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CST: 18/10/2019 04:31:16   

Union Bankshares Reports First Quarter Results

176 Days ago

RICHMOND, Va., April 24, 2019 (GLOBE NEWSWIRE) -- Union Bankshares Corporation (the “Company” or “Union”) (Nasdaq: UBSH) today reported net income of $35.6 million and earnings per share of $0.47 for its first quarter ended March 31, 2019.  Net operating earnings(1) were $50.2 million and operating earnings per share(1) were $0.66 for its first quarter ended March 31, 2019; these operating results exclude $14.6 million in after-tax merger-related costs but include after tax losses from discontinued operations of $85,000 and approximately $322,000 in after-tax expenses related to the Company's previously announced re-branding to be effective in May 2019.

The Company's results for the first quarter of 2019 include two months of financial results of Access National Corporation ("Access"), which the Company acquired on February 1, 2019.

“Union delivered solid financial results in the first quarter of 2019, while continuing our transformation to become the preeminent mid-Atlantic regional bank,” said John C. Asbury, President and CEO of Union Bankshares Corporation. “During the quarter, we achieved year over year improvements in our operating profitability metrics and delivered strong deposit growth while loan growth was muted by seasonality and elevated commercial real estate pay downs.  It was an eventful quarter as we closed the acquisition of Access National Corporation, substantially completing the Virginia jigsaw puzzle by adding a strong franchise in Northern Virginia, and announced that we will rebrand to Atlantic Union Bank, concurrent with the Access systems conversion in mid-May. We are pleased with the first quarter’s financial results and are off to a good start in 2019.”

Select highlights for the first quarter of 2019

  • Performance metrics
    • Return on Average Assets (“ROA”) was 0.92% compared to 1.29% in the fourth quarter of 2018 and 0.52% in the first quarter of 2018. Operating ROA(1) was 1.30% compared to 1.36% in the fourth quarter of 2018 and 1.21% in the first quarter of 2018.
    • Return on Average Equity (“ROE”) was 6.37% compared to 9.21% in the fourth quarter of 2018 and 3.70% in the first quarter of 2018. Operating ROE(1) was 8.97% compared to 9.66% in the fourth quarter of 2018 and 8.64% in the first quarter of 2018.
    • Return on Average Tangible Common Equity (“ROTCE”)(1) was 11.84% compared to 16.42% in the fourth quarter of 2018 and 7.41% in the first quarter of 2018. Operating ROTCE(1) was 16.27% compared to 17.18% in the fourth quarter of 2018 and 16.00% in the first quarter of 2018.
    • Efficiency ratio increased to 69.99% compared to 56.22% in the fourth quarter of 2018 and decreased from 82.22% in the first quarter of 2018. Operating efficiency ratio (FTE)(1) increased to 54.36% compared to 51.34% in the fourth quarter of 2018 and decreased from 56.42% in the first quarter of 2018.
  • On February 1, 2019, the Company announced that it will re-brand to Atlantic Union Bankshares Corporation (subject to shareholder approval) in May 2019. During the current quarter, in preparation for the re-branding, the Company incurred $407,000 in re-branding costs.

(1) These are financial measures not calculated in accordance with generally accepted accounting principles (“GAAP”). For a reconciliation of these non-GAAP financial measures, see Alternative Performance Measures (non-GAAP) section of the Key Financial Results.


NET INTEREST INCOME

For the first quarter of 2019, net interest income was $127.5 million, an increase of $18.5 million from the fourth quarter of 2018.  Net interest income (FTE)(1) was $130.3 million in the first quarter of 2019, an increase of $18.9 million from the fourth quarter of 2018. The increases in both net interest income and net interest income (FTE) were primarily the result of a $1.9 billion increase in average interest earning assets and a $1.4 billion increase in average interest bearing liabilities from the acquisition of Access.  The first quarter net interest margin increased 10 basis points to 3.72% from 3.62% in the previous quarter, while the net interest margin (FTE)(1) increased 10 basis points to 3.80% from 3.70% during the same periods. The increase in the net interest margin and net interest margin (FTE) were principally due to an approximately 18 basis point increase in the yield on earnings assets, partially offset by an approximately 8 basis point increase in the cost of funds.

The Company’s net interest margin (FTE) includes the impact of acquisition accounting fair value adjustments.  During the first quarter of 2019, net accretion related to acquisition accounting increased $2.0 million from the prior quarter to $5.8 million for the quarter ended March 31, 2019.  The fourth quarter of 2018, first quarter of 2019, and the remaining estimated net accretion impact are reflected in the following table (dollars in thousands):

  Loan
Accretion
  Deposit
Accretion
(Amortization)
  Borrowings
Amortization
  Total
For the quarter ended December 31, 2018 $ 3,479   $ 445     $ (161 )   $ 3,763
For the quarter ended March 31, 2019 5,557   292     (70 )   5,779
For the remaining nine months of 2019 (estimated) 13,129   541     (289 )   13,381
For the years ending (estimated):              
2020 14,314   132     (633 )   13,813
2021 11,477   14     (807 )   10,684
2022 9,092   (43 )   (829 )   8,220
2023 6,491   (32 )   (852 )   5,607
2024 4,977   (4 )   (877 )   4,096
Thereafter 18,540   (1 )   (10,773 )   7,766

(1) For the reconciliation of these non-GAAP financial measures, see Alternative Performance Measures (non-GAAP) section of Key Financial Results.


ASSET QUALITY/LOAN LOSS PROVISION

Overview
During the first quarter of 2019, the Company experienced decreases in nonperforming asset (“NPA”) balances from the prior quarter, primarily due to nonaccrual customer payments and charge-offs. The nonaccrual charge-offs related to two credit relationships composed of commercial & industrial as well as construction and land development loans. Past due loan levels as a percentage of total loans held for investment at March 31, 2019 were lower than past due loan levels at December 31, 2018 and higher than past due levels at March 31, 2018. Charge-off levels and the provision for loan losses decreased from the fourth quarter of 2018.

All nonaccrual and past due loan metrics discussed below exclude purchased credit impaired (“PCI”) loans totaling $99.9 million (net of fair value mark of $23.1 million) at March 31, 2019.

Nonperforming Assets
At March 31, 2019, NPAs totaled $32.2 million, a decline of $1.5 million, or 4.4%, from December 31, 2018 and a decrease of $1.0 million, or 3.1%, from March 31, 2018.  NPAs as a percentage of total outstanding loans at March 31, 2019 were 0.27%, a decrease of 8 basis points from 0.35% at December 31, 2018 and a decline of 7 basis points from 0.34% at March 31, 2018.  As the Company's NPAs have been at or near historic lows over the last several quarters, certain changes from quarter to quarter might stand out in comparison to one another but do not have a significant impact on the Company's overall asset quality position.

The following table shows a summary of nonperforming asset balances at the quarter ended (dollars in thousands):

  March 31,   December 31,   September 30,   June 30,   March 31,
  2019   2018   2018   2018   2018
Nonaccrual loans $ 24,841     $ 26,953     $ 28,110     $ 25,662     $ 25,138  
Foreclosed properties 7,353     6,722     6,800     7,241     8,079  
Total nonperforming assets $ 32,194     $ 33,675     $ 34,910     $ 32,903     $ 33,217  

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,
  2019   2018   2018   2018   2018
Beginning Balance $ 26,953     $ 28,110     $ 25,662     $ 25,138     $ 21,743  
Net customer payments (2,314 )   (3,077 )   (2,459 )   (2,651 )   (1,455 )
Additions 3,297     4,659     6,268     5,063     5,451  
Charge-offs (1,626 )   (2,069 )   (1,137 )   (539 )   (403 )
Loans returning to accruing status (952 )   (420 )   (70 )   (1,349 )   (182 )
Transfers to foreclosed property (517 )   (250 )   (154 )       (16 )
Ending Balance $ 24,841     $ 26,953     $ 28,110     $ 25,662     $ 25,138  

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

  March 31,   December 31,   September 30,   June 30,   March 31,
  2019   2018   2018   2018   2018
Beginning Balance $ 6,722     $ 6,800     $ 7,241     $ 8,079     $ 5,253  
Additions of foreclosed property 900     432     165     283     44  
Acquisitions of foreclosed property (1)             (162 )   4,204  
Valuation adjustments (51 )   (140 )   (42 )   (383 )   (759 )
Proceeds from sales (171 )   (286 )   (889 )   (580 )   (684 )
Gains (losses) from sales (47 )   (84 )   325     4     21  
Ending Balance $ 7,353     $ 6,722     $ 6,800     $ 7,241     $ 8,079  

(1) Includes subsequent measurement period adjustments.

Past Due Loans
Past due loans still accruing interest totaled $51.4 million, or 0.43% of total loans, at March 31, 2019 compared to $61.9 million, or 0.64% of total loans, at December 31, 2018 and $41.6 million, or 0.42% of total loans, at March 31, 2018. Of the total past due loans still accruing interest, $11.0 million, or 0.09% of total loans, were loans past due 90 days or more at March 31, 2019, compared to $8.9 million, or 0.09% of total loans, at December 31, 2018 and $2.6 million, or 0.03% of total loans, at March 31, 2018.

Net Charge-offs
For the first quarter of 2019, net charge-offs were $4.2 million, or 0.15% of total average loans on an annualized basis, compared to $5.0 million, or 0.21%, for the prior quarter and $1.1 million, or 0.05%, for the first quarter of 2018. The majority of net charge-offs in the first quarter of 2019 were related to consumer loans.

Provision for Loan Losses
The provision for loan losses for the first quarter of 2019 was $4.0 million, a decrease of $775,000 compared to the previous quarter and an increase of $501,000 compared to first quarter of 2018. The decrease in the provision for loan losses from the previous quarter was primarily due to lower net charge offs and lower loan growth.

Allowance for Loan Losses (“ALL”)
The ALL decreased $218,000 from December 31, 2018 to $40.8 million at March 31, 2019 primarily due to a decrease in historical loss rates. The ALL as a percentage of the total loan portfolio was 0.34% at March 31, 2019, 0.42% at December 31, 2018, and 0.41% at March 31, 2018. The decline in the allowance ratio was primarily attributable to the acquisition of Access. In acquisition accounting, there is no carryover of previously established allowance for loan losses.

The ratio of the ALL to nonaccrual loans was 164.4% at March 31, 2019, compared to 152.3% at December 31, 2018 and 161.6% at March 31, 2018.  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 $1.4 million to $24.9 million for the quarter ended March 31, 2019 from $23.5 million in the prior quarter. The increase in noninterest income was primarily driven by the acquisition of Access on February 1, 2019, partially offset by a decline in other operating income of $1.4 million primarily due to life insurance proceeds of approximately $976,000 recognized in the fourth quarter of 2018.

NONINTEREST EXPENSE

Noninterest expense increased $32.2 million to $106.7 million for the quarter ended March 31, 2019 from $74.5 million in the prior quarter. Excluding merger-related costs and amortization of intangible assets, operating noninterest expense(1) increased $15.1 million, or 21.8%, in the first quarter of 2019, to $84.4 million when compared to the fourth quarter of 2018. The increase in operating noninterest expense was primarily due to the acquisition of Access on February 1, 2019. The Company also incurred $407,000 of re-branding costs in the first quarter of 2019.

(1) For a reconciliation of this non-GAAP financial measure, see Alternative Performance Measures (non-GAAP) section of the Key Financial Results.

INCOME TAXES

The effective tax rate for the quarter ended March 31, 2019 was 14.9% compared to 16.5% for the quarter ended December 31, 2018 and 10.3% for the quarter ended March 31, 2018. The decrease in the effective tax rate as compared to the previous quarter was primarily due to an increase in merger-related expenses related to the acquisition of Access. The increase from the prior year was primarily due to lower tax benefits related to stock based compensation.

BALANCE SHEET

At March 31, 2019, total assets were $16.9 billion, an increase of $3.1 billion from December 31, 2018, and an increase of $3.7 billion from March 31, 2018, reflecting the impact of the Access acquisition.

On February 1, 2019 the Company completed its acquisition of Access. Below is a summary of the transaction and related impact on the Company's balance sheet.

  • The fair value of assets acquired equaled to $2.858 billion, and the fair value of the liabilities assumed equaled $2.559 billion
  • Total loans acquired totaled $2.217 billion with a fair value of $2.176 billion
  • Total deposits assumed totaled $2.228 billion with a fair value of $2.227 billion
  • Total goodwill arising from the transaction equaled $200.6 million
  • Core deposit intangibles acquired totaled $40.9 million

Fair values are preliminary and subject to refinement for up to one year after the closing date of the acquisition, in accordance with ASC 805, Business Combinations.

At March 31, 2019, loans held for investment (net of deferred fees and costs) were $12.0 billion, an increase of $2.2 billion from December 31, 2018, while average loans increased $1.6 billion, or 65.7% (annualized), from the prior quarter. The increase in loans held for investment was primarily a result of the Access acquisition.

At March 31, 2019, total deposits were $12.5 billion, an increase of $2.5 billion from December 31, 2018, while average deposits increased $1.5 billion, or 61.0% (annualized), from the prior quarter. The increase in deposits from the prior quarter was primarily a result of the Access acquisition.

The following table shows the Company's capital ratios at the quarters ended:

  March 31,   December 31,   March 31,
  2019   2018   2018
Common equity Tier 1 capital ratio (1) 10.26 %   9.93 %   9.03 %
Tier 1 capital ratio (1) 10.26 %   11.09 %   10.19 %
Total capital ratio (1) 12.73 %   12.88 %   11.97 %
Leverage ratio (Tier 1 capital to average assets) (1) 9.51 %   9.71 %   9.32 %
Common equity to total assets 14.56 %   13.98 %   13.93 %
Tangible common equity to tangible assets (2) 9.09 %   8.84 %   8.54 %
           
(1) All ratios at March 31, 2019 are estimates and subject to change pending the Company’s filing of its FR Y9-C. All other periods are presented as filed.
(2) For a reconciliation of this non-GAAP financial measure, see Alternative Performance Measures (non-GAAP) section of the Key Financial Results.

During the first quarter of 2019, the Company declared and paid cash dividends of $0.23 per common share consistent with the fourth quarter of 2018 and an increase of $0.02, or 9.5%, compared to the first quarter of 2018.

ABOUT UNION BANKSHARES CORPORATION

Headquartered in Richmond, Virginia, Union Bankshares Corporation (Nasdaq: UBSH) is the holding company for Union Bank & Trust. Union Bank & Trust has 155 branches, 15 of which are operated as Access National Bank, a division of Union Bank & Trust of Richmond, Virginia, or Middleburg Bank, a division of Union Bank & Trust of Richmond, Virginia, and seven of which are operated as Xenith Bank, a division of Union Bank & Trust of Richmond, Virginia, and approximately 200 ATMs located throughout Virginia, and in portions of Maryland and North Carolina. Certain non-bank affiliates of the Company include: Old Dominion Capital Management, Inc., and its subsidiary Outfitter Advisors, Ltd., Dixon, Hubard, Feinour, & Brown, Inc., Capital Fiduciary Advisors, LLC, and Middleburg Investment Services, LLC, all of which provide investment advisory and/or brokerage services; Union Insurance Group, LLC, which offers various lines of insurance products; and Middleburg Trust Company, which provides trust services.

FIRST QUARTER 2019 EARNINGS RELEASE CONFERENCE CALL

Union will hold a conference call on Wednesday, April 24th, 2019 at 9:00 a.m. Eastern Time during which management will review the first quarter 2019 financial results and provide an update on recent activities.  Interested parties may participate in the 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 1658799.

NON-GAAP FINANCIAL MEASURES

In reporting the results of the quarter ended March 31, 2019, the Company has provided supplemental performance measures on a tax-equivalent, tangible, or operating basis.  These non-GAAP financial measures are a supplement to GAAP, which is 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 financial measures may not be comparable to non-GAAP financial measures of other companies.  The Company uses the non-GAAP financial measures discussed herein in its analysis of the Company’s performance. The Company’s management believes that these non-GAAP financial measures provide additional understanding of ongoing operations, enhance comparability of results of operations with prior periods and show the effects of significant gains and charges in the periods presented without the impact of items or events that may obscure trends in the Company’s underlying performance.  For a reconciliation of these measures to their most directly comparable GAAP measures and additional information about these non-GAAP financial measures, see Alternative Performance Measures (non-GAAP) section of the Key Financial Results.

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 include, without limitation, projections, predictions, expectations, or beliefs about future events or results that are not statements of historical fact. Such forward-looking statements are based on various assumptions as of the time they are made, and are inherently subject to known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from those expressed or implied by such forward-looking statements.  Forward-looking statements are often accompanied by words that convey projected future events or outcomes 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, or trends affecting, 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, performance, achievements or trends may differ materially from historical results or those anticipated depending on a variety of factors, including, but not limited to:

  • changes in interest rates;
  • general economic and financial market conditions in the United States generally and particularly in the markets in which the Company operates and which its loans are concentrated, including the effects of declines in real estate values, an increase in unemployment levels, and slowdowns in economic growth,
  • the Company's ability to manage its growth or implement its growth strategy;
  • the possibility that any of the anticipated benefits of the acquisition of Access will not be realized or will not be realized within the expected time period, the expected revenue synergies and cost savings from the acquisition may not be fully realized or realized within the expected time frame, revenues following the acquisition may be lower than expected, or customer and employee relationships and business operations may be disrupted by the acquisition;
  • the Company's ability to recruit and retain key employees;
  • the incremental cost and/or decreased revenues associated with exceeding $10 billion in assets
  • 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 threats, attacks, or events;
  • performance by the Company’s counterparties or vendors;
  • deposit flows;
  • the availability of financing and the terms thereof;
  • the level of prepayments on loans and mortgage-backed securities;
  • legislative or regulatory changes and requirements;
  • the impact of the Tax Cuts and Jobs Act of 2017 (the "Tax Act"), including, but not limited to, the effect of the lower corporate tax rate, including on the valuation of the Company's tax assets and liabilities;
  • changes in the effect of the Tax Act due to issuance of interpretive regulatory guidance or enactment of corrective or supplement legislation;
  • monetary and fiscal policies of the U.S. government including policies of the U.S. Department of the Treasury and the Board of Governors of the Federal Reserve System;
  • changes to applicable accounting principles and guidelines; and
  • other factors, many of which are beyond the control of the Company.

Please refer to the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of the Company's Annual Report on Form 10-K for the year ended December 31, 2018 and comparable “Risk Factors” sections of the Company’s Quarterly Reports on Form 10-Q and related disclosures in other filings, which have been filed with the SEC and are available on the SEC’s website at www.sec.gov. All of the forward-looking statements made in this press release are expressly qualified by the cautionary statements contained or referred to herein. The actual results or developments anticipated may not be realized or, even if substantially realized, they may not have the expected consequences to or effects on the Company or its businesses or operations. Readers are cautioned not to rely too heavily on the forward-looking statements contained in this press release. Forward-looking statements speak only as of the date they are made and the Company does not undertake any obligation to update, revise or clarify these forward-looking statements, whether as a result of new information, future events or otherwise.

 
UNION BANKSHARES CORPORATION AND SUBSIDIARIES
KEY FINANCIAL RESULTS
(Dollars in thousands, except share data)
  As of & For Three Months Ended
  3/31/19   12/31/18   3/31/18
Results of Operations (unaudited)   (unaudited)   (unaudited)
Interest and dividend income $ 165,652     $ 140,636     $ 124,379  
Interest expense 38,105     31,547     20,907  
Net interest income 127,547     109,089     103,472  
Provision for credit losses 3,792     4,725     3,524  
Net interest income after provision for credit losses 123,755     104,364     99,948  
Noninterest income 24,938     23,487     20,267  
Noninterest expenses 106,728     74,533     101,743  
Income before income taxes 41,965     53,318     18,472  
Income tax expense 6,249     9,041     1,897  
Income from continuing operations 35,716     44,277     16,575  
Discontinued operations, net of tax (85 )   (192 )   64  
Net income $ 35,631     $ 44,085     $ 16,639  
           
Interest earned on earning assets (FTE) (1) $ 168,400     $ 142,970     $ 126,217  
Net interest income (FTE) (1) 130,295     111,424     105,310  
           
Key Ratios          
Earnings per common share, diluted $ 0.47     $ 0.67     $ 0.25  
Return on average assets (ROA) 0.92 %   1.29 %   0.52 %
Return on average equity (ROE) 6.37 %   9.21 %   3.70 %
Return on average tangible common equity (ROTCE) (2) (3) 11.84 %   16.42 %   7.41 %
Efficiency ratio 69.99 %   56.22 %   82.22 %
Net interest margin 3.72 %   3.62 %   3.66 %
Net interest margin (FTE) (1) 3.80 %   3.70 %   3.72 %
Yields on earning assets (FTE) (1) 4.92 %   4.74 %   4.46 %
Cost of interest-bearing liabilities 1.44 %   1.34 %   0.93 %
Cost of deposits 0.86 %   0.76 %   0.48 %
Cost of funds 1.12 %   1.04 %   0.74 %
           
Operating Measures (4)          
Net operating earnings $ 50,197     $ 46,248     $ 38,875  
Operating earnings per share, diluted $ 0.66     $ 0.70     $ 0.59  
Operating ROA 1.30 %   1.36 %   1.21 %
Operating ROE 8.97 %   9.66 %   8.64 %
Operating ROTCE (2) (3) 16.27 %   17.18 %   16.00 %
Operating efficiency ratio (FTE) (1)(6) 54.36 %   51.34 %   56.42 %
           
Per Share Data          
Earnings per common share, basic $ 0.47     $ 0.67     $ 0.25  
Earnings per common share, diluted 0.47     0.67     0.25  
Cash dividends paid per common share 0.23     0.23     0.21  
Market value per share 32.33     28.23     36.71  
Book value per common share 30.16     29.34     27.87  
Tangible book value per common share (2) 17.69     17.51     16.14  
Price to earnings ratio, diluted 16.96     12.72     36.21  
Price to book value per common share ratio 1.07     0.96     1.32  
Price to tangible book value per common share ratio (2) 1.83     1.61     2.27  
Weighted average common shares outstanding, basic 76,472,189     65,982,304     65,554,630  
Weighted average common shares outstanding, diluted 76,553,066     66,013,326     65,636,262  
Common shares outstanding at end of period 82,037,354     65,977,149     65,895,421  


  As of & For Three Months Ended
  3/31/19   12/31/18   3/31/18
Capital Ratios (unaudited)   (unaudited)   (unaudited)
Common equity Tier 1 capital ratio (5) 10.26 %   9.93 %   9.03 %
Tier 1 capital ratio (5) 10.26 %   11.09 %   10.19 %
Total capital ratio (5) 12.73 %   12.88 %   11.97 %
Leverage ratio (Tier 1 capital to average assets) (5) 9.51 %   9.71 %   9.32 %
Common equity to total assets 14.56 %   13.98 %   13.93 %
Tangible common equity to tangible assets (2) 9.09 %   8.84 %   8.54 %
           
Financial Condition          
Assets $ 16,897,655     $ 13,765,599     $ 13,149,292  
Loans held for investment 11,952,310     9,716,207     9,805,723  
Securities 2,804,353     2,391,695     1,557,173  
Earning Assets 14,909,318     12,202,023     11,595,325  
Goodwill 927,760     727,168     724,106  
Amortizable intangibles, net 88,553     48,685     50,092  
Deposits 12,489,330     9,970,960     9,677,955  
Borrowings 1,753,103     1,756,278     1,535,026  
Stockholders' equity 2,459,465     1,924,581     1,831,077  
Tangible common equity (2) 1,443,152     1,148,728     1,056,879  
           
Loans held for investment, net of deferred fees and costs          
Construction and land development $ 1,326,679     $ 1,194,821     $ 1,249,196  
Commercial real estate - owner occupied 1,921,464     1,337,345     1,279,155  
Commercial real estate - non-owner occupied 2,970,453     2,467,410     2,230,463  
Multifamily real estate 591,431     548,231     547,520  
Commercial & Industrial 1,866,625     1,317,135     1,125,733  
Residential 1-4 Family - commercial 815,309     713,750     714,660  
Residential 1-4 Family - mortgage  865,502     600,578     604,354  
Auto 300,631     301,943     288,089  
HELOC 672,087     613,383     642,084  
Consumer 397,491     379,694     839,699  
Other Commercial 224,638     241,917     284,770  
Total loans held for investment $ 11,952,310     $ 9,716,207     $ 9,805,723  
           
Deposits          
NOW accounts $ 2,643,228     $ 2,288,523     $ 2,185,562  
Money market accounts 3,579,249     2,875,301     2,692,662  
Savings accounts 798,670     622,823     654,931  
Time deposits of $100,000 and over 1,264,525     1,067,181     819,056  
Other time deposits 1,239,545     1,022,525     1,268,319  
Total interest-bearing deposits $ 9,525,217     $ 7,876,353     $ 7,620,530  
Demand deposits 2,964,113     2,094,607     2,057,425  
Total deposits $ 12,489,330     $ 9,970,960     $ 9,677,955  
           
Averages          
Assets $ 15,699,743     $ 13,538,160     $ 13,019,572  
Loans held for investment 11,127,390     9,557,160     9,680,195  
Loans held for sale 14,999     118     28,709  
Securities 2,645,429     2,340,051     1,567,269  
Earning assets 13,891,248     11,961,234     11,475,099  
Deposits 11,469,935     9,951,983     9,463,697  
Time deposits 2,325,218     2,083,270     2,085,930  
Interest-bearing deposits 8,934,995     7,789,642     7,489,893  
Borrowings 1,790,656     1,575,173     1,614,691  
Interest-bearing liabilities 10,725,651     9,364,815     9,104,584  
Stockholders' equity 2,268,395     1,899,249     1,824,588  
Tangible common equity (2) 1,334,051     1,121,788     1,048,824  


  As of & For Three Months Ended
  3/31/19   12/31/18   3/31/18
Asset Quality (unaudited)   (unaudited)   (unaudited)
Allowance for Loan Losses (ALL)          
Beginning balance $ 41,045     $ 41,294     $ 38,208  
Add: Recoveries 1,696     830     1,480  
Less: Charge-offs 5,939     5,875     2,559  
Add: Provision for loan losses 4,025     4,800     3,524  
Add: Provision for loan losses included in discontinued operations     (4 )   (24 )
Ending balance $ 40,827     $ 41,045     $ 40,629  
           
ALL / total outstanding loans 0.34 %   0.42 %   0.41 %
Net charge-offs / total average loans 0.15 %   0.21 %   0.05 %
Provision / total average loans 0.15 %   0.20 %   0.15 %
           
Total PCI loans, net of fair value mark $ 99,932     $ 90,221     $ 102,861  
Remaining fair value mark on purchased performing loans 63,506     30,281     44,766  
           
Nonperforming Assets          
Construction and land development $ 5,513     $ 8,018     $ 6,391  
Commercial real estate - owner occupied 3,307     3,636     2,539  
Commercial real estate - non-owner occupied 1,787     1,789     2,089  
Commercial & Industrial 721     1,524     1,969  
Residential 1-4 Family - commercial 4,244     2,481     1,512  
Residential 1-4 Family - mortgage 7,119     7,276     7,929  
Auto 523     576     394  
HELOC 1,395     1,518     2,072  
Consumer and all other 232     135     243  
Nonaccrual loans $ 24,841     $ 26,953     $ 25,138  
Foreclosed property 7,353     6,722     8,079  
Total nonperforming assets (NPAs) $ 32,194     $ 33,675     $ 33,217  
Construction and land development $ 1,997     $ 180     $ 322  
Commercial real estate - owner occupied 2,908     3,193      
Commercial & Industrial 313     132     200  
Residential 1-4 Family - commercial 1,490     1,409     113  
Residential 1-4 Family - mortgage  2,476     2,437     1,148  
Auto 153     195     170  
HELOC 518     440     306  
Consumer and all other 1,098     870     371  
Loans ≥ 90 days and still accruing $ 10,953     $ 8,856     $ 2,630  
Total NPAs and loans ≥ 90 days $ 43,147     $ 42,531     $ 35,847  
NPAs / total outstanding loans 0.27 %   0.35 %   0.34 %
NPAs / total assets 0.19 %   0.24 %   0.25 %
ALL / nonaccrual loans 164.35 %   152.28 %   161.62 %
ALL / nonperforming assets 126.82 %   121.89 %   122.31 %
Past Due Detail          
Construction and land development $ 1,019     $ 759     $ 403  
Commercial real estate - owner occupied 4,052     8,755     4,985  
Commercial real estate - non-owner occupied 760     338     1,867  
Multifamily real estate 596          
Commercial & Industrial 2,565     3,353     2,608  
Residential 1-4 Family - commercial 4,059     6,619     3,707  
Residential 1-4 Family - mortgage  5,889     12,049     6,210  
Auto 2,152     3,320     2,167  
HELOC 5,020     4,611     3,564  
Consumer and all other 1,963     1,630     4,179  
Loans 30-59 days past due $ 28,075     $ 41,434     $ 29,690  


  As of & For Three Months Ended
  3/31/19   12/31/18   3/31/18
Past Due Detail cont'd (unaudited)   (unaudited)   (unaudited)
Construction and land development $ 526     $ 6     $ 1,291  
Commercial real estate - owner occupied 480     1,142     777  
Commercial real estate - non-owner occupied 4,129     41      
Multifamily Real Estate     146      
Commercial & Industrial 438     389     1,254  
Residential 1-4 Family - commercial 1,365     1,577     960  
Residential 1-4 Family - mortgage 2,196     5,143     1,397  
Auto 297     403     193  
HELOC 1,753     1,644     1,346  
Consumer and all other 1,197     1,096     2,074  
Loans 60-89 days past due $ 12,381     $ 11,587     $ 9,292  
           
Troubled Debt Restructurings          
Performing $ 20,808     $ 19,201     $ 13,292  
Nonperforming 4,682     7,397     4,284  
Total troubled debt restructurings $ 25,490     $ 26,598     $ 17,576  
           
Alternative Performance Measures (non-GAAP)          
Net interest income (FTE)          
Net interest income (GAAP) $ 127,547     $ 109,089     $ 103,472  
FTE adjustment 2,748     2,335     1,838  
Net interest income (FTE) (non-GAAP) (1) $ 130,295     $ 111,424     $ 105,310  
Average earning assets 13,891,248     11,961,234     11,475,099  
Net interest margin 3.72 %   3.62 %   3.66 %
Net interest margin (FTE) (1) 3.80 %   3.70 %   3.72 %
           
Tangible Assets          
Ending assets (GAAP) $ 16,897,655     $ 13,765,599     $ 13,149,292  
Less: Ending goodwill 927,760     727,168     724,106  
Less: Ending amortizable intangibles 88,553     48,685     50,092  
Ending tangible assets (non-GAAP) $ 15,881,342     $ 12,989,746     $ 12,375,094  
           
Tangible Common Equity (2)          
Ending equity (GAAP) $ 2,459,465     $ 1,924,581     $ 1,831,077  
Less: Ending goodwill 927,760     727,168     724,106  
Less: Ending amortizable intangibles 88,553     48,685     50,092  
Ending tangible common equity (non-GAAP) $ 1,443,152     $ 1,148,728     $ 1,056,879  
           
Average equity (GAAP) $ 2,268,395     $ 1,899,249     $ 1,824,588  
Less: Average goodwill 858,658     727,544     724,106  
Less: Average amortizable intangibles 75,686     49,917     51,658  
Average tangible common equity (non-GAAP) $ 1,334,051     $ 1,121,788     $ 1,048,824  
           
Operating Measures (4)          
Net income (GAAP) $ 35,631     $ 44,085     $ 16,639  
Plus: Merger-related costs, net of tax 14,566     2,163     22,236  
Net operating earnings (non-GAAP) $ 50,197     $ 46,248     $ 38,875  
           
Noninterest expense (GAAP) $ 106,728     $ 74,533     $ 101,743  
Less: Merger-related costs 18,122     2,314     27,712  
Less: Amortization of intangible assets 4,218     2,954     3,181  
Operating noninterest expense (non-GAAP) $ 84,388     $ 69,265     $ 70,850  
           
Net interest income (FTE) (non-GAAP) (1) $ 130,295     $ 111,424     $ 105,310  
           
Noninterest income (GAAP) 24,938     23,487     20,267  
           
Efficiency ratio 69.99 %   56.22 %   82.22 %
Operating efficiency ratio (FTE)(6) 54.36 %   51.34 %   56.42 %
   
  As of & For Three Months Ended
  3/31/19   12/31/18   3/31/18
  (unaudited)   (unaudited)   (unaudited)
ROTCE (2)(3)          
Net Income (GAAP) $ 35,631     $ 44,085     $ 16,639  
Plus: Amortization of intangibles, tax effected 3,332     2,334     2,513  
Net Income before amortization of intangibles (non-GAAP) $ 38,963     $ 46,419     $ 19,152  
           
Average tangible common equity (non-GAAP) $ 1,334,051     $ 1,121,788     $ 1,048,824  
Return on average tangible common equity (non-GAAP) 11.84 %   16.42 %   7.41 %
           
Operating ROTCE (2)(3)          
Operating Net Income (non-GAAP) $ 50,197     $ 46,248     $ 38,875  
Plus: Amortization of intangibles, tax effected 3,332     2,334     2,513  
Net Income before amortization of intangibles (non-GAAP) $ 53,529     $ 48,582     $ 41,388  
           
Average tangible common equity (non-GAAP) $ 1,334,051     $ 1,121,788     $ 1,048,824  
Operating return on average tangible common equity (non-GAAP) 16.27 %   17.18 %   16.00 %
           
Mortgage Origination Volume          
Refinance Volume $ 11,969     $     $ 35,599  
Construction Volume         13,867  
Purchase Volume 32,107         43,082  
Total Mortgage loan originations $ 44,076     $     $ 92,548  
% of originations that are refinances 27.2 %   %   38.5 %
           
Wealth          
 Assets under management ("AUM")  $ 5,425,804     $ 3,379,340     $ 2,603,740  
           
Other Data          
End of period full-time employees 1,947     1,609     1,824  
Number of full-service branches 155     140     150  
Number of full automatic transaction machines ("ATMs") 197     188     216  

(1) These are non-GAAP financial measures. Net interest income (FTE), which is used in computing net interest margin (FTE) and operating 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)  These are non-GAAP financial measures. 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) These are non-GAAP financial measures. The Company believes that ROTCE is a meaningful supplement to GAAP financial measures and useful to investors because it measures the performance of a business consistently across time without regard to whether components of the business were acquired or developed internally.

In periods prior to December 31,2018, the Company has not added amortization of intangibles, tax effected to net income (GAAP) and operating net income (non-GAAP) when calculating ROTCE and operating ROTCE, respectively. The Company has adjusted its presentation for all periods in this release.

(4) These are non-GAAP financial measures. Operating measures exclude merger-related costs unrelated to the Company’s normal operations. The Company believes these measures are useful to investors as they exclude certain costs resulting from acquisition activity and allow investors to more clearly see the combined economic results of the organization's operations.

(5) All ratios at March 31, 2019 are estimates and subject to change pending the Company’s filing of its FR Y9-C. All other periods are presented as filed.

(6) The operating efficiency ratio (FTE) excludes the amortization of intangible assets and merger-related costs.  This measure is similar to the measure utilized by the Company when analyzing corporate performance and is also similar to the measure utilized for incentive compensation.  The Company believes this measure is useful to investors as it excludes certain costs resulting from acquisition activity allowing for greater comparability with others in the industry and allowing investors to more clearly see the combined economic results of the organization's operations.

In prior periods, the Company has not excluded the amortization of intangibles from noninterest expense when calculating the operating efficiency ratio (FTE). The Company has adjusted its presentation for all periods in this release to exclude the amortization of intangibles from noninterest expense.


UNION BANKSHARES CORPORATION AND SUBSIDIARIES  
CONSOLIDATED BALANCE SHEETS  
(Dollars in thousands, except share data)            
  March 31,   December 31,   March 31,  
  2019   2018   2018  
ASSETS (unaudited)   (audited)   (unaudited)  
Cash and cash equivalents:            
Cash and due from banks $ 165,041     $ 166,927     $ 137,761    
Interest-bearing deposits in other banks 116,900     94,056     196,456    
Federal funds sold 1,652     216     8,246    
Total cash and cash equivalents 283,593     261,199     342,463    
Securities available for sale, at fair value 2,109,062     1,774,821     1,253,179    
Securities held to maturity, at carrying value 559,380     492,272     198,733    
Restricted stock, at cost 135,911     124,602     105,261    
Loans held for sale, at fair value 28,712            
Loans held for investment, net of deferred fees and costs 11,952,310     9,716,207     9,805,723    
Less allowance for loan losses 40,827     41,045     40,629    
Net loans held for investment 11,911,483     9,675,162     9,765,094    
Premises and equipment, net 172,522     146,967     162,746    
Goodwill 927,760     727,168     724,106    
Amortizable intangibles, net 88,553     48,685     50,092    
Bank owned life insurance 317,990     263,034     258,381    
Other assets 361,580     250,210     257,390    
Assets of discontinued operations 1,109     1,479     31,847    
Total assets $ 16,897,655     $ 13,765,599     $ 13,149,292    
LIABILITIES            
Noninterest-bearing demand deposits $ 2,964,113     $ 2,094,607     $ 2,057,425    
Interest-bearing deposits 9,525,217     7,876,353     7,620,530    
Total deposits 12,489,330     9,970,960     9,677,955    
Securities sold under agreements to repurchase 73,774     39,197     31,593    
Other short-term borrowings 939,700     1,048,600     1,022,000    
Long-term borrowings 739,629     668,481     481,433    
Other liabilities 194,565     112,093     101,985    
Liabilities of discontinued operations 1,192     1,687     3,249    
Total liabilities 14,438,190     11,841,018     11,318,215    
Commitments and contingencies            
STOCKHOLDERS' EQUITY            
Common stock, $1.33 par value, shares authorized 100,000,000; issued and outstanding,
82,037,354 shares, and 65,977,149 shares, respectively.
108,475     87,250     87,091    
Additional paid-in capital 1,859,588     1,380,259     1,373,782    
Retained earnings 483,005     467,345     382,514    
Accumulated other comprehensive income (loss) 8,397     (10,273 )   (12,310 )  
Total stockholders' equity 2,459,465     1,924,581     1,831,077    
Total liabilities and stockholders' equity $ 16,897,655     $ 13,765,599     $ 13,149,292    


UNION BANKSHARES CORPORATION AND SUBSIDIARIES  
CONSOLIDATED STATEMENTS OF INCOME  
(Dollars in thousands, except share data)            
  Three Months Ended  
  March 31,   December 31,   March 31,  
  2019   2018   2018  
Interest and dividend income: (unaudited)   (unaudited)   (unaudited)  
Interest and fees on loans $ 144,115     $ 121,846     $ 112,652    
Interest on deposits in other banks 473     309     647    
Interest and dividends on securities:            
Taxable 13,081     11,623     7,072    
Nontaxable 7,983     6,858     4,008    
Total interest and dividend income 165,652     140,636     124,379    
Interest expense:            
Interest on deposits 24,430     19,149     11,212    
Interest on short-term borrowings 6,551     5,663     4,249    
Interest on long-term borrowings 7,124     6,735     5,446    
Total interest expense 38,105     31,547     20,907    
Net interest income 127,547     109,089     103,472    
Provision for credit losses 3,792     4,725     3,524    
Net interest income after provision for credit losses 123,755     104,364     99,948    
Noninterest income:            
Service charges on deposit accounts 7,158     6,873     5,894    
Other service charges and fees 1,664     1,467     1,233    
Interchange fees, net 5,045     4,640     4,489    
Fiduciary and asset management fees 5,054     4,643     3,056    
Mortgage banking income, net 1,454            
Gains (losses) on securities transactions, net 151     161     213    
Bank owned life insurance income 2,055     2,072     1,667    
Loan-related interest rate swap fees 1,460     1,376     718    
Other operating income 897     2,255     2,997    
Total noninterest income 24,938     23,487     20,267    
Noninterest expenses:            
Salaries and benefits 48,007     38,581     40,741    
Occupancy expenses 7,399     6,590     6,067    
Furniture and equipment expenses 3,396     2,967     2,937    
Printing, postage, and supplies 1,242     1,125     1,060    
Communications expense 1,005     923     1,095    
Technology and data processing 5,676     4,675     4,560    
Professional services 2,958     2,183     2,554    
Marketing and advertising expense 2,383     2,211     1,436    
FDIC assessment premiums and other 2,639     1,214     2,185    
Other taxes 3,764     2,882     2,886    
Loan-related expenses 2,289     2,109     1,315    
OREO and credit-related expenses 684     1,026     1,532    
Amortization of intangible assets 4,218     2,954     3,181    
Training and other personnel costs 1,144     1,104     1,006    
Merger-related costs 18,122     2,314     27,712    
Other expenses 1,802     1,675     1,476    
Total noninterest expenses 106,728     74,533     101,743    
Income from continuing operations before income taxes 41,965     53,318     18,472    
Income tax expense 6,249     9,041     1,897    
Income from continuing operations 35,716     44,277     $ 16,575    


UNION BANKSHARES CORPORATION AND SUBSIDIARIES  
CONSOLIDATED STATEMENTS OF INCOME (continued)  
(Dollars in thousands, except share data)            
  Three Months Ended  
  March 31,   December 31,   March 31,  
  2019   2018   2018  
Discontinued operations: (unaudited)   (unaudited)   (unaudited)  
Income (loss) from operations of discontinued mortgage segment $ (115 )   $ (509 )   $ 76    
Income tax expense (benefit) (30 )   (317 )   12    
Income (loss) on discontinued operations (85 )   (192 )   64    
Net income $ 35,631     $ 44,085     $ 16,639    
Basic earnings per common share $ 0.47     $ 0.67     $ 0.25    
Diluted earnings per common share $ 0.47     $ 0.67     $ 0.25    


AVERAGE BALANCES, INCOME AND EXPENSES, YIELDS AND RATES (TAXABLE EQUIVALENT BASIS)
  For the Quarter Ended
  March 31, 2019   December 31, 2018
  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 $ 1,661,179       $ 13,067     3.19 %   $ 1,477,670     $ 11,623     3.12 %
Tax-exempt 984,250     10,123     4.17 %   862,381     8,681     3.99 %
Total securities 2,645,429     23,190     3.56 %   2,340,051     20,304     3.44 %
Loans, net (3) (4) 11,127,390     144,499     5.27 %   9,557,160     122,330     5.08 %
Other earning assets 118,429     711     2.43 %   64,023     336     2.09 %
Total earning assets 13,891,248     $ 168,400     4.92 %   11,961,234     $ 142,970     4.74 %
Allowance for loan losses (43,002 )           (41,556 )        
Total non-earning assets 1,851,497             1,618,482          
Total assets $ 15,699,743             $ 13,538,160          
                       
Liabilities and Stockholders' Equity:                      
Interest-bearing deposits:                      
Transaction and money market accounts $ 5,876,491     $ 14,369     0.99 %   $ 5,080,120     $ 11,086     0.87 %
Regular savings 733,286     400     0.22 %   626,252     211     0.13 %
Time deposits (5) 2,325,218     9,661     1.69 %   2,083,270     7,851     1.50 %
Total interest-bearing deposits 8,934,995     24,430     1.11 %   7,789,642     19,148     0.98 %
Other borrowings (6) 1,790,656     13,675     3.10 %   1,575,173     12,398     3.12 %
Total interest-bearing liabilities 10,725,651     38,105     1.44 %   9,364,815     31,546     1.34 %
                       
Noninterest-bearing liabilities:                      
Demand deposits 2,534,940             2,162,341          
Other liabilities 170,757             111,755          
Total liabilities 13,431,348             11,638,911          
Stockholders' equity 2,268,395             1,899,249          
Total liabilities and stockholders' equity $ 15,699,743             $ 13,538,160          
                       
Net interest income     $ 130,295             $ 111,424      
                       
Interest rate spread         3.48 %           3.40 %
Cost of funds         1.12 %           1.04 %
Net interest margin         3.80 %           3.70 %
                       
(1) Income and yields are reported on a taxable equivalent basis using the statutory federal corporate tax rate of 21% for both the three months ended March 31, 2019 and December 31, 2018.
(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 $5.6 million and $3.5 million for the three months ended March 31, 2019 and December 31, 2018, respectively, in accretion of the fair market value adjustments related to acquisitions.
(5) Interest expense on time deposits includes $292,000 and $445,000 for the three months ended March 31, 2019 and December 31, 2018, respectively, in accretion of the fair market value adjustments related to acquisitions.
(6) Interest expense on borrowings includes $70,000 and $161,000 for the three months ended March 31, 2019 and December 31, 2018, respectively, in amortization of the fair market value adjustments related to acquisitions.
 


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



 

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