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Union Bankshares Reports First Quarter Results

RICHMOND, Va., April 19, 2017 (GLOBE NEWSWIRE) -- Union Bankshares Corporation (the “Company” or “Union”) (NASDAQ:UBSH) today reported net income of $19.1 million and earnings per share of $0.44 for its first quarter ended March 31, 2017. The quarterly results represent an increase of $2.2 million, or 12.8%, in net income and an increase of $0.06, or 15.8%, in earnings per share compared to the first quarter of 2016.

I am pleased with Union’s start to the year as we delivered strong first quarter financial results,” said John C. Asbury, president and chief executive officer of Union Bankshares Corporation. “During the quarter, loans grew by 3.9% from the prior quarter, or 16% on an annualized basis, and deposits grew by 3.7% from the prior quarter, or 15% on an annualized basis, as we continued to generate sustainable, profitable growth for our shareholders. I’m also pleased to note that we made solid progress during the quarter in each of our four 2017 key focus areas of diversifying our loan portfolio and income streams, growing core deposits to fund loan growth, improving efficiency, and finalizing our readiness to cross the $10 billion asset threshold. Going forward, we remain committed to achieving top tier financial performance and providing our shareholders with above average returns on their investment.

Select highlights for the first quarter of 2017 include:

  • Net income for the community bank segment was $19.1 million, or $0.44 per share, for the first quarter of 2017, compared to $20.4 million, or $0.47 per share, for the fourth quarter of 2016 and $16.9 million, or $0.38 per share, for the first quarter of 2016.
  • The mortgage segment reported net income of $4,000 for the first quarter of 2017, compared to $382,000 in the fourth quarter of 2016 and $54,000 for the first quarter of 2016.
  • Return on Average Assets (“ROA”) was 0.92% for the quarter ended March 31, 2017 compared to ROA of 0.99% for the prior quarter and 0.88% for the first quarter of 2016. Return on Average Tangible Common Equity (“ROTCE”) was 11.20% for the quarter ended March 31, 2017 compared to ROTCE of 12.05% for the prior quarter and 10.13% for the first quarter of 2016.
  • Loans held for investment grew $247.0 million, or 15.7% (annualized), from December 31, 2016 and increased $773.5 million, or 13.4%, from March 31, 2016. Average loans held for investment increased $169.8 million, or 10.9% (annualized), from the prior quarter and increased $673.9 million, or 11.8%, from the same quarter in the prior year.
  • Period-end deposits increased $234.7 million, or 14.7% (annualized), from December 31, 2016 and grew $668.2 million, or 11.2%, from March 31, 2016. Average deposits increased $97.3 million, or 6.2% (annualized), from the prior quarter and increased $507.9 million, or 8.6%, from the same quarter in the prior year.

NET INTEREST INCOME

Tax-equivalent net interest income was $69.1 million, a decrease of $2.4 million from the fourth quarter of 2016, driven by a lower day count, lower yields on earning assets, and higher costs of interest-bearing liabilities. The first quarter tax-equivalent net interest margin decreased 12 basis points to 3.66% from 3.78% in the previous quarter. Core tax-equivalent net interest margin (which excludes the 8 basis point impact of acquisition accounting accretion in both the current and prior quarters) decreased by 12 basis points to 3.58% from 3.70% in the previous quarter. The decrease in the core tax-equivalent net interest margin was principally due to the 2 basis point decrease in interest-earning asset yields and by the 10 basis point increase in cost of funds. The increase in cost of funds was primarily driven by the full quarter impact of the subordinated debt issued in December of 2016.

The Company’s tax-equivalent net interest margin includes the impact of acquisition accounting fair value adjustments. During the first quarter, net accretion related to acquisition accounting decreased $116,000, or 7.2%, from the prior quarter to $1.5 million for the quarter ended March 31, 2017. The fourth quarter of 2016, first quarter of 2017, 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 December 31, 2016$1,538 $71 $1,609
For the quarter ended March 31, 20171,445 48 1,493
For the remaining nine months of 20174,100 122 4,222
For the years ending:
20184,835 (143) 4,692
20193,566 (286) 3,280
20202,707 (301) 2,406
20212,127 (316) 1,811
20221,732 (332) 1,400
Thereafter6,589 (4,974) 1,615


ASSET QUALITY/LOAN LOSS PROVISION

Overview
During the first quarter of 2017, the Company experienced declines in past due loan levels as well as in net charge-off levels from the prior quarter and the first quarter of 2016. Nonaccrual loan levels increased in the current quarter, primarily related to two credit relationships. The loan loss provision and allowance for loan loss increased from the prior quarter due to loan growth and increased specific reserves related to increases in nonaccrual loans.

All nonaccrual and past due loan metrics discussed below exclude purchased credit impaired (“PCI”) loans totaling $57.8 million (net of fair value mark of $13.7 million).

Nonperforming Assets (“NPAs”)
At March 31, 2017, NPAs totaled $31.9 million, an increase of $4.6 million, or 16.8%, from March 31, 2016 and an increase of $11.9 million, or 59.3%, from December 31, 2016. In addition, NPAs as a percentage of total outstanding loans increased 2 basis points from 0.47% a year earlier and increased 17 basis points from 0.32% last quarter to 0.49% in the first quarter of 2017. The following table shows a summary of asset quality balances at the quarter ended (dollars in thousands):

March 31, December 31, September 30, June 30, March 31,
2017 2016 2016 2016 2016
Nonaccrual loans$22,338 $9,973 $12,677 $10,861 $13,092
Foreclosed properties6,951 7,430 7,927 10,076 10,941
Former bank premises2,654 2,654 2,654 3,305 3,305
Total nonperforming assets$31,943 $20,057 $23,258 $24,242 $27,338

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

March 31, December 31, September 30, June 30, March 31,
2017 2016 2016 2016 2016
Beginning Balance$9,973 $12,677 $10,861 $13,092 $11,936
Net customer payments(1,068) (1,451) (1,645) (2,859) (1,204)
Additions13,557 1,094 4,359 2,568 5,150
Charge-offs(97) (1,216) (660) (1,096) (1,446)
Loans returning to accruing status(27) (1,039) (23) (396) (932)
Transfers to OREO (92) (215) (448) (412)
Ending Balance$22,338 $9,973 $12,677 $10,861 $13,092

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

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

March 31, December 31, September 30, June 30, March 31,
2017 2016 2016 2016 2016
Beginning Balance$10,084 $10,581 $13,381 $14,246 $15,299
Additions of foreclosed property 859 246 501 456
Valuation adjustments(238) (138) (479) (274) (126)
Proceeds from sales(277) (1,282) (2,844) (1,086) (1,390)
Gains (losses) from sales36 64 277 (6) 7
Ending Balance$9,605 $10,084 $10,581 $13,381 $14,246

Past Due Loans
Past due loans still accruing interest totaled $26.9 million, or 0.41% of total loans, at March 31, 2017 compared to $35.1 million, or 0.61%, a year ago and $27.9 million, or 0.44%, at December 31, 2016. At March 31, 2017, loans past due 90 days or more and accruing interest totaled $2.3 million, or 0.04% of total loans, compared to $5.7 million, or 0.10%, a year ago and $3.0 million, or 0.05%, at December 31, 2016.

Net Charge-offs
For the first quarter of 2017, net charge-offs were $788,000, or 0.05% of total average loans on an annualized basis, compared to $2.2 million, or 0.15%, for the same quarter last year and $824,000, or 0.05%, for the prior quarter.

Provision
The provision for loan losses for the current quarter was $2.0 million, a decline of $494,000 compared to the same quarter a year ago and an increase of $536,000 compared to the previous quarter. The increase in provision for loan losses in the current quarter compared to the fourth quarter of 2016 was primarily driven by higher loan balances and increases in specific reserves related to nonaccrual loans. Additionally, a $112,000 provision was recorded during the current quarter related to off-balance sheet credit exposures, resulting in a total of $2.1 million in provision for credit losses for the quarter.

Allowance for Loan Losses
The allowance for loan losses (“ALL”) increased $1.2 million from December 31, 2016 to $38.4 million at March 31, 2017 primarily due to loan growth and increases in specific reserves related to nonaccrual loans during the quarter. The ALL as a percentage of the total loan portfolio was 0.59% at March 31, 2017, 0.59% at December 31, 2016, and 0.60% at March 31, 2016. The ALL as a percentage of the total loan portfolio, adjusted for acquisition accounting (non-GAAP), was 0.84% at March 31, 2017, a decrease from 0.86% at December 31, 2016 and a decrease from 0.95% at March 31, 2016. In acquisition accounting, there is no carryover of previously established allowance for loan losses, as acquired loans are recorded at fair value.

The ratio of the ALL to nonaccrual loans was 172.0% at March 31, 2017, compared to 372.9% at December 31, 2016 and 262.8% at March 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 increased $789,000, or 4.4%, to $18.8 million for the quarter ended March 31, 2017 from $18.1 million in the prior quarter, primarily driven by higher bank owned life insurance income and gains on sales of securities.

Mortgage banking income decreased $604,000, or 23.0%, to $2.0 million in the first quarter of 2017 compared to $2.6 million in the fourth quarter of 2016, related to decreased mortgage loan originations. Mortgage loan originations declined by $45.1 million, or 31.0%, in the current quarter to $100.2 million from $145.3 million in the fourth quarter of 2016. The majority of the decrease was related to refinance loans, which dropped by $37.1 million from the prior quarter. Of the mortgage loan originations in the current quarter, 34.3% were refinances compared with 49.2% in the prior quarter.

Noninterest income increased $2.9 million, or 18.4%, to $18.8 million for the quarter ended March 31, 2017 from $15.9 million for the first quarter of 2016. For the first quarter of 2017, bank owned life insurance income increased $753,000; fiduciary and asset management fees were $656,000 higher due to the acquisition of Old Dominion Capital Management, Inc. ("ODCM") in the second quarter of 2016; loan-related swap fees increased $518,000; customer-related fee income increased $347,000 primarily related to increases in debit card interchange fees; and gains on sales of securities were $338,000 higher, in each case as compared to the first quarter of 2016.

NONINTEREST EXPENSE

Noninterest expense increased $1.1 million, or 2.0%, to $57.4 million for the quarter ended March 31, 2017 from $56.3 million in the prior quarter. Salaries and benefits expenses increased by $2.1 million primarily related to seasonal increases in payroll taxes and annual merit adjustments as well as increased group insurance and equity-based compensation. This increase was partially offset by declines in FDIC and other insurance expenses of $697,000 and marketing expenses of $206,000.

Noninterest expense increased $3.1 million, or 5.8%, to $57.4 million for the quarter ended March 31, 2017 from $54.3 million in the first quarter of 2016. Salaries and benefits expenses increased by $4.1 million primarily related to annual merit adjustments; increases in group insurance, incentive compensation, and equity-based compensation; and increases related to investments in the Company's growth with the ODCM acquisition and opening on the North Carolina LPO. This increase was partially offset by lower FDIC and other insurance expenses of $656,000 and declines in professional fees of $331,000 due to lower legal and consulting fees.

BALANCE SHEET

At March 31, 2017, total assets were $8.7 billion, an increase of $243.1 million from December 31, 2016 and an increase of $837.3 million from March 31, 2016. The increase in assets was mostly related to loan growth.

At March 31, 2017, loans held for investment were $6.6 billion, an increase of $247.0 million, or 15.7% (annualized), from December 31, 2016, while average loans increased $169.8 million, or 10.9% (annualized), from the prior quarter. Loans held for investment increased $773.5 million, or 13.4%, from March 31, 2016, while quarterly average loans increased $673.9 million, or 11.8%, from the prior year.

At March 31, 2017, total deposits were $6.6 billion, an increase of $234.7 million, or 14.7% (annualized), from December 31, 2016, while average deposits increased $97.3 million, or 6.2% (annualized), from the prior quarter. Total deposits grew $668.2 million, or 11.2%, from March 31, 2016, while quarterly average deposits increased $507.9 million, or 8.6%, from the prior year.

At March 31, 2017, December 31, 2016, and March 31, 2016, respectively, the Company had a common equity Tier 1 capital ratio of 9.55%, 9.72%, and 10.25%; a Tier 1 capital ratio of 10.77%, 10.97%, and 11.63%; a total capital ratio of 13.29%, 13.56%, and 12.16%; and a leverage ratio of 9.79%, 9.87%, and 10.25%.

The Company’s common equity to total assets ratios at March 31, 2017, December 31, 2016, and March 31, 2016 were 11.71%, 11.88%, and 12.52%, respectively, while its tangible common equity to tangible assets ratio was 8.36%, 8.41%, and 8.86%, respectively.

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

ABOUT UNION BANKSHARES CORPORATION

Headquartered in Richmond, Virginia, Union Bankshares Corporation (NASDAQ:UBSH) is the holding company for Union Bank & Trust, which has 113 banking offices and approximately 184 ATMs located throughout Virginia. Non-bank affiliates of the holding company include: Union Mortgage Group, Inc., which provides a full line of mortgage products, Old Dominion Capital Management, Inc., which provides investment advisory services, and Union Insurance Group, LLC, which offers various lines of insurance products.

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

Union Bankshares Corporation will hold a conference call on Wednesday, April 19th, at 9:00 a.m. Eastern Time during which management will review earnings and performance trends. Callers wishing to participate may call toll-free by dialing (877) 668-4908; international callers wishing to participate may do so by dialing (973) 453-3058. The conference ID number is 3879232.

NON-GAAP MEASURES

In reporting the results of the quarter ended March 31, 2017, 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 or 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,
  • the incremental cost and/or decreased revenues associated with exceeding $10 billion in assets,
  • levels of unemployment in the Bank’s lending area,
  • real estate values in the Bank’s lending area,
  • an insufficient allowance for loan losses,
  • the quality or composition of the loan or investment portfolios,
  • concentrations of loans secured by real estate, particularly commercial real estate,
  • the effectiveness of the Company’s credit processes and management of the Company’s credit risk,
  • demand for loan products and financial services in the Company’s market area,
  • the Company’s ability to compete in the market for financial services,
  • technological risks and developments, and cyber attacks or events,
  • performance by the Company’s counterparties or vendors,
  • deposit flows,
  • the availability of financing and the terms thereof,
  • the level of prepayments on loans and mortgage-backed securities,
  • legislative or regulatory changes and requirements,
  • monetary and fiscal policies of the U.S. government including policies of the U.S. Department of the Treasury and the Board of Governors of the Federal Reserve System, and
  • accounting principles and guidelines.

More information on risk factors that could affect the Company’s forward-looking statements is available on the Company’s website, http://investors.bankatunion.com or the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 and other reports filed with the 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
3/31/17 12/31/16 3/31/16
Results of Operations(unaudited) (unaudited) (unaudited)
Interest and dividend income$76,640 $76,957 $70,749
Interest expense10,073 8,342 7,018
Net interest income66,567 68,615 63,731
Provision for credit losses2,122 1,723 2,604
Net interest income after provision for credit losses64,445 66,892 61,127
Noninterest income18,839 18,050 15,914
Noninterest expenses57,395 56,267 54,272
Income before income taxes25,889 28,675 22,769
Income tax expense6,765 7,899 5,808
Net income$19,124 $20,776 $16,961
Interest earned on earning assets (FTE) (1)$79,180 $79,833 $73,238
Net interest income (FTE) (1)69,107 71,491 66,220
Core deposit intangible amortization1,516 1,621 1,880
Net income - community bank segment$19,120 $20,394 $16,907
Net income (loss) - mortgage segment4 382 54
Key Ratios
Earnings per common share, diluted$0.44 $0.48 $0.38
Return on average assets (ROA)0.92% 0.99% 0.88%
Return on average equity (ROE)7.68% 8.22% 6.89%
Return on average tangible common equity (ROTCE) (2)11.20% 12.05% 10.13%
Efficiency ratio67.20% 64.92% 68.14%
Efficiency ratio (FTE) (1)65.26% 62.84% 66.08%
Net interest margin3.52% 3.63% 3.68%
Net interest margin (FTE) (1)3.66% 3.78% 3.82%
Yields on earning assets (FTE) (1)4.19% 4.23% 4.23%
Cost of interest-bearing liabilities (FTE) (1)0.68% 0.57% 0.52%
Cost of funds (FTE) (1)0.53% 0.45% 0.41%
Net interest margin, core (FTE) (3)3.58% 3.70% 3.76%
Per Share Data
Earnings per common share, basic$0.44 $0.48 $0.38
Earnings per common share, diluted0.44 0.48 0.38
Cash dividends paid per common share0.20 0.20 0.19
Market value per share35.18 35.74 24.63
Book value per common share23.44 23.15 22.55
Tangible book value per common share (2)16.12 15.78 15.31
Price to earnings ratio, diluted19.71 18.72 16.12
Price to book value per common share ratio1.50 1.54 1.09
Price to tangible common share ratio2.18 2.26 1.61
Weighted average common shares outstanding, basic43,654,498 43,577,634 44,251,276
Weighted average common shares outstanding, diluted43,725,923 43,659,416 44,327,229
Common shares outstanding at end of period43,679,947 43,609,317 43,854,381


As of & For Three Months Ended
3/31/17 12/31/16 3/31/16
Capital Ratios(unaudited) (unaudited) (unaudited)
Common equity Tier 1 capital ratio (4)9.55% 9.72% 10.25%
Tier 1 capital ratio (4)10.77% 10.97% 11.63%
Total capital ratio (4)13.29% 13.56% 12.16%
Leverage ratio (Tier 1 capital to average assets) (4)9.79% 9.87% 10.25%
Common equity to total assets11.71% 11.88% 12.52%
Tangible common equity to tangible assets (2)8.36% 8.41% 8.86%
Financial Condition
Assets$8,669,920 $8,426,793 $7,832,611
Loans held for investment6,554,046 6,307,060 5,780,502
Earning Assets7,859,563 7,611,098 7,045,552
Goodwill298,191 298,191 293,522
Amortizable intangibles, net18,965 20,602 21,430
Deposits6,614,195 6,379,489 5,945,982
Stockholders' equity1,015,631 1,001,032 980,978
Tangible common equity (2)698,475 682,239 666,026
Loans held for investment, net of deferred fees and costs
Construction and land development$770,287 $751,131 $776,698
Commercial real estate - owner occupied870,559 857,805 849,202
Commercial real estate - non-owner occupied1,631,767 1,564,295 1,296,251
Multifamily real estate353,769 334,276 323,270
Commercial & Industrial576,567 551,526 453,208
Residential 1-4 Family1,057,439 1,029,547 978,478
Auto271,466 262,071 241,737
HELOC527,863 526,884 517,122
Consumer and all other494,329 429,525 344,536
Total loans held for investment$6,554,046 $6,307,060 $5,780,502
Deposits
NOW accounts$1,792,531 $1,765,956 $1,504,227
Money market accounts1,499,585 1,435,591 1,323,192
Savings accounts602,851 591,742 589,542
Time deposits of $100,000 and over555,431 530,275 508,153
Other time deposits672,998 662,300 657,625
Total interest-bearing deposits$5,123,396 $4,985,864 $4,582,739
Demand deposits1,490,799 1,393,625 1,363,243
Total deposits$6,614,195 $6,379,489 $5,945,982
Averages
Assets$8,465,517 $8,312,750 $7,764,830
Loans held for investment6,383,905 6,214,084 5,709,998
Loans held for sale27,359 43,594 27,304
Securities1,207,768 1,202,125 1,187,150
Earning assets7,660,937 7,514,979 6,968,988
Deposits6,407,281 6,310,025 5,899,404
Certificates of deposit1,211,064 1,192,253 1,171,972
Interest-bearing deposits5,013,315 4,885,428 4,562,856
Borrowings986,645 927,218 816,943
Interest-bearing liabilities5,999,960 5,812,646 5,379,799
Stockholders' equity1,010,318 1,005,769 989,414
Tangible common equity (2)692,384 686,143 673,562


As of & For Three Months Ended
3/31/17 12/31/16 3/31/16
Asset Quality(unaudited) (unaudited) (unaudited)
Allowance for Loan Losses (ALL)
Beginning balance$37,192 $36,542 $34,047
Add: Recoveries845 1,003 828
Less: Charge-offs1,633 1,827 2,980
Add: Provision for loan losses2,010 1,474 2,504
Ending balance$38,414 $37,192 $34,399
ALL / total outstanding loans0.59% 0.59% 0.60%
ALL / total outstanding loans, adjusted for acquisition accounting (5)0.84% 0.86% 0.95%
Net charge-offs / total average loans0.05% 0.05% 0.15%
Provision / total average loans0.13% 0.09% 0.18%
Total PCI Loans$57,770 $59,292 $70,105
Nonperforming Assets
Construction and land development$6,545 $2,037 $2,156
Commercial real estate - owner occupied1,298 794 2,816
Commercial real estate - non-owner occupied2,798
Commercial & Industrial3,245 124 810
Residential 1-4 Family5,856 5,279 5,696
Auto393 169 162
HELOC1,902 1,279 973
Consumer and all other301 291 479
Nonaccrual loans$22,338 $9,973 $13,092
Other real estate owned9,605 10,084 14,246
Total nonperforming assets (NPAs)$31,943 $20,057 $27,338
Construction and land development$16 $76 $544
Commercial real estate - owner occupied93 35 196
Commercial real estate - non-owner occupied711 723
Commercial & Industrial 9 422
Residential 1-4 Family686 2,048 2,247
Auto11 111 53
HELOC680 635 1,315
Consumer and all other126 91 223
Loans ≥ 90 days and still accruing$2,323 $3,005 $5,723
Total NPAs and loans ≥ 90 days$34,266 $23,062 $33,061
NPAs / total outstanding loans0.49% 0.32% 0.47%
NPAs / total assets0.37% 0.24% 0.35%
ALL / nonaccrual loans171.97% 372.93% 262.75%
ALL / nonperforming assets120.26% 185.43% 125.83%
Troubled Debt Restructurings
Performing$14,325 $13,967 $11,486
Nonperforming4,399 1,435 1,470
Total troubled debt restructurings$18,724 $15,402 $12,956


As of & For Three Months Ended
3/31/17 12/31/16 3/31/16
Past Due Detail(unaudited) (unaudited) (unaudited)
Construction and land development$630 $1,162 $2,676
Commercial real estate - owner occupied878 1,842 1,787
Commercial real estate - non-owner occupied1,487 2,369 24
Multifamily real estate 147 155
Commercial & Industrial453 759 985
Residential 1-4 Family11,615 7,038 13,711
Auto1,534 2,570 1,519
HELOC1,490 1,836 1,870
Consumer and all other1,766 2,522 736
Loans 30-59 days past due$19,853 $20,245 $23,463
Construction and land development$376 $232 $724
Commercial real estate - owner occupied 109 963
Commercial real estate - non-owner occupied 276
Commercial & Industrial126 858 284
Residential 1-4 Family2,104 534 1,111
Auto250 317 126
HELOC365 1,140 388
Consumer and all other1,460 1,431 1,996
Loans 60-89 days past due$4,681 $4,621 $5,868
Alternative Performance Measures (non-GAAP)
Tangible Assets
Ending assets$8,669,920 $8,426,793 $7,832,611
Less: Ending goodwill298,191 298,191 293,522
Less: Ending amortizable intangibles18,965 20,602 21,430
Ending tangible assets (non-GAAP)$8,352,764 $8,108,000 $7,517,659
Tangible Common Equity (2)
Ending equity$1,015,631 $1,001,032 $980,978
Less: Ending goodwill298,191 298,191 293,522
Less: Ending amortizable intangibles18,965 20,602 21,430
Ending tangible common equity (non-GAAP)$698,475 $682,239 $666,026
Average equity$1,010,318 $1,005,769 $989,414
Less: Average goodwill298,191 298,191 293,522
Less: Average amortizable intangibles19,743 21,435 22,330
Average tangible common equity (non-GAAP)$692,384 $686,143 $673,562
ALL to loans, adjusted for acquisition accounting (non-GAAP)(5)
Allowance for loan losses$38,414 $37,192 $34,399
Remaining fair value mark on purchased performing loans16,121 16,939 19,994
Adjusted allowance for loan losses$54,535 $54,131 $54,393
Loans, net of deferred fees$6,554,046 $6,307,060 $5,780,502
Remaining fair value mark on purchased performing loans16,121 16,939 19,994
Less: Purchased credit impaired loans, net of fair value mark57,770 59,292 70,105
Adjusted loans, net of deferred fees$6,512,397 $6,264,707 $5,730,391
ALL / gross loans, adjusted for acquisition accounting0.84% 0.86% 0.95%


As of & For Three Months Ended
3/31/17 12/31/16 3/31/16
Alternative Performance Measures (non-GAAP) cont'd(unaudited) (unaudited) (unaudited)
Net interest income (FTE) & Core Net Interest Income (FTE)
Net interest income (GAAP)$66,567 $68,615 $63,731
FTE adjustment2,540 2,876 2,489
Net interest income FTE (non-GAAP) (1)$69,107 $71,491 $66,220
Less: Net accretion of acquisition fair value marks(1,493) (1,609) (1,146)
Core net interest income FTE (non-GAAP) (3)$67,614 $69,882 $65,074
Average earning assets7,660,937 7,514,979 6,968,988
Net interest margin3.52% 3.63% 3.68%
Net interest margin (FTE)3.66% 3.78% 3.82%
Core net interest margin (FTE)3.58% 3.70% 3.76%
Mortgage Origination Volume
Refinance Volume$34,331 $71,454 $37,304
Construction Volume22,669 10,621 14,894
Purchase Volume43,216 63,249 46,013
Total Mortgage loan originations$100,216 $145,324 $98,211
% of originations that are refinances34.3% 49.2% 38.0%
Other Data
End of period full-time employees1,412 1,416 1,400
Number of full-service branches113 114 124
Number of full automatic transaction machines (ATMs)184 185 201

(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. The entire FTE adjustment is attributable to interest income on earning assets, which is used in computing yield on earning assets. Interest expense and the related cost of interest-bearing liabilities and cost of funds ratios are not affected by the FTE components.

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

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

(4) All ratios at March 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.

(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)
March 31, December 31, March 31,
2017 2016 2016
ASSETS(unaudited) (unaudited)
Cash and cash equivalents:
Cash and due from banks$120,216 $120,758 $95,462
Interest-bearing deposits in other banks62,656 58,030 37,227
Federal funds sold947 449 650
Total cash and cash equivalents183,819 179,237 133,339
Securities available for sale, at fair value953,058 946,764 939,409
Securities held to maturity, at carrying value203,478 201,526 204,444
Restricted stock, at cost65,402 60,782 58,211
Loans held for sale, at fair value19,976 36,487 25,109
Loans held for investment, net of deferred fees and costs6,554,046 6,307,060 5,780,502
Less allowance for loan losses38,414 37,192 34,399
Net loans held for investment6,515,632 6,269,868 5,746,103
Premises and equipment, net122,512 122,027 125,357
Other real estate owned, net of valuation allowance9,605 10,084 14,246
Goodwill298,191 298,191 293,522
Amortizable intangibles, net18,965 20,602 21,430
Bank owned life insurance178,774 179,318 175,033
Other assets100,508 101,907 96,408
Total assets$8,669,920 $8,426,793 $7,832,611
LIABILITIES
Noninterest-bearing demand deposits$1,490,799 $1,393,625 $1,363,243
Interest-bearing deposits5,123,396 4,985,864 4,582,739
Total deposits6,614,195 6,379,489 5,945,982
Securities sold under agreements to repurchase44,587 59,281 91,977
Other short-term borrowings522,500 517,500 466,000
Long-term borrowings413,779 413,308 291,662
Other liabilities59,228 56,183 56,012
Total liabilities7,654,289 7,425,761 6,851,633
Commitments and contingencies
STOCKHOLDERS' EQUITY
Common stock, $1.33 par value, shares authorized 100,000,000; issued and outstanding, 43,679,947 shares, 43,609,317 shares, and 43,854,381 shares, respectively.57,629 57,506 57,850
Additional paid-in capital606,078 605,397 610,084
Retained earnings352,335 341,938 306,685
Accumulated other comprehensive income(411) (3,809) 6,359
Total stockholders' equity1,015,631 1,001,032 980,978
Total liabilities and stockholders' equity$8,669,920 $8,426,793 $7,832,611


UNION BANKSHARES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except share data)
Three Months Ended
March 31, December 31, March 31,
2017 2016 2016
Interest and dividend income:(unaudited) (unaudited) (unaudited)
Interest and fees on loans$68,084 $68,683 $62,947
Interest on deposits in other banks71 67 47
Interest and dividends on securities:
Taxable4,923 4,761 4,316
Nontaxable3,562 3,446 3,439
Total interest and dividend income76,640 76,957 70,749
Interest expense:
Interest on deposits5,077 4,786 4,195
Interest on short-term borrowings950 797 623
Interest on long-term borrowings4,046 2,759 2,200
Total interest expense10,073 8,342 7,018
Net interest income66,567 68,615 63,731
Provision for credit losses2,122 1,723 2,604
Net interest income after provision for credit losses64,445 66,892 61,127
Noninterest income:
Service charges on deposit accounts4,829 5,042 4,734
Other service charges and fees4,408 4,204 4,156
Fiduciary and asset management fees2,794 2,884 2,138
Mortgage banking income, net2,025 2,629 2,146
Gains on securities transactions, net481 60 143
Bank owned life insurance income2,125 1,391 1,372
Loan-related interest rate swap fees1,180 1,198 662
Other operating income997 642 563
Total noninterest income18,839 18,050 15,914
Noninterest expenses:
Salaries and benefits32,168 30,042 28,048
Occupancy expenses4,903 4,901 4,976
Furniture and equipment expenses2,603 2,608 2,636
Printing, postage, and supplies1,150 1,126 1,139
Communications expense910 887 1,089
Technology and data processing3,900 4,028 3,814
Professional services1,658 1,653 1,989
Marketing and advertising expense1,740 1,946 1,938
FDIC assessment premiums and other insurance706 1,403 1,362
Other taxes2,022 1,592 1,618
Loan-related expenses1,329 1,152 878
OREO and credit-related expenses541 637 569
Amortization of intangible assets1,637 1,742 1,880
Training and other personnel costs969 923 744
Other expenses1,159 1,627 1,592
Total noninterest expenses57,395 56,267 54,272
Income before income taxes25,889 28,675 22,769
Income tax expense6,765 7,899 5,808
Net income$19,124 $20,776 $16,961
Basic earnings per common share$0.44 $0.48 $0.38
Diluted earnings per common share$0.44 $0.48 $0.38


UNION BANKSHARES CORPORATION AND SUBSIDIARIES
SEGMENT FINANCIAL INFORMATION
(Dollars in thousands)
Community Bank Mortgage Eliminations Consolidated
Three Months Ended March 31, 2017 (unaudited)
Net interest income$66,234 $333 $ $66,567
Provision for credit losses2,104 18 2,122
Net interest income after provision for credit losses64,130 315 64,445
Noninterest income16,757 2,223 (141) 18,839
Noninterest expenses55,014 2,522 (141) 57,395
Income before income taxes25,873 16 25,889
Income tax expense6,753 12 6,765
Net income$19,120 $4 $ $19,124
Total assets$8,660,987 $76,818 $(67,885) $8,669,920
Three Months Ended December 31, 2016 (unaudited)
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 March 31, 2016 (unaudited)
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 (loss) before income taxes22,689 80 22,769
Income tax expense (benefit)5,782 26 5,808
Net income (loss)$16,907 $54 $ $16,961
Total assets$7,825,652 $55,069 $(48,110) $7,832,611


AVERAGE BALANCES, INCOME AND EXPENSES, YIELDS AND RATES (TAXABLE EQUIVALENT BASIS)
For the Quarter Ended
March 31, 2017 December 31, 2016
Average Balance Interest
Income / Expense
Yield / Rate
(1)
Average Balance Interest
Income / Expense
Yield /
Rate (1)
Assets:(unaudited) (unaudited)
Securities:
Taxable$746,359 $4,923 2.68% $749,059 $4,761 2.53%
Tax-exempt461,409 5,480 4.82% 453,066 5,302 4.66%
Total securities1,207,768 10,403 3.49% 1,202,125 10,063 3.33%
Loans, net (2) (3)6,383,905 68,503 4.35% 6,214,084 69,358 4.44%
Other earning assets69,264 274 1.60% 98,770 412 1.66%
Total earning assets7,660,937 $79,180 4.19% 7,514,979 $79,833 4.23%
Allowance for loan losses(37,898) (37,808)
Total non-earning assets842,478 835,579
Total assets$8,465,517 $8,312,750
Liabilities and Stockholders' Equity:
Interest-bearing deposits:
Transaction and money market accounts$3,205,692 $1,969 0.25% $3,099,424 $1,804 0.23%
Regular savings596,559 191 0.13% 593,751 201 0.13%
Time deposits1,211,064 2,917 0.98% 1,192,253 2,781 0.93%
Total interest-bearing deposits5,013,315 5,077 0.41% 4,885,428 4,786 0.39%
Other borrowings (4)986,645 4,996 2.05% 927,218 3,556 1.53%
Total interest-bearing liabilities5,999,960 10,073 0.68% 5,812,646 8,342 0.57%
Noninterest-bearing liabilities:
Demand deposits1,393,966 1,424,597
Other liabilities61,273 69,738
Total liabilities7,455,199 7,306,981
Stockholders' equity1,010,318 1,005,769
Total liabilities and stockholders' equity$8,465,517 $8,312,750
Net interest income $69,107 $71,491
Interest rate spread (5) 3.51% 3.66%
Cost of funds 0.53% 0.45%
Net interest margin (6) 3.66% 3.78%
(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 $1.4 million and $1.5 million for the three months ended March 31, 2017 and December 31, 2016, respectively, in accretion of the fair market value adjustments related to acquisitions.
(4) Interest expense on borrowings includes $48,000 and $71,000 for the three months ended March 31, 2017 and December 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 3.58% and 3.70% for the three months ended March 31, 2017 and December 31, 2016, respectively.

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

Source:Union Bankshares Corporation