Union Bankshares Reports Fourth Quarter And Full Year Results And Declares Quarterly Dividend

RICHMOND, Va., Jan. 23, 2018 (GLOBE NEWSWIRE) -- Union Bankshares Corporation (the "Company" or "Union") (NASDAQ:UBSH) today reported net income of $15.2 million and earnings per share of $0.35 for its fourth quarter ended December 31, 2017.  These results represent a decrease of $5.5 million, or 26.5%, and $0.12 per share, or 25.5%, compared to net income and earnings per share, respectively, from the third quarter of 2017.  Net operating earnings (1) were $22.8 million and operating earnings per share (1) were $0.52 for its fourth quarter ended December 31, 2017; these operating results exclude $1.4 million in after-tax merger-related costs and $6.3 million in nonrecurring tax expenses related to the Tax Cuts and Jobs Act (the "Tax Act").  The Company's net operating earnings and operating earnings per share for the fourth quarter of 2017 represent increases of $1.5 million, or 7.0%, and $0.03, or 6.1%, respectively, in each case compared to the third quarter of 2017.

For the year ended December 31, 2017, net income was $72.9 million and earnings per share were $1.67.  The Company's net income and earnings per share for the year ended December 31, 2017 represent a decrease of 5.9% and 5.6%, respectively, compared to the net income and earnings per share for the year ended December 31, 2016.  Net operating earnings (1) were $83.6 million and operating earnings per share (1) were $1.91 for the year ended December 31, 2017; these operating results exclude $4.4 million in after-tax merger-related costs and $6.3 million in nonrecurring tax expenses related to the Tax Act.  The Company's net operating earnings and operating earnings per share for 2017 represent increases of $6.1 million, or 7.9%, and $0.14, or 7.9%, respectively, in each case compared to the year ended December 31, 2016.

These fourth quarter and full year results of the Company do not include the financial results of Xenith Bankshares, Inc. ("Xenith"), which the Company acquired on January 1, 2018, and are prior to the effective date of the merger of Xenith into the Company ("the Merger").

Union also declared a quarterly dividend of $0.21 per share payable on February 20, 2018 to shareholders of record as of February 6, 2018.

" As I look back, 2017 was a year of significant progress and change for Union.  We started off 2017 with a well-planned and well-executed CEO transition and added depth and talent to our leadership team as the year progressed.  We finished the year with our transformation to Virginia's regional bank upon the closing of the Xenith acquisition on January 1, 2018," said John C. Asbury, president and chief executive officer of Union Bankshares Corporation.  " The combination of Union and Xenith was perfectly aligned to our previously stated 2017 priorities and gives the Company a growth platform in Virginia, Maryland and North Carolina.

Both Union and Xenith also finished the year with a solid fourth quarter performance headlined by strong loan growth, reinforcing our belief that the merger is off to a great start and will unleash the potential of this uniquely valuable franchise.

In 2018, the Company is focused on six priorities, three of which continue from 2017.  Our 2018 priorities are, 1) integrating Xenith into Union, 2) diversifying our loan portfolio and revenue streams, 3) growing core funding, 4) becoming more efficient, 5) creating a more distinct and enduring brand and 6) managing to higher levels of performance.  We are intensely focused on accelerating the achievement of these priorities and generating top-tier financial performance for our shareholders."

Select highlights for the fourth quarter of 2017 include:
  • Performance metrics linked quarter
    • Return on Average Assets ("ROA") was 0.66% compared to 0.91% in the third quarter; operating ROA (1) was 1.00% compared to 0.94% in the third quarter.
    • Return on Average Equity ("ROE") was 5.75% compared to 7.90% in the third quarter; operating ROE (1) was 8.63% compared to 8.15% in the third quarter.
    • Return on Average Tangible Common Equity ("ROTCE") was 8.20% compared to 11.34% in the third quarter; operating ROTCE (1) was 12.32% compared to 11.70% in the third quarter.
    • Efficiency ratio (FTE) was 64.2% compared to 62.9% in the third quarter; operating efficiency ratio (1) was 62.1%, which was consistent with the third quarter.
  • Segment results linked quarter
    • Net income for the community bank segment was $15.0 million, or $0.34 per share, compared to $20.3 million, or $0.46 per share, in the third quarter; operating earnings for the community bank segment were $22.5 million, or $0.51 per share, compared to $21.0 million, or $0.48 per share, in the third quarter.
    • Net income for the mortgage segment was $199,000 compared to $347,000 in the third quarter; operating earnings for the mortgage segment were $329,000 compared to $347,000 in the third quarter.
  • Balance sheet linked quarter and prior year
    • Period-end loans held for investment grew $242.8 million, or 14.1% (annualized), from September 30, 2017 and increased $834.4 million, or 13.2%, from December 31, 2016.  Average loans held for investment increased $139.8 million, or 8.2% (annualized), from the prior quarter.
    • Period-end deposits increased $109.9 million, or 6.4% (annualized), from September 30, 2017 and grew $612.2 million, or 9.6%, from December 31, 2016. Average deposits increased $158.1 million, or 9.3% (annualized), from the prior quarter.

(1) For a reconciliation of the non-GAAP operating measures that exclude merger-related costs and nonrecurring tax expenses unrelated to the Company's normal operations, see Alternative Performance Measures (non-GAAP) section of the Key Financial Results. Such costs were only incurred during 2017; thus each of these operating measures is equivalent to the corresponding GAAP financial measure for the three months and year ended December 31, 2016.

NET INTEREST INCOME

For the fourth quarter of 2017, net interest income was $73.4 million, an increase of $2.2 million from the third quarter of 2017.  Tax-equivalent net interest income was $76.2 million in the fourth quarter of 2017, an increase of $2.3 million from the third quarter of 2017. The increases in both net interest income and tax-equivalent net interest income were primarily driven by earning asset growth during the fourth quarter of 2017 as well as higher earning asset yields.  The fourth quarter net interest margin increased 5 basis points to 3.51% from 3.46% in the previous quarter, while the tax-equivalent net interest margin also increased 5 basis points to 3.64% from 3.59% during the same periods.  The increase in the tax-equivalent net interest margin was principally due to the 7 basis point increase in the tax-equivalent yield on earning assets, partially offset by the 2 basis point increase in tax-equivalent cost of funds.

The Company's tax-equivalent net interest margin includes the impact of acquisition accounting fair value adjustments.  During the fourth quarter of 2017, net accretion related to acquisition accounting increased $425,000, or 24.9%, from the prior quarter to $2.1 million for the quarter ended December 31, 2017.  The third and fourth quarters of 2017 as well as the remaining estimated net accretion impact are reflected in the following table (dollars in thousands):

  Loan Accretion     Borrowings Accretion (Amortization)     Total
For the quarter ended September 30, 2017                                                                             $ 1,662    $ 47      $        1,709  
For the quarter ended December 31, 2017 2,107   27     2,134  
For the years ending (estimated) (1):          
2018 4,544   (143 )   4,401  
2019 3,371   (286 )   3,085  
2020 2,825   (301 )   2,524  
2021 2,259   (316 )   1,943  
2022 1,815   (332 )   1,483  
Thereafter 6,493   (4,974 )   1,519  

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

ASSET QUALITY/LOAN LOSS PROVISION

OverviewDuring the fourth quarter of 2017, the Company experienced declines in nonperforming asset balances from the prior quarter, primarily related to sales and valuation adjustments of other real estate owned ("OREO").  Past due loan levels at December 31, 2017 improved compared to the past due loans levels at September 30, 2017 and December 31, 2016. The loan loss provision and the allowance for loan losses ("ALL") increased from the prior quarter due to loan growth in the fourth quarter of 2017.

All nonaccrual and past due loan metrics discussed below exclude purchased credit impaired ("PCI") loans totaling $39.0 million (net of fair value mark of $8.9 million).

Nonperforming Assets ("NPAs")At December 31, 2017, NPAs totaled $28.4 million, a decline of $507,000, or 1.8%, from September 30, 2017 and an increase of $8.3 million, or 41.5%, from December 31, 2016.  In addition, NPAs as a percentage of total outstanding loans declined 2 basis points from 0.42% at September 30, 2017 and increased 8 basis points from 0.32% at December 31, 2016 to 0.40% at December 31, 2017.  As the Company's NPAs have been at historic lows over the last several quarters, certain changes from quarter to quarter might stand out in comparison to one another but have an insignificant impact on the Company's overall asset quality position.  The following table shows a summary of asset quality balances at the quarter ended (dollars in thousands):
  December 31,   September 30,   June 30,   March 31,   December 31,
  2017   2017   2017   2017   2016
Nonaccrual loans                                                      $ 21,743     $ 20,122     $ 24,574     $ 22,338     $ 9,973  
Foreclosed properties 5,253     6,449     6,828     6,951     7,430  
Former bank premises 1,383     2,315     2,654     2,654     2,654  
Total nonperforming assets $ 28,379     $ 28,886     $ 34,056     $ 31,943     $ 20,057  
 

The following table shows the activity in nonaccrual loans for the quarter ended (dollars in thousands):
  December 31,     September 30,     June 30,     March 31,     December 31,
  2017   2017   2017   2017   2016
Beginning Balance $ 20,122     $ 24,574     $ 22,338     $ 9,973     $ 12,677  
Net customer payments (768 )   (4,642 )   (1,498 )   (1,068 )   (1,451 )
Additions 4,335     4,114     5,979     13,557     1,094  
Charge-offs (1,305 )   (3,376 )   (2,004 )   (97 )   (1,216 )
Loans returning to accruing status                              (448 )       (134 )   (27 )   (1,039 )
Transfers to OREO (193 )   (548 )   (107 )       (92 )
Ending Balance $ 21,743     $ 20,122     $ 24,574     $ 22,338     $ 9,973  
 

The following table shows the activity in OREO for the quarter ended (dollars in thousands):
  December 31,     September 30,     June 30,     March 31,     December 31,
  2017   2017   2017   2017   2016
Beginning Balance $ 8,764     $ 9,482     $ 9,605     $ 10,084     $ 10,581  
Additions of foreclosed property                              325     621     132         859  
Valuation adjustments (1,046 )   (588 )   (19 )   (238 )   (138 )
Proceeds from sales (1,419 )   (648 )   (272 )   (277 )   (1,282 )
Gains (losses) from sales 12     (103 )   36     36     64  
Ending Balance $ 6,636     $ 8,764     $ 9,482     $ 9,605     $ 10,084  
 

Past Due LoansPast due loans still accruing interest totaled $27.8 million, or 0.39% of total loans, at December 31, 2017 compared to $34.3 million, or 0.50% of total loans, at September 30, 2017 and $27.9 million, or 0.44% of total loans, at December 31, 2016.  Of the total past due loans still accruing interest, $3.5 million, or 0.05% of total loans, were loans past due 90 days or more at December 31, 2017, compared to $4.5 million, or 0.07% of total loans, at September 30, 2017 and $3.0 million, or 0.05% of total loans, at December 31, 2016.

Net Charge-offsFor the fourth quarter of 2017, net charge-offs were $2.7 million, or 0.15% of total average loans on an annualized basis, compared to $4.1 million, or 0.24%, for the prior quarter and $824,000, or 0.05%, for the same quarter last year.  Of the net charge-offs in the fourth quarter of 2017, the majority were previously considered impaired. For the year ended December 31, 2017, net charge-offs were $10.1 million, or 0.15% of total average loans, compared to $5.5 million, or 0.09%, for the year ended December 31, 2016.

Provision for Loan LossesThe provision for loan losses for the fourth quarter of 2017 was $3.7 million, an increase of $661,000 compared to the previous quarter and an increase of $2.2 million compared to the same quarter in 2016.  The increase in provision for loan losses was primarily driven by higher loan balances in the fourth quarter of 2017.

Allowance for Loan LossesThe ALL increased $1.0 million from September 30, 2017 to $38.2 million at December 31, 2017 primarily due to loan growth during the quarter.  The ALL as a percentage of the total loan portfolio was 0.54% at December 31, 2017, 0.54% at September 30, 2017, and 0.59% at December 31, 2016.

The ratio of the ALL to nonaccrual loans was 175.7% at December 31, 2017, compared to 184.7% at September 30, 2017 and 372.9% at December 31, 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 $293,000, or 1.7%, to $17.2 million for the quarter ended December 31, 2017 from $17.5 million in the prior quarter, primarily driven by lower mortgage banking income of $187,000, lower insurance-related income of $127,000, and reduced levels of gains on sales of securities of $166,000, partially offset by increases in customer-related fee income of $214,000.

Mortgage banking income decreased $187,000, or 8.1%, to $2.1 million in the fourth quarter of 2017 compared to $2.3 million in the third quarter of 2017, related to declines in mortgage loan originations and higher unrealized losses on mortgage banking derivatives in the fourth quarter of 2017 compared to the third quarter.  Mortgage loan originations declined by $5.4 million, or 4.3%, in the fourth quarter to $121.9 million from $127.3 million in the third quarter of 2017.  The majority of the decrease was related to purchase-money mortgage loans, which declined by $11.9 million from the prior quarter.   Of the mortgage loan originations in the fourth quarter of 2017, 34.4% were refinances compared with 28.0% in the prior quarter.

NONINTEREST EXPENSE

Noninterest expense increased $2.4 million, or 4.3%, to $59.9 million for the quarter ended December 31, 2017 from $57.5 million in the prior quarter.  Excluding merger-related costs of $1.9 million and $732,000 in the fourth and third quarters of 2017, respectively, operating noninterest expense increased $1.3 million when compared to the third quarter of 2017.  Incentive compensation and profit sharing expenses increased by $420,000 for the fourth quarter of 2017 compared to the prior quarter.  OREO and credit-related expenses increased $602,000 primarily due to higher valuation adjustments of $458,000 as well as higher foreclosed property legal costs.  During the fourth quarter of 2017, the Company entered into a contract to sell a long-held property that includes developed residential lots, a golf course, and undeveloped land and as a result recorded a valuation adjustment of $980,000.  In addition, professional fees increased $205,000 related to higher consulting and legal fees, while technology costs increased $194,000 due to higher data processing fees.

INCOME TAXES

On December 22, 2017, the Tax Act was signed into law. Among other things, the Tax Act permanently reduced the corporate tax rate to 21% from the prior maximum rate of 35%, effective for tax years including or commencing January 1, 2018. As a result of the reduction of the corporate tax rate to 21%, companies are required to revalue their deferred tax assets and liabilities as of the date of enactment, with resulting tax effects accounted for in the fourth quarter of 2017.  The Company continues to evaluate the impact on its 2017 tax expense of the revaluation required by the lower corporate tax rate implemented by the Tax Act, which management has estimated to fall between $5.0 million and $8.0 million.  During the fourth quarter of 2017, the Company recorded $6.3 million in additional tax expense based on the Company's preliminary analysis of the impact of the Tax Act.  The Company's preliminary estimate of the impact of the Tax Act is based on currently available information and interpretation of its provisions.  The actual results may differ from the current estimate due to, among other things, further guidance that may be issued by U.S. tax authorities or regulatory bodies and/or changes in interpretations and assumptions that the Company has preliminarily made.   The Company's evaluation of the impact of the Tax Act is subject to refinement for up to one year after enactment.

During the fourth quarter of 2017, the Company recorded other net tax adjustments of $2.5 million as a reduction to tax expense, primarily related to state net operating losses for which it had previously reserved in prior years.  In assessing the ability to realize deferred tax assets, management considered the scheduled reversal of temporary differences, projected future taxable income, and tax planning strategies. Based on its latest analysis, at December 31, 2017, management concluded that it is more likely than not that the Company would be able to fully realize its deferred tax asset related to net operating losses generated at the state level.

The effective tax rate for the three months ended December 31, 2017 was 44.3% compared to 26.7% for the three months ended September 30, 2017.  The increase in the effective tax rate was related to the impact of the Tax Act, tax-exempt interest income being a smaller percentage of pre-tax income in the fourth quarter of 2017 compared to the prior quarter, the impact of additional nondeductible merger-related costs recognized in the fourth quarter of 2017.

BALANCE SHEET

At December 31, 2017, total assets were $9.3 billion, an increase of $285.7 million from September 30, 2017 and an increase of $888.4 million from December 31, 2016.  The increase in assets was mostly related to loan growth.

At December 31, 2017, loans held for investment (net of deferred fees and costs) were $7.1 billion, an increase of $242.8 million, or 14.1% (annualized), from September 30, 2017, while average loans increased $139.8 million, or 8.2% (annualized), from the prior quarter.  Loans held for investment increased $834.4 million, or 13.2%, from December 31, 2016, while year-to-date average loans increased $745.0 million, or 12.5%, from the prior year.

At December 31, 2017, total deposits were $7.0 billion, an increase of $109.9 million, or 6.4% (annualized), from September 30, 2017, while average deposits increased $158.1 million, or 9.3% (annualized), from the prior quarter. Total deposits grew $612.2 million, or 9.6%, from December 31, 2016, while year-to-date average deposits increased $590.7 million, or 9.7%, from the prior year.

At December 31, 2017, September 30, 2017, and December 31, 2016, respectively, the Company had a common equity Tier 1 capital ratio of 9.04%, 9.40%, and 9.72%; a Tier 1 capital ratio of 10.14%, 10.56%, and 10.97%; a total capital ratio of 12.43%, 12.94%, and 13.56%; and a leverage ratio of 9.42%, 9.52%, and 9.87%.

The Company's common equity to total assets ratios at December 31, 2017, September 30, 2017, and December 31, 2016 were 11.23%, 11.53%, and 11.88%, respectively, while its tangible common equity to tangible assets ratio was 8.14%, 8.34%, and 8.41%, respectively.

During the fourth quarter of 2017, the Company declared and paid cash dividends of $0.21 per common share, an increase of $0.01, or 5.0%, compared to both the prior quarter of 2017 and the fourth quarter of 2016.

XENITH INFORMATION

Xenith's fourth quarter net loss was $55.8 million, compared to net income of $7.2 million in the third quarter of 2017. Excluding after-tax merger-related costs of $5.5 million and nonrecurring tax expenses related to the preliminary estimated impact of the Tax Act of $57.2 million, Xenith's net operating earnings (2) were $6.9 million for the fourth quarter of 2017, a decrease of $1.2 million compared to $8.1 million, which excludes the $896,000 in after-tax merger-related costs, in the third quarter of 2017. The decline in the net operating earnings, excluding these nonrecurring items, from the prior quarter was primarily driven by higher provision for credit losses and lower gains on sales of securities in the fourth quarter of 2017 compared to the third quarter of 2017. The Company continues to evaluate the impact on its 2017 tax expense of the revaluation required by the lower corporate tax rate implemented by the Tax Act, which management has estimated to fall between $55.0 million and $60.0 million.  For more information on the Tax Act and the related accounting considerations, please refer to the "Income Taxes" section above.

Xenith reported a net loss of $36.7 million in 2017, compared to net income of $57.0 million in 2016. Excluding after-tax merger-related costs of $8.3 million and nonrecurring tax expenses related to the Tax Act of $57.2 million, Xenith's 2017 operating earnings (2) were $28.7 million.  Excluding after-tax merger-related costs of $12.0 million and a tax benefit of $60.0 million, Xenith's 2016 operating earnings were $9.1 million.  The increase in operating earnings, excluding these nonrecurring items, of $19.7 million was driven by the full year impact of the merger between Xenith and Hampton Roads Bankshares, Inc., which was effective July 29, 2016, higher average balances of earnings assets in 2017, and lower provision for credit losses in 2017 compared to 2016.

At December 31, 2017, Xenith's loans held for investment were $2.5 billion, an increase of $82.4 million, or 13.5% (annualized), from September 30, 2017, while average loans increased $40.2 million, or 6.6% (annualized), from the prior quarter.  Loans held for investment increased $42.5 million, or 1.7%, from December 31, 2016.

At December 31, 2017, total deposits were $2.5 billion, a decline of $59.8 million, or 9.1% (annualized), from September 30, 2017, while average deposits declined $15.0 million, or 2.3% (annualized), from the prior quarter. Total deposits declined $26.4 million, or 1.0%, from December 31, 2016.

(2) For a reconciliation of the non-GAAP operating measures that exclude merger-related costs and nonrecurring and unusual tax expenses unrelated to the Company's normal operations, see Alternative Performance Measures (non-GAAP) section of the Key Financial Results.

ABOUT UNION BANKSHARES CORPORATION

Headquartered in Richmond, Virginia, Union Bankshares Corporation (NASDAQ: UBSH) is the holding company for Union Bank & Trust, which has 150 banking offices, 39 of which are operated as Xenith Bank, a division of Union Bank & Trust of Richmond, Virginia, and approximately 220 ATMs located throughout Virginia and in portions of Maryland and North Carolina.  Union Bank & Trust also operates Shore Premier Finance, a specialty marine lender.  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 Tuesday, January 23rd, 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 4764909.

NON-GAAP MEASURES

In reporting the results of the quarter ended December 31, 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 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 Merger may not be fully realized or realized within the expected time frame, revenues following the Merger may be lower than expected, or customer and employee relationships and business operations may be disrupted by the Merger,
  • 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,
  • the impact of the Tax Act, including, but not limited to, the effect of the lower corporate tax rate, including on the valuation of the Company's tax assets and liabilities,
  • any future refinements to the Company's preliminary analysis of the impact of the Tax Act on the Company,
  • changes in the effect of the Tax Act due to issuance of interpretive regulatory guidance or enactment of corrective or supplement legislation,
  • 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, the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2017, and other reports filed with the Securities and Exchange Commission. 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.
         
         
UNION BANKSHARES CORPORATION AND SUBSIDIARIES        
KEY FINANCIAL RESULTS        
(Dollars in thousands, except share data)        
(FTE - "Fully Taxable Equivalent")        
  Three Months Ended   Year Ended
  12/31/17   9/30/17   12/31/16   12/31/17   12/31/16
Results of Operations (unaudited)   (unaudited)   (unaudited)   (unaudited)     (unaudited)  
Interest and dividend income $ 87,482     $ 84,850     $ 76,957     $ 330,194     $ 294,920  
Interest expense 14,090     13,652     8,342     50,037     29,770  
Net interest income 73,392     71,198     68,615     280,157     265,150  
Provision for credit losses 3,411     3,050     1,723     10,756     9,100  
Net interest income after provision for credit losses 69,981     68,148     66,892     269,401     256,050  
Noninterest income 17,243     17,536     18,050     71,674     70,907  
Noninterest expenses 59,944     57,496     56,267     234,765     222,703  
Income before income taxes 27,280     28,188     28,675     106,310     104,254  
Income tax expense 12,095     7,530     7,899     33,387     26,778  
Net income $ 15,185     $ 20,658     $ 20,776     $ 72,923     $ 77,476  
                   
Interest earned on earning assets (FTE) (1) $ 90,263     $ 87,498     $ 79,833     $ 340,810     $ 305,164  
Net interest income (FTE) (1) 76,173     73,846     71,491     290,774     275,394  
                   
Net income - community bank segment $ 14,986     $ 20,311     $ 20,394     $ 71,822     $ 75,716  
Net income - mortgage segment 199     347     382     1,101     1,760  
                   
Key Ratios                  
Earnings per common share, diluted $ 0.35     $ 0.47     $ 0.48     $ 1.67     $ 1.77  
Return on average assets (ROA) 0.66 %   0.91 %   0.99 %   0.83 %   0.96 %
Return on average equity (ROE) 5.75 %   7.90 %   8.22 %   7.07 %   7.79 %
Return on average tangible common equity (ROTCE) (2) 8.20 %   11.34 %   12.05 %   10.20 %   11.45 %
Efficiency ratio 66.14 %   64.80 %   64.92 %   66.73 %   66.27 %
Efficiency ratio (FTE) (1) 64.17 %   62.92 %   62.84 %   64.77 %   64.31 %
Net interest margin 3.51 %   3.46 %   3.63 %   3.49 %   3.66 %
Net interest margin (FTE) (1) 3.64 %   3.59 %   3.78 %   3.63 %   3.80 %
Yields on earning assets (FTE) (1) 4.32 %   4.25 %   4.23 %   4.25 %   4.21 %
Cost of interest-bearing liabilities (FTE) (1) 0.87 %   0.85 %   0.57 %   0.80 %   0.53 %
Cost of funds (FTE) (1) 0.68 %   0.66 %   0.45 %   0.62 %   0.41 %
                   
Operating Measures (3)                  
Net operating earnings $ 22,821     $ 21,319     $ 20,776     $ 83,578     $ 77,476  
Operating earnings per share, diluted $ 0.52     $ 0.49     $ 0.48     $ 1.91     $ 1.77  
Operating ROA 1.00 %   0.94 %   0.99 %   0.95 %   0.96 %
Operating ROE 8.63 %   8.15 %   8.22 %   8.11 %   7.79 %
Operating ROTCE 12.32 %   11.70 %   12.05 %   11.69 %   11.45 %
Operating efficiency ratio (FTE) 62.12 %   62.12 %   62.84 %   63.28 %   64.31 %
Community bank segment net operating earnings $ 22,492     $ 20,972     $ 20,394     $ 82,347     $ 75,716  
Community bank segment operating earnings per share, diluted $ 0.51     $ 0.48     $ 0.47     $ 1.88     $ 1.73  
Mortgage segment net operating earnings $ 329     $ 347     $ 382     $ 1,231     $ 1,760  
                   
Per Share Data                  
Earnings per common share, basic $ 0.35     $ 0.47     $ 0.48     $ 1.67     $ 1.77  
Earnings per common share, diluted 0.35     0.47     0.48     1.67     1.77  
Cash dividends paid per common share 0.21     0.20     0.20     0.81     0.77  
Market value per share 36.17     35.30     35.74     36.17     35.74  
Book value per common share 24.10     24.00     23.15     24.10     23.15  
Tangible book value per common share (2) 16.88     16.76     15.78     16.88     15.78  
Price to earnings ratio, diluted 26.05     18.93     18.72     21.66     20.19  
Price to book value per common share ratio 1.50     1.47     1.54     1.50     1.54  
Price to tangible book value per common share ratio (2) 2.14     2.11     2.26     2.14     2.26  
Weighted average common shares outstanding, basic 43,740,001     43,706,635     43,577,634     43,698,897     43,784,193  
Weighted average common shares outstanding, diluted 43,816,018     43,792,058     43,659,416     43,779,744     43,890,271  
Common shares outstanding at end of period 43,743,318     43,729,229     43,609,317     43,743,318     43,609,317  
                             

  As of & For Three Months Ended   As of & For Year Ended
  12/31/17   9/30/17   12/31/16   12/31/17   12/31/16
Capital Ratios (unaudited)   (unaudited)   (unaudited)   (unaudited)     (unaudited) 
Common equity Tier 1 capital ratio (4) 9.04 %   9.40 %   9.72 %   9.04 %   9.72 %
Tier 1 capital ratio (4) 10.14 %   10.56 %   10.97 %   10.14 %   10.97 %
Total capital ratio (4) 12.43 %   12.94 %   13.56 %   12.43 %   13.56 %
Leverage ratio (Tier 1 capital to average assets) (4)                      9.42 %   9.52 %   9.87 %   9.42 %   9.87 %
Common equity to total assets 11.23 %   11.53 %   11.88 %   11.23 %   11.88 %
Tangible common equity to tangible assets (2) 8.14 %   8.34 %   8.41 %   8.14 %   8.41 %
                   
Financial Condition                  
Assets $ 9,315,179     $ 9,029,436     $ 8,426,793     $ 9,315,179     $ 8,426,793  
Loans held for investment 7,141,552     6,898,729     6,307,060     7,141,552     6,307,060  
Earning Assets 8,513,145     8,232,413     7,611,098     8,513,145     7,611,098  
Goodwill 298,528     298,191     298,191     298,528     298,191  
Amortizable intangibles, net 14,803     16,017     20,602     14,803     20,602  
Deposits 6,991,718     6,881,826     6,379,489     6,991,718     6,379,489  
Stockholders' equity 1,046,329     1,041,371     1,001,032     1,046,329     1,001,032  
Tangible common equity (2) 732,998     727,163     682,239     732,998     682,239  
                   
Loans held for investment, net of deferred fees and costs                  
Construction and land development $ 948,791     $ 841,738     $ 751,131     $ 948,791     $ 751,131  
Commercial real estate - owner occupied 943,933     903,523     857,805     943,933     857,805  
Commercial real estate - non-owner occupied 1,713,659     1,748,039     1,564,295     1,713,659     1,564,295  
Multifamily real estate 357,079     368,686     334,276     357,079     334,276  
Commercial & Industrial 612,023     554,522     551,526     612,023     551,526  
Residential 1-4 Family 1,098,085     1,083,112     1,029,547     1,098,085     1,029,547  
Auto 282,474     276,572     262,071     282,474     262,071  
HELOC 537,521     535,446     526,884     537,521     526,884  
Consumer and all other 647,987     587,091     429,525     647,987     429,525  
Total loans held for investment $ 7,141,552     $ 6,898,729     $ 6,307,060     $ 7,141,552     $ 6,307,060  
                   
Deposits                  
NOW accounts $ 1,929,416     $ 1,851,327     $ 1,765,956     $ 1,929,416     $ 1,765,956  
Money market accounts 1,685,174     1,621,443     1,435,591     1,685,174     1,435,591  
Savings accounts 546,274     553,082     591,742     546,274     591,742  
Time deposits of $100,000 and over 624,112     621,070     530,275     624,112     530,275  
Other time deposits 704,534     699,755     662,300     704,534     662,300  
Total interest-bearing deposits $ 5,489,510     $ 5,346,677     $ 4,985,864     $ 5,489,510     $ 4,985,864  
Demand deposits 1,502,208     1,535,149     1,393,625     1,502,208     1,393,625  
Total deposits $ 6,991,718     $ 6,881,826     $ 6,379,489     $ 6,991,718     $ 6,379,489  
                   
Averages                  
Assets $ 9,085,211     $ 8,973,964     $ 8,312,750     $ 8,820,142     $ 8,046,305  
Loans held for investment 6,962,299     6,822,498     6,214,084     6,701,101     5,956,125  
Loans held for sale 31,448     38,569     43,594     31,458     36,126  
Securities 1,238,663     1,243,904     1,202,125     1,230,105     1,202,692  
Earning assets 8,293,366     8,167,919     7,514,979     8,016,311     7,249,090  
Deposits 6,955,949     6,797,840     6,310,025     6,701,475     6,110,788  
Certificates of deposit 1,335,357     1,289,794     1,192,253     1,271,649     1,177,732  
Interest-bearing deposits 5,435,705     5,302,226     4,885,428     5,234,102     4,722,572  
Borrowings 1,022,307     1,080,226     927,218     1,028,434     877,602  
Interest-bearing liabilities 6,458,012     6,382,452     5,812,646     6,262,536     5,600,174  
Stockholders' equity 1,048,632     1,037,792     1,005,769     1,030,847     994,785  
Tangible common equity (2) 734,847     722,920     686,143     715,125     676,654  
                             

        As of & For Three Months Ended           As of & For Year Ended   
  12/31/17     9/30/17     12/31/16     12/31/17     12/31/16
Asset Quality (unaudited)   (unaudited)   (unaudited)   (unaudited)     (unaudited) 
Allowance for Loan Losses (ALL)                      
Beginning balance $ 37,162     $ 38,214     $ 36,542     $ 37,192     $ 34,047  
Add: Recoveries 696     887     1,003     3,255     3,025  
Less: Charge-offs 3,361     4,989     1,827     13,310     8,555  
Add: Provision for loan losses 3,711     3,050     1,474     11,071     8,675  
Ending balance $ 38,208     $ 37,162     $ 37,192     $ 38,208     $ 37,192  
                   
ALL / total outstanding loans 0.54 %   0.54 %   0.59 %   0.54 %   0.59 %
Net charge-offs / total average loans 0.15 %   0.24 %   0.05 %   0.15 %   0.09 %
Provision / total average loans 0.21 %   0.18 %   0.09 %   0.17 %   0.15 %
                   
Total PCI Loans $ 39,021     $ 51,041     $ 59,292     $ 39,021     $ 59,292  
Remaining fair value mark on purchased performing loans 13,726     14,602     16,939     13,726     16,939  
                   
Nonperforming Assets                  
Construction and land development $ 5,610     $ 5,671     $ 2,037     $ 5,610     $ 2,037  
Commercial real estate - owner occupied 2,708     2,205     794     2,708     794  
Commercial real estate - non-owner occupied 2,992     2,701         2,992      
Commercial & Industrial 316     1,252     124     316     124  
Residential 1-4 Family 7,354     6,163     5,279     7,354     5,279  
Auto 413     174     169     413     169  
HELOC 2,075     1,791     1,279     2,075     1,279  
Consumer and all other 275     165     291     275     291  
Nonaccrual loans $ 21,743     $ 20,122     $ 9,973     $ 21,743     $ 9,973  
Other real estate owned 6,636     8,764     10,084     6,636     10,084  
Total nonperforming assets (NPAs) $ 28,379     $ 28,886     $ 20,057     $ 28,379     $ 20,057  
Construction and land development $ 1,340     $ 54     $ 76     $ 1,340     $ 76  
Commercial real estate - owner occupied     679     35         35  
Commercial real estate - non-owner occupied 194     298         194      
Commercial & Industrial 214     101     9     214     9  
Residential 1-4 Family 1,125     2,360     2,048     1,125     2,048  
Auto 40     143     111     40     111  
HELOC 217     709     635     217     635  
Consumer and all other 402     188     91     402     91  
Loans = 90 days and still accruing $ 3,532     $ 4,532     $ 3,005     $ 3,532     $ 3,005  
Total NPAs and loans = 90 days $ 31,911     $ 33,418     $ 23,062     $ 31,911     $ 23,062  
NPAs / total outstanding loans 0.40 %   0.42 %   0.32 %   0.40 %   0.32 %
NPAs / total assets 0.30 %   0.32 %   0.24 %   0.30 %   0.24 %
ALL / nonaccrual loans 175.73 %   184.68 %   372.93 %   175.73 %   372.93 %
ALL / nonperforming assets 134.63 %   128.65 %   185.43 %   134.63 %   185.43 %
                   
Past Due Detail                  
Construction and land development $ 1,248     $ 7,221     $ 1,162     $ 1,248     $ 1,162  
Commercial real estate - owner occupied 444     1,707     1,842     444     1,842  
Commercial real estate - non-owner occupied 187     909     2,369     187     2,369  
Multifamily real estate         147         147  
Commercial & Industrial 1,147     1,558     759     1,147     759  
Residential 1-4 Family 5,520     5,633     7,038     5,520     7,038  
Auto 3,541     2,415     2,570     3,541     2,570  
HELOC 2,382     1,400     1,836     2,382     1,836  
Consumer and all other 2,404     3,469     2,522     2,404     2,522  
Loans 30-59 days past due $ 16,873     $ 24,312     $ 20,245     $ 16,873     $ 20,245  

       
  As of & For Three Months Ended   As of & For Year Ended
  12/31/17     9/30/17     12/31/16     12/31/17     12/31/16
Past Due Detail cont'd (unaudited)   (unaudited)   (unaudited)   (unaudited)     (unaudited)  
Construction and land development  $ 898     $ 100     $ 232     $ 898     $ 232  
Commercial real estate - owner occupied  81     689     109     81     109  
Commercial real estate - non-owner occupied                          84     571         84      
Commercial & Industrial 109     255     858     109     858  
Residential 1-4 Family 3,241     1,439     534     3,241     534  
Auto 185     293     317     185     317  
HELOC 717     628     1,140     717     1,140  
Consumer and all other 2,052     1,445     1,431     2,052     1,431  
Loans 60-89 days past due $ 7,367     $ 5,420     $ 4,621     $ 7,367     $ 4,621  
                   
Troubled Debt Restructurings                  
Performing $ 14,553     $ 16,519     $ 13,967     $ 14,553     $ 13,967  
Nonperforming 2,849     2,725     1,435     2,849     1,435  
Total troubled debt restructurings $ 17,402     $ 19,244     $ 15,402     $ 17,402     $ 15,402  
                   
Alternative Performance Measures (non-GAAP)                  
Net interest income (FTE)                  
Net interest income (GAAP) $ 73,392     $ 71,198     $ 68,615     $ 280,157     $ 265,150  
FTE adjustment 2,781     2,648     2,876     10,617     10,244  
Net interest income (FTE) (non-GAAP) (1) $ 76,173     $ 73,846     $ 71,491     $ 290,774     $ 275,394  
Average earning assets 8,293,366     8,167,919     7,514,979     8,016,311     7,249,090  
Net interest margin 3.51 %   3.46 %   3.63 %   3.49 %   3.66 %
Net interest margin (FTE) (1) 3.64 %   3.59 %   3.78 %   3.63 %   3.80 %
                   
Tangible Assets                  
Ending assets (GAAP) $ 9,315,179     $ 9,029,436     $ 8,426,793     $ 9,315,179     $ 8,426,793  
Less: Ending goodwill 298,528     298,191     298,191     298,528     298,191  
Less: Ending amortizable intangibles 14,803     16,017     20,602     14,803     20,602  
Ending tangible assets (non-GAAP) $ 9,001,848     $ 8,715,228     $ 8,108,000     $ 9,001,848     $ 8,108,000  
                   
Tangible Common Equity (2)                  
Ending equity (GAAP) $ 1,046,329     $ 1,041,371     $ 1,001,032     $ 1,046,329     $ 1,001,032  
Less: Ending goodwill 298,528     298,191     298,191     298,528     298,191  
Less: Ending amortizable intangibles 14,803     16,017     20,602     14,803     20,602  
Ending tangible common equity (non-GAAP) $ 732,998     $ 727,163     $ 682,239     $ 732,998     $ 682,239  
                   
Average equity (GAAP) $ 1,048,632     $ 1,037,792     $ 1,005,769     $ 1,030,847     $ 994,785  
Less: Average goodwill 298,385     298,191     298,191     298,240     296,087  
Less: Average amortizable intangibles 15,400     16,681     21,435     17,482     22,044  
Average tangible common equity (non-GAAP) $ 734,847     $ 722,920     $ 686,143     $ 715,125     $ 676,654  
                   
Operating Measures (3)                  
Net income (GAAP) $ 15,185     $ 20,658     $ 20,776     $ 72,923     $ 77,476  
Plus: Merger-related costs, net of tax 1,386     661         4,405      
Plus: Nonrecurring tax expenses 6,250             6,250      
Net operating earnings (non-GAAP) $ 22,821     $ 21,319     $ 20,776     $ 83,578     $ 77,476  
                   
Noninterest expense (GAAP) $ 59,944     $ 57,496     $ 56,267     $ 234,765     $ 222,703  
Less: Merger-related costs 1,917     732         5,393      
Operating noninterest expense (non-GAAP) $ 58,027     $ 56,764     $ 56,267     $ 229,372     $ 222,703  
                   
Net interest income (FTE) (non-GAAP) (1) $ 76,173     $ 73,846     $ 71,491     $ 290,774     $ 275,394  
Noninterest income (GAAP) 17,243     17,536     18,050     71,674     70,907  
                   
Efficiency ratio 66.14 %   64.80 %   64.92 %   66.73 %   66.27 %
Efficiency ratio (FTE) (1) 64.17 %   62.92 %   62.84 %   64.77 %   64.31 %
Operating efficiency ratio (FTE) 62.12 %   62.12 %   62.84 %   63.28 %   64.31 %

       
                   As of & For Three Months Ended                             As of & For Year Ended         
  12/31/17     9/30/17     12/31/16     12/31/17     12/31/16
Alternative Performance Measures (non-GAAP) cont'd (unaudited)   (unaudited)   (unaudited)   (unaudited)     (unaudited) 
Operating Measures cont'd (3)                  
Community bank segment net income (GAAP) $     14,986     $     20,311     $     20,394     $     71,822     $ 75,716  
Plus: Merger-related costs, net of tax 1,386     661         4,405      
Plus: Nonrecurring tax expenses 6,120             6,120      
Community bank segment net operating earnings (non-GAAP) $ 22,492     $ 20,972     $ 20,394     $ 82,347     $ 75,716  
                   
Community bank segment earnings per share, diluted (GAAP) $ 0.34     $ 0.46     $ 0.47     $ 1.64     $ 1.73  
Community bank segment operating earnings per share, diluted (non-GAAP) 0.51     0.48     0.47     1.88     1.73  
                   
Mortgage segment net income (GAAP) $ 199     $ 347     $ 382     $ 1,101     $ 1,760  
Plus: Nonrecurring tax expenses 130             130      
Mortgage segment net operating earnings (non-GAAP) $ 329     $ 347     $ 382     $ 1,231     $ 1,760  
                   
Mortgage Origination Volume                  
Refinance Volume $ 41,889     $ 35,678     $ 71,454     $ 143,857     $ 208,674  
Construction Volume 20,186     19,966     10,621     82,731     68,026  
Purchase Volume 59,840     71,694     63,249     259,461     263,571  
Total Mortgage loan originations $ 121,915     $ 127,338     $ 145,324     $ 486,049     $ 540,271  
% of originations that are refinances 34.4 %   28.0 %   49.2 %   29.6 %   38.6 %
                   
Other Data                  
End of period full-time employees 1,419     1,427     1,416     1,419     1,416  
Number of full-service branches 111     111     114     111     114  
Number of full automatic transaction machines ("ATMs") 176     173     185     176     185  

(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) Operating measures exclude merger-related costs and nonrecurring tax expenses unrelated to the Company's normal operations. Such costs were only incurred during 2017; thus each of these operating measures is equivalent to the corresponding GAAP financial measure for the three months and year ended December 31, 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.

(4) All ratios at December 31, 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)        
     December 31,         December 31,   
  2017   2016
ASSETS (unaudited)   (audited)
Cash and cash equivalents:      
Cash and due from banks $ 117,586     $ 120,758  
Interest-bearing deposits in other banks 81,291     58,030  
Federal funds sold 496     449  
Total cash and cash equivalents 199,373     179,237  
Securities available for sale, at fair value 974,222     946,764  
Securities held to maturity, at carrying value 199,639     201,526  
Restricted stock, at cost 75,283     60,782  
Loans held for sale, at fair value 40,662     36,487  
Loans held for investment, net of deferred fees and costs 7,141,552     6,307,060  
Less allowance for loan losses 38,208     37,192  
Net loans held for investment 7,103,344     6,269,868  
Premises and equipment, net 119,981     122,027  
Other real estate owned, net of valuation allowance 6,636     10,084  
Goodwill 298,528     298,191  
Amortizable intangibles, net 14,803     20,602  
Bank owned life insurance 182,854     179,318  
Other assets 99,854     101,907  
Total assets $ 9,315,179     $ 8,426,793  
LIABILITIES      
Noninterest-bearing demand deposits $ 1,502,208     $ 1,393,625  
Interest-bearing deposits 5,489,510     4,985,864  
Total deposits 6,991,718     6,379,489  
Securities sold under agreements to repurchase 49,152     59,281  
Other short-term borrowings 745,000     517,500  
Long-term borrowings 425,262     413,308  
Other liabilities 57,718     56,183  
Total liabilities 8,268,850     7,425,761  
Commitments and contingencies      
STOCKHOLDERS' EQUITY      
Common stock, $1.33 par value, shares authorized 100,000,000; issued and outstanding, 43,743,318 shares and 43,609,317 shares, respectively 57,744     57,506  
Additional paid-in capital 610,001     605,397  
Retained earnings 379,468     341,938  
Accumulated other comprehensive income (884 )   (3,809 )
Total stockholders' equity 1,046,329     1,001,032  
Total liabilities and stockholders' equity $ 9,315,179     $ 8,426,793  

         
UNION BANKSHARES CORPORATION AND SUBSIDIARIES        
CONSOLIDATED STATEMENTS OF INCOME        
(Dollars in thousands, except share data)                          
  Three Months Ended   Year Ended
  December 31,   September 30,   December 31,   December 31,   December 31,
  2017   2017   2016   2017   2016
Interest and dividend income: (unaudited)   (unaudited)   (unaudited)   (unaudited)   (audited)
Interest and fees on loans $ 78,501     $ 75,948     $ 68,683     $ 295,146     $ 262,567  
Interest on deposits in other banks 172     181     67     539     244  
Interest and dividends on securities:                  
Taxable 5,225     5,175     4,761     20,305     18,319  
Nontaxable 3,584     3,546     3,446     14,204     13,790  
Total interest and dividend income 87,482     84,850     76,957     330,194     294,920  
Interest expense:                  
Interest on deposits 7,696     7,234     4,786     26,106     17,731  
Interest on short-term borrowings 1,814     1,871     797     6,035     2,894  
Interest on long-term borrowings 4,580     4,547     2,759     17,896     9,145  
Total interest expense 14,090     13,652     8,342     50,037     29,770  
Net interest income 73,392     71,198     68,615     280,157     265,150  
Provision for credit losses 3,411     3,050     1,723     10,756     9,100  
Net interest income after provision for credit losses 69,981     68,148     66,892     269,401     256,050  
Noninterest income:                  
Service charges on deposit accounts 5,266     5,153     5,042     20,212     19,496  
Other service charges and fees 4,630     4,529     4,204     18,205     17,175  
Fiduciary and asset management fees 2,933     2,794     2,884     11,245     10,199  
Mortgage banking income, net 2,118     2,305     2,629     9,241     10,953  
Gains on securities transactions, net 18     184     60     800     205  
Bank owned life insurance income 1,306     1,377     1,391     6,144     5,513  
Loan-related interest rate swap fees 424     416     1,198     3,051     4,254  
Other operating income 548     778     642     2,776     3,112  
Total noninterest income 17,243     17,536     18,050     71,674     70,907  
Noninterest expenses:                  
Salaries and benefits 29,723     29,769     30,042     122,222     117,103  
Occupancy expenses 5,034     4,939     4,901     19,594     19,528  
Furniture and equipment expenses 2,621     2,559     2,608     10,503     10,475  
Printing, postage, and supplies 1,252     1,154     1,126     4,962     4,692  
Communications expense 740     798     887     3,319     3,850  
Technology and data processing 4,426     4,232     4,028     16,485     15,368  
Professional services 2,190     1,985     1,653     7,925     8,085  
Marketing and advertising expense 1,876     1,944     1,946     7,838     7,784  
FDIC assessment premiums and other insurance 1,255     1,141     1,403     4,048     5,406  
Other taxes 2,022     2,022     1,592     8,087     5,456  
Loan-related expenses 1,369     1,349     1,152     5,328     4,790  
OREO and credit-related expenses 1,741     1,139     637     3,764     2,602  
Amortization of intangible assets 1,427     1,480     1,742     6,088     7,210  
Training and other personnel costs 1,034     887     923     3,934     3,435  
Merger-related costs 1,917     732         5,393      
Other expenses 1,317     1,366     1,627     5,275     6,919  
Total noninterest expenses 59,944     57,496     56,267     234,765     222,703  
Income before income taxes 27,280     28,188     28,675     106,310     104,254  
Income tax expense 12,095     7,530     7,899     33,387     26,778  
Net income $ 15,185     $ 20,658     $ 20,776     $ 72,923     $ 77,476  
Basic earnings per common share $ 0.35     $ 0.47     $ 0.48     $ 1.67     $ 1.77  
Diluted earnings per common share $ 0.35     $ 0.47     $ 0.48     $ 1.67     $ 1.77  

 
UNION BANKSHARES CORPORATION AND SUBSIDIARIES
SEGMENT FINANCIAL INFORMATION
(Dollars in thousands)              
  Community Bank   Mortgage   Eliminations   Consolidated
Three Months Ended December 31, 2017 (unaudited)              
Net interest income $ 72,936     $ 456     $     $ 73,392  
Provision for credit losses 3,458     (47 )       3,411  
Net interest income after provision for credit losses 69,478     503         69,981  
Noninterest income 15,040     2,329     (126 )   17,243  
Noninterest expenses 57,722     2,348     (126 )   59,944  
Income before income taxes 26,796     484         27,280  
Income tax expense 11,810     285         12,095  
Net income 14,986     199         15,185  
Plus: Merger-related costs, net of tax 1,386             1,386  
Plus: Nonrecurring tax expenses 6,120     130         6,250  
Net operating earnings (non-GAAP) $ 22,492     $ 329     $     $ 22,821  
Total assets $ 9,305,660     $ 111,845     $ (102,326 )   $ 9,315,179  
Three Months Ended September 30, 2017 (unaudited)              
Net interest income $ 70,718     $ 480     $     $ 71,198  
Provision for credit losses 3,056     (6 )       3,050  
Net interest income after provision for credit losses 67,662     486         68,148  
Noninterest income 15,121     2,527     (112 )   17,536  
Noninterest expenses 55,133     2,475     (112 )   57,496  
Income before income taxes 27,650     538         28,188  
Income tax expense 7,339     191         7,530  
Net income 20,311     347         20,658  
Plus: Merger-related costs, net of tax 661             661  
Net operating earnings (non-GAAP) $ 20,972     $ 347     $     $ 21,319  
Total assets $ 9,020,486     $ 97,154     $ (88,204 )   $ 9,029,436  
Three Months Ended December 31, 2016 (unaudited)              
Net interest income $ 68,205     $ 410     $     $ 68,615  
Provision for credit losses 1,668     55         1,723  
Net interest income after provision for credit losses 66,537     355         66,892  
Noninterest income 15,368     2,823     (141 )   18,050  
Noninterest expenses 53,810     2,598     (141 )   56,267  
Income before income taxes 28,095     580         28,675  
Income tax expense 7,701     198         7,899  
Net income $ 20,394     $ 382     $     $ 20,776  
Total assets $ 8,419,625     $ 93,581     $ (86,413 )   $ 8,426,793  
Year Ended December 31, 2017 (unaudited)              
Net interest income $ 278,470     $ 1,687     $     $ 280,157  
Provision for credit losses 10,802     (46 )       10,756  
Net interest income after provision for credit losses 267,668     1,733         269,401  
Noninterest income 62,120     10,073     (519 )   71,674  
Noninterest expenses 225,366     9,918     (519 )   234,765  
Income before income taxes 104,422     1,888         106,310  
Income tax expense 32,600     787         33,387  
Net income 71,822     1,101         72,923  
Plus: Merger-related costs, net of tax 4,405             4,405  
Plus: Nonrecurring tax expenses 6,120     130         6,250  
Net operating earnings (non-GAAP) $ 82,347     $ 1,231     $     $ 83,578  
Total assets $ 9,305,660     $ 111,845     $ (102,326 )   $ 9,315,179  
Year Ended December 31, 2016 (audited)              
Net interest income $ 263,714     $ 1,436     $     $ 265,150  
Provision for credit losses 8,883     217         9,100  
Net interest income after provision for credit losses 254,831     1,219         256,050  
Noninterest income 59,505     12,008     (606 )   70,907  
Noninterest expenses 212,774     10,535     (606 )   222,703  
Income before income taxes 101,562     2,692         104,254  
Income tax expense 25,846     932         26,778  
Net income $ 75,716     $ 1,760     $     $ 77,476  
Total assets $ 8,419,625     $ 93,581     $ (86,413 )   $ 8,426,793  

 
AVERAGE BALANCES, INCOME AND EXPENSES, YIELDS AND RATES (TAXABLE EQUIVALENT BASIS)
  For the Quarter Ended
  December 31, 2017   September 30, 2017
  AverageBalance     Interest Income / Expense (1)     Yield / Rate (1)(2)     AverageBalance     Interest Income / Expense (1)     Yield / Rate (1)(2)
Assets:         (unaudited)                 (unaudited)       
Securities:                      
Taxable $ 758,189     $ 5,225     2.73 %   $ 774,513     $ 5,175     2.65 %
Tax-exempt 480,474     5,513     4.55 %   469,391     5,455     4.61 %
Total securities 1,238,663     10,738     3.44 %   1,243,904     10,630     3.39 %
Loans, net (3) (4) 6,962,299     79,048     4.50 %   6,822,498     76,333     4.44 %
Other earning assets 92,404     477     2.05 %   101,517     535     2.09 %
Total earning assets 8,293,366     $ 90,263     4.32 %   8,167,919     $ 87,498     4.25 %
Allowance for loan losses (37,449 )           (38,138 )        
Total non-earning assets 829,294             844,183          
Total assets $ 9,085,211             $ 8,973,964          
                       
Liabilities and Stockholders' Equity:                      
Interest-bearing deposits:                      
Transaction and money market accounts                                        $ 3,551,759     $ 3,703     0.41 %   $ 3,457,279     $ 3,491     0.40 %
Regular savings 548,589     150     0.11 %   555,153     151     0.11 %
Time deposits 1,335,357     3,843     1.14 %   1,289,794     3,592     1.10 %
Total interest-bearing deposits 5,435,705     7,696     0.56 %   5,302,226     7,234     0.54 %
Other borrowings (5) 1,022,307     6,394     2.48 %   1,080,226     6,418     2.36 %
Total interest-bearing liabilities 6,458,012     14,090     0.87 %   6,382,452     13,652     0.85 %
                       
Noninterest-bearing liabilities:                      
Demand deposits 1,520,244             1,495,614          
Other liabilities 58,323             58,106          
Total liabilities 8,036,579             7,936,172          
Stockholders' equity 1,048,632             1,037,792          
Total liabilities and stockholders' equity $ 9,085,211             $ 8,973,964          
                       
Net interest income     $ 76,173             $ 73,846      
                       
Interest rate spread         3.45 %           3.40 %
Cost of funds         0.68 %           0.66 %
Net interest margin         3.64 %           3.59 %
                       
(1) Income and yields are reported on a taxable equivalent basis using the statutory federal corporate tax rate of 35%.
(2) Rates and yields are annualized and calculated from actual, not rounded, amounts in thousands, which appear above.
(3) Nonaccrual loans are included in average loans outstanding.
(4) Interest income on loans includes $2.1 million and $1.7 million for the three months ended December 31, 2017 and September 30, 2017, respectively, in accretion of the fair market value adjustments related to acquisitions.
(5) Interest expense on borrowings includes $27,000 and $47,000 for the both three months ended December 31, 2017 and September 30, 2017, respectively, in accretion of the fair market value adjustments related to acquisitions.

         
XENITH BANKSHARES, INC.        
KEY FINANCIAL RESULTS        
(Dollars in thousands, except share data)        
(FTE - "Fully Taxable Equivalent")        
  Three Months Ended   Year Ended
  12/31/17     9/30/17     12/31/16     12/31/17     12/31/16
Results of Operations (unaudited)   (unaudited)   (unaudited)   (unaudited)   (unaudited)
Interest and dividend income $ 30,987     $ 30,412     $ 28,965     $ 120,648     $ 92,417  
Interest expense 5,399     5,187     4,831     20,274     15,548  
Net interest income 25,588     25,225     24,134     100,374     76,869  
Provision for credit losses 865         625     874     11,329  
Net interest income after provision for credit losses                        24,723     25,225     23,509     99,500     65,540  
Noninterest income 3,563     4,172     3,130     14,688     11,124  
Noninterest expenses 25,557     18,779     18,461     83,305     80,878  
Income before income taxes 2,729     10,618     8,178     30,883     (4,214 )
Income tax expense 58,634     3,453     3,066     67,632     (59,728 )
Net income (loss) (55,905 )   7,165     5,112     (36,749 )   55,514  
Net income (loss) from discontinued operations 83     (7 )   61     15     1,528  
Net income (loss) attributable to Company (55,822 )   7,158     5,173     (36,734 )   57,042  
Plus: Merger-related costs, net of tax 5,511     896     755     8,275     11,975  
Plus: Nonrecurring tax expenses 57,200             57,200      
Plus: Tax benefit                 (59,950 )
Net operating earnings (non-GAAP) (1) $ 6,889     $ 8,054     $ 5,928     $ 28,741     $ 9,067  
                   
Net interest margin 3.51 %   3.50 %   3.25 %   3.49 %   3.35 %
Net interest margin (FTE) (2) 3.53 %   3.51 %   3.27 %   3.51 %   3.38 %
                   
Financial Condition                  
Assets $ 3,270,726     $ 3,255,771     $ 3,267,192     $ 3,270,726     $ 3,267,192  
Loans held for investment 2,506,589     2,424,140     2,464,056     2,506,589     2,464,056  
Earning Assets 2,987,115     2,921,542     2,924,263     2,987,115     2,924,263  
Goodwill 26,931     26,931     26,931     26,931     26,931  
Amortizable intangibles, net 3,261     3,393     3,787     3,261     3,787  
Deposits 2,545,547     2,605,390     2,571,970     2,545,547     2,571,970  
Stockholders' equity 429,740     484,261     463,638     429,740     463,638  
Tangible common equity (3) 399,548     453,937     432,920     399,548     432,920  
                   
Averages                  
Assets $ 3,223,346     $ 3,199,595     $ 3,320,516     $ 3,210,633     $ 2,568,744  
Loans held for investment 2,453,025     2,412,871     2,452,449     2,415,868     1,965,504  
Earning assets 2,891,879     2,861,996     2,956,592     2,871,979     2,296,457  
Deposits 2,541,618     2,556,577     2,604,622     2,573,685     2,065,933  
Stockholders' equity 488,269     484,282     466,254     479,637     357,552  
Tangible common equity (3) 458,002     453,878     435,977     449,170     346,014  
                   
Alternative Performance Measures (non-GAAP)                  
Net interest income (FTE)                  
Net interest income (GAAP) $ 25,588     $ 25,225     $ 24,134     $ 100,374     $ 76,869  
FTE adjustment 166     126     197     477     719  
Net interest income (FTE) (non-GAAP) (2) $ 25,754     $ 25,351     $ 24,331     $ 100,851     $ 77,588  
                   
Tangible Common Equity (3)                  
Ending equity (GAAP) $ 429,740     $ 484,261     $ 463,638     $ 429,740     $ 463,638  
Less: Ending goodwill 26,931     26,931     26,931     26,931     26,931  
Less: Ending amortizable intangibles 3,261     3,393     3,787     3,261     3,787  
Ending tangible common equity (non-GAAP) $ 399,548     $ 453,937     $ 432,920     $ 399,548     $ 432,920  
                   
Average equity (GAAP) $ 488,269     $ 484,282     $ 466,254     $ 479,637     $ 357,552  
Less: Average goodwill 26,931     26,931     26,404     26,931     9,969  
Less: Average amortizable intangibles 3,336     3,473     3,873     3,536     1,569  
Average tangible common equity (non-GAAP) $ 458,002     $ 453,878     $ 435,977     $ 449,170     $ 346,014  

(1) Operating earnings excludes after-tax merger-related costs and nonrecurring and unusual tax expenses unrelated to the Company's normal operations.  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.

(2) Net interest income (FTE), which is used in computing net interest margin (FTE), provides valuable additional insight into the net interest margin 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.

(3)  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.

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

 

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