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 March 31, 2022

OR

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

Commission File Number: 001-39325

ATLANTIC UNION BANKSHARES CORPORATION

(Exact name of registrant as specified in its charter)


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

1051 East Cary Street

Suite 1200

Richmond, Virginia 23219

(Address of principal executive offices) (Zip Code)

(804) 633-5031

(Registrant’s telephone number, including area code)

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



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

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

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

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


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

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

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


	Yes ☐ No ☒

The number of shares of common stock outstanding as of April 28, 2022 was 75,014,103.

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 March 31, 2022 (unaudited) and December 31, 2021 (audited)	2

	Consolidated Statements of Income (unaudited) for the three months ended March 31, 2022 and 2021	3

	Consolidated Statements of Comprehensive Income (Loss) (unaudited) for the three months ended March 31, 2022 and 2021	4

	Consolidated Statements of Changes in Stockholders’ Equity (unaudited) for the three months ended March 31, 2022 and 2021	5

	Consolidated Statements of Cash Flows (unaudited) for the three months ended March 31, 2022 and 2021	6

	Notes to Consolidated Financial Statements (unaudited)	8

	Review Report of Independent Registered Public Accounting Firm	47

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

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	70

Item 4.	Controls and Procedures	72

	PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	73

Item 1A.	Risk Factors	73

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

Item 6.	Exhibits	75

	Signatures	77

Table of Contents

Glossary of Acronyms and Defined Terms


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

Table of Contents

NPA	–	Nonperforming assets
OCI	–	Other comprehensive income
OREO	–	Other real estate owned
OTC	–	Over-the-counter
PD/LGD	–	Probability of default/loss given default
PPP	–	Paycheck Protection Program
Quarterly Report	–	Quarterly Report on Form 10-Q for the quarter ended March 31, 2022
Repurchase Program	–	The share repurchase program, approved on December 10, 2021 by the Company’s Board of Directors, which authorizes the Company to purchase up to $100.0 million worth of the Company’s common stock
ROU asset	–	Right of Use Asset
RUC	–	Reserve for unfunded commitments
RVI	–	Residual value insurance
SBA	–	Small Business Administration
SEC	–	Securities and Exchange Commission
Series A preferred stock	–	6.875% Perpetual Non-Cumulative Preferred Stock, Series A, par value $10.00 per share
SOFR	–	Secured Overnight Financing Rate
SSFA	–	Simplified supervisory formula approach
TDR	–	Troubled debt restructuring
Topic 606	–	ASU No. 2014-09, “Revenue from Contracts with Customers: Topic 606”
Topic 848	–	ASU 2020-04, “Reference Rate Reform: Facilitation of the Effects of Reference Rate Reform on Financial Reporting”
VFG	–	Virginia Financial Group, Inc.
2031 Notes	–	$250.0 million of 2.875% fixed-to-floating rate subordinate notes issued by the Company during the fourth quarter of 2021 with a maturity date of December 15, 2031

Table of Contents

PART I – FINANCIAL INFORMATION

ITEM 1 – FINANCIAL STATEMENTS

ATLANTIC UNION BANKSHARES CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

AS OF MARCH 31, 2022 AND DECEMBER 31, 2021

(Dollars in thousands, except share data)


	March 31,		December 31,
	2022		2021
ASSETS		(unaudited)		(audited)
Cash and cash equivalents:
Cash and due from banks	$	178,225	$	180,963
Interest-bearing deposits in other banks		213,140		618,714
Federal funds sold		4,938		2,824
Total cash and cash equivalents		396,303		802,501
Securities available for sale, at fair value		3,193,280		3,481,650
Securities held to maturity, at carrying value		756,872		628,000
Restricted stock, at cost		77,033		76,825
Loans held for sale, at fair value		21,227		20,861
Loans held for investment, net of deferred fees and costs		13,459,349		13,195,843
Less: allowance for loan and lease losses		102,591		99,787
Total loans held for investment, net		13,356,758		13,096,056
Premises and equipment, net		130,998		134,808
Goodwill		935,560		935,560
Amortizable intangibles, net		40,273		43,312
Bank owned life insurance		434,012		431,517
Other assets		440,114		413,706
Total assets	$	19,782,430	$	20,064,796
LIABILITIES
Noninterest-bearing demand deposits	$	5,370,063	$	5,207,324
Interest-bearing deposits		11,114,160		11,403,744
Total deposits		16,484,223		16,611,068
Securities sold under agreements to repurchase		115,027		117,870
Long-term borrowings		389,005		388,724
Other liabilities		295,840		237,063
Total liabilities		17,284,095		17,354,725
Commitments and contingencies (Note 7)
STOCKHOLDERS' EQUITY
Preferred stock, $10.00 par value		173		173
Common stock, $1.33 par value		99,651		100,101
Additional paid-in capital		1,786,640		1,807,368
Retained earnings		803,354		783,794
Accumulated other comprehensive income (loss)		(191,483)		18,635
Total stockholders' equity		2,498,335		2,710,071
Total liabilities and stockholders' equity	$	19,782,430	$	20,064,796

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

See accompanying notes to consolidated financial statements.

-2-

Table of Contents

ATLANTIC UNION BANKSHARES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

THREE MONTHS ENDED MARCH 31, 2022 AND 2021

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


	Three Months Ended
	March 31,		March 31,
	2022		2021
Interest and dividend income:
Interest and fees on loans	$	114,200	$	128,006
Interest on deposits in other banks		131		77
Interest and dividends on securities:
Taxable		13,666		10,353
Nontaxable		10,459		9,237
Total interest and dividend income		138,456		147,673
Interest expense:
Interest on deposits		4,483		9,128
Interest on short-term borrowings		21		48
Interest on long-term borrowings		3,021		3,599
Total interest expense		7,525		12,775
Net interest income		130,931		134,898
Provision for credit losses		2,800		(13,624)
Net interest income after provision for credit losses		128,131		148,522
Noninterest income:
Service charges on deposit accounts		7,596		5,509
Other service charges, commissions and fees		1,655		1,701
Interchange fees		1,810		1,847
Fiduciary and asset management fees		7,255		6,475
Mortgage banking income		3,117		8,255
Bank owned life insurance income		2,697		2,265
Loan-related interest rate swap fees		3,860		1,754
Other operating income		2,163		3,179
Total noninterest income		30,153		30,985
Noninterest expenses:
Salaries and benefits		58,298		52,660
Occupancy expenses		6,883		7,315
Furniture and equipment expenses		3,597		3,968
Technology and data processing		7,796		6,904
Professional services		4,090		4,960
Marketing and advertising expense		2,163		2,044
FDIC assessment premiums and other insurance		2,485		2,307
Other taxes		4,499		4,436
Loan-related expenses		1,776		1,877
Amortization of intangible assets		3,039		3,730
Loss on debt extinguishment		—		14,695
Other expenses		10,695		7,041
Total noninterest expenses		105,321		111,937
Income from continuing operations before income taxes		52,963		67,570
Income tax expense		9,273		11,381
Net income		43,690		56,189
Dividends on preferred stock		2,967		2,967
Net income available to common shareholders	$	40,723	$	53,222

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

See accompanying notes to consolidated financial statements.

-3-

Table of Contents

ATLANTIC UNION BANKSHARES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (UNAUDITED)

THREE MONTHS ENDED MARCH 31, 2022 AND 2021

(Dollars in thousands)


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

⁽¹⁾ The gross amounts are generally reported in the interest income and interest expense sections of the Company’s Consolidated Statements of Income with the corresponding income tax effect being reflected as a component of income tax expense.

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

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

⁽⁴⁾ Reclassifications in earnings are reported in "Salaries and benefits" expense on the Company’s Consolidated Statements of Income.

See accompanying notes to consolidated financial statements.

-4-

Table of Contents

ATLANTIC UNION BANKSHARES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)

THREE MONTHS ENDED MARCH 31, 2022 AND 2021

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

Accumulated

Additional

Other

Common

Preferred

Paid-In

Retained

Comprehensive

Stock

Capital

Earnings

Income (Loss)

Total

Balance - December 31, 2021

100,101

173

1,807,368

783,794

18,635

2,710,071

Net Income

43,690

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

(210,118)

Dividends on common stock ($0.28 per share)

(21,163)

Dividends on preferred stock ($171.88 per share)

(2,967)

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

(837)

(24,181)

(25,018)

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

387

1,044

1,431

Stock-based compensation expense

2,409

Balance - March 31, 2022

99,651

173

1,786,640

803,354

(191,483)

2,498,335


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

See accompanying notes to consolidated financial statements.

-5-

Table of Contents

ATLANTIC UNION BANKSHARES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

THREE MONTHS ENDED MARCH 31, 2022 AND 2021

(Dollars in thousands)


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

-6-

Table of Contents

ATLANTIC UNION BANKSHARES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

THREE MONTHS ENDED MARCH 31, 2022 AND 2021

(Dollars in thousands)


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

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

See accompanying notes to consolidated financial statements.

-7-

Table of Contents

ATLANTIC UNION BANKSHARES CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

1.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Company

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

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

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

Adoption of New Accounting Standards

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

Cash and Cash Equivalents

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

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

Accrued Interest Receivable

The Company has elected to exclude accrued interest from the amortized cost basis in its determination of the ALLL, as well as the ACL reserve for securities. Accrued interest receivable totaled $42.5 million and $43.3 million on LHFI, $6.2 million and $7.0 million on HTM securities, and $13.8 million and $14.5 million on AFS securities at March 31, 2022 and December 31, 2021, respectively, and is included in “Other assets” on the Company’s Consolidated Balance Sheets. The Company’s policy is to write off accrued interest receivable through reversal of interest income when it becomes probable the Company

-8-

Table of Contents

will not be able to collect the accrued interest. For the quarters ended March 31, 2022 and March 30, 2021, accrued interest receivable write offs were not material to the Company’s consolidated financial statements.

Segment Reporting

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

-9-

Table of Contents

2. SECURITIES

Available for Sale

The Company’s AFS investment portfolio is generally highly-rated or agency backed. All AFS securities were current with no securities past due or on non-accrual as of March 31, 2022 and December 31, 2021.

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

Amortized

Gross Unrealized

Estimated

Cost

Gains

(Losses)

Fair Value

March 31, 2022

U.S. government and agency securities

72,068

—

(4,029)

68,039

Obligations of states and political subdivisions

967,219

8,336

(87,255)

888,300

Corporate and other bonds ⁽¹⁾

185,884

802

(2,763)

183,923

Commercial MBS

Agency

342,966

978

(15,592)

328,352

Non-agency

108,462

—

(2,323)

106,139

Total commercial MBS

451,428

978

(17,915)

434,491

Residential MBS

Agency

1,634,860

2,401

(103,848)

1,533,413

Non-agency

86,876

(3,413)

83,469

Total residential MBS

1,721,736

2,407

(107,261)

1,616,882

Other securities

1,645

—

1,645

Total AFS securities

3,399,980

12,523

(219,223)

3,193,280

⁽¹⁾ Other bonds include asset-backed securities

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


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

⁽¹⁾ Other bonds include asset-backed securities

-10-

Table of Contents

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


	Less than 12 months				More than 12 months				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses
March 31, 2022
U.S. government and agency securities	$	64,366	$	(3,972)	$	3,604	$	(57)	$	67,970	$	(4,029)
Obligations of states and political subdivisions		533,491		(79,311)		31,225		(7,944)		564,716		(87,255)
Corporate and other bonds⁽¹⁾		112,253		(2,763)		—		—		112,253		(2,763)
Commercial MBS
Agency		175,651		(11,545)		40,654		(4,047)		216,305		(15,592)
Non-agency		87,127		(1,526)		19,013		(797)		106,140		(2,323)
Total commercial MBS		262,778		(13,071)		59,667		(4,844)		322,445		(17,915)
Residential MBS
Agency		1,016,786		(71,954)		333,594		(31,894)		1,350,380		(103,848)
Non-agency		63,140		(2,550)		12,162		(863)		75,302		(3,413)
Total residential MBS		1,079,926		(74,504)		345,756		(32,757)		1,425,682		(107,261)
Total AFS securities	$	2,052,814	$	(173,621)	$	440,252	$	(45,602)	$	2,493,066	$	(219,223)

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

⁽¹⁾ Other bonds include asset-backed securities

As of March 31, 2022, there were $440.3 million AFS securities, comprised of 106 individual securities that had been in a continuous loss position for more than 12 months and had an aggregate unrealized loss of approximately $45.6 million. As of December 31, 2021, there were $139.7 million AFS securities, comprised of 33 individual securities that had been in a continuous loss position for more than 12 months and had an aggregate unrealized loss of $3.9 million.

The Company has evaluated AFS securities in an unrealized loss position for credit related impairment at March 31, 2022 and December 31, 2021 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% SSFA rating.

-11-

Table of Contents

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


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

Refer to Note 7 "Commitments and Contingencies" in Part I, Item I of this Quarterly Report for information regarding the estimated fair value of AFS securities that were pledged to secure public deposits, repurchase agreements, and for other purposes as permitted or required by law as of March 31, 2022 and December 31, 2021.

Held to Maturity

The Company’s HTM investment portfolio primarily consists of highly-rated municipal securities. The Company’s HTM securities were all current, with no securities past due or on non-accrual at March 31, 2022 and December 31, 2021.

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

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

Carrying

Gross Unrealized

Estimated

Value

Gains

(Losses)

Fair Value

March 31, 2022

U.S. government and agency securities

2,483

—

(74)

2,409

Obligations of states and political subdivisions

684,294

24,828

(17,616)

691,506

Commercial MBS

Agency

31,221

—

(1,697)

29,524

Total commercial MBS

31,221

—

(1,697)

29,524

Residential MBS

Agency

38,874

—

(2,136)

36,738

Total residential MBS

38,874

—

(2,136)

36,738

Total held-to-maturity securities

756,872

24,828

(21,523)

760,177

-12-

Table of Contents

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


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

Credit Quality Indicators & Allowance for Credit Losses - HTM

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

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


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

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

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


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

-13-

Table of Contents

Refer to Note 7 "Commitments and Contingencies" in Part I, Item I of this Quarterly Report for information regarding the estimated fair value of HTM securities that were pledged to secure public deposits as permitted or required by law as of March 31, 2022 and December 31, 2021.

Restricted Stock, at cost

Due to restrictions placed upon the Bank’s common stock investment in the FRB and FHLB, these securities have been classified as restricted equity securities and carried at cost. These restricted securities are not subject to the investment security classifications and are included as a separate line item on the Company’s Consolidated Balance Sheets. Restricted stock consists of FRB stock in the amount of $67.0 million for March 31, 2022 and December 31, 2021 and FHLB stock in the amount of $10.0 million and $9.8 million as of March 31, 2022 and December 31, 2021, respectively.

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 months ended March 31, 2022 and 2021 (dollars in thousands):


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

Proceeds from sales of securities	$	—	$	45,436

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

-14-

Table of Contents

3. LOANS AND ALLOWANCE FOR LOAN AND LEASE LOSSES

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

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


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

⁽¹⁾ Commercial & industrial loans include approximately $66.3 million and $145.3 million in loans from the PPP at March 31, 2022 and December 31, 2021, respectively.

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

⁽³⁾Total loans include unamortized premiums and discounts, and unamortized deferred fees and costs totaling $44.0 million and $49.3 million as of March 31, 2022 and December 31, 2021, respectively.

-15-

Table of Contents

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

Greater than

30-59 Days

60-89 Days

90 Days and

Current

Past Due

still Accruing

Nonaccrual

Total Loans

Construction and Land Development

968,019

170

—

869

969,059

Commercial Real Estate - Owner Occupied

1,995,329

5,081

—

2,396

4,865

2,007,671

Commercial Real Estate - Non-Owner Occupied

3,870,357

223

1,735

3,287

3,875,681

Multifamily Real Estate

723,816

124

—

723,940

Commercial & Industrial

2,535,815

1,382

745

763

1,975

2,540,680

Residential 1-4 Family - Commercial

565,606

827

251

878

2,239

569,801

Residential 1-4 Family - Consumer

804,069

5,890

1,018

1,147

12,039

824,163

Residential 1-4 Family - Revolving

562,159

1,157

651

1,065

3,371

568,403

Auto

497,639

1,508

183

192

333

499,855

Consumer

171,083

467

201

171,875

Other Commercial

706,856

1,270

—

708,221

Total LHFI

13,400,748

17,955

3,367

8,247

29,032

13,459,349

% of total loans

99.56

0.13

0.03

0.06

0.22

100.00

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


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

-16-

Table of Contents

The following table shows the Company’s amortized cost basis of loans on nonaccrual status as of December 31, 2021, as well as amortized cost basis of loans on nonaccrual status and loans past due 90 days and still accruing as of March 31, 2022 (dollars in thousands):

Nonaccrual

December 31, 2021

March 31, 2022

Nonaccrual With No ALLL

90 Days Past due and still Accruing

Construction and Land Development

2,697

869

—

Commercial Real Estate - Owner Occupied

5,637

4,865

970

2,396

Commercial Real Estate - Non-Owner Occupied

3,641

3,287

1,089

1,735

Multifamily Real Estate

113

—

Commercial & Industrial

1,647

1,975

763

Residential 1-4 Family - Commercial

2,285

2,239

—

878

Residential 1-4 Family - Consumer

11,397

12,039

1,147

Residential 1-4 Family - Revolving

3,406

3,371

—

1,065

Auto

223

333

—

192

Consumer

—

Total LHFI

31,100

29,032

2,061

8,247

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


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

There was no interest income recognized on nonaccrual loans during the three months ended March 31, 2022 and 2021. See Note 1 “Summary of Significant Accounting Policies” in the Company’s 2021 Form 10-K for additional information on the Company’s policies for nonaccrual loans.

-17-

Table of Contents

Troubled Debt Restructurings

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

A TDR occurs when a lender, for economic or legal reasons, grants a concession to the borrower related to the borrower’s financial difficulties, that it would not otherwise consider. All loans that are considered to be TDRs are evaluated for credit losses in accordance with the Company’s ALLL methodology. For the three months ended March 31, 2022 and March 31, 2021, the recorded investment in TDRs prior to modifications was not materially impacted by the modifications.

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


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

The Company considers a default of a TDR to occur when the borrower is 90 days past due following the restructure or a foreclosure and repossession of the applicable collateral occurs. During the three months ended March 31, 2022 and 2021, the Company did not have any material loans that went into default that had been restructured in the twelve-month period prior to the time of default.

-18-

Table of Contents

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


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

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

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

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

Total	9	$	3,230	13	$	638

-19-

Table of Contents

Allowance for Loan and Lease Losses

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

●

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

●

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

The following table shows the ALLL activity by loan segment for the three months ended March 31, 2022 and 2021 (dollars in thousands):


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

-20-

Table of Contents

Credit Quality Indicators

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

Commercial Loans

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

Pass is determined by the following criteria:

●

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

●

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

●

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

●

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

●

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

Watch is determined by the following criteria:

●

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

Special Mention is determined by the following criteria:

●

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

Substandard is determined by the following criteria:

●

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

Doubtful is determined by the following criteria:

●

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

●

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

-21-

Table of Contents

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

March 31, 2022

Term Loans Amortized Cost Basis by Origination Year

2022

2021

2020

2019

2018

Prior

Revolving Loans

Total

Construction and Land Development

Pass

61,043

485,263

228,686

43,377

38,969

46,520

22,398

926,256

Watch

—

552

237

10,876

126

3,151

—

14,942

Special Mention

—

658

—

658

Substandard

279

3,673

218

19,434

3,598

—

27,203

Total Construction and Land Development

61,322

489,488

228,924

54,471

58,529

53,927

22,398

969,059

Commercial Real Estate - Owner Occupied

Pass

91,850

216,755

273,443

311,840

246,729

720,355

18,716

1,879,688

Watch

700

182

4,012

13,611

10,452

56,869

701

86,527

Special Mention

650

—

286

9,672

607

9,337

500

21,052

Substandard

—

200

—

2,877

1,648

15,037

642

20,404

Total Commercial Real Estate - Owner Occupied

93,200

217,137

277,741

338,000

259,436

801,598

20,559

2,007,671

Commercial Real Estate - Non-Owner Occupied

Pass

184,450

640,903

407,354

519,513

395,907

1,488,880

40,029

3,677,036

Watch

—

2,152

833

25,867

20,593

50,796

100,254

Special Mention

310

—

10,583

18,854

20,754

9,394

—

59,895

Substandard

—

23,195

400

14,749

152

38,496

Total Commercial Real Estate - Non-Owner Occupied

184,760

643,055

418,770

587,429

437,654

1,563,819

40,194

3,875,681

Commercial & Industrial

Pass

152,567

654,531

406,607

270,464

106,522

167,277

691,191

2,449,159

Watch

373

1,166

5,951

2,556

14,315

4,014

6,583

34,958

Special Mention

—

492

1,284

7,278

481

1,008

5,493

16,036

Substandard

—

451

6,548

4,304

15,398

1,730

12,096

40,527

Total Commercial & Industrial

152,940

656,640

420,390

284,602

136,716

174,029

715,363

2,540,680

Multifamily Real Estate

Pass

2,165

63,181

189,952

65,004

113,421

284,473

1,553

719,749

Watch

—

357

454

436

—

1,247

Special Mention

—

2,235

618

—

2,944

Substandard

—

Total Multifamily Real Estate

2,165

63,181

192,187

65,979

113,875

285,000

1,553

723,940

Residential 1-4 Family - Commercial

Pass

11,521

104,567

87,934

58,117

42,770

232,124

893

537,926

Watch

—

2,033

879

7,464

7,930

117

18,423

Special Mention

—

429

3,440

—

3,965

Substandard

—

3,222

528

5,346

299

9,487

Total Residential 1-4 Family - Commercial

11,521

104,659

90,063

62,218

51,191

248,840

1,309

569,801

Other Commercial

Pass

70,632

222,540

162,150

118,741

5,508

78,886

43,320

701,777

Watch

—

567

5,548

—

6,115

Special Mention

—

Substandard

—

234

—

234

Total Other Commercial

70,632

222,540

162,150

118,741

6,075

84,668

43,415

708,221

Total Commercial

Pass

574,228

2,387,740

1,756,126

1,387,056

949,826

3,018,515

818,100

10,891,591

Watch

1,073

4,052

13,066

54,146

53,971

128,744

7,414

262,466

Special Mention

960

492

14,484

36,422

22,271

23,928

6,088

104,645

Substandard

279

4,416

6,549

33,816

37,408

40,694

13,189

136,351

Total Commercial

576,540

2,396,700

1,790,225

1,511,440

1,063,476

3,211,881

844,791

11,395,053

-22-

Table of Contents

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, 2021 (dollars in thousands):


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


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

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

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

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

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

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

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

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

-23-

Table of Contents

Consumer Loans

For Consumer loans, the Company evaluates credit quality based on the delinquency status of the loan. The following table details the amortized cost of the classes of loans within the Consumer segment based on their delinquency status and year of origination as of March 31, 2022 (dollars in thousands):


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


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

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

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

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

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

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

-24-

Table of Contents

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


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


	2021		2020		2019		2018		2017		Prior		Revolving Loans		Total
Residential 1-4 Family - Consumer
Current	$	248,904	$	174,459	$	47,905	$	33,809	$	44,179	$	246,554	$	11	$	795,821
30-59 Days Past Due		—		157		143		807		460		1,801		—		3,368
60-89 Days Past Due		—		—		—		624		107		2,194		—		2,925
90+ Days Past Due		—		—		46		20		304		2,643		—		3,013
Nonaccrual		444		—		117		884		1,330		8,622		—		11,397
Total Residential 1-4 Family - Consumer	$	249,348	$	174,616	$	48,211	$	36,144	$	46,380	$	261,814	$	11	$	816,524

Residential 1-4 Family - Revolving
Current	$	16,546	$	9,511	$	2,230	$	1,056	$	—	$	484	$	524,825	$	554,652
30-59 Days Past Due		—		—		—		—		—		—		1,493		1,493
60-89 Days Past Due		—		—		—		—		—		—		363		363
90+ Days Past Due		—		—		—		—		—		—		882		882
Nonaccrual		—		63		—		18		—		—		3,325		3,406
Total Residential 1-4 Family - Revolving	$	16,546	$	9,574	$	2,230	$	1,074	$	—	$	484	$	530,888	$	560,796

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

Consumer
Current	$	25,084	$	16,059	$	38,594	$	30,890	$	12,853	$	16,929	$	35,534	$	175,943
30-59 Days Past Due		31		94		201		186		63		26		88		689
60-89 Days Past Due		11		13		62		60		34		—		6		186
90+ Days Past Due		1		4		33		72		8		—		2		120
Nonaccrual		—		—		—		—		—		54		—		54
Total Consumer	$	25,127	$	16,170	$	38,890	$	31,208	$	12,958	$	17,009	$	35,630	$	176,992

Total Consumer
Current	$	497,763	$	323,877	$	161,156	$	97,500	$	73,052	$	271,171	$	560,370	$	1,984,889
30-59 Days Past Due		330		633		862		1,252		768		1,990		1,581		7,416
60-89 Days Past Due		56		42		157		717		177		2,205		369		3,723
90+ Days Past Due		56		105		121		112		335		2,643		884		4,256
Nonaccrual		444		144		172		929		1,357		8,709		3,325		15,080
Total Consumer	$	498,649	$	324,801	$	162,468	$	100,510	$	75,689	$	286,718	$	566,529	$	2,015,364

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

-25-

Table of Contents

4. GOODWILL AND INTANGIBLE ASSETS

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

The Company determined that there was no impairment to its goodwill or intangible assets. In the normal course of business, the Company routinely monitors the impact of the changes in the financial markets and includes these assessments in the Company’s goodwill impairment process.

The Company analyzed its intangible assets at March 31, 2022 and concluded no impairment existed as of the balance sheet date. Amortization expense of intangibles for the three months ended March 31, 2022 and 2021 totaled $3.0 million and $3.7 million, respectively.

As of March 31, 2022, the estimated remaining amortization expense of intangibles is as follows for the years ending (dollars in thousands):


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

-26-

Table of Contents

5. LEASES

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

Lessor Arrangements

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

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

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

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


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

Lessee Arrangements

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

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

-27-

Table of Contents

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

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


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

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


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


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

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


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

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

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

-28-

Table of Contents

6. BORROWINGS

Short-term Borrowings

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

Total short-term borrowings consist of the following as of March 31, 2022 and December 31, 2021 (dollars in thousands):


	March 31,			December 31,
	2022			2021
Securities sold under agreements to repurchase	$	115,027		$	117,870
Federal Funds Purchased		—			—
FHLB Advances		—			—
Total short-term borrowings	$	115,027		$	117,870

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

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

Long-term Borrowings

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

In connection with several previous bank acquisitions, the Company issued $58.5 million and acquired $87.0 million of trust preferred capital notes. Most recently, in connection with the acquisition of Access on February 1, 2019, the Company acquired additional trust preferred capital notes totaling $5.0 million. The remaining fair value discount on all acquired trust preferred capital notes was $13.1 million and $13.3 million at March 31, 2022 and December 31, 2021, respectively.

-29-

Table of Contents

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

Spread to

Principal

3-Month LIBOR

Rate ⁽¹⁾

Maturity

Investment ⁽²⁾

Trust Preferred Capital Securities

Trust Preferred Capital Note - Statutory Trust I

22,500

2.75

3.71

6/17/2034

696

Trust Preferred Capital Note - Statutory Trust II

36,000

1.40

2.36

6/15/2036

1,114

VFG Limited Liability Trust I Indenture

20,000

2.73

3.69

3/18/2034

619

FNB Statutory Trust II Indenture

12,000

3.10

4.06

6/26/2033

372

Gateway Capital Statutory Trust I

8,000

3.10

4.06

9/17/2033

248

Gateway Capital Statutory Trust II

7,000

2.65

3.61

6/17/2034

217

Gateway Capital Statutory Trust III

15,000

1.50

2.46

5/30/2036

464

Gateway Capital Statutory Trust IV

25,000

1.55

2.51

7/30/2037

774

MFC Capital Trust II

5,000

2.85

3.81

1/23/2034

155

Total Trust Preferred Capital Securities

150,500

4,659

Subordinated Debt⁽³⁾⁽⁴⁾

2031 Subordinated Debt

250,000

2.875

12/15/2031

Total Subordinated Debt⁽⁵⁾

250,000

Fair Value Discount⁽⁶⁾

(16,154)

Investment in Trust Preferred Capital Securities

4,659

Total Long-term Borrowings

389,005

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

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

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

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

⁽⁵⁾Fixed-to-floating rate notes. On December 15, 2026, the interest rate changes to a floating rate of the then current Three-Month Term SOFR plus a spread of 186 bps through its maturity date. The notes may be redeemed before maturity on or after December 15, 2026.

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

-30-

Table of Contents

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


			Spread to
	Principal		3-Month LIBOR		Rate ⁽¹⁾		Maturity	Investment ⁽²⁾
Trust Preferred Capital Securities
Trust Preferred Capital Note - Statutory Trust I	$	22,500	2.75	%	2.96	%	6/17/2034	$	696
Trust Preferred Capital Note - Statutory Trust II		36,000	1.40	%	1.61	%	6/15/2036		1,114
VFG Limited Liability Trust I Indenture		20,000	2.73	%	2.94	%	3/18/2034		619
FNB Statutory Trust II Indenture		12,000	3.10	%	3.31	%	6/26/2033		372
Gateway Capital Statutory Trust I		8,000	3.10	%	3.31	%	9/17/2033		248
Gateway Capital Statutory Trust II		7,000	2.65	%	2.86	%	6/17/2034		217
Gateway Capital Statutory Trust III		15,000	1.50	%	1.71	%	5/30/2036		464
Gateway Capital Statutory Trust IV		25,000	1.55	%	1.76	%	7/30/2037		774
MFC Capital Trust II		5,000	2.85	%	3.06	%	1/23/2034		155
Total Trust Preferred Capital Securities	$	150,500						$	4,659
Subordinated Debt⁽³⁾⁽⁴⁾
2031 Subordinated Debt		250,000	-	%	2.875	%	12/15/2031
Total Subordinated Debt⁽⁵⁾	$	250,000
Fair Value Discount⁽⁶⁾		(16,435)
Investment in Trust Preferred Capital Securities		4,659
Total Long-term Borrowings	$	388,724

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

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

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

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

⁽⁵⁾Fixed-to-floating rate notes. On December 15, 2026, the interest changes to a floating rate of the then current Three-Month Term SOFR plus a spread of 186 bps through its maturity date. The notes may be redeemed before maturity on or after December 15, 2026.

⁽⁶⁾ Remaining discounts of $13.3 million and $3.1 million on Trust Preferred Capital Securities and Subordinated Debt, respectively.

As of March 31, 2022, the contractual maturities of long-term debt are as follows for the years ending (dollars in thousands):

Trust

Preferred

Total

Capital

Subordinated

Fair Value

Long-term

Notes

Debt

Discount ⁽¹⁾

Borrowings

For the remaining nine months of 2022

—

(858)

2023

—

(1,162)

2024

—

(1,187)

2025

—

(1,211)

2026

—

(1,236)

Thereafter

155,159

250,000

(10,500)

394,659

Total long-term borrowings

155,159

250,000

(16,154)

389,005

⁽¹⁾ Includes discount on issued subordinated notes.

-31-

Table of Contents

7. COMMITMENTS AND CONTINGENCIES

Litigation Matters

In the ordinary course of its operations, the Company and its subsidiaries are involved in various legal and regulatory proceedings. The amount, if any, of the ultimate liability with respect to such matters cannot be determined. Despite the uncertainties of such litigation and investigations, and based on the information presently available, and after consultation with legal counsel, management believes that the ultimate outcome in such proceedings in the aggregate will not have a material adverse effect on the business, financial condition, or results of operations of the Company, subject to the potential outcomes of disclosed matters. There have been no material changes with respect to the Company’s previously disclosed proceedings.

Financial Instruments with Off-Balance Sheet Risk

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

The Company’s exposure to credit loss in the event of nonperformance by the other party to the financial instruments for commitments to extend credit and letters of credit written is represented by the contractual amount of these instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments. 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 both March 31, 2022 and December 31, 2021, the Company’s RUC and indemnification reserve was $8.4 million.

Commitments to extend credit are agreements to lend to customers as long as there are no violations of any conditions established in the contracts. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Because many of the commitments may expire without being completely drawn upon, the total commitment amounts do not necessarily represent future cash requirements.

Letters of credit are conditional commitments issued by the Company to guarantee the performance of customers to third parties. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loans to customers.

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


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

As of March 31, 2022, the Company had approximately $218.8 million in deposits in other financial institutions of which $147.4 million served as collateral for cash flow and loan swap derivatives. As of December 31, 2021, the Company had approximately $187.4 million in deposits in other financial institutions of which $82.3 million served as collateral for the Company’s derivative interest rate contracts. The Company had approximately $67.9 million and $102.0 million in deposits in other financial institutions that were uninsured at March 31, 2022 and December 31, 2021, respectively. At least annually, the Company’s management evaluates the loss risk of its uninsured deposits in financial counterparties.

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

-32-

Table of Contents

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

Pledged Assets as of March 31, 2022

AFS

HTM

Cash

Securities ⁽¹⁾

Loans ⁽²⁾

Total

Public deposits

—

619,431

527,412

—

1,146,843

Repurchase agreements

—

116,260

—

116,260

FHLB advances

—

40,919

—

2,966,527

3,007,446

Derivatives

147,411

61,255

—

208,666

Fed Funds

—

424,875

Other purposes

—

19,018

915

—

19,933

Total pledged assets

147,411

856,883

528,327

3,391,402

4,924,023


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

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

-33-

Table of Contents

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 and interest rate cap agreements, as well as interest rate lock commitments.

Derivatives Counterparty Credit Risk

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

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

Cash Flow Hedges

The Company designates derivatives as cash flow hedges when they are used to manage exposure to variability in cash flows related to forecasted transactions on variable rate financial instruments. The Company uses interest rate swap agreements as part of its hedging strategy by exchanging a notional amount, equal to the principal amount of the borrowings or commercial loans, for fixed-rate interest based on benchmarked interest rates. The original terms and conditions of the interest rate swaps vary and range in length. Amounts receivable or payable are recognized as accrued under the terms of the agreements.

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

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

At March 31, 2022 and December 31, 2021, 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 $500 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 March 31, 2022 and December 31, 2021, the aggregate notional amount of the related hedged items for certain long-term fixed rate loans totaled $87.4 million and $88.6 million, respectively, and the fair value of the swaps associated with the derivative related to hedged items was an unrealized gain of $4.3 million and an unrealized loss of $620,000, respectively.

-34-

Table of Contents

AFS Securities: The Company has entered into a swap agreement to hedge the interest rate risk on a portion of its fixed rate AFS securities. At March 31, 2022 and December 31, 2021, the aggregate notional amount of the related hedged items of the AFS securities totaled $50.0 million and the fair value of the swaps associated with the derivative related to hedged items was an unrealized loss of $1.2 million and $4.1 million, respectively.

The Company applies hedge accounting in accordance with ASC 815, Derivatives and Hedging, and the fair value hedge and the underlying hedged item, attributable to the risk being hedged, are recorded at fair value with unrealized gains and losses being recorded on the Company’s Consolidated Statements of Income. The Company assesses the effectiveness of each hedging relationship by comparing the changes in fair value or cash flows on the derivative hedging instrument with the changes in fair value or cash flows on the designated hedged item or transactions for the risk being hedged. If a hedging relationship ceases to qualify for hedge accounting, the relationship is discontinued and future changes in the fair value of the derivative instrument are recognized in current period earnings. For a discontinued or terminated fair value hedging relationship, all remaining basis adjustments to the carrying amount of the hedged item are amortized to interest income or expense over the remaining life of the hedged item consistent with the amortization of other discounts or premiums. Previous balances deferred in AOCI from discontinued or terminated cash flow hedges are reclassified to interest income or expense as the hedged transactions affect earnings or over the originally specified term of the hedging relationship. The Company’s hedges continue to be highly effective and had no material impact on the Consolidated Statements of Income.

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.

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

March 31, 2022

December 31, 2021

Derivative ⁽²⁾

Notional or

Contractual

Amount ⁽¹⁾

Assets

Liabilities

Amount ⁽¹⁾

Assets

Liabilities

Derivatives designated as accounting hedges:

Interest rate contracts: ⁽³⁾

Cash flow hedges

500,000

—

500,000

—

Fair value hedges

137,410

597

1,397

138,606

—

5,387

Derivatives not designated as accounting hedges:

Interest rate contracts⁽³⁾

5,324,908

23,506

90,632

5,017,574

73,696

49,051

⁽¹⁾Notional amounts are not recorded on the 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.

-35-

Table of Contents

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

March 31, 2022

December 31, 2021

Cumulative

Amount of Basis

Adjustments

Included in the

Carrying Amount

Carrying

Carrying Amount

Carrying

of Hedged

Amount of the

of Hedged

Amount of the

Assets/(Liabilities)

Hedged

Assets/(Liabilities)

Hedged

Amount ⁽¹⁾

Assets/(Liabilities)

Amount ⁽¹⁾

Assets/(Liabilities)

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

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

105,162

1,154

112,562

4,051

Loans

87,410

(4,369)

88,606

546

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

⁽²⁾Carrying value represents amortized cost.

-36-

Table of Contents

9. STOCKHOLDERS’ EQUITY

Series A Preferred Stock

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

Repurchase Programs

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

Accumulated Other Comprehensive Income (Loss)

The change in AOCI for the three months ended March 31, 2022 is summarized as follows, net of tax (dollars in thousands):

Unrealized Gains

(Losses)

Unrealized

for AFS

Unrealized

Gains (Losses)

Securities

Change in Fair

Gains

on AFS

Transferred to

Value of Cash

(Losses) on

Securities

HTM

Flow Hedge

BOLI

Total

Balance - December 31, 2021

22,763

(1,567)

(2,596)

18,635

Other comprehensive income (loss):

Other comprehensive loss before reclassification

(186,967)

—

(23,313)

—

(210,280)

Amounts reclassified from AOCI into earnings

—

(5)

—

167

162

Net current period other comprehensive income (loss)

(186,967)

(5)

(23,313)

167

(210,118)

Balance - March 31, 2022

(164,204)

(24,880)

(2,429)

(191,483)

The change in AOCI for the three months ended March 31, 2021 is summarized as follows, net of tax (dollars in thousands):


			Unrealized Gain
			(Losses)
	Unrealized		for AFS				Unrealized
	Gains (Losses)		Securities		Change in Fair		Gains
	on AFS		Transferred to		Value of Cash		(Losses)
	Securities		HTM		Flow Hedge		on BOLI		Total
Balance - December 31, 2020	$	74,161	$	55	$	—	$	(3,201)	$	71,015
Cumulative effects from adoption of new accounting standard
Other comprehensive income (loss):
Other comprehensive loss before reclassification		(33,125)		—		(1,428)		—		(34,553)
Amounts reclassified from AOCI into earnings		(62)		(5)		(