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

Quarterly report pursuant to Section 13 or 15(d)

BORROWINGS

BORROWINGS

9 Months Ended

Sep. 30, 2016

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, 2016 and December 31, 2015 (dollars in thousands):



	September 30, 2016			December 31, 2015
Securities sold under agreements to repurchase	$	64,225		$	84,977
Other short-term borrowings	601,500			304,000
Total short-term borrowings	$	665,725		$	388,977

Maximum month-end outstanding balance	$	678,262		$	445,761
Average outstanding balance during the period	583,418			379,783
Average interest rate (year-to-date)	0.48		%	0.25		%
Average interest rate at end of period	0.48		%	0.27		%

Other short-term borrowings:
Federal funds purchased	$	6,000		$	—
FHLB	579,500			304,000
Other lines of credit	16,000			—

The Bank maintains federal funds lines with several correspondent banks; the remaining available balance was $169.0 million at September 30, 2016 and $175.0 million at December 31, 2015. The Company maintains an alternate line of credit at a correspondent bank, the available balance was $9.0 million at September 30, 2016 and $25.0 million at December 31, 2015. 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 $2.4 billion and $1.5 billion at September 30, 2016 and December 31, 2015, respectively.

Long-term Borrowings

In connection with two bank acquisitions prior to 2006, the Company issued trust preferred capital notes to fund the cash portion of those acquisitions, collectively totaling $58.5 million. In connection with the acquisition of StellarOne, the Company acquired trust preferred capital notes totaling $32.0 million with a remaining fair value discount of $6.8 million at September 30, 2016. 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		Maturity
Trust Preferred Capital Note - Statutory Trust I	$	22,500,000	$	696,000	2.75	%	3.60	%	6/17/2034
Trust Preferred Capital Note - Statutory Trust II	36,000,000		1,114,000		1.40	%	2.25	%	6/15/2036
VFG Limited Liability Trust I Indenture	20,000,000		619,000		2.73	%	3.58	%	3/18/2034
FNB Statutory Trust II Indenture	12,000,000		372,000		3.10	%	3.95	%	6/26/2033
Total	$	90,500,000	$	2,801,000

(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" within the Consolidated Balance Sheets.

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 in 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 in the Company’s Consolidated Statements of Income. Amortization expense for the three and nine months ended September 30, 2016 and 2015 was $474,000 and $1.4 million and $463,000 and $1.4 million, respectively.

In connection with the StellarOne acquisition, the Company assumed $70.0 million in long-term borrowings with the FHLB of which there is $45.0 million remaining at September 30, 2016 that had a remaining fair value premium of $693,000.

As of September 30, 2016, 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	%	1.29	%	8/23/2022	$	55,000
Adjustable Rate Credit	0.45	%	1.31	%	11/23/2022	65,000
Adjustable Rate Credit	0.45	%	1.31	%	11/23/2022	10,000
Adjustable Rate Credit	0.45	%	1.31	%	11/23/2022	10,000
Fixed Rate	—		3.62	%	11/28/2017	10,000
Fixed Rate	—		3.75	%	7/30/2018	5,000
Fixed Rate	—		3.97	%	7/30/2018	5,000
Fixed Rate Hybrid	—		2.11	%	10/5/2016	25,000
						$	185,000
⁽¹⁾Interest rates calculated using non-rounded numbers.

As of December 31, 2015, 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	%	1.05	%	8/23/2022	$	55,000
Adjustable Rate Credit	0.45	%	1.07	%	11/23/2022	65,000
Adjustable Rate Credit	0.45	%	1.07	%	11/23/2022	10,000
Adjustable Rate Credit	0.45	%	1.07	%	11/23/2022	10,000
Fixed Rate	—		3.62	%	11/28/2017	10,000
Fixed Rate	—		3.75	%	7/30/2018	5,000
Fixed Rate	—		3.97	%	7/30/2018	5,000
Fixed Rate Hybrid	—		2.11	%	10/5/2016	25,000
Fixed Rate Hybrid	—		0.91	%	7/25/2016	15,000
						$	200,000
⁽¹⁾Interest rates calculated using non-rounded numbers.

The carrying value of the loans and securities pledged as collateral for FHLB advances totaled $2.0 billion as of September 30, 2016 and $1.9 billion at December 31, 2015.

As of September 30, 2016, the contractual maturities of long-term debt are as follows for the years ending (dollars in thousands):



	Trust Preferred Capital Notes		FHLB Advances		Fair Value Premium (Discount)			Prepayment Penalty			Total Long-term Borrowings
For the remaining three months of 2016	$	—	$	25,000	$	71		$	(477	)	$	24,594
2017	—		10,000		170			(1,922		)	8,248
2018	—		10,000		(143		)	(1,970		)	7,887
2019	—		—		(286		)	(2,018		)	(2,304		)
2020	—		—		(301		)	(2,074		)	(2,375		)
Thereafter	93,301		140,000		(5,623		)	(3,826		)	223,852
Total Long-term borrowings	$	93,301	$	185,000	$	(6,112	)	$	(12,287	)	$	259,902