Atlantic Union Bankshares Corporation Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

BORROWINGS

BORROWINGS

12 Months Ended

Dec. 31, 2019

Debt Disclosure [Abstract]

BORROWINGS

9. 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 December 31, 2019 and 2018 (dollars in thousands):


	2019			2018
Securities sold under agreements to repurchase	$	66,053		$	39,197
FHLB advances		370,200			1,043,600
Other short-term borrowings		—			5,000
Total short-term borrowings	$	436,253		$	1,087,797

Average outstanding balance during the period	$	673,116		$	968,014
Average interest rate (during the period)		2.30	%		1.91	%
Average interest rate at end of period		1.52	%		2.43	%

The Bank maintains federal funds lines with several correspondent banks; the remaining available balance was $682.0 million and $382.0 million at December 31, 2019 and 2018 respectively. The Company maintains an alternate line of credit at a correspondent bank; the available balance was $25.0 million at both December 31, 2019 and 2018. The Company has certain restrictive covenants related to certain asset quality, capital, and profitability metrics associated with these lines and is considered to be in compliance with these covenants as of December 31, 2019. Additionally, the Company had a collateral dependent line of credit with the FHLB of up to $5.2 billion and $4.0 billion at December 31, 2019 and 2018, respectively.

Long-term Borrowings

In connection with several previous bank acquisitions, the Company issued and acquired trust preferred capital notes of $58.5 million and $87.0 million, respectively. Most recently, in connection with the acquisition of Access on February 1, 2019, the Company acquired additional trust preferred capital notes totaling $5.0 million. The remaining fair value discount on all acquired trust preferred capital notes was $14.9 million at December 31, 2019. The trust preferred capital notes currently qualify for Tier 2 capital of the Company for regulatory purposes. The Company’s trust preferred capital notes consist of the following as of December 31, 2019:


	Trust
	Preferred
	Capital				Spread to
	Securities ⁽¹⁾		Investment ⁽¹⁾		3-Month LIBOR		Rate ⁽²⁾		Maturity
Trust Preferred Capital Note - Statutory Trust I	$	22,500,000	$	696,000	2.75	%	4.66	%	6/17/2034
Trust Preferred Capital Note - Statutory Trust II		36,000,000		1,114,000	1.40	%	3.31	%	6/15/2036
VFG Limited Liability Trust I Indenture		20,000,000		619,000	2.73	%	4.64	%	3/18/2034
FNB Statutory Trust II Indenture		12,000,000		372,000	3.10	%	5.01	%	6/26/2033
Gateway Capital Statutory Trust I		8,000,000		248,000	3.10	%	5.01	%	9/17/2033
Gateway Capital Statutory Trust II		7,000,000		217,000	2.65	%	4.56	%	6/17/2034
Gateway Capital Statutory Trust III		15,000,000		464,000	1.50	%	3.41	%	5/30/2036
Gateway Capital Statutory Trust IV		25,000,000		774,000	1.55	%	3.46	%	7/30/2037
MFC Capital Trust II		5,000,000		155,000	2.85	%	4.76	%	1/23/2034
Total	$	150,500,000	$	4,659,000

(1)

The total of the trust preferred capital securities and investments in the respective trusts represents the principal asset of the Company’s junior subordinated debt securities with like maturities and like interest rates to the capital securities. The Company’s investment in the trusts is reported in "Other Assets" on the Consolidated Balance Sheets.

(2)	Rate as of December 31, 2019.

During the fourth quarter of 2016, the Company issued $150.0 million of fixed-to-floating rate subordinated notes with an initial fixed interest rate of 5.00% through December 15, 2021. The interest rate then changes to a floating rate of LIBOR plus 3.175% through its maturity date on December 15, 2026. In connection with the acquisition of Xenith on January 1, 2018, the Company acquired $8.5 million of subordinated notes with a fair value premium of $259,000, which was $51,000 at December 31, 2019. The acquired subordinated notes have a fixed interest rate of 6.75% and a maturity date of June 30, 2025. At December 31, 2019 and 2018, the contractual principal reported for all subordinated notes was $158.5 million; remaining issuance discount as of December 31, 2019 and 2018 was $1.4 million and $1.6 million, respectively. The subordinated notes qualify as Tier 2 capital for the Company for regulatory purposes. The Company has certain restrictive covenants related to certain asset quality, capital, and profitability metrics associated with the acquired subordinated notes and was considered to be in compliance with these covenants as of December 31, 2019.

On August 23, 2012, the Company modified its fixed rate FHLB advances to floating rate advances, which resulted in reducing the Company’s FHLB borrowing costs. In connection with this modification, the Company incurred a prepayment penalty of $19.6 million on the original advances which was deferred and to be amortized over the term of the modified advances using the effective rate method. On August 29, 2019, the Company repaid the floating rate FHLB advances. In connection with this repayment, the remaining unamortized prepayment penalty of $7.4 million was immediately recognized as a component of noninterest expense.

As of December 31, 2019, the Company had long-term advances from the FHLB consisting of the following (dollars in thousands):


	Spread to
	3-Month		Interest
Long-term Type	LIBOR		Rate ⁽¹⁾		Maturity Date	Advance Amount
Convertible Flipper	(0.75)	%	1.16	%	8/17/2029	$	50,000
Convertible Flipper	(0.50)	%	1.41	%	5/15/2024		200,000
Convertible Flipper	(0.75)	%	1.16	%	5/22/2029		150,000
Convertible Flipper	(0.75)	%	1.16	%	5/30/2029		50,000
Convertible Flipper	(0.75)	%	1.16	%	6/21/2029		100,000
Fixed Rate Convertible	-		1.78	%	10/26/2028		200,000
Fixed Rate Hybrid	-		1.58	%	5/18/2020		20,000
Fixed Rate Credit	-		1.54	%	10/2/2020		10,000
						$	780,000

(1)	Interest rates calculated using non-rounded numbers.

As of December 31, 2018, the Company had long-term advances from the FHLB consisting of the following (dollars in thousands):


	Spread to
	3-Month		Interest
Long-term Type	LIBOR		Rate ⁽¹⁾		Maturity Date	Advance Amount
Adjustable Rate Credit	0.44	%	3.25	%	8/23/2022	$	55,000
Adjustable Rate Credit	0.45	%	3.26	%	11/23/2022		65,000
Adjustable Rate Credit	0.45	%	3.26	%	11/23/2022		10,000
Adjustable Rate Credit	0.45	%	3.26	%	11/23/2022		10,000
Fixed Rate Convertible	—		1.78	%	10/26/2028		200,000
Fixed Rate Hybrid	—		2.37	%	10/10/2019		25,000
Fixed Rate Hybrid	—		1.58	%	5/18/2020		20,000
						$	385,000

(1)	Interest rates calculated using non-rounded numbers.

For information on the carrying value of loans and securities pledged as collateral on FHLB advances as of December 31, 2019 and 2018, refer to Note 10 "Commitments and Contingencies".

As of December 31, 2019, the contractual maturities of long-term debt are as follows for the years ending (dollars in thousands):


	Trust
	Preferred						Fair Value
	Capital		Subordinated		FHLB		Premium		Total Long-term
	Notes		Debt		Advances		(Discount) ⁽¹⁾		Borrowings
2020	$	—	$	—	$	30,000	$	(834)	$	29,166
2021		—		—		—		(1,008)		(1,008)
2022		—		—		—		(1,030)		(1,030)
2023		—		—		—		(1,053)		(1,053)
2024		—		—		200,000		(1,078)		198,922
Thereafter		155,159		158,500		550,000		(11,161)		852,498
Total long-term borrowings	$	155,159	$	158,500	$	780,000	$	(16,164)	$	1,077,495

(1)	Includes discount on issued subordinated notes.