Union First Market Bankshares Reports First Quarter Results

RICHMOND, Va., April 22, 2014 /PRNewswire/ -- Union First Market Bankshares Corporation (the "Company" or "Union") (NASDAQ: UBSH) today reported net income of $7.8 million and earnings per share of $0.17 for its first quarter ended March 31, 2014.  Excluding after-tax acquisition-related expenses of $9.0 million, operating earnings(1) for the quarter were $16.8 million and operating earnings per share(1) was $0.36.  The quarterly results represent an increase of $8.1 million, or 92.2%, in operating earnings from the prior quarter.  Operating earnings per share of $0.36 for the current quarter increased $0.01, or 2.9%, from the most recent quarter. These first quarter financial results include the full quarter financial results of StellarOne Corporation ("StellarOne"), which the Company acquired on January 1, 2014. 

"Our first quarter operating results demonstrate the significant earnings capacity we envisioned the combination of Union and StellarOne would produce as the largest community banking institution headquartered in Virginia," said G. William Beale, president and chief executive officer of Union First Market Bankshares. "Our merger integration work continues to go well and we are on track for systems conversions and branch consolidations to occur in the second quarter. Our teammates have been working tirelessly to ensure a smooth integration for our customers, and I want to thank them for their commitment during this transition period.  I am more excited than ever about the future of Union and our ability to continue to deliver a best-in-class customer experience, offer superior financial services and solutions, provide a rewarding experience for our teammates and generate top-tier financial performance for our shareholders."

Select highlights for the first quarter include:

  • Operating earnings(1) for the community bank segment, which excludes after-tax acquisition-related expenses of $9.0 million, were $18.2 million, or $0.39 per share. 
  • The mortgage segment reported a net loss of $1.4 million, or $0.03 per share.
  • Operating Return on Average Tangible Common Equity(1) ("ROTCE")  was 10.33% for the quarter ended March 31, 2014 compared to operating ROTCE(1) of 9.43% for the fourth quarter of 2013.  The operating ROTCE(1) of the community bank segment was 11.44%.
  • Operating Return on Average Assets(1) ("ROA") was 0.94% for the quarter ended March 31, 2014 compared to operating ROA(1) of 0.85% for the fourth quarter of 2013.   The operating ROA(1) of the community bank segment was 1.02%.
  • Operating efficiency ratio(1) declined to 68.4% for the current quarter from 71.6% in the prior quarter.  The operating efficiency ratio for the community bank segment was 64.6%.
  • On January 31, 2014, the Company's Board of Directors authorized a share repurchase program to purchase up to $65.0 million worth of the Company's common stock on the open market or in privately negotiated transactions. The repurchase program is authorized through December 31, 2015.  As of April 17, 2014, approximately 822,000 common shares had been repurchased and approximately $44.3 million remained available under the repurchase program.

(1)For a reconciliation of the non-GAAP measures operating earnings, ROA, ROE, ROTCE, EPS, and efficiency ratio, see "Alternative Performance Measures (non-GAAP)" section of the Key Financial Results.

NET INTEREST INCOME

Tax-equivalent net interest income was $65.7 million, an increase of $25.7 million from the fourth quarter of 2013, a result of a $2.7 billion increase in average interest-earning assets and a $2.2 billion increase in average interest-bearing liabilities from the full quarter impact of the StellarOne acquisition.  The first quarter tax-equivalent net interest margin decreased by 13 bps to 4.14% compared to 4.27% in the previous quarter.    Core tax-equivalent net interest margin (which excludes the 15 bps impact of acquisition accounting accretion) decreased by 25 basis points from 4.24% in the previous quarter to 3.99%.  The decrease in the core tax-equivalent net interest margin was principally due to a decrease in earning asset yields (-26 bps), outpacing the decline in cost of funds (+1 bps).  The declines in net interest margin and earning asset yields are primarily driven by the impact of the StellarOne acquisition in the current quarter.

The Company continues to believe that net interest margin will decline modestly over the next several quarters as decreases in earning asset yields are projected to outpace declines in interest-bearing liabilities rates.

The Company's fully taxable equivalent net interest margin includes the impact of acquisition accounting fair value adjustments.  The first quarter 2014 and remaining estimated discount/premium and net accretion impact are reflected in the following table (dollars in thousands):














Loan Accretion


Certificates of
Deposit


Borrowings


Total













For the quarter ended March 31, 2014

$

(546)


$

2,921


$

75


$

2,450

For the remaining nine months of 2014


(260)



5,994



226



5,960

For the years ending:












2015


1,737



1,843



175



3,755

2016


2,661



-



271



2,932

2017


3,067



-



170



3,237

2018


2,742



-



(143)



2,599

2019


2,205



-



(286)



1,919

Thereafter


13,521



-



(5,923)



7,598













ASSET QUALITY/LOAN LOSS PROVISION

Overview
During the first quarter, the Company had a net loan recovery and reduced levels of provision when compared to the prior quarter and the same quarter of the prior year.  There were declines in several asset quality ratios, including nonperforming assets to total loans, accruing loans past due 90 days or more to total loans, allowance to total loans, and allowance to total loans, adjusted for acquisition accounting, while the coverage ratio of allowance to nonaccrual loans remained high.  Levels of nonaccrual loans and other real estate owned ("OREO") remained stable with only slight increases due to the acquisition of StellarOne.  The magnitude of any change in the real estate market and its impact on the Company is still largely dependent upon continued recovery of residential housing and commercial real estate and the pace at which the local economies in the Company's operating markets improve.  All metrics discussed below exclude loans acquired with deteriorated credit quality ("PCI") aggregating $130.3 million (net of fair value mark).

Nonperforming Assets ("NPAs")
At March 31, 2014, nonperforming assets totaled $52.5 million, a decline of $6.4 million, or 10.8%, from a year ago and an increase of $3.4 million, or 6.9%, from December 31, 2013.  In addition, NPAs as a percentage of total outstanding loans declined 98 basis points from 1.98% a year earlier and decreased 62 basis points from 1.62% last quarter to 1.00% in the current quarter.    The following table shows a summary of asset quality balances at the quarter ended (dollars in thousands):













March 31,


December 31,


September 30,


June 30,


March 31,


2014


2013


2013


2013


2013

Nonaccrual loans, excluding PCI loans

$

17,034


$

15,035


$

19,941


$

27,022


$

23,033

Foreclosed properties


35,487



34,116



35,576



35,020



35,100

Real estate investment


-



-



133



133



778

Total nonperforming assets

$

52,521


$

49,151


$

55,650


$

62,175


$

58,911


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












March 31,


December 31,


September 30,


June 30,


March 31,


2014


2013


2013


2013


2013

Beginning Balance

$

15,035


$

19,941


$

27,022


$

23,033


$

26,206

Net customer payments


(959)



(1,908)



(5,574)



(3,196)



(1,715)

Additions


3,674



3,077



3,020



7,934



2,694

Charge-offs


(152)



(4,336)



(1,669)



(476)



(2,262)

Loans returning to accruing status


-



(1,018)



(1,068)



-



(632)

Transfers to OREO


(564)



(721)



(1,790)



(273)



(1,258)

Ending Balance

$

17,034


$

15,035


$

19,941


$

27,022


$

23,033


Of the $3.7 million in additions to nonaccrual loans in the current quarter, $2.7 million related to the acquisition of StellarOne.

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

















March 31,


December 31,


September 30,


June 30,


March 31,


2014


2013


2013


2013


2013

Beginning Balance

$

34,116


$

35,709


$

35,153


$

35,878


$

32,834

Additions


5,404



1,326



2,841



1,768



3,607

Capitalized Improvements


-



101



266



164



30

Valuation Adjustments


(256)



(300)



(491)



-



-

Proceeds from sales


(3,800)



(2,483)



(1,773)



(2,436)



(877)

Gains (losses) from sales


23



(237)



(287)



(221)



284

Ending Balance

$

35,487


$

34,116


$

35,709


$

35,153


$

35,878
















Of the $5.4 million in additions to OREO in the current quarter, $4.3 million related to the acquisition of StellarOne.

Past Due Loans
At March 31, 2014, loans past due 90 days or more and accruing interest totaled $7.2 million, or 0.14%, of total loans, compared to $6.2 million, or 0.21%, a year ago and $6.7 million, or 0.22%, at December 31, 2013. 

Charge-offs 
For the quarter ended March 31, 2014, net loan recoveries were $772,000, or (0.06%), on an annualized basis, compared to net charge-offs of $2.6 million, or 0.35%, for the same quarter last year and $4.9 million, or 0.65%, for the fourth quarter of 2013.  The net recovery in the current quarter largely relates to one recovery of $1.2 million on a commercial loan previously charged off.

Provision
The provision for loan losses for the current quarter was $0, a decrease of $2.1 million from the same quarter a year ago and a decrease of $1.2 million from the previous quarter.  The decrease in provision for loan losses in the current quarter compared to the prior periods is driven by improving asset quality, the impact of lower historical loss factors, and the current quarter's net loan recovery. 

Allowance for Loan Losses 
The allowance for loan losses ("ALL") increased $772,000 from December 31, 2013 to $30.9 million at March 31, 2014.  The ALL as a percentage of the total loan portfolio, adjusted for purchase accounting (non-GAAP), was 1.07% at March 31, 2014, a decrease from 1.32% at March 31, 2013 and 1.10% from the prior quarter.    The allowance for loan losses as a percentage of the total loan portfolio was 0.59% at March 31, 2014, 1.16% at March 31, 2013, and 0.99% at December 31, 2013.  The decrease in the allowance-related ratios was primarily attributable to improving credit quality metrics and the acquisition of StellarOne. In acquisition accounting, there is no carryover of previously established allowance for loan losses.

The nonaccrual loan coverage ratio was 181.4% at March 31, 2014, compared to 149.4% from the same quarter last year and 200.4% at December 31, 2013.  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 $5.8 million, or 69.5%, to $14.2 million from $8.4 million in the prior quarter.  The significant majority of this increase is in customer related noninterest income (services charges on deposit accounts, debit card interchange income, and income from wealth management services) and is due to the acquisition of StellarOne that occurred on January 1, 2014.  Gains on sales of mortgage loans, net of commissions, increased $978,000, or 74.1%, from the prior quarter primarily related to increased margins, lower indemnifications charges, and the inclusion of StellarOne's mortgage unit results in the current quarter, partially offset by declines in mortgage loan originations.  Mortgage loan originations decreased by $7.1 million, or 4.6%, in the current quarter to $149.1 million from $156.2 million in the fourth quarter of 2013.  Originations from Union's legacy mortgage segment declined $40.3 million, or 25.8%, from the prior quarter which was partially offset by the addition of StellarOne's mortgage operation.  Of the loan originations in the current quarter, 30.4% were refinances, which was consistent with the prior quarter.    

NONINTEREST EXPENSE  

Noninterest expense increased $32.4 million, or 91.5%, to $67.8 million from $35.4 million when compared to the prior quarter.  Excluding acquisition-related costs, which were $13.2 million and $739,000 in the current and previous quarters, respectively, noninterest expense increased $20.0 million, or 57.7%, compared to the prior quarter.  The increase in noninterest expense during the first quarter of 2014 is primarily related to the acquisition of StellarOne.  The Company's operating efficiency ratio declined to 68.4% from 71.6% in the prior quarter.

BALANCE SHEET

At March 31, 2014, total assets were $7.3 billion, an increase of $3.1 billion from December 31, 2013 reflecting the impact of the StellarOne acquisition.

On January 1, 2014 the Company acquired StellarOne. Below is a summary of the transaction and related impact on the Company's balance sheet:

  • The fair value of assets acquired equaled $2.959 billion and the fair value of liabilities assumed equaled $2.647 billion.
  • Total goodwill arising from the transaction equaled $237.5 million.
  • Gross loans acquired equaled $2.283 billion with a fair value of $2.239 billion.
  • Total deposits acquired equaled $2.469 billion with a fair value of $2.480 billion.

At March 31, 2014 loans net of unearned income were $5.3 billion, an increase of $2.3 billion from December 31, 2013.  On a proforma basis, including StellarOne loan balances, period end loans balances were flat when compared to December 31, 2013 while average loans grew approximately $41.7 million, or 3.2% (annualized), to $5.3 billion since January 1, 2014.  At March 31, 2014, total deposits were $5.7 billion, an increase of $2.4 billion from December 31, 2013.  On a proforma basis, including StellarOne deposit balances, average deposits declined $54.5 million, or 3.8% (annualized) to $5.6 billion since January 1, 2014.  The decline in average deposits was driven by a decline in average time deposits partially offset by an increase in average money market balances.

The Company's capital ratios continued to be considered "well capitalized" for regulatory purposes.  The Company's estimated ratios of total capital to risk-weighted assets and Tier 1 capital to risk-weighted assets as of March 31, 2014 were 13.69% and 13.02%, respectively. As of December 31, 2013, the Company's ratio of total capital to risk-weighted assets and Tier 1 capital to risk-weighted assets were 14.17% and 13.05%, respectively.  The Company's common equity to asset ratios at March 31, 2014 and December 31, 2013 were 13.47% and 10.49%, respectively, while its tangible common equity to tangible assets ratio was 9.29% and 8.94% at March 31, 2014 and December 31, 2013, respectively. 

COMMUNITY BANK SEGMENT INFORMATION

The community bank segment reported net income of $9.2 million for first quarter, and includes the full-quarter impact of the StellarOne acquisition. Excluding after-tax acquisition-related expenses of $9.0 million, operating earnings increased $7.6 million from the prior quarter to $18.2 million.  As previously discussed, the provision for loan losses declined $1.2 million from the prior quarter due to continued improvements in asset quality and a large recovery of a loan that was previously charged-off.  Net interest income was $63.5 million, an increase of $25.2 million from the fourth quarter of 2013. The increase in net interest income was driven by the StellarOne acquisition.  

Noninterest income increased $4.8 million from $7.2 million in the prior quarter to $12.1 million. The significant majority of this increase is in customer related noninterest income (services charges on deposit accounts, debit card interchange income, and income from wealth management services) and is due to the previously discussed acquisition of StellarOne.  Noninterest expense increased $32.2 million from $31.0 million to $63.2 million.  Excluding acquisition-related costs of $13.2 million, noninterest expense increased $19.8 million, or 65.4%, compared to the prior quarter.  The increase in noninterest expense is largely related to the acquisition of StellarOne.   The community banking segment's operating efficiency ratio was 64.6% compared to 64.5% in the prior quarter.    

MORTGAGE SEGMENT INFORMATION

The mortgage segment reported a net loss of $1.4 million for the first quarter as elevated expense levels resulting from excess loan origination processing capacity, restructuring charges, and project related costs outpaced revenue generated by seasonally low mortgage loan origination volumes.  The net loss declined by $0.5 million from the prior quarter as gains on sales of mortgage loans, net of commissions, increased $978,000, or 74.1%, primarily related to lower indemnification charges, increased net gain on sale margins and the inclusion of StellarOne's mortgage unit in the current quarter.  The positive impact of these items was partially offset by declines in mortgage loan originations from the prior quarter.  Mortgage loan originations decreased by $7.1 million, or 4.6%, in the current quarter to $149.1 million from $156.2 million in the fourth quarter of 2013, inclusive of the StellarOne mortgage unit in the current quarter.  Originations from Union's legacy mortgage segment declined $40.3 million, or 25.8%, from the prior quarter reflective of sluggish seasonal demand for mortgage financing.  Of the originations in the current quarter, 30.4% were refinances, which was consistent with the prior quarter.  On a linked quarter basis, the mortgage segment incurred higher noninterest expenses due to the inclusion of the StellarOne mortgage unit in the current quarter.  Noninterest expenses incurred by Union's legacy mortgage segment declined from the prior quarter as a result of its efforts to recalibrate its cost structure to align with lower mortgage origination levels. 

* * * * * * *

ABOUT UNION FIRST MARKET BANKSHARES CORPORATION

Headquartered in Richmond, Virginia, Union First Market Bankshares Corporation (NASDAQ: UBSH) is the holding company for Union First Market Bank, which has 90 branches and more than 150 ATMs throughout Virginia and StellarOne Bank, which has 54 branches and more than 60 ATMs throughout Virginia as well as trust and wealth management services.  Non-bank affiliates of the holding company include: Union Investment Services, Inc., which provides full brokerage services; Union Mortgage Group, Inc., which provides a full line of mortgage products; 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 First Market Bankshares Corporation will hold a conference call on Tuesday, April 22, at 9:00 a.m. Eastern Time when 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 27512120. Participants can also listen to the live audio webcast by registering at https://engage.vevent.com/rt/unionfirstmarketbank~042214 and through the investor relations section of the Company's website at http://investors.bankatunion.comA replay archive of the conference call will be available beginning April 22 at the same URL, https://engage.vevent.com/rt/unionfirstmarketbank~042214 and will be available for 90 days after April 22.

NON-GAAP MEASURES

In reporting the results of March 31, 2014, the Company has provided supplemental performance measures on an operating or tangible basis.  Operating measures exclude acquisition costs unrelated to the Company's normal operations.  The Company believes these measures are useful to investors as they exclude non-operating adjustments resulting from acquisition activity and allow investors to see the combined economic results of the organization.  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 report 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 and 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 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, and consumer spending and savings habits.  More information is available on the Company's website, http://investors.bankatunion.com and on the SEC's website, www.sec.gov. 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 FIRST MARKET BANKSHARES CORPORATION AND SUBSIDIARIES

KEY FINANCIAL RESULTS










(in thousands, except share data)











Three Months Ended



03/31/14


12/31/13


03/31/13


Results of Operations










Interest and dividend income

$

68,208


$

43,315


$

43,285


Interest expense


4,450



4,702



5,532


Net interest income


63,758



38,613



37,753


Provision for loan losses


-



1,206



2,050


Net interest income after provision for loan losses


63,758



37,407



35,703


Noninterest income


14,200



8,379



9,835


Noninterest expenses


67,781



35,375



33,501


Income before income taxes


10,177



10,411



12,037


Income tax expense


2,362



2,306



3,054


Net income

$

7,815


$

8,105


$

8,983












Interest earned on earning assets (FTE)


70,154



44,702



44,543


Net interest income (FTE)


65,704



40,000



39,011


Core deposit intangible amortization


2,616



919



1,036












Net income - community bank segment

$

9,195


$

10,002


$

8,806


Net income - mortgage segment


(1,380)



(1,897)



177












Key Ratios










Earnings per common share, diluted

$

0.17


$

0.32


$

0.36


Return on average assets (ROA)


0.44%



0.79%



0.90%


Return on average equity (ROE)


3.18%



7.30%



8.32%


Return on average tangible common equity (ROTCE)


4.80%



8.73%



10.03%


Efficiency ratio (FTE)


84.83%



73.12%



68.58%


Efficiency ratio - community bank segment (FTE)


81.56%



66.02%



66.26%


Efficiency ratio - mortgage bank segment (FTE)


186.04%



288.43%



93.25%


Net interest margin (FTE)


4.14%



4.27%



4.23%


Net interest margin, core (FTE) (1)


3.99%



4.24%



4.18%


Yields on earning assets (FTE)


4.42%



4.77%



4.84%


Cost of interest-bearing liabilities (FTE)


0.34%



0.64%



0.76%


Cost of funds


0.28%



0.50%



0.61%












Key operating Ratios - excluding merger costs   (non-GAAP) (3)










Consolidated










Operating net income

$

16,831


$

8,756


$

8,983


Operating diluted earnings per share

$

0.36


$

0.35


$

0.36


Operating return on average assets


0.94%



0.85%



0.90%


Operating return on average equity


6.84%



7.89%



8.32%


Operating return on average tangible common equity


10.33%



9.43%



10.03%


Operating efficiency ratio (FTE)


68.35%



71.59%



68.58%












Community Bank Segment










Operating net income

$

18,211


$

10,653


$

8,806


Operating diluted earnings per share

$

0.39


$

0.43


$

0.35


Operating return on average assets


1.02%



1.04%



0.89%


Operating return on average equity


7.52%



9.79%



8.33%


Operating return on average tangible common equity


11.44%



11.74%



10.08%


Operating efficiency ratio (FTE)


64.57%



64.45%



66.26%

































Three Months Ended



03/31/14


12/31/13


03/31/13












Capital Ratios










Tier 1 risk-based capital ratio (5)


13.02%



13.05%



13.02%


Total risk-based capital ratio (5)


13.69%



14.17%



14.44%


Leverage ratio (Tier 1 capital to average assets) (5)


10.67%



10.70%



10.21%


Common equity to total assets


13.47%



10.49%



10.63%


Tangible common equity to tangible assets


9.29%



8.94%



8.97%












Per Share Data










Earnings per common share, basic

$

0.17


$

0.32


$

0.36


Earnings per common share, diluted


0.17



0.32



0.36


Cash dividends paid per common share


0.14



0.14



0.13


Market value per share


25.42



24.81



19.56


Book value per common share


21.15



17.56



17.43


Tangible book value per common share


13.92



14.69



14.43


Price to earnings ratio, diluted


36.87



19.54



13.40


Price to book value per common share ratio


1.20



1.41



1.12


Price to tangible common share ratio


1.83



1.69



1.36


Weighted average common shares outstanding, basic


46,977,416



24,939,360



25,063,426


Weighted average common shares outstanding, diluted


47,080,661



25,028,760



25,138,003


Common shares outstanding at end of period


46,677,821



24,976,434



24,859,729












Financial Condition










Assets

$

7,294,637


$

4,176,571


$

4,051,135


Loans, net of unearned income


5,274,198



3,039,368



2,973,547


Earning Assets


6,469,151



3,802,870



3,726,703


Goodwill


296,876



59,400



59,400


Core deposit intangibles, net


38,935



11,980



14,742


Deposits


5,686,131



3,236,842



3,311,749


Stockholders' equity


982,513



438,239



430,773


Tangible common equity


646,702



366,859



356,631












Averages










Assets

$

7,249,746


$

4,075,443


$

4,057,156


Loans, net of unearned income


5,279,924



3,004,186



2,965,918


Loans held for sale


49,767



50,819



156,766


Securities


1,076,479



650,351



600,262


Earning assets


6,432,326



3,715,003



3,735,926


Deposits


5,645,961



3,232,688



3,284,435


Certificates of deposit


1,463,076



892,164



1,041,903


Interest-bearing deposits


4,686,438



2,536,769



2,654,918


Borrowings


549,663



363,889



301,343


Interest-bearing liabilities


5,236,101



2,900,658



2,956,261


Stockholders' equity


997,868



440,344



437,981


Tangible common equity


660,543



368,523



363,355

































Three Months Ended



03/31/14


12/31/13


03/31/13


Asset Quality










Allowance for Loan Losses (ALL)










Beginning balance

$

30,135


$

33,877


$

34,916


Add: Recoveries


1,659



889



834


Less: Charge-offs


887



5,837



3,385


Add: Provision for loan losses


-



1,206



2,050


Ending balance

$

30,907


$

30,135


$

34,415












ALL / total outstanding loans


0.59%



0.99%



1.16%


ALL / total outstanding loans, adjusted for purchase accounting (2)


1.07%



1.10%



1.32%


Net charge-offs / total outstanding loans


-0.06%



0.65%



0.35%


Provision / total outstanding loans


0.00%



0.16%



0.28%


Nonperforming Assets










Commercial

$

12,591


$

12,031


$

18,456


Consumer


4,443



3,004



4,577


Nonaccrual loans


17,034



15,035



23,033












Other real estate owned


35,487



34,116



35,878


Total nonperforming assets (NPAs)


52,521



49,151



58,911












Commercial


3,485



3,087



2,105


Consumer


3,720



3,659



4,082


Loans ≥ 90 days and still accruing


7,205



6,746



6,187












Total nonperforming assets and loans ≥ 90 days

$

59,726


$

55,897


$

65,098


NPAs / total outstanding loans


1.00%



1.62%



1.98%


NPAs / total assets


0.72%



1.18%



1.45%


ALL / nonperforming loans


181.44%



200.43%



149.42%


ALL / nonperforming assets


58.85%



61.31%



58.42%












Past Due Detail










Commercial

$

2,599


$

1,017


$

1,844


Consumer


4,511



2,330



2,650


Loans 60-89 days past due

$

7,110


$

3,347


$

4,494


Commercial

$

13,566


$

3,839


$

4,173


Consumer


23,017



12,592



9,890


Loans 30-59 days past due

$

36,583


$

16,431


$

14,063


Commercial

$

114,834


$

2,732


$

3,078


Consumer


15,488



890



941


Purchased impaired

$

130,322


$

3,622


$

4,019












Mortgage Origination Volume










Refinance Volume

$

45,322


$

47,887


$

141,248


Construction Volume


32,103



25,248



26,188


Purchase Volume


71,635



83,043



100,725


Total Mortgage loan originations

$

149,060


$

156,178


$

268,161


% of originations that are refinances


30.41%



30.70%



52.70%












Other Data










End of period full-time employees


1,628



1,024



1,028


Number of full-service branches


144



90



90


Number of full automatic transaction machines (ATMs)


210



154



156

































Three Months Ended



03/31/14


12/31/13


03/31/13


Alternative Performance Measures (non-GAAP)










Operating Earnings (non-GAAP) (3)










Net Income (GAAP)

$

7,815


$

8,105


$

8,983


Plus: Merger and conversion related expense, after tax


9,016



651



-


Net operating earnings (loss) (non-GAAP)

$

16,831


$

8,756


$

8,983












Operating earnings per share - Basic

$

0.36


$

0.35


$

0.36


Operating earnings per share - Diluted


0.36



0.35



0.36












Operating ROA


0.94%



0.85%



0.90%


Operating ROE


6.84%



7.89%



8.32%


Operating ROTCE


10.33%



9.43%



10.03%












Community Bank Segment Operating Earnings (non-GAAP) (3)


Net Income (GAAP)

$

9,195


$

10,002


$

8,806


Plus: Merger and conversion related expense, after tax


9,016



651



-


Net operating earnings (loss) (non-GAAP)

$

18,211


$

10,653


$

8,806












Operating earnings per share - Basic

$

0.39


$

0.43


$

0.35


Operating earnings per share - Diluted


0.39



0.43



0.35












Operating ROA


1.02%



1.04%



0.89%


Operating ROE


7.52%



9.79%



8.33%


Operating ROTCE


11.44%



11.74%



10.08%












Operating Efficiency Ratio FTE (non-GAAP) (3)










Net Interest Income (GAAP)

$

63,758


$

38,613


$

37,753


FTE adjustment


1,946



1,387



1,258


Net Interest Income (FTE)

$

65,704



40,000



39,011


Noninterest Income (GAAP)


14,200



8,379



9,835


Noninterest Expense (GAAP)

$

67,781


$

35,375


$

33,501


Merger and conversion related expense


13,168



739



-


Noninterest Expense (Non-GAAP)

$

54,613


$

34,636


$

33,501












Operating Efficiency Ratio FTE (non-GAAP)


68.35%



71.59%



68.58%












Community Bank Segment Operating Efficiency Ratio FTE (non-GAAP) (3)


Net Interest Income (GAAP)

$

63,526


$

38,363


$

37,188


FTE adjustment


1,947



1,387



1,258


Net Interest Income (FTE)

$

65,473



39,750



38,446


Noninterest Income (GAAP)


12,071



7,226



6,146


Noninterest Expense (GAAP)

$

63,242


$

31,014


$

29,544


Merger and conversion related expense


13,168



739



-


Noninterest Expense (Non-GAAP)

$

50,074


$

30,275


$

29,544












Operating Efficiency Ratio FTE (non-GAAP)


64.57%



64.45%



66.26%












Tangible Common Equity (4)










Ending equity

$

982,513


$

438,239


$

430,773


Less: Ending goodwill


296,876



59,400



59,400


Less: Ending core deposit intangibles


38,935



11,980



14,742


Ending tangible common equity

$

646,702


$

366,859


$

356,631












Average equity

$

997,868


$

440,344


$

437,981


Less: Average trademark intangible


-



-



5


Less: Average goodwill


296,876



59,400



59,400


Less: Average core deposit intangibles


40,449



12,421



15,221


Average tangible common equity

$

660,543


$

368,523


$

363,355


























Three Months Ended



03/31/14


12/31/13


03/31/13


ALL to loans, adjusted for purchase accounting (non-GAAP)(2)










Allowance for loan losses

$

30,907


$

30,135


$

34,415


Remaining credit mark on purchased performing loans


25,756



3,341



4,771


Adjusted allowance for loan losses


56,663



33,476



39,186












Loans, net of unearned income


5,274,198



3,039,368



2,973,547


Remaining credit mark on purchased performing loans


25,756



3,341



4,771


Adjusted loans, net of unearned income

$

5,299,954


$

3,042,709


$

2,978,318












ALL / gross loans, adjusted for purchase accounting


1.07%



1.10%



1.32%












 

(1)  The core net interest margin, fully taxable equivalent ("FTE") excludes the impact of acquisition accounting accretion and amortization adjustments in net interest income.

(2) The allowance for loan losses, adjusted for purchase accounting (non-GAAP) ratio includes an adjustment for the credit mark on purchased performing loans.  The purchased performing loans are reported net of the related credit mark in loans, net of unearned income, on the balance sheet; therefore, the credit mark is added back to the balance to represent the total loan portfolio.  The adjusted allowance for loan losses, including the credit mark, represents the total reserve on the Company's loan portfolio.  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, adjusted for purchase accounting ratio 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 credit 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.

(3) The Company has provided supplemental performance measures which the Company believes may be useful to investors as they exclude non-operating adjustments resulting from acquisition and allow investors to see the combined economic results of the organization. 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.

(4) 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.

(5) March 31, 2014 ratios are estimates and subject to change pending the filing of the FR Y9-C. All other periods presented as filed.

 



UNION FIRST MARKET BANKSHARES CORPORATION AND SUBSIDIARIES







CONSOLIDATED BALANCE SHEETS









(Dollars in thousands, except share data)










March 31,


December 31,


March 31,


2014


2013


2013

ASSETS

(Unaudited)


(Audited)


(Unaudited)

Cash and cash equivalents:









Cash and due from banks

$

117,189


$

66,090


$

52,017

Interest-bearing deposits in other banks


24,541



6,781



24,715

Money market investments


1



1



1

Federal funds sold


519



151



160

Total cash and cash equivalents


142,250



73,023



76,893










Securities available for sale, at fair value


1,078,699



677,348



583,217

Restricted stock, at cost


42,441



26,036



17,956










Loans held for sale


48,753



53,185



127,106










Loans, net of unearned income


5,274,198



3,039,368



2,973,547

Less allowance for loan losses


30,907



30,135



34,415

Net loans


5,243,291



3,009,233



2,939,132










Bank premises and equipment, net


151,840



82,815



83,366

Other real estate owned, net of valuation allowance


35,487



34,116



35,878

Core deposit intangibles, net


38,935



11,980



14,742

Goodwill


296,876



59,400



59,400

Other assets


216,065



149,435



113,445

Total assets

$

7,294,637


$

4,176,571


$

4,051,135










LIABILITIES









Noninterest-bearing demand deposits


1,018,663



691,674



665,992

Interest-bearing deposits:









NOW accounts


1,256,910



498,068



459,117

Money market accounts


1,414,918



940,215



945,273

Savings accounts


559,299



235,034



225,543

Time deposits of $100,000 and over


608,753



427,597



507,972

Other time deposits


827,588



444,254



507,852

Total interest-bearing deposits


4,667,468



2,545,168



2,645,757

Total deposits


5,686,131



3,236,842



3,311,749










Securities sold under agreements to repurchase


57,681



52,455



72,047

Other short-term borrowings


216,600



211,500



-

Trust preferred capital notes


93,301



60,310



60,310

Long-term borrowings


205,116



139,049



137,364

Other liabilities


53,295



38,176



38,892

Total liabilities


6,312,124



3,738,332



3,620,362










Commitments and contingencies


















STOCKHOLDERS' EQUITY









Common stock, $1.33 par value, shares authorized 100,000,000, 36,000,000, and

36,000,000, respectively; issued and outstanding, 46,677,821 shares, 24,976,434

shares, and 24,859,729 shares, respectively.


61,780



33,020



32,869

Surplus


678,143



170,770



168,304

Retained earnings


237,864



236,639



221,330

Accumulated other comprehensive (loss) income


4,726



(2,190)



8,270

Total stockholders' equity


982,513



438,239



430,773










Total liabilities and stockholders' equity

$

7,294,637


$

4,176,571


$

4,051,135




























UNION FIRST MARKET BANKSHARES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Dollars in thousands, except per share amounts)



















Three Months Ended


March 31,


December 31,


March 31,


2014


2013


2013


(Unaudited)


(Unaudited)


(Unaudited)

Interest and dividend income:









Interest and fees on loans

$

61,269


$

38,741


$

39,224

Interest on deposits in other banks


12



3



5

Interest and dividends on securities:









Taxable


3,648



2,345



2,069

Nontaxable


3,279



2,226



1,987

Total interest and dividend income


68,208



43,315



43,285










Interest expense:









Interest on deposits


2,256



3,064



3,962

Interest on federal funds purchased


24



27



15

Interest on short-term borrowings


119



95



54

Interest on long-term borrowings


2,051



1,516



1,501

Total interest expense


4,450



4,702



5,532










Net interest income


63,758



38,613



37,753

Provision for loan losses


-



1,206



2,050

Net interest income after provision for loan losses


63,758



37,407



35,703










Noninterest income:









Service charges on deposit accounts


4,298



2,399



2,272

Other service charges, commissions and fees


4,671



3,096



2,807

Gains (losses) on securities transactions, net


29



(26)



(11)

Gains on sales of mortgage loans, net of commissions


2,297



1,319



3,852

Gains (losses) on sales of bank premises


(233)



(3)



(296)

Other operating income


3,138



1,594



1,211

Total noninterest income


14,200



8,379



9,835










Noninterest expenses:









Salaries and benefits


29,626



17,076



17,966

Occupancy expenses


5,180



3,105



2,855

Furniture and equipment expenses


2,868



1,633



1,845

Communications expense


1,098



611



696

Technology and data processing


3,074



1,975



1,744

Professional services


1,055



1,237



725

Marketing and advertising expense


1,065



1,135



1,052

FDIC assessment premiums and other insurance


1,393



805



790

OREO and credit-related expenses


1,451



1,721



574

Amortization of intangible assets


2,616



919



1,069

Acquisition and conversion costs


13,168



739



-

Other expenses


5,187



4,419



4,185

Total noninterest expenses


67,781



35,375



33,501










Income before income taxes


10,177



10,411



12,037

Income tax expense


2,362



2,306



3,054

Net income

$

7,815


$

8,105


$

8,983

Earnings per common share, basic

$

0.17


$

0.32


$

0.36

Earnings per common share, diluted

$

0.17


$

0.32


$

0.36

 

 

UNION FIRST MARKET BANKSHARES CORPORATION AND SUBSIDIARIES

SEGMENT FINANCIAL INFORMATION












(Dollars in thousands)













Community Bank


Mortgage


Eliminations


Consolidated

Three Months Ended March 31, 2014












Net interest income

$

63,526


$

232


$

-


$

63,758

Provision for loan losses


-



-



-



-

Net interest income after provision for loan losses


63,526



232



-



63,758

Noninterest income


12,071



2,300



(171)



14,200

Noninterest expenses


63,242



4,710



(171)



67,781

Income before income taxes


12,355



(2,178)



-



10,177

Income tax expense


3,160



(798)



-



2,362

Net income

$

9,195


$

(1,380)


$

-


$

7,815

Plus: Merger and conversion related expense,

after tax


9,016



-



-



9,016

Net operating earnings (loss) (non-GAAP)

$

18,211


$

(1,380)


$

-


$

16,831

Total assets

$

7,282,443


$

57,705


$

(45,511)


$

7,294,637













Three Months Ended March 31, 2013












Net interest income

$

37,188


$

565


$

-


$

37,753

Provision for loan losses


2,050



-



-



2,050

Net interest income after provision for loan losses


35,138



565



-



35,703

Noninterest income


6,146



3,856



(167)



9,835

Noninterest expenses


29,544



4,124



(167)



33,501

Income before income taxes


11,740



297



-



12,037

Income tax expense


2,934



120



-



3,054

Net income

$

8,806


$

177


$

-


$

8,983

Total assets

$

4,031,302


$

136,238


$

(116,405)


$

4,051,135

 

 

AVERAGE BALANCES, INCOME AND EXPENSES, YIELDS AND RATES (TAXABLE EQUIVALENT BASIS)


















For the quarter ended


March 31, 2014


December 31, 2013


Average

Balance


Interest

Income /

Expense


Yield /

Rate (1)


Average

Balance


Interest Income

/ Expense


Yield /

Rate (1)



(Dollars in thousands)

Assets:
















Securities:
















Taxable

$

683,620


$

3,648


2.16%


$

411,927


$

2,345


2.26%

Tax-exempt


392,859



5,044


5.21%



238,424



3,424


5.70%

Total securities (2)


1,076,479



8,692


3.27%



650,351



5,769


3.52%

Loans, net (3) (4)


5,279,924



61,033


4.69%



3,004,186



38,455


5.08%

Loans held for sale


49,767



417


3.40%



50,819



475


3.71%

Federal funds sold


268



-


0.17%



298



-


0.17%

Money market investments


1



-


0.00%



1



-


0.00%

Interest-bearing deposits in other banks


25,887



12


0.19%



9,348



3


0.13%

Total earning assets


6,432,326



70,154


4.42%



3,715,003



44,702


4.77%

Allowance for loan losses


(30,925)








(33,435)






Total non-earning assets


848,345








393,875






Total assets

$

7,249,746







$

4,075,443






















Liabilities and Stockholders' Equity:
















Interest-bearing deposits:
















Checking

$

1,252,927



225


0.07%


$

481,152



93


0.08%

Money market savings


1,421,558



913


0.26%



929,816



547


0.23%

Regular savings


548,877



247


0.18%



233,637



180


0.31%

Time deposits (5)


1,463,076



871


0.24%



892,164



2,244


1.02%

Total interest-bearing deposits


4,686,438



2,256


0.20%



2,536,769



3,064


0.48%

Other borrowings (6)


549,663



2,194


1.62%



363,889



1,638


1.79%

Total interest-bearing liabilities


5,236,101



4,450


0.34%



2,900,658



4,702


0.64%

















Noninterest-bearing liabilities:
















Demand deposits


959,523








695,919






Other liabilities


56,254








38,522






Total liabilities


6,251,878








3,635,099






Stockholders' equity


997,868








440,344






Total liabilities and stockholders' equity

$

7,249,746







$

4,075,443






















Net interest income




$

65,704







$

40,000



















Interest rate spread (7)







4.08%








4.13%

Interest expense as a percent of average earning assets


0.28%








0.50%

Net interest margin (8)







4.14%








4.27%

















(1) Rates and yields are annualized and calculated from actual, not rounded amounts in thousands, which appear above.

(2) Interest income on securities includes $0 for the three months ended March 31, 2014 and December 31, 2013, respectively, in accretion of the fair market value adjustments.

(3) Nonaccrual loans are included in average loans outstanding.

(4) Interest income on loans includes $546 thousand and $495 thousand for the three month periods ended March 31, 2104 and December 31, 2013 in accretion of the fair market value adjustments related to the acquisitions.

(5) Interest expense on certificates of deposits includes $2.9 million and $2 thousand for the three month periods ended March 31, 2014 and December 31, 2013, respectively, in accretion of the fair market value adjustments related to the acquisitions.

(6) Interest expense on borrowings includes $75 thousand and $122 thousand for the three month periods ended March 31, 2014, and December 31, 2013, respectively, in amortization of the fair market value adjustments related to acquisitions.

(7) Income and yields are reported on a taxable equivalent basis using the statutory federal corporate tax rate of 35%.

(8) Core net interest margin excludes purchase accounting adjustments and was 3.99% and 4.24% for the three months ended March 31, 2014 and December 31, 2013.

 

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SOURCE Union First Market Bankshares Corporation



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