Quarterly report pursuant to Section 13 or 15(d)

BORROWINGS

v3.8.0.1
BORROWINGS
3 Months Ended
Mar. 31, 2018
Debt Disclosure [Abstract]  
BORROWINGS
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 March 31, 2018 and December 31, 2017 (dollars in thousands):

 
March 31,
2018
 
December 31,
2017
Securities sold under agreements to repurchase
$
31,593

 
$
49,152

Other short-term borrowings (1)
1,022,000

 
745,000

Total short-term borrowings
$
1,053,593

 
$
794,152

 
 
 
 
Maximum month-end outstanding balance
$
1,207,206

 
$
794,152

Average outstanding balance during the period
1,133,603

 
602,553

Average interest rate (during the period)
1.52
%
 
1.00
%
Average interest rate at end of period
1.64
%
 
1.32
%

(1) As of March 31, 2018 and December 31, 2017, all other short-term borrowings were FHLB advances.

The Bank maintains federal funds lines with several correspondent banks; the remaining available balance was $227.0 million at both March 31, 2018 and December 31, 2017. The Company maintains an alternate line of credit at a correspondent bank; the available balance was $25.0 million at both March 31, 2018 and December 31, 2017. 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. Additionally, the Company had a collateral dependent line of credit with the FHLB of up to $3.9 billion and $2.7 billion at March 31, 2018 and December 31, 2017, 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 $32.0 million, respectively. In connection with the acquisition of Xenith on January 1, 2018, the Company acquired trust preferred capital notes totaling $55.0 million with a fair value discount of $9.9 million. The remaining fair value discount on all acquired trust preferred capital notes was $16.2 million at March 31, 2018. The trust preferred capital notes currently qualify for Tier 1 capital of the Company for regulatory purposes.
 
Trust
Preferred
Capital
Securities (1)
 
Investment (1)
 
Spread to 
3-Month LIBOR
 
Rate (2)
 
Maturity
Trust Preferred Capital Note - Statutory Trust I
$
22,500,000

 
$
696,000

 
2.75
%
 
5.06
%
 
6/17/2034
Trust Preferred Capital Note - Statutory Trust II
36,000,000

 
1,114,000

 
1.40
%
 
3.71
%
 
6/15/2036
VFG Limited Liability Trust I Indenture
20,000,000

 
619,000

 
2.73
%
 
5.04
%
 
3/18/2034
FNB Statutory Trust II Indenture
12,000,000

 
372,000

 
3.10
%
 
5.41
%
 
6/26/2033
Gateway Capital Statutory Trust I
8,000,000

 
248,000

 
3.10
%
 
5.41
%
 
9/17/2033
Gateway Capital Statutory Trust II
7,000,000

 
217,000

 
2.65
%
 
4.96
%
 
6/17/2034
Gateway Capital Statutory Trust III
15,000,000

 
464,000

 
1.50
%
 
3.81
%
 
5/30/2036
Gateway Capital Statutory Trust IV
25,000,000

 
774,000

 
1.55
%
 
3.86
%
 
7/30/2037
Total
$
145,500,000

 
$
4,504,000

 
 

 
 

 
 
(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 March 31, 2018. 

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 $233,000 at March 31, 2018. The acquired subordinated notes have a fixed interest rate of 6.75% and a maturity date of June 30, 2025. At March 31, 2018 and December 31, 2017, the carrying value of all subordinated notes was $158.5 million and $150.0 million, respectively, with a remaining issuance discount of $1.7 million and $1.8 million, respectively. The subordinated notes qualify as Tier 2 capital for the Company for regulatory purposes.

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 is included as a component of long-term borrowings on the Company’s Consolidated Balance Sheets. In accordance with ASC 470-50, Modifications and Extinguishments, the Company is amortizing this prepayment penalty over the term of the modified advances using the effective rate method. The amortization expense is included as a component of interest expense on long-term borrowings on the Company’s Consolidated Statements of Income. Amortization expense for the three months ended March 31, 2018 and 2017 was $481,000 and $470,000, respectively.
 
In connection with an acquisition in 2014, the Company assumed $70.0 million in long-term borrowings with the FHLB of which there is $10.0 million remaining at March 31, 2018 that had a remaining fair value premium of $74,000.
 

As of March 31, 2018, the Company had long-term advances from the FHLB consisting of the following (dollars in thousands):
Long-term Type
 
Spread to
3-Month LIBOR
 
Interest Rate (1)
 
Maturity Date
 
Advance Amount
Adjustable Rate Credit
 
0.44
%
 
2.75
%
 
8/23/2022
 
$
55,000

Adjustable Rate Credit
 
0.45
%
 
2.76
%
 
11/23/2022
 
65,000

Adjustable Rate Credit
 
0.45
%
 
2.76
%
 
11/23/2022
 
10,000

Adjustable Rate Credit
 
0.45
%
 
2.76
%
 
11/23/2022
 
10,000

Fixed Rate
 

 
3.75
%
 
7/30/2018
 
5,000

Fixed Rate
 

 
3.97
%
 
7/30/2018
 
5,000

Fixed Rate Hybrid
 

 
0.99
%
 
10/19/2018
 
30,000

Fixed Rate Hybrid
 

 
1.58
%
 
5/18/2020
 
20,000

 
 
 

 
 

 
 
 
$
200,000

(1) Interest rates calculated using non-rounded numbers.
 
 
 
 
 
 
 
 
 
As of December 31, 2017, the Company had long-term advances from the FHLB consisting of the following (dollars in thousands):
Long-term Type
 
Spread to
3-Month LIBOR
 
Interest Rate (1)
 
Maturity Date
 
Advance Amount
 
 
 
 
 
 
 
 
 
Adjustable Rate Credit
 
0.44
%
 
2.13
%
 
8/23/2022
 
$
55,000

Adjustable Rate Credit
 
0.45
%
 
2.15
%
 
11/23/2022
 
65,000

Adjustable Rate Credit
 
0.45
%
 
2.15
%
 
11/23/2022
 
10,000

Adjustable Rate Credit
 
0.45
%
 
2.15
%
 
11/23/2022
 
10,000

Fixed Rate
 

 
3.75
%
 
7/30/2018
 
5,000

Fixed Rate
 

 
3.97
%
 
7/30/2018
 
5,000

Fixed Rate Hybrid
 

 
0.99
%
 
10/19/2018
 
30,000

Fixed Rate Hybrid
 

 
1.58
%
 
5/18/2020
 
20,000

 
 
 

 
 

 
 
 
$
200,000

(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 March 31, 2018 and December 31, 2017, refer to Note 7 "Commitments and Contingencies".

As of March 31, 2018, the contractual maturities of long-term debt are as follows for the years ending (dollars in thousands):
 
Trust
Preferred
Capital
Notes
 
Subordinated
Debt
 
FHLB
Advances
 
Fair Value 
Premium
(Discount) (1)
 
Prepayment
Penalty
 
Total Long-term
Borrowings
For the remaining nine months of 2018
$

 
$

 
$
40,000

 
$
(559
)
 
$
(1,489
)
 
$
37,952

2019

 

 

 
(862
)
 
(2,018
)
 
(2,880
)
2020

 

 
20,000

 
(935
)
 
(2,074
)
 
16,991

2021

 

 

 
(1,006
)
 
(2,119
)
 
(3,125
)
2022

 

 
140,000

 
(1,029
)
 
(1,707
)
 
137,264

Thereafter
150,004

 
158,500

 

 
(13,273
)
 

 
295,231

Total long-term borrowings
$
150,004

 
$
158,500

 
$
200,000

 
$
(17,664
)
 
$
(9,407
)
 
$
481,433


(1) Includes discount on issued subordinated notes.