Union Bankshares Reports Second Quarter Results

RICHMOND, Va., July 19, 2017 (GLOBE NEWSWIRE) -- Union Bankshares Corporation (the "Company" or "Union") (NASDAQ:UBSH) today reported net income of $18.0 million and earnings per share of $0.41 for its second quarter ended June 30, 2017.  Excluding after-tax acquisition and conversion costs of $2.4 million, net operating earnings (1) were $20.3 million and operating earnings per share (1) were $0.46 for the second quarter of 2017. The Company's net operating earnings and operating earnings per share for the second quarter of 2017 represent an increase of $1.2 million, or 6.2%, over net income and an increase of $0.02, or 4.5%, over earnings per share, in each case compared to the first quarter of 2017.  For the six months ended June 30, 2017, net income was $37.1 million and earnings per share were $0.85. Net operating earnings (1) were $39.4 million and operating earnings per share (1) were $0.90 for the six months ended June 30, 2017. The Company's net operating earnings and operating earnings per share for the six months ended June 30, 2017 represent an increase of 8.7% and 9.8%, respectively, compared to the net income and earnings per share for the six months ended June 30, 2016.

" Union continued to generate sustainable, profitable growth for our shareholders in the second quarter," said John C. Asbury, president and chief executive officer of Union Bankshares Corporation.  " Loans grew by 13% and deposits grew by 9% on an annualized basis while profitability metrics on an operating basis continued to improve.  Also during the quarter, we announced the signing of a definitive merger agreement to acquire Xenith Bankshares, Inc., creating the preeminent community banking franchise in Virginia and also gaining retail entry points into North Carolina and Maryland.  This is exciting news for Union as the strategic combination with Xenith will provide Union with the growth, scale and synergies to continue to deliver a best-in-class customer experience, offer superior financial services and solutions to our clients and provide a rewarding experience for our teammates while also generating top-tier financial performance for our shareholders.  We have already started the integration planning work with Xenith and expect to close the transaction on or around January 1, 2018, subject to customary closing conditions, including regulatory and shareholder approvals."

Select highlights for the second quarter of 2017 include:
  • Entry into a definitive merger agreement to acquire Xenith Bankshares, Inc. ("Xenith"), which was announced on May 22, 2017 (the "Pending Merger").
  • Net income for the community bank segment was $17.4 million, or $0.40 per share, for the second quarter of 2017, compared to $19.1 million, or $0.44 per share, for the first quarter of 2017.  Net operating earnings (1) for the community bank segment were $19.8 million, or $0.45 per share, for the second quarter of 2017.  Net income for the community bank segment was $36.5 million, or $0.84 per share, for the six months ended June 30, 2017, compared to $35.7 million, or $0.81 per share, for the six months ended June 30, 2016.  Net operating earnings (1) for the community bank segment were $38.9 million, or $0.89 per share, for the six months ended June 30, 2017.
  • The mortgage segment reported net income of $551,000, or $0.01 per share, for the second quarter of 2017, compared to $4,000 in the first quarter of 2017.  The mortgage segment reported net income of $555,000, or $0.01 per share, for the six months ended June 30, 2017 compared to $593,000, or $0.01 per share, for the six months ended June 30, 2016.
  • Return on Average Assets ("ROA") was 0.82% and operating ROA (1) was 0.93% for the quarter ended June 30, 2017 compared to ROA of 0.92% for the quarter ended March 31, 2017 and 0.98% for the quarter ended June 30, of 2016.
  • Return on Average Equity ("ROE") was 7.02% and operating ROE (1) was 7.94% for the quarter ended June 30, 2017 compared to ROE of 7.68% for the quarter ended March 31, 2017 and 7.88% for the quarter ended June 30, 2016.  Return on Average Tangible Common Equity ("ROTCE") was 10.15% and operating ROTCE (1) was 11.48% for the quarter ended June 30, 2017 compared to ROTCE of 11.20% for the prior quarter and 11.60% for the second quarter of 2016.
  • The efficiency ratio (FTE) was 66.8% and the operating efficiency ratio (FTE) (1) was 63.8% for the quarter ended June 30, 2017 compared to the efficiency ratio (FTE) of 65.3% for the prior quarter and 64.1% for the second quarter of 2016.
  • Loans held for investment grew $217.4 million, or 13.3% (annualized), from March 31, 2017 and increased $830.4 million, or 14.0%, from June 30, 2016.  Average loans held for investment increased $244.1 million, or 15.3% (annualized), from the prior quarter and increased $765.0 million, or 13.0%, from the same quarter in the prior year.
  • Period-end deposits increased $150.2 million, or 9.1% (annualized), from March 31, 2017 and grew $668.6 million, or 11.0%, from June 30, 2016.  Average deposits increased $230.5 million, or 14.4% (annualized), from the prior quarter and increased $612.2 million, or 10.2%, from the same quarter in the prior year.

(1) For a reconciliation of the non-GAAP operating measures that exclude acquisition and conversion costs unrelated to the Company's normal operations, see Alternative Performance Measures (non-GAAP) section of the Key Financial Results.

NET INTEREST INCOME

For the second quarter of 2017, net interest income was $69.0 million, an increase of $2.4 million from the first quarter of 2017.  Tax-equivalent net interest income was $71.6 million, an increase of $2.5 million from the first quarter of 2017. The increases in both net interest income and tax-equivalent net interest income were driven by higher earning asset balances.  The second quarter net interest margin decreased 3 basis points to 3.49% from 3.52% in the previous quarter, while the tax-equivalent net interest margin decreased 4 basis points to 3.62% from 3.66% during the same periods.  Core tax-equivalent net interest margin (which excludes the 8 basis point impact of acquisition accounting accretion in both the current and prior quarters) also decreased by 4 basis points to 3.54% from 3.58% in the previous quarter.  The decrease in the core tax-equivalent net interest margin was principally due to the 8 basis point increase in core tax-equivalent cost of funds offset by the 4 basis point increase in the core tax-equivalent yield on earning assets.

The Company's tax-equivalent net interest margin includes the impact of acquisition accounting fair value adjustments.  During the second quarter of 2017, net accretion related to acquisition accounting increased $124,000, or 8.3%, from the prior quarter to $1.6 million for the quarter ended June 30, 2017.  The first and second quarters of 2017 as well as the remaining estimated net accretion impact are reflected in the following table (dollars in thousands):

    Loan Accretion     BorrowingsAccretion(Amortization)     Total
For the quarter ended March 31, 2017   $ 1,445     $ 48       $ 1,493  
For the quarter ended June 30, 2017     1,570       47         1,617  
For the remaining six months of 2017 (estimated) (1)     2,886       75         2,961  
For the years ending (estimated) (1):                
2018   4,911     (143 )     4,768  
2019   3,518     (286 )     3,232  
2020   2,678     (301 )     2,377  
2021   2,112     (316 )     1,796  
2022   1,766     (332 )     1,434  
Thereafter   6,653     (4,974 )     1,679  

(1) Estimated accretion only includes accretion for previously executed acquisitions.  The effects of the Pending Merger are not included in the information above.

ASSET QUALITY/LOAN LOSS PROVISION

OverviewDuring the second quarter of 2017, the Company experienced declines in past due loans as a percentage of total loans from the prior quarter and the second quarter of 2016.  Nonaccrual loan levels increased in the second quarter of 2017, primarily related to two credit relationships.  Net charge-offs increased from the first quarter of 2017, while year-to-date charge-off levels were down from the prior year.  The loan loss provision increased from the prior quarter due to loan growth and increased specific reserves related to increases in nonaccrual loans.

All nonaccrual and past due loan metrics discussed below exclude purchased credit impaired ("PCI") loans totaling $56.2 million (net of fair value mark of $12.7 million).

Nonperforming Assets ("NPAs")At June 30, 2017, NPAs totaled $34.1 million, an increase of $2.1 million, or 6.6%, from March 31, 2017 and an increase of $9.8 million, or 40.5%, from June 30, 2016.  In addition, NPAs as a percentage of total outstanding loans increased 1 basis point from 0.49% at March 31, 2017 and increased 9 basis points from 0.41% at June 30, 2016 to 0.50% at June 30, 2017.  The following table shows a summary of asset quality balances at the quarter ended (dollars in thousands):

                               
      June 30,     March 31,     December 31,     September 30,     June 30,
      2017     2017     2016     2016     2016
Nonaccrual loans     $ 24,574       $ 22,338       $ 9,973       $ 12,677       $ 10,861  
Foreclosed properties     6,828       6,951       7,430       7,927       10,076  
Former bank premises     2,654       2,654       2,654       2,654       3,305  
Total nonperforming assets     $ 34,056       $ 31,943       $ 20,057       $ 23,258       $ 24,242  
                                                   

The following table shows the activity in nonaccrual loans for the quarter ended (dollars in thousands):
                             
    June 30,     March 31,     December 31,     September 30,     June 30,
    2017     2017     2016     2016     2016
Beginning Balance   $ 22,338       $ 9,973       $ 12,677       $ 10,861       $ 13,092  
Net customer payments   (1,498 )     (1,068 )     (1,451 )     (1,645 )     (2,859 )
Additions   5,979       13,557       1,094       4,359       2,568  
Charge-offs   (2,004 )     (97 )     (1,216 )     (660 )     (1,096 )
Loans returning to accruing status   (134 )     (27 )     (1,039 )     (23 )     (396 )
Transfers to OREO   (107 )           (92 )     (215 )     (448 )
Ending Balance   $ 24,574       $ 22,338       $ 9,973       $ 12,677       $ 10,861  
                                                 

The nonaccrual additions primarily relate to two unrelated commercial and industrial and commercial real estate-non-owner occupied credit relationships.

The following table shows the activity in other real estate owned ("OREO") for the quarter ended (dollars in thousands):

                             
    June 30,     March 31,     December 31,     September 30,     June 30,
    2017     2017     2016     2016     2016
Beginning Balance   $ 9,605       $ 10,084       $ 10,581       $ 13,381       $ 14,246  
Additions of foreclosed property   132             859       246       501  
Valuation adjustments   (19 )     (238 )     (138 )     (479 )     (274 )
Proceeds from sales   (272 )     (277 )     (1,282 )     (2,844 )     (1,086 )
Gains (losses) from sales   36       36       64       277       (6 )
Ending Balance   $ 9,482       $ 9,605       $ 10,084       $ 10,581       $ 13,381  
                                                 

Past Due LoansPast due loans still accruing interest totaled $27.4 million, or 0.40% of total loans, at June 30, 2017 compared to $26.9 million, or 0.41%, at March 31, 2017 and $25.3 million, or 0.43%, at June 30, 2016.  At June 30, 2017, loans past due 90 days or more and accruing interest totaled $3.6 million, or 0.05% of total loans, compared to $2.3 million, or 0.04%, at March 31, 2017 and $3.5 million, or 0.06%, at June 30, 2016.

Net Charge-offsFor the second quarter of 2017, net charge-offs were $2.5 million, or 0.15% of total average loans on an annualized basis, compared to $788,000, or 0.05%, for the prior quarter and $1.6 million, or 0.11%, for the same quarter last year.  Of the net charge-offs in the second quarter of 2017, approximately half were specifically reserved for in the prior quarter. For the six months ended June 30, 2017, net charge-offs were $3.3 million, or 0.10% of total average loans on annualized basis, compared to $3.8 million, or 0.13%, for the same period in 2016.

Provision for Loan LossesThe provision for loan losses for the second quarter of 2017 was $2.3 million, an increase of $290,000 compared to the previous quarter and consistent with the same quarter in 2016.  The increase in provision for loan losses was primarily driven by higher loan balances and increases in specific reserves related to nonaccrual loans.

Allowance for Loan LossesThe allowance for loan losses ("ALL") decreased $200,000 from March 31, 2017 to $38.2 million at June 30, 2017 primarily due to the continued decline in the historical loss rates.  The ALL as a percentage of the total loan portfolio was 0.56% at June 30, 2017, 0.59% at March 31, 2017, and 0.59% at June 30, 2016.

The ratio of the ALL to nonaccrual loans was 155.5% at June 30, 2017, compared to 172.0% at March 31, 2017 and 322.9% at June 30, 2016.  The current level of the allowance for loan losses reflects specific reserves related to nonperforming loans, current risk ratings on loans, net charge-off activity, loan growth, delinquency trends, and other credit risk factors that the Company considers important in assessing the adequacy of the allowance for loan losses.

NONINTEREST INCOME

Noninterest income decreased $783,000, or 4.2%, to $18.1 million for the quarter ended June 30, 2017 from $18.8 million in the prior quarter, primarily driven by lower bank owned life insurance income due to proceeds from death benefits received in the first quarter of 2017, lower gains on sales of securities, and declines in insurance-related income, which is typically seasonally higher in the first quarter.

Mortgage banking income increased $768,000, or 37.9%, to $2.8 million in the second quarter of 2017 compared to $2.0 million in the first quarter of 2017, related to increased mortgage loan originations.  Mortgage loan originations increased by $36.4 million, or 36.3%, in the second quarter to $136.6 million from $100.2 million in the first quarter of 2017.  The majority of the increase was related to purchase-money mortgage loans, which seasonally increased by $41.5 million from the prior quarter.   Of the mortgage loan originations in the second quarter of 2017, 23.4% were refinances compared with 34.3% in the prior quarter.

NONINTEREST EXPENSE

Noninterest expense increased $2.5 million, or 4.4%, to $59.9 million for the quarter ended June 30, 2017 from $57.4 million in the prior quarter.  Excluding acquisition and conversion costs of $2.7 million in the second quarter of 2017, noninterest operating expense decreased $209,000 when compared to noninterest expense during the first quarter of 2017. Salaries and benefits expenses declined by $1.6 million primarily related to decreases in payroll taxes, which are typically seasonally higher in the first quarter, as well as lower group insurance costs and unemployment taxes.  This decrease was partially offset by increases in marketing expenses of $539,000, professional fees of $434,000 related to higher consulting costs, and printing and postage costs of $256,000.

BALANCE SHEET

At June 30, 2017, total assets were $8.9 billion, an increase of $245.3 million from March 31, 2017 and an increase of $814.6 million from June 30, 2016.  The increase in assets was mostly related to loan growth.

At June 30, 2017, loans held for investment (net of deferred fees and costs) were $6.8 billion, an increase of $217.4 million, or 13.3% (annualized), from March 31, 2017, while average loans increased $244.1 million, or 15.3% (annualized), from the prior quarter.  Loans held for investment increased $830.4 million, or 14.0%, from June 30, 2016, while quarterly average loans increased $765.0 million, or 13.0%, from the prior year.

At June 30, 2017, total deposits were $6.8 billion, an increase of $150.2 million, or 9.1% (annualized), from March 31, 2017, while average deposits increased $230.5 million, or 14.4% (annualized), from the prior quarter. Total deposits grew $668.6 million, or 11.0%, from June 30, 2016, while quarterly average deposits increased $612.2 million, or 10.2%, from the prior year.

At June 30, 2017, March 31, 2017, and June 30, 2016, respectively, the Company had a common equity Tier 1 capital ratio of 9.39%, 9.55%, and 9.94%; a Tier 1 capital ratio of 10.57%, 10.77%, and 11.27%; a total capital ratio of 13.00%, 13.30%, and 11.79%; and a leverage ratio of 9.61%, 9.79%, and 10.01%.

The Company's common equity to total assets ratios at June 30, 2017, March 31, 2017, and June 30, 2016 were 11.56%, 11.71%, and 12.21%, respectively, while its tangible common equity to tangible assets ratio was 8.32%, 8.36%, and 8.59%, respectively.

During the second quarter of 2017, the Company declared and paid cash dividends of $0.20 per common share, consistent with the prior quarter and an increase of $0.01, or 5.3%, compared the same quarter in the prior year.

ABOUT UNION BANKSHARES CORPORATION

Headquartered in Richmond, Virginia, Union Bankshares Corporation (NASDAQ:UBSH) is the holding company for Union Bank & Trust, which has 112 banking offices and approximately 173 ATMs located throughout Virginia. Non-bank affiliates of the holding company include: Union Mortgage Group, Inc., which provides a full line of mortgage products, Old Dominion Capital Management, Inc., which provides investment advisory services, and Union Insurance Group, LLC, which offers various lines of insurance products.

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

Union Bankshares Corporation will hold a conference call on Wednesday, July 19th, at 9:00 a.m. Eastern Time during which management will review earnings and performance trends.  Callers wishing to participate may call toll-free by dialing (877) 668-4908; international callers wishing to participate may do so by dialing (973) 453-3058.  The conference ID number is 51128808.

NON-GAAP MEASURES

In reporting the results of the quarter ended June 30, 2017, the Company has provided supplemental performance measures on a tax-equivalent, tangible, or operating basis.  These measures are a supplement to GAAP used to prepare the Company's financial statements and should not be considered in isolation or as a substitute for comparable measures calculated in accordance with GAAP.  In addition, the Company's non-GAAP measures may not be comparable to non-GAAP measures of other companies.

FORWARD-LOOKING STATEMENTS

Certain statements in this press release 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, are based on certain assumptions as of the time they are made, and are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified.  Such statements are often characterized by the use of qualified words (and their derivatives) such as "expect," "believe," "estimate," "plan," "project," "anticipate," "intend," "will," "may," "view," "opportunity," "potential," or words of similar meaning or other statements concerning opinions or judgment of the Company and its management about future events.  Although the Company believes that its expectations with respect to forward-looking statements are based upon reasonable assumptions within the bounds of its existing knowledge of its business and operations, there can be no assurance that actual results, performance, or achievements of the Company will not differ materially from any projected future results, performance, or achievements expressed or implied by such forward-looking statements.  Actual future results and trends may differ materially from historical results or those anticipated depending on a variety of factors, including, but not limited to, the effects of or changes in:
  • the possibility that any of the anticipated benefits of the Pending Merger with Xenith will not be realized or will not be realized within the expected time period, the businesses of the Company and Xenith may not be integrated successfully or such integration may be more difficult, time-consuming or costly than expected, the expected revenue synergies and cost savings from the Pending Merger may not be fully realized or realized within the expected time frame, revenues following the Pending Merger may be lower than expected, customer and employee relationships and business operations may be disrupted by the Pending Merger, or obtaining required regulatory and shareholder approvals, or completing the Pending Merger on the expected timeframe, may be more difficult, time-consuming or costly than expected,
  • changes in interest rates,
  • general economic and financial market conditions,
  • the Company's ability to manage its growth or implement its growth strategy,
  • the incremental cost and/or decreased revenues associated with exceeding $10 billion in assets,
  • levels of unemployment in the Bank's lending area,
  • real estate values in the Bank's lending area,
  • an insufficient allowance for loan losses,
  • the quality or composition of the loan or investment portfolios,
  • concentrations of loans secured by real estate, particularly commercial real estate,
  • the effectiveness of the Company's credit processes and management of the Company's credit risk,
  • demand for loan products and financial services in the Company's market area,
  • the Company's ability to compete in the market for financial services,
  • technological risks and developments, and cyber attacks or events,
  • performance by the Company's counterparties or vendors,
  • deposit flows,
  • the availability of financing and the terms thereof,
  • the level of prepayments on loans and mortgage-backed securities,
  • legislative or regulatory changes and requirements,
  • monetary and fiscal policies of the U.S. government including policies of the U.S. Department of the Treasury and the Board of Governors of the Federal Reserve System, and
  • accounting principles and guidelines.

More information on risk factors that could affect the Company's forward-looking statements is available on the Company's website, http://investors.bankatunion.com or the Company's Annual Report on Form 10-K for the year ended December 31, 2016 and other reports filed with the Securities and Exchange Commission ("SEC"). The information on the Company's website is not a part of this press release. All risk factors and uncertainties described in those documents should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. 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.

ADDITIONAL INFORMATION ABOUT THE PENDING MERGER AND WHERE TO FIND IT

In connection with the Pending Merger, the Company will file with the SEC a registration statement on Form S-4 to register the shares of the Company's common stock to be issued to the shareholders of Xenith. The registration statement will include a joint proxy statement of the Company and Xenith and a prospectus of the Company. A definitive joint proxy statement/prospectus will be sent to the shareholders of the Company and Xenith seeking their approval of the Pending Merger and related matters. This release does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval. Before making any voting or investment decision, investors and shareholders of the Company and Xenith are urged to read carefully the entire registration statement and joint proxy statement/prospectus when they become available, including any amendments thereto, because they will contain important information about the Pending Merger. Free copies of these documents may be obtained as described below.

Investors and shareholders of both companies are urged to read the registration statement on Form S-4 and the joint proxy statement/prospectus included within the registration statement and any other relevant documents to be filed with the SEC in connection with the Pending Merger because they will contain important information about the Company, Xenith and the Pending Merger. Investors and shareholders of both companies are urged to review carefully and consider all public filings by the Company and Xenith with the SEC, including but not limited to their Annual Reports on Form 10-K, their proxy statements, their Quarterly Reports on Form 10-Q, and their Current Reports on Form 8-K. Investors and shareholders may obtain free copies of these documents through the website maintained by the SEC at www.sec.gov  Free copies of the joint proxy statement/prospectus and other documents filed with the SEC also may be obtained by directing a request by telephone or mail to Union Bankshares Corporation, 1051 East Cary Street, Suite 1200, Richmond, Virginia 23219, Attention: Investor Relations (telephone: (804) 633-5031), or Xenith Bankshares, Inc., 901 E. Cary Street Richmond, Virginia, 23219, Attention: Thomas W. Osgood (telephone: (804) 433-2200), or by accessing the Company's website at www.bankatunion.com under "Investor Relations" or Xenith's website at www.xenithbank.com under "Investor Relations" under "About Us." The information on the Company's and Xenith's websites is not, and shall not be deemed to be, a part of this release or incorporated into other filings either company makes with the SEC.

The Company and Xenith and their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from the shareholders of the Company and/or Xenith in connection with the Pending Merger. Information about the directors and executive officers of the Company is set forth in the proxy statement for the Company's 2017 annual meeting of shareholders filed with the SEC on March 21, 2017. Information about the directors and executive officers of Xenith is set forth in Xenith's Annual Report on Form 10-K, as amended, filed with the SEC on May 1, 2017. Additional information regarding the interests of these participants and other persons who may be deemed participants in the Pending Merger may be obtained by reading the joint proxy statement/prospectus regarding the Pending Merger when it becomes available. Free copies of these documents may be obtained as described above.
             
UNION BANKSHARES CORPORATION AND SUBSIDIARIES            
KEY FINANCIAL RESULTS            
(Dollars in thousands, except share data)            
(FTE - "Fully Taxable Equivalent")            
    Three Months Ended     Six Months Ended
    6/30/17     3/31/17     6/30/16     6/30/17     6/30/16
Results of Operations   (unaudited)     (unaudited)     (unaudited)     (unaudited)     (unaudited)
Interest and dividend income   $ 81,221       $ 76,640       $ 72,781       $ 157,861       $ 143,530  
Interest expense   12,222       10,073       7,005       22,294       14,023  
Net interest income   68,999       66,567       65,776       135,567       129,507  
Provision for credit losses   2,173       2,122       2,300       4,295       4,904  
Net interest income after provision for credit losses   66,826       64,445       63,476       131,272       124,603  
Noninterest income   18,056       18,839       17,993       36,894       33,907  
Noninterest expenses   59,930       57,395       55,251       117,325       109,523  
Income before income taxes   24,952       25,889       26,218       50,841       48,987  
Income tax expense   6,996       6,765       6,881       13,761       12,689  
Net income   $ 17,956       $ 19,124       $ 19,337       $ 37,080       $ 36,298  
                             
Interest earned on earning assets (FTE) (1)   $ 83,869       $ 79,180       $ 75,232       $ 163,049       $ 148,471  
Net interest income (FTE) (1)   71,647       69,107       68,227       140,755       134,448  
                             
Net income - community bank segment   $ 17,405       $ 19,120       $ 18,798       $ 36,525       $ 35,705  
Net income (loss) - mortgage segment   551       4       539       555       593  
                             
Key Ratios                            
Earnings per common share, diluted   $ 0.41       $ 0.44       $ 0.44       $ 0.85       $ 0.82  
Return on average assets (ROA)   0.82 %     0.92 %     0.98 %     0.87 %     0.93 %
Return on average equity (ROE)   7.02 %     7.68 %     7.88 %     7.34 %     7.39 %
Return on average tangible common equity (ROTCE) (2)   10.15 %     11.20 %     11.60 %     10.66 %     10.86 %
Efficiency ratio   68.84 %     67.20 %     65.96 %     68.03 %     67.02 %
Efficiency ratio (FTE) (1)   66.81 %     65.26 %     64.08 %     66.04 %     65.06 %
Net interest margin   3.49 %     3.52 %     3.70 %     3.51 %     3.69 %
Net interest margin (FTE) (1)   3.62 %     3.66 %     3.84 %     3.64 %     3.83 %
Yields on earning assets (FTE) (1)   4.24 %     4.19 %     4.23 %     4.22 %     4.23 %
Cost of interest-bearing liabilities (FTE) (1)   0.79 %     0.68 %     0.51 %     0.74 %     0.52 %
Cost of funds (FTE) (1)   0.62 %     0.53 %     0.39 %     0.58 %     0.40 %
Net interest margin, core (FTE) (3)   3.54 %     3.58 %     3.76 %     3.56 %     3.76 %
                             
Operating Measures (4)                            
Net operating earnings   $ 20,314       $ 19,124       $ 19,337       $ 39,438       $ 36,298  
Operating earnings per share, diluted   $ 0.46       $ 0.44       $ 0.44       $ 0.90       $ 0.82  
Operating ROA   0.93 %     0.92 %     0.98 %     0.92 %     0.93 %
Operating ROE   7.94 %     7.68 %     7.88 %     7.81 %     7.39 %
Operating ROTCE   11.48 %     11.20 %     11.60 %     11.34 %     10.86 %
Operating efficiency ratio (FTE)   63.75 %     65.26 %     64.08 %     64.50 %     65.06 %
Community bank segment net operating earnings   $ 19,763       $ 19,120       $ 18,798       $ 38,883       $ 35,705  
Community bank segment operating earnings per share, diluted   $ 0.45       $ 0.44       $ 0.43       $ 0.89       $ 0.81  
                             
Per Share Data                            
Earnings per common share, basic   $ 0.41       $ 0.44       $ 0.44       $ 0.85       $ 0.82  
Earnings per common share, diluted   0.41       0.44       0.44       0.85       0.82  
Cash dividends paid per common share   0.20       0.20       0.19       0.40       0.38  
Market value per share   33.90       35.18       24.71       33.90       24.71  
Book value per common share   23.79       23.44       22.87       23.79       22.87  
Tangible book value per common share (2)   16.50       16.12       15.44       16.50       15.44  
Price to earnings ratio, diluted   20.61       19.71       13.96       19.78       14.98  
Price to book value per common share ratio   1.42       1.50       1.08       1.42       1.08  
Price to tangible book value per common share ratio (2)   2.05       2.18       1.60       2.05       1.60  
Weighted average common shares outstanding, basic   43,693,427       43,654,498       43,746,583       43,674,070       43,998,929  
Weighted average common shares outstanding, diluted   43,783,952       43,725,923       43,824,183       43,755,045       44,075,706  
Common shares outstanding at end of period   43,706,000       43,679,947       43,619,867       43,706,000       43,619,867  

           
    As of & For Three Months Ended     As of & For Six Months Ended
    6/30/17     3/31/17     6/30/16     6/30/17     6/30/16
Capital Ratios   (unaudited)     (unaudited)     (unaudited)     (unaudited)     (unaudited)
Common equity Tier 1 capital ratio (5)   9.39 %     9.55 %     9.94 %     9.39 %     9.94 %
Tier 1 capital ratio (5)   10.57 %     10.77 %     11.27 %     10.57 %     11.27 %
Total capital ratio (5)   13.00 %     13.30 %     11.79 %     13.00 %     11.79 %
Leverage ratio (Tier 1 capital to average assets) (5)   9.61 %     9.79 %     10.01 %     9.61 %     10.01 %
Common equity to total assets   11.56 %     11.71 %     12.21 %     11.56 %     12.21 %
Tangible common equity to tangible assets (2)   8.32 %     8.36 %     8.59 %     8.32 %     8.59 %
                             
Financial Condition                            
Assets   $ 8,915,187       $ 8,669,920       $ 8,100,561       $ 8,915,187       $ 8,100,561  
Loans held for investment   6,771,490       6,554,046       5,941,098       6,771,490       5,941,098  
Earning Assets   8,094,574       7,859,563       7,282,137       8,094,574       7,282,137  
Goodwill   298,191       298,191       297,659       298,191       297,659  
Amortizable intangibles, net   17,422       18,965       23,449       17,422       23,449  
Deposits   6,764,434       6,614,195       6,095,826       6,764,434       6,095,826  
Stockholders' equity   1,030,869       1,015,631       989,201       1,030,869       989,201  
Tangible common equity (2)   715,256       698,475       668,093       715,256       668,093  
                             
Loans held for investment, net of deferred fees and costs                            
Construction and land development   $ 799,938       $ 770,287       $ 765,997       $ 799,938       $ 765,997  
Commercial real estate - owner occupied   888,285       870,559       831,880       888,285       831,880  
Commercial real estate - non-owner occupied   1,698,329       1,631,767       1,370,745       1,698,329       1,370,745  
Multifamily real estate   367,257       353,769       337,723       367,257       337,723  
Commercial & Industrial   568,602       576,567       469,054       568,602       469,054  
Residential 1-4 Family   1,066,519       1,057,439       992,457       1,066,519       992,457  
Auto   274,162       271,466       244,575       274,162       244,575  
HELOC   535,088       527,863       519,196       535,088       519,196  
Consumer and all other   573,310       494,329       409,471       573,310       409,471  
Total loans held for investment   $ 6,771,490       $ 6,554,046       $ 5,941,098       $ 6,771,490       $ 5,941,098  
                             
Deposits                            
NOW accounts   $ 1,882,287       $ 1,792,531       $ 1,563,297       $ 1,882,287       $ 1,563,297  
Money market accounts   1,559,895       1,499,585       1,366,451       1,559,895       1,366,451  
Savings accounts   558,472       602,851       598,622       558,472       598,622  
Time deposits of $100,000 and over   580,962       555,431       521,138       580,962       521,138  
Other time deposits   681,248       672,998       653,584       681,248       653,584  
Total interest-bearing deposits   $ 5,262,864       $ 5,123,396       $ 4,703,092       $ 5,262,864       $ 4,703,092  
Demand deposits   1,501,570       1,490,799       1,392,734       1,501,570       1,392,734  
Total deposits   $ 6,764,434       $ 6,614,195       $ 6,095,826       $ 6,764,434       $ 6,095,826  
                             
Averages                            
Assets   $ 8,747,377       $ 8,465,517       $ 7,949,576       $ 8,607,225       $ 7,857,203  
Loans held for investment   6,628,011       6,383,905       5,863,007       6,506,632       5,786,502  
Loans held for sale   28,331       27,359       30,698       27,848       29,001  
Securities   1,229,593       1,207,768       1,202,772       1,218,741       1,194,961  
Earning assets   7,934,405       7,660,937       7,153,627       7,798,427       7,061,307  
Deposits   6,637,742       6,407,281       6,025,545       6,523,148       5,962,475  
Certificates of deposit   1,248,818       1,211,064       1,164,561       1,230,045       1,168,267  
Interest-bearing deposits   5,179,774       5,013,315       4,642,899       5,097,004       4,602,878  
Borrowings   1,023,599       986,645       881,027       1,005,224       848,984  
Interest-bearing liabilities   6,203,373       5,999,960       5,523,926       6,102,228       5,451,862  
Stockholders' equity   1,026,148       1,010,318       987,147       1,018,277       988,281  
Tangible common equity (2)   709,793       692,384       670,503       701,138       672,033  

           
    As of & For Three Months Ended     As of & For Six Months Ended
    6/30/17     3/31/17     6/30/16     6/30/17     6/30/16
Asset Quality   (unaudited)     (unaudited)     (unaudited)     (unaudited)     (unaudited)
Allowance for Loan Losses (ALL)                            
Beginning balance   $ 38,414       $ 37,192       $ 34,399       $ 37,192       $ 34,047  
Add: Recoveries   827       845       660       1,672       1,488  
Less: Charge-offs   3,327       1,633       2,285       4,960       5,265  
Add: Provision for loan losses   2,300       2,010       2,300       4,310       4,804  
Ending balance   $ 38,214       $ 38,414       $ 35,074       $ 38,214       $ 35,074  
                             
ALL / total outstanding loans   0.56 %     0.59 %     0.59 %     0.56 %     0.59 %
Net charge-offs / total average loans   0.15 %     0.05 %     0.11 %     0.10 %     0.13 %
Provision / total average loans   0.14 %     0.13 %     0.16 %     0.13 %     0.16 %
                             
Total PCI Loans   $ 56,167       $ 57,770       $ 67,170       $ 56,167       $ 67,170  
Remaining fair value mark on purchased performing loans   15,382       16,121       19,092       15,382       19,092  
                             
Nonperforming Assets                            
Construction and land development   $ 5,659       $ 6,545       $ 1,604       $ 5,659       $ 1,604  
Commercial real estate - owner occupied   1,279       1,298       1,661       1,279       1,661  
Commercial real estate - non-owner occupied   4,765       2,798             4,765        
Commercial & Industrial   4,281       3,245       263       4,281       263  
Residential 1-4 Family   6,128       5,856       5,448       6,128       5,448  
Auto   270       393       140       270       140  
HELOC   2,059       1,902       1,495       2,059       1,495  
Consumer and all other   133       301       250       133       250  
Nonaccrual loans   $ 24,574       $ 22,338       $ 10,861       $ 24,574       $ 10,861  
Other real estate owned   9,482       9,605       13,381       9,482       13,381  
Total nonperforming assets (NPAs)   $ 34,056       $ 31,943       $ 24,242       $ 34,056       $ 24,242  
Construction and land development   $ 83       $ 16       $ 116       $ 83       $ 116  
Commercial real estate - owner occupied   56       93       439       56       439  
Commercial real estate - non-owner occupied   298       711       723       298       723  
Commercial & Industrial   55             117       55       117  
Residential 1-4 Family   2,369       686       1,302       2,369       1,302  
Auto   35       11       144       35       144  
HELOC   544       680       642       544       642  
Consumer and all other   185       126       50       185       50  
Loans = 90 days and still accruing   $ 3,625       $ 2,323       $ 3,533       $ 3,625       $ 3,533  
Total NPAs and loans = 90 days   $ 37,681       $ 34,266       $ 27,775       $ 37,681       $ 27,775  
NPAs / total outstanding loans   0.50 %     0.49 %     0.41 %     0.50 %     0.41 %
NPAs / total assets   0.38 %     0.37 %     0.30 %     0.38 %     0.30 %
ALL / nonaccrual loans   155.51 %     171.97 %     322.94 %     155.51 %     322.94 %
ALL / nonperforming assets   112.21 %     120.26 %     144.68 %     112.21 %     144.68 %
                             
Past Due Detail                            
Construction and land development   $ 602       $ 630       $ 402       $ 602       $ 402  
Commercial real estate - owner occupied   3,148       878       912       3,148       912  
Commercial real estate - non-owner occupied   1,530       1,487       267       1,530       267  
Multifamily real estate   500                   500        
Commercial & Industrial   1,652       453       2,464       1,652       2,464  
Residential 1-4 Family   2,477       11,615       5,476       2,477       5,476  
Auto   1,562       1,534       1,282       1,562       1,282  
HELOC   1,405       1,490       1,347       1,405       1,347  
Consumer and all other   1,891       1,766       1,364       1,891       1,364  
Loans 30-59 days past due   $ 14,767       $ 19,853       $ 13,514       $ 14,767       $ 13,514  

           
    As of & For Three Months Ended     As of & For Six Months Ended
    6/30/17     3/31/17     6/30/16     6/30/17     6/30/16
Past Due Detail cont'd   (unaudited)     (unaudited)     (unaudited)     (unaudited)     (unaudited)
Construction and land development   $ 26       $ 376       $ 1,177       $ 26       $ 1,177  
Commercial real estate - owner occupied   194                   194        
Commercial real estate - non-owner occupied   571                   571        
Commercial & Industrial   113       126       62       113       62  
Residential 1-4 Family   5,663       2,104       5,033       5,663       5,033  
Auto   240       250       377       240       377  
HELOC   964       365       1,228       964       1,228  
Consumer and all other   1,242       1,460       412       1,242       412  
Loans 60-89 days past due   $ 9,013       $ 4,681       $ 8,289       $ 9,013       $ 8,289  
                             
Troubled Debt Restructurings                            
Performing   $ 14,947       $ 14,325       $ 11,885       $ 14,947       $ 11,885  
Nonperforming   4,454       4,399       1,658       4,454       1,658  
Total troubled debt restructurings   $ 19,401       $ 18,724       $ 13,543       $ 19,401       $ 13,543  
                             
Alternative Performance Measures (non-GAAP)                            
Net interest income (FTE) & Core Net Interest Income (FTE)                            
Net interest income (GAAP)   $ 68,999       $ 66,567       $ 65,776       $ 135,567       $ 129,507  
FTE adjustment   2,648       2,540       2,451       5,188       4,941  
Net interest income (FTE) (non-GAAP) (1)   $ 71,647       $ 69,107       $ 68,227       $ 140,755       $ 134,448  
Less: Net accretion of acquisition fair value marks   1,617       1,493       1,402       3,110       2,548  
Core net interest income (FTE) (non-GAAP) (3)   $ 70,030       $ 67,614       $ 66,825       $ 137,645       $ 131,900  
Average earning assets   7,934,405       7,660,937       7,153,627       7,798,427       7,061,307  
Net interest margin   3.49 %     3.52 %     3.70 %     3.51 %     3.69 %
Net interest margin (FTE)   3.62 %     3.66 %     3.84 %     3.64 %     3.83 %
Core net interest margin (FTE)   3.54 %     3.58 %     3.76 %     3.56 %     3.76 %
                             
Tangible Assets                            
Ending assets (GAAP)   $ 8,915,187       $ 8,669,920       $ 8,100,561       $ 8,915,187       $ 8,100,561  
Less: Ending goodwill   298,191       298,191       297,659       298,191       297,659  
Less: Ending amortizable intangibles   17,422       18,965       23,449       17,422       23,449  
Ending tangible assets (non-GAAP)   $ 8,599,574       $ 8,352,764       $ 7,779,453       $ 8,599,574       $ 7,779,453  
                             
Tangible Common Equity (2)                            
Ending equity (GAAP)   $ 1,030,869       $ 1,015,631       $ 989,201       $ 1,030,869       $ 989,201  
Less: Ending goodwill   298,191       298,191       297,659       298,191       297,659  
Less: Ending amortizable intangibles   17,422       18,965       23,449       17,422       23,449  
Ending tangible common equity (non-GAAP)   $ 715,256       $ 698,475       $ 668,093       $ 715,256       $ 668,093  
                             
Average equity (GAAP)   $ 1,026,148       $ 1,010,318       $ 987,147       $ 1,018,277       $ 988,281  
Less: Average goodwill   298,191       298,191       294,886       298,191       294,204  
Less: Average amortizable intangibles   18,164       19,743       21,758       18,948       22,044  
Average tangible common equity (non-GAAP)   $ 709,793       $ 692,384       $ 670,503       $ 701,138       $ 672,033  
                             
Operating Measures (4)                            
Net income (GAAP)   $ 17,956       $ 19,124       $ 19,337       $ 37,080       $ 36,298  
Plus: Acquisition and conversion costs, net of tax   2,358                   2,358        
Net operating earnings (non-GAAP)   $ 20,314       $ 19,124       $ 19,337       $ 39,438       $ 36,298  
                             
Noninterest expense (GAAP)   $ 59,930       $ 57,395       $ 55,251       $ 117,325       $ 109,523  
Less: Acquisition and conversion costs   2,744                   2,744        
Operating noninterest expense (non-GAAP)   $ 57,186       $ 57,395       $ 55,251       $ 114,581       $ 109,523  
                             
Net interest income (FTE) (non-GAAP) (1)   $ 71,647       $ 69,107       $ 68,227       $ 140,755       $ 134,448  
Noninterest income (GAAP)   18,056       18,839       17,993       36,894       33,907  
                             
Efficiency ratio   68.84 %     67.20 %     65.96 %     68.03 %     67.02 %
Efficiency ratio (FTE) (1)   66.81 %     65.26 %     64.08 %     66.04 %     65.06 %
Operating efficiency ratio (FTE)   63.75 %     65.26 %     64.08 %     64.50 %     65.06 %

           
    As of & For Three Months Ended     As of & For Six Months Ended
    6/30/17     3/31/17     6/30/16     6/30/17     6/30/16
Alternative Performance Measures (non-GAAP) cont'd   (unaudited)     (unaudited)     (unaudited)     (unaudited)     (unaudited)
Operating Measures cont'd (4)                            
Community bank segment net income (GAAP)   $ 17,405       $ 19,120       $ 18,798       $ 36,525       $ 35,705  
Plus: Acquisition and conversion costs, net of tax   2,358                   2,358        
Community bank segment net operating earnings (non-GAAP)   $ 19,763       $ 19,120       $ 18,798       $ 38,883       $ 35,705  
                             
Community bank segment earnings per share, diluted (GAAP)   $ 0.40       $ 0.44       $ 0.43       $ 0.84       $ 0.81  
Community bank segment operating earnings per share, diluted (non-GAAP)   0.45       0.44       0.43       0.89       0.81  
                             
Mortgage Origination Volume                            
Refinance Volume   $ 31,958       $ 34,331       $ 47,033       $ 66,289       $ 84,337  
Construction Volume   19,909       22,669       21,751       42,579       36,645  
Purchase Volume   84,713       43,216       71,297       127,928       117,310  
Total Mortgage loan originations   $ 136,580       $ 100,216       $ 140,081       $ 236,796       $ 238,292  
% of originations that are refinances   23.4 %     34.3 %     33.6 %     28.0 %     35.4 %
                             
Other Data                            
End of period full-time employees   1,432       1,412       1,423       1,432       1,423  
Number of full-service branches   112       113       120       112       120  
Number of full automatic transaction machines (ATMs)   174       184       200       174       200  

(1) Net interest income (FTE), which is used in computing net interest margin (FTE) and efficiency ratio (FTE), provides valuable additional insight into the net interest margin and the efficiency ratio by adjusting for differences in tax treatment of interest income sources.  The entire FTE adjustment is attributable to interest income on earning assets, which is used in computing yield on earning assets.  Interest expense and the related cost of interest-bearing liabilities and cost of funds ratios are not affected by the FTE components.

(2)  Tangible common equity is used in the calculation of certain profitability, capital, and per share ratios.  The Company believes tangible common equity and the related ratios are meaningful measures of capital adequacy because they provide a meaningful base for period-to-period and company-to-company comparisons, which the Company believes will assist investors in assessing the capital of the Company and its ability to absorb potential losses.

(3) Core net interest income (FTE), which is used in computing core net interest margin (FTE), provides valuable additional insight into the net interest margin by adjusting for differences in tax treatment of interest income sources as well as the net accretion of acquisition-related fair value marks.

(4) Operating measures exclude acquisition and conversion costs unrelated to the Company's normal operations. Such costs were only incurred during the second quarter of 2017; thus each of these operating measures is equivalent to the corresponding GAAP financial measure for the three months ended March 31, 2017 and June 30, 2016, and for the six months ended June 30, 2016. The Company believes these measures are useful to investors as they exclude certain costs resulting from acquisition activity and allow investors to more clearly see the combined economic results of the organization's operations.

(5) All ratios at June 30, 2017 are estimates and subject to change pending the Company's filing of its FR Y9-C. All other periods are presented as filed.
       
UNION BANKSHARES CORPORATION AND SUBSIDIARIES      
CONSOLIDATED BALANCE SHEETS      
(Dollars in thousands, except share data)                
    June 30,     December 31,     June 30,
    2017     2016     2016
ASSETS   (unaudited)           (unaudited)
Cash and cash equivalents:                
Cash and due from banks   $ 135,759       $ 120,758       $ 128,896  
Interest-bearing deposits in other banks   45,473       58,030       87,887  
Federal funds sold   678       449       251  
Total cash and cash equivalents   181,910       179,237       217,034  
Securities available for sale, at fair value   960,537       946,764       949,663  
Securities held to maturity, at carrying value   205,630       201,526       202,917  
Restricted stock, at cost   69,631       60,782       62,206  
Loans held for sale, at fair value   41,135       36,487       38,114  
Loans held for investment, net of deferred fees and costs   6,771,490       6,307,060       5,941,098  
Less allowance for loan losses   38,214       37,192       35,074  
Net loans held for investment   6,733,276       6,269,868       5,906,024  
Premises and equipment, net   121,842       122,027       124,032  
Other real estate owned, net of valuation allowance   9,482       10,084       13,381  
Goodwill   298,191       298,191       297,659  
Amortizable intangibles, net   17,422       20,602       23,449  
Bank owned life insurance   180,110       179,318       176,413  
Other assets   96,021       101,907       89,669  
Total assets   $ 8,915,187       $ 8,426,793       $ 8,100,561  
LIABILITIES                
Noninterest-bearing demand deposits   $ 1,501,570       $ 1,393,625       $ 1,392,734  
Interest-bearing deposits   5,262,864       4,985,864       4,703,092  
Total deposits   6,764,434       6,379,489       6,095,826  
Securities sold under agreements to repurchase   34,543       59,281       121,262  
Other short-term borrowings   602,000       517,500       557,000  
Long-term borrowings   434,260       413,308       274,547  
Other liabilities   49,081       56,183       62,725  
Total liabilities   7,884,318       7,425,761       7,111,360  
Commitments and contingencies                
STOCKHOLDERS' EQUITY                
Common stock, $1.33 par value, shares authorized 100,000,000; issued and outstanding, 43,706,000 shares, 43,609,317 shares, and 43,619,867 shares, respectively.   57,643       57,506       57,537  
Additional paid-in capital   607,666       605,397       605,018  
Retained earnings   361,552       341,938       317,747  
Accumulated other comprehensive income   4,008       (3,809 )     8,899  
Total stockholders' equity   1,030,869       1,001,032       989,201  
Total liabilities and stockholders' equity   $ 8,915,187       $ 8,426,793       $ 8,100,561  

             
UNION BANKSHARES CORPORATION AND SUBSIDIARIES            
CONSOLIDATED STATEMENTS OF INCOME            
(Dollars in thousands, except share data)
    Three Months Ended     Six Months Ended
    June 30,     March 31,     June 30,     June 30,     June 30,
    2017     2017     2016     2017     2016
Interest and dividend income:   (unaudited)     (unaudited)     (unaudited)     (unaudited)     (unaudited)
Interest and fees on loans   $ 72,612       $ 68,084       $ 64,747       $ 140,696       $ 127,694  
Interest on deposits in other banks   115       71       65       186       112  
Interest and dividends on securities:                            
Taxable   4,982       4,923       4,510       9,905       8,826  
Nontaxable   3,512       3,562       3,459       7,074       6,898  
Total interest and dividend income   81,221       76,640       72,781       157,861       143,530  
Interest expense:                            
Interest on deposits   6,100       5,077       4,197       11,176       8,393  
Interest on short-term borrowings   1,400       950       710       2,350       1,332  
Interest on long-term borrowings   4,722       4,046       2,098       8,768       4,298  
Total interest expense   12,222       10,073       7,005       22,294       14,023  
Net interest income   68,999       66,567       65,776       135,567       129,507  
Provision for credit losses   2,173       2,122       2,300       4,295       4,904  
Net interest income after provision for credit losses   66,826       64,445       63,476       131,272       124,603  
Noninterest income:                            
Service charges on deposit accounts   4,963       4,829       4,754       9,792       9,488  
Other service charges and fees   4,637       4,408       4,418       9,045       8,574  
Fiduciary and asset management fees   2,725       2,794       2,333       5,519       4,471  
Mortgage banking income, net   2,793       2,025       2,972       4,818       5,117  
Gains on securities transactions, net   117       481       3       598       146  
Bank owned life insurance income   1,335       2,125       1,361       3,460       2,734  
Loan-related interest rate swap fees   1,031       1,180       1,091       2,211       1,753  
Other operating income   455       997       1,061       1,451       1,624  
Total noninterest income   18,056       18,839       17,993       36,894       33,907  
Noninterest expenses:                            
Salaries and benefits   30,561       32,168       28,519       62,730       56,567  
Occupancy expenses   4,718       4,903       4,809       9,621       9,785  
Furniture and equipment expenses   2,720       2,603       2,595       5,323       5,232  
Printing, postage, and supplies   1,406       1,150       1,280       2,556       2,419  
Communications expense   872       910       927       1,782       2,016  
Technology and data processing   3,927       3,900       3,608       7,827       7,422  
Professional services   2,092       1,658       2,548       3,750       4,537  
Marketing and advertising expense   2,279       1,740       1,924       4,019       3,863  
FDIC assessment premiums and other insurance   947       706       1,379       1,652       2,741  
Other taxes   2,022       2,022       1,607       4,043       3,225  
Loan-related expenses   1,281       1,329       1,229       2,610       2,107  
OREO and credit-related expenses   342       541       894       884       1,463  
Amortization of intangible assets   1,544       1,637       1,745       3,180       3,625  
Training and other personnel costs   1,043       969       905       2,012       1,649  
Acquisition and conversion costs   2,744                   2,744        
Other expenses   1,432       1,159       1,282       2,592       2,872  
Total noninterest expenses   59,930       57,395       55,251       117,325       109,523  
Income before income taxes   24,952       25,889       26,218       50,841       48,987  
Income tax expense   6,996       6,765       6,881       13,761       12,689  
Net income   $ 17,956       $ 19,124       $ 19,337       $ 37,080       $ 36,298  
Basic earnings per common share   $ 0.41       $ 0.44       $ 0.44       $ 0.85       $ 0.82  
Diluted earnings per common share   $ 0.41       $ 0.44       $ 0.44       $ 0.85       $ 0.82  

UNION BANKSHARES CORPORATION AND SUBSIDIARIES
SEGMENT FINANCIAL INFORMATION
(Dollars in thousands)                      
    Community Bank     Mortgage     Eliminations     Consolidated
Three Months Ended June 30, 2017 (unaudited)                      
Net interest income   $ 68,580       $ 419       $       $ 68,999  
Provision for credit losses   2,184       (11 )           2,173  
Net interest income after provision for credit losses   66,396       430             66,826  
Noninterest income   15,203       2,993       (140 )     18,056  
Noninterest expenses   57,496       2,574       (140 )     59,930  
Income before income taxes   24,103       849             24,952  
Income tax expense   6,698       298             6,996  
Net income   17,405       551             17,956  
Plus: Acquisition and conversion costs, net of tax   2,358                   2,358  
Net operating earnings (non-GAAP)   $ 19,763       $ 551       $       $ 20,314  
Total assets   $ 8,904,819       $ 105,429       $ (95,061 )     $ 8,915,187  
                       
Three Months Ended March 31, 2017 (unaudited)                      
Net interest income   $ 66,234       $ 333       $       $ 66,567  
Provision for credit losses   2,104       18             2,122  
Net interest income after provision for credit losses   64,130       315             64,445  
Noninterest income   16,757       2,223       (141 )     18,839  
Noninterest expenses   55,014       2,522       (141 )     57,395  
Income before income taxes   25,873       16             25,889  
Income tax expense   6,753       12             6,765  
Net income   $ 19,120       $ 4       $       $ 19,124  
Total assets   $ 8,660,987       $ 76,818       $ (67,885 )     $ 8,669,920  
                       
Three Months Ended June 30, 2016 (unaudited)                      
Net interest income   $ 65,478       $ 298       $       $ 65,776  
Provision for credit losses   2,260       40             2,300  
Net interest income after provision for credit losses   63,218       258             63,476  
Noninterest income   14,940       3,207       (154 )     17,993  
Noninterest expenses   52,766       2,639       (154 )     55,251  
Income before income taxes   25,392       826             26,218  
Income tax expense   6,594       287             6,881  
Net income   $ 18,798       $ 539       $       $ 19,337  
Total assets   $ 8,094,176       $ 75,802       $ (69,417 )     $ 8,100,561  
                       
Six Months Ended June 30, 2017 (unaudited)                      
Net interest income   $ 134,816       $ 751       $       $ 135,567  
Provision for credit losses   4,288       7             4,295  
Net interest income after provision for credit losses   130,528       744             131,272  
Noninterest income   31,959       5,216       (281 )     36,894  
Noninterest expenses   112,510       5,096       (281 )     117,325  
Income before income taxes   49,977       864             50,841  
Income tax expense   13,452       309             13,761  
Net income   36,525       555             37,080  
Plus: Acquisition and conversion costs, net of tax   2,358                   2,358  
Net operating earnings (non-GAAP)   $ 38,883       $ 555       $       $ 39,438  
Total assets   $ 8,904,819       $ 105,429       $ (95,061 )     $ 8,915,187  
                       
Six Months Ended June 30, 2016 (unaudited)                      
Net interest income   $ 128,903       $ 604       $       $ 129,507  
Provision for credit losses   4,760       144             4,904  
Net interest income after provision for credit losses   124,143       460             124,603  
Noninterest income   28,548       5,684       (325 )     33,907  
Noninterest expenses   104,610       5,238       (325 )     109,523  
Income before income taxes   48,081       906             48,987  
Income tax expense   12,376       313             12,689  
Net income   $ 35,705       $ 593       $       $ 36,298  
Total assets   $ 8,094,176       $ 75,802       $ (69,417 )     $ 8,100,561  

 
AVERAGE BALANCES, INCOME AND EXPENSES, YIELDS AND RATES (TAXABLE EQUIVALENT BASIS)
    For the Quarter Ended
    June 30, 2017     March 31, 2017
    AverageBalance     InterestIncome /Expense     Yield /Rate (1)     AverageBalance     InterestIncome /Expense     Yield /Rate (1)
Assets:   (unaudited)     (unaudited)
Securities:                                  
Taxable   $ 768,648       $ 4,982       2.60 %     $ 746,359       $ 4,923       2.68 %
Tax-exempt   460,945       5,403       4.70 %     461,409       5,480       4.82 %
Total securities   1,229,593       10,385       3.39 %     1,207,768       10,403       3.49 %
Loans, net (2) (3)   6,628,011       73,073       4.42 %     6,383,905       68,503       4.35 %
Other earning assets   76,801       411       2.15 %     69,264       274       1.60 %
Total earning assets   7,934,405       $ 83,869       4.24 %     7,660,937       $ 79,180       4.19 %
Allowance for loan losses   (38,577 )                 (37,898 )            
Total non-earning assets   851,549                   842,478              
Total assets   $ 8,747,377                   $ 8,465,517              
                                   
Liabilities and Stockholders' Equity:                                  
Interest-bearing deposits:                                  
Transaction and money market accounts   $ 3,367,008       $ 2,729       0.33 %     $ 3,205,692       $ 1,969       0.25 %
Regular savings   563,948       152       0.11 %     596,559       191       0.13 %
Time deposits   1,248,818       3,219       1.03 %     1,211,064       2,917       0.98 %
Total interest-bearing deposits   5,179,774       6,100       0.47 %     5,013,315       5,077       0.41 %
Other borrowings (4)   1,023,599       6,122       2.40 %     986,645       4,996       2.05 %
Total interest-bearing liabilities   6,203,373       12,222       0.79 %     5,999,960       10,073       0.68 %
                                   
Noninterest-bearing liabilities:                                  
Demand deposits   1,457,968                   1,393,966              
Other liabilities   59,888                   61,273              
Total liabilities   7,721,229                   7,455,199              
Stockholders' equity   1,026,148                   1,010,318              
Total liabilities and stockholders' equity   $ 8,747,377                   $ 8,465,517              
                                   
Net interest income         $ 71,647                   $ 69,107        
                                   
Interest rate spread (5)               3.45 %                 3.51 %
Cost of funds               0.62 %                 0.53 %
Net interest margin (6)               3.62 %                 3.66 %
                                   
(1) Rates and yields are annualized and calculated from actual, not rounded, amounts in thousands, which appear above.
(2) Nonaccrual loans are included in average loans outstanding.
(3) Interest income on loans includes $1.6 million and $1.4 million for the three months ended June 30, 2017 and March 31, 2017, respectively, in accretion of the fair market value adjustments related to acquisitions.
(4) Interest expense on borrowings includes $47,000 and $48,000 for the three months ended June 30, 2017 and March 31, 2017, respectively, in accretion of the fair market value adjustments related to acquisitions.
(5) Income and yields are reported on a taxable equivalent basis using the statutory federal corporate tax rate of 35%.
(6) Core net interest margin excludes purchase accounting adjustments and was 3.54% and 3.58% for  the three months ended June 30, 2017 and March 31, 2017, respectively.

 
Contact:Robert M. Gorman - (804) 523-7828Executive Vice President / Chief Financial Officer

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