Kirkikis Earnings of Atlantic Union Bankshares Corporation (NYSE:AUB) will likely increase in 2024 on the back of loan growth. The upcoming acquisition of American National and organic means will likely drive loan growth. On the other hand, pressure on the margin will limit earnings growth. Overall, I'm expecting the company to report earnings of $2.50 per share for 2023 and $3.02 per share for 2024. The year-end target price suggests a small upside from the current market price. Based on the total expected ...

Financial Performance - The Company reported a significant change in its financial condition and results of operations, which should be evaluated in conjunction with its consolidated financial statements and prior reports[194]. - Net income available to common shareholders for Q3 2023 was $51.1 million, with basic and diluted EPS of $0.68, compared to $55.1 million and $0.74 for Q3 2022[223]. - Net interest income for Q3 2023 was $151.9 million, an increase of $1.2 million from Q3 2022, while the net interest margin decreased to 3.27%[227]. - For the first nine months of 2023, net interest income was $457.5 million, an increase of $37.1 million from the same period of 2022[229]. - Noninterest income rose to $27,094 thousand, a 5.9% increase from $25,584 thousand year-over-year, driven by a $27.7 million gain from a sale-leaseback transaction[240]. - Adjusted operating earnings for Q3 2023 were $59.8 million, with adjusted diluted operating EPS of $0.80, compared to $55.1 million and $0.74 in Q3 2022[223]. Assets and Liabilities - As of September 30, 2023, total assets increased to $20.7 billion, up $275.1 million or approximately 1.8% from December 31, 2022[225]. - Total liabilities increased by $259.0 million or approximately 1.9% (annualized) to $18.3 billion as of September 30, 2023, compared to December 31, 2022[272]. - Total deposits reached $16.8 billion, an increase of $854.8 million or approximately 7.2% from December 31, 2022, driven by a $1.6 billion increase in interest-bearing deposits[225]. - Total short-term and long-term borrowings decreased by $688.0 million or 40.3% to $1.0 billion as of September 30, 2023, compared to December 31, 2022[274]. - Liquid assets totaled $5.6 billion, accounting for 27.2% of total assets, while liquid earning assets were $5.4 billion, or 29.2% of total earning assets[289]. Loans and Credit Quality - The loan portfolio (LHFI) net of deferred fees and costs increased to $15.3 billion as of September 30, 2023, compared to $14.4 billion at December 31, 2022[294]. - The allowance for credit losses (ACL) increased by $16.5 million to $140.9 million due to economic uncertainty and net loan growth[298]. - Nonperforming assets (NPAs) totaled $28.8 million, reflecting a 6.1% increase from $27.1 million at December 31, 2022, with NPAs as a percentage of total LHFI remaining stable at 0.19%[300]. - The company reported past due LHFI still accruing interest of $40.6 million, or 0.27% of total LHFI, up from $30.0 million or 0.21% at December 31, 2022[306]. - The company continues to focus on soundly underwritten loans to qualifying borrowers, mitigating risks in concentrated portfolios such as commercial real estate[295]. Interest Income and Expense - Interest and dividend income rose to $694.95 million, a $236.59 million increase compared to the same period in 2022[229]. - Interest expense increased significantly to $237.48 million, up by $199.53 million from the previous year[229]. - The cost of interest-bearing liabilities rose to 2.42%, an increase of 199 bps from 0.43% in the prior year[229]. - The yield on interest-earning assets increased to 5.09%, up from 3.44% in the same period of 2022, reflecting a rise of 165 bps[229]. Strategic Initiatives and Mergers - The pending merger with American National is expected to bring strategic gains and cost savings, although there are risks associated with regulatory approvals and market conditions[198]. - The Company incurred pre-tax merger costs of approximately $2.0 million related to the proposed merger with American National Bankshares Inc.[219]. - The Company initiated strategic cost-saving measures expected to reduce annual expenses by approximately $17 million, incurring pre-tax expenses of $8.7 million in Q3 2023[220]. Regulatory and Accounting Changes - The Company does not expect the recent accounting pronouncement (ASU No. 2023-02) to have a significant impact on its consolidated financial statements[211]. - The Company is allowed to phase in the impact of adopting the CECL methodology over a three-year period that began in 2022 and ends in 2024[325]. Risk Factors - The Company is subject to various risks, including changes in market interest rates, economic conditions, and regulatory changes that could affect its operations[198]. - The company remains cautious about future economic conditions, including inflation and interest rates, which may impact NPAs[299]. Branch and ATM Network - The Company has 109 branches and 123 ATMs across Virginia, Maryland, and North Carolina as of September 30, 2023[212].

Financial Data and Key Metrics Changes - The reported net income available to common shareholders was $51.1 million, with earnings per common share at $0.68, while adjusted operating earnings were $59.8 million or $0.80 per common share, reflecting an increase of 7.9% from the previous quarter and 8.5% year-over-year [25][26] - Adjusted operating return on tangible common equity rose to 18.3% from 17% in the prior quarter, and adjusted operating return on assets increased to 1.21%, up 5 basis points from the previous quarter [25][26] - Total deposits grew by 9.1% annualized for the quarter, reaching $16.8 billion, driven by increases in interest-bearing customer deposits and broker deposits [31] Business Line Data and Key Metrics Changes - Annualized loan growth was 5.7% during the third quarter, led by growth in commercial loans, with year-to-date loan growth at 7.7% annualized [17][31] - The loan portfolio yield increased to 5.84%, up 22 basis points from the previous quarter, while the tax equivalent net interest margin was 3.35%, a decrease of 10 basis points from the prior quarter [27][28] Market Data and Key Metrics Changes - Virginia's unemployment rate improved to 2.5% in August, down from 2.9% in May, remaining below the national average of 3.8% [13] - The lending pipeline is slightly higher than a year ago, indicating a healthy macroeconomic environment in the company's footprint [12][13] Company Strategy and Development Direction - The company announced a merger agreement to acquire American National Bankshares, expected to close in Q1 2024, which aims to enhance financial performance and expand market presence [8][10] - The company is focused on generating positive operating leverage, with a strategy to grow revenue faster than expenses, supported by structural expense reductions [7][10] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding the economic outlook, anticipating a mild recession but expecting a favorable macroeconomic environment in their markets [12][20] - The company remains resilient and expects a good finish to the year, with a focus on sustainable, profitable growth [21][33] Other Important Information - The company undertook a sale-leaseback transaction of 27 properties, generating cash proceeds of approximately $46 million and a pre-tax gain of $27.7 million [23][24] - The total allowance for credit losses was $140.9 million, reflecting an increase due to loan growth and economic uncertainty [26] Q&A Session Summary Question: Expectations for margin compression in Q4 - Management expects further margin compression of 5 to 10 basis points in Q4, with a potential trough in the first quarter around 3.25% [36][37] Question: Loan production rates - New loan production is expected to average around 7%, with variable rate loans closer to 8% and fixed-rate loans slightly over 6% [39][40] Question: Shared national credit exposure - The company has a small exposure to shared national credits, primarily with known Virginia-based corporations, and does not engage in secondary issuances [42][43] Question: Fee growth outlook - Fee growth is expected to be in the range of 2% to 4%, driven by net client growth and seasonal impacts [46][47] Question: Credit normalization expectations - Management projects a normalization of charge-offs to 15 to 20 basis points annually, with potential drivers including higher interest rates and recessionary factors [64][66]

PART I - FINANCIAL INFORMATION [Item 1. Financial Statements](index=7&type=section&id=Item%201.%20Financial%20Statements) This section presents Atlantic Union Bankshares Corporation's unaudited consolidated financial statements and notes for periods ending June 30, 2023 [Consolidated Balance Sheets](index=7&type=section&id=Consolidated%20Balance%20Sheets) Total assets, deposits, and stockholders' equity increased by June 30, 2023, reflecting growth in net loans and deposits Consolidated Balance Sheet Highlights (unaudited) | (In Millions) | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | **Total Assets** | **$20,602.3** | **$20,461.1** | | Cash and cash equivalents | $428.3 | $319.9 | | Securities available for sale, at fair value | $2,182.4 | $2,741.8 | | Loans held for investment, net | $14,946.2 | $14,338.4 | | **Total Liabilities** | **$18,177.9** | **$18,088.4** | | Total deposits | $16,412.0 | $15,931.7 | | Total borrowings (short & long-term) | $1,320.3 | $1,708.7 | | **Total Stockholders' Equity** | **$2,424.5** | **$2,372.7** | [Consolidated Statements of Income](index=8&type=section&id=Consolidated%20Statements%20of%20Income) Net income decreased in Q2 and the first half of 2023 due to higher interest expenses and increased provision for credit losses, despite growth in interest income Key Income Statement Data (unaudited) | (In Millions, except per share data) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Net interest income | $152.1 | $138.8 | $305.5 | $269.7 | | Provision for credit losses | $6.1 | $3.6 | $17.9 | $6.4 | | Noninterest income | $24.2 | $38.3 | $33.8 | $68.4 | | Noninterest expenses | $105.7 | $98.8 | $213.9 | $204.1 | | **Net income** | **$55.2** | **$62.2** | **$90.9** | **$105.9** | | Net income available to common shareholders | $52.3 | $59.3 | $85.0 | $100.0 | | **Diluted earnings per common share** | **$0.70** | **$0.79** | **$1.13** | **$1.33** | [Notes to Consolidated Financial Statements](index=14&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) These notes detail accounting policies, financial statement line items, and significant events, including the adoption of ASU 2022-02 and the proposed merger with American National - The company adopted **ASU 2022-02** on January 1, 2023, which eliminated accounting guidance for Troubled Debt Restructurings (TDRs) and introduced new disclosure requirements for **Troubled Loan Modifications (TLMs)**[31](index=31&type=chunk) - On July 24, 2023, the Company entered into a **definitive merger agreement** with **American National Bankshares Inc.**, with the transaction expected to close in the first quarter of 2024[195](index=195&type=chunk) - The Board of Directors declared a **quarterly common stock dividend of $0.30 per share**, payable on August 25, 2023, and a preferred stock dividend of $171.88 per share (equivalent to $0.43 per depositary share), payable on September 1, 2023[196](index=196&type=chunk) - The company is in **settlement discussions with the Consumer Financial Protection Bureau (CFPB)** regarding its **overdraft practices** and policies, with a probable and estimable liability recorded as of June 30, 2023[121](index=121&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=70&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management analyzes the company's financial performance, condition, and strategic initiatives, covering results of operations, financial condition, asset quality, and capital resources [Executive Overview & Recent Events](index=75&type=section&id=Executive%20Overview%20%26%20Recent%20Events) The company highlights strong capital and liquidity amidst industry volatility, detailing the proposed merger with American National, cost-saving measures, and a balance sheet repositioning strategy - Announced a **definitive merger agreement** with **American National Bankshares Inc.** on July 24, 2023, with the transaction expected to close in Q1 2024[215](index=215&type=chunk) - Executed **cost-saving measures** in Q2 2023, expected to reduce the annual expense run rate by **approximately $17 million**, resulting in $3.9 million of pre-tax expenses in Q2 2023[222](index=222&type=chunk) - In Q1 2023, the company executed a **balance sheet repositioning**, selling **AFS securities** with a book value of $505.7 million at a pre-tax loss of $13.4 million to reduce FHLB borrowings[223](index=223&type=chunk) - As of June 30, 2023, the company estimates that approximately **73.5% of its deposits were insured or collateralized**, and it maintained available liquidity to cover approximately **133% of uninsured and uncollateralized deposits**[219](index=219&type=chunk) [Results of Operations](index=78&type=section&id=Results%20of%20Operations) Net interest income increased in Q2 2023 due to margin expansion, while noninterest income decreased and noninterest expenses rose, primarily from higher salaries and benefits Net Interest Income and Margin (FTE, non-GAAP) | Metric | Q2 2023 | Q2 2022 | Change | | :--- | :--- | :--- | :--- | | Net Interest Income (FTE) | $155.8M | $142.3M | +$13.4M | | Net Interest Margin (FTE) | 3.45% | 3.24% | +21 bps | - Noninterest income for Q2 2023 **decreased by $14.1 million (36.8%)** YoY, primarily driven by a $9.1 million gain on the sale of DHFB in Q2 2022[240](index=240&type=chunk) - Noninterest expense for Q2 2023 **increased by $6.9 million (7.0%)** YoY, mainly due to a $6.7 million rise in salaries and benefits, which included severance charges[244](index=244&type=chunk) [Financial Condition](index=94&type=section&id=Financial%20Condition) Total assets increased slightly by June 30, 2023, driven by loan growth and deposit increases, while the investment portfolio decreased and borrowings were reduced - Total assets **increased by $141.2 million (1.4% annualized) to $20.6 billion** from Dec 31, 2022[262](index=262&type=chunk) - Loans held for investment (net) **grew by $617.8 million (8.6% annualized)** since year-end 2022[263](index=263&type=chunk) - Total deposits **increased by $480.3 million (6.1% annualized)**, with a $1.1 billion increase in interest-bearing deposits offsetting a $572.9 million decrease in demand deposits[266](index=266&type=chunk) - Total borrowings **decreased by $388.4 million (22.7%)** from year-end 2022, a result of the balance sheet repositioning strategy[267](index=267&type=chunk) [Asset Quality](index=101&type=section&id=Asset%20Quality) Asset quality remained strong and stable with nonperforming assets unchanged, while net charge-offs increased and the Allowance for Credit Losses grew due to loan growth and economic uncertainty Asset Quality Metrics | Metric | June 30, 2023 ($M) | December 31, 2022 ($M) | | :--- | :--- | :--- | | Nonperforming assets (NPAs) | $29.2 | $27.1 | | NPAs to total LHFI | 0.19% | 0.19% | | Allowance for Credit Losses (ACL) | $136.2 | $124.4 | | ACL to total LHFI | 0.90% | 0.86% | - Net charge-offs for the six months ended June 30, 2023, were **$6.1 million (0.08% of average loans)**, compared to $935,000 (0.01%) for the same period in 2022[303](index=303&type=chunk) - The provision for credit losses for the six months ended June 30, 2023 was **$17.9 million**, an increase from $6.4 million in the prior-year period, driven by economic uncertainty and loan growth[304](index=304&type=chunk) [Capital Resources](index=108&type=section&id=Capital%20Resources) The company's capital ratios remain strong and exceed regulatory minimums, with the tangible common equity to tangible assets ratio showing improvement Regulatory Capital Ratios (Estimates for Q2 2023) | Ratio | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Common equity Tier 1 capital ratio | 9.86% | 9.95% | | Tier 1 capital ratio | 10.81% | 10.93% | | Total capital ratio | 13.64% | 13.70% | | Leverage ratio | 9.64% | 9.42% | | Tangible common equity to tangible assets (+) | 6.66% | 6.43% | [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=113&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company manages interest rate risk, its primary market risk, and was asset-sensitive as of June 30, 2023, though less so than the prior year Interest Rate Sensitivity Analysis (Change in Net Interest Income) | Rate Shock | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | +300 bps | +7.47% | +11.73% | | +200 bps | +5.25% | +8.25% | | +100 bps | +2.89% | +4.65% | | -100 bps | -2.94% | -3.18% | - From a net interest income perspective, the Company was **less asset sensitive** as of June 30, 2023, compared to its position as of June 30, 2022[340](index=340&type=chunk) [Item 4. Controls and Procedures](index=116&type=section&id=Item%204.%20Controls%20and%20Procedures) The company's disclosure controls and procedures were effective as of June 30, 2023, with no material changes to internal control over financial reporting identified - The CEO and CFO concluded that as of June 30, 2023, the Company's disclosure controls and procedures were **effective at the reasonable assurance level**[344](index=344&type=chunk) - There were **no changes** during the quarter ended June 30, 2023, that have **materially affected**, or are reasonably likely to materially affect, the internal control over financial reporting[346](index=346&type=chunk) PART II - OTHER INFORMATION [Item 1. Legal Proceedings](index=117&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal proceedings, including ongoing settlement discussions with the CFPB regarding historical overdraft practices - The company is in **settlement discussions with the CFPB** regarding alleged violations related to its **overdraft practices** and policies, which began in March 2023 and are ongoing[349](index=349&type=chunk) [Item 1A. Risk Factors](index=117&type=section&id=Item%201A.%20Risk%20Factors) This section updates risk factors, primarily focusing on the proposed merger with American National, including completion risks, regulatory challenges, and integration difficulties - **Failure to complete the merger** with American National could **negatively impact the company's stock price** and result in significant unrecovered expenses[352](index=352&type=chunk) - **Regulatory approvals** for the merger may not be received, may be delayed, or may impose conditions that could **adversely affect the combined company**[353](index=353&type=chunk)[355](index=355&type=chunk) - **Integrating with American National** may be more difficult, costly, or time-consuming than expected, and the company may **fail to realize the anticipated benefits and cost savings**[357](index=357&type=chunk)[358](index=358&type=chunk) - The **rising interest rate environment** could increase the magnitude of negative purchase accounting marks on American National's investment and loan portfolios, **diluting tangible book value**[361](index=361&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=121&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered equity sales and repurchased 2,985 shares in Q2 2023 for tax withholding, with no active share repurchase program - As of June 30, 2023, the Company **does not have an authorized share repurchase program**[366](index=366&type=chunk) Issuer Purchases of Equity Securities (Q2 2023) | Period | Total Shares Purchased (1) | Average Price Paid per Share ($) | | :--- | :--- | :--- | | April 1 - April 30, 2023 | 421 | $34.05 | | May 1 - May 31, 2023 | 893 | $25.32 | | June 1 - June 30, 2023 | 1,671 | $26.97 | | **Total** | **2,985** | **$27.48** | (1) Shares were withheld upon vesting of restricted shares to satisfy tax withholding obligations [Item 6. Exhibits](index=122&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including the merger agreement with American National and Sarbanes-Oxley certifications - **Key exhibits filed** include the **merger agreement with American National**, corporate governance documents, and **Sarbanes-Oxley certifications**[370](index=370&type=chunk)

Financial Data and Key Metrics Changes - Reported net income available to common shareholders was $52.3 million, with earnings per share of $0.70, while adjusted operating earnings were $55.4 million or $0.74 per common share, marking an increase of 17.3% from the first quarter and 8% year-over-year [19][20] - Adjusted operating return on tangible common equity was 17%, up from 15.2% in the prior quarter, and adjusted operating return on assets was 1.16%, an increase of 16 basis points from the first quarter [20] - Tax equivalent net interest income was $155.8 million, down 1% from the first quarter, with a net interest margin of 3.45%, a decrease of 5 basis points from the previous quarter but up from 3.24% year-over-year [22][23] Business Line Data and Key Metrics Changes - Annualized loan growth was approximately 13%, with commercial and industrial (C&I) lending leading the growth, while construction lending production slowed [13][14] - Noninterest income increased by $14.6 million to $24.2 million, primarily due to a prior quarter's loss on the sale of securities [24] - Noninterest expense decreased to $105.7 million from $108.3 million in the prior quarter, with adjusted operating noninterest expenses declining to $99.5 million [25][26] Market Data and Key Metrics Changes - Total deposits stood at $16.4 billion, a decrease of approximately 1% annualized from the prior quarter, influenced by customer behavior in response to inflation and higher market interest rates [27] - The loan-to-deposit ratio was 90.6% as of the end of the quarter, indicating a stable deposit base despite a slight decline in demand deposits [9][27] - Virginia's unemployment rate improved to 2.7% in June, remaining below the national average of 3.6% [10] Company Strategy and Development Direction - The company announced a planned merger with American National Bank, which has $3.1 billion in assets, aiming to enhance financial strength and growth potential in Virginia and North Carolina [6][34] - The merger is expected to create a stronger presence in Virginia and provide a platform for growth in North Carolina, with a focus on commercial and industrial banking [34][35] - The company aims to generate positive operating leverage by growing revenue faster than expenses, with a target of flat year-over-year adjusted operating noninterest expense growth for 2023 [12][29] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's resilience amid a challenging banking environment, noting strong asset quality and a healthy lending pipeline [17][16] - The macroeconomic environment is viewed as sound, with expectations of a mild recession but improved prospects for a soft landing [10][11] - The company anticipates continued moderate loan growth in 2023, despite potential challenges from rising interest rates [15] Other Important Information - The company expects to realize $17 million in annualized cost savings from strategic initiatives, with the majority of savings expected to kick in post-August 1 [12][60] - The merger transaction is structured as a 100% stock deal, with an aggregate transaction value of about $417 million, representing a 24% premium for American National shareholders [51][50] - The transaction is expected to close in the first quarter of 2024, subject to regulatory approvals [52] Q&A Session Summary Question: Can you walk us through the cadence of how the $17 million of cost savings will flow through the back half of this year? - Management indicated that about $500,000 or $2 million annualized came out in Q2, with $3.5 million expected in Q3 and the full effect of $4.25 million in Q4 [60] Question: How will the $120 million loan mark on American National flow through earnings? - It is projected that earnings will come in over four years on a sum-of-the-years' digit basis, with a duration of about three years for the loan portfolio [62] Question: How will the merger impact ROA, ROE, and efficiency? - The merger is expected to enhance ROA by about 20 basis points to approximately 1.25%, with ROTCE projected at about 19.5% to 20% and efficiency ratio improving towards the 50% mark [66]

PART I - FINANCIAL INFORMATION [Item 1. Financial Statements](index=7&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited consolidated financial statements for Atlantic Union Bankshares Corporation, including balance sheets, statements of income, comprehensive income, changes in stockholders' equity, and cash flows for the periods ended March 31, 2023 and 2022, along with detailed notes explaining significant accounting policies and financial instrument specifics [Consolidated Balance Sheets](index=7&type=section&id=Consolidated%20Balance%20Sheets) Presents the company's financial position, detailing assets, liabilities, and stockholders' equity at specific quarter-end dates Total Assets (QoQ) | Date | Amount (in thousands) | | :------------- | :-------------------- | | Mar 31, 2023 | $20,103,370 | | Dec 31, 2022 | $20,461,138 | Key Asset Changes (Mar 31, 2023 vs. Dec 31, 2022) | Asset Category | Mar 31, 2023 (in thousands) | Dec 31, 2022 (in thousands) | Change (QoQ) | | :---------------------------------- | :-------------------------- | :-------------------------- | :----------- | | Securities available for sale | $2,252,365 | $2,741,816 | -$489,451 | | Loans held for investment, net | $14,467,768 | $14,338,374 | +$129,394 | Total Liabilities (QoQ) | Date | Amount (in thousands) | | :------------- | :-------------------- | | Mar 31, 2023 | $17,663,134 | | Dec 31, 2022 | $18,088,401 | Key Liability Changes (Mar 31, 2023 vs. Dec 31, 2022) | Liability Category | Mar 31, 2023 (in thousands) | Dec 31, 2022 (in thousands) | Change (QoQ) | | :-------------------------- | :-------------------------- | :-------------------------- | :----------- | | Noninterest-bearing deposits| $4,578,009 | $4,883,239 | -$305,230 | | Interest-bearing deposits | $11,877,901 | $11,048,438 | +$829,463 | | Other short-term borrowings | $245,000 | $1,176,000 | -$931,000 | Total Stockholders' Equity (QoQ) | Date | Amount (in thousands) | | :------------- | :-------------------- | | Mar 31, 2023 | $2,440,236 | | Dec 31, 2022 | $2,372,737 | [Consolidated Statements of Income](index=8&type=section&id=Consolidated%20Statements%20of%20Income) Details the company's revenues, expenses, and net income over specific quarterly periods Net Income Available to Common Shareholders (YoY) | Period | Amount (in thousands) | Change (YoY) | | :------------- | :-------------------- | :----------- | | Mar 31, 2023 | $32,686 | -$8,037 | | Mar 31, 2022 | $40,723 | | Key Income/Expense Changes (Q1 2023 vs. Q1 2022) | Item | Q1 2023 (in thousands) | Q1 2022 (in thousands) | Change (YoY) | | :------------------------------------ | :--------------------- | :--------------------- | :----------- | | Net interest income | $153,443 | $130,931 | +$22,512 | | Provision for credit losses | $11,850 | $2,800 | +$9,050 | | Total noninterest income | $9,628 | $30,153 | -$20,525 | | Loss on sale of securities | ($13,400) | — | -$13,400 | | Total noninterest expenses | $108,274 | $105,321 | +$2,953 | Earnings Per Common Share (EPS) (YoY) | Period | Basic EPS | Diluted EPS | | :------------- | :-------- | :---------- | | Mar 31, 2023 | $0.44 | $0.44 | | Mar 31, 2022 | $0.54 | $0.54 | [Consolidated Statements of Comprehensive Income (Loss)](index=9&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) Reports net income and other comprehensive income (loss) components, reflecting changes in equity not from net income Comprehensive Income (Loss) (YoY) | Period | Amount (in thousands) | Change (YoY) | | :------------- | :-------------------- | :----------- | | Mar 31, 2023 | $92,006 | +$258,434 | | Mar 31, 2022 | ($166,428) | | Key Components of Other Comprehensive Income (Loss) (Q1 2023 vs. Q1 2022) | Item | Q1 2023 (in thousands) | Q1 2022 (in thousands) | Change (YoY) | | :---------------------------------------------------------------- | :--------------------- | :--------------------- | :----------- | | Change in fair value of cash flow hedges (net of tax) | $13,714 | ($23,313) | +$37,027 | | Unrealized holding gains (losses) on AFS securities (net of tax) | $32,068 | ($186,967) | +$219,035 | [Consolidated Statements of Changes in Stockholders' Equity](index=10&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) Outlines the changes in the company's equity accounts, including net income, dividends, and other comprehensive income Total Stockholders' Equity (QoQ) | Date | Amount (in thousands) | | :------------- | :-------------------- | | Mar 31, 2023 | $2,440,236 | | Dec 31, 2022 | $2,372,737 | Key Changes in Stockholders' Equity (Q1 2023) | Item | Amount (in thousands) | | :---------------------------------------- | :-------------------- | | Net Income | $35,653 | | Other comprehensive income (net of taxes) | $56,353 | | Dividends on common stock | ($22,417) | | Dividends on preferred stock | ($2,967) | [Consolidated Statements of Cash Flows](index=11&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Summarizes cash inflows and outflows from operating, investing, and financing activities for the reporting periods Net Cash Provided by Operating Activities (YoY) | Period | Amount (in thousands) | Change (YoY) | | :------------- | :-------------------- | :----------- | | Mar 31, 2023 | $59,567 | -$51,880 | | Mar 31, 2022 | $111,447 | | Net Cash Provided by (Used in) Investing Activities (YoY) | Period | Amount (in thousands) | Change (YoY) | | :------------- | :-------------------- | :----------- | | Mar 31, 2023 | $405,565 | +$745,578 | | Mar 31, 2022 | ($340,013) | | Net Cash Used in Financing Activities (YoY) | Period | Amount (in thousands) | Change (YoY) | | :------------- | :-------------------- | :----------- | | Mar 31, 2023 | ($412,884) | -$235,252 | | Mar 31, 2022 | ($177,632) | | - Key Investing Activities (Q1 2023): * Proceeds from sales of AFS securities: **$558,466 thousand** * Net increase in LHFI: **($145,260) thousand**[22](index=22&type=chunk) - Key Financing Activities (Q1 2023): * Net decrease in short-term borrowings: **($910,077) thousand** * Net increase in interest-bearing deposits: **$829,449 thousand**[22](index=22&type=chunk) [Notes to Consolidated Financial Statements](index=13&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) This section provides detailed disclosures on the company's significant accounting policies, financial instruments, loan portfolio, credit quality, and segment performance, highlighting the adoption of new accounting standards and the impact of a balance sheet repositioning strategy [Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=13&type=section&id=Note%201.%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) Outlines the company's foundational accounting principles, including recent ASU adoptions and their financial impact - Atlantic Union Bankshares Corporation (NYSE: AUB) is the holding company for Atlantic Union Bank, headquartered in Richmond, Virginia, with 109 branches and approximately 125 ATMs in Virginia, Maryland, and North Carolina. Non-bank affiliates include equipment financing, brokerage services, and insurance products[27](index=27&type=chunk) - Adopted ASU No. 2022-01 (Derivatives and Hedging) effective January 1, 2023, with no significant impact on financial statements[30](index=30&type=chunk)[34](index=34&type=chunk) - Adopted ASU No. 2022-02 (Financial Instruments-Credit Losses) effective January 1, 2023, eliminating Troubled Debt Restructurings (TDRs) and introducing Troubled Loan Modifications (TLMs) for borrowers experiencing financial difficulty[31](index=31&type=chunk)[36](index=36&type=chunk)[37](index=37&type=chunk) - Accrued interest is excluded from the Allowance for Loan and Lease Losses (ALLL) and Allowance for Credit Losses (ACL) for securities, and is written off when collection is improbable[38](index=38&type=chunk) [Note 2. SECURITIES](index=16&type=section&id=Note%202.%20SECURITIES) Details the company's available-for-sale and held-to-maturity securities portfolios, including fair values and repositioning strategy AFS Securities Portfolio (Mar 31, 2023 vs. Dec 31, 2022) | Metric | Mar 31, 2023 (in thousands) | Dec 31, 2022 (in thousands) | Change (QoQ) | | :------------------------------------ | :-------------------------- | :-------------------------- | :----------- | | Estimated Fair Value | $2,252,365 | $2,741,816 | -$489,451 | | Total Unrealized Losses | ($408,122) | ($462,838) | +$54,716 | HTM Securities Portfolio (Mar 31, 2023 vs. Dec 31, 2022) | Metric | Mar 31, 2023 (in thousands) | Dec 31, 2022 (in thousands) | Change (QoQ) | | :------------------------------------ | :-------------------------- | :-------------------------- | :----------- | | Carrying Value | $855,418 | $847,732 | +$7,686 | | Total Unrealized Losses | ($38,505) | ($48,063) | +$9,558 | - In Q1 2023, the company executed a balance sheet repositioning strategy by selling **$505.7 million** of AFS securities at a pre-tax loss of **$13.4 million** to reduce high-cost FHLB borrowings, aiming for improved liquidity, enhanced tangible common equity, and additional run-rate earnings[46](index=46&type=chunk)[60](index=60&type=chunk) - Restricted stock includes FRB stock of **$67.0 million** and FHLB stock of **$20.6 million** at March 31, 2023 (down from **$53.2 million** at December 31, 2022)[58](index=58&type=chunk) [Note 3. LOANS AND ALLOWANCE FOR LOAN AND LEASE LOSSES](index=23&type=section&id=Note%203.%20LOANS%20AND%20ALLOWANCE%20FOR%20LOAN%20AND%20LEASE%20LOSSES) Provides details on the loan portfolio, credit quality, and the allowance for loan and lease losses, including nonaccrual loans Total LHFI, net of deferred fees and costs (QoQ) | Date | Amount (in thousands) | | :------------- | :-------------------- | | Mar 31, 2023 | $14,584,280 | | Dec 31, 2022 | $14,449,142 | Allowance for Loan and Lease Losses (ALLL) (QoQ) | Date | Amount (in thousands) | | :------------- | :-------------------- | | Mar 31, 2023 | $116,512 | | Dec 31, 2022 | $110,768 | Nonaccrual LHFI (QoQ) | Date | Amount (in thousands) | | :------------- | :-------------------- | | Mar 31, 2023 | $29,082 | | Dec 31, 2022 | $27,038 | - As of March 31, 2023, Troubled Loan Modifications (TLMs) had an amortized cost basis of **$20.5 million** with an estimated **$296 thousand** in allowance. Unfunded commitments on TLMs totaled **$4.4 million**, and no significant defaults occurred during Q1 2023[71](index=71&type=chunk)[73](index=73&type=chunk) ALLL Activity (Q1 2023 vs. Q1 2022) | Item | Q1 2023 (in thousands) | Q1 2022 (in thousands) | Change (YoY) | | :--------------------------------- | :--------------------- | :--------------------- | :----------- | | Loans charged-off | ($5,726) | ($1,509) | -$4,217 | | Recoveries credited to allowance | $1,167 | $1,513 | -$346 | | Provision charged to operations | $10,303 | $2,800 | +$7,503 | Net Charge-offs by Segment (Q1 2023 vs. Q1 2022) | Segment | Q1 2023 (in thousands) | Q1 2022 (in thousands) | Change (YoY) | | :--------- | :--------------------- | :--------------------- | :----------- | | Commercial | ($4,492) | ($33) | -$4,459 | | Consumer | ($67) | $37 | -$104 | | Total | ($4,559) | $4 | -$4,563 | [Note 4. GOODWILL AND INTANGIBLE ASSETS](index=37&type=section&id=Note%204.%20GOODWILL%20AND%20INTANGIBLE%20ASSETS) Reports on the company's goodwill and amortizable intangible assets, including reallocations and amortization expense Goodwill and Intangible Assets (Mar 31, 2023 vs. Dec 31, 2022) | Asset Type | Mar 31, 2023 (in thousands) | Dec 31, 2022 (in thousands) | Change (QoQ) | | :---------------------- | :-------------------------- | :-------------------------- | :----------- | | Goodwill | $925,211 | $925,211 | $0 | | Amortizable intangibles | $24,482 | $26,761 | -$2,279 | - Effective January 1, 2023, an organizational change reallocated **$9.6 million** of goodwill and **$1.6 million** of intangible assets from the Consumer Banking segment to the Wholesale Banking segment, with no impairment identified[94](index=94&type=chunk) Amortization Expense of Intangibles (YoY) | Period | Amount (in thousands) | | :----- | :-------------------- | | Q1 2023| $2,279 | | Q1 2022| $3,039 | [Note 5. LEASES](index=38&type=section&id=Note%205.%20LEASES) Details the company's lease arrangements, including net investment in sales-type leases and operating lease liabilities Total Net Investment in Sales-type and Direct Financing Leases (QoQ) | Metric | Mar 31, 2023 (in thousands) | Dec 31, 2022 (in thousands) | Change (QoQ) | | :----------------------------------------- | :-------------------------- | :-------------------------- | :----------- | | Lease receivables, net | $257,643 | $266,380 | -$8,737 | | Unguaranteed residual values, net | $15,269 | $15,159 | +$110 | | Total net investment | $272,912 | $281,539 | -$8,627 | Lessee Arrangements (Mar 31, 2023 vs. Dec 31, 2022) | Metric | Mar 31, 2023 (in thousands) | Dec 31, 2022 (in thousands) | Change (QoQ) | | :----------------------------------- | :-------------------------- | :-------------------------- | :----------- | | Operating ROU assets | $34,520 | $35,729 | -$1,209 | | Operating Lease liabilities | $45,897 | $47,696 | -$1,799 | | Weighted-average remaining lease term| 6.70 years | 6.80 years | -0.10 years | Total Lease Cost (Q1 2023 vs. Q1 2022) | Item | Q1 2023 (in thousands) | Q1 2022 (in thousands) | Change (YoY) | | :--------------- | :--------------------- | :--------------------- | :----------- | | Net Operating Lease Cost | $2,240 | $2,309 | -$69 | | Finance Lease Cost | $254 | $257 | -$3 | | Total Lease Cost | $2,494 | $2,566 | -$72 | [Note 6. BORROWINGS](index=41&type=section&id=Note%206.%20BORROWINGS) Outlines the company's short-term and long-term borrowings, including changes in FHLB advances and available liquidity Total Short-term Borrowings (QoQ) | Date | Amount (in thousands) | | :------------- | :-------------------- | | Mar 31, 2023 | $408,760 | | Dec 31, 2022 | $1,318,837 | Key Short-term Borrowing Changes (Mar 31, 2023 vs. Dec 31, 2022) | Item | Mar 31, 2023 (in thousands) | Dec 31, 2022 (in thousands) | Change (QoQ) | | :------------------------ | :-------------------------- | :-------------------------- | :----------- | | Federal Funds Purchased | — | $160,000 | -$160,000 | | FHLB Advances | $245,000 | $1,016,000 | -$771,000 | - The average interest rate on short-term borrowings increased to **4.24%** in Q1 2023 from **1.79%** in Q1 2022[111](index=111&type=chunk) Total Long-term Borrowings (QoQ) | Date | Amount (in thousands) | | :------------- | :-------------------- | | Mar 31, 2023 | $390,150 | | Dec 31, 2022 | $389,863 | - The company became eligible to borrow from the Federal Reserve's Bank Term Funding Program (BTFP) in Q1 2023, with **$548.6 million** available liquidity as of March 31, 2023, which was not utilized[109](index=109&type=chunk) [Note 7. COMMITMENTS AND CONTINGENCIES](index=45&type=section&id=Note%207.%20COMMITMENTS%20AND%20CONTINGENCIES) Discloses off-balance sheet commitments, pledged assets, and contingent liabilities, including legal proceedings - The company is in settlement discussions with the CFPB regarding alleged violations related to overdraft practices. A probable and estimable liability has been recorded, but further losses are reasonably possible and not estimable[119](index=119&type=chunk)[332](index=332&type=chunk) Total Commitments with Off-Balance Sheet Risk (QoQ) | Item | Mar 31, 2023 (in thousands) | Dec 31, 2022 (in thousands) | Change (QoQ) | | :-------------------------------------- | :-------------------------- | :-------------------------- | :----------- | | Commitments to extend credit | $5,485,988 | $5,229,252 | +$256,736 | | Letters of credit | $155,878 | $156,459 | -$581 | | Total commitments with off-balance sheet risk | $5,641,866 | $5,385,711 | +$256,155 | - The reserve for unfunded commitments and indemnification reserve totaled **$15.6 million** at March 31, 2023, an increase from **$14.1 million** at December 31, 2022[122](index=122&type=chunk) Total Pledged Assets (QoQ) | Date | Amount (in thousands) | | :------------- | :-------------------- | | Mar 31, 2023 | $5,428,217 | | Dec 31, 2022 | $4,908,037 | [Note 8. DERIVATIVES](index=49&type=section&id=Note%208.%20DERIVATIVES) Provides details on the company's derivative instruments, including notional amounts and fair values for hedging activities Derivative Instruments Notional Amounts (QoQ) | Category | Mar 31, 2023 Notional Amount (in thousands) | Dec 31, 2022 Notional Amount (in thousands) | | :-------------------------------------- | :------------------------------------------ | :------------------------------------------ | | Cash flow hedges | $900,000 | $900,000 | | Fair value hedges | $131,976 | $133,576 | | Derivatives not designated as accounting hedges | $6,002,395 | $5,820,005 | Fair Value of Derivative Instruments (QoQ) | Category | Mar 31, 2023 Assets (in thousands) | Mar 31, 2023 Liabilities (in thousands) | Dec 31, 2022 Assets (in thousands) | Dec 31, 2022 Liabilities (in thousands) | | :-------------------------------------- | :--------------------------------- | :-------------------------------------- | :--------------------------------- | :-------------------------------------- | | Cash flow hedges | $2,838 | $2,158 | $1,163 | $6,599 | | Fair value hedges | $2,938 | — | $4,117 | — | | Derivatives not designated as accounting hedges | $67,954 | $195,375 | $75,030 | $229,401 | - Fair value hedges for loans had an aggregate notional amount of **$82.0 million** at March 31, 2023 (vs. **$83.6 million** at Dec 31, 2022), with an unrealized gain of **$9.2 million** (vs. **$11.0 million**)[136](index=136&type=chunk)[144](index=144&type=chunk) - Fair value hedges for AFS securities had an aggregate notional amount of **$50.0 million** at both periods, with an unrealized gain of **$1.2 million** at March 31, 2023 (vs. **$1.9 million** at Dec 31, 2022)[138](index=138&type=chunk)[144](index=144&type=chunk) [Note 9. STOCKHOLDERS' EQUITY](index=54&type=section&id=Note%209.%20STOCKHOLDERS'%20EQUITY) Details the components of stockholders' equity, including AOCI and information on share repurchase programs Total Stockholders' Equity (QoQ) | Date | Amount (in thousands) | | :------------- | :-------------------- | | Mar 31, 2023 | $2,440,236 | | Dec 31, 2022 | $2,372,737 | Accumulated Other Comprehensive Income (Loss) (AOCI) (QoQ) | Date | Amount (in thousands) | | :------------- | :-------------------- | | Mar 31, 2023 | ($361,933) | | Dec 31, 2022 | ($418,286) | - The company's share repurchase program expired on December 9, 2022, and there was no active share repurchase program as of March 31, 2023[146](index=146&type=chunk)[338](index=338&type=chunk) [Note 10. FAIR VALUE MEASUREMENTS](index=55&type=section&id=Note%2010.%20FAIR%20VALUE%20MEASUREMENTS) Explains the methodology for fair value measurements, categorizing financial instruments into a three-level hierarchy - The company uses a three-level hierarchy for fair value measurements: Level 1 (quoted prices in active markets), Level 2 (observable inputs), and Level 3 (unobservable inputs)[150](index=150&type=chunk)[151](index=151&type=chunk) - AFS securities and financial derivatives are primarily valued using Level 2 inputs, relying on independent valuation techniques and market data from third-party vendors[152](index=152&type=chunk)[153](index=153&type=chunk)[154](index=154&type=chunk) - Loans Held for Sale (LHFS) are valued at fair value using Level 2 inputs based on secondary market prices. Loans Held for Investment (LHFI) are estimated using discounted cash flows, with performing loans often involving Level 3 unobservable inputs[157](index=157&type=chunk)[166](index=166&type=chunk) - Demand and savings deposits are valued at their carrying amount, while certificates of deposit are valued using discounted cash flow analysis with market rates (Level 2)[168](index=168&type=chunk) [Note 11. EARNINGS PER SHARE](index=61&type=section&id=Note%2011.%20EARNINGS%20PER%20SHARE) Presents the calculation of basic and diluted earnings per common share for the reported periods Earnings Per Common Share (YoY) | Period | Basic EPS | Diluted EPS | | :------------- | :-------- | :---------- | | Mar 31, 2023 | $0.44 | $0.44 | | Mar 31, 2022 | $0.54 | $0.54 | Net Income Available to Common Shareholders (YoY) | Period | Amount (in thousands) | | :------------- | :-------------------- | | Mar 31, 2023 | $32,686 | | Mar 31, 2022 | $40,723 | [Note 12. SEGMENT REPORTING AND REVENUE](index=62&type=section&id=Note%2012.%20SEGMENT%20REPORTING%20AND%20REVENUE) Details financial performance by operating segment, including resegmentation and noninterest income breakdown - Effective January 1, 2023, the company re-segmented its operations into Wholesale Banking, Consumer Banking, and Corporate Other, reallocating certain wealth management lines of business and **$9.6 million** of goodwill from Consumer Banking to Wholesale Banking[177](index=177&type=chunk) Segment Income Before Income Taxes (Q1 2023 vs. Q1 2022) | Segment | Q1 2023 (in thousands) | Q1 2022 (in thousands) | Change (YoY) | | :---------------- | :--------------------- | :--------------------- | :----------- | | Wholesale Banking | $22,153 | $38,986 | -$16,833 | | Consumer Banking | $16,928 | $8,235 | +$8,693 | | Corporate Other | $3,866 | $5,742 | -$1,876 | | Total | $42,947 | $52,963 | -$10,016 | Total Noninterest Income (Q1 2023 vs. Q1 2022) | Item | Q1 2023 (in thousands) | Q1 2022 (in thousands) | Change (YoY) | | :------------------------------------ | :--------------------- | :--------------------- | :----------- | | Deposit Service Charges | $7,902 | $7,596 | +$306 | | Fiduciary and asset management fees | $4,262 | $7,255 | -$2,993 | | Mortgage banking income | $854 | $3,117 | -$2,263 | | Loss on sale of securities | ($13,400) | — | -$13,400 | | Total noninterest income | $9,628 | $30,153 | -$20,525 | [Note 13. SUBSEQUENT EVENTS](index=66&type=section&id=Note%2013.%20SUBSEQUENT%20EVENTS) Reports significant events occurring after the balance sheet date, such as dividend declarations - On May 2, 2023, the Board of Directors declared a quarterly dividend of **$171.88** per share for Series A preferred stock (equivalent to **$0.43** per depositary share), payable on June 1, 2023[188](index=188&type=chunk) - On May 2, 2023, the Board of Directors also declared a quarterly dividend of **$0.30** per share of common stock, payable on June 2, 2023[188](index=188&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=68&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial performance, condition, liquidity, and capital resources for Q1 2023. It highlights the impact of recent banking industry volatility, rising interest rates, and the company's balance sheet repositioning strategy, which included selling AFS securities to reduce FHLB borrowings [EXECUTIVE OVERVIEW](index=74&type=section&id=EXECUTIVE%20OVERVIEW) Provides a high-level summary of the company's financial performance, liquidity, and strategic actions in the current quarter - The banking industry experienced significant volatility in Q1 2023 due to bank failures, leading the company to actively monitor liquidity and deposit flows[208](index=208&type=chunk) - In Q1 2023, the company executed a balance sheet repositioning by selling **$505.7 million** of AFS securities at a pre-tax loss of **$13.4 million** to reduce high-cost FHLB borrowings, aiming for improved liquidity and enhanced tangible common equity. The estimated loss earn-back period is approximately two years[212](index=212&type=chunk)[214](index=214&type=chunk) - As of March 31, 2023, approximately **72.1%** of the company's deposits were insured or collateralized, and available liquidity sources covered approximately **130%** of uninsured and uncollateralized deposits. Brokered deposits increased by **$370.5 million**[209](index=209&type=chunk) - Despite industry challenges, the company's and the Bank's regulatory capital ratios continued to exceed well-capitalized standards[210](index=210&type=chunk) [RESULTS OF OPERATIONS](index=76&type=section&id=RESULTS%20OF%20OPERATIONS) Analyzes the company's net income, net interest income, and noninterest income/expense trends for the period Net Income & EPS (Q1 2023 vs. Q1 2022) | Metric | Q1 2023 (in thousands) | Q1 2022 (in thousands) | Change (YoY) | | :-------------------------------------- | :--------------------- | :--------------------- | :----------- | | Net income available to common shareholders | $32,686 | $40,723 | -$8,037 | | Basic and diluted EPS | $0.44 | $0.54 | -$0.10 | Adjusted Operating Earnings & EPS (Non-GAAP) (Q1 2023 vs. Q1 2022) | Metric | Q1 2023 (in thousands) | Q1 2022 (in thousands) | Change (YoY) | | :-------------------------------------- | :--------------------- | :--------------------- | :----------- | | Adjusted operating earnings available to common shareholders | $47,222 | $45,074 | +$2,148 | | Adjusted diluted operating EPS | $0.63 | $0.60 | +$0.03 | Net Interest Income (Q1 2023 vs. Q1 2022) | Metric | Q1 2023 (in thousands) | Q1 2022 (in thousands) | Change (YoY) | | :-------------------------------------- | :--------------------- | :--------------------- | :----------- | | Net interest income | $153,443 | $130,931 | +$22,512 | | Net interest margin | 3.41% | 2.97% | +44 bps | Noninterest Income (Q1 2023 vs. Q1 2022) | Item | Q1 2023 (in thousands) | Q1 2022 (in thousands) | Change (YoY) | | :------------------------------------ | :--------------------- | :--------------------- | :----------- | | Total noninterest income | $9,628 | $30,153 | -$20,525 | | Loss on sale of securities | ($13,400) | — | -$13,400 | | Fiduciary and asset management fees | $4,262 | $7,255 | -$2,993 | | Mortgage banking income | $854 | $3,117 | -$2,263 | Noninterest Expense (Q1 2023 vs. Q1 2022) | Item | Q1 2023 (in thousands) | Q1 2022 (in thousands) | Change (YoY) | | :------------------------------------ | :--------------------- | :--------------------- | :----------- | | Total noninterest expense | $108,274 | $105,321 | +$2,953 | | Salaries and benefits | $60,529 | $58,298 | +$2,231 | | FDIC assessment premiums and other insurance | $3,899 | $2,485 | +$1,414 | [DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION](index=88&type=section&id=DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION) Examines changes in the company's assets, liabilities, deposits, borrowings, and credit quality metrics Total Assets (QoQ) | Date | Amount (in thousands) | | :------------- | :-------------------- | | Mar 31, 2023 | $20,103,370 | | Dec 31, 2022 | $20,461,138 | Total LHFI, net of deferred fees and costs (QoQ) | Date | Amount (in thousands) | | :------------- | :-------------------- | | Mar 31, 2023 | $14,584,280 | | Dec 31, 2022 | $14,449,142 | Total Deposits (QoQ) | Date | Amount (in thousands) | | :------------- | :-------------------- | | Mar 31, 2023 | $16,455,910 | | Dec 31, 2022 | $15,931,677 | - Deposit mix shifted in Q1 2023, with interest-bearing deposits increasing by **$829.5 million** (including **$377.9 million** in brokered deposits) and demand deposits decreasing by **$305.2 million** as customers moved to higher-yielding products[250](index=250&type=chunk) Total Borrowings (QoQ) | Date | Amount (in thousands) | | :------------- | :-------------------- | | Mar 31, 2023 | $798,910 | | Dec 31, 2022 | $1,708,700 | Nonperforming Assets (NPAs) (QoQ) | Metric | Mar 31, 2023 (in thousands) | Dec 31, 2022 (in thousands) | Change (QoQ) | | :-------------------------------------- | :-------------------------- | :-------------------------- | :----------- | | Total NPAs | $29,111 | $27,114 | +$1,997 | | NPAs as % of total LHFI | 0.20% | 0.19% | +1 bp | Allowance for Credit Losses (ACL) (QoQ) | Metric | Mar 31, 2023 (in thousands) | Dec 31, 2022 (in thousands) | Change (QoQ) | | :-------------------------------------- | :-------------------------- | :-------------------------- | :----------- | | Total ACL | $131,711 | $124,443 | +$7,268 | | ACL as % of total LHFI | 0.90% | 0.86% | +4 bps | [NON-GAAP FINANCIAL MEASURES](index=104&type=section&id=NON-GAAP%20FINANCIAL%20MEASURES) Reconciles non-GAAP financial measures to their most directly comparable GAAP measures, providing additional insights - The company provides supplemental non-GAAP financial measures (e.g., tax-equivalent net interest income, tangible common equity, adjusted operating earnings/expenses) to offer additional understanding of ongoing operations and enhance comparability by excluding significant non-recurring items[306](index=306&type=chunk) Net Interest Income (FTE) Reconciliation (Q1 2023 vs. Q1 2022) | Metric | Q1 2023 (in thousands) | Q1 2022 (in thousands) | | :-------------------------------------- | :--------------------- | :--------------------- | | Net interest income (GAAP) | $153,443 | $130,931 | | FTE adjustment | $3,788 | $3,336 | | Net interest income (FTE) (non-GAAP) | $157,231 | $134,267 | | Net interest margin (GAAP) | 3.41% | 2.97% | | Net interest margin (FTE) (non-GAAP) | 3.50% | 3.04% | Tangible Common Equity to Tangible Assets Reconciliation (Mar 31, 2023 vs. Mar 31, 2022) | Metric | Mar 31, 2023 (in thousands) | Mar 31, 2022 (in thousands) | | :-------------------------------------- | :-------------------------- | :-------------------------- | | Ending tangible assets (non-GAAP) | $19,153,677 | $18,806,597 | | Ending tangible common equity (non-GAAP)| $1,324,186 | $1,356,145 | | Tangible common equity to tangible assets (non-GAAP) | 6.91% | 7.21% | Adjusted Operating Earnings (Non-GAAP) Reconciliation (Q1 2023 vs. Q1 2022) | Item | Q1 2023 (in thousands) | Q1 2022 (in thousands) | | :-------------------------------------- | :--------------------- | :--------------------- | | Net income (GAAP) | $35,653 | $43,690 | | Plus: Legal reserve, net of tax | $3,950 | — | | Plus: Strategic branch closing costs, net of tax | — | $4,351 | | Plus: Loss on sale of securities, net of tax | $10,586 | — | | Adjusted operating earnings (non-GAAP) | $50,189 | $48,041 | [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=106&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company manages interest rate risk, its primary market risk, through an asset liability committee using earnings simulation and economic value modeling. As of March 31, 2023, the company was less asset sensitive compared to March 31, 2022, expecting net interest income to increase in a rising rate environment and decline in a falling rate environment [Interest Sensitivity](index=106&type=section&id=Interest%20Sensitivity) Describes the company's approach to managing interest rate risk through various analytical models - The company's primary market risk is interest rate risk, which is reviewed by the asset liability committee and managed using static gap analysis, earnings simulation modeling, and economic value simulation[314](index=314&type=chunk)[315](index=315&type=chunk) [Earnings Simulation Modeling](index=108&type=section&id=Earnings%20Simulation%20Modeling) Assesses the potential impact of interest rate changes on net interest income over a 12-month forecast horizon - Earnings simulation modeling measures the sensitivity of net interest income to changes in interest rates over a 12-month horizon, based on current and projected balances and rates[318](index=318&type=chunk)[320](index=320&type=chunk) Net Interest Income Sensitivity (March 31, 2023 vs. March 31, 2022) | Change in Yield Curve | Mar 31, 2023 % | Mar 31, 2022 % | | :-------------------- | :------------- | :------------- | | +300 basis points | 7.91 | 15.55 | | +100 basis points | 2.06 | 5.36 | | -100 basis points | (4.75) | (7.40) | | -300 basis points | (11.46) | (19.67) | - As of March 31, 2023, the company was less asset sensitive compared to March 31, 2022, expecting net interest income to increase with an immediate rise in market rates and decline in decreasing interest rate environments[323](index=323&type=chunk) [Economic Value Modeling](index=110&type=section&id=Economic%20Value%20Modeling) Evaluates the long-term impact of interest rate fluctuations on the economic value of equity - Economic value simulation modeling calculates the estimated fair value of assets and liabilities over different interest rate environments to indicate the longer-term earnings capability of the balance sheet[324](index=324&type=chunk) Economic Value of Equity Sensitivity (March 31, 2023 vs. March 31, 2022) | Change in Yield Curve | Mar 31, 2023 % | Mar 31, 2022 % | | :-------------------- | :------------- | :------------- | | +300 basis points | (11.44) | (9.59) | | +100 basis points | (4.05) | (2.90) | | -100 basis points | 3.01 | 0.56 | | -300 basis points | 5.90 | (12.13) | - As of March 31, 2023, the company's economic value of equity was generally less asset sensitive in a rising interest rate environment compared to March 31, 2022, due to the composition of the balance sheet and pricing characteristics of certain deposits[324](index=324&type=chunk) [Item 4. Controls and Procedures](index=110&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of March 31, 2023. No material changes to internal control over financial reporting occurred during the quarter - The company's Chief Executive Officer and Chief Financial Officer concluded that disclosure controls and procedures were effective at the reasonable assurance level as of March 31, 2023[325](index=325&type=chunk)[326](index=326&type=chunk) - No material changes to internal control over financial reporting occurred during the quarter ended March 31, 2023[329](index=329&type=chunk) PART II - OTHER INFORMATION [Item 1. Legal Proceedings](index=113&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in ongoing settlement discussions with the CFPB regarding alleged violations related to overdraft practices. A liability has been accrued, but the final outcome, including potential additional losses or litigation, remains uncertain - Ongoing settlement discussions with the CFPB regarding alleged violations of Regulation E and the Consumer Financial Protection Act related to overdraft practices and policies[332](index=332&type=chunk) - A probable and estimable liability has been recorded in connection with this matter[119](index=119&type=chunk) - The final terms, timing, or amount of loss (potentially including restitution and a civil money penalty) are uncertain, and litigation may commence if a settlement is not reached[332](index=332&type=chunk) [Item 1A. Risk Factors](index=113&type=section&id=Item%201A.%20Risk%20Factors) No material changes to previously disclosed risk factors were identified during Q1 2023, except for new risks related to recent developments in the financial services industry, particularly concerns about liquidity and potential deposit outflows following bank failures - No material changes from the risk factors previously disclosed in the Company's 2022 Form 10-K, except as described in this section[333](index=333&type=chunk) - New risks include potential adverse effects on business, financial condition, and results of operations due to developments impacting the financial services industry, such as recent bank failures (Silicon Valley Bank, Signature Bank, and First Republic Bank) and general concerns involving liquidity[334](index=334&type=chunk)[335](index=335&type=chunk) - Uncertainty from bank failures may lead to deposit outflows, increased borrowing and funding costs, and heightened competition for liquidity, which could materially impact the company[335](index=335&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=115&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company did not have any unregistered sales of equity securities. Its share repurchase program, which authorized up to $100.0 million of common stock purchases, expired on December 9, 2022, and no active program was in place as of March 31, 2023 - No unregistered sales of equity securities during the period[337](index=337&type=chunk) - The share repurchase program, authorized for up to **$100.0 million**, expired on December 9, 2022. Approximately **1.3 million shares** (or **$48.2 million**) were repurchased in 2022 under this program[338](index=338&type=chunk) - As of March 31, 2023, the company does not have an authorized share repurchase program[338](index=338&type=chunk) Common Stock Repurchases (Q1 2023) | Period | Total Shares Purchased | Average Price Paid Per Share ($) | | :------------------------- | :--------------------- | :------------------------------- | | January 1 - January 31, 2023 | 1,101 | 36.33 | | February 1 - February 28, 2023 | 54,279 | 37.87 | | March 1 - March 31, 2023 | 576 | 35.16 | | Total | 55,956 | 37.81 | [Item 6. Exhibits](index=115&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed as part of the Quarterly Report on Form 10-Q, including organizational documents, compensation plans, certifications, and interactive data files - Exhibits include Amended and Restated Articles of Incorporation and Bylaws, Deferred Compensation Plans, Stock Share Agreements, Management Incentive Plan, Certifications (Section 302 and 906 of Sarbanes-Oxley Act of 2002), and Interactive Data Files (Inline XBRL)[341](index=341&type=chunk)[344](index=344&type=chunk) [Signatures](index=118&type=section&id=Signatures) The report is duly signed on May 4, 2023, by John C. Asbury, President and Chief Executive Officer, and Robert M. Gorman, Executive Vice President and Chief Financial Officer, certifying compliance with the Securities Exchange Act of 1934 - The report was signed on May 4, 2023, by John C. Asbury, President and Chief Executive Officer, and Robert M. Gorman, Executive Vice President and Chief Financial Officer[346](index=346&type=chunk)

Financial Data and Key Metrics Changes - The company reported net income available to common shareholders of $32.7 million, with earnings per common share at $0.44, while adjusted operating earnings were $47.2 million or $0.63 per common share, reflecting a 5% increase year-over-year [27][28] - The adjusted operating return on tangible common equity was 15.2%, up from 12.7% in the prior year's first quarter [27] - The efficiency ratio was 56% in the first quarter, down from 58.9% in the same quarter last year [28] - Total assets decreased by $358 million or approximately 7% annualized from December 31 levels, primarily due to the decline in the investment securities portfolio [36] Business Line Data and Key Metrics Changes - The loan portfolio yield increased to 5.35% in the first quarter, up from 4.9% in the fourth quarter [32] - Annualized loan growth was approximately 3.8% in the first quarter, following a seasonally high fourth quarter [20] - Noninterest income decreased by $14.9 million to $9.6 million, primarily due to a $13.4 million pretax loss on the sale of securities [33] Market Data and Key Metrics Changes - The unemployment rate in Virginia was reported at 3.2%, unchanged from February and below the national average of 3.5% [15] - Non-owner occupied office exposure totaled $729 million, comprising 5% of the total loan portfolio, with 25% of this being medical office [16] Company Strategy and Development Direction - The company aims to maintain soundness, profitability, and growth as its priority, emphasizing a diversified, traditional, full-service banking model [8] - The company executed a balance sheet restructuring by selling $506 million of available-for-sale securities to reduce funding costs and improve liquidity [13] - The company expects loan growth of 4% to 6% during 2023, with a focus on managing capital resources prudently [39] Management's Comments on Operating Environment and Future Outlook - Management noted that the macroeconomic environment remains solid, with healthy markets and strong lending pipelines, despite rising expectations for a mild recession [14] - The company anticipates an uptick in the full-year net charge-off ratio to 10 basis points in 2023, up from 2 basis points in 2022, due to elevated net charge-offs in the first quarter [40] - Management expressed confidence in navigating challenges and identified opportunities in the current environment [23] Other Important Information - The company paid a stock dividend of $0.30 per share and did not purchase any shares during the quarter to preserve capital for organic loan growth [39] - The total allowance for credit losses was $131.7 million, an increase of approximately $7.3 million from the fourth quarter [29] Q&A Session Summary Question: What kind of assumption should be made for the loan swap fees? - Management expects loan swap fees to bounce back, projecting them in the $10 million to $12 million range for the full year [44] Question: What are some of the expense levers that can be pulled with the low revenue outlook? - Management indicated they would reduce the rate of expense growth and consider various hiring delays and incentive expenses adjustments [46][47] Question: How are deposit costs expected to trend in the next couple of months? - Management noted that the cost of deposits was up to 1.43% in March and expected betas to increase, projecting a total deposit beta of around 40% by year-end [56] Question: Can you walk us through where deposit costs were towards the end of the quarter? - The cost of deposits was reported at 1.43% in March, with expectations for continued increases throughout the year [56] Question: What is the outlook for service charges for the back half of the year? - Management expects service charges to remain flattish, with no significant impact from the ongoing CFPB matter [54] Question: What is the current loan pricing for new production? - New commercial loan yields are averaging around 6.75% for new production, with a mix of variable and fixed rates [61]

st 1 Quarter 2023 Earnings Presentation NYSE: AUB Forward Looking Statements This presentation and statements by our management may constitute “forward-looking statements” within the meaning of the PrivateSecurities Litigation Reform Act of 1995. Forward-looking statements are statements that include, without limitation, statements on slides entitled “Financial Outlook” and “Stable Deposit Balances” statements regarding our strategic prioritiesand liquidity and capital management strategies, expectations wi ...

Table of Contents Title of each class Trading Symbol(s) Name of exchange on which registered Common Stock, par value $1.33 per share AUB The New York Stock Exchange Depositary Shares, Each Representing a 1/400th Interest in a Share of 6.875% Perpetual Non-Cumulative Preferred Stock, Series A AUB.PRA The New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION ...

Financial Performance Highlights - Net income available to common shareholders for Q4 2022 was $67.6 million, or $0.90 per share, an increase of $12.5 million, or $0.16 per share, compared to the prior quarter[24] - The company's Return on Tangible Common Equity (ROTCE) was 22.92% in Q4 2022, compared to 17.21% in Q3 2022[23] - The company's Return on Assets (ROA) was 1.39% in Q4 2022, compared to 1.15% in Q3 2022[23] - The efficiency ratio was 52.98% in Q4 2022, compared to 56.68% in Q3 2022[23] Loan and Deposit Growth - Total loans held for investment reached $14.4 billion as of December 31, 2022, representing a $530.4 million increase, or 15.1% annualized growth, from the previous quarter[37] - Excluding PPP loans, total loans increased by $535.3 million, or approximately 15.3% annualized, during Q4 2022[37] - Total deposits decreased by $614.5 million, or approximately 14.7% annualized[37] - Commercial loans, excluding PPP, increased by 16.2% annualized[38] Asset Quality and Credit Outlook - Net charge-offs were 2 basis points annualized for Q4 2022[16] - The company expects the ACL to loans to be approximately 85-90 basis points and the net charge-off ratio to be approximately 10 basis points for the full year 2023[48] 2023 Financial Outlook - The company anticipates loan growth of approximately 6%-8% for 2023[16,48] - The company projects net interest income (FTE) growth of approximately 13%-15% for 2023[48] - The company expects the net interest margin (FTE) to be approximately 3.70%-3.75% for 2023[48]