ATLANTIC UNION BANKSHARES CORP MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

Management's discussion and analysis is presented to aid the reader in
understanding and evaluating the financial condition and results of operations
of the Company. This discussion and analysis should be read with the Company's
consolidated financial statements, the notes to the financial statements, and
the other financial data included in this report, as well as the Company's 2021
Form 10-K, including the "Management's Discussion and Analysis of Financial
Condition and Results of Operations" section therein. Highlighted in the
discussion are material changes from prior reporting periods and identifiable
trends materially affecting the Company. Results of operations for the interim
periods are not necessarily indicative of results that may be expected for the
full year or for any other period. Amounts are rounded for presentation
purposes; however, some of the percentages presented are computed based on
unrounded amounts.

In management's discussion and analysis, the Company provides certain financial
information determined by methods other than in accordance with U.S. GAAP. These
non-GAAP financial measures are a supplement to GAAP, which is used to prepare
the Company's financial statements, and should not be considered in isolation or
as a substitute for comparable measures calculated in accordance with GAAP. In
addition, the Company's non-GAAP financial measures may not be comparable to
non-GAAP financial measures of other companies. The Company believes that these
non-GAAP financial measures provide additional understanding of ongoing
operations, enhance comparability of results of operations with prior periods
and show the effects of significant gains and charges in the periods presented
without the impact of items or events that may obscure trends in the Company's
underlying performance. Non-GAAP financial measures may be identified with the
symbol (+) and may be labeled as adjusted.  Refer to the "Non-GAAP Financial
Measures" section within this Item 2 for more information about these non-GAAP
financial measures, including a reconciliation of these measures to the most
directly comparable financial measures in accordance with GAAP.

FORWARD-LOOKING STATEMENTS


Certain statements in this 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 future interest rate environments and potential impacts on
the Company's net interest margin, future economic conditions, and the impacts
of the COVID-19 pandemic, and statements that include other projections,
predictions, expectations, or beliefs about future events or results or
otherwise are not statements of historical fact. Such forward-looking statements
are based on certain assumptions as of the time they are made, and are
inherently subject to known and unknown risks, uncertainties, and other factors,
some of which cannot be predicted or quantified, that may cause actual results,
performance, or achievements to be materially different from those expressed or
implied by such forward-looking statements. Forward-looking statements are often
characterized by the use of qualified words (and their derivatives) such as
"expect," "believe," "estimate," "plan," "project," "anticipate," "intend,"
"will," "may," "view," "opportunity," "potential," or words of similar meaning
or other statements concerning opinions or judgment of the Company and its
management about future events. Although the Company believes that its
expectations with respect to forward-looking statements are based upon
reasonable assumptions within the bounds of its existing knowledge of its
business and operations, there can be no assurance that actual future results,
performance, or achievements of, or trends affecting, the Company 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:

? market interest rates; and the impacts on macroeconomic conditions, customer

and client behavior and the Company’s funding costs;

? higher inflation and its impacts;

general economic and financial market conditions, in the United States

generally and particularly in the markets in which the Company operates and

? which its loans are concentrated, including the effects of declines in real

estate values, an increase in unemployment levels and slowdowns in economic

growth, including as a result of COVID-19;

? the quality or composition of the loan or investment portfolios and changes

therein;

? demand for loan products and financial services in the Company’s market area;

? the Company’s ability to manage its growth or implement its growth strategy;

? the effectiveness of expense reduction plans;

? the introduction of new lines of business or new products and services;

? the Company’s ability to recruit and retain key employees;


                                      -48-

  Table of Contents

? real estate values in the Bank’s lending area;

? an insufficient ACL;

? changes in accounting principles, including, without limitation, relating to

the CECL methodology;

? the Company’s liquidity and capital positions;

? concentrations of loans secured by real estate, particularly commercial real

estate;

? the effectiveness of the Company’s credit processes and management of the

Company’s credit risk;

? the Company’s ability to compete in the market for financial services and

increased competition from fintech companies;

? technological risks and developments, and cyber threats, attacks, or events;

the potential adverse effects of unusual and infrequently occurring events,

such as weather-related disasters, terrorist acts, geopolitical conflicts (such

as the ongoing conflict between Russia and Ukraine) or public health events

(such as COVID-19), and of governmental and societal responses thereto; these

potential adverse effects may include, without limitation, adverse effects on

? the ability of the Company’s borrowers to satisfy their obligations to the

Company, on the value of collateral securing loans, on the demand for the

Company’s loans or its other products and services, on supply chains and

methods used to distribute products and services, on incidents of cyberattack

and fraud, on the Company’s liquidity or capital positions, on risks posed by

reliance on third-party service providers, on other aspects of the Company’s

business operations and on financial markets and economic growth;

the effect of steps the Company takes in response to COVID-19, the severity and

duration of the pandemic, the uncertainty regarding new variants of COVID-19

? that have emerged, the speed and efficacy of vaccine and treatment

developments, the impact of loosening or tightening of government restrictions,

the pace of recovery when the pandemic subsides and the heightened impact it

has on many of the risks described herein;

the discontinuation of LIBOR and its impact on the financial markets, and the

? Company’s ability to manage operational, legal and compliance risks related to

the discontinuation of LIBOR and implementation of one or more alternate

reference rates,

? performance by the Company’s counterparties or vendors;

? deposit flows;

? the availability of financing and the terms thereof;

? the level of prepayments on loans and MBS;

legislative or regulatory changes and requirements, including the impact of the

? CARES Act, as amended by the CAA, and other legislative and regulatory

reactions to COVID-19;

potential claims, damages, and fines related to litigation or government

actions, including litigation or actions arising from the Company’s

? participation in and administration of programs related to COVID-19, including,

among other things, under the CARES Act, as amended by the CAA, and other

legislative and regulatory reactions to COVID-19;

? the effects of changes in federal, state or local tax laws and regulations;

? monetary and fiscal policies of the U.S. government, including policies of the

U.S. Department of the Treasury and the Federal Reserve;

? changes to applicable accounting principles and guidelines; and

? other factors, many of which are beyond the control of the Company.



Please refer to the "Risk Factors" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" sections of the 2021 Form 10-K
and related disclosures in other filings, which have been filed with the SEC and
are available on the SEC's website at www.sec.gov. All risk factors and
uncertainties described herein should be considered in evaluating
forward-looking statements, all of the forward-looking statements made in this
report are expressly qualified by the cautionary statements contained or
referred to in this Quarterly Report. The actual results or developments
anticipated may not be realized or, even if substantially realized, they may not
have the expected consequences to or effects on the Company or its businesses or
operations. Readers are cautioned not to rely too heavily on the forward-looking
statements contained in this Quarterly Report, and undue reliance should not be
placed on such forward-looking statements. Forward-looking statements speak only
as of the date they are made, and the Company does not intend or assume any
obligation to update, revise or clarify any forward-looking statements that may
be made from time to time by or on behalf of the Company, whether as a result of
new information, future events or otherwise.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The accounting and reporting policies of the Company are in accordance with U.S.
GAAP and conform to general practices within the banking industry. The Company's
financial position and results of operations are affected by management's
application of accounting policies, including estimates, assumptions, and
judgments made to arrive at the carrying value of

                                      -49-

Table of Contents


assets and liabilities and amounts reported for revenues, expenses, and related
disclosures. Different assumptions in the application of these policies could
result in material changes in the Company's consolidated financial position
and/or results of operations. The Company evaluates its critical accounting
estimates and assumptions on an ongoing basis and updates them as needed.
Management has discussed the Company's critical accounting policies and
estimates with the Audit Committee of the Board of Directors of the Company.

The critical accounting and reporting policies include the Company's accounting
for the ALLL, acquired loans, and goodwill. The Company's accounting policies
are fundamental to understanding the Company's consolidated financial position
and consolidated results of operations. Accordingly, the Company's significant
accounting policies are discussed in detail in Note 1 "Summary of Significant
Accounting Policies" in the "Notes to the Consolidated Financial Statements"
contained in Item 8 "Financial Statements and Supplementary Data" of the
Company's 2021 Form 10-K.

The Company provides additional information on its critical accounting policies
and estimates under "Management's Discussion and Analysis of Financial Condition
and Results of Operations-Critical Accounting Policies" in its 2021 Form 10-K
and in Note 1 "Summary of Significant Accounting Policies" in Part I, Item 1 of
this Quarterly Report.

RECENT ACCOUNTING PRONOUNCEMENTS (ISSUED BUT NOT FULLY ADOPTED)


In March 2022, the FASB issued ASU No. 2022-02 "Financial Instruments- Credit
Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures." This
guidance eliminates the accounting guidance for TDRs by creditors, while
enhancing disclosure requirements for certain loan refinancings and
restructurings by creditors when a borrower is experiencing financial
difficulty. In addition, for public business entities, the amendments require
disclosure of current period gross write-offs by year of origination for
financing receivables and net investments in leases within the scope of Subtopic
326-20. The amendments are effective for fiscal years beginning after December
15, 2022, including interim periods within those fiscal years. Early adoption of
the amendments is permitted if ASU 2016-13 has been adopted, including adoption
in an interim period. The Company is evaluating the impact ASU No. 2022-02 will
have on its consolidated financial statements.

In March 2022, the FASB issued ASU No. 2022-01 "Derivatives and Hedging (Topic
815): Fair Value Hedging- Portfolio Layer Method" to allow nonprepayable
financial assets to be included in a closed portfolio hedge using the portfolio
layer method and to allow multiple hedged layers to be designated for a single
closed portfolio of financial assets or one or more beneficial interests secured
by a portfolio of financial instruments. The amendments are effective for fiscal
years beginning after December 15, 2022, including interim periods within those
fiscal years. Early adoption of the amendments is permitted if the amendments in
ASU 2017-12 have been adopted for the corresponding period. The Company is
evaluating the impact ASU No. 2022-01 will have on its consolidated financial
statements.

In March 2020, the FASB issued ASU No. 2020-04 "Reference Rate Reform (Topic
848): Facilitation of the Effects of Reference Rate Reform on Financial
Reporting." This guidance provides temporary, optional guidance to ease the
potential burden in accounting for reference rate reform associated with the
LIBOR transition. LIBOR and other interbank offered rates are widely used
benchmark or reference rates that have been used in the valuation of loans,
derivatives, and other financial contracts. Global capital markets are going to
be required to move away from LIBOR and other interbank offered rates and toward
rates that are more observable or transaction based and less susceptible to
manipulation. Topic 848 provides optional expedients and exceptions, subject to
meeting certain criteria, for applying current GAAP to contract modifications
and hedging relationships, for contracts that reference LIBOR or another
reference rate expected to be discontinued. Topic 848 is intended to help
stakeholders during the global market-wide reference rate transition period. The
amendments are effective as of March 12, 2020 through December 31, 2022 and can
be adopted at an instrument level. As of March 31, 2021, the Company utilized
the expedient to assert probability of hedged interest as detailed in Note 1
"Summary of Significant Accounting Policies" in the "Notes to the Consolidated
Financial Statements" contained in Item 8 "Financial Statements and
Supplementary Data" of the Company's 2021 Form 10-K. The Company may incorporate
other components of Topic 848 at a later date as it continues to evaluate the
remaining components of Topic 848 and its impact to the Company.

ABOUT ATLANTIC UNION BANKSHARES CORPORATION

Headquartered in Richmond, Virginia, Atlantic Union Bankshares Corporation
(Nasdaq: AUB) is the holding company for Atlantic Union Bank. Atlantic Union
Bank has 114 branches and approximately 130 ATMs located throughout Virginia,
and in

                                      -50-

  Table of Contents

portions of Maryland and North Carolina. Certain non-bank financial services
affiliates of Atlantic Union Bank include: Atlantic Union Equipment Finance,
Inc., which provides equipment financing; Dixon, Hubard, Feinour & Brown, Inc.,
which provides investment advisory services; Atlantic Union Financial
Consultants, LLC, which provides brokerage services; and Union Insurance Group,
LLC, which offers various lines of insurance products.

Shares of the Company's common stock are traded on the Nasdaq Global Select
Market under the symbol "AUB". Additional information is available on the
Company's website at https://investors.atlanticunionbank.com. The information
contained on the Company's website is not a part of or incorporated into this
Quarterly Report.

RESULTS OF OPERATIONS

SIGNIFICANT ACTIVITIES

Strategic Initiatives

During the fourth quarter of 2021, the Company took certain actions to reduce
expenses in light of the period's prevailing and expected operating environment,
including the closure of the Company's operations center and consolidation of 16
branches, all of which were completed in March 2022. These actions resulted in
restructuring expenses in the first quarter of 2022 of approximately $5.5
million, compared to $16.5 million in the quarter ended December 31, 2021.
Restructuring expenses in the first quarter of 2022 primarily related to lease
and other asset write downs, as well as severance costs.

Share Repurchase Program

On December 10, 2021, the Company’s Board of Directors authorized a share
repurchase program to purchase up to $100.0 million of the Company’s common
stock through December 9, 2022 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 Exchange Act. As part of the
Repurchase Program, approximately 630,000 shares (or $25.0 million) were
repurchased during the quarter ended March 31, 2022, and no shares were
repurchased during the quarter ended December 31, 2021.

COVID-19 UPDATE


The Company's financial performance generally, and in particular the ability of
its borrowers to repay their loans, the value of collateral securing those
loans, as well as demand for loans and other products and services the Company
offers, is highly dependent on the business environment in its primary markets
where it operates and in the United States as a whole. COVID has had, and may
have in the future, a wide range of economic impacts nationally and in the
Company's primary markets. The Company will carefully monitor any future
economic impacts attributable to the COVID-19 pandemic and potential impact on
the Company's borrowers and their ability to repay loans.

Since the start of the pandemic, the Company has taken and is continuing to take
precautions to protect the safety and well-being of the Bank's employees and
customers during COVID-19. The Bank has implemented additional safety policies
and procedures and follows guidance issued by the Centers for Disease Control
and Prevention, state health authorities, and state and local executive orders
where our branches and corporate offices are located. The Bank remains very
focused on the safety and well-being of its employees and customers during
COVID-19 and is committed to safely and responsibly operating its branch network
and maintaining appropriate staffing in each branch.

COVID-19 has adversely affected the Company's business, financial condition, and
results of operations since the first quarter of 2020. The duration, nature and
severity of future impacts of COVID-19 on the Company's operational and
financial performance will depend on future developments with respect to
COVID-19, many of which remain highly uncertain and cannot be predicted.

SUMMARY OF QUARTERLY FINANCIAL RESULTS

Net Income and Performance Metrics

Net income available to common shareholders was $40.7 million and basic and

? diluted EPS was $0.54 for the first quarter of 2022, compared to $53.2 million

   and $0.67 for the first quarter of 2021.


                                      -51-

  Table of Contents

Adjusted operating earnings available to common shareholders(+) totaled $45.1

million and diluted adjusted operating EPS(+) was $0.60 for the first quarter

? of 2022, compared to adjusted operating earnings available to common

shareholders(+) of $65.5 million and diluted adjusted operating EPS(+) of $0.83

for the first quarter of 2021.

Balance Sheet

At March 31, 2022, total assets were $19.8 billion, a decrease of $282.4

million or approximately 5.7% (annualized) from December 31, 2021. Total assets

declined from the prior quarter due to a decrease in cash and cash equivalents

? of $406.2 million primarily related to the deployment of excess liquidity to

fund loan growth and deposit run-off. In addition, the investment securities

portfolio decreased $159.5 million primarily due to a decline in the market

value of the AFS securities portfolio.

LHFI (net of deferred fees and costs) were $13.5 billion, including $67.4

million in PPP loans at March 31, 2022, an increase of $263.5 million or 8.1%

? (annualized) from December 31, 2021. Excluding the impact of the PPP(+), LHFI

(net of deferred fees and costs) increased $346.4 million or 10.8% (annualized)

during this period.

? Total deposits were $16.5 billion at March 31, 2022, a decrease of $126.8

million or 3.1% (annualized) from December 31, 2021.


Net Interest Income

                                                 For the Three Months Ended
                                                         March 31,
                                                    2022             2021          Change

                                                          (Dollars in thousands)
Average interest-earning assets                $   17,885,018    $ 17,692,095    $   192,923
Interest and dividend income                   $      138,456    $    147,673    $   (9,217)
Interest and dividend income (FTE) (+)         $      141,792    $    150,726    $   (8,934)
Yield on interest-earning assets                         3.14 %          3.39 %         (25)    bps
Yield on interest-earning assets (FTE) (+)               3.22 %          3.46 %         (24)    bps
Average interest-bearing liabilities           $   11,797,999    $ 12,065,807    $ (267,808)
Interest expense                               $        7,525    $     12,775    $   (5,250)
Cost of interest-bearing liabilities                     0.26 %          0.43 %         (17)    bps
Cost of funds                                            0.18 %          0.30 %         (12)    bps
Net interest income                            $      130,931    $    134,898    $   (3,967)
Net interest income (FTE) (+)                  $      134,267    $    137,951    $   (3,684)
Net interest margin                                      2.97 %          3.09 %         (12)    bps
Net interest margin (FTE) (+)                            3.04 %          

3.16 % (12) bps



For the first quarter of 2022, net interest income was $130.9 million, a
decrease of $4.0 million from the first quarter of 2021. For the first quarter
of 2022, net interest income (FTE)(+) was $134.3 million, a decrease of $3.7
million from the first quarter of 2021. In the first quarter of 2022, net
interest margin decreased 12 bps to 2.97% from 3.09% in the first quarter of
2021, and net interest margin (FTE)(+) also decreased 12 bps compared to the
first quarter of 2021. The declines in net interest margin and net interest
margin (FTE)(+) measures were primarily the result of a decline in loan yields
driven by lower PPP interest income and fees and lower prepayment activity,
which drove lower accretion from acquisition accounting fair value adjustments.
These decreases were partially offset by higher investment interest income due
to growth in the average balance of the investment portfolio and by a decrease
in the cost of funds driven by a reduction in deposit costs and lower borrowing
costs.

On March 16, 2022, the FOMC increased its Federal Funds target rates to its
current range of 0.25% to 0.5%, which was the first increase since December
2018.  The FOMC also forecasted potential further increases throughout the year.
The Company anticipates that this will result in an expansion on its net
interest margin due to the Company's asset-sensitive position at March 31, 2022.
Refer to "Quantitative and Qualitative Disclosures about Market Risk" in Part
II, Item 3 of this Quarterly Report for additional information about the
Company's interest rate sensitivity.

                                      -52-

Table of Contents


The following table shows interest income on earning assets and related average
yields as well as interest expense on interest-bearing liabilities and related
average rates paid for the periods indicated:

AVERAGE BALANCES, INCOME AND EXPENSES, YIELDS AND RATES (TAXABLE EQUIVALENT
BASIS)

                                                                For the Three Months Ended March 31,
                                                        2022                                             2021
                                                      Interest                                         Interest
                                      Average         Income /         Yield /         Average         Income /         Yield /
                                      Balance        Expense (1)     Rate (1)(2)       Balance        Expense (1)     Rate (1)(2)

                                                                       (Dollars in thousands)
Assets:
Securities:
Taxable                             $  2,617,156    $      13,666           2.12 %   $  1,906,585    $      10,353           2.20 %
Tax-exempt                             1,581,426           13,240           3.40 %      1,302,792           11,693           3.64 %
Total securities                       4,198,582           26,906           2.60 %      3,209,377           22,046           2.79 %
Loans, net (3)                        13,300,789          114,602           3.49 %     14,064,123          128,122           3.69 %
Other earning assets                     385,647              284           0.30 %        418,595              558           0.54 %
Total earning assets                  17,885,018    $     141,792           3.22 %     17,692,095    $     150,726           3.46 %
Allowance for credit losses            (100,342)                                        (157,802)
Total non-earning assets               2,135,692                                        2,152,561
Total assets                        $ 19,920,368                                     $ 19,686,854
Liabilities and Stockholders'
Equity:
Interest-bearing deposits:
Transaction and money market
accounts                            $  8,376,766    $       1,324           0.06 %   $  8,060,328    $       2,152           0.11 %
Regular savings                        1,142,854               55           0.02 %        940,369               59           0.03 %
Time deposits                          1,766,657            3,104           0.71 %      2,490,432            6,917           1.13 %
Total interest-bearing deposits       11,286,277            4,483          
0.16 %     11,491,129            9,128           0.32 %
Other borrowings                         511,722            3,042           2.41 %        574,678            3,647           2.57 %
Total interest-bearing
liabilities                           11,797,999    $       7,525           0.26 %     12,065,807    $      12,775           0.43 %
Noninterest-bearing liabilities:
Demand deposits                        5,228,098                                        4,583,521
Other liabilities                        233,287                                          317,585
Total liabilities                     17,259,384                                       16,966,913
Stockholders' equity                   2,660,984                                        2,719,941
Total liabilities and
stockholders' equity                $ 19,920,368                                     $ 19,686,854
Net interest income                                 $     134,267                                    $     137,951
Interest rate spread                                                        2.96 %                                           3.03 %
Cost of funds                                                               0.18 %                                           0.30 %
Net interest margin                                                         3.04 %                                           3.16 %

(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.


                                      -53-

Table of Contents


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

                                                      Three Months Ended
                                              March 31, 2022 vs. March 31, 2021
                                            Increase (Decrease) Due to Change in:
                                            Volume             Rate          Total
Earning Assets:
Securities:
Taxable                                  $       3,724      $     (411)    $    3,313
Tax-exempt                                       2,373            (826)         1,547
Total securities                                 6,097          (1,237)         4,860
Loans, net                                     (6,765)          (6,755)      (13,520)
Other earning assets                              (40)            (234)         (274)
Total earning assets                     $       (708)      $   (8,226)    $  (8,934)
Interest-Bearing Liabilities:
Interest-bearing deposits:
Transaction and money market accounts    $          81      $     (909)   
$    (828)
Regular savings                                     11             (15)           (4)
Time Deposits                                  (1,684)          (2,129)       (3,813)
Total interest-bearing deposits                (1,592)          (3,053)    

(4,645)

Other borrowings                                 (384)            (221)    

(605)

Total interest-bearing liabilities             (1,976)          (3,274)    
  (5,250)
Change in net interest income            $       1,268      $   (4,952)    $  (3,684)


The Company's net interest margin (FTE)(+) includes the impact of acquisition
accounting fair value adjustments. The impact of net accretion related to
acquisition accounting fair value adjustments for the first quarter of 2021, and
the first quarter of 2022 are reflected in the following table (dollars in
thousands):


                                              Loan                 Deposit              Borrowings
                                            Accretion     Accretion (Amortization)     Amortization      Total
For the quarter ended March 31, 2021       $     4,287    $                      20    $       (198)    $ 4,109
For the quarter ended March 31, 2022             2,253                     
   (10)            (203)      2,040


                                      -54-

  Table of Contents

Noninterest Income

                                                   For the Three Months Ended
                                                           March 31,                      Change
                                                    2022               2021             $         %

                                                                (Dollars in thousands)
Noninterest income:
Service charges on deposit accounts             $       7,596      $       5,509    $   2,087     37.9 %
Other service charges, commissions, and fees            1,655              1,701         (46)    (2.7) %
Interchange fees                                        1,810              1,847         (37)    (2.0) %
Fiduciary and asset management fees                     7,255              6,475          780     12.0 %
Mortgage banking income                                 3,117              8,255      (5,138)   (62.2) %
Bank owned life insurance income                        2,697              2,265          432     19.1 %
Loan-related interest rate swap fees                    3,860              1,754        2,106    120.1 %
Other operating income                                  2,163              3,179      (1,016)   (32.0) %
Total noninterest income                        $      30,153      $      

30,985 $ (832) (2.7) %



Noninterest income decreased $832,000 or 2.7% to $30.2 million for the quarter
ended March 31, 2022, compared to $31.0 million for the quarter ended
March 31, 2021. The decrease was primarily driven by a decrease in mortgage
banking income of $5.1 million due to a decline in mortgage origination volumes
and a decline in unrealized gains on equity method investments of $487,000
included within other operating income. These noninterest income declines were
partially offset by an increase in loan-related interest swap fee income of $2.1
million due to higher transaction volumes, a $2.1 million increase in service
charges on deposit accounts, and a $780,000 increase in fiduciary and asset
management fees due to market driven increases in assets under management. In
future periods, noninterest income could be impacted by modifications to the
Company's non-sufficient funds and overdraft policies, which the Company expects
to finalize and begin implementing later in 2022 and which could lead to a
reduction in certain service charges on deposit accounts.

                                      -55-

  Table of Contents

Noninterest Expense

                                                     For the Three Months Ended
                                                             March 31,                        Change
                                                       2022               2021             $           %

                                                                   (Dollars in thousands)
Noninterest expense:
Salaries and benefits                             $       58,298     $       52,660    $    5,638      10.7 %
Occupancy expenses                                         6,883              7,315         (432)     (5.9) %
Furniture and equipment expenses                           3,597              3,968         (371)     (9.3) %
Technology and data processing                             7,796              6,904           892      12.9 %
Professional services                                      4,090              4,960         (870)    (17.5) %
Marketing and advertising expense                          2,163              2,044           119       5.8 %
FDIC assessment premiums and other insurance               2,485           
  2,307           178       7.7 %
Other taxes                                                4,499              4,436            63       1.4 %
Loan-related expenses                                      1,776              1,877         (101)     (5.4) %
Amortization of intangible assets                          3,039              3,730         (691)    (18.5) %
Loss on debt extinguishment                                    -             14,695      (14,695)   (100.0) %
Other expenses                                            10,695              7,041         3,654      51.9 %
Total noninterest expense                         $      105,321     $     

111,937 $ (6,616) (5.9) %



Noninterest expense decreased $6.6 million or 5.9% to $105.3 million for the
quarter ended March 31, 2022, compared to $111.9 million for the quarter ended
March 31, 2021. Excluding amortization of intangible assets ($3.0 million for
the quarter ended March 31, 2022 compared to $3.7 million for the quarter ended
March 31, 2021), losses related to balance sheet repositioning ($0 for the
quarter ended March 31, 2022 compared to $14.7 million for the quarter ended
March 31, 2021), and branch closing and facility consolidation costs ($5.5
million for the quarter ended March 31, 2022 compared to $924,000 for the
quarter ended March 31, 2021) adjusted operating noninterest expense(+) for the
quarter ended March 31, 2022 increased by $4.2 million or 4.5% from the prior
year quarter. The increase was mainly due to an increase of $5.6 million in
salaries and benefits primarily driven by an increase in salaries, wages, and
variable incentive compensation, and an increase of $892,000 in technology and
data processing expense primarily driven by an increase in software licensing
and maintenance expenses. These noninterest expense category increases were
partially offset by a decrease of $870,000 in professional services expenses, a
$432,000 decrease in occupancy expenses, and a $371,000 decrease in equipment
expenses.

Income Taxes

The provision for income taxes is based upon the results of operations, adjusted
for the effect of certain tax-exempt income and non-deductible expenses. In
addition, certain items of income and expense are reported in different periods
for financial reporting and tax return purposes. The tax effects of these
temporary differences are recognized currently in the deferred income tax
provision or benefit. Deferred tax assets or liabilities are computed based on
the difference between the financial statement and income tax bases of assets
and liabilities using the applicable enacted marginal tax rate.

The effective tax rate for the three months ended March 31, 2022 and 2021 was
17.5% and 16.8%, respectively. The increase in the effective tax rates is
primarily due to the lower proportion of tax-exempt income to pre-tax income in
the first quarter of 2022.

                                      -56-

  Table of Contents

DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

Overview

Assets


At March 31, 2022, total assets were $19.8 billion, a decrease of $282.4 million
or approximately 5.7% (annualized) from $20.1 billion at December 31, 2021. The
decrease in assets was primarily a result of a decrease in cash and cash
equivalents related to the deployment of excess liquidity to fund loan growth
and deposit run-off. In addition, the Company incurred a decrease in the
investment securities portfolio primarily due to a decline in the market value
of the AFS securities portfolio, reflecting the impact of a rise in the interest
rates.

LHFI (net of deferred fees and costs) were $13.5 billion, including $67.4
million in PPP loans, at March 31, 2022, an increase of $263.5 million or 8.1%
(annualized) from December 31, 2021.  Excluding the effects of the PPP(+), LHFI
(net of deferred fees and costs) at March 31, 2022 increased $346.4 million or
10.8% (annualized) from December 31, 2021. Average loans decreased $763.3
million from March 31, 2021. Excluding the effects of the PPP(+), the average
loan balances at March 31, 2022 increased $443.0 million or 3.5% from March 31,
2021. Refer to "Loan Portfolio" within Item 2 and Note 3 "Loans and Allowance
for Loan and Lease Losses" in Part I, Item 1 of this Quarterly Report for
additional information on the Company's loan activity.

Liabilities and Stockholders’ Equity

At March 31, 2022, total liabilities were $17.3 billion, a decrease of $70.6
million
from $17.4 billion at December 31, 2021.


Total deposits at March 31, 2022 were $16.5 billion, a decrease of $126.8
million or approximately 3.1% (annualized) from December 31, 2021. For the
quarter ended March 31, 2022, quarterly average deposits increased $439.7
million or 2.7% compared to the quarter ended March 31, 2021 primarily due to
additional liquidity of bank customers since the start of COVID-19 and increased
savings. Refer to "Deposits" within this Item 2 for further discussion on this
topic.

Total short-term and long-term borrowings at March 31, 2022 were $504.0 million,
a decrease of $2.6 million or 0.5% when compared to $506.6 million at December
31, 2021. Refer to Note 6 "Borrowings" in Part I, Item I for further discussion
on this topic.

At March 31, 2022, stockholders' equity was $2.5 billion, a decrease of $211.7
million from December 31, 2021. Refer to "Capital Resources" within this Item 2,
as well as Note 9 "Stockholders' Equity" in Part I, Item 1 of this Quarterly
Report for additional information on the Company's capital resources.

For information related to the Company’s stock repurchase activity and the
Repurchase Program, please refer to Note 9 “Stockholders’ Equity” in Part I,
Item 1 and Part II, Item 2 of this Quarterly Report.

During the first quarter of 2022, the Company declared and paid a quarterly
dividend on the outstanding shares of Series A preferred stock of $171.88 per
share (equivalent to $0.43 per outstanding depositary share), consistent with
the fourth quarter of 2021 and the first quarter of 2021. During the first
quarter of 2022, the Company also declared and paid a cash dividend of $0.28 per
common share, consistent with the fourth quarter of 2021, and an increase of
$0.03, or approximately 12.0%, compared to the first quarter of 2021.

                                      -57-

  Table of Contents

Securities
At March 31, 2022, the Company had total investments in the amount of $4.0
billion, or 20.4% of total assets, as compared to $4.2 billion, or 20.9% of
total assets, at December 31, 2021. This decline in the Company's investment
portfolio was primarily due to a decline in the market value of the AFS
securities portfolio. The Company seeks to diversify its portfolio to minimize
risk. It focuses on purchasing MBS for cash flow and reinvestment opportunities
and securities issued by states and political subdivisions due to the tax
benefits and the higher yield offered from these securities. The majority of the
Company's MBS are agency-backed securities, which have a government guarantee.
For information regarding the hedge transaction related to AFS securities, see
Note 8 "Derivatives" in Part I, Item 1 of this Quarterly Report.

The table below sets forth a summary of the AFS securities, HTM securities, and
restricted stock as of the dates indicated (dollars in thousands):

                                                             March 31,       December 31,
                                                                2022             2021
Available for Sale:
U.S. government and agency securities                        $    68,039    $        73,849
Obligations of states and political subdivisions                 888,300   
      1,008,396
Corporate and other bonds                                        183,923            153,376
MBS
Commercial                                                       434,491            471,157
Residential                                                    1,616,882          1,773,232
Total MBS                                                      2,051,373          2,244,389
Other securities                                                   1,645              1,640
Total AFS securities, at fair value                            3,193,280   

3,481,650

Held to Maturity:
U.S. government and agency securities                              2,483   

2,604

Obligations of states and political subdivisions                 684,294   
        620,873
MBS
Commercial                                                        31,221              4,523
Residential                                                       38,874                  -
Total MBS                                                         70,095              4,523
Total held to maturity securities, at carrying value             756,872   
        628,000
Restricted Stock:
FRB stock                                                         67,032             67,032
FHLB stock                                                        10,001              9,793
Total restricted stock, at cost                                   77,033   
         76,825
Total investments                                            $ 4,027,185    $     4,186,475


                                      -58-

  Table of Contents

The following table summarizes the weighted average yields(1) for AFS securities
by contractual maturity date of the underlying securities as of March 31, 2022:

                                           1 Year or                       5 - 10      Over 10
                                             Less         1 - 5 Years      Years        Years       Total
U.S. government and agency securities               - %           2.57 %      1.42 %          - %     1.45 %
Obligations of states and political
subdivisions                                     5.00 %           2.79 %      2.63 %       2.77 %     2.77 %
Corporate bonds and other securities             0.25 %           4.54 %   
  3.91 %       2.57 %     3.74 %
MBS:
Commercial                                       3.74 %           3.28 %      2.40 %       2.56 %     2.80 %
Residential                                      2.41 %           2.35 %      2.39 %       1.97 %     1.99 %
Total MBS                                        3.16 %           3.21 %      2.39 %       2.06 %     2.16 %
Total AFS securities                             3.04 %           3.25 %      2.88 %       2.29 %     2.40 %

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


The following table summarizes the weighted average yields(1) for HTM securities
by contractual maturity date of the underlying securities as of March 31, 2022:

                                              1 Year or                      5 - 10     Over 10
                                                Less         1 - 5 Years      Years      Years      Total
U.S. government and agency securities             4.14   %          4.03  %      -   %       -   %    4.09 %
Obligations of states and political
subdivisions                                        2.31 %           3.86 %     3.85 %      3.64 %    3.64 %
MBS:
Commercial                                             - %              - %        - %      2.44 %    2.44 %
Residential                                            - %              - %        - %      2.25 %    2.25 %
Total MBS                                              - %              - %        - %      2.34 %    2.34 %
Total HTM securities                                2.85 %           3.88 %     3.85 %      3.51 %    3.52 %

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

Weighted average yield is calculated as the tax-equivalent yield on a pro rata
basis for each security based on its relative amortized cost.


As of March 31, 2022, the Company maintained a diversified municipal bond
portfolio with approximately 65% of its holdings in general obligation issues
and the majority of the remainder primarily backed by revenue bonds. Issuances
within the State of Texas represented 19% of the total municipal portfolio; no
other state had a concentration above 10%. Substantially all municipal holdings
are considered investment grade. When purchasing municipal securities, the
Company focuses on strong underlying ratings for general obligation issuers or
bonds backed by essential service revenues.

                                      -59-

  Table of Contents

Liquidity

Liquidity represents an institution's ability to meet present and future
financial obligations through either the sale or maturity of existing assets or
the acquisition of additional funds through liability management. Liquid assets
include cash, interest-bearing deposits with banks, money market investments,
federal funds sold, LHFS, and securities and loans maturing or re-pricing within
one year. Additional sources of liquidity available to the Company include its
capacity to borrow additional funds when necessary through federal funds lines
with several correspondent banks, a line of credit with the FHLB, the Federal
Reserve Discount Window, the purchase of brokered certificates of deposit,
corporate line of credit with a large correspondent bank, and debt and capital
issuance. Management considers the Company's overall liquidity to be sufficient
to satisfy its depositors' requirements and to meet its customers' credit needs.

The Company has continued to see elevated customer deposit balances as a result
of the impacts of COVID-19, including as a result of government stimulus
programs. The Company considers a portion of the increases in customer deposits
to be temporary, which it expects will result in outflows in subsequent
quarters.

As of March 31, 2022, liquid assets totaled $5.1 billion or 25.7% of total
assets, and liquid earning assets totaled $4.9 billion or 27.7% of total earning
assets. Asset liquidity is also provided by managing loan and securities
maturities and cash flows. As of March 31, 2022, loan payments of approximately
$4.3 billion or 32.2% of total loans are expected within one year based on
contractual terms, adjusted for expected prepayments, and approximately $332.8
million or 8.3% of total securities are scheduled to be paid down within
one year based on contractual terms, adjusted for expected prepayments.

For additional information and the available balances on various lines of
credit, please refer to Note 6 "Borrowings" in Part I, Item 1 of this Quarterly
Report. In addition to lines of credit, the Bank may also borrow additional
funds by purchasing certificates of deposit through a nationally recognized
network of financial institutions. For additional information and outstanding
balances on purchased certificates of deposits, please refer to "Deposits"
within this Item 2.

Cash Requirements


The Company's cash requirements, outside of lending transactions, consist
primarily of borrowings, debt and capital instruments which are used as part of
the Company's overall liquidity and capital management strategy. Cash required
to repay these obligations will be sourced from future debt and capital
issuances and from other general liquidity sources as described above under
"Liquidity" within this Item 2.

The following table presents the Company’s contractual obligations related to
its major cash requirements and the scheduled payments due at the various
intervals over the next year and beyond as of March 31, 2022 (dollars in
thousands):


                                              Less than   More than
                                     Total      1 year      1 year
Long-term debt (1)                 $ 250,000  $        -  $  250,000
Trust preferred capital notes (1)    155,159           -     155,159
Leases (2)                           214,071      37,728     176,343
Repurchase agreements                115,027     115,027           -

Total contractual obligations $ 734,257 $ 152,755 $ 581,502

(1) Excludes related unamortized premium/discount and interest payments.

(2) Represents lease payments due on non-cancellable operating leases at March

31, 2022. Excluded from these tables are variable lease payments or renewals.

For more information pertaining to the previous table, reference Note 5 “Leases”
and Note 6 “Borrowings” in Part I, Item 1 of this Quarterly Report.

                                      -60-

  Table of Contents

Loan Portfolio
LHFI, net of deferred fees and costs, were $13.5 billion at March 31, 2022, and
$13.2 billion at December 31, 2021. Commercial & industrial loans and commercial
real estate-non-owner occupied loans represented the Company's largest
categories at  March 31, 2022. Commercial and industrial loans included
approximately $66.3 million in loans from the PPP loan program as of March 31,
2022.

The following table presents the remaining maturities, based on contractual
maturity, by loan type and by rate type (variable or fixed), as of
March 31, 2022 (dollars in thousands):

                                                                          Variable Rate                                               Fixed Rate
                        Total        Less than 1                                                  More than                                                  More than
                      Maturities         year           Total        1-5
years     5-15 years      15 years        Total        1-5 years     5-15 years      15 years
Construction and
Land Development     $    969,059    $    361,917    $   462,982    $   401,318    $    60,399    $    1,265    $   144,160    $    84,211    $    25,101    $   34,848
Commercial Real
Estate - Owner
Occupied                2,007,671         185,951        645,878        120,766        506,347        18,765      1,175,842        475,436        669,873        30,533
Commercial Real
Estate -
Non-Owner
Occupied                3,875,681         406,424      2,086,321        913,994      1,154,467        17,860      1,382,936        984,951        341,157        56,828
Multifamily Real
Estate                    723,940          70,472        427,586        107,912        319,674             -        225,882        158,757         67,125             -
Commercial &
Industrial              2,540,680         404,695      1,284,023     
1,072,807        204,842         6,374        851,962        530,090        311,456        10,416
Residential 1-4
Family -
Commercial                569,801          85,334        113,904         30,156         74,497         9,251        370,563        269,226         89,083        12,254
Residential 1-4
Family - Consumer         824,163           5,101        177,437          1,978         28,868       146,591        641,625          8,281         71,942       561,402
Residential 1-4
Family -
Revolving                 568,403          32,738        480,322         33,433        135,698       311,191         55,343          2,256         16,796        36,291
Auto                      499,855           3,061              -              -              -             -        496,794        189,760        307,034             -
Consumer                  171,875          12,644         24,230         21,357          2,180           693        135,001         56,921         52,695        25,385
Other Commercial          708,221          67,034        112,152          7,975         71,172        33,005        529,035        156,029        246,938       126,068
Total LHFI           $ 13,459,349    $  1,635,371    $ 5,814,835    $ 

2,711,696 $ 2,558,144 $ 544,995 $ 6,009,143 $ 2,915,918 $ 2,199,200 $ 894,025

The Company remains committed to originating soundly underwritten loans to
qualifying borrowers within its markets. As reflected in the loan table, at
March 31, 2022, the largest components of the Company's loan portfolio consisted
of commercial real estate and commercial & industrial loans. The risks
attributable to these concentrations are mitigated by the Company's credit
underwriting and monitoring processes, including oversight by a centralized
credit administration function and credit policy and risk management committee,
as well as seasoned bankers focusing their lending to borrowers with proven
track records in markets with which the Company is familiar.

The Company had no short-term loan modifications related to COVID-19 as of March
31, 2022 and had insignificant short-term loan modifications related to COVID-19
as of December 31, 2021.

                                      -61-

  Table of Contents

Asset Quality

Overview

At March 31, 2022, the Company experienced decreases in NPAs compared to
December 31, 2021 and decreases in accruing past due loan levels as a percentage
of total LHFI compared to the prior year end. Net charge-offs decreased $1.2
million from the prior year and were insignificant for the quarter ended March
31, 2022. The ACL increased from December 31, 2021 primarily due to increased
uncertainty in the macroeconomic outlook and the impact of loan growth in the
first quarter of 2022.

The Company believes its continued proactive efforts to effectively manage its
loan portfolio, combined with the unprecedented government stimulus and programs
and regulatory support, have contributed to the sustained historically low
levels of NPAs. The Company's efforts included identifying potential problem
credits through early identification and diligent monitoring of specific problem
credits where the uncertainty has been realized, or conversely, has been reduced
or eliminated. The Company continues to refrain from originating or purchasing
loans from foreign entities. The Company selectively originates loans to higher
risk borrowers. The Company's loan portfolio generally does not include exposure
to option adjustable rate mortgage products, high loan-to-value ratio mortgages,
interest only mortgage loans, subprime mortgage loans or mortgage loans with
initial teaser rates, which are all considered higher risk instruments.

Nonperforming Assets


At March 31, 2022, NPAs totaled $30.7 million, a decrease of $2.1 million or
6.3% from December 31, 2021. NPAs as a percentage of total outstanding loans at
March 31, 2022 were 0.23%, a decrease of 2 bps from December 31, 2021.

The following table shows a summary of asset quality balances and related ratios
as of and for the quarters ended (dollars in thousands):

                                                            March 31,       December 31,
                                                               2022             2021
Nonaccrual loans                                           $     29,032    $        31,100
Foreclosed properties                                             1,696              1,696
Total NPAs                                                       30,728             32,796
Loans past due 90 days and accruing interest                      8,247    

9,132

Total NPAs and loans past due 90 days and accruing
interest                                                   $     38,975    $        41,928
Performing TDRs                                            $     12,157    $        10,313

Balances
Allowance for loan and lease losses                        $    102,591    $        99,787
Allowance for credit losses                                     110,591    

107,787

Average loans, net of deferred fees and costs                13,300,789    

13,082,412

Loans, net of deferred fees and costs                        13,459,349    

13,195,843

Ratios

Nonaccrual loans to total loans                                    0.22 %             0.24 %
NPAs to total loans                                                0.23 %  

0.25 %
NPAs & loans 90 days past due and accruing interest to
total loans

                                                        0.29 %             0.32 %
NPAs to total loans & foreclosed property                          0.23 %  

0.25 %
NPAs & loans 90 days past due and accruing interest to
total loans & foreclosed property

                                  0.29 %             0.32 %
ALLL to nonaccrual loans                                         353.37 %           320.86 %
ALLL to nonaccrual loans & loans 90 days past due and
accruing interest                                                275.20 %           248.03 %
ACL to nonaccrual loans                                          380.93 %           346.58 %


                                      -62-

  Table of Contents

NPAs at March 31, 2022 included $29.0 million in nonaccrual loans, a net
decrease of $2.1 million or 6.6% from December 31, 2021. The following table
shows the activity in nonaccrual loans for the quarters ended (dollars in
thousands):

                          March 31,       December 31,
                             2022             2021
Beginning Balance        $     31,100    $        35,472
Net customer payments         (4,132)            (5,068)
Additions                       2,087              1,294
Charge-offs                      (23)              (598)
Ending Balance           $     29,032    $        31,100


The following table presents the composition of nonaccrual loans and the
coverage ratio, which is the ALLL expressed as a percentage of nonaccrual loans,
as of (dollars in thousands):

                                                March 31,       December 31,
                                                   2022             2021
Construction and Land Development              $        869    $         

2,697

Commercial Real Estate - Owner Occupied               4,865              

5,637

Commercial Real Estate - Non-owner Occupied           3,287              3,641
Multifamily Real Estate                                   -                113
Commercial & Industrial                               1,975              1,647
Residential 1-4 Family - Commercial                   2,239              

2,285

Residential 1-4 Family - Consumer                    12,039             

11,397

Residential 1-4 Family - Revolving                    3,371              3,406
Auto                                                    333                223
Consumer                                                 54                 54
Total                                          $     29,032    $        31,100
Coverage Ratio(1)                                    353.37 %           320.86 %

(1) Represents the ALLL divided by nonaccrual loans.

Past Due Loans


At March 31, 2022, past due loans still accruing interest totaled $29.6 million
or 0.22% of total LHFI, compared to $29.9 million or 0.23% of total LHFI at
December 31, 2021. Of the total past due loans still accruing interest, $8.2
million or 0.06% of total LHFI were past due 90 days or more at March 31, 2022,
compared to $9.1 million or 0.07% of total LHFI at December 31, 2021.

Troubled Debt Restructurings

A modification of a loan's terms constitutes a TDR if the creditor grants a
concession that it would not otherwise consider to the borrower for economic or
legal reasons related to the borrower's financial difficulties. Management
strives to identify borrowers in financial difficulty early and work with them
to modify their loan to more affordable terms before their loan reaches
nonaccrual status. These modified terms may include rate reductions, extension
of terms that are considered to be below market, conversion to interest only,
principal forgiveness and other actions intended to minimize the economic loss
and to avoid foreclosure or repossession of the collateral.

The total recorded investment in TDRs at March 31, 2022 was $19.7 million, an
increase of $1.7 million or 9.8% from $18.0 million at December 31, 2021. Of the
$19.7 million of TDRs at March 31, 2022, $12.2 million or 61.7% were considered
performing, while the remaining $7.5 million were considered nonperforming. Of
the $18.0 million of TDRs at December 31, 2021, $10.3 million or 57.4% were
considered performing while the remaining $7.6 million were considered
nonperforming. Loans are removed from TDR status in accordance with the
established policy described in Note 1 "Summary of Significant Accounting
Policies" in Item 8 "Financial Statements and Supplementary Data" in the
Company's 2021 Form 10-K.

                                      -63-

  Table of Contents

Net Charge-offs
For the quarter ended March 31, 2022, net charge-offs were less than 0.01% of
average loans on an annualized basis, compared to $1.2 million or 0.03% for the
first quarter of 2021. The net charge-offs of loans continue to be
insignificant, driven by benign credit impacts since the pandemic began.

Provision for Credit Losses

The Company recorded a provision for credit losses of $2.8 million for the
quarter ended March 31, 2022, an increase of $16.4 million compared to the
negative provision for credit losses of $13.6 million recorded during the same
quarter of 2021. The provision for credit losses for the first quarter of 2022
reflected a provision of $2.8 million for loan losses and no provision for
unfunded commitments.

Allowance for Credit Losses


At March 31, 2022, the ACL was $110.6 million and included an ALLL of $102.6
million and an RUC of $8.0 million. The ACL increased $2.8 million from December
31, 2021, primarily due to increased uncertainty in the macroeconomic outlook
and the impact of loan growth in the first quarter of 2022.

The ACL as a percentage of the total loan portfolio and as a percentage of total
adjusted loans(+) was 0.82% and 0.83%, respectively, at March 31, 2022 and
December 31, 2021.

The following table summarizes activity in the ALLL during the quarters ended
(dollars in thousands):

                        March 31,       December 31,
                           2022             2021
Total ALLL             $    102,591    $        99,787
Total RUC                     8,000              8,000
Total ACL              $    110,591    $       107,787

ALLL to total loans            0.76 %             0.76 %
ACL to total loans             0.82 %             0.82 %


                                      -64-

  Table of Contents

The following table summarizes the net-charge off activity by segment for the
quarters ended (dollars in thousands):

                                          March 31,                                   March 31,
                                             2022                                        2021
                             Commercial     Consumer       Total         Commercial     Consumer       Total
Loans charged-off           $      (759)    $   (750)    $ (1,509)      $    (1,974)    $ (1,667)    $ (3,641)
Recoveries                           726          787        1,513             1,606          863        2,469
Net charge-offs             $       (33)    $      37    $       4      $      (368)    $   (804)    $ (1,172)
Net charge-offs to average
loans(1)                            0.00 %     (0.01) %       0.00 %            0.01 %       0.16 %       0.03 %


(1) Annualized

The following table shows the ACL by loan segment and the percentage of the loan
portfolio that the related ACL covers as of the quarters ended (dollars in
thousands):

                                       March 31,                                  December 31,
                                          2022                                        2021
                          Commercial     Consumer       Total         Commercial     Consumer       Total
ACL                      $     87,182    $  23,409    $ 110,591      $     85,323    $  22,464    $ 107,787
Loan %(1)                        84.7 %       15.3 %      100.0 %            84.7 %       15.3 %      100.0 %
ACL to total loans               0.77 %       1.13 %       0.82 %            0.76 %       1.11 %       0.82 %

(1) The percentage represents the loan balance divided by total loans


The increase in the ACL for both loan segments is due to increased uncertainty
in the macroeconomic outlook and the impact of loan growth in the first quarter
of 2022.

Deposits

As of March 31, 2022, total deposits were $16.5 billion, a decrease of $126.8
million or 3.1% annualized from December 31, 2021. Total interest-bearing
deposits consist of NOW, money market, savings, and time deposit account
balances. Total time deposit balances of $1.7 billion accounted for 15.1% of
total interest-bearing deposits at March 31, 2022, compared to $1.9 billion and
16.3% at December 31, 2021.

The following table presents the deposit balances by major category as of the
quarters ended (dollars in thousands):


                                                    March 31, 2022          

December 31, 2021

                                                              % of total                    % of total
Deposits:                                        Amount        deposits        Amount        deposits
Non-interest bearing                          $  5,370,063          32.6 %  $  5,207,324          31.3 %
NOW accounts                                     4,121,257          25.0 %     4,176,032          25.1 %
Money market accounts                            4,151,155          25.2 %     4,249,858          25.6 %
Savings accounts                                 1,166,922           7.1 %     1,121,297           6.8 %
Time deposits of $250,000 and over                 365,796           2.2 % 
     452,193           2.7 %
Other time deposits                              1,309,030           7.9 %     1,404,364           8.5 %
Total Deposits (1)                            $ 16,484,223         100.0 %  $ 16,611,068         100.0 %


(1) Includes uninsured deposits of $5.7 billion and $5.9 billion as of March
31, 2022 and December 31, 2021, respectively. Amounts are based on estimated
amounts of uninsured deposits as of the reported period.

The Company may also borrow additional funds by purchasing certificates of
deposit through a nationally recognized network of financial institutions. The
Company utilizes this funding source when rates are more favorable than other
funding sources. There were no purchased certificates of deposit included in
certificates of deposit on the Company's Consolidated Balance

                                      -65-

Table of Contents


Sheets as of March 31, 2022 and December 31, 2021. The reduced usage of purchase
certificates of deposit as of March 31, 2021 and December 31, 2021, as compared
to historical levels, is due to the increase in customer deposits since the
beginning of COVID-19.

Maturities of uninsured time deposits in excess of FDIC limits as of March
31, 2022
and December 31, 2021 were as follows (dollars in thousands):


                 March 31, 2022      December 31, 2021
                     Amount               Amount
Within 3 Months $         19,862    $            42,696
3 - 6 Months              68,788                 30,313
6 - 12 Months             85,752                101,942
Over 12 Months            39,191                104,242
Total           $        213,593    $           279,193


Capital Resources
Capital resources represent funds, earned or obtained, over which financial
institutions can exercise greater or longer control in comparison with deposits
and borrowed funds. The adequacy of the Company's capital is reviewed by
management on an ongoing basis with reference to size, composition, and quality
of the Company's resources and consistency with regulatory requirements and
industry standards. Management seeks to maintain a capital structure that will
assure an adequate level of capital to support anticipated asset growth and to
absorb potential losses, yet allow management to effectively leverage its
capital to maximize return to shareholders.

On December 10, 2021, the Company's Board of Directors authorized the Repurchase
Program to purchase up to $100.0 million of the Company's common stock through
December 9, 2022 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 Exchange Act. During the quarter ended
March 31, 2022, the Company repurchased an aggregate of approximately 630,000
shares (or $25.0 million), at an average price of $39.73. No shares were
repurchased during the quarter ended December 31, 2021.

For information about the Company's stock repurchase activity and the Repurchase
Program, please refer to Note 9 "Stockholders' Equity" in Part I, Item 1 and
Part II, Item 2 of this Quarterly Report.

On January 28, 2022, the Company announced that its Board of Directors declared
a quarterly dividend on the outstanding shares of its Series A preferred stock.
The dividend of $171.88 per share (equivalent to $0.43 per outstanding
depositary share) was payable on March 1, 2022 to preferred shareholders of
record as of February 14, 2022. The Board also declared a quarterly dividend of
$0.28 per share of common stock. The common stock dividend was payable on
February 25, 2022 to common shareholders on record as of February 11, 2022.

The Federal Reserve requires the Company and the Bank to comply with the
following minimum capital ratios: (i) a common equity Tier 1 capital ratio of
7.0% of risk-weighted assets; (ii) a Tier 1 capital ratio of 8.5% of
risk-weighted assets; (iii) a total capital ratio of 10.5% of risk-weighted
assets; and (iv) a leverage ratio of 4.0% of total assets. These ratios, with
the exception of the leverage ratio, include a 2.5% capital conservation buffer,
which is designed to absorb losses during periods of economic stress. Banking
institutions with a ratio of common equity Tier 1 to risk-weighted assets above
the minimum but below the conservation buffer will face constraints on
dividends, equity repurchases, and compensation based on the amount of the
shortfall.

On March 27, 2020, the banking agencies issued an interim final rule that allows
the Company to phase in the impact of adopting the CECL methodology up to two
years, with a three-year transition period to phase out the cumulative benefit
to regulatory capital provided during the two-year delay.  The Company is
allowed to include the impact of the CECL transition, which is defined as the
CECL Day 1 impact to capital plus 25% of the Company's provision for credit
losses during 2020, in regulatory capital through 2021.  The Company elected to
phase-in the regulatory capital impact as permitted under the aforementioned
interim final rule. Beginning in 2022, the transition amount will begin to
impact regulatory capital by phasing it in over a three-year period ending
in
2024.

                                      -66-

  Table of Contents

The table summarizes the Company’s regulatory capital and related ratios for the
periods presented (2) (dollars in thousands):


                                           March 31,    December 31,   

March 31,

                                              2022          2021          

2021

Common equity Tier 1 capital                $ 1,557,135   $ 1,569,752  $ 1,547,675
Tier 1 capital                                1,723,491     1,736,108    1,714,031
Tier 2 capital                                  454,002       437,435      374,101
Total risk-based capital                      2,177,493     2,173,543    2,088,132
Risk-weighted assets                         15,795,239    15,336,432   14,651,486
Capital ratios:
Common equity Tier 1 capital ratio                9.86%        10.24%      
10.56%
Tier 1 capital ratio                             10.91%        11.32%       11.70%
Total capital ratio                              13.79%        14.17%       14.25%

Leverage ratio (Tier 1 capital to average 9.08% 9.01%

9.18%

assets)

Capital conservation buffer ratio (1)             4.91%         5.32%      

5.70%

Common equity to total assets                    11.79%        12.68%      

12.81%

Tangible common equity to tangible assets 7.21% 8.20%

8.24%

(+)



(1) Calculated by subtracting the regulatory minimum capital ratio requirements
from the Company's actual ratio results for Common equity, Tier 1, and Total
risk based capital. The lowest of the three measures represents the Company's
capital conservation buffer ratio.

(2) All ratios and amounts at March 31, 2022 are estimates and subject to change
pending the Company's filing of its FR Y9-C. All other periods are presented as
filed.

(+) Refer to "Non-GAAP Financial Measures" section within this Item 2 for more
information about this non-GAAP financial measure, including a reconciliation of
this measure to the most directly comparable financial measure calculated in
accordance with GAAP.

For the quarter ended March 31, 2022, the Company's common equity to total
assets capital ratio and the tangible common equity to tangible assets capital
ratio decreased from the prior quarter primarily due to the unrealized losses on
the AFS securities portfolio recorded in OCI due to market interest rate
increases in the first quarter of 2022.

NON-GAAP FINANCIAL MEASURES

In this Quarterly Report, the Company has provided supplemental performance
measures on a tax-equivalent, tangible, operating, adjusted or pre-tax
pre-provision basis. These non-GAAP financial measures are a supplement to GAAP,
which is used to prepare the Company's financial statements and should not be
considered in isolation or as a substitute for comparable measures calculated in
accordance with GAAP. In addition, the Company's non-GAAP financial measures may
not be comparable to non-GAAP financial measures of other companies. The Company
uses the non-GAAP financial measures discussed herein in its analysis of the
Company's performance. The Company's management believes that these non-GAAP
financial measures provide additional understanding of ongoing operations,
enhance comparability of results of operations with prior periods and show the
effects of significant gains and charges in the periods presented without the
impact of items or events that may obscure trends in the Company's underlying
performance.

Net interest income (FTE), total revenue (FTE) and total adjusted revenue (FTE),
which are used in computing net interest margin (FTE) and adjusted operating
efficiency ratio (FTE), respectively, provide valuable additional insight into
the net interest margin and the efficiency ratio by adjusting for differences in
the tax treatment of interest income sources. The entire FTE adjustment is
attributable to interest income on earning assets, which is used in computing
the yield on earning assets. Interest expense and the related cost of
interest-bearing liabilities and cost of funds ratios are not affected by the
FTE components.

                                      -67-

  Table of Contents

The following table reconciles non-GAAP financial measures from the most
directly comparable GAAP financial measures for each of the periods presented
(dollars in thousands):

                                                          Three Months Ended
                                                              March 31,
                                                         2022            2021
Interest Income (FTE)
Interest and dividend income (GAAP)                  $    138,456    $    

147,673

FTE adjustment                                              3,336          

3,053

Interest and dividend income FTE (non-GAAP) $ 141,792 $ 150,726
Average earning assets

                               $ 17,885,018    $ 

17,692,095

Yield on interest-earning assets (GAAP)                      3.14 %          3.39 %
Yield on interest-earning assets (FTE) (non-GAAP)            3.22 %        
 3.46 %
Net Interest Income (FTE)
Net interest income (GAAP)                           $    130,931    $    134,898
FTE adjustment                                              3,336           3,053
Net interest income (FTE) (non-GAAP)                 $    134,267    $    

137,951

Noninterest income (GAAP)                                  30,153         

30,985

Total revenue (FTE) (non-GAAP)                       $    164,420    $    168,936
Average earning assets                               $ 17,885,018    $ 17,692,095
Net interest margin (GAAP)                                   2.97 %          3.09 %
Net interest margin (FTE) (non-GAAP)                         3.04 %        

3.16 %



The Company believes tangible common equity is an important indication of its
ability to grow organically and through business combinations as well as its
ability to pay dividends and to engage in various capital management strategies.
Tangible common equity is used in the calculation of certain profitability,
capital, and per share ratios. The Company believes tangible common equity and
related ratios are meaningful measures of capital adequacy because they provide
a meaningful basis for period-to-period and company-to-company comparisons,
which the Company believes will assist investors in assessing the capital of the
Company and its ability to absorb potential losses.

The following table reconciles non-GAAP financial measures from the most
directly comparable GAAP financial measures for each of the periods presented
(dollars in thousands):

                                                                      Three Months Ended
                                                         March 31,       December 31,       March 31,
                                                            2022             2021              2021
Tangible Assets
Ending Assets (GAAP)                                    $ 19,782,430    $    20,064,796    $ 19,854,612
Less: Ending goodwill                                        935,560            935,560         935,560
Less: Ending amortizable intangibles                          40,273             43,312          53,471
Ending tangible assets (non-GAAP)                       $ 18,806,597    $  
 19,085,924    $ 18,865,581
Tangible Common Equity
Ending Equity (GAAP)                                    $  2,498,335    $     2,710,071    $  2,709,732
Less: Ending goodwill                                        935,560            935,560         935,560
Less: Ending amortizable intangibles                          40,273             43,312          53,471
Less: Perpetual preferred stock                              166,357            166,357         166,357
Ending tangible common equity (non-GAAP)                $  1,356,145    $  
  1,564,842    $  1,554,344
Average equity (GAAP)                                   $  2,660,984    $     2,715,610    $  2,719,941
Less: Average goodwill                                       935,560            935,560         935,560
Less: Average amortizable intangibles                         41,743             44,866          55,450
Less: Average perpetual preferred stock                      166,356            166,356         166,356
Average tangible common equity (non-GAAP)               $  1,517,325    $     1,568,828    $  1,562,575
Common equity to total assets (GAAP)                           11.79 %            12.68 %         12.81 %
Tangible common equity to tangible assets (non-GAAP)            7.21 %             8.20 %          8.24 %
Book value per share (GAAP)                             $      31.12    $         33.80    $      32.37
Tangible book value per share (non-GAAP)                $      18.10    $  

20.79 $ 19.78



Adjusted operating measures exclude the losses related to balance sheet
repositioning (principally composed of losses on debt extinguishment), gains on
sale of securities, as well as branch closing and facility consolidation costs
(principally composed of leases and other assets write downs, as well as
severance associated with branch closing and corporate expense reduction
initiatives). The Company believes these non-GAAP adjusted measures provide
investors with important information about the continuing economic results of
the organization's operations. Prior periods in this Quarterly Report have been
adjusted for previously announced branch closing and corporate expense reduction
initiatives.

                                      -68-

  Table of Contents

The following table reconciles non-GAAP financial measures from the most
directly comparable GAAP financial measures for each of the periods presented
(dollars in thousands, except per share amounts):

                                                                 Three Months Ended
                                                                     March 31,
                                                                2022            2021
Adjusted Operating Earnings & EPS
Net income (GAAP)                                           $     43,690   

$ 56,189
Plus: Net loss related to balance sheet repositioning,
net of tax

                                                             -    

11,609

Less: Gain on sale of securities, net of tax                           -   

62

Less: Gain on Visa, Inc. Class B common stock, net of
tax                                                                    -               -
Plus: Branch closing and facility consolidation costs,
net of tax                                                         4,351   

730

Adjusted operating earnings (non-GAAP)                      $     48,041    $     68,466
Less: Dividends on preferred stock                                 2,967   

2,967

Adjusted operating earnings available to common
shareholders (non-GAAP)                                     $     45,074   

$ 65,499

Weighted average common shares outstanding, diluted           75,556,127   

78,884,235

Earnings per common share, diluted (GAAP)                   $       0.54   

$ 0.67
Adjusted operating earnings per common share, diluted
(non-GAAP)

                                                  $       0.60    

$ 0.83



Adjusted operating measures exclude the amortization of intangible assets and
the losses related to balance sheet repositioning, principally composed of
losses on debt extinguishment and gains on sale of securities. The Company
believes this adjusted measure provides investors with important information
about the combined economic results of the organization's operations. The
adjusted operating efficiency ratio (FTE) excludes the amortization of
intangible assets and losses related to balance sheet repositioning (principally
composed of losses on debt extinguishment), as well as branch closing and
facility consolidation costs. This measure is similar to the measure utilized by
the Company when analyzing corporate performance and is also similar to the
measure utilized for incentive compensation. Net interest income (FTE) and total
adjusted revenue (FTE), which are used in computing net interest margin (FTE)
and adjusted operating efficiency ratio (FTE), respectively, provide valuable
additional insight into the net interest margin and the efficiency ratio by
adjusting for differences in tax treatment of interest income sources. The
entire FTE adjustment is attributable to interest income on earning assets,
which is used in computing yield on earning assets. Interest expense and the
related cost of interest-bearing liabilities and cost of funds ratios are not
affected by the FTE components.

The following table reconciles non-GAAP financial measures from the most
directly comparable GAAP financial measures for each of the periods presented
(dollars in thousands):

                                                              Three Months Ended
                                                                  March 31,
                                                               2022         2021

Adjusted Operating Noninterest Expense, Noninterest
Income & Efficiency Ratio
Noninterest expense (GAAP)

                                  $  105,321    $ 

111,937

Less: Amortization of intangible assets                          3,039     

3,730

Less: Losses related to balance sheet repositioning                  -     

14,695

Less: Branch closing and facility consolidation costs            5,508     

924

Adjusted operating noninterest expense (non-GAAP)           $   96,774    $

92,588

Noninterest income (GAAP)                                   $   30,153    $

30,985

Less: Gains on sale of securities                                    -     

78

Adjusted operating noninterest income (non-GAAP)            $   30,153    $

30,907

Net interest income (FTE) (non-GAAP)                        $  134,267    $

137,951

Adjusted operating noninterest income (non-GAAP)                30,153     

30,907

Total adjusted revenue (FTE)(non-GAAP)                      $  164,420    $

168,858

Efficiency ratio (GAAP)                                          65.38 %      67.48 %
Adjusted operating efficiency ratio (FTE) (non-GAAP)             58.86 %   
  54.83 %


                                      -69-

  Table of Contents

PPP adjustment impact excludes the unforgiven portion of PPP loans. The Company
believes LHFI (net of deferred fees and costs), excluding PPP is useful to
investors as it provides more clarity on the Company’s organic growth.


The following table reconciles non-GAAP financial measures from the most
directly comparable GAAP financial measures for each of the periods presented
(dollars in thousands):

                                                   Three Months Ended
                                        March 31,      December 31,     March 31,
                                           2022            2021            2021
Adjusted Loans
Loans held for investment (net of
deferred fees and costs)(GAAP)        $   13,459,349   $  13,195,843   $ 14,272,280
Less: PPP adjustments (net of
deferred fees and costs)                      67,444         150,363      

1,512,714

Total adjusted loans (non-GAAP) $ 13,391,905 $ 13,045,480 $ 12,759,566


Average loans held for investment
(net of deferred fees and costs)
(GAAP)                                $   13,300,789   $  13,082,412   $ 

14,064,123

Less: Average PPP adjustments (net
of deferred fees and costs)                  103,041         288,204      

1,309,326

Total adjusted average loans
(non-GAAP)                            $   13,197,748   $  12,794,208   $ 

12,754,797

© Edgar Online, source Glimpses

Source link

Leave a Reply

Your email address will not be published. Required fields are marked *