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

Quarterly report pursuant to Section 13 or 15(d)

SECURITIES

SECURITIES

3 Months Ended

Mar. 31, 2019

Investments, Debt and Equity Securities [Abstract]

Available for Sale

The amortized cost, gross unrealized gains and losses, and estimated fair values of AFS securities as of March 31, 2019 and December 31, 2018 are summarized as follows (dollars in thousands):



	Amortized		Gross Unrealized					Estimated
	Cost		Gains		(Losses)			Fair Value
March 31, 2019
U.S. government and agency securities	$	4,451	$	6	$	—		$	4,457
Obligations of states and political subdivisions	516,897		14,972		(81		)	531,788
Corporate and other bonds ⁽¹⁾	177,910		1,784		(807		)	178,887
Mortgage-backed securities	1,386,056		10,465		(6,128		)	1,390,393
Other securities	3,537		—		—			3,537
Total AFS securities	$	2,088,851	$	27,227	$	(7,016	)	$	2,109,062

December 31, 2018
Obligations of states and political subdivisions	$	466,588	$	3,844	$	(1,941	)	$	468,491
Corporate and other bonds ⁽¹⁾	167,561		1,118		(983		)	167,696
Mortgage-backed securities	1,138,034		4,452		(12,621		)	1,129,865
Other securities	8,769		—		—			8,769
Total AFS securities	$	1,780,952	$	9,414	$	(15,545	)	$	1,774,821

(1) Other bonds includes asset-backed securities.

The following table shows the gross unrealized losses and fair value of the Company’s AFS securities with unrealized losses that are not deemed to be other-than-temporarily impaired as of March 31, 2019 and December 31, 2018 (dollars in thousands). These are aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position.



	Less than 12 months					More than 12 months					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
March 31, 2019
Obligations of states and political subdivisions	$	777	$	(4	)	$	4,823	$	(77	)	$	5,600	$	(81	)
Corporate bonds and other securities	34,413		(206		)	39,561		(601		)	73,974		(807		)
Mortgage-backed securities	69,850		(207		)	458,646		(5,921		)	528,496		(6,128		)
Total AFS securities	$	105,040	$	(417	)	$	503,030	$	(6,599	)	$	608,070	$	(7,016	)

December 31, 2018
Obligations of states and political subdivisions	$	133,513	$	(1,566	)	$	10,145	$	(375	)	$	143,658	$	(1,941	)
Corporate bonds and other securities	35,478		(315		)	33,888		(668		)	69,366		(983		)
Mortgage-backed securities	306,038		(3,480		)	341,400		(9,141		)	647,438		(12,621		)
Total AFS securities	$	475,029	$	(5,361	)	$	385,433	$	(10,184	)	$	860,462	$	(15,545	)

As of March 31, 2019, there were $503.0 million, or 187 issues, of individual AFS securities that had been in a continuous loss position for more than 12 months and had an aggregate unrealized loss of $6.6 million. As of December 31, 2018, there were $385.4 million, or 138 issues, of individual securities that had been in a continuous loss position for more than 12 months and had an aggregate unrealized loss of $10.2 million. The Company has determined that these securities were temporarily impaired at March 31, 2019 and December 31, 2018 for the reasons set out below:

Obligations of state and political subdivisions. This category’s unrealized losses are primarily the result of interest rate fluctuations and ratings downgrades for a limited number of securities. The contractual terms of the investments do not permit the issuer to settle the securities at a price less than the cost basis of each investment. Because the Company does not intend to sell any of the investments and the accounting standard of “more likely than not” has not been met for the Company to be required to sell any of the investments before recovery of its amortized cost basis, which may be maturity, the Company does not consider these investments to be other-than-temporarily impaired.

Corporate and other bonds. This category's unrealized losses are the result of interest rate fluctuations and ratings downgrades for a limited number of securities. The majority of these securities remain investment grade and the Company’s analysis did not indicate the existence of a credit loss. The contractual terms of the investments do not permit the issuer to settle the securities at a price less than the cost basis of each investment. Because the Company does not intend to sell any of the investments and the accounting standard of “more likely than not” has not been met for the Company to be required to sell any of the investments before recovery of its amortized cost basis, which may be maturity, the Company does not consider these investments to be other-than-temporarily impaired.

Mortgage-backed securities. This category’s unrealized losses are primarily the result of interest rate fluctuations. Because the decline in market value is attributable to changes in interest rates and not credit quality, the Company does not intend to sell the investments, and the accounting standard of "more likely than not" has not been met for the Company to be required to sell any of the investments before recovery of their amortized cost basis, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired. Also, the majority of the Company’s mortgage-backed securities are agency-backed securities, which have a government guarantee.

The following table presents the amortized cost and estimated fair value of AFS securities as of March 31, 2019 and December 31, 2018, by contractual maturity (dollars in thousands). Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.



	March 31, 2019				December 31, 2018
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Due in one year or less	$	21,087	$	21,214	$	22,653	$	22,789
Due after one year through five years	280,969		281,047		191,003		188,999
Due after five years through ten years	257,437		258,813		218,211		217,304
Due after ten years	1,529,358		1,547,988		1,349,085		1,345,729
Total AFS securities	$	2,088,851	$	2,109,062	$	1,780,952	$	1,774,821

Refer to Note 8 "Commitments and Contingencies" for information regarding the estimated fair value of AFS securities that were pledged to secure public deposits, repurchase agreements, and for other purposes as permitted or required by law as of March 31, 2019 and December 31, 2018.

Held to Maturity

The Company reports HTM securities on the Company's Consolidated Balance Sheets at carrying value. Carrying value is amortized cost which includes any unamortized unrealized gains and losses recognized in accumulated other comprehensive income prior to reclassifying the securities from AFS securities to HTM securities. Investment securities transferred into the HTM category from the AFS category are recorded at fair value at the date of transfer. The unrealized holding gain or loss at the date of transfer is retained in accumulated other comprehensive income and in the carrying value of the HTM securities. Such unrealized gains or losses are accreted over the remaining life of the security with no impact on future net income.

The carrying value, gross unrealized gains and losses, and estimated fair values of HTM securities as of March 31, 2019 and December 31, 2018 are summarized as follows (dollars in thousands):



	Carrying		Gross Unrealized					Estimated
	Value		Gains		(Losses)			Fair Value
March 31, 2019
Obligations of states and political subdivisions	$	548,383	$	25,179	$	—		$	573,562
Mortgage-backed securities	10,997		47		—			11,044
Total held-to-maturity securities	$	559,380	$	25,226	$	—		$	584,606
December 31, 2018
Obligations of states and political subdivisions	$	492,272	$	7,375	$	(146	)	$	499,501

The following table shows the gross unrealized losses and fair value (dollars in thousands) of the Company’s HTM securities with unrealized losses that are not deemed to be other-than-temporarily impaired as of March 31, 2019 and December 31, 2018 (dollars in thousands). These are aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position.



	Less than 12 months					More than 12 months				Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
March 31, 2019
Mortgage-backed securities	1,219		—			—		—		1,219		—

December 31, 2018
Obligations of states and political subdivisions	$	43,206	$	(146	)	$	—	$	—	$	43,206	$	(146	)

As of March 31, 2019 and December 31, 2018 there were no issues of individual HTM securities that had been in a continuous loss position for more than 12 months.

The following table presents the amortized cost and estimated fair value of HTM securities as of March 31, 2019 and December 31, 2018, by contractual maturity (dollars in thousands). Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.



	March 31, 2019				December 31, 2018
	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
Due in one year or less	$	252	$	252	$	—	$	—
Due after one year through five years	8,212		8,332		3,893		3,900
Due after five years through ten years	4,010		4,054		3,480		3,507
Due after ten years	546,906		571,968		484,899		492,094
Total HTM securities	$	559,380	$	584,606	$	492,272	$	499,501

Refer to Note 8 "Commitments and Contingencies" for information regarding the estimated fair value of HTM securities that were pledged to secure public deposits as permitted or required by law as of March 31, 2019 and December 31, 2018.

Restricted Stock, at cost

Due to restrictions placed upon the Bank’s common stock investment in the Federal Reserve Bank and FHLB, these securities have been classified as restricted equity securities and carried at cost. These restricted securities are not subject to the investment security classifications and are included as a separate line item on the Company’s Consolidated Balance Sheets. At March 31, 2019 and December 31, 2018, the FHLB required the Bank to maintain stock in an amount equal to 4.25% of outstanding borrowings and a specific percentage of the Bank’s total assets. The Federal Reserve Bank required the Bank to maintain stock with a par value equal to 6% of the Bank's outstanding capital at both March 31, 2019 and December 31, 2018. Restricted equity securities consist of Federal Reserve Bank stock in the amount of $61.8 million and $52.6 million for March 31, 2019 and December 31, 2018 and FHLB stock in the amount of $74.1 million and $72.0 million as of March 31, 2019 and December 31, 2018, respectively.

Other-Than-Temporary-Impairment

During each quarter, the Company conducts an assessment of the securities portfolio for OTTI consideration. The assessment considers factors such as external credit ratings, delinquency coverage ratios, market price, management’s judgment, expectations of future performance, and relevant industry research and analysis. An impairment is other-than-temporary if any of the following conditions exist: the entity intends to sell the security; it is more likely than not that the entity will be required to sell the security before recovery of its amortized cost basis; or the entity does not expect to recover the security’s entire amortized cost basis (even if the entity does not intend to sell). If a credit loss exists, but an entity does not intend to sell the impaired debt security and is not more likely than not to be required to sell before recovery, the impairment is other-than-temporary and should be separated into a credit portion to be recognized in earnings and the remaining amount relating to all other factors recognized as other comprehensive loss. Based on the assessment for the three months ended March 31, 2019, and in accordance with accounting guidance, no OTTI was recognized.

Realized Gains and Losses

The following table presents the gross realized gains and losses on and the proceeds from the sale of securities during the three months ended March 31, 2019 and 2018 (dollars in thousands).



	Three Months Ended March 31, 2019			Three Months Ended March 31, 2018
Realized gains (losses):
Gross realized gains	$	1,213		$	697
Gross realized losses	(1,062		)	(484		)
Net realized gains	$	151		$	213

Proceeds from sales of securities	$	208,249		$	115,850