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Union Bankshares Reports Second Quarter Results and Declares Quarterly Dividend

RICHMOND, Va., July 22, 2016 (GLOBE NEWSWIRE) -- Union Bankshares Corporation (the “Company” or “Union”) (NASDAQ:UBSH) today reported net income of $19.3 million and earnings per share of $0.44 for its second quarter ended June 30, 2016. The quarterly results represent an increase of $2.4 million, or 14.0%, in net income and an increase of $0.06, or 15.8%, in earnings per share from the first quarter. For the six months ended June 30, 2016, net income was $36.3 million and earnings per share was $0.82, an increase of 16.9% and 18.8%, respectively, compared to the results from the six months ended June 30, 2015.

Union also declared a quarterly dividend of $0.19 per share payable on August 19, 2016 to shareholders of record as of August 5, 2016.

Union’s second quarter results clearly demonstrate the steady progress we are making toward our strategic growth and profitability objectives,” said G. William Beale, president and chief executive officer of Union Bankshares Corporation. “During the quarter we achieved double digit annualized loan, deposit and net income growth, increased mortgage loan production levels and profitability, completed our acquisition of Old Dominion Capital Management and also opened a commercial loan production office in Charlotte, North Carolina.

I believe, now more than ever, that Union is well positioned to generate sustainable, profitable growth, achieve top tier financial performance and deliver the above average returns our shareholders expect on their investment.

Select highlights for the second quarter include:

  • Return on Average Tangible Common Equity (“ROTCE”) was 11.60% for the quarter ended June 30, 2016 compared to ROTCE of 10.13% for the prior quarter and 9.20% for the second quarter of 2015. Return on Average Assets (“ROA”) was 0.98% for the quarter ended June 30, 2016 compared to ROA of 0.88% for the prior quarter and 0.83% for the second quarter of 2015.
  • Net income for the community bank segment was $18.8 million, or $0.43 per share, for the second quarter, compared to $16.9 million, or $0.38 per share, for the first quarter. Net income for the community bank segment for the six months ended June 30, 2016 was $35.7 million, or $0.81 per share.
  • The mortgage segment reported net income of $539,000 for the second quarter, compared to net income of $54,000 in the first quarter. Net income for the mortgage segment for the six months ended June 30, 2016 was $593,000, or $0.01 per share.
  • On May 31, 2016, Union Bank & Trust (the “Bank”), the subsidiary bank of the Company, completed its acquisition of Old Dominion Capital Management, Inc. (“ODCM”), a Charlottesville, Virginia based registered investment advisor with nearly $300 million in assets under management.
  • As previously announced, the Company closed five branches and opened a new stand-alone branch during the quarter as part of its continuing efforts to become more efficient. The Company plans to close an additional five in-store branches in the Richmond market on September 30, 2016.
  • Loans held for investment grew $160.6 million, or 11.1% (annualized), from March 31, 2016 and increased $457.5 million, or 8.3%, from June 30, 2015, adjusting for the sale of the credit card portfolio in the third quarter of 2015. Average loans increased $153.0 million, or 10.7% (annualized), from the prior quarter and increased $441.4 million, or 8.1%, from the same quarter in the prior year, adjusting for the sale of the credit card portfolio in the third quarter of 2015.
  • Period-end deposits increased $149.8 million, or 10.1% (annualized), from March 31, 2016 and grew $311.4 million, or 5.4%, from June 30, 2015. Average deposits increased $126.1 million, or 8.6% (annualized), from the prior quarter and increased $315.6 million, or 5.5%, from the prior year.

NET INTEREST INCOME

Tax-equivalent net interest income was $68.2 million, an increase of $2.0 million from the first quarter, primarily driven by higher earning asset balances. The second quarter tax-equivalent net interest margin increased 2 basis points to 3.84% from 3.82% in the previous quarter driven by higher levels of acquisition-related net accretion income. Core tax-equivalent net interest margin (which excludes the 8 and 6 basis point impact of acquisition accounting accretion in the current and prior quarter, respectively) remained constant at 3.76% compared to the previous quarter.

The Company’s fully taxable equivalent net interest margin includes the impact of acquisition accounting fair value adjustments. During the second quarter, net accretion related to acquisition accounting increased $256,000, or 22.3%, from the prior quarter to $1.4 million for the quarter ended June 30, 2016. The first and second quarters of 2016 and remaining estimated net accretion impact are reflected in the following table (dollars in thousands):

Loan Accretion Borrowings
Accretion
(Amortization)
Total
For the quarter ended March 31, 2016 $1,084 $62 $1,146
For the quarter ended June 30, 2016 1,259 143 1,402
For the remaining six months of 2016 2,195 190 2,385
For the years ending:
2017 4,285 170 4,455
2018 3,815 (143) 3,672
2019 3,018 (286) 2,732
2020 2,477 (301) 2,176
2021 2,112 (316) 1,796
Thereafter 8,766 (5,306) 3,460

ASSET QUALITY/LOAN LOSS PROVISION

Overview
During the second quarter, the Company experienced declines in past due and nonaccrual loan levels, other real estate owned (“OREO”) balances, and net charge-off levels from the prior quarter. Nonperforming assets and past due loans were also down from the prior year. The loan loss provision declined from the prior quarter due to lower charge-off levels and improving asset quality metrics. The allowance for loan loss increased from the prior quarter due to loan growth in the current quarter.

All nonaccrual and past due loan metrics discussed below exclude purchased credit impaired loans (“PCI”) totaling $67.2 million (net of fair value mark of $15.9 million).

Nonperforming Assets (“NPAs”)
At June 30, 2016, NPAs totaled $24.2 million, a decrease of $7.5 million, or 23.6%, from June 30, 2015 and a decline of $3.1 million, or 11.3%, from March 31, 2016. In addition, NPAs as a percentage of total outstanding loans declined 17 basis points from 0.58% a year earlier and decreased 6 basis points from 0.47% last quarter to 0.41% in the current quarter. 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,
2016 2016 2015 2015 2015
Nonaccrual loans, excluding PCI loans $10,861 $13,092 $11,936 $12,966 $9,521
Foreclosed properties 10,076 10,941 11,994 18,789 18,917
Former bank premises 3,305 3,305 3,305 3,305 3,305
Total nonperforming assets $24,242 $27,338 $27,235 $35,060 $31,743

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,
2016 2016 2015 2015 2015
Beginning Balance $13,092 $11,936 $12,966 $9,521 $17,385
Net customer payments (2,859) (1,204) (1,493) (1,104) (4,647)
Additions 2,568 5,150 2,344 5,213 581
Charge-offs (1,096) (1,446) (1,245) (541) (2,171)
Loans returning to accruing status (396) (932) (402) (123) (919)
Transfers to OREO (448) (412) (234) (708)
Ending Balance $10,861 $13,092 $11,936 $12,966 $9,521

The following table shows the activity in OREO for the quarter ended (dollars in thousands):


June 30, March 31, December 31, September 30, June 30,
2016 2016 2015 2015 2015
Beginning Balance $14,246 $15,299 $22,094 $22,222 $25,434
Additions of foreclosed property 501 456 234 1,082 904
Additions of former bank premises 1,822
Capitalized improvements 9 243
Valuation adjustments (274) (126) (4,229) (473) (710)
Proceeds from sales (1,086) (1,390) (4,961) (767) (3,511)
Gains (losses) from sales (6) 7 339 21 (138)
Ending Balance $13,381 $14,246 $15,299 $22,094 $22,222

During the second quarter, the majority of sales of OREO were related to residential real estate.

Past Due Loans
Past due loans still accruing interest totaled $25.3 million, or 0.43% of total loans, at June 30, 2016 compared to $33.5 million, or 0.61%, a year ago and $35.1 million, or 0.61%, at March 31, 2016. At June 30, 2016, loans past due 90 days or more and accruing interest totaled $3.5 million, or 0.06% of total loans, compared to $10.9 million, or 0.20%, a year ago and $5.7 million, or 0.10%, at March 31, 2016.

Net Charge-offs
For the second quarter, net charge-offs were $1.6 million, or 0.11% on an annualized basis, compared to $2.2 million, or 0.16%, for the same quarter last year and $2.2 million, or 0.15%, for the prior quarter. For the six months ended June 30, 2016, net charge-offs were $3.8 million, or 0.13% on an annualized basis, compared to $5.3 million, or 0.20%, for the same period last year.

Provision
The provision for loan losses for the current quarter was $2.3 million, a decline of $1.2 million compared to the same quarter a year ago and a decrease of $204,000 compared to the previous quarter. The decline in provision for loan losses in the current quarter compared to the prior periods was primarily driven by lower charge-off levels and improving asset quality metrics.

Allowance for Loan Losses
The allowance for loan losses (“ALL”) increased $675,000 from March 31, 2016 to $35.1 million at June 30, 2016 primarily due to loan growth during the quarter. The allowance for loan losses as a percentage of the total loan portfolio was 0.59% at June 30, 2016, 0.60% at March 31, 2016, and 0.59% at June 30, 2015. The ALL as a percentage of the total loan portfolio, adjusted for purchase accounting (non-GAAP), was 0.92% at June 30, 2016, a decrease from 0.95% from the prior quarter and a decrease from 1.02% from the quarter ended June 30, 2015. In acquisition accounting, there is no carryover of previously established allowance for loan losses, as acquired loans are recorded at fair value.

The nonaccrual loan coverage ratio was 322.9% at June 30, 2016, compared to 262.8% at March 31, 2016 and 339.7% at June 30, 2015. The current level of the allowance for loan losses reflects specific reserves related to nonperforming loans, current risk ratings on loans, net charge-off activity, loan growth, delinquency trends, and other credit risk factors that the Company considers important in assessing the adequacy of the allowance for loan losses.

NONINTEREST INCOME

Noninterest income increased $2.1 million, or 13.1%, to $18.0 million for the quarter ended June 30, 2016 from $15.9 million in the prior quarter, primarily driven by higher mortgage banking income of $826,000, higher customer-related fee income of $477,000, increases in loan-related interest rate swap fees of $428,000, and higher insurance-related income of $226,000. Increases in customer-related fee income were primarily driven by higher fiduciary and asset management fees, resulting from the acquisition of ODCM, as well as higher debit card interchange fees.

Mortgage banking income increased $826,000, or 38.5%, to $3.0 million in the second quarter compared to $2.1 million in the first quarter, related to increased mortgage loan originations. Mortgage loan originations increased by $41.9 million, or 42.6%, in the current quarter to $140.1 million from $98.2 million in the first quarter. Of the mortgage loan originations in the current quarter, 33.6% were refinances, which was a decline from 38.0% in the prior quarter.

NONINTEREST EXPENSE

Noninterest expense increased $979,000, or 1.8%, to $55.3 million for the quarter ended June 30, 2016 from $54.3 million in the prior quarter. Professional fees increased $559,000 due to higher project-related consulting expenses. Salary and benefit expenses increased $471,000 primarily related to the full-quarter impact of annual merit adjustments in the second quarter and increases related to the ODCM acquisition and the new Charlotte Loan Production Office. OREO and credit-related costs were $325,000 higher due to increases in valuation adjustments, OREO expenses, and seasonal real estate tax expenses on foreclosed properties in the second quarter. These increases were partially offset by the $300,000 in branch closure costs recorded in the first quarter.

BALANCE SHEET

At June 30, 2016, total assets were $8.1 billion, an increase of $268.0 million from March 31, 2016 and an increase of $602.9 million from June 30, 2015. The increase in assets was mostly related to loan growth.

At June 30, 2016, loans held for investment were $5.9 billion, an increase of $160.6 million, or 11.1% (annualized), from March 31, 2016, while average loans increased $153.0 million, or 10.7% (annualized), from the prior quarter. Adjusted for the sale of the credit card portfolio that occurred in the third quarter of 2015, loans held for investment increased $457.5 million, or 8.3%, from June 30, 2015, while quarterly average loans increased $441.4 million, or 8.1%, from the prior year.

At June 30, 2016, total deposits were $6.1 billion, an increase of $149.8 million, or 10.1% (annualized), from March 31, 2016, while average deposits increased $126.1 million, or 8.6% (annualized), from the prior quarter. Total deposits grew $311.4 million, or 5.4%, from June 30, 2015, while average deposits increased $315.6 million, or 5.5%, from the prior year.

At June 30, 2016, March 31, 2016, and June 30, 2015, respectively, the Company had a common equity Tier 1 capital ratio of 9.92%, 10.25%, and 10.87%; a Tier 1 capital ratio of 11.25%, 11.63%, and 12.31%; a total capital ratio of 11.77%, 12.16%, and 12.83%; and a leverage ratio of 10.01%, 10.25%, and 10.82%.

The Company’s common equity to asset ratios at June 30, 2016, March 31, 2016, and June 30, 2015 were 12.21%, 12.52%, and 13.18%, respectively, while its tangible common equity to tangible assets ratio was 8.59%, 8.86%, and 9.30%, respectively. The decrease in capital ratios from prior periods is primarily due to share repurchases and asset growth.

During the second quarter, the Company declared and paid cash dividends of $0.19 per common share, consistent with the dividend paid in the prior quarter and an increase of $0.02, or 11.8%, compared to the same quarter in the prior year.

On February 25, 2016, the Company’s Board of Directors authorized a share repurchase program to purchase up to $25.0 million worth of the Company’s common stock on the open market or in privately negotiated transactions. The Company repurchased approximately 272,000 shares during the quarter ended June 30, 2016 and had approximately $15.5 million available for repurchase under the current program.

ABOUT UNION BANKSHARES CORPORATION

Headquartered in Richmond, Virginia, Union Bankshares Corporation (NASDAQ:UBSH) is the holding company for Union Bank & Trust, which has 120 banking offices and 200 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 Friday, July 22nd, at 9:00 a.m. Eastern Time during which management will review earnings and performance trends. Callers wishing to participate may call toll-free by dialing (877) 668-4908. The conference ID number is 44271225.

NON-GAAP MEASURES

In reporting the results of the quarter ended June 30, 2016, the Company has provided supplemental performance measures on a tangible basis. Tangible common equity is used in the calculation of certain capital and per share ratios. The Company believes tangible common equity and the related ratios are meaningful measures of capital adequacy because they provide a meaningful base for period-to-period and company-to-company comparisons, which the Company believes will assist investors in assessing the capital of the Company and its ability to absorb potential losses.

These measures are a supplement to GAAP used to prepare the Company’s financial statements and should not be viewed as a substitute for GAAP measures. In addition, the Company’s non-GAAP measures may not be comparable to non-GAAP measures of other companies.

FORWARD-LOOKING STATEMENTS

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

UNION BANKSHARES CORPORATION AND SUBSIDIARIES
KEY FINANCIAL RESULTS
(Dollars in thousands, except share data)
(FTE - "Fully Taxable Equivalent")
Three Months Ended Six Months Ended
6/30/16 3/31/16 6/30/15 6/30/16 6/30/15
Results of Operations
Interest and dividend income $72,781 $70,749 $69,854 $143,530 $137,455
Interest expense 7,005 7,018 6,038 14,023 11,670
Net interest income 65,776 63,731 63,816 129,507 125,785
Provision for credit losses 2,300 2,604 3,749 4,904 5,499
Net interest income after provision for credit losses 63,476 61,127 60,067 124,603 120,286
Noninterest income 17,993 15,914 16,212 33,907 31,266
Noninterest expenses 55,251 54,272 55,241 109,523 109,081
Income before income taxes 26,218 22,769 21,038 48,987 42,471
Income tax expense 6,881 5,808 5,690 12,689 11,422
Net income $19,337 $16,961 $15,348 $36,298 $31,049
Interest earned on earning assets (FTE) $75,232 $73,238 $72,145 $148,471 $141,907
Net interest income (FTE) 68,227 66,220 66,107 134,448 130,237
Core deposit intangible amortization 1,745 1,880 2,138 3,625 4,361
Net income - community bank segment $18,798 $16,907 $15,253 $35,705 $31,221
Net income (loss) - mortgage segment 539 54 95 593 (172)
Key Ratios
Earnings per common share, diluted $0.44 $0.38 $0.34 $0.82 $0.69
Return on average assets (ROA) 0.98% 0.88% 0.83% 0.93% 0.84%
Return on average equity (ROE) 7.88% 6.89% 6.21% 7.39% 6.34%
Return on average tangible common equity (ROTCE) 11.60% 10.13% 9.20% 10.86% 9.43%
Efficiency ratio (FTE) 64.08% 66.08% 67.11% 65.06% 67.54%
Efficiency ratio - community bank segment (FTE) 63.77% 65.27% 66.07% 64.51% 66.25%
Efficiency ratio - mortgage bank segment (FTE) 75.31% 93.36% 94.21% 83.30% 103.90%
Net interest margin (FTE) 3.84% 3.82% 3.97% 3.83% 3.96%
Yields on earning assets (FTE) 4.23% 4.23% 4.33% 4.23% 4.32%
Cost of interest-bearing liabilities (FTE) 0.51% 0.52% 0.47% 0.52% 0.46%
Cost of funds (FTE) 0.39% 0.41% 0.36% 0.40% 0.36%
Net interest margin, core (FTE) (1) 3.76% 3.76% 3.86% 3.76% 3.85%
Yields on earning assets (FTE), core (1) 4.16% 4.16% 4.27% 4.16% 4.27%
Cost of interest-bearing liabilities (FTE), core (1) 0.52% 0.53% 0.53% 0.52% 0.54%
Cost of funds (FTE), core (1) 0.40% 0.40% 0.41% 0.40% 0.42%
Per Share Data
Earnings per common share, basic $0.44 $0.38 $0.34 $0.82 $0.69
Earnings per common share, diluted 0.44 0.38 0.34 0.82 0.69
Cash dividends paid per common share 0.19 0.19 0.17 0.38 0.32
Market value per share 24.71 24.63 23.24 24.71 23.24
Book value per common share 22.87 22.55 22.02 22.87 22.02
Tangible book value per common share 15.44 15.31 14.87 15.44 14.87
Price to earnings ratio, diluted 13.96 16.12 17.04 14.98 16.70
Price to book value per common share ratio 1.08 1.09 1.06 1.08 1.06
Price to tangible common share ratio 1.60 1.61 1.56 1.60 1.56
Weighted average common shares outstanding, basic 43,746,583 44,251,276 45,128,698 43,998,929 45,117,396
Weighted average common shares outstanding, diluted 43,824,183 44,327,229 45,209,814 44,075,706 45,198,727
Common shares outstanding at end of period 43,619,867 43,854,381 45,112,893 43,619,867 45,112,893


Three Months Ended Six Months Ended
6/30/16 3/31/16 6/30/15 6/30/16 6/30/15
Capital Ratios
Common equity Tier 1 capital ratio (2) 9.92% 10.25% 10.87% 9.92% 10.87%
Tier 1 capital ratio (2) 11.25% 11.63% 12.31% 11.25% 12.31%
Total capital ratio (2) 11.77% 12.16% 12.83% 11.77% 12.83%
Leverage ratio (Tier 1 capital to average assets) (2) 10.01% 10.25% 10.82% 10.01% 10.82%
Common equity to total assets 12.21% 12.52% 13.18% 12.21% 13.18%
Tangible common equity to tangible assets 8.59% 8.86% 9.30% 8.59% 9.30%
Financial Condition
Assets $8,100,561 $7,832,611 $7,497,706 $8,100,561 $7,497,706
Loans held for investment 5,941,098 5,780,502 5,510,385 5,941,098 5,510,385
Earning Assets 7,282,137 7,045,552 6,717,137 7,282,137 6,717,137
Goodwill 297,659 293,522 293,522 297,659 293,522
Core deposit intangibles, net 19,685 21,430 27,394 19,685 27,394
Deposits 6,095,826 5,945,982 5,784,474 6,095,826 5,784,474
Stockholders' equity 989,201 980,978 988,134 989,201 988,134
Tangible common equity (3) 668,093 666,026 667,218 668,093 667,218
Loans held for investment, net of deferred fees and costs
Construction and land development $765,997 $776,698 $671,234 $765,997 $671,234
Commercial real estate - owner occupied 831,880 849,202 874,582 831,880 874,582
Commercial real estate - non-owner occupied 1,370,745 1,296,251 1,217,646 1,370,745 1,217,646
Multifamily real estate 337,723 323,270 316,474 337,723 316,474
Commercial & Industrial 469,054 453,208 426,193 469,054 426,193
Residential 1-4 Family 992,457 978,478 991,592 992,457 991,592
Auto 244,575 241,737 216,420 244,575 216,420
HELOC 519,196 517,122 512,123 519,196 512,123
Consumer and all other 409,471 344,536 284,121 409,471 284,121
Total loans held for investment $5,941,098 $5,780,502 $5,510,385 $5,941,098 $5,510,385
Deposits
NOW accounts $1,563,297 $1,504,227 $1,378,129 $1,563,297 $1,378,129
Money market accounts 1,366,451 1,323,192 1,303,792 1,366,451 1,303,792
Savings accounts 598,622 589,542 565,584 598,622 565,584
Time deposits of $100,000 and over 521,138 508,153 547,492 521,138 547,492
Other time deposits 653,584 657,625 699,801 653,584 699,801
Total interest-bearing deposits $4,703,092 $4,582,739 $4,494,798 $4,703,092 $4,494,798
Demand deposits 1,392,734 1,363,243 1,289,676 1,392,734 1,289,676
Total deposits $6,095,826 $5,945,982 $5,784,474 $6,095,826 $5,784,474
Averages
Assets $7,949,576 $7,764,830 $7,459,446 $7,857,203 $7,411,332
Loans held for investment 5,863,007 5,709,998 5,448,126 5,786,502 5,404,643
Loans held for sale 30,698 27,304 43,307 29,001 40,901
Securities 1,202,772 1,187,150 1,143,343 1,194,961 1,143,487
Earning assets 7,153,627 6,968,988 6,676,440 7,061,307 6,626,704
Deposits 6,025,545 5,899,404 5,709,963 5,962,475 5,675,134
Certificates of deposit 1,164,561 1,171,972 1,233,904 1,168,267 1,251,531
Interest-bearing deposits 4,642,899 4,562,856 4,431,087 4,602,878 4,423,933
Borrowings 881,027 816,943 703,223 848,984 691,348
Interest-bearing liabilities 5,523,926 5,379,799 5,134,310 5,451,862 5,115,281
Stockholders' equity 987,147 989,414 991,093 988,281 986,844
Tangible common equity (3) 670,503 673,562 669,139 672,033 663,814


Three Months Ended Six Months Ended
6/30/16 3/31/16 6/30/15 6/30/16 6/30/15
Asset Quality
Allowance for Loan Losses (ALL)
Beginning balance $34,399 $34,047 $30,977 $34,047 $32,384
Add: Recoveries 660 828 1,023 1,488 1,695
Less: Charge-offs 2,285 2,980 3,205 5,265 7,034
Add: Provision for loan losses 2,300 2,504 3,549 4,804 5,299
Ending balance $35,074 $34,399 $32,344 $35,074 $32,344
ALL / total outstanding loans 0.59% 0.60% 0.59% 0.59% 0.59%
ALL / total outstanding loans, adjusted for acquisition accounting (4) 0.92% 0.95% 1.02% 0.92% 1.02%
Net charge-offs / total outstanding loans 0.11% 0.15% 0.16% 0.13% 0.20%
Provision / total outstanding loans 0.16% 0.18% 0.26% 0.16% 0.19%
Total PCI Loans $67,170 $70,105 $87,841 $67,170 $87,841
Nonperforming Assets
Construction and land development $1,604 $2,156 $2,402 $1,604 $2,402
Commercial real estate - owner occupied 1,661 2,816 3,624 1,661 3,624
Commercial real estate - non-owner occupied 200 200
Commercial & Industrial 263 810 564 263 564
Residential 1-4 Family 5,448 5,696 2,128 5,448 2,128
Auto 140 162 140
HELOC 1,495 973 493 1,495 493
Consumer and all other 250 479 110 250 110
Nonaccrual loans $10,861 $13,092 $9,521 $10,861 $9,521
Other real estate owned 13,381 14,246 22,222 13,381 22,222
Total nonperforming assets (NPAs) $24,242 $27,338 $31,743 $24,242 $31,743
Construction and land development $116 $544 $1,447 $116 $1,447
Commercial real estate - owner occupied 439 196 705 439 705
Commercial real estate - non-owner occupied 723 723 142 723 142
Multifamily real estate 656 656
Commercial & Industrial 117 422 494 117 494
Residential 1-4 Family 1,302 2,247 5,530 1,302 5,530
Auto 144 53 222 144 222
HELOC 642 1,315 1,289 642 1,289
Consumer and all other 50 223 418 50 418
Loans ≥ 90 days and still accruing $3,533 $5,723 $10,903 $3,533 $10,903
Total NPAs and loans ≥ 90 days $27,775 $33,061 $42,646 $27,775 $42,646
NPAs / total outstanding loans 0.41% 0.47% 0.58% 0.41% 0.58%
NPAs / total assets 0.30% 0.35% 0.42% 0.30% 0.42%
ALL / nonperforming loans 322.94% 262.75% 339.71% 322.94% 339.71%
ALL / nonperforming assets 144.68% 125.83% 101.89% 144.68% 101.89%
Troubled Debt Restructurings
Performing $11,885 $11,486 $19,880 $11,885 $19,880
Nonperforming 1,658 1,470 2,244 1,658 2,244
Total troubled debt restructurings $13,543 $12,956 $22,124 $13,543 $22,124


Three Months Ended Six Months Ended
6/30/16 3/31/16 6/30/15 6/30/16 6/30/15
Past Due Detail
Construction and land development $402 $2,676 $248 $402 $248
Commercial real estate - owner occupied 912 1,787 169 912 169
Commercial real estate - non-owner occupied 267 24 1,427 267 1,427
Multifamily real estate 155 1,909 1,909
Commercial & Industrial 2,464 985 1,256 2,464 1,256
Residential 1-4 Family 5,476 13,711 3,854 5,476 3,854
Auto 1,282 1,519 1,663 1,282 1,663
HELOC 1,347 1,870 2,515 1,347 2,515
Consumer and all other 1,364 736 2,106 1,364 2,106
Loans 30-59 days past due $13,514 $23,463 $15,147 $13,514 $15,147
Construction and land development $1,177 $724 $326 $1,177 $326
Commercial real estate - owner occupied 963 341 341
Commercial real estate - non-owner occupied 276 1,199 1,199
Commercial & Industrial 62 284 284 62 284
Residential 1-4 Family 5,033 1,111 4,410 5,033 4,410
Auto 377 126 234 377 234
HELOC 1,228 388 387 1,228 387
Consumer and all other 412 1,996 263 412 263
Loans 60-89 days past due $8,289 $5,868 $7,444 $8,289 $7,444
Alternative Performance Measures (non-GAAP)
Tangible Common Equity (3)
Ending equity $989,201 $980,978 $988,134 $989,201 $988,134
Less: Ending goodwill 297,659 293,522 293,522 297,659 293,522
Less: Ending core deposit intangibles 19,685 21,430 27,394 19,685 27,394
Less: Ending other amortizable intangibles 3,764 3,764
Ending tangible common equity (non-GAAP) $668,093 $666,026 $667,218 $668,093 $667,218
Average equity $987,147 $989,414 $991,093 $988,281 $986,844
Less: Average goodwill 294,886 293,522 293,522 294,204 293,522
Less: Average core deposit intangibles 20,517 22,330 28,432 21,424 29,508
Less: Average other amortizable intangibles 1,241 620
Average tangible common equity (non-GAAP) $670,503 $673,562 $669,139 $672,033 $663,814
ALL to loans, adjusted for acquisition accounting (non-GAAP)(4)
Allowance for loan losses $35,074 $34,399 $32,344 $35,074 $32,344
Remaining fair value mark on purchased performing loans 19,092 19,994 23,010 19,092 23,010
Adjusted allowance for loan losses $54,166 $54,393 $55,354 $54,166 $55,354
Loans, net of deferred fees $5,941,098 $5,780,502 $5,510,385 $5,941,098 $5,510,385
Remaining fair value mark on purchased performing loans 19,092 19,994 23,010 19,092 23,010
Less: Purchased credit impaired loans, net of fair value mark 67,170 70,105 87,841 67,170 87,841
Adjusted loans, net of deferred fees $5,893,020 $5,730,391 $5,445,554 $5,893,020 $5,445,554
ALL / gross loans, adjusted for acquisition accounting 0.92% 0.95% 1.02% 0.92% 1.02%


Three Months Ended Six Months Ended
6/30/16 3/31/16 6/30/15 6/30/16 6/30/15
Mortgage Origination Volume
Refinance Volume $47,033 $37,304 $43,385 $84,337 $108,934
Construction Volume 21,751 14,894 20,946 36,645 40,498
Purchase Volume 71,297 46,013 75,971 117,310 129,584
Total Mortgage loan originations $140,081 $98,211 $140,302 $238,292 $279,016
% of originations that are refinances 33.6% 38.0% 30.9% 35.4% 39.0%
Other Data
End of period full-time employees 1,423 1,400 1,443 1,423 1,443
Number of full-service branches 120 124 131 120 131
Number of full automatic transaction machines (ATMs) 200 201 199 200 199

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

(2) All ratios at June 30, 2016 are estimates and subject to change pending the Company’s filing of its FR Y9-C. All other periods are presented as filed.

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

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

UNION BANKSHARES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share data)
June 30, December 31, June 30,
2016 2015 2015
ASSETS
Cash and cash equivalents:
Cash and due from banks $128,896 $111,323 $109,480
Interest-bearing deposits in other banks 87,887 29,670 26,334
Federal funds sold 251 1,667 1,019
Total cash and cash equivalents 217,034 142,660 136,833
Securities available for sale, at fair value 949,663 903,292 888,362
Securities held to maturity, at carrying value 202,917 205,374 201,072
Restricted stock, at cost 62,206 51,828 50,171
Loans held for sale 38,114 36,030 39,450
Loans held for investment, net of deferred fees and costs 5,941,098 5,671,462 5,510,385
Less allowance for loan losses 35,074 34,047 32,344
Net loans held for investment 5,906,024 5,637,415 5,478,041
Premises and equipment, net 124,032 126,028 132,681
Other real estate owned, net of valuation allowance 13,381 15,299 22,222
Core deposit intangibles, net 19,685 23,310 27,394
Goodwill 297,659 293,522 293,522
Bank owned life insurance 176,413 173,687 141,284
Other assets 93,433 84,846 86,674
Total assets $8,100,561 $7,693,291 $7,497,706
LIABILITIES
Noninterest-bearing demand deposits $1,392,734 $1,372,937 $1,289,676
Interest-bearing deposits 4,703,092 4,590,999 4,494,798
Total deposits 6,095,826 5,963,936 5,784,474
Securities sold under agreements to repurchase 121,262 84,977 119,680
Other short-term borrowings 557,000 304,000 261,000
Long-term borrowings 274,547 291,198 300,294
Other liabilities 62,725 53,813 44,124
Total liabilities 7,111,360 6,697,924 6,509,572
Commitments and contingencies
STOCKHOLDERS' EQUITY
Common stock, $1.33 par value, shares authorized 100,000,000; issued and outstanding, 43,619,867 shares, 44,785,674 shares, and 45,112,893 shares, respectively. 57,537 59,159 59,672
Additional paid-in capital 605,018 631,822 640,936
Retained earnings 317,747 298,134 278,297
Accumulated other comprehensive income 8,899 6,252 9,229
Total stockholders' equity 989,201 995,367 988,134
Total liabilities and stockholders' equity $8,100,561 $7,693,291 $7,497,706


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,
2016 2016 2015 2016 2015
Interest and dividend income:
Interest and fees on loans $64,747 $62,947 $62,604 $127,694 $123,057
Interest on deposits in other banks 65 47 24 112 41
Interest and dividends on securities:
Taxable 4,510 4,316 3,860 8,826 7,667
Nontaxable 3,459 3,439 3,366 6,898 6,690
Total interest and dividend income 72,781 70,749 69,854 143,530 137,455
Interest expense:
Interest on deposits 4,197 4,195 3,680 8,393 7,000
Interest on federal funds purchased 2 2 4 3 5
Interest on short-term borrowings 708 621 255 1,329 505
Interest on long-term borrowings 2,098 2,200 2,099 4,298 4,160
Total interest expense 7,005 7,018 6,038 14,023 11,670
Net interest income 65,776 63,731 63,816 129,507 125,785
Provision for credit losses 2,300 2,604 3,749 4,904 5,499
Net interest income after provision for credit losses 63,476 61,127 60,067 124,603 120,286
Noninterest income:
Service charges on deposit accounts 4,754 4,734 4,622 9,488 8,835
Other service charges and fees 4,418 4,156 4,051 8,574 7,634
Fiduciary and asset management fees 2,333 2,138 2,312 4,471 4,531
Mortgage banking income, net 2,972 2,146 2,574 5,117 4,952
Gains on securities transactions, net 3 143 404 146 597
Bank owned life insurance income 1,361 1,372 1,134 2,734 2,269
Other operating income 2,152 1,225 1,115 3,377 2,448
Total noninterest income 17,993 15,914 16,212 33,907 31,266
Noninterest expenses:
Salaries and benefits 28,519 28,048 25,561 56,567 53,052
Occupancy expenses 4,809 4,976 5,173 9,785 10,305
Furniture and equipment expenses 2,595 2,636 2,989 5,232 5,803
Printing, postage, and supplies 1,280 1,139 1,408 2,419 2,779
Communications expense 927 1,089 1,143 2,016 2,322
Technology and data processing 3,608 3,814 3,216 7,422 6,471
Professional services 2,548 1,989 1,669 4,537 3,017
Marketing and advertising expense 1,924 1,938 2,372 3,863 4,060
FDIC assessment premiums and other insurance 1,379 1,362 1,280 2,741 2,679
Other taxes 1,607 1,618 1,554 3,225 3,105
Loan-related expenses 855 599 687 1,454 1,371
OREO and credit-related expenses 894 569 1,965 1,463 3,152
Amortization of intangible assets 1,745 1,880 2,138 3,625 4,361
Training and other personnel costs 905 744 912 1,649 1,633
Other expenses 1,656 1,871 3,174 3,525 4,971
Total noninterest expenses 55,251 54,272 55,241 109,523 109,081
Income before income taxes 26,218 22,769 21,038 48,987 42,471
Income tax expense 6,881 5,808 5,690 12,689 11,422
Net income $19,337 $16,961 $15,348 $36,298 $31,049
Basic earnings per common share $0.44 $0.38 $0.34 $0.82 $0.69
Diluted earnings per common share $0.44 $0.38 $0.34 $0.82 $0.69


UNION BANKSHARES CORPORATION AND SUBSIDIARIES
SEGMENT FINANCIAL INFORMATION
(Dollars in thousands)
Community Bank Mortgage Eliminations Consolidated
Three Months Ended June 30, 2016
Net interest income$65,478 $298 $ $65,776
Provision for credit losses2,260 40 2,300
Net interest income after provision for credit losses63,218 258 63,476
Noninterest income14,940 3,207 (154) 17,993
Noninterest expenses52,766 2,639 (154) 55,251
Income before income taxes25,392 826 26,218
Income tax expense6,594 287 6,881
Net income$18,798 $539 $ $19,337
Total assets$8,094,176 $75,802 $(69,417) $8,100,561
Three Months Ended March 31, 2016
Net interest income$63,425 $306 $ $63,731
Provision for credit losses2,500 104 2,604
Net interest income after provision for credit losses60,925 202 61,127
Noninterest income13,608 2,477 (171) 15,914
Noninterest expenses51,844 2,599 (171) 54,272
Income before income taxes22,689 80 22,769
Income tax expense5,782 26 5,808
Net income$16,907 $54 $ $16,961
Total assets$7,825,652 $55,069 $(48,110) $7,832,611
Three Months Ended June 30, 2015
Net interest income$63,441 $375 $ $63,816
Provision for credit losses3,700 49 3,749
Net interest income after provision for credit losses59,741 326 60,067
Noninterest income13,523 2,860 (171) 16,212
Noninterest expenses52,365 3,047 (171) 55,241
Income before income taxes20,899 139 21,038
Income tax expense5,646 44 5,690
Net income$15,253 $95 $ $15,348
Total assets$7,495,564 $55,563 $(53,421) $7,497,706
Six Months Ended June 30, 2016
Net interest income$128,903 $604 $ $129,507
Provision for credit losses4,760 144 4,904
Net interest income after provision for credit losses124,143 460 124,603
Noninterest income28,548 5,684 (325) 33,907
Noninterest expenses104,610 5,238 (325) 109,523
Income before income taxes48,081 906 48,987
Income tax expense12,376 313 12,689
Net income$35,705 $593 $ $36,298
Total assets$8,094,176 $75,802 $(69,417) $8,100,561
Six Months Ended June 30, 2015
Net interest income$125,164 $621 $ $125,785
Provision for credit losses5,450 49 5,499
Net interest income after provision for credit losses119,714 572 120,286
Noninterest income26,371 5,236 (341) 31,266
Noninterest expenses103,337 6,085 (341) 109,081
Income (loss) before income taxes42,748 (277) 42,471
Income tax expense (benefit)11,527 (105) 11,422
Net income (loss)$31,221 $(172) $ $31,049
Total assets$7,495,564 $55,563 $(53,421) $7,497,706


AVERAGE BALANCES, INCOME AND EXPENSES, YIELDS AND RATES (TAXABLE EQUIVALENT BASIS)
For the Quarter Ended
June 30, 2016 March 31, 2016
Average
Balance
Interest
Income /
Expense
Yield /
Rate
(1)
Average
Balance
Interest
Income /
Expense
Yield /
Rate (1)
Assets:
Securities:
Taxable$755,655 $4,510 2.40% $743,724 $4,316 2.33%
Tax-exempt447,117 5,321 4.79% 443,426 5,291 4.80%
Total securities1,202,772 9,831 3.29% 1,187,150 9,607 3.25%
Loans, net (2) (3)5,863,007 65,115 4.47% 5,709,998 63,326 4.46%
Other earning assets87,848 286 1.31% 71,840 305 1.71%
Total earning assets7,153,627 $75,232 4.23% 6,968,988 $73,238 4.23%
Allowance for loan losses(35,282) (35,034)
Total non-earning assets831,231 830,876
Total assets$7,949,576 $7,764,830
Liabilities and Stockholders' Equity:
Interest-bearing deposits:
Transaction and money market accounts$2,882,468 $1,448 0.20% $2,809,961 $1,393 0.20%
Regular savings595,870 224 0.15% 580,923 217 0.15%
Time deposits1,164,561 2,525 0.87% 1,171,972 2,585 0.89%
Total interest-bearing deposits4,642,899 4,197 0.36% 4,562,856 4,195 0.37%
Other borrowings (4)881,027 2,808 1.28% 816,943 2,823 1.39%
Total interest-bearing liabilities5,523,926 $7,005 0.51% 5,379,799 $7,018 0.52%
Noninterest-bearing liabilities:
Demand deposits1,382,646 1,336,548
Other liabilities55,857 59,069
Total liabilities6,962,429 6,775,416
Stockholders' equity987,147 989,414
Total liabilities and stockholders' equity$7,949,576 $7,764,830
Net interest income $68,227 $66,220
Interest rate spread (5) 3.72% 3.71%
Cost of funds 0.39% 0.41%
Net interest margin (6) 3.84% 3.82%
(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 $1.3 million and $1.1 million for the three months ended June 30, 2016 and March 31, 2016, respectively, in accretion of the fair market value adjustments related to acquisitions.
(4) Interest expense on borrowings includes $143,000 and $62,000 for the three months ended June 30, 2016 and March 31, 2016, 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 3.76% for both the three months ended June 30, 2016 and March 31, 2016.

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

Source:Union Bankshares Corporation