AUB 10-K & 10-Q changes, risk factors and insider trading
Atlantic Union Bankshares Corp (also AUB-PA) · NYSE · State Commercial Banks · CIK 883948 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “Challenges to our tax positions could result in tax liability.”
Removed heading “Risks Related to Our Pending Merger with Sandy Spring”
Removed heading “The dilution caused by the issuance of shares of our common stock in connection with the merger with Sandy Spring may adversely affect the market price of our common stock.”
Removed heading “Combining the Company and Sandy Spring may be more difficult, costly or time consuming than expected and the combined company may fail to realize the anticipated benefits and cost savings of the merger.”
Removed heading “We and Sandy Spring have, and the combined company following the merger will, incur significant transaction and merger-related costs in connection with the transactions contemplated by the merger agreement.”
Removed heading “The merger agreement with Sandy Spring may be terminated in accordance with its terms and the merger may not be completed. Such failure to complete the transactions contemplated by the merger agreement could have a material and adverse effect on our stock price and results of operations.”
Removed heading “The market price for our common stock following the closing of the transactions contemplated by the merger agreement with Sandy Spring may be affected by factors different from those that historically have affected or currently affect our common stock and Sandy Spring common stock.”
Removed heading “Upon completion of the transactions contemplated by the merger agreement with Sandy Spring, we will be subject to the risks related to Sandy Spring’s business, including its CRE loan portfolio.”
Removed heading “As a result of the transactions contemplated by the merger agreement and our acquisition of Sandy Spring, we will record goodwill in connection with such acquisition, and if it becomes impaired, our earnings could be significantly impacted.”
Removed heading “The future results of the combined company following the merger with Sandy Spring may suffer if the combined company does not effectively manage its expanded operations.”
Removed heading “We and Sandy Spring will be subject to business uncertainties and contractual restrictions while the merger is pending.”
Removed heading “Shareholder litigation could prevent or delay the completion of the merger or otherwise negatively impact our business, financial condition and results of operations.”
Removed heading “Uncertainty surrounding potential legal, regulatory and policy changes by the new presidential administration may directly impact the financial services industry and the broader economy.”
Removed heading “Settlement provisions contained in the Forward Sale Agreements could result in substantial dilution to our earnings per share and return on equity or result in substantial cash payment obligations.”
Largest changes
“Upon completion of the transactions contemplated by the merger agreement, we will be subject to risks related to Sandy Spring’s business and will take on its loans, investments and other obligations. This will increase our credit risk and, if such obligations are not repaid or losses are incurred on such obligations, there could be material and adverse effects on our business. Additionally, where our businesses overlap, any risks we face may be increased. For example, we and Sandy Spring each have significant credit exposure in CRE. …”see in full comparison
“As a result of the transactions contemplated by the merger agreement and our acquisition of Sandy Spring, we will record goodwill in connection with such acquisition, and if it becomes impaired, our earnings could be significantly impacted.”see in full comparison
“Shareholder litigation could prevent or delay the completion of the merger or otherwise negatively impact our business, financial condition and results of operations.”see in full comparison
“Both Atlantic Union Bank and Sandy Spring Bank are regulated and supervised by the Federal Reserve as well as the CFPB. In addition, at the state level, Atlantic Union Bank is chartered by the Commonwealth of Virginia and is supervised and regularly examined by the Bureau of Financial Institutions, a division of the Virginia State Corporation Commission, while Sandy Spring Bank is a state-chartered bank and trust company subject to supervision by the Office of Financial Regulation, part of the Maryland Department of Labor. …”see in full comparison
“If the transactions contemplated by the merger agreement with Sandy Spring, including the merger, are not completed for any reason, we and/or Sandy Spring may experience negative reactions from the financial markets and from our respective customers and employees. For example, our business may have been impacted adversely by the failure to pursue other beneficial opportunities due to the focus of our management on the merger, without realizing any of the anticipated benefits of completing the merger. …”see in full comparison
“Shareholders of Atlantic Union and/or stockholders of Sandy Spring have filed and may file lawsuits against the Company, Sandy Spring and/or the directors and officers of either company in connection with the merger. One of the conditions to the closing is that no law, order, injunction or decree issued by any court or governmental entity of competent jurisdiction that would prevent, prohibit or make illegal the completion of the merger, the subsidiary bank merger, or any of the other transactions contemplated by the merger agreement be in effect. …”see in full comparison
Full comparison: every changed paragraph (86)
Risks Related to Our Pending Merger with Sandy Spring
The dilution caused by the issuance of shares of our common stock in connection with the merger with Sandy Spring may adversely affect the market price of our common stock.
We expect to issue approximately 41 million shares of our common stock as merger consideration to Sandy Spring stockholders, and assuming full physical settlement, we expect to issue 11,338,028 shares of our common stock pursuant to the Forward Sale Agreements. The dilution caused by the issuance of the new shares of our common stock may result in fluctuations in the market price of our common stock, including a stock price decrease.
Combining the Company and Sandy Spring may be more difficult, costly or time consuming than expected and the combined company may fail to realize the anticipated benefits and cost savings of the merger.
Upon completing the merger with Sandy Spring, we will begin the process of integrating its business with ours. A successful integration will depend substantially on our ability to consolidate operations, corporate cultures, systems and procedures, to eliminate redundancies and to realize the anticipated cost savings. If we and Sandy Spring are not able to successfully achieve these objectives, the anticipated benefits of the merger may not be realized fully or at all or may take longer to realize than expected. In addition, the actual cost savings and anticipated benefits of the merger could be less than anticipated, and integration may result in additional unforeseen expenses. We may not be able to combine our business with the business of Sandy Spring without encountering difficulties that could adversely affect our ability to maintain relationships with existing clients, customers, depositors and employees, such as:
Any disruption to the businesses could cause customers to remove their accounts and move their business to a competing financial institution. Integration efforts between the two companies may also divert management attention and resources. Additionally, general market and economic conditions or governmental actions affecting the financial industry generally may inhibit our successful integration of Sandy Spring.
Further, we entered into the merger agreement to acquire Sandy Spring with the expectation that the acquisition will result in various benefits including, among other things, benefits relating to enhanced revenues, a strengthened market position for the combined company, cross selling opportunities, technological efficiencies, cost savings and operating efficiencies. Achieving the anticipated benefits of the transactions contemplated by the merger agreement is subject to a number of uncertainties, including whether we integrate Sandy Spring in an efficient, effective and timely manner, and general competitive factors in the marketplace. Failure to achieve these anticipated benefits on the anticipated timeframe, or at all, could result in a reduction in the price of our common stock as well as in increased costs, decreases in the amount of expected revenues and diversion of management’s time and energy and could materially and adversely affect our business, financial condition and operating results. Additionally, upon consummation of the transactions contemplated by the merger agreement, we will make fair value estimates of certain assets and liabilities in recording the acquisition. Actual values of these assets and liabilities could differ from our estimates, which could result in our not achieving the anticipated benefits of the merger. Finally, any cost savings that are realized may be offset by losses in revenues or other charges to earnings.
We and Sandy Spring have operated and, until the completion of the merger, must continue to operate, independently. It is possible that the integration process could result in the loss of key employees, the disruption of our ongoing business, inability to maintain and increase competitive presence, additional costs or unexpected problems with operations, personnel, technology and credit, or inconsistencies in standards, controls, procedures and policies that adversely affect each company’s ability to maintain relationships with clients, customers, depositors and employees or to achieve the anticipated benefits and cost savings of the merger. Integration efforts may also divert management attention during this transition period and for an undetermined period after completion of the merger, which may have an adverse effect on the combined company.
We and Sandy Spring have, and the combined company following the merger will, incur significant transaction and merger-related costs in connection with the transactions contemplated by the merger agreement.
We and Sandy Spring have incurred and expect to incur significant non-recurring costs associated with combining the operations of Sandy Spring with our operations. These costs include legal, financial advisory, accounting, consulting and other advisory fees, severance/employment-related costs, public company filing fees and other regulatory fees, printing costs and other related costs. We have begun collecting information to formulate detailed integration plans to deliver anticipated cost savings. Additional unanticipated costs may be incurred in the integration of our business with the business of Sandy Spring, and there are many factors beyond our or Sandy Spring’s control that could affect the total amount or timing of integration costs. Although we expect that the elimination of duplicative costs, as well as the realization of other efficiencies related to the integration of the businesses, may offset incremental transaction and merger-related costs over time, this net benefit may not be achieved in the near term, or at all.
Whether or not the merger is consummated, we, Sandy Spring and the combined company will incur substantial expenses in pursuing the merger and this may adversely impact our and the combined company’s earnings. Completion of the transactions contemplated by the merger agreement is conditioned on customary closing conditions. There can be no assurance that such closing conditions will be satisfied without additional cost, on the anticipated timeframe, or at all.
The merger agreement with Sandy Spring may be terminated in accordance with its terms and the merger may not be completed. Such failure to complete the transactions contemplated by the merger agreement could have a material and adverse effect on our stock price and results of operations.
If the transactions contemplated by the merger agreement with Sandy Spring, including the merger, are not completed for any reason, we and/or Sandy Spring may experience negative reactions from the financial markets and from our respective customers and employees. For example, our business may have been impacted adversely by the failure to pursue other beneficial opportunities due to the focus of our management on the merger, without realizing any of the anticipated benefits of completing the merger. Moreover, our stock price may decline because costs related to such transactions, such as legal, accounting and financial advisory fees, must be paid even if such transactions, including the merger, are not completed. Moreover, we may be required to pay a termination fee of $56.0 million to Sandy Spring upon a termination of the merger agreement in certain circumstances. In addition, if the transactions contemplated by the merger agreement are not completed, whether because of our failure to receive required regulatory approvals in a timely fashion or because one of the parties has breached its obligations in a way that permits Sandy Spring to terminate the merger agreement, or for any other reason, our stock price may decline to the extent that the current market price reflects a market assumption that the merger will be beneficial and will be completed. We and/or Sandy Spring also could be subject to litigation related to any failure to complete the merger or to proceedings commenced against either company to perform our obligations under the merger agreement.
The market price for our common stock following the closing of the transactions contemplated by the merger agreement with Sandy Spring may be affected by factors different from those that historically have affected or currently affect our common stock and Sandy Spring common stock.
Subject to the terms and conditions of the merger agreement, upon completion of the merger, holders of shares of Sandy Spring common stock will receive shares of our common stock as merger consideration. The combined company’s business and financial position will differ from our and Sandy Spring’s respective businesses and financial positions before the completion of the merger and, accordingly, the results of operations of the combined company will be affected by some factors that are different from those currently affecting our results of operations and those currently affecting the results of operations of Sandy Spring. Accordingly, the market price and performance of our common stock is likely to be different from the performance of our common stock in the absence of the merger. In addition, general fluctuations in stock markets could have a material adverse effect on the market for, or liquidity of, our common stock, regardless of our actual operating performance.
Upon completion of the transactions contemplated by the merger agreement with Sandy Spring, we will be subject to the risks related to Sandy Spring’s business, including its CRE loan portfolio.
Upon completion of the transactions contemplated by the merger agreement, we will be subject to risks related to Sandy Spring’s business and will take on its loans, investments and other obligations. This will increase our credit risk and, if such obligations are not repaid or losses are incurred on such obligations, there could be material and adverse effects on our business. Additionally, where our businesses overlap, any risks we face may be increased. For example, we and Sandy Spring each have significant credit exposure in CRE. At December 31, 2024, Sandy Spring’s CRE loan portfolio totaled $7.9 billion, or 68% of its total loan portfolio, which includes $1.7 billion of commercial owner-occupied real estate loans. A large concentration of CRE loans in the combined company involves additional risks because the value of real estate can fluctuate significantly in a short period of time as a result of market conditions in any of the geographic bank markets in which such real estate is located, as well as because funds for acquisition, development and construction loans are advanced based on estimates of costs and the estimated value of the completed project and therefore have a greater risk of default in a weaker economy. Construction projects require prudent underwriting, including determination of a borrower’s ability to complete the project, while staying within budget and on time in accordance with construction plans. Economic events, supply chain issues, labor market disruptions, and other factors outside the control of Sandy Spring and our control, or that of the borrowers, could negatively impact the future cash flow and market values of affected properties. Within six months of the completion of the transactions contemplated by the merger agreement, we expect to sell at least $2.0 billion of the CRE loans originally held by either Sandy Spring Bank or the Bank to one or more unrelated third parties after a bidding process. When complete, it is expected that the sale would reduce the combined company’s CRE concentration, improve its loan/deposit liquidity profile, and bring the capital ratios of the newly combined entity closer in line with those we maintain pre-merger. However, there is no assurance that we will be able to find a prospective purchaser or sell the loans at a price or other terms acceptable to us. Integrating Sandy Spring’s CRE loans into our existing portfolio may also exacerbate the existing risks we already undertake with our own portfolio comprised meaningfully of CRE loans, as described in this Form 10-K under “Item 1A. Risk Factors—We have significant credit exposure in CRE, which may expose us to additional credit risks, and may adversely affect our business, financial condition, and results of operations,” and may result in new ones.
As a result of the transactions contemplated by the merger agreement and our acquisition of Sandy Spring, we will record goodwill in connection with such acquisition, and if it becomes impaired, our earnings could be significantly impacted.
Under current accounting methods, goodwill is not amortized but, instead, is subject to impairment tests on at least an annual basis and more frequently if an event occurs or circumstances change that reduce the fair value of a reporting unit below its carrying amount. In connection with our acquisition of Sandy Spring, we will record goodwill in the fair value amount of such acquisition. Although we do not anticipate impairment charges, if we conclude that some portion of such goodwill is impaired, a non-cash charge for the amount of such impairment would be recorded against earnings.
A goodwill impairment charge could be caused by a decline in our stock price or the occurrence of a triggering event that compounds negative financial results. Further, because a large portion of Sandy Spring’s portfolio is secured by CRE loans, if such portfolio were to be seen as less valuable in a deteriorating real estate market, or if we were to sell a portion of Sandy Spring’s CRE loans at a less favorable price following the acquisition, we may be required to record an impairment on our acquisition of Sandy Spring. Therefore, following the transactions contemplated by the merger agreement, including the merger, and our recording of goodwill in connection therewith, if such goodwill becomes impaired, our earnings could be significantly and adversely affected.
The future results of the combined company following the merger with Sandy Spring may suffer if the combined company does not effectively manage its expanded operations.
Following the merger with Sandy Spring, the size of the business of the combined company will increase significantly beyond the current size of either our or Sandy Spring’s business. The combined company’s future success will depend, in part, upon its ability to manage this expanded business, which may pose challenges for management, including challenges related to the management and monitoring of new operations and associated increased costs and complexity. The combined company may also face increased scrutiny from governmental authorities as a result of the significant increase in the size of its business.
Both Atlantic Union Bank and Sandy Spring Bank are regulated and supervised by the Federal Reserve as well as the CFPB. In addition, at the state level, Atlantic Union Bank is chartered by the Commonwealth of Virginia and is supervised and regularly examined by the Bureau of Financial Institutions, a division of the Virginia State Corporation Commission, while Sandy Spring Bank is a state-chartered bank and trust company subject to supervision by the Office of Financial Regulation, part of the Maryland Department of Labor. The laws, regulations and regulatory guidance applicable to both banks will therefore differ in ways that may affect the operations of the combined company. Additionally, the internal policies of Atlantic Union Bank and Sandy Spring Bank with regards to their investment portfolios may differ on factors such as hold limits per bond issuer, life of the bond or credit risk appetite. As a result, there are assets on the balance sheet of Sandy Spring Bank that the bank subsidiary of the combined company is not expected to hold, whether based on differences in regulatory oversight or internal policies, and we may dispose of such assets contemporaneous with or subsequent to, the closing of the merger. The disposition of certain assets in a high-interest rate environment, such as we have in the past experienced, are currently experiencing and may experience again in the future, could result in a sale of assets at a market price that is different than the estimated book value of such assets and impact regulatory capital ratios at the time of the closing of the merger. Further, we may replace such disposed assets with lower-yielding investments, any of which could impact our future earnings and return on equity.
There can be no assurances that the combined company will be successful or that it will realize the expected operating efficiencies, cost savings or other benefits currently anticipated from the merger.
We and Sandy Spring will be subject to business uncertainties and contractual restrictions while the merger is pending.
Uncertainty about the effect of the merger on employees, customers (including depositors and borrowers), suppliers and vendors may have an adverse effect on us and Sandy Spring. These uncertainties may impair our and Sandy Spring’s ability to attract, retain and motivate key personnel and customers (including depositors and borrowers) until the merger is completed, as such personnel and customers may experience uncertainty about their future roles and relationships following the completion of the merger. Additionally, these uncertainties could cause customers and others that deal with us or Sandy Spring to seek to change existing business relationships with us or Sandy Spring or fail to extend an existing relationship with us or Sandy Spring, as applicable. Competitors may target each party’s existing customers by highlighting potential uncertainties and integration difficulties that may result from the merger.
In addition, subject to certain exceptions, we and Sandy Spring have agreed to operate our respective businesses in the ordinary course consistent with past practice in all material respects before closing, and we and Sandy Spring have agreed not to take certain actions, which could cause us or Sandy Spring to be unable to pursue other beneficial opportunities that may arise before the completion of the merger.
Shareholder litigation could prevent or delay the completion of the merger or otherwise negatively impact our business, financial condition and results of operations.
Shareholders of Atlantic Union and/or stockholders of Sandy Spring have filed and may file lawsuits against the Company, Sandy Spring and/or the directors and officers of either company in connection with the merger. One of the conditions to the closing is that no law, order, injunction or decree issued by any court or governmental entity of competent jurisdiction that would prevent, prohibit or make illegal the completion of the merger, the subsidiary bank merger, or any of the other transactions contemplated by the merger agreement be in effect. If any plaintiff were successful in obtaining an injunction prohibiting the Company or Sandy Spring from completing the merger, the subsidiary bank merger, or any of the other transactions contemplated by the merger agreement, then such injunction may delay or prevent the effectiveness of the merger and could result in significant costs to either party, including any cost associated with the indemnification of its directors and officers. We and Sandy Spring have incurred and may incur additional costs relating to the defense or settlement of any shareholder lawsuits filed in connection with the merger. Shareholder lawsuits may divert management attention from management of each company’s business or operations. Such litigation could have an adverse effect on such party’s business, financial condition and results of operations and could prevent or delay the completion of the merger.
If the models, estimates, and assumptions we use to establish reserves or the judgments we make in extending credit to our borrowers prove inaccurate in predicting future events, we may suffer unexpected losses. The ACL is our best estimate of expected credit losses; however, there is no guarantee that it will be sufficient to address credit losses, particularly if the economic outlook deteriorates significantly and quickly. In such an event, we may increase our ACL, which would reduce our earnings.earnings and capital. Additionally, to the extent that economic conditions worsen, impacting our consumer and commercial borrowers or underlying collateral, and credit losses are worse than expected, as may be caused by inflation, an economic recession or otherwise, we may increase our provision for loan losses, which could have an adverse effect on our business, financial condition, and results of operations.
A significant portion of our loan portfolio is secured by real estate,estate and events that negatively impact the real estate market could hurt our business.
A significant portion of our loan portfolio is secured by real estate located in our core banking markets. The real estate collateral in each case provides an alternate source of repayment in the event of default by the borrower and may deteriorate in value during the time the credit is extended. A decline in local economic conditions may have a greater effect on our earnings and capital than on the earnings and capital of other financial institutions whose real estate loan portfolios are more geographically diverse. Deterioration in national real estate market conditions, or in conditions in specific local real estate markets, could cause us to adjust our opinion of the level of credit quality in our loan portfolio. Such a determination may lead to an additional increase in our ACL, which could also adversely affect our business, financial condition,condition and results of operations. Additionally, changes in the real estate market could also affect the value of foreclosed assets, which could cause additional losses when management determines it is appropriate to sell the assets.
The banking regulatory agencies have recently expressed concerns about weaknesses in the current CRE market. Banking regulators generally give CRE lending greater scrutiny and may require banks with higher levels of CRE loans to implement enhanced risk management practices, including stricter underwriting, internal controls, risk management policies, more granular reporting, and portfolio stress testing, as well as possibly higher levels of allowances for losses and capital levels as a result of CRE lending growth and exposures. If our banking regulators determine that our CRE lending activities are particularly risky and are subject to such heightened scrutiny, we may incur significant additional costs or be required to restrict certain of our CRE lending activities. Furthermore, failures in our risk management policies, procedures and controls could adversely affect our ability to manage this portfolio going forward and could result in an increased rate of delinquencies in, and increased losses from, this portfolio, which could have a material adverse effect on our business, financial condition, and results of operations.
Our commercial and industrial loans haveare contributeda significantlysignificant tocomponent of our loan growth,portfolio, which may expose us to additional credit risks, and may adversely affect our results of operations and financial condition.
A significant portion of our loan portfolio consists of loans secured by real estate. In considering whether to make a loan secured by real estate, we generally require an appraisal of the property. However,An anappraisal, appraisalhowever, is only an estimate of the value of the property at the time the appraisal is made and, as real estate values may change significantly in relatively short periods of time (especially in periods of heightened economic uncertainty), this estimate may not accurately describe the net value of the real estate after the loan is made. Independent appraisers may also make mistakes of fact or judgment that adversely affect the reliability of their appraisals. In addition, we rely on appraisals and other valuation techniques to establish the value of our other real estate owned that we acquire through foreclosure proceedings and to determine certain loan impairments. If any of these valuations are inaccurate, our consolidated financial statements may not reflect the correct value of our other real estate owned, and our ACL may not reflect accurate loan impairments. Additionally, if a default occurs on a loan secured by real estate that is less valuable than originally estimated, we may not be able to recover the outstanding balance of the loan. This could have an adverse effect on our business, financial condition, and results of operations.
Our focus on lending to small to mid-sized community-based businesses may increase our credit risk.
WeOur makeloan mostportfolio of our commercial business and CREincludes loans to small business or middle market customers. These businesses generally have fewer financial resources in terms of capital or borrowing capacity than larger entities, frequently have smaller market share than their competitors, may be more vulnerable to economic downturns, often need substantial additional capital to expand or compete, and may experience substantial volatility in operating results, any of which, individually or in the aggregate, may impair their ability as a borrower to repay their loans, which could adversely affect our business, results of operations, and financial condition. Moreover, we made some of these loans in recent years, and the borrowers may not have experienced a complete business or economic cycle. Any deterioration of the borrowers’ businesses may hinder their ability to repay their loans, which could have a material adverse effect on our business, financial condition, and results of operations.
Our nonperforming assets adversely affect our net income in various ways. We do not record interest income on nonaccrual loans, which adversely affects our income and increases loan administration costs. When we receive collateral through foreclosures and similar proceedings, we are required to mark the related loan to the then fair market value of the collateral less estimated selling costs, which may result in a loss. An increase in the level of nonperforming assets also increases our risk profile and may affect the minimum capital levels our regulators believe are appropriate for us in light of such risks. We use various techniques such as workouts, restructurings, and loan sales to manage problem assets. Increases in or negative adjustments into the value of these problem assets, the underlying collateral, or in the borrowers’ performance or financial condition, could adversely affect our business, results of operations, and financial condition. In addition, the resolution of nonperforming assets requires significant commitments of time from management and staff, which can be detrimental to the performance of their other responsibilities. There can be no assurance that we will not experience increases in our nonperforming assets in the future, or that our nonperforming assets will not result in losses in the future.
General economic, political, social and health conditions in the U.S. and abroad affect markets in the U.S. and our business. In particular, markets in the U.S. may be affected by the level and volatility of interest rates, availability and market conditions of financing, unexpected changes in gross domestic product, economic growth or its sustainability, inflation, supply chain disruptions, consumer spending, employment levels, labor shortages, wage stagnation, federal government shutdowns, developments related to the U.S. federal debt ceiling, energy prices, home prices, commercial property values, bankruptcies, a default by a significant market participant or class of counterparties, fluctuations or other significant changes in both debt and equity capital markets and currencies, liquidity of the global financial markets, the growth of global trade and commerce, trade policies, tariffs, a U.S. withdrawal from or significant renegotiation of trade agreements, trade wars, the availability and cost of capital and credit, disruption of communication, transportation or energy infrastructure and investor sentiment and confidence. Markets may also be adversely affected by the current or anticipated impact of climate change, extreme weather events or natural disasters, the emergence or continuation of widespread health emergencies or pandemics, cyberattacks or campaigns, military conflict, acts of war or terrorism, or other geopolitical events. Market fluctuations may impact net interest margin and affect our business liquidity. Also, any sudden or prolonged market downturn in the U.S., as a result of the above factors or otherwise, could result in a decline in net interest income and noninterest income and adversely affect our results of operations and financial condition, including capital and liquidity levels. Events in the financial services industry,industry suchhave asin the high-profilepast, bankand failuresmay in 2023,the mayfuture, also cause concern and uncertainty about the financial services industry generally, which may result in sudden deposit outflows, increased borrowing and funding costs, and increased competition for liquidity, any of which could have a material adverse impact on our business, financial condition, and results of operations.
Our financial performance generally, and in particular, the ability of borrowers to pay interest on and repay the principal of outstanding loans and the value of collateral securing those loans, as well as demand for loans and other products and services we offer and whose success we rely on to drive our growth, is also highly dependent on the business environment in the primary markets where we operate. Unlike larger financial institutions that are more geographically diversified, we are a regional bank that focuses on providing banking and financial services to customers primarily in Virginia, andMaryland, inWashington, certain markets in Maryland,D.C., North Carolina, and South Carolina, and Washington, D.C.Carolina. The economic conditions in these markets may be different from, and in some instances worse than, the economic conditions in the United States as a whole. An economic downturn or prolonged recession can result in a deterioration of our credit quality, an increase in the number of loan delinquencies, defaults and charge-offs, foreclosures, additional provisions for loan losses, adverse asset values and a reduction in deposits and assets under management or administration. Unlike many larger institutions, we are not able to spread the risks of unfavorable local economic conditions across a large number of diversified economies. An economic downturn could, therefore, result in losses that materially and adversely affect our business.
We may not be able to maintain a strong core deposit base or access other low-cost funding sources.sources
We operate in a competitive market for financial services and face intense competition from other financial institutions both in making loans and attracting deposits, which can greatly affect pricing for our products and services and could adversely affect our cost of funds. Our primary competitors include community, regional, national and internet banks, as well as credit unions and mortgage companies. Many of these financial institutions are significantly larger and have established customer bases, greater financial resources, and higher lending limits. In addition, credit unions are exempt from corporate income taxes, providing a significant competitive pricing advantage compared to banks. In addition, as customer preferences and expectations continue to evolve, technology has lowered barriers to entry and made it possible for nonbanks to offer products and services traditionally provided by banks, such as automatic transfer and automatic payment systems. In addition, many of these nonbank competitors are not subject to the same extensive federal regulations that govern bank holding companies and federally insured banks. As a result, some of our competitors have the ability tocan offer products and services that we are unable to offer or to offer such products and services at more competitive rates.
Consumers may increasingly decide not to use banks to complete their financial transactions, which could materially adversely effectaffect our business, financial condition, and results of operations.
Technology and other changes are allowing parties to complete financial transactions through alternative methods that have historically involved banks. For example, consumers can now maintain funds that would have historically been held as bank deposits in brokerage accounts, mutual funds, or general-purpose reloadable prepaid cards. Consumers can also complete transactions such as paying bills and/or transferring funds directly without the assistance of banks. We face increasing competition from fintech companies, as trends toward digital financial transactions have accelerated. TheThere processhas also been a significant increase in digital asset adoption globally over the past several years. For example, the Guiding and Establishing National Innovation for U.S. Stablecoins Act of eliminating2025 banks as intermediaries, known as(the “disintermediation,GENIUS Act”), which was enacted in July 2025, provides a legal framework for stablecoins and their issuers in the United States. Depending on consumer and business interest in payment stablecoins, and the characteristics and utility of payment stablecoins, the passage of the GENIUS Act could result in increased competition with respect to our deposit products. However, the lossGENIUS Act requires the U.S. Treasury Department and federal regulators to issue regulations on numerous topics to interpret and implement the statute, so the effect of fee income, as well as the lossGENIUS ofAct customerwill depositsdepend andon the related income generated fromwhat those deposits.regulations The loss of these revenue streams and the higher cost of deposits as a source of funds could have a material adverse effect on our business, financial condition, and results of operations.provide.
Certain characteristics of digital asset transactions, such as the speed with which such transactions can be conducted, the ability to transact without the involvement of regulated intermediaries, the ability to engage in transactions across multiple jurisdictions, and the anonymous nature of the transactions, are appealing to certain consumers notwithstanding the various risks posed by such transactions. Accordingly, digital asset service providers, which, at present, are not subject to the same degree of scrutiny and oversight as bank holding companies and federally insured banks, are becoming active competitors, and customers could move their deposits from traditional federal insured banks into digital currencies, which would have a negative effect on our liquidity, results of operations and financial condition.
The process of eliminating banks as intermediaries, known as “disintermediation,” could result in the loss of fee income, as well as the loss of customer deposits and the related income generated from those deposits. The loss of these revenue streams and the higher cost of deposits as a source of funds could have a material adverse effect on our business, financial condition, and results of operations.
Our income and cash flows depend to a great extent on the difference between the interest rates earned on interest-earning assets, such as loans and investment securities, and the interest rates paid on interest-bearing liabilities, such as deposits and borrowings. These rates are highly sensitive to many factors beyond our control, including general economic conditions and the policies of the Federal Reserve and other governmental and regulatory agencies. In late 2024, the Federal Reserve’s interest rate policy shifted as inflationary pressure began to ease and economic growth moderated. FollowingThe FOMC reduced the target range for the Federal Funds rate by a periodtotal of aggressive100 bps from September 2024 to December 2024 and by another 75 bps from September 2025 to December 2025, resulting in a target range of 3.50% to 3.75%. In January 2026, the FOMC held the target range for the Federal Funds rate hikesat 3.50% to 3.75%, but noted that uncertainty about the economic outlook remains elevated. We are currently operating in 2022an andenvironment 2023in aimed at curbing inflation,which the Federal Reserve loweredhas ratesshifted intoward 2024reducing byinterest 100rates, bps,although comparedmodestly. However, the economic and inflationary outlook continues to 2023,remain resultinguncertain, and if the Federal Reserve were to reverse course and rapidly increase the target Federal Funds rate, the increase could constrain our interest rate spread and may adversely affect our business forecasts. Alternatively, an acceleration in the current Federal Funds target rate range of 4.25%decreases tomay 4.50%.negatively Whileimpact our net interest margin or may result in a change in the FOMCmix foreshadowedof additional decreases to the target rates in 2025, it also noted it will continue to assess additional informationnoninterest and implicationsinterest-bearing for the economic outlook in determining future actions with respect to target rates.accounts.
Gains or losses on these instruments can have a direct impact on our results of operations, unless we have effectively hedged our exposures. If interest rates continuedecrease, tothen rise,prepayment speeds of certain assets may increase, and therefore, may adversely affect net income. If interest rates increase, then we could have continuing changes in spreads that may adversely impact the fair value of securities and, accordingly, for debt securities classified as available for sale, may adversely affect accumulated other comprehensive income and, thus, capital levels. Decreases in interest rates may increase prepayment speeds of certain assets, and, therefore, may adversely affect net interest income.
Operational risk exposures could adversely impact our results of operations, liquidity and financial condition, as well as cause reputational harm. The potential for operational risk exposure exists throughout our business and, as a result of our interactions with, and reliance on, third parties, is not limited to our own internal operational functions. We depend on our ability to process, record and monitor a large number of client transactions on a continuous basis. As client, public, and regulatory expectations regarding operational and information security have increased, we must continue to safeguard and monitor our operational systems and infrastructure for potential failures, disruptions, and breakdowns. Although we have information and data security, business continuity plans and other safeguards in place, our business operations may be adversely affected by significant and widespread disruption to our physical infrastructure or operating systems that support our businesses and clients.
We face information security risks, including denial of service attacks, hacking, social engineering attacks targeting our employees and customers, malware intrusion or data corruption attempts, terrorist activities, and identity theft, that could result in the disclosure of confidential information, adversely affect our business or reputation, and create significant legal and financial exposure.
We intend to continue pursuing a growth strategy for our business. Our ability to continue to grow successfully will depend on a variety of factors, including economic conditions in the markets in which we operate as well as in the U.S. and globally, continued availability of desirable business opportunities, and competitive responses from other financial and non-financial institution competitors in our market areas. In addition, our ability to manage growth successfully depends on a variety of factors, including whether we can maintain adequate capital levels, maintain cost controls, effectively manage asset quality, effectively manage increasing regulatory compliance requirements, and successfully integrate any businesses acquired into our organization,organization. includingFollowing our proposedacquisition merger withof Sandy Spring.Spring, the size of our company increased significantly, and our continued success will depend, in part, upon our ability to manage this expanded business. This may pose challenges for management related to managing and monitoring the acquired operations, the cost and complexity of the acquired operations, and increased regulatory scrutiny related to our expanded business, increased complexity or rate of growth.
While we believe we have the management and other resources and internal systems in place to successfully manage our future growth, there can be no assurance growth opportunities will be availableavailable, or growth will be successfully managed. As consolidation within the financial services industry continues, the competition for growth opportunities, including through strategic acquisition, may increase, and many of our competitors for growth opportunities will have greater financial resources than us. In addition, if we are unable to successfully manage future expansion in our operations, we may experience compliance and operational problems, have to slow the pace of growth, or have to incur additional expenses to support such growth, any of which could adversely affect our business. Particularly in light of prevailing economic and competitive conditions, we cannot assure you we will be able to expand our market presence in our existing markets or successfully enter new markets or that any such expansion will not adversely affect our results of operations. Failure to manage our growth effectively could have a material adverse effect on our business, future prospects, financial condition, or results of operations, and could adversely affect our ability to successfully implement our business strategy. Also, if our growth occurs more slowly than anticipated or declines, our operating results could be materially adversely affected.
Our business growth, profitability, and market share has been enhanced by us engaging in strategic mergers and acquisitions, such as our mergermergers with American National and our proposed merger with Sandy Spring, either within or contiguous to our existing footprint. We expect to continue to evaluate merger and acquisition opportunities that are presented to us in our current and expected markets and conduct due diligence related to those opportunities, as well as negotiatenegotiating to acquire or merge with other institutions. We have in the past, and may in the future, issue equity securities, including common stock and securities convertible into shares of our common stock in connection with future acquisitions. We also may issue debt to finance one or more transactions, including subordinated debt issuances, which could cause us to become more susceptible to economic downturns and competitive pressures. Generally, acquisitions of financial institutions involve the payment of a premium over book and market values, resulting in dilution of our book value and fully diluted earnings per share, as well as dilution to our existing shareholders.
Our merger and acquisition activities, including our proposed merger with Sandy Spring,activities could involve a number of additional risks, including, among others, the risks of:
There is no assurance that, following any future mergers or acquisitions, including our proposed merger with Sandy Spring,acquisitions our integration efforts will be successful or that we, after giving effect to the acquisition, will achieve the strategic objectives, operating efficiencies, increased revenues comparable to or better than our historical experience, or other benefits expected in the acquisition, and failure to realize such strategic objectives, operating efficiencies, expected revenue increases, cost savings, increases in market presence or other benefits could have a material adverse effect on our business, financial condition, and results of operations.
When we complete an acquisition, goodwill and other intangible assets are often recorded on the date of acquisition as an asset. Current accounting guidance requires goodwill to be tested for impairment, in aggregate and at a reportable segment level, and we perform this impairment analysis at least annually. A significant adverse change in our expected future cash flows or a sustained adverse change in the price of our common stock, at the reportable segment level and/or the aggregate level, could require our goodwill and other intangible assets to become impaired. If goodwill is impaired, we would incur a charge to earnings that would have a significant impact on our results of operations. The carrying value of our goodwill and net amortizable intangibles were approximately $1.2$1.7 billion and $84.6$315.5 million, respectively, at December 31, 2024.2025.
We maintain an enterprise risk management program that is designed to identify, assess, mitigate, monitor, and report the risks that we face. These risks include: strategic, credit, marketmarket, (including interest-rate, capital, and liquidity),liquidity, operational, regulatory (compliance),compliance, legal, and technology. While we assess and seek to improve this program on an ongoing basis, there can be no assurance that our risk management framework and related controls will effectively mitigate all risk and limit losses in our business. If conditions or circumstances arise that expose flaws or gaps in our risk-management program, or if our controls break down, our results of operations and financial condition may be adversely affected. We must also develop and maintain a culture of risk management among our employees, as well as manage risks associated with third parties, and we could fail to do so effectively. If our risk management framework is not effective, we could suffer unexpected losses and become subject to litigation, negative regulatory consequences, or reputational damage among other adverse consequences, which could materially adversely affect our business, financial condition, results of operations, and prospects.
The use of statistical and quantitative models and other quantitatively based analyses is central to bank decision-making and regulatory compliance processes, and the employment of such analyses is becoming increasingly widespread in our operations. We use quantitative models to price products and services, measure risk, calculate the quantitative portion of our allowance for loan losses, estimate asset and liability values, assess capital and liquidity, manage our balance sheet, create financial forecasts, and otherwise conduct our business and operations. We anticipate that model-derived insights will penetrate further into bank decision-making, and particularly risk management efforts. While these quantitative techniques and approaches improve our decision-making, they also create the possibility that faulty data or flawed quantitative approaches could yield adverse outcomes or regulatory scrutiny. Additionally, because of the complexity inherent in these approaches, misunderstanding or misuse of their outputs could similarly result in suboptimal decision-making. Some models we use employ methodologies based on artificial intelligence or machine learning. These models may have unique complexities when compared to more traditional models, such as the need for large and representative datasets for training, the increased potential for bias, and the difficulty in interpreting model decisions and implementing model adjustments. We also rely on model inputs that are provided by third parties. To the extent that any flawed models or inaccurate model outputs are used in reports to banking agencies or the public, we could be subjected to supervisory actions, private litigation, and other proceedings that may adversely affect our business, financial condition, and results of operations. If our models fail to produce reliable results on an ongoing basis, we may not make appropriate risk management, capital planning or other business or financial decisions.
We have an enterprise-wide model risk management program designed to identify, measure, monitor and manage model risk (including model governance and validation, model inventory and establishing model control standards and risk metrics). This model risk management program may not function effectively or as intended and, if our strategies for managing the risks associated with our use of models are not effective or reliable, our business, financial condition, results of operations and risk exposure may be adversely affected.
The financial services industry is continually undergoing technological change with frequent introductions of new technology-driven products and services, including digital assets and payment systems, and we anticipate that new technologies will continue to emerge. Our continued success depends, in part, on our ability to address the needs of our customers by using technology to provide products and services that satisfy customer demands and create efficiencies in our operations. Developing or acquiring access to new technologies and incorporating those technologies into our products and services, or using them to expand our products and services, may require significant investments, may take considerable time to complete, and ultimately may not be successful. Also, certain new technologies, such as digital assets and payments systems, are subject to continued regulatory uncertainty, making it more difficult for highly-regulated institutions, such as us, to adopt such new technologies as compared to other entities that are not subject to the same level of regulation. If we fail to maintain or enhance our competitive position with respect to technology, whether because of a failure to anticipate customer expectations, substantially fewer resources to invest in technological improvements than our larger competitors, or because our technological developments fail to perform as desired or are not rolled out in a timely manner, we may lose market share or incur additional expense. In addition, any future implementation of technological changes and upgrades to maintain current systems may cause operational and customer challenges upon implementation and for some time afterwards. Key challenges include service interruptions, transaction processing errors and system conversion delays, which may cause us to lose customers or fail to comply with applicable laws, and may cause us to incur additional expenses, which may be substantial and could have a material adverse effect on our business, financial condition, results of operations, and future prospects.
Management's Discussion & Analysis (MD&A)
New heading “Valuation of Deferred Tax Assets”
New heading “Valuation of Acquired Assets and Liabilities”
New heading “(1) The Company recorded measurement period adjustments in the third and fourth quarters of 2025 related to the fair values of certain loans, which impacted the nonaccrual activity for the year ended December 31, 2025. The increase in additions during the year ended December 31, 2025 was primarily due to PCD loans acquired from Sandy Spring.”
Removed heading “Acquisition Accounting”
Removed heading “Acquisition of American National Bankshares Inc.”
Removed heading “(1) Operating results include a reallocation from the Consumer Banking segment, due to the January 1, 2023 organizational change discussed above.”
Removed heading “(1) Operating results include a reallocation to the Wholesale Banking segment, due to the January 1, 2023 organizational change discussed above.”
Largest changes
“We are continually monitoring the impact of various global and national events on our results of operations and financial condition, including changes in economic conditions, such as inflation and recessionary conditions, changes in the unemployment rate, changes in market interest rates, geopolitical conflicts, deposit competition, liquidity strains, changes in government policy, including changes in, or the imposition of, tariffs and/or trade barriers, and changes in legislative or regulatory requirements. …”see in full comparison
“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. …”see in full comparison
“The Company performs its goodwill impairment analysis annually on April 30th at the reporting unit level whereby the Company compares the estimated fair value of the reporting unit to its carrying value. If the estimated fair value of a reporting unit exceeds its carrying value, goodwill is not considered impaired. To determine the fair value of a reporting unit, the Company utilizes a combination of two separate quantitative methods, the market value approach, which considers comparable publicly-traded companies, and the income approach which estimates future cash flows. …”see in full comparison
“In 2025, financial markets were impacted by increased and prolonged economic uncertainty, including due to changes and developments in U.S. trade policies and practices, including tariffs, changes in the unemployment rate, and international relations. These factors could adversely affect the U.S. and global economies and financial markets, including by increasing inflation and leading to a slowdown of future economic growth and ultimately recessionary conditions.”see in full comparison
“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. …”see in full comparison
“Acquired intangible assets represent purchased assets that lack physical substance but can be differentiated from goodwill. Acquired intangible assets are primarily comprised of customer deposit intangibles and customer relationship intangibles, which are amortized over their useful lives. Core deposit intangibles are amortized using an accelerated method and other amortizable intangible assets are amortized using various methods. …”see in full comparison
Full comparison: every changed paragraph (166)
The following discussion and analysis provides information about the major components of our results of operations andoperations, financial condition, liquidity, and capital resources. This discussion and analysis should be read in conjunction with our “Consolidated Financial StatementsStatements,” and our “Notes to the Consolidated Financial Statements,” and the other financial data included in this report, which include our significant accounting policies, presented in Item 8 “Financial Statements and Supplementary Data” contained in this Form 10-K. Amounts are rounded for presentation purposes; however, some of the percentages presented are computed based on unrounded amounts.
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, valuation of deferred tax assets, and acquisitionvaluation accountingof acquired assets and liabilities 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.
We provide additional information about our critical accounting estimates below in “Critical Accounting Estimates” in this Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Form 10-K.
Valuation of Deferred Tax Assets
We account for income taxes in accordance with income tax accounting guidance (ASC 740, Income Taxes). Deferred income tax assets and liabilities are determined using the asset and liability (or balance sheet) method. Under this method, the net deferred tax asset or liability is determined based on the tax effects of the temporary differences between the book and tax basis of the various balance sheet assets and liabilities. Deferred income tax assets are also recorded for any tax attributes, such as net operating loss and tax credit carryforwards. Any changes in tax rates and laws are reflected in the period of the enactment date. A valuation allowance against the deferred tax assets is recorded when evidence supports it is more likely than not that some or all of the deferred tax assets will not be realized.
We determine the realization of deferred tax assets by considering all relevant information, including the impact of recent operating results, future reversals of taxable temporary differences, future taxable income exclusive of reversing temporary differences and carryforwards and tax planning strategies. Determining whether deferred tax assets are realizable is subjective and requires the use of significant judgment.
For more information on our income taxes, refer to Note 16 “Income Taxes” in the “Notes to Consolidated Financial Statements” contained in Item 8 “Financial Statements and Supplementary Data” of this Form 10-K.
Valuation of Acquired Assets and Liabilities
Acquisition Accounting
Goodwill is generally determined as the excess of the fair value of the consideration transferred, plus the fair value of any noncontrolling interests in the acquiree over the fair value of the net assets acquired and liabilities assumed as of the acquisition date. Goodwill and intangible assets determined to have an indefinite useful life are not amortized and are tested for impairment at least annually or more frequently if events and circumstances exist that indicate that a goodwill impairment test should be performed. Goodwill is the only intangible asset with an indefinite life included on the Company’s Consolidated Balance Sheets.
The Company performs its goodwill impairment analysis annually on April 30th at the reporting unit level whereby the Company compares the estimated fair value of the reporting unit to its carrying value. If the estimated fair value of a reporting unit exceeds its carrying value, goodwill is not considered impaired. To determine the fair value of a reporting unit, the Company utilizes a combination of two separate quantitative methods, the market value approach, which considers comparable publicly-traded companies, and the income approach which estimates future cash flows. Critical assumptions that are used as part of these calculations include: the selection of comparable publicly-traded companies and selection of market comparable acquisition transactions, the discount rate, the forecast of future earnings and cash flows of the reporting unit, economic conditions, which impact the assumptions related to interest, growth rates, loss rates, the cost savings expected to be realized by a market participant, the control premium associated with the reporting unit and a relative weight given to the valuations derived by the two valuation methods. In the normal course of business, the Company routinely monitors the impact of the changes in the financial markets and includes these assessments in our impairment process.
Acquired intangible assets represent purchased assets that lack physical substance but can be differentiated from goodwill. Acquired intangible assets are primarily comprised of customer deposit intangibles and customer relationship intangibles, which are amortized over their useful lives. Core deposit intangibles are amortized using an accelerated method and other amortizable intangible assets are amortized using various methods. Long-lived assets, including intangible assets subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
Acquired loans are recorded at their fair value at the acquisition date without carryover of the acquiree’s previously established ALLL. The fair value for acquired loans is determined using a discounted cash flow analysis that considers factors including loan type, interest rate type, prepayment speeds, duration and current discount rates. During evaluation upon acquisition, acquired loans are also classified as either – (1) loans that have experienced a more-than insignificant amount of credit deterioration since origination (“PCD” loans) or (2) loans that have not experienced a more-than insignificant amount of credit deterioration since origination (“non-PCD” loans). Acquired loans are subject to the Company’s ALLL policy upon acquisition.
For loans that have not experienced a more-than an insignificant amount of credit deterioration since origination, the difference between the fair value and unpaid principal balance of the loans at the acquisition date (premium or discount) is amortized or accreted into interest income over the life of the loans in accordance with ASC 310-20, Receivables – Nonrefundable Fees and Other Costs. If the acquired performing loan has revolving privileges, the discount/premium is accounted for using the straight-line method; otherwise, the Company uses the effective interest rate method.
WeThe evaluateCompany acquiredrecords PCD loans at the acquisitionamount datepaid and classify them as either (1) loans that have experienced a more-than insignificant amount of credit deterioration since origination (“PCD” loans) or (2) loans that have not experienced a more-thanestablishes an insignificant amount of credit deterioration since origination (“non-PCD” loans). The fair value for acquired loans is estimated using a discounted cash flow analysis that considers factors including loan type, interest rate type, prepayment speeds, duration, and current discount rates. These cash flow evaluations are inherently subjective as they require material estimates, all of which may be susceptible to significant change. The fair value adjustment is recorded as a premium or discount to the unpaid principal balance of each acquired loan. PCD loans are recorded at the amount paid. Aninitial ALLL on PCD loans is determined using the same methodology as other LHFI, however, there is no initial impact to net income to record the allowance at acquisition.LHFI. The sum of the PCD loan’s purchase price and initial ALLL becomes its initial amortized cost basis. The difference between the initial amortized cost basis and the par value of the PCD loan is a noncredit discount or premium, which is amortized into interest income over the life of the loan under ASC 310-20, Receivables – Nonrefundable Fees and Other Costs. If the PCD loan has revolving privileges, the discount/premium is amortized/accreted using the straight-line method; otherwise, the effective interest method is used. Subsequent changes to the ALLL on PCD loans are recorded through provision expense. The allowance for credit losses for non-PCD loans is recognized as provision expense upon acquisition using the Company’s existing ACL methodology. For further information, refer to Note 2 “Acquisitions” in the “Notes to Consolidated Financial Statements” contained in Item 8 “Financial Statements and Supplementary Data” of this Form 10-K.
When determining the initial ALLL on PCD loans, the Company considers charge offs necessary at acquisition to comply with the Company’s charge off policy. For PCD loans that are subject to write-off under the Company’s charge-off policy at acquisition, the initial ALLL on PCD loans is included as part of the loan balance at the time of acquisition and is immediately written off with no impact on net income. See also 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 for additional detail regarding the ALLL on PCD loans.
See also Note 2 “Acquisitions” in the “Notes to Consolidated Financial Statements” contained in Item 8 “Financial Statements and Supplementary Data” of this Form 10-K for additional discussion of the Company’s acquisitions.
In December 2023, the FASB issued ASU No. 2023-09 Income 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.
In November 2024, the FASB issued ASU No. 2024-03 Income 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 is not expected to have an impact on our consolidated financial statements.condition or results of operations but could change certain disclosures in our SEC filings.
In September 2025, the FASB issued ASU No. 2025-06 Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software, which outlined targeted improvements to Subtopic 350-40 to increase the operability of the recognition guidance considering different methods of software development. The amendments are effective for fiscal years beginning after December 15, 2027, and interim reporting periods within those annual reporting periods. We are evaluating the impact of ASU No. 2025-06 on our consolidated financial statements.
In September 2025, the FASB issued ASU No. 2025-07 Derivatives and Hedging (Topic 815) and Revenue from Contracts with Customers (Topic 606): Derivatives Scope Refinements and Scope Clarification for Share-Based Noncash Consideration from a Customer in a Revenue Contract. The update to Topic 815 outlined the addition of derivative scope exceptions with underlyings that are based on the operations or activities of one of the parties to the contract. The update to Topic 606 clarified the applicability of Topic 606 and its interaction with other Topics. The amendments are effective for fiscal years beginning after December 15, 2026, and interim reporting periods within those annual reporting periods. ASU No. 2025-07 is not expected to have an impact on our financial condition or results of operations.
In November 2025, the FASB issued ASU No. 2025-08 Financial Instruments – Credit Losses (Topic 326): Purchased Loans. This update expanded the population of acquired financial assets subject to the gross-up approach in Topic 326. The amendments are effective for fiscal years beginning after December 15, 2026, and interim reporting periods within those annual reporting periods. We are evaluating the impact of ASU No. 2025-08 on our consolidated financial statements.
In November 2025, the FASB issued ASU No. 2025-09 Derivatives and Hedging (Topic 815): Hedge Accounting Improvements. This update clarified certain aspects of the guidance on hedge accounting. The amendments are effective for fiscal years beginning after December 15, 2026, and interim reporting periods within those annual reporting periods. We are evaluating the impact of ASU No. 2025-09 on our consolidated financial statements.
In December 2025, the FASB issued ASU No. 2025-10 Government Grants (Topic 832): Accounting for Government Grants Received by Business Entities. This update established authoritative guidance on the accounting for government grants received by business entities. The amendments are effective for fiscal years beginning after December 15, 2028, and interim reporting periods within those annual reporting periods. We are evaluating the impact of ASU No. 2025-10 on our consolidated financial statements.
In December 2025, the FASB issued ASU No. 2025-11 Interim Reporting (Topic 270): Narrow Scope Improvements. This update improved the navigability of the required interim disclosures and clarified when that guidance is applicable. The amendments are effective for fiscal years beginning after December 15, 2027, and interim reporting periods within those annual reporting periods. ASU No. 2025-11 is not expected to have an impact on our financial condition or results of operations but could have an impact on interim disclosures.
We are continually monitoring the impact of various global and national events on our results of operations and financial condition, including changes in economic conditions, such as inflation and recessionary conditions, changes in the unemployment rate, changes in market interest rates, geopolitical conflicts, deposit competition, liquidity strains, changes in government policy, including changes in, or the imposition of, tariffs and/or trade barriers, and changes in legislative or regulatory requirements. 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 2025, financial markets were impacted by increased and prolonged economic uncertainty, including due to changes and developments in U.S. trade policies and practices, including tariffs, changes in the unemployment rate, and international relations. These factors could adversely affect the U.S. and global economies and financial markets, including by increasing inflation and leading to a slowdown of future economic growth and ultimately recessionary conditions.
In late 2024, the Federal Reserve’s interest rate policy shifted as inflationary pressure began to ease and economic growth moderated. The FOMC reduced the target range for the Federal Funds rate by a total of 100 bps from September 2024 to December 2024 and by another 75 bps from September 2025 to December 2025, resulting in a target range of 3.50% to 3.75%. In January 2026, the FOMC held the target range for the Federal Funds rate at 3.50% to 3.75%, but noted that uncertainty about the economic outlook remains elevated. With continued uncertainty over the potential impacts of changes in U.S. and global trade and other economic policies and international tensions, it is difficult to predict how the Federal Reserve will balance possible inflationary pressure with the potential of slower economic growth and rising risks in employment.
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 enable us 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.
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.
Financial institutions continue to deal with macroeconomic headwinds. In 2024, the higher-for-longerhigher interest rate environment and heightened competition for deposits hasand 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.products. At December 31, 2024,2025, our LHFI and total deposits increased from December 31, 20232024 by $2.8$9.3 billion and $3.6$10.1 billion, respectively, primarily due to our acquisition of AmericanSandy National, and our short-term borrowings decreased by $804.6 million from December 31, 2023, due to paydowns on FHLB borrowings.Spring. At December 31, 2024,2025, non-interest-bearing deposits comprised 21.0%22.5% of total deposits, compared to 23.6%21.0% at December 31, 2023.2024. As of December 31, 2024,2025, we estimate that approximately 70.6%68.7% of our deposits were insured or collateralized,collateralized and that we maintained available liquidity sources to cover approximately 139.8%151.7% of uninsured and uncollateralized deposits. InAt addition,December to31, further bolster2025, our funding position, we augmented customer deposit growth by also increasing brokered deposits decreased by $89.6 million to $1.2$1.1 billion at December 31, 2024, an increase of $669.5 million from December 31, 2023.2024.
The recent change in U.S. presidential administration may lead to potentially significant changes to the existence, priorities, scope, practices and/or staffing levels of various regulatory agencies, which may have significant effects on our business and economic and market conditions generally. We cannot predict these changes or their ultimate scope. See “Item 1A – Risk Factors” of this Form 10-K.
Acquisition of American National Bankshares Inc.
On April 1, 2024, we completed our acquisition of American National, the holding company for American National Bank and Trust Company. American National’s results of operations are included in our consolidated results since the date of acquisition, and therefore, our fourth quarter and full year 2024 results reflect increased levels of average balances, net interest income, and expense compared to our results for the corresponding period in 2023. For more information, reference Note 2 “Acquisitions” in “Notes to the Consolidated Financial Statements” contained in Item 8 “Financial Statements and Supplementary Data” of this Form 10-K.
PendingAcquisition Merger withof Sandy Spring Bancorp, Inc.
On April 1, 2025, we completed our acquisition of Sandy Spring, the bank holding company for Sandy Spring Bank, and we successfully completed the integration of Sandy Spring branches and operations on October 14, 2025. Sandy Spring’s results of operations are included in our consolidated results since the date of acquisition, and therefore, our fourth quarter and full year 2025 results reflect increased levels of average balances, net interest income, and expenses compared to our results for the corresponding period in 2024. For more information, reference Note 2 “Acquisitions” in “Notes to the Consolidated Financial Statements” contained in Item 8 “Financial Statements and Supplementary Data” of this Form 10-K.
CRE Loan Sale
On June 26, 2025, we completed the sale of performing CRE loans acquired in the Sandy Spring acquisition with an unpaid principal balance of $2.0 billion, which we marked to fair value at $1.8 billion and classified as held for sale as of the April 1, 2025 acquisition date. The CRE loan sale transaction generated a $10.9 million pre-tax gain, net of transaction expenses, for the year ended 2025. Under the terms of the loan purchase agreement, we sold the loans without recourse and retained customer-facing servicing responsibilities.
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.
Subject to the terms and conditions of the merger agreement, at the effective time of the merger, each outstanding share of Sandy Spring common stock, other than shares of restricted Sandy Spring common stock and certain shares held by the Company or Sandy Spring, will be converted into the right to receive 0.900 shares of our common stock plus cash in lieu of fractional shares.
All necessary regulatory and shareholder or stockholder approvals for the merger have been received by the Company and Sandy Spring, as applicable, and the merger is expected to close on April 1, 2025, subject to the satisfaction or waiver of customary closing conditions.
As of December 31, 2024, Sandy Spring had total assets of approximately $14.1 billion, total loans of approximately $11.5 billion, and total deposits of approximately $11.7 billion.
On October 21, 2024, in connection with the execution of the Sandy Spring merger agreement with respect to Sandy Spring,agreement, we entered into an initial forward sale agreement with Morgan Stanley & Co. LLC (the “Forward Purchaser”), relating to an aggregate of 9,859,155 shares of our common stock. On October 21, 2024, we priced the public offering of shares of our common stock in connection with such forward sale agreement and entered into an underwriting agreement with Morgan Stanley & Co. LLC, as representative for the underwriters named therein, the Forward Purchaser and Morgan Stanley & Co. LLC as forward seller (the “Forward Seller”), relating to the registered public offering and sale of 9,859,155 shares of our common stock at a public offering price of $35.50 per share (before underwriting discounts and commissions). The underwriters were granted a 30-day option to purchase up to an additional 1,478,873 shares of our common stock. On October 21, 2024, the underwriters exercised in full their option to purchase the additional 1,478,873 shares of our common stock pursuant to the underwriting agreement and, in connection therewith, we entered into an additional forward sale agreement with the Forward Purchaser relating to 1,478,873 shares of our common stock, on terms substantially similar to those contained in the initial forward sale agreement (such additional forward sale agreement together with the initial forward sale agreement, the “Forward Sale Agreements”).
On April 1, 2025, we physically settled in full the Forward Sale Agreements by delivering 11,338,028 shares of our common stock to the Forward Purchaser. We received net proceeds from such sale of shares of our common stock and full physical settlement of the Forward Sale Agreements, before expenses, of approximately $385.0 million.
We did not initially receive any proceeds from the sale of our common stock sold by the Forward Seller to the underwriters named in the underwriting agreement. We expect to physically settle the Forward Sale Agreements (by the delivery of shares of our common stock) and receive proceeds from the sale of those shares of our common stock upon one or more forward settlement dates within approximately 18 months from the date of the Forward Sale Agreements at the then applicable forward sale price. The forward sale price was initially $34.08 per share, which is equal to the public offering price per share, less the underwriting discount per share, and would result in net proceeds (before offering expenses) of approximately $386.4 million to the Company under the Forward Sale Agreements. No physical settlement has occurred through the date on which our consolidated financial statements for the year ended December 31, 2024.
In the fourth quarter of 2024, average diluted common shares outstanding increased, driven by the dilutive accounting impact of the Forward Sale Agreements under the treasury stock method of accounting, which required us to reflect the potential shares of our common stock to be issued under the Forward Sale Agreements, even though no shares of our common stock have been issued to date. Accordingly, at December 31, 2024, 1,759,194 shares of our common stock under the Forward Sale Agreements were included in the calculation of diluted earnings per share.
Net income available to common shareholders was $197.3$261.8 million for 2024,2025, an increase of $7.3$64.5 million or 3.8%32.7% and represented both basic and diluted EPS of $2.03, compared to net income of $197.3 million and basic and diluted EPS of $2.29 and $2.24, respectively, compared to net income of $190.0 million and basic and diluted EPS of $2.53 for 2023.2024. The increase in net income was primarily related to the AmericanSandy NationalSpring acquisition. Adjusted operating earnings available to common shareholders(+) totaled $241.3$444.8 million for 2025, compared to $252.8 million for 2024, compared to $221.2 million for 2023, and adjusted diluted operating EPS(+) was $2.74$3.44 for 2024,2025, compared to $2.95$2.88 for 2023.2024.
Net interest income for 20242025 totaled $698.5$1.2 million,billion, an increase of $87.5$456.4 million or 14.3%65.3%, fromcompared 2023.to 2024. The increase in net interest income was primarily the result of an increase in interest-earning assets, higher yield onaverage interest-earning assets,assets and higher net accretion income, partially offset by the impact of higher interest-bearing liabilities and higher cost of funds. Thean increase in interest-earning assets andaverage interest-bearing depositsliabilities, wasin each case primarily related to the acquisitionSandy ofSpring American National.acquisition. The increasedincrease assetin yieldnet interest income was also impacted by organic loan growth and lower cost of fundsfunds, reflectdriven by lower deposit costs, reflecting the impact of the FOMC rate increases throughout 2022 and 2023 prior to the Federal Reserve lowering the Federal Funds target rate by 100 bps betweenfrom September and2024 to December in2024 2024.and by another 75 bps from September 2025 to December 2025. For additional details on net interest income, refer to the section “Net Interest Income” included within this Item 7 of this Form 10-K.
Noninterest income for 2025 increased $28.0$100.6 million or 30.8%84.6% to $118.9$219.4 million for 2024,million, compared to $90.92024, millionprimarily fordue 2023,to the impact of the Sandy Spring acquisition that resulted in increases in most categories of noninterest income and an increase in other operating income, primarily driven by a decreasepre-tax gain on the sale of our equity interest in lossCSP and a pre-tax gain on the CRE loan sale. In addition, pre-tax losses incurred on the sale of AFS securities,securities asdecreased well asfrom the impactprior year due to our restructuring of the American National acquisition,securities partially offset by a decreaseportfolio in other operating income primarily driven by a gain recognized in 2023 related to our sale-leaseback transactions.2024. For additional details on noninterest income, refer to the section “Noninterest Income” included within this Item 7 of this Form 10-K.
Noninterest expense for 2025 increased $77.1$388.0 million or 17.9%76.5% to $507.5$895.6 million for 2024,million, compared to $430.4 million for 2023,2024, primarily driven by an increase in merger-related costs due to the American National acquisition and our pending merger with Sandy Spring, as well as an increase in salaries and benefits and other increases in various categories of noninterest expense, most of which were due to the impact of the AmericanSandy NationalSpring acquisition.acquisition, Thesewhich drove the increases werein partiallysalaries offsetand bybenefits aexpense, decreasemerger-related costs, and amortization of intangible assets, as well as increases in most other expenses,categories dueof primarilynoninterest to higher expenses in the prior year associated with strategic cost saving initiatives and a legal reserve related to our previously disclosed settlement with the CFPB.expense. For additional details on noninterest expense, refer to the section “Noninterest Expense” included within this Item 7 of this Form 10-K.
Net income available to common shareholders was $197.3 million for 2024, an increase of $7.3 million or 3.8% and represented basic and diluted EPS of $2.29 and $2.24, respectively, compared to net income of $190.0 million and basic and diluted EPS of $2.53 for 2023. The increase in net income was primarily related to the American National acquisition. Adjusted operating earnings available to common shareholders(+) totaled $252.8 million for 2024, compared to $221.2 million for 2023, and adjusted diluted operating EPS(+) was $2.88 for 2024, compared to $2.95 for 2023.
Net interest income for 2024 totaled $698.5 million, an increase of $87.5 million or 14.3%, compared to 2023. The increase in net interest income was primarily the result of an increase in interest-earning assets, higher yield on interest-earning assets, and higher net accretion income, partially offset by the impact of higher interest-bearing liabilities and higher cost of funds. The increase in interest-earning assets and interest-bearing deposits was primarily related to the acquisition of American National. The increased asset yield and cost of funds reflect the impact of the FOMC rate increases throughout 2022 and 2023 prior to the Federal Reserve lowering the Federal Funds target rate 100 bps between September and December 2024.
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.
Net interest income for 2023 totaled $611.0 million, an increase of $26.8 million or 4.6% from 2022. The increase in net interest income was primarily driven by higher loan yields due to rising market interest rates and loan growth. This increase was partially offset by an increase in interest expense due to increased deposit and borrowing costs because of higher short-term market interest rates, average interest-bearing deposit growth, and higher average short-term borrowings.
Noninterest income decreasedfor $27.62024 increased $28.0 million or 23.3%30.8% to $90.9$118.9 millionmillion, forcompared to 2023, from $118.5 million for 2022, primarily driven by lossesa incurreddecrease in loss on the sale of AFS securities, as well as decreasesthe inimpact fiduciaryof andthe assetAmerican managementNational fees, mortgage banking income, and loan-related interest rate swap fees. These decreases in noninterest income wereacquisition, partially offset by increasesa decrease in other operating income,income whichprimarily includeddriven gainsby a gain recognized in 2023 related to theour salesale-leaseback lease-back transactions, service charges on deposit accounts, and other service charges, commissions, and fees.transactions.
Noninterest expense for 2024 increased $77.1 million or 17.9% to $507.5 million, compared to 2023, primarily driven by an increase in merger-related costs due to the American National and Sandy Spring acquisitions, as well as an increase in salaries and benefits and other increases in various categories of noninterest expense, most of which were due to the impact of the American National acquisition. These increases were partially offset by a decrease in other expenses, due primarily to higher expenses in the prior year associated with strategic cost saving initiatives and a legal reserve related to our previously disclosed settlement with the CFPB.
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.
Net interest income, which represents our principal source of revenue, is the amount by which interest income exceeds interest expense. Our net 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 net interest income includes the accretion of discounts on our acquired loans, as well as amortization of deposits and borrowings, which will also affect our net interest income and net interest margin.
We seek to fund increased loan volumes by growing our core deposits, but, subject to internal policy limits on the amount of wholesale funding we may maintain,funding, we may use other wholesale funding sources to fund shortfalls, if any, or provide additional liquidity. To the extent that our dependence on wholesale funding sources increased, as was the case during 2024 and 2023, our net interest margin would likely be negatively impacted as it was in 2024 and 2023, as we may not be able to reduce the rates we pay on these funding sources as quickly as we can on core deposits should rates begin to decline.
The following tables show interest income on earning assets and related average yields, as well as interest expense on interest-bearing liabilities and related average rates paid for the years ended December 31, (dollars in thousands):
What changed in the latest 10-Q
Risk Factors
During the quarter ended June 30, 2026, there have been no material changes from the risk factors previously disclosed under Part I, Item 1A. “Risk Factors” in our 2025 Form 10-K.
An investment in our securities involves risks. In addition to the other information set forth in this Quarterly Report, including the information addressed under “Forward-Looking Statements,” investors in our securities should carefully consider the risk factors discussed in our 2025 Form 10-K. These factors could materially and adversely affect our business, financial condition, liquidity, results of operations, and capital position and could cause our actual results to differ materially from our historical results or the results contemplated by the forward-looking statements contained in this report, in which case the trading price of our securities could decline.
Full comparison: every changed paragraph (1)
During the quarter ended MarchJune 31,30, 2026, there have been no material changes from the risk factors previously disclosed under Part I, Item 1A. “Risk Factors” in our 2025 Form 10-K.
Management's Discussion & Analysis (MD&A)
New heading “Strategic Actions”
New heading “Bearing Insurance Sale”
New heading “Repurchase Program”
New heading “Subordinated Notes Issuance”
New heading “First Six Months Net Income & Performance Metrics”
New heading “(1) Income and yields are reported on a taxable equivalent basis using the statutory federal corporate tax rate of 21%.”
New heading “(2) Rates and yields are annualized and calculated from actual, not rounded amounts in thousands, which appear above.”
New heading “(3) Nonaccrual loans are included in average loans outstanding.”
New heading “(4) Interest income on loans includes accretion of the fair market value adjustments related to acquisitions, as disclosed above.”
New heading “(5) Interest expense on time deposits includes accretion (amortization) of the fair market value adjustments related to acquisitions, as disclosed above.”
New heading “(6) Interest expense on borrowings includes amortization of the fair market value adjustments related to acquisitions, as disclosed above.”
New heading “Six Months Ended June 30, 2026 and June 30, 2025”
New heading “Six Months Ended June 30, 2026 and June 30, 2025”
New heading “Corporate Other”
New heading “(1) We use a funds transfer pricing methodology for our net interest income which utilizes the matched funding approach to allocate the cost of funds used or credit for funds provided to all operating loans and deposits, resulting in interest and dividend expense and interest income for our Corporate Other segment.”
Removed heading “Allowance for Loan and Lease Losses”
Largest changes
“(1) We use a funds transfer pricing methodology for our net interest income which utilizes the matched funding approach to allocate the cost of funds used or credit for funds provided to all operating loans and deposits, resulting in interest and dividend expense and interest income for our Corporate Other segment.”see in full comparison
Effective January 1, 2026, the Company made certain changes to its allowance methodology as part of the continued enhancement of its credit modeling practices, resulting in more dynamic and precise modeling that allow for more granularity in the monitoring of our expected credit losses. As a result of this change, the Company moved from two loan portfolio segments (Commercial and Consumer) to three portfolio segments (CRE, Commercial and Industrial, and Consumer), by reorganizing the former Commercial segment into the CRE and Commercial and Industrial segments, with no changes made to the Consumer segment. The Company also updated its modeling approach to use either a loan-level probability of default/loss given default methodology or a segment level loss rate model for its loan portfolio. The ALLL is estimated using quantitative methods that consider a variety of factors from both internal and external sources at the loan, portfolio, and macroeconomic environment levels. These changes were accounted for prospectively as a change in accountingsee in full comparisonestimate,estimate in the first quarter of 2026, did not have a material impact on the Company’s consolidated financial statements, and resulted in no changes to previously reported values. For more information onthisthesechange in estimate, see below andchanges, see Note 1 “Summary of Significant Accounting Policies” in Part I, Item 1 of this Quarterly Report.For information regarding our prior allowance methodology, see Note 1 “Summary of Significant Accounting Policies” in the “Notes to Consolidated Financial Statements” contained in Item 8 “Financial Statements and Supplementary Data” of our 2025 Form 10-K.
“(5) Interest expense on time deposits includes accretion (amortization) of the fair market value adjustments related to acquisitions, as disclosed above.”see in full comparison
“(6) Interest expense on borrowings includes amortization of the fair market value adjustments related to acquisitions, as disclosed above.”see in full comparison
“(4) Interest income on loans includes accretion of the fair market value adjustments related to acquisitions, as disclosed above.”see in full comparison
“The ALLL represents the estimated balance that we consider appropriate to absorb expected credit losses over the expected contractual life of the loan portfolio. Effective January 1, 2026, we estimate our ALLL using either a loan-level probability of default/loss given default methodology or a segment level loss rate model for our loan portfolios.”see in full comparison
Full comparison: every changed paragraph (130)
Certain statements in this Quarterly Report may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements that include, without limitation, statements regarding the acquisition of Sandy Spring, including expectations with regard to the benefits of the Sandy Spring acquisition; statements regarding our strategic expansion into North Carolina; statements regarding our future ability to recognize the benefits of certain tax assets; statements regarding our business, financial and operating results, including our deposit base and funding; the impact of changes in economic conditions, anticipated changes in the interest rate environment and the related impacts on our net interest margin, changes inenvironment, economic, fiscal or trade policy and the potential related impacts on our business,business and loan demand and economic conditions in our markets and nationally; management’s beliefs regarding our liquidity, capital resources, asset quality, CRE loan portfolio and our customer relationships; and statements that include other projections, predictions, expectations, or beliefs about future events or results or otherwise are not statements of historical fact. Such forward-looking statements are based on certain assumptions as of the time they are made, and are inherently subject to known and unknown risks, uncertainties, and other factors, some of which cannot be predicted or quantified, that may cause actual results, performance, or achievements to be materially different from those expressed or implied by such forward-looking statements. Forward-looking statements are often characterized by the use of qualified words (and their derivatives) such as “expect,” “believe,” “estimate,” “plan,” “project,” “anticipate,” “intend,” “will,” “may,” “view,” “opportunity,” “seek to,” “potential,” “continue,” “confidence,” or words of similar meaning or other statements concerning opinions or judgment of the Company and our management about future events. Although we believe that our expectations with respect to forward-looking statements are based upon reasonable assumptions within the bounds of our existing knowledge of our business and operations, there can be no assurance that actual future results, performance, or achievements of, or trends affecting, us will not differ materially from any projected future results, performance, achievements or trends expressed or implied by such forward-looking statements. Actual future results, performance, achievements or trends may differ materially from historical results or those anticipated depending on a variety of factors, including, but not limited to, the effects of or changes in
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 valuation of deferred tax assets, and valuation of acquired assets and liabilities 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.
Effective January 1, 2026, the Company made certain changes to its allowance methodology as part of the continued enhancement of its credit modeling practices, resulting in more dynamic and precise modeling that allow for more granularity in the monitoring of our expected credit losses. As a result of this change, the Company moved from two loan portfolio segments (Commercial and Consumer) to three portfolio segments (CRE, Commercial and Industrial, and Consumer), by reorganizing the former Commercial segment into the CRE and Commercial and Industrial segments, with no changes made to the Consumer segment. The Company also updated its modeling approach to use either a loan-level probability of default/loss given default methodology or a segment level loss rate model for its loan portfolio. The ALLL is estimated using quantitative methods that consider a variety of factors from both internal and external sources at the loan, portfolio, and macroeconomic environment levels. These changes were accounted for prospectively as a change in accounting estimate,estimate in the first quarter of 2026, did not have a material impact on the Company’s consolidated financial statements, and resulted in no changes to previously reported values. For more information on thisthese change in estimate, see below andchanges, see Note 1 “Summary of Significant Accounting Policies” in Part I, Item 1 of this Quarterly Report. For information regarding our prior allowance methodology, see Note 1 “Summary of Significant Accounting Policies” in the “Notes to Consolidated Financial Statements” contained in Item 8 “Financial Statements and Supplementary Data” of our 2025 Form 10-K.
For information regarding our prior allowance methodology, see Note 1 “Summary of Significant Accounting Policies” in the “Notes to Consolidated Financial Statements” contained in Item 8 “Financial Statements and Supplementary Data” of our 2025 Form 10-K.
Allowance for Loan and Lease Losses
The ALLL represents the estimated balance that we consider appropriate to absorb expected credit losses over the expected contractual life of the loan portfolio. Effective January 1, 2026, we estimate our ALLL using either a loan-level probability of default/loss given default methodology or a segment level loss rate model for our loan portfolios.
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 (e.g., loan balances, credit quality, collateral values, 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.
The ALLL is estimated using quantitative methods that consider a variety of factors from both internal and external sources at the loan, portfolio, and macroeconomic environment levels. Our quantitative models consider various macroeconomic variables including the unemployment rate, gross domestic product, home price index, and others for a reasonable and supportable forecast period. The ALLL quantitative estimate is sensitive to changes in the macroeconomic variable forecasts during the reasonable and supportable period. The estimated loan losses that are forecasted using the methodology described above are then adjusted for changes in qualitative factors not inherently considered in the quantitative analysis. The qualitative factors include, among others, credit concentrations of the loan portfolio, economic uncertainty, model imprecision, and factors related to credit administration.
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. In estimating the ALLL, we consider multiple forecast scenarios to address the uncertainty inherent in macroeconomic variable forecasts. 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.
We review the ALLL estimation process regularly for appropriateness as the economic and internal environment are constantly changing. While the ALLL estimate represents our current estimate of expected credit losses, due to uncertainty surrounding internal and external factors, there is potential that the estimate may not be appropriate over time to cover credit losses in the portfolio. While we use available information to estimate expected losses on loans, future changes in the ALLL may be necessary based on changes in portfolio composition, portfolio credit quality, economic conditions and/or other factors.
In September 2025, the FASB issued ASU No. 2025-06 Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software, which outlined targeted improvements to Subtopic 350-40 to increase the operability of the recognition guidance considering different methods of software development. The amendments are effective for fiscal years beginning after December 15, 2027, and interim reporting periods within those annual reporting periods. We are evaluating the impact of ASU No. 2025-06 is not expected to have a material impact on our consolidated financial statements.
In November 2025, the FASB issued ASU No. 2025-08 Financial Instruments – Credit Losses (Topic 326): Purchased Loans. This update expanded the population of acquired financial assets subject to the gross-up approach in Topic 326. The amendments are effective for fiscal years beginning after December 15, 2026, and interim reporting periods within those annual reporting periods. We are evaluating the impact of ASU No. 2025-08 is not expected to have a material impact on our consolidated financial statements.statements at adoption; however, the amendments in this update will be applied prospectively to loans that are acquired on or after the adoption date.
In November 2025, the FASB issued ASU No. 2025-09 Derivatives and Hedging (Topic 815): Hedge Accounting Improvements. This update clarified certain aspects of the guidance on hedge accounting. The amendments are effective for fiscal years beginning after December 15, 2026, and interim reporting periods within those annual reporting periods. We are evaluating the impact of ASU No. 2025-09 is not expected to have a material impact on our consolidated financial statements.
Strategic Actions
Bearing Insurance Sale
We completed the sale of our equity interest (held by our indirect subsidiary, Union Insurance Group, LLC) in Bearing Insurance to an unaffiliated third party, effective May 1, 2026, resulting in a pre-tax gain of approximately $32.3 million during the second quarter of 2026.
Repurchase Program
During the second quarter of 2026, our Board of Directors authorized the Repurchase Program to purchase up to $250.0 million of our common stock through May 5, 2027 in open market transactions or privately negotiated transactions, including pursuant to a trading plan in accordance with Rule 10b5-1 and/or Rule 10b-18 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). As part of the Repurchase Program, approximately 265 thousand common shares (or $10.0 million) were repurchased during the second quarter of 2026 at an average purchase price of $37.76. At June 30, 2026, approximately $240.0 million of share repurchases remained available under the Repurchase Program.
Subordinated Notes Issuance
In July 2026, we issued $250.0 million in aggregate principal amount of 2036 Subordinated Notes due 2036 at public offering price equal to 100% of the aggregate principal amount of the 2036 Subordinated Notes. The 2036 Subordinated Notes qualify for Tier 2 capital treatment. The proceeds of this issuance will be used to redeem $168.0 million of our 2029 Subordinated Notes during the third quarter of 2026 and for general business purposes.
We are continually monitoring the impact of various global and national events on our results of operations and financial condition, including changes in economic conditions, such as inflation and recessionary conditions, changes in the unemployment rate, changes in market interest rates, geopolitical conflicts, deposit competition, liquidity strains, changes in government policy, including changes in, or the imposition of, tariffs and/or trade barriers, and changes in legislative or regulatory requirements. The timing and impact of such events on our results of operationoperations and financial condition will depend on future developments, which are highly uncertain and difficult to predict.
DuringIn the first quarterhalf of 2026, financial markets experienced increased and prolonged economic uncertainty arising from international conflicts, including those in the Middle East, and changes in the unemployment rate. These factors could adversely affect the U.S. and global economies and financial markets, including by increasing inflation and leading to a slowdown of future economic growth and ultimately recessionary conditions.
In MarchJune 2026, the FOMC maintained the target range for the Federal Funds rate at 3.50% to 3.75%. The FOMC noted that economic activity is expanding at a solid pace despite elevated uncertainty aboutdue thein economicpart outlookto remainsongoing elevated,geopolitical andconflicts theincluding implications of developmentsthose in the Middle EastEast, foras thewell U.S.as economyuncertainties arestemming uncertain.from changes in trade policy. In light of this continued uncertainty,uncertainty and elevated inflation, it is difficult to predict how the Federal Reserve will balance possible inflationary pressure with the potential of slower economic growth and rising risks in employment.
At March 31, 2026, our LHFI increased from December 31, 2025 by $150.3 million, primarily due to an increase in the commercial and industrial portfolio, while our total deposits decreased by $80.4 million from December 31, 2025, primarily due to a $518.0 million decrease in brokered deposits, partially offset by an increase in interest bearing customer deposits. At both March 31, 2026 and December 31, 2025, noninterest bearing deposits comprised 22.5% of total deposits. As of March 31, 2026, we estimate that approximately 68.4% of our deposits were insured or collateralized, and that we maintained available liquidity sources to cover approximately 156.2% of uninsured and uncollateralized deposits. At March 31, 2026, our total borrowings decreased by $192.7 million from December 31, 2025, primarily due to higher short-term borrowings in the prior quarter that were repaid in the current quarter using funds from customer deposits.
FirstSecond Quarter Net Income & Performance Metrics
First Six Months Net Income & Performance Metrics
The following tables show interest and dividend income on earning assets and related average yields, as well as interest expense on interest-bearing liabilities and related average rates paid for the three months ended MarchJune 31,30, (dollars in thousands):
For the firstsecond quarter of 2026, our net interest income was $312.4$325.1 million, an increase of $128.2$3.7 million from the firstsecond quarter of 2025, and our net interest income (FTE)(+) was $316.9$329.7 million, an increase of $129.0$4.0 million from the firstsecond quarter of 2025. The increases were primarily the result of alower $11.3cost billionof increasefunds, inprimarily averagedue interestto earninglower assetsdeposit and higher net accretion income,costs, partially offset by lower earning asset yields, primarily driven by a $8.2 billion increasedecrease in average interest-bearing liabilities, primarily related to the acquisition of Sandy Spring, as well as organic loan growthyields and lower costaccretion of funds.income. The decline in cost of funds was driven by lower deposit costs,costs reflectingreflect the impact of the Federal Reserve lowering the Federal Funds rates 75 bps between September and December 2025.2025, as well as reduced brokered deposits, while the decline in earning asset yields was primarily driven by the lower rate environment.
In the firstsecond quarter of 2026, our net interest margin increased 4211 bps to 3.80%3.89% from 3.38%3.78% in the firstsecond quarter of 2025, and our net interest margin (FTE)(+) increased 4011 bps to 3.85%3.94% in the firstsecond quarter of 2026 from 3.45%3.83% for the same period of 2025. The increases in net interest margin and net interest margin (FTE)(+) were primarily driven by lower cost of fundsfunds, andpartially higheroffset by lower earning asset yields. Our cost of funds decreased 2928 bps to 1.94% from 2.23%2.22% in the firstsecond quarter of 2025, due to lower cost of deposits, primarily due to the Federal Funds rate cuts discussed above, as well as reduced brokered deposits. The lower cost of funds was partially offset by an increase in net amortization related to acquisition accounting and an increase in long-term subordinated debt with higher borrowing costs, both related to the Sandy Spring acquisition. Our earning asset yield increaseddecreased 1218 bps to 5.73%5.82% for the firstsecond quarter of 2026 from 5.61%6.00% in the firstsecond quarter of 2025, due primarily to increases inlower loan balancesyields and lower accretion income, primarily driven by the Sandy Spring acquisition.income.
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 $32.9 million for the first quarter of 2026, an increase of $20.3 million compared to the first quarter of 2025, primarily due to the impacts from the Sandy Spring acquisition. The impact of accretion and amortization for the periods presented are reflected in the following table (dollars in thousands):
The following tabletables showsshow interest and dividend income on earning assets and related average yieldsyields, as well as interest expense on interest-bearing liabilities and related average rates paid for the threesix months ended MarchJune 31,30, (dollars in thousands):
For the first six months of 2026 net interest income was $637.5 million, an increase of $132.0 million from the same period of 2025, and our net interest income (FTE)(+) was $646.6 million, an increase of $132.9 million from the same period of 2025. The increases in both net interest income and net interest income (FTE)(+) were primarily the result of a $5.3 billion increase in average interest earning assets and higher net accretion income, partially offset by a $3.9 billion increase in average interest-bearing liabilities, primarily related to the acquisition of Sandy Spring.
For the first six months of 2026, our net interest margin and net interest margin (FTE)(+) both increased 22 bps to 3.84% and 3.90%, respectively, compared to the first six months of 2025. The increases were primarily driven by lower cost of funds, as well as lower yield on interest-earning assets. Our cost of funds decreased 30 bps to 1.93% from 2.23% in the same period of 2025, due primarily to lower cost of deposits, reflecting the impact of the Federal Reserve lowering the Federal Funds rates 75 bps between September and December 2025, as well as reduced brokered deposits. Our earning asset yield decreased 7 bps to 5.78% for the first six months of 2026 from 5.85% in the same period of 2025, due primarily to lower loan yields, partially offset by accretion income related to the Sandy Spring acquisition.
Our net interest margin and net interest margin (FTE)(+) includes the impact of acquisition accounting fair value adjustments. The impact of accretion and amortization for the periods presented are reflected in the following table (dollars in thousands):
The following table shows interest income on earning assets and related average yields as well as interest expense on interest-bearing liabilities and related average rates paid for the three and six months ended June 30, (dollars in thousands):
(1) Income and yields are reported on a taxable equivalent basis using the statutory federal corporate tax rate of 21%.
(2) Rates and yields are annualized and calculated from actual, not rounded amounts in thousands, which appear above.
(3) Nonaccrual loans are included in average loans outstanding.
(4) Interest income on loans includes accretion of the fair market value adjustments related to acquisitions, as disclosed above.
(5) Interest expense on time deposits includes accretion (amortization) of the fair market value adjustments related to acquisitions, as disclosed above.
(6) Interest expense on borrowings includes amortization of the fair market value adjustments related to acquisitions, as disclosed above.
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 three and six months ended MarchJune 31,30, (dollars in thousands):
Three Months Ended MarchJune 31,30, 2026 and MarchJune 31,30, 2025
Our noninterest income increased $25.6$8.7 million or 87.9%10.7% to $54.8$90.2 million for the quarter ended MarchJune 31,30, 2026, compared to the quarter ended MarchJune 31,30, 2025,2025. The increase was primarily driven by a $4.8 million increase in loan-related interest rate swap fees due to thean impactincrease ofin transaction volumes associated with loan growth in the Sandyperiod, Springa acquisition, which drove the majority of the $13.5$3.7 million increase in fiduciary and asset management fees, duereflecting toan increase in assets under managementmanagement, increasingand 125%,a the $2.4$1.9 million increase in serviceother charges on deposit accounts, the $1.7 million increase in BOLI income, and the $1.1 million increase in mortgage bankingoperating income. In addition to the acquisition impact, otherOther operating income increasedin $4.9the million,second primarilyquarter dueof to2026 anincluded increasea $32.3 million pre-tax gain on the sale of our equity interest in equityBearing methodInsurance, investmentwhile income,the second quarter of 2025 included a $15.7 million pre-tax gain on CRE loan sale and loan-relateda $14.3 million pre-tax gain on the sale of our equity interest ratein swap fees increased $1.6 million due to higher transaction volumes.CSP.
Our adjusted operating noninterest income,(+) which excludes the pre-tax gain on sale of equity interest in Bearing Insurance ($32.3 million in the second quarter of 2026), the pre-tax gain on CRE loan sale ($15.7 million in the second quarter of 2025), the pre-tax gain on sale of equity interest in CSP ($14.3 million in the second quarter of 2025), and the pre-tax gains on sale of securities ($4 thousand in the second quarter of 2026 and $16 thousand in the second quarter of 2025), increased $6.4 million or 12.4% to $57.9 million for the quarter ended June 30, 2026, compared to the quarter ended June 30, 2025. The increase in adjusted operating noninterest income(+) was primarily driven by a $4.8 million increase in loan-related interest rate swap fees and a $3.7 million increase in fiduciary and asset management fees, both discussed above. These increases were partially offset by a $1.6 million decrease in BOLI income, reflecting lower death benefit proceeds received compared to the same period in the prior year.
Six Months Ended June 30, 2026 and June 30, 2025
Our noninterest income increased $34.3 million or 31.0% to $145.0 million for the six months ended June 30, 2026, compared to the six months ended June 30, 2025, primarily due to the full period impact of the Sandy Spring acquisition, which drove the majority of the $17.2 million increase in fiduciary and asset management fees and the $2.5 million increase in service charges on deposit accounts. In addition to the acquisition impacts, other operating income increased $6.8 million driven by a $32.3 million pre-tax gain on the sale of our equity interest in Bearing Insurance in the second quarter of 2026 and an increase in equity method investment income, partially offset by a $15.7 million pre-tax gain on CRE loan sale and a $14.3 million pre-tax gain on sale of our equity interest in CSP, both of which occurred in the second quarter of 2025. Additionally, loan-related interest rate swap fees increased $6.3 million due to an increase in transaction volumes associated with loan growth in the period.
Our adjusted operating noninterest income,(+) which excludes the pre-tax gain on sale of equity interest in Bearing Insurance ($32.3 million in 2026), the pre-tax gain on CRE loan sale ($15.7 million in 2025), the pre-tax gain on sale of equity interest in CSP ($14.3 million in 2025), and the pre-tax gains and losses on sale of securities (gains of $6 thousand in 2026 and losses of $87 thousand in 2025), increased $31.9 million or 39.5% to $112.7 million for the six months ended June 30, 2026, compared to the six months ended June 30, 2025. The increase in adjusted operating noninterest income(+) was primarily due to the full period impact of the Sandy Spring acquisition and a $6.3 million increase in loan-related interest rate swap fees, as discussed above, as well a $4.5 million increase in other operating income, primarily due to an increase in equity method investment income.
Three Months Ended MarchJune 31,30, 2026 and MarchJune 31,30, 2025
Our noninterest expense increaseddecreased $75.6$80.6 million or 56.4%28.8% to $209.8$199.1 million for the quarter ended MarchJune 31,30, 20262026, compared to the quarter ended MarchJune 31,30, 2025, primarily duedriven toby thea impact of the Sandy Spring acquisition, which drove the majority of the increases of $38.0$78.9 million in salaries and benefits expense, $10.0 milliondecrease in amortization of intangible assets, and $4.1 million inpre-tax merger-related costs, as well as the other increases in most other categories of noninterest expense.costs.
Our adjusted operating noninterest expense(+), which excludes merger-related costs ($78.9 million in the second quarter of 2025) and amortization of intangible assets ($15.4$15.1 million in the firstsecond quarter of 2026 and $5.4$18.4 million in the firstsecond quarter 2025) and merger-related costs ($9.0 million in the first quarter 2026 and $4.9 million in the first quarterof 2025) increased $61.5$1.6 million or 49.7%0.9% to $185.3$184.0 million for the quarter ended MarchJune 31,30, 2026, compared to $123.8 million for the quarter ended MarchJune 31,30, 2025. The increase in adjusted operating noninterest expense(+) was primarily due to thea impact of the Sandy Spring acquisition, which drove the majority of the $38.0$2.4 million increase in salaries and benefits expense, theprimarily $5.4due to an increase in variable incentive compensation, a $1.7 million increase in technology and data processing, the $4.6 million increase in occupancyother expenses, thea $4.1$1.7 million increase in marketing and advertising expense, theand $3.3a $1.4 million increase in otherloan-related expenses,expenses. theThese $1.6increases were partially offset by a $2.0 million increasedecrease in FDIC assessment premiums and other insurance,insurance due to a lower assessment in the $1.6second quarter of 2026, a $1.7 million increasedecrease in furniture and equipment expenses, and the $1.6 million increase in loan-related expenses. In addition to the acquisition impacts, professional services increased $1.1 million related to strategic projects that occurred duringin the firstprior quarteryear, ofand 2026.a $1.2 million decrease in technology and data processing expense primarily due to a decrease in online banking expenses, reflecting cost synergies realized from the Sandy Spring acquisition.
Six Months Ended June 30, 2026 and June 30, 2025
Our noninterest expense decreased $4.9 million or 1.2% to $408.9 million for the six months ended June 30, 2026, compared to the six months ended June 30, 2025, primarily driven by a $74.8 million decrease in pre-tax merger-related costs, partially offset by a $40.4 million increase in salaries and benefits expense, as well as other increases in noninterest expense categories discussed below, primarily due to the full period impact of the Sandy Spring acquisition.
Our adjusted operating noninterest expense(+), which excludes merger-related costs ($9.0 million in 2026 and $83.8 million in 2025) and amortization of intangible assets ($30.6 million in 2026 and $23.8 million in 2025) increased $63.1 million or 20.6% to $369.3 million for the six months ended June 30, 2026, compared to the six months ended June 30, 2025. The increase in adjusted operating noninterest expense(+) was primarily due to the full period impact of the Sandy Spring acquisition, which drove the majority of the $40.4 million increase in salaries and benefits expense, the $5.9 million increase in marketing and advertising expense, the $5.0 million increase in other expenses, the $4.7 million increase in occupancy expenses, the $4.2 million increase in technology and data processing expense, and the $3.0 million increase in loan-related expenses.
The following table presents operating results for the three and six months ended MarchJune 31,30, for the Wholesale Banking segment (dollars in thousands):
Wholesale Banking income before income taxes increased by $82.2 million and $137.0 million, respectively, for the three and six months ended June 30, 2026, compared to the three and six months ended June 30, 2025. The increases were primarily due to decreases in the provision for credit losses, primarily driven by the Day 1 initial provision expense recorded in the prior year on non-PCD loans and unfunded commitments, each acquired from Sandy Spring. Wholesale Banking net interest income also increased for the three and six months ended June 30, 2026, compared to the same periods in the prior year. The increase for the three months ended June 30, 2026 was primarily the result of lower cost of funds, driven by lower deposit costs. The increase for the six months ended June 30, 2026 was primarily the result of an increase in average interest earning assets and higher net accretion income, primarily related to the acquisition of Sandy Spring. In addition, Wholesale Banking noninterest income increased for the three and six months ended June 30, 2026 compared to the same periods in the prior year, primarily due to increases in fiduciary and asset management fees, reflecting an increase in assets under management and the full period impact of the Sandy Spring acquisition, and increases in loan-related interest rate swap fees due to an increase in transaction volumes associated with loan growth in the periods.
Wholesale Banking income before income taxes increased by $54.9 million for the three months ended March 31, 2026, compared to the three months ended March 31, 2025. The increase was primarily due to increases in net interest income and noninterest income, in each case primarily driven by the impact of the Sandy Spring acquisition. In addition, the Wholesale Banking provision for credit losses decreased as compared to the same period in the prior year, primarily due to higher uncertainty in the economic outlook in the prior year, as well as specific reserves recorded in the prior year on two impaired commercial and industrial loans.
The increaseincreases in income before income taxes waswere partially offset by an increaseincreases in noninterest expense, primarily due to increases in salaries and benefits expense, resulting from an increase in variable incentive compensation for the three months ended June 30, 2026 and the full period impact of the Sandy Spring acquisition.acquisition for the six months ended June 30, 2026.
At MarchJune 31,30, 2026, LHFI for the Wholesale Banking segment increased $114.7$658.3 million to $23.3$23.8 billion, compared to December 31, 2025, primarily due to an increaseincreases in the commercial and industrial portfolio.and construction and land development loan portfolios.
At MarchJune 31,30, 2026, Wholesale Banking deposits increased $538.9$686.8 million to $11.9$12.0 billion, compared to December 31, 2025, primarily due to an increase in interest-bearing customer deposits.
AUB insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 1 Form 4 filing (1 insider, 1 trade date, 650 shares, about $25.4K) and open-market sales in 0 filings. Net open-market shares: 650 (purchases minus sales); net value about $25.4K.Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted. Only the most recent filings made after 2026-09-30 are included.
| Trade date | Insider | Transaction | Shares | Price | Value |
|---|---|---|---|---|---|
| 2026-10-01 | Delorier Rilla S |
Grant/award | 527 | — | — |
| 2026-10-01 | Schrider Daniel J |
Grant/award | 527 | — | — |
| 2026-10-01 | Ellett Frank Russell |
Grant/award | 922 | — | — |
| 2026-10-01 | Agee Nancy H |
Grant/award | 922 | — | — |
| 2026-10-01 | Kimble Donald R |
Grant/award | 527 | — | — |
| 2026-10-01 | O'hara Michelle A. |
Grant/award | 527 | — | — |
| 2026-10-01 | Micklem Mark C |
Grant/award | 527 | — | — |
| 2026-10-01 | Wampler Keith L |
Grant/award | 527 | — | — |
| 2026-10-01 | Schreiner Linda V |
Grant/award | 527 | — | — |
| 2026-10-01 | Engola Paul |
Grant/award | 922 | — | — |
| 2026-10-01 | Mccann Patrick J |
Grant/award | 527 | — | — |
| 2026-10-01 | Stephenson Mona Abutaleb |
Grant/award | 527 | — | — |
| 2026-07-01 | Agee Nancy H |
Grant/award | 827 | — | — |
| 2026-07-01 | Delorier Rilla S |
Grant/award | 473 | — | — |
| 2026-07-01 | Ellett Frank Russell |
Grant/award | 827 | — | — |
| 2026-07-01 | Kimble Donald R |
Grant/award | 473 | — | — |
| 2026-07-01 | O'hara Michelle A. |
Grant/award | 473 | — | — |
| 2026-07-01 | Schreiner Linda V |
Grant/award | 473 | — | — |
| 2026-07-01 | Schrider Daniel J |
Grant/award | 473 | — | — |
| 2026-07-01 | Stephenson Mona Abutaleb |
Grant/award | 473 | — | — |
| 2026-07-01 | Wampler Keith L |
Grant/award | 473 | — | — |
| 2026-07-01 | Mccann Patrick J |
Grant/award | 473 | — | — |
| 2026-07-01 | Micklem Mark C |
Grant/award | 473 | — | — |
| 2026-07-01 | Engola Paul |
Grant/award | 827 | — | — |
| 2026-05-13 | Dodd Alexander D |
Grant/award | 16,447 | — | — |
| 2026-04-20 | Agee Nancy H |
Open-market purchase | 650 | $39.05 | $25.4K |
Well-known investors holding AUB (13F)
| Investor | Quarter | Shares | Reported value | % of their 13F | Change vs prior quarter |
|---|---|---|---|---|---|
| AQR Capital Management (Cliff Asness) | 2026-06-30 | 268,472 | $11.4M | 0.0% | Reduced 3% |
| Renaissance Technologies | 2026-06-30 | 183,102 | $7.7M | 0.01% | New position |
| Citadel Advisors (Ken Griffin) | 2026-06-30 | 36,134 | $1.5M | 0.0% | New position |
| Two Sigma Investments | 2026-06-30 | 28,510 | $1.2M | 0.0% | Reduced 78% |
| Millennium Management (Israel Englander) | 2026-06-30 | 23,947 | $855.9K | — | Sold out |