Union Bankshares Reports Fourth Quarter and Full Year Results

RICHMOND, Va., Jan. 24, 2017 (GLOBE NEWSWIRE) -- Union Bankshares Corporation (the “Company” or “Union”) (NASDAQ:UBSH) today reported net income of $20.8 million and earnings per share of $0.48 for its fourth quarter ended December 31, 2016. The quarterly results represent an increase of $3.0 million, or 16.6%, in net income and an increase of $0.08, or 20.0%, in earnings per share from the fourth quarter of 2015. For the year ended December 31, 2016, net income was $77.5 million and earnings per share was $1.77, an increase of $10.4 million, or 15.5%, and $0.28, or 18.8%, respectively, compared to the results for the year ended December 31, 2015.

2016 was a year of growth and change for Union,” said John C. Asbury, president and chief executive officer for Union Bankshares Corporation. “With double digit gains in net income, earnings per share and loans for the year, the company showed impressive growth in 2016 and demonstrated the earnings power of the bank. Union made meaningful progress on its goal of achieving top tier financial performance by posting solid gains in our return on assets and return on tangible common equity profitability ratios from the prior year. Improving efficiency, along with diversifying the loan portfolio, growing core deposits to fund loan growth, and finalizing the work already underway to cross the $10 billion threshold will be focus areas for Union in 2017.

I also want to personally thank Billy Beale for his service and dedication to Union over the past 25 years and for the remarkably smooth leadership transition. The company is well positioned to continue to deliver long term shareholder value thanks to Billy's leadership and we look forward to his continuing contributions to the Company as a board member and an advisor going forward.

Select highlights for the fourth quarter and full year of 2016 include:

  • Net income for the community bank segment was $20.4 million, or $0.47 per share, for the fourth quarter, compared to $17.9 million, or $0.40 per share, for the same quarter in 2015. Net income for the community bank segment for the year ended December 31, 2016 was $75.7 million, or $1.73 per share, compared to net income of $67.3 million, or $1.49 per share for the year ended December 31, 2015.
  • The mortgage segment reported net income of $382,000, or $0.01 per share, for the fourth quarter, compared to a net loss of $90,000 in the fourth quarter 2015. Net income for the mortgage segment for the year ended December 31, 2016 was $1.8 million, or $0.04 per share, compared to a net loss of $202,000 for the year ended December 31, 2015.
  • Return on Average Assets (“ROA”) was 0.99% for the quarter ended December 31, 2016 compared to ROA of 1.00% for the prior quarter and 0.93% for the fourth quarter of 2015. Return on Average Tangible Common Equity (“ROTCE”) was 12.05% for the quarter ended December 31, 2016 compared to ROTCE of 12.00% for the prior quarter and 10.38% for the fourth quarter of 2015.
  • Loans held for investment grew $158.1 million, or 10.3% (annualized), from September 30, 2016 and increased $635.6 million, or 11.2%, from December 31, 2015. Average loans increased $180.4 million, or 12.0% (annualized), from the prior quarter and increased $601.7 million, or 10.7%, from the same quarter in the prior year.
  • Period-end deposits increased $121.0 million, or 7.7% (annualized), from September 30, 2016 and grew $415.6 million, or 7.0%, from December 31, 2015. Average deposits increased $105.1 million, or 6.8% (annualized), from the prior quarter and increased $404.6 million, or 6.9%, from the same quarter in the prior year.
  • During the fourth quarter of 2016, the Company issued $150.0 million of fixed-to-floating rate subordinated debt with a maturity date of December 15, 2026. The notes were sold at par resulting in net proceeds, after discounts and offering expenses, of approximately $148.0 million.

NET INTEREST INCOME

Tax-equivalent net interest income was $71.5 million, an increase of $2.0 million from the third quarter, driven by both higher earning asset balances and higher yields on earning assets. The fourth quarter tax-equivalent net interest margin increased 2 basis points to 3.78% from 3.76% in the previous quarter. Core tax-equivalent net interest margin (which excludes the 8 and 9 basis point impact of acquisition accounting accretion in the current and prior quarter, respectively) increased by 3 basis points to 3.70% from 3.67% in the previous quarter. The increase in the core tax-equivalent net interest margin was principally due to the 5 basis point increase in interest-earning asset yields offset by the 2 basis point increase in cost of funds. The increase in interest-earnings asset yields was primarily driven by higher loan yields in the current quarter.

The Company’s tax-equivalent net interest margin includes the impact of acquisition accounting fair value adjustments. During the fourth quarter, net accretion related to acquisition accounting increased $90,000, or 5.9%, from the prior quarter to $1.6 million for the quarter ended December 31, 2016 due to higher than expected acquired loan balance paydowns. The third quarter, fourth quarter, and full year 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 September 30, 2016$1,338 $181 $1,519
For the quarter ended December 31, 20161,538 71 1,609
For the year ended December 31, 20165,218 458 5,676
For the years ending:
20174,657 170 4,827
20184,120 (143) 3,977
20193,320 (286) 3,034
20202,810 (301) 2,509
20212,236 (316) 1,920
Thereafter8,461 (5,306) 3,155

ASSET QUALITY/LOAN LOSS PROVISION

Overview
During the fourth quarter, the Company experienced declines in nonperforming asset balances as well as in net charge-off levels from the prior quarter and the prior year. Past due loans levels were consistent with the prior quarter and down from the prior year. The loan loss provision decreased from prior periods due to lower levels of net charge-offs and improving credit quality metrics, while the allowance for loan loss increased from prior periods due to loan growth.

All nonaccrual and past due loan metrics discussed below exclude purchased credit impaired (“PCI”) loans totaling $59.3 million (net of fair value mark of $14.3 million).

Nonperforming Assets (“NPAs”)
At December 31, 2016, NPAs totaled $20.1 million, a decrease of $7.2 million, or 26.4%, from December 31, 2015 and a decline of $3.2 million, or 13.8%, from September 30, 2016. In addition, NPAs as a percentage of total outstanding loans declined 16 basis points from 0.48% a year earlier and decreased 6 basis points from 0.38% last quarter to 0.32% in the current quarter. 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,
2016 2016 2016 2016 2015
Nonaccrual loans, excluding PCI loans$9,973 $12,677 $10,861 $13,092 $11,936
Foreclosed properties7,430 7,927 10,076 10,941 11,994
Former bank premises2,654 2,654 3,305 3,305 3,305
Total nonperforming assets$20,057 $23,258 $24,242 $27,338 $27,235

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,
2016 2016 2016 2016 2015
Beginning Balance$12,677 $10,861 $13,092 $11,936 $12,966
Net customer payments(1,451) (1,645) (2,859) (1,204) (1,493)
Additions1,094 4,359 2,568 5,150 2,344
Charge-offs(1,216) (660) (1,096) (1,446) (1,245)
Loans returning to accruing status(1,039) (23) (396) (932) (402)
Transfers to OREO(92) (215) (448) (412) (234)
Ending Balance$9,973 $12,677 $10,861 $13,092 $11,936

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

December 31, September 30, June 30, March 31, December 31,
2016 2016 2016 2016 2015
Beginning Balance$10,581 $13,381 $14,246 $15,299 $22,094
Additions of foreclosed property859 246 501 456 234
Additions of former bank premises 1,822
Valuation adjustments(138) (479) (274) (126) (4,229)
Proceeds from sales(1,282) (2,844) (1,086) (1,390) (4,961)
Gains (losses) from sales64 277 (6) 7 339
Ending Balance$10,084 $10,581 $13,381 $14,246 $15,299

During the fourth quarter, the majority of sales of OREO were related to land and residential real estate.

Past Due Loans
Past due loans still accruing interest totaled $27.9 million, or 0.44% of total loans, at December 31, 2016 compared to $42.9 million, or 0.76%, a year ago and $26.9 million, or 0.44%, at September 30, 2016. At December 31, 2016, loans past due 90 days or more and accruing interest totaled $3.0 million, or 0.05% of total loans, compared to $5.8 million, or 0.10%, a year ago and $3.5 million, or 0.06%, at September 30, 2016.

Net Charge-offs
For the fourth quarter, net charge-offs were $824,000, or 0.05% on an annualized basis, compared to $1.2 million, or 0.09%, for the same quarter last year and $929,000, or 0.06%, for the prior quarter. For the year ended December 31, 2016, net charge-offs were $5.5 million, or 0.09%, compared to $7.6 million, or 0.13%, for the prior year.

Provision
The provision for loan losses for the current quarter was $1.5 million, a decrease of $536,000 compared to the same quarter a year ago and a decline of $923,000 compared to the previous quarter. The decrease in provision for loan losses in the current quarter compared to the prior periods was primarily driven by lower net charge-off levels and improving credit quality metrics. Additionally, a $250,000 provision was recognized during the current quarter for unfunded loan commitments, resulting in a total of $1.7 million in provision for credit losses for the quarter.

Allowance for Loan Losses
The allowance for loan losses (“ALL”) increased $650,000 from September 30, 2016 to $37.2 million at December 31, 2016 primarily due to loan growth during the quarter. The ALL as a percentage of the total loan portfolio was 0.59% at December 31, 2016, 0.59% at September 30, 2016, and 0.60% at December 31, 2015. The ALL as a percentage of the total loan portfolio, adjusted for acquisition accounting (non-GAAP), was 0.86% at December 31, 2016, a decrease from 0.90% from the prior quarter and a decrease from 0.98% from the quarter ended December 31, 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 372.9% at December 31, 2016, compared to 288.3% at September 30, 2016 and 285.3% at December 31, 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 decreased $900,000, or 4.7%, to $18.1 million for the quarter ended December 31, 2016 from $19.0 million in the prior quarter, primarily driven by lower mortgage banking income of $578,000, lower insurance-related income of $151,000, declines in customer-related fee income of $116,000 primarily driven by lower letter of credit fees, and decreases in loan swap fees of $105,000.

Mortgage banking income decreased $578,000, or 18.0%, to $2.6 million in the fourth quarter compared to $3.2 million in the third quarter, related to decreased mortgage loan originations and fair value adjustments associated with the interest rate lock derivative. The fair value of the interest rate lock derivative declined $516,000 in the current quarter, compared to an increase of $64,000 in the prior quarter, as a result of lower levels of locked mortgage balances at year-end. Mortgage loan originations decreased by $11.3 million, or 7.2%, in the current quarter to $145.3 million from $156.7 million in the third quarter. Of the mortgage loan originations in the current quarter, 49.2% were refinances compared with 33.8% in the prior quarter.

NONINTEREST EXPENSE

Noninterest expense decreased $646,000, or 1.1%, to $56.3 million for the quarter ended December 31, 2016 from $56.9 million in the prior quarter. Salaries and benefits expenses declined by $451,000 primarily due to lower levels of incentive compensation expense. Other declines in noninterest expense were driven by $400,000 in branch closure costs incurred in the prior quarter, lower loan-related expenses of $379,000 due to lower appraisal expenses, reduced levels of professional fees of $242,000, and lower amortization of intangible assets of $101,000. These lower expenses were partially offset by approximately $900,000 in increased franchise tax expenses driven by a one-time tax credit recognized in the prior quarter related to the Company's investment in a historic rehabilitation project.

INCOME TAXES

The effective tax rate for the fourth quarter was 27.5% compared to 23.3% in the third quarter. The increase in the effective tax rate was primarily driven by a one-time tax credit recognized in the prior quarter related to the Company's investment in a historic rehabilitation project and proportionately higher levels of taxable income compared to tax-exempt income. The effective tax rate for the year ended December 31, 2016 was 25.7% compared to 25.8% in the prior year.

BALANCE SHEET

At December 31, 2016, total assets were $8.4 billion, an increase of $168.6 million from September 30, 2016 and an increase of $733.5 million from December 31, 2015. The increase in assets was mostly related to loan growth.

At December 31, 2016, loans held for investment were $6.3 billion, an increase of $158.1 million, or 10.3% (annualized), from September 30, 2016, while average loans increased $180.4 million, or 12.0% (annualized), from the prior quarter. Loans held for investment increased $635.6 million, or 11.2%, from December 31, 2015, while quarterly average loans increased $601.7 million, or 10.7%, from the prior year.

At December 31, 2016, total deposits were $6.4 billion, an increase of $121.0 million, or 7.7% (annualized), from September 30, 2016, while average deposits increased $105.1 million, or 6.8% (annualized), from the prior quarter. Total deposits grew $415.6 million, or 7.0%, from December 31, 2015, while quarterly average deposits increased $404.6 million, or 6.9%, from the prior year.

At December 31, 2016, long-term borrowings were $413.3 million, an increase of $153.4 million from September 30, 2016, as a result of $150.0 million of fixed-to-floating subordinated debt issued in the fourth quarter.

At December 31, 2016, September 30, 2016, and December 31, 2015, respectively, the Company had a common equity Tier 1 capital ratio of 9.72%, 9.78%, and 10.55%; a Tier 1 capital ratio of 10.98%, 11.07%, and 11.93%; a total capital ratio of 13.59%, 11.60%, and 12.46%; and a leverage ratio of 9.87%, 9.89%, and 10.68%.

The Company’s common equity to asset ratios at December 31, 2016, September 30, 2016, and December 31, 2015 were 11.88%, 12.12%, and 12.94%, respectively, while its tangible common equity to tangible assets ratio was 8.41%, 8.57%, and 9.20%, respectively.

During the fourth quarter of 2016, the Company declared and paid cash dividends of $0.20 per common share, an increase of $0.01, or 5.3%, compared to prior quarter and the same quarter in the prior year.

ABOUT UNION BANKSHARES CORPORATION

Headquartered in Richmond, Virginia, Union Bankshares Corporation (NASDAQ:UBSH) is the holding company for Union Bank & Trust, which has 114 banking offices and approximately 185 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 Tuesday, January 24th, 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 49841348.

NON-GAAP MEASURES

In reporting the results of the quarter ended December 31, 2016, the Company has provided supplemental performance measures on a tangible or tax-equivalent 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 and changes in:

  • changes in interest rates,
  • general economic and financial market conditions,
  • the Company’s ability to manage its growth or implement its growth strategy,
  • levels of unemployment in the Bank’s lending area,
  • real estate values in the Bank’s lending area,
  • an insufficient allowance for loan losses,
  • the quality or composition of the loan or investment portfolios,
  • concentrations of loans secured by real estate, particularly commercial real estate,
  • the effectiveness of the Company’s credit processes and management of the Company’s credit risk,
  • demand for loan products and financial services in the Company’s market area,
  • the Company’s ability to compete in the market for financial services,
  • technological risks and developments, and cyber attacks or events,
  • performance by the Company’s counterparties or vendors,
  • deposit flows,
  • the availability of financing and the terms thereof,
  • the level of prepayments on loans and mortgage-backed securities,
  • legislative or regulatory changes and requirements,
  • monetary and fiscal policies of the U.S. government including policies of the U.S. Department of the Treasury and the Board of Governors of the Federal Reserve System, and
  • accounting principles and guidelines.

More information on risk factors that could affect the Company’s forward-looking statements is available on the Company’s website, http://investors.bankatunion.com or the Company’s Annual Report on Form 10-K for the year ended December 31, 2015 and other reports filed with the SEC. The information on the Company’s website is not a part of this press release. All risk factors and uncertainties described in those documents should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. The Company does not intend or assume any obligation to update or revise any forward-looking statements that may be made from time to time by or on behalf of the Company.

UNION BANKSHARES CORPORATION AND SUBSIDIARIES
KEY FINANCIAL RESULTS
(Dollars in thousands, except share data)
(FTE - "Fully Taxable Equivalent")
Three Months Ended Year Ended
12/31/16 9/30/16 12/31/15 12/31/16 12/31/15
Results of Operations
Interest and dividend income$76,957 $74,433 $69,317 $294,920 $276,771
Interest expense8,342 7,405 6,712 29,770 24,937
Net interest income68,615 67,028 62,605 265,150 251,834
Provision for credit losses1,723 2,472 2,010 9,100 9,571
Net interest income after provision for credit losses66,892 64,556 60,595 256,050 242,263
Noninterest income18,050 18,950 17,016 70,907 65,007
Noninterest expenses56,267 56,913 54,476 222,703 216,882
Income before income taxes28,675 26,593 23,135 104,254 90,388
Income tax expense7,899 6,192 5,321 26,778 23,309
Net income$20,776 $20,401 $17,814 $77,476 $67,079
Interest earned on earning assets (FTE)$79,833 $76,860 $71,655 $305,164 $285,850
Net interest income (FTE) (1)71,491 69,455 64,943 275,394 260,913
Core deposit intangible amortization1,621 1,683 2,010 6,930 8,445
Net income - community bank segment$20,394 $19,616 $17,904 $75,716 $67,281
Net income (loss) - mortgage segment382 785 (90) 1,760 (202)
Key Ratios
Earnings per common share, diluted$0.48 $0.47 $0.40 $1.77 $1.49
Return on average assets (ROA)0.99% 1.00% 0.93% 0.96% 0.90%
Return on average equity (ROE)8.22% 8.14% 7.08% 7.79% 6.76%
Return on average tangible common equity (ROTCE) (4)12.05% 12.00% 10.38% 11.45% 10.00%
Efficiency ratio64.92% 66.19% 68.42% 66.27% 68.45%
Efficiency ratio (FTE) (1)62.84% 64.38% 66.47% 64.31% 66.54%
Net interest margin3.63% 3.63% 3.63% 3.66% 3.75%
Net interest margin (FTE) (1)3.78% 3.76% 3.76% 3.80% 3.89%
Yields on earning assets (FTE)4.23% 4.16% 4.15% 4.21% 4.26%
Cost of interest-bearing liabilities (FTE)0.57% 0.52% 0.51% 0.53% 0.48%
Cost of funds (FTE)0.45% 0.40% 0.39% 0.41% 0.37%
Net interest margin, core (FTE) (2)3.70% 3.67% 3.69% 3.72% 3.79%
Yields on earning assets (FTE), core (2)4.14% 4.09% 4.08% 4.14% 4.19%
Cost of interest-bearing liabilities (FTE), core (2)0.58% 0.53% 0.52% 0.54% 0.53%
Cost of funds (FTE), core (2)0.44% 0.42% 0.39% 0.42% 0.40%
Per Share Data
Earnings per common share, basic$0.48 $0.47 $0.40 $1.77 $1.49
Earnings per common share, diluted0.48 0.47 0.40 1.77 1.49
Cash dividends paid per common share0.20 0.19 0.19 0.77 0.68
Market value per share35.74 26.77 25.24 35.74 25.24
Book value per common share23.15 23.18 22.38 23.15 22.38
Tangible book value per common share (4)15.78 15.75 15.25 15.78 15.25
Price to earnings ratio, diluted18.72 14.32 15.90 20.19 16.94
Price to book value per common share ratio1.54 1.15 1.13 1.54 1.13
Price to tangible common share ratio2.26 1.70 1.66 2.26 1.66
Weighted average common shares outstanding, basic46,577,634 43,565,937 44,899,629 43,784,193 45,054,938
Weighted average common shares outstanding, diluted43,659,416 43,754,915 44,988,577 43,890,271 45,138,891
Common shares outstanding at end of period43,609,317 43,556,486 44,785,674 43,609,317 44,785,674


Three Months Ended Year Ended
12/31/16 9/30/16 12/31/15 12/31/16 12/31/15
Capital Ratios
Common equity Tier 1 capital ratio (3)9.72% 9.78% 10.55% 9.72% 10.55%
Tier 1 capital ratio (3)10.98% 11.07% 11.93% 10.98% 11.93%
Total capital ratio (3)13.59% 11.60% 12.46% 13.59% 12.46%
Leverage ratio (Tier 1 capital to average assets) (3)9.87% 9.89% 10.68% 9.87% 10.68%
Common equity to total assets11.88% 12.12% 12.94% 11.88% 12.94%
Tangible common equity to tangible assets (4)8.41% 8.57% 9.20% 8.41% 9.20%
Financial Condition
Assets$8,426,793 $8,258,230 $7,693,291 $8,426,793 $7,693,291
Loans held for investment6,307,060 6,148,918 5,671,462 6,307,060 5,671,462
Earning Assets7,611,098 7,466,956 6,900,023 7,611,098 6,900,023
Goodwill298,191 298,191 293,522 298,191 293,522
Amortizable intangibles, net20,602 22,343 23,310 20,602 23,310
Deposits6,379,489 6,258,506 5,963,936 6,379,489 5,963,936
Stockholders' equity1,001,032 1,000,964 955,367 1,001,032 995,367
Tangible common equity (4)682,239 680,430 678,535 682,239 678,535
Loans held for investment, net of deferred fees and costs
Construction and land development$751,131 $776,430 $749,720 $751,131 $749,720
Commercial real estate - owner occupied857,805 857,142 860,086 857,805 860,086
Commercial real estate - non-owner occupied1,564,295 1,454,828 1,270,480 1,564,295 1,270,480
Multifamily real estate334,276 339,313 322,528 334,276 322,528
Commercial & Industrial551,526 509,857 435,365 551,526 435,365
Residential 1-4 Family1,029,547 999,361 978,469 1,029,547 978,469
Auto262,071 255,188 234,061 262,071 234,061
HELOC526,884 524,097 516,726 526,884 516,726
Consumer and all other429,525 432,702 304,027 429,525 304,027
Total loans held for investment$6,307,060 $6,148,918 $5,671,462 $6,307,060 $5,671,462
Deposits
NOW accounts$1,765,956 $1,635,446 $1,521,906 $1,765,956 $1,521,906
Money market accounts1,435,591 1,398,177 1,312,612 1,435,591 1,312,612
Savings accounts591,742 596,702 572,800 591,742 572,800
Time deposits of $100,000 and over530,275 528,227 514,286 530,275 514,286
Other time deposits662,300 657,686 669,395 662,300 669,395
Total interest-bearing deposits$4,985,864 $4,816,238 $4,590,999 $4,985,864 $4,590,999
Demand deposits1,393,625 1,442,268 1,372,937 1,393,625 1,372,937
Total deposits$6,379,489 $6,258,506 $5,963,936 $6,379,489 $5,963,936
Averages
Assets$8,312,750 $8,153,951 $7,624,416 $8,046,305 $7,492,895
Loans held for investment6,214,084 6,033,723 5,612,366 5,956,125 5,487,367
Loans held for sale43,594 42,755 35,402 36,126 40,524
Securities1,202,125 1,218,552 1,149,817 1,202,692 1,143,816
Earning assets7,514,979 7,354,684 6,845,071 7,249,090 6,713,239
Deposits6,310,025 6,204,958 5,905,406 6,110,789 5,768,213
Certificates of deposit1,192,253 1,181,936 1,196,127 1,177,732 1,231,593
Interest-bearing deposits4,885,428 4,796,505 4,536,643 4,722,573 4,471,870
Borrowings927,218 884,597 659,567 877,602 675,819
Interest-bearing liabilities5,812,646 5,681,102 5,196,210 5,600,174 5,147,689
Stockholders' equity1,005,769 996,668 998,590 994,785 991,977
Tangible common equity (4)686,143 676,308 680,801 676,654 671,071


Three Months Ended Year Ended
12/31/16 9/30/16 12/31/15 12/31/16 12/31/15
Asset Quality
Allowance for Loan Losses (ALL)
Beginning balance$36,542 $35,074 $33,269 $34,047 $32,384
Add: Recoveries1,003 534 933 3,025 3,927
Less: Charge-offs1,827 1,463 2,165 8,555 11,535
Add: Provision for loan losses1,474 2,397 2,010 8,675 9,271
Ending balance$37,192 $36,542 $34,047 $37,192 $34,047
ALL / total outstanding loans0.59% 0.59% 0.60% 0.59% 0.60%
ALL / total outstanding loans, adjusted for acquisition accounting (5)0.86% 0.90% 0.98% 0.86% 0.98%
Net charge-offs / total average loans0.05% 0.06% 0.09% 0.09% 0.13%
Provision / total average loans0.09% 0.16% 0.14% 0.15% 0.16%
Total PCI Loans$59,292 $62,346 $73,737 $59,292 $73,737
Nonperforming Assets
Construction and land development$2,037 $2,301 $2,113 $2,037 $2,113
Commercial real estate - owner occupied794 1,609 3,904 794 3,904
Commercial real estate - non-owner occupied 100 100
Commercial & Industrial124 1,344 429 124 429
Residential 1-4 Family5,279 5,279 3,563 5,279 3,563
Auto169 231 192 169 192
HELOC1,279 1,464 1,348 1,279 1,348
Consumer and all other291 449 287 291 287
Nonaccrual loans$9,973 $12,677 $11,936 $9,973 $11,936
Other real estate owned10,084 10,581 15,299 10,084 15,299
Total nonperforming assets (NPAs)$20,057 $23,258 $27,235 $20,057 $27,235
Construction and land development$76 $610 $128 $76 $128
Commercial real estate - owner occupied35 304 103 35 103
Commercial real estate - non-owner occupied 723 723
Multifamily real estate 272 272
Commercial & Industrial9 77 124 9 124
Residential 1-4 Family2,048 2,005 3,638 2,048 3,638
Auto111 28 60 111 60
HELOC635 407 762 635 762
Consumer and all other91 98 19 91 19
Loans ≥ 90 days and still accruing$3,005 $3,529 $5,829 $3,005 $5,829
Total NPAs and loans ≥ 90 days$23,062 $26,787 $33,064 $23,062 $33,064
NPAs / total outstanding loans0.32% 0.38% 0.48% 0.32% 0.48%
NPAs / total assets0.24% 0.28% 0.35% 0.24% 0.35%
ALL / nonperforming loans372.93% 288.25% 285.25% 372.93% 285.25%
ALL / nonperforming assets185.43% 157.12% 125.01% 185.43% 125.01%
Troubled Debt Restructurings
Performing$13,967 $11,824 $10,780 $13,967 $10,780
Nonperforming1,435 1,452 1,921 1,435 1,921
Total troubled debt restructurings$15,402 $13,276 $12,701 $15,402 $12,701


Three Months Ended Year Ended
12/31/16 9/30/16 12/31/15 12/31/16 12/31/15
Past Due Detail
Construction and land development$1,162 $309 $3,155 $1,162 $3,155
Commercial real estate - owner occupied1,842 1,411 1,714 1,842 1,714
Commercial real estate - non-owner occupied2,369 324 771 2,369 771
Multifamily real estate147 147
Commercial & Industrial759 567 1,056 759 1,056
Residential 1-4 Family7,038 4,985 15,023 7,038 15,023
Auto2,570 1,846 2,312 2,570 2,312
HELOC1,836 2,600 2,589 1,836 2,589
Consumer and all other2,522 1,713 1,167 2,522 1,167
Loans 30-59 days past due$20,245 $13,755 $27,787 $20,245 $27,787
Construction and land development$232 $697 $380 $232 $380
Commercial real estate - owner occupied109 365 118 109 118
Commercial real estate - non-owner occupied
Commercial & Industrial858 51 27 858 27
Residential 1-4 Family534 6,345 6,774 534 6,774
Auto317 239 233 317 233
HELOC1,140 899 1,112 1,140 1,112
Consumer and all other1,431 1,037 689 1,431 689
Loans 60-89 days past due$4,621 $9,633 $9,333 $4,621 $9,333
Alternative Performance Measures (non-GAAP)
Tangible Assets
Ending assets$8,426,793 $8,258,230 $7,693,291 $8,426,793 $7,693,291
Less: Ending goodwill298,191 298,191 293,522 298,191 293,522
Less: Ending amortizable intangibles20,602 22,343 23,310 20,602 23,310
Ending tangible assets (non-GAAP)$8,108,000 $7,937,696 $7,376,459 $8,108,000 $7,376,459
Tangible Common Equity (4)
Ending equity$1,001,032 $1,000,964 $995,367 $1,001,032 $995,367
Less: Ending goodwill298,191 298,191 293,522 298,191 293,522
Less: Ending amortizable intangibles20,602 22,343 23,310 20,602 23,310
Ending tangible common equity (non-GAAP)$682,239 $680,430 $678,535 $682,239 $678,535
Average equity$1,005,769 $996,668 $998,590 $994,785 $991,977
Less: Average goodwill298,191 297,707 293,522 296,087 293,522
Less: Average amortizable intangibles21,435 22,653 24,267 22,044 27,384
Average tangible common equity (non-GAAP)$686,143 $676,308 $680,801 $676,654 $671,071
ALL to loans, adjusted for acquisition accounting (non-GAAP)(5)
Allowance for loan losses$37,192 $36,542 $34,047 $37,192 $34,047
Remaining fair value mark on purchased performing loans16,939 18,154 20,819 16,939 20,819
Adjusted allowance for loan losses$54,131 $54,696 $54,866 $54,131 $54,866
Loans, net of deferred fees$6,307,060 $6,148,918 $5,671,462 $6,307,060 $5,671,462
Remaining fair value mark on purchased performing loans16,939 18,154 20,819 16,939 20,819
Less: Purchased credit impaired loans, net of fair value mark59,292 62,346 73,737 59,292 73,737
Adjusted loans, net of deferred fees$6,264,707 $6,104,726 $5,618,544 $6,264,707 $5,618,544
ALL / gross loans, adjusted for acquisition accounting0.86% 0.90% 0.98% 0.86% 0.98%


Three Months Ended Year Ended
12/31/16 9/30/16 12/31/15 12/31/16 12/31/15
Alternative Performance Measures (non-GAAP) continued
Net interest income (FTE) (1)
Net Interest Income (GAAP)$68,615 $67,028 $62,605 $265,150 $251,834
FTE Adjustment2,876 2,427 2,338 10,244 9,079
FTE Net Interest Income (non-GAAP)$71,491 $69,455 $64,943 $275,394 $260,913
Mortgage Origination Volume
Refinance Volume$71,454 $52,883 $40,943 $208,674 $197,665
Construction Volume10,621 20,760 12,394 68,026 74,885
Purchase Volume63,249 83,014 59,702 263,571 267,572
Total Mortgage loan originations$145,324 $156,657 $113,039 $540,271 $540,122
% of originations that are refinances49.2% 33.8% 36.2% 38.6% 36.6%
Other Data
End of period full-time employees1,416 1,391 1,422 1,416 1,422
Number of full-service branches114 115 124 114 124
Number of full automatic transaction machines (ATMs)185 193 201 185 201


(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.
(2) The core metrics, FTE, exclude the impact of acquisition accounting accretion and amortization adjustments in net interest income.
(3) All ratios at December 31, 2016 are estimates and subject to change pending the Company’s filing of its FR Y9-C. All other periods are presented as filed.
(4) 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.
(5) 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)
December 31, December 31,
2016 2015
ASSETS
Cash and cash equivalents:
Cash and due from banks$120,758 $111,323
Interest-bearing deposits in other banks58,030 29,670
Federal funds sold449 1,667
Total cash and cash equivalents179,237 142,660
Securities available for sale, at fair value946,764 903,292
Securities held to maturity, at carrying value201,526 205,374
Restricted stock, at cost60,782 51,828
Loans held for sale, at fair value36,487 36,030
Loans held for investment, net of deferred fees and costs6,307,060 5,671,462
Less allowance for loan losses37,192 34,047
Net loans held for investment6,269,868 5,637,415
Premises and equipment, net122,027 126,028
Other real estate owned, net of valuation allowance10,084 15,299
Goodwill298,191 293,522
Amortizable intangibles, net20,602 23,310
Bank owned life insurance179,318 173,687
Other assets101,907 84,846
Total assets$8,426,793 $7,693,291
LIABILITIES
Noninterest-bearing demand deposits$1,393,625 $1,372,937
Interest-bearing deposits4,985,864 4,590,999
Total deposits6,379,489 5,963,936
Securities sold under agreements to repurchase59,281 84,977
Other short-term borrowings517,500 304,000
Long-term borrowings413,308 291,198
Other liabilities56,183 53,813
Total liabilities7,425,761 6,697,924
Commitments and contingencies
STOCKHOLDERS' EQUITY
Common stock, $1.33 par value, shares authorized 100,000,000; issued and outstanding, 43,609,317 shares, and 44,785,674 shares, respectively.57,506 59,159
Additional paid-in capital605,397 631,822
Retained earnings341,938 298,134
Accumulated other comprehensive income(3,809) 6,252
Total stockholders' equity1,001,032 995,367
Total liabilities and stockholders' equity$8,426,793 $7,693,291


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,
2016 2016 2015 2016 2015
Interest and dividend income:
Interest and fees on loans$68,683 $66,190 $61,880 $262,567 $247,587
Interest on deposits in other banks67 65 30 244 94
Interest and dividends on securities:
Taxable4,761 4,732 3,985 18,319 15,606
Nontaxable3,446 3,446 3,422 13,790 13,484
Total interest and dividend income76,957 74,433 69,317 294,920 276,771
Interest expense:
Interest on deposits4,786 4,552 4,348 17,731 15,553
Interest on short-term borrowings797 765 211 2,894 944
Interest on long-term borrowings2,759 2,088 2,153 9,145 8,440
Total interest expense8,342 7,405 6,712 29,770 24,937
Net interest income68,615 67,028 62,605 265,150 251,834
Provision for credit losses1,723 2,472 2,010 9,100 9,571
Net interest income after provision for credit losses66,892 64,556 60,595 256,050 242,263
Noninterest income:
Service charges on deposit accounts5,042 4,965 5,104 19,496 18,904
Other service charges and fees4,204 4,397 3,957 17,175 15,575
Fiduciary and asset management fees2,884 2,844 2,306 10,199 9,141
Mortgage banking income, net2,629 3,207 2,185 10,953 9,767
Gains on securities transactions, net60 813 205 1,486
Other-than-temporary impairment losses (300)
Bank owned life insurance income1,391 1,389 1,163 5,513 4,593
Other operating income1,840 2,148 1,488 7,366 5,841
Total noninterest income18,050 18,950 17,016 70,907 65,007
Noninterest expenses:
Salaries and benefits30,042 30,493 25,287 117,103 104,192
Occupancy expenses4,901 4,841 4,832 19,528 20,053
Furniture and equipment expenses2,608 2,635 2,856 10,475 11,674
Printing, postage, and supplies1,126 1,147 1,154 4,692 5,124
Communications expense887 948 1,153 3,850 4,634
Technology and data processing4,028 3,917 3,647 15,368 13,667
Professional services1,653 1,895 1,302 8,085 6,309
Marketing and advertising expense1,946 1,975 1,375 7,784 7,215
FDIC assessment premiums and other insurance1,403 1,262 1,346 5,406 5,376
Other taxes1,592 639 1,553 5,456 6,227
Loan-related expenses1,152 1,531 923 4,790 4,097
OREO and credit-related expenses637 503 4,496 2,602 8,911
Amortization of intangible assets1,742 1,843 2,010 7,210 8,445
Training and other personnel costs923 863 844 3,435 3,675
Other expenses1,627 2,421 1,698 6,919 7,283
Total noninterest expenses56,267 56,913 54,476 222,703 216,882
Income before income taxes28,675 26,593 23,135 104,254 90,388
Income tax expense7,899 6,192 5,321 26,778 23,309
Net income$20,776 $20,401 $17,814 $77,476 $67,079
Basic earnings per common share$0.48 $0.47 $0.40 $1.77 $1.49
Diluted earnings per common share$0.48 $0.47 $0.40 $1.77 $1.49


UNION BANKSHARES CORPORATION AND SUBSIDIARIES
SEGMENT FINANCIAL INFORMATION
(Dollars in thousands)
Community Bank Mortgage Eliminations Consolidated
Three Months Ended December 31, 2016
Net interest income$68,205 $410 $ $68,615
Provision for credit losses1,668 55 1,723
Net interest income after provision for credit losses66,537 355 66,892
Noninterest income15,368 2,823 (141) 18,050
Noninterest expenses53,810 2,598 (141) 56,267
Income before income taxes28,095 580 28,675
Income tax expense7,701 198 7,899
Net income$20,394 $382 $ $20,776
Total assets$8,419,625 $93,581 $(86,413) $8,426,793
Three Months Ended September 30, 2016
Net interest income$66,605 $423 $ $67,028
Provision for credit losses2,455 17 2,472
Net interest income after provision for credit losses64,150 406 64,556
Noninterest income15,589 3,501 (140) 18,950
Noninterest expenses54,353 2,700 (140) 56,913
Income before income taxes25,386 1,207 26,593
Income tax expense5,770 422 6,192
Net income$19,616 $785 $ $20,401
Total assets$8,251,351 $90,692 $(83,813) $8,258,230
Three Months Ended December 31, 2015
Net interest income$62,271 $334 $ $62,605
Provision for credit losses2,000 10 2,010
Net interest income after provision for credit losses60,271 324 60,595
Noninterest income14,987 2,200 (171) 17,016
Noninterest expenses51,982 2,665 (171) 54,476
Income (loss) before income taxes23,276 (141) 23,135
Income tax expense (benefit)5,372 (51) 5,321
Net income (loss)$17,904 $(90) $ $17,814
Total assets$7,690,132 $57,900 $(54,741) $7,693,291
Year Ended December 31, 2016
Net interest income$263,714 $1,436 $ $265,150
Provision for credit losses8,883 217 9,100
Net interest income after provision for credit losses254,831 1,219 256,050
Noninterest income59,505 12,008 (606) 70,907
Noninterest expenses212,774 10,535 (606) 222,703
Income before income taxes101,562 2,692 104,254
Income tax expense25,846 932 26,778
Net income$75,716 $1,760 $ $77,476
Total assets$8,419,625 $93,581 $(86,413) $8,426,793
Year Ended December 31, 2015
Net interest income$250,510 $1,324 $ $251,834
Provision for credit losses9,450 121 9,571
Net interest income after provision for credit losses241,060 1,203 242,263
Noninterest income55,645 10,044 (682) 65,007
Noninterest expenses205,993 11,571 (682) 216,882
Income (loss) before income taxes90,712 (324) 90,388
Income tax expense (benefit)23,431 (122) 23,309
Net income (loss)$67,281 $(202) $ $67,079
Total assets$7,690,132 $57,900 $(54,741) $7,693,291


AVERAGE BALANCES, INCOME AND EXPENSES, YIELDS AND RATES (TAXABLE EQUIVALENT BASIS)
For the Quarter Ended
December 31, 2016 September 30, 2016
Average
Balance
Interest
Income /
Expense
Yield /
Rate
(1)
Average
Balance
Interest
Income /
Expense
Yield /
Rate
(1)
Assets:
Securities:
Taxable$749,059 $4,761 2.53% $768,608 $4,732 2.45%
Tax-exempt453,066 5,302 4.66% 449,944 5,302 4.69%
Total securities1,202,125 10,063 3.33% 1,218,552 10,034 3.28%
Loans, net (2) (3)6,214,084 69,358 4.44% 6,033,723 66,397 4.38%
Other earning assets98,770 412 1.66% 102,409 429 1.67%
Total earning assets7,514,979 $79,833 4.23% 7,354,684 $76,860 4.16%
Allowance for loan losses(37,808) (35,995)
Total non-earning assets835,579 835,262
Total assets$8,312,750 $8,153,951
Liabilities and Stockholders' Equity:
Interest-bearing deposits:
Transaction and money market accounts$3,099,424 $1,804 0.23% $3,016,337 $1,682 0.22%
Regular savings593,751 201 0.13% 598,232 207 0.14%
Time deposits1,192,253 2,781 0.93% 1,181,936 2,663 0.90%
Total interest-bearing deposits4,885,428 4,786 0.39% 4,796,505 4,552 0.38%
Other borrowings (4)927,218 3,556 1.53% 884,597 2,853 1.28%
Total interest-bearing liabilities5,812,646 8,342 0.57% 5,681,102 7,405 0.52%
Noninterest-bearing liabilities:
Demand deposits1,424,597 1,408,453
Other liabilities69,738 67,728
Total liabilities7,306,981 7,157,283
Stockholders' equity1,005,769 996,668
Total liabilities and stockholders' equity$8,312,750 $8,153,951
Net interest income $71,491 $69,455
Interest rate spread (5) 3.66% 3.64%
Cost of funds 0.45% 0.40%
Net interest margin (6) 3.78% 3.76%
(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 $1.5 million and $1.3 million for the three months ended December 31, 2016 and September 30, 2016, respectively, in accretion of the fair market value adjustments related to acquisitions.
(4) Interest expense on borrowings includes $71,000 and $181,000 for the three months ended December 31, 2016 and September 30, 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 3.70% and 3.67% for the three months ended December 31, 2016 and September 30, 2016, respectively.

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

Source:Union Bankshares Corporation