Atlantic Union Bankshares Corporation Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

LOANS AND ALLOWANCE FOR LOAN LOSSES

LOANS AND ALLOWANCE FOR LOAN LOSSES

9 Months Ended

Sep. 30, 2015

LOANS AND ALLOWANCE FOR LOAN LOSSES [Abstract]

4.LOANS AND ALLOWANCE FOR LOAN LOSSES

Loans are stated at their face amount, net of deferred fees and costs, and consist of the following at September 30, 2015 and December 31, 2014 (dollars in thousands):


	September 30,		December 31,
	2015		2014
Commercial:
Commercial Construction	$	429,645	$	341,280
Commercial Real Estate - Owner Occupied		863,551		875,443
Commercial Real Estate - Non-Owner Occupied		1,586,334		1,509,159
Raw Land and Lots		187,182		211,225
Single Family Investment Real Estate		436,340		412,494
Commercial and Industrial		444,199		393,776
Other Commercial		89,344		81,106
Consumer:
Mortgage		466,418		478,151
Consumer Construction		55,718		74,168
Indirect Auto		217,928		199,411
Indirect Marine		42,763		43,190
HELOCs		492,202		500,579
Credit Card		-		24,225
Other Consumer		231,997		201,789
Total	$	5,543,621	$	5,345,996

The following table shows the aging of the Company’s loan portfolio, by class, at September 30, 2015 (dollars in thousands):


	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days and still Accruing		PCI		Nonaccrual		Current		Total Loans
Commercial:
Commercial Construction	$	296	$	-	$	126	$	2,459	$	1,786	$	424,978	$	429,645
Commercial Real Estate - Owner Occupied		1,148		165		680		28,695		3,989		828,874		863,551
Commercial Real Estate - Non-Owner Occupied		752		974		1,821		15,172		200		1,567,415		1,586,334
Raw Land and Lots		93		-		-		5,141		493		181,455		187,182
Single Family Investment Real Estate		536		35		228		15,167		1,157		419,217		436,340
Commercial and Industrial		721		696		494		2,249		903		439,136		444,199
Other Commercial		643		-		-		793		61		87,847		89,344
Consumer:
Mortgage		2,485		5,079		875		5,561		2,276		450,142		466,418
Consumer Construction		250		-		-		251		819		54,398		55,718
Indirect Auto		1,319		270		116		-		89		216,134		217,928
Indirect Marine		150		-		94		-		-		42,519		42,763
HELOCs		3,192		1,085		282		1,812		611		485,220		492,202
Other Consumer		1,521		966		448		1,306		582		227,174		231,997
Total	$	13,106	$	9,270	$	5,164	$	78,606	$	12,966	$	5,424,509	$	5,543,621

The following table shows the aging of the Company’s loan portfolio, by class, at December 31, 2014 (dollars in thousands):


	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days and still Accruing		PCI		Nonaccrual		Current		Total Loans
Commercial:
Commercial Construction	$	815	$	-	$	-	$	3,782	$	968	$	335,715	$	341,280
Commercial Real Estate - Owner Occupied		621		1,542		1,683		31,167		1,060		839,370		875,443
Commercial Real Estate - Non-Owner Occupied		3,984		237		91		28,869		5,902		1,470,076		1,509,159
Raw Land and Lots		145		44		194		7,427		2,359		201,056		211,225
Single Family Investment Real Estate		2,825		338		734		16,879		2,070		389,648		412,494
Commercial and Industrial		1,250		529		549		3,855		3,286		384,307		393,776
Other Commercial		42		2		-		2,256		74		78,732		81,106
Consumer:
Mortgage		12,851		4,300		4,095		7,394		2,485		447,026		478,151
Consumer Construction		120		-		844		516		-		72,688		74,168
Indirect Auto		1,593		263		317		-		-		197,238		199,411
Indirect Marine		150		-		-		-		201		42,839		43,190
HELOCs		3,082		955		820		2,000		258		493,464		500,579
Credit Card		232		108		219		-		-		23,666		24,225
Other Consumer		1,587		412		501		1,643		592		197,054		201,789
Total	$	29,297	$	8,730	$	10,047	$	105,788	$	19,255	$	5,172,879	$	5,345,996

The following table shows the PCI commercial and consumer loan portfolios, by class and their delinquency status, at September 30, 2015 (dollars in thousands):


	30-89 Days Past Due		Greater than 90 Days		Current		Total
Commercial:
Commercial Construction	$	-	$	459	$	2,000	$	2,459
Commercial Real Estate - Owner Occupied		1,024		1,752		25,919		28,695
Commercial Real Estate - Non-Owner Occupied		1,202		392		13,578		15,172
Raw Land and Lots		196		70		4,875		5,141
Single Family Investment Real Estate		1,225		646		13,296		15,167
Commercial and Industrial		412		69		1,768		2,249
Other Commercial		31		63		699		793
Consumer:
Mortgage		597		1,612		3,352		5,561
Consumer Construction		-		251		-		251
HELOCs		244		365		1,203		1,812
Other Consumer		47		60		1,199		1,306
Total	$	4,978	$	5,739	$	67,889	$	78,606

The following table shows the PCI commercial and consumer loan portfolios, by class and their delinquency status, at December 31, 2014 (dollars in thousands):


	30-89 Days Past Due		Greater than 90 Days		Current		Total
Commercial:
Commercial Construction	$	-	$	652	$	3,130	$	3,782
Commercial Real Estate - Owner Occupied		1,138		843		29,186		31,167
Commercial Real Estate - Non-Owner Occupied		523		1,255		27,091		28,869
Raw Land and Lots		522		-		6,905		7,427
Single Family Investment Real Estate		1,327		1,311		14,241		16,879
Commercial and Industrial		144		538		3,173		3,855
Other Commercial		107		1,133		1,016		2,256
Consumer:
Mortgage		1,975		2,866		2,553		7,394
Consumer Construction		-		516		-		516
HELOCs		356		728		916		2,000
Other Consumer		89		171		1,383		1,643
Total	$	6,181	$	10,013	$	89,594	$	105,788

The Company measures the amount of impairment by evaluating loans either in their collective homogeneous pools or individually. The following table shows the Company’s impaired loans, excluding PCI loans related to the StellarOne acquisition, by class at September 30, 2015 (dollars in thousands):


	Recorded Investment		Unpaid Principal Balance		Related Allowance		YTD Average Investment		Interest Income Recognized
Loans without a specific allowance
Commercial:
Commercial Construction	$	5,760	$	6,036	$	-	$	5,126	$	187
Commercial Real Estate - Owner Occupied		11,801		11,998		-		11,602		356
Commercial Real Estate - Non-Owner Occupied		6,854		7,166		-		7,025		212
Raw Land and Lots		24,762		24,896		-		25,595		1,290
Single Family Investment Real Estate		2,295		2,721		-		2,455		99
Commercial and Industrial		1,983		2,532		-		2,115		47
Other Commercial		876		876		-		895		41
Consumer:
Mortgage		333		333		-		333		8
Consumer Construction		819		821		-		822		29
HELOCs		196		331		-		310		10
Other Consumer		216		339		-		285		15
Total impaired loans without a specific allowance	$	55,895	$	58,049	$	-	$	56,563	$	2,294

Loans with a specific allowance
Commercial:
Commercial Construction	$	561	$	561	$	40	$	629	$	16
Commercial Real Estate - Owner Occupied		6,763		7,874		677		7,107		191
Commercial Real Estate - Non-Owner Occupied		6,863		6,864		178		6,870		304
Raw Land and Lots		1,224		1,221		60		978		34
Single Family Investment Real Estate		3,018		3,035		212		3,052		113
Commercial and Industrial		2,581		2,640		330		2,684		100
Other Commercial		423		451		32		475		16
Consumer:
Mortgage		3,273		3,522		362		3,495		64
Indirect Auto		89		95		1		121		5
HELOCs		1,008		1,038		5		1,032		24
Other Consumer		525		720		115		635		17
Total impaired loans with a specific allowance	$	26,328	$	28,021	$	2,012	$	27,078	$	884
Total impaired loans	$	82,223	$	86,070	$	2,012	$	83,641	$	3,178

The following table shows the Company’s impaired loans, by class, at December 31, 2014 (dollars in thousands):


	Recorded Investment		Unpaid Principal Balance		Related Allowance		YTD Average Investment		Interest Income Recognized
Loans without a specific allowance
Commercial:
Commercial Construction	$	5,281	$	5,367	$	-	$	5,755	$	165
Commercial Real Estate - Owner Occupied		15,722		16,430		-		16,774		737
Commercial Real Estate - Non-Owner Occupied		22,917		22,917		-		23,209		1,116
Raw Land and Lots		44,790		47,662		-		47,988		2,124
Single Family Investment Real Estate		4,197		4,881		-		6,534		170
Commercial and Industrial		4,453		7,933		-		5,070		121
Other Commercial		1,536		1,538		-		1,624		90
Consumer:
Mortgage		1,571		1,582		-		1,583		58
Indirect Auto		-		6		-		4		-
Indirect Marine		201		505		-		281		-
HELOCs		559		699		-		573		8
Other Consumer		89		208		-		107		-
Total impaired loans without a specific allowance	$	101,316	$	109,728	$	-	$	109,502	$	4,589

Loans with a specific allowance
Commercial:
Commercial Construction	$	570	$	570	$	51	$	506	$	13
Commercial Real Estate - Owner Occupied		5,951		5,999		355		5,946		280
Commercial Real Estate - Non-Owner Occupied		10,575		10,572		2,017		10,823		474
Raw Land and Lots		1,343		1,373		98		1,472		59
Single Family Investment Real Estate		4,125		4,144		562		4,293		159
Commercial and Industrial		2,938		3,009		582		3,125		138
Other Commercial		359		378		32		442		29
Consumer:
Mortgage		3,323		3,375		481		3,381		60
Consumer Construction		375		375		34		373		19
Indirect Marine		192		192		5		199		15
HELOCs		434		434		4		436		17
Other Consumer		679		706		310		686		19
Total impaired loans with a specific allowance	$	30,864	$	31,127	$	4,531	$	31,682	$	1,282
Total impaired loans	$	132,180	$	140,855	$	4,531	$	141,184	$	5,871

The Company considers TDRs to be impaired loans. A modification of a loan’s terms constitutes a TDR if the creditor grants a concession that it would not otherwise consider to the borrower for economic or legal reasons related to the borrower’s financial difficulties. TDRs totaled $11.6 million and $26.8 million as of September 30, 2015 and December 31, 2014, respectively. All loans that are considered to be TDRs are evaluated for impairment in accordance with the Company’s allowance for loan loss methodology and are included in the preceding impaired loan tables. For the quarter ended September 30, 2015, the recorded investment in restructured loans prior to modifications was not materially impacted by the modification.

The following table provides a summary, by class, of modified loans that continue to accrue interest under the terms of the restructuring agreement, which are considered to be performing, and modified loans that have been placed on nonaccrual status, which are considered to be nonperforming, as of September 30, 2015 and December 31, 2014 (dollars in thousands):


	September 30, 2015					December 31, 2014
	No. of Loans	Recorded Investment		Outstanding Commitment		No. of Loans	Recorded Investment		Outstanding Commitment
Performing
Commercial:
Commercial Construction	1	$	296	$	-	1	$	707	$	-
Commercial Real Estate - Owner Occupied	5		1,608		-	3		682		-
Commercial Real Estate - Non-Owner Occupied	2		2,390		-	3		3,362		-
Raw Land and Lots	5		3,081		-	9		14,777		-
Single Family Investment Real Estate	2		444		-	6		1,046		-
Commercial and Industrial	3		103		-	9		722		-
Other Commercial	1		128		-	1		191		-
Consumer:
Mortgage	7		1,331		-	7		1,244		-
Other Consumer	2		87		-	3		98		-
Total performing	28	$	9,468	$	-	42	$	22,829	$	-

Nonperforming
Commercial:
Commercial Construction	1	$	126	$	-	1	$	253	$	-
Commercial Real Estate - Owner Occupied	1		140		-	2		153		-
Commercial Real Estate - Non-Owner Occupied	1		200		-	1		539		-
Raw Land and Lots	1		33		-	2		1,053		-
Single Family Investment Real Estate	2		234		-	1		433		-
Commercial and Industrial	3		485		-	5		616		-
Other Commercial	1		61		-	1		74		-
Consumer:
Mortgage	3		771		-	2		770		-
Other Consumer	1		37		-	1		57		-
Total nonperforming	14	$	2,087	$	-	16	$	3,948	$	-

Total performing and nonperforming	42	$	11,555	$	-	58	$	26,777	$	-

The Company considers a default of a restructured loan 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, 2015, the Company did not identify any restructured loans that went into default that had been restructured in the twelve-month period prior to default. During the three months ended September 30, 2014, the Company did not identify any restructured loans that went into default that had been restructured in the twelve-month period prior to default. During the nine months ended September 30, 2014, the Company identified one loan, totaling approximately $24,000, that went into default that had been restructured in the twelve-month period prior to the time of default. This loan was a mortgage loan which had a term modification at a market rate.

The following table shows, by class and modification type, TDRs that occurred during the three and nine months ended September 30, 2015 (dollars in thousands):


	Three months ended			Nine months ended
	September 30, 2015			September 30, 2015
	No. of Loans	Recorded Investment at Period End		No. of Loans	Recorded Investment at Period End
Term modification, at a market rate
Commercial:
Commercial Real Estate - Owner Occupied	-	$	-	1	$	117
Commercial and Industrial	-		-	1		17
Total loan term extended at a market rate	-	$	-	2	$	134

Term modification, below market rate
Commercial:
Commercial Real Estate - Owner Occupied	-	$	-	1	$	871
Raw Land and Lots	1		400	1		400
Consumer:
Mortgage	2		619	2		619
Other Consumer	1		55	1		55
Total loan term extended at a below market rate	4	$	1,074	5	$	1,945

Total	4	$	1,074	7	$	2,079

The following table shows, by class and modification type, TDRs that occurred during the three and nine months ended September 30, 2014 (dollars in thousands):


	Three months ended			Nine months ended
	September 30, 2014			September 30, 2014
	No. of Loans	Recorded Investment at Period End		No. of Loans	Recorded Investment at Period End
Term modification, at a market rate
Commercial:
Commercial Real Estate - Non-Owner Occupied	1	$	989	1	$	989
Single Family Investment Real Estate	-		-	1		110
Commercial and Industrial	-		-	1		33
Other Commercial	-		-	2		269
Total loan term extended at a market rate	1	$	989	5	$	1,401

Total	1	$	989	5	$	1,401

The following table shows the allowance for loan loss activity, balances for allowance for loan losses, and loan balances based on impairment methodology by portfolio segment for the nine months ended and as of September 30, 2015. The table below includes the provision for loan losses. In addition, a $300,000 provision was recognized during the nine months ended September 30, 2015 for unfunded loan commitments for which the reserves are recorded as a component of “Other Liabilities” on the Company’s Consolidated Balance Sheets. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories (dollars in thousands):


	Commercial		Consumer		Total
Allowance for loan losses:
Balance, beginning of the year	$	22,352	$	10,032	$	32,384
Recoveries credited to allowance		1,921		1,073		2,994
Loans charged off		(6,013)		(3,357)		(9,370)
Provision charged to operations		5,364		1,897		7,261
Balance, end of period	$	23,624	$	9,645	$	33,269

Ending Balance, ALL:
Loans individually evaluated for impairment	$	1,529	$	483	$	2,012
Loans collectively evaluated for impairment		22,095		9,162		31,257
Loans acquired with deteriorated credit quality		-		-		-
Total	$	23,624	$	9,645	$	33,269

Ending Balance, Loans:
Loans individually evaluated for impairment	$	75,308	$	6,310	$	81,618
Loans collectively evaluated for impairment		3,891,611		1,491,786		5,383,397
Loans acquired with deteriorated credit quality		69,676		8,930		78,606
Total	$	4,036,595	$	1,507,026	$	5,543,621

The following table shows the allowance for loan loss activity, balances for allowance for loan losses, and loan balances based on impairment methodology by portfolio segment for the nine months ended and as of September 30, 2014. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories (dollars in thousands):


	Commercial		Consumer		Total
Allowance for loan losses:
Balance, beginning of the year	$	19,908	$	10,227	$	30,135
Recoveries credited to allowance		1,999		866		2,865
Loans charged off		(1,991)		(2,200)		(4,191)
Provision charged to operations		1,507		1,793		3,300
Balance, end of period	$	21,423	$	10,686	$	32,109

Ending Balance, ALL:
Loans individually evaluated for impairment	$	3,183	$	922	$	4,105
Loans collectively evaluated for impairment		18,240		9,764		28,004
Loans acquired with deteriorated credit quality		-		-		-
Total	$	21,423	$	10,686	$	32,109

Ending Balance, Loans:
Loans individually evaluated for impairment	$	125,310	$	8,855	$	134,165
Loans collectively evaluated for impairment		3,430,451		1,486,644		4,917,095
Loans acquired with deteriorated credit quality		106,021		13,722		119,743
Total	$	3,661,782	$	1,509,221	$	5,171,003

The Company uses the past due status and delinquency trends as the primary credit quality indicator for the consumer loan portfolio segment while a risk rating system is utilized for commercial loans. Commercial loans are graded on a scale of 0 through 9. A general description of the characteristics of the risk grades follows:

Risk rated 0 loans have little or no risk and are generally secured by General Obligation Municipal Credits;

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;

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;

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;

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;

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; and

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.

The following table shows the recorded investment in all loans, excluding PCI loans, in the commercial portfolios by class with their related risk rating current as of September 30, 2015 (dollars in thousands):


	0-3		4		5		6		7		8		Total
Commercial Construction	$	37,671	$	355,150	$	22,661	$	8,857	$	2,847	$	-	$	427,186
Commercial Real Estate - Owner Occupied		179,846		622,852		13,967		6,526		9,433		2,232		834,856
Commercial Real Estate - Non-Owner Occupied		467,026		1,048,396		19,654		22,369		13,717		-		1,571,162
Raw Land and Lots		12,036		122,236		7,307		15,792		24,670		-		182,041
Single Family Investment Real Estate		63,146		339,683		8,430		5,210		4,704		-		421,173
Commercial and Industrial		186,807		235,543		10,732		4,669		4,199		-		441,950
Other Commercial		43,355		40,386		2,613		898		1,299		-		88,551
Total	$	989,887	$	2,764,246	$	85,364	$	64,321	$	60,869	$	2,232	$	3,966,919

The following table shows the recorded investment in all loans, excluding PCI loans, in the commercial portfolios by class with their related risk rating current as of December 31, 2014 (dollars in thousands):


	1-3		4		5		6		7		8		Total
Commercial Construction	$	22,512	$	289,064	$	11,932	$	10,906	$	3,084	$	-	$	337,498
Commercial Real Estate - Owner Occupied		185,789		620,587		15,003		7,688		15,209		-		844,276
Commercial Real Estate - Non-Owner Occupied		356,263		1,041,515		22,358		28,388		31,766		-		1,480,290
Raw Land and Lots		11,162		128,281		16,803		4,783		42,769		-		203,798
Single Family Investment Real Estate		59,638		311,900		9,750		6,680		7,647		-		395,615
Commercial and Industrial		138,973		230,084		9,392		4,383		7,089		-		389,921
Other Commercial		31,571		40,913		3,818		844		1,704		-		78,850
Total	$	805,908	$	2,662,344	$	89,056	$	63,672	$	109,268	$	-	$	3,730,248

The following table shows the recorded investment in only PCI loans in the commercial portfolios by class with their related risk rating and credit quality indicator information current as of September 30, 2015 (dollars in thousands):


	4		5		6		7		8		Total
Commercial Construction	$	-	$	-	$	2,000	$	-	$	459	$	2,459
Commercial Real Estate - Owner Occupied		5,203		700		9,016		13,776		-		28,695
Commercial Real Estate - Non-Owner Occupied		3,492		6,288		2,867		2,525		-		15,172
Raw Land and Lots		1,425		517		2,317		882		-		5,141
Single Family Investment Real Estate		4,598		1,689		4,322		4,558		-		15,167
Commercial and Industrial		357		12		360		1,498		22		2,249
Other Commercial		86		-		387		320		-		793
Total	$	15,161	$	9,206	$	21,269	$	23,559	$	481	$	69,676


	4		5		6		7		8		Total
Commercial Construction	$	-	$	-	$	3,130	$	194	$	458	$	3,782
Commercial Real Estate - Owner Occupied		1,525		3,546		10,880		15,216		-		31,167
Commercial Real Estate - Non-Owner Occupied		2,837		934		18,736		6,362		-		28,869
Raw Land and Lots		1,564		189		3,148		2,526		-		7,427
Single Family Investment Real Estate		2,807		1,253		6,462		6,357		-		16,879
Commercial and Industrial		437		-		913		2,477		28		3,855
Other Commercial		-		-		510		1,746		-		2,256
Total	$	9,170	$	5,922	$	43,779	$	34,878	$	486	$	94,235

Loans acquired are originally recorded at fair value, with certain loans being identified as impaired at the date of purchase. The fair values were determined based on the credit quality of the portfolio, expected future cash flows, and timing of those expected future cash flows.

The following shows changes in the accretable yield for loans accounted for under ASC 310-30, Receivables – Loans and Debt Securities Acquired with Deteriorated Credit Quality, for the periods presented (dollars in thousands):


	For the Nine Months ended June 30,
	September 30,
	2015		2014
Balance at beginning of period	$	28,956	$	2,980
Additions		-		34,653
Accretion		(4,707)		(5,681)
Reclass of nonaccretable difference due to improvement in expected cash flows		3,168		-
Other, net (1)		(5,624)		(2,150)
Balance at end of period	$	21,793	$	29,802

(1) This line item represents changes in the cash flows expected to be collected due to the impact of non-credit changes such as prepayment assumptions, changes in interest rates on variable rate PCI loans, and discounted payoffs that occurred in the quarter.

The carrying value of the Company’s PCI loan portfolio, accounted for under ASC 310-30, totaled $78.6 million at September 30, 2015 and $105.8 million at December 31, 2014. The outstanding balance of the Company’s PCI loan portfolio totaled $95.7 million at September 30, 2015 and $126.3 million at December 31, 2014. The carrying value of the Company’s acquired performing loan portfolio, accounted for under ASC 310-20, Receivables – Nonrefundable Fees and Other Costs, totaled $1.5 billion at September 30, 2015 and $1.8 billion at December 31, 2014; the remaining discount on these loans totaled $21.9 million at September 30, 2015 and $24.3 million at December 31, 2014, respectively.

- Definition

The entire disclosure for claims held for amounts due a entity, excluding financing receivables. Examples include, but are not limited to, trade accounts receivables, notes receivables, loans receivables. Includes disclosure for allowance for credit losses.

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