UNITED STATES
 
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 2018
OR
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 0-20293
UNION BANKSHARES CORPORATION
(Exact name of registrant as specified in its charter)
VIRGINIA
54-1598552
(State or other jurisdiction of
(I.R.S. Employer
incorporation or organization)
Identification No.)
 1051 East Cary Street
Suite 1200
Richmond, Virginia 23219
(Address of principal executive offices) (Zip Code)
 
(804) 633-5031
(Registrant’s telephone number, including area code)
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer
x
Accelerated filer
¨
Non-accelerated filer
¨
(Do not check if a smaller reporting company)
 
 
Smaller reporting company
¨
 
 
Emerging growth company
¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange
Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
 
Yes ¨ No x

The number of shares of common stock outstanding as of May 2, 2018 was 65,909,642.


UNION BANKSHARES CORPORATION
FORM 10-Q
INDEX
 
ITEM
 
 
PAGE
 
 
 
 
 
 
 
 
 
 
 
Item 1.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2.
 
 
 
 
 
Item 3.
 
 
 
 
 
Item 4.
 
 
 
 
 
 
 
 
 
 
 
 
Item 1.
 
 
 
 
 
Item 1A.
 
 
 
 
 
Item 2.
 
 
 
 
 
Item 6.
 
 
 
 
 
 
 








Glossary of Acronyms and Defined Terms
 
2017 Form 10-K
–
Annual Report on Form 10-K for the year ended December 31, 2017
AFS
–
Available for sale
ALCO
–
Asset Liability Committee
ALL
–
Allowance for loan losses
ASC
–
Accounting Standards Codification
ASU
–
Accounting Standards Update
ATM
–
Automated teller machine
the Bank
–
Union Bank & Trust
BOLI
–
Bank-owned life insurance
bps
–
Basis points
CECL
–
Current expected credit losses
the Company
–
Union Bankshares Corporation and its subsidiaries
DHFB
–
Dixon, Hubard, Feinour, & Brown, Inc.
Dodd-Frank Act
–
Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010
EPS
–
Earnings per share
Exchange Act
–
Securities Exchange Act of 1934
FASB
–
Financial Accounting Standards Board
FDIC
–
Federal Deposit Insurance Corporation
Federal Reserve
–
Board of Governors of the Federal Reserve System
Federal Reserve Bank
–
Federal Reserve Bank of Richmond
FHLB
–
Federal Home Loan Bank of Atlanta
U.S. GAAP or GAAP
–
Accounting principles generally accepted in the United States
HELOC
–
Home equity line of credit
HTM
–
Held to maturity
IDC
–
Interactive Data Corporation
LIBOR
–
London Interbank Offered Rate
NPA
–
Nonperforming assets
OCI
–
Other comprehensive income
OREO
–
Other real estate owned
OTTI
–
Other than temporary impairment
PCI
–
Purchased credit impaired
ROA
–
Return on average assets
ROE
–
Return on average common equity
ROTCE
–
Return on average tangible common equity
SEC
–
Securities and Exchange Commission
Tax Act
–
Tax Cuts and Jobs Act
TDR
–
Troubled debt restructuring
UMG
–
Union Mortgage Group, Inc.
Xenith
–
Xenith Bankshares, Inc.



PART I – FINANCIAL INFORMATION
 
ITEM 1 – FINANCIAL STATEMENTS
 
UNION BANKSHARES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share data)
 
March 31,
2018
 
December 31,
2017
 
(Unaudited)
 
(Audited)
ASSETS
 

 
 

Cash and cash equivalents:
 

 
 

Cash and due from banks
$
137,761

 
$
117,586

Interest-bearing deposits in other banks
196,456

 
81,291

Federal funds sold
8,246

 
496

Total cash and cash equivalents
342,463

 
199,373

Securities available for sale, at fair value
1,253,179

 
974,222

Securities held to maturity, at carrying value
198,733

 
199,639

Restricted stock, at cost
105,261

 
75,283

Loans held for sale, at fair value
27,727

 
40,662

Loans held for investment, net of deferred fees and costs
9,805,723

 
7,141,552

Less allowance for loan losses
40,629

 
38,208

Net loans held for investment
9,765,094

 
7,103,344

Premises and equipment, net
163,076

 
119,981

Other real estate owned, net of valuation allowance
10,099

 
6,636

Goodwill
724,106

 
298,528

Amortizable intangibles, net
50,092

 
14,803

Bank owned life insurance
258,381

 
182,854

Other assets
251,081

 
99,854

Total assets
$
13,149,292

 
$
9,315,179

LIABILITIES
 

 
 

Noninterest-bearing demand deposits
$
2,057,425

 
$
1,502,208

Interest-bearing deposits
7,620,530

 
5,489,510

Total deposits
9,677,955

 
6,991,718

Securities sold under agreements to repurchase
31,593

 
49,152

Other short-term borrowings
1,022,000

 
745,000

Long-term borrowings
481,433

 
425,262

Other liabilities
105,234

 
57,718

Total liabilities
11,318,215

 
8,268,850

Commitments and contingencies (Note 7)


 


STOCKHOLDERS' EQUITY
 

 
 

Common stock, $1.33 par value, shares authorized 100,000,000; issued and outstanding, 65,895,421 shares and 43,743,318 shares, respectively.
87,091

 
57,744

Additional paid-in capital
1,373,997

 
610,001

Retained earnings
382,299

 
379,468

Accumulated other comprehensive income
(12,310
)
 
(884
)
Total stockholders' equity
1,831,077

 
1,046,329

Total liabilities and stockholders' equity
$
13,149,292

 
$
9,315,179

See accompanying notes to consolidated financial statements.

-2-

UNION BANKSHARES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(Dollars in thousands, except share and per share data)
 
Three Months Ended
 
March 31,
2018
 
March 31,
2017
Interest and dividend income:
 
 
 
Interest and fees on loans
$
112,927

 
$
68,084

Interest on deposits in other banks
647

 
71

Interest and dividends on securities:
 
 
 
Taxable
7,072

 
4,923

Nontaxable
4,008

 
3,562

Total interest and dividend income
124,654

 
76,640

Interest expense:
 
 
 
Interest on deposits
11,212

 
5,077

Interest on short-term borrowings
4,249

 
950

Interest on long-term borrowings
5,446

 
4,046

Total interest expense
20,907

 
10,073

Net interest income
103,747

 
66,567

Provision for credit losses
3,500

 
2,122

Net interest income after provision for credit losses
100,247

 
64,445

Noninterest income:
 
 
 
Service charges on deposit accounts
5,894

 
4,516

Other service charges and fees
1,233

 
1,139

Interchange fees, net
4,489

 
3,582

Fiduciary and asset management fees
3,056

 
2,794

Mortgage banking income, net
2,041

 
2,025

Gains on securities transactions, net
213

 
481

Bank owned life insurance income
1,667

 
2,125

Loan-related interest rate swap fees
718

 
1,180

Other operating income
2,998

 
997

Total noninterest income
22,309

 
18,839

Noninterest expenses:
 
 
 
Salaries and benefits
42,329

 
32,168

Occupancy expenses
6,310

 
4,903

Furniture and equipment expenses
3,033

 
2,603

Printing, postage, and supplies
1,073

 
1,150

Communications expense
1,097

 
910

Technology and data processing
4,649

 
3,900

Professional services
2,597

 
1,658

Marketing and advertising expense
1,443

 
1,740

FDIC assessment premiums and other insurance
2,185

 
706

Other taxes
2,886

 
2,022

Loan-related expenses
1,471

 
1,329

OREO and credit-related expenses
1,532

 
541

Amortization of intangible assets
3,181

 
1,637

Training and other personnel costs
1,027

 
969

Merger-related costs
27,712

 
—

Other expenses
1,483

 
1,159

Total noninterest expenses
104,008

 
57,395

Income before income taxes
18,548

 
25,889

Income tax expense
1,909

 
6,765

Net income
$
16,639

 
$
19,124

Basic earnings per common share
$
0.25

 
$
0.44

Diluted earnings per common share
$
0.25

 
$
0.44

Dividends declared per common share
$
0.21

 
$
0.20

Basic weighted average number of common shares outstanding
65,554,630

 
43,654,498

Diluted weighted average number of common shares outstanding
65,636,262

 
43,725,923

See accompanying notes to consolidated financial statements.

-3-

UNION BANKSHARES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
(Dollars in thousands)
 
 
Three Months Ended
March 31,
 
2018
 
2017
 
 
 
 
Net income
$
16,639

 
$
19,124

Other comprehensive income (loss):
 

 
 

Cash flow hedges:
 

 
 

Change in fair value of cash flow hedges
1,964

 
(31
)
Reclassification adjustment for losses (gains) included in net income (net of tax, $66 and $97 for the three months ended March 31, 2018 and 2017, respectively)
249

 
180

AFS securities:
 

 
 

Unrealized holding gains (losses) arising during period (net of tax, $3,506 and $1,958 for the three months ended March 31, 2018 and 2017, respectively)
(13,191
)
 
3,637

Reclassification adjustment for losses (gains) included in net income (net of tax, $45 and $168 for the three months ended March 31, 2018 and 2017, respectively)
(168
)
 
(313
)
HTM securities:
 

 
 

Reclassification adjustment for accretion of unrealized gain on AFS securities transferred to HTM (net of tax, $80 and $99 for the three months ended March 31, 2018 and 2017, respectively)
(299
)
 
(184
)
Bank owned life insurance:
 
 
 
  Reclassification adjustment for losses included in net income
19

 
109

Other comprehensive income (loss)
(11,426
)
 
3,398

Comprehensive income
$
5,213

 
$
22,522

See accompanying notes to consolidated financial statements.

-4-

UNION BANKSHARES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 2018 AND 2017
(Dollars in thousands, except share and per share amounts)
 
 
Common
Stock
 
Additional
Paid-In
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Total
 
 
 
 
 
 
 
 
 
 
Balance - December 31, 2016
$
57,506

 
$
605,397

 
$
341,938

 
$
(3,809
)
 
$
1,001,032

Net income - 2017
 

 
 

 
19,124

 
 

 
19,124

Other comprehensive income (net of taxes of $1,788)
 

 
 

 
 

 
3,398

 
3,398

Dividends on common stock ($0.20 per share)
 

 
 

 
(8,727
)
 
 

 
(8,727
)
Issuance of common stock under Equity Compensation Plans (29,008 shares)
39

 
489

 
 

 
 

 
528

Issuance of common stock for services rendered (4,856 shares)
6

 
170

 
 

 
 

 
176

Vesting of restricted stock, net of shares held for taxes, under Equity Compensation Plans (58,679 shares)
78

 
(1,126
)
 
 

 
 

 
(1,048
)
Stock-based compensation expense
 

 
1,148

 
 

 
 

 
1,148

Balance - March 31, 2017
$
57,629

 
$
606,078

 
$
352,335

 
$
(411
)
 
$
1,015,631

 
 
 
 
 
 
 
 
 
 
Balance - December 31, 2017
$
57,744

 
$
610,001

 
$
379,468

 
$
(884
)
 
$
1,046,329

Net income - 2018
 

 
 

 
16,639

 
 

 
16,639

Other comprehensive income (net of taxes of $3,565)
 

 
 

 
 

 
(11,426
)
 
(11,426
)
Issuance of common stock in regard to acquisition (21,922,077 shares)(1)
29,156

 
765,653

 
 
 
 
 
794,809

Dividends on common stock ($0.21 per share)
 

 
 

 
(13,808
)
 
 

 
(13,808
)
Issuance of common stock under Equity Compensation Plans (68,495 shares)
91

 
836

 
 

 
 

 
927

Issuance of common stock for services rendered (4,914 shares)
7

 
177

 
 

 
 

 
184

Vesting of restricted stock, net of shares held for taxes, under Equity Compensation Plans (69,562 shares)
93

 
(2,363
)
 
 

 
 

 
(2,270
)
Cancellation of warrants
 
 
(1,530
)
 
 
 
 
 
(1,530
)
Stock-based compensation expense
 

 
1,223

 
 

 
 

 
1,223

Balance - March 31, 2018
$
87,091

 
$
1,373,997

 
$
382,299

 
$
(12,310
)
 
$
1,831,077

(1) Includes conversion of Xenith warrants to Union warrants.
See accompanying notes to consolidated financial statements.

-5-

UNION BANKSHARES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 2018 AND 2017
(Dollars in thousands)
 
2018
 
2017
Operating activities:
 

 
 

Net income
$
16,639

 
$
19,124

Adjustments to reconcile net income to net cash and cash equivalents provided by (used in) operating activities:
 

 
 

Depreciation of premises and equipment
3,480

 
2,645

Writedown of OREO
759

 
238

Amortization, net
3,776

 
3,396

Amortization (accretion) related to acquisition, net
(2,691
)
 
144

Provision for credit losses
3,500

 
2,122

Gains on securities transactions, net
(213
)
 
(481
)
BOLI income
(1,667
)
 
(2,125
)
Decrease (increase) in loans held for sale, net
12,935

 
16,511

Gains on sales of other real estate owned, net
(21
)
 
(36
)
Losses (gains) on sales of premises, net
(153
)
 
26

Stock-based compensation expenses
1,223

 
1,148

Issuance of common stock for services
184

 
176

Net decrease (increase) in other assets
(18,216
)
 
2,241

Net increase in other liabilities
16,228

 
5,347

Net cash and cash equivalents provided by (used in) operating activities
35,763

 
50,476

Investing activities:
 

 
 

Purchases of securities available for sale and restricted stock
(154,512
)
 
(53,782
)
Purchases of securities held to maturity
—

 
(4,878
)
Proceeds from sales of securities available for sale and restricted stock
115,850

 
21,306

Proceeds from maturities, calls and paydowns of securities available for sale
33,909

 
26,167

Proceeds from maturities, calls and paydowns of securities held to maturity
—

 
1,001

Net increase in loans held for investment
(201,369
)
 
(246,258
)
Net increase in premises and equipment
(902
)
 
(3,156
)
Proceeds from sales of other real estate owned
1,157

 
206

Cash paid in acquisition
(6,170
)
 
—

Cash acquired in acquisitions
174,218

 
—

Net cash and cash equivalents provided by (used in) investing activities
(37,819
)
 
(259,394
)
Financing activities:
 

 
 

Net increase in noninterest-bearing deposits
43,846

 
97,174

Net increase in interest-bearing deposits
93,540

 
137,532

Net increase (decrease) in short-term borrowings
24,441

 
(9,694
)
Cash paid for contingent consideration
—

 
(2,265
)
Cash dividends paid - common stock
(13,808
)
 
(8,727
)
Cancellation of warrants
(1,530
)
 
—

Issuance of common stock
927

 
528

Vesting of restricted stock, net of shares held for taxes
(2,270
)
 
(1,048
)
Net cash and cash equivalents provided by (used in) financing activities
145,146

 
213,500

Increase (decrease) in cash and cash equivalents
143,090

 
4,582

Cash and cash equivalents at beginning of the period
199,373

 
179,237

Cash and cash equivalents at end of the period
$
342,463

 
$
183,819







-6-

UNION BANKSHARES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 2018 AND 2017
(Dollars in thousands)
 
2018
 
2017
Supplemental Disclosure of Cash Flow Information
 
 
 
Cash payments for:
 
 
 
Interest
$
18,011

 
$
8,141

Income taxes
—

 
—

 
 
 
 
Supplemental schedule of noncash investing and financing activities
 
 
 
Transfers between loans and OREO
(54
)
 
(71
)
Issuance of common stock in exchange for net assets in acquisition
794,809

 
—

 
 
 
 
Transactions related to acquisitions
 
 
 
Assets acquired
3,249,420

 
—

Liabilities assumed
2,874,018

 
—

See accompanying notes to consolidated financial statements.

-7-

UNION BANKSHARES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)


-8-

1. ACCOUNTING POLICIES

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Significant inter-company accounts and transactions have been eliminated in consolidation.

The unaudited consolidated financial statements have been prepared in accordance with U.S. GAAP for interim financial information and follow general practice within the banking industry. Accordingly, the unaudited consolidated financial statements do not include all the information and footnotes required by U.S. GAAP for complete financial statements; however, in the opinion of management, all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation of the results of the interim periods presented have been made. The results of operations for the interim periods are not necessarily indicative of the results that may be expected for the full year.
 
These financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s 2017 Form 10-K. Certain prior period amounts have been reclassified to conform to current period presentation.

Business Combinations
On January 1, 2018, the Company completed the acquisition of Xenith, a bank holding company based in Richmond, Virginia, for a purchase price of approximately $801.0 million. Under the terms of the merger agreement, Xenith’s common stockholders received 0.9354 shares of the Company’s common stock in exchange for each share of Xenith’s common stock, resulting in the Company issuing 21,922,077 shares of the Company's common stock. In addition, the Company paid $6.2 million in exchange for Xenith's outstanding options.

In connection with the acquisition, the Company recorded $425.6 million in goodwill and $38.5 million of amortizable assets, which relate to core deposit intangibles. The goodwill is not expected to be deductible for tax purposes. The Company currently estimates that these intangibles assets will be amortized over 10 years using sum-of-years digits. The transaction was accounted for using the acquisition method of accounting and, accordingly, assets acquired, liabilities assumed, and consideration exchanged were recorded at estimated fair values on the acquisition date. Fair values are preliminary and subject to refinement for up to one year after the closing date of the acquisition.

Affordable Housing Entities
The Company invests in private investment funds that make equity investments in multifamily affordable housing properties that provide affordable housing tax credits for these investments. The activities of these entities are financed with a combination of invested equity capital and debt. For the three months ended March 31, 2018 and March 31, 2017, the Company recognized amortization of $235,000 and $223,000, respectively, and tax credits of $283,000 and $309,000, respectively, associated with these investments within “Income tax expense” on the Company’s Consolidated Statements of Income. The carrying value of the Company’s investments in these qualified affordable housing projects was $11.6 million and $11.0 million as of March 31, 2018 and December 31, 2017, respectively. At March 31, 2018 and December 31, 2017, the Company's recorded liability totaled $8.3 million and $7.3 million, respectively, for the related unfunded commitments, which are expected to be paid from 2018 to 2019.
 
Adoption of New Accounting Standards
On January 1, 2018, the Company adopted ASU No. 2014-09, “Revenue from Contracts with Customers: Topic 606” and all subsequent amendments to the ASU (“Topic 606”). This ASU revised guidance for the recognition, measurement, and disclosure of revenue from contracts with customers. The guidance, as amended, is applicable to all entities and replaces a significant portion of existing industry and transaction-specific revenue recognition rules with a more principles-based recognition model. Most revenue associated with financial instruments, including interest income, loan origination fees, and credit card fees, is outside the scope of the guidance. Gains and losses on investment securities, derivatives, and sales of financial instruments are similarly excluded from the scope. The Company adopted this ASU using the modified retrospective approach, which requires a cumulative effect adjustment to retained earnings as of the beginning of the reporting period in which the entity first applies the new guidance. The adoption of ASU No. 2016-09 did not have a material impact on the Company’s consolidated financial results but did result in expanded disclosures related to noninterest income and enhanced qualitative disclosures on the revenues within the scope of the new guidance. Refer to Note 11 “Revenue" for further discussion on the Company's accounting policies for revenue sources within the scope of ASC 606.
On January 1, 2018, the Company adopted ASU No. 2016-01, “Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.” This ASU requires an entity to, among other things: (i) measure equity investments at fair value through net income, with certain exceptions; (ii) present in OCI the changes in

-9-

instrument-specific credit risk for financial liabilities measured using the fair value option; (iii) present financial assets and financial liabilities by measurement category and form of financial asset; (iv) calculate the fair value of financial instruments for disclosure purposes based on an exit price and; (v) assess a valuation allowance on deferred tax assets related to unrealized losses of AFS debt securities in combination with other deferred tax assets. The ASU provides an election to subsequently measure certain nonmarketable equity investments at cost less any impairment and adjusted for certain observable price changes. The ASU also requires a qualitative impairment assessment of such equity investments and amends certain fair value disclosure requirements. The adoption of ASU 2016-01 did not have a material impact on the Company’s consolidated financial statements and resulted in enhancements to the financial instrument disclosures.

Recent Accounting Pronouncements
In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842).” This ASU requires lessees to put most leases on their balance sheets, but recognize expenses in the income statement in a manner similar to today’s accounting. The guidance also eliminates the real estate-specific provisions and changes the guidance on sale-leaseback transactions, initial direct costs, and lease executory costs for all entities. For lessors, this ASU modifies the classification criteria and the accounting for sales-type and direct financing leases. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted. The Company is currently working to identify the complete lease population, including potential embedded leases. The adoption of this standard is expected to result in additional assets and liabilities, as the Company will be required to recognize operating leases on the Consolidated Balance Sheet. Other implementation matters to be addressed include, but are not limited to, the determination of effects on the financial and capital ratios and the quantification of the impacts that this accounting guidance will have on the Company's consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” This ASU updates the existing guidance to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. The amendment replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The CECL model will replace the Company's current accounting for PCI and impaired loans. The guidance also amends the AFS debt securities OTTI model. The amendment is effective for fiscal years beginning after December 15, 2019. The Company is currently assessing the requirements and necessary changes to the existing credit loss estimation methods and identifying a complete set of data requirements and sources. The Company is currently evaluating the impact ASU No. 2016-13 will have on its consolidated financial statements. This guidance may result in material changes in the Company's accounting for credit losses on financial instruments.

In August 2017, the FASB issued ASU No. 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities.” This ASU relates to any entity that elects to apply hedge accounting in accordance with current GAAP. The amendment simplifies the application of the hedge accounting guidance and improves the financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial statements. The targeted improvements in ASU No. 2017-12 will allow the Company a one-time transfer of certain debt securities from HTM to AFS. The amendments will be effective for the Company for annual periods, and interim periods within those annual periods, beginning after December 15, 2018. Early adoption is permitted. The Company plans to early adopt this standard in the second quarter of 2018 using the modified retrospective approach. As part of this adoption, the Company plans to make the one time election to transfer eligible HTM securities to the AFS category in order to optimize the investment portfolio management for capital and risk management considerations. The Company plans to transfer HTM securities with a carrying amount of approximately $200 million, which will result in an impact to accumulated other comprehensive income. The consolidated financial statements for the quarter ended June 30, 2018, will also include a cumulative effect adjustment to the opening balance of retained earnings to reflect the application of the new guidance related to the fair value hedges. The Company is in the process of developing the required disclosures, which will be included in its second quarter 2018 Quarterly Report on Form 10-Q.
   
In February 2018, the FASB issued ASU No. 2018-02, “Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.” This ASU allows for a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Act and requires certain disclosures about the stranded tax effects. The amendments will be effective for the Company for annual periods, and interim periods within those annual periods, beginning after December 15, 2018. Early adoption is permitted. The Company plans to adopt this guidance in 2018 via the retrospective approach applying the effect of the change to the date of the enacted Tax Act, which was December 22, 2017. The Company has concluded the adoption of ASU No. 2018-02 will not have a material impact on its consolidated financial statements.

-10-



-11-

2. ACQUISITIONS

On January 1, 2018, the Company completed its acquisition of Xenith, a bank holding company based in Richmond, Virginia. Xenith's common stockholders received 0.9354 shares of the Company's common stock in exchange for each share of Xenith's common stock, resulting in the Company issuing 21,922,077 shares of the Company's common stock at a fair value of $794.8 million. In addition, the Company paid $6.2 million in exchange for Xenith's outstanding stock options.

The transaction was accounted for using the acquisition method of accounting and, accordingly, assets acquired, liabilities assumed, and consideration exchanged were recorded at estimated fair values on the acquisition date. Fair values are preliminary and subject to refinement for up to one year after the closing date of the acquisition, in accordance with ASC 350, Intangibles-Goodwill and Other. The following table provides a preliminary assessment of the consideration transferred, assets acquired, and liabilities assumed as of the date of the acquisition (dollars in thousands):
Purchase Price:
 
 
Fair value of shares of Union common stock issued & warrants converted
 
$
794,809

Cash paid for Xenith options
 
6,170

Total purchase price
 
$
800,979

 
 
 
Fair value of assets acquired:
 
 
Cash and cash equivalents
$
174,218

 
Securities available for sale
295,782

 
Restricted stock, at cost
27,569

 
Net loans
2,458,981

 
Premises and equipment
45,520

 
OREO
5,412

 
Core deposit intangibles
38,470

 
Other assets
203,468

 
Total assets
$
3,249,420

 
 
 
 
Fair value of liabilities assumed:
 
 
Deposits
$
2,549,683

 
Other short-term borrowings
235,000

 
Borrowings
55,542

 
Other liabilities
33,793

 
Total liabilities
$
2,874,018

 
 
 
 
Net assets acquired
 
$
375,402

Preliminary goodwill
 
$
425,577


The acquired loans were recorded at fair value at the acquisition date without carryover of Xenith’s previously established allowance for loan losses. The fair value of the loans was determined using market participant assumptions in estimating the amount and timing of both principal and interest cash flows expected to be collected on the loans and leases and then applying a market-based discount rate to those cash flows. In this regard, the acquired loans were segregated into pools based on loan type and credit risk. Loan type was determined based on collateral type, purpose, and lien position. Credit risk characteristics included risk rating groups (pass rated loans and adversely classified loans), and past due status. For valuation purposes, these pools were further disaggregated by maturity, pricing characteristics (e.g., fixed-rate, adjustable-rate) and re-payment structure (e.g., interest only, fully amortizing, balloon). If new information is obtained about facts and circumstances about expected cash flows that existed as of the acquisition date, management will adjust fair values in accordance with accounting for business combinations.

The acquired loans were divided into loans with evidence of credit quality deterioration which are accounted for under ASC 310-30, Receivables - Loans and Debt Securities Acquired with Deteriorated Credit Quality, (acquired impaired) and loans that

-12-

do not meet these criteria, which are accounted for under ASC 310-20, Receivables - Nonrefundable Fees and Other Costs, (acquired performing). The fair values of the acquired performing loans were $2.4 billion and the fair values of the acquired impaired loans were $68.5 million. The gross contractually required principal and interest payments receivable for acquired performing loans was $2.7 billion. The best estimate of contractual cash flows not expected to be collected related to the acquired performing loans is $22.2 million.

The following table presents the acquired impaired loans receivable at the acquisition date (dollars in thousands):
Contractually required principal and interest payments
$
97,123

Nonaccretable difference
(16,422
)
Cash flows expected to be collected
80,701

Accretable difference
(12,225
)
Fair value of loans acquired with a deterioration of credit quality
$
68,476


The following table presents certain pro forma information as if Xenith had been acquired on January 1, 2017. These results combine the historical results of Xenith in the Company's Consolidated Statements of Income and, while certain adjustments were made for the estimated impact of certain fair value adjustments and other acquisition-related activity, they are not indicative of what would have occurred had the acquisition taken place on January 1, 2017. In particular, no adjustments have been made to eliminate the amount of Xenith’s provision for credit losses that would not have been necessary had the acquired loans been recorded at fair value as of January 1, 2017. Pro forma adjustments below include the net impact of accretion for 2017 and the elimination of merger-related costs for 2018. The Company expects to achieve further operating cost savings and other business synergies, including branch closures, as a result of the acquisition which are not reflected in the pro forma amounts below (dollars in thousands):
 
Pro forma for the three months ended
 
March 31,
 
2018
 
2017
 
(unaudited)
 
(unaudited)
Total revenues (1)
$
126,056

 
$
116,733

Net income
$
38,875

 
$
25,921

Earnings per share
$
0.59

 
$
0.40

(1) Includes net interest income and noninterest income.

Merger-related costs associated with the acquisition of Xenith were $27.7 million for the three months ended March 31, 2018; no merger-related costs were incurred for the three months ended March 31, 2017. Such costs include legal and accounting fees, lease and contract termination expenses, system conversion, and employee severances, which have been expensed as incurred.

-13-

3. SECURITIES 

Available for Sale
The amortized cost, gross unrealized gains and losses, and estimated fair values of securities available for sale as of March 31, 2018 and December 31, 2017 are summarized as follows (dollars in thousands):
 
 
Amortized
 
Gross Unrealized
 
Estimated
 
Cost
 
Gains
 
(Losses)
 
Fair Value
March 31, 2018
 

 
 

 
 

 
 

Obligations of states and political subdivisions
$
365,816

 
$
3,002

 
$
(4,179
)
 
$
364,639

Corporate bonds
122,903

 
1,175

 
(938
)
 
123,140

Mortgage-backed securities
767,366

 
1,807

 
(14,761
)
 
754,412

Other securities
11,120

 
—

 
(132
)
 
10,988

Total available for sale securities
$
1,267,205

 
$
5,984

 
$
(20,010
)
 
$
1,253,179

 
 
 
 
 
 
 
 
December 31, 2017
 

 
 

 
 

 
 

Obligations of states and political subdivisions
$
295,546

 
$
6,842

 
$
(564
)
 
$
301,824

Corporate bonds
113,625

 
1,131

 
(876
)
 
113,880

Mortgage-backed securities
552,431

 
2,596

 
(6,169
)
 
548,858

Other securities
9,737

 
—

 
(77
)
 
9,660

Total available for sale securities
$
971,339

 
$
10,569

 
$
(7,686
)
 
$
974,222

 
The following table shows the gross unrealized losses and fair value (dollars in thousands) of the Company’s available for sale securities with unrealized losses that are not deemed to be other-than-temporarily impaired as of March 31, 2018 and December 31, 2017. These are aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position.
 
 
Less than 12 months
 
More than 12 months
 
Total
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
March 31, 2018
 

 
 

 
 

 
 

 
 

 
 

Obligations of states and political subdivisions
$
150,366

 
$
(3,288
)
 
$
16,413

 
$
(891
)
 
$
166,779

 
$
(4,179
)
Mortgage-backed securities
531,141

 
(10,089
)
 
139,217

 
(4,672
)
 
670,358

 
(14,761
)
Corporate bonds and other securities
21,775

 
(156
)
 
37,591

 
(914
)
 
59,366

 
(1,070
)
Total available for sale securities
$
703,282

 
$
(13,533
)
 
$
193,221

 
$
(6,477
)
 
$
896,503

 
$
(20,010
)
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2017
 

 
 

 
 

 
 

 
 

 
 

Obligations of states and political subdivisions
$
25,790

 
$
(132
)
 
$
16,934

 
$
(432
)
 
$
42,724

 
$
(564
)
Mortgage-backed securities
298,439

 
(3,267
)
 
136,298

 
(2,902
)
 
434,737

 
(6,169
)
Corporate bonds and other securities
10,976

 
(99
)
 
44,408

 
(854
)
 
55,384

 
(953
)
Total available for sale securities
$
335,205

 
$
(3,498
)
 
$
197,640

 
$
(4,188
)
 
$
532,845

 
$
(7,686
)
 
As of March 31, 2018, there were $193.2 million, or 74 issues, of individual available for sale securities that had been in a continuous loss position for more than 12 months and had an aggregate unrealized loss of $6.5 million. As of December 31, 2017, there were $197.6 million, or 71 issues, of individual securities that had been in a continuous loss position for more than 12 months and had an aggregate unrealized loss of $4.2 million. The Company has determined that these securities are temporarily impaired at March 31, 2018 and December 31, 2017 for the reasons set out below:
 

-14-

Mortgage-backed securities. This category’s unrealized losses are primarily the result of interest rate fluctuations. Because the decline in market value is attributable to changes in interest rates and not credit quality, the Company does not intend to sell the investments, and it is not likely that the Company will be required to sell the investments before recovery of their amortized cost basis, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired. Also, the majority of the Company’s mortgage-backed securities are agency-backed securities, which have a government guarantee.
 
Obligations of state and political subdivisions. This category’s unrealized losses are primarily the result of interest rate fluctuations and also a certain few ratings downgrades brought about by the impact of the credit crisis on states and political subdivisions. The contractual terms of the investments do not permit the issuer to settle the securities at a price less than the cost basis of each investment. Because the Company does not intend to sell any of the investments and the accounting standard of “more likely than not” has not been met for the Company to be required to sell any of the investments before recovery of its amortized cost basis, which may be maturity, the Company does not consider these investments to be other-than-temporarily impaired.
 
Corporate bonds. The Company’s unrealized losses in corporate debt securities are related to both interest rate fluctuations and ratings downgrades for a limited number of securities. The majority of the securities remain investment grade and the Company’s analysis did not indicate the existence of a credit loss. The contractual terms of the investments do not permit the issuer to settle the securities at a price less than the cost basis of each investment. Because the Company does not intend to sell any of the investments and the accounting standard of “more likely than not” has not been met for the Company to be required to sell any of the investments before recovery of its amortized cost basis, which may be maturity, the Company does not consider these investments to be other-than-temporarily impaired.
 
The following table presents the amortized cost and estimated fair value of available for sale securities as of March 31, 2018 and December 31, 2017, by contractual maturity (dollars in thousands). Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
 
 
March 31, 2018
 
December 31, 2017
 
Amortized
Cost
 
Estimated
Fair Value
 
Amortized
Cost
 
Estimated
Fair Value
Due in one year or less
$
30,048

 
$
30,097

 
$
25,179

 
$
25,326

Due after one year through five years
201,580

 
199,198

 
145,276

 
145,980

Due after five years through ten years
228,924

 
228,561

 
223,210

 
226,251

Due after ten years
806,653

 
795,323

 
577,674

 
576,665

Total securities available for sale
$
1,267,205

 
$
1,253,179

 
$
971,339

 
$
974,222

 

For information regarding the estimated fair value of available for sale securities which were pledged to secure public deposits, repurchase agreements, and for other purposes as permitted or required by law as of March 31, 2018 and December 31, 2017, see Note 7 “Commitments and Contingencies.”

Held to Maturity
The Company reports securities held to maturity on the Consolidated Balance Sheets at carrying value. Carrying value is amortized cost which includes any unamortized unrealized gains and losses recognized in accumulated other comprehensive income prior to reclassifying the securities from securities available for sale to securities held to maturity. Investment securities transferred into the held to maturity category from the available for sale category are recorded at fair value at the date of transfer. The unrealized holding gain or loss at the date of transfer is retained in accumulated other comprehensive income and in the carrying value of the securities held to maturity. Such unrealized gains or losses are accreted over the remaining life of the security with no impact on future net income.
 

-15-

The carrying value, gross unrealized gains and losses, and estimated fair values of securities held to maturity as of March 31, 2018 and December 31, 2017 are summarized as follows (dollars in thousands):
 
 
Carrying
 
Gross Unrealized
 
Estimated
 
Value (1)
 
Gains
 
(Losses)
 
Fair Value
March 31, 2018
 

 
 

 
 

 
 

Obligations of states and political subdivisions
$
198,733

 
$
1,540

 
$
(369
)
 
$
199,904

 
 
 
 
 
 
 
 
December 31, 2017
 

 
 

 
 

 
 

Obligations of states and political subdivisions
$
199,639

 
$
4,014

 
$
(170
)
 
$
203,483

 
(1) The carrying value includes $3.2 million as of March 31, 2018 and $3.6 million as of December 31, 2017 of net unrealized gains present at the time of transfer from available for sale securities, net of any accretion.
 
The following table shows the gross unrealized losses and fair value (dollars in thousands) of the Company’s held to maturity securities with unrealized losses that are not deemed to be other-than-temporarily impaired as of March 31, 2018 and December 31, 2017. These are aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position.
 
 
Less than 12 months
 
More than 12 months
 
Total
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
March 31, 2018
 

 
 

 
 

 
 

 
 

 
 

Obligations of states and political subdivisions
$
57,691

 
$
(302
)
 
$
2,629

 
$
(67
)
 
$
60,320

 
$
(369
)
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2017
 
 
 
 
 
 
 
 
 
 
 
Obligations of states and political subdivisions
$
18,896

 
$
(139
)
 
$
1,084

 
$
(31
)
 
$
19,980

 
$
(170
)
 
As of March 31, 2018, there was $2.6 million, or four issues, of individual held to maturity securities that had been in a continuous loss position for more than 12 months and had an aggregate unrealized loss of $67,000. As of December 31, 2017, there was $1.1 million, or two issues, of individual held to maturity securities that had been in a continuous loss position for more than 12 months and had an aggregate unrealized loss of $31,000. These securities are municipal bonds with minimal credit exposure. For this reason, the Company has determined that these securities in a loss position were temporarily impaired as of March 31, 2018 and December 31, 2017. Because the Company does not intend to sell these investments and the accounting standard of “more likely than not” has not been met for the Company to be required to sell the investments before recovery of their amortized cost bases, which may be maturity, the Company does not consider these investments to be other-than-temporarily impaired.

The following table presents the amortized cost and estimated fair value of held to maturity securities as of March 31, 2018 and December 31, 2017, by contractual maturity (dollars in thousands). Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
 
 
March 31, 2018
 
December 31, 2017
 
Carrying
Value (1)
 
Estimated
Fair Value
 
Carrying
Value (1)
 
Estimated
Fair Value
Due in one year or less
$
6,764

 
$
6,780

 
$
3,221

 
$
3,230

Due after one year through five years
48,016

 
48,265

 
44,289

 
44,601

Due after five years through ten years
78,816

 
79,099

 
79,114

 
80,532

Due after ten years
65,137

 
65,760

 
73,015

 
75,120

Total securities held to maturity
$
198,733

 
$
199,904

 
$
199,639

 
$
203,483

 
(1) The carrying value includes $3.2 million as of March 31, 2018 and $3.6 million as of December 31, 2017 of net unrealized gains present at the time of transfer from available for sale securities, net of any accretion.

-16-

 
For information regarding the estimated fair value of held to maturity securities which were pledged to secure public deposits as permitted or required by law as of March 31, 2018 and December 31, 2017, see Note 7 “Commitments and Contingencies.”
 
Restricted Stock, at cost
Due to restrictions placed upon the Bank’s common stock investment in the Federal Reserve Bank and FHLB, these securities have been classified as restricted equity securities and carried at cost. These restricted securities are not subject to the investment security classifications and are included as a separate line item on the Company’s Consolidated Balance Sheets. At March 31, 2018 and December 31, 2017, the FHLB required the Bank to maintain stock in an amount equal to 4.25% of outstanding borrowings and a specific percentage of the Bank’s total assets. The Federal Reserve Bank required the Bank to maintain stock with a par value equal to 6% of the Bank's outstanding capital at both March 31, 2018 and December 31, 2017. Restricted equity securities consist of Federal Reserve Bank stock in the amount of $42.0 million and $27.6 million for March 31, 2018 and December 31, 2017 and FHLB stock in the amount of $63.2 million and $47.7 million as of March 31, 2018 and December 31, 2017, respectively.
 
Other-Than-Temporary-Impairment
During each quarter, the Company conducts an assessment of the securities portfolio for OTTI consideration. The assessment considers factors such as external credit ratings, delinquency coverage ratios, market price, management’s judgment, expectations of future performance, and relevant industry research and analysis. An impairment is other-than-temporary if any of the following conditions exist: the entity intends to sell the security; it is more likely than not that the entity will be required to sell the security before recovery of its amortized cost basis; or the entity does not expect to recover the security’s entire amortized cost basis (even if the entity does not intend to sell). If a credit loss exists, but an entity does not intend to sell the impaired debt security and is not more likely than not to be required to sell before recovery, the impairment is other-than-temporary and should be separated into a credit portion to be recognized in earnings and the remaining amount relating to all other factors recognized as other comprehensive loss. Based on the assessment for the three months ended March 31, 2018, and in accordance with accounting guidance, no OTTI was recognized.

Realized Gains and Losses
The following table presents the gross realized gains and losses on and the proceeds from the sale of securities during the three months ended March 31, 2018 and 2017 (dollars in thousands).
 
 
Three Months Ended
March 31, 2018
 
Three Months Ended
March 31, 2017
Realized gains (losses):
 

 
 

Gross realized gains
$
697

 
$
481

Gross realized losses
(484
)
 
—

Net realized gains
$
213

 
$
481

 
 
 
 
Proceeds from sales of securities
$
115,850

 
$
21,306


 

-17-

4. LOANS AND ALLOWANCE FOR LOAN LOSSES

Loans are stated at their face amount, net of deferred fees and costs, and consist of the following at March 31, 2018 and December 31, 2017 (dollars in thousands):
 
March 31, 2018
 
December 31, 2017
Construction and Land Development
$
1,249,196

 
$
948,791

Commercial Real Estate - Owner Occupied
1,279,155

 
943,933

Commercial Real Estate - Non-Owner Occupied
2,230,463

 
1,713,659

Multifamily Real Estate
547,520

 
357,079

Commercial & Industrial
1,125,733

 
612,023

Residential 1-4 Family - Commercial
714,660

 
612,395

Residential 1-4 Family - Mortgage
604,354

 
485,690

Auto
288,089

 
282,474

HELOC
642,084

 
537,521

Consumer
839,699

 
408,667

Other Commercial
284,770

 
239,320

Total loans held for investment, net (1)
$
9,805,723

 
$
7,141,552

 
(1) Loans, as presented, are net of deferred fees and costs totaling $2.7 million and $1.3 million as of March 31, 2018 and December 31, 2017, respectively.
 
The following table shows the aging of the Company’s loan portfolio, by segment, at March 31, 2018 (dollars in thousands):
 
30-59 Days
Past Due
 
60-89 Days
Past Due
 
Greater than 90
Days and still
Accruing
 
PCI
 
Nonaccrual
 
Current
 
Total Loans
Construction and Land Development
$
403

 
$
1,291

 
$
322

 
$
10,202

 
$
6,391

 
$
1,230,587

 
$
1,249,196

Commercial Real Estate - Owner Occupied
4,985

 
777

 
—

 
25,826

 
2,539

 
1,245,028

 
1,279,155

Commercial Real Estate - Non-Owner Occupied
1,867

 
—

 
—

 
19,594

 
2,089

 
2,206,913

 
2,230,463

Multifamily Real Estate
—

 
—

 
—

 
3,380

 
—

 
544,140

 
547,520

Commercial & Industrial
2,608

 
1,254

 
200

 
2,890

 
1,969

 
1,116,812

 
1,125,733

Residential 1-4 Family - Commercial
3,707

 
960

 
113

 
14,826

 
1,512

 
693,542

 
714,660

Residential 1-4 Family - Mortgage
6,210

 
1,397

 
1,148

 
20,517

 
7,929

 
567,153

 
604,354

Auto
2,167

 
193

 
170

 
14

 
394

 
285,151

 
288,089

HELOC
3,564

 
1,346

 
306

 
1,884

 
2,072

 
632,912

 
642,084

Consumer and all
other(1)
4,179

 
2,074

 
371

 
3,728

 
243

 
1,113,874

 
1,124,469

Total loans held for investment
$
29,690

 
$
9,292

 
$
2,630

 
$
102,861

 
$
25,138

 
$
9,636,112

 
$
9,805,723

 (1)Consumer and Other Commercial are grouped together as Consumer and all other for reporting purposes.

-18-

The following table shows the aging of the Company’s loan portfolio, by segment, at December 31, 2017 (dollars in thousands):
 
30-59 Days
Past Due
 
60-89 Days
Past Due
 
Greater than 90
Days and still
Accruing
 
PCI
 
Nonaccrual
 
Current
 
Total Loans
Construction and Land Development
$
1,248

 
$
898

 
$
1,340

 
$
2,838

 
$
5,610

 
$
936,857

 
$
948,791

Commercial Real Estate - Owner Occupied
444

 
81

 
—

 
14,790

 
2,708

 
925,910

 
943,933

Commercial Real Estate - Non-Owner Occupied
187

 
84

 
194

 
6,610

 
2,992

 
1,703,592

 
1,713,659

Multifamily Real Estate
—

 
—

 
—

 
80

 
—

 
356,999

 
357,079

Commercial & Industrial
1,147

 
109

 
214

 
408

 
316

 
609,829

 
612,023

Residential 1-4 Family - Commercial
1,682

 
700

 
579

 
9,414

 
1,085

 
598,935

 
612,395

Residential 1-4 Family - Mortgage
3,838

 
2,541

 
546

 
3,733

 
6,269

 
468,763

 
485,690

Auto
3,541

 
185

 
40

 
—

 
413

 
278,295

 
282,474

HELOC
2,382

 
717

 
217

 
950

 
2,075

 
531,180

 
537,521

Consumer and all other(1)
2,404

 
2,052

 
402

 
198

 
275

 
642,656

 
647,987

Total loans held for investment
$
16,873

 
$
7,367

 
$
3,532

 
$
39,021

 
$
21,743

 
$
7,053,016

 
$
7,141,552

 (1)Consumer and Other Commercial are grouped together as Consumer and all other for reporting purposes.

The following table shows the PCI loan portfolios, by segment and their delinquency status, at March 31, 2018 (dollars in thousands):
 
30-89 Days Past
Due
 
Greater than 90
Days
 
Current
 
Total
Construction and Land Development
$
54

 
$
1,909

 
$
8,239

 
$
10,202

Commercial Real Estate - Owner Occupied
438

 
4,995

 
20,393

 
25,826

Commercial Real Estate - Non-Owner Occupied
180

 
1,558

 
17,856

 
19,594

Multifamily Real Estate
—

 
—

 
3,380

 
3,380

Commercial & Industrial
38

 
120

 
2,732

 
2,890

Residential 1-4 Family - Commercial
383

 
1,454

 
12,989

 
14,826

Residential 1-4 Family - Mortgage
1,673

 
4,076

 
14,768

 
20,517

Auto
—

 
—

 
14

 
14

HELOC
83

 
645

 
1,156

 
1,884

Consumer and all other(1)
7

 
220

 
3,501

 
3,728

Total
$
2,856

 
$
14,977

 
$
85,028

 
$
102,861

 (1)Consumer and Other Commercial are grouped together as Consumer and all other for reporting purposes.


-19-

The following table shows the PCI loan portfolios, by segment and their delinquency status, at December 31, 2017 (dollars in thousands):
 
 
30-89 Days Past
Due
 
Greater than 90
Days
 
Current
 
Total
Construction and Land Development
$
8

 
$
57

 
$
2,773

 
$
2,838

Commercial Real Estate - Owner Occupied
381

 
478

 
13,931

 
14,790

Commercial Real Estate - Non-Owner Occupied
188

 
233

 
6,189

 
6,610

Multifamily Real Estate
—

 
—

 
80

 
80

Commercial & Industrial
—

 
—

 
408

 
408

Residential 1-4 Family - Commercial
433

 
351

 
8,630

 
9,414

Residential 1-4 Family - Mortgage
343

 
626

 
2,764

 
3,733

HELOC
291

 
214

 
445

 
950

Consumer and all other(1)
—

 
—

 
198

 
198

Total
$
1,644

 
$
1,959

 
$
35,418

 
$
39,021

 (1)Consumer and Other Commercial are grouped together as Consumer and all other for reporting purposes.

The Company measures the amount of impairment by evaluating loans either in their collective homogeneous pools or individually. The following table shows the Company’s impaired loans, excluding PCI loans, by segment at March 31, 2018 and December 31, 2017 (dollars in thousands):
 
March 31, 2018
 
December 31, 2017
 
Recorded
Investment
 
Unpaid
Principal
Balance
 
Related
Allowance
 
Recorded
Investment
 
Unpaid
Principal
Balance
 
Related
Allowance
Loans without a specific allowance
 

 
 

 
 

 
 

 
 

 
 

Construction and Land Development
$
11,652

 
$
11,831

 
$
—

 
$
16,035

 
$
16,214

 
$
—

Commercial Real Estate - Owner Occupied
15,966

 
16,347

 
—

 
5,427

 
5,527

 
—

Commercial Real Estate - Non-Owner Occupied
7,545

 
7,727

 
—

 
6,017

 
6,103

 
—

Commercial & Industrial
2,313

 
2,649

 
—

 
1,681

 
1,933

 
—

Residential 1-4 Family - Commercial
5,459

 
6,254

 
—

 
4,098

 
4,879

 
—

Residential 1-4 Family - Mortgage
12,910

 
13,238

 
—

 
9,512

 
9,786

 
 
HELOC
3,497

 
3,788

 
—

 
2,056

 
2,144

 
—

Consumer and all other(1)
585

 
753

 
—

 
567

 
734

 
—

Total impaired loans without a specific allowance
$
59,927

 
$
62,587

 
$
—

 
$
45,393

 
$
47,320

 
$
—

 
 
 
 
 
 
 
 
 
 
 
 
Loans with a specific allowance
 

 
 

 
 

 
 

 
 

 
 

Construction and Land Development
$
526

 
$
572

 
$
78

 
$
1,536

 
$
1,573

 
$
122

Commercial Real Estate - Owner Occupied
820

 
830

 
74

 
1,161

 
1,161

 
94

Commercial Real Estate - Non-Owner Occupied
83

 
83

 
1

 
—

 
—

 
—

Commercial & Industrial
2,074

 
2,113

 
60

 
1,295

 
1,319

 
128

Residential 1-4 Family - Commercial
909

 
921

 
30

 
1,062

 
1,068

 
35

Residential 1-4 Family - Mortgage
3,279

 
3,532

 
88

 
1,953

 
2,070

 
36

Auto
740

 
900

 
3

 
413

 
577

 
2

HELOC
936

 
1,053

 
167

 
464

 
535

 
51

Consumer and all other(1)
159

 
298

 
1

 
204

 
309

 
35

Total impaired loans with a specific allowance
$
9,526

 
$
10,302

 
$
502

 
$
8,088

 
$
8,612

 
$
503

Total impaired loans
$
69,453

 
$
72,889

 
$
502

 
$
53,481

 
$
55,932

 
$
503

(1)Consumer and Other Commercial are grouped together as Consumer and all other for reporting purposes.

-20-

The following tables show the average recorded investment and interest income recognized for the Company’s impaired loans, excluding PCI loans, by segment for the three months ended March 31, 2018 and 2017 (dollars in thousands):
 
Three Months Ended
March 31, 2018
 
Three Months Ended
March 31, 2017
 
Average
Investment
 
Interest Income
Recognized
 
Average
Investment
 
Interest Income
Recognized
Construction and Land Development
$
12,326

 
$
74

 
$
17,179

 
$
139

Commercial Real Estate - Owner Occupied
17,112

 
160

 
6,793

 
64

Commercial Real Estate - Non-Owner Occupied
7,904

 
61

 
11,540

 
108

Commercial & Industrial
4,933

 
45

 
6,830

 
36

Residential 1-4 Family - Commercial
6,618

 
56

 
5,251

 
43

Residential 1-4 Family - Mortgage
16,529

 
77

 
7,796

 
30

Auto
836

 
5

 
477

 
1

HELOC
4,784

 
32

 
2,366

 
4

Consumer and all other(1)
764

 
7

 
303

 
—

Total impaired loans
$
71,806

 
$
517

 
$
58,535

 
$
425

(1)Consumer and Other Commercial are grouped together as Consumer and all other for reporting purposes.

The Company considers TDRs to be impaired loans. A modification of a loan’s terms constitutes a TDR if the creditor grants a concession that it would not otherwise consider to the borrower for economic or legal reasons related to the borrower’s financial difficulties. All loans that are considered to be TDRs are evaluated for impairment in accordance with the Company’s allowance for loan loss methodology and are included in the preceding impaired loan tables. For the three months ended March 31, 2018, the recorded investment in TDRs prior to modifications was not materially impacted by the modification.

The following table provides a summary, by segment, of TDRs that continue to accrue interest under the terms of the restructuring agreement, which are considered to be performing, and TDRs that have been placed on nonaccrual status, which are considered to be nonperforming, as of March 31, 2018 and December 31, 2017 (dollars in thousands):
 
March 31, 2018
 
December 31, 2017
 
No. of
Loans
 
Recorded
Investment