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Union First Market Bankshares Reports First Quarter Results

Union Bankshares Corporation. (PRNewsFoto/Union Bankshares Corporation) (PRNewsFoto/UNION BANKSHARES CORPORATION)

News provided by

Union First Market Bankshares Corporation

Apr 26, 2011, 01:05 ET

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RICHMOND, Va., April 26, 2011 /PRNewswire/ -- Union First Market Bankshares Corporation (the “Company”) (NASDAQ: UBSH) today reported net income of $6.2 million and earnings per share of $0.22 for its first quarter ended March 31, 2011.  The quarterly results represent an increase of $1.8 million in net income and $0.07 in earnings per share from the prior year’s fourth quarter and an increase of $4.5 million in net income and a $0.16 increase in earnings per share from the quarter ended March 31, 2010.  

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

“The first quarter results demonstrated the strength of our bank as we reported improved profitability over last year during a difficult operating environment,” said G. William Beale, chief executive officer of Union First Market Bankshares.  “The slow economic recovery has resulted in a reduction in loan balances, negatively impacting our earning asset levels and related interest income. I remain encouraged by our net interest margin, the reinforcement of the loan loss reserve, and the competitive advantage of the footprint we hold within Virginia.   With our strong financial position, we are focusing on increasing our market share within our markets and deepening our relationships with our customers.”

Select highlights:

  • The core net interest margin(1) for the first quarter was 4.47%, an increase of 18 basis points from the fourth quarter of last year due to favorable investment securities yields and lower funding costs.
  • Lower provision for loan losses of $3.2 million compared to the fourth quarter of last year.  
  • Net charge-offs of $4.3 million were nearly 50% lower than the fourth quarter of last year.
  • Allowance for loan loss as a percentage of total loans increased from 1.35% at December 31, 2010 to 1.44% at March 31, 2011.
  • Total nonperforming assets increased $3.5 million compared to the fourth quarter of 2010.  Both other real estate owned (“OREO”) and nonaccrual loans experienced slight net increases due principally to continued softness in residential home builder real estate markets.  
  • Mortgage segment net income declined from $854,000 in the fourth quarter of last year to $328,000 principally due to lower mortgage originations during a historically slow quarter.
  • Customers reduced debt at a faster pace than new loans were generated during the quarter resulting in reductions of interest income.
  • The first quarter 2010 income statement included two months of post-acquisition First Market Bank (“FMB”) income and expenses. Nonrecurring FMB acquisition costs were $6.9 million for that quarter.

The increase in quarterly net income from the prior year is largely a result of improvements in net interest income, the absence of prior year nonrecurring acquisition costs partially offset by increased provisions for loan losses.  Comparative results to the first quarter of the prior year exclude FMB results for the month of January 2010.  For the first quarter of 2011 net income available to common shareholders, which deducts dividends and discount accretion on preferred stock from net income, was $5.7 million compared to $1.3 million for the prior year’s first quarter.

First quarter net income increased $1.8 million from the fourth quarter of last year and was largely attributable to a reduction in the provision for loan losses and lower nonrecurring costs.  These improvements were partially offset by lower income from the mortgage segment.  

NET INTEREST INCOME

On a linked quarter basis, tax-equivalent net interest income was $39.9 million, a decrease of $395,000, or 0.98%, from the fourth quarter of last year.  The linked quarter decrease was principally due to a greater decrease in earning asset volumes compared to interest-bearing liabilities.  First quarter tax-equivalent net interest margin increased 13 basis points to 4.68% from 4.55% in the most recent quarter.  The net interest margin increase was principally attributable to the increase of investment security yields and lower costs of interest-bearing deposits.  Additionally, the funding mix continued to shift from higher cost certificates of deposit to lower cost money market accounts and checking accounts.  The following table shows average interest-earning assets, interest-bearing liabilities, the related income/expense and change for the periods shown:



Linked quarter results




Dollars in thousands




Three Months Ended




03/31/11

12/31/10

Change








Average interest-earning assets


$ 3,459,834

$ 3,514,367

$ (54,533)


Interest income


$      48,490

$      49,834

$   (1,344)


Yield on interest-earning assets


5.68%

5.63%

5

bps

Average interest-earning liabilities


$ 2,858,406

$ 2,895,213

$ (36,807)


Interest expense


$        8,591

$        9,540

$      (949)


Cost of interest-bearing liabilities


1.22%

1.31%

(9)

bps

The first quarter tax-equivalent net interest income increased $4.8 million, or 13.67%, when compared to the same period last year.  This increase was principally attributable to increased interest-earning asset volumes resulting from the acquisition of FMB.  The tax-equivalent net interest margin increased 9 basis points to 4.68% from 4.59% in the prior year.  The improvement in the cost of funds was principally a result of declining costs on certificates of deposit.  Another favorable factor driving the increase in the net interest margin was the increase in demand deposits.  The decrease in the interest-earning asset yield was principally related to lower loan yields and lower yields on investment securities.  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 following table shows average interest-earning assets, interest-bearing liabilities, the related income/expense and change for the periods shown:



Year-over-year results




Dollars in thousands




Three Months Ended




03/31/11

03/31/10

Change








Average interest-earning assets


$ 3,459,834

$ 3,103,964

$ 355,870


Interest income


$      48,490

$      44,256

$     4,234


Yield on interest-earning assets


5.68%

5.78%

(10)

bps

Average interest-earning liabilities


$ 2,858,406

$ 2,621,815

$ 236,591


Interest expense


$        8,591

$        9,159

$      (568)


Cost of interest-bearing liabilities


1.22%

1.42%

(20)

bps

Acquisition Activity – net interest margin

The favorable impact of acquisition accounting fair value adjustments on net interest income was $1.8 million for the three months ended March 31, 2011.  If not for this favorable impact, the net interest margin for the first quarter would have been 4.47%, an 18 basis point improvement from the fourth quarter of last year.  

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.  The Company also assumed borrowings (Federal Home Loan Bank (“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 is accreted/amortized as an increase (or decrease) to interest expense over the estimated lives of the liabilities and reduced by provisions for loan losses.  

The first quarter and remaining estimated discount/premium is reflected in the following table (dollars in thousands):



Loan Accretion


Investment Securities


Borrowings


Certificates of Deposit









For the quarter ended March 31, 2011

$     1,557


$           108


$          (122)


$            258

For the remaining nine months of 2011

3,755


278


(367)


504

For the years ending:








2012


3,576


201


(489)


222

2013


2,925


15


(489)


-

2014


1,835


-


(489)


-

2015


-


-


(489)


-

2016


-


-


(163)


-

Acquisition Activity – other operating expenses

Total nonrecurring costs associated with the previously announced NewBridge Bank branch acquisition were $294,000 for the quarter ended March 31, 2011.  Costs to date principally include systems conversion and integrating operations, which were expensed as incurred.  The costs are reported as a component of “Other operating expenses” within the Company’s “Condensed Consolidated Statements of Income.”  Total acquisition costs are expected to be approximately $457,000 with no additional costs expected to be incurred after the second quarter of 2011.

ASSET QUALITY/LOAN LOSS PROVISION

Overview

During the first quarter, the Company experienced a slight deterioration in asset quality, principally within the builder/developer real estate portfolio, as the housing market remained soft.  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 the economies in the markets we serve recover.  

The Company considers the level of nonperforming assets to be manageable and has devoted an appropriate amount of resources to review the loan portfolio and workout problem assets in order to minimize any potential losses to the Company.  Management continues 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 adjusts 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.  

Nonperforming Assets (NPAs)

At March 31, 2011, nonperforming assets totaled $101.3 million, an increase of $3.5 million from the fourth quarter of last year and $37.9 million compared to a year ago.  The increase in NPAs continues to be related to stresses in the residential home builder market, driven by the slow pace of the economic recovery.  Nonperforming loans have increased as residential real estate borrowers (i.e., developers, owners of residential housing, and those related to the residential housing industry) continue to experience financial difficulties with the protracted economic recovery depleting their cash reserves and other repayment resources.  In addition, despite working with the borrowers, the Company has foreclosed on various real estate collateral in order to avoid additional losses.  The current quarter increase in NPAs from the fourth quarter of last year related to increases in nonaccrual loans of $926,000 and OREO of $2.6 million.  

Nonperforming Loans

Nonperforming assets at March 31, 2011 included $62.6 million in nonaccrual loans.  This total includes residential real estate loans of $30.0 million, commercial real estate loans of $14.9 million, land loans of $13.1 million, commercial and industrial loans of $2.4 million, land development loans of $1.5 million, and other loans of $722,000.  At March 31, 2011, the coverage ratio of the allowance for loan losses to nonperforming loans was 64.5%, a decline from 88.7% a year earlier but an increase from 62.2% at December 31, 2010.  Impairment analyses provided appropriate reserves on these nonperforming loans while appropriate reserves on homogenous pools continue to be maintained.  The current quarter increase in the coverage ratio as compared to year end 2010 is partially related to the allowance for loan loss building at a faster pace than nonaccrual loans.

Other Real Estate Owned (OREO)

Nonperforming assets also included $38.7 million in other real estate owned.  This total includes residential real estate of $15.4 million, land development of $12.2 million, land of $8.9 million, commercial real estate of $1.2 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 first quarter ended March 31, 2011, the Company’s OREO showed a net increase of approximately $2.6 million, with sales of $3.6 million at a net loss of $299,000 and additions of $6.4 million.  Approximately half of the additions were related to residential builders with the remaining split between commercial developers and homeowners; sales from OREO were principally related to residential lots, land and houses.  The Company expects this type of activity to continue until the market for these properties and the economy as a whole shows marked improvement.  The Company also believes that its foreclosure practices are sound.

Charge-offs

For the quarter ended March 31, 2011, net charge-offs were $4.3 million, or 0.62%, of loans on an annualized basis, compared to $8.5 million, or 1.19%, for the fourth quarter of last year and $1.5 million, or 0.21%, for the same quarter last year.  Net charge-offs in the first quarter included commercial construction loans of $1.6 million, residential builder loans of $1.3 million, and other consumer loans of $1.4 million.  At March 31, 2011, total accruing past due loans were $42.7 million, or 1.52%, of total loans, a decrease from 1.85% at December 31, 2010, and 1.89% for the same quarter a year ago.  

Provision

The provision for loan losses for the current quarter was $6.3 million, a decrease of $3.2 million from the fourth quarter of last year and an increase of $1.3 million from the same quarter a year ago.  The lower provision for loan losses compared to the most recent quarter is partially reflective of lower net charge-offs.  The current level 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.  The allowance for loan losses as a percentage of the total loan portfolio, including net loans acquired in the FMB acquisition was 1.44% at March 31, 2011, and 1.35% at December 31, 2010, and 1.19% at March 31, 2010.  The allowance for loan losses as a percentage of the total loan portfolio, adjusted for acquired loans, was 1.96% at March 31, 2011, an increase from 1.88% at December 31, 2010 and 1.82% in the same quarter a year ago.  The lower ratio of the allowance for loan losses as a percentage of loans compared to the loan portfolio, adjusted for acquired loans, is related to the elimination of FMB’s allowance for loan losses at acquisition.  In acquisition accounting there is no carryover of FMB’s previously established allowance for loan losses.

NONINTEREST INCOME

On a linked quarter basis, noninterest income decreased $2.5 million, or 19.3%, to $10.5 million from $13.1 million in the fourth quarter of last year.  Gains on the sale of loans in the mortgage segment decreased $1.5 million, or 23.0%, and were driven by a decline in mortgage originations.  Declines in refinanced mortgage loan volume from 56.1% to 38.1% accounted for most of this decrease.  Gains on sales of other real estate owned decreased $551,000.  During the current quarter, the Company recorded sales of other real estate owned at a net loss of $299,000 as compared to a net gain of $252,000 during the prior quarter.  Excluding the mortgage segment operations and other real estate sales, noninterest income decreased $487,000, or 7.5% from the fourth quarter of last year and related to a combination of lower service charge income, letter of credit fees, and ATM income.

For the first quarter, noninterest income increased $808,000, or 8.3%, to $10.5 million from $9.7 million in the prior year’s same quarter.  Other service charges and fees increased $609,000, primarily as a result of increased debit card income, ATM income, brokerage commissions, and letter of credit fees.  Gains on sales of loans in the mortgage segment increased $477,000, or 10.6%.  Gains on sales of other real estate owned decreased $338,000.  During the current quarter, the Company recorded sales of other real estate owned at a net loss of $299,000.  Other operating income increased $208,000, primarily the result of higher trust revenue and bank owned life insurance investment income.  Additionally, service charges on deposit accounts decreased principally from lower overdraft and return check income.  Excluding the mortgage segment operations, and other real estate sales transactions, noninterest income increased $703,000, or 13.2%, from the same period a year ago.

NONINTEREST EXPENSE

On a linked quarter basis, noninterest expense decreased $2.3 million, or 6.2%, to $34.8 million from $37.1 million when compared to the fourth quarter of last year.  Other operating expenses decreased $2.0 million, or 13.9%.  Of the other operating expenses decrease, $708,000 was related to post acquisition lease and contract termination expenses incurred during the fourth quarter of last year.  Conversion costs related to merging bank affiliates in the fourth quarter of last year declined by $436,000.  Marketing and advertising expenses declined $460,000 related to Loyalty Banking® and multi-media brand awareness campaigns in the prior year’s fourth quarter.  Additionally, legal and professional fees related to continuing problem loan work outs and foreclosure activity decreased $388,000, and costs to maintain the Company’s portfolio of other real estate owned decreased $248,000.  Partially offsetting decreases in other operating expenses were increases related to expected FDIC insurance assessments of $323,000, and an increase in franchise tax of $299,000 levied in the first quarter of 2011 that included the acquired branches of FMB.  Excluding the mortgage segment operations and non-recurring costs, noninterest expense decreased $450,000, or 1.5%, compared to last year’s fourth quarter.

For the first quarter, noninterest expense decreased $2.0 million, or 5.5%, to $34.8 million from $36.8 million for the first quarter of 2010.  Other operating expenses decreased $4.7 million, or 26.8%.  Included in other operating expenses were costs associated with the acquisition of FMB of $6.9 million during the first quarter of 2010, and current quarter bank branch acquisition costs of $294,000.  Partially offsetting the decrease in other operating expenses were increases in internet and communication expenses of $640,000, increases related to expected FDIC insurance assessments of $448,000, and an increase in franchise tax of $299,000 levied in the first quarter of 2011 that included the acquired branches of FMB.  Salaries and benefits increased $2.2 million and were primarily due to increased salary expense of $1.9 million related to first quarter merit increases and additional personnel, and included $436,000 higher commissions in the mortgage segment.  Marketing and advertising costs declined $268,000 primarily related to brand awareness campaigns that occurred in the first quarter of 2010.  Additionally, costs to maintain the Company’s portfolio of other real estate owned decreased as did legal and professional fees related to continuing problem loan work outs and foreclosure activity.  Excluding mortgage segment operations and non recurring current and prior period costs, noninterest expense increased $3.5 million, or 13.5%.

BALANCE SHEET

At March 31, 2011, total cash and cash equivalents were $84.8 million, an increase of $23.7 million from December 31, 2011, and a decrease of $45.7 million from March 31, 2010.  At March 31, 2011, net loans were $2.8 billion, a decrease of $32.3 million, or 1.2% from the fourth quarter of last year.  Net loans decreased $49.6 million, or 1.8%, from March 31, 2010.  Loans held for sale of $50.6 million in the Company’s mortgage segment decreased by $23.4 million from the fourth quarter of last year, related to lower origination volume, and flat from the prior year’s same quarter.  At March 31, 2011, total assets were $3.8 billion, a decrease of $24.5 million compared to the fourth quarter of 2010, and a decrease of $37.0 million from $3.8 billion at March 31, 2010.  

Total deposits decreased $3.4 million compared to the fourth quarter of last year driven by lower volumes of time deposits and CDs, offset by higher money market and savings accounts.  Total deposits decreased $5.4 million from March 31, 2010 with net volume inflows into money market accounts and out of certificates of deposit.  Total borrowings, including repurchase agreements, decreased $26.6 million on a linked quarter basis and $52.5 million from March 31, 2010.  The Company’s equity to assets ratio was 11.42% and 10.77% at March 31, 2011 and 2010, respectively.  The Company’s tangible common equity to assets ratio was 8.51% and 7.70% at March 31, 2011 and 2010, respectively.

MORTGAGE SEGMENT INFORMATION

On a linked quarter basis, the mortgage segment net income for the first quarter decreased $526,000, or 61.6%, to $328,000 from $854,000 in the fourth quarter of 2010.  Originations declined by $87.4 million from $236.5 million to $149.1 million, or 37.0%, from the fourth quarter of last year.  Gains on the sale of loans decreased $1.5 million, or 23.0%, on lower originations.   Refinanced loans represented 38.1% of originations during the first quarter compared to 56.1% during the fourth quarter of 2010.  Salary and benefit expenses decreased $753,000 on loan volume driven commission expense.  Occupancy and equipment expense decreased 4.4% and 10.0% respectively on a linked quarter basis.

For the first quarter, the mortgage segment net income decreased $251,000 to $328,000, from $579,000 for the same quarter in 2010.  Noninterest expenses increased $1.0 million.  Of this amount, salaries and benefits increased $782,000 as a result of commission expenses associated with the higher loan revenue and personnel expenses related to the hiring of corporate support staff to service increased loan volume during the past twelve months.  Originations increased $930,000 from $148.2 million to $149.1 million, or 0.6%, during the same period last year.  Gains on the sale of loans increased $478,000, or 10.6%.  The increase in gain on sale revenue was driven by adjustments to loan fees and pricing strategies, volume related revenue incentives and the contribution of newer branches originating loans at favorable margins.  

ABOUT UNION FIRST MARKET BANKSHARES CORPORATION

Headquartered in Richmond, Virginia, Union First Market Bankshares Corporation is the holding company for Union First Market Bank, which has 91 branches and more than 160 ATMs throughout Virginia.  Non-bank affiliates of the holding company include: Union Investment Services, Inc., which provides full brokerage services; Union Mortgage Group, Inc., which provides a full line of mortgage products; and Union Insurance Group, LLC, which offers various lines of insurance products.  Union First Market Bank also owns a non-controlling interest in Johnson Mortgage Company, LLC.  

On March 21, 2011, Union First Market Bank announced that it has opened a new branch in Stafford, Virginia.  Located at 1044 Warrenton Road, the Berea Marketplace branch is the 91st branch of Union First Market Bank.

On February 8, 2011, Union First Market Bank and MARTIN’S® Food Markets announced that Union First Market Bank will add in-store bank branches to seven MARTIN’S stores in the western part of Virginia.  Union First Market Bank currently operates in-store bank branches in 22 MARTIN’S Food Markets.

On December 21, 2010, the Company announced it will acquire approximately $73.5 million of loans and assume approximately $59.3 million in deposits at book value through the acquisition of the Harrisonburg, Virginia branch of NewBridge Bank.  The close date is expected to be in the second quarter of 2011.  

Additional information is available on the Company’s website at http://investors.bankatunion.com.  The information contained on the Company’s website is not a part of this report.  Shares of the Company’s common stock are traded on the NASDAQ Global Select Market under the symbol UBSH.

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

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, http://investors.bankatunion.com and on the Securities and Exchange Commission’s website, www.sec.gov.  The information on the Company’s website is not a part of this press release.  The Company does not intend or assume any obligation to update or revise any forward-looking statements that may be made from time to time by or on behalf of the Company.  

UNION FIRST MARKET BANKSHARES CORPORATION AND SUBSIDIARIES

KEY FINANCIAL RESULTS

(in thousands, except share data)








Three Months Ended


03/31/11


12/31/10


03/31/10

Results of Operations






Interest and dividend income

$      47,392


$      48,768


$      43,318

Interest expense

8,592


9,541


9,158

Net interest income

38,800


39,227


34,160

Provision for loan losses

6,300


9,500


5,001

Net interest income after provision for loan losses

32,500


29,727


29,159

Noninterest income

10,547


13,078


9,739

Noninterest expenses

34,767


37,069


36,800

Income before income taxes

8,280


5,736


2,098

Income tax expense

2,086


1,312


399

Net income

$        6,194


$        4,424


$        1,699







Interest earned on loans (FTE)

$      42,157


$      43,505


$      38,597

Interest earned on securities (FTE)

6,328


6,325


5,639

Interest earned on earning assets (FTE)

48,490


49,834


44,256

Net interest income (FTE)

39,899


40,294


35,097

Interest expense on certificates of deposit

4,916


5,810


5,422

Interest expense on interest-bearing deposits

6,683


7,685


7,264

Core deposit intangible amortization

1,655


1,936


1,454







Net income - community bank segment

$        5,865


$        3,570


$        1,120

Net income - mortgage segment

328


854


579







Key Ratios






Return on average assets (ROA)

0.66%


0.46%


0.20%

Return on average equity (ROE)

5.81%


4.07%


1.77%

Efficiency ratio

70.45%


70.87%


83.83%

Efficiency ratio - community bank segment

68.07%


69.43%


84.33%

Net interest margin (FTE)

4.68%


4.55%


4.59%

Net interest margin, core (FTE)(1)

4.47%


4.29%


4.23%

Yields on earning assets (FTE)

5.68%


5.63%


5.78%

Cost of interest-bearing liabilities (FTE)

1.22%


1.31%


1.42%

Noninterest expense less noninterest income / average assets

2.58%


2.47%


3.19%







Per Share Data






Earnings per common share, basic

$          0.22


$          0.15


$          0.06

Earnings per common share, diluted

0.22


0.15


0.06

Cash dividends paid per common share

0.07


0.07


0.06

Market value per share

11.25


14.78


15.10

Book value per common share

15.43


15.16


14.70

Tangible book value per common share

12.22


11.88


11.17

Price to earnings ratio, diluted

12.67


24.84


62.05

Price to book value per common share ratio

0.73


0.97


1.03

Price to tangible common share ratio

0.92


1.24


1.35

Weighted average common shares outstanding, basic

25,958,121


25,902,835


23,197,145

Weighted average common shares outstanding, diluted

25,980,698


25,949,521


23,235,498

Common shares outstanding at end of period

26,034,989


26,004,197


25,928,956









Three Months Ended


03/31/11


12/31/10


03/31/10

Financial Condition






Assets

$ 3,812,700


$ 3,837,247


$ 3,849,699

Loans, net of unearned income

2,806,928


2,837,253


2,850,166

Earning Assets

3,470,309


3,485,870


3,505,679

Goodwill

57,567


57,567


57,567

Core deposit intangibles, net

25,171


26,827


32,636

Deposits

3,066,616


3,070,059


3,072,015

Stockholders' equity

435,489


428,085


414,801

Tangible common equity

317,536


308,440


289,222







Averages






Assets

$ 3,807,960


$ 3,854,718


$ 3,440,413

Loans, net of unearned income

2,812,412


2,830,435


2,515,652

Loans held for sale

54,152


93,325


44,607

Securities

577,440


580,590


498,096

Earning assets

3,459,834


3,514,367


3,103,964

Deposits

3,053,858


3,086,478


2,659,353

Certificates of deposit

1,221,100


1,295,227


1,172,423

Interest-bearing deposits

2,566,994


2,589,313


2,257,382

Borrowings

291,412


305,900


364,433

Interest-bearing liabilities

2,858,406


2,895,213


2,621,815

Stockholders' equity

432,407


430,748


389,726

Tangible common equity

313,617


310,144


285,049







Asset Quality






Allowance for Loan Losses (ALLL)






Beginning balance

$      38,406


$      37,395


$      30,484

Add: Recoveries

373


367


1,042

Less: Charge-offs

4,680


8,856


2,513

Add: Provision for loan losses

6,300


9,500


5,001

Ending balance

$      40,399


$      38,406


$      34,014

ALLL / total outstanding loans

1.44%


1.35%


1.19%

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

1.96%


1.88%


1.82%

Net charge-offs / total outstanding loans

0.62%


1.19%


0.21%

Nonperforming Assets






Nonaccrual loans

$      62,642


$      61,716


$      38,337

Other real estate owned

38,674


36,122


25,082

Total nonperforming assets (NPAs)

101,316


97,838


63,419

Loans > 90 days and still accruing

10,846


17,993


8,985

Total nonperforming assets and loans > 90 days and still accruing

$    112,162


$    115,831


$      72,404

NPAs / total outstanding loans

3.61%


3.45%


2.23%

NPAs / total assets

2.66%


2.55%


1.65%

ALLL / nonperforming loans

64.49%


62.23%


88.72%

ALLL / nonperforming assets

39.87%


39.25%


53.63%







Other Data






Mortgage loan originations

$    149,125


$    236,653


$    148,195

% of originations that are refinances

38.10%


56.10%


39.08%

End of period full-time employees

1,019


1,005


970

Number of full-service branches

91


90


92

Number of full automatic transaction machines (ATMs)

160


159


171



Three Months Ended


03/31/11


12/31/10


03/31/10

Alternative Performance Measures






Cash basis earnings(3)






Net income

$               6,194


$               4,424


$               1,699

Plus: Core deposit intangible amortization, net of tax

1,076


1,258


945

Plus: Trademark intangible amortization, net of tax

65


65


44

Cash basis operating earnings

$               7,335


$               5,747


$               2,688







Average assets

$        3,807,960


$        3,854,718


$        3,440,413

Less: Average trademark intangible

782


882


786

Less: Average goodwill

57,566


57,566


56,740

Less: Average core deposit intangibles

25,994


27,767


24,736

Average tangible assets

$        3,723,618


$        3,768,503


$        3,358,151







Average equity

$           432,407


$           430,748


$           389,726

Less: Average trademark intangible

782


882


786

Less: Average goodwill

57,566


57,566


56,740

Less: Average core deposit intangibles

25,994


27,767


24,736

Less: Average preferred equity

34,448


34,389


22,416

Average tangible common equity

$           313,617


$           310,144


$           285,048







Cash basis earnings per share, diluted

$                 0.28


$                 0.22


$                 0.12

Cash basis return on average tangible assets

0.80%


0.61%


0.32%

Cash basis return on average tangible common equity

9.49%


7.35%


3.82%







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



(2) The allowance for loan losses, adjusted for acquired loans (non-GAAP) ratio includes the allowance for loan losses to the total loan portfolio less acquired loans without additional credit deterioration above the original credit mark (which have been provided for in the ALLL subsequent to acquisition).  GAAP requires the acquired allowance for loan losses not be carried over in an acquisition or merger.  We believe the presentation of the allowance for loan losses, adjusted for acquired loans ratio is useful to investors because the acquired loans were purchased at a market discount with no allowance for loan losses carried over to the Company.  Therefore, acquired loans without additional credit deterioration above the original credit mark are adjusted out of the loan balance denominator.































Gross Loans

$        2,806,928


$        2,837,253


$        2,850,166

 less acquired loans without additional credit deterioration

(743,308)


(793,730)


(981,541)

Gross Loans, adjusted for acquired

2,063,620


2,043,523


1,868,625

Allowance for loan losses

40,399


38,406


34,014

ALLL / gross loans, adjusted for acquired

1.96%


1.88%


1.82%







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


In management's opinion, cash basis earnings are useful to investors because by excluding non-operating adjustments they allow investors to see clearly the economic impact on the results of 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 and per share amounts)



March 31,


December 31,


March 31,


2011


2010


2010

ASSETS

(Unaudited)


(Audited)


(Unaudited)

Cash and cash equivalents:






Cash and due from banks

$      54,403


$             58,951


$      54,984

Interest-bearing deposits in other banks

30,050


1,449


62,918

Money market investments

178


158


126

Other interest-bearing deposits

-


-


2,598

Federal funds sold

175


595


9,887

Total cash and cash equivalents

84,806


61,153


130,513







Securities available for sale, at fair value

582,394


572,441


529,351







Loans held for sale

50,584


73,974


50,633







Loans, net of unearned income

2,806,928


2,837,253


2,850,166

Less allowance for loan losses

40,399


38,406


34,014

Net loans

2,766,529


2,798,847


2,816,152







Bank premises and equipment, net

90,594


90,680


92,566

Other real estate owned

38,674


36,122


25,082

Core deposit intangibles, net

25,171


26,827


32,636

Goodwill

57,567


57,567


57,567

Other assets

116,381


119,636


115,199

Total assets

$ 3,812,700


$        3,837,247


$ 3,849,699







LIABILITIES






Noninterest-bearing demand deposits

$    507,565


$           484,867


$    488,426

Interest-bearing deposits:






NOW accounts

381,887


381,512


357,762

Money market accounts

827,076


783,431


720,074

Savings accounts

174,244


153,724


150,753

Time deposits of $100,000 and over

521,940


563,375


597,768

Other time deposits

653,904


703,150


757,232

Total interest-bearing deposits

2,559,051


2,585,192


2,583,589

Total deposits

3,066,616


3,070,059


3,072,015







Securities sold under agreements to repurchase

66,225


69,467


73,307

Other short-term borrowings

-


23,500


45,000

Trust preferred capital notes

60,310


60,310


60,310

Long-term borrowings

155,014


154,892


155,462

Other liabilities

29,046


30,934


28,804

Total liabilities

3,377,211


3,409,162


3,434,898







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 for all years.

35,595


35,595


35,595

Common stock, $1.33 par value, shares authorized 36,000,000; issued and outstanding, 26,034,989 shares, 26,004,197 shares, and 25,928,956 shares, respectively

34,559


34,532


34,440

Surplus

185,962


185,763


184,481

Retained earnings

173,655


169,801


155,067

Discount on preferred stock

(1,113)


(1,177)


(1,352)

Accumulated other comprehensive income

6,831


3,571


6,570

Total stockholders' equity

435,489


428,085


414,801







Total liabilities and stockholders' equity

$ 3,812,700


$        3,837,247


$ 3,849,699

UNION FIRST MARKET BANKSHARES CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Dollars in thousands, except per share amounts)






Three Months Ended


March 31


2011


2010

Interest and dividend income:

(Unaudited)


(Unaudited)

Interest and fees on loans

$      42,003


$      38,394

Interest on Federal funds sold

-


12

Interest on deposits in other banks

5


8

Interest and dividends on securities:




Taxable

3,630


3,539

Nontaxable

1,754


1,365

Total interest and dividend income

47,392


43,318





Interest expense:




Interest on deposits

6,684


7,263

Interest on Federal funds purchased

7


14

Interest on short-term borrowings

161


598

Interest on long-term borrowings

1,740


1,283

Total interest expense

8,592


9,158





Net interest income

38,800


34,160

Provision for loan losses

6,300


5,001

Net interest income after provision for loan losses

32,500


29,159





Noninterest income:




Service charges on deposit accounts

2,058


2,171

Other service charges, commissions and fees

2,924


2,315

Gains (losses) on securities transactions, net

(16)


19

Gains on sales of loans

4,968


4,491

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

(299)


39

Other operating income

912


704

Total noninterest income

10,547


9,739





Noninterest expenses:




Salaries and benefits

17,654


15,415

Occupancy expenses

2,754


2,635

Furniture and equipment expenses

1,662


1,402

Other operating expenses

12,697


17,348

Total noninterest expenses

34,767


36,800





Income before income taxes

8,280


2,098

Income tax expense

2,086


399

Net income

$        6,194


$        1,699

Dividends paid and accumulated on preferred stock

462


303

Accretion of discount on preferred stock

64


51

Net income available to common shareholders

$        5,668


$        1,345

Earnings per common share, basic

$          0.22


$          0.06

Earnings per common share, diluted

$          0.22


$          0.06





For the Three Months Ended March 31,


2011


2010


2009


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

$    412,512


$   3,630


3.57%


$    378,494


$   3,539


3.79%


$    219,977


$   2,436


4.49%

Tax-exempt

164,928


2,698


6.63%


119,602


2,100


7.12%


116,739


2,100


7.29%

Total securities (2)

577,440


6,328


4.44%


498,096


5,639


4.59%


336,716


4,536


5.46%

Loans, net (3) (4)

2,812,412


41,592


6.00%


2,515,652


38,151


6.15%


1,869,759


27,257


5.91%

Loans held for sale

54,152


565


4.23%


44,607


446


4.05%


38,698


431


4.52%

Federal funds sold

266


-


0.32%


28,205


12


0.17%


471


-


0.14%

Money market investments

161


-


0.00%


112


-


0.00%


93


-


0.00%

Interest-bearing deposits in other banks

15,403


5


0.14%


14,694


8


0.22%


94,235


54


0.23%

Other interest-bearing deposits

-


-


0.00%


2,598


-


0.00%


2,598


-


0.00%

Total earning assets

3,459,834


48,490


5.68%


3,103,964


44,256


5.78%


2,342,570


32,278


5.59%

Allowance for loan losses

(38,765)






(31,579)






(26,144)





Total non-earning assets

386,891






368,028






249,492





Total assets

$ 3,807,960






$ 3,440,413






$ 2,565,918























Liabilities and Stockholders' Equity:


















Interest-bearing deposits:


















Checking

$    374,756


159


0.17%


$    303,824


177


0.24%


$    198,120


81


0.17%

Money market savings

810,573


1,505


0.75%


634,090


1,476


0.94%


400,157


2,489


2.52%

Regular savings

160,565


103


0.26%


147,045


189


0.52%


95,570


101


0.43%

Certificates of deposit: (5)


















$100,000 and over

600,932


2,482


1.68%


583,442


2,854


1.98%


469,667


4,052


3.50%

Under $100,000

620,168


2,434


1.59%


588,981


2,568


1.77%


516,806


4,382


3.44%

Total interest-bearing deposits

2,566,994


6,683


1.06%


2,257,382


7,264


1.30%


1,680,320


11,105


2.68%

Other borrowings (6)

291,412


1,908


2.66%


364,433


1,895


2.11%


319,648


2,545


3.23%

Total interest-bearing liabilities

2,858,406


8,591


1.22%


2,621,815


9,159


1.42%


1,999,968


13,650


2.77%



















Noninterest-bearing liabilities:


















Demand deposits

486,864






401,971






267,980





Other liabilities

30,283






26,901






21,419





Total liabilities

3,375,553






3,050,687






2,289,367





Stockholders' equity

432,407






389,726






276,551





Total liabilities and stockholders' equity

$ 3,807,960






$ 3,440,413






$ 2,565,918























Net interest income



$ 39,899






$ 35,097






$ 18,628





















Interest rate spread (7)





4.46%






4.36%






2.82%

Interest expense as a percent of average earning assets





1.01%






1.20%






2.36%

Net interest margin (8)





4.68%






4.59%






3.22%



















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

(2) Interest income on securities includes $108 thousand in accretion of the fair market value adjustments related to the acquisition of FMB.  Remaining estimated accretion for 2011 is $278 thousand.

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

(4) Interest income on loans includes $1.6 million in accretion of the fair market value adjustments related to the acquisition of FMB.  Remaining estimated accretion for 2011 is $3.8 million.

(5) Interest expense on certificates of deposits includes $258 thousand in accretion of the fair market value adjustments related to the acquisition of FMB.  Remaining estimated accretion for 2011 is $504 thousand.

(6) Interest expense on borrowings includes $122 thousand in amortization of the fair market value adjustments related to the acquisition of FMB.  Remaining estimated amortization for 2011 is $367 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 adjustments and was 4.47% for the quarter ending 3/31/11.

SOURCE Union First Market Bankshares Corporation

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