Exhibit 99.1

 

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

 

UNION BANKSHARES REPORTS THIRD QUARTER RESULTS

 

Richmond, Va., October 20, 2015 - Union Bankshares Corporation (the “Company” or “Union”) (NASDAQ: UBSH) today reported net income of $18.2 million and earnings per share of $0.40 for its third quarter ended September 30, 2015. The quarterly results represent an increase of $2.9 million, or 18.7%, in net income and an increase of $0.06, or 17.6%, in earnings per share from the second quarter. For the nine months ended September 30, 2015, net income was $49.3 million and earnings per share was $1.09.

 

“Despite economic headwinds, heightened competition and margin compression, Union continued to make sustainable progress toward our top tier financial performance objectives, through the combination of net loan, core deposit and household growth and our efforts to improve efficiency, ” said G. William Beale, president and chief executive officer for Union Bankshares Corporation. “In addition, our wealth management area continued to add clients during the quarter and Union Mortgage Group reported a profit for the second consecutive quarter.

 

During the quarter, the company made the decision to sell its credit card portfolio and enter into an outsourced partnership solution with Elan Financial Services. By partnering with Elan, Union will be able to provide consumers with access to a more competitive suite of products and services which allows us more opportunities to deepen relationships with our customer base.

 

As we move into the fourth quarter and look forward to 2016, our focus is on deepening relationships with our customer base through a holistic approach involving all of our business lines. We are also working to enhance and upgrade our infrastructure to support initiatives that will result in an increased rate of organic growth while improving operating efficiency across the Company.”

 

Select highlights for the third quarter include:

·

Net income for the community bank segment was $18.2 million, or $0.40 per share, for the third quarter, compared to $15.3 million, or $0.34 per share, for the second quarter. Net income for the community bank segment for the nine months ended September 30, 2015 was $49.4 million, or $1.09 per share.

·

The mortgage segment reported net income of $59,000 for the third quarter, a slight decline from net income of $95,000 for the second quarter. The mortgage segment reported a net loss of $113,000 for the nine months ended September 30, 2015 compared to a net loss of $2.6 million for the nine months ended September 30, 2014.

·

During the third quarter, the Company moved its credit card loan portfolio, totaling $26.4 million at September 30, 2015, from loans held for investment to loans held for sale, resulting from management’s decision to sell the credit card loans to Elan.

·

Excluding credit cards from the prior period loan portfolio, loans held for investment grew $59.6 million, or 4.3% (annualized), from June 30, 2015 and increased $396.5 million, or 7.7%, from September 30, 2014. Average loans increased $77.0 million, or 5.7% (annualized) during the quarter.

·

Period-end deposits increased $34.4 million, or 2.4% (annualized), from June 30, 2015 and increased $184.8 million, or 3.3%, from September 30, 2014. Average deposits increased $104.2 million, or 7.3% (annualized), during the quarter.

·

As previously announced, the Company closed seven branches, or 5% of its branch network, during the quarter as part of its continuing efforts to become more efficient.

 

  

NET INTEREST INCOME

 

Tax-equivalent net interest income was $65.7 million, a decrease of $376,000 from the second quarter, primarily driven by lower earning asset yields. The third quarter tax-equivalent net interest margin decreased 11 basis points to 3.86% from 3.97% in the previous quarter. Core tax-equivalent net interest margin (which excludes the 9 basis point impact of acquisition accounting accretion) declined by 9 basis points to 3.77% from 3.86% in the previous quarter. The decrease in the core tax-equivalent net interest margin was principally due to the 10 basis point decline in interest-earning asset yields outpacing the 1 basis point reduction in cost of funds. The decline in interest-earning asset yields was primarily driven by lower loan yields on new and renewed loans and lower levels of loan fees recorded in the current quarter.

 

The Company continues to believe that core net interest margin will decline modestly over the next several quarters as decreases in interest-earning asset yields are projected to outpace any further declines in interest-bearing liabilities rates.

 

The Company’s fully taxable equivalent net interest margin includes the impact of acquisition accounting fair value adjustments. During the third quarter, net accretion related to acquisition accounting declined by $198,000 from the prior quarter to $1.6 million as of September 30, 2015. The second and third quarters of 2015 and remaining estimated net accretion impact are reflected in the following table (dollars in thousands):

 

		Accretion								Accretion (Amortization)
		Loan				Certificates of Deposit				Borrowings				Total
For the quarter ended June 30, 2015		$	1,052			$	614			$	137			$	1,803
For the quarter ended September 30, 2015			1,364				154				87				1,605
For the remaining three months of 2015			1,051				-				-				1,051
For the years ending:
2016			3,808				-				271				4,079
2017			3,516				-				170				3,686
2018			2,996				-				(143	)			2,853
2019			2,349				-				(286	)			2,063
2020			1,904				-				(301	)			1,603
Thereafter			10,538				-				(5,622	)			4,916

 

ASSET QUALITY/LOAN LOSS PROVISION

 

Overview

During the third quarter, the Company experienced declines in past due and nonaccrual loan levels and other real estate owned (“OREO”) balances from the prior year. Past due loans decreased from the prior quarter while nonaccrual loans increased from the prior quarter, as loans were moved from past due status to nonaccrual status during the current quarter. The combined past due and nonaccrual loan balances decreased $2.5 million, or 5.8%, from the previous quarter. The loan loss provision decreased from the prior quarter due to lower levels of net charge-offs and continued improvements in asset quality. The allowance for loan losses to total loans ratios (both unadjusted and adjusted for acquisition accounting) were consistent with the prior quarter and down from the prior year.

 

All nonaccrual and past due loan metrics discussed below exclude purchased credit impaired loans (“PCI”) totaling $78.6 million (net of fair value mark).

 

  

Nonperforming Assets (“NPAs”)

At September 30, 2015, nonperforming assets totaled $35.1 million, a decrease of $23.0 million, or 39.6%, from September 30, 2014 and an increase of $3.3 million, or 10.4%, from June 30, 2015. In addition, NPAs as a percentage of total outstanding loans declined 49 basis points from 1.12% a year earlier and increased 5 basis points from 0.58% last quarter to 0.63% in the current quarter. 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,
		2015				2015				2015				2014				2014
Nonaccrual loans, excluding PCI loans		$	12,966			$	9,521			$	17,385			$	19,255			$	20,279
Foreclosed properties			18,789				18,917				21,727				23,058				28,783
Former bank premises			3,305				3,305				3,707				5,060				8,971
Total nonperforming assets		$	35,060			$	31,743			$	42,819			$	47,373			$	58,033

 

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,
		2015				2015				2015				2014				2014
Beginning Balance		$	9,521			$	17,385			$	19,255			$	20,279			$	23,099
Net customer payments			(1,104	)			(4,647	)			(2,996	)			(4,352	)			(1,654	)
Additions			5,213				581				4,379				7,413				1,099
Charge-offs			(541	)			(2,171	)			(3,107	)			(1,839	)			(604	)
Loans returning to accruing status			(123	)			(919	)			(53	)			(2,246	)			(723	)
Transfers to OREO			-				(708	)			(93	)			-				(938	)
Ending Balance		$	12,966			$	9,521			$	17,385			$	19,255			$	20,279

 

During the third quarter, the additions to nonaccrual loans were comprised of several smaller credit relationships.

 

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

 

		September 30,				June 30,				March 31,				December 31,				September 30,
		2015				2015				2015				2014				2014
Beginning Balance		$	22,222			$	25,434			$	28,118			$	37,754			$	38,494
Additions of foreclosed property			1,082				904				158				367				2,553
Additions of former bank premises			-				-				402				63				4,814
Capitalized improvements			9				243				56				424				203
Valuation adjustments			(473	)			(710	)			(590	)			(381	)			(6,192	)
Proceeds from sales			(767	)			(3,511	)			(2,748	)			(11,362	)			(2,216	)
Gains (losses) from sales			21				(138	)			38				1,253				98
Ending Balance		$	22,094			$	22,222			$	25,434			$	28,118			$	37,754

 

During the third quarter, the majority of both additions and sales of OREO were related to residential real estate.

 

Past Due Loans

Past due loans still accruing interest totaled $27.5 million, or 0.50% of total loans, at September 30, 2015 compared to $58.4 million, or 1.13%, a year ago and $33.5 million, or 0.61%, at June 30, 2015. At September 30, 2015, loans past due 90 days or more and accruing interest totaled $5.2 million, or 0.09% of total loans, compared to $16.1 million, or 0.31%, a year ago and $10.9 million, or 0.20%, at June 30, 2015.

 

Net Charge-offs

For the third quarter, net charge-offs were $1.0 million, or 0.07% on an annualized basis, compared to $1.1 million, or 0.08%, for the same quarter last year and $2.2 million, or 0.16%, for the second quarter of 2015. For the nine months ended September 30, 2015, net charge-offs were $6.4 million, or 0.15% on an annualized basis, compared to $1.3 million, or 0.03%, for the same period in the prior year.

 

  

Provision

The provision for loan losses for the current quarter was $2.0 million, an increase of $162,000 compared to the same quarter a year ago and a decrease of $1.6 million compared to the previous quarter. The decrease in provision for loan losses in the current quarter compared to the prior quarter was driven by reduced levels of charge-offs during the current quarter, lower quarterly loan growth, and continued improvements in asset quality. Additionally, a $100,000 provision was recognized during the current quarter for unfunded loan commitments, resulting in a total provision for credit losses of $2.1 million for the quarter.

 

Allowance for Loan Losses

The allowance for loan losses (“ALL”) increased $925,000 from June 30, 2015 to $33.3 million at September 30, 2015 primarily due to loan growth during the quarter. The ALL as a percentage of the total loan portfolio, adjusted for purchase accounting (non-GAAP), was 1.01% at September 30, 2015, a decrease from 1.02% from the prior quarter and a decrease from 1.12% from the quarter ended September 30, 2014. The allowance for loan losses as a percentage of the total loan portfolio was 0.60% at September 30, 2015, 0.59% at June 30, 2015, and 0.62% at September 30, 2014. In acquisition accounting, there is no carryover of previously established allowance for loan losses, as acquired loans are recorded at fair value.

 

The nonaccrual loan coverage ratio was 256.6% at September 30, 2015, compared to 339.7% at June 30, 2015 and 158.3% at September 30, 2014. 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 $513,000, or 3.2%, to $16.7 million as of September 30, 2015 from $16.2 million in the prior quarter. Customer-related fee income increased $275,000, primarily driven by higher overdraft fees. Gains on sales of mortgage loans, net of commissions, increased $56,000, or 2.2%, from the prior quarter, related to improved gain on sale margins as well as increased mortgage loan originations. Included in gain on sales of mortgage loans were unrealized losses on mortgage banking derivatives of $136,000 in the current quarter. Mortgage loan originations increased by $7.8 million, or 5.5%, in the current quarter to $148.1 million from $140.3 million in the second quarter. Of the loan originations in the current quarter, 32.3% were refinances, which was an increase from 30.9% in the prior quarter. Other noninterest income increased $163,000, as other operating income increased $792,000 primarily due to gains on the resolution of a problem credit, which was partially offset by lower gains on sales of securities of $329,000 from the prior quarter as well as $300,000 in other-than-temporary impairment recognized in the current quarter on a municipal security in the available-for-sale portfolio.

 

NONINTEREST EXPENSE

 

Noninterest expense decreased $1.9 million, or 3.5%, to $53.3 million as of September 30, 2015 from $55.2 million when compared to the prior quarter. Excluding the nonrecurring branch closure costs of $1.3 million in the prior quarter, noninterest expense decreased $637,000, or 1.2%, from the prior quarter. OREO and credit-related costs decreased $702,000 related to lower legal-related fees, real estate taxes, and valuation adjustments as well as net gains on sales of OREO in the current quarter compared to net losses in the prior quarter. Marketing expenses decreased $591,000 related to the timing of advertising campaigns. These decreases were partially offset by increased technology expenses of $333,000 primarily due to higher data processing fees and higher professional and consulting fees of $322,000.

 

BALANCE SHEET

 

At September 30, 2015, total assets were $7.6 billion, an increase of $96.6 million from June 30, 2015 and an increase of $400.4 million from September 30, 2014. The increase in assets was mostly related to loan growth.

 

  

At September 30, 2015, loans held for investment were $5.5 billion, an increase of $33.2 million from June 30, 2015. During the third quarter, the Company moved its credit card portfolio, totaling $26.4 million at September 30, 2015, from loans held for investment to loans held for sale, resulting from management’s decision to sell the loans in the near future. Excluding credit cards from the prior period loan portfolio, loans held for investment grew $59.6 million, or 4.3% (annualized), from June 30, 2015. Average loans increased $77.0 million, or 5.7% (annualized) from the prior quarter. Excluding credit cards from the prior period loan portfolio, loans held for investment increased $396.4 million, or 7.7 %, from September 30, 2014.

 

At September 30, 2015, total deposits were $5.8 billion, an increase of $34.4 million, or 2.4% (annualized) from June 30, 2015, while average deposits increased $104.2 million, or 7.3% (annualized) from June 30, 2015. Total deposits increased $184.8 million, or 3.3%, from September 30, 2014.

 

At September 30 and June 30, 2015, respectively, the Company had a common equity Tier 1 capital ratio of 10.75% and 10.87%, a Tier 1 capital ratio of 12.16% and 12.31%, a total capital ratio of 12.69% and 12.83%, and a leverage ratio of 10.77% and 10.82%.

 

The Company’s common equity to asset ratios at September 30, 2015, June 30, 2015, and September 30, 2014 were 13.10%, 13.18%, and 13.58%, respectively, while its tangible common equity to tangible assets ratio was 9.29%, 9.30%, and 9.41% at September 30, 2015, June 30, 2015, and September 30, 2014, respectively.

 

During the third quarter, the Company declared and paid cash dividends of $0.17 per common share, consistent with the dividend paid in the prior quarter.

 

COMMUNITY BANK SEGMENT INFORMATION

 

The community bank segment reported net income of $18.2 million for the third quarter, an increase of $2.9 million, or 19.0%, from $15.3 million in the second quarter. Net interest income was $63.1 million, a decrease of $366,000 from the second quarter principally due to lower earning asset yields and a decline of $198,000 in accretion of purchase accounting adjustments. The provision for loan losses decreased $1.6 million from the prior quarter due to reduced charge-off levels, lower quarterly loan growth, and continued improvements in asset quality.

 

Noninterest income increased $764,000 to $14.3 million in the current quarter compared to $13.5 million in the prior quarter. Customer-related fee income increased $275,000, primarily driven by higher overdraft fees. Other noninterest income increased $493,000, as other operating income increased $1.1 million primarily due to gains on the resolution of a problem credit, which was partially offset by lower gains on sales of securities of $329,000 from the prior quarter as well as $300,000 in other-than-temporary impairment recognized in the current quarter on a municipal security in the available-for-sale portfolio.

 

Noninterest expense decreased $1.7 million from $52.4 million in the prior quarter to $50.7 million in the current quarter. Excluding the nonrecurring branch closure costs of $1.3 million in the prior quarter, noninterest expense decreased $411,000, or 0.8%, from the prior quarter. OREO and credit-related costs decreased $702,000 related to lower legal-related fees, real estate taxes, and valuation adjustments as well as net gains on sales of OREO in the current quarter compared to net losses in the prior quarter. Marketing expenses decreased $588,000 related to the timing of advertising campaigns. These decreases were partially offset by increased salaries and benefits of $370,000 related to increased equity based incentive compensation, technology expenses of $341,000 primarily due to higher data processing fees, and higher professional fees of $359,000 related to increased consulting fees.

 

MORTGAGE SEGMENT INFORMATION

 

The mortgage segment reported net income of $59,000 for the third quarter, a slight decline from net income of $95,000 in the second quarter. Noninterest income decreased $252,000 during the quarter due to adjustments to required indemnification reserves during the second quarter. Gains on sales of mortgage loans, net of commissions, increased $56,000, or 2.2%, from the prior quarter, related to improved gain on sale margins as well as increased mortgage loan originations. Included in gains on sales of mortgage loans were unrealized losses on mortgage banking derivatives of $136,000 in the current quarter. Mortgage loan originations increased by $7.8 million, or 5.5%, in the current quarter to $148.1 million from $140.3 million in the second quarter. Of the loan originations in the current quarter, 32.3% were refinances, which was an increase from 30.9% in the prior quarter. Noninterest expenses declined $226,000, or 7.4%, compared to the prior quarter primarily due to lower salaries and benefits expenses, rental expenses, underwriting fees, and other loan-related fees due to management’s continued focus on controlling costs. 

 

* * * * * * *

 

  

ABOUT UNION BANKSHARES CORPORATION

 

Headquartered in Richmond, Virginia, Union Bankshares Corporation (NASDAQ: UBSH) is the holding company for Union Bank & Trust, which has 124 banking offices and nearly 200 ATMs located throughout Virginia. Non-bank affiliates of the holding company include: Union Investment Services, Inc., which provides full brokerage services; Union Mortgage Group, Inc., which provides a full line of mortgage products; and Union Insurance Group, LLC, which offers various lines of insurance products.

 

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

 

Union Bankshares Corporation will hold a conference call on Tuesday, October 20^th, at 9:00 a.m. Eastern Time during which management will review earnings and performance trends. Callers wishing to participate may call toll-free by dialing (877) 668-4908. The conference ID number is 57712544.

 

ADOPTION OF NEW ACCOUNTING STANDARDS

 

The Company adopted ASU 2014-01, “Accounting for Investments in Qualified Affordable Housing Projects” as of January 1, 2015. As permitted by the guidance, the Company adopted the proportional amortization method of accounting for Qualified Affordable Housing Projects. The proportional amortization method amortizes the cost of the investment over the period in which the Company will receive tax credits and other tax benefits, and the resulting amortization is recognized as a component of income taxes attributable to continuing operations. Historically, these investments were accounted for under the equity method of accounting and the passive losses related to the investments were recognized within noninterest expense. The Company adopted this guidance in the first quarter of 2015 with retrospective application as required by the ASU. Prior period 2014 results and related metrics have been restated to conform to this presentation.

 

NON-GAAP MEASURES

 

In reporting the results of the quarter ended September 30, 2015, the Company has provided supplemental performance measures on an operating or tangible basis. Operating measures exclude acquisition costs unrelated to the Company’s normal operations. The Company believes these measures are useful to investors as they exclude non-operating adjustments resulting from acquisition activity and allow investors to see the combined economic results of the organization. Tangible common equity is used in the calculation of certain capital and per share ratios. The Company believes tangible common equity and the related ratios are meaningful measures of capital adequacy because they provide a meaningful base for period-to-period and company-to-company comparisons, which the Company believes will assist investors in assessing the capital of the Company and its ability to absorb potential losses.

 

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

 

  

FORWARD-LOOKING STATEMENTS

 

Certain statements in this press release may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.  Forward-looking statements are statements that include projections, predictions, expectations, or beliefs about future events or results or otherwise are not statements of historical fact.  Such statements are often characterized by the use of qualified words (and their derivatives) such as “expect,” “believe,” “estimate,” “plan,” “project,” “anticipate,” “intend,” “will,” or words of similar meaning or other statements concerning opinions or judgment of the Company and its management about future events.  Although the Company believes that its expectations with respect to forward-looking statements are based upon reasonable assumptions within the bounds of its existing knowledge of its business and operations, there can be no assurance that actual results, performance, or achievements of the Company will not differ materially from any projected future results, performance, or achievements expressed or implied by such forward-looking statements.  Actual future results and trends may differ materially from historical results or those anticipated depending on a variety of factors, including, but not limited to, the effects of and changes in: general economic and bank industry conditions, the interest rate environment, legislative and regulatory requirements, competitive pressures, new products and delivery systems, inflation, stock and bond markets, accounting standards or interpretations of existing standards, mergers and acquisitions, technology, and consumer spending and saving habits.  More information is available on the Company’s website, http://investors.bankatunion.com. The information on the Company’s website is not a part of this press release. The Company does not intend or assume any obligation to update or revise any forward-looking statements that may be made from time to time by or on behalf of the Company.

 

  

UNION BANKSHARES CORPORATION AND SUBSIDIARIES

KEY FINANCIAL RESULTS

(Dollars in thousands, except share data)

(FTE - "Fully Taxable Equivalent")

 

		Three Months Ended												Nine Months Ended
		09/30/15				06/30/15				09/30/14				09/30/15				09/30/14
Results of Operations
Interest and dividend income		$	70,000			$	69,854			$	69,591			$	207,454			$	206,434
Interest expense			6,556				6,038				5,112				18,225				14,481
Net interest income			63,444				63,816				64,479				189,229				191,953
Provision for credit losses			2,062				3,749				1,800				7,561				3,300
Net interest income after provision for credit losses			61,382				60,067				62,679				181,668				188,653
Noninterest income			16,725				16,212				16,318				47,990				46,385
Noninterest expenses			53,325				55,241				59,413				162,405				185,665
Income before income taxes			24,782				21,038				19,584				67,253				49,373
Income tax expense			6,566				5,690				4,767				17,989				12,174
Net income		$	18,216			$	15,348			$	14,817			$	49,264			$	37,199
Interest earned on earning assets (FTE)		$	72,287			$	72,145			$	71,649			$	214,195			$	212,556
Net interest income (FTE)			65,731				66,107				66,537				195,970				198,075
Core deposit intangible amortization			2,074				2,138				2,391				6,435				7,462
Net income - community bank segment		$	18,157			$	15,253			$	15,445			$	49,377			$	39,808
Net income (loss) - mortgage segment			59				95				(628	)			(113	)			(2,609	)
Key Ratios
Earnings per common share, diluted		$	0.40			$	0.34			$	0.32			$	1.09			$	0.80
Return on average assets (ROA)			0.96	%			0.83	%			0.81	%			0.88	%			0.69	%
Return on average equity (ROE)			7.26	%			6.21	%			6.01	%			6.65	%			5.05	%
Return on average tangible common equity (ROTCE)			10.70	%			9.20	%			9.09	%			9.86	%			7.65	%
Efficiency ratio (FTE)			64.67	%			67.11	%			71.71	%			66.57	%			75.95	%
Efficiency ratio - community bank segment (FTE)			63.65	%			66.07	%			69.51	%			65.37	%			73.36	%
Efficiency ratio - mortgage bank segment (FTE)			94.77	%			94.21	%			133.59	%			100.82	%			146.76	%
Net interest margin (FTE)			3.86	%			3.97	%			4.11	%			3.93	%			4.11	%
Yields on earning assets (FTE)			4.25	%			4.33	%			4.43	%			4.29	%			4.41	%
Cost of interest-bearing liabilities (FTE)			0.50	%			0.47	%			0.40	%			0.47	%			0.38	%
Cost of funds (FTE)			0.39	%			0.36	%			0.32	%			0.36	%			0.30	%
Net interest margin, core (FTE) (1)			3.77	%			3.86	%			3.92	%			3.82	%			3.95	%
Yields on earning assets (FTE), core (1)			4.17	%			4.27	%			4.37	%			4.23	%			4.41	%
Cost of interest-bearing liabilities (FTE), core (1)			0.52	%			0.53	%			0.58	%			0.53	%			0.59	%
Cost of funds (FTE), core (1)			0.40	%			0.41	%			0.45	%			0.41	%			0.46	%
Key Operating Ratios - excluding merger costs (non-GAAP) (2)
Consolidated
Operating net income		$	18,216			$	15,348			$	15,919			$	49,264			$	50,360
Operating diluted earnings per share		$	0.40			$	0.34			$	0.35			$	1.09			$	1.09
Operating ROA			0.96	%			0.83	%			0.87	%			0.88	%			0.93	%
Operating ROE			7.26	%			6.21	%			6.45	%			6.65	%			6.84	%
Operating ROTCE			10.70	%			9.20	%			9.77	%			9.86	%			10.36	%
Operating efficiency ratio (FTE)			64.67	%			67.11	%			69.66	%			66.57	%			67.96	%
Community Bank Segment
Operating net income		$	18,157			$	15,253			$	16,547			$	49,377			$	52,969
Operating diluted earnings per share		$	0.40			$	0.34			$	0.36			$	1.09			$	1.14
Operating ROA			0.96	%			0.82	%			0.91	%			0.89	%			0.98	%
Operating ROE			7.26	%			6.19	%			6.73	%			6.69	%			7.25	%
Operating ROTCE			10.71	%			9.18	%			10.21	%			9.93	%			11.04	%
Operating efficiency ratio (FTE)			63.65	%			66.07	%			67.39	%			65.37	%			65.10	%

 

 

		Three Months Ended												Nine Months Ended
		09/30/15				06/30/15				09/30/14				09/30/15				09/30/14
Capital Ratios
Common equity Tier 1 capital ratio (3)			10.75	%			10.87	%			N/A				10.75	%			N/A
Tier 1 capital ratio (3)			12.16	%			12.31	%			13.06	%			12.16	%			13.06	%
Total capital ratio (3)			12.69	%			12.83	%			13.70	%			12.69	%			13.70	%
Leverage ratio (Tier 1 capital to average assets) (3)			10.77	%			10.82	%			10.54	%			10.77	%			10.54	%
Common equity to total assets			13.10	%			13.18	%			13.58	%			13.10	%			13.58	%
Tangible common equity to tangible assets			9.29	%			9.30	%			9.41	%			9.29	%			9.41	%
Financial Condition
Assets		$	7,594,313			$	7,497,706			$	7,193,883			$	7,594,313			$	7,193,883
Loans, net of deferred fees			5,543,621				5,510,385				5,171,003				5,543,621				5,171,003
Earning Assets			6,827,669				6,717,137				6,382,463				6,827,669				6,382,463
Goodwill			293,522				293,522				296,876				293,522				296,876
Core deposit intangibles, net			25,320				27,394				34,089				25,320				34,089
Deposits			5,818,853				5,784,474				5,634,050				5,818,853				5,634,050
Stockholders' equity			995,012				988,134				976,923				995,012				976,923
Tangible common equity (5)			676,170				667,218				645,958				676,170				645,958
Loans, net of deferred fees
Raw land and lots		$	187,182			$	201,630			$	210,557			$	187,182			$	210,557
Commercial construction			429,645				378,204				303,576				429,645				303,576
Commercial real estate			2,449,885				2,443,888				2,279,708				2,449,885				2,279,708
Single family investment real estate			436,340				435,068				407,972				436,340				407,972
Commercial and industrial			444,199				450,682				380,613				444,199				380,613
Other commercial			89,344				90,556				79,356				89,344				79,356
Consumer			1,507,026				1,510,357				1,509,221				1,507,026				1,509,221
Total loans, net of deferred fees		$	5,543,621			$	5,510,385			$	5,171,003			$	5,543,621			$	5,171,003
Interest-Bearing Deposits
NOW accounts		$	1,382,891			$	1,378,129			$	1,260,267			$	1,382,891			$	1,260,267
Money market accounts			1,318,229				1,303,792				1,276,560				1,318,229				1,276,560
Savings accounts			569,667				565,584				552,309				569,667				552,309
Time deposits of $100,000 and over			527,642				547,492				565,934				527,642				565,934
Other time deposits			682,379				699,801				774,637				682,379				774,637
Total interest-bearing deposits		$	4,480,808			$	4,494,798			$	4,429,707			$	4,480,808			$	4,429,707
Demand deposits			1,338,045				1,289,676				1,204,343				1,338,045				1,204,343
Total deposits		$	5,818,853			$	5,784,474			$	5,634,050			$	5,818,853			$	5,634,050
Averages
Assets		$	7,521,841			$	7,459,446			$	7,241,373			$	7,448,573			$	7,254,953
Loans, net of deferred fees			5,525,119				5,448,126				5,196,116				5,445,243				5,240,610
Loans held for sale			44,904				43,307				50,393				42,250				51,021
Securities			1,138,462				1,143,343				1,143,303				1,141,793				1,118,107
Earning assets			6,751,654				6,676,440				6,423,743				6,668,812				6,438,924
Deposits			5,814,146				5,709,963				5,701,752				5,721,980				5,680,474
Certificates of deposit			1,227,835				1,233,904				1,370,299				1,243,546				1,414,674
Interest-bearing deposits			4,501,411				4,431,087				4,507,247				4,450,043				4,536,532
Borrowings			661,517				703,223				507,882				681,295				535,866
Interest-bearing liabilities			5,162,928				5,134,310				5,015,129				5,131,338				5,072,398
Stockholders' equity			995,463				991,093				978,909				989,749				984,654
Tangible common equity (5)			675,618				669,139				646,723				667,792				649,890

 

 

		Three Months Ended												Nine Months Ended
		09/30/15				06/30/15				09/30/14				09/30/15				09/30/14
Asset Quality
Allowance for Loan Losses (ALL)
Beginning balance		$	32,344			$	30,977			$	31,379			$	32,384			$	30,135
Add: Recoveries			1,299				1,023				695				2,994				2,866
Less: Charge-offs			2,336				3,205				1,765				9,370				4,192
Add: Provision for loan losses			1,962				3,549				1,800				7,261				3,300
Ending balance		$	33,269			$	32,344			$	32,109			$	33,269			$	32,109
ALL / total outstanding loans			0.60	%			0.59	%			0.62	%			0.60	%			0.62	%
ALL / total outstanding loans, adjusted for acquisition accounting (4)			1.01	%			1.02	%			1.12	%			1.01	%			1.12	%
Net charge-offs / total outstanding loans			0.07	%			0.16	%			0.08	%			0.15	%			0.03	%
Provision / total outstanding loans			0.14	%			0.26	%			0.14	%			0.18	%			0.09	%
Nonperforming Assets
Commercial		$	8,589			$	8,056			$	14,836			$	8,589			$	14,836
Consumer			4,377				1,465				5,443				4,377				5,443
Nonaccrual loans			12,966				9,521				20,279				12,966				20,279
Other real estate owned			22,094				22,222				37,754				22,094				37,754
Total nonperforming assets (NPAs)			35,060				31,743				58,033				35,060				58,033
Commercial			3,349				2,781				9,096				3,349				9,096
Consumer			1,815				8,122				7,022				1,815				7,022
Loans ≥ 90 days and still accruing			5,164				10,903				16,118				5,164				16,118
Total NPAs and loans ≥ 90 days		$	40,224			$	42,646			$	74,151			$	40,224			$	74,151
NPAs / total outstanding loans			0.63	%			0.58	%			1.12	%			0.63	%			1.12	%
NPAs / total assets			0.46	%			0.42	%			0.81	%			0.46	%			0.81	%
ALL / nonperforming loans			256.59	%			339.71	%			158.33	%			256.59	%			158.33	%
ALL / nonperforming assets			94.89	%			101.89	%			55.33	%			94.89	%			55.33	%
Past Due Detail
Commercial		$	1,870			$	2,274			$	2,554			$	1,870			$	2,554
Consumer			7,400				5,170				6,726				7,400				6,726
Loans 60-89 days past due		$	9,270			$	7,444			$	9,280			$	9,270			$	9,280
Commercial		$	4,189			$	6,420			$	8,580			$	4,189			$	8,580
Consumer			8,917				8,727				24,430				8,917				24,430
Loans 30-59 days past due		$	13,106			$	15,147			$	33,010			$	13,106			$	33,010
Commercial		$	69,676			$	77,519			$	106,021			$	69,676			$	106,021
Consumer			8,930				10,322				13,722				8,930				13,722
Purchased impaired		$	78,606			$	87,841			$	119,743			$	78,606			$	119,743
Troubled Debt Restructurings
Performing		$	9,468			$	19,880			$	26,243			$	9,468			$	26,243
Nonperforming			2,087				2,244				2,728				2,087				2,728
Total troubled debt restructurings		$	11,555			$	22,124			$	28,971			$	11,555			$	28,971
Per Share Data
Earnings per common share, basic		$	0.40			$	0.34			$	0.32			$	1.09			$	0.80
Earnings per common share, diluted			0.40				0.34				0.32				1.09				0.80
Cash dividends paid per common share			0.17				0.17				0.15				0.49				0.43
Market value per share			24.00				23.24				23.10				24.00				23.10
Book value per common share			22.24				22.02				21.56				22.24				21.56
Tangible book value per common share			15.11				14.87				14.26				15.11				14.26
Price to earnings ratio, diluted			15.12				17.04				18.20				16.47				21.60
Price to book value per common share ratio			1.08				1.06				1.07				1.08				1.07
Price to tangible common share ratio			1.59				1.56				1.62				1.59				1.62
Weighted average common shares outstanding, basic			45,087,409				45,128,698				45,649,309				45,107,290				46,268,996
Weighted average common shares outstanding, diluted			45,171,610				45,209,814				45,738,554				45,189,578				46,367,156
Common shares outstanding at end of period			44,990,569				45,112,893				45,514,028				44,990,569				45,514,028

 

 

		Three Months Ended												Nine Months Ended
		09/30/15				06/30/15				09/30/14				09/30/15				09/30/14
Alternative Performance Measures (non-GAAP)
Operating Earnings (2)
Net Income (GAAP)		$	18,216			$	15,348			$	14,817			$	49,264			$	37,199
Plus: Merger and conversion related expense, after tax			-				-				1,102				-				13,161
Net operating earnings (loss) (non-GAAP)		$	18,216			$	15,348			$	15,919			$	49,264			$	50,360
Operating earnings per share - Basic		$	0.40			$	0.34			$	0.35			$	1.09			$	1.09
Operating earnings per share - Diluted			0.40				0.34				0.35				1.09				1.09
Operating ROA			0.96	%			0.83	%			0.87	%			0.88	%			0.93	%
Operating ROE			7.26	%			6.21	%			6.45	%			6.65	%			6.84	%
Operating ROTCE			10.70	%			9.20	%			9.77	%			9.86	%			10.36	%
Community Bank Segment Operating Earnings (2)
Net Income (GAAP)		$	18,157			$	15,253			$	15,445			$	49,377			$	39,808
Plus: Merger and conversion related expense, after tax			-				-				1,102				-				13,161
Net operating earnings (loss) (non-GAAP)		$	18,157			$	15,253			$	16,547			$	49,377			$	52,969
Operating earnings per share - Basic		$	0.40			$	0.34			$	0.36			$	1.09			$	1.14
Operating earnings per share - Diluted			0.40				0.34				0.36				1.09				1.14
Operating ROA			0.96	%			0.82	%			0.91	%			0.89	%			0.98	%
Operating ROE			7.26	%			6.19	%			6.73	%			6.69	%			7.25	%
Operating ROTCE			10.71	%			9.18	%			10.21	%			9.93	%			11.04	%
Operating Efficiency Ratio FTE (2)
Net Interest Income (GAAP)		$	63,444			$	63,816			$	64,479			$	189,229			$	191,953
FTE adjustment			2,287				2,291				2,058				6,741				6,122
Net Interest Income (FTE)		$	65,731			$	66,107			$	66,537			$	195,970			$	198,075
Noninterest Income (GAAP)			16,725				16,212				16,318				47,990				46,385
Noninterest Expense (GAAP)		$	53,325			$	55,241			$	59,413			$	162,405			$	185,665
Merger and conversion related expense			-				-				1,695				-				19,524
Noninterest Expense (Non-GAAP)		$	53,325			$	55,241			$	57,718			$	162,405			$	166,141
Operating Efficiency Ratio FTE (non-GAAP)			64.67	%			67.11	%			69.66	%			66.57	%			67.96	%
Community Bank Segment Operating Efficiency Ratio FTE (2)
Net Interest Income (GAAP)		$	63,075			$	63,441			$	64,162			$	188,240			$	191,090
FTE adjustment			2,256				2,291				2,058				6,707				6,122
Net Interest Income (FTE)		$	65,331			$	65,732			$	66,220			$	194,947			$	197,212
Noninterest Income (GAAP)			14,287				13,523				13,884				40,658				38,964
Noninterest Expense (GAAP)		$	50,674			$	52,365			$	55,680			$	154,011			$	173,268
Merger and conversion related expense			-				-				1,695				-				19,524
Noninterest Expense (Non-GAAP)		$	50,674			$	52,365			$	53,985			$	154,011			$	153,744
Operating Efficiency Ratio FTE (non-GAAP)			63.65	%			66.07	%			67.39	%			65.37	%			65.10	%
Tangible Common Equity (5)
Ending equity		$	995,012			$	988,134			$	976,923			$	995,012			$	976,923
Less: Ending goodwill			293,522				293,522				296,876				293,522				296,876
Less: Ending core deposit intangibles			25,320				27,394				34,089				25,320				34,089
Ending tangible common equity		$	676,170			$	667,218			$	645,958			$	676,170			$	645,958
Average equity		$	995,463			$	991,093			$	978,909			$	989,749			$	984,654
Less: Average goodwill			293,522				293,522				296,876				293,522				296,876
Less: Average core deposit intangibles			26,323				28,432				35,310				28,435				37,888
Average tangible common equity		$	675,618			$	669,139			$	646,723			$	667,792			$	649,890

 

 

		Three Months Ended												Nine Months Ended
		09/30/15				06/30/15				09/30/14				09/30/15				09/30/14
ALL to loans, adjusted for acquisition accounting (non-GAAP)(4)
Allowance for loan losses		$	33,269			$	32,344			$	32,109			$	33,269			$	32,109
Remaining fair value mark on purchased performing loans			21,884				23,010				25,064				21,884				25,064
Adjusted allowance for loan losses			55,153				55,354				57,173				55,153				57,173
Loans, net of deferred fees			5,543,621				5,510,385				5,171,003				5,543,621				5,171,003
Remaining fair value mark on purchased performing loans			21,884				23,010				25,064				21,884				25,064
Less: Purchased credit impaired loans, net of fair value mark			78,606				87,841				119,743				78,606				119,743
Adjusted loans, net of deferred fees		$	5,486,899			$	5,445,554			$	5,076,324			$	5,486,899			$	5,076,324
ALL / gross loans, adjusted for acquisition accounting			1.01	%			1.02	%			1.12	%			1.01	%			1.12	%
Mortgage Origination Volume
Refinance Volume		$	47,788			$	43,385			$	50,959			$	156,722			$	143,922
Construction Volume			21,994				20,946				36,645				62,491				108,189
Purchase Volume			78,286				75,971				90,388				207,870				270,062
Total Mortgage loan originations		$	148,068			$	140,302			$	177,992			$	427,083			$	522,173
% of originations that are refinances			32.27	%			30.92	%			28.63	%			36.70	%			27.56	%
Other Data
End of period full-time employees			1,418				1,443				1,483				1,418				1,483
Number of full-service branches			124				131				131				124				131
Number of full automatic transaction machines (ATMs)			202				199				201				202				201

 

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

 

(2) The Company has provided supplemental performance measures which it believes may be useful to investors as they exclude non-operating adjustments resulting from acquisition activity and allow investors to see the combined economic results of the organization. These measures are a supplement to GAAP used to prepare the Company’s financial statements and should not be viewed as a substitute for GAAP measures. In addition, the Company’s non-GAAP measures may not be comparable to non-GAAP measures of other companies.

 

(3) Beginning January 1, 2015, the Company calculates its regulatory capital under the Basel III Standardized Approach. The Company calculated regulatory capital measures for periods prior to 2015 under previous regulatory requirements. All ratios at September 30, 2015 are estimates and subject to change pending the Company’s filing of its FR Y9-C. All other periods are presented as filed.

 

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

 

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

 

 

UNION BANKSHARES CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except share data)

 

		September 30,				December 31,				September 30,
		2015				2014				2014
ASSETS
Cash and cash equivalents:
Cash and due from banks		$	102,955			$	112,752			$	112,891
Interest-bearing deposits in other banks			76,001				19,344				35,489
Money market investments			1				1				1
Federal funds sold			237				1,163				311
Total cash and cash equivalents			179,194				133,260				148,692
Securities available for sale, at fair value			888,692				1,102,114				1,095,636
Securities held to maturity, at carrying value			199,363				-				-
Restricted stock, at cost			52,721				54,854				48,554
Loans held for sale			65,713				42,519				30,857
Loans held for investment, net of deferred fees and costs			5,543,621				5,345,996				5,171,003
Less allowance for loan losses			33,269				32,384				32,109
Net loans held for investment			5,510,352				5,313,612				5,138,894
Premises and equipment, net			129,191				135,247				138,549
Other real estate owned, net of valuation allowance			22,094				28,118				37,754
Core deposit intangibles, net			25,320				31,755				34,089
Goodwill			293,522				293,522				296,876
Bank owned life insurance			142,433				139,005				137,748
Other assets			85,718				84,637				86,234
Total assets		$	7,594,313			$	7,358,643			$	7,193,883
LIABILITIES
Noninterest-bearing demand deposits		$	1,338,045			$	1,199,378			$	1,204,343
Interest-bearing deposits			4,480,808				4,439,392				4,429,707
Total deposits			5,818,853				5,638,770				5,634,050
Securities sold under agreements to repurchase			99,417				44,393				33,517
Other short-term borrowings			332,000				343,000				195,000
Long-term borrowings			290,732				299,542				299,162
Other liabilities			58,299				55,769				55,231
Total liabilities			6,599,301				6,381,474				6,216,960
Commitments and contingencies
STOCKHOLDERS' EQUITY
Common stock, $1.33 par value, shares authorized 100,000,000; issued and outstanding, 44,990,569 shares, 45,162,853 shares, and 45,514,028 shares, respectively			59,514				59,795				60,267
Surplus			638,511				643,443				651,178
Retained earnings			288,841				261,676				253,510
Accumulated other comprehensive income			8,146				12,255				11,968
Total stockholders' equity			995,012				977,169				976,923
Total liabilities and stockholders' equity		$	7,594,313			$	7,358,643			$	7,193,883

 

 

UNION BANKSHARES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(Dollars in thousands, except share data)

 

		Three Months Ended												Nine Months Ended
		September 30,				June 30,				September 30,				September 30,				September 30,
		2015				2015				2014				2015				2014
Interest and dividend income:
Interest and fees on loans		$	62,651			$	62,604			$	62,340			$	185,706			$	184,996
Interest on federal funds sold			-				-				-				1				1
Interest on deposits in other banks			23				24				21				64				41
Interest and dividends on securities:
Taxable			3,954				3,860				3,883				11,621				11,391
Nontaxable			3,372				3,366				3,347				10,062				10,005
Total interest and dividend income			70,000				69,854				69,591				207,454				206,434
Interest expense:
Interest on deposits			4,204				3,680				3,027				11,204				7,833
Interest on federal funds purchased			1				4				3				6				49
Interest on short-term borrowings			223				255				108				728				373
Interest on long-term borrowings			2,128				2,099				1,974				6,287				6,226
Total interest expense			6,556				6,038				5,112				18,225				14,481
Net interest income			63,444				63,816				64,479				189,229				191,953
Provision for credit losses			2,062				3,749				1,800				7,561				3,300
Net interest income after provision for credit losses			61,382				60,067				62,679				181,668				188,653
Noninterest income:
Service charges on deposit accounts			4,965				4,622				4,458				13,800				13,281
Other service charges and fees			3,983				4,051				3,773				11,618				11,281
Fiduciary and asset management fees			2,304				2,312				2,120				6,835				6,753
Gains on sales of mortgage loans, net of commissions			2,630				2,574				2,598				7,582				7,925
Gains on securities transactions, net			75				404				995				672				1,449
Other-than-temporary impairment losses			(300	)			-				-				(300	)			-
Bank owned life insurance income			1,161				1,134				1,195				3,431				3,467
Other operating income			1,907				1,115				1,179				4,352				2,229
Total noninterest income			16,725				16,212				16,318				47,990				46,385
Noninterest expenses:
Salaries and benefits			25,853				25,561				25,636				78,905				82,466
Occupancy expenses			4,915				5,173				4,902				15,220				15,184
Furniture and equipment expenses			3,015				2,989				3,050				8,818				8,555
Printing, postage, and supplies			1,191				1,408				1,290				3,970				3,682
Communications expense			1,159				1,143				1,291				3,481				3,740
Technology and data processing			3,549				3,216				3,280				10,020				9,145
Professional services			1,991				1,669				1,400				5,008				3,897
Marketing and advertising expense			1,781				2,372				2,064				5,841				4,821
FDIC assessment premiums and other insurance			1,351				1,280				1,577				4,030				4,563
Other taxes			1,569				1,554				1,460				4,674				4,352
Loan-related expenses			935				687				814				2,306				1,987
OREO and credit-related expenses			1,263				1,965				6,559				4,415				10,254
Amortization of intangible assets			2,074				2,138				2,391				6,435				7,462
Acquisition and conversion costs			-				-				1,695				-				19,524
Other expenses			2,679				4,086				2,004				9,282				6,033
Total noninterest expenses			53,325				55,241				59,413				162,405				185,665
Income before income taxes			24,782				21,038				19,584				67,253				49,373
Income tax expense			6,566				5,690				4,767				17,989				12,174
Net income		$	18,216			$	15,348			$	14,817			$	49,264			$	37,199
Basic earnings per common share		$	0.40			$	0.34			$	0.32			$	1.09			$	0.80
Diluted earnings per common share		$	0.40			$	0.34			$	0.32			$	1.09			$	0.80

 

 

UNION BANKSHARES CORPORATION AND SUBSIDIARIES

SEGMENT FINANCIAL INFORMATION

(Dollars in thousands)

 

		Community Bank				Mortgage				Eliminations				Consolidated
Three Months Ended September 30, 2015
Net interest income		$	63,075			$	369			$	-			$	63,444
Provision for credit losses			2,000				62				-				2,062
Net interest income after provision for credit losses			61,075				307				-				61,382
Noninterest income			14,287				2,608				(170	)			16,725
Noninterest expenses			50,674				2,821				(170	)			53,325
Income before income taxes			24,688				94				-				24,782
Income tax expense			6,531				35				-				6,566
Net income		$	18,157			$	59			$	-			$	18,216
Plus: Merger and conversion related expense, after tax			-				-				-				-
Net operating earnings (non-GAAP)		$	18,157			$	59			$	-			$	18,216
Total assets		$	7,588,606			$	62,127			$	(56,420	)		$	7,594,313
Three Months Ended June 30, 2015
Net interest income		$	63,441			$	375			$	-			$	63,816
Provision for credit losses			3,700				49				-				3,749
Net interest income after provision for credit losses			59,741				326				-				60,067
Noninterest income			13,523				2,860				(171	)			16,212
Noninterest expenses			52,365				3,047				(171	)			55,241
Income (loss) before income taxes			20,899				139				-				21,038
Income tax expense (benefit)			5,646				44				-				5,690
Net income (loss)		$	15,253			$	95			$	-			$	15,348
Plus: Merger and conversion related expense, after tax			-				-				-				-
Net operating earnings (loss) (non-GAAP)		$	15,253			$	95			$	-			$	15,348
Total assets		$	7,495,564			$	55,563			$	(53,421	)		$	7,497,706
Three Months Ended September 30, 2014
Net interest income		$	64,162			$	317			$	-			$	64,479
Provision for credit losses			1,800				-				-				1,800
Net interest income after provision for credit losses			62,362				317				-				62,679
Noninterest income			13,884				2,604				(170	)			16,318
Noninterest expenses			55,680				3,903				(170	)			59,413
Income (loss) before income taxes			20,566				(982	)			-				19,584
Income tax expense (benefit)			5,121				(354	)			-				4,767
Net income (loss)		$	15,445			$	(628	)		$	-			$	14,817
Plus: Merger and conversion related expense, after tax			1,102				-				-				1,102
Net operating earnings (loss) (non-GAAP)		$	16,547			$	(628	)		$	-			$	15,919
Total assets		$	7,188,596			$	41,857			$	(36,570	)		$	7,193,883

 

 

		Community Bank				Mortgage				Eliminations				Consolidated
Nine Months Ended September 30, 2015
Net interest income		$	188,240			$	989			$	-			$	189,229
Provision for credit losses			7,450				111				-				7,561
Net interest income after provision for credit losses			180,790				878				-				181,668
Noninterest income			40,658				7,844				(512	)			47,990
Noninterest expenses			154,011				8,906				(512	)			162,405
Income (loss) before income taxes			67,437				(184	)			-				67,253
Income tax expense (benefit)			18,060				(71	)			-				17,989
Net income (loss)		$	49,377			$	(113	)		$	-			$	49,264
Plus: Merger and conversion related expense, after tax			-				-				-				-
Net operating earnings (loss) (non-GAAP)		$	49,377			$	(113	)		$	-			$	49,264
Total assets		$	7,588,606			$	62,127			$	(56,420	)		$	7,594,313
Nine Months Ended September 30, 2014
Net interest income		$	191,090			$	863			$	-			$	191,953
Provision for credit losses			3,300				-				-				3,300
Net interest income after provision for credit losses			187,790				863				-				188,653
Noninterest income			38,964				7,932				(511	)			46,385
Noninterest expenses			173,268				12,908				(511	)			185,665
Income (loss) before income taxes			53,486				(4,113	)			-				49,373
Income tax expense (benefit)			13,678				(1,504	)			-				12,174
Net income (loss)		$	39,808			$	(2,609	)		$	-			$	37,199
Plus: Merger and conversion related expense, after tax			13,161				-				-				13,161
Net operating earnings (loss) (non-GAAP)		$	52,969			$	(2,609	)		$	-			$	50,360
Total assets		$	7,188,596			$	41,857			$	(36,570	)		$	7,193,883

 

 

AVERAGE BALANCES, INCOME AND EXPENSES, YIELDS AND RATES (TAXABLE EQUIVALENT BASIS)

 

		For the Quarter Ended
		September 30, 2015												June 30, 2015
		Average Balance				Interest Income / Expense				Yield / Rate (1)				Average Balance				Interest Income / Expense				Yield / Rate (1)
		(Dollars in thousands)
Assets:
Securities:
Taxable		$	710,583			$	3,954				2.21	%		$	720,939			$	3,860				2.15	%
Tax-exempt			427,879				5,187				4.81	%			422,404				5,179				4.92	%
Total securities			1,138,462				9,141				3.19	%			1,143,343				9,039				3.17	%
Loans, net (2) (3)			5,525,119				62,745				4.51	%			5,448,126				62,687				4.62	%
Loans held for sale			44,904				378				3.34	%			43,307				395				3.66	%
Federal funds sold			807				-				0.20	%			572				-				0.17	%
Money market investments			1				-				0.00	%			1				-				0.00	%
Interest-bearing deposits in other banks			42,361				23				0.22	%			41,091				24				0.23	%
Total earning assets			6,751,654			$	72,287				4.25	%			6,676,440			$	72,145				4.33	%
Allowance for loan losses			(32,857	)											(31,675	)
Total non-earning assets			803,044												814,681
Total assets		$	7,521,841											$	7,459,446
Liabilities and Stockholders' Equity:
Interest-bearing deposits:
Transaction and money market accounts		$	2,706,542			$	1,289				0.19	%		$	2,632,835			$	1,201				0.18	%
Regular savings			567,034				248				0.17	%			564,348				262				0.19	%
Time deposits (4)			1,227,835				2,667				0.86	%			1,233,904				2,217				0.72	%
Total interest-bearing deposits			4,501,411				4,204				0.37	%			4,431,087				3,680				0.33	%
Other borrowings (5)			661,517				2,352				1.41	%			703,223				2,358				1.34	%
Total interest-bearing liabilities			5,162,928			$	6,556				0.50	%			5,134,310			$	6,038				0.47	%
Noninterest-bearing liabilities:
Demand deposits			1,312,735												1,278,876
Other liabilities			50,715												55,167
Total liabilities			6,526,378												6,468,353
Stockholders' equity			995,463												991,093
Total liabilities and stockholders' equity		$	7,521,841											$	7,459,446
Net interest income						$	65,731											$	66,107
Interest rate spread (6)											3.75	%											3.86	%
Cost of funds											0.39	%											0.36	%
Net interest margin (7)											3.86	%											3.97	%

 

(1) Rates and yields are annualized and calculated from actual, not rounded, amounts in thousands, which appear above.

(2) Nonaccrual loans are included in average loans outstanding.

(3) Interest income on loans includes $1.4 million and $1.1 million for the three months ended September 30, 2015 and June 30, 2015, respectively, in accretion of the fair market value adjustments related to acquisitions.

(4) Interest expense on certificates of deposits includes $154,000 and $614,000 for the three months ended September 30, 2015 and June 30, 2015, respectively, in accretion of the fair market value adjustments related to acquisitions.

(5) Interest expense on borrowings includes $87,000 and $137,000 for the three months ended September 30, 2015 and June 30, 2015, respectively, in accretion of the fair market value adjustments related to acquisitions.

(6) Income and yields are reported on a taxable equivalent basis using the statutory federal corporate tax rate of 35%.

(7) Core net interest margin excludes purchase accounting adjustments and was 3.77% and 3.86% for the three months ended September 30, 2015 and June 30, 2015, respectively.