Atlantic Union Bankshares Corp: Form 10-Q for the period ended Jun 30, 2025

The following discussion and analysis provides information about the major components of our results of operations, financial condition, liquidity, and capital resources. This discussion and analysis should be read in conjunction with our “Consolidated Financial Statements,” our “Notes to the Consolidated Financial Statements,” and the other financial data included in this report, as well as our Annual Report on Form 10-K for the year ended December 31, 2024 (the “2024 Form 10-K”), including the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section therein. Our 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 the following discussion and analysis, we provide certain financial information determined by methods other than in accordance with GAAP. These non-GAAP financial measures are a supplement to GAAP, which we use to prepare our financial statements, and should not be considered in isolation or as a substitute for comparable measures calculated in accordance with GAAP. In addition, our non-GAAP financial measures may not be comparable to non-GAAP financial measures of other companies. We use the non-GAAP financial measures discussed herein in our analysis of our performance. Management believes that these non-GAAP financial measures provide additional understanding of our ongoing operations, enhance the comparability of our results of operations with prior periods and show the effects of significant gains and charges in the periods presented without the impact of items or events that may obscure trends in our underlying performance. Non-GAAP financial measures may be identified with the symbol (+) and may be labeled as adjusted. Refer to the “Non-GAAP Financial Measures” section within this Item 2 for more information about these non-GAAP financial measures, including a reconciliation of these measures to the most directly comparable GAAP financial measures.

FORWARD-LOOKING STATEMENTS

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 recently completed acquisition of Sandy Spring, including expectations with regard to the benefits of the Sandy Spring acquisition; 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 in economic, fiscal or trade policy and the potential impacts on our business, 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

• market interest rates and their related impacts on macroeconomic conditions, customer and client behavior, our funding costs and our loan and securities portfolios;
• economic conditions, including inflation and recessionary conditions and their related impacts on economic growth and customer and client behavior;
• U.S. and global trade policies and tensions, including changes in, or the imposition of, tariffs and/or trade barriers and the economic impacts, volatility and uncertainty resulting therefrom, and geopolitical instability;
• volatility in the financial services sector, including failures or rumors of failures of other depository institutions, along with actions taken by governmental agencies to address such turmoil, and the effects on the ability of depository institutions, including us, to attract and retain depositors and to borrow or raise capital;
• legislative or regulatory changes and requirements, including as part of the regulatory reform agenda of the Trump administration, including changes in federal, state or local tax laws and changes impacting the rulemaking, supervision, examination and enforcement priorities of the federal banking agencies;
• the sufficiency of liquidity and changes in our capital position;
• general economic and financial market conditions, in the United States generally and particularly in the markets in which we operate and which our loans are concentrated, including the effects of declines in real estate values, an increase in unemployment levels, U.S. fiscal debt, budget and tax matters, and slowdowns in economic growth;
• the diversion of management’s attention from ongoing business operations and opportunities due to our recent acquisition of Sandy Spring;
• the impact of purchase accounting with respect to the Sandy Spring acquisition, or any change in the assumptions used regarding the assets acquired and liabilities assumed to determine the fair value and credit marks;
• the possibility that the anticipated benefits of our acquisition activity, including our acquisitions of Sandy Spring and American National, including anticipated cost savings and strategic gains, are not realized when expected or at all, including as a result of the strength of the economy, competitive factors in the areas where we do business, or as a result of other unexpected factors or events, or with respect to our acquisition of Sandy Spring, as a result of the impact of, or problems arising from, the integration of the two companies;
• the integration of the business and operations of Sandy Spring may take longer or be more costly than anticipated;
• potential adverse reactions or changes to business or employee relationships, including those resulting from our acquisitions of Sandy Spring and American National;
• our ability to identify, recruit, and retain key employees;
• monetary, fiscal and regulatory policies of the U.S. government, including policies of the U.S. Department of the Treasury and the Federal Reserve;
• the quality or composition of our loan or investment portfolios and changes in these portfolios;
• demand for loan products and financial services in our market areas;
• our ability to manage our growth or implement our growth strategy;
• the effectiveness of expense reduction plans;
• the introduction of new lines of business or new products and services;
• real estate values in our lending area;
• changes in accounting principles, standards, rules, and interpretations, and the related impact on our financial statements;
• an insufficient ACL or volatility in the ACL resulting from the CECL methodology, either alone or as that may be affected by changing economic conditions, credit concentrations, inflation, changing interest rates, or other factors;
• concentrations of loans secured by real estate, particularly CRE;
• the effectiveness of our credit processes and management of our credit risk;
• our 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;
• operational, technological, cultural, regulatory, legal, credit, and other risks associated with the exploration, consummation and integration of potential future acquisitions, whether involving stock or cash consideration;
• the potential adverse effects of unusual and infrequently occurring events, such as weather-related disasters, terrorist acts, geopolitical conflicts or public health events (such as pandemics), and of governmental and societal responses thereto; these potential adverse effects may include, without limitation, adverse effects on the ability of our borrowers to satisfy their obligations to us, on the value of collateral securing loans, on the demand for our loans or our other products and services, on supply chains and methods used to distribute products and services, on incidents of cyberattack and fraud, on our liquidity or capital positions, on risks posed by reliance on third-party service providers, on other aspects of our business operations and on financial markets and economic growth;
• performance by our counterparties or vendors;
• deposit flows;
• the availability of financing and the terms thereof;
• the level of prepayments on loans and mortgage-backed securities;
• actual or potential claims, damages, and fines related to litigation or government actions, which may result in, among other things, additional costs, fines, penalties, restrictions on our business activities, reputational harm, or other adverse consequences;
• any event or development that would cause us to conclude that there was an impairment of any asset, including intangible assets, such as goodwill; and
• other factors, many of which are beyond our control.

Please also refer to such other factors as discussed throughout Part I, Item 1A. “Risk Factors” and Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the 2024 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 (http://www.sec.gov). All risk factors and uncertainties described herein and therein should be considered in evaluating forward-looking statements, and all of the forward-looking statements made in this Quarterly Report are expressly qualified by the cautionary statements contained or referred to herein and therein. The actual results or developments anticipated may not be realized or, even if substantially realized, they may not have the expected consequences to or effects on the Company or our businesses or operations. Readers are cautioned not to rely too heavily on the forward-looking statements contained in this Quarterly Report. Forward-looking statements speak only as of the date they are made. We do not intend or assume any obligation to update, revise or clarify any forward-looking statements that may be made from time to time by or on behalf of the Company, whether as a result of new information, future events or otherwise, except as required by law.

CRITICAL ACCOUNTING ESTIMATES

We prepare our consolidated financial statements based on the application of accounting and reporting policies in accordance with GAAP and general practices within the banking industry. Our financial position and results of operations are affected by management’s application of accounting policies, which require the use of estimates, assumptions, and judgments, which may prove inaccurate or are subject to variations. Changes in underlying factors, estimates, assumptions or judgements could result in material changes in our consolidated financial position and/or results of operations.

Certain accounting policies inherently have a greater reliance on the use of estimates, assumptions and judgments and, as such, have a greater possibility of producing results that could be materially different than originally reported. We have identified the allowance for loan and lease losses, fair value measurements, and acquisition accounting as accounting policies that require the most difficult, subjective, or complex judgments and, as such, could be most subject to revision as new or additional information becomes available or circumstances change. Therefore, we evaluate these accounting policies and related critical accounting estimates on an ongoing basis and update them as needed. Management has discussed these accounting policies and the critical accounting estimates summarized below with the Audit Committee of the Board of Directors.

We provide additional information about our critical accounting estimates in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates” in our 2024 Form 10-K. There have been no material changes to our critical accounting policies or the estimates made pursuant to those policies during the most recent quarter from those disclosed in our 2024 Form 10-K.

Our significant accounting policies are discussed 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 our 2024 Form 10-K.

RECENT ACCOUNTING PRONOUNCEMENTS (ISSUED BUT NOT FULLY ADOPTED)

In December 2023, the FASB issued Accounting Standards Update (“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 our financial condition or results of operations but could change certain disclosures in our 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. ASU No. 2024-03 is not expected to have an impact on our financial condition or results of operations but could change certain disclosures in our SEC filings.

ABOUT ATLANTIC UNION BANKSHARES CORPORATION

Headquartered in Richmond, Virginia, Atlantic Union Bankshares Corporation (NYSE: AUB) is the holding company for Atlantic Union Bank. Atlantic Union Bank has branches and ATMs located in Virginia, Maryland and North Carolina. Certain non-bank financial services affiliates of Atlantic Union Bank include: Atlantic Union Equipment Finance, Inc., which provides equipment financing; Atlantic Union Financial Consultants, LLC, which provides brokerage services; and Union Insurance Group, LLC, which offers various lines of insurance products.

Shares of our common stock are traded on the New York Stock Exchange under the symbol “AUB”. Additional information is available on our website at https://investors.atlanticunionbank.com. The information contained on our website is not a part of or incorporated into this Quarterly Report.

RECENT EVENTS

Acquisition of Sandy Spring Bancorp, Inc.

On April 1, 2025, we completed our merger with Sandy Spring, the bank holding company for Sandy Spring Bank. Sandy Spring’s results of operations are included in our consolidated results since the date of acquisition, and therefore, our second quarter and first half of 2025 results reflect increased levels of average balances, net interest income, noninterest income and noninterest expense compared to prior quarter and first half of 2024 results.

Under the terms of the Sandy Spring 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, was converted into the right to receive 0.900 shares of our common stock. With the acquisition of Sandy Spring, we acquired over 50 branches in Virginia, Maryland, and Washington D.C, enhancing our presence in Northern Virginia and Maryland.

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 $15.7 million pre-tax gain, net of transaction expenses, during the second quarter of 2025. Under the terms of the loan purchase agreement, we sold the loans without recourse and retained customer-facing servicing responsibilities. As a result of the CRE loan sale, our CRE loan concentration ratio, which is total commercial real estate loans as a percentage of total risk-based capital, was reduced to 283.8% at June 30, 2025 compared to 292.7% at December 31, 2024. The loan balances used to determine the CRE concentration ratio are as defined in the Call Report instructions and do not necessarily match the balances displayed in Note 4 “Loans And Allowance For Loan Losses” in Part I, Item 1 of this Quarterly Report.

Forward Sale Agreements

On October 21, 2024, in connection with the execution of the Sandy Spring merger 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 the 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.

Sale of Equity Interest in CSP

In the second quarter of 2025, we completed the sale of our equity interest in CSP, resulting in a pre-tax $14.3 million gain, net of transaction expenses.

RESULTS OF OPERATIONS

Economic Environment and Industry Events

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 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 July 2025, the One Big Beautiful Bill Act was signed into law, which includes a broad range of tax reform provisions affecting businesses, including extending and modifying certain key provisions from the Tax Cuts and Jobs Act of 2017 and expanding certain incentives from the Inflation Reduction Act of 2022 while accelerating the phase-out of others. We are still evaluating the impact on our income tax expense and taxes payable from the tax provisions of the One Big Beautiful Bill Act.

In the first half of 2025, financial markets, international relations and global supply chains were impacted by changes and developments in U.S. trade policies and practices, including tariffs. Due to the rapidly evolving state of U.S. trade policies, the amount and duration of any tariffs and their ultimate impact on us, our customers, financial markets and the U.S. and global economies is currently uncertainty. However, there is a risk that these policy changes could have a negative impact on certain of our customers causing increased difficulty in repaying their loans or other obligations which could result in a higher level of credit losses in our loan portfolios with a corresponding impact on our results of operations. In addition, increased and prolonged economic uncertainty, the potential for elevated tariff levels or their wide-spread use in U.S. trade policies, as well as related tensions caused by such tariffs, 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.

Inflation eased substantially in 2024, but it was estimated at 2.7% as of June 2025, which is still over the FOMC’s 2.0% target. In late 2024, the Federal Reserve shifted its interest rate policy as inflationary pressure began to ease and economic growth moderated, lowering rates three times between September and December in 2024, which resulted in the current Federal Funds target rate range of 4.25% to 4.50%. While the FOMC, has maintained the Federal Funds target rate range at 4.25% to 4.50% so far in 2025, with uncertainty elevated over the potential impacts of changes in U.S. and global trade and other economic policies and tensions, it is difficult to predict how the Federal Reserve will balance possible inflationary pressure with the potential of slower economic growth.

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 2 for additional information about our liquidity and “Quantitative and Qualitative Disclosures about Market Risk” in Part I, Item 3 of this Quarterly Report for additional information about our interest rate sensitivity.

In 2024, the higher-for-longer interest rate environment and heightened competition for deposits led to a shift within deposit composition toward higher cost products, which has continued through the first half of 2025, although the pace of movement slowed in late 2024 and so far in 2025. The interest rate environment has also affected the affordability of credit to consumers and businesses, moderating loan demand. At June 30, 2025, our LHFI, total deposits, and total borrowings increased from December 31, 2024 by $8.9 billion, $10.6 billion, and $358.2 million, respectively, primarily due to the Sandy Spring acquisition. At June 30, 2025, noninterest bearing deposits comprised 22.7% of total deposits, compared to 21.0% at December 31, 2024. As of June 30, 2025, we estimate that approximately 68.0% of our deposits were insured or collateralized, and that we maintained available liquidity sources to cover approximately 157.2% of uninsured and uncollateralized deposits. At June 30, 2025, our brokered deposits decreased by $54.3 million to $1.2 billion from December 31, 2024.

Our regulatory capital ratios continued to exceed the standards to be considered well-capitalized under regulatory requirements. See “Capital Resources” within this Item 2 for additional information about our regulatory capital.

SUMMARY OF FINANCIAL RESULTS

Executive Overview

Second Quarter Net Income & Performance Metrics

• Net income available to common shareholders was $16.8 million and basic and diluted EPS was $0.12 for the second quarter of 2025, compared to net income available to common shareholders of $22.2 million and basic and diluted EPS of $0.25 for the second quarter of 2024.
• Adjusted operating earnings available to common shareholders(+), which excludes (net of taxes, where applicable), the CECL Day 1 initial provision expense on non-PCD loans and the initial provision for unfunded commitments ($77.7 million in the second quarter of 2025 and $11.5 million in the second quarter of 2024), merger-related costs ($63.3 million in the second quarter 2025 and $24.2 million in the second quarter 2024), gain on CRE loan sale ($12.1 million in the second quarter of 2025), gain on the sale of equity interest in CSP ($10.7 million in the second quarter of 2025), a deferred tax asset write-down ($4.8 million in the second quarter of 2024), and gains and losses on the sale of securities (gains of $12,000 in the second quarter 2025 and losses of $5.1 million in the second quarter 2024) was $135.1 million and adjusted diluted operating EPS(+) was $0.95 for the second quarter of 2025, compared to adjusted operating earnings available to common shareholders(+) of $67.9 million and diluted adjusted operating EPS(+) of $0.76 for the second quarter of 2024.

First Six Months Net Income & Performance Metrics

• Net income available to common shareholders was $63.7 million and basic and diluted EPS was $0.55 for the first six months of 2025, compared to net income available to common shareholders of $69.0 million and basic and diluted EPS of $0.84 for the first six months of 2024.
• Adjusted operating earnings available to common shareholders(+), which excludes (net of taxes, where applicable), the CECL Day 1 initial provision expense on non-PCD loans and the initial provision expense for unfunded commitments ($77.7 million in 2025 and $11.5 million in 2024), merger-related costs ($68.0 million in 2025 and $25.8 million in 2024), gain on CRE loan sale ($12.1 million in 2025), gain on the sale of equity interest in CSP ($10.7 million in 2025), a deferred tax asset write-down ($4.8 million in 2024), a FDIC special assessment ($664,000 in 2024), and losses on the sale of securities ($67,000 in 2025 and $5.1 million in 2024), was $186.7 million and adjusted diluted operating EPS(+) was $1.61 for the six months ended June 30, 2025, compared to adjusted operating earnings available to common shareholders(+) of $116.9 million and diluted adjusted operating EPS(+) of $1.42 for the first six months of 2024.

Balance Sheet

• Our consolidated balance sheet at June 30, 2025 includes the impact of the Sandy Spring acquisition, which closed April 1, 2025. Below is a summary of the related impact of the acquisition on our consolidated balance sheet as of the acquisition date:
• The fair value of assets acquired totaled $13.0 billion and included LHFI of $8.6 billion with an initial loan discount of $789.7 million, loans held for sale of $1.9 billion, and total investments of $1.3 billion.
• The fair value of the liabilities assumed totaled $12.2 billion and included total deposits of $11.2 billion with an initial deposit mark related to time deposits of $5.6 million and total borrowings of $833.0 million.
• Core deposit intangibles and other intangibles recorded totaled $290.7 million.
• Preliminary goodwill recorded totaled $496.9 million.
• Total assets were $37.3 billion at June 30, 2025, and included $27.3 billion of total loans, primarily reflecting the impact of the Sandy Spring acquisition.
• Cash and cash equivalents were $1.6 billion at June 30, 2025, an increase of $1.2 billion from December 31, 2024, primarily reflecting the impact from the CRE loan sale proceeds.
• LHFI were $27.3 billion at June 30, 2025, an increase of $8.9 billion or 96.7% (annualized) from December 31, 2024, primarily due to the Sandy Spring acquisition, as well as organic loan growth. At June 30, 2025, quarterly average LHFI increased $8.9 billion or 49.2% from the same period in the prior year.
• Total investments were $4.8 billion at June 30, 2025, an increase of $1.4 billion or 86.0 % (annualized) from December 31, 2024, primarily due to the Sandy Spring acquisition. AFS securities totaled $3.8 billion at June 30, 2025 and $2.4 billion at December 31, 2024. As part of the Sandy Spring acquisition, we restructured $485.2 million

of securities acquired from Sandy Spring and reinvested the proceeds into higher yielding securities. At June 30, 2025, total net unrealized losses on the AFS securities portfolio were $372.8 million, a decrease of $29.8 million from $402.6 million at December 31, 2024. HTM securities are carried at cost and totaled $827.1 million at June 30, 2025, compared to $803.9 million at December 31, 2024 and had net unrealized losses of $49.2 million at June 30, 2025, an increase of $4.7 million from $44.5 million at December 31, 2024.

• Total deposits were $31.0 billion at June 30, 2025, an increase of $10.6 billion or approximately 104.5% (annualized) from December 31, 2024. At June 30, 2025 quarterly average deposits increased $11.2 billion or 56.0% from the same period in the prior year. The increases were primarily due to increases in interest-bearing customer deposits and demand deposits, primarily related to the addition of the Sandy Spring acquired deposits.
• Total borrowings were $892.8 million at June 30, 2025, an increase of $358.2 million or 135.1% (annualized) from December 31, 2024, primarily driven by the assumption of long-term subordinated debt issued by Sandy Spring.

NET INTEREST INCOME

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

The following tables show interest income on earning assets and related average yields, as well as interest expense on interest-bearing liabilities and related average rates paid for the three and six months ended June 30, (dollars in thousands):

For the second quarter of 2025, our net interest income was $321.4 million, an increase of $136.8 million from the second quarter of 2024, and our net interest income (FTE)(+) was $325.7 million, an increase of $137.4 million from the second quarter of 2024. The increases were the result of a $12.2 billion increase in average interest earning assets due primarily to the addition of Sandy Spring acquired loans and the impact of loan accretion income related to acquisition accounting, as well as organic loan growth, and lower cost of funds, partially offset by a $9.0 billion increase in average interest-bearing liabilities due primarily to the addition of Sandy Spring acquired deposits and borrowings and the associated net amortization related to acquisition accounting.

In the second quarter of 2025, our net interest margin increased 39 bps to 3.78% from 3.39% in the second quarter of 2024, and our net interest margin (FTE)(+) increased 37 bps to 3.83% in the second quarter of 2025 from 3.46% for the same period of 2024. The increases were primarily driven by the net accretion of purchase accounting adjustments on loans, deposits, and long-term borrowings related to the Sandy Spring acquisition.

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 $45.4 million for the second quarter of 2025 compared to $14.3 million for the second quarter of 2024, an increase of $31.1 million 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):

For the first six months of 2025 net interest income was $505.5 million, an increase of $173.2 million from the same period of 2024, and our net interest income (FTE)(+) was $513.7, an increase of $173.8 million from the same period of 2024. The increases in both net interest income and net interest income (FTE)(+) were primarily the result of a $7.6 billion increase in average interest earning assets, partially offset by a $5.7 billion increase in average interest-bearing liabilities, in each case primarily related to the Sandy Spring acquisition, as well as organic loan growth and lower cost of funds.

For the first six months of 2025, our net interest margin increased 36 bps to 3.62% and our net interest margin (FTE)(+) increased 35 bps to 3.68%, compared to the first six months of 2024. The increases were primarily driven by the higher earning asset yields which increased due to higher loan accretion, primarily driven by the Sandy Spring acquisition, as well as organic loan growth. Our cost of funds decreased by 24 basis points to 2.23% for the six months ended June 30, 2025, compared to the same period in the prior year, primarily due to a lower cost of deposits and a decrease in our short-term borrowings, 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 as a result of the Sandy Spring acquisition.

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):

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

(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 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.

(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 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 June 30, (dollars in thousands):

(1) The rate-related changes in interest income on loans includes the impact of higher accretion of the acquisition-related fair market value adjustments, as disclosed above.

(2) The rate-related changes in interest expense on deposits includes the impact of higher accretion (amortization) of the acquisition-related fair market value adjustments, as disclosed above.

(3) The rate-related changes in interest expense on other borrowings include the impact of higher amortization of the acquisition-related fair market value adjustments, as disclosed above.

NONINTEREST INCOME

Three Months Ended June 30, 2025 and 2024

(Dollars in thousands)

NM = Not Meaningful

Our noninterest income increased $57.7 million or 242.4% to $81.5 million for the quarter ended June 30, 2025, compared to $23.8 million for the quarter ended June 30, 2024, primarily driven by the $15.7 million pre-tax gain on the CRE loan sale, a $14.3 million pre-tax gain on the sale of our equity interest in CSP, a $6.5 million pre-tax loss on the sale of securities in the second quarter of 2024 as part of our restructuring of the American National securities portfolio, and the full quarter impact of the Sandy Spring acquisition that closed on April 1, 2025.

Our adjusted operating noninterest income,(+) which excludes the pre-tax gain on CRE loan sale ($15.7 million in the second quarter 2025), pre-tax gain on sale of our equity interest in CSP ($14.3 million in the second quarter 2025), and pre-tax gains and losses on sale of securities (gains of $16,000 in the second quarter 2025 and losses of $6.5 million in the second quarter 2024), increased $21.2 million or 69.8% to $51.5 million for the quarter ended June 30, 2025, compared to $30.3 million for the quarter ended June 30, 2024. The increase in adjusted operating noninterest income(+) was primarily due to the impact of the Sandy Spring acquisition, which drove the majority of the $10.8 million increase in fiduciary and asset management fees, due to assets under management increasing approximately 120%, and the $3.1 million increase in service charges on deposit accounts. In addition to the acquisition impact, the BOLI income increase of $3.5 million includes death benefits of $2.4 million received in the second quarter of 2025 and the mortgage banking income increase of $1.6 million includes the impact of Sandy Spring’s mortgage business, as well as an increase in mortgage loan origination volumes. Other operating income increased $1.0 million, primarily due to an increase in gains on the sale of leased equipment.

Six Months Ended June 30, 2025 and 2024

(Dollars in thousands)

Our noninterest income increased $61.3 million or 124.2% to $110.7 million for the six months ended June 30, 2025, compared to $49.4 million for the six months ended June 30, 2024, primarily driven by the $15.7 million pre-tax gain on the CRE loan sale, a $14.3 million pre-tax gain on the sale of our equity interest in CSP, and the impact of the Sandy Spring acquisition that closed on April 1, 2025.

Our adjusted operating noninterest income,(+) which excludes the pre-tax gain on CRE loan sale ($15.7 million in 2025), pre-tax gain on sale of our equity interest in CSP ($14.3 million in 2025), and pre-tax losses on sale of securities ($87,000 in 2025 and $6.5 million in 2024), increased $24.9 million or 44.5% to $80.8 million for the six months ended June 30, 2025, compared to $55.9 million for the six months ended June 30, 2024. The increase in adjusted operating noninterest income(+) was primarily due to the impact of the Sandy Spring acquisition, which drove the majority of the $12.7 million increase in fiduciary and asset management fees, due to assets under management increasing approximately 120%, the $4.3 million increase in service charges on deposit accounts, and the $1.3 million increase in interchange fees. In addition to the acquisition impacts, the BOLI income increase of $3.8 million includes death benefits of $2.4 million received in the second quarter of 2025, the mortgage banking income increase of $1.7 million includes the impact of Sandy Spring’s mortgage business, as well as an increase in mortgage loan origination volumes, and loan-related interest rate swap fees increased $1.3 million due to higher transaction volumes.

NONINTEREST EXPENSE

Three Months Ended June 30, 2025 and 2024

(Dollars in thousands)

Our noninterest expense increased $129.7 million or 86.5% to $279.7 million for the quarter ended June 30, 2025, compared to $150.0 million for the quarter ended June 30, 2024, primarily driven by a $49.1 million increase in merger-related costs, a $41.4 million increase in salaries and benefits, and other increases in noninterest expense, primarily due to the full quarter impact of the Sandy Spring acquisition that closed on April 1, 2025.

Our adjusted operating noninterest expense(+), which excludes merger-related costs ($78.9 million in the second quarter 2025 and $29.8 million in the second quarter 2024) and amortization of intangible assets ($18.4 million in the second quarter 2025 and $6.0 million in the second quarter 2024) increased $68.2 million or 59.6% to $182.4 million for the quarter ended June 30, 2025, compared to $114.2 million for the quarter ended June 30, 2024. The increase in adjusted operating noninterest expense(+) was primarily due to the impact of the Sandy Spring acquisition, which drove the majority of the $41.4 million increase in salaries and benefits, the $7.0 million increase in technology and data processing, the $4.9 million increase in occupancy expenses, the $4.4 million in other expenses, the $4.0 million increase in FDIC assessment premiums and other insurance, the $3.4 million increase in professional services and the $2.5 million increase in furniture and equipment expenses.

Six Months Ended June 30, 2025 and 2024

(Dollars in thousands)

Our noninterest expense increased $158.6 million or 62.1% to $413.9 million for the six months ended June 30, 2025, compared to $255.3 million for the six months ended June 30, 2024, primarily driven by a $54.9 million increase in salaries and benefits, a $52.2 million increase in merger-related costs, and other increases in noninterest expense, primarily due to the impact of the Sandy Spring acquisition that closed on April 1, 2025.

Our adjusted operating noninterest expense(+), which excludes merger-related costs ($83.8 million in 2025 and $31.7 million in 2024), amortization of intangible assets ($23.8 million in 2025 and $7.9 million in 2024), and a FDIC special assessment ($840,000 in 2024) increased $91.3 million or 42.5% to $306.2 million for the six months ended June 30, 2025, compared to $214.9 million for the six months ended June 30, 2024. The increase in adjusted operating noninterest expense(+) was primarily due to the impact of the Sandy Spring acquisition, which drove the majority of the $54.9 million increase in salaries and benefits, the $9.0 million increase in technology and data processing, the $6.9 million increase in occupancy expenses, the $5.0 million increase in professional services, the $4.9 million increase in FDIC assessment premiums and other insurance, and the $3.1 million increase in furniture and equipment expenses. In addition to the acquisition impacts, other expenses increased $6.0 million, primarily due to an increase in non-credit related losses on customer transactions and marketing and advertising expense increased $1.6 million.

SEGMENT RESULTS

Wholesale Banking

Our Wholesale Banking segment provides loan, leasing, and deposit services, as well as treasury management and capital market services to wholesale customers primarily throughout Virginia, Maryland, North Carolina, and South Carolina. These customers include CRE and commercial and industrial customers. This segment also includes our equipment finance subsidiary, which has nationwide exposure. The wealth management business also resides in the Wholesale Banking segment.

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

Wholesale Banking income before income taxes decreased by $19.6 million and $18.7 million, respectively, for the three and six months ended June 30, 2025 compared to the three and six months ended June 30, 2024. The decreases were primarily due to increases in the provision for credit losses primarily driven by the Day 1 initial provision expense on non-PCD loans and unfunded commitments acquired from Sandy Spring. In addition, Wholesale Banking noninterest expense increased for the three and six months ended June 30, 2025 compared to the same periods in 2024, primarily due to the impact of the Sandy Spring acquisition, which drove the majority of the increases in salaries and benefits. The decreases in income before income taxes were partially offset by increases in net interest income, driven by the impact of the Sandy Spring acquisition. Wholesale Banking noninterest income also increased for the three and six months ended June 30, 2025 compared to the same periods in 2024, primarily due to the impact of Sandy Spring acquisition, which drove the majority of the increases in fiduciary and asset management fees.

The following table presents the key balance sheet metrics as of the periods ended for the Wholesale Banking segment (dollars in thousands):

LHFI for the Wholesale Banking segment increased $7.4 billion to $22.9 billion at June 30, 2025, compared to December 31, 2024, primarily driven by the Sandy Spring acquisition, as well as organic loan growth.

Wholesale Banking deposits increased $4.5 billion to $11.7 billion at June 30, 2025, compared to December 31, 2024, primarily due to increases in interest-bearing customer deposits and demand deposits, primarily driven by the Sandy Spring acquisition.

Consumer Banking

Our Consumer Banking segment provides loan and deposit services to consumers and small businesses throughout Virginia, Maryland, and North Carolina. Consumer Banking also includes the home loan division and investment management and advisory services businesses.

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

Consumer Banking income before income taxes decreased by $16.3 million and $19.2 million, respectively, for the three and six months ended June 30, 2025, compared to the three and six months ended June 30, 2024. The decreases were primarily due to increases in noninterest expense, primarily due to the impact of the Sandy Spring acquisition, which drove the majority of the increases in salaries and benefits. In addition, the Consumer Banking provision for credit losses increased for the three and six months ended June 30, 2025 compared to the same periods in 2024, primarily driven by the Day 1 initial provision expense on non-PCD loans and unfunded commitments acquired from Sandy Spring. The decreases in income before income taxes were partially offset by increases in net interest income driven by the impact of the Sandy Spring acquisition. Consumer Banking noninterest income also increased for the three and six months ended June 30, 2025, compared to the same periods in 2024, primarily due to the impact of Sandy Spring acquisition, which drove the majority of the increases in service charges on deposit accounts and interchange fees. In addition to the acquisition impact, the increases in noninterest income were driven by increases in mortgage banking income, which includes the impact of Sandy Spring’s mortgage business, as well as increases in mortgage loan origination volumes.

The following table presents the key balance sheet metrics as of the periods ended for the Consumer Banking segment (dollars in thousands):

LHFI for the Consumer Banking segment increased $2.1 billion to $5.2 billion at June 30, 2025, compared to December 31, 2024, primarily due to increases in the residential 1-4 family consumer and residential 1-4 family revolving portfolios, primarily driven by the Sandy Spring acquisition.

Consumer Banking deposits increased $6.0 billion to $17.9 billion at June 30, 2025, compared to December 31, 2024, primarily due to increases across all deposit categories, primarily driven by the Sandy Spring acquisition.

INCOME TAXES

During the second quarter of 2025, our estimated annual effective tax rate increased to 21.7% as of June 30, 2025 from approximately 19.0% in the first quarter of 2025, reflecting the impact of the Sandy Spring acquisition as Sandy Spring operated in a higher state tax jurisdiction, which now impacts a larger proportion of our consolidated pre-tax income. The updated annual effective tax rate was applied to the year-to-date pre-tax income calculation during the second quarter of 2025, impacting our income tax expense for the quarter ended June 30, 2025.

Our effective tax rate for the three months ended June 30, 2025 and 2024 was (13.2%) and 31.2%, respectively, and the effective tax rate for the six months ended June 30, 2025 and 2024 was 11.9% and 22.3%, respectively. The decreases in the effective tax rate for both the three and six months ended June 30, 2025 reflects the impact of a $8.0 million income tax benefit recorded this quarter related to re-evaluating our state deferred tax asset, as a result of the Sandy Spring acquisition, as well as the impact of the $4.8 million valuation allowance established during the second quarter of 2024.

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

As of each reporting date, we consider existing evidence, both positive and negative, that could impact our view regarding our future realization of deferred tax assets. Our valuation allowance was $11.1 million and $4.4 million as of June 30, 2025 and December 31, 2024, respectively. The increase in the valuation allowance was due to the Sandy Spring acquisition and Sandy Spring’s historical valuation allowance relating to net operating losses in certain state filing jurisdictions. The prior year valuation allowance balance primarily includes the initial recording of the deferred tax asset valuation.

DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

Balance Sheet

At June 30, 2025, our consolidated balance sheet includes the impact of the Sandy Spring acquisition, which closed April 1, 2025, as discussed in Note 1 “Summary of Significant Accounting Policies” in Part I, Item 1 of this Quarterly Report. Under ASC 805, Business Combinations, we may adjust provisional fair values of assets acquired and liabilities assumed in a business combination for a measurement period of up to one year beyond the acquisition date as additional information about the facts and circumstances that existed as of the acquisition date becomes available. If applicable, any future measurement period adjustments will be recorded through goodwill upon identification. Below is a summary of the related impact of the Sandy Spring acquisition on our balance sheet as of the acquisition date:

• The fair value of assets acquired totaled $13.0 billion and included LHFI of $8.6 billion with an initial loan discount of $789.7 million, loans held for sale of $1.9 billion, and total investments of $1.3 billion.
• The fair value of the liabilities assumed totaled $12.2 billion and included total deposits of $11.2 billion with an initial deposit mark related to time deposits of $5.6 million and total borrowings of $833.0 million.
• Core deposit intangibles and other intangibles recorded totaled $290.7 million.
• Preliminary goodwill recorded totaled $496.9 million.

On June 26, 2025, we completed the sale of $2.0 billion of performing CRE loans acquired in the Sandy Spring acquisition, which we marked to fair value at $1.84 billion and classified as held for sale as of the April 1, 2025 acquisition date. We received net proceeds from the sale of the CRE loans, before expenses, of approximately $1.87 billion, which increased our cash balance at June 30, 2025, and a portion of such proceeds were used to repay our short-term FHLB advances and brokered certificates of deposit that matured during the second quarter of 2025.

Assets

At June 30, 2025, we had total assets of $37.3 billion, an increase of $12.7 billion or approximately 104.2% (annualized) from December 31, 2024. The increase in total assets was primarily driven by growth in LHFI and the AFS securities portfolio, primarily due to the Sandy Spring acquisition. At June 30, 2025, cash and cash equivalents were $1.6 billion, an increase of $1.2 billion from December 31, 2024, primarily reflecting the impact from the CRE loan sale proceeds.

LHFI were $27.3 billion at June 30, 2025, an increase of $8.9 billion or 96.7% (annualized) from December 31, 2024, primarily due to the Sandy Spring acquisition, as well as organic loan growth. At June 30, 2025, quarterly average LHFI increased $8.9 billion or 49.2% from the same period in the prior year. Refer to "Loan Portfolio" within this Item 2 and Note 4 "Loans and Allowance for Loan and Lease Losses" in Part I, Item 1 of this Quarterly Report for additional information on our loan activity.

At June 30, 2025, we had total investments of $4.8 billion, an increase of $1.4 billion or 86.0% (annualized) from December 31, 2024. The increase in total investments was primarily due to the Sandy Spring acquisition. AFS securities totaled $3.8 billion at June 30, 2025, compared to $2.4 billion at December 31, 2024. As part of the Sandy Spring acquisition, we restructured $485.2 million of securities acquired from Sandy Spring and reinvested the proceeds into higher yielding securities. At June 30, 2025, total net unrealized losses on the AFS securities portfolio were $372.8 million, compared to $402.6 million at December 31, 2024. HTM securities totaled $827.1 million at June 30, 2025, compared to $803.9 million at December 31, 2024, with net unrealized losses of $49.2 million at June 30, 2025, compared to $44.5 million at December 31, 2024.

Liabilities and Stockholders’ Equity

At June 30, 2025, we had total liabilities of $32.5 billion, an increase of $11.0 billion or approximately 103.6% (annualized) from December 31, 2024, which was primarily driven by the growth in total deposits, primarily due to the Sandy Spring acquisition.

Total deposits at June 30, 2025 were $31.0 billion, an increase of $10.6 billion or approximately 104.5% (annualized) from December 31, 2024. At June 30, 2025, quarterly average deposits increased $11.2 billion or 56.0% from the same period in the prior year. Total deposits increased from December 31, 2024 primarily due to increases in interest-bearing customer deposits and demand deposits, primarily related to the Sandy Spring acquisition. Refer to “Deposits” within this Item 2 for additional information on this topic.

Total borrowings at June 30, 2025 were $892.8 million, an increase of $358.2 million or 135.1% (annualized) from December 31, 2024, primarily due to the long-term subordinated debt of $358.0 million assumed in connection with the Sandy Spring acquisition. Refer to Note 7 “Borrowings” in Part I, Item 1 of this Quarterly Report for additional information on our borrowing activity.

At June 30, 2025, our stockholders’ equity was $4.8 billion, an increase of $1.7 billion from December 31, 2024, primarily driven by the issuance of common stock in connection with the Sandy Spring acquisition. Our consolidated regulatory capital ratios continue to exceed the minimum capital requirements and are considered “well-capitalized” for regulatory purposes. Refer to “Capital Resources” within this Item 2, as well as Note 10 "Stockholders’ Equity" in Part I, Item 1 of this Quarterly Report for additional information on our capital resources.

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. Refer to Note 10 “Stockholders’ Equity” in Part I, Item 1 of this Quarterly Report for additional details on the Forward Sale Agreements.

During the second quarter of 2025, we declared and paid a quarterly dividend on our 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 2024 and the second quarter of 2024. During the second quarter of 2025, we also declared and paid cash dividends of $0.34 per common share, consistent with the fourth quarter of 2024 and an increase of $0.02 per share or 6.3% from the second quarter of 2024.

SECURITIES

At June 30, 2025, we had total investments of $4.8 billion or 12.8% of total assets as compared to $3.3 billion or 13.6% of total assets at December 31, 2024. This increase was primarily due to the Sandy Spring acquisition. We seek to diversify our investment portfolio to minimize risk, and we focus on purchasing MBS for cash flow and reinvestment opportunities and securities issued by states and political subdivisions due to the tax benefits and the higher tax-equivalent yield offered from these securities. The majority of our MBS are agency-backed securities, which have a government guarantee. For information regarding the hedge transaction related to AFS securities, see Note 9 “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 periods ended (dollars in thousands):

The following table summarizes the weighted average yields(1) for AFS securities by contractual maturity date of the underlying securities as of June 30, 2025:

(1) Yields on tax-exempt securities have been computed on an estimated 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 June 30, 2025:

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

(2) There were no securities with contractual maturity dates of one year or less.

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 June 30, 2025, we maintained a diversified municipal bond portfolio with approximately 65% of our holdings in general obligation issues and the remainder primarily backed by revenue bonds. Issuances within the State of Texas represented 18% of the total municipal portfolio; no other state had a concentration above 10%. Substantially all of our municipal holdings are considered investment grade. When purchasing municipal securities, we focus on strong underlying ratings for general obligation issuers or bonds backed by essential service revenues.

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. Our largest source of liquidity on a consolidated basis is our customer deposit base generated by our wholesale and consumer businesses. These deposits provide relatively stable and low-cost funding. Total deposits at June 30, 2025 were $31.0 billion, an increase of $10.6 billion or approximately 51.8% from December 31, 2024. Total deposits increased from December 31, 2024 primarily due to an increase in interest-bearing customer deposits of $7.9 billion and demand deposits of $2.8 billion, partially offset by a decrease in brokered deposits. Refer to “Deposits” within this Item 2 for additional information on this topic.

We closely monitor changes in the industry and market conditions that may impact our liquidity and will use other borrowing means or other liquidity and funding strategies sources to fund our liquidity needs as needed. We also closely track the potential impacts on our liquidity from declines in the fair value of our securities portfolio due to changing market interest rates and developments in the banking industry that may change the availability of traditional sources of liquidity or market expectations with respect to available sources and amounts of additional liquidity.

We consider our liquid assets to 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. As of June 30, 2025, our liquid assets totaled $13.5 billion or 36.3% of total assets, and liquid earning assets totaled $13.2 billion or 39.5% of total earning assets. We also provide asset liquidity by managing loan and securities maturities and cash flows. As of June 30, 2025, loan payments of approximately $11.3 billion or 41.2% of total LHFI are expected within one year based on contractual terms, adjusted for expected prepayments, and approximately $662.8 million or 13.9% of total investments as of June 30, 2025 are scheduled to be paid down within one year based on contractual terms, adjusted for expected prepayments.

On June 26, 2025, we completed the sale of $2.0 billion of performing CRE loans acquired in the Sandy Spring acquisition, which we marked to fair value at $1.84 billion and classified as held for sale as of the April 1, 2025 acquisition date. We received net proceeds from the sale of the CRE loans, before expenses, of approximately $1.87 billion, which increased our cash balance at June 30, 2025, and a portion of such proceeds were used to repay our short-term FHLB advances and brokered CDs that matured during the second quarter of 2025.

Additional sources of liquidity available to us include our 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, a corporate line of credit with a large correspondent bank, and debt and capital issuances. We also recently increased our borrowing capacity at the FHLB and FRB since secured borrowing facilities provide the most reliable sources of funding, especially during times of market turbulence and financial distress. Management believes our overall liquidity to be sufficient to satisfy our depositors’ requirements and to meet our customers’ credit needs.

For additional information and the available balances on various lines of credit, please refer to Note 7 “Borrowings” in Part I, Item 1 of this Quarterly Report. In addition to lines of credit, we may also borrow additional funds by purchasing certificates of deposit through a nationally recognized network of financial institutions.

Cash Requirements

Our cash requirements, outside of lending transactions, consist primarily of borrowings, leases, debt and capital instruments, which are used as part of our overall liquidity and capital management strategy. We expect that the cash required to repay these obligations will be sourced from our general liquidity sources and future debt and capital issuances and from other general liquidity sources as described above under “Liquidity” within this Item 2.

The following table presents our contractual obligations related to our major cash requirements and the scheduled payments due at the various intervals over the next year and beyond as of June 30, 2025 (dollars in thousands):

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

(2) Represents lease payments due on non-cancellable operating leases at June 30, 2025. Excluded from these tables are variable lease payments or renewals.

For more information pertaining to the previous table, reference Note 6 “Leases” and Note 7 “Borrowings” in Part I, Item 1 of this Quarterly Report.

Off-Balance Sheet Obligations

In the normal course of business, we are party to financial instruments with off-balance sheet risk to meet the financing needs of our customers and to reduce our own exposure to fluctuations in interest rates. These financial instruments include commitments to extend credit and letters of credit. These instruments involve elements of credit and interest rate risk in excess of the amount recognized in our Consolidated Balance Sheets. The contractual amounts of these instruments reflect the extent of our involvement in particular classes of financial instruments.

Our exposure to credit loss in the event of nonperformance by the other party to the financial instruments for commitments to extend credit and letters of credit is represented by the contractual amount of these instruments. We use the same credit policies in making commitments and conditional obligations as we do for on-balance sheet instruments. Unless noted otherwise, we do not require collateral or other security to support off-balance sheet financial instruments with credit risk.

For a summary of our total commitments with off-balance sheet risk see Note 8 “Commitments and Contingencies” in Part I, Item I of this Quarterly Report.

We are also a lessor in sales-type and direct financing leases for equipment, as noted in Note 6 “Leases” in Part I, Item I of this Quarterly Report. Our future commitments related to the aforementioned leases totaled $620.1 million and $621.3 million, respectively, at June 30, 2025 and December 31, 2024.

Impact of Inflation and Changing Prices

Our financial statements included in Item I “Financial Statements” of this Quarterly Report have been prepared in accordance with GAAP, which requires the financial position and operating results to be measured principally in terms of historic dollars without considering the change in the relative purchasing power of money over time due to inflation. Inflation affects our results of operations mainly through increased operating costs, but since nearly all of our assets and liabilities are monetary in nature, changes in interest rates generally affect our financial condition to a greater degree than changes in the rate of inflation. Although interest rates are greatly influenced by changes in the inflation rate, they do not necessarily change at the same rate or in the same magnitude as the inflation rate. Management reviews pricing of our products and services, in light of current and expected costs due to inflation, to seek to mitigate the inflationary impact on our financial performance.

LOAN PORTFOLIO

LHFI totaled $27.3 billion at June 30, 2025 and $18.5 billion at December 31, 2024, primarily driven by the increase in LHFI of $8.6 billion from the acquisition of Sandy Spring. Total CRE and commercial and industrial loans represented our largest loan categories at both June 30, 2025 and December 31, 2024. We remain committed to originating soundly underwritten loans to qualifying borrowers within our markets.

The following table presents the remaining maturities, based on contractual maturity, by loan type, and by rate type (variable or fixed), net of deferred fees and costs, as of June 30, 2025 (dollars in thousands):

Our highest concentration of credit by loan type is in CRE. CRE loans consist of term loans secured by a mortgage lien on the real property and include both non-owner occupied and owner occupied CRE loans, as well as construction and land development, multifamily real estate, and residential 1-4 family-commercial loans. CRE loans are generally viewed as having more risk of default than residential real estate loans and depend on cash flows from the owner’s business or the property’s tenants to service the debt. The borrower’s cash flows may be affected significantly by general economic conditions, a downturn in the local economy, or in occupancy rates in the market where the property is located, any of which could increase the likelihood of default.

We perform risk assessments to identify the CRE concentration ratio based on the two-tiered guidelines issued by the federal banking regulators: (i) total reported loans for construction, land development, and other land represent 100 percent or more of the institution's total capital; or (ii) total CRE loans represent 300 percent or more of the institution's total capital, and the outstanding balance of the institution's CRE loan portfolio has increased by 50 percent or more during the prior 36 months. The loan balances used to determine the CRE concentration ratio are as defined in the Call Report instructions and do not necessarily match the balances displayed in Note 4 “Loans And Allowance For Loan Losses”.

As of June 30, 2025 and December 31, 2024, our construction and land development concentration as a percentage of capital totaled 59.8% and 63.2%, respectively, and our CRE concentration as a percentage of capital totaled 283.8% and 292.7%, respectively. The decreases in the concentration ratios are primarily driven by the Sandy Spring acquisition and the subsequent sale of $2.0 billion of performing CRE loans acquired in the Sandy Spring acquisition. Total CRE exposure increased 102.4% for the 36 month period ended June 30, 2025 primarily as a result of the Sandy Spring and American National acquisitions, partially offset by the CRE loan sale.

We seek to mitigate risks attributable to our most highly concentrated portfolios and our portfolios that pose unique risks to our balance sheet through our credit underwriting and monitoring processes, including oversight by a centralized credit administration function, approval process, credit policy, and risk management committee, as well as through our seasoned bankers that focus on lending to borrowers with proven track records in markets that we are familiar with. All construction lending risk is controlled by a centralized construction loan servicing department that independently reviews and approves each draw request, including assessing on-going budget adequacy, and monitors project completion milestones. When underwriting CRE loans, we require collateral values in excess of the loan amounts, cash flows in excess of expected debt service requirements, and equity investment in the project. As part of the CRE loan origination process, we also stress test loan interest rates and occupancy rates to determine the impact of different economic conditions on the borrower’s ability to maintain adequate debt service.

We also manage our CRE exposure through product type limits, individual loan-size limits for CRE product types, client relationship limits, and transactional risk acceptance criteria, as well as other techniques, including but not limited to, loan syndications/participations, collateral, guarantees, structure, covenants, and other risk reduction techniques. Our CRE loan policies are specific to individual product types and underwriting parameters vary depending on the risk profile of each asset class. We evaluate risk concentrations regularly in our CRE portfolio on both an aggregate portfolio level and on an individual client basis, and regularly review and adjust as appropriate our lending strategies and CRE product-specific approach to underwriting in light of market conditions and our overall corporate strategy and initiatives.

The average loan size of our CRE portfolio was approximately $1.2 million and $1.1 million as of June 30, 2025 and December 31, 2024, respectively, and the median loan size in our CRE portfolio was approximately $306,000 as of June 30, 2025 and approximately $242,000 as of December 31, 2024.

The following table presents the composition of our CRE loan categories, including the industry classification for CRE non-owner occupied loans, and CRE loans as a percentage of total loans for the periods ended (dollars in thousands):

Because payments on loans secured by commercial and multifamily properties are often dependent on the successful operation or management of the properties, repayment of these loans may be subject to adverse conditions in the real estate market or the economy. In particular, the repayment of loans secured by non-owner occupied commercial properties depend primarily on the tenant’s continuing ability to pay rent to the property owner, who is our borrower, or, if the property owner is unable to find a tenant, the property owner’s ability to repay the loan without the benefit of a rental income stream. If the cash flow from the project is reduced, or if leases are not obtained or renewed, the borrower’s ability to repay the loan may be impaired. Due to these risks, we proactively monitor our non-owner occupied CRE and multifamily real estate exposures and evaluate these portfolios against our established lending policies, and we believe this monitoring and evaluation helps ensure that these portfolios are geographically diverse and granular. We do not currently monitor owner-occupied CRE loans based on geographical markets as the primary source of repayment for these loans is predicated on the cash flow from the underlying operating entity, which is generally less dependent on conditions in the relevant CRE market. These loans are generally located within our geographical footprint and are generally distributed across industries.

The following table presents the distribution of our CRE non-owner occupied, multifamily real estate, and office portfolio loans by market location based on the underlying loan collateral for the periods ended (dollars in thousands):

(1) The office portfolio is a subset of our CRE non-owner occupied loans included in the column to the left.

The shift to work-from-home and hybrid work environments have caused a decreased utilization of office space. As such, we have additional monitoring for our exposure to office space, within our non-owner occupied CRE portfolio, including periodic credit risk assessment of expiring office leases for most of the office portfolio. We do not currently finance large, high-rise, or major metropolitan central business district office buildings, and the office portfolio is generally in suburban markets with strong occupancy levels. The average loan size in our office portfolio was approximately $1.9 million and $1.7 million as of June 30, 2025 and December 31, 2024, respectively, and the median loan size in our office portfolio was approximately $725,000 as of June 30, 2025 and approximately $571,000 as of December 31, 2024. The average loan size in our multifamily portfolio was approximately $3.1 million as of June 30, 2025 and $2.5 million as of December 31, 2024, and the median loan size in our multifamily portfolio was approximately $753,000 as of June 30, 2025 and approximately $646,000 as of December 31, 2024.

ASSET QUALITY

Overview

At June 30, 2025 and December 31, 2024, nonaccrual LHFI was $162.6 million and $58.0 million, respectively, while non-performing assets (“NPAs”) as a percentage of LHFI totaled 0.60% and 0.32%, respectively. The increase in NPAs as a percentage of LHFI was primarily due to PCD loans acquired from Sandy Spring, primarily in the construction and land development, commercial real estate non-owner occupied, residential 1-4 family consumer and revolving, and commercial real estate owner occupied portfolios, which were nonperforming at the time of acquisition and were recorded at their amortized cost basis, which reflects their acquisition date fair value plus the initial allowance for expected credit losses recognized at acquisition, in accordance with ASC 326, Financial Instruments – Credit Losses. Net charge-offs were $2.9 million for the six months ended June 30, 2025, compared to net charge-offs of $6.7 million for the same period in the prior year. We continue to experience historically low levels of NPAs; however, there is increased uncertainty in the economic forecast which could lead to increases in NPAs in future periods. Our ACL at June 30, 2025 increased $148.7 million from December 31, 2024 to $342.4 million, primarily reflecting the impacts of the Sandy Spring acquisition. In connection with the Sandy Spring acquisition, we recorded an initial ACL of $129.2 million that consisted of an ALLL of $117.8 million and RUC of $11.4 million. The ALLL included an $89.5 million reserve on acquired non-PCD loans established through provision expense, which represents the CECL “double count” of the non-PCD credit mark, and a $28.3 million reserve on PCD loans. Refer to Note 4 “Loans and Allowance for Loan Losses” within Item 1 of this Quarterly Report for further information.

We continue to refrain from originating or purchasing loans from foreign entities, and we selectively originate loans to higher risk borrowers. Our 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 June 30, 2025 and December 31, 2024, NPAs totaled $163.4 million and $58.4 million, respectively, representing an increase of $105.0 million. Our NPAs as a percentage of total outstanding LHFI at June 30, 2025 and December 31, 2024 were 0.60% and 0.32%, respectively. The increase in NPAs was primarily due to PCD loans acquired in the Sandy Spring acquisition, which included $49.4 million of acquired construction and land development loans, $27.1 million of acquired commercial real estate non-owner occupied loans, $10.3 million of acquired residential 1-4 family consumer and revolving loans, $3.1 million of acquired commercial real estate owner occupied loans, and the remainder due to other acquired Sandy Spring loans.

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

NPAs include nonaccrual LHFI, which totaled $162.6 million at June 30, 2025, representing an increase of $104.6 million from December 31, 2024. The following table shows the activity in nonaccrual LHFI for the quarters ended (dollars in thousands):

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

Past Due Loans

At June 30, 2025, past due LHFI still accruing interest totaled $77.7 million or 0.28% of total LHFI, compared to $57.7 million or 0.31% of total LHFI at December 31, 2024. Of the total past due LHFI still accruing interest, $39.8 million or 0.15% of total LHFI were loans past due 90 days or more at June 30, 2025, compared to $14.1 million or 0.08% of total LHFI at December 31, 2024.

Troubled Loan Modifications

As of June 30, 2025 and 2024, we had TLMs with an amortized cost basis of $20.2 million and $24.1 million, respectively. There was no material allowance on TLMs for both June 30, 2025 and 2024. As of June 30, 2025 and 2024, there were no material unfunded commitments on loans modified and designated as TLMs.

Net Charge-offs

For the second quarter of 2025, net charge-offs were $666,000 or 0.01% of total average LHFI on an annualized basis, compared to net charge-offs of $1.7 million or 0.04% for the same quarter last year.

Provision for Credit Losses

We recorded a provision for credit losses of $105.7 million for the second quarter of 2025, an increase of $83.9 million compared to the provision for credit losses of $21.8 million recorded during the same quarter of 2024. The provision for credit losses for the second quarter of 2025 reflected a provision of $94.2 million for loan losses and a $11.5 million provision for unfunded commitments. Included in the provision for credit losses for the second quarter of 2025 was $89.5 million of Day 1 initial provision expense on non-PCD loans and $11.4 million on unfunded commitments, each acquired from Sandy Spring. Included in the provision for credit losses for the second quarter of 2024 was $13.2 million of Day 1 initial provision expense on non-PCD loans and $1.4 million on unfunded commitments, each acquired from American National. Outside of Day 1 initial provision expense recorded on non-PCD loans and unfunded commitments acquired from Sandy Spring and American National, the provision for credit losses decreased compared to the same period in the prior year, primarily reflecting the impact of lower net charge-offs in the second quarter of 2025.

Allowance for Credit Losses

At June 30, 2025, the ACL was $342.4 million and included an ALLL of $315.6 million and an RUC of $26.8 million. At April 1, 2025, the initial ACL related to the Sandy Spring acquisition was $129.2 million, consisting of an ALLL of $117.8 million and RUC of $11.4 million. The ALLL included an $89.5 million reserve on acquired non-PCD loans established through provision expense, which represents the CECL “double count” of the non-PCD credit mark, and a $28.3 million reserve on PCD loans. Outside of the initial ACL related to the Sandy Spring acquisition, the ACL at June 30, 2025 increased $19.4 million from December 31, 2024, primarily reflecting the impacts of loan growth and deteriorating macroeconomic forecasts.

The following table summarizes the ACL as of the periods ended (dollars in thousands):

The following table summarizes net charge-off activity by loan segment for the three and six months ended June 30, (dollars in thousands):

(1) Net charge-off rates are annualized and calculated by dividing net charge-offs by average LHFI for the period for each loan category.

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

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

(2)The percentage represents ALLL divided by the total LHFI for each loan category.

The increase in the ALLL from the prior year for the Commercial segment is primarily due to the Sandy Spring acquisition, as well as loan growth and deteriorating macroeconomic forecasts. The increase in the ALLL from the prior year for the Consumer segment is primarily due to the Sandy Spring acquisition, as well as the impact of deteriorating macroeconomic forecasts, partially offset by the run-off in the third-party lending and auto portfolios.

DEPOSITS

As of June 30, 2025, our total deposits were $31.0 billion, an increase of $10.6 billion or 51.8% from December 31, 2024. Total interest-bearing deposits consisted of interest checking accounts, money market accounts, savings, time deposits, and brokered deposits. Our total time deposit balances with customers totaled $5.8 billion and accounted for 25.3% of total interest-bearing customer deposits at June 30, 2025, compared to $4.1 billion and 27.5% at December 31, 2024. We seek to fund increased loan volumes by growing core deposits, but, subject to internal policy limits on the amount of wholesale funding we may maintain, we may use wholesale funding sources to fund shortfalls, if any, or provide additional liquidity. We use purchased brokered deposits as part of our overall liquidity management strategy on an as needed basis, and we purchase such brokered deposits through nationally recognized networks. At June 30, 2025, our brokered deposits totaled $1.2 billion, a $54.3 million decrease from December 31, 2024.

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

(1) Includes uninsured deposits of $11.3 billion and $7.1 billion as of June 30, 2025 and December 31, 2024, respectively, and collateralized deposits of $1.3 billion and $1.1 billion as of June 30, 2025 and December 31, 2024, respectively. Amounts are based on estimated amounts of uninsured deposits as of the reported period.

Maturities of time deposits in excess of FDIC insurance limits were as follows for the quarters ended (dollars in thousands):

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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. Our management reviews our capital adequacy on an ongoing basis with reference to size, composition, and quality of our resources and consistency with regulatory requirements and industry standards. We seek to maintain a capital structure that will assure an adequate level of capital to support anticipated asset growth and to absorb potential losses, while allowing us to effectively leverage our capital to maximize return to shareholders.

Under the Basel III capital rules, we must 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.

The following table summarizes our regulatory capital and related ratios as of the periods ended (2) (dollars in thousands):

(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 June 30, 2025 are estimates and subject to change pending the filing of our FR Y9-C. All other periods are presented as filed.

(+) Refer to “Non-GAAP Financial Measures” 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 more information about our off-balance sheet obligations and cash requirements, refer to “Liquidity” within this Item 2.

NON-GAAP FINANCIAL MEASURES

In this Quarterly Report, we have provided supplemental performance measures determined by methods other than in accordance with GAAP. These non-GAAP financial measures are a supplement to GAAP, which is used to prepare our financial statements, and should not be considered in isolation or as a substitute for comparable measures calculated in accordance with GAAP. In addition, our non-GAAP financial measures may not be comparable to non-GAAP financial measures of other companies. We use the non-GAAP financial measures discussed herein in our analysis of our performance. Management believes that these non-GAAP financial measures provide additional understanding of ongoing operations, enhance the comparability of our results of operations with prior periods and show the effects of significant gains and charges in the periods presented without the impact of items or events that may obscure trends in our underlying performance.

We believe interest and dividend income (FTE), which is used in computing yield on interest-earning assets (FTE), provides valuable additional insight into the yield on interest-earning assets (FTE) by adjusting for differences in the tax treatment of interest income sources. We believe net interest income (FTE) and total revenue (FTE), which are used in computing net interest margin (FTE), provide valuable additional insight into the net interest margin 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.

The following table reconciles non-GAAP financial measures from the most directly comparable GAAP financial measures for the three and six months ended June 30, (dollars in thousands):

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

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):

Adjusted operating measures exclude, as applicable, merger-related costs, deferred tax asset write-down, FDIC special assessments, CECL Day 1 non-PCD loans and RUC provision expense, gain on sale of equity interest in CSP, gain on CRE loan sale, and gain (loss) on sale of securities. We believe these non-GAAP adjusted measures provide investors with important information about the continuing economic results of our operations. Due to the impact of completing the Sandy Spring acquisition in the second quarter of 2025 and the acquisition of American National in the second quarter of 2024, we updated our non-GAAP operating measures beginning in the second quarter of 2025 to exclude the CECL Day 1 non-PCD loans and RUC provision expense. The CECL Day 1 non-PCD loans and RUC provision expense is comprised of the initial provision expense on non-PCD loans, which represents the CECL “double count” of the non-PCD credit mark, and the additional provision for unfunded commitments. We do not view the CECL Day 1 non-PCD loans and RUC provision expense as organic costs to run our business and believe this updated presentation will provide investors with additional information to assist in period-to-period and company-to-company comparisons of operating performance, which will aid investors in analyzing our performance. Prior period non-GAAP operating measures presented in this Quarterly Report have been recast to conform to this updated presentation. The following table reconciles non-GAAP financial measures from the most directly comparable GAAP financial measures for the three and six months ended June 30, (dollars in thousands, except per share amounts):

Adjusted operating noninterest expense excludes, as applicable, expenses related to the amortization of intangible assets, merger-related costs, and FDIC special assessments. Adjusted operating noninterest income excludes, as applicable, gain on sale of equity interest in CSP, gain on CRE loan sale, and gain (loss) on sale of securities. These measures are similar to the measures we use when analyzing corporate performance and are also similar to the measure used for incentive compensation. We believe this adjusted measure provides investors with important information about the continuing economic results of our operations. The following table reconciles non-GAAP financial measures from the most directly comparable GAAP financial measures for the three and six months ended June 30, (dollars in thousands):

Interest Rate Sensitivity

Market risk is the risk of loss arising from adverse changes in the fair value of financial instruments due to changes in interest rates, exchange rates, and equity prices. Our market risk is composed primarily of interest rate risk. Our asset liability management committee is responsible for reviewing our interest rate sensitivity position and establishing policies to monitor and limit exposure to this risk. Our Board of Directors reviews and approves the policies established by our asset liability management committee.

We monitor interest rate risk using three complementary modeling tools: static gap analysis, earnings simulation modeling, and economic value simulation (net present value estimation). Each of these models measures changes in a variety of interest rate scenarios. While each of the interest rate risk models has limitations, taken together, they represent a reasonably comprehensive view of the magnitude of our interest rate risk, the distribution of risk along the yield curve, the level of risk through time, and the amount of exposure to changes in certain interest rate relationships. We use the static gap analysis, which measures aggregate re-pricing values, less often because it does not effectively consider the optionality embedded into many assets and liabilities and, therefore, we do not address it here. We use earnings simulation and economic value simulation models on a regular basis, which more effectively measure the cash flow and optionality impacts, and these models are discussed below.

We determine the overall magnitude of interest sensitivity risk and then we create policies and practices governing asset generation and pricing, funding sources and pricing, and off-balance sheet commitments. These policies and practices are based on management’s expectations regarding future interest rate movements, the states of the national, regional and local economies, and other financial and business risk factors. We use simulation modeling to measure and monitor the effect of various interest rate scenarios and business strategies on our net interest income. This modeling reflects interest rate changes and the related impact on net interest income and net income over specified time horizons.

Earnings Simulation Modeling

Management uses earnings simulation modeling to measure the sensitivity of our net interest income to changes in interest rates. The model calculates an earnings estimate based on current and projected balances and rates. This method is subject to the accuracy of the assumptions that underlie the process, but we believe it provides a better analysis of the sensitivity of earnings to changes in interest rates than other analyses, such as the static gap analysis noted above.

We derive the assumptions used in the model from historical trends and management’s outlook, including expected loan growth, loan prepayment rates, projected loan origination spreads, deposit growth rates, changes to deposit product betas and non-maturity deposit decay rates, and projected yields and rates. These assumptions may not be realized and unanticipated events and circumstances may also occur that cause the assumptions to be inaccurate. The model also does not take into account any future actions of management to mitigate the impact of interest rate changes. Our asset liability management committee monitors the assumptions at least quarterly and periodically adjusts them as it deems appropriate. In the modeling, we assume that all maturities, calls, and prepayments in the securities portfolio are reinvested in like instruments, and we base the MBS prepayment assumptions on industry estimates of prepayment speeds for portfolios with similar coupon ranges and seasoning. We also use different interest rate scenarios and yield curves to measure the sensitivity of earnings to changing interest rates. Interest rates on different asset and liability accounts move differently when the short-term market rate changes and these differences are reflected in the different rate scenarios. We adjust deposit betas, decay rates and loan prepayment speeds periodically in our models for non-maturity deposits and loans.

We use our earnings simulation model to estimate earnings in rate environments where rates are instantaneously shocked up or down around a “most likely” rate scenario, based on implied forward rates and futures curves. The analysis assesses the impact on net interest income over a 12-month period after an immediate increase or “shock” in rates, of 100 bps up to 300 bps. The model, under all scenarios, does not drop the index below zero.

The following table represents the interest rate sensitivity on our net interest income across the rate paths modeled for balances as of the quarterly periods ended:

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If an institution is asset sensitive its assets reprice more quickly than its liabilities and net interest income would be expected to increase in a rising interest rate environment and decrease in a falling interest rate environment. If an institution is liability sensitive its liabilities reprice more quickly than its assets and net interest income would be expected to decrease in a rising interest rate environment and increase in a falling interest rate environment.

From a net interest income perspective, we were less asset sensitive as of June 30, 2025 compared to our positions as of December 31, 2024 and June 30, 2024. This shift is due, in part, to the changing market characteristics of certain loan and deposit products and, in part, due to various other balance sheet strategies. We expect net interest income to increase with an immediate increase or shock in market rates. In a decreasing interest rate environment, we expect a decline in net interest income as interest-earning assets re-price more quickly than interest-bearing deposits.

Economic Value Simulation Modeling

We use economic value simulation modeling to calculate the estimated fair value of assets and liabilities over different interest rate environments. We calculate the economic values based on discounted cash flow analysis. The net economic value of equity is the economic value of all assets minus the economic value of all liabilities. The change in net economic value over different rate environments is an indication of the longer-term earnings capability of the balance sheet. We use the same assumptions in the economic value simulation model as in the earnings simulation model. The economic value simulation model uses instantaneous rate shocks to the balance sheet.

The following table reflects the estimated change in net economic value over different rate environments using economic value simulation for the balances as of the periods ended:

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As of June 30, 2025, our economic value of equity is generally more liability sensitive in a rising interest rate environment compared to our positions as of December 31, 2024 and June 30, 2024, primarily due to the composition of our Consolidated Balance Sheets and also due to the pricing characteristics and assumptions of certain deposits and loans.

Evaluation of Disclosure Controls and Procedures

Management, under the supervision and with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Company’s disclosure controls and procedures as of June 30, 2025. The term “disclosure controls and procedures,” as defined in Rule 13a-15(e) under the Exchange Act, means controls and other procedures that are designed to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Based on this evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded as of June 30, 2025, the Company’s disclosure controls and procedures were effective at the reasonable assurance level.

In designing and evaluating the Company’s disclosure controls and procedures, management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable assurance that the objectives of the disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Changes in Internal Control Over Financial Reporting

There was no change in the Company’s internal control over financial reporting (as such term is defined Rule 13a-15(f) of the Exchange Act) that occurred during the quarter ended June 30, 2025 that materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

During the quarter ended June 30, 2025, there have been no material changes from the risk factors previously disclosed under Part I, Item 1A. “Risk Factors” in our 2024 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 2024 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.