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Union Bankshares Reports Third Quarter Results

RICHMOND, Va., Oct. 18, 2017 (GLOBE NEWSWIRE) -- Union Bankshares Corporation (the “Company” or “Union”) (NASDAQ:UBSH) today reported net operating earnings(1) of $21.3 million and operating earnings per share(1) of $0.49 for its third quarter ended September 30, 2017; these operating results exclude $661,000 in after-tax merger-related costs. The Company's net operating earnings and operating earnings per share for the third quarter of 2017 represent increases of $1.0 million, or 4.9%, and $0.03, or 6.5%, respectively, in each case compared to the second quarter of 2017. For the third quarter ended September 30, 2017, net income, which includes the impact of merger-related costs, was $20.7 million, an increase of $2.7 million, or 15.0%, compared to the second quarter of 2017, and earnings per share was $0.47, an increase of $0.06, or 14.6%, compared to the second quarter of 2017.

For the nine months ended September 30, 2017, net operating earnings(1) were $60.8 million and operating earnings per share(1) were $1.39. The Company's net operating earnings and operating earnings per share for the nine months ended September 30, 2017 represent an increase of 7.2% and 7.8%, respectively, compared to the net income and earnings per share for the nine months ended September 30, 2016. For the nine months ended September 30, 2017, net income, which includes the impact of merger-related costs, was $57.7 million, an increase of 1.8% compared to the same period in 2016, and earnings per share were $1.32, an increase of 2.3% compared to the same period in 2016.

Union delivered another solid quarterly performance with growth in operating earnings and earnings per share as we continue to gain market share and tell our unique story, which we believe is being well received in our markets,” said John C. Asbury, president and chief executive officer of Union Bankshares Corporation. “Our profitability metrics improved, and I was especially pleased to see significant progress made in lowering the efficiency ratio this quarter. The Xenith acquisition remains on track to close in early January, and I am confident that our combination will accelerate the achievement of our top tier financial performance goals, which should provide our shareholders with above average returns on their investments over the long term. Union is fast becoming something that Virginia hasn’t had in nearly 20 years - a statewide regional bank that is uniquely positioned to provide value to our teammates, customers, shareholders and the communities we serve.

Select highlights for the third quarter of 2017 include:

  • On October 17, 2017, the Company and Xenith Bankshares, Inc. (“Xenith”) jointly announced the receipt of regulatory approval from the Federal Reserve Bank of Richmond and from the Virginia State Corporation Commission to move forward with the proposed merger of Xenith into the Company (the “Pending Merger”).
  • Net income for the community bank segment was $20.3 million, or $0.46 per share, for the third quarter of 2017, compared to $17.4 million, or $0.40 per share, for the second quarter of 2017. Net operating earnings(1) for the community bank segment were $21.0 million, or $0.48 per share, for the third quarter of 2017, compared to $19.8 million, or $0.45 per share, for the second quarter of 2017. Net income for the community bank segment was $56.8 million, or $1.30 per share, for the nine months ended September 30, 2017, compared to $55.3 million, or $1.26 per share, for the nine months ended September 30, 2016. Net operating earnings(1) for the community bank segment were $59.9 million, or $1.37 per share, for the nine months ended September 30, 2017.
  • The mortgage segment reported net income of $347,000, or $0.01 per share, for the third quarter of 2017, compared to $551,000, or $0.01 per share, in the second quarter of 2017. The mortgage segment reported net income of $901,000, or $0.02 per share, for the nine months ended September 30, 2017 compared to $1.4 million, or $0.03 per share, for the nine months ended September 30, 2016.
  • Return on Average Assets (“ROA”) was 0.91% and operating ROA(1) was 0.94% for the quarter ended September 30, 2017 compared to ROA of 0.82% and operating ROA of 0.93% for the quarter ended June 30, 2017 and ROA of 1.00% for the quarter ended September 30, 2016.
  • Return on Average Equity (“ROE”) was 7.90% and operating ROE(1) was 8.15% for the quarter ended September 30, 2017 compared to ROE of 7.02% and operating ROE of 7.94% for the quarter ended June 30, 2017 and ROE of 8.14% for the quarter ended September 30, 2016.
  • Return on Average Tangible Common Equity (“ROTCE”) was 11.34% and operating ROTCE(1) was 11.70% for the quarter ended September 30, 2017 compared to ROTCE of 10.15% and operating ROTCE of 11.48% for the prior quarter and ROTCE of 12.00% for the third quarter of 2016.
  • The efficiency ratio (FTE) was 62.9% and the operating efficiency ratio (FTE)(1) was 62.1% for the quarter ended September 30, 2017 compared to the efficiency ratio (FTE) of 66.8% and operating efficiency ratio (FTE) of 63.8% for the prior quarter and efficiency ratio (FTE) of 64.4% for the third quarter of 2016.
  • Loans held for investment grew $127.2 million, or 7.5% (annualized), from June 30, 2017 and increased $749.8 million, or 12.2%, from September 30, 2016. Average loans held for investment increased $194.5 million, or 11.7% (annualized), from the prior quarter and increased $788.8 million, or 13.1%, from the same quarter in the prior year.
  • Period-end deposits increased $117.4 million, or 6.9% (annualized), from June 30, 2017 and grew $623.3 million, or 10.0%, from September 30, 2016. Average deposits increased $160.1 million, or 9.6% (annualized), from the prior quarter and increased $592.9 million, or 9.6%, from the same quarter in the prior year.

(1) For a reconciliation of the non-GAAP operating measures that exclude merger-related costs unrelated to the Company’s normal operations, see Alternative Performance Measures (non-GAAP) section of the Key Financial Results. Such costs were only incurred during the second and third quarters of 2017; thus each of these operating measures is equivalent to the corresponding GAAP financial measure for the three and nine months ended September 30, 2016.

NET INTEREST INCOME

For the third quarter of 2017, net interest income was $71.2 million, an increase of $2.2 million from the second quarter of 2017. Tax-equivalent net interest income was $73.8 million, an increase of $2.2 million from the second quarter of 2017. The increases in both net interest income and tax-equivalent net interest income were driven by higher earning asset balances. The third quarter net interest margin decreased 3 basis points to 3.46% from 3.49% in the previous quarter, while the tax-equivalent net interest margin also decreased 3 basis points to 3.59% from 3.62% during the same periods. The decrease in the tax-equivalent net interest margin was principally due to the 4 basis point increase in tax-equivalent cost of funds partially offset by the 1 basis point increase in the tax-equivalent yield on earning assets.

The Company’s tax-equivalent net interest margin includes the impact of acquisition accounting fair value adjustments. During the third quarter of 2017, net accretion related to acquisition accounting increased $92,000, or 5.7%, from the prior quarter to $1.7 million for the quarter ended September 30, 2017. The second and third quarters of 2017 as well as the remaining estimated net accretion impact are reflected in the following table (dollars in thousands):

Loan Accretion Borrowings
Accretion
(Amortization)
Total
For the quarter ended June 30, 2017$1,570 $47 $1,617
For the quarter ended September 30, 20171,662 47 1,709
For the remaining three months of 2017 (estimated) (1)1,358 28 1,386
For the years ending (estimated) (1):
20184,842 (143) 4,699
20193,483 (286) 3,197
20202,689 (301) 2,388
20212,187 (316) 1,871
20221,767 (332) 1,435
Thereafter6,589 (4,974) 1,615

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

ASSET QUALITY/LOAN LOSS PROVISION

Overview
During the third quarter of 2017, the Company experienced declines in nonperforming asset balances from the prior quarter, primarily related to charge-offs of nonaccrual loans. The loan loss provision increased from the prior quarter due to loan growth and higher levels of charge-offs in the third quarter of 2017. The allowance for loan losses and the related allowance for loan losses to total loans ratio decreased from the prior quarter primarily due to the continued decline in the historical loss rates and reductions in specific reserves on impaired loans that were charged off during the quarter.

All nonaccrual and past due loan metrics discussed below exclude purchased credit impaired (“PCI”) loans totaling $51.0 million (net of fair value mark of $11.7 million).

Nonperforming Assets (“NPAs”)
At September 30, 2017, NPAs totaled $28.9 million, a decline of $5.2 million, or 15.2%, from June 30, 2017 and an increase of $5.6 million, or 24.2%, from September 30, 2016. In addition, NPAs as a percentage of total outstanding loans declined 8 basis points from 0.50% at June 30, 2017 and increased 4 basis points from 0.38% at September 30, 2016 to 0.42% at September 30, 2017. As the Company's NPAs have been at historic lows over the last several quarters, certain changes from quarter to quarter might stand out in comparison to one another but have an insignificant impact on the Company's overall asset quality position. The following table shows a summary of asset quality balances at the quarter ended (dollars in thousands):

September 30, June 30, March 31, December 31, September 30,
2017 2017 2017 2016 2016
Nonaccrual loans$20,122 $24,574 $22,338 $9,973 $12,677
Foreclosed properties6,449 6,828 6,951 7,430 7,927
Former bank premises2,315 2,654 2,654 2,654 2,654
Total nonperforming assets$28,886 $34,056 $31,943 $20,057 $23,258

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

September 30, June 30, March 31, December 31, September 30,
2017 2017 2017 2016 2016
Beginning Balance$24,574 $22,338 $9,973 $12,677 $10,861
Net customer payments(4,642) (1,498) (1,068) (1,451) (1,645)
Additions4,114 5,979 13,557 1,094 4,359
Charge-offs(3,376) (2,004) (97) (1,216) (660)
Loans returning to accruing status (134) (27) (1,039) (23)
Transfers to OREO(548) (107) (92) (215)
Ending Balance$20,122 $24,574 $22,338 $9,973 $12,677

The net decline in nonaccrual loans from the prior quarter was primarily attributable to charge-offs and customer payments.

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

September 30, June 30, March 31, December 31, September 30,
2017 2017 2017 2016 2016
Beginning Balance$9,482 $9,605 $10,084 $10,581 $13,381
Additions of foreclosed property621 132 859 246
Valuation adjustments(588) (19) (238) (138) (479)
Proceeds from sales(648) (272) (277) (1,282) (2,844)
Gains (losses) from sales(103) 36 36 64 277
Ending Balance$8,764 $9,482 $9,605 $10,084 $10,581

Past Due Loans
Past due loans still accruing interest totaled $34.3 million, or 0.50% of total loans, at September 30, 2017 compared to $27.4 million, or 0.40% of total loans, at June 30, 2017 and $26.9 million, or 0.44% of total loans, at September 30, 2016. Of the total past due loans still accruing interest, $4.5 million, or 0.07% of total loans, were loans past due 90 days or more at September 30, 2017, compared to $3.6 million, or 0.05% of total loans, at June 30, 2017 and $3.5 million, or 0.06% of total loans, at September 30, 2016.

Net Charge-offs
For the third quarter of 2017, net charge-offs were $4.1 million, or 0.24% of total average loans on an annualized basis, compared to $2.5 million, or 0.15%, for the prior quarter and $929,000, or 0.06%, for the same quarter last year. Of the net charge-offs in the third quarter of 2017, the majority were previously considered impaired. For the nine months ended September 30, 2017, net charge-offs were $7.4 million, or 0.15% of total average loans on annualized basis, compared to $4.7 million, or 0.11%, for the same period in 2016.

Provision for Loan Losses
The provision for loan losses for the third quarter of 2017 was $3.1 million, an increase of $750,000 compared to the previous quarter and an increase of $653,000 compared to the same quarter in 2016. The increase in provision for loan losses was primarily driven by higher loan balances and higher levels of charge-offs in the third quarter of 2017.

Allowance for Loan Losses
The allowance for loan losses (“ALL”) decreased $1.1 million from June 30, 2017 to $37.2 million at September 30, 2017 primarily due to the continued decline in the historical loss rates and reductions in specific reserves on impaired loans that were charged off during the quarter. The ALL as a percentage of the total loan portfolio was 0.54% at September 30, 2017, 0.56% at June 30, 2017, and 0.59% at September 30, 2016.

The ratio of the ALL to nonaccrual loans was 184.7% at September 30, 2017, compared to 155.5% at June 30, 2017 and 288.3% at September 30, 2016. The current level of the allowance for loan losses reflects specific reserves related to nonperforming loans, current risk ratings on loans, net charge-off activity, loan growth, delinquency trends, and other credit risk factors that the Company considers important in assessing the adequacy of the allowance for loan losses.

NONINTEREST INCOME

Noninterest income decreased $520,000, or 2.9%, to $17.5 million for the quarter ended September 30, 2017 from $18.1 million in the prior quarter, primarily driven by lower loan-related swap fees and mortgage banking income, partially offset by increases in customer-related fee income and higher insurance-related income.

Mortgage banking income decreased $488,000, or 17.5%, to $2.3 million in the third quarter of 2017 compared to $2.8 million in the second quarter of 2017, related to declines in mortgage loan originations. Mortgage loan originations declined by $9.2 million, or 6.8%, in the third quarter to $127.3 million from $136.6 million in the second quarter of 2017. The majority of the decrease was related to purchase-money mortgage loans, which declined by $13.0 million from the prior quarter. Of the mortgage loan originations in the third quarter of 2017, 28.0% were refinances compared with 23.4% in the prior quarter.

NONINTEREST EXPENSE

Noninterest expense decreased $2.4 million, or 4.1%, to $57.5 million for the quarter ended September 30, 2017 from $59.9 million in the prior quarter. Excluding merger-related costs of $732,000 and $2.7 million in the third and second quarters of 2017, respectively, operating noninterest expense decreased $422,000 when compared to the second quarter of 2017. Salaries and benefits expenses declined by $792,000 primarily related to declines in incentive compensation. Marketing and advertising costs decreased $335,000 due to seasonally lower expenses. These decreases were partially offset by an increase in OREO and credit-related expenses of $797,000 primarily due to higher valuation adjustments of $569,000 and losses on sales of OREO property compared to gains on sales of OREO property in the prior quarter.

BALANCE SHEET

At September 30, 2017, total assets were $9.0 billion, an increase of $114.2 million from June 30, 2017 and an increase of $771.2 million from September 30, 2016. The increase in assets was mostly related to loan growth.

At September 30, 2017, loans held for investment (net of deferred fees and costs) were $6.9 billion, an increase of $127.2 million, or 7.5% (annualized), from June 30, 2017, while average loans increased $194.5 million, or 11.7% (annualized), from the prior quarter. Loans held for investment increased $749.8 million, or 12.2%, from September 30, 2016, while quarterly average loans increased $788.8 million, or 13.1%, from the prior year.

At September 30, 2017, total deposits were $6.9 billion, an increase of $117.4 million, or 6.9% (annualized), from June 30, 2017, while average deposits increased $160.1 million, or 9.6% (annualized), from the prior quarter. Total deposits grew $623.3 million, or 10.0%, from September 30, 2016, while quarterly average deposits increased $592.9 million, or 9.6%, from the prior year.

At September 30, 2017, June 30, 2017, and September 30, 2016, respectively, the Company had a common equity Tier 1 capital ratio of 9.40%, 9.39%, and 9.78%; a Tier 1 capital ratio of 10.56%, 10.57%, and 11.07%; a total capital ratio of 12.94%, 13.00%, and 11.60%; and a leverage ratio of 9.52%, 9.61%, and 9.89%.

The Company’s common equity to total assets ratios at September 30, 2017, June 30, 2017, and September 30, 2016 were 11.53%, 11.56%, and 12.12%, respectively, while its tangible common equity to tangible assets ratio was 8.34%, 8.32%, and 8.57%, respectively.

During the third 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 to 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 111 banking offices and approximately 173 ATMs located throughout Virginia. Non-bank affiliates of the holding company include: Union Mortgage Group, Inc., which provides a full line of mortgage products, Old Dominion Capital Management, Inc., which provides investment advisory services, and Union Insurance Group, LLC, which offers various lines of insurance products.

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

Union Bankshares Corporation will hold a conference call on Wednesday, October 18th, 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 95436690.

NON-GAAP MEASURES

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

FORWARD-LOOKING STATEMENTS
Certain statements in this press release may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements that include projections, predictions, expectations, or beliefs about future events or results or otherwise are not statements of historical fact, are based on certain assumptions as of the time they are made, and are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. Such statements are often characterized by the use of qualified words (and their derivatives) such as “expect,” “believe,” “estimate,” “plan,” “project,” “anticipate,” “intend,” “will,” “may,” “view,” “opportunity,” “potential,” or words of similar meaning or other statements concerning opinions or judgment of the Company and its management about future events. Although the Company believes that its expectations with respect to forward-looking statements are based upon reasonable assumptions within the bounds of its existing knowledge of its business and operations, there can be no assurance that actual results, performance, or achievements of the Company will not differ materially from any projected future results, performance, or achievements expressed or implied by such forward-looking statements. Actual future results and trends may differ materially from historical results or those anticipated depending on a variety of factors, including, but not limited to, the effects of or changes in:

  • the possibility that any of the anticipated benefits of the Pending Merger with Xenith will not be realized or will not be realized within the expected time period, the businesses of the Company and Xenith may not be integrated successfully or such integration may be more difficult, time-consuming or costly than expected, the expected revenue synergies and cost savings from the Pending Merger may not be fully realized or realized within the expected time frame, revenues following the Pending Merger may be lower than expected, customer and employee relationships and business operations may be disrupted by the Pending Merger, or obtaining required shareholder approvals, or completing the Pending Merger on the expected timeframe, may be more difficult, time-consuming or costly than expected,
  • changes in interest rates,
  • general economic and financial market conditions,
  • the Company’s ability to manage its growth or implement its growth strategy,
  • the incremental cost and/or decreased revenues associated with exceeding $10 billion in assets,
  • levels of unemployment in the Bank’s lending area,
  • real estate values in the Bank’s lending area,
  • an insufficient allowance for loan losses,
  • the quality or composition of the loan or investment portfolios,
  • concentrations of loans secured by real estate, particularly commercial real estate,
  • the effectiveness of the Company’s credit processes and management of the Company’s credit risk,
  • demand for loan products and financial services in the Company’s market area,
  • the Company’s ability to compete in the market for financial services,
  • technological risks and developments, and cyber attacks or events,
  • performance by the Company’s counterparties or vendors,
  • deposit flows,
  • the availability of financing and the terms thereof,
  • the level of prepayments on loans and mortgage-backed securities,
  • legislative or regulatory changes and requirements,
  • monetary and fiscal policies of the U.S. government including policies of the U.S. Department of the Treasury and the Board of Governors of the Federal Reserve System, and
  • accounting principles and guidelines.

More information on risk factors that could affect the Company’s forward-looking statements is available on the Company’s website, http://investors.bankatunion.com or the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2017, and other reports filed with the Securities and Exchange Commission (“SEC”). The information on the Company’s website is not a part of this press release. All risk factors and uncertainties described in those documents should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. The Company does not intend or assume any obligation to update or revise any forward-looking statements that may be made from time to time by or on behalf of the Company.

ADDITIONAL INFORMATION ABOUT THE PENDING MERGER AND WHERE TO FIND IT

In connection with the Pending Merger, the Company has filed with the SEC a registration statement on Form S-4 to register the shares of the Company’s common stock to be issued to the shareholders of Xenith. The registration statement includes a joint proxy statement of the Company and Xenith and a prospectus of the Company. A definitive joint proxy statement/prospectus was first sent to the shareholders of the Company and Xenith on September 21, 2017 seeking their approval of the Pending Merger and related matters. This release does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval. Before making any voting or investment decision, investors and shareholders of the Company and Xenith are urged to read carefully the entire registration statement and joint proxy statement/prospectus, including all amendments thereto, because they contain important information about the Pending Merger. Free copies of these documents may be obtained as described below.

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

The Company and Xenith and their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from the shareholders of the Company and/or Xenith in connection with the Pending Merger. Information about the directors and executive officers of the Company is set forth in the proxy statement for the Company’s 2017 annual meeting of shareholders filed with the SEC on March 21, 2017. Information about the directors and executive officers of Xenith is set forth in Xenith’s Annual Report on Form 10-K, as amended, filed with the SEC on May 1, 2017. Additional information regarding the interests of these participants and other persons who may be deemed participants in the Pending Merger may be obtained by reading the joint proxy statement/prospectus regarding the Pending Merger when it becomes available. Free copies of these documents may be obtained as described above.

UNION BANKSHARES CORPORATION AND SUBSIDIARIES
KEY FINANCIAL RESULTS
(Dollars in thousands, except share data)
(FTE - "Fully Taxable Equivalent")
Three Months Ended Nine Months Ended
9/30/17 6/30/17 9/30/16 9/30/17 9/30/16
Results of Operations(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
Interest and dividend income$84,850 $81,221 $74,433 $242,712 $217,964
Interest expense13,652 12,222 7,405 35,947 21,429
Net interest income71,198 68,999 67,028 206,765 196,535
Provision for credit losses3,050 2,173 2,472 7,345 7,376
Net interest income after provision for credit losses68,148 66,826 64,556 199,420 189,159
Noninterest income17,536 18,056 18,950 54,430 52,857
Noninterest expenses57,496 59,930 56,913 174,821 166,436
Income before income taxes28,188 24,952 26,593 79,029 75,580
Income tax expense7,530 6,996 6,192 21,292 18,881
Net income$20,658 $17,956 $20,401 $57,737 $56,699
Interest earned on earning assets (FTE) (1)$87,498 $83,869 $76,860 $250,548 $225,331
Net interest income (FTE) (1)73,846 71,647 69,455 214,601 203,902
Net income - community bank segment$20,311 $17,405 $19,616 $56,836 $55,321
Net income - mortgage segment347 551 785 901 1,378
Key Ratios
Earnings per common share, diluted$0.47 $0.41 $0.47 $1.32 $1.29
Return on average assets (ROA)0.91% 0.82% 1.00% 0.88% 0.95%
Return on average equity (ROE)7.90% 7.02% 8.14% 7.53% 7.64%
Return on average tangible common equity (ROTCE) (2)11.34% 10.15% 12.00% 10.90% 11.25%
Efficiency ratio64.80% 68.84% 66.19% 66.93% 66.74%
Efficiency ratio (FTE) (1)62.92% 66.81% 64.38% 64.98% 64.82%
Net interest margin3.46% 3.49% 3.63% 3.49% 3.67%
Net interest margin (FTE) (1)3.59% 3.62% 3.76% 3.62% 3.80%
Yields on earning assets (FTE) (1)4.25% 4.24% 4.16% 4.23% 4.20%
Cost of interest-bearing liabilities (FTE) (1)0.85% 0.79% 0.52% 0.78% 0.52%
Cost of funds (FTE) (1)0.66% 0.62% 0.40% 0.61% 0.40%
Operating Measures (3)
Net operating earnings$21,319 $20,314 $20,401 $60,757 $56,699
Operating earnings per share, diluted$0.49 $0.46 $0.47 $1.39 $1.29
Operating ROA0.94% 0.93% 1.00% 0.93% 0.95%
Operating ROE8.15% 7.94% 8.14% 7.93% 7.64%
Operating ROTCE11.70% 11.48% 12.00% 11.47% 11.25%
Operating efficiency ratio (FTE)62.12% 63.75% 64.38% 63.69% 64.82%
Community bank segment net operating earnings$20,972 $19,763 $19,616 $59,856 $55,321
Community bank segment operating earnings per share, diluted$0.48 $0.45 $0.45 $1.37 $1.26
Per Share Data
Earnings per common share, basic$0.47 $0.41 $0.47 $1.32 $1.29
Earnings per common share, diluted0.47 0.41 0.47 1.32 1.29
Cash dividends paid per common share0.20 0.20 0.19 0.60 0.57
Market value per share35.30 33.90 26.77 35.30 26.77
Book value per common share24.00 23.79 23.18 24.00 23.18
Tangible book value per common share (2)16.76 16.50 15.75 16.76 15.75
Price to earnings ratio, diluted18.93 20.61 14.32 20.00 15.54
Price to book value per common share ratio1.47 1.42 1.15 1.47 1.15
Price to tangible book value per common share ratio (2)2.11 2.05 1.70 2.11 1.70
Weighted average common shares outstanding, basic43,706,635 43,693,427 43,565,937 43,685,045 43,853,548
Weighted average common shares outstanding, diluted43,792,058 43,783,952 43,754,915 43,767,502 43,967,725
Common shares outstanding at end of period43,729,229 43,706,000 43,556,486 43,729,229 43,556,486


As of & For Three Months Ended As of & For Nine Months Ended
9/30/17 6/30/17 9/30/16 9/30/17 9/30/16
Capital Ratios(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
Common equity Tier 1 capital ratio (4)9.40% 9.39% 9.78% 9.40% 9.78%
Tier 1 capital ratio (4)10.56% 10.57% 11.07% 10.56% 11.07%
Total capital ratio (4)12.94% 13.00% 11.60% 12.94% 11.60%
Leverage ratio (Tier 1 capital to average assets) (4)9.52% 9.61% 9.89% 9.52% 9.89%
Common equity to total assets11.53% 11.56% 12.12% 11.53% 12.12%
Tangible common equity to tangible assets (2)8.34% 8.32% 8.57% 8.34% 8.57%
Financial Condition
Assets$9,029,436 $8,915,187 $8,258,230 $9,029,436 $8,258,230
Loans held for investment6,898,729 6,771,490 6,148,918 6,898,729 6,148,918
Earning Assets8,232,413 8,094,574 7,466,956 8,232,413 7,466,956
Goodwill298,191 298,191 298,191 298,191 298,191
Amortizable intangibles, net16,017 17,422 22,343 16,017 22,343
Deposits6,881,826 6,764,434 6,258,506 6,881,826 6,258,506
Stockholders' equity1,041,371 1,030,869 1,000,964 1,041,371 1,000,964
Tangible common equity (2)727,163 715,256 680,430 727,163 680,430
Loans held for investment, net of deferred fees and costs
Construction and land development$841,738 $799,938 $776,430 $841,738 $776,430
Commercial real estate - owner occupied903,523 888,285 857,142 903,523 857,142
Commercial real estate - non-owner occupied1,748,039 1,698,329 1,454,828 1,748,039 1,454,828
Multifamily real estate368,686 367,257 339,313 368,686 339,313
Commercial & Industrial554,522 568,602 509,857 554,522 509,857
Residential 1-4 Family1,083,112 1,066,519 999,361 1,083,112 999,361
Auto276,572 274,162 255,188 276,572 255,188
HELOC535,446 535,088 524,097 535,446 524,097
Consumer and all other587,091 573,310 432,702 587,091 432,702
Total loans held for investment$6,898,729 $6,771,490 $6,148,918 $6,898,729 $6,148,918
Deposits
NOW accounts$1,851,327 $1,882,287 $1,635,446 $1,851,327 $1,635,446
Money market accounts1,621,443 1,559,895 1,398,177 1,621,443 1,398,177
Savings accounts553,082 558,472 596,702 553,082 596,702
Time deposits of $100,000 and over621,070 580,962 528,227 621,070 528,227
Other time deposits699,755 681,248 657,686 699,755 657,686
Total interest-bearing deposits$5,346,677 $5,262,864 $4,816,238 $5,346,677 $4,816,238
Demand deposits1,535,149 1,501,570 1,442,268 1,535,149 1,442,268
Total deposits$6,881,826 $6,764,434 $6,258,506 $6,881,826 $6,258,506
Averages
Assets$8,973,964 $8,747,377 $8,153,951 $8,730,815 $7,956,841
Loans held for investment6,822,498 6,628,011 6,033,723 6,613,078 5,869,511
Loans held for sale38,569 28,331 42,755 31,461 33,619
Securities1,243,904 1,229,593 1,218,552 1,227,220 1,202,882
Earning assets8,167,919 7,934,405 7,354,684 7,922,944 7,159,813
Deposits6,797,840 6,637,742 6,204,958 6,615,718 6,043,892
Certificates of deposit1,289,794 1,248,818 1,181,936 1,250,180 1,172,856
Interest-bearing deposits5,302,226 5,179,774 4,796,505 5,166,163 4,667,891
Borrowings1,080,226 1,023,599 884,597 1,030,500 860,942
Interest-bearing liabilities6,382,452 6,203,373 5,681,102 6,196,663 5,528,833
Stockholders' equity1,037,792 1,026,148 996,668 1,024,853 991,097
Tangible common equity (2)722,920 709,793 676,308 708,478 673,468


As of & For Three Months Ended As of & For Nine Months
Ended
9/30/17 6/30/17 9/30/16 9/30/17 9/30/16
Asset Quality(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
Allowance for Loan Losses (ALL)
Beginning balance$38,214 $38,414 $35,074 $37,192 $34,047
Add: Recoveries887 827 534 2,559 2,022
Less: Charge-offs4,989 3,327 1,463 9,949 6,728
Add: Provision for loan losses3,050 2,300 2,397 7,360 7,201
Ending balance$37,162 $38,214 $36,542 $37,162 $36,542
ALL / total outstanding loans0.54% 0.56% 0.59% 0.54% 0.59%
Net charge-offs / total average loans0.24% 0.15% 0.06% 0.15% 0.11%
Provision / total average loans0.18% 0.14% 0.16% 0.15% 0.16%
Total PCI Loans$51,041 $56,167 $62,346 $51,041 $62,346
Remaining fair value mark on purchased performing loans14,602 15,382 18,154 14,602 18,154
Nonperforming Assets
Construction and land development$5,671 $5,659 $2,301 $5,671 $2,301
Commercial real estate - owner occupied2,205 1,279 1,609 2,205 1,609
Commercial real estate - non-owner occupied2,701 4,765 2,701
Commercial & Industrial1,252 4,281 1,344 1,252 1,344
Residential 1-4 Family6,163 6,128 5,279 6,163 5,279
Auto174 270 231 174 231
HELOC1,791 2,059 1,464 1,791 1,464
Consumer and all other165 133 449 165 449
Nonaccrual loans$20,122 $24,574 $12,677 $20,122 $12,677
Other real estate owned8,764 9,482 10,581 8,764 10,581
Total nonperforming assets (NPAs)$28,886 $34,056 $23,258 $28,886 $23,258
Construction and land development$54 $83 $610 $54 $610
Commercial real estate - owner occupied679 56 304 679 304
Commercial real estate - non-owner occupied298 298 298
Commercial & Industrial101 55 77 101 77
Residential 1-4 Family2,360 2,369 2,005 2,360 2,005
Auto143 35 28 143 28
HELOC709 544 407 709 407
Consumer and all other188 185 98 188 98
Loans ≥ 90 days and still accruing$4,532 $3,625 $3,529 $4,532 $3,529
Total NPAs and loans ≥ 90 days$33,418 $37,681 $26,787 $33,418 $26,787
NPAs / total outstanding loans0.42% 0.50% 0.38% 0.42% 0.38%
NPAs / total assets0.32% 0.38% 0.28% 0.32% 0.28%
ALL / nonaccrual loans184.68% 155.51% 288.25% 184.68% 288.25%
ALL / nonperforming assets128.65% 112.21% 157.12% 128.65% 157.12%
Past Due Detail
Construction and land development$7,221 $602 $309 $7,221 $309
Commercial real estate - owner occupied1,707 3,148 1,411 1,707 1,411
Commercial real estate - non-owner occupied909 1,530 324 909 324
Multifamily real estate 500
Commercial & Industrial1,558 1,652 567 1,558 567
Residential 1-4 Family5,633 2,477 4,985 5,633 4,985
Auto2,415 1,562 1,846 2,415 1,846
HELOC1,400 1,405 2,600 1,400 2,600
Consumer and all other3,469 1,891 1,713 3,469 1,713
Loans 30-59 days past due$24,312 $14,767 $13,755 $24,312 $13,755


As of & For Three Months Ended As of & For Nine Months
Ended
9/30/17 6/30/17 9/30/16 9/30/17 9/30/16
Past Due Detail cont'd(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
Construction and land development$100 $26 $697 $100 $697
Commercial real estate - owner occupied689 194 365 689 365
Commercial real estate - non-owner occupied571 571 571
Commercial & Industrial255 113 51 255 51
Residential 1-4 Family1,439 5,663 6,345 1,439 6,345
Auto293 240 239 293 239
HELOC628 964 899 628 899
Consumer and all other1,445 1,242 1,037 1,445 1,037
Loans 60-89 days past due$5,420 $9,013 $9,633 $5,420 $9,633
Troubled Debt Restructurings
Performing$16,519 $14,947 $11,824 $16,519 $11,824
Nonperforming2,725 4,454 1,452 2,725 1,452
Total troubled debt restructurings$19,244 $19,401 $13,276 $19,244 $13,276
Alternative Performance Measures (non-GAAP)
Net interest income (FTE)
Net interest income (GAAP)$71,198 $68,999 $67,028 $206,765 $196,535
FTE adjustment2,648 2,648 2,427 7,836 7,367
Net interest income (FTE) (non-GAAP) (1)$73,846 $71,647 $69,455 $214,601 $203,902
Average earning assets8,167,919 7,934,405 7,354,684 7,922,944 7,159,813
Net interest margin3.46% 3.49% 3.63% 3.49% 3.67%
Net interest margin (FTE)3.59% 3.62% 3.76% 3.62% 3.80%
Tangible Assets
Ending assets (GAAP)$9,029,436 $8,915,187 $8,258,230 $9,029,436 $8,258,230
Less: Ending goodwill298,191 298,191 298,191 298,191 298,191
Less: Ending amortizable intangibles16,017 17,422 22,343 16,017 22,343
Ending tangible assets (non-GAAP)$8,715,228 $8,599,574 $7,937,696 $8,715,228 $7,937,696
Tangible Common Equity (2)
Ending equity (GAAP)$1,041,371 $1,030,869 $1,000,964 $1,041,371 $1,000,964
Less: Ending goodwill298,191 298,191 298,191 298,191 298,191
Less: Ending amortizable intangibles16,017 17,422 22,343 16,017 22,343
Ending tangible common equity (non-GAAP)$727,163 $715,256 $680,430 $727,163 $680,430
Average equity (GAAP)$1,037,792 $1,026,148 $996,668 $1,024,853 $991,097
Less: Average goodwill298,191 298,191 297,707 298,191 295,380
Less: Average amortizable intangibles16,681 18,164 22,653 18,184 22,249
Average tangible common equity (non-GAAP)$722,920 $709,793 $676,308 $708,478 $673,468
Operating Measures (3)
Net income (GAAP)$20,658 $17,956 $20,401 $57,737 $56,699
Plus: Merger-related costs, net of tax661 2,358 3,020
Net operating earnings (non-GAAP)$21,319 $20,314 $20,401 $60,757 $56,699
Noninterest expense (GAAP)$57,496 $59,930 $56,913 $174,821 $166,436
Less: Merger-related costs732 2,744 3,476
Operating noninterest expense (non-GAAP)$56,764 $57,186 $56,913 $171,345 $166,436
Net interest income (FTE) (non-GAAP) (1)$73,846 $71,647 $69,455 $214,601 $203,902
Noninterest income (GAAP)17,536 18,056 18,950 54,430 52,857
Efficiency ratio64.80% 68.84% 66.19% 66.93% 66.74%
Efficiency ratio (FTE) (1)62.92% 66.81% 64.38% 64.98% 64.82%
Operating efficiency ratio (FTE)62.12% 63.75% 64.38% 63.69% 64.82%


As of & For Three Months Ended As of & For Nine Months
Ended
9/30/17 6/30/17 9/30/16 9/30/17 9/30/16
Alternative Performance Measures (non-GAAP) cont'd(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
Operating Measures cont'd (3)
Community bank segment net income (GAAP)$20,311 $17,405 $19,616 $56,836 $55,321
Plus: Merger-related costs, net of tax661 2,358 3,020
Community bank segment net operating earnings (non-GAAP)$20,972 $19,763 $19,616 $59,856 $55,321
Community bank segment earnings per share, diluted (GAAP)$0.46 $0.40 $0.45 $1.30 $1.26
Community bank segment operating earnings per share, diluted (non-GAAP)0.48 0.45 0.45 1.37 1.26
Mortgage Origination Volume
Refinance Volume$35,678 $31,958 $52,883 $101,967 $137,221
Construction Volume19,966 19,909 20,760 62,545 57,405
Purchase Volume71,694 84,713 83,014 199,622 200,323
Total Mortgage loan originations$127,338 $136,580 $156,657 $364,134 $394,949
% of originations that are refinances28.0% 23.4% 33.8% 28.0% 34.7%
Other Data
End of period full-time employees1,427 1,432 1,391 1,427 1,391
Number of full-service branches111 112 115 111 115
Number of full automatic transaction machines (ATMs)173 174 193 173 193

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

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

(3) Operating measures exclude merger-related costs unrelated to the Company’s normal operations. Such costs were only incurred during the second and third quarters of 2017; thus each of these operating measures is equivalent to the corresponding GAAP financial measure for the three and nine months ended September 30, 2016. The Company believes these measures are useful to investors as they exclude certain costs resulting from acquisition activity and allow investors to more clearly see the combined economic results of the organization's operations.

(4) All ratios at September 30, 2017 are estimates and subject to change pending the Company’s filing of its FR Y9-C. All other periods are presented as filed.

UNION BANKSHARES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share data)
September 30, December 31, September 30,
2017 2016 2016
ASSETS(unaudited) (audited) (unaudited)
Cash and cash equivalents:
Cash and due from banks$115,776 $120,758 $103,979
Interest-bearing deposits in other banks60,294 58,030 51,303
Federal funds sold891 449 893
Total cash and cash equivalents176,961 179,237 156,175
Securities available for sale, at fair value968,361 946,764 954,984
Securities held to maturity, at carrying value204,801 201,526 200,839
Restricted stock, at cost68,441 60,782 63,204
Loans held for sale, at fair value30,896 36,487 46,814
Loans held for investment, net of deferred fees and costs6,898,729 6,307,060 6,148,918
Less allowance for loan losses37,162 37,192 36,542
Net loans held for investment6,861,567 6,269,868 6,112,376
Premises and equipment, net120,808 122,027 123,416
Other real estate owned, net of valuation allowance8,764 10,084 10,581
Goodwill298,191 298,191 298,191
Amortizable intangibles, net16,017 20,602 22,343
Bank owned life insurance181,451 179,318 177,847
Other assets93,178 101,907 91,460
Total assets$9,029,436 $8,426,793 $8,258,230
LIABILITIES
Noninterest-bearing demand deposits$1,535,149 $1,393,625 $1,442,268
Interest-bearing deposits5,346,677 4,985,864 4,816,238
Total deposits6,881,826 6,379,489 6,258,506
Securities sold under agreements to repurchase43,337 59,281 64,225
Other short-term borrowings574,000 517,500 601,500
Long-term borrowings434,750 413,308 259,902
Other liabilities54,152 56,183 73,133
Total liabilities7,988,065 7,425,761 7,257,266
Commitments and contingencies
STOCKHOLDERS' EQUITY
Common stock, $1.33 par value, shares authorized 100,000,000; issued and outstanding, 43,729,229 shares, 43,609,317 shares, and 43,556,486 shares, respectively.57,708 57,506 57,444
Additional paid-in capital608,884 605,397 603,785
Retained earnings373,468 341,938 329,876
Accumulated other comprehensive income1,311 (3,809) 9,859
Total stockholders' equity1,041,371 1,001,032 1,000,964
Total liabilities and stockholders' equity$9,029,436 $8,426,793 $8,258,230


UNION BANKSHARES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except share data)
Three Months Ended Nine Months Ended
September 30, June 30, September 30, September 30, September 30,
2017 2017 2016 2017 2016
Interest and dividend income:(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
Interest and fees on loans$75,948 $72,612 $66,190 $216,644 $193,884
Interest on deposits in other banks181 115 65 367 178
Interest and dividends on securities:
Taxable5,175 4,982 4,732 15,081 13,558
Nontaxable3,546 3,512 3,446 10,620 10,344
Total interest and dividend income84,850 81,221 74,433 242,712 217,964
Interest expense:
Interest on deposits7,234 6,100 4,552 18,410 12,945
Interest on short-term borrowings1,871 1,400 765 4,221 2,098
Interest on long-term borrowings4,547 4,722 2,088 13,316 6,386
Total interest expense13,652 12,222 7,405 35,947 21,429
Net interest income71,198 68,999 67,028 206,765 196,535
Provision for credit losses3,050 2,173 2,472 7,345 7,376
Net interest income after provision for credit losses68,148 66,826 64,556 199,420 189,159
Noninterest income:
Service charges on deposit accounts5,153 4,963 4,965 14,945 14,454
Other service charges and fees4,529 4,637 4,397 13,575 12,971
Fiduciary and asset management fees2,794 2,725 2,844 8,313 7,315
Mortgage banking income, net2,305 2,793 3,207 7,123 8,324
Gains on securities transactions, net184 117 782 145
Bank owned life insurance income1,377 1,335 1,389 4,837 4,122
Loan-related interest rate swap fees416 1,031 1,303 2,627 3,056
Other operating income778 455 845 2,228 2,470
Total noninterest income17,536 18,056 18,950 54,430 52,857
Noninterest expenses:
Salaries and benefits29,769 30,561 30,493 92,499 87,061
Occupancy expenses4,939 4,718 4,841 14,560 14,627
Furniture and equipment expenses2,559 2,720 2,635 7,882 7,867
Printing, postage, and supplies1,154 1,406 1,147 3,710 3,566
Communications expense798 872 948 2,580 2,964
Technology and data processing4,232 3,927 3,917 12,059 11,340
Professional services1,985 2,092 1,895 5,734 6,432
Marketing and advertising expense1,944 2,279 1,975 5,963 5,838
FDIC assessment premiums and other insurance1,141 947 1,262 2,793 4,003
Other taxes2,022 2,022 639 6,065 3,864
Loan-related expenses1,349 1,281 1,531 3,959 3,638
OREO and credit-related expenses1,139 342 503 2,023 1,965
Amortization of intangible assets1,480 1,544 1,843 4,661 5,468
Training and other personnel costs887 1,043 863 2,900 2,512
Merger-related costs732 2,744 3,476
Other expenses1,366 1,432 2,421 3,957 5,291
Total noninterest expenses57,496 59,930 56,913 174,821 166,436
Income before income taxes28,188 24,952 26,593 79,029 75,580
Income tax expense7,530 6,996 6,192 21,292 18,881
Net income$20,658 $17,956 $20,401 $57,737 $56,699
Basic earnings per common share$0.47 $0.41 $0.47 $1.32 $1.29
Diluted earnings per common share$0.47 $0.41 $0.47 $1.32 $1.29


UNION BANKSHARES CORPORATION AND SUBSIDIARIES
SEGMENT FINANCIAL INFORMATION
(Dollars in thousands)
Community Bank Mortgage Eliminations Consolidated
Three Months Ended September 30, 2017 (unaudited)
Net interest income$70,718 $480 $ $71,198
Provision for credit losses3,056 (6) 3,050
Net interest income after provision for credit losses67,662 486 68,148
Noninterest income15,121 2,527 (112) 17,536
Noninterest expenses55,133 2,475 (112) 57,496
Income before income taxes27,650 538 28,188
Income tax expense7,339 191 7,530
Net income20,311 347 20,658
Plus: Merger-related costs, net of tax661 661
Net operating earnings (non-GAAP)$20,972 $347 $ $21,319
Total assets$9,020,486 $97,154 $(88,204) $9,029,436
Three Months Ended June 30, 2017 (unaudited)
Net interest income$68,580 $419 $ $68,999
Provision for credit losses2,184 (11) 2,173
Net interest income after provision for credit losses66,396 430 66,826
Noninterest income15,203 2,993 (140) 18,056
Noninterest expenses57,496 2,574 (140) 59,930
Income before income taxes24,103 849 24,952
Income tax expense6,698 298 6,996
Net income17,405 551 17,956
Plus: Merger-related costs, net of tax2,358 2,358
Net operating earnings (non-GAAP)$19,763 $551 $ $20,314
Total assets$8,904,819 $105,429 $(95,061) $8,915,187
Three Months Ended September 30, 2016 (unaudited)
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
Nine Months Ended September 30, 2017 (unaudited)
Net interest income$205,534 $1,231 $ $206,765
Provision for credit losses7,344 1 7,345
Net interest income after provision for credit losses198,190 1,230 199,420
Noninterest income47,080 7,743 (393) 54,430
Noninterest expenses167,643 7,571 (393) 174,821
Income before income taxes77,627 1,402 79,029
Income tax expense20,791 501 21,292
Net income56,836 901 57,737
Plus: Merger-related costs, net of tax3,020 3,020
Net operating earnings (non-GAAP)$59,856 $901 $ $60,757
Total assets$9,020,486 $97,154 $(88,204) $9,029,436
Nine Months Ended September 30, 2016 (unaudited)
Net interest income$195,508 $1,027 $ $196,535
Provision for credit losses7,215 161 7,376
Net interest income after provision for credit losses188,293 866 189,159
Noninterest income44,137 9,185 (465) 52,857
Noninterest expenses158,964 7,937 (465) 166,436
Income before income taxes73,466 2,114 75,580
Income tax expense18,145 736 18,881
Net income$55,321 $1,378 $ $56,699
Total assets$8,251,351 $90,692 $(83,813) $8,258,230


AVERAGE BALANCES, INCOME AND EXPENSES, YIELDS AND RATES (TAXABLE EQUIVALENT BASIS)
For the Quarter Ended
September 30, 2017 June 30, 2017
Average
Balance
Interest
Income /
Expense (1)
Yield /
Rate (1)(2)
Average
Balance
Interest
Income /
Expense (1)
Yield /
Rate (1)(2)
Assets:(unaudited) (unaudited)
Securities:
Taxable$774,513 $5,175 2.65% $768,648 $4,982 2.60%
Tax-exempt469,391 5,455 4.61% 460,945 5,403 4.70%
Total securities1,243,904 10,630 3.39% 1,229,593 10,385 3.39%
Loans, net (3) (4)6,822,498 76,333 4.44% 6,628,011 73,073 4.42%
Other earning assets101,517 535 2.09% 76,801 411 2.15%
Total earning assets8,167,919 $87,498 4.25% 7,934,405 $83,869 4.24%
Allowance for loan losses(38,138) (38,577)
Total non-earning assets844,183 851,549
Total assets$8,973,964 $8,747,377
Liabilities and Stockholders' Equity:
Interest-bearing deposits:
Transaction and money market accounts$3,457,279 $3,491 0.40% $3,367,008 $2,729 0.33%
Regular savings555,153 151 0.11% 563,948 152 0.11%
Time deposits1,289,794 3,592 1.10% 1,248,818 3,219 1.03%
Total interest-bearing deposits5,302,226 7,234 0.54% 5,179,774 6,100 0.47%
Other borrowings (5)1,080,226 6,418 2.36% 1,023,599 6,122 2.40%
Total interest-bearing liabilities6,382,452 13,652 0.85% 6,203,373 12,222 0.79%
Noninterest-bearing liabilities:
Demand deposits1,495,614 1,457,968
Other liabilities58,106 59,888
Total liabilities7,936,172 7,721,229
Stockholders' equity1,037,792 1,026,148
Total liabilities and stockholders' equity$8,973,964 $8,747,377
Net interest income $73,846 $71,647
Interest rate spread 3.40% 3.45%
Cost of funds 0.66% 0.62%
Net interest margin 3.59% 3.62%
(1) Income and yields are reported on a taxable equivalent basis using the statutory federal corporate tax rate of 35%.
(2) Rates and yields are annualized and calculated from actual, not rounded, amounts in thousands, which appear above.
(3) Nonaccrual loans are included in average loans outstanding.
(4) Interest income on loans includes $1.7 million and $1.6 million for the three months ended September 30, 2017 and June 30, 2017, respectively, in accretion of the fair market value adjustments related to acquisitions.
(5) Interest expense on borrowings includes $47,000 for the both three months ended September 30, 2017 and June 30, 2017, respectively, in accretion of the fair market value adjustments related to acquisitions.


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

Source:Union Bankshares Corporation