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Union Bankshares Reports First Quarter Results

Union Bankshares Corporation.

News provided by

Union Bankshares Corporation

Apr 20, 2015, 07:30 ET

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RICHMOND, Va., April 20, 2015 /PRNewswire/ -- Union Bankshares Corporation (the "Company" or "Union") (NASDAQ: UBSH) today reported net income of $15.7 million and earnings per share of $0.35 for its first quarter ended March 31, 2015.  The quarterly results represent an increase of $736,000, or 4.9%, in net income and an increase of $0.02, or 6.1%, in earnings per share from the fourth quarter of 2014; excluding after-tax acquisition-related expenses of $563,000 in the prior quarter, the quarterly results represent an increase of $173,000 in operating earnings(1) and an increase of $0.01 in operating earnings per share(1).

"Union's first quarter results demonstrated steady progress toward our growth objectives now that the StellarOne integration is fully behind us," said G. William Beale, president and chief executive officer of Union Bankshares Corporation, "Commercial loans grew at a 7.5% annualized rate during the quarter as our lending teams continued the strong loan production momentum they generated in the fourth quarter.  Asset quality continued to improve with non-performing loans and OREO, including former branch sites, declining during the quarter.  As part of our continuing effort to become more efficient, we completed an in-depth branch analysis across our footprint and will close seven branches, 5% of current branch levels, by the end of August.  Going forward, we remain focused on leveraging the franchise for sustainable growth in order to deliver top-tier financial performance for our shareholders over the long-term."

Select highlights for the first quarter include:

  • Net income for the community bank segment, was $16.0 million, or $0.36 per share, for the first quarter compared to $15.9 million, or $0.35 per share, for the fourth quarter of 2014.  Operating earnings(1) for the community bank segment, which excludes after-tax acquisition-related expenses of $563,000, were $16.4 million, or $0.36 per share, for the fourth quarter of 2014.
  • The mortgage segment reported a net loss of $267,000, or $0.01 per share, for the first quarter, an improvement from a net loss of $889,000, or $0.02 per share, for the fourth quarter of 2014.
  • The Return on Average Tangible Common Equity ("ROTCE") was 9.67% and 9.11% for the quarters ended March 31, 2015 and December 31, 2014, respectively.  Operating ROTCE(1) for the quarter ended December 31, 2014 was 9.46%.
  • The Return on Average Assets ("ROA") was 0.86% and 0.82% for the quarters ended March 31, 2015 and December 31, 2014, respectively.  Operating ROA(1) for the quarter ended December 31, 2014 was 0.85%.
  • Average loan balances increased $140.5 million, or 10.8% on an annualized basis, from December 31, 2014.  Ending loan balances increased $41.8 million, or 3.1% on an annualized basis, from December 31, 2014. 
  • Asset quality improved due to reductions in past due and nonaccrual loan and other real estate owned ("OREO") balances as well as lower levels of charge-offs and provision for loan losses.

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

NET INTEREST INCOME

Tax-equivalent net interest income was $64.1 million, a decrease of $940,000 from the fourth quarter of 2014, primarily driven by the impact of the lower day count in the first quarter and lower net accretion related to acquisition accounting.  The first quarter tax-equivalent net interest margin decreased 6 basis points to 3.95% from 4.01% in the previous quarter.  Core tax-equivalent net interest margin (which excludes the 11 basis points impact of acquisition accounting accretion) decreased by 4 basis points from 3.88% in the previous quarter to 3.84%.  The decrease in the core tax-equivalent net interest margin was principally due to the 6 basis point decline in interest-earning asset yields outpacing the 2 basis point reduction in cost of funds.  The decline in interest-earning asset yields was primarily driven by lower loan yields, as new and renewed loans were originated and re-priced at lower rates.

The Company continues to believe that core net interest margin will decline modestly over the next several quarters as decreases in interest-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.  During the first quarter, net accretion related to acquisition accounting declined by $326,000 from the prior quarter to $1.9 million.  The fourth quarter of 2014, first quarter of 2015, and remaining estimated discount/premium and net accretion impact are reflected in the following table (dollars in thousands):


















Accretion


Accretion (Amortization)







Loan


Certificates of Deposit


Borrowings


Total















For the quarter ended December 31, 2014

$

504


$

1,536


$

137


$

2,177

For the quarter ended March 31, 2015


639



1,075



137



1,851

For the remaining nine months of 2015


1,954



768



100



2,822

For the years ending:












2016




2,547



-



271



2,818

2017




2,743



-



170



2,913

2018




2,520



-



(143)



2,377

2019




1,970



-



(286)



1,684

2020




1,728



-



(301)



1,427

Thereafter




10,313



-



(5,622)



4,691

ASSET QUALITY/LOAN LOSS PROVISION

Overview

During the first quarter, the Company experienced declines in past due loan and OREO balances from the prior quarter and the prior year and declines in nonaccrual loan balances from the prior quarter.  The decline in OREO balances was mostly attributable to sales of closed bank premises and foreclosed residential real estate property during the quarter.  The loan loss provision decreased from the prior quarter due to decreases in net charge-offs and lower specific reserves on impaired loans.  The allowance for loan losses to total loans ratios (both unadjusted and adjusted for acquisition accounting) were down from both the prior quarter and the prior year. 

All nonaccrual and past due loan metrics discussed below exclude purchased credit impaired loans ("PCI") totaling $91.3 million (net of fair value mark).

Nonperforming Assets ("NPAs")

At March 31, 2015, nonperforming assets totaled $42.8 million, a decrease of $7.4 million, or 14.7%, from a year ago and a decline of $4.6 million, or 9.6%, from December 31, 2014.  In addition, NPAs as a percentage of total outstanding loans declined 16 basis points from 0.95% a year earlier and 10 basis points from 0.89% last quarter to 0.79% 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,



2015


2014


2014


2014


2014


Nonaccrual loans, excluding PCI loans

$

17,385


$

19,255


$

20,279


$

23,099


$

14,722


Foreclosed properties


21,727



23,058



28,783



33,739



35,487


Former bank premises


3,707



5,060



8,971



4,755



-


Total nonperforming assets


42,819



47,373



58,033



61,593



50,209






























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,


2015


2014


2014


2014


2014

Beginning Balance

$

19,255


$

20,279


$

23,099


$

14,722


$

15,035

Net customer payments


(2,996)



(4,352)



(1,654)



(1,088)



(959)

Additions


4,379



7,413



1,099



11,087



1,362

Charge-offs


(3,107)



(1,839)



(604)



(137)



(152)

Loans returning to accruing status


(53)



(2,246)



(723)



(523)



-

Transfers to OREO


(93)



-



(938)



(962)



(564)

Ending Balance

$

17,385


$

19,255


$

20,279


$

23,099


$

14,722
















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,


2015


2014


2014


2014


2014

Beginning Balance

$

28,118


$

37,754


$

38,494


$

35,487


$

34,116

Additions of foreclosed property


158



367



2,553



1,619



5,404

Additions of former bank premises


402



63



4,814



6,052



-

Capitalized Improvements


56



424



203



59



-

Valuation Adjustments


(590)



(381)



(6,192)



(817)



(256)

Proceeds from sales


(2,748)



(11,362)



(2,216)



(3,913)



(3,800)

Gains (losses) from sales


38



1,253



98



7



23

Ending Balance

$

25,434


$

28,118


$

37,754


$

38,494


$

35,487
















During the first quarter of 2015, the majority of sales of OREO were related to closed bank premises and residential real estate.

Past Due Loans

Past due loans still accruing interest totaled $42.7 million, or 0.79% of total loans, at March 31, 2015 compared to $49.7 million, or 0.94%, a year ago and $48.1 million, or 0.90%, at December 31, 2014.  At March 31, 2015, loans past due 90 days or more and accruing interest totaled $7.9 million, or 0.15% of total loans, compared to $7.2 million, or 0.14%, a year ago and $10.0 million, or 0.19%, at December 31, 2014. 

Net Charge-offs

For the quarter ended March 31, 2015, net charge-offs were $3.2 million, or 0.24% on an annualized basis, compared to a net recovery of $772,000, or (0.06%), for the same quarter last year and $4.2 million, or 0.31%, for the fourth quarter of 2014.  Of the $3.2 million in loans charged off in the first quarter, $2.9 million, or 90.1%, related to impaired loans specifically reserved for in the prior period. 

Provision

The provision for loan losses for the current quarter was $1.8 million, an increase of $1.8 million compared to the same quarter a year ago and a decrease of $2.8 million from the previous quarter.  The decrease in provision for loan losses in the current quarter compared to the prior quarter was driven by declines in net charge-offs, lower specific reserves on impaired loans, and improving asset quality metrics.

Allowance for Loan Losses

The allowance for loan losses ("ALL") decreased $1.4 million from December 31, 2014 to $31.0 million at March 31, 2015.  The decline in ALL was primarily driven by lower levels of specific reserves required on impaired loans.  The ALL as a percentage of the total loan portfolio, adjusted for purchase accounting (non-GAAP), was 1.03% at March 31, 2015, a decrease from 1.08% from the prior quarter and from 1.09% at March 31, 2014.  The allowance for loan losses as a percentage of the total loan portfolio was 0.57% at March 31, 2015, 0.61% at December 31, 2014, and 0.59% at March 31, 2014.  In acquisition accounting, there is no carryover of previously established allowance for loan losses, as acquired loans are recorded at fair value.

The nonaccrual loan coverage ratio was 178.2% at March 31, 2015, compared to 168.2% at December 31, 2014 and 209.9% at March 31, 2014.  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 to $15.1 million from $14.9 million in the prior quarter. Gains on sales of mortgage loans, net of commissions, increased $597,000 or 33.5%, from the prior quarter, driven by unrealized gains on interest rate lock commitments and improved gain on sale margins on mortgage loan originations, despite a seasonal decline in mortgage loan originations.  Mortgage loan originations declined by $16.5 million, or 10.6%, in the current quarter to $138.7 million from $155.2 million in the fourth quarter of 2014.  Of the loan originations in the current quarter, 47.3% were refinances, which was an increase from 37.8% in the prior quarter.  This increase in noninterest income was partially offset by lower service charges on deposit accounts, interchange fees, and gross brokerage commissions.

NONINTEREST EXPENSE

 Noninterest expense increased $1.3 million, or 2.5%, to $53.8 million from $52.5 million when compared to the prior quarter.  The increase in noninterest expense is primarily driven by a $2.2 million increase in salaries and benefits expense related to seasonal increases in payroll taxes, increased group insurance, and higher incentive compensation costs.  OREO and credit-related expenses increased $1.3 million predominantly related to lower gains on sales of OREO in the current quarter.  Partially offsetting these increases, acquisition-related costs decreased $821,000, furniture and equipment expenses decreased $504,000, professional fees declined $349,000 and other losses decreased $323,000 primarily due to reductions in fraud-related losses.

BALANCE SHEET

At March 31, 2015, total assets were $7.4 billion, an increase of $29.9 million from December 31, 2014 and an increase of $94.1 million from March 31, 2014.  The increase in assets was mostly related to loan growth.

At March 31, 2015, loans net of unearned income were $5.4 billion, an increase of $41.8 million, or 3.1% (annualized), from December 31, 2014, while average loans increased $140.5 million, or 10.8% (annualized).  Loans increased $113.6 million, or 2.2%, from March 31, 2014, while average loans increased $80.8 million, or 1.5%.

At March 31, 2015, total deposits were $5.7 billion, an increase of $31.5 million, or 2.2% (annualized) from December 31, 2014, while average deposits declined $20.9 million, or 1.5% (annualized).  Deposits decreased $15.9 million, or 0.3%, from March 31, 2014, while average deposits declined $6.0 million, or 0.1%.

In July 2013, the Board of Governors of the Federal Reserve System issued a final rule that makes technical changes to its market risk capital rule to align it with the Basel III regulatory capital framework and meet certain requirements of the Dodd-Frank Act.  Effective January 1, 2015, the final rules required the Company to comply with the following minimum capital ratios: (i) a new common equity Tier 1 capital ratio of 4.5% of risk-weighted assets; (ii) a Tier 1 capital ratio of 6.0% of risk-weighted assets (increased from the prior requirement of 4.0%); (iii) a total capital ratio of 8.0% of risk-weighted assets (unchanged from prior requirement); and (iv) a leverage ratio of 4.0% of total assets (unchanged from the prior requirement).  These are the initial capital requirements, which will be phased in over a four-year period; the next phase does not take effect until January 1, 2016.  The capital requirements contained in the final rule also include changes in the risk weights of assets to better reflect credit risk and other risk exposures. 

At March 31, 2015, the Company had a common equity Tier 1 capital ratio of 10.72%, a Tier 1 capital ratio of 12.19%, a total capital ratio of 12.70%, and a leverage ratio of 10.64%. 

The Company's common equity to asset ratios at March 31, 2015, December 31, 2014, and March 31, 2014 were 13.36%, 13.28%, and 13.47%, respectively, while its tangible common equity to tangible assets ratio was 9.40%, 9.27%, and 9.29% at March 31, 2015, December 31, 2014, and March 31, 2014, respectively. 

COMMUNITY BANK SEGMENT INFORMATION

The community bank segment reported net income of $16.0 million for the first quarter, an increase of $114,000, or 0.7%, from $15.9 million in the fourth quarter of 2014.  Excluding after-tax acquisition-related expenses of $563,000 in the prior quarter, operating earnings decreased $449,000 from $16.4 million in the fourth quarter of 2014.  As previously discussed, the provision for loan losses declined $2.8 million from the prior quarter due to decreased net charge-off levels, lower specific reserves on impaired loans, and continued improvement in asset quality metrics.  Net interest income was $61.7 million, a decrease of $1.1 million from the fourth quarter of 2014 principally due to the impact of the lower day count in the current quarter and lower net accretion related to acquisition accounting.  

Noninterest income remained consistent at $12.8 million in the current quarter compared to $12.9 million in the prior quarter.  

Noninterest expense increased $1.9 million from $49.1 million in the prior quarter to $51.0 million in the current quarter.  The increase in noninterest expense is primarily driven by a $2.6 million increase in salaries and benefits expense related to seasonal increases in payroll taxes, increased group insurance, and higher incentive compensation costs.  OREO and credit-related expenses increased $1.3 million, predominantly related to lower gains on sales of OREO of $1.2 million in the current quarter.  Partially offsetting these increases, acquisition-related costs decreased $821,000, furniture and equipment expenses decreased $493,000, professional fees declined $292,000 and other losses decreased $245,000 primarily due to reductions in fraud-related losses.

MORTGAGE SEGMENT INFORMATION

The mortgage segment reported a net loss of $267,000 for the first quarter, an improvement of $622,000 from a net loss of $889,000 in the fourth quarter of 2014. Noninterest income increased $216,000 during the quarter due to higher gains on sales of mortgage loans, net of commissions, partially offset by nonrecurring income of $334,000 recorded in the fourth quarter.  Gains on sales of mortgage loans, net of commissions, increased $597,000, related to unrealized gains on interest rate lock commitments and improved gain on sale margins on mortgage loan originations, despite a seasonal decline in mortgage loan originations. Mortgage loan originations declined by $16.5 million, or 10.6%, in the current quarter to $138.7 million from $155.2 million in the fourth quarter of 2014.  Of the loan originations in the current quarter, 47.3% were refinances, which was an increase from 37.8% in the prior quarter.  Noninterest expenses decreased $641,000, or 17.4%, from the prior quarter and by $1.7 million from the prior year's first quarter to $3.0 million, as a result of management's continued efforts to streamline the mortgage segment's processes and cost structure to align with mortgage origination levels it has been experiencing over the last several quarters. 

ABOUT UNION BANKSHARES CORPORATION

Headquartered in Richmond, Virginia, Union Bankshares Corporation (NASDAQ: UBSH) is the holding company for Union Bank & Trust, which has 131 banking offices and 200 ATMs located 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.

The Company announced that, effective February 16, 2015, it had changed its subsidiary bank's name from "Union First Market Bank" to "Union Bank & Trust."

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

Union Bankshares Corporation will hold a conference call on Monday, April 20th, at 9:00 a.m. Eastern Time during which management will review earnings and performance trends.  Callers wishing to participate may call toll-free by dialing (877) 668-4908.  The conference ID number is 22746695.

ADOPTION OF NEW ACCOUNTING STANDARDS

The Company adopted ASU 2014-01, "Accounting for Investments in Qualified Affordable Housing Projects" as of January 1, 2015.  As permitted by the guidance, the Company adopted the proportional amortization method of accounting for Qualified Affordable Housing Projects.  The proportional amortization method amortizes the cost of the investment over the period in which the Company will receive tax credits and other tax benefits, and the resulting amortization is recognized as a component of income taxes attributable to continuing operations.  Historically, these investments were accounted for under the equity method of accounting and the passive losses related to the investments were recognized within noninterest expense.  The Company adopted this guidance in the first quarter of 2015 with retrospective application as required by the ASU.  Prior period results and related metrics have been restated to conform to this presentation.

NON-GAAP MEASURES

In reporting the results of the quarter ended March 31, 2015, 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 are not statements of historical fact.  Such statements are often characterized by the use of qualified words (and their derivatives) such as "expect," "believe," "estimate," "plan," "project," "anticipate," "intend," "will," or words of similar meaning or other statements concerning opinions or judgment of the Company and its management about future events.  Although the Company believes that its expectations with respect to forward-looking statements are based upon reasonable assumptions within the bounds of its existing knowledge of its business and operations, there can be no assurance that actual results, performance, or achievements of the Company will not differ materially from any projected future results, performance, or achievements expressed or implied by such forward-looking statements.  Actual future results and trends may differ materially from historical results or those anticipated depending on a variety of factors, including, but not limited to, the effects of and changes in: general economic and bank industry conditions, the interest rate environment, legislative and regulatory requirements, competitive pressures, new products and delivery systems, inflation, changes in the stock and bond markets, accounting standards or interpretations of existing standards, technology, consumer spending and savings habits, mergers and acquisitions, technology and consumer spending and saving habits.  More information is available on the Company's website, http://investors.bankatunion.com. The information on the Company's website is not a part of this press release. The Company does not intend or assume any obligation to update or revise any forward-looking statements that may be made from time to time by or on behalf of the Company.











UNION BANKSHARES CORPORATION AND SUBSIDIARIES

KEY FINANCIAL RESULTS










(Dollars in thousands, except share data)











Three Months Ended



03/31/15


12/31/14


03/31/14


Results of Operations










Interest and dividend income

$

67,600


$

68,511


$

68,208


Interest expense


5,631



5,446



4,450


Net interest income


61,969



63,065



63,758


Provision for loan losses


1,750



4,500



-


Net interest income after provision for loan losses


60,219



58,565



63,758


Noninterest income


15,054



14,901



13,788


Noninterest expenses


53,840



52,550



67,285


Income before income taxes


21,433



20,916



10,261


Income tax expense


5,732



5,951



2,553


Net income

$

15,701


$

14,965


$

7,708












Interest earned on earning assets (FTE)

$

69,761


$

70,516


$

70,154


Net interest income (FTE)


64,130



65,070



65,704


Core deposit intangible amortization


2,222



2,334



2,616












Net income - community bank segment

$

15,968


$

15,854


$

9,088


Net income (loss) - mortgage segment


(267)



(889)



(1,380)












Key Ratios










Earnings per common share, diluted

$

0.35


$

0.33


$

0.16


Return on average assets (ROA)


0.86%



0.82%



0.43%


Return on average equity (ROE)


6.48%



6.05%



3.13%


Return on average tangible common equity (ROTCE)


9.67%



9.11%



4.73%


Efficiency ratio (FTE)


67.99%



65.71%



84.64%


Efficiency ratio - community bank segment (FTE)


66.43%



63.05%



81.33%


Efficiency ratio - mortgage bank segment (FTE)


115.86%



155.98%



186.04%


Net interest margin (FTE)


3.95%



4.01%



4.14%


Net interest margin, core (FTE) (1)


3.84%



3.88%



3.99%


Yields on earning assets (FTE)


4.30%



4.35%



4.42%


Cost of interest-bearing liabilities (FTE)


0.45%



0.43%



0.34%


Cost of funds


0.35%



0.34%



0.28%












Key Operating Ratios - excluding merger costs (non-GAAP) (2)








Consolidated










Operating net income

$

15,701


$

15,528


$

16,724


Operating diluted earnings per share

$

0.35


$

0.34


$

0.36


Operating return on average assets


0.86%



0.85%



0.94%


Operating return on average equity


6.48%



6.28%



6.80%


Operating return on average tangible common equity


9.67%



9.46%



10.27%


Operating efficiency ratio (FTE)


67.99%



64.68%



68.08%












Community Bank Segment










Operating net income

$

15,968


$

16,417


$

18,104


Operating diluted earnings per share

$

0.36


$

0.36


$

0.38


Operating return on average assets


0.88%



0.90%



1.02%


Operating return on average equity


6.61%



6.66%



7.47%


Operating return on average tangible common equity


9.88%



10.05%



11.38%


Operating efficiency ratio (FTE)


66.43%



61.99%



64.26%























Three Months Ended



03/31/15


12/31/14


03/31/14












Capital Ratios










Common equity Tier 1 capital ratio (3)


10.72%



N/A



N/A


Tier 1 capital ratio (3)


12.19%



12.77%



13.02%


Total capital ratio (3)


12.70%



13.40%



13.70%


Leverage ratio (Tier 1 capital to average assets) (3)


10.64%



10.63%



10.66%


Common equity to total assets


13.36%



13.28%



13.47%


Tangible common equity to tangible assets


9.40%



9.27%



9.29%












Financial Condition










Assets

$

7,388,559


$

7,358,643


$

7,294,505


Loans, net of unearned income


5,387,755



5,345,996



5,274,198


Earning Assets


6,602,453



6,566,504



6,469,151


Goodwill


293,522



293,522



296,876


Core deposit intangibles, net


29,533



31,755



38,935


Deposits


5,670,228



5,638,770



5,686,131


Stockholders' equity


986,916



977,169



982,299


Tangible common equity


663,861



651,892



646,488












Loans, net of unearned income










Raw land and lots

$

197,759


$

211,225


$

233,207


Commercial construction


358,436



341,280



329,364


Commercial real estate


2,416,812



2,384,602



2,343,631


Single family investment real estate


416,984



412,494



386,471


Commercial and industrial


426,490



393,776



390,072


Other commercial


80,416



81,106



80,790


Consumer


1,490,858



1,521,513



1,510,663


Total loans, net of unearned income

$

5,387,755


$

5,345,996


$

5,274,198












Interest-Bearing Deposits










NOW accounts

$

1,328,994


$

1,332,029


$

1,256,910


Money market accounts


1,258,564



1,261,520



1,414,918


Savings accounts


565,506



548,526



559,299


Time deposits of $100,000 and over


520,720



550,842



608,753


Other time deposits


721,509



746,475



827,588


Total interest-bearing deposits

$

4,395,293


$

4,439,392


$

4,667,468


Demand deposits


1,274,935



1,199,378



1,018,663


Total deposits

$

5,670,228


$

5,638,770


$

5,686,131












Averages










Assets

$

7,362,683


$

7,237,492


$

7,249,614


Loans, net of unearned income


5,360,676



5,220,223



5,279,924


Loans held for sale


38,469



34,740



49,767


Securities


1,143,632



1,145,458



1,076,479


Earning assets


6,576,415



6,433,992



6,432,326


Deposits


5,639,917



5,660,824



5,645,961


Certificates of deposit


1,269,352



1,318,005



1,463,076


Interest-bearing deposits


4,416,699



4,437,178



4,686,438


Borrowings


679,341



536,639



549,663


Interest-bearing liabilities


5,096,040



4,973,817



5,236,101


Stockholders' equity


982,548



981,291



997,654


Tangible common equity


658,429



651,561



660,329













Three Months Ended



03/31/15


12/31/14


03/31/14


Asset Quality










Allowance for Loan Losses (ALL)










Beginning balance

$

32,384


$

32,109


$

30,135


Add: Recoveries


672



603



1,659


Less: Charge-offs


3,829



4,828



887


Add: Provision for loan losses


1,750



4,500



-


Ending balance

$

30,977


$

32,384


$

30,907












ALL / total outstanding loans


0.57%



0.61%



0.59%


ALL / total outstanding loans, adjusted for acquisition
  accounting (4)


1.03%



1.08%



1.09%


Net charge-offs / total outstanding loans


0.24%



0.31%



-0.06%


Provision / total outstanding loans


0.13%



0.33%



0.00%


Nonperforming Assets










Commercial

$

14,532


$

15,719


$

11,362


Consumer


2,853



3,536



3,360


Nonaccrual loans


17,385



19,255



14,722


Other real estate owned


25,434



28,118



35,487


Total nonperforming assets (NPAs)


42,819



47,373



50,209


Commercial


2,578



3,251



3,485


Consumer


5,354



6,796



3,720


Loans ≥ 90 days and still accruing


7,932



10,047



7,205


Total nonperforming assets and loans ≥ 90 days

$

50,751


$

57,420


$

57,414


NPAs / total outstanding loans


0.79%



0.89%



0.95%


NPAs / total assets


0.58%



0.64%



0.69%


ALL / nonperforming loans


178.18%



168.19%



209.94%


ALL / nonperforming assets


72.34%



68.36%



61.56%


Past Due Detail










Commercial

$

1,388


$

2,692


$

2,599


Consumer


5,833



6,038



4,511


Loans 60-89 days past due

$

7,221


$

8,730


$

7,110


Commercial

$

6,499


$

9,682


$

12,381


Consumer


21,090



19,615



23,018


Loans 30-59 days past due

$

27,589


$

29,297


$

35,399


Commercial

$

81,155


$

94,235


$

120,291


Consumer


10,191



11,553



18,140


Purchased impaired

$

91,346


$

105,788


$

138,431


Troubled Debt Restructurings










Performing

$

21,336


$

22,829


$

37,195


Nonperforming


2,740



3,948



7,090


Total troubled debt restructurings

$

24,076


$

26,777


$

44,285












Per Share Data










Earnings per common share, basic

$

0.35


$

0.33


$

0.16


Earnings per common share, diluted


0.35



0.33



0.16


Cash dividends paid per common share


0.15



0.15



0.14


Market value per share


22.21



24.08



25.42


Book value per common share


21.98



21.73



21.15


Tangible book value per common share


14.78



14.50



13.92


Price to earnings ratio, diluted


15.65



18.39



39.17


Price to book value per common share ratio


1.01



1.11



1.20


Price to tangible common share ratio


1.50



1.66



1.83


Weighted average common shares outstanding, basic


45,105,969



45,341,854



46,977,416


Weighted average common shares outstanding, diluted


45,187,516



45,426,861



47,080,661


Common shares outstanding at end of period


45,155,024



45,162,853



46,677,821













Three Months Ended



03/31/15


12/31/14


03/31/14


Alternative Performance Measures (non-GAAP)










Operating Earnings (2)










Net Income (GAAP)

$

15,701


$

14,965


$

7,708


Plus: Merger and conversion related expense, after tax


-



563



9,016


Net operating earnings (loss) (non-GAAP)

$

15,701


$

15,528


$

16,724












Operating earnings per share - Basic

$

0.35


$

0.34


$

0.36


Operating earnings per share - Diluted


0.35



0.34



0.36


Operating ROA


0.86%



0.85%



0.94%


Operating ROE


6.48%



6.28%



6.80%


Operating ROTCE


9.67%



9.46%



10.27%












Community Bank Segment Operating Earnings (2)


Net Income (GAAP)

$

15,968


$

15,854


$

9,088


Plus: Merger and conversion related expense, after tax


-



563



9,016


Net operating earnings (loss) (non-GAAP)

$

15,968


$

16,417


$

18,104












Operating earnings per share - Basic

$

0.36


$

0.36


$

0.38


Operating earnings per share - Diluted


0.36



0.36



0.38


Operating ROA


0.88%



0.90%



1.02%


Operating ROE


6.61%



6.66%



7.47%


Operating ROTCE


9.88%



10.05%



11.38%












Operating Efficiency Ratio FTE (2)










Net Interest Income (GAAP)

$

61,969


$

63,065


$

63,758


FTE adjustment


2,161



2,005



1,946


Net Interest Income (FTE)

$

64,130


$

65,070


$

65,704


Noninterest Income (GAAP)


15,054



14,901



13,788


Noninterest Expense (GAAP)

$

53,840


$

52,550


$

67,285


Merger and conversion related expense


-



821



13,168


Noninterest Expense (Non-GAAP)

$

53,840


$

51,729


$

54,117












Operating Efficiency Ratio FTE (non-GAAP)


67.99%



64.68%



68.08%












Community Bank Segment Operating Efficiency Ratio FTE (2)


Net Interest Income (GAAP)

$

61,723


$

62,866


$

63,526


FTE adjustment


2,161



2,005



1,962


Net Interest Income (FTE)

$

63,884


$

64,871


$

65,488


Noninterest Income (GAAP)


12,848



12,912



11,659


Noninterest Expense (GAAP)

$

50,972


$

49,042


$

62,746


Merger and conversion related expense


-



821



13,168


Noninterest Expense (Non-GAAP)

$

50,972


$

48,221


$

49,578












Operating Efficiency Ratio FTE (non-GAAP)


66.43%



61.99%



64.26%












Tangible Common Equity (5)










Ending equity

$

986,916


$

977,169


$

982,299


Less: Ending goodwill


293,522



293,522



296,876


Less: Ending core deposit intangibles


29,533



31,755



38,935


Ending tangible common equity

$

663,861


$

651,892


$

646,488












Average equity

$

982,548


$

981,291


$

997,654


Less: Average goodwill


293,522



296,855



296,876


Less: Average core deposit intangibles


30,597



32,875



40,449


Average tangible common equity

$

658,429


$

651,561


$

660,329













Three Months Ended



03/31/15


12/31/14


03/31/14


ALL to loans, adjusted for acquisition accounting (non-GAAP)(4)








Allowance for loan losses

$

30,977


$

32,384


$

30,907


Remaining fair value mark on purchased performing loans


23,794



24,340



25,515


Adjusted allowance for loan losses


54,771



56,724



56,422












Loans, net of unearned income


5,387,755



5,345,996



5,274,198


Remaining fair value mark on purchased performing loans


23,794



24,340



25,515


Less: Purchased credit impaired loans, net of fair value mark


91,346



105,788



138,431


Adjusted loans, net of unearned income

$

5,320,203


$

5,264,548


$

5,161,282












ALL / gross loans, adjusted for acquisition accounting


1.03%



1.08%



1.09%












Mortgage Origination Volume










Refinance Volume

$

65,549


$

58,662


$

45,322


Construction Volume


19,552



25,764



32,103


Purchase Volume


53,613



70,775



71,635


Total Mortgage loan originations

$

138,714


$

155,201


$

149,060


% of originations that are refinances


47.26%



37.80%



30.41%












Other Data










End of period full-time employees


1,445



1,471



1,628


Number of full-service branches


131



131



144


Number of full automatic transaction machines (ATMs)


200



201



210


(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 Company has provided supplemental performance measures which the Company believes may be 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. 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.

(3) Beginning January 1, 2015, the Company calculates its regulatory capital under the Basel III Standardized Approach.  The Company calculated regulatory capital measures for periods prior to 2015 under previous regulatory requirements.  All ratios at March 31, 2015 are estimates and subject to change pending the Company's filing of its FR Y9-C. All other periods presented as filed.

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

(5) 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.










UNION BANKSHARES CORPORATION AND SUBSIDIARIES







CONSOLIDATED BALANCE SHEETS









(Dollars in thousands, except share data)










March 31,


December 31,


March 31,


2015


2014


2014

ASSETS






Cash and cash equivalents:









Cash and due from banks

$

112,793


$

112,752


$

117,189

Interest-bearing deposits in other banks


24,256



19,344



24,541

Money market investments


1



1



1

Federal funds sold


312



1,163



519

Total cash and cash equivalents


137,362



133,260



142,250










Securities available for sale, at fair value


1,089,664



1,102,114



1,078,699

Restricted stock, at cost


53,146



54,854



42,441










Loans held for sale


46,048



42,519



48,341










Loans, net of unearned income


5,387,755



5,345,996



5,274,198

Less allowance for loan losses


30,977



32,384



30,907

Net loans


5,356,778



5,313,612



5,243,291










Premises and equipment, net


134,429



135,247



151,840

Other real estate owned, net of valuation allowance


25,434



28,118



35,487

Core deposit intangibles, net


29,533



31,755



38,935

Goodwill


293,522



293,522



296,876

Bank owned life insurance


140,143



139,005



135,350

Other assets


82,500



84,637



80,995

Total assets

$

7,388,559


$

7,358,643


$

7,294,505










LIABILITIES









Noninterest-bearing demand deposits

$

1,274,935


$

1,199,378


$

1,018,663

Interest-bearing deposits


4,395,293



4,439,392



4,667,468

Total deposits


5,670,228



5,638,770



5,686,131










Securities sold under agreements to repurchase


39,434



44,393



57,681

Other short-term borrowings


335,000



343,000



216,600

Long-term borrowings


299,914



299,542



298,417

Other liabilities


57,067



55,769



53,377

Total liabilities


6,401,643



6,381,474



6,312,206










Commitments and contingencies


















STOCKHOLDERS' EQUITY









Common stock, $1.33 par value, shares authorized 100,000,000; issued and outstanding, 45,155,024 shares, 45,162,853 shares, and 46,677,821 shares, respectively.


59,721



59,795



61,780

Surplus


641,882



643,443



678,143

Retained earnings


270,618



261,676



237,650

Accumulated other comprehensive income


14,695



12,255



4,726

Total stockholders' equity


986,916



977,169



982,299










Total liabilities and stockholders' equity

$

7,388,559


$

7,358,643


$

7,294,505










UNION BANKSHARES CORPORATION AND SUBSIDIARIES







CONSOLIDATED STATEMENTS OF INCOME









(Dollars in thousands, except share data)



















Three Months Ended


March 31,


December 31,


March 31,


2015


2014


2014







Interest and dividend income:









Interest and fees on loans

$

60,452


$

61,369


$

61,269

Interest on federal funds sold


-



1



-

Interest on deposits in other banks


17



19



12

Interest and dividends on securities:









Taxable


3,807



3,834



3,648

Nontaxable


3,324



3,288



3,279

Total interest and dividend income


67,600



68,511



68,208










Interest expense:









Interest on deposits


3,321



3,201



2,256

Interest on federal funds purchased


1



1



24

Interest on short-term borrowings


249



143



119

Interest on long-term borrowings


2,060



2,101



2,051

Total interest expense


5,631



5,446



4,450










Net interest income


61,969



63,065



63,758

Provision for loan losses


1,750



4,500



-

Net interest income after provision for loan losses


60,219



58,565



63,758










Noninterest income:









Service charges on deposit accounts


4,214



4,440



4,298

Other service charges and fees


3,584



3,701



3,344

Fiduciary and asset management fees


2,219



2,282



2,303

Gains on sales of mortgage loans, net of commissions


2,379



1,782



2,297

Gains on securities transactions, net


193



246



29

Bank owned life insurance income


1,135



1,181



1,089

Other operating income


1,330



1,269



428

Total noninterest income


15,054



14,901



13,788










Noninterest expenses:









Salaries and benefits


27,492



25,338



29,214

Occupancy expenses


5,133



4,952



5,180

Furniture and equipment expenses


2,813



3,317



2,868

Printing, postage, and supplies


1,370



1,242



1,223

Communications expense


1,179



1,161



1,098

Technology and data processing


3,255



3,319



3,074

Professional services


1,348



1,697



1,055

Marketing and advertising expense


1,687



1,585



1,065

FDIC assessment premiums and other insurance


1,398



1,562



1,393

Other taxes


1,551



1,432



1,385

Loan-related expenses


684



685



542

OREO and credit-related expenses (recovery)


1,186



(89)



1,451

Amortization of intangible assets


2,222



2,334



2,616

Acquisition and conversion costs


-



821



13,168

Other expenses


2,522



3,194



1,953

Total noninterest expenses


53,840



52,550



67,285










Income before income taxes


21,433



20,916



10,261

Income tax expense


5,732



5,951



2,553

Net income

$

15,701


$

14,965


$

7,708

Earnings per common share:









Basic

$

0.35


$

0.33


$

0.16

Diluted

$

0.35


$

0.33


$

0.16

Weighted average number of common shares outstanding:









Basic


45,105,969



45,341,854



46,977,416

Diluted


45,187,516



45,426,861



47,080,661













UNION BANKSHARES CORPORATION AND SUBSIDIARIES










SEGMENT FINANCIAL INFORMATION












(Dollars in thousands)













Community

Bank


Mortgage


Eliminations


Consolidated

Three Months Ended March 31, 2015












Net interest income

$

61,723


$

246


$

-


$

61,969

Provision for loan losses


1,750



-



-



1,750

Net interest income after provision for loan losses


59,973



246



-



60,219

Noninterest income


12,848



2,376



(170)



15,054

Noninterest expenses


50,972



3,038



(170)



53,840

Income (loss) before income taxes


21,849



(416)



-



21,433

Income tax expense (benefit)


5,881



(149)



-



5,732

Net income (loss)

$

15,968


$

(267)


$

-


$

15,701

Plus:  Merger and conversion related expense, after tax


-



-



-



-

Net operating earnings (loss) (non-GAAP)

$

15,968


$

(267)


$

-


$

15,701

Total assets

$

7,382,266


$

55,380


$

(49,087)


$

7,388,559













Three Months Ended December 31, 2014












Net interest income

$

62,866


$

199


$

-


$

63,065

Provision for loan losses


4,500



-



-



4,500

Net interest income after provision for loan losses


58,366



199



-



58,565

Noninterest income


12,912



2,160



(171)



14,901

Noninterest expenses


49,042



3,679



(171)



52,550

Income (loss) before income taxes


22,236



(1,320)



-



20,916

Income tax expense (benefit)


6,382



(431)



-



5,951

Net income (loss)

$

15,854


$

(889)


$

-


$

14,965

Plus:  Merger and conversion related expense, after tax


563



-



-



563

Net operating earnings (loss) (non-GAAP)

$

16,417


$

(889)


$

-


$

15,528

Total assets

$

7,354,058


$

51,485


$

(46,900)


$

7,358,643













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


11,659



2,300



(171)



13,788

Noninterest expenses


62,746



4,710



(171)



67,285

Income (loss) before income taxes


12,439



(2,178)



-



10,261

Income tax expense (benefit)


3,351



(798)



-



2,553

Net income (loss)

$

9,088


$

(1,380)


$

-


$

7,708

Plus:  Merger and conversion related expense, after tax


9,016



-



-



9,016

Net operating earnings (loss) (non-GAAP)

$

18,104


$

(1,380)


$

-


$

16,724

Total assets

$

7,282,311


$

57,705


$

(45,511)


$

7,294,505

















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


















For the Quarter Ended


March 31, 2015


December 31, 2014


Average

Balance


Interest

Income /

Expense


Yield /

Rate (1)


Average

Balance


Interest

Income /

Expense


Yield /

Rate (1)


(Dollars in thousands)

Assets:
















Securities:
















Taxable

$

730,404


$

3,807


2.11%


$

739,227


$

3,834


2.06%

Tax-exempt


413,228



5,114


5.02%



406,231



5,059


4.94%

Total securities


1,143,632



8,921


3.16%



1,145,458



8,893


3.08%

Loans, net (2) (3)


5,360,676



60,527


4.58%



5,220,223



61,272


4.66%

Loans held for sale


38,469



296


3.12%



34,740



331


3.78%

Federal funds sold


792



-


0.20%



1,292



1


0.21%

Money market investments


1



-


0.00%



1



-


0.00%

Interest-bearing deposits in other banks


32,845



17


0.20%



32,278



19


0.23%

Total earning assets


6,576,415


$

69,761


4.30%



6,433,992


$

70,516


4.35%

Allowance for loan losses


(32,992)








(31,759)






Total non-earning assets


819,260








835,259






Total assets

$

7,362,683







$

7,237,492






















Liabilities and Stockholders' Equity:
















Interest-bearing deposits:
















Transaction and money market accounts

$

2,591,991


$

1,160


0.18%


$

2,568,628


$

1,178


0.18%

Regular savings


555,356



268


0.20%



550,545



278


0.20%

Time deposits (4)


1,269,352



1,893


0.60%



1,318,005



1,745


0.53%

Total interest-bearing deposits


4,416,699



3,321


0.30%



4,437,178



3,201


0.29%

Other borrowings (5)


679,341



2,310


1.38%



536,639



2,245


1.66%

Total interest-bearing liabilities


5,096,040


$

5,631


0.45%



4,973,817


$

5,446


0.43%

















Noninterest-bearing liabilities:
















Demand deposits


1,223,218








1,223,646






Other liabilities


60,877








58,738






Total liabilities


6,380,135








6,256,201






Stockholders' equity


982,548








981,291






Total liabilities and stockholders' equity

$

7,362,683







$

7,237,492






















Net interest income




$

64,130







$

65,070



















Interest rate spread (6)







3.85%








3.92%

Cost of funds


0.35%








0.34%

Net interest margin (7)







3.95%








4.01%

















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

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

(3) Interest income on loans includes $639,000 and $504,000 for the three months ended March 31, 2015 and December 31, 2014, respectively, in accretion of the fair market value adjustments related to acquisitions.

(4) Interest expense on certificates of deposits includes $1.1 million and $1.5 million for the three months ended March 31, 2015 and December 31, 2014, respectively, in accretion of the fair market value adjustments related to acquisitions.

(5) Interest expense on borrowings includes $137,000 for both the three months ended March 31, 2015 and December 31, 2014, respectively, in amortization of the fair market value adjustments related to acquisitions.

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

(7) Core net interest margin excludes purchase accounting adjustments and was 3.84% and 3.88% for the three months ended March 31, 2015 and December 31, 2014, respectively.

Logo - http://photos.prnewswire.com/prnh/20091027/NE00206LOGO

SOURCE Union Bankshares Corporation

Related Links

http://investors.bankatunion.com

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