UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



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

For the Quarterly Period Ended September 30, 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 October 27, 2022 was 74,711,507.

Table of Contents

ATLANTIC UNION BANKSHARES CORPORATION

FORM 10-Q

INDEX


ITEM		PAGE

	PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements

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

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

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

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

	Consolidated Statements of Cash Flows (unaudited) for the nine months ended September 30, 2022 and 2021	7

	Notes to Consolidated Financial Statements (unaudited)	9

	Review Report of Independent Registered Public Accounting Firm	53

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	54

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	84

Item 4.	Controls and Procedures	86

	PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	87

Item 1A.	Risk Factors	87

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	87

Item 6.	Exhibits	88

	Signatures	89

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
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
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
CODM	–	Chief operating decision maker
the Company	–	Atlantic Union Bankshares Corporation (formerly, Union Bankshares Corporation) and its subsidiaries
COVID-19	–	COVID-19 global pandemic
CSP	–	Cary Street Partners Financial LLC
depositary shares	–	Depositary shares, each representing a 1/400th ownership interest in a share of the Company’s Series A preferred stock, with a liquidation preference of $10,000 per share of Series A preferred stock (equivalent to $25 per depositary share)
DHFB	–	Dixon, Hubard, Feinour & Brown, Inc.
EPS	–	Earnings per common share
Exchange Act	–	Securities Exchange Act of 1934, as amended
FASB	–	Financial Accounting Standards Board
FCMs	–	Futures Commission Merchants
FDIC	–	Federal Deposit Insurance Corporation
Federal Reserve	–	Board of Governors of the Federal Reserve System
FRB	–	Federal Reserve Bank of Richmond
FHLB	–	Federal Home Loan Bank of Atlanta
FHLMC	–	Federal Home Loan Mortgage Corporation
FNB	–	FNB Corporation
FNMA	–	Federal National Mortgage Association
FOMC	–	Federal Open Markets Committee
FR Y9-C	–	Consolidated financial statements for a U.S. bank holding company, a savings and loan holding company, a U.S. intermediate holding company, and a securities holding company
FTE	–	Fully taxable equivalent
GAAP or U.S. GAAP	–	Accounting principles generally accepted in the United States
GNMA	–	Government National Mortgage Association
HTM	–	Held to maturity
ICE	–	Intercontinental Exchange Data Services

Table of Contents

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
MFC	–	Middleburg Financial Corporation
NASDAQ	–	National Association of Securities Dealers Automated Quotation exchange
NM	–	Not meaningful
NOW	–	Negotiable order of withdrawal
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 September 30, 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
RPAs	–	Risk Participation Agreements
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.

Table of Contents

PART I – FINANCIAL INFORMATION

ITEM 1 – FINANCIAL STATEMENTS

ATLANTIC UNION BANKSHARES CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

AS OF SEPTEMBER 30, 2022 AND DECEMBER 31, 2021

(Dollars in thousands, except share data)


	September 30,		December 31,
	2022		2021
ASSETS		(unaudited)		(audited)
Cash and cash equivalents:
Cash and due from banks	$	177,969	$	180,963
Interest-bearing deposits in other banks		211,785		618,714
Federal funds sold		1,188		2,824
Total cash and cash equivalents		390,942		802,501
Securities available for sale, at fair value		2,717,323		3,481,650
Securities held to maturity, at carrying value		841,349		628,000
Restricted stock, at cost		82,050		76,825
Loans held for sale, at fair value		12,889		20,861
Loans held for investment, net of deferred fees and costs		13,918,720		13,195,843
Less: allowance for loan and lease losses		108,009		99,787
Total loans held for investment, net		13,810,711		13,096,056
Premises and equipment, net		126,374		134,808
Goodwill		925,211		935,560
Amortizable intangibles, net		29,142		43,312
Bank owned life insurance		437,988		431,517
Other assets		576,252		413,706
Total assets	$	19,950,231	$	20,064,796
LIABILITIES
Noninterest-bearing demand deposits	$	5,290,938	$	5,207,324
Interest-bearing deposits		11,255,278		11,403,744
Total deposits		16,546,216		16,611,068
Securities sold under agreements to repurchase		146,182		117,870
Other short-term borrowings		133,800		—
Long-term borrowings		389,576		388,724
Other liabilities		453,307		237,063
Total liabilities		17,669,081		17,354,725
Commitments and contingencies (Note 7)
STOCKHOLDERS' EQUITY
Preferred stock, $10.00 par value		173		173
Common stock, $1.33 par value		98,845		100,101
Additional paid-in capital		1,769,858		1,807,368
Retained earnings		874,393		783,794
Accumulated other comprehensive (loss) income		(462,119)		18,635
Total stockholders' equity		2,281,150		2,710,071
Total liabilities and stockholders' equity	$	19,950,231	$	20,064,796

Common shares outstanding		74,703,774		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.

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ATLANTIC UNION BANKSHARES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022 AND 2021

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


	Three Months Ended				Nine Months Ended
	September 30,		September 30,		September 30,		September 30,
	2022		2021		2022		2021
Interest and dividend income:
Interest and fees on loans	$	144,673	$	124,999	$	382,139	$	383,575
Interest on deposits in other banks		941		291		1,229		454
Interest and dividends on securities:
Taxable		14,750		11,230		43,110		32,102
Nontaxable		10,792		9,859		31,889		28,773
Total interest and dividend income		171,156		146,379		458,367		444,904
Interest expense:
Interest on deposits		15,386		5,837		25,966		22,203
Interest on short-term borrowings		1,229		22		1,805		91
Interest on long-term borrowings		3,826		3,032		10,183		9,676
Total interest expense		20,441		8,891		37,954		31,970
Net interest income		150,715		137,488		420,413		412,934
Provision for credit losses		6,412		(18,850)		12,771		(59,888)
Net interest income after provision for credit losses		144,303		156,338		407,642		472,822
Noninterest income:
Service charges on deposit accounts		6,784		7,198		22,421		19,314
Other service charges, commissions and fees		1,770		1,534		5,134		4,970
Interchange fees		2,461		2,203		6,539		6,252
Fiduciary and asset management fees		4,134		7,029		18,329		20,323
Mortgage banking income		1,390		4,818		6,707		17,692
Bank owned life insurance income		3,445		2,727		8,858		8,202
Loan-related interest rate swap fees		2,050		1,102		8,510		4,176
Other operating income		3,550		3,327		17,525		8,459
Total noninterest income		25,584		29,938		94,023		89,388
Noninterest expenses:
Salaries and benefits		56,600		53,534		170,203		156,959
Occupancy expenses		6,408		7,251		19,685		21,705
Furniture and equipment expenses		3,673		4,040		10,860		11,919
Technology and data processing		8,273		7,534		23,930		21,657
Professional services		3,504		3,792		12,274		13,161
Marketing and advertising expense		2,343		2,548		7,008		7,330
FDIC assessment premiums and other insurance		3,094		2,172		8,344		6,798
Franchise and other taxes		4,507		4,432		13,506		13,303
Loan-related expenses		1,575		1,503		5,218		5,289
Amortization of intangible assets		2,480		3,381		8,434		10,679
Loss on debt extinguishment		—		—		—		14,695
Other expenses		7,466		5,156		24,550		15,756
Total noninterest expenses		99,923		95,343		304,012		299,251
Income from continuing operations before income taxes		69,964		90,933		197,653		262,959
Income tax expense		11,894		16,368		33,667		46,821
Net income		58,070		74,565		163,986		216,138
Dividends on preferred stock		2,967		2,967		8,901		8,901
Net income available to common shareholders	$	55,103	$	71,598	$	155,085	$	207,237

Basic earnings per common share	$	0.74	$	0.94	$	2.07	$	2.66
Diluted earnings per common share	$	0.74	$	0.94	$	2.07	$	2.66
Dividends declared per common share	$	0.30	$	0.28	$	0.86	$	0.81
Basic weighted average number of common shares outstanding		74,703,699		76,309,355		75,029,000		77,988,151
Diluted weighted average number of common shares outstanding		74,705,054		76,322,736		75,034,084		78,007,543

See accompanying notes to consolidated financial statements.

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ATLANTIC UNION BANKSHARES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (UNAUDITED)

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022 AND 2021

(Dollars in thousands)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021
Net income	$	58,070	$	74,565	$	163,986	$	216,138
Other comprehensive (loss) income:
Cash flow hedges:
Change in fair value of cash flow hedges (net of tax, $6,417 and $145 for the three months and $15,691 and $169 for the nine months ended September 30, 2022 and 2021, respectively)		(24,142)		(545)		(59,027)		634
Reclassification adjustment for (gains) included in net income (net of tax, $0 and $0 for the three months and $0 and $12 for the nine months ended September 30, 2022 and 2021, respectively) ⁽¹⁾		—		—		—		(47)
AFS securities:
Unrealized holding (losses) arising during period (net of tax, $32,388 and $6,178 for the three months and $112,226 and $11,311 for the nine months ended September 30, 2022 and 2021, respectively)		(121,841)		(23,242)		(422,183)		(42,549)
Reclassification adjustment for (gains) losses included in net income (net of tax, $0 and $2 for the three months and $0 and $18 for the nine months ended September 30, 2022 and 2021, respectively) ⁽²⁾		—		(7)		2		(69)
HTM securities:
Reclassification adjustment for accretion of unrealized (gain) on AFS securities transferred to HTM (net of tax, $1 and $1 for the three months and $4 and $4 for the nine months ended September 30, 2022 and 2021, respectively) ⁽³⁾		(4)		(5)		(14)		(15)
Bank owned life insurance:
Reclassification adjustment for losses included in net income ⁽⁴⁾		151		150		468		454
Other comprehensive (loss) income:		(145,836)		(23,649)		(480,754)		(41,592)
Comprehensive (loss) income	$	(87,766)	$	50,916	$	(316,768)	$	174,546

⁽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 "Other operating income" on the Company’s Consolidated Statements of Income with the corresponding income tax effect being reflected as a component of income tax expense.

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

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

See accompanying notes to consolidated financial statements.

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Table of Contents

ATLANTIC UNION BANKSHARES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)

NINE MONTHS ENDED SEPTEMBER 30, 2022

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

Accumulated

Additional

Other

Common

Preferred

Paid-In

Retained

Comprehensive

Stock

Capital

Earnings

Income (Loss)

Total

Balance - December 31, 2021

100,101

173

1,807,368

783,794

18,635

2,710,071

Net Income

43,690

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

(210,118)

Dividends on common stock ($0.28 per share)

(21,163)

Dividends on preferred stock ($171.88 per share)

(2,967)

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

(837)

(24,181)

(25,018)

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

387

1,044

1,431

Stock-based compensation expense

2,409

Balance - March 31, 2022

99,651

173

1,786,640

803,354

(191,483)

2,498,335

Net Income

62,226

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

(124,800)

Dividends on common stock ($0.28 per share)

(20,912)

Dividends on preferred stock ($171.88 per share)

(2,967)

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

(863)

(22,350)

(23,213)

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

(154)

(120)

Stock-based compensation expense

2,927

Balance - June 30, 2022

98,822

173

1,767,063

841,701

(316,283)

2,391,476

Net Income

58,070

Other comprehensive loss (net of taxes of $38,806)

(145,836)

Dividends on common stock ($0.30 per share)

(22,411)

Dividends on preferred stock ($171.88 per share)

(2,967)

Issuance of common stock under Equity Compensation Plans, stock issuance for services rendered, and vesting of restricted stock, net of shares held for taxes (17,048 shares)

Stock-based compensation expense

2,729

Balance - September 30, 2022

98,845

173

1,769,858

874,393

(462,119)

2,281,150

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Table of Contents

ATLANTIC UNION BANKSHARES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)

NINE MONTHS ENDED SEPTEMBER 30, 2021

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


									Accumulated
					Additional				Other
	Common		Preferred		Paid-In		Retained		Comprehensive
	Stock		Stock		Capital		Earnings		Income (Loss)		Total
Balance - December 31, 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
Net Income								85,384				85,384
Other comprehensive income (net of taxes of $3,672)										16,571		16,571
Dividends on common stock ($0.28 per share)								(22,125)				(22,125)
Dividends on preferred stock ($171.88 per share)								(2,967)				(2,967)
Stock purchased under stock repurchase plan (1,090,169 shares)		(1,450)				(40,913)						(42,363)
Issuance of common stock under Equity Compensation Plans, stock issuance for services rendered, and vesting of restricted stock, net of shares held for taxes (35,693 shares)		48				663						711
Stock-based compensation expense						2,654						2,654
Balance - June 30, 2021	$	103,091	$	173	$	1,881,395	$	709,866	$	53,072	$	2,747,597
Net Income								74,565				74,565
Other comprehensive loss (net of taxes of $6,181)										(23,649)		(23,649)
Dividends on common stock ($0.28 per share)								(21,300)				(21,300)
Dividends on preferred stock ($171.88 per share)								(2,967)				(2,967)
Stock purchased under stock repurchase plan (2,288,961 shares)		(3,045)				(79,592)						(82,637)
Issuance of common stock under Equity Compensation Plans, stock issuance for services rendered, and vesting of restricted stock, net of shares held for taxes (11,953 shares)		16				175						191
Stock-based compensation expense						2,639						2,639
Balance - September 30, 2021	$	100,062	$	173	$	1,804,617	$	760,164	$	29,423	$	2,694,439

See accompanying notes to consolidated financial statements.

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ATLANTIC UNION BANKSHARES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

NINE MONTHS ENDED SEPTEMBER 30, 2022 AND 2021

(Dollars in thousands)


	2022		2021
Operating activities:
Net income	$	163,986	$	216,138
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of premises and equipment		10,652		11,992
Writedown of ROU assets, foreclosed properties, and equipment		4,768		1,119
Amortization, net		23,838		24,397
Amortization (accretion) related to acquisitions, net		2,271		(1,792)
Provision for credit losses		12,771		(59,888)
Gain on sale of DHFB		(9,082)		—
BOLI income		(8,858)		(8,202)
Originations and purchases of LHFS		(263,162)		(491,895)
Proceeds from sales of LHFS		270,853		550,683
(Gains) losses on sales of foreclosed properties and former bank premises, net		(507)		638
Losses on debt extinguishment		—		14,695
Stock-based compensation expenses		8,065		7,492
Issuance of common stock for services		611		372
Net (increase) decrease in other assets		(6,489)		108,590
Net increase (decrease) in other liabilities		117,188		(134,336)
Net cash provided by operating activities		326,905		240,003
Investing activities:
Purchases of AFS securities, restricted stock, and other investments		(97,518)		(1,142,304)
Purchases of HTM securities		(225,026)		—
Proceeds from sales of AFS securities and restricted stock		29,719		45,436
Proceeds from maturities, calls and paydowns of AFS securities		281,542		392,129
Proceeds from maturities, calls and paydowns of HTM securities		8,223		6,642
Net (increase) decrease in LHFI		(717,591)		891,240
Net increase in premises and equipment		(3,054)		(9,221)
Proceeds from BOLI settlements		2,876		4,843
Purchases of BOLI policies		—		(100,000)
Proceeds from sales of foreclosed properties and former bank premises		5,965		8,632
Net cash (used in) provided by investing activities		(714,864)		97,397
Financing activities:
Net increase in noninterest-bearing deposits		83,614		960,135
Net decrease in interest-bearing deposits		(148,497)		(60,716)
Net increase (decrease) in short-term borrowings		162,112		(255,707)
Repayments of long-term debt		—		(214,695)
Cash dividends paid - common stock		(64,486)		(63,125)
Cash dividends paid - preferred stock		(8,901)		(8,901)
Repurchase of common stock		(48,231)		(125,000)
Issuance of common stock		3,849		2,955
Vesting of restricted stock, net of shares held for taxes		(3,060)		(2,390)
Net cash (used in) provided by financing activities		(23,600)		232,556
(Decrease) increase in cash and cash equivalents		(411,559)		569,956
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	$	390,942	$	1,063,250

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ATLANTIC UNION BANKSHARES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

NINE MONTHS ENDED SEPTEMBER 30, 2022 AND 2021

(Dollars in thousands)


	2022		2021
Supplemental Disclosure of Cash Flow Information
Cash payments for:
Interest	$	34,099	$	30,749
Income taxes		1,224		1,260

Supplemental schedule of noncash investing and financing activities
Transfers from loans to foreclosed properties		404		14
Transfers from bank premises to OREO		—		1,109

See accompanying notes to consolidated financial statements.

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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 September 30, 2022. Certain non-bank financial services affiliates of Atlantic Union Bank include: Atlantic Union Equipment Finance, Inc., which provides equipment financing; Atlantic Union Financial Consultants, LLC, which provides brokerage services; and Union Insurance Group, LLC, which offers various lines of insurance products.

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

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

The unaudited consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in the Company’s 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 September 30, 2022.

Accrued Interest Receivable

The Company has elected to exclude accrued interest from the amortized cost basis in its determination of the ALLL, as well as the ACL reserve for securities. Accrued interest receivable totaled $48.1 million and $43.3 million on LHFI, $6.6 million and $7.0 million on HTM securities, and $13.3 million and $14.5 million on AFS securities at September 30, 2022 and December 31, 2021, respectively, and is included in “Other assets” on the Company’s Consolidated Balance Sheets. The

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Company’s policy is to write off accrued interest receivable through reversal of interest income when it becomes probable the Company will not be able to collect the accrued interest. For the quarters ended September 30, 2022 and September 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 where separate financial information is available and evaluated regularly by the CODMs in deciding how to allocate resources and in assessing performance. ASC Topic 280, Segment Reporting, requires information to be reported about a company’s operating segments using a “management approach,” meaning it is based on the way management organizes segments internally to make operating decisions and assess performance. Based on this guidance, historically, the Company has had only one reportable operating segment, the Bank. However, effective for the third quarter of 2022, the Company completed system conversions that allow its CODMs to evaluate the business, establish the overall business strategy, allocate resources, and assess business performance within two reportable operating segments: Wholesale Banking and Consumer Banking, with corporate support functions such as corporate treasury and others included in Corporate Other. The application and development of management reporting methodologies is a dynamic process subject to periodic enhancements. As these enhancements are made, financial results presented by each reportable segment may be periodically revised. Refer to Note 12 "Segment Reporting and Revenue" in Part I, Item I of this Quarterly Report for additional details on the Company’s reportable operating segments.

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2. SECURITIES

Available for Sale

The Company’s AFS investment portfolio is generally highly-rated or agency backed. All AFS securities were current with no securities past due or on non-accrual as of September 30, 2022 and December 31, 2021.

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

Amortized

Gross Unrealized

Estimated

Cost

Gains

(Losses)

Fair Value

September 30, 2022

U.S. government and agency securities

70,399

—

(8,763)

61,636

Obligations of states and political subdivisions

961,722

(197,186)

764,543

Corporate and other bonds ⁽¹⁾

246,411

—

(15,323)

231,088

Commercial MBS

Agency

247,854

(36,739)

211,199

Non-agency

101,460

—

(4,085)

97,375

Total commercial MBS

349,314

(40,824)

308,574

Residential MBS

Agency

1,520,401

(238,966)

1,281,503

Non-agency

75,130

—

(6,805)

68,325

Total residential MBS

1,595,531

(245,771)

1,349,828

Other securities

1,654

—

1,654

Total AFS securities

3,225,031

159

(507,867)

2,717,323

⁽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

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The following table shows the gross unrealized losses and fair value of the Company’s AFS securities with unrealized losses for which an ACL has not been recorded at September 30, 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⁽²⁾		Losses		Value		Losses
September 30, 2022
U.S. government and agency securities	$	58,670	$	(8,726)	$	2,896	$	(37)	$	61,566	$	(8,763)
Obligations of states and political subdivisions		601,039		(120,853)		159,773		(76,333)		760,812		(197,186)
Corporate and other bonds⁽¹⁾		219,904		(14,111)		8,788		(1,212)		228,692		(15,323)
Commercial MBS
Agency		113,687		(15,734)		92,435		(21,005)		206,122		(36,739)
Non-agency		76,779		(2,877)		20,596		(1,208)		97,375		(4,085)
Total commercial MBS		190,466		(18,611)		113,031		(22,213)		303,497		(40,824)
Residential MBS
Agency		606,805		(88,065)		668,275		(150,901)		1,275,080		(238,966)
Non-agency		56,490		(5,356)		11,724		(1,449)		68,214		(6,805)
Total residential MBS		663,295		(93,421)		679,999		(152,350)		1,343,294		(245,771)
Total AFS securities	$	1,733,374	$	(255,722)	$	964,487	$	(252,145)	$	2,697,861	$	(507,867)

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

⁽²⁾ Comprised of 302 and 33 individual securities as of September 30, 2022 and December 31, 2021, respectively

The Company has evaluated AFS securities in an unrealized loss position for credit related impairment at September 30, 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.

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


	September 30, 2022				December 31, 2021
	Amortized		Estimated		Amortized		Estimated
	Cost		Fair Value		Cost		Fair Value
Due in one year or less	$	31,089	$	30,799	$	18,247	$	18,317
Due after one year through five years		165,998		160,945		180,080		183,981
Due after five years through ten years		338,619		308,149		324,615		331,215
Due after ten years		2,689,325		2,217,430		2,925,842		2,948,137
Total AFS securities	$	3,225,031	$	2,717,323	$	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 September 30, 2022 and December 31, 2021.

Held to Maturity

The Company’s HTM investment portfolio primarily consists of highly-rated municipal securities. The Company’s HTM securities were substantially all current at September 30, 2022 and December 31, 2021.

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

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

Carrying

Gross Unrealized

Estimated

Value

Gains

(Losses)

Fair Value

September 30, 2022

U.S. government and agency securities

690

—

(39)

651

Obligations of states and political subdivisions

724,330

176

(64,366)

660,140

Commercial Agency MBS

29,096

—

(4,360)

24,736

Residential MBS

Agency

43,080

—

(6,732)

36,348

Non-agency

44,153

—

(548)

43,605

Total residential MBS

87,233

—

(7,280)

79,953

Total HTM securities

841,349

176

(76,045)

765,480

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 Agency MBS		4,523		—		(58)		4,465
Total HTM securities	$	628,000	$	65,982	$	(208)	$	693,774

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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 September 30, 2022 and December 31, 2021. The primary indicators of credit quality for the Company’s HTM portfolio are security type and credit rating, which is influenced by a number of factors including obligor cash flow, geography, seniority, and others. The majority of the Company’s HTM securities with credit risk are obligations of states and political subdivisions.

The following table presents the amortized cost of HTM securities as of September 30, 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
September 30, 2022
Credit Rating:
AAA/AA/A	$	—	$	700,138	$	2,764	$	702,902
BBB/BB/B		—		1,192		—		1,192
Not Rated - Agency⁽¹⁾		690		—		72,176		72,866
Not Rated - Non-Agency⁽²⁾		—		23,000		41,389		64,389
Total	$	690	$	724,330	$	116,329	$	841,349
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

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

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


	September 30, 2022				December 31, 2021
	Carrying		Estimated		Carrying		Estimated
	Value		Fair Value		Value		Fair Value
Due in one year or less	$	25,025	$	25,016	$	3,034	$	3,027
Due after one year through five years		35,709		35,656		5,852		6,065
Due after five years through ten years		15,798		15,587		14,019		15,984
Due after ten years		764,817		689,221		605,095		668,698
Total HTM securities	$	841,349	$	765,480	$	628,000	$	693,774

Refer to Note 7 "Commitments and Contingencies" in Part I, Item I of this Quarterly Report for information regarding the estimated fair value of HTM securities that were pledged to secure public deposits as permitted or required by law as of September 30, 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 September 30, 2022 and December 31, 2021 and FHLB stock in the amount of $15.0 million and $9.8 million as of September 30, 2022 and December 31, 2021, respectively.

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Realized Gains and Losses

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


	Three Months Ended		Nine Months Ended
	September 30, 2022		September 30, 2022
Realized gains (losses)⁽¹⁾:
Gross realized gains	$	—	$	—
Gross realized losses		—		(2)
Net realized gains	$	—	$	(2)

Proceeds from sales of securities	$	17,250	$	29,719


	Three Months Ended		Nine Months Ended
	September 30, 2021		September 30, 2021
Realized gains (losses)⁽¹⁾:
Gross realized gains	$	9	$	147
Gross realized losses		—		(60)
Net realized gains	$	9	$	87

Proceeds from sales of securities	$	—	$	45,436

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

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3. LOANS AND ALLOWANCE FOR LOAN AND LEASE LOSSES

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


	September 30, 2022		December 31, 2021
Construction and Land Development	$	1,068,201	$	862,236
Commercial Real Estate - Owner Occupied		1,953,872		1,995,409
Commercial Real Estate - Non-Owner Occupied		3,900,325		3,789,377
Multifamily Real Estate		774,970		778,626
Commercial & Industrial⁽¹⁾		2,709,047		2,542,243
Residential 1-4 Family - Commercial		542,612		607,337
Residential 1-4 Family - Consumer		891,353		816,524
Residential 1-4 Family - Revolving		588,452		560,796
Auto		561,277		461,052
Consumer		172,776		176,992
Other Commercial⁽²⁾		755,835		605,251
Total LHFI, net of deferred fees and costs⁽³⁾		13,918,720		13,195,843
Allowance for loan and lease losses		(108,009)		(99,787)
Total LHFI, net	$	13,810,711	$	13,096,056

⁽¹⁾ Commercial & industrial loans included approximately $12.1 million and $145.3 million in loans from the PPP at September 30, 2022 and December 31, 2021, respectively.

⁽²⁾ There are no loans from the PPP included in other commercial loans as of September 30, 2022. As of December 31, 2021 other commercial loans included approximately $5.1 million in loans from the PPP.

⁽³⁾Total loans include unamortized premiums and discounts, and unamortized deferred fees and costs totaling $45.7 million and $49.3 million as of September 30, 2022 and December 31, 2021, respectively.

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

1,067,438

120

107

115

421

1,068,201

Commercial Real Estate - Owner Occupied

1,937,372

7,337

763

3,517

4,883

1,953,872

Commercial Real Estate - Non-Owner Occupied

3,897,324

—

457

621

1,923

3,900,325

Multifamily Real Estate

774,970

—

774,970

Commercial & Industrial

2,702,308

796

3,128

526

2,289

2,709,047

Residential 1-4 Family - Commercial

538,835

1,410

308

1,962

542,612

Residential 1-4 Family - Consumer

876,980

1,123

1,449

680

11,121

891,353

Residential 1-4 Family - Revolving

581,418

1,115

1,081

1,255

3,583

588,452

Auto

558,678

1,876

257

148

318

561,277

Consumer

172,180

409

101

—

172,776

Other Commercial

755,740

—

755,835

Total LHFI

13,863,243

14,186

7,440

7,351

26,500

13,918,720

% of total loans

99.61

0.10

0.05

0.19

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	%

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


	September 30, 2022
	Nonaccrual		Nonaccrual With No ALLL		90 Days Past due and still Accruing
Construction and Land Development	$	421	$	—	$	115
Commercial Real Estate - Owner Occupied		4,883		932		3,517
Commercial Real Estate - Non-Owner Occupied		1,923		—		621
Commercial & Industrial		2,289		1		526
Residential 1-4 Family - Commercial		1,962		—		308
Residential 1-4 Family - Consumer		11,121		—		680
Residential 1-4 Family - Revolving		3,583		—		1,255
Auto		318		—		148
Consumer		—		—		86
Other Commercial		—		—		95
Total LHFI	$	26,500	$	933	$	7,351

The following table shows the Company’s 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):


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

There was no interest income recognized on nonaccrual loans during the three and nine months ended September 30, 2022 and 2021. See Note 1 “Summary of Significant Accounting Policies” in the “Notes to the Consolidated Financial Statements” contained in Item 8 “Financial Statements and Supplementary Data” in the Company’s 2021 Form 10-K for additional information on the Company’s policies for nonaccrual loans.

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Troubled Debt Restructurings

As of September 30, 2022, the Company had TDRs totaling $15.6 million with an estimated $569,000 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 and nine months ended September 30, 2022 and September 30, 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 September 30, 2022 and December 31, 2021 (dollars in thousands):


	September 30, 2022					December 31, 2021
	No. of	Recorded		Outstanding		No. of	Recorded		Outstanding
	Loans	Investment		Commitment		Loans	Investment		Commitment
Performing
Construction and Land Development	3	$	159	$	—	4	$	201	$	—
Commercial Real Estate - Owner Occupied	2		1,000		—	3		572		—
Commercial & Industrial	1		100		—	—		—		—
Residential 1-4 Family - Commercial	1		1,334		—	—		—		—
Residential 1-4 Family - Consumer	81		7,470		—	75		9,021		—
Residential 1-4 Family - Revolving	3		257		5	3		265		4
Consumer	1		13		—	2		15		—
Other Commercial	—		—		—	1		239		—
Total performing	92	$	10,333	$	5	88	$	10,313	$	4
Nonperforming
Commercial Real Estate - Owner Occupied	1	$	16	$	—	2	$	830	$	—
Commercial Real Estate - Non-Owner Occupied	2		242		—	3		1,357		—
Commercial & Industrial	2		481		—	3		729		—
Residential 1-4 Family - Commercial	3		371		—	3		388		—
Residential 1-4 Family - Consumer	24		4,092		—	24		4,239		—
Residential 1-4 Family - Revolving	3		96		—	3		99		—
Total nonperforming	35	$	5,298	$	—	38	$	7,642	$	—
Total performing and nonperforming	127	$	15,631	$	5	126	$	17,955	$	4

The Company considers a default of a TDR to occur when the borrower is 90 days past due following the restructure or a foreclosure and repossession of the applicable collateral occurs. During the three and nine months ended September 30, 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.

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


	Three Months Ended September 30, 2022			Nine Months Ended September 30, 2022
		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	$	766
Total loan term extended at a market rate	—	$	—	1	$	766

Term modification, below market rate
Residential 1-4 Family - Consumer	7	$	665	17	$	1,166
Total loan term extended at a below market rate	7	$	665	17	$	1,166

Total	7	$	665	19	$	3,266


	Three Months Ended September 30, 2021			Nine Months Ended September 30, 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
Total interest only at market rate of interest	—	$	—	—	$	—

Term modification, at a market rate
Commercial Real Estate - Non-Owner Occupied	1	$	157	1	$	157
Residential 1-4 Family - Consumer	—		—	2		102
Total loan term extended at a market rate	1	$	157	3	$	259

Term modification, below market rate
Residential 1-4 Family - Consumer	—	$	—	11	$	1,813
Consumer	—		—	1		15
Total loan term extended at a below market rate	—	$	—	12	$	1,828

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	1	$	157	16	$	2,132

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Allowance for Loan and Lease Losses

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

●

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

●

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

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

Three Months Ended September 30, 2022

Nine Months Ended September 30, 2022

Commercial

Consumer

Total

Commercial

Consumer

Total

Balance at beginning of period

77,413

26,771

104,184

77,902

21,885

99,787

Loans charged-off

(1,086)

(715)

(1,801)

(2,852)

(2,415)

(5,267)

Recoveries credited to allowance

605

609

1,214

1,723

2,022

3,745

Provision charged to operations

6,969

(2,557)

4,412

7,128

2,616

9,744

Balance at end of period

83,901

24,108

108,009

83,901

24,108

108,009


	Three Months Ended September 30, 2021						Nine Months Ended September 30, 2021
	Commercial		Consumer		Total		Commercial		Consumer		Total
Balance at beginning of period	$	89,837	$	28,424	$	118,261	$	117,403	$	43,137	$	160,540
Loans charged-off		(967)		(1,299)		(2,266)		(3,832)		(4,020)		(7,852)
Recoveries credited to allowance		1,281		872		2,153		3,929		2,569		6,498
Provision charged to operations		(15,173)		(1,177)		(16,350)		(42,522)		(14,866)		(57,388)
Balance at end of period	$	74,978	$	26,820	$	101,798	$	74,978	$	26,820	$	101,798

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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.

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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 September 30, 2022 (dollars in thousands):

September 30, 2022

Term Loans Amortized Cost Basis by Origination Year

2022

2021

2020

2019

2018

Prior

Revolving Loans

Total

Construction and Land Development

Pass

278,751

522,332

139,003

16,527

35,327

36,153

22,434

1,050,527

Watch

—

855

—

3,842

120

2,736

—

7,553

Special Mention

921

1,491

338

—

174

—

2,924

Substandard

1,261

2,359

214

1,345

1,978

—

7,197

Total Construction and Land Development

280,933

527,037

139,381

20,583

36,792

41,041

22,434

1,068,201

Commercial Real Estate - Owner Occupied

Pass

193,743

204,645

256,490

290,697

233,459

663,420

15,089

1,857,543

Watch

1,069

178

2,463

8,293

12,375

26,383

1,149

51,910

Special Mention

641

—

1,479

914

18,816

21,892

Substandard

—

2,826

—

4,370

1,610

13,256

465

22,527

Total Commercial Real Estate - Owner Occupied

195,453

207,649

258,953

304,839

248,358

721,875

16,745

1,953,872

Commercial Real Estate - Non-Owner Occupied

Pass

339,274

671,073

397,814

508,462

375,951

1,392,787

31,971

3,717,332

Watch

—

2,151

818

26,793

40,466

27,259

—

97,487

Special Mention

234

—

6,084

2,609

18,771

—

27,698

Substandard

—

10,501

22,797

18,930

5,580

—

57,808

Total Commercial Real Estate - Non-Owner Occupied

339,508

673,224

409,133

564,136

437,956

1,444,397

31,971

3,900,325

Commercial & Industrial

Pass

529,915

576,070

321,669

191,789

86,424

144,362

746,107

2,596,336

Watch

1,401

794

17,955

5,204

12,546

2,283

22,057

62,240

Special Mention

—

182

416

2,500

373

2,031

20,174

25,676

Substandard

536

112

3,912

14,253

1,375

4,509

24,795

Total Commercial & Industrial

531,414

577,582

340,152

203,405

113,596

150,051

792,847

2,709,047

Multifamily Real Estate

Pass

84,683

79,629

216,676

62,386

76,761

247,444

2,225

769,804

Watch

—

4,209

446

423

—

5,078

Special Mention

—

Total Multifamily Real Estate

84,683

79,629

216,676

66,595

77,207

247,955

2,225

774,970

Residential 1-4 Family - Commercial

Pass

35,383

91,966

79,004

53,298

38,421

208,616

949

507,637

Watch

—

1,344

545

8,561

2,985

5,093

114

18,642

Special Mention

—

1,495

4,800

2,717

—

9,083

Substandard

—

2,464

478

4,009

299

7,250

Total Residential 1-4 Family - Commercial

35,383

93,310

81,044

64,394

46,684

220,435

1,362

542,612

Other Commercial

Pass

168,290

216,249

156,770

118,283

3,683

70,833

13,209

747,317

Watch

5,367

—

3,056

—

8,423

Substandard

—

Total Other Commercial

173,657

216,249

156,770

118,283

3,683

73,889

13,304

755,835

Total Commercial

Pass

1,630,039

2,361,964

1,567,426

1,241,442

850,026

2,763,615

831,984

11,246,496

Watch

7,837

5,322

21,781

56,902

68,938

67,233

23,320

251,333

Special Mention

1,796

1,673

2,249

10,134

8,696

42,597

20,216

87,361

Substandard

1,359

5,721

10,653

33,757

36,616

26,198

5,368

119,672

Total Commercial

1,641,031

2,374,680

1,602,109

1,342,235

964,276

2,899,643

880,888

11,704,862

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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

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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 September 30, 2022 (dollars in thousands):


		September 30, 2022
		Term Loans Amortized Cost Basis by Origination Year


	2022		2021		2020		2019		2018		Prior		Revolving Loans		Total
Residential 1-4 Family - Consumer
Current	$	163,110	$	250,861	$	161,913	$	38,668	$	23,633	$	238,782	$	13	$	876,980
30-59 Days Past Due		—		—		90		142		174		717		—		1,123
60-89 Days Past Due		—		—		—		104		—		1,345		—		1,449
90+ Days Past Due		—		—		—		45		—		635		—		680
Nonaccrual		—		429		—		268		957		9,467		—		11,121
Total Residential 1-4 Family - Consumer	$	163,110	$	251,290	$	162,003	$	39,227	$	24,764	$	250,946	$	13	$	891,353

Residential 1-4 Family - Revolving
Current	$	58,864	$	14,630	$	5,825	$	1,715	$	826	$	478	$	499,080	$	581,418
30-59 Days Past Due		—		—		—		—		—		—		1,115		1,115
60-89 Days Past Due		—		—		—		—		—		—		1,081		1,081
90+ Days Past Due		—		—		—		—		—		—		1,255		1,255
Nonaccrual		—		149		57		—		14		—		3,363		3,583
Total Residential 1-4 Family - Revolving	$	58,864	$	14,779	$	5,882	$	1,715	$	840	$	478	$	505,894	$	588,452

Auto
Current	$	221,446	$	168,008	$	89,869	$	49,923	$	19,147	$	10,285	$	—	$	558,678
30-59 Days Past Due		310		653		292		375		119		127		—		1,876
60-89 Days Past Due		3		79		78		55		—		42		—		257
90+ Days Past Due		—		108		13		6		12		9		—		148
Nonaccrual		—		90		107		89		8		24		—		318
Total Auto	$	221,759	$	168,938	$	90,359	$	50,448	$	19,286	$	10,487	$	—	$	561,277

Consumer
Current	$	36,208	$	17,683	$	12,001	$	26,271	$	19,195	$	21,475	$	39,347	$	172,180
30-59 Days Past Due		10		6		40		150		109		51		43		409
60-89 Days Past Due		—		1		19		39		39		2		1		101
90+ Days Past Due		—		13		28		9		14		1		21		86
Total Consumer	$	36,218	$	17,703	$	12,088	$	26,469	$	19,357	$	21,529	$	39,412	$	172,776

Total Consumer
Current	$	479,628	$	451,182	$	269,608	$	116,577	$	62,801	$	271,020	$	538,440	$	2,189,256
30-59 Days Past Due		320		659		422		667		402		895		1,158		4,523
60-89 Days Past Due		3		80		97		198		39		1,389		1,082		2,888
90+ Days Past Due		—		121		41		60		26		645		1,276		2,169
Nonaccrual		—		668		164		357		979		9,491		3,363		15,022
Total Consumer	$	479,951	$	452,710	$	270,332	$	117,859	$	64,247	$	283,440	$	545,319	$	2,213,858

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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 nine months ended September 30, 2022 or the year ended December 31, 2021.

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4. GOODWILL AND INTANGIBLE ASSETS

The Company’s intangible assets consist of core deposits, goodwill, and other intangibles arising from acquisitions. The Company has determined that core deposit intangibles have finite lives and amortizes them over their estimated useful lives. Core deposit intangibles are being amortized over the period of expected benefit, which ranges from 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. In the normal course of business, the Company routinely monitors the impact of the changes in the financial markets and includes these assessments in the Company’s impairment process. The Company concluded there was no impairment to the Company’s goodwill or intangible assets as of the balance sheet date.

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

In the third quarter of 2022, the Company moved from one reportable operating segment, the Bank, to two reportable operating segments, Wholesale Banking and Consumer Banking, which resulted in goodwill being allocated between the two reportable operating segments based on their relative fair values. The Company determined that there was no impairment to the Bank’s goodwill prior to reallocating goodwill.

The following table presents the Company’s goodwill and intangible assets by operating segment as of September 30, 2022 and December 31, 2021 (dollars in thousands):


	Wholesale Banking		Consumer Banking		Corporate Other		Total
As of September 30, 2022
Goodwill	$	642,256	$	282,955	$	—	$	925,211
Intangible assets		—		1,704		27,438		29,142
As of December 31, 2021
Goodwill	$	642,256	$	293,304	$	—	$	935,560
Intangible assets		—		8,327		34,985		43,312

Refer to Note 12 “Segment Reporting and Revenue” in Part I, Item 1 “Financial Statements” of this Quarterly Report for more information on the Company’s reportable operating segment changes.

Amortization expense of intangibles for the three months ended September 30, 2022 and 2021 totaled $2.5 million and $3.4 million, respectively. Amortization expense of intangibles for the nine months ended September 30, 2022 and 2021 totaled $8.4 million and $10.7 million, respectively.

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


For the remaining three months of 2022	$	2,382
2023		8,518
2024		6,753
2025		5,154
2026		3,559
Thereafter		2,776
Total estimated amortization expense	$	29,142

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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.

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 September 30, 2022 and December 31, 2021, the carrying value of residual assets covered by residual value guarantees and RVI was $36.7 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):


	September 30, 2022		December 31, 2021
Sales-type and direct financing leases:
Lease receivables, net of unearned income and deferred selling profit	$	254,773	$	199,423
Unguaranteed residual values, net of unearned income and deferred selling profit		12,219		8,911
Total net investment in sales-type and direct financing leases	$	266,992	$	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 23 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.

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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):


	September 30, 2022						December 31, 2021
	Operating			Finance			Operating			Finance
ROU assets	$	31,821		$	5,817		$	40,653		$	6,506
Lease liabilities		44,145			8,593			50,742			9,477
Lease Term and Discount Rate of Operating leases:
Weighted-average remaining lease term (years)		6.44			6.33			6.75			7.08
Weighted-average discount rate ⁽¹⁾		2.63	%		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


	Nine months ended September 30,
	2022		2021
Cash paid for amounts included in measurement of lease liabilities:
Operating Cash Flows from Finance Leases	$	79	$	89
Operating Cash Flows from Operating Leases		8,514		8,961
Financing Cash Flows from Finance Leases		885		851
ROU assets obtained in exchange for lease obligations:
Operating leases	$	1,268	$	2,412


	Three months ended September 30,				Nine months ended September 30,
		2022		2021		2022		2021
Net Operating Lease Cost	$	2,117	$	2,535	$	6,658	$	7,615
Finance Lease Cost:
Amortization of right-of-use assets		230		230		689		689
Interest on lease liabilities		25		29		79		89
Total Lease Cost	$	2,372	$	2,794	$	7,426	$	8,393

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


	September 30, 2022
	Lessor		Lessee
		Sales-type and Direct Financing	Operating		Finance
For the remaining three months of 2022	$	16,842	$	2,806	$	329
2023		65,059		10,388		1,325
2024		62,282		9,441		1,358
2025		48,508		7,297		1,392
2026		36,606		4,826		1,427
Thereafter		50,030		13,642		3,088
Total undiscounted cash flows		279,327		48,400		8,919
Less: Adjustments ⁽¹⁾		24,554		4,255		326
Total ⁽²⁾	$	254,773	$	44,145	$	8,593

⁽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

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6. BORROWINGS

Short-term Borrowings

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

Total short-term borrowings consist of the following as of September 30, 2022 and December 31, 2021 (dollars in thousands):


	September 30,			December 31,
	2022			2021
Securities sold under agreements to repurchase	$	146,182		$	117,870
FHLB Advances		133,800			—
Total short-term borrowings	$	279,982		$	117,870

Average outstanding balance during the period	$	262,782		$	113,030
Average interest rate during the period		0.92	%		0.10	%
Average interest rate at end of period		1.54	%		0.07	%

The Bank maintains federal funds lines with several correspondent banks, the available balance was $1.0 billion and $997.0 million at September 30, 2022 and December 31, 2021 respectively. The Company maintains an alternate line of credit at a correspondent bank; the available balance was $25.0 million at both September 30, 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 September 30, 2022 and December 31, 2021. Additionally, the Company had a collateral dependent line of credit with the FHLB of up to $5.9 billion and $6.0 billion at September 30, 2022 and December 31, 2021 respectively.

Long-term Borrowings

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

In connection with several previous bank acquisitions, the Company issued $58.5 million and acquired $92.0 million of trust preferred capital notes. The remaining fair value discount on all acquired trust preferred capital notes was $12.7 million and $13.3 million at September 30, 2022 and December 31, 2021, respectively.

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Total long-term borrowings consist of the following as of September 30, 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

6.50

6/17/2034

696

Trust Preferred Capital Note - Statutory Trust II

36,000

1.40

5.15

6/15/2036

1,114

VFG Limited Liability Trust I Indenture

20,000

2.73

6.48

3/18/2034

619

FNB Statutory Trust II Indenture

12,000

3.10

6.85

6/26/2033

372

Gateway Capital Statutory Trust I

8,000

3.10

6.85

9/17/2033

248

Gateway Capital Statutory Trust II

7,000

2.65

6.40

6/17/2034

217

Gateway Capital Statutory Trust III

15,000

1.50

5.25

5/30/2036

464

Gateway Capital Statutory Trust IV

25,000

1.55

5.30

7/30/2037

774

MFC Capital Trust II

5,000

2.85

6.60

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⁾

(15,583)

Investment in Trust Preferred Capital Securities

4,659

Total Long-term Borrowings

389,576

⁽¹⁾Rate as of September 30, 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 September 30, 2022 is $2.9 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 or earlier redemption. The notes may be redeemed before maturity on any interest payment date occurring on or after December 15, 2026.

⁽⁶⁾Remaining discounts of $12.7 million and $2.9 million on Trust Preferred Capital Securities and Subordinated Debt, respectively.

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

Spread to