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

Annual report pursuant to Section 13 and 15(d)

SEGMENT REPORTING DISCLOSURES

SEGMENT REPORTING DISCLOSURES

12 Months Ended

Dec. 31, 2017

The Company has two reportable segments: a traditional full-service community bank segment and a mortgage loan origination business segment. The community bank segment includes one subsidiary bank, the Bank, which provides loan, deposit, investment, and trust services to retail and commercial customers throughout its 111 retail locations in Virginia as of December 31, 2017. The mortgage segment includes UMG, which provides a variety of mortgage loan products principally in Virginia, North Carolina, Maryland, and the Washington D.C. metro area. These loans are originated and primarily sold in the secondary market through purchase commitments from investors, which serves to mitigate the Company’s exposure to interest rate risk.

Profit and loss is measured by net income after taxes including realized gains and losses on the Company’s investment portfolio. The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies. Inter-segment transactions are recorded at cost and eliminated as part of the consolidation process.

Both of the Company’s reportable segments are service-based. The mortgage segment’s business is a primarily fee-based business while the community bank segment is driven principally by net interest income. The community bank segment provides a distribution and referral network through its customers for the mortgage loan origination business. The mortgage segment offers a more limited referral network for the bank segment.

The community bank segment provides the mortgage segment with the short-term funds needed to originate mortgage loans through a warehouse line of credit and charges the mortgage banking segment interest. The interest rate on the warehouse line of credit was the three-month LIBOR rate plus 0.15% with no floor for the years ended December 31, 2017, 2016, and 2015. These transactions are eliminated in the consolidation process.

During 2015, the mortgage segment began originating loans with the intent that they be held for investment purposes. The community bank segment provides the mortgage segment with the long-term funds needed to originate these loans through a long-term funding facility and charges the mortgage segment interest. The interest charged is determined by the community bank segment based on the cost of funds available to the community bank segment for similar durations of the loans being funded by the mortgage segment.

A management fee for operations and administrative support services is charged to all subsidiaries and eliminated in the consolidated totals.

Information about reportable segments and reconciliation of such information to the consolidated financial statements for years ended December 31, 2017, 2016, and 2015 is as follows (dollars in thousands):

UNION BANKSHARES CORPORATION AND SUBSIDIARIES

SEGMENT FINANCIAL INFORMATION



	Community Bank		Mortgage			Eliminations			Consolidated
Year Ended December 31, 2017
Net interest income	$	278,470	$	1,687		$	—		$	280,157
Provision for credit losses	10,802		(46		)	—			10,756
Net interest income after provision for credit losses	267,668		1,733			—			269,401
Noninterest income	62,120		10,073			(519		)	71,674
Noninterest expenses	225,366		9,918			(519		)	234,765
Income before income taxes	104,422		1,888			—			106,310
Income tax expense	32,600		787			—			33,387
Net income	$	71,822	$	1,101		$	—		$	72,923
Total assets	$	9,305,660	$	111,845		$	(102,326	)	$	9,315,179



Year Ended December 31, 2016
Net interest income	$	263,714	$	1,436	$	—		$	265,150
Provision for credit losses	8,883		217		—			9,100
Net interest income after provision for credit losses	254,831		1,219		—			256,050
Noninterest income	59,505		12,008		(606		)	70,907
Noninterest expenses	212,774		10,535		(606		)	222,703
Income before income taxes	101,562		2,692		—			104,254
Income tax expense	25,846		932		—			26,778
Net income	$	75,716	$	1,760	$	—		$	77,476
Total assets	$	8,419,625	$	93,581	$	(86,413	)	$	8,426,793



Year Ended December 31, 2015
Net interest income	$	250,510	$	1,324		$	—		$	251,834
Provision for credit losses	9,450		121			—			9,571
Net interest income after provision for credit losses	241,060		1,203			—			242,263
Noninterest income	55,645		10,044			(682		)	65,007
Noninterest expenses	205,993		11,571			(682		)	216,882
Income (loss) before income taxes	90,712		(324		)	—			90,388
Income tax expense (benefit)	23,431		(122		)	—			23,309
Net income (loss)	$	67,281	$	(202	)	$	—		$	67,079
Total assets	$	7,690,132	$	57,900		$	(54,741	)	$	7,693,291