Union First Market Bankshares Reports Second Quarter Results

22 Jul, 2013, 17:02 ET from Union First Market Bankshares Corporation

Richmond, Va., July 22, 2013 /PRNewswire/ -- Union First Market Bankshares Corporation (the "Company") (NASDAQ: UBSH) today reported net income of $9.5 million and earnings per share of $0.38 for its second quarter ended June 30, 2013.  Excluding acquisition-related expenses of $919,000, operating earnings(1) for the quarter were $10.4 million and operating earnings per share(1) was $0.42.  The quarterly results represent an increase of $2.0 million, or 23.3%, in operating earnings from the same quarter of the prior year and an increase of $1.4 million, or 15.6%, from the quarter ended March 31, 2013.  Operating earnings per share of $0.42 for the current quarter increased $0.10, or 31.3%, from the prior year's second quarter and increased $0.06, or 16.7%, from the most recent quarter.

(Logo:  http://photos.prnewswire.com/prnh/20091027/NE00206LOGO )

"Second quarter results demonstrate the progress Union First Market Bankshares is making to deliver top quartile financial performance nationally and provide our shareholders with above average returns on their investment over the long term," said G. William Beale, chief executive officer of Union First Market Bankshares. "In addition to reporting continued improvements in key financial performance metrics, the Company saw consistent growth in net new deposit households and in loan balances.  Overall asset quality continues to improve and quarterly net charge-offs were at a four year low. The mortgage company results reflect the changing interest rate environment as well as additional expenses associated with moving the mortgage company's headquarters to Richmond and our proactive efforts to improve the mortgage segment's operating capabilities and profitability.   Overall, we are pleased with the Company's performance in the first half of 2013 and are poised to generate strong financial results during the second half of the year."  

"During the quarter, we announced the signing of a definitive merger agreement to acquire StellarOne Corporation, which is expected to create the largest community banking institution in the Commonwealth of Virginia.  This is exciting news for Union as the combination of two of Virginia's largest community banks provides Union with the growth and synergies 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.  We have already started the integration planning work with StellarOne and continue to expect to close the transaction on or around January 1, 2014, subject to customary closing conditions, including regulatory and shareholder approvals."

Select highlights:

  • Operating Return on Average Equity(1) increased to 9.58% for the quarter ended June 30, 2013 compared to Return on Average Equity ("ROE") of 7.84% and 8.32% for the same quarter of the prior year and the first quarter of 2013, respectively.  Including current quarter acquisition-related costs, ROE was 8.73%.
  • Operating Return on Average Assets(1)  increased to 1.03% for the quarter ended June 30, 2013 compared to Return on Average Assets ("ROA") of 0.86% and 0.90% for the same quarter of the prior year and the first quarter of 2013, respectively.  Including current quarter acquisition-related costs, ROA was 0.94%.
  • Operating efficiency ratio(1) of 66.73% declined 185 basis points when compared to the prior quarter and 134 basis points when compared to the same quarter of the prior year.
  • Loan demand continued to improve with an increase in loans outstanding of $113.1 million, or 3.9%, since June 30, 2012.  Loan balances increased $27.3 million, or 3.6% on an annualized basis from the prior quarter.
  • During the quarter, the Company added almost 1,100 net new core household accounts consistent with growth in the prior quarter and the 4.4% annualized growth rate in 2012.  Deposit balances increased $47.0 million, or 1.5%, from June 30, 2012 while deposit balances declined $31.8 million since year end primarily due to net run-off in higher cost time deposits.
  • Credit quality metrics continued to improve as nonperforming assets ("NPAs") and the ratio of NPAs compared to total loans declined from the same quarter last year.  Net charge-offs declined materially from the same quarter last year and from the most recent quarter.

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

NET INTEREST INCOME

Three Months Ended

Dollars in thousands

06/30/13

03/31/13

Change

06/30/12

Change

Average interest-earning assets

$

3,713,392

$

3,735,926

$

(22,534)

$

3,615,718

$

97,674

Interest income (FTE)

$

43,981

$

44,543

$

(562)

$

46,340

$

(2,359)

Yield on interest-earning assets

4.75%

4.84%

(9)

 bps

5.15%

(40)

 bps

Average interest-bearing liabilities

$

2,907,523

$

2,956,261

$

(48,738)

$

2,910,987

$

(3,464)

Interest expense

$

5,283

$

5,532

$

(249)

$

7,215

$

(1,932)

Cost of interest-bearing liabilities

0.73%

0.76%

(3)

 bps

1.00%

(27)

 bps

Cost of funds

0.57%

0.60%

(3)

 bps

0.79%

(22)

 bps

Net Interest Income (FTE)

$

38,698

$

39,011

$

(313)

$

39,125

$

(427)

Net Interest Margin (FTE)

4.18%

4.23%

(5)

 bps

4.36%

(18)

 bps

Core Net Interest Margin (FTE) (1)

4.14%

4.18%

(4)

 bps

4.25%

(11)

 bps

(1)  Core net interest margin (FTE) excludes the impact of acquisition accounting accretion and amortization adjustments in net interest income.

 

On a linked quarter basis, tax-equivalent net interest income was $38.7 million, a decrease of $313,000, or 0.8%, from the first quarter of 2013.  The second quarter tax-equivalent net interest margin declined by 5 basis points to 4.18% from 4.23% in the previous quarter.  The change in net interest margin was principally attributable to the continued decline in net accretion on the acquired net earning assets (1 bp) and lower investment and loan yields outpacing the reduction in the cost of interest-bearing liabilities (4 bps).  Loan yields continued to be negatively affected by the low rate environment as new and renewed loans were originated and repriced at lower rates.  Yields on investment securities were primarily impacted by lower reinvestment rates during the quarter, offset by a shift in mix from taxable securities to higher yielding tax-exempt securities.  The cost of interest-bearing liabilities declined during the quarter largely driven by lower time deposit account balances.

For the three months ended June 30, 2013, tax-equivalent net interest income decreased $427,000, or 1.1%, when compared to the same period last year.  The tax-equivalent net interest margin decreased by 18 basis points to 4.18% from 4.36% in the prior year.  The decline in net interest margin was principally due to the continued decline in accretion on the acquired net earning assets (7 bps) and declines in earning asset yields exceeding the reduction in interest-bearing liabilities rates paid (11 bps).  Lower earning asset interest income was principally due to lower yields on loans as new and renewed loans were originated and repriced at lower rates, faster prepayments on mortgage-backed securities, and cash flows from securities investments reinvested at lower yields.  The decline in the cost of interest-bearing liabilities from the prior year's first quarter was driven by a shift in mix from time deposits to low cost deposits, reductions in deposit rates and lower wholesale borrowing costs.

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

 

Year-over-year results

For the Six Months Ended

Dollars in thousands

06/30/13

06/30/12

Change

Average interest-earning assets

$

3,724,597

$

3,597,115

$

127,482

Interest income (FTE)

$

88,524

$

93,259

$

(4,735)

Yield on interest-earning assets

4.79%

5.21%

(42)

 bps

Average interest-bearing liabilities

$

2,931,758

$

2,909,904

$

21,854

Interest expense

$

10,816

$

14,744

$

(3,928)

Cost of interest-bearing liabilities

0.74%

1.02%

(28)

 bps

Cost of funds

0.59%

0.82%

(23)

 bps

Net Interest Income (FTE)

$

77,708

$

78,515

$

(807)

Net Interest Margin (FTE)

4.21%

4.39%

(18)

 bps

Core Net Interest Margin (FTE) (1)

4.16%

4.26%

(10)

 bps

(1)  Core net interest margin (FTE) excludes the impact of acquisition accounting accretion and amortization adjustments in net interest income.

 

For the six months ended June 30, 2013, tax-equivalent net interest income was $77.7 million, a decrease of $807,000, or 1.0%, when compared to the same period last year.  The tax-equivalent net interest margin decreased by 18 basis points to 4.21% from 4.39% in the prior year.  The decline in the net interest margin was principally due to the continued decline in accretion on the acquired net earning assets (8 bps) and a decline in the yield on interest-earning assets that outpaced the reduction in the cost of interest-bearing liabilities (10 bps).  Lower interest-earning asset income was principally due to lower yields on loans as new loans and renewed loans were originated and repriced at lower rates and declining investment securities yields driven by faster prepayments on mortgage-backed securities and cash flows from securities investments reinvested at lower yields.

The Company's fully taxable equivalent net interest margin includes the impact of acquisition accounting fair value adjustments.  The 2013 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 June 30, 2013

$

534

$

2

$

(122)

$

414

For the remaining six months of 2013

932

3

(245)

690

For the years ending:

2014

1,459

4

(489)

974

2015

1,002

-

(489)

513

2016

557

-

(163)

394

2017

172

-

-

172

2018

19

-

-

19

Thereafter

101

-

-

101

 

ASSET QUALITY/LOAN LOSS PROVISION

Overview During the second quarter, the Company continued to reduce the levels of impaired loans and troubled debt restructurings. Nonperforming assets and past due loans also declined from the same quarter last year. Net charge-offs, the related ratio of net charge-offs to total loans, and the loan loss provision decreased materially from the prior quarter and from the same quarter of the previous year.  The allowance to nonperforming loans coverage ratio remained at consistently high levels.  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.

Nonperforming Assets ("NPAs") At June 30, 2013, nonperforming assets totaled $62.2 million, a decline of $12.8 million, or 17.1%, from a year ago and an increase of $3.3 million, or 5.6%, from the first quarter.  In addition, NPAs as a percentage of total outstanding loans declined 53 basis points from 2.60% a year earlier and increased 9 basis points from 1.98% last quarter to 2.07% in the current quarter.

Nonperforming assets at June 30, 2013 included $27.0 million in nonaccrual loans (excluding purchased impaired loans), a net decrease of $12.2 million, or 31.1%, from June 30, 2012 and an increase of $4.0 million, or 17.4%, from the prior quarter.  The current quarter increase relates to one loan relationship, totaling $5.5 million, being placed on nonaccrual status during the second quarter.  The following table shows the activity in nonaccrual loans for the quarter ended (dollars in thousands): 

 

June 30,

March 31,

December 31,

September 30,

June 30,

2013

2013

2012

2012

2012

Beginning Balance

$

23,033

$

26,206

$

32,159

$

39,171

$

42,391

Net customer payments

(3,196)

(1,715)

(1,898)

(5,774)

(3,174)

Additions

7,934

2,694

2,306

2,586

2,568

Charge-offs

(476)

(2,262)

(3,388)

(3,012)

(561)

Loans returning to accruing status

-

(632)

(840)

(812)

(1,803)

Transfers to OREO

(273)

(1,258)

(2,133)

-

(250)

Ending Balance

$

27,022

$

23,033

$

26,206

$

32,159

$

39,171

 

The following table presents the composition of nonaccrual loans (excluding purchased impaired loans) and the coverage ratio, which is the allowance for loan losses expressed as a percentage of nonaccrual loans, at the quarter ended (dollars in thousands):

 

June 30,

March 31,

December 31,

September 30,

June 30,

2013

2013

2012

2012

2012

Raw Land and Lots

$

4,573

$

6,353

$

8,760

$

10,995

$

12,139

Commercial Construction

5,103

4,547

5,781

7,846

9,763

Commercial Real Estate

2,716

2,988

3,018

2,752

5,711

Single Family Investment Real Estate

2,859

2,117

3,420

4,081

3,476

Commercial and Industrial

7,291

2,261

2,036

2,678

4,715

Other Commercial

471

190

193

195

231

Consumer

4,009

4,577

2,998

3,612

3,136

Total

$

27,022

$

23,033

$

26,206

$

32,159

$

39,171

Coverage Ratio

127.06%

149.42%

133.24%

124.05%

104.63%

 

Nonperforming assets at June 30, 2013 also included $35.2 million in OREO, a decrease of $649,000, or 1.8%, from the prior year and down $725,000, or 2.0%, from the prior quarter.  The following table shows the activity in OREO for the quarter ended (dollars in thousands):

 

June 30,

March 31,

December 31,

September 30,

June 30,

2013

2013

2012

2012

2012

Beginning Balance

$

35,878

$

32,834

$

34,440

$

35,802

$

37,663

Additions

1,768

3,607

2,866

929

3,887

Capitalized Improvements

164

30

22

16

23

Valuation Adjustments

-

-

(301)

-

-

Proceeds from sales

(2,515)

(877)

(4,004)

(2,071)

(5,592)

Gains (losses) from sales

(142)

284

(189)

(236)

(179)

Ending Balance

$

35,153

$

35,878

$

32,834

$

34,440

$

35,802

 

The additions to OREO were principally related to raw land and residential real estate; sales from OREO were principally related to residential real estate and former branch property.

The following table presents the composition of the OREO portfolio at the quarter ended (dollars in thousands):

 

June 30,

March 31,

December 31,

September 30,

June 30,

2013

2013

2012

2012

2012

Land

$

10,310

$

9,861

$

8,657

$

6,953

$

6,953

Land Development

10,894

11,023

10,886

11,034

11,313

Residential Real Estate

7,274

7,467

7,939

9,729

10,431

Commercial Real Estate

6,542

6,749

5,352

5,640

6,085

Former Bank Premises (1)

133

778

-

1,084

1,020

Total

$

35,153

$

35,878

$

32,834

$

34,440

$

35,802

(1) Includes closed branch property and land previously held for branch sites.

 

Included in land development is $9.4 million related to a residential community in the Northern Neck region of Virginia, which includes developed residential lots, a golf course, and undeveloped land.  Foreclosed properties were adjusted to their fair values at the time of each foreclosure and any losses were taken as loan charge-offs against the allowance for loan losses at that time.  OREO asset balances are evaluated at least quarterly by the Bank's Special Asset Loan Committee and any necessary write downs to fair values are recorded as impairment. 

Past Due Loans At June 30, 2013, total accruing past due loans were $29.7 million, or 0.99% of total loans, a decrease from $33.2 million, or 1.15% of total loans, a year ago and an increase from $24.7 million, or 0.83% of total loans, at March 31, 2013. 

Charge-offs For the quarter ended June 30, 2013, net charge-offs of loans were $1.1 million, or 0.14% on an annualized basis, compared to $2.2 million, or 0.31%, for the same quarter last year and $2.6 million, or 0.35%, for the first quarter of 2013.  Nearly all net charge-offs in the current quarter were related to consumer loans. 

Provision The provision for loan losses for the current quarter was $1.0 million, a decrease of $2.0 million from the same quarter a year ago and a decrease of $1.1 million from the previous quarter.  The decline in provision for loan losses in the current quarter compared to the prior periods is driven by improving asset quality and the impact of lower historical charge-off factors.  The provision to loans ratio for the quarter ended June 30, 2013 was 0.13% on an annualized basis compared to 0.42% for the same quarter a year ago and to 0.28% last quarter.

Allowance for Loan Losses The allowance for loan losses ("ALL") as a percentage of the total loan portfolio, adjusted for acquired loans (non-GAAP), was 1.33% at June 30, 2013, a decrease from 1.74% at June 30, 2012 and 1.36% from the prior quarter.  In acquisition accounting, there is no carryover of previously established allowance for loan losses.  The allowance for loan losses as a percentage of the total loan portfolio was 1.14% at June 30, 2013, 1.42% at June 30, 2012, and 1.16% at March 31, 2013.  The decrease in the allowance and related ratios was primarily attributable to the reduced levels of provision and improving credit quality metrics.  The following table shows the loans and related allowance for loans individually and collectively evaluated for impairment for the quarter ended (dollars in thousands):

 

June 30,

March 31,

December 31,

September 30,

June 30,

2013

2013

2012

2012

2012

Loans individually evaluated for impairment

$

112,484

$

133,861

$

142,415

$

161,196

$

189,399

Related allowance

6,109

5,712

6,921

11,438

11,500

ALL to loans individually evaluated for impairment

5.43%

4.27%

4.86%

7.10%

6.07%

Loans collectively evaluated for impairment

$

2,888,371

$

2,839,686

$

2,824,432

$

2,747,314

$

2,698,391

Related allowance

28,224

28,703

27,995

28,456

29,485

ALL to loans collectively evaluated for impairment

0.98%

1.01%

0.99%

1.04%

1.09%

Total loans

$

3,000,855

$

2,973,547

$

2,966,847

$

2,908,510

$

2,887,790

Related allowance

34,333

34,415

34,916

39,894

40,985

ALL to total loans

1.14%

1.16%

1.18%

1.37%

1.42%

 

Impaired loans (individually and collectively evaluated for impairment) have declined from $201.3 million at June 30, 2012 and from $145.7 million at March 31, 2013 to $133.8 million at June 30, 2013.  The nonaccrual loan coverage ratio remained strong at 127.1% at June 30, 2013, an increase from 104.6% the same quarter last year but a decrease from 149.4% at March 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 in assessing the adequacy of the allowance for loan losses. 

Troubled Debt Restructurings ("TDRs") Loans classified as TDRs as of June 30, 2013 totaled $53.0 million, a decline of $27.2 million, or 33.9%, from $80.2 million at June 30, 2012 and a decrease of $1.7 million, or 3.1%, from $54.7 million at March 31, 2013.  Of the $53.0 million of TDRs at June 30, 2013, $39.8 million, or 75.1%, were considered performing while the remaining $13.2 million were considered nonperforming.  The decline in the TDR balance from the prior quarter is attributable to $4.7 million being removed from TDR status and $2.9 million in net payments, partially offset by additions of $5.9 million.  Loans removed from TDR status represent restructured loans with a market rate of interest at the time of the restructuring, which were performing in accordance with their modified terms for a consecutive twelve month period and that were no longer considered impaired. 

The following table shows the Company's performing and nonperforming TDRs by modification type for the quarter ended (dollars in thousands):

 

June 30,

March 31,

December 31,

September 30,

June 30,

2013

2013

2012

2012

2012

Performing

Modified to interest only, at a market rate

$

1,883

$

2,071

$

1,877

$

1,437

$

2,191

Term modification, at a market rate

27,829

30,380

38,974

39,195

53,905

Term modification, below market rate

7,724

7,803

8,227

8,911

9,004

Interest rate modification, below market rate

2,390

2,390

2,390

2,390

2,390

Total performing

$

39,826

$

42,644

$

51,468

$

51,933

$

67,490

Nonperforming

Modified to interest only, at a market rate

$

1,191

$

1,275

$

672

$

920

$

642

Term modification, at a market rate

4,225

2,940

3,653

3,288

3,451

Term modification, below market rate

7,794

7,797

7,666

7,672

8,587

Total nonperforming

$

13,210

$

12,012

$

11,991

$

11,880

$

12,680

Total performing & nonperforming

$

53,036

$

54,656

$

63,459

$

63,813

$

80,170

 

NONINTEREST INCOME

For the Three Months Ended

Dollars in thousands

06/30/13

03/31/13

$

%

06/30/12

$

%

Noninterest income:

Service charges on deposit accounts

$

2,346

$

2,272

$

74

3.3%

$

2,291

$

55

2.4%

Other service charges, commissions and fees

3,222

2,807

415

14.8%

2,774

448

16.1%

Losses (gains) on securities transactions, net

53

(11)

64

NM

10

43

430.0%

Gains on sales of mortgage loans, net of commissions

4,668

3,852

816

21.2%

3,832

836

21.8%

Gains (losses) on bank premises, net

(34)

(296)

262

NM

373

(407)

NM

Other operating income

1,044

1,211

(167)

-13.8%

973

71

7.3%

Total noninterest income

$

11,299

$

9,835

$

1,464

14.9%

$

10,253

$

1,046

10.2%

Mortgage segment operations

$

(4,668)

$

(3,856)

$

(812)

21.1%

$

(3,833)

$

(835)

21.8%

Intercompany eliminations

167

167

-

0.0%

117

50

42.7%

Community Bank segment

$

6,798

$

6,146

$

652

10.6%

$

6,537

$

261

4.0%

NM - Not Meaningful

 

On a linked quarter basis, noninterest income increased $1.5 million, or 14.9%, to $11.3 million from $9.8 million in the first quarter.  Other services charges, commissions and fees, increased $415,000 primarily due to increased revenue on retail investment products and higher net interchange fees.  Gains on sales of mortgage loans, net of commissions, increased $816,000, or 21.2%, as mortgage loan originations increased by $30.0 million, or 11.2%, in the current quarter to $298.2 million from $268.2 million in the first quarter.  Losses on bank premises decreased $262,000 largely due to the write down of a former branch location in the first quarter.  Other operating income decreased $167,000 primarily due to elevated insurance related revenue during the first quarter.  Excluding mortgage segment operations, noninterest income increased $652,000, or 10.6%.

For the quarter ended June 30, 2013, noninterest income increased $1.0 million, or 10.2%, to $11.3 million from $10.3 million in the prior year's second quarter.  Other service charges, commissions and fees increased $448,000 primarily due to increased revenue on retail investment products and letter of credit related fees.  Gains on sales of mortgage loans, net of commissions, increased $836,000, or 21.8%, due to higher origination volumes, primarily a result of additional loan originators hired in 2012.  Gains on bank premises declined due to branch sales gains recognized during the second quarter of 2012.  Excluding mortgage segment operations, noninterest income increased $261,000, or 4.0%, from the same period a year ago.

 

For the Six Months Ended

Dollars in thousands

06/30/13

06/30/12

$

%

Noninterest income:

Service charges on deposit accounts

$

4,618

$

4,421

$

197

4.5%

Other service charges, commissions and fees

6,029

5,346

683

12.8%

Gains on securities transactions

42

5

37

NM

Gains on sales of mortgage loans, net of commissions

8,520

6,597

1,923

29.1%

Gains (losses) on bank premises

(330)

343

(673)

NM

Other operating income

2,254

2,017

237

11.8%

Total noninterest income

$

21,133

$

18,729

$

2,404

12.8%

Mortgage segment operations

$

(8,522)

$

(6,600)

$

(1,922)

29.1%

Intercompany eliminations

334

234

100

42.7%

Community Bank segment

$

12,945

$

12,363

$

582

4.7%

NM - Not Meaningful

 

For the six months ending June 30, 2013, noninterest income increased $2.4 million, or 12.8%, to $21.1 million, from $18.7 million a year ago.  Service charges on deposit accounts increased $197,000 primarily related to higher overdraft and returned check fees.  Other account service charges and fees increased $683,000 due to higher net interchange fee income, revenue on retail investment products, and fees on letters of credit. Gains on sales of mortgage loans, net of commissions, increased $1.9 million driven by an increase in loan origination volume, a result of additional loan originators hired in 2012 and historically low interest rates.  Conversely, gains on bank premises decreased $673,000 as the Company recorded a loss in the current year on the closure of bank premises coupled with gains in the prior year related to sale of bank premises.  Other operating income increased $237,000 primarily related to increased income on bank owned life insurance and insurance related revenues.  Excluding mortgage segment operations, noninterest income increased $582,000, or 4.7%, from the same period a year ago.

NONINTEREST EXPENSE  

For the Three Months Ended

Dollars in thousands

06/30/13

03/31/13

$

%

06/30/12

$

%

Noninterest expense:

Salaries and benefits

$

17,912

$

17,966

$

(54)

-0.3%

$

16,935

$

977

5.8%

Occupancy expenses

2,764

2,855

(91)

-3.2%

3,092

(328)

-10.6%

Furniture and equipment expenses

1,741

1,845

(104)

-5.6%

1,868

(127)

-6.8%

OREO and credit-related expenses (1)

984

574

410

71.4%

1,310

(326)

-24.9%

Acquisition-related expenses

919

-

919

NM

-

919

NM

Other operating expenses

9,963

10,261

(298)

-2.9%

10,402

(439)

-4.2%

  Total noninterest expense

$

34,283

$

33,501

$

782

2.3%

$

33,607

$

676

2.0%

Mortgage segment operations

$

(4,657)

$

(4,124)

$

(533)

12.9%

$

(3,338)

$

(1,319)

39.5%

Intercompany eliminations

167

167

-

0.0%

117

50

42.7%

  Community Bank segment

$

29,793

$

29,544

$

249

0.8%

$

30,386

$

(593)

-2.0%

  NM - Not Meaningful

 (1) OREO related costs include foreclosure related expenses, gains/losses on the sale of OREO, valuation reserves, and asset resolution related legal expenses.

 

On a linked quarter basis, noninterest expense increased $782,000, or 2.3%, to $34.3 million from $33.5 million when compared to the first quarter.  Excluding acquisition-related expenses of $919,000 incurred in the second quarter, noninterest expense decreased $137,000, or 0.4%, from the prior quarter. OREO and credit-related costs increased $410,000 as the Company incurred a loss on the sale of OREO in the current quarter while generating a gain during the prior quarter.  Other operating expense decreased $298,000 primarily due to declining core deposit intangible amortization expense.  Excluding mortgage segment operations and acquisition related costs, noninterest expense decreased $670,000, or 2.3%, compared to the first quarter.

For the quarter ended June 30, 2013, noninterest expense increased $676,000, or 2.0%, to $34.3 million from $33.6 million for the second quarter of 2012.  Excluding of acquisition-related expenses of $919,000, noninterest expense decreased $243,000, or 0.7%, from the prior year.  Salaries and benefits expenses increased $997,000 primarily related to the costs associated with the addition of mortgage loan originators and support personnel in 2012 and management incentive payments related to higher earnings.  Occupancy expenses decreased $328,000 primarily due to branch closures in 2012.  OREO and credit-related costs decreased $326,000 from the prior year's second quarter primarily due to declines in problem loan related legal fees and foreclosure related costs as asset quality continues to improve.  Other operating expenses were lower by $439,000 primarily related to declining core deposit intangible amortization expense.  Excluding mortgage segment operations and acquisition related costs, noninterest expense decreased $1.5 million, or 5.0%, compared to the second quarter of 2012.

 

For the Six Months Ended

Dollars in thousands

06/30/13

06/30/12

$

%

Noninterest expense:

Salaries and benefits

$

35,878

$

33,911

$

1,967

5.8%

Occupancy expenses

5,619

5,739

(120)

-2.1%

Furniture and equipment expenses

3,585

3,631

(46)

-1.3%

OREO and credit-related expenses (1)

1,558

2,238

(680)

-30.4%

Acquisition-related expenses

919

-

919

NM

Other operating expenses

20,224

20,355

(131)

-0.6%

Total noninterest expense

$

67,783

$

65,874

$

1,909

2.9%

Mortgage segment operations

$

(8,779)

$

(6,039)

$

(2,740)

45.4%

Intercompany eliminations

334

234

100

42.7%

Community Bank segment

$

59,338

$

60,069

$

(731)

-1.2%

  NM - Not Meaningful

 (1) OREO related costs include foreclosure related expenses, gains/losses on the sale of OREO, valuation reserves, and asset resolution related legal expenses.

 

For the six months ending June 30, 2013, noninterest expense increased $1.9 million, or 2.9% to $67.8 million, from $65.9 million a year ago. Excluding acquisition-related expenses of $919,000, noninterest expense increased $990,000, or 1.5%, from the prior year period.  Salaries and benefits expense increased $2.0 million due to the addition of mortgage loan originators and support personnel hired in 2012, group insurance cost increases, and severance expense recorded in the current quarter related to the relocation of Union Mortgage Group's headquarters to Richmond.  OREO and related costs decreased $680,000, or 30.4%, due to gains on sales of OREO and declines in problem loan legal fees and foreclosure related costs as asset quality continues to improve.  Excluding mortgage segment operations and acquisition related costs, noninterest expense declined $1.7 million, or 2.7%, compared to the same period in 2012.

BALANCE SHEET

At June 30, 2013, total assets were $4.1 billion, an increase of $5.4 million from March 31, 2013, and an increase of $74.3 million from June 30, 2012.  Total cash and cash equivalents were $71.5 million at June 30, 2013, a decrease of $837,000 from the same period last year, and a decrease of $5.3 million from March 31, 2013.  Investment in securities declined $45.2 million, or 7.2%, from $627.5 million at June 30, 2012 to $582.3 million at June 30, 2013, and decreased $905,000 from March 31, 2013.  Mortgage loans held for sale were $109.4 million, an increase of $9.3 million from June 30, 2012, but a decline of $17.7 million from March 31, 2013.

At June 30, 2013, loans (net of unearned income) were $3.0 billion, an increase of $113.1 million, or 3.9% from June 30, 2012, and an increase of $27.3 million, or 0.9%, from March 31, 2013. 

As of June 30, 2013, total deposits were $3.3 billion, an increase of $47.0 million, or 1.5%, when compared to June 30, 2012, and a decrease of $45.8 million from March 31, 2013.  Year over year deposit growth was driven by increases in low cost deposit levels, which grew $76.5 million, while the drop in linked quarter deposits was driven by lower time deposit balances of $39.7 million.

Net short term borrowings declined as a result of lower mortgage loans held for sale funding requirements during the quarter.  During the third quarter of 2012, the Company modified its fixed rate convertible Federal Home Loan Bank of Atlanta ("FHLB") advances to floating rate advances, which resulted in reducing the Company's FHLB borrowing costs.  In connection with this modification, the Company incurred a prepayment penalty of $19.6 million which is being amortized, as a component of interest expense on borrowing, over the life of the advances.  The prepayment amount is reported as a component of long-term borrowings in the Company's consolidated balance sheet. 

The Company's capital ratios continued to be considered "well capitalized" for regulatory purposes.  The Company's ratio of total capital to risk-weighted assets was 14.37% and 14.55% on June 30, 2013 and 2012, respectively.  The Company's ratio of Tier 1 capital to risk-weighted assets was 13.08% and 12.99% at June 30, 2013 and 2012, respectively.  The Company's common equity to asset ratios at June 30, 2013 and 2012 were 10.56% and 10.88%, respectively, while its tangible common equity to tangible assets ratio was 8.92% and 9.11% at June 30, 2013 and 2012.  During the first quarter, the Company entered into an agreement to purchase 500,000 shares of its common stock from Markel Corporation, the Company's largest shareholder, for an aggregate purchase price of $9,500,000, or $19.00 per share.  The repurchase was funded with cash on hand and the shares were retired.  The Company is authorized to repurchase an additional 250,000 shares under its current repurchase program authorization, which expires December 31, 2013.  Also, the Company paid a dividend of $0.13 per share during the current quarter, no change from the prior quarter and $0.05 per share, or 62.5%, from the same quarter a year ago.

MORTGAGE SEGMENT INFORMATION

On a linked quarter basis, the mortgage segment's net income of $294,000 for the second quarter represents an increase of $117,000, or 66.1%, from $177,000 in the first quarter.   Current quarter results include severance expenses of $186,000 related to the recently announced plan to relocate Union Mortgage Group's headquarters to Richmond, Virginia.  The linked quarter net income increase was primarily due to increased mortgage loan origination volumes of $30.0 million, driven by higher seasonal demand during the second quarter.  As a result of the higher volumes and stronger gain on sale margins, gains on the sale of loans, net of commission expenses, increased $816,000 or 21.2%, to $4.7 million.  Refinanced loans represented 38.4% of the mortgage loan originations during the second quarter compared to 52.7% during the first quarter.

For the three months ended June 30, 2013, net income of $294,000 for the mortgage segment declined by $176,000 or 37.4% from net income of $470,000 in the same period last year.  Excluding the severance expense impact noted above, net income would have decreased $57,000 or 12.1% over the same period last year. Mortgage loan originations increased by $40.8 million, or 15.9%, to $298.2 million from $257.4 million in the prior year driven by additions in production personnel in 2012 and lower mortgage interest rates.  In early 2012, the Company significantly increased its mortgage loan production capacity by hiring additional loan originators and support personnel.  During the current quarter, the Company recorded gains on the sale of mortgage loans, net of commission expenses that were $836,000, or 21.8%, higher than the same period last year primarily due to higher loan origination volumes.  Excluding severance expenses, year over year expenses increased $1.1 million driven by the personnel additions in 2012 as well as investments made in the current quarter to enhance the mortgage segment's operating capabilities and improve profitability.  Refinanced loans represented 38.4% of mortgage loan originations during the second quarter of 2013 compared to 45.1% during the same period last year.

For the six months ended June 30, 2013, the mortgage segment net income decreased $231,000, or 32.8%, from $704,000 during the same period last year to $473,000.  Net income for the current year includes the impact of the severance accrual described above.  Mortgage loan originations increased by $125.0 million, or 28.3%, to $566.3 million from $441.3 million during the same period last year due to the addition of mortgage loan originators in 2012 noted above and the low interest rate environment.   Gains on sales of loans, net of commission expenses, increased $1.9 million, or 29.1%,  a result of the increased mortgage loan origination volumes.  Excluding severance expenses, year over year expenses increased by $2.5 million, or 45.3%, due to higher salary and benefit expenses of $2.1 million related to the addition of mortgage loan originators and support personnel in early 2012 as well as investments made in the current year to enhance the mortgage segment's operating capabilities.  Refinanced loans represented 45.2% of mortgage loan originations during the year compared to 49.8% during 2012. 

                                                                     * * * * * * *

ABOUT UNION FIRST MARKET BANKSHARES CORPORATION

Headquartered in Richmond, Virginia, Union First Market Bankshares Corporation is the holding company for Union First Market Bank, which has 90 branches and more than 150 ATMs throughout Virginia.  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.  Union First Market Bank also owns a non-controlling interest in Johnson Mortgage Company, L.L.C. 

Additional information is available on the Company's website at http://investors.bankatunion.com.  Shares of the Company's common stock are traded on the NASDAQ Global Select Market under the symbol UBSH.

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, changes in the 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 Securities and Exchange Commission'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

Six Months Ended

06/30/13

03/31/13

06/30/12

06/30/13

06/30/12

Results of Operations

Interest and dividend income

$

42,686

$

43,285

$

45,302

$

85,973

$

91,178

Interest expense

5,283

5,532

7,215

10,816

14,744

Net interest income

37,403

37,753

38,087

75,157

76,434

Provision for loan losses

1,000

2,050

3,000

3,050

6,500

Net interest income after provision for loan losses

36,403

35,703

35,087

72,107

69,934

Noninterest income

11,299

9,835

10,253

21,133

18,729

Noninterest expenses

34,283

33,501

33,607

67,783

65,874

Income before income taxes

13,419

12,037

11,733

25,457

22,789

Income tax expense

3,956

3,054

3,313

7,011

6,446

Net income

$

9,463

$

8,983

$

8,420

$

18,446

$

16,343

Interest earned on loans (FTE)

$

38,876

$

39,413

$

40,371

$

78,288

$

81,061

Interest earned on securities (FTE)

5,099

5,125

5,937

10,224

12,143

Interest earned on earning assets (FTE)

43,981

44,543

46,340

88,524

93,259

Net interest income (FTE)

38,698

39,011

39,125

77,708

78,515

Interest expense on certificates of deposit

2,863

3,058

3,851

5,921

7,880

Interest expense on interest-bearing deposits

3,701

3,962

5,023

7,663

10,358

Core deposit intangible amortization

921

1,036

1,225

1,957

2,535

Net income - community bank segment

$

9,169

$

8,806

$

7,950

$

17,973

$

15,639

Net income - mortgage segment

294

177

470

473

704

Key Ratios

Return on average assets (ROA)

0.94%

0.90%

0.86%

0.92%

0.84%

Return on average equity (ROE)

8.73%

8.32%

7.84%

8.53%

7.68%

Efficiency ratio (FTE)

68.57%

68.58%

68.07%

68.58%

67.74%

Efficiency ratio - community bank segment (FTE)

66.13%

66.26%

66.98%

66.19%

66.54%

Efficiency ratio - mortgage bank segment (FTE)

91.11%

93.25%

80.87%

92.10%

83.83%

Net interest margin (FTE)

4.18%

4.23%

4.36%

4.21%

4.39%

Net interest margin, core (FTE) (1)

4.14%

4.18%

4.25%

4.16%

4.26%

Yields on earning assets (FTE)

4.75%

4.84%

5.15%

4.79%

5.21%

Cost of interest-bearing liabilities (FTE)

0.73%

0.76%

1.00%

0.74%

1.02%

Cost of funds

0.57%

0.60%

0.79%

0.59%

0.82%

Noninterest expense less noninterest income / average assets

2.28%

2.37%

2.38%

2.32%

2.42%

Capital Ratios

Tier 1 risk-based capital ratio

13.08%

13.02%

12.99%

13.08%

12.99%

Total risk-based capital ratio

14.37%

14.44%

14.55%

14.37%

14.55%

Leverage ratio (Tier 1 capital to average assets)

10.45%

10.21%

10.44%

10.45%

10.44%

Common equity to total assets

10.56%

10.63%

10.88%

10.56%

10.88%

Tangible common equity to tangible assets

8.92%

8.97%

9.11%

8.92%

9.11%

 

Three Months Ended

Six Months Ended

06/30/13

03/31/13

06/30/12

06/30/13

06/30/12

Per Share Data

Earnings per common share, basic

$

0.38

$

0.36

$

0.32

$

0.74

$

0.63

Earnings per common share, diluted

0.38

0.36

0.32

0.74

0.63

Cash dividends paid per common share

0.13

0.13

0.08

0.26

0.15

Market value per share

20.59

19.56

14.45

20.59

14.45

Book value per common share

17.32

17.43

16.75

17.32

16.75

Tangible book value per common share

14.36

14.43

13.74

14.36

13.74

Price to earnings ratio, diluted

13.51

13.40

11.23

13.80

11.41

Price to book value per common share ratio

1.19

1.12

0.86

1.19

0.86

Price to tangible common share ratio

1.43

1.36

1.05

1.43

1.05

Weighted average common shares outstanding, basic

24,721,771

25,063,426

25,868,174

24,891,655

25,899,648

Weighted average common shares outstanding, diluted

24,802,231

25,138,003

25,888,151

24,961,431

25,923,505

Common shares outstanding at end of period

24,880,403

24,859,729

25,952,035

24,880,403

25,952,035

Financial Condition

Assets

$

4,056,557

$

4,051,135

$

3,982,288

$

4,056,557

$

3,982,288

Loans, net of unearned income

3,000,855

2,973,547

2,887,790

3,000,855

2,887,790

Earning Assets

3,722,199

3,726,703

3,649,829

3,722,199

3,649,829

Goodwill

59,400

59,400

59,400

59,400

59,400

Core deposit intangibles, net

13,821

14,742

18,178

13,821

18,178

Deposits

3,265,963

3,311,749

3,218,986

3,265,963

3,218,986

Stockholders' equity

428,429

430,773

433,436

428,429

433,436

Tangible common equity

355,209

356,631

355,625

355,209

355,625

Averages

Assets

$

4,037,696

$

4,057,156

$

3,942,727

$

4,047,372

$

3,923,243

Loans, net of unearned income

2,975,200

2,965,918

2,847,087

2,970,584

2,838,484

Loans held for sale

117,467

156,766

73,518

137,008

70,712

Securities

609,592

600,262

649,121

604,953

645,736

Earning assets

3,713,392

3,735,926

3,615,718

3,724,597

3,597,115

Deposits

3,265,128

3,284,435

3,200,016

3,274,728

3,183,834

Certificates of deposit

979,011

1,041,903

1,112,964

1,010,283

1,125,532

Interest-bearing deposits

2,608,408

2,654,918

2,636,390

2,631,535

2,634,724

Borrowings

299,115

301,343

274,597

300,223

275,180

Interest-bearing liabilities

2,907,523

2,956,261

2,910,987

2,931,758

2,909,904

Stockholders' equity

434,640

437,981

431,915

436,301

428,102

Tangible common equity

360,974

363,355

353,473

362,157

348,985

 

Three Months Ended

Six Months Ended

06/30/13

03/31/13

06/30/12

06/30/13

06/30/12

Asset Quality

Allowance for Loan Losses (ALL)

Beginning balance

$

34,415

$

34,916

$

40,204

$

34,916

$

39,470

Add: Recoveries

721

834

350

1,555

691

Less: Charge-offs

1,803

3,385

2,569

5,188

5,676

Add: Provision for loan losses

1,000

2,050

3,000

3,050

6,500

Ending balance

$

34,333

$

34,415

$

40,985

$

34,333

$

40,985

Components of ALL:

ALL for Loans individually evaluated for impairment

$

6,109

$

5,712

$

11,500

$

6,109

$

11,500

ALL for Loans collectively evaluated for impairment

28,224

28,703

29,485

28,224

29,485

$

34,333

$

34,415

$

40,985

$

34,333

$

40,985

ALL / total outstanding loans

1.14%

1.16%

1.42%

1.14%

1.42%

ALL / total outstanding loans, adjusted for acquired (2)

1.33%

1.36%

1.74%

1.33%

1.74%

Net charge-offs / total outstanding loans

0.14%

0.35%

0.31%

0.24%

0.35%

Provision / total outstanding loans

0.13%

0.28%

0.42%

0.21%

0.45%

Nonperforming Assets

   Commercial

$

23,013

$

18,456

$

36,035

$

23,013

$

36,035

   Consumer

4,009

4,577

3,136

4,009

3,136

Nonaccrual loans

27,022

23,033

39,171

27,022

39,171

Other real estate owned

35,153

35,878

35,802

35,153

35,802

Total nonperforming assets (NPAs)

62,175

58,911

74,973

62,175

74,973

   Commercial

1,353

2,105

2,324

1,353

2,324

   Consumer

4,938

4,082

8,444

4,938

8,444

Loans greater than or equal to 90 days and still accruing

6,291

6,187

10,768

6,291

10,768

Total nonperforming assets and loans 90 days

$

68,466

$

65,098

$

85,741

$

68,466

$

85,741

NPAs / total outstanding loans

2.07%

1.98%

2.60%

2.07%

2.60%

NPAs / total assets

1.53%

1.45%

1.88%

1.53%

1.88%

ALL / nonperforming loans

127.06%

149.42%

104.63%

127.06%

104.63%

ALL / nonperforming assets

55.22%

58.42%

54.67%

55.22%

54.67%

Past Due Detail

   Commercial

$

1,093

$

1,844

$

3,022

$

1,093

$

3,022

   Consumer

3,729

2,650

3,602

3,729

3,602

Loans 60-89 days past due

$

4,822

$

4,494

$

6,624

$

4,822

$

6,624

   Commercial

$

7,392

$

4,173

$

5,674

$

7,392

$

5,674

   Consumer

11,215

9,890

10,147

11,215

10,147

Loans 30-59 days past due

$

18,607

$

14,063

$

15,821

$

18,607

$

15,821

   Commercial

$

3,039

$

3,078

$

5,741

$

3,039

$

5,741

   Consumer

934

941

1,034

934

1,034

Purchased impaired

$

3,973

$

4,019

$

6,775

$

3,973

$

6,775

Mortgage Origination Volume

Total Mortgage loan originations

$

298,180

$

268,161

$

257,354

$

566,341

$

441,329

% of originations that are refinances

38.40%

52.70%

45.10%

45.20%

49.80%

Other Data

End of period full-time employees

1,044

1,028

1,084

1,044

1,084

Number of full-service branches

90

90

94

90

94

Number of full automatic transaction machines (ATMs)

155

156

158

155

158

 

Three Months Ended

Six Months Ended

06/30/13

03/31/13

06/30/12

06/30/13

06/30/12

Alternative Performance Measures (non-GAAP)

Operating Earnings (non-GAAP) (3)

Net Income (GAAP)

$

9,463

$

8,983

$

8,420

$

18,446

$

16,343

Plus: Merger and conversion related expense

919

-

-

919

-

Net operating earnings (loss) (non-GAAP)

$

10,382

$

8,983

$

8,420

$

19,365

$

16,343

Operating earnings per share - Basic

$

0.42

$

0.36

$

0.32

$

0.78

$

0.63

Operating earnings per share - Diluted

0.42

0.36

0.32

0.78

0.63

Operating earnings - ROA

1.03%

0.90%

0.86%

0.96%

0.84%

Operating earnings - ROE

9.58%

8.32%

7.84%

8.95%

7.68%

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

Net Interest Income (GAAP)

$

37,403

$

37,753

$

38,087

$

75,157

$

76,434

FTE adjustment

1,295

1,258

1,038

2,552

2,081

Net Interest Income (FTE)

$

38,698

39,011

39,125

77,709

78,515

Noninterest Income (GAAP)

11,299

9,835

10,253

21,133

18,729

Noninterest Expense (GAAP)

$

34,283

$

33,501

$

33,607

$

67,783

$

65,874

Merger and conversion related expense

919

-

-

919

-

Noninterest Expense (Non-GAAP)

$

33,364

$

33,501

$

33,607

$

66,864

$

65,874

Operating Efficiency Ratio FTE (non-GAAP)

66.73%

68.58%

68.07%

67.65%

67.74%

Cash basis earnings (non-GAAP) (4)

Net income

$

9,463

$

8,983

$

8,420

$

18,446

$

16,343

Plus: Core deposit intangible amortization, net of tax

599

673

796

1,272

1,648

Plus: Trademark intangible amortization, net of tax

-

22

65

22

130

Cash basis earnings

$

10,062

$

9,678

$

9,281

$

19,740

$

18,121

Average assets

$

4,037,696

$

4,057,156

$

3,942,727

$

4,047,372

$

3,923,243

Less: Average trademark intangible

-

5

281

3

331

Less: Average goodwill

59,400

59,400

59,400

59,400

59,400

Less: Average core deposit intangibles

14,266

15,221

18,761

14,741

19,386

Average tangible assets

$

3,964,030

$

3,982,530

$

3,864,285

$

3,973,228

$

3,844,126

Average equity

$

434,640

$

437,981

$

431,915

$

436,301

$

428,102

Less: Average trademark intangible

-

5

281

3

331

Less: Average goodwill

59,400

59,400

59,400

59,400

59,400

Less: Average core deposit intangibles

14,266

15,221

18,761

14,741

19,386

Average tangible common equity

$

360,974

$

363,355

$

353,473

$

362,157

$

348,985

Cash basis earnings per share, diluted

$

0.41

$

0.38

$

0.36

$

0.79

$

0.70

Cash basis return on average tangible assets

1.02%

0.99%

0.97%

1.00%

0.95%

Cash basis return on average tangible common equity

11.18%

10.80%

10.56%

10.99%

10.44%

ALL to legacy loans (non-GAAP) (2)

Gross Loans

$

3,000,855

$

2,973,547

$

2,887,790

$

3,000,855

$

2,887,790

    Less:  Acquired loans without additional credit deterioration

(424,402)

(447,406)

(533,087)

(424,402)

(533,087)

Gross Loans, adjusted for acquired

2,576,453

2,526,141

2,354,703

2,576,453

2,354,703

Allowance for loan losses

34,333

34,415

40,985

34,333

40,985

ALL / gross loans, adjusted for acquired

1.33%

1.36%

1.74%

1.33%

1.74%

 

(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 acquired loans (non-GAAP) ratio includes the allowance for loan losses to the total loan portfolio less acquired loans without additional credit deterioration above the original credit mark.  Loans with credit deterioration subsequent to being acquired have been provided for in accordance with the Company's ALL methodology.  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 acquired loans 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.  Therefore, acquired loans without additional credit deterioration above the original credit mark are adjusted out of the loan balance denominator.

(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) As a supplement to GAAP, management also reviews operating performance based on its "cash basis earnings" to fully analyze its core business.  Cash basis earnings exclude amortization expense attributable to intangibles (goodwill and core deposit intangibles) that do not qualify as regulatory capital.  Financial ratios based on cash basis earnings exclude the amortization of nonqualifying intangible assets from earnings and the unamortized balance of nonqualifying intangibles from assets and equity. 

 

UNION FIRST MARKET BANKSHARES CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except share data)

June 30,

December 31,

June 30,

2013

2012

2012

ASSETS

(Unaudited)

(Audited)

(Unaudited)

Cash and cash equivalents:

Cash and due from banks

$

59,867

$

71,426

$

57,245

Interest-bearing deposits in other banks

11,526

11,320

14,975

Money market investments

1

1

1

Federal funds sold

153

155

163

   Total cash and cash equivalents

71,547

82,902

72,384

Securities available for sale, at fair value

582,312

585,382

627,543

Restricted stock, at cost

17,956

20,687

19,291

Loans held for sale

109,395

167,698

100,066

Loans, net of unearned income

3,000,855

2,966,847

2,887,790

Less allowance for loan losses

34,333

34,916

40,985

   Net loans

2,966,522

2,931,931

2,846,805

Bank premises and equipment, net

82,857

85,409

91,122

Other real estate owned, net of valuation allowance

35,153

32,834

35,802

Core deposit intangibles, net

13,821

15,778

18,178

Goodwill

59,400

59,400

59,400

Other assets

117,594

113,844

111,697

   Total assets

$

4,056,557

$

4,095,865

$

3,982,288

LIABILITIES

Noninterest-bearing demand deposits

668,303

645,901

591,757

Interest-bearing deposits:

NOW accounts

456,459

454,150

425,188

Money market accounts

953,978

957,130

905,739

Savings accounts

225,821

207,846

198,728

Time deposits of $100,000 and over

468,263

508,630

534,682

Other time deposits

493,139

524,110

562,892

   Total interest-bearing deposits

2,597,660

2,651,866

2,627,229

   Total deposits

3,265,963

3,297,767

3,218,986

Securities sold under agreements to repurchase

101,418

54,270

75,394

Other short-term borrowings

28,000

78,000

-

Trust preferred capital notes

60,310

60,310

60,310

Long-term borrowings

137,919

136,815

155,625

Other liabilities

34,518

32,840

38,537

   Total liabilities

3,628,128

3,660,002

3,548,852

Commitments and contingencies

STOCKHOLDERS' EQUITY

Common stock, $1.33 par value, shares authorized 36,000,000; issued

and outstanding, 24,880,403 shares, 25,270,970 shares, and 25,952,035

shares, respectively.

32,901

33,510

34,415

Surplus

168,600

176,635

185,733

Retained earnings

227,563

215,634

202,278

Accumulated other comprehensive income

(635)

10,084

11,010

   Total stockholders' equity

428,429

435,863

433,436

      Total liabilities and stockholders' equity

$

4,056,557

$

4,095,865

$

3,982,288

 

UNION FIRST MARKET BANKSHARES CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Dollars in thousands, except per share amounts)

Three Months Ended

Six Months Ended

June 30,

June 30,

2013

2012

2013

2012

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

Interest and dividend income:

Interest and fees on loans

$

38,687

$

40,299

$

77,912

$

80,907

Interest on Federal funds sold

-

-

1

-

Interest on deposits in other banks

6

32

11

54

Interest and dividends on securities:

Taxable

1,939

3,184

4,008

6,640

Nontaxable

2,054

1,787

4,041

3,577

Total interest and dividend income

42,686

45,302

85,973

91,178

Interest expense:

Interest on deposits

3,701

5,023

7,663

10,358

Interest on federal funds purchased

21

1

36

1

Interest on short-term borrowings

54

47

108

91

Interest on long-term borrowings

1,507

2,144

3,009

4,294

Total interest expense

5,283

7,215

10,816

14,744

Net interest income

37,403

38,087

75,157

76,434

Provision for loan losses

1,000

3,000

3,050

6,500

Net interest income after provision for loan losses

36,403

35,087

72,107

69,934

Noninterest income:

Service charges on deposit accounts

2,346

2,291

4,618

4,421

Other service charges, commissions and fees

3,222

2,774

6,029

5,346

Losses on securities transactions, net

53

10

42

5

Gains on sales of mortgage loans, net of commissions

4,668

3,832

8,520

6,597

Losses on sales of bank premises

(34)

373

(330)

343

Other operating income

1,044

973

2,254

2,017

Total noninterest income

11,299

10,253

21,133

18,729

Noninterest expenses:

Salaries and benefits

17,912

16,935

35,878

33,911

Occupancy expenses

2,764

3,092

5,619

5,739

Furniture and equipment expenses

1,741

1,868

3,585

3,631

Other operating expenses

11,866

11,712

22,701

22,593

Total noninterest expenses

34,283

33,607

67,783

65,874

Income before income taxes

13,419

11,733

25,457

22,789

Income tax expense

3,956

3,313

7,011

6,446

Net income

$

9,463

$

8,420

$

18,446

$

16,343

Earnings per common share, basic

$

0.38

$

0.32

$

0.74

$

0.63

Earnings per common share, diluted

$

0.38

$

0.32

$

0.74

$

0.63

 

UNION FIRST MARKET BANKSHARES CORPORATION AND SUBSIDIARIES

SEGMENT FINANCIAL INFORMATION

(Dollars in thousands)

Community Bank

Mortgage

Eliminations

Consolidated

Three Months Ended June 30,  2013

Net interest income

$

36,960

$

443

$

-

$

37,403

Provision for loan losses

1,000

-

-

1,000

Net interest income after provision for loan losses

35,960

443

-

36,403

Noninterest income

6,798

4,668

(167)

11,299

Noninterest expenses

29,793

4,657

(167)

34,283

Income before income taxes

12,965

454

-

13,419

Income tax expense

3,796

160

-

3,956

Net income

$

9,169

$

294

$

-

$

9,463

Total assets

$

4,045,163

$

121,392

$

(109,998)

$

4,056,557

Three Months Ended June 30,  2012

Net interest income

$

37,792

$

295

$

-

$

38,087

Provision for loan losses

3,000

-

-

3,000

Net interest income after provision for loan losses

34,792

295

-

35,087

Noninterest income

6,537

3,833

(117)

10,253

Noninterest expenses

30,386

3,338

(117)

33,607

Income before income taxes

10,943

790

-

11,733

Income tax expense

2,993

320

-

3,313

Net income

$

7,950

$

470

$

-

$

8,420

Total assets

$

3,967,690

$

110,374

$

(95,776)

$

3,982,288

Six Months Ended June 30,  2013

Net interest income

$

74,147

$

1,010

$

-

$

75,157

Provision for loan losses

3,050

-

-

3,050

Net interest income after provision for loan losses

71,097

1,010

-

72,107

Noninterest income

12,945

8,522

(334)

21,133

Noninterest expenses

59,338

8,779

(334)

67,783

Income before income taxes

24,704

753

-

25,457

Income tax expense

6,731

280

-

7,011

Net income

$

17,973

$

473

$

-

$

18,446

Total assets

$

4,045,163

$

121,392

$

(109,998)

$

4,056,557

Six Months Ended June 30,  2012

Net interest income

$

75,830

$

604

$

-

$

76,434

Provision for loan losses

6,500

-

-

6,500

Net interest income after provision for loan losses

69,330

604

-

69,934

Noninterest income

12,363

6,600

(234)

18,729

Noninterest expenses

60,069

6,039

(234)

65,874

Income before income taxes

21,624

1,165

-

22,789

Income tax (benefit) expense

5,985

461

-

6,446

Net income

$

15,639

$

704

$

-

$

16,343

Total assets

$

3,967,690

$

110,374

$

(95,776)

$

3,982,288

 

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

For the Three Months Ended June 30,

2013

2012

2011

Average

Balance

Interest

Income /

Expense

Yield /

Rate (1)

Average

Balance

Interest

Income /

Expense

Yield /

Rate (1)

Average

Balance

Interest

Income /

Expense

Yield /

Rate (1)

(Dollars in thousands)

Assets:

Securities:

Taxable

$

389,662

$

1,939

2.00%

$

473,158

$

3,185

2.71%

$

419,747

$

3,627

3.47%

Tax-exempt

219,930

3,160

5.76%

175,963

2,752

6.29%

166,660

2,722

6.55%

Total securities (2)

609,592

5,099

3.35%

649,121

5,937

3.68%

586,407

6,349

4.34%

Loans, net (3) (4)

2,975,200

37,928

5.11%

2,847,087

39,734

5.61%

2,823,186

42,004

5.97%

Loans held for sale

117,467

948

3.24%

73,518

637

3.48%

42,341

468

4.43%

Federal funds sold

446

0

0.23%

380

0

0.24%

165

(0)

0.22%

Money market investments

1

-

0.00%

10

-

0.00%

153

-

0.00%

Interest-bearing deposits in other banks

10,686

6

0.23%

45,602

32

0.28%

34,697

27

0.32%

Other interest-bearing deposits

-

-

0.00%

-

-

0.00%

-

-

0.00%

Total earning assets

3,713,392

43,981

4.75%

3,615,718

46,340

5.15%

3,486,949

48,848

5.62%

Allowance for loan losses

(34,874)

(40,635)

(39,999)

Total non-earning assets

359,178

367,644

383,836

Total assets

$

4,037,696

$

3,942,727

$

3,830,786

Liabilities and Stockholders' Equity:

Interest-bearing deposits:

Checking

$

454,652

79

0.07%

$

423,044

116

0.11%

$

386,107

157

0.16%

Money market savings

948,992

590

0.25%

903,682

881

0.39%

840,696

1,465

0.70%

Regular savings

225,753

169

0.30%

196,700

175

0.36%

175,869

192

0.44%

Time deposits: (5)

$100,000 and over

479,274

1,527

1.28%

543,271

2,054

1.52%

569,587

2,217

1.56%

Under $100,000

499,737

1,336

1.07%

569,693

1,797

1.27%

600,754

2,135

1.43%

Total interest-bearing deposits

2,608,408

3,701

0.57%

2,636,390

5,023

0.77%

2,573,013

6,166

0.96%

Other borrowings (6)

299,115

1,582

2.12%

274,597

2,192

3.21%

288,554

1,967

2.73%

Total interest-bearing liabilities

2,907,523

5,283

0.73%

2,910,987

7,215

1.00%

2,861,567

8,133

1.14%

Noninterest-bearing liabilities:

Demand deposits

656,720

563,626

504,810

Other liabilities

38,813

36,199

24,050

Total liabilities

3,603,056

3,510,812

3,390,427

Stockholders' equity

434,640

431,915

440,359

Total liabilities and stockholders' equity

$

4,037,696

$

3,942,727

$

3,830,786

Net interest income

$

38,698

$

39,125

$

40,715

Interest rate spread (7)

4.02%

4.16%

4.48%

Interest expense as a percent of average earning assets

0.57%

0.79%

0.94%

Net interest margin (8)

4.18%

4.36%

4.68%

(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, $46 thousand, and $93 thousand for the three months ended June 30, 2013, 2012, and 2011 in

     accretion of the fair market value adjustments. 

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

(4) Interest income on loans includes $534 thousand, $915 thousand, and $1.6 million for the three months ended June 30, 2013, 2012, and 2011

      in accretion of the fair market value adjustments related to the acquisitions. 

(5) Interest expense on certificates of deposits includes $2 thousand, $111 thousand, and $216 thousand for the three months ended June 30, 2013, 2012,

     and 2011 in accretion of the fair market value adjustments related to the acquisitions. 

(6) Interest expense on borrowings includes $122 thousand for the three months ended June 30, 2013, 2012, and 2011.

(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 4.14%, 4.25%, and 4.47% for the three months ended June 30, 2013, 2012, and 2011.

 

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

For the Six Months Ended June 30,

2013

2012

2011

Average

Balance

Interest

Income /

Expense

Yield /

Rate (1)

Average

Balance

Interest

Income /

Expense

Yield /

Rate (1)

Average

Balance

Interest

Income /

Expense

Yield /

Rate (1)

(Dollars in thousands)

Assets:

Securities:

Taxable

$

389,986

$

4,008

2.07%

$

471,605

$

6,640

2.83%

$

416,150

$

7,257

3.52%

Tax-exempt

214,967

6,216

5.83%

174,131

5,503

6.36%

165,799

5,420

6.59%

Total securities (2)

604,953

10,224

3.41%

645,736

12,143

3.78%

581,949

12,677

4.39%

Loans, net (3) (4)

2,970,584

76,142

5.17%

2,838,484

79,825

5.66%

2,817,829

83,597

5.98%

Loans held for sale

137,008

2,146

3.16%

70,712

1,236

3.51%

48,214

1,032

4.32%

Federal funds sold

486

1

0.24%

397

1

0.24%

215

0

0.23%

Money market investments

1

-

0.00%

24

-

0.00%

157

-

0.00%

Interest-bearing deposits in other banks

11,565

11

0.19%

41,762

54

0.26%

25,103

33

0.26%

Other interest-bearing deposits

-

-

0.00%

-

-

0.00%

-

-

0.00%

Total earning assets

3,724,597

88,524

4.79%

3,597,115

93,259

5.21%

3,473,467

97,339

5.65%

Allowance for loan losses

(35,208)

(40,328)

(39,386)

Total non-earning assets

357,983

366,456

385,355

Total assets

$

4,047,372

$

3,923,243

$

3,819,436

Liabilities and Stockholders' Equity:

Interest-bearing deposits:

Checking

$

451,107

172

0.08%

$

416,557

247

0.12%

$

380,463

316

0.17%

Money market savings

949,035

1,244

0.26%

901,110

1,878

0.42%

825,717

2,970

0.73%

Regular savings

221,110

326

0.30%

191,525

353

0.37%

168,259

295

0.35%

Time deposits: (5)

$100,000 and over

502,595

3,193

1.28%

549,157

4,164

1.52%

585,173

4,700

1.62%

Under $100,000

507,688

2,728

1.08%

576,375

3,716

1.30%

610,407

4,570

1.51%

Total interest-bearing deposits

2,631,535

7,663

0.59%

2,634,724

10,358

0.79%

2,570,019

12,851

1.01%

Other borrowings (6)

300,223

3,153

2.12%

275,180

4,386

3.21%

289,976

3,874

2.69%

Total interest-bearing liabilities

2,931,758

10,816

0.74%

2,909,904

14,744

1.02%

2,859,995

16,725

1.18%

Noninterest-bearing liabilities:

Demand deposits

643,193

549,109

495,886

Other liabilities

36,120

36,128

27,150

Total liabilities

3,611,071

3,495,141

3,383,031

Stockholders' equity

436,301

428,102

436,405

Total liabilities and stockholders' equity

$

4,047,372

$

3,923,243

$

3,819,436

Net interest income

$

77,708

$

78,515

$

80,614

Interest rate spread (7)

4.05%

4.19%

4.47%

Interest expense as a percent of average earning assets

0.59%

0.82%

0.97%

Net interest margin (8)

4.21%

4.39%

4.68%

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

(2) Interest income on securities includes $15 thousand, $108 thousand, and $201 thousand for the six months ended June 30, 2013, 2012, and 2011 in

     accretion of the fair market value adjustments. 

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

(4) Interest income on loans includes $1.1 million, $2.2 million, and $3.2 million for the six months ended June 30, 2013, 2012, and 2011

      in accretion of the fair market value adjustments related to the acquisitions. 

(5) Interest expense on certificates of deposits includes $4 thousand, $228 thousand, and $474 thousand for the six months ended June 30, 2013, 2012,

     and 2011 in accretion of the fair market value adjustments related to the acquisitions. 

(6) Interest expense on borrowings includes $244 thousand for the six months ended June 30, 2013, 2012, and 2011.

(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 4.16%, 4.26%, and 4.47% for the six months ended June 30, 2013, 2012, and 2011.

 

 

SOURCE Union First Market Bankshares Corporation



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