Atlantic Union Bankshares Corp

Previous wording

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

Current wording

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

Previous wording

Please also refer to such other factors as discussed throughout Part I, Item 1A, “Risk Factors” and Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the 2023 Form 10-K and related disclosures in other filings, which have been filed with the SEC and are available on the SEC’s website at www.sec.gov. All risk factors and uncertainties described herein and therein should be considered in evaluating forward-looking statements, and all of the forward-looking statements made in this report are expressly qualified by the cautionary statements contained or

Current wording

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

Previous wording

referred to herein and therein. The actual results or developments anticipated may not be realized or, even if substantially realized, they may not have the expected consequences to or effects on the Company or our businesses or operations. Readers are cautioned not to rely too heavily on the forward-looking statements contained in this Quarterly Report. Forward-looking statements speak only as of the date they are made. We do not intend or assume any obligation to update, revise or clarify any forward-looking statements that may be made from time to time by or on behalf of the Company, whether as a result of new information, future events or otherwise, except as required by law.

Current wording

revise or clarify any forward-looking statements that may be made from time to time by or on behalf of the Company, whether as a result of new information, future events or otherwise, except as required by law.

Previous wording

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

Current wording

Certain accounting policies inherently have a greater reliance on the use of estimates, assumptions and judgments and, as such, have a greater possibility of producing results that could be materially different than originally reported. As a result of our merger with American National, which closed on April 1, 2024, we have updated our critical accounting estimates to include acquisition accounting. Accordingly, we have identified the allowance for loan and lease losses, fair value measurements, and acquisition accounting as accounting policies that require the most difficult, subjective, or complex judgments and, as such, could be most subject to revision as new or additional information becomes available or circumstances change. Therefore, we evaluate these accounting policies and related critical accounting estimates on an ongoing basis and update them as needed. Management has discussed these accounting policies and critical accounting estimates summarized below with the Audit Committee of the Board of Directors.

Previous wording

We provide additional information about our critical accounting estimates in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates” in our 2023 Form 10-K. There have been no material changes to our critical accounting policies, or the estimates made pursuant to those policies during the most recent quarter from those disclosed in our 2023 Form 10-K. Our significant accounting policies are discussed in detail in Note 1 “Summary of Significant Accounting Policies” in the “Notes to the Consolidated Financial Statements” contained in Item 8 “Financial Statements and Supplementary Data” of our 2023 Form 10-K.

Current wording

We provide additional information about our critical accounting estimates in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates” in our 2023 Form 10-K, other than with respect to acquisition accounting, which we discuss below. Other than as noted above and discussed below, there have been no material changes to our critical accounting policies or the estimates made pursuant to those policies during the most recent quarter from those disclosed in our 2023 Form 10-K.

Previous wording

Headquartered in Richmond, Virginia, Atlantic Union Bankshares Corporation (NYSE: AUB) is the holding company for Atlantic Union Bank. Atlantic Union Bank has 135 branches and approximately 150 ATMs located throughout Virginia and in portions of Maryland and North Carolina as of April 1, 2024. 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.

Current wording

Headquartered in Richmond, Virginia, Atlantic Union Bankshares Corporation (NYSE: AUB) is the holding company for Atlantic Union Bank. Atlantic Union Bank had 129 branches and approximately 150 ATMs located throughout Virginia and in portions of Maryland and North Carolina as of June 30, 2024. 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.

Previous wording

On April 1, 2024, we completed our merger with American National, the holding company for American National Bank and Trust Company. Under the terms of the merger agreement, at the effective time of the merger, each outstanding share of American National common stock was converted into 1.35 shares of our common stock. With the acquisition of American National, we acquired 26 branches, deepening our presence in Central, Western and Southern Virginia and providing entry into North Carolina’s Piedmont Triad region and Raleigh.

Current wording

Under the terms of the merger agreement, at the effective time of the merger, each outstanding share of American National common stock was converted into 1.35 shares of our common stock. With the acquisition of American National, we acquired 26 branches, deepening our presence in central and western Virginia, and expanding our franchise into contiguous markets in southern Virginia and North Carolina. For more information, reference Note 2 “Acquisitions” in Part I, Item 1 of this Quarterly Report.

Previous wording

We are continually monitoring the impact of various global and national events on our results of operations and financial condition, including inflation, rising interest rates and geopolitical conflicts. The timing and impact of inflation, market interest rates, and the competitive landscape of deposits on our business and results of operations will depend on future developments, which are highly uncertain and difficult to predict. In an effort to combat inflation, the FOMC increased the Federal Funds target rates throughout 2022 and 2023 to its current range of 5.25% to 5.50%. These developments helped drive the increased deposit costs that we continue to experience. While inflation eased in 2023, it remains elevated over the FOMC’s long-run target of 2%. The FOMC has noted that it will continue to assess additional information and its implications for monetary policy, and in determining future actions with respect to the target rates, the FOMC will consider a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments. The FOMC also left open the potential for decreases to the target rates in 2024, none of which were executed in the first quarter of 2024, and confirmed the continued reduction to the Federal Reserve’s holdings of U.S. Treasury securities and agency debt and agency MBS. We will continue to deploy various asset liability management strategies to seek to manage our risk related to interest rate fluctuations and monitor balance sheet trends, deposit flows, and liquidity needs to ensure that we are able to meet the needs of our customers and maintain financial flexibility. Refer to “Liquidity” within this Item 2 for additional information about our liquidity and “Quantitative and Qualitative Disclosures about Market Risk” in Part I, Item 3 of this Quarterly Report for additional information about the Company’s interest rate sensitivity.

Current wording

into 2024, it remains elevated over the FOMC’s long-run target of 2%. The FOMC has noted that it will carefully assess incoming data, the evolving outlook, and the balance of risks in considering any adjustments to the target range for the Federal Funds rate and that its assessments will take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments. The FOMC further noted that it does not expect it will be appropriate to reduce the target range for the Federal Funds rate until the FOMC has gained greater confidence that inflation is moving sustainability toward 2%, but that the FOMC would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the FOMC’s goals. The FOMC also confirmed the continued reduction to the Federal Reserve’s holdings of U.S. Treasury securities and agency debt and agency MBS. We will continue to deploy various asset liability management strategies to seek to manage our risk related to interest rate fluctuations and monitor balance sheet trends, deposit flows, and liquidity needs to ensure that we are able to meet the needs of our customers and maintain financial flexibility. Refer to “Liquidity” within this Item 2 for additional information about our liquidity and “Quantitative and Qualitative Disclosures about Market Risk” in Part I, Item 3 of this Quarterly Report for additional information about the Company’s interest rate sensitivity.

Previous wording

At March 31, 2024, our LHFI (net of deferred fees and costs) and total deposits increased from December 31, 2023 by $216.6 million and $460.3 million, respectively, and our short-term borrowings decreased by $254.4 million from December 31, 2023.

Current wording

Financial institutions continue to deal with macroeconomic and industry-specific headwinds. The higher-for-longer interest rate environment and heightened competition for deposits has led to a continued shift within deposit composition toward higher cost products, although the pace of movement has slowed in recent months. The interest rate environment has also affected the affordability of credit to consumers and businesses, moderating loan demand. At June 30, 2024, our LHFI (net of deferred fees and costs) and total deposits increased from December 31, 2023 by $2.7 billion and $3.2 billion, respectively, and our short-term borrowings decreased by $130.7 million from December 31, 2023, which includes the impact of our acquisition of American National. At June 30, 2024, noninterest bearing deposits comprised 23% of total deposits, compared to 24% at December 31, 2023. As of June 30, 2024, we estimate that approximately 73.1% of our deposits were insured or collateralized, and that we maintained available liquidity sources to cover approximately 113.0% of uninsured and uncollateralized deposits. In addition, to further bolster our funding position, we augmented customer deposit growth by also increasing brokered deposits to $1.3 billion at June 30, 2024, an increase of $786.7 million from December 31, 2023.

Previous wording

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

Current wording

Net interest income, which represents our principal source of revenue, is the amount by which interest income exceeds interest expense. Our interest margin represents net interest income expressed as a percentage of average earning assets. Changes in the volume and mix of interest-earning assets and interest-bearing liabilities, as well as their respective yields and rates, have a significant impact on our net interest income, the net interest margin, and net income. In addition, our interest income includes the accretion of discounts on our acquired loans, which will also affect our net interest income and net interest margin.

Previous wording

The following tables show interest income on earning assets and related average yields, as well as interest expense on interest-bearing liabilities and related average rates paid for the periods presented (dollars in thousands):

Current wording

The following tables show interest income on earning assets and related average yields, as well as interest expense on interest-bearing liabilities and related average rates paid for the three and six months ended June 30, (dollars in thousands):

Previous wording

The impact of net accretion related to acquisition accounting fair value adjustments are reflected in the following table (dollars in thousands):

Current wording

Our net interest margin and net interest margin (FTE)(+) includes the impact of acquisition accounting fair value adjustments. Net accretion income related to acquisition accounting was $14.3 million for the second quarter of 2024 compared to approximately $853,000 for the second quarter of 2023, an increase of $13.5 million due to the impacts from the American National acquisition. The impact of accretion and amortization for the periods presented are reflected in the following table (dollars in thousands):

Previous wording

For the first quarter of 2024, our net interest income was $147.8 million, a decrease of $5.6 million from the first quarter of 2023. Net interest income (FTE)(+) for the first quarter of 2024 was $151.5 million, a decrease of $5.7 million from the first quarter of 2023. In the first quarter of 2024, our net interest margin decreased 30 bps to 3.11% from 3.41% in the first quarter of 2023, and our net interest margin (FTE)(+) decreased 31 bps to 3.19% in the first quarter of 2024 from 3.50% for the same period of 2023. The decreases in net interest margin and net interest margin (FTE)(+) were primarily driven by an increase in interest expense due to higher deposit costs resulting from increases in market interest rates and changes in the deposit mix, as depositors continued to migrate to higher cost interest bearing deposit accounts, and higher average deposit balances, as well as higher borrowing costs due to increased market interest rates. These increases in interest expense were partially offset by higher loan yields due to increased market interest rates, as well as net loan growth.

Current wording

For the first six months of 2024 net interest income was $332.4 million, an increase of $26.8 million from the same period of 2023. For the first six months of 2024, net interest income (FTE)(+) was $339.9 million, an increase of $26.9 million from the same period of 2023. The increases in both net interest income and net interest income (FTE)(+) were primarily the result of a $2.3 billion increase in average interest earning assets, partially offset by a $2.5 billion increase in average interest bearing liabilities, in each case primarily related to the acquisition of American National. In the first six months of 2024, net interest margin decreased 13 bps to 3.26% from 3.39% in the first six months of 2023, and net interest margin (FTE)(+) decreased 14 bps to 3.33% in the first six months of 2024 from 3.47% in the first six months of 2023. The decreases in net interest margin and net interest margin (FTE)(+) were primarily driven by an increase in interest expense due to higher deposit costs resulting from higher average deposit balances and increases in market interest rates, the competitive rate environment for deposits in our markets, changes in our deposit mix, as depositors continued to migrate to higher cost interest bearing deposit accounts, as well as increased usage of brokered deposits, partially offsetby higher yields in loan growth, higher loan yields due to higher market interest rates, and net accretion income related to acquisition accounting.

Previous wording

The following table shows interest income on earning assets and related average yields as well as interest expense on interest-bearing liabilities and related average rates paid for the periods ended (dollars in thousands):

Current wording

The following table shows interest income on earning assets and related average yields as well as interest expense on interest-bearing liabilities and related average rates paid for the three and six months ended June 30, (dollars in thousands):

Previous wording

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

Current wording

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

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

Current wording

(1)The rate-related changes in interest income on loans includes the impact of higher accretion of the acquisition-related fair market value adjustments of $14.6 million and $14.3 million for the three and six months, respectively.

Previous wording

Our adjusted operating noninterest expense,(+) which excludes amortization of intangible assets ($1.9 million in 2024 and $2.3 million in 2023), merger-related costs associated with American National ($1.9 million in 2024), a FDIC special assessment ($840,000 in 2024), and a legal reserve related to our previously disclosed settlement with the CFPB ($5.0 million in 2023), decreased $331,000 or 0.3% to $100.7 million for the quarter ended March 31, 2024, compared to $101.0 million for the quarter ended March 31, 2023. The decrease in adjusted operating noninterest expense(+) was primarily driven by a $1.3 million decrease in other expenses, reflecting a decline in branch closing and trailing costs related to the closure of five branches in the first quarter of 2023 and a decrease in non-credit related losses on customer transactions, and a $443,000 decrease in furniture and equipment expenses. These decreases in adjusted operating noninterest expense(+)were partially offset by a $1.4 million increase in salaries and benefits expense discussed above.

Current wording

Our adjusted operating noninterest expense(+), which excludes merger-related costs ($31.7 million in 2024), amortization of intangible assets ($7.9 million in 2024 and $4.5 million in 2023), a legal reserve related to our previously disclosed settlement with the CFPB, included within other expenses ($5.0 million in 2023), strategic cost saving initiatives principally composed of severance charges related to headcount reductions and charges for exiting leases ($3.9 million in 2023), and a FDIC special assessment ($840,000 in 2024), increased $14.4 million or 7.2% to $214.9 million for the six months ended June 30, 2024, compared to $200.5 million for the six months ended June 30, 2023. The increase in adjusted operating noninterest expense(+) was primarily due to the impact of the American National acquisition, which drove the majority of the $7.9 million increase in salaries and benefits, the $2.0 million increase in occupancy expenses, the $1.7 million increase in technology and data processing, and the $517,000 increase in franchise and other taxes. In addition to the acquisition impact, FDIC assessment premiums and other insurance increased $1.0 million. These increases were partially offset by a $575,000 decrease in other expenses, primarily driven by recoveries of fraud losses on customer transactions, and a $573,000 decrease in loan-related expenses.

Previous wording

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

Current wording

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

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The following table presents operating results for the three months ended March 31, for the Wholesale Banking segment (dollars in thousands):

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The following table presents operating results for the three and six months ended June 30, for the Wholesale Banking segment (dollars in thousands):

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

Current wording

Our Consumer Banking segment provides loan and deposit services to consumers and small businesses throughout Virginia, Maryland, and North Carolina. Consumer Banking includes the home loan division, which has limited nationwide exposure, and investment management, and advisory services businesses.

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The following table presents operating results for the three months ended March 31, for the Consumer Banking segment (dollars in thousands):

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The following table presents operating results for the three and six months ended June 30, for the Consumer Banking segment (dollars in thousands):

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Our effective tax rate for the three months ended March 31, 2024 and 2023 was 16.9% and 17.0%, respectively.

Current wording

Our effective tax rate for the three months ended June 30, 2024 and 2023 was 31.2% and 14.4%, respectively. Our effective tax rate for the six months ended June 30, 2024 and 2023 was 22.3% and 15.5%, respectively. The increases in the effective tax rate for both the three and six months ended June 30, 2024 were primarily due to the valuation allowance established on June 30, 2024, which resulted in a 13 and 5 percentage point increase, respectively, in the effective tax rate.

Previous wording

At March 31, 2024, we had total assets of $21.4 billion, an increase of $211.9 million or approximately 4.0% (annualized) from December 31, 2023. The increase in total assets was primarily due to an increase in LHFI, net of deferred fees and costs, of $216.6 million driven primarily by increases in the construction and land development and other commercial loan portfolios.

Current wording

At June 30, 2024, we had total assets of $24.8 billion, an increase of $3.6 billion or approximately 17.0% from December 31, 2023. The increase in total assets was primarily due to an increase in LHFI, net of deferred fees and costs, of $2.7 billion, and the AFS securities portfolio of $324.5 million, in each case, primarily due to the American National acquisition.

Previous wording

LHFI, net of deferred fees and costs, were $15.9 billion at March 31, 2024, an increase of $216.6 million or 5.6% (annualized) from December 31, 2023. At March 31, 2024, quarterly average LHFI, net of deferred fees and costs, increased $1.2 billion or 8.5% from the same period in the prior year. Refer to "Loan Portfolio" within this Item 2 and Note 3 "Loans and Allowance for Loan and Lease Losses" in Part I, Item 1 of this Quarterly Report for additional information on our loan activity.

Current wording

LHFI, net of deferred fees and costs, were $18.3 billion at June 30, 2024, an increase of $2.7 billion or 17.3% from December 31, 2023. At June 30, 2024, quarterly average LHFI, net of deferred fees and costs, increased $3.4 billion or 23.1% from the same period in the prior year. Refer to "Loan Portfolio" within this Item 2 and Note 4 "Loans and Allowance for Loan and Lease Losses" in Part I, Item 1 of this Quarterly Report for additional information on our loan activity.

Previous wording

At March 31, 2024, we had total investments of $3.1 billion, a decrease of $42.7 million or 5.4% (annualized) from December 31, 2023. AFS securities totaled $2.2 billion at both March 31, 2024 and December 31, 2023. At March 31, 2024, total net unrealized losses on the AFS securities portfolio were $410.9 million, compared to $384.3 million at December 31, 2023. HTM securities totaled $828.9 million at March 31, 2024, compared to $837.4 at December 31, 2023, with net unrealized losses of $37.6 million at March 31, 2024, compared to $29.3 million at December 31, 2023.

Current wording

At June 30, 2024, we had total investments of $3.5 billion, an increase of $307.4 million or 9.7% from December 31, 2023. AFS securities totaled $2.6 billion at June 30, 2024, compared to $2.2 billion at December 31, 2023. At June 30, 2024, total net unrealized losses on the AFS securities portfolio were $420.7 million, compared to $384.3 million at December 31, 2023. HTM securities totaled $810.5 million at June 30, 2024, compared to $837.4 million at December 31, 2023, with net unrealized losses of $44.0 million at June 30, 2024, compared to $29.3 million at December 31, 2023.

Previous wording

At March 31, 2024, we had total liabilities of $18.8 billion, an increase of $219.3 million or approximately 4.7% (annualized) from December 31, 2023, which was primarily driven by an increase in deposits of $460.3 million, partially offset by a decrease in total borrowings of $254.1 million.

Current wording

At June 30, 2024, we had total liabilities of $21.7 billion, an increase of $3.1 billion or approximately 16.7% from December 31, 2023, which was primarily driven by an increase in deposits of $3.2 billion, primarily due to the American National assumed deposits, as well as increased usage of brokered deposits, partially offset by a decrease in total borrowings of $105.1 million.

Previous wording

Total deposits at March 31, 2024 were $17.3 billion, an increase of $460.3 million or approximately 11.0% (annualized) from December 31,2023. At March 31, 2024, quarterly average deposits increased $730.0 million or 4.4%from the same period in the prior year. Total deposits increased from December 31, 2023 primarily due to a $578.3 million increase in interest-bearing deposits, which included $461.4 million of interest-bearing customer deposits and $116.9 million in brokered deposits, partially offset by a $118.0 million decrease in demand deposits, as customers continued to move funds from lower to higher yielding products. Refer to “Deposits” within this Item 2 for additional information on this topic.

Current wording

Total deposits at June 30, 2024 were $20.0 billion, an increase of $3.2 billion or approximately 18.9% from December 31, 2023. At June 30, 2024, quarterly average deposits increased $3.8 billion or 23.1%from the same period in the prior year. Total deposits increased from December 31, 2023, primarily due to a $1.8 billion increase in interest-bearing customer deposits and $564.1 million in demand deposits primarily related to the American National acquisition, as well as a $786.7 million increase in brokered deposits. Refer to “Deposits” within this Item 2 for additional information on this topic.

Previous wording

Total borrowings at March 31, 2024 were $1.1 billion, a decrease of $254.1 million or 19.4% from December 31, 2023, primarily due to paydowns of short-term borrowings due to deposit growth. Refer to Note 6 “Borrowings” in Part I, Item 1 of this Quarterly Report for additional information on our borrowing activity.

Current wording

Total borrowings at June 30, 2024 were $1.2 billion, a decrease of $105.1 million or 8.0% from December 31, 2023, primarily due to paydowns of short-term borrowings due to deposit growth. Refer to Note 7 “Borrowings” in Part I, Item 1 of this Quarterly Report for additional information on our borrowing activity.

Previous wording

At March 31, 2024, our stockholders’ equity was $2.5 billion, a decrease of $7.4 million from December 31, 2023. The net decrease was primarily attributable to the increase in other comprehensive losses primarily due to the increase in net unrealized losses on the AFS securities portfolio. Our consolidated regulatory capital ratios continue to exceed the minimum capital requirements and are considered “well-capitalized” for regulatory purposes. Refer to “Capital Resources” within this Item 2, as well as Note 9 "Stockholders’ Equity" in Part I, Item 1 of this Quarterly Report for additional information on our capital resources.

Current wording

At June 30, 2024, our stockholders’ equity was $3.0 billion, an increase of $487.4 million from December 31, 2023. The net increase was primarily attributable to the issuance of common stock as merger consideration in the American National acquisition, partially offset by the increase in other comprehensive losses, primarily due to the increase in net unrealized losses on the AFS securities portfolio. Our consolidated regulatory capital ratios continue to exceed the minimum capital requirements and are considered “well-capitalized” for regulatory purposes. Refer to “Capital Resources” within this Item 2, as well as Note 10 "Stockholders’ Equity" in Part I, Item 1 of this Quarterly Report for additional information on our capital resources.

Previous wording

During the first quarter of 2024, we declared and paid a quarterly dividend on our outstanding shares of Series A Preferred Stock of $171.88 per share (equivalent to $0.43 per outstanding depositary share), consistent with the fourth quarter of 2023 and the first quarter of 2023. During the first quarter of 2024, we also declared and paid cash dividends of $0.32 per common share, consistent with the fourth quarter of 2023 and an increase of $0.02 per share or approximately 6.7% from the first quarter of 2023.

Current wording

During the second quarter of 2024, we declared and paid a quarterly dividend on our outstanding shares of Series A Preferred Stock of $171.88 per share (equivalent to $0.43 per outstanding depositary share), consistent with the fourth quarter of 2023 and the second quarter of 2023. During the second quarter of 2024, we also declared and paid cash dividends of $0.32 per common share, consistent with the fourth quarter of 2023 and an increase of $0.02 per share or 6.7% from the second quarter of 2023.

Previous wording

At March 31, 2024, we had total investments of $3.1 billion, or 14.7% of total assets, as compared to $3.2 billion, or 15.0% of total assets, at December 31,2023. This decrease was primarily due to the increase in unrealized losses in the AFS portfolio caused by the decline in market value due to the impact of market interest rate fluctuations. We seek to diversify our portfolio to minimize risk, and we focus on purchasing MBS for cash flow and reinvestment opportunities and securities issued by states and political subdivisions due to the tax benefits and the higher yield offered from these securities. The majority of our MBS are agency-backed securities, which have a government guarantee. For information regarding the hedge transaction related to AFS securities, see Note 8 “Derivatives” in Part I, Item 1 of this Quarterly Report.

Current wording

At June 30, 2024, we had total investments of $3.5 billion or 14.1% of total assets as compared to $3.2 billion or 15.0% of total assets at December 31,2023. This increase was primarily due to the American National acquisition. We seek to diversify our portfolio to minimize risk, and we focus on purchasing MBS for cash flow and reinvestment opportunities and securities issued by states and political subdivisions due to the tax benefits and the higher yield offered from these securities. The majority of our MBS are agency-backed securities, which have a government guarantee. For information regarding the hedge transaction related to AFS securities, see Note 9 “Derivatives” in Part I, Item 1 of this Quarterly Report.

Previous wording

As of March 31, 2024, we maintained a diversified municipal bond portfolio with approximately 68% of our holdings in general obligation issues and the majority of the remainder primarily backed by revenue bonds. Issuances within the State of Texas represented 19% of the total municipal portfolio; no other state had a concentration above 10%. Substantially all municipal holdings are considered investment grade. When purchasing municipal securities, we focus on strong underlying ratings for general obligation issuers or bonds backed by essential service revenues.

Current wording

As of June 30, 2024, we maintained a diversified municipal bond portfolio with approximately 67% of our holdings in general obligation issues and the majority of the remainder primarily backed by revenue bonds. Issuances within the State of Texas represented 19% of the total municipal portfolio; no other state had a concentration above 10%. Substantially all municipal holdings are considered investment grade. When purchasing municipal securities, we focus on strong underlying ratings for general obligation issuers or bonds backed by essential service revenues.

Previous wording

Liquidity represents an institution’s ability to meet present and future financial obligations through either the sale or maturity of existing assets or the acquisition of additional funds through liability management. Our largest source of liquidity on a consolidated basis is the customer deposit base generated by our wholesale and consumer businesses. Total deposits at March 31, 2024 were $17.3 billion, an increase of $460.3 million or approximately 11.0% (annualized) from December 31, 2023. Total deposits increased $578.3 million in interest-bearing deposits, which includes a $116.9 million increase in brokered deposits, partially offset by a $118.0 million decrease in demand deposits, as customers continued to move funds from lower to higher yielding products. Refer to “Deposits” within this Item 2 for additional information on this topic.

Current wording

Liquidity represents an institution’s ability to meet present and future financial obligations through either the sale or maturity of existing assets or the acquisition of additional funds through liability management. Our largest source of liquidity on a consolidated basis is our customer deposit base generated by our wholesale and consumer businesses. Total deposits at June 30, 2024 were $20.0 billion, an increase of $3.2 billion or approximately 18.9% from December 31, 2023. Total deposits increased from December 31, 2023, primarily due to a $1.8 billion increase in interest-bearing customer deposits and $564.1 million in demand deposits primarily related to the American National acquisition, as well as a $786.7 million increase in brokered deposits. Refer to “Deposits” within this Item 2 for additional information on this topic.

Previous wording

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

Current wording

We closely monitor changes in the industry and market conditions that may impact our liquidity and will use other borrowing means or other liquidity and funding strategies sources to fund our liquidity needs as needed. We also closely track the potential impacts on our liquidity from declines in the fair value of our securities portfolio due to changing market interest rates and developments in the banking industry that may change the availability of traditional sources of liquidity or market expectations with respect to available sources and amounts of additional liquidity.

Previous wording

As of March 31, 2024, our liquid assets totaled $5.6 billion or 26.1% of total assets, and liquid earning assets totaled $5.4 billion or 28.1% of total earning assets. We also provide asset liquidity by managing loan and securities maturities and cash flows. As of March 31, 2024, loan payments of approximately $4.8 billion or 30.6% of total loans as of March 31, 2024 are expected within one year based on contractual terms, adjusted for expected prepayments, and approximately $319.0 million or 10.2% of total investments as of March 31, 2024 are scheduled to be paid down within one year based on contractual terms, adjusted for expected prepayments.

Current wording

We consider our liquid assets to include cash, interest-bearing deposits with banks, money market investments, federal funds sold, LHFS, and securities and loans maturing or re-pricing within one year. As of June 30, 2024, our liquid assets totaled $7.7 billion or 31.0% of total assets, and liquid earning assets totaled $7.4 billion or 33.7% of total earning assets. We also provide asset liquidity by managing loan and securities maturities and cash flows. As of June 30, 2024, loan payments of approximately $6.8 billion or 37.2% of total LHFI as of June 30, 2024 are expected within one year based on contractual terms, adjusted for expected prepayments, and approximately $376.4 million or 10.8% of total investments as of June 30, 2024 are scheduled to be paid down within one year based on contractual terms, adjusted for expected prepayments.

Previous wording

Liquid assets include cash, interest-bearing deposits with banks, money market investments, federal funds sold, LHFS, and securities and loans maturing or re-pricing within one year. Additional sources of liquidity available to us include our capacity to borrow additional funds when necessary through federal funds lines with several correspondent banks, a line of credit with the FHLB, the Federal Reserve Discount Window, the purchase of brokered certificates of deposit, corporate line of credit with

Current wording

Additional sources of liquidity available to us include our capacity to borrow additional funds when necessary through federal funds lines with several correspondent banks, a line of credit with the FHLB, the Federal Reserve Discount Window, the purchase of brokered certificates of deposit, a corporate line of credit with a large correspondent bank, and debt and capital issuances. Management believes our overall liquidity to be sufficient to satisfy our depositors’ requirements and to meet our customers’ credit needs.

Previous wording

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

Current wording

For additional information and the available balances on various lines of credit, please refer to Note 7 “Borrowings” in Part I, Item 1 of this Quarterly Report. In addition to lines of credit, we may also borrow additional funds by purchasing certificates of deposit through a nationally recognized network of financial institutions.

Previous wording

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

Current wording

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

Previous wording

We are also a lessor in sales-type and direct financing leases for equipment, as noted in Note 5 “Leases” in Part I, Item I of this Quarterly Report. Our future commitments related to the aforementioned leases totaled $530.6 million and $472.7 million, respectively, at March 31, 2024 and December 31, 2023.

Current wording

We are also a lessor in sales-type and direct financing leases for equipment, as noted in Note 6 “Leases” in Part I, Item I of this Quarterly Report. Our future commitments related to the aforementioned leases totaled $567.1 million and $472.7 million, respectively, at June 30, 2024 and December 31, 2023.

Previous wording

Our financial statements included in Item I “Financial Statements” of this Quarterly Report have been prepared in accordance with GAAP, which requires the financial position and operating results to be measured principally in terms of historic dollars without considering the change in the relative purchasing power of money over time due to inflation. Inflation affects our results of operations mainly through increased operating costs, but since nearly all of our assets and liabilities are monetary in nature, changes in interest rates generally affect our financial condition to a greater degree than changes in the rate of inflation. Although interest rates are greatly influenced by changes in the inflation rate, they do not necessarily change at the same rate or in the same magnitude as the inflation rate. Management reviews pricing of our products and services, in light of current and expected costs due to inflation, to seek to mitigate the inflationary impact on our financial performance.

Current wording

nature, changes in interest rates generally affect our financial condition to a greater degree than changes in the rate of inflation. Although interest rates are greatly influenced by changes in the inflation rate, they do not necessarily change at the same rate or in the same magnitude as the inflation rate. Management reviews pricing of our products and services, in light of current and expected costs due to inflation, to seek to mitigate the inflationary impact on our financial performance.