Union Bankshares Reports Third Quarter Results

RICHMOND, Va., Oct. 20, 2016 (GLOBE NEWSWIRE) — Union Bankshares Corporation (the “Company” or “Union”) (NASDAQ:UBSH) today reported net income of $20.4 million and earnings per share of $0.47 for its third quarter ended September 30, 2016.  The quarterly results represent an increase of $1.1 million, or 5.5%, in net income and an increase of $0.03, or 6.8%, in earnings per share from the second quarter.  For the nine months ended September 30, 2016, net income was $56.7 million and earnings per share was $1.29, an increase of 15.1% and 18.3%, respectively, compared to the results for the nine months ended September 30, 2015.

Union’s third quarter financial results continued to demonstrate the steady progress we are making toward our strategic growth and profitability objectives with another quarter of double digit loan and deposit growth and net income of $20.4 million,” said G. William Beale, chief executive officer of Union Bankshares Corporation.  “We also continued to make headway towards delivering the top-tier financial performance our shareholders expect as the return on average assets improved to 1.0% and return on tangible common equity increased to 12.0%.

“As John Asbury and I begin the CEO transition plan we recently announced, I want to thank all of you for your interest and investment in Union over the years.  While I’m proud of what the company has accomplished and the significant value the Company has created for our shareholders over the past 25 years, I believe that Union’s best days lie ahead and that John is the right person to lead the company into the future.

Select highlights for the third quarter include:

  • Net income for the community bank segment was $19.6 million, or $0.45 per share, for the third quarter, compared to $18.9 million, or $0.43 per share, for the second quarter.  Net income for the community bank segment for the nine months ended September 30, 2016 was $55.3 million, or $1.26 per share.
  • The mortgage segment reported net income of $785,000, or $0.02 per share, for the third quarter, compared to net income of $539,000, or $0.01 per share, in the second quarter.  Net income for the mortgage segment for the nine months ended September 30, 2016 was $1.4 million, or $0.03 per share.
  • Return on Average Assets (“ROA”) was 1.00% for the quarter ended September 30, 2016 compared to ROA of 0.98% for the prior quarter and 0.96% for the third quarter of 2015.  Return on Average Tangible Common Equity (“ROTCE”) was 12.00% for the quarter ended September 30, 2016 compared to ROTCE of 11.60% for the prior quarter and 10.70% for the third quarter of 2015. 
  • As previously announced, the Company closed five in-store branches in the Richmond market on September 30, 2016 as part of its continuing efforts to become more efficient.  The Company incurred approximately $400,000 in related branch closure costs.
  • Loans held for investment grew $207.8 million, or 14.0% (annualized), from June 30, 2016 and increased $605.3 million, or 10.9%, from September 30, 2015.  Average loans increased $170.7 million, or 11.6% (annualized), from the prior quarter and increased $508.6 million, or 9.2%, from the same quarter in the prior year.
  • Period-end deposits increased $162.7 million, or 10.7% (annualized), from June 30, 2016 and grew $439.7 million, or 7.6%, from September 30, 2015.  Average deposits increased $179.4 million, or 11.9% (annualized), from the prior quarter and increased $390.8 million, or 6.7%, from the prior year.

NET INTEREST INCOME

Tax-equivalent net interest income was $69.5 million, an increase of $1.2 million from the second quarter, primarily driven by higher earning asset balances.  The third quarter tax-equivalent net interest margin decreased 8 basis points to 3.76% from 3.84% in the previous quarter.  Core tax-equivalent net interest margin (which excludes the 9 and 8 basis point impact of acquisition accounting accretion in the current and prior quarter, respectively) declined by 9 basis points to 3.67% from 3.76% in the previous quarter.  The decrease in the core tax-equivalent net interest margin was principally due to the 7 basis point decline in interest-earning asset yields and the 2 basis point increase in cost of funds.  The decline in interest-earnings asset yields was primarily driven by lower loan yields on new and renewed loans (4 basis points) and lower levels of loans fees recorded in the current quarter (3 basis points).

The Company’s tax-equivalent net interest margin includes the impact of acquisition accounting fair value adjustments.  During the third quarter, net accretion related to acquisition accounting increased $117,000, or 8.3%, from the prior quarter to $1.5 million for the quarter ended September 30, 2016.  The second and third quarters of 2016 and remaining estimated net accretion impact are reflected in the following table (dollars in thousands):

    Loan Accretion   Borrowings
Accretion
(Amortization)
  Total
For the quarter ended June 30, 2016   $ 1,259   $ 143     $ 1,402  
For the quarter ended September 30, 2016   1,338     181     1,519  
For the remaining three months of 2016   1,040     71     1,111  
For the years ending:            
2017   4,089     170     4,259  
2018   3,692     (143 )   3,549  
2019   3,029     (286 )   2,743  
2020   2,622     (301 )   2,321  
2021   2,232     (316 )   1,916  
Thereafter   8,691     (5,306 )   3,385  
                   

ASSET QUALITY/LOAN LOSS PROVISION

Overview
During the third quarter, the Company experienced declines in nonperforming asset balances as well as in net charge-off levels from the prior quarter.  Nonperforming assets, past due loans, and net charge-offs were also down from the prior year.   The loan loss provision and the allowance for loan loss increased from the prior quarter due to loan growth in the current quarter.

All nonaccrual and past due loan metrics discussed below exclude purchased credit impaired loans (“PCI”) totaling $62.3 million (net of fair value mark of $15.6 million).

Nonperforming Assets (“NPAs”)
At September 30, 2016, NPAs totaled $23.3 million, a decrease of $11.8 million, or 33.7%, from September 30, 2015 and a decline of $984,000, or 4.1%, from June 30, 2016.  In addition, NPAs as a percentage of total outstanding loans declined 25 basis points from 0.63% a year earlier and decreased 3 basis points from 0.41% last quarter to 0.38% in the current quarter.  The following table shows a summary of asset quality balances at the quarter ended (dollars in thousands):

    September 30,   June 30,   March 31,   December 31,   September 30,
    2016   2016   2016   2015   2015
Nonaccrual loans, excluding PCI loans   $ 12,677     $ 10,861     $ 13,092     $ 11,936     $ 12,966  
Foreclosed properties   7,927     10,076     10,941     11,994     18,789  
Former bank premises   2,654     3,305     3,305     3,305     3,305  
Total nonperforming assets   $ 23,258     $ 24,242     $ 27,338     $ 27,235     $ 35,060  
                                         

The following table shows the activity in nonaccrual loans for the quarter ended (dollars in thousands):

    September 30,   June 30,   March 31,   December 31,   September 30,
    2016   2016   2016   2015   2015
Beginning Balance   $ 10,861     $ 13,092     $ 11,936     $ 12,966     $ 9,521  
Net customer payments   (1,645 )   (2,859 )   (1,204 )   (1,493 )   (1,104 )
Additions   4,359     2,568     5,150     2,344     5,213  
Charge-offs   (660 )   (1,096 )   (1,446 )   (1,245 )   (541 )
Loans returning to accruing status   (23 )   (396 )   (932 )   (402 )   (123 )
Transfers to OREO   (215 )   (448 )   (412 )   (234 )    
Ending Balance   $ 12,677     $ 10,861     $ 13,092     $ 11,936     $ 12,966  
                                         

The following table shows the activity in other real estate owned (“OREO”) for the quarter ended (dollars in thousands):

    September 30,   June 30,   March 31,   December 31,   September 30,
    2016   2016   2016   2015   2015
Beginning Balance   $ 13,381     $ 14,246     $ 15,299     $ 22,094     $ 22,222  
Additions of foreclosed property   246     501     456     234     1,082  
Additions of former bank premises               1,822      
Capitalized improvements                   9  
Valuation adjustments   (479 )   (274 )   (126 )   (4,229 )   (473 )
Proceeds from sales   (2,844 )   (1,086 )   (1,390 )   (4,961 )   (767 )
Gains (losses) from sales   277     (6 )   7     339     21  
Ending Balance   $ 10,581     $ 13,381     $ 14,246     $ 15,299     $ 22,094  
                                         

During the third quarter, the majority of sales of OREO were related to land and residential real estate.

Past Due Loans
Past due loans still accruing interest totaled $26.9 million, or 0.44% of total loans, at September 30, 2016 compared to $27.5 million, or 0.50%, a year ago and $25.3 million, or 0.43%, at June 30, 2016.  At September 30, 2016, loans past due 90 days or more and accruing interest totaled $3.5 million, or 0.06% of total loans, compared to $5.2 million, or 0.09%, a year ago and $3.5 million, or 0.06%, at June 30, 2016.

Net Charge-offs
For the third quarter, net charge-offs were $929,000, or 0.06% on an annualized basis, compared to $1.0 million, or 0.07%, for the same quarter last year and $1.6 million, or 0.11%, for the prior quarter.  For the nine months ended September 30, 2016, net charge-offs were $4.7 million, or 0.11% on an annualized basis, compared to $6.4 million, or 0.15%, for the same period last year.

Provision
The provision for loan losses for the current quarter was $2.4 million, an increase of $435,000 compared to the same quarter a year ago and a slight increase of $97,000 compared to the previous quarter.  The increase in provision for loan losses in the current quarter compared to the prior periods was primarily driven by higher loan balances.  Additionally, a $75,000 provision was recognized during the current quarter for unfunded loan commitments, resulting in a total of $2.5 million in provision for credit losses for the quarter.

Allowance for Loan Losses
The allowance for loan losses (“ALL”) increased $1.5 million from June 30, 2016 to $36.5 million at September 30, 2016 primarily due to loan growth during the quarter.  The allowance for loan losses as a percentage of the total loan portfolio was 0.59% at September 30, 2016, 0.59% at June 30, 2016, and 0.60% at September 30, 2015.  The ALL as a percentage of the total loan portfolio, adjusted for purchase accounting (non-GAAP), was 0.90% at September 30, 2016, a decrease from 0.92% from the prior quarter and a decrease from 1.01% from the quarter ended September 30, 2015.  In acquisition accounting, there is no carryover of previously established allowance for loan losses, as acquired loans are recorded at fair value.

The nonaccrual loan coverage ratio was 288.3% at September 30, 2016, compared to 322.9% at June 30, 2016 and 256.6% at September 30, 2015.  The current level of the allowance for loan losses reflects specific reserves related to nonperforming loans, current risk ratings on loans, net charge-off activity, loan growth, delinquency trends, and other credit risk factors that the Company considers important in assessing the adequacy of the allowance for loan losses.

NONINTEREST INCOME

Noninterest income increased $957,000, or 5.3%, to $19.0 million for the quarter ended September 30, 2016 from $18.0 million in the prior quarter, primarily driven by higher fiduciary and asset management fees of $511,000, or 21.9%, due to the Old Dominion Capital Management acquisition, higher mortgage banking income of $235,000, and higher customer-related fee income of $190,000.  Increases in customer-related fee income were primarily driven by higher overdraft and letter of credit fees.

Mortgage banking income increased $235,000, or 7.9%, to $3.2 million in the third quarter compared to $3.0 million in the second quarter, related to increased mortgage loan originations.  Mortgage loan originations increased by $16.6 million, or 11.8%, in the current quarter to $156.7 million from $140.1 million in the second quarter.  Of the mortgage loan originations in the current quarter, 33.8% were refinances, which was consistent with 33.6% in the prior quarter.

NONINTEREST EXPENSE

Noninterest expense increased $1.7 million, or 3.0%, to $56.9 million for the quarter ended September 30, 2016 from $55.3 million in the prior quarter.  Salaries and benefits expenses increased $2.0 million primarily due to increases in incentive compensation and profit sharing expenses tied to the Company’s financial performance as well as costs incurred related to the CEO succession plan announced during the quarter.  Other increases in noninterest expense included branch closure costs of approximately $400,000 related to the five branches closed on September 30, 2016, higher loan volume driven expenses of $302,000, and higher transaction driven data processing fees of $309,000. These increases were partially offset by declines in professional fees of $653,000 due to lower project-related consulting expenses and lower OREO and credit-related costs of $391,000 primarily due to gains on sales of OREO property compared to losses in the prior quarter and lower real estate tax expenses on foreclosed properties.

In addition, the Company realized franchise tax credits related to the Company’s investment in a historic rehabilitation project that was recently completed which reduced expenses by approximately $900,000 during the quarter.  The Company also earned federal historic tax credits of approximately $780,000 associated with this investment which reduced its effective tax rate to 23.3% during the quarter.

BALANCE SHEET

At September 30, 2016, total assets were $8.3 billion, an increase of $157.7 million from June 30, 2016 and an increase of $663.9 million from September 30, 2015.  The increase in assets was mostly related to loan growth.

At September 30, 2016, loans held for investment were $6.1 billion, an increase of $207.8 million, or 14.0% (annualized), from June 30, 2016, while average loans increased $170.7 million, or 11.6% (annualized), from the prior quarter.  Loans held for investment increased $605.3 million, or 10.9%, from September 30, 2015, while quarterly average loans increased $508.6 million, or 9.2%, from the prior year.

At September 30, 2016, total deposits were $6.3 billion, an increase of $162.7 million, or 10.7% (annualized), from June 30, 2016, while average deposits increased $179.4 million, or 11.9% (annualized), from the prior quarter. Total deposits grew $439.7 million, or 7.6%, from September 30, 2015, while average deposits increased $390.8 million, or 6.7%, from the prior year.

At September 30, 2016, June 30, 2016, and September 30, 2015, respectively, the Company had a common equity Tier 1 capital ratio of 9.78%, 9.94%, and 10.75%; a Tier 1 capital ratio of 11.07%, 11.27%, and 12.16%; a total capital ratio of 11.60%, 11.79%, and 12.69%; and a leverage ratio of 9.89%, 10.01%, and 10.80%.

The Company’s common equity to asset ratios at September 30, 2016, June 30, 2016, and September 30, 2015 were 12.12%, 12.21%, and 13.10%, respectively, while its tangible common equity to tangible assets ratio was 8.57%, 8.59%, and 9.29%, respectively.  The decrease in capital ratios from prior periods is primarily due to share repurchases and asset growth.

During the third quarter, the Company declared and paid cash dividends of $0.19 per common share, consistent with the dividend paid in the prior quarter and an increase of $0.02, or 11.8%, compared to the same quarter in the prior year.

On February 25, 2016, the Company’s Board of Directors authorized a share repurchase program to purchase up to $25.0 million worth of the Company’s common stock on the open market or in privately negotiated transactions.  The Company repurchased approximately 100,000 shares during the quarter ended September 30, 2016 and had approximately $13.0 million available for repurchase under the current program.

ABOUT UNION BANKSHARES CORPORATION

Headquartered in Richmond, Virginia, Union Bankshares Corporation (NASDAQ:UBSH) is the holding company for Union Bank & Trust, which has 115 banking offices and approximately 190 ATMs located throughout Virginia. Non-bank affiliates of the holding company include: Union Mortgage Group, Inc., which provides a full line of mortgage products, Old Dominion Capital Management, Inc., which provides investment advisory services, and Union Insurance Group, LLC, which offers various lines of insurance products.

Additional information on the Company is available at http://investors.bankatunion.com.

Union Bankshares Corporation will hold a conference call on Thursday, October 20th, at 9:00 a.m. Eastern Time during which management will review earnings and performance trends.  Callers wishing to participate may call toll-free by dialing (877) 668-4908.  The conference ID number is 94252786.

NON-GAAP MEASURES

In reporting the results of the quarter ended September 30, 2016, the Company has provided supplemental performance measures on a tangible basis.  Tangible common equity is used in the calculation of certain capital and per share ratios. The Company believes tangible common equity and the related ratios are meaningful measures of capital adequacy because they provide a meaningful base for period-to-period and company-to-company comparisons, which the Company believes will assist investors in assessing the capital of the Company and its ability to absorb potential losses.

These measures are a supplement to GAAP used to prepare the Company’s financial statements and should not be viewed as a substitute for GAAP measures.  In addition, the Company’s non-GAAP measures may not be comparable to non-GAAP measures of other companies.

FORWARD-LOOKING STATEMENTS

Certain statements in this press release may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.  Forward-looking statements are statements that include projections, predictions, expectations, or beliefs about future events or results or otherwise are not statements of historical fact.  Such statements are often characterized by the use of qualified words (and their derivatives) such as “expect,” “believe,” “estimate,” “plan,” “project,” “anticipate,” “intend,” “will,” or words of similar meaning or other statements concerning opinions or judgment of the Company and its management about future events.  Although the Company believes that its expectations with respect to forward-looking statements are based upon reasonable assumptions within the bounds of its existing knowledge of its business and operations, there can be no assurance that actual results, performance, or achievements of the Company will not differ materially from any projected future results, performance, or achievements expressed or implied by such forward-looking statements.  Actual future results and trends may differ materially from historical results or those anticipated depending on a variety of factors, including, but not limited to, the effects of and changes in: general economic and bank industry conditions, the interest rate environment, legislative and regulatory requirements, competitive pressures, new products and delivery systems, inflation, stock and bond markets, accounting standards or interpretations of existing standards, mergers and acquisitions, technology, information security, and consumer spending and saving habits.  More information is available on the Company’s website, http://investors.bankatunion.com. The information on the Company’s website is not a part of this press release. The Company does not intend or assume any obligation to update or revise any forward-looking statements that may be made from time to time by or on behalf of the Company.

UNION BANKSHARES CORPORATION AND SUBSIDIARIES
KEY FINANCIAL RESULTS
(Dollars in thousands, except share data)
(FTE – “Fully Taxable Equivalent”)
    Three Months Ended   Nine Months Ended
    9/30/16   6/30/16   9/30/15   9/30/16   9/30/15
Results of Operations                    
Interest and dividend income   $ 74,433     $ 72,781     $ 70,000     $ 217,964     $ 207,454  
Interest expense   7,405     7,005     6,556     21,429     18,225  
Net interest income   67,028     65,776     63,444     196,535     189,229  
Provision for credit losses   2,472     2,300     2,062     7,376     7,561  
Net interest income after provision for credit losses   64,556     63,476     61,382     189,159     181,668  
Noninterest income   18,950     17,993     16,725     52,857     47,990  
Noninterest expenses   56,913     55,251     53,325     166,436     162,405  
Income before income taxes   26,593     26,218     24,782     75,580     67,253  
Income tax expense   6,192     6,881     6,566     18,881     17,989  
Net income   $ 20,401     $ 19,337     $ 18,216     $ 56,699     $ 49,264  
                     
Interest earned on earning assets (FTE)   $ 76,860     $ 75,232     $ 72,287     $ 225,331     $ 214,195  
Net interest income (FTE)   69,455     68,227     65,731     203,902     195,970  
Core deposit intangible amortization   1,683     1,745     2,074     5,308     6,435  
                     
Net income – community bank segment   $ 19,616     $ 18,798     $ 18,157     $ 55,321     $ 49,377  
Net income (loss) – mortgage segment   785     539     59     1,378     (113 )
                     
Key Ratios                    
Earnings per common share, diluted   $ 0.47     $ 0.44     $ 0.40     $ 1.29     $ 1.09  
Return on average assets (ROA)   1.00 %   0.98 %   0.96 %   0.95 %   0.88 %
Return on average equity (ROE)   8.14 %   7.88 %   7.26 %   7.64 %   6.65 %
Return on average tangible common equity (ROTCE)   12.00 %   11.60 %   10.70 %   11.25 %   9.86 %
Efficiency ratio (FTE)   64.38 %   64.08 %   64.67 %   64.82 %   66.57 %
Efficiency ratio – community bank segment (FTE)   64.35 %   63.77 %   63.65 %   64.45 %   65.37 %
Efficiency ratio – mortgage bank segment (FTE)   68.81 %   75.31 %   94.77 %   77.73 %   100.82 %
Net interest margin (FTE)   3.76 %   3.84 %   3.86 %   3.80 %   3.93 %
Yields on earning assets (FTE)   4.16 %   4.23 %   4.25 %   4.20 %   4.29 %
Cost of interest-bearing liabilities (FTE)   0.52 %   0.51 %   0.50 %   0.52 %   0.47 %
Cost of funds (FTE)   0.40 %   0.39 %   0.39 %   0.40 %   0.36 %
Net interest margin, core (FTE) (1)   3.67 %   3.76 %   3.77 %   3.73 %   3.82 %
Yields on earning assets (FTE), core (1)   4.09 %   4.16 %   4.17 %   4.14 %   4.23 %
Cost of interest-bearing liabilities (FTE), core (1)   0.53 %   0.52 %   0.52 %   0.53 %   0.53 %
Cost of funds (FTE), core (1)   0.42 %   0.40 %   0.40 %   0.41 %   0.41 %
                     
Per Share Data                    
Earnings per common share, basic   $ 0.47     $ 0.44     $ 0.40     $ 1.29     $ 1.09  
Earnings per common share, diluted   0.47     0.44     0.40     1.29     1.09  
Cash dividends paid per common share   0.19     0.19     0.17     0.57     0.49  
Market value per share   26.77     24.71     24.00     26.77     24.00  
Book value per common share   23.18     22.87     22.24     23.18     22.24  
Tangible book value per common share   15.75     15.44     15.11     15.75     15.11  
Price to earnings ratio, diluted   14.32     13.96     15.12     15.54     16.47  
Price to book value per common share ratio   1.15     1.08     1.08     1.15     1.08  
Price to tangible common share ratio   1.70     1.60     1.59     1.70     1.59  
Weighted average common shares outstanding, basic   43,565,937     43,746,583     45,087,409     43,853,548     45,107,290  
Weighted average common shares outstanding, diluted   43,754,915     43,824,183     45,171,610     43,967,725     45,189,578  
Common shares outstanding at end of period   43,556,486     43,619,867     44,990,569     43,556,486     44,990,569  
                               

           
    Three Months Ended     Nine Months Ended
    9/30/16
    6/30/16
    9/30/15     9/30/16     9/30/15  
Capital Ratios                                        
Common equity Tier 1 capital ratio (2)   9.78 %     9.94 %     10.75 %     9.78 %     10.75 %  
Tier 1 capital ratio (2)   11.07 %     11.27 %     12.16 %     11.07 %     12.16 %  
Total capital ratio (2)   11.60 %     11.79 %     12.69 %     11.60 %     12.69 %  
Leverage ratio (Tier 1 capital to average assets) (2)   9.89 %     10.01 %     10.80 %     9.89 %     10.80 %  
Common equity to total assets   12.12 %     12.21 %     13.10 %     12.12 %     13.10 %  
Tangible common equity to tangible assets   8.57 %     8.59 %     9.29 %     8.57 %     9.29 %  
                     
Financial Condition                    
Assets   $ 8,258,230       $ 8,100,561       $ 7,594,313       $ 8,258,230       $ 7,594,313    
Loans held for investment   6,148,918       5,941,098       5,543,621       6,148,918       5,543,621    
Earning Assets   7,466,956       7,282,137       6,827,669       7,466,956       6,827,669    
Goodwill   298,191       297,659       293,522       298,191       293,522    
Amortizable intangibles, net   22,343       23,449       25,320       22,343       25,320    
Deposits   6,258,506       6,095,826       5,818,853       6,258,506       5,818,853    
Stockholders’ equity   1,000,964       989,201       995,012       1,000,964       995,012    
Tangible common equity (3)   680,430       668,093       676,170       680,430       676,170    
                     
Loans held for investment, net of deferred fees and costs                    
Construction and land development   $ 776,430       $ 765,997       $ 694,645       $ 776,430       $ 694,645    
Commercial real estate – owner occupied   857,142       831,880       863,578       857,142       863,578    
Commercial real estate – non-owner occupied   1,454,828       1,370,745       1,223,607       1,454,828       1,223,607    
Multifamily real estate   339,313       337,723       329,959       339,313       329,959    
Commercial & Industrial   509,857       469,054       409,657       509,857       409,657    
Residential 1-4 Family   999,361       992,457       987,788       999,361       987,788    
Auto   255,188       244,575       225,994       255,188       225,994    
HELOC   524,097       519,196       514,362       524,097       514,362    
Consumer and all other   432,702       409,471       294,031       432,702       294,031    
Total loans held for investment   $ 6,148,918       $ 5,941,098       $ 5,543,621       $ 6,148,918       $ 5,543,621    
                     
Deposits                    
NOW accounts   $ 1,635,446       $ 1,563,297       $ 1,382,891       $ 1,635,446       $ 1,382,891    
Money market accounts   1,398,177       1,366,451       1,318,229       1,398,177       1,318,229    
Savings accounts   596,702       598,622       569,667       596,702       569,667    
Time deposits of $100,000 and over   528,227       521,138       527,642       528,227       527,642    
Other time deposits   657,686       653,584       682,379       657,686       682,379    
Total interest-bearing deposits   $ 4,816,238       $ 4,703,092       $ 4,480,808       $ 4,816,238       $ 4,480,808    
Demand deposits   1,442,268       1,392,734       1,338,045       1,442,268       1,338,045    
Total deposits   $ 6,258,506       $ 6,095,826       $ 5,818,853       $ 6,258,506       $ 5,818,853    
                     
Averages                    
Assets   $ 8,153,951       $ 7,949,576       $ 7,521,841       $ 7,956,841       $ 7,448,573    
Loans held for investment   6,033,723       5,863,007       5,525,119       5,869,511       5,445,243    
Loans held for sale   42,755       30,698       44,904       33,619       42,250    
Securities   1,218,552       1,202,772       1,138,462       1,202,882       1,141,793    
Earning assets   7,354,684       7,153,627       6,751,654       7,159,813       6,668,812    
Deposits   6,204,958       6,025,545       5,814,146       6,043,892       5,721,980    
Certificates of deposit   1,181,936       1,164,561       1,227,835       1,172,856       1,243,546    
Interest-bearing deposits   4,796,505       4,642,899       4,501,411       4,667,891       4,450,043    
Borrowings   884,597       881,027       661,517       860,941       681,295    
Interest-bearing liabilities   5,681,102       5,523,926       5,162,928       5,528,833       5,131,338    
Stockholders’ equity   996,668       987,147       995,463       991,097       989,749    
Tangible common equity (3)   676,308       670,503       675,618       673,468       667,792    
                                         

                     
    Three Months Ended   Nine Months Ended
    9/30/16
  6/30/16   9/30/15
  9/30/16   9/30/15
                                         
Asset Quality                                        
Allowance for Loan Losses (ALL)                                        
Beginning balance   $ 35,074     $ 34,399     $ 32,344     $ 34,047     $ 32,384  
Add: Recoveries   534     660     1,299     2,022     2,994  
Less: Charge-offs   1,463     2,285     2,336     6,728     9,370  
Add: Provision for loan losses   2,397     2,300     1,962     7,201     7,261  
Ending balance   $ 36,542     $ 35,074     $ 33,269     $ 36,542     $ 33,269  
                     
ALL / total outstanding loans   0.59 %   0.59 %   0.60 %   0.59 %   0.60 %
ALL / total outstanding loans, adjusted for acquisition accounting (4)   0.90 %   0.92 %   1.01 %   0.90 %   1.01 %
Net charge-offs / total average loans   0.06 %   0.11 %   0.07 %   0.11 %   0.15 %
Provision / total average loans   0.16 %   0.16 %   0.14 %   0.16 %   0.18 %
                     
Total PCI Loans   $ 62,346     $ 67,170     $ 78,606     $ 62,346     $ 78,606  
                     
Nonperforming Assets                    
Construction and land development   $ 2,301     $ 1,604     $ 3,142     $ 2,301     $ 3,142  
Commercial real estate – owner occupied   1,609     1,661     3,988     1,609     3,988  
Commercial real estate – non-owner occupied           200         200  
Commercial & Industrial   1,344     263     403     1,344     403  
Residential 1-4 Family   5,279     5,448     3,960     5,279     3,960  
Auto   231     140     89     231     89  
HELOC   1,464     1,495     937     1,464     937  
Consumer and all other   449     250     247     449     247  
Nonaccrual loans   $ 12,677     $ 10,861     $ 12,966     $ 12,677     $ 12,966  
Other real estate owned   10,581     13,381     22,094     10,581     22,094  
Total nonperforming assets (NPAs)   $ 23,258     $ 24,242     $ 35,060     $ 23,258     $ 35,060  
Construction and land development   $ 610     $ 116     $ 209     $ 610     $ 209  
Commercial real estate – owner occupied   304     439     680     304     680  
Commercial real estate – non-owner occupied       723     1,165         1,165  
Multifamily real estate           656         656  
Commercial & Industrial   77     117     470     77     470  
Residential 1-4 Family   2,005     1,302     1,447     2,005     1,447  
Auto   28     144     119     28     119  
HELOC   407     642     282     407     282  
Consumer and all other   98     50     136     98     136  
Loans ≥ 90 days and still accruing   $ 3,529     $ 3,533     $ 5,164     $ 3,529     $ 5,164  
Total NPAs and loans ≥ 90 days   $ 26,787     $ 27,775     $ 40,224     $ 26,787     $ 40,224  
NPAs / total outstanding loans   0.38 %   0.41 %   0.63 %   0.38 %   0.63 %
NPAs / total assets   0.28 %   0.30 %   0.46 %   0.28 %   0.46 %
ALL / nonperforming loans   288.25 %   322.94 %   256.59 %   288.25 %   256.59 %
ALL / nonperforming assets   157.12 %   144.68 %   94.89 %   157.12 %   94.89 %
                     
Troubled Debt Restructurings                    
Performing   $ 11,824     $ 11,885     $ 9,468     $ 11,824     $ 9,468  
Nonperforming   1,452     1,658     2,087     1,452     2,087  
Total troubled debt restructurings   $ 13,276     $ 13,543     $ 11,555     $ 13,276     $ 11,555  
                                         

       
  Three Months Ended
  Nine Months Ended
  9/30/16   6/30/16   9/30/15
  9/30/16
  9/30/15
Past Due Detail                                      
Construction and land development $ 309     $ 402     $ 799     $ 309     $ 799  
Commercial real estate – owner occupied 1,411     912     1,148     1,411     1,148  
Commercial real estate – non-owner occupied 324     267     752     324     752  
Commercial & Industrial 567     2,464     687     567     687  
Residential 1-4 Family 4,985     5,476     4,342     4,985     4,342  
Auto 1,846     1,282     1,386     1,846     1,386  
HELOC 2,600     1,347     3,240     2,600     3,240  
Consumer and all other 1,713     1,364     752     1,713     752  
Loans 30-59 days past due $ 13,755     $ 13,514     $ 13,106     $ 13,755     $ 13,106  
                   
Construction and land development $ 697     $ 1,177     $ 105     $ 697     $ 105  
Commercial real estate – owner occupied 365         165     365     165  
Commercial real estate – non-owner occupied         588         588  
Multifamily real estate         272         272  
Commercial & Industrial 51     62     791     51     791  
Residential 1-4 Family 6,345     5,033     5,341     6,345     5,341  
Auto 239     377     285     239     285  
HELOC 899     1,228     1,204     899     1,204  
Consumer and all other 1,037     412     519     1,037     519  
Loans 60-89 days past due $ 9,633     $ 8,289     $ 9,270     $ 9,633     $ 9,270  
                   
Alternative Performance Measures (non-GAAP)                  
Tangible Common Equity (3)                  
Ending equity $ 1,000,964     $ 989,201     $ 995,012     $ 1,000,964     $ 995,012  
Less: Ending goodwill 298,191     297,659     293,522     298,191     293,522  
Less: Ending core deposit intangibles 18,001     19,685     25,320     18,001     25,320  
Less: Ending other amortizable intangibles 4,342     3,764         4,342      
Ending tangible common equity (non-GAAP) $ 680,430     $ 668,093     $ 676,170     $ 680,430     $ 676,170  
                   
Average equity $ 996,668     $ 987,147     $ 995,463     $ 991,097     $ 989,749  
Less: Average goodwill 297,707     294,886     293,522     295,380     293,522  
Less: Average core deposit intangibles 18,820     20,517     26,323     20,550     28,435  
Less: Average other amortizable intangibles 3,833     1,241         1,699      
Average tangible common equity (non-GAAP) $ 676,308     $ 670,503     $ 675,618     $ 673,468     $ 667,792  
                   
ALL to loans, adjusted for acquisition accounting (non-GAAP)(4)                
Allowance for loan losses $ 36,542     $ 35,074     $ 33,269     $ 36,542     $ 33,269  
Remaining fair value mark on purchased performing loans 18,154     19,092     21,884     18,154     21,884  
Adjusted allowance for loan losses $ 54,696     $ 54,166     $ 55,153     $ 54,696     $ 55,153  
                   
Loans, net of deferred fees $ 6,148,918     $ 5,941,098     $ 5,543,621     $ 6,148,918     $ 5,543,621  
Remaining fair value mark on purchased performing loans 18,154     19,092     21,884     18,154     21,884  
Less: Purchased credit impaired loans, net of fair value mark  62,346     67,170     78,606     62,346     78,606  
Adjusted loans, net of deferred fees $ 6,104,726     $ 5,893,020     $ 5,486,899     $ 6,104,726     $ 5,486,899  
                   
ALL / gross loans, adjusted for acquisition accounting 0.90 %   0.92 %   1.01 %   0.90 %   1.01 %
                             

         
    Three Months Ended
  Nine Months Ended
    9/30/16
  6/30/16
9/30/15
  9/30/16
  9/30/15
Mortgage Origination Volume                                        
Refinance Volume   $ 52,883     $ 47,033     $ 47,788     $ 137,221     $ 156,722  
Construction Volume   20,760     21,751     21,994     57,405     62,491  
Purchase Volume   83,014     71,297     78,286     200,323     207,870  
Total Mortgage loan originations   $ 156,657     $ 140,081     $ 148,068     $ 394,949     $ 427,083  
% of originations that are refinances   33.8 %   33.6 %   32.3 %   34.7 %   36.7 %
                     
Other Data                    
End of period full-time employees   1,391     1,423     1,418     1,391     1,418  
Number of full-service branches   115     120     124     115     124  
Number of full automatic transaction machines (ATMs)   193     200     202     193     202  
                               

(1)  The core metrics, FTE, exclude the impact of acquisition accounting accretion and amortization adjustments in net interest income.

(2) All ratios at September 30, 2016 are estimates and subject to change pending the Company’s filing of its FR Y9-C. All other periods are presented as filed.

(3) Tangible common equity is used in the calculation of certain capital and per share ratios.  The Company believes tangible common equity and the related ratios are meaningful measures of capital adequacy because they provide a meaningful base for period-to-period and company-to-company comparisons, which the Company believes will assist investors in assessing the capital of the Company and its ability to absorb potential losses.

(4) The allowance for loan losses ratio, adjusted for acquisition accounting (non-GAAP), includes an adjustment for the fair value mark on purchased performing loans. The purchased performing loans are reported net of the related fair value mark in loans, net of deferred fees, on the Company’s Consolidated Balance Sheet; therefore, the fair value mark is added back to the balance to represent the total loan portfolio. The adjusted allowance for loan losses, including the fair value mark, represents the total reserve on the Company’s loan portfolio. The PCI loans, net of the respective fair value mark, are removed from the loans, net of deferred fees, as these PCI loans are not covered by the allowance established by the Company unless changes in expected cash flows indicate that one of the PCI loan pools are impaired, at which time an allowance for PCI loans will be established. GAAP requires the acquired allowance for loan losses not be carried over in an acquisition or merger. The Company believes the presentation of the allowance for loan losses ratio, adjusted for acquisition accounting, is useful to investors because the acquired loans were purchased at a market discount with no allowance for loan losses carried over to the Company, and the fair value mark on the purchased performing loans represents the allowance associated with those purchased loans. The Company believes that this measure is a better reflection of the reserves on the Company’s loan portfolio.

UNION BANKSHARES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share data)            
  September 30,
    December 31,   September 30,
  2016     2015   2015
ASSETS                                    
Cash and cash equivalents:                                    
Cash and due from banks $ 103,979       $ 111,323     $ 102,955  
Interest-bearing deposits in other banks 51,303       29,670     76,002  
Federal funds sold 893       1,667     237  
Total cash and cash equivalents 156,175       142,660     179,194  
Securities available for sale, at fair value 954,984       903,292     888,692  
Securities held to maturity, at carrying value 200,839       205,374     199,363  
Restricted stock, at cost 63,204       51,828     52,721  
Loans held for sale 46,814       36,030     65,713  
Loans held for investment, net of deferred fees and costs 6,148,918       5,671,462     5,543,621  
Less allowance for loan losses 36,542       34,047     33,269  
Net loans held for investment 6,112,376       5,637,415     5,510,352  
Premises and equipment, net 123,416       126,028     129,191  
Other real estate owned, net of valuation allowance 10,581       15,299     22,094  
Goodwill 298,191       293,522     293,522  
Core deposit intangibles, net 18,001       23,310     25,320  
Other amortizable intangibles, net 4,342            
Bank owned life insurance 177,847       173,687     142,433  
Other assets 91,460       84,846     85,718  
Total assets $ 8,258,230       $ 7,693,291     $ 7,594,313  
LIABILITIES            
Noninterest-bearing demand deposits $ 1,442,268       $ 1,372,937     $ 1,338,045  
Interest-bearing deposits 4,816,238       4,590,999     4,480,808  
Total deposits 6,258,506       5,963,936     5,818,853  
Securities sold under agreements to repurchase 64,225       84,977     99,417  
Other short-term borrowings 601,500       304,000     332,000  
Long-term borrowings 259,902       291,198     290,732  
Other liabilities 73,133       53,813     58,299  
Total liabilities 7,257,266       6,697,924     6,599,301  
Commitments and contingencies            
STOCKHOLDERS’ EQUITY            
Common stock, $1.33 par value, shares authorized 100,000,000; issued and outstanding, 43,556,486 shares, 44,785,674 shares, and 44,990,569 shares, respectively. 57,444       59,159     59,514  
Additional paid-in capital 603,785       631,822     638,511  
Retained earnings 329,876       298,134     288,841  
Accumulated other comprehensive income 9,859       6,252     8,146  
Total stockholders’ equity 1,000,964       995,367     995,012  
Total liabilities and stockholders’ equity $ 8,258,230       $ 7,693,291     $ 7,594,313  
                         

UNION BANKSHARES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except share data)                  
  Three Months Ended   Nine Months Ended
  September 30,   June 30,
  September 30,   September 30,   September 30,
  2016   2016
  2015
  2016
  2015
Interest and dividend income:                                      
Interest and fees on loans $ 66,190     $ 64,747     $ 62,651     $ 193,884     $ 185,707  
Interest on deposits in other banks 65     65     23     178     64  
Interest and dividends on securities:                  
Taxable 4,732     4,510     3,954     13,558     11,621  
Nontaxable 3,446     3,459     3,372     10,344     10,062  
Total interest and dividend income 74,433     72,781     70,000     217,964     207,454  
Interest expense:                  
Interest on deposits 4,552     4,197     4,204     12,945     11,204  
Interest on federal funds purchased 2     2     1     5     6  
Interest on short-term borrowings 763     708     223     2,093     728  
Interest on long-term borrowings 2,088     2,098     2,128     6,386     6,287  
Total interest expense 7,405     7,005     6,556     21,429     18,225  
Net interest income 67,028     65,776     63,444     196,535     189,229  
Provision for credit losses 2,472     2,300     2,062     7,376     7,561  
Net interest income after provision for credit losses  64,556     63,476     61,382     189,159     181,668  
Noninterest income:                  
Service charges on deposit accounts 4,965     4,754     4,965     14,454     13,800  
Other service charges and fees 4,397     4,418     3,983     12,971     11,618  
Fiduciary and asset management fees 2,844     2,333     2,304     7,315     6,835  
Mortgage banking income, net 3,207     2,972     2,630     8,324     7,582  
Gains on securities transactions, net     3     75     145     672  
Other-than-temporary impairment losses         (300 )       (300 )
Bank owned life insurance income 1,389     1,361     1,161     4,122     3,431  
Other operating income 2,148     2,152     1,907     5,526     4,352  
Total noninterest income 18,950     17,993     16,725     52,857     47,990  
Noninterest expenses:                  
Salaries and benefits 30,493     28,519     25,853     87,061     78,905  
Occupancy expenses 4,841     4,809     4,915     14,627     15,220  
Furniture and equipment expenses 2,635     2,595     3,015     7,867     8,818  
Printing, postage, and supplies 1,147     1,280     1,191     3,566     3,970  
Communications expense 948     927     1,159     2,964     3,481  
Technology and data processing 3,917     3,608     3,549     11,340     10,020  
Professional services 1,895     2,548     1,991     6,432     5,008  
Marketing and advertising expense 1,975     1,924     1,781     5,838     5,841  
FDIC assessment premiums and other insurance 1,262     1,379     1,351     4,003     4,030  
Other taxes 639     1,607     1,569     3,864     4,674  
Loan-related expenses 1,531     1,229     1,341     3,638     3,173  
OREO and credit-related expenses 503     894     1,263     1,965     4,415  
Amortization of intangible assets 1,843     1,745     2,074     5,468     6,435  
Training and other personnel costs 863     905     1,198     2,512     2,831  
Other expenses 2,421     1,282     1,075     5,291     5,584  
Total noninterest expenses 56,913     55,251     53,325     166,436     162,405  
Income before income taxes 26,593     26,218     24,782     75,580     67,253  
Income tax expense 6,192     6,881     6,566     18,881     17,989  
Net income $ 20,401     $ 19,337     $ 18,216     $ 56,699     $ 49,264  
Basic earnings per common share $ 0.47     $ 0.44     $ 0.40     $ 1.29     $ 1.09  
Diluted earnings per common share $ 0.47     $ 0.44     $ 0.40     $ 1.29     $ 1.09  
                                       

UNION BANKSHARES CORPORATION AND SUBSIDIARIES
SEGMENT FINANCIAL INFORMATION
(Dollars in thousands)              
  Community Bank   Mortgage   Eliminations   Consolidated
Three Months Ended September 30, 2016                              
Net interest income $ 66,605     $ 423     $     $ 67,028  
Provision for credit losses 2,455     17         2,472  
Net interest income after provision for credit losses 64,150     406         64,556  
Noninterest income 15,589     3,501     (140 )   18,950  
Noninterest expenses 54,353     2,700     (140 )   56,913  
Income before income taxes 25,386     1,207         26,593  
Income tax expense 5,770     422         6,192  
Net income $ 19,616     $ 785     $     $ 20,401  
Total assets $ 8,251,351     $ 90,692     $ (83,813 )   $ 8,258,230  
               
Three Months Ended June 30, 2016              
Net interest income $ 65,478     $ 298     $     $ 65,776  
Provision for credit losses 2,260     40         2,300  
Net interest income after provision for credit losses 63,218     258         63,476  
Noninterest income 14,940     3,207     (154 )   17,993  
Noninterest expenses 52,766     2,639     (154 )   55,251  
Income before income taxes 25,392     826         26,218  
Income tax expense 6,594     287         6,881  
Net income $ 18,798     $ 539     $     $ 19,337  
Total assets $ 8,094,176     $ 75,802     $ (69,417 )   $ 8,100,561  
               
Three Months Ended September 30, 2015              
Net interest income $ 63,075     $ 369     $     $ 63,444  
Provision for credit losses 2,000     62         2,062  
Net interest income after provision for credit losses 61,075     307         61,382  
Noninterest income 14,287     2,608     (170 )   16,725  
Noninterest expenses 50,674     2,821     (170 )   53,325  
Income before income taxes 24,688     94         24,782  
Income tax expense 6,531     35         6,566  
Net income $ 18,157     $ 59     $     $ 18,216  
Total assets $ 7,588,606     $ 62,127     $ (56,420 )   $ 7,594,313  
               
Nine Months Ended September 30, 2016              
Net interest income $ 195,508     $ 1,027     $     $ 196,535  
Provision for credit losses 7,215     161         7,376  
Net interest income after provision for credit losses 188,293     866         189,159  
Noninterest income 44,137     9,185     (465 )   52,857  
Noninterest expenses 158,964     7,937     (465 )   166,436  
Income before income taxes 73,466     2,114         75,580  
Income tax expense 18,145     736         18,881  
Net income $ 55,321     $ 1,378     $     $ 56,699  
Total assets $ 8,251,351     $ 90,692     $ (83,813 )   $ 8,258,230  
               
Nine Months Ended September 30, 2015              
Net interest income $ 188,240     $ 989     $     $ 189,229  
Provision for credit losses 7,450     111         7,561  
Net interest income after provision for credit losses  180,790     878         181,668  
Noninterest income 40,658     7,844     (512 )   47,990  
Noninterest expenses 154,011     8,906     (512 )   162,405  
Income (loss) before income taxes 67,437     (184 )       67,253  
Income tax expense (benefit) 18,060     (71 )       17,989  
Net income (loss) $ 49,377     $ (113 )   $     $ 49,264  
Total assets $ 7,588,606     $ 62,127     $ (56,420 )   $ 7,594,313  
                               

AVERAGE BALANCES, INCOME AND EXPENSES, YIELDS AND RATES (TAXABLE EQUIVALENT BASIS)
                       
  For the Quarter Ended
  September 30, 2016
  June 30, 2016
  Average
Balance
  Interest
Income /
Expense
  Yield /
Rate
(1)
  Average
Balance
  Interest
Income /
Expense
  Yield /
Rate
(1)
Assets:                      
Securities:                      
Taxable $ 768,608     $ 4,732     2.45 %   $ 755,655     $ 4,510     2.40 %
Tax-exempt 449,944     5,302     4.69 %   447,117     5,321     4.79 %
Total securities 1,218,552     10,034     3.28 %   1,202,772     9,831     3.29 %
Loans, net (2) (3) 6,033,723     66,397     4.38 %   5,863,007     65,115     4.47 %
Other earning assets 102,409     429     1.67 %   87,848     286     1.31 %
Total earning assets 7,354,684     $ 76,860     4.16 %   7,153,627     $ 75,232     4.23 %
Allowance for loan losses (35,995 )           (35,282 )        
Total non-earning assets 835,262             831,231          
Total assets $ 8,153,951             $ 7,949,576          
                       
Liabilities and Stockholders’ Equity:                      
Interest-bearing deposits:                      
Transaction and money market accounts $ 3,016,337     $ 1,682     0.22 %   $ 2,882,468     $ 1,448     0.20 %
Regular savings 598,232     207     0.14 %   595,870     224     0.15 %
Time deposits 1,181,936     2,663     0.90 %   1,164,561     2,525     0.87 %
Total interest-bearing deposits 4,796,505     4,552     0.38 %   4,642,899     4,197     0.36 %
Other borrowings (4) 884,597     2,853     1.28 %   881,027     2,808     1.28 %
Total interest-bearing liabilities 5,681,102     $ 7,405     0.52 %   5,523,926     $ 7,005     0.51 %
                       
Noninterest-bearing liabilities:                      
Demand deposits 1,408,453             1,382,646          
Other liabilities 67,728             55,857          
Total liabilities 7,157,283             6,962,429          
Stockholders’ equity 996,668             987,147          
Total liabilities and stockholders’ equity $ 8,153,951             $ 7,949,576          
                       
Net interest income     $ 69,455             $ 68,227      
                       
Interest rate spread (5)         3.64 %           3.72 %
Cost of funds         0.40 %           0.39 %
Net interest margin (6)         3.76 %           3.84 %
                       
(1) Rates and yields are annualized and calculated from actual, not rounded, amounts in thousands, which appear above.
(2) Nonaccrual loans are included in average loans outstanding.
(3) Interest income on loans includes $1.3 million for both the three months ended September 30, 2016 and June 30, 2016 in accretion of the fair market value adjustments related to acquisitions.
(4) Interest expense on borrowings includes $181,000 and $143,000 for the three months ended September 30, 2016 and June 30, 2016, respectively, in accretion of the fair market value adjustments related to acquisitions.
(5) Income and yields are reported on a taxable equivalent basis using the statutory federal corporate tax rate of 35%.
(6) Core net interest margin excludes purchase accounting adjustments and was 3.67% and 3.76% for the three months ended September 30, 2016 and June 30, 2016, respectively.

 

CONTACT: Contact: Robert M. Gorman - (804) 523-7828
Executive Vice President / Chief Financial Officer