		1,864		—		3,632
Nonaccrual		—		491		565		—		106		9,206		—		10,368
Total Residential 1-4 Family – Consumer	$	101,749	$	256,194	$	273,046	$	155,412	$	33,327	$	237,554	$	12	$	1,057,294
Current period gross writeoff	$	—	$	(16)	$	—	$	—	$	(69)	$	(39)	$	—	$	(124)
Residential 1-4 Family – Revolving
Current	$	36,058	$	56,777	$	12,148	$	4,517	$	1,059	$	1,165	$	480,024	$	591,748
30-59 Days Past Due		—		135		—		—		—		—		2,191		2,326
60-89 Days Past Due		183		—		—		—		—		—		419		602
90+ Days Past Due		—		—		—		—		—		—		1,034		1,034
Nonaccrual		—		157		27		53		—		—		3,335		3,572
Total Residential 1-4 Family – Revolving	$	36,241	$	57,069	$	12,175	$	4,570	$	1,059	$	1,165	$	487,003	$	599,282
Current period gross writeoff	$	—	$	—	$	(3)	$	—	$	—	$	—	$	(26)	$	(29)
Auto
Current	$	84,225	$	229,046	$	118,931	$	59,340	$	28,926	$	10,261	$	—	$	530,729
30-59 Days Past Due		229		905		851		317		315		86		—		2,703
60-89 Days Past Due		—		68		95		69		73		34		—		339
90+ Days Past Due		29		88		65		21		1		25		—		229
Nonaccrual		10		171		68		73		39		—		—		361
Total Auto	$	84,493	$	230,278	$	120,010	$	59,820	$	29,354	$	10,406	$	—	$	534,361
Current period gross writeoff	$	(23)	$	(410)	$	(171)	$	(101)	$	(60)	$	(48)	$	—	$	(813)
Consumer
Current	$	10,803	$	26,226	$	11,550	$	8,635	$	17,174	$	25,877	$	25,107	$	125,372
30-59 Days Past Due		49		136		55		19		95		133		30		517
60-89 Days Past Due		12		5		12		24		59		19		33		164
90+ Days Past Due		10		40		37		4		—		7		—		98
Nonaccrual		—		—		—		—		—		—		—		—
Total Consumer	$	10,874	$	26,407	$	11,654	$	8,682	$	17,328	$	26,036	$	25,170	$	126,151
Current period gross writeoff	$	(15)	$	(65)	$	(90)	$	(652)	$	(14)	$	(510)	$	(56)	$	(1,402)
Total Consumer
Current	$	232,739	$	567,228	$	413,209	$	227,731	$	80,380	$	261,938	$	505,143	$	2,288,368
30-59 Days Past Due		325		1,273		939		509		410		869		2,221		6,546
60-89 Days Past Due		195		500		256		93		132		1,252		452		2,880
90+ Days Past Due		88		128		1,821		25		1		1,896		1,034		4,993
Nonaccrual		10		819		660		126		145		9,206		3,335		14,301
Total Consumer	$	233,357	$	569,948	$	416,885	$	228,484	$	81,068	$	275,161	$	512,185	$	2,317,088
Total current period gross writeoff	$	(38)	$	(491)	$	(264)	$	(753)	$	(143)	$	(597)	$	(82)	$	(2,368)

-25-

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

		December 31, 2022
		Term Loans Amortized Cost Basis by Origination Year
	2022		2021		2020		2019			2018		Prior		Revolving Loans		Total
Residential 1-4 Family – Consumer
Current	$	212,697	$	263,734	$	162,826	$	36,197	���	$	22,629	$	221,738	$	12	$	919,833
30-59 Days Past Due		174		2,169		89		46			220		3,253		—		5,951
60-89 Days Past Due		—		—		—		—			413		1,277		—		1,690
90+ Days Past Due		—		—		—		64			—		1,891		—		1,955
Nonaccrual		—		423		—		307			940		9,176		—		10,846
Total Residential 1-4 Family – Consumer	$	212,871	$	266,326	$	162,915	$	36,614		$	24,202	$	237,335	$	12	$	940,275
Residential 1-4 Family – Revolving
Current	$	68,434	$	13,810	$	4,997	$	1,672		$	801	$	476	$	487,803	$	577,993
30-59 Days Past Due		90		—		—		—			—		—		1,753		1,843
60-89 Days Past Due		—		—		—		—			—		—		511		511
90+ Days Past Due		—		—		—		—			—		—		1,384		1,384
Nonaccrual		—		149		57		—			13		—		3,234		3,453
Total Residential 1-4 Family – Revolving	$	68,524	$	13,959	$	5,054	$	1,672		$	814	$	476	$	494,685	$	585,184
Auto
Current	$	285,036	$	154,904	$	81,710	$	44,086		$	15,974	$	7,525	$	—	$	589,235
30-59 Days Past Due		808		772		451		456			134		126		—		2,747
60-89 Days Past Due		65		129		146		76			30		4		—		450
90+ Days Past Due		169		—		111		32			12		20		—		344
Nonaccrual		—		113		18		62			2		5		—		200
Total Auto	$	286,078	$	155,918	$	82,436	$	44,712		$	16,152	$	7,680	$	—	$	592,976
Consumer
Current	$	36,513	$	15,897	$	11,019	$	23,838		$	16,084	$	19,070	$	29,537	$	151,958
30-59 Days Past Due		61		27		36		113			34		61		19		351
60-89 Days Past Due		43		17		10		11			14		21		9		125
90+ Days Past Due		22		—		9		12			32		—		33		108
Nonaccrual		—		3		—		—			—		—		—		3
Total Consumer	$	36,639	$	15,944	$	11,074	$	23,974		$	16,164	$	19,152	$	29,598	$	152,545
Total Consumer
Current	$	602,680	$	448,345	$	260,552	$	105,793		$	55,488	$	248,809	$	517,352	$	2,239,019
30-59 Days Past Due		1,133		2,968		576		615			388		3,440		1,772		10,892
60-89 Days Past Due		108		146		156		87			457		1,302		520		2,776
90+ Days Past Due		191		—		120		108			44		1,911		1,417		3,791
Nonaccrual		—		688		75		369			955		9,181		3,234		14,502
Total Consumer	$	604,112	$	452,147	$	261,479	$	106,972		$	57,332	$	264,643	$	524,295	$	2,270,980

The Company did not have any significant revolving loans convert to term during the nine months ended September 30, 2023 or the year ended December 31, 2022.

-26-

Prior to the adoption of ASU 2022-02

Troubled Debt Restructurings

As of December 31, 2022, the Company had TDRs totaling $14.2 million with an estimated $739,000 of allowance for those loans. TDRs that occurred during the three and nine months ended September 30, 2022 were not significant.

A TDR occurred when a lender, for economic or legal reasons, granted a concession to the borrower related to the borrower’s financial difficulties, that it would not have otherwise considered. All loans that were considered to be TDRs were evaluated for credit losses in accordance with the Company’s ALLL methodology. For the three and nine months ended September 30, 2022, 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 continued to accrue interest under the terms of the applicable restructuring agreement, which were considered to be performing, and TDRs that had been placed on nonaccrual status, which were considered to be nonperforming, as of December 31, 2022 (dollars in thousands):

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

The Company considered a default of a TDR to occur when the borrower was 90 days past due following the restructure or a foreclosure and repossession of the applicable collateral occurred. During the three and nine months ended September 30, 2022, the Company did not have any material loans that went into default that had been restructured in the twelve-month period prior to the time of default.

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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 four years to ten years, using an accelerated method. Other amortizable intangible assets are being amortized over the period of expected benefit, which ranges from four years to ten years, using various methods. The Company concluded there was no impairment to the Company’s goodwill or intangible assets as of the balance sheet date. In the normal course of business, the Company routinely monitors the impact of the changes in the financial markets and includes these assessments in the Company’s impairment process.

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

The following table presents the Company’s goodwill and intangible assets by operating segment as of September 30, 2023 and December 31, 2022 (dollars in thousands):

	Wholesale Banking		Consumer Banking		Corporate Other		Total
September 30, 2023
Goodwill	$	639,180	$	286,031	$	—	$	925,211
Intangible Assets		1,366		1,108		18,803		21,277
December 31, 2022
Goodwill	$	639,180	$	286,031	$	—	$	925,211
Intangible Assets		1,558		75		25,128		26,761

Refer to Note 12 “Segment Reporting and Revenue” for additional information on the Company’s reportable operating segment changes.

Amortization expense of intangibles for the three months ended September 30, 2023 and 2022 totaled $2.2 million and $2.5 million, respectively. Amortization expense of intangibles for the nine months ended September 30, 2023 and 2022 totaled $6.7 million and $8.4 million, respectively.

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

For the remaining three months of 2023	$	2,095
2024		6,936
2025		5,289
2026		3,654
2027		2,068
Thereafter		1,235
Total estimated amortization expense	$	21,277

-28-

5. LEASES

Lessor Arrangements

The Company’s lessor arrangements consist of sales-type and direct financing leases for equipment, including vehicles and machinery, with terms ranging from 1 month to 122 months. At lease inception the Company estimates the expected residual value of the leased property at the end of the lease term by considering both internal and third-party appraisals. In certain cases, the Company obtains lessee-provided residual value guarantees and third-party residual value insurance to reduce its residual asset risk. At September 30, 2023 and December 31, 2022, the carrying value of residual assets covered by residual value guarantees and residual value insurance was $62.0 million and $44.3 million, respectively. For more information on the Company’s lessor arrangements, refer to Note 1 “Summary of Significant Accounting Policies” in the Company’s 2022 Form 10-K.

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

	September 30, 2023		December 31, 2022
Sales-type and direct financing leases:
Lease receivables, net of unearned income and deferred selling profit	$	325,556	$	266,380
Unguaranteed residual values, net of unearned income and deferred selling profit		16,711		15,159
Total net investment in sales-type and direct financing leases	$	342,267	$	281,539

Lessee Arrangements

The Company’s lessee arrangements consist of operating and finance leases; however, the majority of the leases have been classified as non-cancellable operating leases and are primarily for real estate leases with remaining lease terms of up to 23 years. For more information on the Company’s lessee arrangements, refer to Note 1 “Summary of Significant Accounting Policies” in the Company’s 2022 Form 10-K.

On September 20, 2023, the Bank entered into and closed on an agreement for the purchase and sale of 27 properties, which included 25 branches and a drive thru and parking lot, each adjacent to a sold branch, to a single purchaser, for an aggregate purchase price of $45.8 million. Concurrently, the Bank entered into absolute net lease agreements with the purchaser under which the Bank will lease each property for an initial term of 17 years with specified renewal options. The sale-leaseback transaction resulted in a pre-tax gain for the quarter ended September 30, 2023 of approximately $27.7 million, after transaction-related expenses, included in Other Operating Income in the accompanying Consolidated Statements of Income. Each lease agreement includes a 1.5% annual rent escalation during the initial term and 2.0% rent escalation during the renewal terms, if exercised. The Company recorded operating lease ROU assets and corresponding operating lease liabilities of $38.3 million and $38.1 million, respectively, which primarily drove the increases in operating ROU assets and operating lease liabilities at September 30, 2023, compared to December 31, 2022.

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

	September 30, 2023						December 31, 2022
	Operating			Finance			Operating			Finance
ROU assets	$	68,807		$	4,899		$	35,729		$	5,588
Lease liabilities		75,502			7,369			47,696			8,288
Lease Term and Discount Rate of Operating leases:
Weighted-average remaining lease term (years)		11.66			5.33			6.80			6.08
Weighted-average discount rate (1)		6.06	%		1.17	%		2.91	%		1.17	%

⁽¹⁾ A lease implicit rate or an incremental borrowing rate is used based on information available at commencement date of lease or at remeasurement date.

-29-

	Nine months ended September 30,
	2023		2022
Cash paid for amounts included in measurement of lease liabilities:
Operating Cash Flows from Finance Leases	$	68	$	79
Operating Cash Flows from Operating Leases		8,902		8,514
Financing Cash Flows from Finance Leases		919		885
ROU assets obtained in exchange for lease obligations:
Operating leases	$	38,318	$	1,268

	Three months ended September 30,				Nine months ended September 30,
		2023		2022		2023		2022
Net Operating Lease Cost	$	2,381	$	2,117	$	7,291	$	6,658
Finance Lease Cost:
Amortization of right-of-use assets		230		230		689		689
Interest on lease liabilities		22		25		68		79
Total Lease Cost	$	2,633	$	2,372	$	8,048	$	7,426

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

	September 30, 2023
	Lessor		Lessee
		Sales-type and Direct Financing	Operating		Finance
For the remaining three months of 2023	$	20,314	$	3,536	$	337
2024		84,391		13,666		1,358
2025		73,581		11,603		1,392
2026		62,743		9,146		1,427
2027		50,928		7,759		1,462
Thereafter		76,765		66,137		1,627
Total undiscounted cash flows		368,722		111,847		7,603
Less: Adjustments (1)		43,166		36,345		234
Total (2)	$	325,556	$	75,502	$	7,369

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

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

-30-

6. BORROWINGS

Short-term Borrowings

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

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

	September 30,			December 31,
	2023			2022
Securities sold under agreements to repurchase	$	134,936		$	142,837
Federal Funds Purchased		—			160,000
FHLB Advances		495,000			1,016,000
Total short-term borrowings	$	629,936		$	1,318,837
Average outstanding balance during the period	$	633,896		$	302,060
Average interest rate during the period		4.66	%		1.79	%
Average interest rate at end of period		5.12	%		3.89	%

The Bank maintains federal funds lines with several correspondent banks; the available balance was $737.0 million and $1.0 billion at September 30, 2023 and December 31, 2022, respectively. The Company maintains an alternate line of credit at a correspondent bank; the available balance was $25.0 million at both September 30, 2023 and December 31, 2022. The Company has certain restrictive covenants related to certain asset quality, capital, and profitability metrics associated with these lines and was in compliance with these covenants as of September 30, 2023 and December 31, 2022. Additionally, the Company had a collateral dependent line of credit with the FHLB of up to $6.2 billion at September 30, 2023 and $6.0 billion at December 31, 2022. The remaining credit availability on the collateral dependent line of credit with the FHLB was $5.7 billion and $4.9 billion at September 30, 2023 and December 31, 2022, respectively. Refer to Note 7 “Commitments and Contingencies” for additional information on the Company’s pledged collateral.

Starting in the first quarter of 2023, the Company was eligible to borrow from the Federal Reserve's BTFP, which provides additional contingent liquidity through the pledging of certain qualifying securities. The BTFP is a one-year program ending March 11, 2024, and the Company can borrow any time during the term and can repay the obligation at any time without penalty. As of September 30, 2023, liquidity of $531.0 million was available based on the par-value of qualifying securities from BTFP. The Company had not utilized the BTFP facility as of September 30, 2023.

Long-term Borrowings

In connection with several previous bank acquisitions, the Company issued $58.5 million and acquired $92.0 million of trust preferred capital notes. The remaining fair value discount on all acquired trust preferred capital notes was $11.9 million and $12.5 million at September 30, 2023 and December 31, 2022, respectively.

-31-

Total long-term borrowings consist of the following as of September 30, 2023 (dollars in thousands):

			Spread to
	Principal		3-Month SOFR (1)		Rate (2)		Maturity	Investment (3)
Trust Preferred Capital Securities
Trust Preferred Capital Note - Statutory Trust I	$	22,500	2.75	%	8.41	%	6/17/2034	$	696
Trust Preferred Capital Note - Statutory Trust II		36,000	1.40	%	7.06	%	6/15/2036		1,114
VFG Limited Liability Trust I Indenture		20,000	2.73	%	8.39	%	3/18/2034		619
FNB Statutory Trust II Indenture		12,000	3.10	%	8.76	%	6/26/2033		372
Gateway Capital Statutory Trust I		8,000	3.10	%	8.76	%	9/17/2033		248
Gateway Capital Statutory Trust II		7,000	2.65	%	8.31	%	6/17/2034		217
Gateway Capital Statutory Trust III		15,000	1.50	%	7.16	%	5/30/2036		464
Gateway Capital Statutory Trust IV		25,000	1.55	%	7.21	%	7/30/2037		774
MFC Capital Trust II		5,000	2.85	%	8.51	%	1/23/2034		155
Total Trust Preferred Capital Securities	$	150,500						$	4,659
Subordinated Debt (4)
2031 Subordinated Debt		250,000	—	%	2.875	%	12/15/2031
Total Subordinated Debt (5)	$	250,000
Fair Value Discount (6)		(14,426)
Investment in Trust Preferred Capital Securities		4,659
Total Long-term Borrowings	$	390,733

⁽¹⁾ As part of the adoption of ASC 848, the index changed from Three-Month LIBOR to Three-Month CME SOFR + 0.262% in the third quarter of 2023. For more information on ASC 848, refer to Note 1 “Summary of Significant Accounting Policies” in Part 1, Item 1 of this Quarterly Report.

⁽²⁾ Rate as of September 30, 2023. Calculated using non-rounded numbers.

⁽³⁾ Represents the junior subordinated debentures owned by the Company in trust and is reported in “Other assets” on the Company’s Consolidated Balance Sheets.

⁽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 or earlier redemption. The notes may be redeemed before maturity on any interest payment date occurring on or after December 15, 2026.

⁽⁶⁾ Remaining discounts of $11.9 million and $2.6 million on Trust Preferred Capital Securities and Subordinated Debt, respectively.

-32-

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

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

⁽¹⁾The index rate changed from Three-Month LIBOR to Three-Month CME SOFR +0.262% in the third quarter of 2023 due to LIBOR cessation.

⁽²⁾Rate as of December 31, 2022. Calculated using non-rounded numbers.

⁽³⁾ Represents the junior subordinated debentures owned by the Company in trust and is reported in "Other assets" on the Company’s Consolidated Balance Sheets.

⁽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 or earlier redemption. The notes may be redeemed before maturity on any interest payment date occurring on or after December 15, 2026.

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

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

	Trust
	Preferred						Total
	Capital		Subordinated		Fair Value		Long-term
	Notes		Debt		Discount (1)		Borrowings
For the remaining three months of 2023	$	—	$	—	$	(292)	$	(292)
2024		—		—		(1,187)		(1,187)
2025		—		—		(1,211)		(1,211)
2026		—		—		(1,236)		(1,236)
2027		—		—		(1,263)		(1,263)
Thereafter		155,159		250,000		(9,237)		395,922
Total long-term borrowings	$	155,159	$	250,000	$	(14,426)	$	390,733

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

-33-

7. COMMITMENTS AND CONTINGENCIES

Litigation and Regulatory Matters

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

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

As of September 30, 2023, the Company has recorded a probable and estimable liability in connection with this matter. In addition, the Company believes that it is reasonably possible that the Company may experience losses in connection with this matter in excess of what the Company has accrued; however, the Company cannot reasonably estimate any loss beyond the estimated liability that has been recorded.

The Company cannot provide assurance whether a settlement will be reached, the final terms or timing of any such settlement, or the final amount of loss (potentially including both restitution and a civil money penalty) with respect to this matter. If the Company and the CFPB do not reach a settlement, the CFPB may commence litigation against the Company.

Financial Instruments with Off-Balance Sheet Risk

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

The Company’s exposure to credit loss in the event of nonperformance by the other party to the financial instruments for commitments to extend credit and letters of credit written is represented by the contractual amount of these instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments. Unless noted otherwise, the Company does not require collateral or other security to support off-balance sheet instruments with credit risk. The Company considers credit losses related to off-balance sheet commitments by undergoing a similar process in evaluating losses for loans that are carried on the balance sheet. The Company considers historical loss and funding information, current and future economic conditions, risk ratings, and past due status among other factors in the consideration of expected credit losses in the Company’s off-balance sheet commitments to extend credit. The Company also records an indemnification reserve based on historical statistics and loss rates related to mortgage loans previously sold. At September 30, 2023 and December 31, 2022, the Company’s reserve for unfunded commitments and indemnification reserve totaled $15.7 million and $14.1 million, respectively.

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

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

	September 30, 2023		December 31, 2022
Commitments with off-balance sheet risk:
Commitments to extend credit(1)	$	5,600,928	$	5,229,252
Letters of credit		146,178		156,459
Total commitments with off-balance sheet risk	$	5,747,106	$	5,385,711

⁽¹⁾ Includes unfunded overdraft protection.

As of September 30, 2023, the Company had approximately $260.4 million in deposits in other financial institutions of which $211.0 million served as collateral for cash flow and loan swap derivatives. As of December 31, 2022, the Company had approximately $273.5 million in deposits in other financial institutions of which $196.2 million served as collateral for the Company’s cash flow and loan swap derivatives. The Company had approximately $46.1 million and $74.0 million in deposits in other financial institutions that were uninsured at September 30, 2023 and December 31, 2022, respectively. At least annually, the Company’s management evaluates the loss risk of its uninsured deposits in financial counterparties.

For asset/liability management purposes, the Company uses interest rate contracts to hedge various exposures or to modify the interest rate characteristics of various balance sheet accounts. For the over-the-counter derivatives cleared with the central clearinghouses, the variation margin is treated as a settlement of the related derivatives fair values. Refer to Note 8 “Derivatives” within this Item 1 of this Quarterly Report for additional information.

As part of the Company’s liquidity management strategy, it pledges collateral to secure various financing and other activities that occur during the normal course of business. The following tables present the types of collateral pledged at September 30, 2023 and December 31, 2022 (dollars in thousands):

	Pledged Assets as of September 30, 2023
			AFS		HTM
	Cash		Securities (1)		Securities (1)		Loans (2)		Total
Public deposits	$	—	$	686,217	$	580,172	$	—	$	1,266,389
Repurchase agreements		—		142,537		—		—		142,537
FHLB advances		—		51,084		—		3,073,097		3,124,181
Derivatives		210,977		59,568		—		—		270,545
Fed Funds (3)		—		392,491		16,444		452,649		861,584
Other purposes		—		15,248		—		—		15,248
Total pledged assets	$	210,977	$	1,347,145	$	596,616	$	3,525,746	$	5,680,484

⁽¹⁾ Balance represents market value.

⁽²⁾ Balance represents carrying value.

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

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

⁽¹⁾ Balance represents market value.

⁽²⁾ Balance represents book value.

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8. DERIVATIVES

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

Derivatives Counterparty Credit Risk

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

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

Derivatives designated as accounting hedges

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 in range and length. Amounts receivable or payable are recognized as accrued under the terms of the agreements.

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

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

At September 30, 2023 and December 31, 2022, the Company had interest rate swaps designated and qualifying as cash flow hedges of the Company’s forecasted variable interest receipts on variable rate loans due to changes in the interest rate with a notional amount of $900 million. For each agreement, the Company receives interest at a fixed rate and pays at a variable rate. 

Fair Value Hedges

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

Loans: During the normal course of business, the Company enters into swap agreements to convert certain long-term fixed-rate loans to floating rates to hedge the Company’s exposure to interest rate risk. The Company pays a fixed interest rate to the counterparty and receives a floating rate from the same counterparty calculated on the aggregate notional amount. At September 30, 2023 and December 31, 2022, the aggregate notional amount of the related hedged items for certain long-term fixed rate loans totaled $79.3 million and $83.6 million, respectively, and the fair value of the swaps associated with the derivative related to hedged items was an unrealized gain of $12.8 million and $11.0 million, respectively.

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AFS Securities: The Company has a swap agreement to hedge the interest rate risk on a portion of its fixed rate AFS securities. At September 30, 2023 and December 31, 2022, the aggregate notional amount of the related hedged items of the AFS securities totaled $50.0 million and the fair value of the swaps associated with the derivative related to hedged items was an unrealized gain of $2.6 million and $1.9 million, respectively.

The Company applies hedge accounting in accordance with ASC 815, Derivatives and Hedging, and the fair value hedge and the underlying hedged item, attributable to the risk being hedged, are recorded at fair value with unrealized gains and losses being recorded on the Company’s Consolidated Statements of Income. 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.

Derivatives not designated as accounting hedges

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

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

Foreign Exchange Contracts: The Company enters into certain foreign exchange derivative contracts that are not designated as accounting hedges primarily to support the banking needs of certain commercial banking customers. These foreign exchange contracts qualify as financial derivatives with fair values reported in “Other assets” and “Other liabilities” on the Company’s Consolidated Balance Sheets with changes in fair value recorded in “Other operating income” on the Company’s Consolidated Statements of Income. At September 30, 2023 and December 31, 2022, the Company’s foreign exchange derivative contracts had an aggregate notional amount of $12.3 million and $10.4 million, respectively. Unrealized losses at both September 30, 2023 and December 31, 2022 were not significant. The Company had no foreign exchange derivative contracts at September 30, 2022.

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The following table summarizes key elements of the Company’s derivative instruments as of September 30, 2023 and December 31, 2022, segregated by derivatives that are considered accounting hedges and those that are not (dollars in thousands):

	September 30, 2023						December 31, 2022
			Derivative (2)						Derivative (2)
	Notional or						Notional or
	Contractual						Contractual
	Amount (1)		Assets		Liabilities		Amount (1)		Assets		Liabilities
Derivatives designated as accounting hedges:
Interest rate contracts: (3)
Cash flow hedges	$	900,000	$	—	$	14,955	$	900,000	$	1,163	$	6,599
Fair value hedges		129,309		5,102		—		133,576		4,117		—
Derivatives not designated as accounting hedges:
Interest rate contracts (3)(4)		6,248,254		117,917		276,814		5,820,005		75,030		229,401

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

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

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

⁽⁴⁾ Includes RPAs.

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 September 30, 2023 and December 31, 2022 (dollars in thousands):

	September 30, 2023				December 31, 2022
			Cumulative				Cumulative
			Amount of Basis				Amount of Basis
			Adjustments				Adjustments
			Included in the				Included in the
	Carrying Amount		Carrying		Carrying Amount		Carrying
	of Hedged		Amount of the		of Hedged		Amount of the
	Assets/(Liabilities)		Hedged		Assets/(Liabilities)		Hedged
	Amount (1)		Assets/(Liabilities)		Amount (1)		Assets/(Liabilities)
Line items on the Consolidated Balance Sheets in which the hedged item is included:
Securities available-for-sale (1) (2)	$	84,482	$	(2,589)	$	91,388	$	(1,889)
Loans(3)		79,309		(12,635)		83,576		(10,832)

⁽¹⁾ These amounts include the amortized cost basis of the investment securities designated in hedging relationships for which the hedged item is the last layer expected to be remaining at the end of the hedging relationship. At September 30, 2023 and December 31, 2022, the amortized cost basis of this portfolio was $84.5 million and $91.4 million, respectively, and the cumulative basis adjustment associated with this hedge was $2.6 million and $1.9 million, respectively. The amount of the designated hedged item at September 30, 2023 and December 31, 2022 totaled $50 million.

⁽²⁾ Carrying value represents amortized cost.

⁽³⁾ The fair value of the swaps associated with the derivative related to hedged items at September 30, 2023 and December 31, 2022 was an unrealized gain of $12.8 million and $11.0 million, respectively.

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9. STOCKHOLDERS’ EQUITY

Repurchase Programs

As of September 30, 2023, the Company does not have an active share repurchase program. The Company’s prior share repurchase plan expired on December 9, 2022. During the nine months ended September 30, 2022, the Company repurchased an aggregate of 1.3 million shares (or $48.2 million), and none of these shares were repurchased during the third quarter of 2022.

Accumulated Other Comprehensive Income (Loss)

The change in AOCI for the three and nine months ended September 30, 2023 is summarized as follows, net of tax (dollars in thousands):

			Unrealized Gains
			(Losses)
	Unrealized		for AFS				Unrealized
	(Losses)		Securities		Change in Fair		Gains
	on AFS		Transferred to		Value of Cash		(Losses) on
	Securities		HTM		Flow Hedge		BOLI		Total
AOCI (loss) – June 30, 2023	$	(353,811)	$	12	$	(57,221)	$	153	$	(410,867)
Other comprehensive (loss) income:
Other comprehensive loss before reclassification		(79,193)		—		(9,581)		—		(88,774)
Amounts reclassified from AOCI into earnings		21,799		(2)		—		(62)		21,735
Net current period other comprehensive loss		(57,394)		(2)		(9,581)		(62)		(67,039)
AOCI (loss) – September 30, 2023	$	(411,205)	$	10	$	(66,802)	$	91	$	(477,906)

			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
AOCI (loss) – December 31, 2022	$	(363,919)	$	17	$	(54,610)	$	226	$	(418,286)
Other comprehensive income (loss):
Other comprehensive (loss) income before reclassification		(79,669)		—		(12,192)		10		(91,851)
Amounts reclassified from AOCI into earnings		32,383		(7)		—		(145)		32,231
Net current period other comprehensive loss		(47,286)		(7)		(12,192)		(135)		(59,620)
AOCI (loss) – September 30, 2023	$	(411,205)	$	10	$	(66,802)	$	91	$	(477,906)

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The change in AOCI for the three and nine months ended September 30, 2022 is summarized as follows, net of tax (dollars in thousands):

			Unrealized Gain
			(Losses)
	Unrealized		for AFS				Unrealized
	Gains (Losses)		Securities		Change in Fair		Gains
	on AFS		Transferred to		Value of Cash		(Losses)
	Securities		HTM		Flow Hedge		on BOLI		Total
AOCI (loss) – June 30, 2022	$	(277,577)	$	25	$	(36,452)	$	(2,279)	$	(316,283)
Other comprehensive (loss) income:
Other comprehensive loss before reclassification		(121,841)		—		(24,142)		—		(145,983)
Amounts reclassified from AOCI into earnings		—		(4)		—		151		147
Net current period other comprehensive (loss) income		(121,841)		(4)		(24,142)		151		(145,836)
AOCI (loss) – September 30, 2022	$	(399,418)	$	21	$	(60,594)	$	(2,128)	$	(462,119)

			Unrealized Gain
			(Losses)
	Unrealized		for AFS				Unrealized
	Gains (Losses)		Securities		Change in Fair		Gains
	on AFS		Transferred to		Value of Cash		(Losses)
	Securities		HTM		Flow Hedge		on BOLI		Total
AOCI – December 31, 2021	$	22,763	$	35	$	(1,567)	$	(2,596)	$	18,635
Other comprehensive (loss) income:
Other comprehensive loss before reclassification		(422,183)		—		(59,027)		—		(481,210)
Amounts reclassified from AOCI into earnings		2		(14)		—		468		456
Net current period other comprehensive (loss) income		(422,181)		(14)		(59,027)		468		(480,754)
AOCI (loss) – September 30, 2022	$	(399,418)	$	21	$	(60,594)	$	(2,128)	$	(462,119)

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10. FAIR VALUE MEASUREMENTS

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

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

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

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

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

Assets and Liabilities Measured at Fair Value on a Recurring Basis

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

Derivative Instruments

As discussed in Note 8 “Derivatives” within this Item 1 of this Quarterly Report, the Company records derivative instruments at fair value on a recurring basis. The Company utilizes derivative instruments as part of the management of interest rate risk to modify the re-pricing characteristics of certain portions of the Company’s interest-bearing assets and liabilities, as well as to manage the Company’s exposure to credit risk related to borrower’s performance under interest rate derivatives. The Company has contracted with a third-party vendor to provide valuations for derivatives using standard valuation techniques and therefore classifies such valuations as Level 2. Third-party valuations are validated by the Company using the Bloomberg Valuation Service’s derivative pricing functions. No significant differences were identified during the validation as of September 30, 2023 and December 31, 2022. The Company has considered counterparty credit risk in the valuation of its derivative assets and has considered its own credit risk in the valuation of its derivative liabilities.

AFS Securities

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

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

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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 the Bloomberg Valuation Service, an independent information source that draws on quantitative models and market data contributed from over 4,000 market participants, to validate third party valuations. Any significant differences between valuation sources are researched by further analyzing the various inputs that are utilized by each pricing source. No significant differences were identified during the validation as of September 30, 2023 and December 31, 2022.

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

Loans Held for Sale

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

The following table presents the balances of financial assets and liabilities measured at fair value on a recurring basis at September 30, 2023 and December 31, 2022 (dollars in thousands):

	Fair Value Measurements at September 30, 2023 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	$	59,568	$	2,270	$	—	$	61,838
Obligations of states and political subdivisions		—		417,460		—		417,460
Corporate and other bonds(1)		—		242,818		—		242,818
MBS		—		1,361,085		—		1,361,085
Other securities		—		1,727		—		1,727
LHFS		—		6,608		—		6,608
Financial Derivatives(2)		—		123,019		—		123,019
LIABILITIES
Financial Derivatives(2)	$	—	$	291,769	$	—	$	291,769

⁽¹⁾ Other bonds include asset-backed securities.

⁽²⁾ Includes hedged and non-hedged derivatives.

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		Fair Value Measurements at December 31, 2022 using
				Significant
		Quoted Prices in		Other		Significant
		Active Markets for		Observable		Unobservable
		Identical Assets		Inputs		Inputs
		Level 1		Level 2		Level 3		Balance
ASSETS
AFS securities:
U.S. government and agency securities		$	56,606	$	5,337	$	—	$	61,943
Obligations of states and political subdivisions			—		807,435		—		807,435
Corporate and other bonds(1)			—		226,380		—		226,380
MBS			—		1,644,394		—		1,644,394
Other securities			—		1,664		—		1,664
LHFS			—		3,936		—		3,936
Financial Derivatives(2)	��		—		80,310		—		80,310
LIABILITIES
Financial Derivatives(2)		$	—	$	236,000	$	—	$	236,000

⁽¹⁾ Other bonds include asset-backed securities.

⁽²⁾ Includes hedged and non-hedged derivatives.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Certain assets are measured at fair value on a nonrecurring basis in accordance with 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 nonrecurring valuation adjustments for these assets did not have a significant impact on the Company’s consolidated financial statements.

Fair Value of Financial Instruments

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

Cash and Cash Equivalents

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

HTM Securities

The Company’s HTM investment portfolio is primarily valued using fair value measurements that are considered to be Level 2, utilizes the same valuation approach as described above with the AFS securities portfolio. Any significant differences between valuation sources are researched by further analyzing the various inputs that are utilized by each pricing source. No significant differences were identified during the validation as of September 30, 2023 and December 31, 2022.

The Company’s Level 3 HTM securities are a result of a prior acquisition and are comprised of asset-backed securities and municipal bonds. Valuations of the asset-backed securities are provided by a third-party vendor specializing in the SBA markets and are based on underlying loan pool information, market data, and recent trading activity for similar securities. Valuations of the municipal bonds are provided by a third-party vendor that specializes in hard-to-value securities and are based on a discounted cash flow model and incorporates considerations for the complexity of the instrument, likelihood it will be called, and credit ratings. The Company reviews the valuations obtained for any material differences between valuation sources by analyzing the various inputs and results utilized by each pricing source. No significant differences were identified during the validation as of September 30, 2023 and December 31, 2022.

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Loans and Leases

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

Bank Owned Life Insurance

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

Deposits

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

Accrued Interest

The carrying amounts of accrued interest approximate fair value.

The carrying values and estimated fair values of the Company’s financial instruments at September 30, 2023 and December 31, 2022 are as follows (dollars in thousands):

	Fair Value Measurements at September 30, 2023 using
			Quoted Prices		Significant
			in Active		Other		Significant
			Markets for		Observable		Unobservable		Total Fair
			Identical Assets		Inputs		Inputs		Value
	Carrying
	Value		Level 1		Level 2		Level 3		Balance
ASSETS
Cash and cash equivalents	$	398,945	$	398,945	$	—	$	—	$	398,945
AFS securities		2,084,928		59,568		2,025,360		—		2,084,928
HTM securities		843,269		—		760,786		1,260		762,046
Restricted stock		104,785		—		104,785		—		104,785
LHFS		6,608		—		6,608		—		6,608
LHFI, net of deferred fees and costs		15,283,620		—		—		14,712,224		14,712,224
Financial Derivatives(1)		123,019		—		123,019		—		123,019
Accrued interest receivable		85,663		—		85,663		—		85,663
BOLI		449,452		—		449,452		—		449,452
LIABILITIES
Deposits	$	16,786,505	$	—	$	16,758,971	$	—	$	16,758,971
Borrowings		1,020,669		—		947,640		—		947,640
Accrued interest payable		17,046		—		17,046		—		17,046
Financial Derivatives(1)		291,769		—		291,769		—		291,769

⁽¹⁾ Includes hedged and non-hedged derivatives.

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	Fair Value Measurements at December 31, 2022 using
			Quoted Prices		Significant
			in Active		Other		Significant
			Markets for		Observable		Unobservable		Total Fair
			Identical Assets		Inputs		Inputs		Value
	Carrying
	Value		Level 1		Level 2		Level 3		Balance
ASSETS
Cash and cash equivalents	$	319,948	$	319,948	$	—	$	—	$	319,948
AFS securities		2,741,816		56,606		2,685,210		—		2,741,816
HTM securities		847,732		—		798,778		3,109		801,887
Restricted stock		120,213		—		120,213		—		120,213
LHFS		3,936		—		3,936		—		3,936
LHFI, net of deferred fees and costs		14,449,142		—		—		13,974,926		13,974,926
Financial Derivatives(1)		80,310		—		80,310		—		80,310
Accrued interest receivable		81,953		—		81,953		—		81,953
BOLI		440,656		—		440,656		—		440,656
LIABILITIES
Deposits	$	15,931,677	$	—	$	15,927,361	$	—	$	15,927,361
Borrowings		1,708,700		—		1,645,095		—		1,645,095
Accrued interest payable		5,268		—		5,268		—		5,268
Financial Derivatives(1)		236,000		—		236,000		—		236,000

⁽¹⁾ Includes hedged and non-hedged derivatives.

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

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11. 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 nine months ended September 30, 2023 and 2022 (dollars in thousands except per share data):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2023		2022		2023		2022
Net Income	$	54,017	$	58,070	$	144,911	$	163,986
Less: Preferred Stock Dividends		2,967		2,967		8,901		8,901
Net income available to common shareholders	$	51,050	$	55,103	$	136,010	$	155,085
Weighted average shares outstanding, basic		74,999		74,704		74,943		75,029
Dilutive effect of stock awards		—		1		1		5
Weighted average shares outstanding, diluted		74,999		74,705		74,944		75,034
Earnings per common share, basic	$	0.68	$	0.74	$	1.81	$	2.07
Earnings per common share, diluted	$	0.68	$	0.74	$	1.81	$	2.07

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12. SEGMENT REPORTING AND REVENUE

Operating Segments

Effective January 1, 2023, the Company made an organizational change to move certain lines of business in the wealth management division that primarily serve Wholesale Banking customers from the Consumer Banking segment to the Wholesale Banking segment. As a result, the Company reallocated $9.6 million of goodwill from the Consumer Banking segment to the Wholesale Banking segment and restated its prior segment information for the year ended December 31, 2022, based on this organizational change. Goodwill was evaluated for impairment prior to and immediately following the organizational change. Refer to Note 4 “Goodwill and Intangible Assets” within this Item 1 “Financial Statements” of this Quarterly Report for additional information. In addition, effective January 1, 2023, the Company restated its prior segment operating results for the three and nine months ended September 30, 2022, resulting in a reallocation of noninterest income ($3.0 million and $9.5 million, respectively) and noninterest expense ($4.0 million and $12.1 million, respectively) from the Consumer Banking segment to the Wholesale Banking segment.

As of September 30, 2023, the Company’s operating segments include the following:

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

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

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

Segment Reporting Methodology

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

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Segment Results

The following tables present the Company’s operating segment results for the three months and nine months ended September 30, 2023 and 2022 (dollars in thousands):

	Wholesale Banking		Consumer Banking		Corporate Other (1)		Total
Three Months Ended September 30, 2023
Net interest income	$	68,049	$	63,912	$	19,980	$	151,941
Provision for credit losses		9,310		(4,319)		—		4,991
Net interest income after provision for credit losses		58,739		68,231		19,980		146,950
Noninterest income		9,468		13,722		3,904		27,094
Noninterest expenses		40,039		54,994		13,475		108,508
Income before income taxes	$	28,168	$	26,959	$	10,409	$	65,536
Three Months Ended September 30, 2022 (2)
Net interest income	$	77,625	$	58,749	$	14,341	$	150,715
Provision for credit losses		8,470		(2,058)		—		6,412
Net interest income after provision for credit losses		69,155		60,807		14,341		144,303
Noninterest income		8,453		11,939		5,192		25,584
Noninterest expenses		40,164		54,740		5,019		99,923
Income before income taxes	$	37,444	$	18,006	$	14,514	$	69,964

	Wholesale Banking		Consumer Banking		Corporate Other (1)		Total
Nine Months Ended September 30, 2023
Net interest income	$	201,722	$	190,806	$	64,941	$	457,469
Provision for credit losses		25,853		(2,947)		5		22,911
Net interest income after provision for credit losses		175,869		193,753		64,936		434,558
Noninterest income		25,743		38,188		(3,013)		60,918
Noninterest expenses		123,207		168,971		30,264		322,442
Income before income taxes	$	78,405	$	62,970	$	31,659	$	173,034
Nine Months Ended September 30, 2022 (2)
Net interest income	$	221,979	$	157,918	$	40,516	$	420,413
Provision for credit losses		12,844		(100)		27		12,771
Net interest income after provision for credit losses		209,135		158,018		40,489		407,642
Noninterest income		25,967		45,135		22,921		94,023
Noninterest expenses		118,216		165,523		20,273		304,012
Income before income taxes	$	116,886	$	37,630	$	43,137	$	197,653

⁽¹⁾ For the three and nine months ended September 30, 2023, noninterest expenses include $8.7 million ($8.7 million included within other expenses and ($67,000) included within salaries and benefits) and $12.6 million ($9.8 million included within other expenses and $2.8 million included within salaries and benefits), respectively, in expenses associated with strategic cost saving initiatives, principally composed of severance costs related to headcount reductions, costs related to modifying certain third-party vendor contracts, and charges for exiting certain leases.

⁽²⁾ As discussed above, the segment operating results for the three and nine months ended September 30, 2022 include a reallocation from Consumer Banking to Wholesale Banking.

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The following table presents the Company’s operating segment results for key balance sheet metrics as of September 30, 2023 and December 31, 2022 (dollars in thousands):

	Wholesale Banking		Consumer Banking		Corporate Other		Total
As of September 30, 2023
LHFI, net of deferred fees and costs (1)	$	12,343,799	$	2,953,367	$	(13,546)	$	15,283,620
Goodwill		639,180		286,031		—		925,211
Deposits		6,537,472		9,726,079		522,954		16,786,505
As of December 31, 2022
LHFI, net of deferred fees and costs (1)(2)	$	11,476,258	$	2,990,017	$	(17,133)	$	14,449,142
Goodwill (3)		639,180		286,031		—		925,211
Deposits (4)		6,128,729		9,724,598		78,350		15,931,677

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

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

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

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

Revenue

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

Noninterest income disaggregated by major source for the three and nine months ended September 30, 2023 and 2022, consisted of the following (dollars in thousands):

	Three Months Ended				Nine Months Ended
	September 30,		September 30,		September 30,		September 30,
	2023		2022		2023		2022
Noninterest income:
Deposit Service Charges (1):
Overdraft fees	$	5,210	$	3,831	$	14,873	$	14,130
Maintenance fees & other		3,347		2,953		9,704		8,291
Other service charges, commissions, and fees (1)		2,632		1,770		6,071		5,134
Interchange fees(1)		2,314		2,461		7,098		6,539
Fiduciary and asset management fees (1):
Trust asset management fees		3,120		3,035		9,329		9,726
Registered advisor management fees		—		—		—		5,088
Brokerage management fees		1,429		1,099		3,840		3,515
Mortgage banking income		666		1,390		1,969		6,707
Loss on sale of securities		(27,594)		—		(40,992)		(2)
Bank owned life insurance income		2,973		3,445		8,671		8,858
Loan-related interest rate swap fees		2,695		2,050		6,450		8,510
Other operating income (2)		30,302		3,550		33,905		17,527
Total noninterest income	$	27,094	$	25,584	$	60,918	$	94,023

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

⁽²⁾ Includes a $27.7 million gain related to the sale-leaseback transaction for the three and nine months ended September 30, 2023, and a $9.1 million gain related to the sale of DHFB for the nine months ended September 30, 2022.

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The following tables present noninterest income disaggregated by reportable operating segment for the three and nine months ended September 30, 2023 and 2022 (dollars in thousands):

	Wholesale Banking		Consumer Banking		Corporate Other (1)(2)		Total
Three Months Ended September 30, 2023
Noninterest income:
Deposit service charges	$	2,184	$	6,373	$	—	$	8,557
Other service charges and fees		399		2,233		—		2,632
Fiduciary and asset management fees		3,050		1,499		—		4,549
Mortgage banking income		—		666		—		666
Other income		3,835		2,951		3,904		10,690
Total noninterest income	$	9,468	$	13,722	$	3,904	$	27,094
Three Months Ended September 30, 2022 (3)
Noninterest income:
Deposit service charges	$	1,783	$	5,001	$	—	$	6,784
Other service charges and fees		513		1,257		—		1,770
Fiduciary and asset management fees		2,960		1,174		—		4,134
Mortgage banking income		—		1,390		—		1,390
Other income		3,197		3,117		5,192		11,506
Total noninterest income	$	8,453	$	11,939	$	5,192	$	25,584

	Wholesale Banking		Consumer Banking		Corporate Other (1)(2)		Total
Nine Months Ended September 30, 2023
Noninterest income:
Deposit service charges	$	6,268	$	18,309	$	—	$	24,577
Other service charges and fees		1,140		4,931		—		6,071
Fiduciary and asset management fees		9,118		4,051		—		13,169
Mortgage banking income		—		1,969		—		1,969
Other income		9,217		8,928		(3,013)		15,132
Total noninterest income	$	25,743	$	38,188	$	(3,013)	$	60,918
Nine Months Ended September 30, 2022 (3)
Noninterest income:
Deposit service charges	$	4,990	$	17,431	$	—	$	22,421
Other service charges and fees		1,342		3,792		—		5,134
Fiduciary and asset management fees		9,501		8,828		—		18,329
Mortgage banking income		—		6,707		—		6,707
Other income		10,134		8,377		22,921		41,432
Total noninterest income	$	25,967	$	45,135	$	22,921	$	94,023

⁽¹⁾ For the three and nine months ended September 30, 2022, other income primarily includes a $9.1 million gain related to the sale of DHFB and income from BOLI.

⁽²⁾ For the three and nine months ended September 30, 2023, other income primarily includes a $27.7 million gain related to the sale-leaseback transaction, losses incurred on the sale of AFS securities ($27.6 million and $41.0 million, respectively), and income from BOLI.

⁽³⁾ As discussed above, noninterest income for the three and nine months ended September 30, 2022 includes a reallocation from Consumer Banking to Wholesale Banking.

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13. SUBSEQUENT EVENTS

The Company’s management has evaluated subsequent events through November 2, 2023, the date the financial statements were issued.

On October 26, 2023, the Company’s Board of Directors declared a quarterly dividend on the outstanding shares of its Series A preferred stock. The Series A preferred stock is represented by depositary shares, each representing a 1/400^th ownership interest in a share of Series A preferred stock. The dividend of $171.88 per share (equivalent to $0.43 per outstanding depositary share) is payable on December 1, 2023 to preferred shareholders of record as of November 16, 2023.

The Company’s Board of Directors also declared a quarterly dividend of $0.32 per share of common stock. The common stock dividend is payable on November 24, 2023 to common shareholders of record as of November 10, 2023.

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Report of Independent Registered Public Accounting Firm

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

Results of Review of Interim Financial Statements

We have reviewed the accompanying consolidated balance sheet of Atlantic Union Bankshares Corporation and Subsidiaries (the Company) as of September 30, 2023, the related consolidated statements of income, comprehensive income (loss), and changes in stockholders’ equity for the three and nine-month periods ended September 30, 2023 and 2022, the consolidated statements of cash flows for the nine-month periods ended September 30, 2023 and 2022, and the related notes (collectively referred to as the “consolidated interim financial statements”). Based on our reviews, we are not aware of any material modifications that should be made to the consolidated interim financial statements for them to be in conformity with U.S. generally accepted accounting principles.

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

Basis for Review Results

These financial statements are the responsibility of the Company’s management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the SEC and the PCAOB. We conducted our review in accordance with the standards of the PCAOB. A review of interim financial 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

November 2, 2023

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

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

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

FORWARD-LOOKING STATEMENTS

Certain statements in this report may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements that include, without limitation, statements regarding our expectations with regard to our business, financial and operating results, including our deposit base and funding and the impact of future economic conditions, anticipated changes in the interest rate environments and the related impacts on the Company’s net interest margin, changes in economic conditions, management’s belief regarding liquidity and capital resources, and the expected impact of our cost saving measures initiated in the second quarter of 2023, statements regarding the pending merger with American National, and statements that include other projections, predictions, expectations, or beliefs about future events or results or otherwise are not statements of historical fact. Such forward-looking statements are based on certain assumptions as of the time they are made, and are inherently subject to known and unknown risks, uncertainties, and other factors, some of which cannot be predicted or quantified, that may cause actual results, performance, or achievements to be materially different from those expressed or implied by such forward-looking statements. Forward-looking statements are often characterized by the use of qualified words (and their derivatives) such as “expect,” “believe,” “estimate,” “plan,” “project,” “anticipate,” “intend,” “will,” “may,” “view,” “opportunity,” “potential,” “continue,” “confidence,” or words of similar meaning or other statements concerning opinions or judgment of the Company and our management about future events. Although we believe that our expectations with respect to forward-looking statements are based upon reasonable assumptions within the bounds of our existing knowledge of our business and operations, there can be no assurance that actual future results, performance, or achievements of, or trends affecting, us will not differ materially from any projected future results, performance, achievements or trends expressed or implied by such forward-looking statements. Actual future results, performance, achievements or trends may differ materially from historical results or those anticipated depending on a variety of factors, including, but not limited to, the effects of or changes in:

● market interest rates and their related impacts on macroeconomic conditions, customer and client behavior, our funding costs and our loan and securities portfolios;

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

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

● the sufficiency of liquidity;

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

● the failure to close our previously announced merger with American National when expected or at all because required regulatory, American National shareholder or other approvals and other conditions to closing are not received or satisfied on a timely basis or at all, and the risk that any regulatory approvals may result in the imposition of conditions that could adversely affect the combined company or the expected benefits of the proposed merger;

● the occurrence of any event, change or other circumstances that could give rise to the right of one or both of the parties to terminate the merger agreement;

● any change in the purchase accounting assumptions used regarding the American National assets acquired and liabilities assumed to determine the fair value and credit marks, particularly in light of the current rising interest rate environment;

● the possibility that the anticipated benefits of the proposed merger, including anticipated cost savings and strategic gains, are not realized when expected or at all;

● the proposed merger being more expensive or taking longer to complete than anticipated, including as a result of unexpected factors or events;

● the diversion of management’s attention from ongoing business operations and opportunities do to the proposed merger;

● potential adverse reactions or changes to business or employee relationships, including those resulting from the announcement or completion of the proposed merger;

● the dilutive effect of shares of the Company’s common stock to be issued at the completion of the proposed merger;

● changes in the Company’s or American National’s share price before closing;

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

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

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

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

● the effectiveness of expense reduction plans;

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

● our ability to recruit and retain key employees;

● real estate values in our lending area;

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

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

● our liquidity and capital positions;

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

● the effectiveness of our credit processes and management of our credit risk;

● our ability to compete in the market for financial services and increased competition from fintech companies;

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

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

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

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

● performance by our counterparties or vendors;

● deposit flows;

● the availability of financing and the terms thereof;

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

● legislative or regulatory changes and requirements;

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

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

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

● other factors, many of which are beyond our control.

Please also refer to such other factors as discussed throughout Part I, Item 1A, “Risk Factors” and Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the 2022 Form 10-K, Part II, Item 1A, “Risk Factors” in our Quarterly Reports on Form 10-Q for the quarters ended June 30, 2023 and March 31, 2023, and related disclosures in other filings, which have been filed with the SEC and are available on the SEC’s website at www.sec.gov. All risk factors and uncertainties described herein and therein should be considered in evaluating forward-looking statements, and all of the forward-looking statements made in this report are expressly qualified by the cautionary statements contained or referred to herein and therein. The actual results or developments anticipated may not be realized or, even if substantially realized, they may not have the expected consequences to or effects on the Company or our businesses or operations. Readers are cautioned not to rely too heavily on the forward-looking statements contained in this Quarterly Report, and undue reliance should not be placed on such forward-looking statements. Forward-looking statements speak only as of the date they are made. We do not intend or assume any obligation to update, revise or clarify any forward-looking statements that may be made from time to time by or on behalf of the Company, whether as a result of new information, future events or otherwise.

CRITICAL ACCOUNTING ESTIMATES

The Company’s consolidated financial statements are prepared based on the application of accounting and reporting policies in accordance with 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, which require the use of estimates, assumptions, and judgments, which may prove inaccurate or are subject to variations. Changes in underlying factors, estimates, assumptions or judgements could result in material changes in the Company’s consolidated financial position and/or results of operations.

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

Effective September 30, 2023, the Company implemented certain changes to its ALLL estimation methodology. These changes did not have a significant impact on the overall ALLL estimate. The ALLL represents the estimated balance that management considers adequate to absorb expected credit losses over the expected contractual life of the loan portfolio. The Company estimates the ALLL using a loan-level PD/LGD method for all loans.

Determining the appropriateness of the ALLL is complex and requires judgment by management about the effect of matters that are inherently uncertain. Subsequent evaluations of the then-existing loan portfolio, in light of the factors then prevailing, may result in significant changes in the ALLL in future periods. There are both internal factors (i.e., loan balances, credit quality, and the contractual lives of loans) and external factors (i.e., economic conditions such as trends in housing prices, interest rates GDP, inflation, and unemployment) that can impact the ALLL estimate.

The Company considers a number of external economic variables in developing the ALLL. Prior to September 30, 2023, the most significant of these external economic variables was the Virginia unemployment rate. The Company now considers various national economic variables in developing the ALLL, including the national unemployment rate, national gross domestic product, national CRE pricing index, national home price index, and national retail sales. The national

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unemployment rate is used in all models regardless of the loan portfolio type, and a second economic variable is used in each cohort model depending on the loan portfolio type. The ALLL quantitative estimate is sensitive to changes in the economic variable forecasts during the two-year reasonable and supportable period. In determining forecasted expected losses, the Company uses multiple Moody’s economic variable forecasts and applies probability weights to the related economic scenarios. Because current economic conditions and forecasts can change and future events are inherently difficult to predict, the anticipated amount of estimated credit losses on loans, and therefore the appropriateness of the ALLL, could change significantly. It is difficult to estimate how potential changes in any one economic factor or input might affect the overall ALLL because a wide variety of factors and inputs are considered in estimating the ALLL and changes in those factors and inputs may not occur at the same rate and may not be consistent across all loan types. Additionally, changes in factors and inputs may be directionally inconsistent, such that improvement in one factor may offset deterioration in others.

The Company reviews its ALLL estimation process regularly for appropriateness as the economic and internal environment are constantly changing. While the ALLL estimate represents management’s current estimate of expected credit losses, due to uncertainty surrounding internal and external factors, there is potential that the estimate may not be adequate over time to cover credit losses in the portfolio. While management uses available information to estimate expected losses on loans, future changes in the ALLL may be necessary based on changes in portfolio composition, portfolio credit quality, economic conditions and/or other factors.

The Company provides additional information on its critical accounting estimates in Note 1 “Summary of Significant Accounting Policies” in Part I, Item 1 of this Quarterly Report and under “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates” in its 2022 Form 10-K. 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 2022 Form 10-K.

RECENT ACCOUNTING PRONOUNCEMENTS (ISSUED BUT NOT FULLY ADOPTED)

In March 2023, the FASB issued ASU No. 2023-02 Investments—Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method. Prior to the issuance of ASU 2023-02, companies could only apply the proportional amortization method to low-income-housing tax credit structures. Topic 323 allows for the expansion of use of the proportional amortization method to all tax equity investments that meet certain conditions. Under the proportional amortization method, the initial cost of the investment is amortized in proportion to the income tax credits and other income tax benefits received and presents this net amount as a component of income tax expense (benefit). The amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted. The Company evaluated the impact of ASU No. 2023-02 and concluded that it will not have a significant impact on its consolidated financial statements.

ABOUT ATLANTIC UNION BANKSHARES CORPORATION

Headquartered in Richmond, Virginia, Atlantic Union Bankshares Corporation (NYSE: AUB) is the holding company for Atlantic Union Bank. Atlantic Union Bank has 109 branches and 123 ATMs located throughout Virginia and in portions of Maryland and North Carolina as of September 30, 2023. Certain non-bank financial services affiliates of Atlantic Union Bank include: Atlantic Union Equipment Finance, Inc., which provides equipment financing; Atlantic Union Financial Consultants, LLC, which provides brokerage services; and Union Insurance Group, LLC, which offers various lines of insurance products.

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

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RESULTS OF OPERATIONS

INDUSTRY IMPACTS

In March and April of 2023, the banking industry experienced significant volatility due to three high-profile bank failures. These bank failures resulted in significant concerns within the banking industry related to liquidity, deposit outflows, and unrealized losses on investment securities. These concerns and volatility in the banking industry may persist if other industry participants experience similar high-profile financial challenges or if other banks are closed by federal or state banking regulators. These events in the banking industry have reinforced the importance of maintaining access to diverse sources of funding and the benefits of a robust and stable deposit base.

In light of the bank closures and uncertainty in the banking industry, a continued rising interest rate environment, and persistent concerns about recessionary conditions in the U.S. economy, the Company continues to actively monitor balance sheet trends, deposit flows, and liquidity needs to ensure that the Company and the Bank are able to meet the needs of the Bank’s customers and maintain financial flexibility. During the first nine months of 2023, the Company’s LHFI, net of deferred fees and costs, and total deposits increased from December 31, 2022 by $834.5 million and $854.8 million, respectively, and the Company’s short-term borrowings decreased by $688.9 million from December 31, 2022. As of September 30, 2023, the Company estimates that approximately 73.2% of the Company’s deposits were insured or collateralized, and that the Company maintained available liquidity sources to cover approximately 132% of uninsured and uncollateralized deposits. In addition, to further bolster the Company’s funding position, the Company augmented customer deposit growth by also increasing brokered deposits to $516.7 million at September 30, 2023.

Despite the negative developments within the broader banking industry during the first nine months of 2023, the Company’s and the Bank’s regulatory capital ratios continued to exceed the standards to be considered well-capitalized under regulatory requirements. See “Capital Resources” within this Item 2 for additional information about the Company’s regulatory capital.

The Company is continually monitoring the impact of other various global and national events on the Company’s results of operations and financial condition, including inflation and rising interest rates. Inflation has risen, although at a slower pace in the second half of 2023, as a result of growth in economic activity and demand for goods and services, as well as labor shortages and global supply chain issues. In an effort to combat inflation, the FOMC increased the Federal Funds target rates throughout 2022 and 2023 to its current range of 5.25% to 5.50%. The FOMC has noted that it will continue to assess additional information and its implications for monetary policy, and in determining future actions with respect to the target rates, the FOMC will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments. The FOMC also confirmed the continued reduction to the Federal Reserve’s holdings of U.S. Treasury securities and agency debt and agency MBS. These developments helped drive the meaningful increase in deposit costs and deposit competition that the Company continues to experience. The Company anticipates that the net impact of these factors will result in a continued contraction of its net interest margin. The timing and impact of inflation, market interest rates, and the competitive landscape of deposits on the Company's business and results of operations will depend on future developments, which are highly uncertain and difficult to predict. The Company will continue to deploy various asset liability management strategies to seek to manage the Company's risk related to interest rate fluctuations. Refer to “Liquidity” within this Item 2 for additional information about the Company’s liquidity and “Quantitative and Qualitative Disclosures about Market Risk” in Part II, Item 3 of this Quarterly Report for additional information about the Company’s interest rate sensitivity.

RECENT STRATEGIC ACTIONS

Merger with American National Bankshares Inc.

On July 24, 2023, the Company and American National entered into a merger agreement. Under the merger agreement, American National will merge with and into the Company, with the Company continuing as the surviving entity. Immediately following the merger, American National Bank and Trust Company will merge with and into the Bank, with the Bank continuing as the surviving bank. Subject to the terms and conditions of the merger agreement, at the effective time of the merger, each outstanding share of American National common stock will be converted into the right to receive 1.35 shares of the Company’s common stock. The merger agreement was unanimously approved by the boards of directors of the Company and American National, and is subject to customary closing conditions, including receipt of required regulatory approvals and American National shareholder approval. The proposed merger is expected to close in the first quarter of 2024.

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During the third quarter of 2023, the Company incurred pre-tax merger costs of approximately $2.0 million related to the proposed merger with American National.

Cost Saving Initiatives

As previously disclosed, the Company initiated a series of strategic cost saving measures during the second quarter of 2023 that is expected to reduce our annual expense run rate by approximately $17 million. As a result of these measures, the Company incurred pre-tax expenses of $8.7 million in the third quarter of 2023 and $3.9 million in the second quarter of 2023, principally composed of severance charges related to headcount reductions, costs related to modifying certain third-party vendor contracts, and charges for exiting certain leases.

Sale-Leaseback Transaction

On September 20, 2023, the Bank executed a sale-leaseback transaction and sold 27 properties, which consisted of 25 branches and a drive thru and parking lot, each adjacent to a sold branch, to a single purchaser for an aggregate purchase price of $45.8 million. Concurrently, the Bank entered into absolute net lease agreements with the purchaser under which the Bank will lease each of the properties for an initial term of 17 years with specified renewal options. The sale-leaseback transaction resulted in a pre-tax gain of approximately $27.7 million during the third quarter of 2023, after transaction-related expenses. Refer to Note 5 “Leases” within Part I, Item 1 “Financial Statements” of this Quarterly Report for additional information.

AFS Securities Sales

Concurrent with the sale-leaseback transaction, also on September 20, 2023, the Company restructured a portion of its investment portfolio by selling low yielding AFS securities with a book value of $228.3 million, resulting in a pre-tax net loss of $27.7 million. The net proceeds from the securities sale transaction were reinvested into higher yielding AFS securities at the end of the third quarter of 2023.

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

SUMMARY OF FINANCIAL RESULTS

Third Quarter Net Income & Performance Metrics

● Net income available to common shareholders was $51.1 million and basic and diluted EPS was $0.68 for the third quarter of 2023, compared to $55.1 million and $0.74 for the third quarter of 2022.

● Adjusted operating earnings available to common shareholders⁽⁺⁾, which excludes (net of taxes) expenses incurred associated with our strategic cost saving initiatives principally composed of severance charges related to headcount reductions, costs related to modifying certain third-party vendor contracts, and charges for exiting certain leases ($6.9 million in 2023), merger-related costs associated with the American National merger ($2.0 million in 2023), losses on the sale of securities ($21.8 million in 2023), and the gain related to the sale-leaseback transaction ($21.9 million in 2023), was $59.8 million and adjusted diluted operating EPS ⁽⁺⁾ was $0.80 for the quarter ended September 30, 2023, compared to adjusted operating earnings available to common shareholders⁽⁺⁾ of $55.1 million and diluted adjusted operating EPS⁽⁺⁾ of $0.74 for the third quarter of 2022.

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Nine Month Net Income & Performance Metrics

● Net income available to common shareholders was $136.0 million and basic and diluted EPS was $1.81 for the first nine months of 2023, compared to $155.1 million and $2.07 for the first nine months of 2022.

● Adjusted operating earnings available to common shareholders⁽⁺⁾, which excludes (net of taxes) expenses incurred associated with our strategic cost saving initiatives ($10.0 million in 2023), merger-related costs associated with the American National merger ($2.0 million in 2023), the legal reserve associated with an ongoing regulatory matter as previously disclosed ($4.0 million in 2023), strategic branch closing and facility consolidation costs ($4.4 million in 2022), losses on the sale of securities ($32.4 million in 2023 and $2,000 in 2022), the gain related to the sale-leaseback transaction ($21.9 million in 2023), and the gain on sale of DHFB ($8.0 million in 2022), was $162.4 million and adjusted diluted operating EPS ⁽⁺⁾ was $2.17 for the nine months ended September 30, 2023, compared to adjusted operating earnings available to common shareholders⁽⁺⁾ of $151.5 million and diluted adjusted operating EPS⁽⁺⁾ of $2.02 for the first nine months of 2022.

Balance Sheet

● Total assets were $20.7 billion at September 30, 2023, an increase of $275.1 million or approximately 1.8% (annualized) from December 31, 2022. Total assets increased during the first nine months of 2023 primarily due to a $834.5 million increase in LHFI, net of deferred fees and costs, driven primarily by increases in the commercial and industrial, commercial real estate non-owner occupied, and multifamily real estate portfolios, partially offset by a $676.8 million decrease in the investment securities portfolio, primarily due to the sales of AFS securities executed during the period, as well as a decline in the market value of the AFS securities portfolio, due to the impact of market interest rate fluctuations.

● Total LHFI, net of deferred fees and costs, were $15.3 billion at September 30, 2023, an increase of $834.5 million or 7.7% (annualized) from December 31, 2022.

● Total investments were $3.0 billion at September 30, 2023, a decrease of $676.8 million from December 31, 2022. AFS securities totaled $2.1 billion at September 30, 2023, compared to $2.7 billion at December 31, 2022. At September 30, 2023, total net unrealized losses on the AFS securities portfolio were $523.1 million, an increase of $60.6 million from $462.5 million at December 31, 2022. HTM securities are carried at cost and totaled $843.3 million at September 30, 2023, compared to $847.7 million at December 31, 2022 and had net unrealized losses of $81.2 million at September 30, 2023, an increase of $35.4 million from $45.8 million at December 31, 2022, due primarily to changes in interest rates and market conditions during the first nine months of 2023.

● At September 30, 2023, total deposits were $16.8 billion, an increase of $854.8 million or approximately 7.2% (annualized) from December 31, 2022, due to a $1.6 billion increase in interest-bearing deposits, which included approximately $516.7 million in brokered deposits, partially offset by a $738.3 million decrease in demand deposits, as customers continued to move funds from lower to higher yielding deposit products.

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Net Interest Income

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

The following 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:

	For the Three Months Ended
	September 30,
	2023			2022			Change
	(Dollars in thousands)
Average interest-earning assets	$	18,462,505		$	17,879,222		$	583,283
Interest and dividend income	$	247,159		$	171,156		$	76,003
Interest and dividend income (FTE) (+)	$	250,903		$	174,998		$	75,905
Yield on interest-earning assets		5.31	%		3.80	%		151	bps
Yield on interest-earning assets (FTE) (+)		5.39	%		3.88	%		151	bps
Average interest-bearing liabilities	$	13,481,946		$	11,867,217		$	1,614,729
Interest expense	$	95,218		$	20,441		$	74,777
Cost of interest-bearing liabilities		2.80	%		0.68	%		212	bps
Cost of funds		2.04	%		0.45	%		159	bps
Net interest income	$	151,941		$	150,715		$	1,226
Net interest income (FTE) (+)	$	155,685		$	154,557		$	1,128
Net interest margin		3.27	%		3.34	%		(7)	bps
Net interest margin (FTE) (+)		3.35	%		3.43	%		(8)	bps

For the third quarter of 2023, net interest income was $151.9 million, an increase of $1.2 million from the third quarter of 2022. For the third quarter of 2023, net interest income (FTE)⁽⁺⁾ was $155.7 million, an increase of $1.1 million from the third quarter of 2022. In the third quarter of 2023, net interest margin decreased 7 bps to 3.27% from 3.34% in the third quarter of 2022, and net interest margin (FTE)⁽⁺⁾ decreased 8 bps to 3.35% in the third quarter of 2023 from 3.43% for the same period of 2022. The decreases in net interest margin and net interest margin (FTE)⁽⁺⁾ were primarily driven by an increase in interest expense primarily due to higher deposit costs resulting from increases in market interest rates and changes in the deposit mix, as depositors migrated to higher cost interest bearing deposit accounts during the third quarter of 2023, as well as higher borrowing costs due to increased short-term borrowings and funding costs associated with increased market interest rates. These increases in interest expense were partially offset by higher loan yields due to increased short-term interest rates impacting variable rate loans, as well as net loan growth.

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	For the Nine Months Ended
	September 30,
	2023			2022			Change
	(Dollars in thousands)
Average interest-earning assets	$	18,264,957		$	17,803,550		$	461,407
Interest and dividend income	$	694,952		$	458,367		$	236,585
Interest and dividend income (FTE) (+)	$	706,150		$	469,122		$	237,028
Yield on interest-earning assets		5.09	%		3.44	%		165	bps
Yield on interest-earning assets (FTE) (+)		5.17	%		3.52	%		165	bps
Average interest-bearing liabilities	$	13,103,073		$	11,752,110		$	1,350,963
Interest expense	$	237,483		$	37,954		$	199,529
Cost of interest-bearing liabilities		2.42	%		0.43	%		199	bps
Cost of funds		1.74	%		0.28	%		146	bps
Net interest income	$	457,469		$	420,413		$	37,056
Net interest income (FTE) (+)	$	468,667		$	431,168		$	37,499
Net interest margin		3.35	%		3.16	%		19	bps
Net interest margin (FTE) (+)		3.43	%		3.24	%		19	bps

For the first nine months of 2023, net interest income was $457.5 million, an increase of $37.1 million from the same period of 2022. For the first nine months of 2023, net interest income (FTE)⁽⁺⁾ was $468.7 million, an increase of $37.5 million from the same period of 2022. In the first nine months of 2023, net interest margin increased 19 bps to 3.35% from 3.16% in the first nine months of 2022, and net interest margin (FTE)⁽⁺⁾ increased 19 bps to 3.43% in the first nine months of 2023 from 3.24% in the first nine months of 2022. The increases in net interest margin and net interest margin (FTE)⁽⁺⁾ were primarily driven by higher loan yields due to increased short-term interest rates impacting variable rate loans, as well as net loan growth. These increases were partially offset by an increase in interest expense primarily due to higher deposit costs resulting from increases in market interest rates and changes in the deposit mix as depositors migrated to higher cost interest bearing deposit accounts during the nine months ended September 30, 2023, as well as higher borrowing costs due to increased short-term borrowings and funding costs associated with increased market interest rates.

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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 (dollars in thousands):

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

	For the Three Months Ended September 30,
	2023						2022
			Interest						Interest
	Average		Income /		Yield /		Average		Income /		Yield /
��	Balance		Expense (1)		Rate (1)(2)		Balance		Expense (1)		Rate (1)(2)
	(Dollars in thousands)
Assets:
Securities:
Taxable	$	1,799,675	$	16,055	3.54	%	$	2,193,279	$	14,750	2.67	%
Tax-exempt		1,301,983		10,653	3.25	%		1,625,328		13,661	3.33	%
Total securities		3,101,658		26,708	3.42	%		3,818,607		28,411	2.95	%
LHFI, net of deferred fees and costs(3)		15,139,761		222,698	5.84	%		13,733,447		145,433	4.20	%
Other earning assets		221,086		1,497	2.69	%		327,168		1,154	1.40	%
Total earning assets		18,462,505	$	250,903	5.39	%		17,879,222	$	174,998	3.88	%
Allowance for loan and lease losses		(121,229)						(104,746)
Total non-earning assets		2,254,913						2,206,024
Total assets	$	20,596,189					$	19,980,500
Liabilities and Stockholders' Equity:
Interest-bearing deposits:
Transaction and money market accounts	$	8,697,801	$	57,378	2.62	%	$	8,247,650	$	11,342	0.55	%
Regular savings		964,971		499	0.21	%		1,171,071		64	0.02	%
Time deposits		2,914,004		25,713	3.50	%		1,745,224		3,980	0.90	%
Total interest-bearing deposits		12,576,776		83,590	2.64	%		11,163,945		15,386	0.55	%
Other borrowings		905,170		11,628	5.10	%		703,272		5,055	2.85	%
Total interest-bearing liabilities		13,481,946	$	95,218	2.80	%		11,867,217	$	20,441	0.68	%
Noninterest-bearing liabilities:
Demand deposits		4,218,835						5,324,279
Other liabilities		448,506						352,005
Total liabilities		18,149,287						17,543,501
Stockholders' equity		2,446,902						2,436,999
Total liabilities and stockholders' equity	$	20,596,189					$	19,980,500
Net interest income			$	155,685					$	154,557
Interest rate spread					2.59	%					3.20	%
Cost of funds					2.04	%					0.45	%
Net interest margin (FTE)(+)					3.35	%					3.43	%

⁽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.

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	For the Nine Months Ended September 30,
	2023						2022
			Interest						Interest
	Average		Income /		Yield /		Average		Income /		Yield /
	Balance		Expense (1)		Rate (1)(2)		Balance		Expense (1)		Rate (1)(2)
	(Dollars in thousands)
Assets:
Securities:
Taxable	$	1,900,154	$	48,373	3.40	%	$	2,375,933	$	43,110	2.43	%
Tax-exempt		1,347,133		33,189	3.29	%		1,605,375		40,366	3.36	%
Total securities		3,247,287		81,562	3.36	%		3,981,308		83,476	2.80	%
LHFI, net of deferred fees and costs(3)		14,799,520		620,328	5.60	%		13,521,507		383,799	3.79	%
Other earning assets		218,150		4,260	2.61	%		300,735		1,847	0.82	%
Total earning assets		18,264,957	$	706,150	5.17	%		17,803,550	$	469,122	3.52	%
Allowance for loan and lease losses		(117,048)						(102,783)
Total non-earning assets		2,249,609						2,172,877
Total assets	$	20,397,518					$	19,873,644
Liabilities and Stockholders' Equity:
Interest-bearing deposits:
Transaction and money market accounts	$	8,478,017	$	142,646	2.25	%	$	8,203,629	$	15,748	0.26	%
Regular savings		1,021,875		1,294	0.17	%		1,161,145		175	0.02	%
Time deposits		2,571,114		56,750	2.95	%		1,726,341		10,043	0.78	%
Total interest-bearing deposits		12,071,006		200,690	2.22	%		11,091,115		25,966	0.31	%
Other borrowings		1,032,067		36,793	4.77	%		660,995		11,988	2.42	%
Total interest-bearing liabilities		13,103,073	$	237,483	2.42	%		11,752,110	$	37,954	0.43	%
Noninterest-bearing liabilities:
Demand deposits		4,428,039						5,306,675
Other liabilities		422,573						301,337
Total liabilities		17,953,685						17,360,122
Stockholders' equity		2,443,833						2,513,522
Total liabilities and stockholders' equity	$	20,397,518					$	19,873,644
Net interest income			$	468,667					$	431,168
Interest rate spread					2.75	%					3.09	%
Cost of funds					1.74	%					0.28	%
Net interest margin (FTE)(+)					3.43	%					3.24	%

⁽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.

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The Volume Rate Analysis table below presents changes in net interest income (FTE)⁽⁺⁾ and interest expense and distinguishes between the changes related to increases or decreases in average outstanding balances of interest-earning assets and interest-bearing liabilities (volume), and the changes related to increases or decreases in average interest rates on such assets and liabilities (rate). Changes attributable to both volume and rate have been allocated proportionally. Results, on a taxable equivalent basis, are as follows for the three and nine months ended September 30, 2023 and 2022 (dollars in thousands):

	Three Months Ended						Nine Months Ended
	September 30, 2023 vs. September 30, 2022						September 30, 2023 vs. September 30, 2022
	Increase (Decrease) Due to Change in:						Increase (Decrease) Due to Change in:
	Volume		Rate		Total		Volume		Rate		Total
Earning Assets:
Securities:
Taxable	$	(2,954)	$	4,259	$	1,305	$	(9,787)	$	15,050	$	5,263
Tax-exempt		(2,654)		(354)		(3,008)		(6,377)		(800)		(7,177)
Total securities		(5,608)		3,905		(1,703)		(16,164)		14,250		(1,914)
Loans, net(1)		16,100		61,165		77,265		39,136		197,393		236,529
Other earning assets		(464)		807		343		(631)		3,044		2,413
Total earning assets	$	10,028	$	65,877	$	75,905	$	22,341	$	214,687	$	237,028
Interest-Bearing Liabilities:
Interest-bearing deposits:
Transaction and money market accounts	$	652	$	45,384	$	46,036	$	545	$	126,353	$	126,898
Regular savings		(13)		448		435		(23)		1,142		1,119
Time deposits(1)		4,112		17,621		21,733		6,960		39,747		46,707
Total interest-bearing deposits		4,751		63,453		68,204		7,482		167,242		174,724
Other borrowings(1)		1,757		4,816		6,573		9,119		15,686		24,805
Total interest-bearing liabilities		6,508		68,269		74,777		16,601		182,928		199,529
Change in net interest income (FTE)(+)	$	3,520	$	(2,392)	$	1,128	$	5,740	$	31,759	$	37,499

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

The impact of net accretion related to acquisition accounting fair value adjustments for the first, second, and third quarters of 2022 and 2023 are reflected in the following table (dollars in thousands):

	Loan		Deposit		Borrowings
	Accretion		Amortization		Amortization		Total
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
For the quarter ended September 30, 2022		1,326		(11)		(209)		1,106
For the quarter ended March 31, 2023		1,106		(14)		(209)		883
For the quarter ended June 30, 2023		1,073		(7)		(213)		853
For the quarter ended September 30, 2023		1,300		(6)		(215)		1,079

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Noninterest Income

	For the Three Months Ended
	September 30,				Change
	2023		2022		$		%
	(Dollars in thousands)
Noninterest income:
Service charges on deposit accounts	$	8,557	$	6,784	$	1,773	26.1	%
Other service charges, commissions, and fees		2,632		1,770		862	48.7	%
Interchange fees		2,314		2,461		(147)	(6.0)	%
Fiduciary and asset management fees		4,549		4,134		415	10.0	%
Mortgage banking income		666		1,390		(724)	(52.1)	%
Loss on sale of securities		(27,594)		—		(27,594)	NM
Bank owned life insurance income		2,973		3,445		(472)	(13.7)	%
Loan-related interest rate swap fees		2,695		2,050		645	31.5	%
Other operating income		30,302		3,550		26,752	NM
Total noninterest income	$	27,094	$	25,584	$	1,510	5.9	%

Noninterest income increased $1.5 million or 5.9% to $27.1 million for the quarter ended September 30, 2023, compared to $25.6 million for the quarter ended September 30, 2022, primarily driven by a $27.7 million gain related to the sale-leaseback transaction, included within other operating income, and a $1.8 million increase in service charges on deposit accounts, partially offset by a $27.6 million loss on the sale of AFS securities in the third quarter of 2023.

Adjusted operating noninterest income,⁽⁺⁾ which excludes losses on sale of securities ($27.6 million in 2023) and the gain related to the sale-leaseback transaction ($27.7 million in 2023), increased $1.4 million or 5.5% to $27.0 million for the quarter ended September 30, 2023, compared to $25.6 million for the quarter ended September 30, 2022. The increase in adjusted operating noninterest income⁽⁺⁾ was primarily driven by a $1.8 million increase in service charges on deposit accounts, a $862,000 increase in other service charges, commissions, and fees due primarily to a merchant services vendor contract signing bonus, and a $645,000 increase in loan-related interest rate swap fees due to several new swap transactions. These increases in adjusted operating noninterest income⁽⁺⁾ were partially offset by a $948,000 decrease in other operating income primarily due to a decline in equity method investment income, and a $724,000 decrease in mortgage banking income due to a decline in mortgage loan origination volumes and a decrease in gain on sale margins due to increases in market interest rates.

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	For the Nine Months Ended
	September 30,				Change
	2023		2022		$		%
	(Dollars in thousands)
Noninterest income:
Service charges on deposit accounts	$	24,577	$	22,421	$	2,156	9.6	%
Other service charges, commissions, and fees		6,071		5,134		937	18.3	%
Interchange fees		7,098		6,539		559	8.5	%
Fiduciary and asset management fees		13,169		18,329		(5,160)	(28.2)	%
Mortgage banking income		1,969		6,707		(4,738)	(70.6)	%
Loss on sale of securities		(40,992)		(2)		(40,990)	NM
Bank owned life insurance income		8,671		8,858		(187)	(2.1)	%
Loan-related interest rate swap fees		6,450		8,510		(2,060)	(24.2)	%
Other operating income		33,905		17,527		16,378	93.4	%
Total noninterest income	$	60,918	$	94,023	$	(33,105)	(35.2)	%

Noninterest income decreased $33.1 million or 35.2% to $60.9 million for the nine months ended September 30, 2023, compared to $94.0 million for the nine months ended September 30, 2022, primarily driven by $41.0 million of losses incurred on the sale of AFS securities executed in the first and third quarters of 2023, partially offset by a $16.4 million increase in other operating income, which included a $27.7 million gain related to the sale-leaseback transaction during the third quarter of 2023, partially offset by a $9.1 million gain on sale of DHFB in the second quarter of 2022.

Adjusted operating noninterest income,⁽⁺⁾ which excludes losses on sale of securities ($41.0 million in 2023 and $2,000 in 2022), the gain on sale of DHFB ($9.1 million in 2022), and the gain related to the sale-leaseback transaction ($27.7 million in 2023), decreased $10.7 million or 12.6% for the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022. The decrease in adjusted operating noninterest income⁽⁺⁾ was primarily driven by a $5.2 million decrease in fiduciary and asset management fees due to a decrease in assets under management mainly driven by the DHFB sale executed in the second quarter of 2022, a $4.7 million decrease in mortgage banking income due to a decline in mortgage loan origination volumes and decrease in gain on sale margins due to increases in market interest rates, a $2.2 million decrease in other operating income primarily due to a decline in equity method investment income, and a $2.1 million decrease in loan-related interest rate swap fees primarily due to lower transaction volumes. These decreases in adjusted operating noninterest income⁽⁺⁾ were partially offset by a $2.2 million increase in service charges on deposit accounts, a $937,000 increase in other service charges, commissions, and fees due primarily to a merchant services vendor contract signing bonus, and a $559,000 increase in interchange fees.

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Noninterest Expense

	For the Three Months Ended
	September 30,				Change
	2023		2022		$		%
	(Dollars in thousands)
Noninterest expense:
Salaries and benefits	$	57,449	$	56,600	$	849	1.5	%
Occupancy expenses		6,053		6,408		(355)	(5.5)	%
Furniture and equipment expenses		3,449		3,673		(224)	(6.1)	%
Technology and data processing		7,923		8,273		(350)	(4.2)	%
Professional services		3,291		3,504		(213)	(6.1)	%
Marketing and advertising expense		2,219		2,343		(124)	(5.3)	%
FDIC assessment premiums and other insurance		4,258		3,094		1,164	37.6	%
Franchise and other taxes		4,510		4,507		3	0.1	%
Loan-related expenses		1,388		1,575		(187)	(11.9)	%
Amortization of intangible assets		2,193		2,480		(287)	(11.6)	%
Other expenses		15,775		7,466		8,309	111.3	%
Total noninterest expense	$	108,508	$	99,923	$	8,585	8.6	%

Noninterest expense increased $8.6 million or 8.6% to $108.5 million for the quarter ended September 30, 2023, compared to $99.9 million for the quarter ended September 30, 2022, primarily driven by a $8.3 million increase in other expenses due primarily to expenses associated with strategic cost saving initiatives and merger-related costs.

Adjusted operating noninterest expense,⁽⁺⁾ which excludes amortization of intangible assets ($2.2 million in 2023 and $2.5 million in 2022), expenses associated with strategic cost saving initiatives ($8.7 million in 2023), and merger-related costs associated with the American National merger ($2.0 million in 2023), decreased $1.8 million or 1.8% to $95.7 million for the quarter ended September 30, 2023, compared to $97.4 million for the quarter ended September 30, 2022. The decrease in adjusted operating non-interest expense⁽⁺⁾ was primarily driven by a $2.4 million decrease in other expenses reflecting a decline in non-credit related losses on customer transactions, a $355,000 decrease in occupancy expenses reflecting the impacts of strategic actions, and a $350,000 decrease in technology and data processing expense. These decreases in adjusted operating non-interest expense⁽⁺⁾ were partially offset by a $1.2 million increase in FDIC assessment premiums and other insurance reflecting an increase in the FDIC assessment rates, effective January 1, 2023, and a $916,000 increase in salaries and benefits expense.

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	For the Nine Months Ended
	September 30,				Change
	2023		2022		$		%
	(Dollars in thousands)
Noninterest expense:
Salaries and benefits	$	179,996	$	170,203	$	9,793	5.8	%
Occupancy expenses		18,503		19,685		(1,182)	(6.0)	%
Furniture and equipment expenses		10,765		10,860		(95)	(0.9)	%
Technology and data processing		24,631		23,930		701	2.9	%
Professional services		11,138		12,274		(1,136)	(9.3)	%
Marketing and advertising expense		7,387		7,008		379	5.4	%
FDIC assessment premiums and other insurance		12,231		8,344		3,887	46.6	%
Franchise and other taxes		13,508		13,506		2	0.0	%
Loan-related expenses		4,560		5,218		(658)	(12.6)	%
Amortization of intangible assets		6,687		8,434		(1,747)	(20.7)	%
Other expenses		33,036		24,550		8,486	34.6	%
Total noninterest expense	$	322,442	$	304,012	$	18,430	6.1	%

Noninterest expense increased $18.4 million or 6.1% to $322.4 million for the nine months ended September 30, 2023, compared to $304.0 million for the nine months ended September 30, 2022, primarily driven by a $9.8 million increase in salaries and benefits expense, which includes $2.8 million in expenses associated with strategic cost saving initiatives, and an $8.5 million increase in other expenses in 2023, due primarily to expenses related to strategic cost saving initiatives, merger-related costs, and the legal reserve associated with an ongoing regulatory matter previously disclosed, partially offset by strategic branch closing and facility consolidation costs in 2022.

Adjusted operating noninterest expense,⁽⁺⁾ which excludes amortization of intangible assets ($6.7 million in 2023 and $8.4 million in 2022), expenses associated with strategic cost saving initiatives ($12.6 million in 2023), merger-related costs associated with the American National merger ($2.0 million in 2023), the legal reserve associated with an ongoing regulatory matter previously disclosed ($5.0 million in 2023), and strategic branch closing and facility consolidation costs ($5.5 million in 2022), increased $6.1 million or 2.1% to $296.2 million for the nine months ended September 30, 2023, compared to $290.1 million for the nine months ended September 30, 2022. The increase in adjusted operating non-interest expense⁽⁺⁾ was primarily driven by a $7.0 million increase in salaries and benefits expense, outside of severance charges related to headcount reductions from our cost saving initiatives in the second quarter of 2023, a $3.9 million increase in FDIC assessment premiums and other insurance primarily due to the increase in the FDIC assessment rates, effective January 1, 2023, and a $701,000 increase in technology and data processing expense. These increases in adjusted operating non-interest expense⁽⁺⁾ were partially offset by a $2.8 million decrease in other expenses primarily due to a decrease of non-credit related losses on customer transactions, a $1.2 million decrease in occupancy expenses, and a $1.1 million decrease in professional services related to strategic projects that occurred in the prior year.

Segment Results

Effective January 1, 2023, the Company made an organizational change to move certain lines of business in the wealth management division that primarily serve Wholesale Banking customers from the Consumer Banking segment to the Wholesale Banking segment. As a result, the Company re-allocated $9.6 million of goodwill from the Consumer Banking segment to the Wholesale Banking segment and restated its prior segment information for the year ended December 31, 2022, based on this organizational change. In addition, the Company restated its prior segment operating results for the three and nine months ended September 30, 2022, resulting in a reallocation of noninterest income ($3.0 million and $9.5 million, respectively) and noninterest expense ($4.0 million and $12.1 million, respectively) from the Consumer Banking segment to the Wholesale Banking segment. Refer to Note 4 “Goodwill and Intangible Assets” and Note 12 “Segment Reporting and Revenue” within Part I, Item 1 “Financial Statements” of this Quarterly Report for additional information.

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Wholesale Banking

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

The following table presents operating results for the three and nine months ended September 30, 2023 and 2022 for the Wholesale Banking segment (dollars in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022 (1)		2023		2022 (1)
Net interest income	$	68,049	$	77,625	$	201,722	$	221,979
Provision for credit losses		9,310		8,470		25,853		12,844
Net interest income after provision for credit losses		58,739		69,155		175,869		209,135
Noninterest income		9,468		8,453		25,743		25,967
Noninterest expense		40,039		40,164		123,207		118,216
Income before income taxes	$	28,168	$	37,444	$	78,405	$	116,886

⁽¹⁾ Operating results include a reallocation from the Consumer Banking segment, due to the January 1, 2023 organizational change discussed in Note 12, “Segment Reporting and Revenue,” in Part I, Item 1 of this Quarterly Report.

Wholesale Banking income before income taxes decreased for the three and nine months ended September 30, 2023 as compared to the three and nine months ended September 30, 2022, by $9.3 million and $38.5 million, respectively. The decreases were primarily due to a decrease in net interest income driven by spread compression on the deposit portfolio as a result of the rapid rise in interest rates, and an increase in the provision for credit losses due to increased uncertainty in the economic outlook and loan growth during 2023. In addition, noninterest expense increased for the first nine months of 2023 compared to the same period in 2022, primarily due to an increase in salaries and benefits expense. For the three months ended September 30, 2023 compared to the same period in 2022, the decrease in net interest income and the increase in the provision for credit losses were partially offset by an increase in noninterest income driven by an increase in loan-related interest rate swap fees due to several new swap transactions.

The following table presents the key balance sheet metrics as of September 30, 2023 and December 31, 2022 for the Wholesale Banking segment (dollars in thousands):

	September 30, 2023		December 31, 2022 (1)
LHFI, net of deferred fees and costs	$	12,343,799	$	11,476,258
Total Deposits		6,537,472		6,128,729

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

​
LHFI, net of deferred fees and costs, for the Wholesale Banking segment increased $867.5 million or 10.1% (annualized) to $12.3 billion at September 30, 2023 compared to December 31, 2022, with growth across the commercial and industrial, commercial real estate non-owner occupied, and multifamily real estate loan portfolios.

Wholesale banking deposits increased $408.7 million or 8.9% (annualized) to $6.5 billion at September 30, 2023 compared to December 31, 2022. This increase was primarily driven by an increase in interest checking accounts, partially offset by a decrease in demand deposits and money market balances.

Consumer Banking

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

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The following table presents operating results for the three and nine months ended September 30, 2023 and 2022 for the Consumer Banking segment (dollars in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022 (1)		2023		2022 (1)
Net interest income	$	63,912	$	58,749	$	190,806	$	157,918
Provision for credit losses		(4,319)		(2,058)		(2,947)		(100)
Net interest income after provision for credit losses		68,231		60,807		193,753		158,018
Noninterest income		13,722		11,939		38,188		45,135
Noninterest expense		54,994		54,740		168,971		165,523
Income before income taxes	$	26,959	$	18,006	$	62,970	$	37,630

⁽¹⁾ Operating results include a reallocation to the Wholesale Banking segment, due to the January 1, 2023 organizational change discussed in Note 12, “Segment Reporting and Revenue,” in Part I, Item 1 of this Quarterly Report.

Consumer Banking income before income taxes increased for the three and nine months ended September 30, 2023, compared to the three and nine months ended September 30, 2022 by $9.0 million and $25.3 million, respectively. The increases were primarily driven by an increase in net interest income due to favorable funding credit on deposits and increased interest income attributable to the higher interest rate environment and higher average loan balances, partially offset by spread compression on the loan portfolio and a decrease in the provision for credit losses primarily driven by runoff in the third-party lending and auto portfolios. In addition, for the three months ended September 30, 2023 compared to the same period in 2022, noninterest income increased primarily due to an increase in service charges on deposit accounts and an increase in other service charges, commissions, and fees primarily due to a merchant services vendor contract signing bonus.

For the nine months ended 2023 compared to the same period in 2022, the increase in net interest income and the decrease in the provision for credit losses were partially offset by a decrease in noninterest income, primarily due to a decline in fiduciary and asset management fees driven by a decrease in assets under management primarily due to the sale of DHFB in the second quarter of 2022, and a decrease in mortgage banking income due to a decline in mortgage loan origination volumes driven by the rapid increase in market interest rates and a decline in gain on sale margins due to increases in market interest rates. In addition, noninterest expense increased driven by an increase in salaries and benefits expense, as well as an increase in FDIC assessment premiums and other insurance due to the increase in the FDIC assessment rates, effective January 1, 2023.

The following table presents the key balance sheet metrics as of September 30, 2023 and December 31, 2022 for the Consumer Banking segment (dollars in thousands):

	September 30, 2023		December 31, 2022 (1)
LHFI, net of deferred fees and costs	$	2,953,367	$	2,990,017
Total Deposits		9,726,079		9,724,598

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

LHFI, net of deferred fees and costs, for the Consumer Banking segment decreased $36.7 million or 1.6% (annualized) to $3.0 billion at September 30, 2023 compared to December 31, 2022. The decrease primarily occurred across the auto loan portfolio due to the exit from our indirect automobile financing business during the second quarter of 2023, as part of the strategic cost saving initiatives.

Consumer Banking deposits totaled $9.7 billion at both September 30, 2023 and December 31, 2022. The increase in time deposits, was almost wholly offset by a decrease in demand deposits, interest checking accounts, savings accounts, and money market balances, as customers moved funds from lower to higher yielding deposit products.

Income Taxes

The Company’s effective tax rate for the three months ended September 30, 2023 and 2022 was 17.6% and 17.0%, respectively. The effective tax rate for the nine months ended September 30, 2023 and 2022 was 16.3% and 17.0%,

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respectively. The changes for the three months and nine months periods in 2023, compared to the same periods in 2022, is a result of the proportionality of tax-exempt income as compared to pre-tax income in the periods.

DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

Overview

Assets

At September 30, 2023, total assets were $20.7 billion, an increase of $275.1 million or approximately 1.8% (annualized) from December 31, 2022. The increase in total assets was primarily due to an increase in LHFI, net of deferred fees and costs, of $834.5 million driven primarily by increases in the commercial and industrial, commercial real estate non-owner occupied and multifamily real estate portfolios, partially offset by a decline in the investment securities portfolio of $676.8 million, primarily due to the AFS securities sales during the first and third quarters of 2023 and the decline in market value of the AFS securities portfolio due to the impact of market interest rate fluctuations.

LHFI, net of deferred fees and costs, were $15.3 billion at September 30, 2023, an increase of $834.5 million or 7.7% (annualized) from December 31, 2022. At September 30, 2023, quarterly average LHFI, net of deferred fees and costs, increased $1.4 billion or 10.2% from the same period in the prior year. Refer to "Loan Portfolio" within this Item 2 and Note 3 "Loans and Allowance for Loan and Lease Losses" in Part I, Item 1 of this Quarterly Report for additional information on our loan activity.

At September 30, 2023, total investments were $3.0 billion, a decrease of $676.8 million from December 31, 2022. AFS securities totaled $2.1 billion at September 30, 2023, a $656.9 million decrease from December 31, 2022. At September 30, 2023, total net unrealized losses on the AFS securities portfolio were $523.1 million, compared to $462.5 million at December 31, 2022. HTM securities totaled $843.3 million at September 30, 2023, a $4.5 million decrease from December 31, 2022, with net unrealized losses of $81.2 million at September 30, 2023, compared to $45.8 million at December 31, 2022.

Liabilities and Stockholders’ Equity

At September 30, 2023, total liabilities were $18.3 billion, an increase of $259.0 million or approximately 1.9% (annualized) from $18.1 billion at December 31, 2022, which was primarily driven by an increase in deposits of $854.8 million, partially offset by a decrease in borrowings of $688.0 million.

Total deposits at September 30, 2023 were $16.8 billion, an increase of $854.8 million or approximately 7.2% (annualized) from December 31, 2022. For the quarter ended September 30, 2023, quarterly average deposits increased $307.4 million or 1.9% from the same period in the prior year. Total deposits at September 30, 2023 increased from December 31, 2022 due to a $1.6 billion increase in interest-bearing deposits, which includes $1.1 billion of interest-bearing customer deposits and $509.3 million in brokered deposits, partially offset by a $738.3 million decrease in demand deposits, as customers continued to move funds from lower to higher yielding products. Refer to “Deposits” within this Item 2 for additional information on this topic.

Total short-term and long-term borrowings at September 30, 2023 were $1.0 billion, compared to $1.7 billion at December 31, 2022, a decrease of $688.0 million or 40.3% due to paydowns of short-term borrowings. Refer to Note 6 “Borrowings” in Part I, Item 1, and “Executive Overview” within this Item 2 of this Quarterly Report for additional information on our borrowing activity.

At September 30, 2023, stockholders’ equity was $2.4 billion, an increase of $16.1 million from December 31, 2022. The Company’s consolidated regulatory capital ratios continue to exceed the minimum capital requirements and are considered “well-capitalized” for regulatory purposes. Refer to “Capital Resources” within this Item 2, as well as Note 9 "Stockholders’ Equity" in Part I, Item 1 of this Quarterly Report for additional information on our capital resources.

During the third quarter of 2023, the Company declared and paid a quarterly dividend on the outstanding shares of Series A Preferred Stock of $171.88 per share (equivalent to $0.43 per outstanding depositary share), consistent with the fourth quarter of 2022 and the third quarter of 2022. During the third quarter of 2023, the Company also declared and paid cash dividends of $0.30 per common share, consistent with the fourth quarter of 2022 and the third quarter of 2022.

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At September 30, 2023, the Company had no active share repurchase programs, as the most recent share repurchase program expired on December 9, 2022. Under that repurchase program, the Company repurchased an aggregate of approximately 1.3 million shares (or approximately $48.2 million) in 2022.

Securities
​

At September 30, 2023, the Company had total investments of $3.0 billion, or 14.6% of total assets, as compared to $3.7 billion, or 18.1% of total assets, at December 31, 2022. This decrease was primarily due to the sales of AFS securities executed during the period and the decline in market value of the AFS securities portfolio due to the impact of market interest rate fluctuations, which was partially offset by growth in the Company’s HTM portfolio. The Company seeks to diversify its portfolio to minimize risk and focuses on purchasing MBS for cash flow and reinvestment opportunities and securities issued by states and political subdivisions due to the tax benefits and the higher yield offered from these securities. The majority of the Company’s MBS are agency-backed securities, which have a government guarantee. For information regarding the hedge transaction related to AFS securities, see Note 8 "Derivatives" in Part I, Item 1 of this Quarterly Report.

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

	September 30,		December 31,
	2023		2022
Available for Sale:
U.S. government and agency securities	$	61,838	$	61,943
Obligations of states and political subdivisions		417,460		807,435
Corporate and other bonds		242,818		226,380
MBS
Commercial		234,703		306,161
Residential		1,126,382		1,338,233
Total MBS		1,361,085		1,644,394
Other securities		1,727		1,664
Total AFS securities, at fair value		2,084,928		2,741,816
Held to Maturity:
U.S. government and agency securities		—		687
Obligations of states and political subdivisions		700,400		705,990
Corporate and other bonds		4,536		5,159
MBS
Commercial		52,498		42,761
Residential		85,835		93,135
Total MBS		138,333		135,896
Total held to maturity securities, at carrying value		843,269		847,732
Restricted Stock:
FRB stock		67,032		67,032
FHLB stock		37,753		53,181
Total restricted stock, at cost		104,785		120,213
Total investments	$	3,032,982	$	3,709,761

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The following table summarizes the weighted average yields⁽¹⁾ for AFS securities by contractual maturity date of the underlying securities as of September 30, 2023:

	1 Year or						5 – 10			Over 10
	Less			1 - 5 Years			Years			Years			Total
U.S. government and agency securities		—	%		4.58	%		6.02	%		—	%		4.64	%
Obligations of states and political subdivisions		4.55	%		3.57	%		2.24	%		2.19	%		2.22	%
Corporate bonds and other securities		3.64	%		7.12	%		4.68	%		5.80	%		4.97	%
MBS:
Commercial		3.88	%		3.32	%		6.22	%		2.37	%		2.82	%
Residential		1.98	%		5.50	%		3.49	%		2.38	%		2.46	%
Total MBS		3.88	%		5.04	%		4.73	%		2.38	%		2.52	%
Total AFS securities		3.88	%		5.20	%		4.63	%		2.34	%		2.76	%

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

The following table summarizes the weighted average yields⁽¹⁾ for HTM securities by contractual maturity date of the underlying securities as of September 30, 2023:

	1 Year or						5 – 10			Over 10
	Less			1 - 5 Years			Years			Years			Total
Obligations of states and political subdivisions		2.44	%		4.10	%		3.36	%		3.49	%		3.49	%
Corporate bonds and other securities		—	%		—	%		—	%		6.02	%		6.02	%
MBS:
Commercial		—	%		—	%		—	%		4.51	%		4.51	%
Residential		—	%		5.50	%		—	%		3.56	%		4.08	%
Total MBS		—	%		5.50	%		—	%		3.99	%		4.24	%
Total HTM securities		2.44	%		4.98	%		3.36	%		3.58	%		3.63	%

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

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

As of September 30, 2023, the Company maintained a diversified municipal bond portfolio with approximately 67% of its holdings in general obligation issues and the majority of the remainder primarily backed by revenue bonds. Issuances within the State of Texas represented 19% of the total municipal portfolio; no other state had a concentration above 10%. Substantially all municipal holdings are considered investment grade. When purchasing municipal securities, the Company focuses on strong underlying ratings for general obligation issuers or bonds backed by essential service revenues.

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Liquidity

Liquidity represents an institution’s ability to meet present and future financial obligations through either the sale or maturity of existing assets or the acquisition of additional funds through liability management. The Company’s largest source of liquidity on a consolidated basis is the customer deposit base generated by our wholesale and consumer businesses. These deposits provide relatively stable and low-cost funding. Total deposits at September 30, 2023 were $16.8 billion, an increase of $854.8 million or approximately 7.2% (annualized) from December 31, 2022. For the quarter ended September 30, 2023, quarterly average deposits increased $307.4 million or 1.9% (annualized) compared to the prior quarter. Total deposits at September 30, 2023 increased from December 31, 2022 due to a $1.6 billion increase of interest-bearing deposits, which includes $509.3 million in brokered deposits, partially offset by a $738.3 million decrease in demand deposits, as customers continued to move funds from lower to higher costing products. Refer to “Deposits” within this Item 2 for additional information on this topic.

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

Starting in the first quarter of 2023, the Company is eligible to borrow from the Federal Reserve's BTFP, which provides additional contingent liquidity through the pledging of certain qualifying securities. The BTFP is a one-year program ending March 11, 2024, and the Company can borrow any time during the term and can repay the obligation at any time without penalty. As of September 30, 2023, liquidity of $531.0 million was available based on the par-value of qualifying securities from BTFP. The Company did not utilize the BTFP facility as of September 30, 2023.

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

As of September 30, 2023, liquid assets totaled $5.6 billion or 27.2% of total assets, and liquid earning assets totaled $5.4 billion or 29.2% of total earning assets. Asset liquidity is also provided by managing loan and securities maturities and cash flows. As of September 30, 2023, loan payments of approximately $4.9 billion or 32.3% of total loans are expected within one year based on contractual terms, adjusted for expected prepayments, and approximately $291.4 million or 9.6% of total securities are scheduled to be paid down within one year based on contractual terms, adjusted for expected prepayments.

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

Cash Requirements

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

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The following table presents the Company’s contractual obligations related to its major cash requirements and the scheduled payments due at the various intervals over the next year and beyond as of September 30, 2023 (dollars in thousands):

			Less than		More than
	Total		1 year		1 year
Long-term debt (1)	$	250,000	$	—	$	250,000
Trust preferred capital notes (1)		155,159		—		155,159
Leases (2)		111,847		3,536		108,311
Repurchase agreements		134,936		134,936		—
Total contractual obligations	$	651,942	$	138,472	$	513,470

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

⁽²⁾ Represents lease payments due on non-cancellable operating leases at September 30, 2023. Excluded from these tables are variable lease payments or renewals.

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

Loan Portfolio

LHFI, net of deferred fees and costs, totaled $15.3 billion at September 30, 2023 and $14.4 billion at December 31, 2022. Commercial real estate and commercial and industrial loans represented the Company’s largest loan categories at both September 30, 2023 and December 31, 2022.

The following table presents the remaining maturities, based on contractual maturity, by loan type, and by rate type (variable or fixed), net of deferred fees and costs, as of September 30, 2023 (dollars in thousands):

					Variable Rate								Fixed Rate
	Total		Less than 1								More than								More than
	Maturities		year		Total		1-5 years		5-15 years		15 years		Total		1-5 years		5-15 years		15 years
Construction and Land Development	$	1,132,940	$	380,255	$	543,195	$	413,852	$	128,226	$	1,117	$	209,490	$	142,754	$	30,317	$	36,419
Commercial Real Estate - Owner Occupied		1,975,281		143,692		610,048		158,604		435,462		15,982		1,221,541		616,595		598,577		6,369
Commercial Real Estate - Non-Owner Occupied		4,148,218		424,186		2,318,445		1,212,499		1,105,946		—		1,405,587		1,074,775		324,460		6,352
Multifamily Real Estate		947,153		160,090		573,525		268,421		305,104		—		213,538		171,249		42,289		—
Commercial & Industrial		3,432,319		533,395		1,760,600		1,639,297		117,856		3,447		1,138,324		744,297		388,784		5,243
Residential 1-4 Family - Commercial		517,034		44,993		125,231		52,353		68,077		4,801		346,810		270,820		65,942		10,048
Residential 1-4 Family - Consumer		1,057,294		543		194,312		2,105		27,789		164,418		862,439		10,178		75,206		777,055
Residential 1-4 Family - Revolving		599,282		19,871		469,170		25,705		112,416		331,049		110,241		6,417		38,924		64,900
Auto		534,361		3,379		—		—		—		—		530,982		270,243		260,739		—
Consumer		126,151		11,218		15,864		13,348		2,232		284		99,069		48,733		34,689		15,647
Other Commercial		813,587		58,922		98,648		12,179		63,526		22,943		656,017		249,440		289,054		117,523
Total LHFI	$	15,283,620	$	1,780,544	$	6,709,038	$	3,798,363	$	2,366,634	$	544,041	$	6,794,038	$	3,605,501	$	2,148,981	$	1,039,556

The Company remains committed to originating soundly underwritten loans to qualifying borrowers within its markets. The Company seeks to mitigate risks attributable to our most highly concentrated portfolios—commercial real estate, commercial

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and industrial, and construction and land development—through its credit underwriting and monitoring processes, including oversight by a centralized credit administration function and credit policy and risk management committee, as well as through its seasoned bankers that focus on lending to borrowers with proven track records in markets with which the Company is familiar.

Asset Quality

Overview

At September 30, 2023 and December 31, 2022, NPAs as a percentage of LHFI totaled 0.19% and included nonaccrual LHFI of $28.6 million and $27.1 million, respectively. Net charge-offs were $6.4 million for the nine months ended September 30, 2023, compared to net charge offs of $1.5 million for the same period in the prior year. The ACL at September 30, 2023 increased $16.5 million from December 31, 2022 to $140.9 million, due to continued uncertainty in the economic outlook and net loan growth.

The Company continues to experience historically low levels of NPAs; however, the economic environment in the Company’s footprint could be impacted as persistent inflation, higher interest rates, and the threat of a recession persists, which could increase NPAs in future periods. The Company continues to refrain from originating or purchasing loans from foreign entities. The Company selectively originates loans to higher risk borrowers. The Company’s loan portfolio generally does not include exposure to option adjustable rate mortgage products, high loan-to-value ratio mortgages, interest only mortgage loans, subprime mortgage loans, or mortgage loans with initial teaser rates, which are all considered higher risk instruments.

Nonperforming Assets

At September 30, 2023, NPAs totaled $28.8 million, an increase of $1.7 million or 6.1% from December 31, 2022. NPAs as a percentage of total outstanding LHFI at September 30, 2023 and December 31, 2022 were 0.19%, respectively.

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

	September 30,			December 31,
	2023			2022
Nonaccrual LHFI	$	28,626		$	27,038
Foreclosed properties		149			76
Total NPAs		28,775			27,114
LHFI past due 90 days and accruing interest		11,871			7,490
Total NPAs and LHFI past due 90 days and accruing interest	$	40,646		$	34,604
Balances
Allowance for loan and lease losses	$	125,627		$	110,768
Allowance for credit losses		140,929			124,443
Average LHFI, net of deferred fees and costs		15,139,761			13,671,714
LHFI, net of deferred fees and costs		15,283,620			14,449,142
Ratios
Nonaccrual LHFI to total LHFI		0.19	%		0.19	%
NPAs to total LHFI		0.19	%		0.19	%
NPAs & LHFI 90 days past due and accruing interest to total LHFI		0.27	%		0.24	%
NPAs to total LHFI & foreclosed property		0.19	%		0.19	%
NPAs & LHFI 90 days past due and accruing interest to total LHFI & foreclosed property		0.27	%		0.24	%
ALLL to nonaccrual LHFI		438.86	%		409.68	%
ALLL to nonaccrual LHFI & LHFI 90 days past due and accruing interest		310.21	%		320.81	%
ACL to nonaccrual LHFI		492.31	%		460.25	%

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NPAs include nonaccrual LHFI, which totaled $28.6 million at September 30, 2023, a net increase of $1.6 million or 5.9% from December 31, 2022. The following table shows the activity in nonaccrual LHFI for the quarters ended (dollars in thousands):

	September 30,		December 31,
	2023		2022
Beginning Balance	$	29,105	$	26,500
Net customer payments		(1,947)		(1,805)
Additions		1,651		2,935
Charge-offs		(64)		(461)
Loans returning to accruing status		(119)		(131)
Ending Balance	$	28,626	$	27,038

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

	September 30,			December 31,
	2023			2022
Construction and Land Development	$	355		$	307
Commercial Real Estate - Owner Occupied		3,882			7,178
Commercial Real Estate - Non-owner Occupied		5,999			1,263
Commercial & Industrial		2,256			1,884
Residential 1-4 Family - Commercial		1,833			1,904
Residential 1-4 Family - Consumer		10,368			10,846
Residential 1-4 Family - Revolving		3,572			3,453
Auto		361			200
Consumer		—			3
Total	$	28,626		$	27,038
Coverage Ratio(1)		438.86	%		409.68	%

⁽¹⁾ Represents the ALLL divided by nonaccrual LHFI.

Past Due Loans

At September 30, 2023, past due LHFI still accruing interest totaled $40.6 million or 0.27% of total LHFI, compared to $30.0 million or 0.21% of total LHFI at December 31, 2022. Of the total past due LHFI still accruing interest, $11.9 million or 0.08% of total LHFI were loans past due 90 days or more at September 30, 2023, compared to $7.5 million or 0.05% of total LHFI at December 31, 2022.

Troubled Loan Modifications

The Company adopted ASU 2022-02, Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures, effective January 1, 2023 on a prospective basis. Refer to Note 1 “Summary of Significant Accounting Policies” in Part I, Item 1 of this Quarterly Report for information on the Company’s accounting policy for loan modifications to borrowers experiencing financial difficulty and how the Company defines TLMs. As of September 30, 2023, the Company had TLMs totaling $29.4 million.

Troubled Debt Restructurings

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

A modification of a loan’s terms constituted a TDR if the creditor granted a concession that it would not have otherwise considered to the borrower for economic or legal reasons related to the borrower’s financial difficulties. Management strove to identify borrowers in financial difficulty early and work with them to modify their loan to more affordable terms before their

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loan reached nonaccrual status. These modified terms may have included rate reductions, extension of terms that were 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 December 31, 2022 was $14.2 million of which $9.3 million or 65.3% were considered performing, while the remaining $4.9 million were considered nonperforming.

Net Charge-offs

For the third quarter of 2023, net charge-offs were $294,000 or 0.01% of total average LHFI on an annualized basis, compared to net charge-offs of $587,000 or 0.02% for the same quarter last year. For the nine months ended September 30, 2023, net charge-offs were $6.4 million or 0.06% of total average LHFI on an annualized basis, compared to net charge-offs of $1.5 million or 0.02% for the same period last year. For the nine months ended September 30, 2023, the majority of the net charge-offs related to two commercial loans within the commercial and industrial and commercial real estate portfolios that took place during the first quarter of 2023.

Provision for Credit Losses

The Company recorded a provision for credit losses of $5.0 million for the third quarter of 2023, a decrease of $1.4 million compared to the provision for credit losses of $6.4 million recorded during the same quarter of 2022. The provision for credit losses for the third quarter of 2023 reflected a provision of $5.2 million for loan losses and a $246,000 release of the provision for unfunded commitments. The Company recorded a provision for credit losses of $22.9 million for the nine months ended September 30, 2023, an increase of $10.1 million compared to the provision for credit losses of $12.8 million recorded during the same period in 2022. The provision for credit losses for the nine months ended September 30, 2023 reflected a provision of $21.3 million for loan losses and a $1.6 million provision for unfunded commitments. The increased provision for credit losses is due to continued uncertainty in the economic outlook and loan growth throughout 2023.

Allowance for Credit Losses

At September 30, 2023, the ACL was $140.9 million and included an ALLL of $125.6 million and a reserve for unfunded commitments of $15.3 million. The ACL at September 30, 2023 increased $16.5 million from December 31, 2022, due to continued uncertainty in the economic outlook and loan growth throughout 2023.

The ACL as a percentage of LHFI was 0.92% at September 30, 2023, compared to 0.86% at December 31, 2022.

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

s
	September 30,			December 31,
	2023			2022
Total ALLL	$	125,627		$	110,768
Total Reserve for Unfunded Commitments		15,302			13,675
Total ACL	$	140,929		$	124,443
ALLL to total LHFI		0.82	%		0.77	%
ACL to total LHFI		0.92	%		0.86	%

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

	Three months ended									Nine months ended
	September 30, 2023									September 30, 2023
	Commercial			Consumer			Total			Commercial			Consumer			Total
Loans charged-off	$	(788)		$	(841)		$	(1,629)		$	(7,589)		$	(2,368)		$	(9,957)
Recoveries		878			457			1,335			1,911			1,626			3,537
Net charge-offs	$	90		$	(384)		$	(294)		$	(5,678)		$	(742)		$	(6,420)
Net charge-offs to average loans(1)		0.00	%		0.07	%		0.01	%		0.06	%		0.04	%		0.06	%
	Three months ended									Nine months ended
	September 30, 2022									September 30, 2022
	Commercial			Consumer			Total			Commercial			Consumer			Total
Loans charged-off	$	(1,086)		$	(715)		$	(1,801)		$	(2,852)		$	(2,415)		$	(5,267)
Recoveries		605			609			1,214			1,723			2,022			3,745
Net charge-offs	$	(481)		$	(106)		$	(587)		$	(1,129)		$	(393)		$	(1,522)
Net charge-offs to average loans(1)		0.02	%		0.02	%		0.02	%		0.01	%		0.04	%		0.02	%

⁽¹⁾ Annualized

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

	September 30, 2023									December 31, 2022
	Commercial			Consumer			Total			Commercial			Consumer			Total
ACL	$	113,237		$	27,692		$	140,929		$	95,527		$	28,916		$	124,443
Loan %(1)		84.8	%		15.2	%		100.0	%		84.3	%		15.7	%		100.0	%
ACL to total LHFI		0.87	%		1.20	%		0.92	%		0.78	%		1.27	%		0.86	%

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

The increase in the ACL for the commercial loan segment is due to continued uncertainty in the macroeconomic outlook and the impact of loan growth throughout 2023.  The decrease in the consumer loan segment was primarily driven by the continued run off of the Company’s third-party lending and auto portfolios.

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Deposits

As of September 30, 2023, total deposits were $16.8 billion, an increase of $854.8 million or 7.2% annualized from December 31, 2022. Total interest-bearing deposits consist of interest checking accounts, money market, savings, time deposit account balances, and brokered deposits. Total time deposit balances of $2.6 billion accounted for 20.93% of total interest-bearing deposits at September 30, 2023, compared to $1.8 billion and 16.3% at December 31, 2022.

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

	September 30, 2023				December 31, 2022
			% of total				% of total
Deposits:	Amount		deposits		Amount		deposits
Interest checking accounts	$	5,055,464	30.1	%	$	4,186,505	26.3	%
Money market accounts		3,472,953	20.7	%		3,922,533	24.6	%
Savings accounts		950,363	5.6	%		1,130,899	7.1	%
Customer time deposits of $250,000 and over		634,950	3.8	%		405,060	2.5	%
Other customer time deposits		2,011,106	12.0	%		1,396,011	8.8	%
Time Deposits		2,646,056	15.8	%		1,801,071	11.3	%
Total interest-bearing customer deposits		12,124,836	72.2	%		11,041,008	69.3	%
Brokered deposits		516,720	3.1	%		7,430	—	%
Total interest-bearing deposits	$	12,641,556	75.3	%	$	11,048,438	69.3	%
Demand deposits		4,144,949	24.7	%		4,883,239	30.7	%
Total Deposits (1)	$	16,786,505	100.0	%	$	15,931,677	100.0	%

⁽¹⁾ Includes estimated uninsured deposits of $5.4 billion and $6.3 billion as of September 30, 2023 and December 31, 2022, respectively, and collateralized deposits of $872.2 million and $951.9 million as of September 30, 2023 and December 31, 2022, respectively.

The Company may also borrow additional funds by purchasing certificates of deposit through a nationally recognized network of financial institutions, and the Company utilizes this funding source as part of its overall liquidity management strategy. As of September 30, 2023 and December 31, 2022, the Company’s certificates of deposits included $111.0 million and $7.5 million, respectively, in purchased certificates of deposits.

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

	September 30, 2023		December 31, 2022
3 Months or Less	$	59,068	$	14,225
Over 3 Months through 6 Months		129,139		36,907
Over 6 Months through 12 Months		60,842		88,410
Over 12 Months		27,902		53,666
Total	$	276,950	$	193,208

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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.

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

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

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

	September 30,	December 31,	September 30,
	2023	2022	2022
Common equity Tier 1 capital	$ 1,761,437	$ 1,684,088	$ 1,633,072
Tier 1 capital	1,927,793	1,850,444	1,799,428
Tier 2 capital	500,454	468,716	463,175
Total risk-based capital	2,428,247	2,319,160	2,262,604
Risk-weighted assets	17,719,845	16,930,559	16,393,301
Capital ratios:
Common equity Tier 1 capital ratio	9.94%	9.95%	9.96%
Tier 1 capital ratio	10.88%	10.93%	10.98%
Total capital ratio	13.70%	13.70%	13.80%
Leverage ratio (Tier 1 capital to average assets)	9.62%	9.42%	9.32%
Capital conservation buffer ratio (1)	4.88%	4.93%	4.98%
Common equity to total assets	10.72%	10.78%	10.60%
Tangible common equity to tangible assets (+)	6.45%	6.43%	6.11%

⁽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 September 30, 2023 are estimates and subject to change pending the Company’s filing of its FR Y9-C. All other periods are presented as filed.

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

For more information about our off-balance sheet obligations and cash requirements, refer to “Liquidity” within this Item 2.

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NON-GAAP FINANCIAL MEASURES

In reporting the results as of and for the period ended September 30, 2023, the Company has provided supplemental performance measures on a tax-equivalent, tangible, operating, adjusted or pre-tax pre-provision basis. These non-GAAP financial measures are a supplement to GAAP, which is used to prepare the Company’s financial statements, and should not be considered in isolation or as a substitute for comparable measures calculated in accordance with GAAP. In addition, the Company’s non-GAAP financial measures may not be comparable to non-GAAP financial measures of other companies. The Company uses the non-GAAP financial measures discussed herein in its analysis of the Company’s performance. The Company’s management believes that these non-GAAP financial measures provide additional understanding of ongoing operations, enhance comparability of results of operations with prior periods and show the effects of significant gains and charges in the periods presented without the impact of items or events that may obscure trends in the Company’s underlying performance.

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

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						Nine Months Ended
	September 30,						September 30,
	2023			2022			2023			2022
Interest Income (FTE)
Interest and dividend income (GAAP)	$	247,159		$	171,156		$	694,952		$	458,367
FTE adjustment		3,744			3,842			11,198			10,755
Interest and dividend income (FTE) (non-GAAP)	$	250,903		$	174,998		$	706,150		$	469,122
Average earning assets	$	18,462,505		$	17,879,222		$	18,264,957		$	17,803,550
Yield on interest-earning assets (GAAP)		5.31	%		3.80	%		5.09	%		3.44	%
Yield on interest-earning assets (FTE) (non-GAAP)		5.39	%		3.88	%		5.17	%		3.52	%
Net Interest Income (FTE)
Net interest income (GAAP)	$	151,941		$	150,715		$	457,469		$	420,413
FTE adjustment		3,744			3,842			11,198			10,755
Net interest income (FTE) (non-GAAP)	$	155,685		$	154,557		$	468,667		$	431,168
Noninterest income (GAAP)		27,094			25,584			60,918			94,023
Total revenue (FTE) (non-GAAP)	$	182,779		$	180,141		$	529,585		$	525,191
Average earning assets	$	18,462,505		$	17,879,222		$	18,264,957		$	17,803,550
Net interest margin (GAAP)		3.27	%		3.34	%		3.35	%		3.16	%
Net interest margin (FTE) (non-GAAP)		3.35	%		3.43	%		3.43	%		3.24	%

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

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
		September 30,			December 31,			September 30,
		2023			2022			2022
Tangible Assets
Ending Assets (GAAP)		$	20,736,236		$	20,461,138		$	19,950,231
Less: Ending goodwill			925,211			925,211			925,211
Less: Ending amortizable intangibles			21,277			26,761			29,142
Ending tangible assets (non-GAAP)		$	19,789,748		$	19,509,166		$	18,995,878
Tangible Common Equity	���
Ending Equity (GAAP)		$	2,388,801		$	2,372,737		$	2,281,150
Less: Ending goodwill			925,211			925,211			925,211
Less: Ending amortizable intangibles			21,277			26,761			29,142
Less: Perpetual preferred stock			166,357			166,357			166,357
Ending tangible common equity (non-GAAP)		$	1,275,956		$	1,254,408		$	1,160,440
Average equity (GAAP)		$	2,446,902		$	2,321,208		$	2,436,999
Less: Average goodwill			925,211			925,211			925,211
Less: Average amortizable intangibles			22,342			27,909			30,347
Less: Average perpetual preferred stock			166,356			166,356			166,356
Average tangible common equity (non-GAAP)		$	1,332,993		$	1,201,732		$	1,315,085
Common equity to total assets (GAAP)			10.72	%		10.78	%		10.60	%
Tangible common equity to tangible assets (non-GAAP)			6.45	%		6.43	%		6.11	%
Book value per common share (GAAP)		$	29.82		$	29.68		$	28.46

Adjusted operating measures exclude, as applicable, strategic cost saving initiatives (principally composed of severance charges related to headcount reductions, costs related to modifying certain third party vendor contracts, and charges for exiting certain leases), merger-related costs, a legal reserve associated with an ongoing regulatory matter previously disclosed, strategic branch closing and related facility consolidation costs (principally composed of real estate, leases and other assets write downs, as well as severance and expense reduction initiatives), loss on sale of securities, gain on sale-leaseback transaction, and gain on sale of DHFB. The Company believes these non-GAAP adjusted measures provide investors with important information about the continuing economic results of the organization’s operations. 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):

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	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2023		2022		2023		2022
Adjusted Operating Earnings & EPS
Net income (GAAP)	$	54,017	$	58,070	$	144,911	$	163,986
Plus: Strategic cost saving initiatives, net of tax		6,851		—		9,959		—
Plus: Merger-related costs, net of tax		1,965		—		1,965		—
Plus: Legal reserve, net of tax		—		—		3,950		—
Plus: Strategic branch closing and facility consolidation costs, net of tax		—		—		—		4,351
Less: Loss on sale of securities, net of tax		(21,799)		—		(32,384)		(2)
Less: Gain on sale-leaseback transaction, net of tax		21,883		—		21,883		—
Less: Gain on sale of DHFB, net of tax		—		—		—		7,984
Adjusted operating earnings (non-GAAP)	$	62,749	$	58,070	$	171,286	$	160,355
Less: Dividends on preferred stock		2,967		2,967		8,901		8,901
Adjusted operating earnings available to common shareholders (non-GAAP)	$	59,782	$	55,103	$	162,385	$	151,454
Weighted average common shares outstanding, diluted		74,999,128		74,705,054		74,943,999		75,034,084
Earnings per common share, diluted (GAAP)	$	0.68	$	0.74	$	1.81	$	2.07
Adjusted operating earnings per common share, diluted (non-GAAP)	$	0.80	$	0.74	$	2.17	$	2.02

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Adjusted operating noninterest expense excludes, as applicable, the amortization of intangible assets, strategic cost saving initiatives (principally composed of severance charges related to headcount reductions, costs related to modifying certain third party vendor contracts, and charges for exiting certain leases), merger-related costs, a legal reserve associated with an ongoing regulatory matter previously disclosed, strategic branch closing and related facility consolidation costs (principally composed of real estate, leases and other assets write downs, as well as severance and expense reduction initiatives), and adjusted operating noninterest income excludes, as applicable, loss on sale of securities, gain on sale-leaseback transaction, and gain on sale of DHFB. These measures are similar to the measures used by the Company when analyzing corporate performance and are also similar to the measure used for incentive compensation.

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				Nine Months Ended
	September 30,				September 30,
	2023		2022		2023		2022
Adjusted Operating Noninterest Expense & Noninterest Income
Noninterest expense (GAAP)	$	108,508	$	99,923	$	322,442	$	304,012
Less: Amortization of intangible assets		2,193		2,480		6,687		8,434
Less: Strategic cost saving initiatives		8,672		—		12,607		—
Less: Merger-related costs		1,993		—		1,993		—
Less: Legal reserve		—		—		5,000		—
Less: Strategic branch closing and facility consolidation costs		—		—		—		5,508
Adjusted operating noninterest expense (non-GAAP)	$	95,650	$	97,443	$	296,155	$	290,070
Noninterest income (GAAP)	$	27,094	$	25,584	$	60,918	$	94,023
Less: Loss on sale of securities		(27,594)		—		(40,992)		(2)
Less: Gain on sale-leaseback transaction		27,700		—		27,700		—
Less: Gain on sale of DHFB		—		—		—		9,082
Adjusted operating noninterest income (non-GAAP)	$	26,988	$	25,584	$	74,210	$	84,943

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ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Sensitivity

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

The Company monitors interest rate risk through the use of three complementary modeling tools: static gap analysis, earnings simulation modeling, and economic value simulation (net present value estimation). Each of these models measures changes in a variety of interest rate scenarios. While each of the interest rate risk models has limitations, taken together, they represent a reasonably comprehensive view of the magnitude of the Company’s interest rate risk, 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. The Company’s static gap analysis, which measures aggregate re-pricing values, is utilized less often because it does not effectively take into account the optionality embedded into many assets and liabilities and, therefore, the Company does not address it here. The Company uses earnings simulation and economic value simulation models on a regular basis, which more effectively measure the cash flow and optionality impacts, and these models are discussed below.

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

Earnings Simulation Modeling

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

The Company derives the assumptions used in the model from historical trends and management’s outlook, including expected loan growth, loan prepayment rates, deposit growth rates, changes to deposit product betas and non-maturity deposit decay rates, and projected yields and rates. These assumptions may not be realized and unanticipated events and circumstances may also occur that cause the assumptions to be inaccurate. The model also does not take into account any future actions of management to mitigate the impact of interest rate changes. The Company’s ALCO monitors the assumptions at least quarterly and periodically adjusts them as deemed appropriate. In the modeling, the Company assumed that all maturities, calls, and prepayments in the securities portfolio are reinvested in like instruments, and the Company based the MBS prepayment assumptions on industry estimates of prepayment speeds for portfolios with similar coupon ranges and seasoning. The Company also used different interest rate scenarios and yield curves to measure the sensitivity of earnings to changing interest rates. Interest rates on different asset and liability accounts move differently when the short-term market rate changes and these differences are reflected in the different rate scenarios. Deposit betas, decay rates and loan prepayment speeds are adjusted periodically in the Company’s models for non-maturity deposits and loans.

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

-86-

The following table represents the interest rate sensitivity on net interest income for the Company across the rate paths modeled for balances as of September 30, 2023, December 31, 2022, and September 30, 2022:

	Change In Net Interest Income
	September 30,	December 31,	September 30,
	2023	2022	2022
	%	%	%
Change in Yield Curve:
+300 basis points	7.26	11.73	16.70
+200 basis points	4.97	8.25	11.05
+100 basis points	2.66	4.65	5.54
Most likely rate scenario	—	—	—
-100 basis points	(1.64)	(3.18)	(4.99)
-200 basis points	(5.48)	(7.40)	(10.10)
-300 basis points	(9.72)	(12.21)	(17.24)

​
If an institution is asset sensitive its assets reprice more quickly than its liabilities and net interest income would be expected to increase in a rising interest rate environment, and decrease in a falling interest rate environment. If an institution is liability sensitive its liabilities reprice more quickly than its assets and net interest income would be expected to decrease in a rising interest rate environment and increase in a falling interest rate environment.

From a net interest income perspective, the Company was less asset sensitive as of September 30, 2023, compared to its position as of September 30, 2022. This shift is in part due to the changing market characteristics of certain loan and deposit products and in part due to various other balance sheet strategies. The Company would expect net interest income to increase with an immediate increase or shock in market rates. In the decreasing interest rate environments, the Company would expect a decline in net interest income as interest-earning assets re-price more quickly than interest-bearing deposits.

Economic Value Modeling

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

The following chart reflects the estimated change in net economic value over different rate environments using economic value simulation for the balances at the quarterly periods ended September 30, 2023, December 31, 2022, and September 30, 2022:

	Change In Economic Value of Equity
	September 30,	December 31,	September 30,
	2023	2022	2022
	%	%	%
Change in Yield Curve:
+300 basis points	(8.54)	(12.32)	(6.21)
+200 basis points	(5.89)	(8.41)	(4.44)
+100 basis points	(3.06)	(4.25)	(2.49)
Most likely rate scenario	—	—	—
-100 basis points	2.94	3.55	1.29
-200 basis points	3.38	6.41	1.95
-300 basis points	2.25	5.71	(0.75)

As of September 30, 2023, the Company’s economic value of equity is generally less asset sensitive in a rising interest rate environment compared to its position as of September 30, 2022 primarily due to the composition of the Consolidated Balance Sheets and due in part to the pricing characteristics and assumptions of certain deposits.

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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 September 30, 2023. The term “disclosure controls and procedures,” as defined in Rule 13a-15(e) under the Exchange Act, means controls and other procedures that are designed to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and to ensure that such information is accumulated and communicated to management, including the Company’s Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Based on this evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of September 30, 2023, the Company’s disclosure controls and procedures were effective at the reasonable assurance level.

In designing and evaluating the Company’s disclosure controls and procedures, management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable assurance that the objectives of the disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Changes in Internal Control Over Financial Reporting

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

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PART II - OTHER INFORMATION

ITEM 1 – LEGAL PROCEEDINGS

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

As previously disclosed, on February 9, 2022, pursuant to the CFPB’s Notice and Opportunity to Respond and Advise process, the CFPB Office of Enforcement notified us that it is considering recommending that the CFPB take legal action against us in connection with alleged violations of Regulation E, 12 C.F.R. § 1005.17, and the Consumer Financial Protection Act, 12 U.S.C. §§ 5531 and 5536, in connection with our overdraft practices and policies.  In March 2023, the CFPB commenced settlement discussions with us to resolve the matter, which are ongoing. We cannot provide assurance whether a settlement will be reached, the final terms or timing of any such settlement, or the final amount of loss (potentially including both restitution and a civil money penalty) with respect to this matter. Any final loss could be materially different from our current estimate and accrued amount. If the Company and the CFPB do not reach a settlement, the CFPB may commence litigation against the Company. See Note 7, “Commitments and Contingencies” in the “Notes to the Consolidated Financial Statements” in Part I, Item I of this Form 10-Q for additional information.

ITEM 1A – RISK FACTORS

Except as set forth in Part II, Item 1A. “Risk Factors” of our Quarterly Report on Form 10-Q for the quarters ended March 31, 2023 and June 30, 2023, filed with the SEC on May 4, 2023 and August 3, 2023, respectively, and incorporated herein by reference, there have been no material changes from the risk factors previously disclosed under Part I, Item 1A. “Risk Factors” in our 2022 Form 10-K.

An investment in our 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 our securities should carefully consider the risk factors discussed in our 2022 Form 10-K and Quarterly Report on Form 10-Q for the quarter ended March 31, 2023 and June 30, 2023. These factors could materially and adversely affect our business, financial condition, liquidity, results of operations, and capital position and could cause our actual results to differ materially from our historical results or the results contemplated by the forward-looking statements contained in this report, in which case the trading price of our securities could decline.

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ITEM 2 – UNREGISTERED SALES OF EQUITY SECURITIES, USE OF PROCEEDS, AND ISSUER PURCHASES OF EQUITY SECURITIES

(a) Sales of Unregistered Securities – None

(b) Use of Proceeds – Not Applicable

(c) Issuer Purchases of Securities 

Stock Repurchase Program; Other Repurchases

As of September 30, 2023, the Company does not have an authorized share repurchase program.

The following information describes the Company’s common stock repurchases for the three months ended September 30, 2023:

Period	Total number of shares purchased(1)	Average price paid per share ($)	Total number of shares purchased as part of publicly announced plans or programs	Approximate dollar value of shares that may yet be purchased under the plans or programs ($)
July 1 - July 31, 2023	5,006	30.65	—	—
August 1 - August 31, 2023	630	29.93	—	—
September 1 - September 30, 2023	438	30.06	—	—
Total	6,074	30.53	—

^{_________________________________________}​

⁽¹⁾ For the three months ended September 30, 2023, 6,074 shares were withheld upon vesting of restricted shares granted to employees of the Company in order to satisfy tax withholding obligations.

ITEM 5 – OTHER INFORMATION

During the three months ended September 30, 2023, none of our directors or officers (as defined in Rule 16a-1(f) of the Exchange Act) informed us of the adoption or termination of any Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement (as such terms are defined in Item 408 of Regulation S-K of the Securities Act of 1933).

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ITEM 6 – EXHIBITS

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

Exhibit No.	Description
2.1	Agreement and Plan of Merger by and between Atlantic Union Bankshares Corporation and American National Bankshares Inc. dated July 24, 2023 (incorporated by reference to Exhibit 2.1 to Current Report on Form 8-K filed on July 25, 2023).*
3.1	Amended and Restated Articles of Incorporation of Atlantic Union Bankshares Corporation, effective May 7, 2020 (incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K filed on May 7, 2020).
3.1.1	Articles of Amendment designating the 6.875% Perpetual Non-Cumulative Preferred Stock, Series A, effective June 9, 2020 (incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K filed on June 9, 2020).
3.2	Amended and Restated Bylaws of Atlantic Union Bankshares Corporation, effective as of December 5, 2019 (incorporated by reference to Exhibit 3.3 to Annual Report on Form 10-K filed on February 25, 2020).
10.1	Agreement for Purchase and Sale of Real Property, dated September 20, 2023, by and between Atlantic Union Bank and Blue Owl AUB Owner LLC (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on September 21, 2023)*
10.2	Schedule of Atlantic Union Bankshares Corporation Non-Employee Director Compensation
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 September 30, 2023 pursuant to Rule 405 of Regulation S-T: (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Income (unaudited), (iii) the Consolidated Statements of Comprehensive Income (Loss) (unaudited), (iv) the Consolidated Statements of Changes in Stockholders’ Equity (unaudited), (v) the Consolidated Statements of Cash Flows (unaudited) and (vi) the Notes to Consolidated Financial Statements (unaudited).
104	The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2023, formatted in Inline eXtensible Business Reporting Language (included with Exhibit 101). *  Certain schedules and similar attachments to this exhibit have been omitted pursuant to Item 601(a)(5) or Item 601(b)(2) of Regulation S-K, as applicable. The registrant hereby agrees to furnish a copy of any omitted schedule or similar attachment to the SEC upon request.

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SIGNATURES

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

	Atlantic Union Bankshares Corporation
	(Registrant)
Date: November 2, 2023	By:	/s/ John C. Asbury
		John C. Asbury,
		President and Chief Executive Officer
		(principal executive officer)
Date: November 2, 2023	By:	/s/ Robert M. Gorman
		Robert M. Gorman,
		Executive Vice President and Chief Financial Officer
		(principal financial and accounting officer)

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