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Union First Market Bankshares Corporation Reports Third Quarter Earnings


News provided by

Union First Market Bankshares Corporation

Oct 22, 2010, 02:38 ET

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RICHMOND, Va., Oct. 22 /PRNewswire-FirstCall/ -- Union First Market Bankshares Corporation (the "Company") (Nasdaq: UBSH) today reported net income of $8.1 million and basic and diluted earnings per share of $0.29 for its third quarter ended September 30, 2010.  The results are a year-over-year increase of $5.3 million in net income and $0.16 in basic and diluted earnings per share from the prior year period which ended on September 30, 2009.  

"Our third quarter results are solid and demonstrate the strength of our bank," said G. William Beale, chief executive officer of Union First Market Bankshares. "We are continuing to see the benefits of the merger with First Market Bank as our teammate and systems integration culminate in the uniting of all of our banks under one brand.  While asset quality remains an ongoing focus, we are managing our portfolio well given the continued economic conditions in our footprint.  An air of uncertainty continues to impact both us and our customers as we collectively face changes to banking, health care and tax regulations coupled with soft real estate values and low job growth.  While these issues affect the psyche of business owners and consumers and may impede the pace of recovery, we expect our earnings momentum to continue to generate solid financial performance."

Select third quarter highlights:

  • Year-to-date income and expenses include the operations of the former First Market Bank ("FMB") for the eight months of 2010 since the February 1, 2010 business combination.
  • The core net interest margin, excluding the impact of acquisition accounting, remained unchanged at 4.23% from the second quarter and increased from 3.69% a year ago.
  • Net interest income improved $17.8 million over the same quarter a year ago, due to additional earning assets from the FMB acquisition and significant reductions in the cost of funds.  
  • Total nonperforming assets as a percentage of loans remained unchanged at 2.74% compared to the second quarter.  Increases in nonaccrual loans were offset by decreases in other real estate owned ("OREO") as the Company was able to sell several properties.
  • Provision for loan losses increased $2.0 million from the second quarter and was principally related to the acquired commercial real estate and residential real estate loan portfolios.
  • Mortgage segment net income for the third quarter was $899,000 an increase of $103,000 from the second quarter.
  • A cumulative reduction of $994,000 in discount accretion was recorded during the third quarter to align year-to-date accretion following an assessment of actual and anticipated future payments.  
  • Nonrecurring costs of $259,000 were incurred relating to merging our two affiliate banks, Rappahannock National Bank and Northern Neck State Bank, into Union First Market Bank.  The consolidation was completed on October 12, 2010.

The increase in net income from last year largely relates to improvements in the net interest margin and the addition of the operations of the former FMB for the period.  Third quarter net income available to common shareholders, which deducts dividends and discount accretion on preferred stock from net income, was $7.5 million compared to $1.9 million for the third quarter last year.  

Third quarter net income decreased $653,000 from the second quarter which ended on June 30, 2010.  The decrease was largely attributable to an increase in the provision for loan losses in response to continued slowness in economic recovery.  

The reported net income of $18.5 million for the nine months ended September 30, 2010, represented an increase of $13.0 million from the same period a year ago.  The increase was largely attributable to the addition of FMB and improvement in the net interest margin, partially offset by nonrecurring acquisition costs.

NET INTEREST INCOME

On a linked quarter basis, tax-equivalent net interest income decreased $897,000, or 2.2%, to $39.7 million due principally to lower yields on loans and lower accretion from purchased performing loans partially offset by the continued low cost structure of interest-bearing liabilities.  The tax-equivalent net interest margin decreased 18 basis points from 4.65% in the prior quarter to 4.47%.  The net interest margin decrease was principally attributable to the aforementioned lower accretion from purchased performing loans and lower yields on investment securities partially offset by a continued low cost structure from interest-bearing liabilities.  During the third quarter the funding mix shifted from higher cost certificates of deposit to lower cost money market accounts and demand deposits.  The following table shows average interest-earning assets, interest-bearing liabilities, their related income/expense and change for the periods shown:



Linked quarter results




Dollars in thousands




Three Months Ended




09/30/10

06/30/10

Change








Average interest-earning assets


$ 3,523,678

$ 3,502,398

$ 21,280


Related interest income


$      49,490

$      50,351

$    (861)


Yield on interest-earning assets


5.57%

5.77%

-20

bps

Average interest-earning liabilities


$ 2,914,482

$ 2,917,606

$ (3,124)


Related interest expense


$        9,791

$        9,755

$        36


Cost of interest-bearing liabilities


1.33%

1.34%

-1

bps

For the three months ended September 30, 2010, tax-equivalent net interest income increased $18.0 million, or 82.6%, to $39.7 million compared to the same period last year.  This improvement was principally attributable to declines in costs of interest-bearing liabilities, as well as increased interest-earning assets related to the acquisition of FMB.  The tax-equivalent net interest margin increased 78 basis points from 3.69% in the prior year to 4.47%.  Improvements in the cost of funds were principally a result of declining costs on certificates of deposit, fair value adjustments from acquisition accounting and lower costs related to Federal Home Loan Bank of Atlanta ("FHLB") borrowings.  The decrease in interest-earning asset yields were principally related to improvements in loan yields offset by lower yields on investment securities.  The following table shows average interest-earning assets, interest-bearing liabilities, their related income/expense and change for the periods shown:



Year-over-year results




Dollars in thousands




Three Months Ended




09/30/10

09/30/09

Change








Average interest-earning assets


$ 3,523,678

$ 2,333,648

$ 1,190,030


Related interest income


$      49,490

$      33,427

$      16,063


Yield on interest-earning assets


5.57%

5.68%

-11

bps

Average interest-earning liabilities


$ 2,914,482

$ 1,957,974

$    956,508


Related interest expense


$        9,791

$      11,685

$      (1,894)


Cost of interest-bearing liabilities


1.33%

2.37%

-104

bps


For the nine months ended September 30, 2010, tax-equivalent net interest income increased $55.4 million, or 92.3%, to $115.4 million compared to the same period last year.  This improvement was principally attributable to declines in costs of interest-bearing liabilities as well as increased interest-earning assets related to the acquisition of FMB.  The tax-equivalent net interest margin increased 115 basis points from 3.41% in the prior year to 4.56%.  The improvement in the cost of funds was principally a result of declining costs on certificates of deposit and money market accounts, fair value adjustments from acquisition accounting and lower costs related to FHLB borrowings.  The following table shows average interest-earning assets, interest-bearing liabilities, their related income/expense and change for the periods shown:




Year-to-date results




Dollars in thousands




Nine Months Ended




09/30/10

09/30/09

Change








Average interest-earning assets


$ 3,378,128

$ 2,355,462

$ 1,022,666


Related interest income


$    144,096

$      98,629

$      45,467


Yield on interest-earning assets


5.69%

5.60%

9

bps

Average interest-earning liabilities


$ 2,818,950

$ 1,994,602

$    824,348


Related interest expense


$      28,704

$      38,608

$      (9,904)


Cost of interest-bearing liabilities


1.36%

2.59%

-123

bps


Acquisition Activity

The impact of acquisition accounting fair value adjustments on net interest income was $2.8 million and $8.5 million for the three and nine months ended September 30, 2010, respectively.  If not for this impact, the net interest margin for the third quarter would have been 4.23%, unchanged from the second quarter and a 54 basis point improvement from the same quarter a year ago.  The Company's ability to maintain the net interest margin at current levels is largely dependent upon future interest rates, loan demand, and deposit competition.

The acquired loan and investment security portfolios of FMB were marked-to-market with a fair value discount to market rates.  Performing loan and investment security discount accretion is recognized as interest income over the estimated remaining life of the loans and investment securities.  During the third quarter, the Company compared the expected prepayments at acquisition to actual prepayments and anticipated future payments.  The slower prepayment speed noted on land loans during this assessment is considered a change in accounting estimate and resulted in a lower effective yield.  A cumulative reduction of $994,000 in discount accretion was recorded during the third quarter to align year-to-date accretion following an assessment of actual and anticipated future payments.  The Company also assumed borrowings (FHLB and subordinated debt) and certificates of deposit.  These liabilities were marked-to-market with estimates of fair value on acquisition date.  The resulting discount/premium to market are accreted/amortized as an increase (or decrease) to interest expense over the estimated lives of the liabilities.  

The third quarter, year-to-date and remaining estimated discount/premium is reflected in the following table (in 000s):


Loan Accretion


Investment Securities


Borrowings


Certificates of Deposit









Quarter-to-date

$     1,077


$           139


$            217


$            725

Year-to-date

4,609


371


925


2,635









For the remaining three months of 2010

1,634


139


(27)


524

For the year ended 2011

5,312


387


(489)


763

For the year ended 2012

3,576


201


(489)


222

For the year ended 2013

2,925


15


(489)


-

For the year ended 2014

1,835


-


(489)


-

Thereafter

-


-


(652)


-

ASSET QUALITY/LOAN LOSS PROVISION

Overview

Asset quality remains a primary focus of the Company.  During the third quarter, the Company continued to experience some deterioration in asset quality as the economy remained soft.  While economic indicators suggest the recession has technically ended and there are signs of increased economic activity (including Virginia housing markets), the signals are somewhat mixed and there could be additional softening in asset quality in the near term.  The magnitude of any such softening is largely dependent upon any lagging impact on commercial real estate, the recovery of residential housing, and the pace at which our local economies recover.

Necessary resources continue to be devoted to the ongoing review of the loan portfolio and the workouts of problem assets to minimize any losses to the Company.  The Company has in place a special assets loan committee, which includes the Company's Chief Executive Officer, Chief Credit Officer, and other senior lenders and credit officers that address significant potential problem loans, formulate strategies, and develop action plans related to such assets.  Management will continue to monitor delinquencies, risk rating changes, charge-offs, market trends and other indicators of risk in the Company's portfolio, particularly those tied to residential and commercial real estate, and adjust the allowance for loan losses accordingly. Historically, and particularly in the current economic environment, the Company seeks to work with its customers on loan collection matters while taking appropriate actions to improve the Company's position and minimize any losses.  These loans are closely monitored and evaluated for collection with appropriate loss reserves established whenever necessary.  

Portfolio Concentration

The Company's loan portfolio has a significant concentration in real estate loans.  The composition, risk and performance of the Company's loan portfolio are reflective of the relatively stable markets in which it operates.  During the economic downturn, both residential acquisition and development lending and builder/construction lending were scaled back as housing activity across the Company's markets declined.  While this softening has negatively impacted delinquency and nonperforming asset levels, the collateralized nature of real estate loans serves to better protect the Company from losses.

Acquisition

During the first quarter of 2010, the Company acquired the loan portfolio of FMB at a fair value discount of $30.0 million (the discount represents expected credit losses, comparison to market rates and liquidity adjustments).  The performing loan portfolio fair value estimate was $960.7 million, and the impaired loan portfolio fair value estimate was $20.8 million.  During the third quarter, the Company recognized $4.0 million in provision for loan losses related to the acquired portfolio, offsetting a portion of the accretion on the acquired performing loan portfolio.  

Loans obtained in connection with the FMB acquisition have been accounted for in accordance with ASC 805, Business Combinations and/or ASC 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality ("ASC 310-30") if the loan experienced deterioration of credit quality at the time of acquisition.  Both require that acquired loans be recorded at fair value and prohibit the carryover of the related allowance for loan losses.  Determining the fair value of the acquired loans required estimating cash flows expected to be collected on the loans.  Because ASC 310-30 loans (i.e., impaired loans) have been recorded at fair value, such loans are not classified as nonaccrual even though some payments may be contractually past due.  The carrying amount of purchased impaired loans was $16.5 million at September 30, 2010, or approximately 0.58% of total loans.

Nonperforming Assets (NPAs)

At September 30, 2010, nonperforming assets totaled $78.0 million, a slight increase $700,000 compared to the second quarter and an increase of $34.6 million compared to the same period a year ago.  The increase in NPAs continues to be related to stresses in the residential home builder market, which is largely a result of the broader and extended economic slowdown.  Given the outlook for a prolonged economic recovery, these levels of nonperforming assets are likely to remain unchanged in the near term.  The increase compared to the second quarter principally related to increases in nonaccrual loans of $2.7 million partially offset by lower OREO of $2.0 million.  The net increase in nonaccrual loans are principally within the commercial real estate loan and residential loan portfolios.  At September 30, 2010, the coverage ratio of the allowance for loan losses to nonperforming loans was 72.4%, a decline from 111.1% a year earlier and up from 69.4% in the second quarter.  

Nonperforming Loans (NPLs)

Nonperforming assets at September 30, 2010 included $51.6 million in nonperforming loans.  This total includes residential real estate loans of $22.5 million, land loans of $11.6 million, commercial real estate loans of $11.8 million, commercial and industrial loans of $3.1 million, land development loans of $1.6 million, and other loans totaling $1.0 million.  

Other Real Estate Owned (OREO)

Nonperforming assets also included $26.4 million in other real estate owned.  This total includes land development of $11.3 million, residential real estate of $8.2 million, land of $4.1 million, commercial real estate of $1.8 million and land held for development of bank branch sites of $1.0 million.  Included in land development is $8.7 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 valuations are also evaluated at least quarterly and any necessary write down to fair value is recorded as impairment.  During the third quarter, the Company reduced OREO by $2.0 million, selling approximately $4.0 million at a net gain of $332,000 while adding $2.0 million.  The sales principally related to a partially completed land development project and residential real estate properties on a lot by lot basis.   The Company expects this type of activity to continue until the market for these properties and the economy as a whole improves.  The Company also believes that its foreclosure practices are sound.

Charge-offs

For the third quarter, net charge-offs were $2.5 million, or 0.35%, of loans on an annualized basis, compared to $4.0 million, or 0.57%, for the second quarter and $1.2 million, or 0.26%, in the same quarter last year.  Net charge-offs in the third quarter included real estate loans of $1.5 million, consumer loans of $715,000 and commercial loans of $310,000.  At September 30, 2010, total past due loans were $56.6 million, or 1.99%, of total loans, an increase from 1.53% a year ago, and from 1.79% at June 30, 2010.  

Provision

The provision for loan losses for the third quarter was $5.9 million, an increase of $1.9 million from the second quarter and $1.4 million from the same quarter a year ago.  The current levels of the allowance for loan losses reflect specific reserves related to nonperforming loans, changes in 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.  As noted above, in acquisition accounting there was no carryover of FMB's previously established allowance for loan losses.  The increases in the provision for loan losses from the second quarter was principally related to specific reserves on the acquired commercial real estate and residential real estate loan portfolios.  The allowance for loan losses as a percentage of the total loan portfolio, including net loans purchased at fair value in the FMB acquisition, was 1.32% at September 30, 2010, 1.20% at June 30, 2010 and 1.75% at September 30, 2009.  The reduction in the allowance for loan losses as a percentage of loans compared to the prior year is related to the elimination of FMB's allowance for loan losses.  The allowance for loan losses as a percentage of the total loan portfolio, adjusted for acquired loans, was 1.86% at September 30, 2010, an increase from 1.76% at June 30, 2010.

NONINTEREST INCOME

On a linked quarter basis, noninterest income increased $252,000, or 2.1%, to $12.4 million from $12.1 million at June 30, 2010.  Gains on the sale of loans in the mortgage segment increased $714,000 and were driven by increased originations at favorable pricing. Increased loan originations were stimulated by refinances driven by a low interest rate environment in addition to contributions from recent branch office additions.  Gains  on sales of other real estate owned increased by $327,000 and principally related to individual residential real estate lot sales.  Offsetting these increases, other operating income decreased $408,000 primarily related to a non-recurring reversal of a liability that occurred in the second quarter.  Other service charges and account fees decreased $276,000 and were primarily due to a decline in ATM usage and related surcharges, a decline in letter of credit fees driven by slower construction activity and a decline in brokerage commissions.  Service charges on deposit accounts decreased $138,000 and principally related to lower overdraft and returned check and checking account fee income.  Excluding the mortgage segment operations, investment securities and real estate sales gains, noninterest income declined $815,000, or 11.7%.

For the three months ended September 30, 2010, noninterest income increased $4.5 million, or 56.1%, to $12.4 million from $7.9 million in the same period in 2009 and reflect the FMB acquisition.  Gains on sales of loans in the mortgage segment increased $2.2 million, or 58.5%.  Gains on the sale of loans were driven by the increased originations, adjustments to loan fee and pricing policies, and the contribution of newer branches originating loans at favorable margins.  Other service charges and fees increased $1.4 million, primarily due to debit card income, ATM income, and brokerage commissions.  Other operating income increased $436,000 primarily related to trust revenue and bank owned life insurance investment income.  Gains on sales of other real estate owned increased $302,000 and principally related to individual residential real estate lot sales.  Account service charges increased $128,000, related to commercial and savings accounts fee income partially offset by lower overdraft and returned check income.  

For the nine months ended September 30, 2010, noninterest income increased $9.7 million, or 39.4%, to $34.2 million from $24.5 million in the same period in 2009, and reflect the FMB acquisition for eight months since the acquisition date.  Other service charges and fees increased $3.9 million, primarily related to debit card income, ATM income and brokerage commissions and letter of credit fees.  Mortgage originations increased $53.6 million from $518.4 million to $572.0 million, or 10.3%, over the same period last year, as gains on the sale of loans increased $3.3 million, or 26.7%.  Gains on the sale of loans were driven by increased originations in addition to the contribution of newer branches originating loans at favorable margins, adjustments to loan fee and pricing policies and volume related revenue incentives.  Other operating income increased $1.5 million and primarily related to revenue from the former FMB trust operations, bank owned life insurance investment income and other income.  Account service charges increased $579,000 and related to overdraft and returned check charges and fees on commercial and savings accounts.  Gains on sales of other real estate owned increased $400,000 and principally related to individual residential real estate lot sales.  

NONINTEREST EXPENSE

On a linked quarter basis, noninterest expense decreased $1.2 million, or 3.3%, to $34.0 million from $35.2 million for second quarter.  Other operating expenses decreased $1.2 million, or 9.1%, primarily related to decreased marketing and advertising costs of $812 ,000 in television and print brand awareness campaigns for Union First Market Bank that occurred in the second quarter.  Additionally, the Company experienced decreased costs in maintaining the Company's portfolio of other real estate owned of $159,000, and lower FDIC insurance and data processing fees of $127,000, and $116,000, respectively.  These decreases were partially offset by higher professional fees of $109,000 related to continuing problem loan work outs and foreclosure activity.  Other non-recurring costs during the quarter were related to the consolidation of bank affiliates of $259,000 and costs associated with the acquisition of FMB. Excluding mortgage segment operations, acquisition related expenses and gains from investment securities and real estate sales, noninterest expense decreased approximately $1.2 million, or 4.0%, from the second quarter.

For the three months ended September 30, 2010, noninterest expense increased $12.9 million, or 61.0%, to $34.0 million from $21.1 million compared to the third quarter of 2009 and reflects the FMB acquisition.  Salaries and benefits increased $6.6 million and were primarily due to increased salaries expense of $4.8 million related to additional personnel as result of the acquisition and higher group insurance costs of $468,000 from increased current year premiums and additional personnel.  Also contributing to the increase was higher profit sharing expense of $807,000 due to improved profitability.  Commissions in the mortgage segment increased $833,000, or 42.3%, as a result of increased originations.  

Other operating expenses increased $4.5 million.  Included in other operating expenses was higher amortization on acquired deposit intangible assets of $1.6 million, higher internet and communication expenses of $854,000 and higher data processing fees of $401,000 related to increased loans and deposits from the FMB acquisition. Other increased costs included higher legal and professional fees increases of $401,000 due to continuing problem loan work outs and foreclosure activity, increased FDIC insurance premiums of $233,000 and other costs associated with ATMs of $244,000.  Occupancy expenses increased $1.2 million primarily related to additional rental expense and operations of acquired branches.  Furniture and equipment expense increased $611,000 due to higher depreciation and amortization expense related to acquired fixed assets and equipment service contracts.  

For the nine months ended September 30, 2010, noninterest expense increased $42.5 million, or 67.1%, to $105.9 million from $63.4 million for the nine months ended September 30, 2009 and reflects the FMB acquisition for the eight months since acquisition date.  Other operating expenses increased $20.1 million.  This increase included acquisition costs of $7.8 million and increases in amortization of acquired deposit intangible assets of $3.9 million, higher marketing and advertising expenses of $1.9 million related to television and print brand awareness campaigns for Union First Market Bank and higher communications expenses of $2.1 million.  Data processing fees also increased $1.6 million and principally related to acquired loans and deposits.  Additional other increases of $1.1 million related to ATM, bank card and overdraft losses.  Professional fees increased $899,000 primarily related to higher legal fees for continuing problem loan work outs and foreclosure activity.  In addition, loan expenses increased $792,000 due to maintenance of the Company's portfolio of other real estate owned and collection efforts on problem loans.  

Salaries and benefits expense increased $17.9 million primarily due to higher salaries expense of $12.0 million related principally to additional personnel from the FMB acquisition, higher profit sharing expense of $2.4 million due to improved profitability, higher group insurance costs of $1.4 million due to higher current year premiums and additional personnel as well as higher incentive compensation costs of $712,000.  Commissions in the mortgage segment increased $1.5 million, or 25.4%, as a result of increased originations.  Occupancy costs increased $3.1 million and primarily related to additional rental expense and operations of acquired branches.  Furniture and equipment expense increased $1.4 million due to higher depreciation and amortization expense related to acquired fixed assets and equipment service contracts.  

During the third quarter of 2010, the Company incurred the remaining costs related to the acquisition of FMB and no additional costs are expected going forward.  Costs included legal and accounting fees, lease and contract termination expenses, system conversion, integrating operations, and employee severances, which were expensed as incurred.  For the third quarter, costs associated with the acquisition of FMB were $123,000 and for the nine months ending on September 30, 2010 the costs were $7.8 million. The costs are reported as a component of "Other operating expenses" within the Company's "Condensed Consolidated Statements of Income."  Total acquisition costs incurred from the date the Company announced the acquisition of FMB through September 30, 2010 were $9.3 million, approximately $1.5 million below the initial estimate of approximately $10.8 million.  

BALANCE SHEET

At September 30, 2010, total cash and cash equivalents were $80.1 million, a decrease of $55.6 million from June 30, 2010, and an increase of $34.2 million and $8.8 million from December 31, 2009 and September 30, 2009, respectively.  At September 30, 2010, net loans were $2.8 billion, an increase of $19.1 million from the prior quarter.  Net loans increased $961.1 million, or 52.1%, from December 31, 2009, and increased $952.7 million, or 51.4%, compared to September 30, 2009.  Both of these period increases were principally the result of the acquired loan portfolio of FMB, which totaled $981.5 million at acquisition.  The Company's mortgage segment increased loans held for sale by $9.7 million from the prior quarter, by $30.1 million from December 31, 2009 and by $42.3 million from September 30, 2009 as mortgage production remained strong.  At September 30, 2010, total assets were $3.86 billion, a decrease of $14.9 million compared to the second quarter.  Total assets increased $1.3 billion from $2.6 billion at both December 31, 2009 and September 30, 2009, respectively, driven principally by the acquisition of FMB.  

Total deposits decreased $21.3 million compared to the second quarter and was driven by lower demand deposits.  Total deposits increased $1.2 billion, or 60.4%, from December 31, 2009, and $1.1 billion, or 56.4%, from a year ago.  Both of these period increases principally related to the acquired deposits of FMB, which totaled $1.2 billion.  Total borrowings, including repurchase agreements, decreased $2.2 million on a linked quarter basis and $40.0 million from December 31, 2009.  Total borrowings increased $66.3 million to $326.1 million at September 30, 2010 from the same period a year ago.  The Company's equity to assets ratio was 11.16% and 13.17% at September 30, 2010 and 2009, respectively.  The Company's tangible common equity to assets ratio was 8.19% and 8.70% at September 30, 2010 and 2009, respectively.

MORTGAGE SEGMENT INFORMATION

On a linked quarter basis, the mortgage segment net income for the third quarter increased $103,000, or 12.9%, to $899,000 from $796,000 in the second quarter of 2010.  Originations increased $16.9 million from $203.3 million to $220.4 million, or 8.3%, from the second quarter.  Gains on sales of loans increased $707,000, or 13.5%.  Gains on sales of loans were driven by increased originations. Increased loan originations were stimulated by refinances driven by a low interest rate environment.  Refinanced loans represented 50.0% of originations during the third quarter and 38.0% year to date.  Salary and benefit expenses increased $509,000 primarily related to volume driven commission expenses and staffing additions required to handle increased production.  

For the three months ended September 30, 2010, the mortgage segment net income increased $603,000 to $899,000, from $295,000 for the same quarter in 2009.  Originations increased $76.1 million from $144.3 million to $220.4 million, or 52.7%, during the same period last year. Gains on the sale of loans increased $2.2 million, or 58.8%.  Gains on the sale of loans were driven by the increased originations, adjustments to loan fee and pricing policies and the contribution of newer branches originating loans at favorable margins.  Noninterest expenses increased $1.5 million.  Of this amount, salaries and benefits increased $1.2 million primarily related to increased commissions associated with the growth of loan originations and expenses connected to the addition of branch office and corporate support personnel.  Other operating expenses increased $149,000 principally due to increased loan costs related to higher origination volume, investments in technology and management fees.  

For the nine months ended September 30, 2010, the mortgage segment net income increased $327,000, or 16.8%, to $2.3 million from $1.9 million in the same period of 2009.  Originations increased $53.6 million from $518.4 million to $572.0 million, or 10.3%, compared to the same period last year, as gains on the sale of loans increased $3.3 million, or 26.8%.  Gains on the sale of loans were driven by increased originations in addition to the contribution of newer branches originating loans at favorable margins, adjustments to loan fee and pricing policies and volume related revenue incentives.  Noninterest expenses increased $3.1 million.  Of this amount, salaries and benefits increased $2.4 million primarily related to increased commissions generated by loan originations as well as costs associated with additional branch office and corporate support personnel required to support production growth.  Other operating expenses increased $541,000 principally due to origination related increased underwriting costs and loan expenses in addition to higher operating expenses for communications and office supplies associated with additional branch offices.  

ABOUT UNION FIRST MARKET BANKSHARES CORPORATION

Union First Market Bankshares Corporation is the largest community banking organization based in Virginia, providing full service banking to the Northern, Central, Rappahannock, Tidewater and Northern Neck regions of Virginia through its bank subsidiary Union First Market Bank (91 locations in the counties of Albemarle, Caroline, Chesterfield, Essex, Fairfax, Fluvanna, Hanover, Henrico, James City, King George, King William, Nelson, Richmond, Spotsylvania, Stafford, Westmoreland, York, and the cities of Richmond, Fredericksburg, Williamsburg, Newport News, Grafton, Charlottesville, Colonial Heights, Roanoke, Washington, Front Royal, Middleburg, Warrenton, and Winchester). Union Investment Services, Inc. provides full brokerage services; Union Mortgage Group, Inc. provides a full line of mortgage products; and Union Insurance Group, LLC offers various lines of insurance products. Union First Market Bank also owns a non-controlling interest in Johnson Mortgage Company, LLC.

On October 12, 2010, the Company combined two of its community banks, Northern Neck State Bank and Rappahannock National Bank, into its largest bank affiliate, Union First Market Bank.

Additional information is available on the Company's website at www.ubsh.com.  The shares of the Company 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 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 conditions, the interest rate environment, legislative and regulatory requirements, competitive pressures, new products and delivery systems, inflation, changes in the stock and bond markets, technology, and consumer spending and savings habits.  More information is available on the Company's website, www.ubsh.com and on the SEC's website, www.sec.gov.  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


Nine Months Ended


09/30/10

06/30/10

09/30/09


09/30/10

09/30/09

Results of Operations







Interest and dividend income

$      48,440

$      49,322

$      32,502


$    141,080

$      95,843

Interest expense

9,791

9,755

11,685


28,704

38,608

Net interest income

38,649

39,567

20,817


112,376

57,235

Provision for loan losses

5,912

3,955

4,517


14,868

12,502

Net interest income after provision for loan losses

32,737

35,612

16,300


97,508

44,733

Noninterest income

12,353

12,101

7,911


34,193

24,522

Noninterest expenses

33,984

35,148

21,105


105,932

63,383

Income before income taxes

11,106

12,565

3,106


25,769

5,872

Income tax expense

3,033

3,839

301


7,271

361

Net income

$        8,073

$        8,726

$        2,805


$      18,498

$        5,511








Interest earned on loans (FTE)

$      43,737

$      44,474

$      28,484


$    126,807

$      84,215

Interest earned on securities (FTE)

5,703

5,859

4,934


17,201

14,291

Interest earned on earning assets (FTE)

49,490

50,351

33,427


144,096

98,629

Net interest income (FTE)

39,699

40,596

21,742


115,392

60,021

Interest expense on certificates of deposit

5,983

5,780

7,647


17,185

24,047

Interest expense on interest-bearing deposits

7,955

7,837

9,331


23,056

31,222

Core deposit intangible amortization

1,935

1,938

481


5,327

1,443








Net income - community bank segment

$        7,175

$        7,929

$        2,509


$      16,224

$        3,564

Net income - mortgage segment

899

796

296


2,274

1,947








Key Ratios







Return on average assets (ROA)

0.83%

0.91%

0.43%


0.67%

0.29%

Return on average equity (ROE)

7.46%

8.41%

3.88%


6.01%

2.63%

Efficiency ratio

66.63%

68.03%

73.46%


72.27%

77.53%

Efficiency ratio - community bank segment

65.00%

66.76%

71.02%


71.46%

77.57%

Net interest margin (FTE)

4.47%

4.65%

3.69%


4.56%

3.41%

Yields on earning assets (FTE)

5.57%

5.77%

5.68%


5.69%

5.60%

Cost of interest-bearing liabilities (FTE)

1.33%

1.34%

2.37%


1.36%

2.59%

Noninterest expense less noninterest income / average assets

2.22%

2.40%

2.04%


2.58%

2.01%








Per Share Data







Earnings per common share, basic

$          0.29

$          0.32

$          0.13


$          0.68

$          0.21

Earnings per common share, diluted

0.29

0.32

0.13


0.68

0.21

Cash dividends paid per common share

0.06

0.06

0.06


0.18

0.24

Market value per share

13.06

12.26

12.45


13.06

12.45

Book value per common share

15.29

14.98

15.47


15.29

15.47

Tangible book value per common share

11.93

11.53

11.95


11.93

11.95

Price to earnings ratio, diluted

11.35

9.55

24.14


14.36

44.34

Price to book value per common share ratio

0.85

0.82

0.80


0.85

0.80

Price to tangible common share ratio

1.10

1.06

1.04


1.10

1.04

Weighted average common shares outstanding, basic

25,881,694

25,871,588

15,123,935


24,993,316

14,093,227

Weighted average common shares outstanding, diluted

25,920,287

25,913,471

15,165,105


25,035,926

14,134,161

Common shares outstanding at end of period

25,955,213

25,933,516

18,335,266


25,955,213

18,335,266








Financial Condition







Assets

$ 3,859,323

$ 3,874,199

$ 2,583,284


$ 3,859,323

$ 2,583,284

Loans, net of unearned income

2,842,267

2,819,651

1,885,075


2,842,267

1,885,075

Earning Assets

3,505,845

3,530,648

2,360,752


3,505,845

2,360,752

Goodwill

57,567

57,567

56,474


57,567

56,474

Core deposit intangibles, net

28,762

30,698

8,171


28,762

8,171

Deposits

3,074,195

3,095,474

1,965,568


3,074,195

1,965,568

Stockholders' equity

430,596

422,307

340,231


430,596

340,231

Tangible common equity

308,979

298,716

219,130


308,979

219,130









Three Months Ended


Nine Months Ended


09/30/10

06/30/10

09/30/09


09/30/10

09/30/09

Averages







Assets

$ 3,865,249

$ 3,844,256

$ 2,566,838


$ 3,718,107

$ 2,582,200

Loans, net of unearned income

2,827,451

2,825,183

1,872,906


2,723,904

1,871,281

Loans held for sale

75,261

59,854

48,126


60,020

46,150

Securities

572,016

548,447

398,991


539,790

372,247

Earning assets

3,523,678

3,502,398

2,333,648


3,378,128

2,355,462

Deposits

3,080,908

3,067,582

1,984,639


2,937,491

1,978,495

Certificates of deposit

1,330,228

1,338,334

940,340


1,280,906

963,752

Interest-bearing deposits

2,591,275

2,583,104

1,682,432


2,478,476

1,691,249

Borrowings

323,207

334,502

275,542


340,474

303,353

Interest-bearing liabilities

2,914,482

2,917,606

1,957,974


2,818,950

1,994,602

Stockholders' equity

429,126

416,117

286,870


411,801

279,776

Tangible common equity

306,564

291,574

165,594


294,203

158,152








Asset Quality







Allowance for Loan Losses (ALLL)







Beginning balance

$      33,956

$      34,014

$      29,639


$      30,484

$      25,496

Add: Recoveries

320

374

750


1,736

1,024

Less: Charge-offs

2,793

4,387

1,976


9,693

6,092

Add: Provision for loan losses

5,912

3,955

4,517


14,868

12,502

Ending balance

$      37,395

$      33,956

$      32,930


$      37,395

$      32,930

ALLL / total outstanding loans

1.32%

1.20%

1.75%


1.32%

1.75%

ALLL / total outstanding loans, adjusted for acquired1

1.86%

1.76%

-


1.86%

-

Net charge-offs / total outstanding loans

0.35%

0.57%

0.26%


0.37%

0.43%

Nonperforming Assets







Nonaccrual loans

$      51,630

$      48,911

$      29,653


$      51,630

$      29,653

Other real estate owned

26,382

28,394

13,783


26,382

13,783

Total nonperforming assets (NPAs)

78,012

77,305

43,436


78,012

43,436

Loans > 90 days and still accruing

18,554

18,560

11,236


18,554

11,236

Total nonperforming assets and loans > 90 days and still accruing

$      96,566

$      95,865

$      54,672


$      96,566

$      54,672

NPAs / total outstanding loans

2.74%

2.74%

2.30%


2.74%

2.30%

NPAs / total assets

2.02%

2.00%

1.68%


2.02%

1.68%

ALLL / nonperforming loans

72.43%

69.42%

111.05%


72.43%

111.05%

ALLL / nonperforming assets

47.93%

43.92%

75.81%


47.93%

75.81%








Other Data







Mortgage loan originations

$    220,352

$    203,463

$    144,258


$    572,010

$    518,389

% of originations that are refinances

50.40%

23.07%

30.88%


37.70%

53.96%

End of period full-time employees

982

964

665


982

665

Number of full-service branches

91

92

58


91

58

Number of full automatic transaction machines (ATM's)

159

172

125


159

125








Alternative Performance Measures







Cash basis earnings2







Net income

$        8,073

$        8,726

$        2,805


$      18,498

$        5,511

Plus: Core deposit intangible amortization, net of tax

1,258

1,260

313


3,463

938

Plus: Trademark intangible amortization, net of tax

65

65

-


174

-

Cash basis operating earnings

$        9,396

$      10,051

$        3,118


$      22,135

$        6,449








Average assets

$ 3,865,249

$ 3,844,256

$ 2,566,838


$ 3,718,107

$ 2,582,200

Less: Average trademark intangible

982

1,082

-


950

-

Less: Average goodwill

57,566

57,566

56,474


57,566

56,474

Less: Average core deposit intangibles

29,696

31,635

8,405


28,707

8,881

Average tangible assets

$ 3,777,005

$ 3,753,973

$ 2,501,959


$ 3,630,884

$ 2,516,845








Average equity

$    429,126

$    416,117

$    286,870


$    411,801

$    279,776

Less: Average trademark intangible

982

1,082

-


950

-

Less: Average goodwill

57,566

57,566

56,474


57,566

56,474

Less: Average core deposit intangibles

29,696

31,635

8,405


28,707

8,881

Less: Average preferred equity

34,318

34,260

56,397


30,375

56,269

Average tangible common equity

$    306,564

$    291,574

$    165,594


$    294,203

$    158,152








Cash basis earnings per share, diluted

$          0.36

$          0.39

$          0.21


$          0.88

$          0.46

Cash basis return on average tangible assets

0.99%

1.07%

0.49%


0.82%

0.34%

Cash basis return on average tangible common equity

12.16%

13.83%

7.47%


10.06%

5.45%















(1) Excludes acquired loans, but includes any acquired loan with additional credit deterioration since acquisition.

(2) As a supplement to accounting principles generally accepted in the United States ("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.


In management's opinion, cash basis earnings are useful to investors because by excluding non-operating adjustments stemming from the consolidation of our organization, they allow investors to see clearly the combined economic results of our multi-bank company. These non-GAAP disclosures should not, however, be viewed in direct comparison with non-GAAP measures of other companies.

UNION FIRST MARKET BANKSHARES CORPORATION AND SUBSIDIARIES






CONDENSED CONSOLIDATED BALANCE SHEETS






(Dollars in thousands, except share amounts)













September 30,


December 31,


September 30,


2010


2009


2009

ASSETS

(Unaudited)


(Audited)


(Unaudited)

Cash and cash equivalents:






Cash and due from banks

$               76,981


$             38,725


$               36,601

Interest-bearing deposits in other banks

2,329


4,106


31,552

Money market investments

143


127


243

Other interest-bearing deposits

-


2,598


2,598

Federal funds sold

685


355


318

Total cash and cash equivalents

80,138


45,911


71,312







Securities available for sale, at fair value

576,040


400,591


398,870







Loans held for sale

84,381


54,280


42,096







Loans, net of unearned income

2,842,267


1,874,224


1,885,075

Less allowance for loan losses

37,395


30,484


32,930

Net loans

2,804,872


1,843,740


1,852,145







Bank premises and equipment, net

91,054


78,722


79,196

Other real estate owned

26,382


22,509


13,783

Core deposit intangibles, net

28,762


7,690


8,171

Goodwill

57,567


56,474


56,474

Other assets

110,127


77,355


61,237

Total assets

$          3,859,323


$        2,587,272


$          2,583,284







LIABILITIES






Noninterest-bearing demand deposits

$             495,779


$           294,222


$             299,452

Interest-bearing deposits:






NOW accounts

359,986


215,327


199,777

Money market accounts

756,938


446,980


428,729

Savings accounts

153,928


102,852


101,655

Time deposits of $100,000 and over

577,239


407,894


446,777

Other time deposits

730,325


449,089


489,178

Total interest-bearing deposits

2,578,416


1,622,142


1,666,116

Total deposits

3,074,195


1,916,364


1,965,568







Securities sold under agreements to repurchase

69,693


50,550


44,455

Other short-term borrowings

41,200


115,201


15,000

Trust preferred capital notes

60,310


60,310


60,310

Long-term borrowings

154,864


140,000


140,000

Other liabilities

28,465


22,759


17,720

Total liabilities

3,428,727


2,305,184


2,243,053







Commitments and contingencies












STOCKHOLDERS' EQUITY






Preferred stock, $10.00 par value, $1,000 liquidation value, shares
   authorized 500,000; issued and outstanding, 35,595 shares, no shares,
   59,000 shares, respectively

35,595


-


58,874

Common stock, $1.33 par value, shares authorized 36,000,000; issued
   and outstanding, 25,955,213 shares, 18,419,567 shares, and 18,335,266
   shares, respectively

34,460


24,462


24,395

Surplus

184,964


98,136


96,681

Retained earnings

167,718


155,047


155,073

Warrant

-


-


2,808

Discount on preferred stock

(1,240)


-


(2,418)

Accumulated other comprehensive income

9,099


4,443


4,818

Total stockholders' equity

430,596


282,088


340,231







Total liabilities and stockholders' equity

$          3,859,323


$        2,587,272


$          2,583,284

UNION FIRST MARKET BANKSHARES CORPORATION AND SUBSIDIARIES








CONDENSED CONSOLIDATED STATEMENTS OF INCOME








(Dollars in thousands, except per share amounts)








(Unaudited)

















Three Months Ended


Nine Months Ended


September 30


September 30


2010


2009


2010


2009

Interest and dividend income:








Interest and fees on loans

$ 43,571


$ 28,308


$ 126,234


$ 83,680

Interest on Federal funds sold

2


-


17


-

Interest on deposits in other banks

49


9


72


123

Interest and dividends on securities:








Taxable

3,176


2,794


10,218


7,860

Nontaxable

1,642


1,391


4,539


4,180

Total interest and dividend income

48,440


32,502


141,080


95,843









Interest expense:








Interest on deposits

7,956


9,330


23,056


31,222

Interest on Federal funds purchased

5


16


19


16

Interest on short-term borrowings

367


640


1,628


1,983

Interest on long-term borrowings

1,463


1,699


4,001


5,387

Total interest expense

9,791


11,685


28,704


38,608









Net interest income

38,649


20,817


112,376


57,235

Provision for loan losses

5,912


4,517


14,868


12,502

Net interest income after provision for loan losses

32,737


16,300


97,508


44,733









Noninterest income:








Service charges on deposit accounts

2,243


2,115


6,795


6,216

Other service charges, commissions and fees

2,860


1,507


8,311


4,422

Gains on securities transactions, net

38


16


62


30

Gains on sales of loans

5,962


3,761


15,701


12,396

Gains (losses) on sales of other real estate and bank premises, net

332


30


376


(24)

Other operating income

918


482


2,948


1,482

Total noninterest income

12,353


7,911


34,193


24,522









Noninterest expenses:








Salaries and benefits

17,451


10,856


50,269


32,403

Occupancy expenses

2,947


1,780


8,453


5,312

Furniture and equipment expenses

1,691


1,080


4,874


3,451

Other operating expenses

11,895


7,389


42,336


22,217

Total noninterest expenses

33,984


21,105


105,932


63,383









Income before income taxes

11,106


3,106


25,769


5,872

Income tax expense

3,033


301


7,271


361

Net income

$   8,073


$   2,805


$   18,498


$   5,511

Dividends paid and accumulated on preferred stock

462


737


1,227


2,212

Accretion of discount on preferred stock

62


125


163


372

Net income available to common shareholders

$   7,549


$   1,943


$   17,108


$   2,927

Earnings per common share, basic

$     0.29


$     0.13


$       0.68


$     0.21

Earnings per common share, diluted

$     0.29


$     0.13


$       0.68


$     0.21

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



For the Three Months September 30,


2010


2009


2008


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

$    420,394

$   3,176

3.00%


$    279,394

$   2,794

3.97%


$    176,959

$   2,220

4.99%

Tax-exempt

151,622

2,527

6.61%


119,597

2,140

7.10%


112,825

2,053

7.24%

Total securities (2)

572,016

5,703

3.96%


398,991

4,934

4.91%


289,784

4,273

5.87%

Loans, net (3) (4)

2,827,451

43,062

6.04%


1,872,906

28,054

5.94%


1,840,979

30,231

6.53%

Loans held for sale

75,261

675

3.56%


48,126

430

3.54%


24,682

379

6.10%

Federal funds sold

12,960

2

0.04%


304

-

0.18%


1,661

5

1.20%

Money market investments

160

-

0.00%


151

-

0.00%


124

-

0.01%

Interest-bearing deposits in other banks

35,830

48

0.53%


10,572

9

0.33%


1,738

8

1.88%

Other interest-bearing deposits

-

-

0.00%


2,598

-

0.00%


2,598

7

1.01%

Total earning assets

3,523,678

49,490

5.57%


2,333,648

33,427

5.68%


2,161,566

34,903

6.42%

Allowance for loan losses

(34,486)




(30,321)




(22,125)



Total non-earning assets

376,057




263,511




251,569



Total assets

$ 3,865,249




$ 2,566,838




$ 2,391,010















Liabilities and Stockholders' Equity:












Interest-bearing deposits:












Checking

$    354,590

196

0.22%


$    199,063

83

0.17%


$    215,675

341

0.63%

Money market savings

754,238

1,652

0.87%


441,106

1,504

1.35%


272,513

1,701

2.48%

Regular savings

152,219

124

0.32%


101,923

97

0.38%


102,181

143

0.56%

Certificates of deposit: (5)












$100,000 and over

665,980

3,110

1.85%


451,249

3,717

3.27%


419,448

3,895

3.69%

Under $100,000

664,248

2,873

1.72%


489,091

3,930

3.19%


495,901

4,605

3.69%

Total interest-bearing deposits

2,591,275

7,955

1.22%


1,682,432

9,331

2.20%


1,505,718

10,685

2.82%

Other borrowings (6)

323,207

1,836

2.25%


275,542

2,354

3.38%


378,126

3,074

3.23%

Total interest-bearing liabilities

2,914,482

9,791

1.33%


1,957,974

11,685

2.37%


1,883,844

13,759

2.91%













Noninterest-bearing liabilities:












Demand deposits

489,633




302,207




273,696



Other liabilities

32,008




19,787




18,430



Total liabilities

3,436,123




2,279,968




2,175,970



Stockholders' equity

429,126




286,870




215,040



Total liabilities and stockholders' equity

$ 3,865,249




$ 2,566,838




$ 2,391,010















Net interest income


$ 39,699




$ 21,742




$ 21,144














Interest rate spread (7)



4.24%




3.31%




3.51%

Interest expense as a percent of average earning assets



1.10%




1.99%




2.53%

Net interest margin (8)



4.47%




3.69%




3.89%













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

(2) Interest income on securities includes $139 thousand in accretion of the fair market value adjustments related to the recent acquisition.  Remaining estimated accretion for 2010 is $139 thousand.

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

(4) Interest income on loans includes $1.7 million in accretion of the fair market value adjustments related to the recent acquisition.  Remaining estimated accretion for 2010 is $1.6 million.

(5) Interest expense on certificates of deposits includes $725 thousand in accretion of the fair market value adjustments related to the recent acquisition.  Remaining estimated accretion for 2010 is $524 thousand.

(6) Interest expense on borrowings includes $217 thousand in accretion of the fair market value adjustments related to the recent acquisition.  Remaining estimated expense for 2010 is $27 thousand.

(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 adjustment and was 4.23% for the quarter ending 9/30/10.

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



For the Nine Months Ended September 30,


2010


2009


2008


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

$    402,771

$   10,218

3.39%


$    252,991

$   7,860

4.15%


$    177,184

$   6,797

5.12%

Tax-exempt

      137,019

       6,983

6.81%


      119,256

     6,431

7.21%


      109,750

     5,943

7.23%

Total securities (2)

      539,790

     17,201

4.26%


      372,247

   14,291

5.13%


      286,934

   12,740

5.93%

Loans, net (3) (4)

   2,723,904

   124,969

6.13%


   1,871,281

   82,774

5.91%


   1,801,561

   90,751

6.73%

Loans held for sale

        60,020

       1,838

4.09%


        46,150

     1,441

4.17%


        26,398

     1,104

5.59%

Federal funds sold

        16,132

            17

0.14%


             305

             -

0.19%


          1,615

          34

2.81%

Money market investments

             160

               -

0.00%


             116

             -

0.00%


             170

            1

0.47%

Interest-bearing deposits in other banks

        37,151

            71

0.26%


        62,765

        123

0.26%


          1,259

          22

2.31%

Other interest-bearing deposits

             971

               -

0.00%


          2,598

             -

0.00%


          2,598

          47

2.41%

Total earning assets

   3,378,128

   144,096

5.69%


   2,355,462

   98,629

5.60%


   2,120,535

 104,699

6.60%

Allowance for loan losses

      (33,419)




      (28,253)




      (20,833)



Total non-earning assets

      373,398




      254,991




      249,887



Total assets

$ 3,718,107




$ 2,582,200




$ 2,349,589















Liabilities and Stockholders' Equity:












Interest-bearing deposits:












Checking

$    339,910

          579

0.23%


$    200,156

        250

0.17%


$    220,627

     1,077

0.65%

Money market savings

      707,334

       4,852

0.92%


      428,050

     6,630

2.07%


      216,255

     3,776

2.33%

Regular savings

      150,326

          440

0.39%


        99,291

        295

0.40%


      102,295

        451

0.59%

Certificates of deposit: (5)












$100,000 and over

      638,249

       8,997

1.88%


      465,304

   11,730

3.37%


      436,229

   13,315

4.08%

Under $100,000

      642,657

       8,188

1.70%


      498,448

   12,317

3.30%


      486,581

   14,477

3.97%

Total interest-bearing deposits

   2,478,476

     23,056

1.24%


   1,691,249

   31,222

2.47%


   1,461,987

   33,096

3.02%

Other borrowings (6)

      340,474

       5,648

2.22%


      303,353

     7,386

3.26%


      380,220

     9,888

3.47%

Total interest-bearing liabilities

   2,818,950

     28,704

1.36%


   1,994,602

   38,608

2.59%


   1,842,207

   42,984

3.12%













Noninterest-bearing liabilities:












Demand deposits

      459,015




      287,246




      272,616



Other liabilities

        28,341




        20,576




        19,862



Total liabilities

   3,306,306




   2,302,424




   2,134,685



Stockholders' equity

      411,801




      279,776




      214,904



Total liabilities and stockholders' equity

$ 3,718,107




$ 2,582,200




$ 2,349,589















Net interest income


$ 115,392




$ 60,021




$ 61,715














Interest rate spread (7)



4.33%




3.01%




3.48%

Interest expense as a percent of average earning assets



1.13%




2.19%




2.71%

Net interest margin



4.56%




3.41%




3.89%

























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

(2) Interest income on securities includes $371 thousand in accretion of the fair market value adjustments related to the recent acquisition.  Remaining estimated accretion for 2010 is $139 thousand.

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

(4) Interest income on loans includes $4.6 million in accretion of the fair market value adjustments related to the recent acquisition.  Remaining estimated accretion for 2010 is $1.6 million.

(5) Interest expense on certificates of deposits includes $2.6 million in accretion of the fair market value adjustments related to the recent acquisition.  Remaining estimated accretion for 2010 is $524 thousand.

(6) Interest expense on borrowings includes $925 thousand in accretion of the fair market value adjustments related to the recent acquisition.  Remaining estimated expense for 2010 is $27 thousand.

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

SOURCE Union First Market Bankshares Corporation

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