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 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:

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 the pending merger with Sandy Spring, statements regarding the Forward Sale Agreement and transactions related thereto, 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 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,

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, 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. 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.

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 the American National merger, 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 account for mergers and acquisitions that qualify as a business combination under ASC 805,Business Combinations, which requires the use of the acquisition method of accounting. Under the acquisition method, we record all identifiable assets acquired, including intangible assets and the liabilities assumed at their fair values as of the acquisition date. Determining fair values of net assets acquired often involves estimates based on third-party valuations, such as appraisals or internal valuations based on discounted cash flow analysis or other valuation techniques. These methodologies are inherently subjective and involve significant assumptions, adjustments, and judgement around the selection of assumptions including, among others, discount rates, future expected cash flows, market conditions, and other future events that are highly subjective in nature and subject to change. The determination of the useful lives over which an intangible asset will be amortized is also subjective. While the selected fair values represent our best estimate of fair value as of the acquisition date, these estimates are inherently uncertain. In addition, the acquisition method of accounting allows for a measurement period to adjust acquisition accounting for up to one year after the acquisition date, for new information that existed at the acquisition date but may not have been known or available at that time. For further information, refer to Note 2 “Acquisitions” in Part I, Item 1 of this Quarterly Report.

Current wording

values of net assets acquired often involves estimates based on third-party valuations, such as appraisals or internal valuations based on discounted cash flow analysis or other valuation techniques. These methodologies are inherently subjective and involve significant assumptions, adjustments, and judgement around the selection of assumptions including, among others, discount rates, future expected cash flows, market conditions, and other future events that are highly subjective in nature and subject to change. The determination of the useful lives over which an intangible asset will be amortized is also subjective. While the selected fair values represented our best estimate of fair value as of the acquisition date, these estimates are inherently uncertain. In addition, the acquisition method of accounting allows for a measurement period to adjust acquisition accounting for up to one year after the acquisition date, for new information that existed at the acquisition date but may not have been known or available at that time. For further information, refer to Note 2 “Acquisitions” in Part I, Item 1 of this Quarterly Report.

Previous wording

The fair value for acquired loans is estimated using a discounted cash flow analysis that considers factors including loan type, interest rate type, prepayment speeds, duration, and current discount rates. These cash flow evaluations are inherently subjective as they require material estimates, all of which may be susceptible to significant change. The fair value adjustment is recorded as a premium or discount to the unpaid principal balance of each acquired loan. PCD loans are loans that have experienced more-than-insignificant credit deterioration since origination and are recorded at the amount paid. An ALLL on PCD loans is determined using the same methodology as other LHFI, however, there is no initial impact to net income to record the allowance at acquisition. The sum of the PCD loan’s purchase price and ALLL becomes its initial amortized cost basis. The difference between the initial amortized cost basis and the par value of the PCD loan is a noncredit discount or premium, which is amortized into interest income over the life of the loan under ASC 310-20,

Current wording

The fair value for acquired loans is estimated using a discounted cash flow analysis that considers factors including loan type, interest rate type, prepayment speeds, duration, and current discount rates. These cash flow evaluations are inherently subjective as they require material estimates, all of which may be susceptible to significant change. The fair value adjustment is recorded as a premium or discount to the unpaid principal balance of each acquired loan. PCD loans are loans that have experienced more-than-insignificant credit deterioration since origination and are recorded at the amount paid. An ALLL on PCD loans is determined using the same methodology as other LHFI, however, there is no initial impact to net income to record the allowance at acquisition. The sum of the PCD loan’s purchase price and ALLL becomes its initial amortized cost basis. The difference between the initial amortized cost basis and the par value of the PCD loan is a noncredit discount or premium, which is amortized into interest income over the life of the loan under ASC 310-20,Receivables – Nonrefundable Fees and Other Costs. If the PCD loan has revolving privileges, the discount/premium is amortized/accreted using the straight-line method; otherwise, the effective interest method is used. Subsequent changes to the ALLL on PCD loans are recorded through provision expense. The allowance for credit losses for non-PCD loans is recognized as provision expense upon acquisition using the Company’s existing ACL methodology. See Note 2 “Acquisitions” in Part I, Item 1 of this Quarterly Report for additional discussion of American National acquisition.

Previous wording

In November 2023, the FASB issued ASU No. 2023-07Segment Reporting (Topic 280): Improvements to Reportable Segment

Current wording

In November 2023, the FASB issued ASU No. 2023-07 Segment Reporting (Topic 280): Improvements to Reportable Segment

Previous wording

On April 1, 2024, we completed our acquisition of American National, the holding company for American National Bank and Trust Company. American National’s results of operations are included in our consolidated results since the date of acquisition, and therefore, our second quarter and first half of 2024 results reflect increased levels of average balances, net interest income, and expense compared to our prior quarter and first half of 2023 results.

Current wording

On April 1, 2024, we completed our acquisition of American National, the holding company for American National Bank and Trust Company. American National’s results of operations are included in our consolidated results since the date of acquisition, and therefore, our third quarter and first nine months of 2024 results reflect increased levels of average balances, net interest income, and expense compared to our results for the corresponding period in 2023. For more information, reference Note 2 “Acquisitions” in Part I, Item 1 of this Quarterly Report.

Previous 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.

Current wording

We are continually monitoring the impact of various global and national events on our results of operations and financial condition, including inflation, changes in market interest rates, geopolitical conflicts, and the upcoming elections. The timing and impact of inflation, changes in 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 light of the progress on inflation and the balance of risks, on September 18, 2024, the FOMC announced that it was lowering the Federal Funds target rate by 50 bps to its current range of 4.75% to 5.0%. While inflation has eased in 2024, it remains elevated over the FOMC’s long-run target of 2.0%. The FOMC noted that it has gained greater confidence that inflation is moving sustainably toward 2.0%. Further the FOMC has also noted that it will carefully assess incoming data, the evolving outlook, and the balance of risks in considering additional 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 noted that it 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

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.

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 September 30, 2024, our LHFI and total deposits increased from December 31, 2023 by $2.7 billion and $3.5 billion, respectively, and our short-term borrowings decreased by $486.6 million from December 31, 2023, which includes the impact of our acquisition of American National. At September 30, 2024, noninterest bearing deposits comprised 22% of total deposits, compared to 24% at December 31, 2023. As of September 30, 2024, we estimate that approximately 72.7% of our deposits were insured or collateralized, and that we maintained available liquidity sources to cover approximately 166.1% of uninsured and uncollateralized deposits. In addition, to further bolster our funding position, we augmented customer deposit growth by also increasing brokered deposits to $1.4 billion at September 30, 2024, an increase of $869.9 million from December 31, 2023.

Previous wording

We seek to fund increased loan volumes by growing our core deposits, but, subject to internal policy limits on the amount of wholesale funding we may maintain, we may use wholesale funding sources to fund shortfalls, if any, or provide additional liquidity. To the extent that our dependence on wholesale funding sources increases, as was the case during 2023 and 2024, our net interest margin would likely be negatively impacted, as we may not be able to reduce the rates we pay on these funding sources as quickly as we can on core deposits should rates begin to decline.

Current wording

We seek to fund increased loan volumes by growing our core deposits, but, subject to internal policy limits on the amount of wholesale funding we may maintain, we may use wholesale funding sources to fund shortfalls, if any, or provide additional liquidity. To the extent that our dependence on wholesale funding sources increases, as was the case during 2024 and 2023, our net interest margin would likely be negatively impacted.

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 three and six months ended June 30, (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 nine months ended September 30, (dollars in thousands):

Previous wording

For the second quarter of 2024, our net interest income was $184.5 million, an increase of $32.5 million from the second quarter of 2023. Net interest income (FTE)(+) for the second quarter of 2024 was $188.3 million, an increase of $32.6 million from the second quarter of 2023. The increases in both net interest income and net interest income (FTE)(+) were primarily the result of a $3.8 billion increase in average interest earning assets, partially offset by a $3.5 billion increase in average interest bearing liabilities, in each case primarily related to the acquisition of American National. In the second quarter of 2024, our net interest margin increased 2 bps to 3.39% from 3.37% in the second quarter of 2023, and our net interest margin (FTE)(+)increased 1 bp to 3.46% in the second quarter of 2024 from 3.45% for the same period of 2023. The increases in net interest margin and net interest margin (FTE)(+)were primarily driven by the impacts of acquisition accounting fair value adjustments associated with the American National acquisition, as well as higher yields in loan growth, partially offset by increases in interest expense driven primarily by changes in our deposit mix, as depositors continued to move to higher yielding deposit products, as well as increased usage of brokered deposits.

Current wording

For the third quarter of 2024, our net interest income was $182.9 million, an increase of $30.9 million from the third quarter of 2023. Net interest income (FTE)(+) for the third quarter of 2024 was $186.8 million, an increase of $31.1 million from the third quarter of 2023. The increases in both net interest income and net interest income (FTE)(+) were primarily the result of a $3.5 billion increase in average interest earning assets, and higher net accretion income, partially offset by a $3.1 billion increase in average interest bearing liabilities, in each case primarily related to the acquisition of American National. In the third quarter of 2024, our net interest margin increased 4 bps to 3.31% from 3.27% in the third quarter of 2023, and our net interest margin (FTE)(+)increased 3 bps to 3.38% in the third quarter of 2024 from 3.35% for the same period of 2023. The increases in net interest margin and net interest margin (FTE)(+)were primarily driven by the impacts of acquisition accounting fair value adjustments associated with the American National acquisition, as well as higher loan yields, partially offset by increases in interest expense driven primarily by higher market interest rates, changes in deposit mix as depositors move to higher yielding deposit products, as well as increased usage of brokered deposits.

Previous 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):

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 $12.7 million for the third quarter of 2024 compared to approximately $1.1 million for the third quarter of 2023, an increase of $11.6 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 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.

Current wording

For the first nine months of 2024 net interest income was $515.3 million, an increase of $57.8 million from the same period of 2023. For the first nine months of 2024, net interest income (FTE)(+) was $526.7 million, an increase of $58.1 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 $2.7 billion increase in average interest earning assets and net accretion income, partially offset by a $2.7 billion increase in average interest bearing liabilities, in each case primarily related to the acquisition of American National. In the first nine months of 2024, net interest margin decreased 7 bps to 3.28% from 3.35% in the first nine months of 2023, and net interest margin (FTE)(+) decreased 8 bps to 3.35% in the first nine months of 2024 from 3.43% in the first nine months of 2023. The decreases in net interest margin and net interest margin (FTE)(+) were primarily driven byhigher market interest rates, changes in deposit mix as depositors move to higher yielding deposit products, as well as increased usage of brokered deposits, partially offset by higher loan yields, 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 three and six months ended June 30, (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 nine months ended September 30, (dollars in thousands):

Previous wording

(5)* *Interest expense on time deposits includes $1.0 million and $7,000 for the three months ended June 30, 2024 and 2023, respectively, in accretion of the fair market value adjustments related to acquisitions.

Current wording

(5)* *Interest expense on time deposits includes $913,000 and $6,000 for the three months ended September 30, 2024 and 2023, respectively, in accretion of the fair market value adjustments related to acquisitions.

Previous wording

(6)* Interest expense on borrowings includes $285,000 and $213,000 for the three months ended June 30, 2024 and 2023, respectively, in amortization of the fair market value adjustments related to acquisitions.*

Current wording

(6)* Interest expense on borrowings includes $288,000 and $215,000 for the three months ended September 30, 2024 and 2023, respectively, in amortization of the fair market value adjustments related to acquisitions.*

Previous wording

(5)* Interest expense on time deposits includes $1.0 million and $21,000 for the six months ended June 30, 2024 and 2023, respectively, in accretion of the fair market value adjustments related to acquisitions.*

Current wording

(5)* Interest expense on time deposits includes $1.9 million and $27,000 for the nine months ended September 30, 2024 and 2023, respectively, in accretion of the fair market value adjustments related to acquisitions.*

Previous wording

(6)* Interest expense on borrowings includes $502,000 and $422,000 for the six months ended June 30, 2024 and 2023, respectively, in amortization of the fair market value adjustments related to acquisitions.*

Current wording

(6)* Interest expense on borrowings includes $789,000 and $637,000 for the nine months ended September 30, 2024 and 2023, respectively, in amortization of the fair market value adjustments related to acquisitions.*

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 three and six months ended June 30, (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 nine months ended September 30, (dollars in thousands):

Previous 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.

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 $12.6 million and $26.9 million for the three and nine months, respectively.

Previous wording

(2)The rate-related changes in interest expense on deposits includes the impact of higher accretion of the acquisition-related fair market value adjustments of $1.0 millionfor the three and six months, respectively.

Current wording

(2)The rate-related changes in interest expense on deposits includes the impact of higher accretion of the acquisition-related fair market value adjustments of $1.0 million and $1.9for the three and nine months, respectively.

Previous wording

(3)The rate-related changes in interest expense on other borrowings include the impact of higher amortization of the acquisition-related fair market value adjustments of $72,000and $79,000 for the three and six months, respectively.

Current wording

(3)The rate-related changes in interest expense on other borrowings include the impact of higher amortization of the acquisition-related fair market value adjustments of $73,000and $152,000 for the three and nine months, respectively.

Previous wording

Our noninterest income decreased $385,000 or 1.6% to $23.8 million for the quarter ended June 30, 2024, compared to $24.2 million for the quarter ended June 30, 2023, primarily driven by $6.5 million of pre-tax losses incurred on the sale of AFS securities as part of our restructuring of the American National securities portfolio, partially offset by other increases in noninterest income, most of which were due to the full quarter impact of the American National acquisition.

Current wording

Our noninterest income increased $7.2 million or 26.5% to $34.3 million for the quarter ended September 30, 2024, compared to $27.1 million for the quarter ended September 30, 2023, primarily driven by $27.6 million of pre-tax losses incurred on the sale of AFS securities in the prior year, as well as increases in other noninterest income line items due primarily to the impact of the American National acquisition, partially offset by a $25.8 million decrease in other operating income driven by a $27.7 million gain related to the sale-leaseback transaction in the prior year.

Previous wording

Our adjusted operating noninterest income,(+) which excludes losses and gains on sale of AFS securities (losses of $6.5 million in 2024 and gains of $2,000 in 2023), increased $6.1 million or 25.3% to $30.3 million for the quarter ended June 30, 2024, compared to $24.2 million for the quarter ended June 30, 2023. The increase in adjusted operating noninterest income(+) was primarily due to the impact of the American National acquisition, which drove the majority of the $2.5 million increase in fiduciary and asset management fees and the $667,000 increase in interchange fees. In addition to the acquisition impact, service charges on deposit accounts increased $968,000 primarily due to improved margins in treasury management services, BOLI income increased $921,000 primarily due to an increase in policy cash surrender values and a death benefit received in the second quarter of 2024, mortgage banking income increased $744,000 due to an increase in mortgage loan origination volumes and gain on sale margins, and other operating income increased $693,000 primarily due to an increase in capital market transaction-related fees and equity method investment income. These increases were partially offset by a $682,000 decrease in loan-related interest rate swap fees primarily due to lower transaction volumes.

Current wording

Our adjusted operating noninterest income,(+) which excludes gains and losses on sale of AFS securities (gains of $4,000 in 2024 and losses of $27.6 million in 2023) and the gain on sale-leaseback transaction ($27.7 million in 2023), increased $7.3 million or 27.0% to $34.3 million for the quarter ended September 30, 2024, compared to $27.0 million for the quarter ended September 30, 2023. The increase in adjusted operating noninterest income(+) was primarily due to the impact of the American National acquisition, which drove the majority of the $2.3 million increase in fiduciary and asset management fees, the $1.2 million increase in service charges on deposit accounts, and the $1.1 million increase in interchange fees. In addition to the American National acquisition impact, BOLI income increased $2.1 million primarily due to death benefits received in the third quarter of 2024, other operating income increased $1.9 million primarily due to an increase in equity method investment income, and mortgage banking income increased $548,000 due to an increase in mortgage loan origination volumes and gain on sale margins. These increases were partially offset by a $1.2 million decrease in loan-related interest rate swap fees due to lower transaction volumes and a $630,000 decrease in other service charges, commissions, and fees primarily due to a merchant services vendor contract signing bonus in the prior year.

Previous wording

Our noninterest income increased $15.5 million or 45.9% to $49.4 million for the six months ended June 30, 2024, compared to $33.8 million for the six months ended June 30, 2023, primarily driven by a $6.9 million decrease in pre-tax losses incurred on the sale of AFS securities, which included $13.4 million of losses resulting from our balance sheet repositioning strategy executed in the prior year, compared to $6.5 million of losses in the current year as part of our restructuring of the American National securities portfolio, and other increases in noninterest income, most of which were due to the full quarter impact of the American National acquisition.

Current wording

Our noninterest income increased $22.7 million or 37.3% to $83.7 million for the nine months ended September 30, 2024, compared to $60.9 million for the nine months ended September 30, 2023, primarily driven by a $34.5 million decrease in pre-tax losses incurred on the sale of AFS securities, which included $41.0 million of losses resulting from our balance sheet repositioning strategy executed in the prior year, compared to $6.5 million of losses in the current year as part of our restructuring of the American National securities portfolio, as well as increases in other noninterest income line items due primarily to the impact of the American National acquisition, partially offset by a $24.0 million decrease in other operating income driven by a $27.7 million gain related to the sale-leaseback transaction in the prior year.

Previous wording

Our adjusted operating noninterest income(+), which excludes losses on sale of securities ($6.5 million in 2024 and $13.4 million in 2023), increased $8.7 million or 18.3% to $55.9 million for the six months ended June 30, 2024, compared to $47.2 million for the six months ended June 30, 2023. The increase in adjusted operating noninterest income(+) was primarily due to the impact of the American National acquisition, which drove the majority of the $3.1 million increase in fiduciary and asset management fees and the $636,000 increase in interchange fees. In addition to the acquisition impact, other operating income increased $1.8 million primarily due to an increase in equity method investment income and capital market transaction-related fees, service charges on deposit accounts increased $1.6 million primarily due to improved margins in treasury management services, BOLI income increased $1.3 million primarily due to an increase in policy cash surrender values and a death benefit received in the second quarter of 2024, and mortgage banking income increased $757,000 due to an increase in mortgage loan origination volumes and gain on sale margins. These increases were partially offset by a $905,000 decrease in loan-related interest rate swap fees primarily due to lower transaction volumes.

Current wording

Our adjusted operating noninterest income(+), which excludes losses on sale of securities ($6.5 million in 2024 and $41.0 million in 2023) and the gain on sale-leaseback transaction ($27.7 million in 2023), increased $16.0 million or 21.5% to $90.2 million for the nine months ended September 30, 2024, compared to $74.2 million for the nine months ended September 30, 2023. The increase in adjusted operating noninterest income(+) was primarily due to the impact of the American National acquisition, which drove the majority of the $5.4 million increase in fiduciary and asset management fees and the $1.7 million increase in interchange fees. In addition to the American National acquisition impact, other operating income increased $3.7 million primarily due to increases in equity method investment income and capital market transaction-related fees, BOLI income increased $3.4 million primarily due to death benefits received in 2024, service charges on deposit accounts increased $2.9 million primarily due to improved margins in treasury management services, and mortgage banking income increased $1.3 million due to an increase in mortgage loan origination volumes and gain on sale margins. These increases were partially offset by a $2.1 million decrease in loan-related interest rate swap fees due to lower transaction volumes.

Previous wording

Our noninterest expense increased $44.3 million or 42.0% to $150.0 million for the quarter ended June 30, 2024, compared to $105.7 million for the quarter ended June 30, 2023, primarily driven by $29.8 million in merger-related expenses, as well as other increases in noninterest expense, most of which were due to the full quarter impact of the American National acquisition.

Current wording

Our noninterest expense increased $14.1 million or 13.0% to $122.6 million for the quarter ended September 30, 2024, compared to $108.5 million for the quarter ended September 30, 2023, primarily driven by general increases in noninterest expense, most of which were due to the impact of the American National acquisition, partially offset by a $8.3 million decrease in other expenses due primarily to the prior year’s expenses associated with strategic cost saving initiatives.

Previous wording

Our adjusted operating noninterest expense(+), which excludes merger-related costs ($29.8 million in 2024), amortization of intangible assets ($6.0 million in 2024 and $2.2 million in 2023), and strategic cost saving initiatives principally composed of severance charges related to headcount reductions and charges for exiting leases ($3.9 million in 2023), increased $14.7 million or 14.8% to $114.2 million for the quarter ended June 30, 2024, compared to $99.5 million for the quarter 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 $6.5 million increase in salaries and benefits, the $1.7 million increase in occupancy expenses, the $1.7 million increase in technology and data processing, and the $514,000 increase in franchise and other taxes. In addition to the acquisition impact, other expenses increased $732,000, primarily due to nonrecurring OREO-related gains in the prior year quarter, and FDIC assessment premiums and other insurance increased $601,000.

Current wording

Our adjusted operating noninterest expense(+), which excludes expenses related to strategic cost saving initiatives principally composed of severance charges related to headcount reductions and charges for exiting leases ($8.7 million in 2023), merger-related costs ($1.4 million in 2024 and $2.0 million in 2023), and amortization of intangible assets ($5.8 million in 2024 and $2.2 million in 2023), increased $19.7 million or 20.7% to $115.4 million for the quarter ended September 30, 2024, compared to $95.7 million for the quarter ended September 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 $11.9 million increase in salaries and benefits, the $1.8 million increase in technology and data processing, the $1.8 million increase in occupancy expenses, the $1.0 million increase in FDIC assessment premiums and other insurance, and the $746,000 increase in franchise and other taxes. In addition to the American National acquisition impact, marketing and advertising expense increased $1.1 million and professional services increased $703,000.

Previous wording

Our noninterest expense increased $41.3 million or 19.3% to $255.3 million for the six months ended June 30, 2024, compared to $213.9 million for the six months ended June 30, 2023, primarily driven by $31.7 million in merger-related expenses, as well as other increases in noninterest expense, most of which were due to the impact of the American National acquisition in the second quarter of 2024.

Current wording

Our noninterest expense increased $55.4 million or 17.2% to $377.9 million for the nine months ended September 30, 2024, compared to $322.4 million for the nine months ended September 30, 2023, primarily driven by a $31.0 million increase in merger-related expenses, as well as overall other increases in noninterest expense, most of which were due to the impact of the American National acquisition. These increases were partially offset by a $14.9 million decrease in other expenses primarily due to the prior year’s expenses associated with strategic cost saving initiatives.

Previous 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.

Current wording

Our adjusted operating noninterest expense(+), which excludes merger-related costs ($33.0 million in 2024 and $2.0 million in 2023), amortization of intangible assets ($13.7 million in 2024 and $6.7 million in 2023), expenses related to strategic cost saving initiatives principally composed of severance charges related to headcount reductions and charges for exiting leases ($12.6 million in 2023), a legal reserve related to our previously disclosed settlement with the CFPB, included within other expenses ($5.0 million in 2023), and a FDIC special assessment ($840,000 in 2024), increased $34.1 million or 11.5% to $330.3 million for the nine months ended September 30, 2024, compared to $296.2 million for the nine months ended September 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 $22.7 million increase in salaries and benefits, the $3.8 million increase in occupancy expenses, the $3.5 million increase in technology and data processing, the $2.9 million increase in FDIC assessment premiums and other insurance, and the $1.3 million increase in franchise and other taxes. In addition to the American National acquisition impact, marketing and advertising expense increased $1.2 million. These increases were partially offset by a $517,000 decrease in loan-related expenses.

Previous wording

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

Current wording

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

Previous wording

Consumer Banking income before income taxes increased by $5.9 million and $12.6 million, respectively, for the three and six months ended June 30, 2024 compared to the three and six months ended June 30, 2023. The increases were primarily due to increases in net interest income driven by the impact of the American National acquisition and higher funding credit on deposits (in addition to the acquisition impact), partially offset by increases in the provision for credit losses primarily driven by the initial provision expense on non-PCD loans and unfunded commitments acquired from American National. Our noninterest income also increased for the three and six months ended June 30, 2024 compared to the same periods in 2023, primarily due to the impact of the American National acquisition, which drove the majority of the increases in fiduciary and asset management fees and interchange fee income. In addition to the acquisition impact, the increases in noninterest income were primarily driven by increases in mortgage banking income due to increases in mortgage loan origination volumes and gain on sale margins. The increases in income before income taxes were partially offset by increases in noninterest expense primarily due to the impact of the American National acquisition, which drove the majority of the increases in salaries and benefits and occupancy expense.

Current wording

Wholesale Banking income before income taxes increased by $32.6 million and $58.5 million, respectively, for the three and nine months ended September 30, 2024 compared to the three and nine months ended September 30, 2023. The increase for the three months ended September 30, 2024 was primarily due to increases in net interest income driven by the impact of the American National acquisition and favorable spreads on both the loan and deposit portfolios, as well as a decrease in the provision for credit losses. The increase for the nine months ended September 30, 2024 was primarily due to increases in net interest income driven by the impact of the American National acquisition and favorable spreads on both the loan and deposit portfolios. Wholesale Banking’s noninterest income also increased for the three and nine months ended September 30, 2024 compared to the same periods in 2023, primarily due to the impact of the American National acquisition, which drove the majority of the increases in fiduciary and asset management fees. The increases in income before income taxes were partially offset by increases in noninterest expense primarily due to the impact of the American National acquisition, which drove the majority of the increases in salaries and benefits.

Previous wording

Wholesale banking deposits increased $761.4 million to $7.2 billion at June 30, 2024 compared to December 31, 2023, primarily due to increases in interest checking accounts, money market balances, and demand deposits, primarily driven by the American National acquisition.

Current wording

Wholesale banking deposits increased $680.3 million to $7.1 billion at September 30, 2024, compared to December 31, 2023, primarily due to increases in interest checking accounts and demand deposits, primarily driven by the American National acquisition.

Previous wording

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

Current wording

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

Previous wording

Wholesale Banking income before income taxes increased by $8.6 million and $25.9 million, respectively, for the three and six months ended June 30, 2024 compared to the three and six months ended June 30, 2023. The increases were primarily due to increases in net interest income driven by the impact of the American National acquisition, loan growth and higher funding credit on deposits (in addition to the acquisition impact), partially offset by increases in the provision for credit losses primarily driven by the initial provision expense on non-PCD loans and unfunded commitments acquired from American National. Our noninterest income also increased for the three and six months ended June 30, 2024 compared to the same periods in 2023, primarily due to the impact of the American National acquisition, which drove the majority of the increases in fiduciary and asset management fees. The increases in income before income taxes were partially offset by increases in noninterest expense primarily due to the impact of the American National acquisition, which drove the majority of the increases in salaries and benefits.

Current wording

Consumer Banking income before income taxes increased by $1.2 million and $13.7 million, respectively, for the three and nine months ended September 30, 2024 compared to the three and nine months ended September 30, 2023. The increases were primarily due to increases in net interest income driven by the impact of the American National acquisition and higher funding credit on deposits, partially offset by increases in the provision for credit losses. Consumer Banking’s noninterest income also increased for the three and nine months ended September 30, 2024 compared to the same periods in 2023, primarily due to the impact of the American National acquisition, which drove the majority of the increases in fiduciary and asset management fees, interchange fee income, and service charges on deposit accounts. The increases in income before income taxes were partially offset by increases in noninterest expense primarily due to the impact of the American National acquisition, which drove the majority of the increases in salaries and benefits and occupancy expense.

Previous wording

LHFI, net of deferred fees and costs, for the Consumer Banking segment increased $174.9 million to $3.1 billion at June 30, 2024 compared to December 31, 2023 primarily due to increases across the residential 1-4 family consumer and residential 1-4 family revolving portfolios, primarily driven by the American National acquisition.

Current wording

LHFI, net of deferred fees and costs, for the Consumer Banking segment increased $154.7 million to $3.1 billion at September 30, 2024, compared to December 31, 2023 primarily due to increases across the residential 1-4 family consumer and residential 1-4 family revolving portfolios, primarily driven by the American National acquisition.

Previous wording

Consumer Banking deposits increased $1.6 billion to $11.4 billion at June 30, 2024 compared to December 31, 2023 with increases across all deposit categories, primarily driven by the American National acquisition.

Current wording

Consumer Banking deposits increased $1.8 billion to $11.6 billion at September 30, 2024, compared to December 31, 2023 with increases across all deposit categories, primarily driven by the American National acquisition.

Previous wording

As of each reporting date, we consider existing evidence, both positive and negative, that could impact our view with regard to future realization of deferred tax assets. Our bank subsidiary, Atlantic Union Bank, is subject to a bank franchise tax but not a state income tax in Virginia, its primary place of business. We, our subsidiaries, and Atlantic Union Bank’s non-bank subsidiaries are subject to Virginia income taxes and may be able to utilize existing state deferred tax assets, depending on a number of factors including those entities’ financial results. During the quarter ended June 30, 2024, we reviewed our business plan considering the American National acquisition and other business changes and noted shifts within our state income tax footprint and other factors that impacted projected future realization of state deferred tax items, including those attributable to operations in Virginia. As a result, we concluded it is more likely than not that the benefit for certain state net operating loss carryforwards will not be realized, and we recorded a valuation allowance of $4.8 million via a non-cash charge to income tax expense for the second quarter of 2024.

Current wording

As of each reporting date, we consider existing evidence, both positive and negative, that could impact our view with regard to future realization of deferred tax assets. Our bank subsidiary, Atlantic Union Bank, is subject to a bank franchise tax but not a state income tax in Virginia, its primary place of business. We, our subsidiaries, and Atlantic Union Bank’s non-bank subsidiaries are subject to Virginia income taxes and may be able to utilize existing state deferred tax assets, depending on a number of factors including those entities’ financial results. During the quarter ended June 30, 2024, we reviewed our business plan considering the American National acquisition and other business changes and noted shifts within our state income tax footprint and other factors that impacted projected future realization of state deferred tax items, including those attributable to operations in Virginia. As a result, we concluded it is more likely than not that the benefit for certain state net operating loss carryforwards will not be realized, and we recorded a valuation allowance of $4.8 million via a non-cash charge to income tax expense for the second quarter of 2024. There has been no change in the valuation allowance for the quarter ended September 30, 2024.

Previous 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.

Current wording

Our effective tax rate for the three months ended September 30, 2024 and 2023 was 17.0% and 17.6%, respectively. Our effective tax rate for the nine months ended September 30, 2024 and 2023 was 19.7% and 16.3%, respectively. The increase in the effective tax rate for the nine months ended September 30, 2024 was primarily due to the valuation allowance established during the second quarter of 2024, which resulted in a 250 bps increase in the effective tax rate.