UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2021

OR

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 001-39325

ATLANTIC 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)

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock, par value $1.33 per share	AUB	The NASDAQ Global Select Market
Depositary Shares, Each Representing a 1/400^th Interest in a Share of 6.875% Perpetual Non-Cumulative Preferred Stock, Series A	AUBAP	The NASDAQ Global Select Market

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☒ 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	☒	Accelerated filer	☐
Non-accelerated filer	☐
		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 ☒

The number of shares of common stock outstanding as of October 28, 2021 was 75,653,113.

Table of Contents

ATLANTIC UNION BANKSHARES CORPORATION

FORM 10-Q

INDEX


ITEM		PAGE

	PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements

	Consolidated Balance Sheets as of September 30, 2021 (unaudited) and December 31, 2020 (audited)	2

	Consolidated Statements of Income (unaudited) for the three and nine months ended September 30, 2021 and 2020	3

	Consolidated Statements of Comprehensive Income (unaudited) for the three and nine months ended September 30, 2021 and 2020	4

	Consolidated Statements of Changes in Stockholders’ Equity (unaudited) for the three and nine months ended September 30, 2021 and 2020	5

	Consolidated Statements of Cash Flows (unaudited) for the nine months ended September 30, 2021 and 2020	7

	Notes to Consolidated Financial Statements (unaudited)	9

	Review Report of Independent Registered Public Accounting Firm	52

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	53

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	84

Item 4.	Controls and Procedures	86

	PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	88

Item 1A.	Risk Factors	88

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	88

Item 6.	Exhibits	89

	Signatures	90

Table of Contents

Glossary of Acronyms and Defined Terms


2020 Form 10-K	–	Annual Report on Form 10-K for the year ended December 31, 2020
Access	–	Access National Corporation and its subsidiaries
ACL	–	Allowance for credit losses
AFS	–	Available for sale
ALCO	–	Asset Liability Committee
ALLL	–	Allowance for loan and lease losses, a component of ACL
AOCI	–	Accumulated other comprehensive income (loss)
ASC	–	Accounting Standards Codification
ASC 326	–	ASU 2016-13, Financial Instruments and Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments
ASC 820	–	ASC 820, Fair Value Measurements and Disclosures
ASU	–	Accounting Standards Update
ATM	–	Automated teller machine
AUB	–	Atlantic Union Bankshares Corporation
AUBAP	–	Atlantic Union Bankshares Corporation trading symbol
the Bank	–	Atlantic Union Bank (formerly, Union Bank & Trust)
BOLI	–	Bank-owned life insurance
bps	–	Basis points
CAA	–	Consolidated Appropriations Act, 2021
CARES Act	–	Coronavirus Aid, Relief, and Economic Security Act
CECL	–	Current expected credit losses
the Company	–	Atlantic Union Bankshares Corporation (formerly, Union Bankshares Corporation) and its subsidiaries
COVID-19	–	COVID-19 global pandemic
depositary shares	–	Depositary shares, each representing a 1/400th ownership interest in a share of the Company’s Series A preferred stock, with a liquidation preference of $10,000 per share of Series A preferred stock (equivalent to $25 per depositary share)
DHFB	–	Dixon, Hubard, Feinour & Brown, Inc.
EPS	–	Earnings per common share
Exchange Act	–	Securities Exchange Act of 1934, as amended
FASB	–	Financial Accounting Standards Board
FCMs	–	Futures Commission Merchants
FDIC	–	Federal Deposit Insurance Corporation
Federal Reserve	–	Board of Governors of the Federal Reserve System
Federal Reserve Bank or FRB	–	Federal Reserve Bank of Richmond
FHLB	–	Federal Home Loan Bank of Atlanta
FHLMC	–	Federal Home Loan Mortgage Corporation
FNMA	–	Federal National Mortgage Association
FOMC	–	Federal Open Markets Committee
FTE	–	Fully taxable equivalent
GAAP or U.S. GAAP	–	Accounting principles generally accepted in the United States
GNMA	–	Government National Mortgage Association
HTM	–	Held to maturity
ICE Data Services	–	Intercontinental Exchange Data Services
the Joint Guidance	–	The five federal bank regulatory agencies and the Conference of State Bank Supervisors guidance issued on March 22, 2020 (subsequently revised on April 7, 2020)
LHFI	–	Loans held for investment
LHFS	–	Loans held for sale
LIBOR	–	London Interbank Offered Rate

Table of Contents

NOW	–	Negotiable order of withdrawal
NPA	–	Nonperforming assets
OCI	–	Other comprehensive income
OREO	–	Other real estate owned
OTC	–	Over-the-counter
PCD	–	Purchased credit deteriorated
PD/LGD	–	Probability of default/loss given default
PPPLF	–	Paycheck Protection Program Liquidity Facility
PPP	–	Paycheck Protection Program
Quarterly Report	–	Quarterly Report on Form 10-Q for the quarter ended September 30, 2021
Repurchase Program	–	The share repurchase program, approved on May 4, 2021 by the Company’s Board of Directors, which authorizes the Company to purchase up to $125 million worth of the Company’s common stock
ROU Asset	–	Right of Use Asset
RUC	–	Reserve for unfunded commitments
RVI	–	Residual value insurance
SBA	–	Small Business Administration
SEC	–	Securities and Exchange Commission
Series A preferred stock	–	6.875% Perpetual Non-Cumulative Preferred Stock, Series A, par value $10.00 per share
SSFA	–	Simplified supervisory formula approach
TDR	–	Troubled debt restructuring
Topic 606	–	ASU No. 2014-09, “Revenue from Contracts with Customers: Topic 606”
Topic 740	–	ASU 2019-12, “Income Taxes: Simplifying the Accounting for Income Taxes”
Topic 848	–	ASU 2020-04, “Reference Rate Reform: Facilitation of the Effects of Reference Rate Reform on Financial Reporting”

Table of Contents

PART I – FINANCIAL INFORMATION

ITEM 1 – FINANCIAL STATEMENTS

ATLANTIC UNION BANKSHARES CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except share data)


	September 30,		December 31,
	2021		2020
ASSETS		(unaudited)		(audited)
Cash and cash equivalents:
Cash and due from banks	$	255,648	$	172,307
Interest-bearing deposits in other banks		807,225		318,974
Federal funds sold		377		2,013
Total cash and cash equivalents		1,063,250		493,294
Securities available for sale, at fair value		3,195,176		2,540,419
Securities held to maturity, at carrying value		535,722		544,851
Restricted stock, at cost		76,825		94,782
Loans held for sale, at fair value		35,417		96,742
Loans held for investment, net of deferred fees and costs		13,139,586		14,021,314
Less allowance for loan and lease losses		101,798		160,540
Total loans held for investment, net		13,037,788		13,860,774
Premises and equipment, net		159,588		163,829
Goodwill		935,560		935,560
Amortizable intangibles, net		46,537		57,185
Bank owned life insurance		430,341		326,892
Other assets		419,453		514,121
Total assets	$	19,935,657	$	19,628,449
LIABILITIES
Noninterest-bearing demand deposits	$	5,328,838	$	4,368,703
Interest-bearing deposits		11,293,322		11,354,062
Total deposits		16,622,160		15,722,765
Securities sold under agreements to repurchase		95,181		100,888
Other short-term borrowings		—		250,000
Long-term borrowings		290,584		489,829
Other liabilities		233,293		356,477
Total liabilities		17,241,218		16,919,959
Commitments and contingencies (Note 7)
STOCKHOLDERS' EQUITY
Preferred stock, $10.00 par value		173		173
Common stock, $1.33 par value		100,062		104,169
Additional paid-in capital		1,804,617		1,917,081
Retained earnings		760,164		616,052
Accumulated other comprehensive income (loss)		29,423		71,015
Total stockholders' equity		2,694,439		2,708,490
Total liabilities and stockholders' equity	$	19,935,657	$	19,628,449

Common shares outstanding		75,645,031		78,729,212
Common shares authorized		200,000,000		200,000,000
Preferred shares outstanding		17,250		17,250
Preferred shares authorized		500,000		500,000

See accompanying notes to consolidated financial statements.

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ATLANTIC UNION BANKSHARES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(Dollars in thousands, except share and per share data)


	Three Months Ended				Nine Months Ended
	September 30,		September 30,		September 30,		September 30,
	2021		2020		2021		2020
Interest and dividend income:
Interest and fees on loans	$	124,999	$	138,402	$	383,575	$	432,763
Interest on deposits in other banks		291		137		454		1,154
Interest and dividends on securities:
Taxable		11,230		10,275		32,102		33,170
Nontaxable		9,859		8,600		28,773		24,520
Total interest and dividend income		146,379		157,414		444,904		491,607
Interest expense:
Interest on deposits		5,837		15,568		22,203		63,943
Interest on short-term borrowings		22		72		91		1,598
Interest on long-term borrowings		3,032		4,393		9,676		16,372
Total interest expense		8,891		20,033		31,970		81,913
Net interest income		137,488		137,381		412,934		409,694
Provision for credit losses		(18,850)		6,558		(59,888)		100,954
Net interest income after provision for credit losses		156,338		130,823		472,822		308,740
Noninterest income:
Service charges on deposit accounts		7,198		6,041		19,314		18,549
Other service charges, commissions and fees		1,534		1,621		4,970		4,600
Interchange fees		2,203		1,979		6,252		5,300
Fiduciary and asset management fees		7,029		6,045		20,323		17,543
Mortgage banking income		4,818		8,897		17,692		16,744
Gains on securities transactions		9		18		87		12,293
Bank owned life insurance income		2,727		3,421		8,202		7,498
Loan-related interest rate swap fees		1,102		3,170		4,176		12,602
Other operating income		3,318		3,215		8,372		4,116
Total noninterest income		29,938		34,407		89,388		99,245
Noninterest expenses:
Salaries and benefits		53,534		49,000		156,959		149,013
Occupancy expenses		7,251		7,441		21,705		21,798
Furniture and equipment expenses		4,040		3,895		11,919		11,042
Technology and data processing		7,534		6,564		21,657		19,187
Professional services		3,792		2,914		13,161		9,211
Marketing and advertising expense		2,548		2,631		7,330		7,413
FDIC assessment premiums and other insurance		2,172		1,811		6,798		7,578
Other taxes		4,432		4,124		13,303		12,364
Loan-related expenses		1,503		2,314		5,289		7,512
Amortization of intangible assets		3,381		4,053		10,679		12,676
Loss on debt extinguishment		—		—		14,695		10,306
Other expenses		5,156		8,475		15,756		23,581
Total noninterest expenses		95,343		93,222		299,251		291,681
Income from continuing operations before income taxes		90,933		72,008		262,959		116,304
Income tax expense		16,368		11,008		46,821		17,506
Net income		74,565		61,000		216,138		98,798
Dividends on preferred stock		2,967		2,691		8,901		2,691
Net income available to common shareholders	$	71,598	$	58,309	$	207,237	$	96,107

Basic earnings per common share	$	0.94	$	0.74	$	2.66	$	1.22
Diluted earnings per common share	$	0.94	$	0.74	$	2.66	$	1.22
Dividends declared per common share	$	0.28	$	0.25	$	0.81	$	0.75
Basic weighted average number of common shares outstanding		76,309,355		78,714,353		77,988,151		78,904,792
Diluted weighted average number of common shares outstanding		76,322,736		78,725,346		78,007,543		78,921,108

See accompanying notes to consolidated financial statements.

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Table of Contents

ATLANTIC UNION BANKSHARES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(Dollars in thousands)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
Net income	$	74,565	$	61,000	$	216,138	$	98,798
Other comprehensive income (loss):
Cash flow hedges:
Change in fair value of cash flow hedges		(545)		—		634		(699)
Reclassification adjustment for losses (gains) included in net income (net of tax, $0 and $0 for the three months and $12 and $394 for the nine months ended September 30, 2021 and 2020, respectively) ⁽¹⁾		—		—		(47)		1,481
AFS securities:
Unrealized holding gains (losses) arising during period (net of tax, $6,178 and $332 for the three months and $11,311 and $9,824 for the nine months ended September 30, 2021 and 2020, respectively)		(23,242)		1,250		(42,549)		36,956
Reclassification adjustment for gains included in net income (net of tax, $2 and $4 for the three months and $18 and $2,582 for the nine months ended September 30, 2021 and 2020, respectively) ⁽²⁾		(7)		(14)		(69)		(9,711)
HTM securities:
Reclassification adjustment for accretion of unrealized gain on AFS securities transferred to HTM (net of tax, $1 and $1 for the three months and $4 and $4 for the nine months ended September 30, 2021 and 2020, respectively) ⁽³⁾		(5)		(5)		(15)		(15)
Bank owned life insurance:
Unrealized holding losses arising during the period		—		—		—		(1,289)
Reclassification adjustment for losses included in net income ⁽⁴⁾		150		127		454		364
Other comprehensive income (loss)		(23,649)		1,358		(41,592)		27,087
Comprehensive income	$	50,916	$	62,358	$	174,546	$	125,885

⁽¹⁾ The gross amounts reclassified into earnings for the nine months ended September 30, 2020 included a $1.8 million loss related to the termination of a cash flow hedge that is reported in “Other operating income” with the corresponding income tax effect being reflected as a component of income tax expense. The remaining gross amounts are reported in the interest income and interest expense sections of the Company’s Consolidated Statements of Income with the corresponding income tax effect being reflected as a component of income tax expense.

⁽²⁾ The gross amounts reclassified into earnings are reported as "Gains on securities transactions" on the Company’s Consolidated Statements of Income with the corresponding income tax effect being reflected as a component of income tax expense.

⁽³⁾ The gross amounts reclassified into earnings are reported within interest income on the Company’s Consolidated Statements of Income with the corresponding income tax effect being reflected as a component of income tax expense.

⁽⁴⁾ Reclassifications in earnings are reported in "Salaries and benefits" expense on the Company’s Consolidated Statements of Income.

See accompanying notes to consolidated financial statements.

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Table of Contents

ATLANTIC UNION BANKSHARES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021

(Dollars in thousands, except share and per share amounts)

Accumulated

Additional

Other

Common

Preferred

Paid-In

Retained

Comprehensive

Stock

Capital

Earnings

Income

Total

Balance - December 31, 2020

104,169

173

1,917,081

616,052

71,015

2,708,490

Net Income

56,189

Other comprehensive loss (net of taxes of $8,835)

(34,514)

Dividends on common stock ($0.25 per share)

(19,700)

Dividends on preferred stock ($171.88 per share)

(2,967)

Issuance of common stock under Equity Compensation Plans, for services rendered, and vesting of restricted stock, net of shares held for taxes (243,884 shares)

324

(289)

Stock-based compensation expense

2,199

Balance - March 31, 2021

104,493

173

1,918,991

649,574

36,501

2,709,732

Net Income

85,384

Other comprehensive gain (net of taxes of $3,672)

16,571

Dividends on common stock ($0.28 per share)

(22,125)

Dividends on preferred stock ($171.88 per share)

(2,967)

Stock purchased under stock repurchase plan (1,090,169 shares)

(1,450)

(40,913)

(42,363)

Issuance of common stock under Equity Compensation Plans, for services rendered, and vesting of restricted stock, net of shares held for taxes (35,693 shares)

663

711

Stock-based compensation expense

2,654

Balance- June 30, 2021

103,091

173

1,881,395

709,866

53,072

2,747,597

Net Income

74,565

Other comprehensive loss (net of taxes of $6,181)

(23,649)

Dividends on common stock ($0.28 per share)

(21,300)

Dividends on preferred stock ($171.88 per share)

(2,967)

Stock purchased under stock repurchase plan (2,288,961 shares)

(3,045)

(79,592)

(82,637)

Issuance of common stock under Equity Compensation Plans, for services rendered, and vesting of restricted stock, net of shares held for taxes (11,953 shares)

175

191

Stock-based compensation expense

2,639

Balance- September 30, 2021

100,062

173

1,804,617

760,164

29,423

2,694,439

See accompanying notes to consolidated financial statements.

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ATLANTIC UNION BANKSHARES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020

(Dollars in thousands, except share and per share amounts)


									Accumulated
					Additional				Other
	Common		Preferred		Paid-In		Retained		Comprehensive
	Stock		Stock		Capital		Earnings		Income		Total
Balance - December 31, 2019	$	105,827	$	—	$	1,790,305	$	581,395	$	35,575	$	2,513,102
Net Income								7,089				7,089
Other comprehensive income (net of taxes of $3,890)										12,754		12,754
Dividends on common stock ($0.25 per share)								(19,825)				(19,825)
Stock purchased under stock repurchase plan (1,493,472 shares)		(1,985)				(47,894)						(49,879)
Issuance of common stock under Equity Compensation Plans, for services rendered, and vesting of restricted stock, net of shares held for taxes (183,750 shares)		244				(1,273)						(1,029)
Impact of adoption of ASC 326								(39,053)				(39,053)
Stock-based compensation expense						2,291						2,291
Balance- March 31, 2020	$	104,086	$	—	$	1,743,429	$	529,606	$	48,329	$	2,425,450
Net Income								30,709				30,709
Other comprehensive income (net of taxes of $3,415)										12,975		12,975
Issuance of preferred stock (17,250 shares)				173		166,190						166,363
Dividends on common stock ($0.25 per share)								(19,677)				(19,677)
Issuance of common stock under Equity Compensation Plans, for services rendered, and vesting of restricted stock, net of shares held for taxes (30,120 shares)		40				5						45
Stock-based compensation expense						2,361						2,361
Balance - June 30, 2020	$	104,126	$	173	$	1,911,985	$	540,638	$	61,304	$	2,618,226
Net Income								61,000				61,000
Other comprehensive income (net of taxes of $327)										1,358		1,358
Net proceeds from preferred stock						(7)						(7)
Dividends on common stock ($0.25 per share)								(19,678)				(19,678)
Dividends on preferred stock ($156.60 per share)								(2,691)				(2,691)
Issuance of common stock under Equity Compensation Plans, for services rendered, and vesting of restricted stock, net of shares held for taxes (11,601 shares)		15				162						177
Stock-based compensation expense						2,500						2,500
Balance - September 30, 2020	$	104,141	$	173	$	1,914,640	$	579,269	$	62,662	$	2,660,885

See accompanying notes to consolidated financial statements.

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ATLANTIC UNION BANKSHARES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020


(Dollars in thousands)	2021		2020
Operating activities:
Net income	$	216,138	$	98,798
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation of premises and equipment		11,992		11,311
Writedown of foreclosed properties and former bank premises		1,119		4,847
Amortization, net		24,397		20,151
Accretion related to acquisitions, net		(1,792)		(7,736)
Provision for credit losses		(59,888)		100,954
Gains on securities transactions, net		(87)		(12,293)
BOLI income		(8,202)		(7,498)
Originations and purchases of loans held for sale		(491,895)		(514,760)
Proceeds from sales of loans held for sale		550,683		516,516
Losses on sales of foreclosed properties and former bank premises, net		638		37
Losses on debt extinguishment		14,695		10,306
Stock-based compensation expenses		7,492		7,152
Issuance of common stock for services		372		604
Net (increase) decrease in other assets		108,677		(180,343)
Net increase (decrease) in other liabilities		(134,336)		128,323
Net cash provided by operating activities		240,003		176,369
Investing activities:
Purchases of AFS securities and restricted stock		(1,142,304)		(940,745)
Proceeds from sales of AFS securities and restricted stock		45,436		232,946
Proceeds from maturities, calls and paydowns of AFS securities		392,129		271,986
Proceeds from maturities, calls and paydowns of HTM securities		6,642		5,996
Net decrease (increase) in loans held for investment		891,240		(1,760,300)
Net increase in premises and equipment		(9,221)		(18,557)
Proceeds from BOLI settlements		4,843		439
Purchases of BOLI policies		(100,000)		—
Proceeds from sales of foreclosed properties and former bank premises		8,632		2,706
Net cash provided by (used in) investing activities		97,397		(2,205,529)
Financing activities:
Net increase in noninterest-bearing deposits		960,135		1,450,526
Net increase in interest-bearing deposits		(60,716)		820,701
Net decrease in short-term borrowings		(255,707)		(169,967)
Proceeds from issuance of long-term debt		—		189,945
Repayments of long-term debt		(214,695)		(230,306)
Cash dividends paid - common stock		(63,125)		(59,180)
Cash dividends paid - preferred stock		(8,901)		(2,691)
Repurchase of common stock		(125,000)		(49,879)
Issuance of common stock		2,955		801
Issuance of preferred stock, net		—		166,356
Vesting of restricted stock, net of shares held for taxes		(2,390)		(2,212)
Net cash provided by financing activities		232,556		2,114,094
Increase in cash and cash equivalents		569,956		84,934
Cash, cash equivalents, and restricted cash at beginning of the period		493,294		436,032
Cash, cash equivalents, and restricted cash at end of the period	$	1,063,250	$	520,966

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ATLANTIC UNION BANKSHARES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020

(Dollars in thousands)


	2021		2020
Supplemental Disclosure of Cash Flow Information
Cash payments for:
Interest	$	30,749	$	82,409
Income taxes		1,260		13,649

Supplemental schedule of noncash investing and financing activities
Transfers from loans to foreclosed properties		14		615
Transfers from bank premises to OREO		1,109		7,949
Transfers from LHFS to LHFI		—		1,050

See accompanying notes to consolidated financial statements.

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ATLANTIC UNION BANKSHARES CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

1.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Company

Headquartered in Richmond, Virginia, Atlantic Union Bankshares Corporation (Nasdaq: AUB) is the holding company for Atlantic Union Bank. Atlantic Union Bank has 130 branches and approximately 150 ATMs located throughout Virginia, and in portions of Maryland and North Carolina. Certain non-bank financial services affiliates of Atlantic Union Bank include: Atlantic Union Equipment Finance, Inc., which provides equipment financing; Dixon, Hubard, Feinour & Brown, Inc., which provides investment advisory services; Atlantic Union Financial Consultants, LLC, which provides brokerage services; and Union Insurance Group, LLC, which offers various lines of insurance products.

Effective March 1, 2021, Middleburg Financial, the Bank’s wealth management division was rebranded to Atlantic Union Bank Wealth Management, and Middleburg Investment Services, LLC changed its name to Atlantic Union Financial Consultants, LLC.

Effective October 1, 2021, Old Dominion Capital Management, Inc., and its subsidiary, Outfitter Advisors, Ltd., merged with and into DHFB, as part of an internal reorganization to streamline operations. Old Dominion Capital Management operates as a division of DHFB.

The unaudited consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. 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 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 or any other period.

The unaudited consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in the Company’s 2020 Form 10-K. Certain prior period amounts have been reclassified to conform to current period presentation.

Adoption of New Accounting Standards

In March 2020, the FASB issued Topic 848. This guidance provides temporary, optional guidance to ease the potential burden in accounting for reference rate reform associated with the LIBOR transition. LIBOR and other interbank offered rates are widely used benchmark or reference rates that have been used in the valuation of loans, derivatives, and other financial contracts. Topic 848 provides optional expedients and exceptions for applying GAAP to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued. Topic 848 is intended to help stakeholders during the global market-wide reference rate transition period. The amendments are effective as of March 12, 2020 through December 31, 2022 and can be adopted at an instrument level. As of March 31, 2021, the Company utilized the expedient to assert probability of the hedged interest, regardless of any expected modification in terms related to reference rate reform for the newly executed cash flow hedges. The Company expects to incorporate other components of Topic 848 at a later date. This amendment does not have a material impact on the consolidated financial statements.

On January 1, 2021, the Company adopted Topic 740. This guidance was issued to simplify accounting for income taxes by removing specific technical exceptions that often produce information difficult for users of financial statements to understand. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. The Company’s adoption of Topic 740 did not have a material impact on the consolidated financial statements.

Cash and Cash Equivalents

For purposes of reporting cash flows, the Company defines cash and cash equivalents as cash, cash due from banks, interest-bearing deposits in other banks, money market investments, other interest-bearing deposits, and federal funds sold.

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Restricted cash is disclosed in Note 7 “Commitments and Contingencies” and is comprised of cash maintained at various correspondent banks as collateral for the Company’s derivative portfolio and is included in interest-bearing deposits in other banks in the Company’s Consolidated Balance Sheets. In addition, the Company is required to maintain reserve balances with the Federal Reserve Bank based on the type and amount of deposits; however, on March 15, 2020 the Federal Reserve announced that reserve requirement ratios would be reduced to zero percent effective March 26, 2020 due to economic conditions, which eliminated the reserve requirement for all depository institutions.

Accrued Interest Receivable

The Company has elected to exclude accrued interest from the amortized cost basis in its determination of the ALLL, as well as the ACL reserve for securities. Accrued interest receivable totaled $46.2 million and $56.7 million on loans held for investment, $5.1 million and $6.8 million on HTM securities, and $13.0 million and $11.9 million on AFS securities at September 30, 2021 and December 31, 2020, respectively, and is included in “Other Assets” on the Company’s Consolidated Balance Sheets. The Company’s policy is to write off accrued interest receivable through reversal of interest income when it becomes probable the Company will not be able to collect the accrued interest. For the quarters ended September 30, 2021 and September 30, 2020, accrued interest receivable write offs were not material to the Company’s consolidated financial statements.

Segment Reporting

Operating segments are components of a business about which separate financial information is available and evaluated regularly by the chief operating decision makers in deciding how to allocate resources and assessing performance. The Bank is the Company’s only reportable operating segment upon which management makes decisions regarding how to allocate resources and assess performance. While the Company’s chief operating decision makers do have some limited financial information about its various financial products and services, that information is not complete since it does not include a full allocation of revenue, costs, and capital from key corporate functions; therefore, the Company evaluates financial performance on the Company-wide basis. Management continues to evaluate these business units for separate reporting as facts and circumstances change.

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2. SECURITIES

Available for Sale

The Company’s AFS investment portfolio is generally highly-rated or agency backed. All AFS securities were current with no securities past due or on non-accrual as of September 30, 2021 and December 31, 2020.

The amortized cost, gross unrealized gains and losses, and estimated fair values of AFS securities as of September 30, 2021 are summarized as follows (dollars in thousands):

Amortized

Gross Unrealized

Estimated

Cost

Gains

(Losses)

Fair Value

September 30, 2021

U.S. government and agency securities

74,214

645

(41)

74,818

Obligations of states and political subdivisions

971,987

34,885

(7,991)

998,881

Corporate and other bonds ⁽¹⁾

145,151

3,931

(54)

149,028

Commercial mortgage-backed securities

Agency

338,327

9,213

(2,557)

344,983

Non-agency

95,405

250

(296)

95,359

Total commercial mortgage-backed securities

433,732

9,463

(2,853)

440,342

Residential mortgage-backed securities

Agency

1,449,753

20,630

(14,030)

1,456,353

Non-agency

73,783

530

(195)

74,118

Total residential mortgage-backed securities

1,523,536

21,160

(14,225)

1,530,471

Other securities

1,636

—

1,636

Total AFS securities

3,150,256

70,084

(25,164)

3,195,176

⁽¹⁾ Other bonds include asset-backed securities

The amortized cost, gross unrealized gains and losses, and estimated fair values of AFS securities as of December 31, 2020 are summarized as follows (dollars in thousands):


	Amortized		Gross Unrealized				Estimated
	Cost		Gains		(Losses)		Fair Value
December 31, 2020
U.S. government and agency securities	$	13,009	$	437	$	(52)	$	13,394
Obligations of states and political subdivisions		786,466		50,878		(18)		837,326
Corporate and other bonds ⁽¹⁾		148,747		2,430		(99)		151,078
Commercial mortgage-backed securities
Agency		321,015		16,277		(2)		337,290
Non-agency		51,244		167		(17)		51,394
Total commercial mortgage-backed securities		372,259		16,444		(19)		388,684
Residential mortgage-backed securities
Agency		1,012,237		31,816		(1,946)		1,042,107
Non-agency		104,904		1,507		(206)		106,205
Total residential mortgage-backed securities		1,117,141		33,323		(2,152)		1,148,312
Other securities		1,625		—		—		1,625
Total AFS securities	$	2,439,247	$	103,512	$	(2,340)	$	2,540,419

⁽¹⁾ Other bonds include asset-backed securities

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The following table shows the gross unrealized losses and fair value of the Company’s AFS securities with unrealized losses for which an ACL has not been recorded at September 30, 2021 and December 31, 2020 and that are not deemed to be impaired as of those dates. These are aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position (dollars in thousands).


	Less than 12 months				More than 12 months				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses
September 30, 2021
U.S. government and agency securities	$	—	$	—	$	4,255	$	(41)	$	4,255	$	(41)
Obligations of states and political subdivisions		394,065		(7,885)		2,072		(106)		396,137		(7,991)
Corporate and other bonds⁽¹⁾		11,594		(51)		1,903		(3)		13,497		(54)
Commercial mortgage-backed securities
Agency		136,397		(2,556)		344		(1)		136,741		(2,557)
Non-agency		21,407		(103)		11,789		(193)		33,196		(296)
Total commercial mortgage-backed securities		157,804		(2,659)		12,133		(194)		169,937		(2,853)
Residential mortgage-backed securities
Agency		857,253		(12,584)		76,393		(1,446)		933,646		(14,030)
Non-agency		13,182		(195)		—		—		13,182		(195)
Total residential mortgage-backed securities		870,435		(12,779)		76,393		(1,446)		946,828		(14,225)
Total AFS securities	$	1,433,898	$	(23,374)	$	96,756	$	(1,790)	$	1,530,654	$	(25,164)

December 31, 2020
U.S. government and agency securities	$	—	$	—	$	5,456	$	(52)	$	5,456	$	(52)
Obligations of states and political subdivisions		5,091		(18)		—		—		5,091		(18)
Corporate and other bonds⁽¹⁾		17,946		(52)		10,698		(47)		28,644		(99)
Commercial mortgage-backed securities
Agency		5,893		(2)		376		—		6,269		(2)
Non-agency		17,654		(17)		—		—		17,654		(17)
Total commercial mortgage-backed securities		23,547		(19)		376		—		23,923		(19)
Residential mortgage-backed securities
Agency		219,388		(1,944)		1,055		(2)		220,443		(1,946)
Non-agency		36,942		(206)		—		—		36,942		(206)
Total residential mortgage-backed securities		256,330		(2,150)		1,055		(2)		257,385		(2,152)
Total AFS securities	$	302,914	$	(2,239)	$	17,585	$	(101)	$	320,499	$	(2,340)

⁽¹⁾ Other bonds includes asset-backed securities

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As of September 30, 2021, there were $96.8 million, comprised of 26 individual AFS securities that had been in a continuous loss position for more than 12 months and had an aggregate unrealized loss of approximately $1.8 million. As of December 31, 2020, there were $17.6 million, comprised of 15 individual securities that had been in a continuous loss position for more than 12 months and had an aggregate unrealized loss of $101,000.

The Company has evaluated AFS securities in an unrealized loss position for credit related impairment at September 30, 2021 and December 31, 2020 and concluded no impairment existed based on several factors which included: (1) the majority of these securities are of high credit quality, (2) unrealized losses are primarily the result of market volatility, (3) the contractual terms of the investments do not permit the issuer(s) to settle the securities at a price less than the cost basis of each investment, (4) issuers continue to make timely principal and interest payments, and (5) 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.

Additionally, the majority of the Company’s mortgage-backed securities are issued by FNMA, FHLMC, and GNMA and do not have credit risk given the implicit and explicit government guarantees associated with these agencies. In addition, the non-agency mortgage-backed and asset-backed securities generally received a 20% SSFA rating.

The following table presents the amortized cost and estimated fair value of AFS securities as of September 30, 2021 and December 31, 2020, by contractual maturity. 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 (dollars in thousands).


	September 30, 2021				December 31, 2020
	Amortized		Estimated		Amortized		Estimated
	Cost		Fair Value		Cost		Fair Value
Due in one year or less	$	11,823	$	11,927	$	19,875	$	19,997
Due after one year through five years		175,393		180,836		161,448		169,103
Due after five years through ten years		316,877		325,440		235,021		242,791
Due after ten years		2,646,163		2,676,973		2,022,903		2,108,528
Total AFS securities	$	3,150,256	$	3,195,176	$	2,439,247	$	2,540,419

Refer to Note 7 "Commitments and Contingencies" for information regarding the estimated fair value of AFS securities that were pledged to secure public deposits, repurchase agreements, and for other purposes as permitted or required by law as of September 30, 2021 and December 31, 2020.

Held to Maturity

The Company’s HTM investment portfolio primarily consists of highly-rated municipal securities and the estimated credit loss inherent in the portfolio is currently immaterial. The Company’s HTM securities were all current, with no securities past due or on non-accrual at September 30, 2021 and December 31, 2020.

The Company reports HTM securities on the Company’s 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 AFS securities to HTM securities. Investment securities transferred into the HTM category from the AFS 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 HTM securities. Such unrealized gains or losses are accreted over the remaining life of the security with no impact on future net income.

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The carrying value, gross unrealized gains and losses, and estimated fair values of HTM securities as of September 30, 2021 are summarized as follows (dollars in thousands):

Carrying

Gross Unrealized

Estimated

Value

Gains

(Losses)

Fair Value

September 30, 2021

U.S. government and agency securities

2,637

(8)

2,631

Obligations of states and political subdivisions

528,157

62,763

—

590,920

Commercial mortgage-backed securities

Agency

4,928

(30)

4,901

Non-agency

—

Total commercial mortgage-backed securities

4,928

(30)

4,901

Total held-to-maturity securities

535,722

62,768

(38)

598,452

The carrying value, gross unrealized gains and losses, and estimated fair values of HTM securities as of December 31, 2020 are summarized as follows (dollars in thousands):


	Carrying		Gross Unrealized				Estimated
	Value		Gains		(Losses)		Fair Value
December 31, 2020
U.S. government and agency securities	$	2,751	$	—	$	(18)	$	2,733
Obligations of states and political subdivisions		536,767		74,978		—		611,745
Commercial mortgage-backed securities
Agency		5,333		4		(50)		5,287
Non-agency		—		—		—		—
Total commercial mortgage-backed securities		5,333		4		(50)		5,287
Total held-to-maturity securities	$	544,851	$	74,982	$	(68)	$	619,765

Credit Quality Indicators & Allowance for Credit Losses - HTM

For HTM securities, the Company evaluates the credit risk of its securities on at least a quarterly basis. The Company estimates expected credit losses on HTM debt securities on an individual basis based on the PD/LGD methodology primarily using security-level credit ratings. The Company’s HTM securities ACL was immaterial at September 30, 2021 and December 31, 2020. The primary indicators of credit quality for the Company’s HTM portfolio are security type and credit rating, which is influenced by a number of factors including obligor cash flow, geography, seniority, and others. The Company’s only HTM securities with credit risk are obligations of states and political subdivisions.

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The following table presents the amortized cost of HTM securities as of September 30, 2021 and December 31, 2020 by security type and credit rating (dollars in thousands):


	U.S. Government and Agency		Obligations of states and political		Mortgage-backed		Total HTM
	securities		subdivisions		securities		securities
September 30, 2021
Credit Rating:
AAA/AA/A	$	—	$	528,157	$	—	$	528,157
Not Rated - Agency⁽¹⁾		2,637		—		4,928		7,565
Not Rated - Non-Agency		—		—		—		—
Total	$	2,637	$	528,157	$	4,928	$	535,722
December 31, 2020
Credit Rating:
AAA/AA/A	$	—	$	532,157	$	—	$	532,157
Not Rated - Agency⁽¹⁾		2,751		—		5,333		8,084
Not Rated - Non-Agency		—		4,610		—		4,610
Total	$	2,751	$	536,767	$	5,333	$	544,851

⁽¹⁾ Generally considered not to have credit risk given the government guarantees associated with these agencies

The following table presents the amortized cost and estimated fair value of HTM securities as of September 30, 2021 and December 31, 2020, by contractual maturity. 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 (dollars in thousands).


	September 30, 2021				December 31, 2020
	Carrying		Estimated		Carrying		Estimated
	Value		Fair Value		Value		Fair Value
Due in one year or less	$	3,501	$	3,512	$	1,443	$	1,460
Due after one year through five years		5,890		6,142		8,577		8,893
Due after five years through ten years		14,061		16,091		1,744		1,805
Due after ten years		512,270		572,707		533,087		607,607
Total HTM securities	$	535,722	$	598,452	$	544,851	$	619,765

Refer to Note 7 "Commitments and Contingencies" for information regarding the estimated fair value of HTM securities that were pledged to secure public deposits as permitted or required by law as of September 30, 2021 and December 31, 2020.

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. The FHLB required the Bank to maintain stock in an amount equal to 3.75% and 4.25% of outstanding borrowings at September 30, 2021 and December 31, 2020, respectively, as well as 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 September 30, 2021 and December 31, 2020. Restricted equity securities consist of Federal Reserve Bank stock in the amount of $67.0 million for September 30, 2021 and December 31, 2020 and FHLB stock in the amount of $9.8 million and $27.8 million as of September 30, 2021 and December 31, 2020, respectively.

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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 and nine months ended September 30, 2021 and 2020 (dollars in thousands):


	Three Months Ended		Nine Months Ended
	September 30, 2021		September 30, 2021
Realized gains (losses)⁽¹⁾:
Gross realized gains	$	9	$	147
Gross realized losses		—		(60)
Net realized gains	$	9	$	87

Proceeds from sales of securities	$	—	$	45,436


	Three Months Ended		Nine Months Ended
	September 30, 2020		September 30, 2020
Realized gains (losses)⁽¹⁾:
Gross realized gains	$	18	$	12,522
Gross realized losses		—		(229)
Net realized gains	$	18	$	12,293

Proceeds from sales of securities	$	4,675	$	232,946

⁽¹⁾ Includes gains (losses) on sales and calls of securities

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3. LOANS AND ALLOWANCE FOR LOAN AND LEASE LOSSES

The information included below reflects the impact of the CARES Act, as amended by the CAA, and the Joint Guidance. See Note 1 “Summary of Significant Accounting Policies” in the Company’s 2020 Form 10-K for information about COVID-19 and related legislative and regulatory developments.

The Company’s loans are stated at their face amount, net of deferred fees and costs, and consist of the following at September 30, 2021 and December 31, 2020 (dollars in thousands):


	September 30, 2021		December 31, 2020
Construction and Land Development	$	877,351	$	925,798
Commercial Real Estate - Owner Occupied		2,027,299		2,128,909
Commercial Real Estate - Non-Owner Occupied		3,730,720		3,657,562
Multifamily Real Estate		776,287		814,745
Commercial & Industrial⁽¹⁾		2,580,190		3,263,460
Residential 1-4 Family - Commercial		624,347		671,949
Residential 1-4 Family - Consumer		822,971		822,866
Residential 1-4 Family - Revolving		557,803		596,996
Auto		425,436		401,324
Consumer		182,039		247,730
Other Commercial⁽²⁾		535,143		489,975
Total loans held for investment, net of deferred fees and costs⁽³⁾		13,139,586		14,021,314
Allowance for loan and lease losses		(101,798)		(160,540)
Total loans held for investment, net	$	13,037,788	$	13,860,774

⁽¹⁾ Commercial & industrial loans include approximately $455.8 million and $1.2 billion in loans from the PPP at September 30, 2021 and December 31, 2020, respectively.

⁽²⁾ Other commercial loans include approximately $10.8 million and $11.3 million in loans from the PPP at September 30, 2021 and December 31, 2020, respectively.

⁽³⁾Total loans include unamortized premiums and discounts, and unamortized deferred fees and costs totaling $60.0 million and $69.7 million as of September 30, 2021 and December 31, 2020, respectively.

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The following table shows the aging of the Company’s loan portfolio, by class, at September 30, 2021 (dollars in thousands):

Greater than

30-59 Days

60-89 Days

90 Days and

Current

Past Due

still Accruing

Nonaccrual

Total Loans

Construction and Land Development

873,535

744

304

2,710

877,351

Commercial Real Estate - Owner Occupied

2,016,831

735

1,886

7,786

2,027,299

Commercial Real Estate - Non-Owner Occupied

3,723,499

1,302

570

1,175

4,174

3,730,720

Multifamily Real Estate

776,174

—

113

776,287

Commercial & Industrial

2,562,455

11,089

3,328

1,256

2,062

2,580,190

Residential 1-4 Family - Commercial

619,306

807

698

1,091

2,445

624,347

Residential 1-4 Family - Consumer

805,765

406

2,188

2,462

12,150

822,971

Residential 1-4 Family - Revolving

549,927

1,092

587

2,474

3,723

557,803

Auto

423,222

1,548

202

209

255

425,436

Consumer

180,705

790

317

173

182,039

Other Commercial

533,912

631

600

—

535,143

Total loans held for investment

13,065,331

19,144

8,609

11,030

35,472

13,139,586

% of total loans

99.43

0.15

0.07

0.08

0.27

100.00

The following table shows the aging of the Company’s loan portfolio, by class, at December 31, 2020 (dollars in thousands):


										Greater than
				30-59 Days			60-89 Days			90 Days and
	Current			Past Due			Past Due			still Accruing			Nonaccrual			Total Loans
Construction and Land Development	$	920,276		$	1,903		$	547		$	—		$	3,072		$	925,798
Commercial Real Estate - Owner Occupied		2,114,804			1,870			1,380			3,727			7,128			2,128,909
Commercial Real Estate - Non-Owner Occupied		3,651,232			2,144			1,721			148			2,317			3,657,562
Multifamily Real Estate		814,095			617			—			—			33			814,745
Commercial & Industrial		3,257,201			1,848			1,190			1,114			2,107			3,263,460
Residential 1-4 Family - Commercial		657,351			2,227			818			1,560			9,993			671,949
Residential 1-4 Family - Consumer		792,852			10,182			1,533			5,699			12,600			822,866
Residential 1-4 Family - Revolving		587,522			2,975			1,044			826			4,629			596,996
Auto		398,206			2,076			376			166			500			401,324
Consumer		245,551			1,166			550			394			69			247,730
Other Commercial		489,959			16			—			—			—			489,975
Total loans held for investment	$	13,929,049		$	27,024		$	9,159		$	13,634		$	42,448		$	14,021,314
% of total loans		99.34	%		0.19	%		0.07	%		0.10	%		0.30	%		100.00	%

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The following table shows the Company’s amortized cost basis of loans on nonaccrual status as of January 1, 2021, as well as amortized cost basis of loans on nonaccrual status and loans past due 90 days and still accruing as of September 30, 2021 (dollars in thousands):

Nonaccrual

January 1, 2021

September 30, 2021

Nonaccrual With No ALLL

90 Days and still Accruing

Construction and Land Development

3,072

2,710

1,985

304

Commercial Real Estate - Owner Occupied

7,128

7,786

1,996

1,886

Commercial Real Estate - Non-Owner Occupied

2,317

4,174

1,089

1,175

Multifamily Real Estate

113

—

Commercial & Industrial

2,107

2,062

1,256

Residential 1-4 Family - Commercial

9,993

2,445

1,091

Residential 1-4 Family - Consumer

12,600

12,150

1,047

2,462

Residential 1-4 Family - Revolving

4,629

3,723

2,474

Auto

500

255

—

209

Consumer

—

173

Total loans held for investment

42,448

35,472

6,178

11,030

The following table shows the Company’s amortized cost basis of loans on nonaccrual status as of January 1, 2020, as well as amortized cost basis of loans on nonaccrual status and loans past due 90 days and still accruing as of December 31, 2020 (dollars in thousands):


	Nonaccrual
	January 1, 2020		December 31, 2020		Nonaccrual With No ALLL		90 Days and still Accruing
Construction and Land Development	$	4,060	$	3,072	$	1,985	$	—
Commercial Real Estate - Owner Occupied		13,889		7,128		1,994		3,727
Commercial Real Estate - Non-Owner Occupied		1,368		2,317		—		148
Multifamily Real Estate		—		33		—		—
Commercial & Industrial		3,037		2,107		1		1,114
Residential 1-4 Family - Commercial		6,492		9,993		6,388		1,560
Residential 1-4 Family - Consumer		13,117		12,600		1,069		5,699
Residential 1-4 Family - Revolving		2,490		4,629		60		826
Auto		565		500		—		166
Consumer		88		69		—		394
Other Commercial		98		—		—		—
Total loans held for investment	$	45,204	$	42,448	$	11,497	$	13,634

There was no interest income recognized on nonaccrual loans during the three and nine months ended September 30, 2021 and 2020. See Note 1 “Summary of Significant Accounting Policies” in the Company’s 2020 Form 10-K for additional information on the Company’s policies for nonaccrual loans.

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Troubled Debt Restructurings

The CARES Act, as amended by the CAA, permits financial institutions to suspend requirements under GAAP for loan modifications to borrowers affected by COVID-19 that would otherwise be characterized as TDRs and suspend any determination related thereto if (i) the loan modification is made between March 1, 2020 and the earlier of January 1, 2022 or 60 days after the end of the COVID-19 emergency declaration and (ii) the applicable loan was not more than 30 days past due as of December 31, 2019. In addition, federal bank regulatory authorities also issued guidance to encourage financial institutions to make loan modifications for borrowers affected by COVID-19. As of September 30, 2021, there were immaterial loans still under their modified terms. As of December 31, 2020, the Company had approximately $146.1 million in loans still under their modified terms.

As of September 30, 2021, the Company has TDRs totaling $18.7 million with an estimated $854,000 of allowance for those loans for the current period. As of December 31, 2020, the Company had TDRs totaling $20.6 million with an estimated $1.6 million of allowance for those 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 credit losses in accordance with the Company’s ALLL methodology. For the three and nine months ended September 30, 2021 and September 30, 2020, the recorded investment in TDRs prior to modifications was not materially impacted by the modifications.

The following table provides a summary, by class, of TDRs that continue to accrue interest under the terms of the applicable 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 September 30, 2021 and December 31, 2020 (dollars in thousands):


	September 30, 2021					December 31, 2020
	No. of	Recorded		Outstanding		No. of	Recorded		Outstanding
	Loans	Investment		Commitment		Loans	Investment		Commitment
Performing
Construction and Land Development	4	$	205	$	—	4	$	215	$	—
Commercial Real Estate - Owner Occupied	4		1,003		—	6		2,033		176
Commercial Real Estate - Non-Owner Occupied	—		—		—	1		1,089		—
Commercial & Industrial	2		413		—	4		727		—
Residential 1-4 Family - Commercial	—		—		—	3		245		—
Residential 1-4 Family - Consumer	75		9,182		—	77		8,943		—
Residential 1-4 Family - Revolving	3		268		4	3		277		—
Consumer	2		16		—	3		22		—
Other Commercial	1		248		—	1		410		—
Total performing	91	$	11,335	$	4	102	$	13,961	$	176
Nonperforming
Commercial Real Estate - Owner Occupied	2	$	831	$	—	1	$	20	$	—
Commercial Real Estate - Non-Owner Occupied	3		1,366		—	1		134		—
Commercial & Industrial	4		362		—	3		237		—
Residential 1-4 Family - Commercial	3		393		—	4		1,296		—
Residential 1-4 Family - Consumer	24		4,312		—	23		4,865		—
Residential 1-4 Family - Revolving	3		101		—	3		103		—
Total nonperforming	39	$	7,365	$	—	35	$	6,655	$	—
Total performing and nonperforming	130	$	18,700	$	4	137	$	20,616	$	176

The Company considers a default of a TDR to occur when the borrower is 90 days past due following the restructure or a foreclosure and repossession of the applicable collateral occurs. During the three and nine months ended September 30, 2021 and 2020, the Company did not have any material loans that went into default that had been restructured in the twelve-month period prior to the time of default.

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The following table shows, by class and modification type, TDRs that occurred during the three and nine months ended September 30, 2021 (dollars in thousands):


	Three Months Ended September 30, 2021			Nine Months Ended September 30, 2021
		Recorded			Recorded
	No. of	Investment at		No. of	Investment at
	Loans	Period End		Loans	Period End
Modified to interest only, at a market rate
Total interest only at market rate of interest	—	$	—	—	$	—

Term modification, at a market rate
Commercial Real Estate - Non-Owner Occupied	1		157	1		157
Residential 1-4 Family - Consumer	—	$	—	2	$	102
Total loan term extended at a market rate	1	$	157	3	$	259

Term modification, below market rate
Residential 1-4 Family - Consumer	—	$	—	11	$	1,813
Consumer	—		—	1		15
Total loan term extended at a below market rate	—	$	—	12	$	1,828

Interest rate modification, below market rate
Residential 1-4 Family - Commercial	—	$	—	1	$	45
Total interest only at below market rate of interest	—	$	—	1	$	45

Total	1	$	157	16	$	2,132

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The following table shows, by class and modification type, TDRs that occurred during the three and nine months ended September 30, 2020 (dollars in thousands):


	Three Months Ended September 30, 2020			Nine Months Ended September 30, 2020
		Recorded			Recorded
	No. of	Investment at		No. of	Investment at
	Loans	Period End		Loans	Period End
Modified to interest only, at a market rate
Commercial Real Estate - Owner Occupied	—	$	—	1	$	272
Residential 1-4 Family - Commercial	1		652	1		652
Total interest only at market rate of interest	1	$	652	2	$	924

Term modification, at a market rate
Commercial & Industrial	—	$	—	3	$	127
Residential 1-4 Family - Commercial	1		299	1		299
Residential 1-4 Family - Consumer	—		—	4		324
Consumer	—		—	1		10
Total loan term extended at a market rate	1	$	299	9	$	760

Term modification, below market rate
Construction and Land Development	—	$	—	1	$	34
Commercial & Industrial	1		143	2		358
Residential 1-4 Family - Commercial	1		290	1		290
Residential 1-4 Family - Consumer	4		423	17		2,387
Residential 1-4 Family - Revolving	—		—	1		52
Total loan term extended at a below market rate	6	$	856	22	$	3,121

Interest rate modification, below market rate
Total interest only at below market rate of interest	—	$	—	—	$	—

Total	8	$	1,807	33	$	4,805

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Allowance for Loan and Lease Losses

ALLL on the loan portfolio is a material estimate for the Company. The Company estimates its ALLL on its loan portfolio on a quarterly basis. The Company models the ALLL using two primary segments, Commercial and Consumer. Each loan segment is further disaggregated into classes based on similar risk characteristics. The Company has identified the following classes within each loan segment:

●

Commercial: Construction and Land Development, Commercial Real Estate – Owner Occupied, Commercial Real Estate – Non-Owner Occupied, Multifamily Real Estate, Commercial & Industrial, Residential 1-4 Family – Commercial, and Other Commercial

●

Consumer: Residential 1-4 Family – Consumer, Residential 1-4 Family – Revolving, Auto, and Consumer

The following tables show the ALLL activity by loan segment for the three and nine months ended September 30, 2021 and 2020 (dollars in thousands):

Three Months Ended September 30, 2021

Nine Months Ended September 30, 2021

Commercial

Consumer

Total

Commercial

Consumer

Total

Balance at beginning of period

89,837

28,424

118,261

117,403

43,137

160,540

Loans charged-off

(967)

(1,299)

(2,266)

(3,832)

(4,020)

(7,852)

Recoveries credited to allowance

1,281

872

2,153

3,929

2,569

6,498

Provision charged to operations

(15,173)

(1,177)

(16,350)

(42,522)

(14,866)

(57,388)

Balance at end of period

74,978

26,820

101,798

74,978

26,820

101,798


	Three Months Ended September 30, 2020						Nine Months Ended September 30, 2020
	Commercial		Consumer		Total		Commercial		Consumer		Total
Balance at beginning of period	$	111,954	$	58,023	$	169,977	$	30,941	$	11,353	$	42,294
Impact of ASC 326 adoption on non-PCD loans		—		—		—		4,432		40,666		45,098
Impact of ASC 326 adoption on PCD loans		—		—		—		1,752		634		2,386
Impact of adopting ASC 326		—		—		—		6,184		41,300		47,484
Loans charged-off		(995)		(1,983)		(2,978)		(5,553)		(9,253)		(14,806)
Recoveries credited to allowance		718		848		1,566		2,580		2,557		5,137
Provision charged to operations		14,978		(9,421)		5,557		92,503		1,510		94,013
Balance at end of period	$	126,655	$	47,467	$	174,122	$	126,655	$	47,467	$	174,122

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Credit Quality Indicators

Credit quality indicators are utilized to help estimate the collectability of each loan class within the Commercial and Consumer loan segments. For classes of loans within the Commercial segment, the primary credit quality indicator used for evaluating credit quality and estimating the ALLL is risk rating categories of Pass, Watch, Special Mention, Substandard, and Doubtful. For classes of loans within the Consumer segment, the primary credit quality indicator used for evaluating credit quality and estimating the ALLL is delinquency bands of Current, 30-59, 60-89, 90+, and Nonaccrual. While other credit quality indicators are evaluated and analyzed as part of the Company’s credit risk management activities, these indicators are primarily used in estimating the ALLL. The Company evaluates the credit risk of its loan portfolio on at least a quarterly basis.

Commercial Loans

The Company uses a risk rating system as the primary credit quality indicator for classes of loans within the Commercial segment. The risk rating system on a scale of 0 through 9 is used to determine risk level as used in the calculation of the allowance for credit loss. The risk levels, as described below, do not necessarily follow the regulatory definitions of risk levels with the same name. A general description of the characteristics of the risk levels follows:

Pass is determined by the following criteria:

●

Risk rated 0 loans have little or no risk and are with General Obligation Municipal Borrowers;

●

Risk rated 1 loans have little or no risk and are generally secured by cash or cash equivalents;

●

Risk rated 2 loans have minimal risk to well qualified borrowers and no significant questions as to safety;

●

Risk rated 3 loans are satisfactory loans with strong borrowers and secondary sources of repayment;

●

Risk rated 4 loans are satisfactory loans with borrowers not as strong as risk rated 3 loans and may exhibit a greater degree of financial risk based on the type of business supporting the loan.

Watch is determined by the following criteria:

●

Risk rated 5 loans are watch loans that warrant more than the normal level of supervision and have the possibility of an event occurring that may weaken the borrower’s ability to repay;

Special Mention is determined by the following criteria:

●

Risk rated 6 loans have increasing potential weaknesses beyond those at which the loan originally was granted and if not addressed could lead to inadequately protecting the Company’s credit position.

Substandard is determined by the following criteria:

●

Risk rated 7 loans are substandard loans and are inadequately protected by the current sound worth or paying capacity of the obligor or the collateral pledged; these have well defined weaknesses that jeopardize the liquidation of the debt with the distinct possibility the Company will sustain some loss if the deficiencies are not corrected.

Doubtful is determined by the following criteria:

●

Risk rated 8 loans are doubtful of collection and the possibility of loss is high but pending specific borrower plans for recovery, its classification as a loss is deferred until its more exact status is determined;

●

Risk rated 9 loans are loss loans which are considered uncollectable and of such little value that their continuance as bankable assets is not warranted.

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Table of Contents

The table below details the amortized cost of the classes of loans within the Commercial segment by risk level and year of origination as of September 30, 2021 (dollars in thousands):

September 30, 2021

Term Loans Amortized Cost Basis by Origination Year

2021

2020

2019

2018

2017

Prior

Revolving Loans

Total

Construction and Land Development

Pass

305,044

265,805

107,223

46,770

17,980

50,365

23,429

816,616

Watch

545

657

24,401

538

335

6,255

—

32,731

Special Mention

2,742

181

—

303

—

3,227

Substandard

—

263

18,901

199

5,414

—

24,777

Total Construction and Land Development

308,331

266,463

132,068

66,209

18,514

62,337

23,429

877,351

Commercial Real Estate - Owner Occupied

Pass

161,174

286,458

310,041

266,173

202,234

588,315

19,484

1,833,879

Watch

187

11,745

16,141

17,279

48,534

903

94,814

Special Mention

201

945

24,706

1,486

1,112

30,264

1,001

59,715

Substandard

—

12,155

1,696

1,953

22,378

709

38,891

Total Commercial Real Estate - Owner Occupied

161,562

287,428

358,647

285,496

222,578

689,491

22,097

2,027,299

Commercial Real Estate - Non-Owner Occupied

Pass

360,208

439,673

531,065

370,114

391,043

1,161,218

56,566

3,309,887

Watch

14,549

8,528

29,797

53,599

11,463

76,680

194,632

Special Mention

—

10,649

29,923

31,347

14,062

30,133

—

116,114

Substandard

—

41,595

21,279

12,557

34,354

302

110,087

Total Commercial Real Estate - Non-Owner Occupied

374,757

458,850

632,380

476,339

429,125

1,302,385

56,884

3,730,720

Commercial & Industrial

Pass

725,216

534,948

302,159

147,127

42,624

168,224

577,089

2,497,387

Watch

173

3,808

2,526

21,778

4,571

4,855

14,322

52,033

Special Mention

221

1,343

8,417

1,924

906

659

2,135

15,605

Substandard

397

580

4,375

1,381

247

2,515

5,670

15,165

Total Commercial & Industrial

726,007

540,679

317,477

172,210

48,348

176,253

599,216

2,580,190

Multifamily Real Estate

Pass

41,843

163,955

89,602

136,569

79,594

250,115

1,597

763,275

Watch

—

4,336

463

—

532

—

5,331

Special Mention

—

2,261

629

4,544

—

7,568

Substandard

—

113

—

113

Total Multifamily Real Estate

41,843

166,216

94,567

141,576

79,594

250,852

1,639

776,287

Residential 1-4 Family - Commercial

Pass

85,081

96,580

68,972

50,528

61,335

215,176

917

578,589

Watch

—

2,047

6,727

7,494

3,708

8,772

314

29,062

Special Mention

160

—

455

409

4,957

—

6,078

Substandard

—

3,467

896

1,341

4,520

299

10,618

Total Residential 1-4 Family - Commercial

85,336

98,724

79,166

59,373

66,793

233,425

1,530

624,347

Other Commercial

Pass

145,656

173,414

105,143

5,995

26,284

50,631

13,425

520,548

Watch

—

589

1,259

4,563

—

6,411

Special Mention

—

203

7,730

7,936

Substandard

—

248

—

248

Total Other Commercial

145,656

173,414

105,143

6,584

27,546

55,645

21,155

535,143

Total Commercial

Pass

1,824,222

1,960,833

1,514,205

1,023,276

821,094

2,484,044

692,507

10,320,181

Watch

15,454

15,065

79,532

100,602

38,615

150,191

15,555

415,014

Special Mention

3,324

15,296

63,856

39,756

16,492

66,611

10,908

216,243

Substandard

492

580

61,855

44,153

16,297

69,542

6,980

199,899

Total Commercial

1,843,492

1,991,774

1,719,448

1,207,787

892,498

2,770,388

725,950

11,151,337

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The table below details the amortized cost of the classes of loans within the Commercial segment by risk level and year of origination as of December 31, 2020 (dollars in thousands):


		December 31, 2020
		Term Loans Amortized Cost Basis by Origination Year


	2020		2019		2018		2017		2016		Prior		Revolving Loans		Total
Construction and Land Development
Pass	$	316,585	$	277,142	$	116,800	$	24,770	$	42,970	$	54,023	$	23,324	$	855,614
Watch		1,873		18,181		8,434		344		2,355		6,372		412		37,971
Special Mention		—		5,532		135		—		—		2,655		—		8,322
Substandard		—		—		17,780		64		2,037		4,010		—		23,891
Total Construction and Land Development	$	318,458	$	300,855	$	143,149	$	25,178	$	47,362	$	67,060	$	23,736	$	925,798

Commercial Real Estate - Owner Occupied
Pass	$	286,522	$	375,541	$	300,583	$	233,359	$	128,261	$	570,361	$	18,838	$	1,913,465
Watch		1,942		14,611		22,224		15,623		24,979		41,361		1,648		122,388
Special Mention		988		6,052		5,749		4,198		9,907		30,455		1,121		58,470
Substandard		—		4,858		5,159		914		1,555		21,101		999		34,586
Total Commercial Real Estate - Owner Occupied	$	289,452	$	401,062	$	333,715	$	254,094	$	164,702	$	663,278	$	22,606	$	2,128,909

Commercial Real Estate - Non-Owner Occupied
Pass	$	381,849	$	455,427	$	433,183	$	403,677	$	336,630	$	850,035	$	30,421	$	2,891,222
Watch		28,354		142,279		76,838		59,451		79,533		224,944		16,870		628,269
Special Mention		702		11,072		34,905		18,073		40,771		11,211		723		117,457
Substandard		246		—		13,357		—		25		6,986		—		20,614
Total Commercial Real Estate - Non-Owner Occupied	$	411,151	$	608,778	$	558,283	$	481,201	$	456,959	$	1,093,176	$	48,014	$	3,657,562

Commercial & Industrial
Pass	$	1,730,876	$	350,618	$	199,489	$	67,035	$	71,799	$	140,461	$	590,701	$	3,150,979
Watch		4,872		32,028		13,073		6,500		3,182		4,906		19,972		84,533
Special Mention		1,009		2,178		3,890		1,150		724		1,234		4,755		14,940
Substandard		534		4,269		1,274		309		560		2,676		3,386		13,008
Total Commercial & Industrial	$	1,737,291	$	389,093	$	217,726	$	74,994	$	76,265	$	149,277	$	618,814	$	3,263,460

Multifamily Real Estate
Pass	$	144,805	$	85,740	$	150,724	$	117,881	$	67,984	$	231,113	$	2,311	$	800,558
Watch		—		5,074		475		—		617		560		—		6,726
Special Mention		2,280		—		4,388		—		—		760		—		7,428
Substandard		—		—		—		—		—		33		—		33
Total Multifamily Real Estate	$	147,085	$	90,814	$	155,587	$	117,881	$	68,601	$	232,466	$	2,311	$	814,745

Residential 1-4 Family - Commercial
Pass	$	104,630	$	89,332	$	70,310	$	79,156	$	68,915	$	201,492	$	2,236	$	616,071
Watch		666		6,665		8,252		4,141		4,067		9,307		195		33,293
Special Mention		—		—		601		663		468		5,923		—		7,655
Substandard		644		793		4,913		1,995		986		5,111		488		14,930
Total Residential 1-4 Family - Commercial	$	105,940	$	96,790	$	84,076	$	85,955	$	74,436	$	221,833	$	2,919	$	671,949

Other Commercial
Pass	$	223,490	$	112,045	$	9,549	$	30,314	$	16,494	$	42,158	$	44,180	$	478,230
Watch		—		—		613		1,299		1,189		3,934		—		7,035
Special Mention		10		—		—		7		—		4,591		102		4,710
Total Other Commercial	$	223,500	$	112,045	$	10,162	$	31,620	$	17,683	$	50,683	$	44,282	$	489,975

Total Commercial
Pass	$	3,188,757	$	1,745,845	$	1,280,638	$	956,192	$	733,053	$	2,089,643	$	712,011	$	10,706,139
Watch		37,707		218,838		129,909		87,358		115,922		291,384		39,097		920,215
Special Mention		4,989		24,834		49,668		24,091		51,870		56,829		6,701		218,982
Substandard		1,424		9,920		42,483		3,282		5,163		39,917		4,873		107,062
Total Commercial	$	3,232,877	$	1,999,437	$	1,502,698	$	1,070,923	$	906,008	$	2,477,773	$	762,682	$	11,952,398

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Table of Contents

Consumer Loans

For Consumer loans, the Company evaluates credit quality based on the delinquency status of the loan. The following table details the amortized cost of the classes of loans within the Consumer segment based on their delinquency status and year of origination as of September 30, 2021 (dollars in thousands):


		September 30, 2021
		Term Loans Amortized Cost Basis by Origination Year


	2021		2020		2019		2018		2017		Prior		Revolving Loans		Total
Residential 1-4 Family - Consumer
Current	$	194,184	$	190,849	$	57,249	$	37,678	$	49,080	$	276,715	$	10	$	805,765
30-59 Days Past Due		—		—		117		159		47		83		—		406
60-89 Days Past Due		—		—		—		—		305		1,883		—		2,188
90+ Days Past Due		451		—		46		20		—		1,945		—		2,462
Nonaccrual		—		—		—		899		1,361		9,890		—		12,150
Total Residential 1-4 Family - Consumer	$	194,635	$	190,849	$	57,412	$	38,756	$	50,793	$	290,516	$	10	$	822,971

Residential 1-4 Family - Revolving
Current	$	6,418	$	10,327	$	2,343	$	1,176	$	—	$	487	$	529,176	$	549,927
30-59 Days Past Due		—		—		—		—		—		—		1,092		1,092
60-89 Days Past Due		—		—		—		—		—		—		587		587
90+ Days Past Due		—		—		—		—		—		—		2,474		2,474
Nonaccrual		—		64		—		19		—		227		3,413		3,723
Total Residential 1-4 Family - Revolving	$	6,418	$	10,391	$	2,343	$	1,195	$	—	$	714	$	536,742	$	557,803

Consumer
Current	$	14,576	$	17,830	$	44,158	$	37,069	$	14,446	$	17,697	$	34,929	$	180,705
30-59 Days Past Due		9		28		287		180		49		224		13		790
60-89 Days Past Due		1		35		53		166		7		4		51		317
90+ Days Past Due		—		3		31		88		10		24		17		173
Nonaccrual		—		—		—		—		—		54		—		54
Total Consumer	$	14,586	$	17,896	$	44,529	$	37,503	$	14,512	$	18,003	$	35,010	$	182,039

Auto
Current	$	138,193	$	136,530	$	81,956	$	36,844	$	19,660	$	10,039	$	—	$	423,222
30-59 Days Past Due		79		477		423		227		190		152		—		1,548
60-89 Days Past Due		—		81		58		45		14		4		—		202
90+ Days Past Due		101		15		75		6		—		12		—		209
Nonaccrual		—		98		75		11		29		42		—		255
Total Auto	$	138,373	$	137,201	$	82,587	$	37,133	$	19,893	$	10,249	$	—	$	425,436

Total Consumer
Current	$	353,371	$	355,536	$	185,706	$	112,767	$	83,186	$	304,938	$	564,115	$	1,959,619
30-59 Days Past Due		88		505		827		566		286		459		1,105		3,836
60-89 Days Past Due		1		116		111		211		326		1,891		638		3,294
90+ Days Past Due		552		18		152		114		10		1,981		2,491		5,318
Nonaccrual		—		162		75		929		1,390		10,213		3,413		16,182
Total Consumer	$	354,012	$	356,337	$	186,871	$	114,587	$	85,198	$	319,482	$	571,762	$	1,988,249

The Company did not have any material revolving loans convert to term during the nine months ended September 30, 2021.

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The following table details the amortized cost of the classes of loans within the Consumer segment based on their delinquency status and year of origination as of December 31, 2020 (dollars in thousands):


		December 31, 2020
		Term Loans Amortized Cost Basis by Origination Year


	2020		2019		2018		2017		2016		Prior		Revolving Loans		Total
Residential 1-4 Family - Consumer
Current	$	213,763	$	75,133	$	64,299	$	68,320	$	102,123	$	269,203	$	11	$	792,852
30-59 Days Past Due		678		181		2,243		516		457		6,107		—		10,182
60-89 Days Past Due		156		—		57		679		—		641		—		1,533
90+ Days Past Due		608		1,696		23		—		1,246		2,126		—		5,699
Nonaccrual		—		—		696		851		887		10,166		—		12,600
Total Residential 1-4 Family - Consumer	$	215,205	$	77,010	$	67,318	$	70,366	$	104,713	$	288,243	$	11	$	822,866

Residential 1-4 Family - Revolving
Current	$	13,217	$	3,916	$	1,593	$	300	$	—	$	636	$	567,860	$	587,522
30-59 Days Past Due		70		—		—		—		—		—		2,905		2,975
60-89 Days Past Due		53		—		—		—		—		—		991		1,044
90+ Days Past Due		—		—		—		—		—		—		826		826
Nonaccrual		—		—		21		—		—		227		4,381		4,629
Total Residential 1-4 Family - Revolving	$	13,340	$	3,916	$	1,614	$	300	$	—	$	863	$	576,963	$	596,996

Consumer
Current	$	26,498	$	68,208	$	67,041	$	22,464	$	9,997	$	15,893	$	35,450	$	245,551
30-59 Days Past Due		35		252		504		98		15		143		119		1,166
60-89 Days Past Due		28		176		317		23		—		3		3		550
90+ Days Past Due		5		84		242		4		—		56		3		394
Nonaccrual		—		—		—		—		—		69		—		69
Total Consumer	$	26,566	$	68,720	$	68,104	$	22,589	$	10,012	$	16,164	$	35,575	$	247,730

Auto
Current	$	171,051	$	115,319	$	55,886	$	32,555	$	17,081	$	6,314	$	—	$	398,206
30-59 Days Past Due		239		467		543		478		197		152		—		2,076
60-89 Days Past Due		124		150		—		59		26		17		—		376
90+ Days Past Due		6		23		53		58		15		11		—		166
Nonaccrual		30		93		126		101		88		62		—		500
Total Auto	$	171,450	$	116,052	$	56,608	$	33,251	$	17,407	$	6,556	$	—	$	401,324

Total Consumer
Current	$	424,529	$	262,576	$	188,819	$	123,639	$	129,201	$	292,046	$	603,321	$	2,024,131
30-59 Days Past Due		1,022		900		3,290		1,092		669		6,402		3,024		16,399
60-89 Days Past Due		361		326		374		761		26		661		994		3,503
90+ Days Past Due		619		1,803		318		62		1,261		2,193		829		7,085
Nonaccrual		30		93		843		952		975		10,524		4,381		17,798
Total Consumer	$	426,561	$	265,698	$	193,644	$	126,506	$	132,132	$	311,826	$	612,549	$	2,068,916

The Company did not have any material revolving loans convert to term during the year ended December 31, 2020.

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4. GOODWILL AND INTANGIBLE ASSETS

The Company’s intangible assets consist of core deposits, goodwill, and other intangibles arising from acquisitions. The Company has determined that core deposit intangibles have finite lives and amortizes them over their estimated useful lives. Core deposit intangibles are being amortized over the period of expected benefit, which ranges from 4 to 10 years, using an accelerated method. Other amortizable intangible assets are being amortized over the period of expected benefit, which ranges from 4 to 10 years, using various methods.

COVID-19 has disrupted and adversely impacted the economy and created significant volatility in the financial markets. The volatility in the financial markets adversely affected the Company’s expected future cash flows, due to the lower interest rate environment and other factors. The forecasted impact from COVID-19 was included in the Company’s annual goodwill impairment test in the second quarter of 2021 and the Company determined that there was no impairment to its goodwill or intangible assets. In the normal course of business, the Company routinely monitors the impact of the changes in the financial markets and includes these assessments in the Company’s goodwill impairment process.

The Company analyzed its intangible assets at September 30, 2021 and concluded no impairment existed as of the balance sheet date. Amortization expense of intangibles for the three and nine months ended September 30, 2021 and 2020 totaled $3.4 million and $10.7 million, and $4.1 million and $12.7 million, respectively.

As of September 30, 2021, the estimated remaining amortization expense of intangibles is as follows for the years ending (dollars in thousands):


For the remaining three months of 2021	$	3,226
2022		11,490
2023		9,687
2024		7,818
2025		6,219
Thereafter		8,097
Total estimated amortization expense	$	46,537

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5. LEASES

The Company enters into both lessor and lessee arrangements and determines if an arrangement is a lease at inception. As both a lessee and lessor, the Company elected the practical expedient permitted under the transition guidance within the standard to account for lease and non-lease components as a single lease component for all asset classes.

Lessor Arrangements

The Company’s lessor arrangements consist of sales-type and direct financing leases for equipment. Lease payment terms are fixed and are typically payable in monthly installments with terms ranging from 31 months to 125 months. The lease arrangements may contain renewal options and purchase options that allow the lessee to purchase the leased equipment at the end of the lease term. The leases generally do not contain non-lease components. The Company has no material sale leaseback transactions and no lease transactions with related parties.

At lease inception the Company estimates the expected residual value of the leased property at the end of the lease term by considering both internal and third-party appraisals. In certain cases, the Company obtains lessee-provided residual value guarantees and third-party RVI to reduce its residual asset risk. At September 30, 2021 and December 31, 2020, the carrying value of residual assets covered by residual value guarantees and RVI was $20.5 million and $14.7 million, respectively.

The net investment in sales-type and direct financing leases consists of the carrying amount of the lease receivables plus unguaranteed residual assets, net of unearned income and any deferred selling profit on direct financing leases. The lease receivables include the lessor’s right to receive lease payments and the guaranteed residual asset value the lessor expects to derive from the underlying assets at the end of the lease term. The Company’s net investment in sales-type and direct financing leases are included in Loans Held for Investment (net of deferred fees and costs) on the Company’s Consolidated Balance Sheets. Lease income is recorded within Interest Income on the Company’s Consolidated Statements of Income. There were no significant changes in the balance of the Company’s unguaranteed residual assets for the periods ending September 30, 2021 and December 31, 2020.

Total net investment in sales-type and direct financing leases consists of the following (dollars in thousands):


	September 30, 2021		December 31, 2020
Sales-type and direct financing leases:
Lease receivables, net of unearned income and deferred selling profit	$	161,703	$	141,180
Unguaranteed residual values, net of unearned income and deferred selling profit		6,805		4,796
Total net investment in sales-type and direct financing leases	$	168,508	$	145,976

Lessee Arrangements

The Company’s lessee arrangements consist of operating and finance leases; however, the majority of the leases have been classified as non-cancellable operating leases and are primarily for real estate leases with remaining lease terms of up to 24 years. The Company’s real estate lease agreements do not contain residual value guarantees and most agreements do not contain restrictive covenants. The Company does not have any material arrangements where the Company is in a sublease contract.

Lessee arrangements with an initial term of 12 months or less are not recorded on the Consolidated Balance Sheets. The ROU Assets and lease liabilities associated with operating and finance leases greater than 12 months are recorded in the Company’s Consolidated Balance Sheets; ROU Assets within Other Assets and lease liabilities within Other Liabilities. ROU Assets represent the Company’s right to use an underlying asset over the course of the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. The initial measurement of lease liabilities and ROU Assets are the same for operating and finance leases. Lease liabilities are recognized at the commencement date based on the present value of the remaining lease payments, discounted using the incremental borrowing rate. As most of the Company’s leases do not provide an implicit rate, the Company uses an incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. ROU Assets are recognized at commencement date based on the initial measurement of the lease liability, any lease payments made excluding lease incentives, and any initial direct costs incurred. Most of the Company’s operating leases include one or more options to renew and if the Company is reasonably certain to exercise those options it would be included in the measurement of the operating ROU Assets and lease liabilities.

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Lease expense for operating lease payments is recognized on a straight-line basis over the lease term and recorded in Occupancy Expenses within noninterest expense on the Company’s Consolidated Statements of Income. Finance lease expenses consist of straight-line amortization expense of the ROU Assets recognized over the lease term and interest expense on the lease liability. Total finance lease expenses for the amortization of the ROU Assets are recorded in Occupancy Expenses within noninterest expense on the Company’s Consolidated Statements of Income and interest expense on the finance lease liability is recorded in Interest on Long-Term Borrowings within total interest expense on the Company’s Consolidated Statements of Income.

As of September 30, 2021, the Company had no sales leaseback transactions or leases that have not yet commenced that create significant rights and obligations.

The tables below provide information about the Company’s lessee lease portfolio and other supplemental lease information (dollars in thousands):


	September 30, 2021						December 31, 2020
	Operating			Finance			Operating			Finance
Right-of-use-assets	$	43,299		$	6,736		$	48,051		$	7,425
Lease liabilities		52,766			9,770			58,901			10,621
Lease Term and Discount Rate of Operating leases:
Weighted-average remaining lease term (years)		6.85			7.33			7.27			8.08
Weighted-average discount rate ⁽¹⁾		2.60	%		1.17	%		2.66	%		1.17	%

⁽¹⁾An incremental borrowing rate is used based on information available at commencement date of lease or at remeasurement date.


	Nine months ended September 30,
	2021		2020
Cash paid for amounts included in measurement of lease liabilities:
Operating Cash Flows from Finance Leases	$	89	$	41
Operating Cash Flows from Operating Leases		8,961		10,398
Financing Cash Flows from Finance Leases		851		—
Right-of-use assets obtained in exchange for lease obligations:
Operating leases		2,412		7,566
Finance leases		—		10,549


	Three months ended September 30,				Nine months ended September 30,
		2021		2020		2021		2020
Net Operating Lease Cost	$	2,535	$	2,536	$	7,615	$	8,383
Finance Lease Cost:
Amortization of right-of-use assets		230		230		689		306
Interest on lease liabilities		29		31		89		41
Total Lease Cost	$	2,794	$	2,797	$	8,393	$	8,730

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The maturities of lessor and lessee arrangements outstanding at September 30, 2021 are presented in the tables below (dollars in thousands):


	September 30, 2021
	Lessor		Lessee
		Sales-type and Direct Financing	Operating		Finance
For the remaining three months of 2021	$	9,333	$	2,976	$	321
2022		39,099		11,348		1,292
2023		37,133		10,204		1,325
2024		36,889		9,183		1,358
2025		24,928		6,857		1,392
Thereafter		28,242		17,534		4,515
Total undiscounted cash flows		175,624		58,102		10,203
Less: Adjustments ⁽¹⁾		13,921		5,336		433
Total ⁽²⁾	$	161,703	$	52,766	$	9,770

⁽¹⁾ Lessor – unearned income and unearned guaranteed residual value; Lessee – imputed interest.

⁽²⁾ Represents lease receivables for lessor arrangements and lease liabilities for lessee arrangements.

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6. BORROWINGS

Short-term Borrowings

The Company classifies all borrowings that will mature within a year from the date on which the Company enters into them as short-term borrowings. Total short-term borrowings consist primarily of advances from the FHLB, federal funds purchased (which are secured overnight borrowings from other financial institutions), and other lines of credit. Also included in total short-term borrowings are securities sold under agreements to repurchase, which are secured transactions with customers and generally mature the day following the date sold.

Total short-term borrowings consist of the following as of September 30, 2021 and December 31, 2020 (dollars in thousands):


	September 30,		December 31,
	2021		2020
Securities sold under agreements to repurchase	$	95,181	$	100,888
Federal Funds Purchased		—		150,000
FHLB Advances		—		100,000
Total short-term borrowings	$	95,181	$	350,888

Average outstanding balance during the period	$	114,710	$	213,932