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Table of Contents

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, 2024

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 29, 2024 was 89,776,626.

Table of Contents

ATLANTIC UNION BANKSHARES CORPORATION

FORM 10-Q

INDEX

ITEM

    

    

PAGE

PART I - FINANCIAL INFORMATION

Item 1.

Financial Statements

Consolidated Balance Sheets as of September 30, 2024 (unaudited) and December 31, 2023 (audited)

2

Consolidated Statements of Income (unaudited) for the three and nine months ended September 30, 2024 and 2023

3

Consolidated Statements of Comprehensive Income (Loss) (unaudited) for the three and nine months ended September 30, 2024 and 2023

4

Consolidated Statements of Changes in Stockholders’ Equity (unaudited) for the nine months ended September 30, 2024 and 2023

5

Consolidated Statements of Cash Flows (unaudited) for the nine months ended September 30, 2024 and 2023

7

Notes to Consolidated Financial Statements (unaudited)

9

Report of Independent Registered Public Accounting Firm

53

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

54

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

88

Item 4.

Controls and Procedures

90

PART II - OTHER INFORMATION

Item 1.

Legal Proceedings

91

Item 1A.

Risk Factors

91

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

96

Item 5.

Other Information

96

Item 6.

Exhibits

97

Signatures

98

Table of Contents

Glossary of Acronyms and Defined Terms

In this Quarterly Report on 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.

2023 Form 10-K

Annual Report on Form 10-K for the year ended December 31, 2023

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.

American National merger

The merger of American National Bankshares Inc. with and into Atlantic Union Bankshares Corporation pursuant to the American National merger agreement

American National merger agreement

Agreement and Plan of Merger dated July 24, 2023 by and between Atlantic Union Bankshares Corporation and 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

CDI

Core deposit intangibles

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

CRE

Commercial real estate

depositary shares

Depositary shares, each representing a 1/400th ownership interest in a share of the Company’s Series A preferred stock, with a liquidation preference of $10,000 per share of Series A preferred stock (equivalent to $25 per depositary share)

EPS

Earnings per common share

Exchange Act

Securities Exchange Act of 1934, as amended

FASB

Financial Accounting Standards Board

FDIC

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

LHFI

Loans held for investment

LHFS

Loans held for sale

MBS

Mortgage-Backed Securities

Table of Contents

merger agreement

Agreement and Plan of Merger dated October 21, 2024 by and between Atlantic Union Bankshares Corporation and Sandy Spring Bancorp, Inc.

merger

The merger of Sandy Spring Bancorp, 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

PCD

Purchased credit deteriorated

ROU asset

Right of Use Asset

RPAs

Risk Participation Agreements

Sandy Spring

Sandy Spring Bancorp, Inc.

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

VFG

Virginia Financial Group, Inc.

Table of Contents

PART I – FINANCIAL INFORMATION

ITEM 1 – FINANCIAL STATEMENTS

ATLANTIC UNION BANKSHARES CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

AS OF SEPTEMBER 30, 2024 AND DECEMBER 31, 2023

(Dollars in thousands, except share data)

September 30,

December 31,

2024

    

2023

ASSETS

(unaudited)

(audited)

Cash and cash equivalents:

Cash and due from banks

$

232,222

$

196,754

Interest-bearing deposits in other banks

291,163

167,601

Federal funds sold

4,685

13,776

Total cash and cash equivalents

528,070

378,131

Securities available for sale, at fair value

2,608,182

2,231,261

Securities held to maturity, at carrying value

807,080

837,378

Restricted stock, at cost

117,881

115,472

Loans held for sale

11,078

6,710

Loans held for investment, net of deferred fees and costs

18,337,299

15,635,043

Less: allowance for loan and lease losses

160,685

132,182

Total loans held for investment, net

18,176,614

15,502,861

Premises and equipment, net

115,093

90,959

Goodwill

1,212,710

925,211

Amortizable intangibles, net

90,176

19,183

Bank owned life insurance

489,759

452,565

Other assets

647,080

606,466

Total assets

$

24,803,723

$

21,166,197

LIABILITIES

Noninterest-bearing demand deposits

$

4,422,909

$

3,963,181

Interest-bearing deposits

15,882,378

12,854,948

Total deposits

20,305,287

16,818,129

Securities sold under agreements to repurchase

59,227

110,833

Other short-term borrowings

375,000

810,000

Long-term borrowings

417,937

391,025

Other liabilities

463,856

479,883

Total liabilities

21,621,307

18,609,870

Commitments and contingencies (Note 8)

STOCKHOLDERS' EQUITY

Preferred stock, $10.00 par value

173

173

Common stock, $1.33 par value

118,494

99,147

Additional paid-in capital

2,277,024

1,782,286

Retained earnings

1,079,032

1,018,070

Accumulated other comprehensive loss

(292,307)

(343,349)

Total stockholders' equity

3,182,416

2,556,327

Total liabilities and stockholders' equity

$

24,803,723

$

21,166,197

Common shares outstanding

89,774,392

75,023,327

Common shares authorized

200,000,000

200,000,000

Preferred shares outstanding

17,250

17,250

Preferred shares authorized

500,000

500,000

See accompanying notes to consolidated financial statements.

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Table of Contents

ATLANTIC UNION BANKSHARES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023

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

Three Months Ended

Nine Months Ended

September 30,

September 30,

September 30,

September 30,

2024

    

2023

    

2024

2023

Interest and dividend income:

Interest and fees on loans

$

291,089

$

221,380

$

810,886

$

616,544

Interest on deposits in other banks

1,060

1,309

4,977

3,815

Interest and dividends on securities:

Taxable

24,247

16,055

68,012

48,373

Nontaxable

8,132

8,415

24,455

26,220

Total interest and dividend income

324,528

247,159

908,330

694,952

Interest expense:

Interest on deposits

130,216

83,590

354,584

200,690

Interest on short-term borrowings

5,698

6,499

22,049

22,106

Interest on long-term borrowings

5,682

5,129

16,407

14,687

Total interest expense

141,596

95,218

393,040

237,483

Net interest income

182,932

151,941

515,290

457,469

Provision for credit losses

2,603

4,991

32,592

22,911

Net interest income after provision for credit losses

180,329

146,950

482,698

434,558

Noninterest income:

Service charges on deposit accounts

9,792

8,557

27,447

24,577

Other service charges, commissions and fees

2,002

2,632

5,700

6,071

Interchange fees

3,371

2,314

8,791

7,098

Fiduciary and asset management fees

6,858

4,549

18,603

13,169

Mortgage banking income

1,214

666

3,274

1,969

Gain (loss) on sale of securities

4

(27,594)

(6,510)

(40,992)

Bank owned life insurance income

5,037

2,973

12,074

8,671

Loan-related interest rate swap fees

1,503

2,695

4,353

6,450

Other operating income

4,505

30,302

9,919

33,905

Total noninterest income

34,286

27,094

83,651

60,918

Noninterest expenses:

Salaries and benefits

69,454

57,449

199,867

179,996

Occupancy expenses

7,806

6,053

22,267

18,503

Furniture and equipment expenses

3,685

3,449

10,799

10,765

Technology and data processing

9,737

7,923

28,138

24,631

Professional services

3,994

3,291

11,452

11,138

Marketing and advertising expense

3,308

2,219

8,609

7,387

FDIC assessment premiums and other insurance

5,282

4,258

15,099

12,231

Franchise and other taxes

5,256

4,510

14,770

13,508

Loan-related expenses

1,445

1,388

4,043

4,560

Amortization of intangible assets

5,804

2,193

13,693

6,687

Merger-related costs

1,353

1,993

33,005

1,993

Other expenses

5,458

13,782

16,117

31,043

Total noninterest expenses

122,582

108,508

377,859

322,442

Income before income taxes

92,033

65,536

188,490

173,034

Income tax expense

15,618

11,519

37,144

28,123

Net Income

$

76,415

$

54,017

$

151,346

$

144,911

Dividends on preferred stock

2,967

2,967

8,901

8,901

Net income available to common shareholders

$

73,448

$

51,050

$

142,445

$

136,010

Basic earnings per common share

$

0.82

$

0.68

$

1.68

$

1.81

Diluted earnings per common share

$

0.82

$

0.68

$

1.68

$

1.81

Dividends declared per common share

$

0.32

$

0.30

$

0.96

$

0.90

Basic weighted average number of common shares outstanding

89,780,531

74,999,128

84,933,126

74,942,851

Diluted weighted average number of common shares outstanding

89,780,531

74,999,128

84,933,213

74,943,999

See accompanying notes to consolidated financial statements.

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ATLANTIC UNION BANKSHARES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023

(Dollars in thousands)

Three Months Ended

 

Nine Months Ended

September 30, 

 

September 30, 

    

2024

    

2023

 

2024

    

2023

Net income

$

76,415

$

54,017

$

151,346

$

144,911

Other comprehensive income (loss):

 

 

 

  

 

Cash flow hedges:

 

 

 

  

 

Change in fair value of cash flow hedges (net of tax, $6,271 and $2,547 for the three months and $3,450 and $3,241 for the nine months ended September 30, 2024 and 2023, respectively)

 

23,589

 

(9,581)

 

12,979

 

(12,192)

AFS securities:

 

 

 

 

Unrealized holding gains (losses) arising during period (net of tax, $17,770 and $21,051 for the three months and $8,887 and $21,178 for the nine months ended September 30, 2024 and 2023, respectively)

 

66,856

 

(79,193)

 

33,438

 

(79,669)

Reclassification adjustment for (gains) losses included in net income (net of tax, $1 and $5,795 for the three months and $1,367 and $8,609 for the nine months ended September 30, 2024 and 2023, respectively) (1)

 

(3)

 

21,799

 

5,143

 

32,383

HTM securities:

 

 

 

 

Reclassification adjustment for accretion of unrealized gains on AFS securities transferred to HTM (net of tax) (2)

 

 

(2)

 

(5)

 

(7)

Bank owned life insurance:

 

 

 

Unrealized holding (losses) gains arising during the period

(16)

10

Reclassification adjustment for gains included in net income (3)

 

(162)

 

(62)

 

(497)

 

(145)

Other comprehensive income (loss):

 

90,280

 

(67,039)

 

51,042

 

(59,620)

Comprehensive income (loss)

$

166,695

$

(13,022)

$

202,388

$

85,291

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

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

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

See accompanying notes to consolidated financial statements.

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Table of Contents

ATLANTIC UNION BANKSHARES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)

NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023

(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, 2023

$

99,147

$

173

$

1,782,286

$

1,018,070

$

(343,349)

$

2,556,327

Net Income

 

49,769

 

49,769

Other comprehensive loss (net of taxes of $8,182)

 

(30,949)

 

(30,949)

Dividends on common stock ($0.32 per share)

 

(24,027)

 

(24,027)

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 (189,503 shares)

 

252

(2,458)

(2,206)

Stock-based compensation expense

 

2,981

 

2,981

Balance - March 31, 2024

$

99,399

$

173

$

1,782,809

$

1,040,845

$

(374,298)

$

2,548,928

Net Income

 

25,161

 

25,161

Other comprehensive loss (net of taxes of $2,161)

 

(8,289)

 

(8,289)

Issuance of common stock in regard to acquisition (14,349,239 shares)

19,052

486,694

505,746

Dividends on common stock ($0.32 per share)

 

(28,726)

 

(28,726)

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 (17,363 shares)

 

24

117

 

141

Stock-based compensation expense

3,692

3,692

Balance - June 30, 2024

$

118,475

$

173

$

2,273,312

$

1,034,313

$

(382,587)

$

3,043,686

Net Income

 

76,415

 

76,415

Other comprehensive income (net of taxes of $24,040)

 

90,280

 

90,280

Dividends on common stock ($0.32 per share)

 

(28,729)

 

(28,729)

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 (14,833 shares)

 

19

110

 

129

Stock-based compensation expense

3,602

3,602

Balance - September 30, 2024

$

118,494

$

173

$

2,277,024

$

1,079,032

$

(292,307)

$

3,182,416

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Table of Contents

ATLANTIC UNION BANKSHARES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)

NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023

(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

See accompanying notes to consolidated financial statements.

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Table of Contents

ATLANTIC UNION BANKSHARES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023

(Dollars in thousands)

    

2024

    

2023

Operating activities:

 

  

 

  

Net income

$

151,346

$

144,911

Adjustments to reconcile net income to net cash provided by operating activities:

 

  

 

  

Provision for credit losses

 

32,592

 

22,911

Depreciation of premises and equipment

 

9,541

 

9,897

Amortization, net

 

17,064

 

18,215

(Accretion) amortization related to acquisitions, net

 

(14,325)

 

3,530

Losses on securities sales, net

 

6,510

 

40,992

BOLI income

 

(12,074)

 

(8,671)

Writedown of ROU assets, foreclosed properties, and equipment

 

216

 

1,929

Gain on sale-leaseback transaction

 

 

(27,700)

Loans held for sale:

Originations and purchases

(157,156)

(109,934)

Proceeds from sales

 

155,392

 

107,264

Changes in operating assets and liabilities:

 

 

Net decrease (increase) in other assets

 

38,888

 

(74,154)

Net (decrease) increase in other liabilities

 

(17,831)

 

95,563

Net cash provided by operating activities

 

210,163

 

224,753

Investing activities:

 

 

  

Securities AFS and restricted stock:

 

Purchases

 

(619,879)

 

(425,431)

Proceeds from sales

 

620,405

 

856,881

Proceeds from maturities, calls, and paydowns

 

170,542

 

133,947

Securities HTM:

 

Purchases

(2,615)

(13,826)

Proceeds from maturities, calls, and paydowns

 

29,702

 

15,453

Net change in other investments

(14,919)

(9,177)

Net increase in LHFI

 

(523,841)

 

(839,536)

Net purchases of premises and equipment

(6,543)

(3,835)

Proceeds from BOLI settlements

5,645

353

Proceeds from sale-leaseback transaction

45,805

Proceeds from sales of foreclosed properties and former bank premises

3,021

 

5,846

Net cash received in acquisition

 

54,988

 

Net cash used in investing activities

 

(283,494)

 

(233,520)

Financing activities:

 

  

 

  

Net increase (decrease) in:

 

Non-interest-bearing deposits

 

308,316

 

(738,290)

Interest-bearing deposits

 

593,803

 

1,593,090

Short-term borrowings

(584,942)

(688,901)

Common stock:

 

Issuance

227

563

Dividends paid

 

(90,383)

 

(76,315)

Vesting of restricted stock, net of shares held for taxes

(3,751)

(2,383)

Net cash provided by financing activities

 

223,270

 

87,764

Increase in cash and cash equivalents

 

149,939

78,997

Cash, cash equivalents and restricted cash at beginning of the period

 

378,131

 

319,948

Cash, cash equivalents and restricted cash at end of the period

$

528,070

$

398,945

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Table of Contents

ATLANTIC UNION BANKSHARES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023

(Dollars in thousands)

    

2024

    

2023

Supplemental Disclosure of Cash Flow Information

 

  

 

  

Cash payments for:

 

  

 

  

Interest

$

381,133

$

224,809

Income taxes

 

3,552

 

15,501

Supplemental schedule of noncash investing and financing activities

 

  

 

  

Transfers from loans to foreclosed properties

 

375

 

Transfers from bank premises to foreclosed properties

8,573

Issuance of common stock in exchange for net assets in acquisitions

 

505,402

 

Transactions related to acquisitions

 

  

 

  

Assets acquired

 

2,948,035

 

Liabilities assumed

 

2,730,061

 

See accompanying notes to consolidated financial statements.

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Table of Contents

ATLANTIC UNION BANKSHARES CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Company

Headquartered in Richmond, Virginia, Atlantic Union Bankshares Corporation (NYSE: AUB) is the holding company for Atlantic Union Bank, which provides banking and related financial products and services to consumers and businesses.

Basis of Financial Information

The accounting policies and practices of Atlantic Union Bankshares Corporation and subsidiaries conform to GAAP and follow general practices within the banking industry. The consolidated financial statements include the accounts of the Company, which is a financial holding company and a bank holding company that owns all of the outstanding common stock of its banking subsidiary, Atlantic Union Bank, which owns Union Insurance Group, LLC, Atlantic Union Financial Consultants, LLC, Atlantic Union Bank Investments, Inc., and Atlantic Union Equipment Finance, Inc.

The unaudited consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. The preparation of the unaudited consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from these estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the ACL, the fair value of financial instruments, and the fair values associated with assets acquired and liabilities assumed in a business combination. 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.

On April 1, 2024, the Company completed its acquisition of American National. American National’s results of operations are included in the Company’s consolidated results since the date of acquisition.

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 2023 Form 10-K. Certain prior period amounts have been reclassified to conform to current period presentation. None of these reclassifications had a material effect on the Company’s financial statements. 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 2023 Form 10-K and this Note 1 for additional information on the Company’s significant accounting policies. Except as set forth below with respect to acquisition accounting, there have not been any significant changes to the Company’s accounting policies from those disclosed in the Company’s 2023 Form 10-K that could have a material effect on the Company’s financial statements.

Acquisition Accounting

The Company accounts for its mergers and acquisitions that qualify as a business combination under ASC 805, Business Combinations, which requires the use of the acquisition method of accounting, resulting in all identifiable assets acquired and liabilities assumed being recorded at their fair values as of the acquisition date, with the acquisition and merger-related transaction expenses and restructuring costs expensed in the period incurred. The determination of fair values requires management to make estimates about discount rates, future expected cash flows, market conditions, and other future events that are highly subjective in nature and subject to change. The excess of the consideration paid over the fair value of the net assets acquired is recorded as goodwill. The results of operations of the acquired entity are included in the consolidated statement of income from the acquisition date.

The Company evaluates acquired loans at the acquisition date and classifies them as either – (1) loans that have experienced a more-than insignificant amount of credit deterioration since origination (“PCD” loans) or (2) loans that have not experienced a more-than insignificant amount of credit deterioration since origination (“non-PCD” loans). At acquisition, the allowance on PCD loans is booked directly to the ACL using the Company’s existing ACL methodology, but there is no initial impact to net income. Subsequent to acquisition, future changes in estimates of expected credit losses on PCD loans are recognized as provision expense (or reversal of provision expense). The ACL for non-PCD loans is recognized as provision expense in the same reporting period as the business acquisition, using the Company’s existing ACL methodology. See Note 1 “Summary of Significant Accounting Policies” in the “Notes to the Consolidated Financial Statements” contained in Item 8 “Financial

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Table of Contents

Statements and Supplementary Data” in the Company’s 2023 Form 10-K for additional information on the Company’s accounting policy over acquired loans and ACL.

Under ASC 805, the Company may adjust provisional fair values of assets acquired and liabilities assumed in a business combination for a measurement period of up to one year from the acquisition date if additional information about the facts and circumstances that existed as of the acquisition date becomes available. Any future measurement period adjustments, if necessary, will be recognized in the reporting period in which the adjustment amount is determined.

See also Note 2 “Acquisitions” in this Form 10-Q for additional discussion of the Company’s acquisitions.

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Table of Contents

2. ACQUISITIONS

American National Acquisition

On April 1, 2024, the Company completed its previously announced merger with American National, the holding company for American National Bank and Trust Company, headquartered in Danville, Virginia. Under the terms of the American National merger agreement, at the effective time of the American National merger, each outstanding share of American National common stock was converted into 1.35 shares of the Company’s common stock, resulting in 14.3 million additional shares issued, or aggregate consideration of $505.5 million, based on the closing price per share of the Company’s common stock as quoted on NYSE on March 28, 2024, which was the last trading day prior to the consummation of the acquisition. With the acquisition of American National, the Company acquired 26 branches, deepening its presence in central and western Virginia, and expanding its franchise into contiguous markets in southern Virginia and in North Carolina.

As a result of the American National acquisition, the Company’s associated goodwill at September 30, 2024 totaled $287.5 million, which reflects expected synergies and economies of scale from the American National merger, allocated between the Company’s Wholesale Banking ($209.9 million) and Consumer Banking ($77.6 million) reporting segments, which is not deductible for tax purposes. While the Company believed the information available on April 1, 2024 provided a reasonable basis for estimating fair value, the Company obtained additional information and evidence within the one year measurement period, that resulted in changes to the estimated fair value amounts and associated goodwill for which measurement period adjustments were recorded. Measurement period adjustments recorded during the third quarter of 2024 related to the Company’s foreclosed properties, deferred tax assets, and long-term borrowings, which resulted in a $5.2 million increase in the preliminary goodwill recognized as part of the American National acquisition during the second quarter of 2024. Valuations subject to change include, but are not limited to: LHFI, identified intangible assets, certain deposits, income taxes, and certain other assets and liabilities. In addition, certain reclassification adjustments were made to other assets and other liabilities to conform to the Company’s current balance sheet presentation.

The following table provides a summary of the consideration transferred and the fair value of the assets acquired and liabilities assumed as of the date of the acquisition, reflecting the aforementioned measurement period and reclassification adjustments (dollars in thousands):

Purchase price consideration

 

  

$

505,473

Fair value of assets acquired:

 

  

 

  

Cash and cash equivalents

$

55,060

 

  

Securities AFS

 

507,764

 

  

LHFS

 

2,611

 

  

LHFI

2,151,517

Premises and equipment

 

35,802

 

  

CDI and other intangibles

 

84,687

 

  

Bank owned life insurance

30,627

Other assets

 

79,967

 

  

Total assets

$

2,948,035

 

  

Fair value of liabilities assumed:

 

  

 

  

Deposits

$

2,583,089

 

  

Short-term borrowings

 

98,336

 

  

Long-term borrowings

 

25,890

 

  

Other liabilities

 

22,746

 

  

Total liabilities

$

2,730,061

 

  

Fair value of net assets acquired

 

  

$

217,974

Preliminary goodwill

 

  

$

287,499

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Table of Contents

The Company assessed the fair value based on the following methods for the significant assets acquired and liabilities assumed:

Cash and cash equivalents: The fair value was determined to approximate the carrying amount based on the short-term nature of these assets.

Securities AFS: The fair value of the investment portfolio was based on quoted market prices and dealer quotes and pricing obtained from independent pricing services.

LHFS: The LHFS portfolio was recorded at fair value based on quotes or bids from third parties.

LHFI: Fair values for LHFI were estimated using a discounted cash flow analysis that considered factors including loan type, interest rate type, prepayment speeds, duration, and current discount rates. The discount rates used for loans were based on current market rates for new originations of comparable loans and factored in adjustments for any expected liquidity events. Expected cash flows were derived using inputs that considered estimated credit losses and prepayments.

Premises and equipment: The fair value of bank premises and equipment held for use was valued by obtaining recent market data for similar property types with adjustments for characteristics of individual properties.

CDI and other intangibles: CDI represents the future economic benefit of acquired customer deposits. The fair value of the CDI asset was estimated based on a discounted cash flow methodology that incorporated expected customer attrition rates, cost of deposit base, net maintenance cost associated with customer deposits, and the cost for alternative funding sources. The discount rates used were based on market rates. Other intangibles include customer relationship intangible assets and non-compete intangible assets. Customer relationship intangible assets represent the value associated with customer relationships related to the wealth management business that was acquired. Non-compete intangible assets represent the value associated with non-compete agreements for former employees in place at the date of the acquisition.

BOLI: The fair value of BOLI is carried at its current cash surrender value, which is the most reasonable estimate of fair value.

Deposits: The fair value of interest bearing and non-interest bearing deposits is the amount payable on demand at the acquisition date. The fair value of time deposits was estimated 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.

Short-Term Borrowings: Acquired short term borrowings consist of FHLB overnight borrowings and borrowings under repurchase agreements. The fair value of the short-term borrowings was determined to approximate the carrying amounts.

Long-Term Borrowings: The fair values of the Company’s long-term borrowings, including trust preferred securities, were estimated using discounted cash flow analyses, based on the current incremental borrowing rates for similar types of borrowing arrangements.

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The following table presents for illustrative purposes only certain pro forma information as if the Company had acquired American National on January 1, 2023. These results combine the historical results of American National in the Company's Consolidated Statements of Income and while certain adjustments were made for the estimated impact of certain fair value adjustments and other acquisition-related activity, they are not indicative of what would have occurred had the acquisition taken place on January 1, 2023. No adjustments have been made to the pro forma results regarding possible revenue enhancements, provision for credit losses, or expense efficiencies. Pro forma adjustments below include the net impact of American National’s accretion and the elimination of American National merger-related costs, as disclosed below. The Company expects to achieve further operating cost savings and other business synergies, including branch closures, as a result of the acquisition, which are not reflected in the pro forma amounts below (dollars in thousands):

Pro forma

Pro forma

Three Months Ended

Nine Months Ended

September 30,

September 30,

    

2024 (2)

    

2023 (3)

    

2024 (2)

    

2023 (3)

(unaudited)

(unaudited)

(unaudited)

(unaudited)

Total revenues (1)

 

$

217,218

 

$

214,812

 

$

632,927

 

$

628,065

Net income available to common shareholders (4)

 

$

74,533

 

$

63,690

 

$

180,409

 

$

174,815

(1) Includes net interest income and noninterest income.

(2) Includes the net impact of American National’s accretion adjustments of $5.0 million for the nine months ended September 30, 2024. There were no pro forma net accretion adjustments for the three months ended September 30, 2024.

(3) Includes the net impact of American National’s accretion adjustments of $4.9 million and $14.8 million for the three and nine months ended September 30, 2023, respectively.

(4) For the three and nine months ended September 30, 2024 and 2023, excludes American National merger-related costs as noted below.

Merger-related costs associated with the acquisition of American National were $1.1 million and $26.9 million, net of tax, for the three and nine months ended September 30, 2024, respectively, and $2.0 million for both the three and nine months ended September 30, 2023. Such costs include employee severance, professional fees, system conversion, and lease and contract termination expenses, which have been expensed as incurred, and are recorded in “Merger-related costs” on the Company’s Consolidated Statements of Income.

The Company’s operating results for the three and nine months ended September 30, 2024 include the operating results of the acquired assets and assumed liabilities of American National subsequent to the acquisition on April 1, 2024. Due to the merging of certain processes and the conversion of American National’s systems during the second quarter of 2024, historical reporting for the former American National operations is impracticable and thus disclosures of the revenue from the assets acquired and income before income taxes is impracticable for the period subsequent to acquisition.

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3. SECURITIES AND OTHER INVESTMENTS

Available for Sale

The amortized cost, gross unrealized gains and losses, and estimated fair values of AFS securities as of September 30, 2024 are as follows (dollars in thousands):

Amortized

Gross Unrealized

Estimated

    

Cost

    

Gains

    

(Losses)

    

Fair Value

September 30, 2024

 

  

 

  

 

  

  

U.S. government and agency securities

$

65,384

$

1,313

$

(26)

$

66,671

Obligations of states and political subdivisions

 

600,074

 

294

 

(111,841)

 

488,527

Corporate and other bonds (1)

 

283,861

 

631

 

(12,517)

 

271,975

Commercial MBS

 

 

Agency

287,747

 

1,724

 

(37,721)

251,750

Non-agency

76,501

 

202

 

(1,636)

75,067

Total commercial MBS

364,248

 

1,926

 

(39,357)

326,817

Residential MBS

Agency

1,522,319

 

4,144

 

(176,187)

1,350,276

Non-agency

104,967

 

984

 

(3,867)

102,084

Total residential MBS

1,627,286

 

5,128

 

(180,054)

1,452,360

Other securities

 

1,832

 

 

 

1,832

Total AFS securities

$

2,942,685

$

9,292

$

(343,795)

$

2,608,182

(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, 2023 are as follows (dollars in thousands):

Amortized

Gross Unrealized

Estimated

    

Cost

    

Gains

    

(Losses)

    

Fair Value

December 31, 2023

U.S. government and agency securities

$

62,367

$

1,023

$

(34)

$

63,356

Obligations of states and political subdivisions

586,865

 

33

 

(111,451)

 

475,447

Corporate and other bonds (1)

 

261,656

 

7

 

(19,774)

 

241,889

Commercial MBS

 

 

Agency

233,775

 

274

 

(41,181)

192,868

Non-agency

66,743

 

 

(1,965)

64,778

Total commercial MBS

300,518

 

274

 

(43,146)

257,646

Residential MBS

Agency

1,312,538

 

114

 

(205,635)

1,107,017

Non-agency

89,840

 

141

 

(5,827)

84,154

Total residential MBS

1,402,378

 

255

 

(211,462)

1,191,171

Other securities

 

1,752

 

 

 

1,752

Total AFS securities

$

2,615,536

$

1,592

$

(385,867)

$

2,231,261

(1) Other bonds include asset-backed securities.

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Table of Contents

The following table shows the gross unrealized losses and fair value of the Company’s AFS securities with unrealized losses, which are aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position for the following periods ended (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, 2024

 

 

 

 

 

 

U.S. government and agency securities

$

$

$

1,439

$

(26)

$

1,439

$

(26)

Obligations of states and political subdivisions

1,277

(213)

462,306

(111,628)

463,583

(111,841)

Corporate and other bonds(1)

 

14,899

 

(167)

 

188,773

 

(12,350)

 

203,672

 

(12,517)

Commercial MBS

 

Agency

25,224

(86)

148,257

(37,635)

173,481

(37,721)

Non-agency

17,533

(616)

40,135

(1,020)

57,668

(1,636)

Total commercial MBS

42,757

(702)

188,392

(38,655)

231,149

(39,357)

Residential MBS

Agency

94,214

(288)

947,499

(175,899)

1,041,713

(176,187)

Non-agency

16,199

(96)

29,821

(3,771)

46,020

(3,867)

Total residential MBS

110,413

(384)

977,320

(179,670)

1,087,733

(180,054)

Total AFS securities

$

169,346

$

(1,466)

$

1,818,230

$

(342,329)

$

1,987,576

$

(343,795)

December 31, 2023

 

  

 

  

 

  

 

  

 

  

 

  

U.S. government and agency securities

$

$

$

1,980

$

(34)

$

1,980

$

(34)

Obligations of states and political subdivisions

11,758

(2,090)

455,931

(109,361)

467,689

(111,451)

Corporate and other bonds(1)

 

89,450

 

(531)

 

144,155

 

(19,243)

 

233,605

 

(19,774)

Commercial MBS

 

Agency

35,665

(547)

143,657

(40,634)

179,322

(41,181)

Non-agency

64,778

(1,965)

64,778

(1,965)

Total commercial MBS

35,665

(547)

208,435

(42,599)

244,100

(43,146)

Residential MBS

Agency

59,707

(491)

1,011,809

(205,144)

1,071,516

(205,635)

Non-agency

9,022

(41)

40,085

(5,786)

49,107

(5,827)

Total residential MBS

68,729

(532)

1,051,894

(210,930)

1,120,623

(211,462)

Total AFS securities

$

205,602

$

(3,700)

$

1,862,395

$

(382,167)

$

2,067,997

$

(385,867)

(1) Other bonds include asset-backed securities.

(2) Comprised of 740 and 757 individual securities as of September 30, 2024 and December 31, 2023, respectively.

The Company has evaluated AFS securities in an unrealized loss position for credit related impairment at September 30, 2024 and December 31, 2023 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. The Company’s AFS investment portfolio is generally highly-rated or agency backed. At September 30, 2024 and December 31, 2023, all AFS securities were current with no securities past due or on non-accrual, and no ACL was held against the Company’s AFS securities portfolio.

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Table of Contents

The following table presents the amortized cost and estimated fair value of AFS securities as of the periods ended, 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, 2024

December 31, 2023

    

Amortized

    

Estimated

    

Amortized

    

Estimated

Cost

Fair Value

Cost

Fair Value

Due in one year or less

$

49,287

$

49,040

$

52,427

$

51,936

Due after one year through five years

 

214,039

 

215,657

 

150,271

 

149,545

Due after five years through ten years

 

322,155

 

305,664

 

282,309

 

261,720

Due after ten years

 

2,357,204

 

2,037,821

 

2,130,529

 

1,768,060

Total AFS securities

$

2,942,685

$

2,608,182

$

2,615,536

$

2,231,261

Refer to Note 8 “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, 2024 and December 31, 2023.

Accrued interest receivable on AFS securities totaled $10.3 million and $9.5 million at September 30, 2024 and December 31, 2023, respectively, and is included in “Other assets” on the Company’s Consolidated Balance Sheets. For the three and nine months ended September 30, 2024 and 2023, accrued interest receivable write-offs were not material to the Company’s consolidated financial statements.

Held to Maturity

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, 2024 are as follows (dollars in thousands):

Carrying

Gross Unrealized

Estimated

    

Value

    

Gains

    

(Losses)

Fair Value

September 30, 2024

  

 

  

 

  

  

Obligations of states and political subdivisions

$

695,460

$

3,775

$

(23,241)

$

675,994

Corporate and other bonds(1)

3,484

(64)

3,420

Commercial MBS

 

Agency

27,164

(5,308)

21,856

Non-agency

21,218

156

(533)

20,841

Total commercial MBS

48,382

156

(5,841)

42,697

Residential MBS

Agency

38,339

(4,872)

33,467

Non-agency

21,415

15

(181)

21,249

Total residential MBS

59,754

15

(5,053)

54,716

Total HTM securities

$

807,080

$

3,946

$

(34,199)

$

776,827

(1) Other bonds include asset-backed securities.

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Table of Contents

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

Carrying

Gross Unrealized

Estimated

    

Value

    

Gains

    

(Losses)

    

Fair Value

December 31, 2023

 

  

 

  

 

  

 

  

Obligations of states and political subdivisions

$

699,189

$

6,175

$

(23,464)

$

681,900

Corporate and other bonds(1)

4,349

(100)

4,249

Commercial MBS

Agency

27,477

(5,570)

21,907

Non-agency

24,503

37

(449)

24,091

Total commercial MBS

51,980

37

(6,019)

45,998

Residential MBS

Agency

40,562

(5,713)

34,849

Non-agency

41,298

122

(342)

41,078

Total residential MBS

81,860

122

(6,055)

75,927

Total HTM securities

$

837,378

$

6,334

$

(35,638)

$

808,074

(1) Other bonds include asset-backed securities.

The following table presents the amortized cost of HTM securities as of the periods ended, by security type and credit rating (dollars in thousands):

    

Obligations of states and political

    

Corporate and other

    

Mortgage-backed

    

Total HTM

subdivisions

bonds

securities

securities

September 30, 2024

Credit Rating:

 

 

AAA/AA/A

$

684,805

$

$

6,439

$

691,244

BBB/BB/B

1,150

1,150

Not Rated – Agency(1)

67,416

67,416

Not Rated – Non-Agency(2)

 

9,505

 

3,484

34,281

47,270

Total

$

695,460

$

3,484

$

108,136

$

807,080

December 31, 2023

Credit Rating:

 

 

AAA/AA/A

$

688,499

$

$

9,720

$

698,219

BBB/BB/B

1,166

1,166

Not Rated – Agency(1)

68,039

68,039

Not Rated – Non-Agency(2)

 

9,524

 

4,349

56,081

69,954

Total

$

699,189

$

4,349

$

133,840

$

837,378

(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.

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Table of Contents

The following table presents the amortized cost and estimated fair value of HTM securities as of the periods ended, 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, 2024

December 31, 2023

    

Carrying

    

Estimated

    

Carrying

    

Estimated

Value

Fair Value

Value

Fair Value

Due in one year or less

$

4,022

$

3,997

$

3,065

$

3,058

Due after one year through five years

 

13,173

 

13,554

 

34,093

 

34,613

Due after five years through ten years

 

103,411

 

100,798

 

45,919

 

45,263

Due after ten years

 

686,474

 

658,478

 

754,301

 

725,140

Total HTM securities

$

807,080

$

776,827

$

837,378

$

808,074

Refer to Note 8 “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, 2024 and December 31, 2023.

Accrued interest receivable on HTM securities totaled $6.7 million and $8.4 million at September 30, 2024 and December 31, 2023, respectively, and is included in “Other assets” on the Company’s Consolidated Balance Sheets. For the three and nine months ended September 30, 2024 and 2023, accrued interest receivable write-offs were not material to the Company’s consolidated financial statements.

The Company’s HTM investment portfolio primarily consists of highly-rated municipal securities. At September 30, 2024 and December 31, 2023, the Company’s HTM securities were all current, with no securities past due or on non-accrual. The Company’s HTM securities ACL was immaterial at September 30, 2024 and December 31, 2023.

Restricted Stock, at cost

The FHLB required the Bank to maintain stock in an amount equal to 4.75% of outstanding borrowings and a specific percentage of the member’s total assets at September 30, 2024 and December 31, 2023, respectively. The FRB requires the Company to maintain stock with a par value equal to 6% of its outstanding capital. At September 30, 2024 and December 31, 2023, restricted stock consisted of FRB stock in the amount of $82.9 million and $67.0 million, respectively, and FHLB stock in the amount of $35.0 million and $48.4 million, respectively.

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Table of Contents

Realized Gains and Losses

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

    

Three Months Ended

    

Nine Months Ended

2024

2024

Realized gains (losses)(1):

 

  

 

  

Gross realized gains

$

4

$

16

Gross realized losses

 

 

(6,526)

Net realized gains (losses)

$

4

$

(6,510)

Proceeds from sales of securities

$

102,888

$

620,405

    

Three Months Ended

    

Nine Months Ended

2023

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

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

4. 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 includes loan balances as of September 30, 2024, acquired through the American National acquisition that closed on April 1, 2024, and consisted of the following as of the periods ended (dollars in thousands):

September 30, 2024

December 31, 2023

Construction and Land Development

$

1,588,531

$

1,107,850

CRE – Owner Occupied

 

2,401,807

 

1,998,787

CRE – Non-Owner Occupied

 

4,885,785

 

4,172,401

Multifamily Real Estate

 

1,357,730

 

1,061,997

Commercial & Industrial

 

3,799,872

 

3,589,347

Residential 1-4 Family – Commercial

 

729,315

 

522,580

Residential 1-4 Family – Consumer

 

1,281,914

 

1,078,173

Residential 1-4 Family – Revolving

 

738,665

 

619,433

Auto

 

354,570

 

486,926

Consumer

 

109,522

 

120,641

Other Commercial

 

1,089,588

 

876,908

Total LHFI, net of deferred fees and costs(1)

18,337,299

15,635,043

Allowance for loan and lease losses

(160,685)

(132,182)

Total LHFI, net

$

18,176,614

$

15,502,861

(1) Total loans included unamortized premiums and discounts, and unamortized deferred fees and costs totaling $228.3 million and $79.7 million as of September 30, 2024 and December 31, 2023, respectively.

Refer to Note 1 “Summary of Significant Accounting Policies” and Note 2 “Acquisitions” within Item 1 of this Quarterly Report for further information about the American National acquisition.

Accrued interest receivable on LHFI totaled $75.2 million and $72.5 million at September 30, 2024 and December 31, 2023, respectively. Accrued interest receivable write-offs were not material to the Company’s consolidated financial statements for the three and nine months ended September 30, 2024 and 2023.

-19-

Table of Contents

The following table shows the aging of the Company’s LHFI portfolio by class at September 30, 2024 (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

$

1,584,576

$

1,559

    

$

369

    

$

82

    

$

1,945

    

$

1,588,531

CRE – Owner Occupied

 

2,392,190

 

2,291

    

 

1,306

    

 

1,239

    

 

4,781

    

 

2,401,807

CRE – Non-Owner Occupied

 

4,866,516

 

1,085

    

 

6,875

    

 

1,390

    

 

9,919

    

 

4,885,785

Multifamily Real Estate

 

1,356,721

 

821

    

 

135

    

 

53

    

 

    

 

1,357,730

Commercial & Industrial

 

3,789,537

 

5,876

    

 

549

    

 

862

    

 

3,048

    

 

3,799,872

Residential 1-4 Family – Commercial

 

725,395

 

656

    

 

736

    

 

801

    

 

1,727

    

 

729,315

Residential 1-4 Family – Consumer

 

1,260,678

 

471

    

 

6,950

    

 

1,890

    

 

11,925

    

 

1,281,914

Residential 1-4 Family – Revolving

 

728,538

 

3,309

 

2,672

    

 

1,186

    

 

2,960

    

 

738,665

Auto

 

350,373

 

2,796

 

468

 

401

    

 

532

    

 

354,570

Consumer

 

108,487

 

700

 

182

 

143

 

10

 

109,522

Other Commercial

1,082,274

2

185

7,127

1,089,588

Total LHFI, net of deferred fees and costs

$

18,245,285

$

19,566

$

20,427

$

15,174

$

36,847

$

18,337,299

% of total loans

99.50

%

0.11

%

0.11

%

0.08

%

0.20

%

100.00

%

The following table shows the aging of the Company’s LHFI portfolio by class at December 31, 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

$

1,107,183

$

270

$

24

$

25

$

348

$

1,107,850

CRE – Owner Occupied

 

1,991,632

 

1,575

 

 

2,579

 

3,001

 

1,998,787

CRE – Non-Owner Occupied

 

4,156,089

 

545

 

184

 

2,967

 

12,616

 

4,172,401

Multifamily Real Estate

 

1,061,851

 

 

146

 

 

 

1,061,997

Commercial & Industrial

 

3,579,657

 

4,303

 

49

 

782

 

4,556

 

3,589,347

Residential 1-4 Family – Commercial

 

518,150

 

567

 

676

 

1,383

 

1,804

 

522,580

Residential 1-4 Family – Consumer

 

1,053,255

 

7,546

 

1,804

 

4,470

 

11,098

 

1,078,173

Residential 1-4 Family – Revolving

 

611,584

 

2,238

 

1,429

 

1,095

 

3,087

 

619,433

Auto

 

480,557

 

4,737

 

872

 

410

 

350

 

486,926

Consumer

 

119,487

 

770

 

232

 

152

 

 

120,641

Other Commercial

870,339

6,569

876,908

Total LHFI, net of deferred fees and costs

$

15,549,784

$

29,120

$

5,416

$

13,863

$

36,860

$

15,635,043

% of total loans

99.45

%

0.19

%

0.03

%

0.09

%

0.24

%

100.00

%

-20-

Table of Contents

The following table shows the Company’s amortized cost basis of loans on nonaccrual status with no related ALLL as of the periods ended (dollars in thousands):

September 30, 

December 31, 

2024

2023

CRE – Owner Occupied

$

2,050

$

CRE – Non-Owner Occupied

8,156

4,835

Total LHFI

$

10,206

$

4,835

There was no interest income recognized on nonaccrual loans during the three and nine months ended September 30, 2024 and 2023. 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 2023 Form 10-K for additional information on the Company’s policies for nonaccrual loans.

Troubled Loan Modifications

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 2023 Form 10-K for loan modifications to borrowers experiencing financial difficulty and how the Company defines TLMs.

As of September 30, 2024 and 2023, the Company had TLMs with an amortized cost basis of $24.5 million and $29.4 million, respectively.

The following table presents the amortized cost basis of TLMs for the three and nine months ended September 30, (dollars in thousands):

Three Months Ended

Nine Months Ended

2024

2024

    

Amortized Cost

% of Total Class of Financing Receivable

 

Amortized Cost

% of Total Class of Financing Receivable

 

Combination - Other-Than-Insignificant Payment Delay and Term Extension

Commercial and Industrial

$

%

$

553

0.01

%

CRE – Non-Owner Occupied

%

22,175

0.45

%

Total Combination - Other-Than-Insignificant Payment Delay and Term Extension

$

$

22,728

Term Extension

 

 

Construction and Land Development

$

50

NM

%

$

50

NM

%

Commercial and Industrial

141

NM

%

141

NM

%

CRE – Owner Occupied

586

0.02

%

586

0.02

%

Residential 1-4 Family – Consumer

236

0.02

%

236

0.02

%

Total Term Extension

$

1,013

$

1,013

Combination - Term Extension and Interest Rate Reduction

Residential 1-4 Family – Consumer

$

283

0.02

%

$

630

0.05

%

Total Combination - Term Extension and Interest Rate Reduction

$

283

$

630

Combination - Interest Rate Reduction, Term Extension and Other-Than-Insignificant Payment Delay

Commercial and Industrial

$

%

$

106

NM

%

Total Combination - Interest Rate Reduction, Term Extension and Other-Than-Insignificant Payment Delay

$

$

106

Total

$

1,296

$

24,477

NM = Not Meaningful

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Table of Contents

Three Months Ended

Nine Months Ended

2023

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

%

CRE – Non-Owner Occupied

%

20,133

0.49

%

CRE – 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

 

%

 

15

NM

Total Combination - Term Extension and Interest Rate Reduction

$

127

$

974

Principal Forgiveness

CRE – Non-Owner Occupied

%

4,935

0.12

%

Total Principal Forgiveness

$

$

4,935

Total

$

1,019

$

29,419

NM = Not Meaningful

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Table of Contents

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,:

Three Months Ended

2024

Term Extension

Loan Type

Financial Effect

CRE – Owner Occupied

Added a weighted-average 3.0 years to the life of loans.

Nine Months Ended

2024

Other-Than-Insignificant Payment Delay and Term Extension

Loan Type

Financial Effect

Commercial and Industrial

Added a weighted-average 1.0 years to the life of loans.

CRE – Non-Owner Occupied

Added a weighted-average 1.6 years to the life of loans.

Term Extension

Loan Type

Financial Effect

CRE – Owner Occupied

Added a weighted-average 3.0 years to the life of loans.

Three Months Ended

2023

Term Extension

Loan Type

Financial Effect

CRE – Owner Occupied

Added a weighted-average 0.2 years to the life of loans.

Nine Months Ended

2023

Term Extension

Loan Type

Financial Effect

Commercial and Industrial

Added a weighted-average 0.2 years to the life of loans.

CRE – Owner Occupied

Added a weighted-average 0.2 years to the life of loans.

CRE – 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

CRE – Non-Owner Occupied

Reduced the amortized cost basis of loans by $3.5 million.

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Table of Contents

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, 2024 and 2023, the Company did not have any material loans that went into default that had been modified and designated as TLMs in the twelve-month period prior to the time of default.

The Company monitors the performance of TLMs to determine the effectiveness of the modifications. During the three and nine months ended September 30, 2024 and 2023, the Company did not have any material loans that have been modified and designated as TLMs that were past due.

As of September 30, 2024, there were no unfunded commitments on loans modified and designated as TLMs. As of December 31, 2023, unfunded commitments on loans modified and designated as TLMs were $1.6 million.

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, CRE – Owner Occupied, CRE – 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, (dollars in thousands):

Three Months Ended

Nine Months Ended

2024

2024

Commercial

Consumer

Total

    

Commercial

Consumer

Total

Balance at beginning of period

$

131,139

$

26,992

$

158,131

$

105,896

$

26,286

$

132,182

Initial Allowance on PCD American National loans

2,609

1,287

3,896

Loans charged-off

 

(1,642)

 

(1,077)

 

(2,719)

 

 

(8,675)

 

(3,026)

 

(11,701)

Recoveries credited to allowance

 

1,292

 

761

 

2,053

 

2,881

 

1,497

 

4,378

Initial Provision - Non-PCD American National loans

11,213

2,016

13,229

Provision charged to operations

 

1,931

 

1,289

 

3,220

 

 

18,796

 

(95)

 

18,701

Balance at end of period

$

132,720

$

27,965

$

160,685

 

$

132,720

$

27,965

$

160,685

Three Months Ended

Nine Months Ended

2023

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

-24-

Table of Contents

The following table presents additional information related to the acquired American National loan portfolio at the acquisition date, including the initial ACL at acquisition on the PCD loans (dollars in thousands):

April 1, 2024

PCD Loans:

Book value of acquired loans at acquisition

    

$

89,418

Initial ACL at acquisition

 

(3,896)

Non-credit discount at acquisition

 

(10,466)

Purchase Price

$

75,056

Non-PCD Loans:

Fair Value

$

2,073,037

Gross contractual amounts receivable

2,503,707

Estimate of contractual cash flows not expected to be collected

10,887

Credit Quality Indicators

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

The Company presents loan and lease portfolio segments and classes by credit quality indicator and vintage year. The Company defines the vintage date for the purpose of this disclosure as the date of the most recent credit decision. Renewals are categorized as new credit decisions and reflect the renewal date as the vintage date, except for renewals of loans modified for borrowers experiencing financial difficulty or TLMs, which are presented in the original vintage.

Refer to 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 2023 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 Company uses a risk rating system as the primary credit quality indicator for classes of loans within the Commercial segment. The Company defines pass loans as risk rated 1-5 and criticized loans as risk rated 6-9. See Note 3 “Loans and

Allowance For Loan and Lease Losses” in the “Notes to Consolidated Financial Statements” contained in Item 8 “Financial Statements and Supplementary Data” of the Company’s 2023 Form 10-K for information on the Company’s risk rating system.

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Table of Contents

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, (dollars in thousands):

2024

Term Loans Amortized Cost Basis by Origination Year

Revolving

2024

2023

2022

2021

2020

Prior

Loans

Total

Construction and Land Development

Pass

$

248,772

$

546,827

$

453,332

$

124,660

$

21,372

$

47,130

$

103,907

$

1,546,000

Watch

4,019

2,187

1,135

1,048

8,389

Special Mention

1,824

827

296

226

1,332

2,492

6,997

Substandard

160

81

22,945

991

1,527

1,441

27,145

Total Construction and Land Development

$

250,756

$

551,754

$

478,760

$

127,012

$

24,231

$

52,111

$

103,907

$

1,588,531

Current period gross write-off

$

$

$

(392)

$

$

$

$

$

(392)

CRE – Owner Occupied

Pass

$

119,494

$

237,967

$

286,271

$

267,150

$

253,840

$

1,053,513

$

27,073

$

2,245,308

Watch

32,278

9,567

13,374

1,927

2,539

36,841

51

96,577

Special Mention

1,163

9,527

1,590

1,748

2,878

14,266

2,201

33,373

Substandard

932

1,021

358

1,921

22,317

26,549

Total CRE – Owner Occupied

$

152,935

$

257,993

$

302,256

$

271,183

$

261,178

$

1,126,937

$

29,325

$

2,401,807

Current period gross write-off

$

$

$

$

$

$

(354)

$

$

(354)

CRE – Non-Owner Occupied

Pass

$

220,707

$

520,289

$

664,692

$

851,291

$

387,340

$

1,903,875

$

42,583

$

4,590,777

Watch

152

1,477

5,936

4,037

54,881

66,483

Special Mention

397

17,947

5,125

3,355

62,509

12,750

102,083

Substandard

13,758

1,128

39,701

71,782

73

126,442

Total CRE – Non-Owner Occupied

$

221,104

$

534,199

$

684,116

$

863,480

$

434,433

$

2,093,047

$

55,406

$

4,885,785

Current period gross write-off

$

$

$

$

$

(3,386)

$

$

$

(3,386)

Commercial & Industrial

Pass

$

627,486

$

688,535

$

571,125

$

331,698

$

138,708

$

259,312

$

925,580

$

3,542,444

Watch

3,266

25,712

79,979

1,000

588

17,882

44,303

172,730

Special Mention

46

4,961

9,119

3,653

2,674

290

46,054

66,797

Substandard

61

696

1,249

2,145

620

3,725

9,405

17,901

Total Commercial & Industrial

$

630,859

$

719,904

$

661,472

$

338,496

$

142,590

$

281,209

$

1,025,342

$

3,799,872

Current period gross write-off

$

$

(42)

$

(239)

$

(5)

$

(113)

$

(600)

$

(962)

$

(1,961)

Multifamily Real Estate

Pass

$

39,570

$

28,510

$

226,917

$

427,559

$

240,473

$

339,438

$

36,318

$

1,338,785

Watch

1,722

1,722

Special Mention

250

1,196

1,446

Substandard

14,212

1,512

53

15,777

Total Multifamily Real Estate

$

39,570

$

42,722

$

228,639

$

427,559

$

240,723

$

342,146

$

36,371

$

1,357,730

Current period gross write-off

$

$

$

$

$

$

$

$

Residential 1-4 Family – Commercial

Pass

$

42,386

$

68,715

$

140,565

$

111,205

$

80,592

$

259,004

$

9,394

$

711,861

Watch

338

1,072

509

809

6,840

101

9,669

Special Mention

233

217

335

1,881

2,666

Substandard

519

232

613

3,502

253

5,119

Total Residential 1-4 Family – Commercial

$

42,905

$

69,053

$

141,870

$

112,163

$

82,349

$

271,227

$

9,748

$

729,315

Current period gross write-off

$

$

$

$

$

$

$

$

Other Commercial

Pass

$

163,223

$

206,491

$

175,616

$

166,506

$

87,207

$

172,238

$

96,733

$

1,068,014

Watch

572

7,095

983

7,013

4,599

20,262

Special Mention

86

591

677

Substandard

493

41

2

99

635

Total Other Commercial

$

163,223

$

207,642

$

182,711

$

167,489

$

94,261

$

177,430

$

96,832

$

1,089,588

Current period gross write-off

$

$

$

$

$

$

(2,582)

$

$

(2,582)

Total Commercial

Pass

$

1,461,638

$

2,297,334

$

2,518,518

$

2,280,069

$

1,209,532

$

4,034,510

$

1,241,588

$

15,043,189

Watch

35,544

40,360

106,906

11,490

14,986

122,091

44,455

375,832

Special Mention

3,430

15,401

29,185

10,969

10,824

83,225

61,005

214,039

Substandard

740

30,172

25,215

4,854

44,423

104,281

9,883

219,568

Total Commercial

$

1,501,352

$

2,383,267

$

2,679,824

$

2,307,382

$

1,279,765

$

4,344,107

$

1,356,931

$

15,852,628

Total current period gross write-off

$

$

(42)

$

(631)

$

(5)

$

(3,499)

$

(3,536)

$

(962)

$

(8,675)

-26-

Table of Contents

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 December 31, (dollars in thousands):

2023

Term Loans Amortized Cost Basis by Origination Year

Revolving

2023

2022

2021

2020

2019

Prior

Loans

Total

Construction and Land Development

Pass

$

289,786

$

440,473

$

192,148

$

19,536

$

10,934

$

38,841

$

64,137

$

1,055,855

Watch

84

3,611

16,249

2,127

22,071

Special Mention

4,444

1,332

367

6,143

Substandard

114

1,244

1,248

20,705

205

265

23,781

Total Construction and Land Development

$

289,984

$

445,328

$

214,089

$

41,573

$

11,139

$

41,600

$

64,137

$

1,107,850

Current period gross write-off

$

$

$

$

$

$

(11)

$

$

(11)

CRE – Owner Occupied

Pass

$

175,627

$

257,889

$

194,030

$

239,549

$

259,502

$

750,180

$

23,689

$

1,900,466

Watch

5,919

1,311

4,768

4,422

9,146

27,829

399

53,794

Special Mention

786

849

249

5,150

9,549

611

17,194

Substandard

362

326

26,645

27,333

Total CRE – Owner Occupied

$

182,694

$

260,049

$

199,047

$

244,297

$

273,798

$

814,203

$

24,699

$

1,998,787

Current period gross write-off

$

$

$

$

$

$

(141)

$

$

(141)

CRE – Non-Owner Occupied

Pass

$

374,221

$

548,262

$

710,122

$

334,449

$

492,782

$

1,419,882

$

35,276

$

3,914,994

Watch

1,520

1,690

32,326

82,930

118,466

Special Mention

67,001

12,155

79,156

Substandard

4,837

2,121

17,956

5,899

28,972

59,785

Total CRE – Non-Owner Occupied

$

379,058

$

549,782

$

713,933

$

352,405

$

531,007

$

1,598,785

$

47,431

$

4,172,401

Current period gross write-off

$

$

$

$

$

$

(3,528)

$

$

(3,528)

Commercial & Industrial

Pass

$

981,290

$

617,805

$

409,973

$

178,578

$

122,160

$

168,368

$

923,359

$

3,401,533

Watch

2,708

38,711

512

1,379

18,065

4,943

22,832

89,150

Special Mention

108

32,714

981

3,310

1,722

1,513

19,865

60,213

Substandard

146

343

2,000

925

3,181

31,856

38,451

Total Commercial & Industrial

$

984,106

$

689,376

$

411,809

$

185,267

$

142,872

$

178,005

$

997,912

$

3,589,347

Current period gross write-off

$

$

$

(101)

$

$

$

(17)

$

(1,812)

$

(1,930)

Multifamily Real Estate

Pass

$

21,911

$

129,854

$

321,918

$

222,172

$

45,879

$

250,887

$

50,060

$

1,042,681

Watch

914

914

Special Mention

250

81

331

Substandard

14,222

3,703

146

18,071

Total Multifamily Real Estate

$

36,133

$

129,854

$

321,918

$

222,422

$

49,582

$

252,028

$

50,060

$

1,061,997

Current period gross write-off

$

$

$

$

$

$

$

$

Residential 1-4 Family – Commercial

Pass

$

41,631

$

67,495

$

77,321

$

69,779

$

44,498

$

203,125

$

604

$

504,453

Watch

49

387

580

220

757

8,854

107

10,954

Special Mention

47

1,302

1,349

Substandard

57

614

279

624

3,997

253

5,824

Total Residential 1-4 Family – Commercial

$

41,784

$

67,882

$

78,515

$

70,278

$

45,879

$

217,278

$

964

$

522,580

Current period gross write-off

$

$

$

$

$

$

$

$

Other Commercial

Pass

$

201,252

$

180,346

$

165,732

$

114,838

$

123,515

$

62,284

$

9,850

$

857,817

Watch

14,355

32

4

3,977

18,368

Special Mention

93

630

723

Total Other Commercial

$

215,700

$

180,346

$

165,732

$

114,870

$

123,519

$

66,891

$

9,850

$

876,908

Current period gross write-off

$

$

(101)

$

$

$

$

(3,016)

$

$

(3,117)

Total Commercial

Pass

$

2,085,718

$

2,242,124

$

2,071,244

$

1,178,901

$

1,099,270

$

2,893,567

$

1,106,975

$

12,677,799

Watch

23,115

45,540

23,799

6,053

60,298

131,574

23,338

313,717

Special Mention

1,034

33,563

5,674

4,892

6,872

80,443

32,631

165,109

Substandard

19,592

1,390

4,326

41,266

11,356

63,206

32,109

173,245

Total Commercial

$

2,129,459

$

2,322,617

$

2,105,043

$

1,231,112

$

1,177,796

$

3,168,790

$

1,195,053

$

13,329,870

Total current period gross write-off

$

$

(101)

$

(101)

$

$

$

(6,713)

$

(1,812)

$

(8,727)

-27-

Table of Contents

Consumer Loans

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

2024

Term Loans Amortized Cost Basis by Origination Year

Revolving

2024

2023

2022

2021

2020

Prior

Loans

Total

Residential 1-4 Family – Consumer

Current

$

109,941

$

170,351

$

290,571

$

281,489

$

154,185

$

254,128

$

13

$

1,260,678

30-59 Days Past Due

131

42

298

471

60-89 Days Past Due

717

5,078

1,155

6,950

90+ Days Past Due

72

95

1,723

1,890

Nonaccrual

318

2,292

1,122

8,193

11,925

Total Residential 1-4 Family – Consumer

$

109,941

$

170,872

$

293,717

$

287,689

$

154,185

$

265,497

$

13

$

1,281,914

Current period gross write-off

$

$

(76)

$

(3)

$

$

$

(19)

$

$

(98)

Residential 1-4 Family – Revolving

Current

$

13,213

$

35,769

$

47,624

$

10,700

$

3,936

$

1,793

$

615,503

$

728,538

30-59 Days Past Due

89

60

3,160

3,309

60-89 Days Past Due

178

130

2,364

2,672

90+ Days Past Due

14

1,172

1,186

Nonaccrual

54

115

46

2,745

2,960

Total Residential 1-4 Family – Revolving

$

13,213

$

36,090

$

47,943

$

10,700

$

3,982

$

1,793

$

624,944

$

738,665

Current period gross write-off

$

$

$

$

(28)

$

$

$

(145)

$

(173)

Auto

Current

$

1,840

$

60,423

$

161,406

$

77,325

$

34,173

$

15,206

$

$

350,373

30-59 Days Past Due

45

363

1,261

645

258

224

2,796

60-89 Days Past Due

103

210

81

57

17

468

90+ Days Past Due

112

171

20

73

25

401

Nonaccrual

46

276

96

76

38

532

Total Auto

$

1,885

$

61,047

$

163,324

$

78,167

$

34,637

$

15,510

$

$

354,570

Current period gross write-off

$

$

(153)

$

(653)

$

(263)

$

(59)

$

(62)

$

$

(1,190)

Consumer

Current

$

11,268

$

9,292

$

15,310

$

7,746

$

6,466

$

30,332

$

28,073

$

108,487

30-59 Days Past Due

11

73

179

11

24

371

31

700

60-89 Days Past Due

18

71

11

41

33

8

182

90+ Days Past Due

4

11

42

6

2

62

16

143

Nonaccrual

9

1

10

Total Consumer

$

11,283

$

9,394

$

15,602

$

7,783

$

6,533

$

30,799

$

28,128

$

109,522

Current period gross write-off

$

$

(192)

$

(93)

$

(26)

$

(525)

$

(591)

$

(138)

$

(1,565)

Total Consumer

Current

$

136,262

$

275,835

$

514,911

$

377,260

$

198,760

$

301,459

$

643,589

$

2,448,076

30-59 Days Past Due

56

656

1,542

656

282

893

3,191

7,276

60-89 Days Past Due

299

1,128

5,170

98

1,205

2,372

10,272

90+ Days Past Due

4

195

322

26

75

1,810

1,188

3,620

Nonaccrual

418

2,683

1,227

122

8,232

2,745

15,427

Total Consumer

$

136,322

$

277,403

$

520,586

$

384,339

$

199,337

$

313,599

$

653,085

$

2,484,671

Total current period gross write-off

$

$

(421)

$

(749)

$

(317)

$

(584)

$

(672)

$

(283)

$

(3,026)

-28-

Table of Contents

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

2023

Term Loans Amortized Cost Basis by Origination Year

Revolving

2023

2022

2021

2020

2019

Prior

Loans

Total

Residential 1-4 Family – Consumer

Current

$

120,480

$

266,261

$

265,255

$

154,440

$

32,591

$

214,214

$

14

$

1,053,255

30-59 Days Past Due

273

2,195

705

249

181

3,943

7,546

60-89 Days Past Due

208

1,596

1,804

90+ Days Past Due

1,713

2,757

4,470

Nonaccrual

205

875

870

38

9,110

11,098

Total Residential 1-4 Family – Consumer

$

121,166

$

269,331

$

268,543

$

154,689

$

32,810

$

231,620

$

14

$

1,078,173

Current period gross write-off

$

$

(16)

$

(21)

$

$

(69)

$

(95)

$

$

(201)

Residential 1-4 Family – Revolving

Current

$

42,593

$

54,560

$

11,756

$

4,348

$

937

$

1,115

$

496,275

$

611,584

30-59 Days Past Due

14

39

2,185

2,238

60-89 Days Past Due

181

148

26

1,074

1,429

90+ Days Past Due

1,095

1,095

Nonaccrual

154

27

51

2,855

3,087

Total Residential 1-4 Family – Revolving

$

42,774

$

54,876

$

11,783

$

4,399

$

976

$

1,141

$

503,484

$

619,433

Current period gross write-off

$

$

$

(3)

$

$

$

$

(55)

$

(58)

Auto

Current

$

77,293

$

210,692

$

107,568

$

52,742

$

24,877

$

7,385

$

$

480,557

30-59 Days Past Due

526

2,022

1,095

612

292

190

4,737

60-89 Days Past Due

61

326

298

58

96

33

872

90+ Days Past Due

36

210

24

112

23

5

410

Nonaccrual

39

120

63

69

59

350

Total Auto

$

77,955

$

213,370

$

109,048

$

53,593

$

25,347

$

7,613

$

$

486,926

Current period gross write-off

$

(64)

$

(487)

$

(295)

$

(145)

$

(69)

$

(80)

$

$

(1,140)

Consumer

Current

$

12,453

$

23,303

$

10,442

$

7,999

$

15,176

$

24,056

$

26,058

$

119,487

30-59 Days Past Due

21

156

28

32

129

366

38

770

60-89 Days Past Due

11

82

40

14

47

21

17

232

90+ Days Past Due

63

72

10

4

3

152

Total Consumer

$

12,548

$

23,613

$

10,520

$

8,045

$

15,352

$

24,447

$

26,116

$

120,641

Current period gross write-off

$

(43)

$

(66)

$

(124)

$

(851)

$

(23)

$

(679)

$

(83)

$

(1,869)

Total Consumer

Current

$

252,819

$

554,816

$

395,021

$

219,529

$

73,581

$

246,770

$

522,347

$

2,264,883

30-59 Days Past Due

820

4,387

1,828

893

641

4,499

2,223

15,291

60-89 Days Past Due

461

556

338

72

143

1,676

1,091

4,337

90+ Days Past Due

99

282

1,747

112

23

2,766

1,098

6,127

Nonaccrual

244

1,149

960

120

97

9,110

2,855

14,535

Total Consumer

$

254,443

$

561,190

$

399,894

$

220,726

$

74,485

$

264,821

$

529,614

$

2,305,173

Current period gross write-off

$

(107)

$

(569)

$

(443)

$

(996)

$

(161)

$

(854)

$

(138)

$

(3,268)

As of September 30, 2024 and December 31, 2023, the Company did not have any significant revolving loans convert to term.

-29-

Table of Contents

5. GOODWILL AND INTANGIBLE ASSETS

The Company’s intangible assets consist of core deposits, goodwill, and other intangibles arising from previous acquisitions. The Company has determined that CDI have finite lives and amortizes them over their estimated useful lives. CDI 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 that there was no impairment to 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.

As a result of the American National acquisition, the Company’s associated goodwill at September 30, 2024 totaled $287.5 million. During the quarter ended September 30, 2024, the Company adjusted the American National acquisition allocation of the purchase price for certain provisional amounts recognized at the acquisition date to reflect new information obtained about facts and circumstances that existed as of the acquisition date. The measurement period and reclassification adjustments recorded in this quarter relate to deferred taxes, the fair values of long-term borrowings, and foreclosed properties, which resulted in a $5.2 million increase in the preliminary goodwill recognized during the second quarter of 2024.

The following table provides information on the significant components of goodwill and other acquired intangible assets as of the periods ended (dollars in thousands).

    

Gross

    

Additions:

    

    

Net

Carrying

American National

Accumulated

Carrying

Value

Acquisition (1)

Amortization

Value

September 30, 2024

 

  

 

  

 

  

 

  

Goodwill

$

925,211

$

287,499

$

$

1,212,710

CDI

85,491

74,410

(80,828)

79,073

Other amortizable intangibles

3,977

10,277

(3,151)

11,103

December 31, 2023

 

  

 

  

 

  

 

  

Goodwill

$

925,211

$

$

$

925,211

CDI

85,491

(68,599)

16,892

Other amortizable intangibles

 

3,977

 

 

(1,686)

 

2,291

(1) Includes initial goodwill of $282.3 million and a goodwill adjustment of $5.2 million related to the American National acquisition. Refer to Note 2 “Acquisitions” for more information.

The following table presents the Company’s goodwill and intangible assets by operating segment as of the periods ended (dollars in thousands):

Wholesale Banking

Consumer Banking

Corporate Other

Total

September 30, 2024

 

  

 

  

 

  

  

Goodwill (1)

$

845,239

$

362,245

$

5,226

$

1,212,710

Intangible Assets (2)

 

9,032

 

830

 

80,314

 

90,176

December 31, 2023

 

  

 

  

 

  

 

  

Goodwill

$

639,180

$

286,031

$

$

925,211

Intangible Assets

 

1,302

 

989

 

16,892

 

19,183

(1) Wholesale Banking and Consumer Banking includes gross carrying values of $209.9 million and $77.6 million, respectively, which were added in the second quarter of 2024 related to the American National acquisition. Refer to Note 2 “Acquisitions” for more information.

(2) Wholesale Banking and Corporate Other includes gross carrying values of $8.4 million and $76.3 million, respectively, which were added in the second quarter of 2024 related to the American National acquisition. Refer to Note 2 “Acquisitions” for more information.


-30-

Table of Contents

Amortization expense of intangibles for the three months ended September 30, 2024 and 2023 totaled $5.8 million and $2.2 million, respectively. Amortization expense of intangibles for the nine months ended September 30, 2024 and 2023 totaled $13.7 million and $6.7 million, respectively. As of September 30, 2024, the estimated remaining amortization expense of intangibles is as follows for the years ending (dollars in thousands):

For the remaining three months of 2024

    

$

5,615

2025