16. INCOME TAXES

The Company files income tax returns in the U.S., the Commonwealth of Virginia, Maryland, and other states. With few exceptions, the Company is no longer subject to U.S. federal or state income tax examinations by tax authorities for years prior to 2022.

Significant components of the Company’s net deferred tax assets and liabilities, which include balances associated with the Sandy Spring acquisition, consist of the following as of December 31, (dollars in thousands):


		2025			2024
Deferred tax assets:
AFS securities		$	74,506		$	87,641
ACL			74,519			42,393
Loan Fair Value Marks			162,104			27,623
Net operating loss ("NOL") carryforwards			50,567			20,399
Tax credit carryforwards ⁽¹⁾			15,375			1,063
Lease liabilities			29,993			18,404
Cash flow hedges			6,066			11,671
Employee compensation and benefit plans			12,113			8,556
Other			7,506			8,810
Total deferred tax assets, gross			432,749			226,560
Less: valuation allowance			(7,802)			(4,419)
Total deferred tax assets, net			424,947			222,141

Deferred tax liabilities:
Premises and equipment			91,852			75,701
Intangibles			75,208			20,233
Lease ROU asset			24,785			16,922
Other			5,502			6,354
Total deferred tax liabilities			197,347			119,210
Net deferred tax assets		$	227,600		$	102,931

⁽¹⁾ Tax credit carryforward was included in the Other line item in the 2024 financial statement presentation.

For more information about the Company’s assessment of deferred tax assets, refer to Note 1 “Summary of Significant Accounting Policies” in this Form 10-K.

During 2025, the Company re-evaluated its net deferred tax assets as a result of the Sandy Spring acquisition and reviewed its business plan considering the Sandy Spring acquisition, as well as current and projected future realizations of state deferred tax items. As a result, the Company concluded it is more likely than not that a portion of certain state net operating loss carryforwards will not be realized and recorded a valuation allowance via a non-cash charge to income tax expense. The valuation allowance increased to $7.8 million at December 31, 2025 from $4.4 million in December 31, 2024, primarily due to the Sandy Spring acquisition and its historical valuation allowance related to net operating losses in certain state filing jurisdictions.

The NOL carryforwards at December 31, were as follows (dollars in thousands):


					Expiration
		2025			Year
NOL carryforwards – federal ⁽¹⁾ ⁽²⁾		$	40,273			2031-2037
NOL carryforwards – federal ⁽¹⁾			25,156			N/A
NOL carryforwards – North Carolina ⁽³⁾			69,908			2030
NOL carryforwards – Maryland ⁽⁴⁾			67,055			N/A
NOL carryforwards – Virginia ⁽⁴⁾			58,278			N/A
NOL carryforwards – Delaware ⁽⁵⁾			33,713			N/A
Tax credit carryforwards ⁽⁶⁾			15,375			N/A

N/A – not applicable as the NOL can be carried forward indefinitely

⁽¹⁾ The Company acquired a portion of these carryforwards and will be subject to limitations that could limit the

Company’s utilization in future periods.

⁽²⁾ Balance includes recognized built in loss carryforwards that are subject to the same limitations as net operating loss

carryforwards.

⁽³⁾ Balance is pre-tax and includes the expected effect of the North Carolina rate reprice.

⁽⁴⁾ Balance is pre-tax, pre-apportionment, and net of the valuation allowance.

⁽⁵⁾ Balance is pre-tax and pre-apportionment.

⁽⁶⁾ The Company generated tax credits in excess of allowable based on taxable income limitations. The amount is carried forward indefinitely until there is sufficient taxable income to absorb the utilization of the tax credits.

The Company analyzed the tax positions taken or expected to be taken in its tax returns for the periods ending December 31, 2025, 2024, and 2023, and had no material liability related to uncertain tax positions in accordance with applicable ASC 740, Income Taxes.

The components of income tax expense (benefit) for the years ended December 31, were as follows (dollars in thousands):


		2025			2024			2023
Current income tax expense:
Federal		$	9,743		$	16,465		$	33,374
State			3,359			53			2,538
Total current income tax expense			13,102			16,518			35,912
Deferred tax expense (benefit):
Federal			52,383			24,720			3,646
State			(2,209)			9,425			(1,475)
Total deferred income tax expense ⁽¹⁾			50,174			34,145			2,171
Total income tax expense		$	63,276		$	50,663		$	38,083

⁽¹⁾ Does not reflect the deferred tax effects of unrealized gains and losses on AFS securities, unrealized gains and losses

for AFS securities transferred to HTM, unrealized gains and losses on BOLI or changes in fair values of cash flow hedges that are included in Accumulated Other Comprehensive (Loss) Income. Refer to Note 12 “Stockholders’ Equity” in this Form 10-K for additional information.

Income tax expense for 2025, 2024, and 2023 varies from the amount computed by applying the statutory U.S. federal income tax rate to income before income taxes. A reconciliation between the expected and actual income tax expense, and resulting effective tax rate, is presented in the following table for the years ended December 31, (dollars in thousands):


		2025				2024				2023
			Amount	Percent			Amount	Percent			Amount	Percent
Expected federal income tax expense		$	70,725	21.0	%	$	54,557	21.0	%	$	50,361	21.0	%
State income tax (benefit) expense, net of federal income tax effect - Virginia			(65)	NM			8,490	3.3			194	0.1
State income tax (benefit) expense, net of federal income tax effect - Other ^{(1), (2)}			(1,113)	(0.3)			956	0.4			336	0.1
Tax credits			(2,877)	(0.9)			(1,475)	(0.6)			(767)	(0.3)
Valuation allowance changes			—	—			—	—			—	—
Non-taxable and non-deductible items
Tax-exempt income, net of expense disallowance			(11,518)	(3.4)			(11,104)	(4.2)			(11,123)	(4.6)
Bank owned life insurance ⁽³⁾			(4,414)	(1.3)			(3,282)	(1.3)			(2,469)	(1.0)
Executive compensation ⁽³⁾			4,532	1.3			1,305	0.5			405	0.2
FDIC expense ⁽³⁾			4,038	1.2			1,340	0.5			852	0.3
Other non-taxable and non-deductible items			2,520	0.7			1,362	0.5			254	0.1
Unrecognized tax benefits ⁽⁴⁾			1,594	0.5			—	—			—	—
Other adjustments			(146)	NM			(1,486)	(0.6)			40	NM
Provision for income taxes and effective income tax rate		$	63,276	18.8	%	$	50,663	19.5	%	$	38,083	15.9	%

⁽¹⁾ State taxes in Maryland made up the majority (greater than 50 percent) of the tax effect in this category in 2025.

⁽²⁾ State taxes in Pennsylvania, Maryland, North Carolina, and South Carolina made up the majority (greater than 50 percent) of the tax effect in this category in 2023.

⁽³⁾ Includes the impact of the Sandy Spring acquisition.

⁽⁴⁾ Unrecognized tax benefits reflect potential exposure to certain state income tax filing obligations where the Company potentially has established a nexus but does not currently file income tax returns. The Company continues to monitor state tax developments and filing requirements for compliance and to manage related risks.

NM = Not Meaningful

The following table presents income taxes paid (net refunds) for the years ended December 31, (dollars in thousands):


		2025			2024			2023
Federal		$	415		$	2,500		$	17,149
State and local income tax, net of federal income tax effect ⁽¹⁾
Maryland			2,736			—			—
Virginia			553			—			—
Other			515			1,254			2,347
Total income taxes paid		$	4,219		$	3,754		$	19,496

⁽¹⁾ State and local jurisdictions were below the threshold for disaggregation for the years ended December 31, 2024 and 2023.

For the years ended December 31, 2025, 2024, and 2023 investment tax credits totaled approximately $12.1 million, $9.3 million, and $4.8 million, respectively.

Historical Timeline

Fiscal Year	Filed
2025	Feb 26, 2026	Showing above
2024	Feb 27, 2025

2023	Feb 22, 2024

2022	Feb 24, 2023

2021	Feb 25, 2022

2020	Feb 26, 2021

2019	Feb 25, 2020

2018	Feb 27, 2019

2017	Feb 27, 2018

2016	Feb 28, 2017

2015	Feb 25, 2016

About Income Taxes Disclosures

The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.

Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.

Atlantic Union Bankshares Corp Income Taxes Disclosure

Historical Timeline

About Income Taxes Disclosures

Other Available Disclosures