Atlantic Union Bankshares Corp

Previous wording

In management’s discussion and analysis, we provide certain financial information determined by methods other than in accordance with GAAP. These non-GAAP financial measures are a supplement to GAAP, which we use to prepare our financial statements, and should not be considered in isolation or as a substitute for comparable measures calculated in accordance with GAAP. In addition, our non-GAAP financial measures may not be comparable to non-GAAP financial measures of other companies. We use the non-GAAP financial measures discussed herein in our analysis of our performance. Management believes that these non-GAAP financial measures provide additional understanding of our ongoing operations, enhance the comparability of our results of operations with prior periods and show the effects of significant gains and charges in the periods presented without the impact of items or events that may obscure trends in our underlying performance. Non-GAAP financial measures may be identified with the symbol(+) and may be labeled as adjusted. Refer to the “Non-GAAP Financial Measures” section within this Item 7 for more information about these non-GAAP financial measures, including a reconciliation of these measures to the most directly comparable GAAP financial measures.

Current wording

In the following discussion and analysis, we provide certain financial information determined by methods other than in accordance with GAAP. These non-GAAP financial measures are a supplement to GAAP, which we use to prepare our financial statements, and should not be considered in isolation or as a substitute for comparable measures calculated in accordance with GAAP. In addition, our non-GAAP financial measures may not be comparable to non-GAAP financial measures of other companies. We use the non-GAAP financial measures discussed herein in our analysis of our performance. Management believes that these non-GAAP financial measures provide additional understanding of our ongoing operations, enhance the comparability of our results of operations with prior periods and show the effects of significant gains and charges in the periods presented without the impact of items or events that may obscure trends in our underlying performance. Non-GAAP financial measures may be identified with the symbol(+) and may be labeled as adjusted. Refer to the “Non-GAAP Financial Measures” section within this Item 7 for more information about these non-GAAP financial measures, including a reconciliation of these measures to the most directly comparable GAAP financial measures.

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 the 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. 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 the critical accounting estimates summarized below with the Audit Committee of the Board of Directors.

Previous wording

The ALLL represents the estimated balance that we consider adequate to absorb expected credit losses over the expected contractual life of the loan portfolio. We estimate our ALLL using a loan-level probability of default/loss given default methodology for all loans.

Current wording

The ALLL represents the estimated balance that we consider adequate to absorb expected credit losses over the expected contractual life of the loan portfolio. We estimate our ALLL using a loan-level probability of default/loss given default methodology for all loans and also consider the need to qualitatively adjust the expected credit losses for information not already captured in the loan-level probability of default/loss given default methodology based on a qualitative framework that adheres to the Interagency Policy Statement on Allowances for Credit Losses.

Previous wording

then prevailing, may result in significant changes in the ALLL in future periods. There are both internal factors (i.e., loan balances, credit quality, and the contractual lives of loans) and external factors (i.e., economic conditions such as trends in housing prices, interest rates, gross domestic product, inflation, and unemployment) that can impact the ALLL estimate.

Current wording

Determining the appropriateness of the ALLL is complex and requires judgment by management about the effect of matters that are inherently uncertain. Subsequent evaluations of the then-existing loan portfolio, in light of the factors then prevailing, may result in significant changes in the ALLL in future periods. There are both internal factors (i.e., loan balances, credit quality, and the contractual lives of loans) and external factors (i.e., economic conditions such as trends in housing prices, interest rates, gross domestic product, inflation, and unemployment) that can impact the ALLL estimate.

Previous wording

We consider a number of external economic variables in developing the ALLL. Before September 30, 2023, the most significant of these external economic variables was the Virginia unemployment rate. We now consider various national economic variables in developing the ALLL, including the national unemployment rate, national gross domestic product, the national commercial real estate pricing index, the national home price index, and national retail sales. We use the national unemployment rate in all of our models regardless of the loan portfolio type, and we use a second economic variable in each cohort model depending on the loan portfolio type. The ALLL quantitative estimate is sensitive to changes in the economic variable forecasts during the two-year reasonable and supportable forecast period with a straight-line reversion over the next two years to long-term average loss factors. In determining forecasted expected losses, we use Moody’s economic variable forecasts and apply probability weights to the related economic scenarios. Because current economic conditions and forecasts can change and future events are inherently difficult to predict, the anticipated amount of estimated credit losses on loans, and therefore the appropriateness of the ALLL, could change significantly. It is difficult to estimate how potential changes in any one economic factor or input might affect the overall ALLL because we consider a wide variety of factors and inputs in estimating the ALLL and changes in those factors and inputs may not occur at the same rate and may not be consistent across all loan types. Additionally, changes in factors and inputs may be directionally inconsistent, such that an improvement in one factor may offset deterioration in others.

Current wording

We consider a number of external economic variables in developing the ALLL. We consider various national economic variables in developing the ALLL, including the national unemployment rate, national gross domestic product, the national commercial real estate pricing index, the national home price index, and national retail sales. We use the national unemployment rate in all of our models regardless of the loan portfolio type, and we use a second economic variable in each cohort model depending on the loan portfolio type. The ALLL quantitative estimate is sensitive to changes in the economic variable forecasts during the two-year reasonable and supportable forecast period with a straight-line reversion over the next two years to long-term average loss factors. In determining forecasted expected losses, we use Moody’s economic variable forecasts and apply probability weights to the related economic scenarios. Because current economic conditions and forecasts can change and future events are inherently difficult to predict, the anticipated amount of estimated credit losses on loans, and therefore the appropriateness of the ALLL, could change significantly. It is difficult to estimate how potential changes in any one economic factor or input might affect the overall ALLL because we consider a wide variety of factors and inputs in estimating the ALLL and changes in those factors and inputs may not occur at the same rate and may not be consistent across all loan types. Additionally, changes in factors and inputs may be directionally inconsistent, such that an improvement in one factor may offset deterioration in others.

Previous wording

Under ASC 820,Fair Value Measurements, there is a three-level fair value hierarchy that requires the use of inputs that are observable or unobservable, when observable inputs are not available. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our market assumptions. As such, fair value measurements, particularly in level 2 and level 3 of the hierarchy, may require us to use significant assumptions that are subject to change. A change in one assumption could have a significant impact on the fair value estimate and certain assumptions may have offsetting impacts to one another. We prepare a supportable estimate in accordance with ASC 820 but changes in significant assumptions could have a significant impact on our Balance Sheet, Statements of Income, and/or fair value disclosures. For more information on our financial instruments and fair value assessment, refer to Note 1 “Summary of Significant Accounting Policies” and Note 13 “Fair Value Measurements” in this Form 10-K.

Current wording

Under ASC 820,Fair Value Measurements, there is a three-level fair value hierarchy that requires the use of inputs that are observable or unobservable, when observable inputs are not available. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our market assumptions. As such, fair value measurements, particularly in level 2 and level 3 of the hierarchy, may require us to use significant assumptions that are subject to change. A change in one assumption could have a significant impact on the fair value estimate and certain assumptions may have offsetting impacts to one another. We prepare a supportable estimate in accordance with ASC 820 but changes in significant assumptions could have a significant impact on our Balance Sheet, Statements of Income, and/or fair value disclosures. For more information on our financial instruments and fair value assessment, refer to Note 1 “Summary of Significant Accounting Policies” and Note 14 “Fair Value Measurements” in the “Notes to Consolidated Financial Statements” contained in Item 8 “Financial Statements and Supplementary Data” of this Form 10-K.

Previous wording

In December 2023, the FASB issued ASU No. 2023-09Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This guidance requires enhanced disclosure for the rate reconciliation and income taxes paid disclosures and aligns the guidance to SEC Regulation S-X disclosure requirements. The amendments are effective for annual periods beginning after December 15, 2024. We are evaluating the impact of ASU No. 2023-09 on our consolidated financial statements.

Current wording

In December 2023, the FASB issued ASU No. 2023-09Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This guidance requires enhanced disclosure for the rate reconciliation and income taxes paid disclosures and aligns the guidance to SEC Regulation S-X disclosure requirements. The amendments are effective for annual periods beginning after December 15, 2024. ASU No. 2023-09 is not expected to have an impact on the Company’s financial condition or results of operations but could change certain disclosures in the Company’s SEC filings.

Previous wording

In November 2023, the FASB issued ASU No. 2023-07*Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures,*which requires enhanced segment reporting disclosures. This guidance requires that interim disclosures align to the annual disclosure requirements and introduces additional disclosures intended to provide more insight into segment operations. The amendments are effective for fiscal years beginning after December 14, 2023, and interim periods within fiscal years beginning after December 15, 2024. We are evaluating the impact of ASU No. 2023-07 on our consolidated financial statements.

Current wording

In November 2024, the FASB issued ASU No. 2024-03Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures. This guidance requires enhanced disclosure of income statement expenses. The amendments are effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. We are evaluating the impact of ASU No. 2024-03 on our consolidated financial statements.

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. 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%. While inflation has 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 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 also left open the potential for decreases to the target rates in 2024 and confirmed the continued reduction to the Federal Reserve’s holdings of U.S. Treasury securities and agency debt and agency MBS. These actions in 2023 helped drive the meaningful increase in our deposit costs that we continue to experience. 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. We will continue to deploy various asset liability management strategies to seek to manage our risk related to interest rate fluctuations. Refer to “Liquidity” within this Item 7 for additional information about our liquidity and “Quantitative and Qualitative Disclosures about Market Risk” in Part II, Item 7A of this Form 10-K for additional information about our 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 inflationary pressures, changes in market interest rates, geopolitical conflicts, deposit competition and liquidity strains, and changes in political leadership. The timing and impact of such events on our results of operation and financial condition will depend on future developments, which are highly uncertain and difficult to predict. In late 2024, the Federal Reserve’s interest rate policy shifted as inflationary pressure began to ease and economic growth moderated. Following a period of aggressive rate hikes aimed at curbing inflation in 2022 and 2023, the Federal Reserve lowered rates three times between September and December in 2024 by a total of 100 bps, compared to 2023, resulting in the Federal Funds target rate range of 4.25% to 4.50%. The FOMC, at its January 2025 meeting, decided not to further lower the Federal Funds target range, but instead decided to maintain the target range at 4.25% to 4.50%. While inflation eased substantially in 2024, it was estimated at 2.9% as of December 2024, over the FOMC’s 2.0% target, and such estimate increased to 3.0% as of January 2025. The FOMC has noted that it will continue to 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 seek to ensure that we are able to meet the needs of our customers and maintain financial flexibility. Refer to “Liquidity” within this Item 7 for additional information about our liquidity and “Quantitative and Qualitative Disclosures about Market Risk” in Part II, Item 7A of this Form 10-K for additional information about our interest rate sensitivity.

Previous wording

In light of these bank closures and uncertainty in the banking industry, an uncertain interest rate environment, and the potential for recessionary conditions in the U.S. economy, we continue to actively monitor balance sheet trends, deposit flows, and liquidity needs to ensure we are able to meet the needs of our customers and maintain financial flexibility. As of December 31, 2023, we estimate that approximately 70.7% of our deposits were insured or collateralized, and that we maintained available liquidity sources to cover approximately 106% of uninsured and uncollateralized deposits. In addition, to further bolster our funding position, we augmented customer deposit growth by also increasing brokered deposits to $548.4 million at December 31, 2023.

Current wording

Financial institutions continue to deal with macroeconomic headwinds. In 2024, 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 December 31, 2024, our LHFI and total deposits increased from December 31, 2023 by $2.8 billion and $3.6 billion, respectively, primarily due to our acquisition of American National, and our short-term borrowings decreased by $804.6 million from December 31, 2023, due to paydowns on FHLB borrowings. At December 31, 2024, non-interest-bearing deposits comprised 21.0% of total deposits, compared to 23.6% at December 31, 2023. As of December 31, 2024, we estimate that approximately 70.6% of our deposits were insured or collateralized, and that we maintained available liquidity sources to cover approximately 139.8% of uninsured and uncollateralized deposits. In addition, to further bolster our funding position, we augmented customer deposit growth by also increasing brokered deposits to $1.2 billion at December 31, 2024, an increase of $669.5 million from December 31, 2023.

Previous wording

Despite the uncertainty within the broader banking industry during 2023, our regulatory capital ratios continued to exceed the standards to be considered well-capitalized under regulatory requirements. See “Capital Resources” within this Item 7 for additional information about our regulatory capital.

Current wording

Our regulatory capital ratios continued to exceed the standards to be considered well-capitalized under regulatory requirements. See “Capital Resources” within this Item 7 for additional information about our regulatory capital.

Previous wording

Pending Merger with American National Bankshares Inc.

Current wording

Acquisition of American National Bankshares Inc.

Previous wording

On July 24, 2023, the Company and American National entered into a merger agreement. Under the merger agreement, American National will merge with and into the Company, with the Company continuing as the surviving entity. Immediately following the merger, American National Bank and Trust Company will merge with and into the Bank, with the Bank continuing as the surviving bank. Subject to the terms and conditions of the merger agreement, at the effective time of the merger, each outstanding share of American National common stock will be converted into the right to receive 1.35 shares of the Company’s common stock. The merger agreement was unanimously approved by the boards of directors of the Company and American National, and is subject to customary closing conditions, including receipt of required regulatory approvals. American National shareholders approved the merger agreement at a special shareholder meeting held on November 14, 2023. The proposed merger is expected to close in the second quarter of 2024.

Current wording

On October 21, 2024, we entered into a merger agreement with Sandy Spring. Under the merger agreement, Sandy Spring will merge with and into the Company, with the Company continuing as the surviving entity. Immediately following the merger, Sandy Spring’s wholly owned banking subsidiary, Sandy Spring Bank, will merge with and into the Bank, with the Bank continuing as the surviving bank.

Previous wording

Net income available to common shareholders was $190.0 million for 2023, a decrease of $32.7 million or 14.7% and represented diluted EPS of $2.53, compared to $222.6 million and $2.97, respectively, for 2022. The decrease was primarily driven by a $27.6 million decrease in noninterest income, a $26.6 million increase in noninterest expense, and a $12.6 million increase in the provision for credit losses. The increase in provision expense was due to increased uncertainty in the economic outlook, loan growth during 2023, an increase in net charge-offs, and an increase in the allowance on two individually assessed loans due to changes in borrower-specific circumstances. These changes were partially offset by a $26.8 million increase in net interest income, and a $7.4 million decrease in income tax expense.

Current wording

Net income available to common shareholders was $190.0 million for 2023, a decrease of $32.7 million or 14.7% and represented diluted EPS of $2.53, compared to $222.6 million and $2.97, respectively, for 2022. The decrease was primarily driven by a $27.6 million decrease in noninterest income, a $26.6 million increase in noninterest expense, and a $12.6 million increase in the provision for credit losses. The increase in provision expense was due to increased uncertainty in the economic outlook, loan growth during 2023, an increase in net charge-offs, and an increase in the allowance on two individually assessed loans due to changes in borrower-specific circumstances. These changes were partially offset by a $26.8 million increase in net interest income, and a $7.4 million decrease in income tax expense. Adjusted operating earnings available to common shareholders(+) totaled $221.2 million for 2023, compared to $219.0 million for 2022, and diluted adjusted operating EPS(+) was $2.95 for 2023, compared to $2.92 for 2022.

Previous wording

Noninterest income decreased $27.6 million or 23.3% to $90.9 million for 2023, from $118.5 million for 2022, primarily driven by losses incurred on the sale of AFS securities, as well as decreases in fiduciary and asset management fees, mortgage banking income, and loan-related interest rate swap fees. These decreases in noninterest income were partially offset by increases in other operating income, service charges on deposit accounts, and other service charges, commissions, and fees. For additional details on noninterest income, refer to the section “Noninterest Income” included within this Item 7 of this Form 10-K.

Current wording

Noninterest income decreased $27.6 million or 23.3% to $90.9 million for 2023, from $118.5 million for 2022, primarily driven by losses incurred on the sale of AFS securities, as well as decreases in fiduciary and asset management fees, mortgage banking income, and loan-related interest rate swap fees. These decreases in noninterest income were partially offset by increases in other operating income, which included gains related to the sale lease-back transactions, service charges on deposit accounts, and other service charges, commissions, and fees.

Previous wording

Noninterest expense increased $26.6 million or 6.6% to $430.4 million for 2023, compared to $403.8 million for 2022, primarily driven by increases in other expenses, FDIC assessment premiums and other insurance, and salaries and benefits expense. These increases in noninterest expense were partially offset by decreases in amortization of intangible assets, professional services, loan-related expenses, technology and data processing, and occupancy expenses. For additional details on noninterest expense, refer to the section “Noninterest Expense” included within this Item 7 of this Form 10-K.

Current wording

Noninterest expense increased $26.6 million or 6.6% to $430.4 million for 2023, compared to $403.8 million for 2022, primarily driven by increases in other expenses, FDIC assessment premiums and other insurance, and salaries and benefits expense. These increases in noninterest expense were partially offset by decreases in amortization of intangible assets, professional services, loan-related expenses, technology and data processing, and occupancy expenses.

Previous wording

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

For 2023, net interest income was $611.0 million, an increase of $26.8 million from 2022. For 2023, net interest income (FTE) (+)was $625.9 million, an increase of $26.8 million from the prior year. For 2023, net interest margin increased 6 bps to 3.33% from 3.27% from 2022 and net interest margin (FTE) (+)increased 5 bps to 3.41% from 3.36% in the prior year. The increases in net interest income and net interest income (FTE) (+)were primarily driven by higher loan yields due to rising market interest rates and loan growth. These increases were partially offset by an increase in interest expense due to increased deposit and borrowing costs as a result of higher short-term market interest rates, higher average interest bearing deposits. and higher short-term borrowings to help fund loan growth.

Current wording

For 2023, net interest income was $611.0 million, an increase of $26.8 million from 2022. For 2023, net interest income (FTE)(+) was $625.9 million, an increase of $26.8 million from the prior year. For 2023, net interest margin increased 6 bps to 3.33% from 3.27% from 2022 and net interest margin (FTE)(+) increased 5 bps to 3.41% from 3.36% in the prior year. The increases in net interest income and net interest income (FTE)(+) were primarily driven by higher loan yields due to rising market interest rates and loan growth. These increases were partially offset by an increase in interest expense due to increased deposit and borrowing costs as a result of higher short-term market interest rates, higher average interest-bearing deposits. and higher short-term borrowings.

Previous wording

The impact of net accretion related to acquisition accounting fair value adjustments for the years ended December 31, 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 approximately $40.3 million for 2024 compared to approximately $3.5 million for 2023, an increase of $36.8 million due to the American National acquisition. The impact of accretion and amortization related to acquisition accounting fair value adjustments for the years ended December 31, are reflected in the following table (dollars in thousands):

Previous wording

(2)Rates and yields are calculated from actual, not rounded amounts in thousands, which appear above.

Current wording

(2)* Rates and yields are annualized and calculated from actual, not rounded amounts in thousands, which appear above.*

Previous wording

The Volume Rate Analysis table below presents changes in our interest income (FTE)(+)and interest expense and distinguishes between the changes related to increases or decreases in our 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 years ended December 31, (dollars in thousands):

Current wording

The Volume Rate Analysis table below presents changes in our net interest income (FTE)(+)and interest expense and distinguishes between the changes related to increases or decreases in our 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 years ended December 31, (dollars in thousands):

Previous wording

(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

(3)The rate-related changes in interest expense on other borrowings include the impact of higher amortization of the acquisition-related fair value adjustments of $226,000,$24,000, and $22,000 for the years ended December 31, 2024, 2023, and 2022, respectively.

Previous wording

Our adjusted operating noninterest expense(+) for 2023, which excludes expenses associated with strategic cost saving initiatives ($12.6 million in 2023), amortization of intangible assets ($8.8 million in 2023 and $10.8 million in 2022), the legal reserve related to our previously disclosed settlement with the CFPB ($8.3 million in 2023), a FDIC special assessment ($3.4 million in 2023), merger-related costs associated with our pending merger with American National ($3.0 million in 2023), and strategic branch closing and facility consolidation costs ($5.5 million in 2022), increased $6.8 million or 1.8% to $394.3 million, compared to $387.5 million for 2022. The increase was primarily driven by a $6.3 increase in FDIC assessment premiums and other insurance primarily due to increase in the FDIC assessment rates discussed above, a $4.9 million increase in salaries and benefits expense, outside of severance charges related to headcount reductions from cost saving initiatives in the second quarter of 2023, and a $1.2 million increase in marketing and advertising expense. These increases were partially offset by a $1.2 million decrease in professional services related to strategic projects that occurred in the prior year, a $991,000 decrease in other expenses primarily due to a decrease in non-credit related losses on customer transactions, a $955,000 decrease in loan-related expenses primarily due a decrease

Current wording

Our adjusted operating noninterest expense(+)for 2023, which excludes expenses associated with strategic cost saving initiatives ($12.6 million in 2023), amortization of intangible assets ($8.8 million in 2023 and $10.8 million in 2022), the legal reserve related to our previously disclosed settlement with the CFPB ($8.3 million in 2023), a FDIC special assessment ($3.4 million in 2023), merger-related costs associated with our pending merger with American National ($3.0 million in 2023), and strategic branch closing and facility consolidation costs ($5.5 million in 2022), increased $6.8 million or 1.8% to $394.3 million, compared to $387.5 million for 2022. The increase was primarily driven by a $6.3 increase in FDIC assessment premiums and other insurance primarily due to increase in the FDIC assessment rates discussed above, a $4.9 million increase in salaries and benefits expense, outside of severance charges related to headcount reductions from cost saving initiatives in the second quarter of 2023, and a $1.2 million increase in marketing and advertising expense. These increases were partially offset by a $1.2 million decrease in professional services related to strategic projects that occurred in the prior year, a $991,000 decrease in other expenses primarily due to a decrease in non-credit related losses on customer transactions, a $955,000 decrease in loan-related expenses primarily due to a decrease in third-party loan servicing, a $888,000 decrease in technology and data processing due to the fee restructuring of a major contract, and a $867,000 decrease in occupancy expenses.

Previous wording

Effective January 1, 2023, we made an organizational change to move certain lines of business in the wealth management division that primarily serve Wholesale Banking customers from the Consumer Banking segment to the Wholesale Banking segment. As a result, we reallocated $9.6 million of goodwill from the Consumer Banking segment to the Wholesale Banking segment and restated our prior segment information for the year ended December 31, 2022, based on this organizational change. Goodwill was evaluated for impairment prior to and immediately following the organizational change. Refer to Note 5 “Goodwill and Intangible Assets” within Item 8 “Financial Statements and Supplementary Data” of this Form 10-K. In addition, we restated our prior segment operating results for the years ended

Current wording

As discussed in Note 18 “Segment Reporting and Revenue” within Item 8 “Financial Statements and Supplementary Data” of this Form 10-K, effective January 1, 2023, we made an organizational change to move certain lines of business in the wealth management division that primarily serve Wholesale Banking customers from the Consumer Banking segment to the Wholesale Banking segment. As a result, we revised our prior segment operating results for the year ended December 31, 2022, resulting in a reallocation of noninterest income ($12.5 million) and noninterest expense ($16.0 million) from the Consumer Banking segment to the Wholesale Banking segment. Based on that reorganizational change, we also reallocated $9.6 million of goodwill from the Consumer Banking segment to the Wholesale Banking segment and revised our prior segment information for the year ended December 31, 2022. Goodwill was evaluated for impairment prior to and immediately following the organizational change. Refer to Note 6 “Goodwill and Intangible Assets” within Item 8 “Financial Statements and Supplementary Data” of this Form 10-K.

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 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 wealth management business also resides in the Wholesale Banking segment.

Previous wording

(1)* Operating results include a reallocation from the Consumer Banking segment, due to the January 1, 2023 organizational change discussed in Note 17, “Segment Reporting and Revenue,” within Part II, Item 8 of this Form 10-K.*

Current wording

(1)* Operating results include a reallocation from the Consumer Banking segment, due to the January 1, 2023 organizational change discussed above.*

Previous wording

Wholesale Banking income before income taxes decreased $59.5 million to $108.0 million for 2023, compared to $167.6 million for 2022. The decrease was primarily due to a decrease in our net interest income driven by spread compression on the deposit portfolio as a result of the rapid rise in interest rates, and an increase in the provision for credit losses due to increased uncertainty in the economic outlook and loan growth during 2023, higher net charge-offs, and an increase in the individually assessed allowance on two loans due to changes in borrower-specific circumstances. In addition, our noninterest expense increased in 2023 compared to 2022, primarily due to an increase in salaries and benefits expense, as well as an increase in FDIC assessment premiums and other insurance due to the increase in the FDIC assessment rates, effective January 1, 2023, and a FDIC special assessment recognized in the fourth quarter of 2023.

Current wording

Wholesale Banking income before income taxes decreased $59.1 million to $109.3 million for 2023, compared to $168.4 million for 2022. The decrease was primarily due to a decrease in net interest income driven by spread compression on the deposit portfolio as a result of the rapid rise in interest rates, and an increase in the provision for credit losses due to increased uncertainty in the economic outlook and loan growth during 2023, higher net charge-offs, and an increase in the individually assessed allowance on two loans due to changes in borrower-specific circumstances. In addition, noninterest expense increased in 2023 compared to 2022, primarily due to an increase in salaries and benefits expense, as well as an increase in FDIC assessment premiums and other insurance due to the increase in the FDIC assessment rates, effective January 1, 2023, and a FDIC special assessment recognized in the fourth quarter of 2023.

Previous wording

LHFI, net of deferred fees and costs, for the Wholesale Banking segment increased $1.2 billion or 10.6% to $12.7 billion at December 31, 2023 compared to December 31, 2022, with growth reported in the commercial and industrial, multifamily real estate, and commercial real estate – non-owner occupied loan portfolios.

Current wording

LHFI, net of deferred fees and costs, for the Wholesale Banking segment increased $2.8 billion or 22.3% to $15.5 billion at December 31, 2024 compared to December 31, 2023 primarily driven by the American National acquisition and organic loan growth.

Previous wording

Wholesale Banking deposits increased $274.7 million or 4.5% to $6.4 billion at December 31, 2023 compared to December 31, 2022, primarily driven by an increase in interest checking accounts, partially offset by a decrease in demand deposits.

Current wording

Wholesale Banking deposits increased $790.0 million or 12.3% to $7.2 billion at December 31, 2024 compared to December 31, 2023 primarily due to an increase in interest checking accounts, primarily driven by the American National acquisition.

Previous wording

(1)* Operating results include a reallocation to the Wholesale Banking segment, due to the January 1, 2023 organizational change discussed in Note 17, “Segment Reporting and Revenue,” in Part II, Item 8 of this Form 10-K.*

Current wording

(1)* Operating results include a reallocation to the Wholesale Banking segment, due to the January 1, 2023 organizational change discussed above.*

Previous wording

Consumer Banking income before income taxes increased $27.1 million to $80.7 million for 2023 compared to $53.5 million for 2022. The increase was primarily driven by an increase in our net interest income due to favorable funding credits on deposits and increased interest income attributable to the higher interest rate environment and higher average loan balances, partially offset by spread compression on the loan portfolio. Also contributing to the increase in net interest income was a decrease in the provision for credit losses primarily driven by runoff in the third-party lending and auto portfolios related to our decision to exit this business. The increase in our net interest income after provision for credit losses was partially offset by an increase in our noninterest expense primarily driven by an increase in salaries and benefits expense, as well as an increase in FDIC assessment premiums and other insurance due to the increase in the FDIC assessment rates, effective January 1, 2023, and a FDIC special assessment recognized in the fourth quarter of 2023. In addition, our noninterest income in 2023 decreased from 2022, primarily due to a decline in fiduciary and asset management fees driven by a decrease in assets under management primarily due to the sale of DHFB in the second quarter of 2022, and a continued decrease in mortgage banking income from the prior year due to a decline in mortgage loan origination volumes and a decline in gain on sale margins due to increases in market interest rates.

Current wording

Consumer Banking income before income taxes increased $26.8 million to $79.4 million for 2023 compared to $52.6 million for 2022. The increase was primarily driven by an increase in net interest income after provision for credit losses due to favorable funding credits on deposits and increased interest income attributable to the higher interest rate environment and higher average loan balances, partially offset by spread compression on the loan portfolio. Also contributing to the increase in net interest income after provision for credit losses was a decrease in the provision for credit losses primarily driven by runoff in the third-party lending and auto portfolios related to the decision to exit this business. The increase in net interest income after provision for credit losses was partially offset by a decrease in noninterest income, primarily due to a decline in fiduciary and asset management fees driven by a decrease in assets under management primarily due to the sale of DHFB in the second quarter of 2022, and a continued decrease in mortgage banking income from the prior year due to a decline in mortgage loan origination volumes and a decline in gain on sale margins due to increases in market interest rates. In addition, noninterest expense increased in 2023 from 2022, primarily driven by an increase in salaries and benefits expense, as well as an increase in FDIC assessment premiums and other insurance due to the increase in the FDIC assessment rates, effective January 1, 2023, and a FDIC special assessment recognized in the fourth quarter of 2023.

Previous wording

Our effective tax rate for the years ended December 31, 2023, 2022, and 2021 was 15.9%, 16.2%, and 17.2%, respectively. The decrease in the effective rate for 2023 compared to 2022 is primarily due to the higher proportion of tax-exempt income to pre-tax income.

Current wording

Our effective tax rate for the years ended December 31, 2024, 2023, and 2022 was 19.5%, 15.9%, and 16.2%, respectively. The increase in the effective rate for 2024 compared to 2023 is primarily due to the valuation allowance established in 2024, which resulted in a 170 bps increase in the effective tax rate, and the proportionality of tax-exempt income to pre-tax income.

Previous wording

LHFI (net of deferred fees and costs) were $15.6 billion at December 31, 2023, an increase of $1.2 billion or 8.2% from December 31, 2022. For additional information on our loan activity, please refer to the section “Loan Portfolio” included within this Item 7 and Note 3 “Loans and Allowance for Loan and Lease Losses” in the “Notes to Consolidated Financial Statements” contained in Item 8 “Financial Statements and Supplementary Data” of this Form 10-K.

Current wording

LHFI were $18.5 billion at December 31, 2024, an increase of $2.8 billion or 18.1% from December 31, 2023. For additional information on our loan activity, please refer to the section “Loan Portfolio” included within this Item 7 and Note 4 “Loans and Allowance for Loan and Lease Losses” in the “Notes to Consolidated Financial Statements” contained in Item 8 “Financial Statements and Supplementary Data” of this Form 10-K.

Previous wording

Total investments at December 31, 2023 were $3.2 billion, a decrease of $525.7 million or 14.2% from December 31, 2022. AFS securities totaled $2.2 billion at December 31, 2023, a decrease of $510.6 million or 18.6% from December 31, 2022. At December 31, 2023, total net unrealized losses on the AFS securities portfolio were $384.3 million,

Current wording

Total investments at December 31, 2024 were $3.3 billion, an increase of $164.9 million or 5.2% from December 31, 2023. AFS securities totaled $2.4 billion at December 31, 2024, an increase of $210.9 million or 9.5% from December 31, 2023. At December 31, 2024, total net unrealized losses on the AFS securities portfolio were $402.6 million, compared to $384.3 million at December 31, 2023. HTM securities totaled $803.9 million at December 31, 2024, a $33.5 million decrease from December 31, 2023. Total net unrealized losses on the HTM securities portfolio were $44.5 million at December 31, 2024, compared to $29.3 million at December 31, 2023.

Previous wording

Total deposits at December 31, 2023 were $16.8 billion, an increase of $886.5 million or 5.6% from December 31, 2022. Average deposits at December 31, 2023 increased $501.6 million or 3.0% from December 31, 2022. The increase in total deposits was primarily due to increases in interest bearing customer deposits and brokered deposits, partially offset by decreases in demand deposits. For additional information on deposits, refer to the section “Deposits” included within this Item 7 of this Form 10-K.

Current wording

Total deposits at December 31, 2024 were $20.4 billion, an increase of $3.6 billion or 21.3% from December 31, 2023. Average deposits at December 31, 2024 increased $3.6 billion or 21.3% from December 31, 2023. Total deposits increased from December 31, 2023 due to a $2.6 billion increase in interest-bearing customer deposits and $313.9 million increase in demand deposits, primarily due to the American National acquisition, as well as an increase of $669.5 million in brokered deposits. For additional information on deposits, refer to the section “Deposits” included within this Item 7 of this Form 10-K.

Previous wording

Total borrowings at December 31, 2023 were $1.3 billion, a decrease of $396.8 million or 23.2% compared to $1.7 billion at December 31, 2022. The decrease in borrowings was primarily due to paydowns of short-term borrowings due to deposit growth. For additional information on our borrowing activity, please refer to Note 8 “Borrowings” in the “Notes to Consolidated Financial Statements” contained in Item 8 “Financial Statements and Supplementary Data” of this Form 10-K.

Current wording

Total borrowings at December 31, 2024 were $534.6 million, a decrease of $777.3 million or 59.3% compared to $1.3 billion at December 31, 2023. The decrease in borrowings was primarily due to repayment of short-term FHLB advances using funds from customer deposit growth. For additional information on our borrowing activity, please refer to Note 9 “Borrowings” in the “Notes to Consolidated Financial Statements” contained in Item 8 “Financial Statements and Supplementary Data” of this Form 10-K.

Previous wording

During 2023, we declared and paid dividends on our outstanding shares of Series A Preferred Stock of $687.52 per share (equivalent to $1.72 per outstanding depositary share). During 2023, we also declared and paid cash dividends of $1.22 per common share, an increase of $0.06 per share or 5.2% over 2022.

Current wording

During 2024, we declared and paid dividends on our outstanding shares of Series A Preferred Stock of $687.52 per share (equivalent to $1.72 per outstanding depositary share). During 2024, we also declared and paid cash dividends of $1.30 per common share, an increase of $0.08 per share or 6.6% over 2023.

Previous wording

At December 31, 2023, we had total investments of $3.2 billion or 15.0% of total assets, compared to $3.7 billion or 18.1% of total assets at December 31, 2022. This decrease was primarily due to the sale of AFS securities in the first quarter of 2023, partially offset by the improvement in the fair value of the AFS securities portfolio due to the impact of lower market interest rates. We seek to diversify our investment portfolio to minimize risk, as 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 10 “Derivatives” in “Notes to the Consolidated Financial Statements” contained in Item 8 “Financial Statements and Supplementary Data” of this Form 10-K.

Current wording

At December 31, 2024, we had total investments of $3.3 billion or 13.6% of total assets, 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 investment 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 tax-equivalent 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 11 “Derivatives” in “Notes to the Consolidated Financial Statements” contained in Item 8 “Financial Statements and Supplementary Data” of this Form 10-K.

Previous wording

(1)* Yields on tax-exempt securities have been computed on a tax-equivalent basis.*

Current wording

(1)* Yields on tax-exempt securities have been computed on an estimated tax-equivalent basis.*

Previous wording

(1)* Yields on tax-exempt securities have been computed on a tax-equivalent basis.*

Current wording

(1)* Yields on tax-exempt securities have been computed on an estimated tax-equivalent basis.*