RICHMOND, Va., Oct. 18, 2017 (GLOBE NEWSWIRE) -- Union Bankshares Corporation (the “Company” or “Union”) (NASDAQ:UBSH) today reported net operating earnings(1) of $21.3 million and operating earnings per share(1) of $0.49 for its third quarter ended September 30, 2017; these operating results exclude $661,000 in after-tax merger-related costs. The Company's net operating earnings and operating earnings per share for the third quarter of 2017 represent increases of $1.0 million, or 4.9%, and $0.03, or 6.5%, respectively, in each case compared to the second quarter of 2017. For the third quarter ended September 30, 2017, net income, which includes the impact of merger-related costs, was $20.7 million, an increase of $2.7 million, or 15.0%, compared to the second quarter of 2017, and earnings per share was $0.47, an increase of $0.06, or 14.6%, compared to the second quarter of 2017.
For the nine months ended September 30, 2017, net operating earnings(1) were $60.8 million and operating earnings per share(1) were $1.39. The Company's net operating earnings and operating earnings per share for the nine months ended September 30, 2017 represent an increase of 7.2% and 7.8%, respectively, compared to the net income and earnings per share for the nine months ended September 30, 2016. For the nine months ended September 30, 2017, net income, which includes the impact of merger-related costs, was $57.7 million, an increase of 1.8% compared to the same period in 2016, and earnings per share were $1.32, an increase of 2.3% compared to the same period in 2016.
“Union delivered another solid quarterly performance with growth in operating earnings and earnings per share as we continue to gain market share and tell our unique story, which we believe is being well received in our markets,” said John C. Asbury, president and chief executive officer of Union Bankshares Corporation. “Our profitability metrics improved, and I was especially pleased to see significant progress made in lowering the efficiency ratio this quarter. The Xenith acquisition remains on track to close in early January, and I am confident that our combination will accelerate the achievement of our top tier financial performance goals, which should provide our shareholders with above average returns on their investments over the long term. Union is fast becoming something that Virginia hasn’t had in nearly 20 years - a statewide regional bank that is uniquely positioned to provide value to our teammates, customers, shareholders and the communities we serve.”
Select highlights for the third quarter of 2017 include:
- On October 17, 2017, the Company and Xenith Bankshares, Inc. (“Xenith”) jointly announced the receipt of regulatory approval from the Federal Reserve Bank of Richmond and from the Virginia State Corporation Commission to move forward with the proposed merger of Xenith into the Company (the “Pending Merger”).
- Net income for the community bank segment was $20.3 million, or $0.46 per share, for the third quarter of 2017, compared to $17.4 million, or $0.40 per share, for the second quarter of 2017. Net operating earnings(1) for the community bank segment were $21.0 million, or $0.48 per share, for the third quarter of 2017, compared to $19.8 million, or $0.45 per share, for the second quarter of 2017. Net income for the community bank segment was $56.8 million, or $1.30 per share, for the nine months ended September 30, 2017, compared to $55.3 million, or $1.26 per share, for the nine months ended September 30, 2016. Net operating earnings(1) for the community bank segment were $59.9 million, or $1.37 per share, for the nine months ended September 30, 2017.
- The mortgage segment reported net income of $347,000, or $0.01 per share, for the third quarter of 2017, compared to $551,000, or $0.01 per share, in the second quarter of 2017. The mortgage segment reported net income of $901,000, or $0.02 per share, for the nine months ended September 30, 2017 compared to $1.4 million, or $0.03 per share, for the nine months ended September 30, 2016.
- Return on Average Assets (“ROA”) was 0.91% and operating ROA(1) was 0.94% for the quarter ended September 30, 2017 compared to ROA of 0.82% and operating ROA of 0.93% for the quarter ended June 30, 2017 and ROA of 1.00% for the quarter ended September 30, 2016.
- Return on Average Equity (“ROE”) was 7.90% and operating ROE(1) was 8.15% for the quarter ended September 30, 2017 compared to ROE of 7.02% and operating ROE of 7.94% for the quarter ended June 30, 2017 and ROE of 8.14% for the quarter ended September 30, 2016.
- Return on Average Tangible Common Equity (“ROTCE”) was 11.34% and operating ROTCE(1) was 11.70% for the quarter ended September 30, 2017 compared to ROTCE of 10.15% and operating ROTCE of 11.48% for the prior quarter and ROTCE of 12.00% for the third quarter of 2016.
- The efficiency ratio (FTE) was 62.9% and the operating efficiency ratio (FTE)(1) was 62.1% for the quarter ended September 30, 2017 compared to the efficiency ratio (FTE) of 66.8% and operating efficiency ratio (FTE) of 63.8% for the prior quarter and efficiency ratio (FTE) of 64.4% for the third quarter of 2016.
- Loans held for investment grew $127.2 million, or 7.5% (annualized), from June 30, 2017 and increased $749.8 million, or 12.2%, from September 30, 2016. Average loans held for investment increased $194.5 million, or 11.7% (annualized), from the prior quarter and increased $788.8 million, or 13.1%, from the same quarter in the prior year.
- Period-end deposits increased $117.4 million, or 6.9% (annualized), from June 30, 2017 and grew $623.3 million, or 10.0%, from September 30, 2016. Average deposits increased $160.1 million, or 9.6% (annualized), from the prior quarter and increased $592.9 million, or 9.6%, from the same quarter in the prior year.
(1) For a reconciliation of the non-GAAP operating measures that exclude merger-related costs unrelated to the Company’s normal operations, see Alternative Performance Measures (non-GAAP) section of the Key Financial Results. Such costs were only incurred during the second and third quarters of 2017; thus each of these operating measures is equivalent to the corresponding GAAP financial measure for the three and nine months ended September 30, 2016.
NET INTEREST INCOME
For the third quarter of 2017, net interest income was $71.2 million, an increase of $2.2 million from the second quarter of 2017. Tax-equivalent net interest income was $73.8 million, an increase of $2.2 million from the second quarter of 2017. The increases in both net interest income and tax-equivalent net interest income were driven by higher earning asset balances. The third quarter net interest margin decreased 3 basis points to 3.46% from 3.49% in the previous quarter, while the tax-equivalent net interest margin also decreased 3 basis points to 3.59% from 3.62% during the same periods. The decrease in the tax-equivalent net interest margin was principally due to the 4 basis point increase in tax-equivalent cost of funds partially offset by the 1 basis point increase in the tax-equivalent yield on earning assets.
The Company’s tax-equivalent net interest margin includes the impact of acquisition accounting fair value adjustments. During the third quarter of 2017, net accretion related to acquisition accounting increased $92,000, or 5.7%, from the prior quarter to $1.7 million for the quarter ended September 30, 2017. The second and third quarters of 2017 as well as the remaining estimated net accretion impact are reflected in the following table (dollars in thousands):
| Loan Accretion | Borrowings Accretion (Amortization) | Total | ||||||||||
| For the quarter ended June 30, 2017 | $ | 1,570 | $ | 47 | $ | 1,617 | ||||||
| For the quarter ended September 30, 2017 | 1,662 | 47 | 1,709 | |||||||||
| For the remaining three months of 2017 (estimated) (1) | 1,358 | 28 | 1,386 | |||||||||
| For the years ending (estimated) (1): | ||||||||||||
| 2018 | 4,842 | (143 | ) | 4,699 | ||||||||
| 2019 | 3,483 | (286 | ) | 3,197 | ||||||||
| 2020 | 2,689 | (301 | ) | 2,388 | ||||||||
| 2021 | 2,187 | (316 | ) | 1,871 | ||||||||
| 2022 | 1,767 | (332 | ) | 1,435 | ||||||||
| Thereafter | 6,589 | (4,974 | ) | 1,615 | ||||||||
(1) Estimated accretion only includes accretion for previously executed acquisitions. The effects of the Pending Merger are not included in the information above.
ASSET QUALITY/LOAN LOSS PROVISION
Overview
During the third quarter of 2017, the Company experienced declines in nonperforming asset balances from the prior quarter, primarily related to charge-offs of nonaccrual loans. The loan loss provision increased from the prior quarter due to loan growth and higher levels of charge-offs in the third quarter of 2017. The allowance for loan losses and the related allowance for loan losses to total loans ratio decreased from the prior quarter primarily due to the continued decline in the historical loss rates and reductions in specific reserves on impaired loans that were charged off during the quarter.
All nonaccrual and past due loan metrics discussed below exclude purchased credit impaired (“PCI”) loans totaling $51.0 million (net of fair value mark of $11.7 million).
Nonperforming Assets (“NPAs”)
At September 30, 2017, NPAs totaled $28.9 million, a decline of $5.2 million, or 15.2%, from June 30, 2017 and an increase of $5.6 million, or 24.2%, from September 30, 2016. In addition, NPAs as a percentage of total outstanding loans declined 8 basis points from 0.50% at June 30, 2017 and increased 4 basis points from 0.38% at September 30, 2016 to 0.42% at September 30, 2017. As the Company's NPAs have been at historic lows over the last several quarters, certain changes from quarter to quarter might stand out in comparison to one another but have an insignificant impact on the Company's overall asset quality position. The following table shows a summary of asset quality balances at the quarter ended (dollars in thousands):
| September 30, | June 30, | March 31, | December 31, | September 30, | |||||||||||||||
| 2017 | 2017 | 2017 | 2016 | 2016 | |||||||||||||||
| Nonaccrual loans | $ | 20,122 | $ | 24,574 | $ | 22,338 | $ | 9,973 | $ | 12,677 | |||||||||
| Foreclosed properties | 6,449 | 6,828 | 6,951 | 7,430 | 7,927 | ||||||||||||||
| Former bank premises | 2,315 | 2,654 | 2,654 | 2,654 | 2,654 | ||||||||||||||
| Total nonperforming assets | $ | 28,886 | $ | 34,056 | $ | 31,943 | $ | 20,057 | $ | 23,258 | |||||||||
The following table shows the activity in nonaccrual loans for the quarter ended (dollars in thousands):
| September 30, | June 30, | March 31, | December 31, | September 30, | |||||||||||||||
| 2017 | 2017 | 2017 | 2016 | 2016 | |||||||||||||||
| Beginning Balance | $ | 24,574 | $ | 22,338 | $ | 9,973 | $ | 12,677 | $ | 10,861 | |||||||||
| Net customer payments | (4,642 | ) | (1,498 | ) | (1,068 | ) | (1,451 | ) | (1,645 | ) | |||||||||
| Additions | 4,114 | 5,979 | 13,557 | 1,094 | 4,359 | ||||||||||||||
| Charge-offs | (3,376 | ) | (2,004 | ) | (97 | ) | (1,216 | ) | (660 | ) | |||||||||
| Loans returning to accruing status | — | (134 | ) | (27 | ) | (1,039 | ) | (23 | ) | ||||||||||
| Transfers to OREO | (548 | ) | (107 | ) | — | (92 | ) | (215 | ) | ||||||||||
| Ending Balance | $ | 20,122 | $ | 24,574 | $ | 22,338 | $ | 9,973 | $ | 12,677 | |||||||||
The net decline in nonaccrual loans from the prior quarter was primarily attributable to charge-offs and customer payments.
The following table shows the activity in other real estate owned ("OREO") for the quarter ended (dollars in thousands):
| September 30, | June 30, | March 31, | December 31, | September 30, | |||||||||||||||
| 2017 | 2017 | 2017 | 2016 | 2016 | |||||||||||||||
| Beginning Balance | $ | 9,482 | $ | 9,605 | $ | 10,084 | $ | 10,581 | $ | 13,381 | |||||||||
| Additions of foreclosed property | 621 | 132 | — | 859 | 246 | ||||||||||||||
| Valuation adjustments | (588 | ) | (19 | ) | (238 | ) | (138 | ) | (479 | ) | |||||||||
| Proceeds from sales | (648 | ) | (272 | ) | (277 | ) | (1,282 | ) | (2,844 | ) | |||||||||
| Gains (losses) from sales | (103 | ) | 36 | 36 | 64 | 277 | |||||||||||||
| Ending Balance | $ | 8,764 | $ | 9,482 | $ | 9,605 | $ | 10,084 | $ | 10,581 | |||||||||
Past Due Loans
Past due loans still accruing interest totaled $34.3 million, or 0.50% of total loans, at September 30, 2017 compared to $27.4 million, or 0.40% of total loans, at June 30, 2017 and $26.9 million, or 0.44% of total loans, at September 30, 2016. Of the total past due loans still accruing interest, $4.5 million, or 0.07% of total loans, were loans past due 90 days or more at September 30, 2017, compared to $3.6 million, or 0.05% of total loans, at June 30, 2017 and $3.5 million, or 0.06% of total loans, at September 30, 2016.
Net Charge-offs
For the third quarter of 2017, net charge-offs were $4.1 million, or 0.24% of total average loans on an annualized basis, compared to $2.5 million, or 0.15%, for the prior quarter and $929,000, or 0.06%, for the same quarter last year. Of the net charge-offs in the third quarter of 2017, the majority were previously considered impaired. For the nine months ended September 30, 2017, net charge-offs were $7.4 million, or 0.15% of total average loans on annualized basis, compared to $4.7 million, or 0.11%, for the same period in 2016.
Provision for Loan Losses
The provision for loan losses for the third quarter of 2017 was $3.1 million, an increase of $750,000 compared to the previous quarter and an increase of $653,000 compared to the same quarter in 2016. The increase in provision for loan losses was primarily driven by higher loan balances and higher levels of charge-offs in the third quarter of 2017.
Allowance for Loan Losses
The allowance for loan losses (“ALL”) decreased $1.1 million from June 30, 2017 to $37.2 million at September 30, 2017 primarily due to the continued decline in the historical loss rates and reductions in specific reserves on impaired loans that were charged off during the quarter. The ALL as a percentage of the total loan portfolio was 0.54% at September 30, 2017, 0.56% at June 30, 2017, and 0.59% at September 30, 2016.
The ratio of the ALL to nonaccrual loans was 184.7% at September 30, 2017, compared to 155.5% at June 30, 2017 and 288.3% at September 30, 2016. The current level of the allowance for loan losses reflects specific reserves related to nonperforming loans, current risk ratings on loans, net charge-off activity, loan growth, delinquency trends, and other credit risk factors that the Company considers important in assessing the adequacy of the allowance for loan losses.
NONINTEREST INCOME
Noninterest income decreased $520,000, or 2.9%, to $17.5 million for the quarter ended September 30, 2017 from $18.1 million in the prior quarter, primarily driven by lower loan-related swap fees and mortgage banking income, partially offset by increases in customer-related fee income and higher insurance-related income.
Mortgage banking income decreased $488,000, or 17.5%, to $2.3 million in the third quarter of 2017 compared to $2.8 million in the second quarter of 2017, related to declines in mortgage loan originations. Mortgage loan originations declined by $9.2 million, or 6.8%, in the third quarter to $127.3 million from $136.6 million in the second quarter of 2017. The majority of the decrease was related to purchase-money mortgage loans, which declined by $13.0 million from the prior quarter. Of the mortgage loan originations in the third quarter of 2017, 28.0% were refinances compared with 23.4% in the prior quarter.
NONINTEREST EXPENSE
Noninterest expense decreased $2.4 million, or 4.1%, to $57.5 million for the quarter ended September 30, 2017 from $59.9 million in the prior quarter. Excluding merger-related costs of $732,000 and $2.7 million in the third and second quarters of 2017, respectively, operating noninterest expense decreased $422,000 when compared to the second quarter of 2017. Salaries and benefits expenses declined by $792,000 primarily related to declines in incentive compensation. Marketing and advertising costs decreased $335,000 due to seasonally lower expenses. These decreases were partially offset by an increase in OREO and credit-related expenses of $797,000 primarily due to higher valuation adjustments of $569,000 and losses on sales of OREO property compared to gains on sales of OREO property in the prior quarter.
BALANCE SHEET
At September 30, 2017, total assets were $9.0 billion, an increase of $114.2 million from June 30, 2017 and an increase of $771.2 million from September 30, 2016. The increase in assets was mostly related to loan growth.
At September 30, 2017, loans held for investment (net of deferred fees and costs) were $6.9 billion, an increase of $127.2 million, or 7.5% (annualized), from June 30, 2017, while average loans increased $194.5 million, or 11.7% (annualized), from the prior quarter. Loans held for investment increased $749.8 million, or 12.2%, from September 30, 2016, while quarterly average loans increased $788.8 million, or 13.1%, from the prior year.
At September 30, 2017, total deposits were $6.9 billion, an increase of $117.4 million, or 6.9% (annualized), from June 30, 2017, while average deposits increased $160.1 million, or 9.6% (annualized), from the prior quarter. Total deposits grew $623.3 million, or 10.0%, from September 30, 2016, while quarterly average deposits increased $592.9 million, or 9.6%, from the prior year.
At September 30, 2017, June 30, 2017, and September 30, 2016, respectively, the Company had a common equity Tier 1 capital ratio of 9.40%, 9.39%, and 9.78%; a Tier 1 capital ratio of 10.56%, 10.57%, and 11.07%; a total capital ratio of 12.94%, 13.00%, and 11.60%; and a leverage ratio of 9.52%, 9.61%, and 9.89%.
The Company’s common equity to total assets ratios at September 30, 2017, June 30, 2017, and September 30, 2016 were 11.53%, 11.56%, and 12.12%, respectively, while its tangible common equity to tangible assets ratio was 8.34%, 8.32%, and 8.57%, respectively.
During the third quarter of 2017, the Company declared and paid cash dividends of $0.20 per common share, consistent with the prior quarter and an increase of $0.01, or 5.3%, compared to the same quarter in the prior year.
ABOUT UNION BANKSHARES CORPORATION
Headquartered in Richmond, Virginia, Union Bankshares Corporation (NASDAQ:UBSH) is the holding company for Union Bank & Trust, which has 111 banking offices and approximately 173 ATMs located throughout Virginia. Non-bank affiliates of the holding company include: Union Mortgage Group, Inc., which provides a full line of mortgage products, Old Dominion Capital Management, Inc., which provides investment advisory services, and Union Insurance Group, LLC, which offers various lines of insurance products.
Additional information on the Company is available at http://investors.bankatunion.com.
Union Bankshares Corporation will hold a conference call on Wednesday, October 18th, at 9:00 a.m. Eastern Time during which management will review earnings and performance trends. Callers wishing to participate may call toll-free by dialing (877) 668-4908; international callers wishing to participate may do so by dialing (973) 453-3058. The conference ID number is 95436690.
NON-GAAP MEASURES
In reporting the results of the quarter ended September 30, 2017, the Company has provided supplemental performance measures on a tax-equivalent, tangible, or operating basis. These measures are a supplement to GAAP used to prepare the Company’s financial statements and should not be considered in isolation or as a substitute for comparable measures calculated in accordance with GAAP. In addition, the Company’s non-GAAP measures may not be comparable to non-GAAP measures of other companies.
FORWARD-LOOKING STATEMENTS
Certain statements in this press release may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements that include projections, predictions, expectations, or beliefs about future events or results or otherwise are not statements of historical fact, are based on certain assumptions as of the time they are made, and are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. Such statements are often characterized by the use of qualified words (and their derivatives) such as “expect,” “believe,” “estimate,” “plan,” “project,” “anticipate,” “intend,” “will,” “may,” “view,” “opportunity,” “potential,” or words of similar meaning or other statements concerning opinions or judgment of the Company and its management about future events. Although the Company believes that its expectations with respect to forward-looking statements are based upon reasonable assumptions within the bounds of its existing knowledge of its business and operations, there can be no assurance that actual results, performance, or achievements of the Company will not differ materially from any projected future results, performance, or achievements expressed or implied by such forward-looking statements. Actual future results and trends may differ materially from historical results or those anticipated depending on a variety of factors, including, but not limited to, the effects of or changes in:
- the possibility that any of the anticipated benefits of the Pending Merger with Xenith will not be realized or will not be realized within the expected time period, the businesses of the Company and Xenith may not be integrated successfully or such integration may be more difficult, time-consuming or costly than expected, the expected revenue synergies and cost savings from the Pending Merger may not be fully realized or realized within the expected time frame, revenues following the Pending Merger may be lower than expected, customer and employee relationships and business operations may be disrupted by the Pending Merger, or obtaining required shareholder approvals, or completing the Pending Merger on the expected timeframe, may be more difficult, time-consuming or costly than expected,
- changes in interest rates,
- general economic and financial market conditions,
- the Company’s ability to manage its growth or implement its growth strategy,
- the incremental cost and/or decreased revenues associated with exceeding $10 billion in assets,
- levels of unemployment in the Bank’s lending area,
- real estate values in the Bank’s lending area,
- an insufficient allowance for loan losses,
- the quality or composition of the loan or investment portfolios,
- concentrations of loans secured by real estate, particularly commercial real estate,
- the effectiveness of the Company’s credit processes and management of the Company’s credit risk,
- demand for loan products and financial services in the Company’s market area,
- the Company’s ability to compete in the market for financial services,
- technological risks and developments, and cyber attacks or events,
- performance by the Company’s counterparties or vendors,
- deposit flows,
- the availability of financing and the terms thereof,
- the level of prepayments on loans and mortgage-backed securities,
- legislative or regulatory changes and requirements,
- monetary and fiscal policies of the U.S. government including policies of the U.S. Department of the Treasury and the Board of Governors of the Federal Reserve System, and
- accounting principles and guidelines.
More information on risk factors that could affect the Company’s forward-looking statements is available on the Company’s website, http://investors.bankatunion.com or the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2017, and other reports filed with the Securities and Exchange Commission (“SEC”). The information on the Company’s website is not a part of this press release. All risk factors and uncertainties described in those documents should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. The Company does not intend or assume any obligation to update or revise any forward-looking statements that may be made from time to time by or on behalf of the Company.
ADDITIONAL INFORMATION ABOUT THE PENDING MERGER AND WHERE TO FIND IT
In connection with the Pending Merger, the Company has filed with the SEC a registration statement on Form S-4 to register the shares of the Company’s common stock to be issued to the shareholders of Xenith. The registration statement includes a joint proxy statement of the Company and Xenith and a prospectus of the Company. A definitive joint proxy statement/prospectus was first sent to the shareholders of the Company and Xenith on September 21, 2017 seeking their approval of the Pending Merger and related matters. This release does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval. Before making any voting or investment decision, investors and shareholders of the Company and Xenith are urged to read carefully the entire registration statement and joint proxy statement/prospectus, including all amendments thereto, because they contain important information about the Pending Merger. Free copies of these documents may be obtained as described below.
Investors and shareholders of both companies are urged to read the registration statement on Form S-4 and the joint proxy statement/prospectus included within the registration statement and any other relevant documents filed with the SEC in connection with the Pending Merger because they contain important information about the Company, Xenith and the Pending Merger. Investors and shareholders of both companies are urged to review carefully and consider all public filings by the Company and Xenith with the SEC, including but not limited to their Annual Reports on Form 10-K, their proxy statements, their Quarterly Reports on Form 10-Q, and their Current Reports on Form 8-K. Investors and shareholders may obtain free copies of these documents through the website maintained by the SEC at www.sec.gov. Free copies of the joint proxy statement/prospectus and other documents filed with the SEC also may be obtained by directing a request by telephone or mail to Union Bankshares Corporation, 1051 East Cary Street, Suite 1200, Richmond, Virginia 23219, Attention: Investor Relations (telephone: (804) 633-5031), or Xenith Bankshares, Inc., 901 E. Cary Street Richmond, Virginia, 23219, Attention: Thomas W. Osgood (telephone: (804) 433-2200), or by accessing the Company’s website at www.bankatunion.com under “Investor Relations” or Xenith’s website at www.xenithbank.com under “Investor Relations” under “About Us.” The information on the Company’s and Xenith’s websites is not, and shall not be deemed to be, a part of this release or incorporated into other filings either company makes with the SEC.
The Company and Xenith and their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from the shareholders of the Company and/or Xenith in connection with the Pending Merger. Information about the directors and executive officers of the Company is set forth in the proxy statement for the Company’s 2017 annual meeting of shareholders filed with the SEC on March 21, 2017. Information about the directors and executive officers of Xenith is set forth in Xenith’s Annual Report on Form 10-K, as amended, filed with the SEC on May 1, 2017. Additional information regarding the interests of these participants and other persons who may be deemed participants in the Pending Merger may be obtained by reading the joint proxy statement/prospectus regarding the Pending Merger when it becomes available. Free copies of these documents may be obtained as described above.
| UNION BANKSHARES CORPORATION AND SUBSIDIARIES | |||||||||||||||||||
| KEY FINANCIAL RESULTS | |||||||||||||||||||
| (Dollars in thousands, except share data) | |||||||||||||||||||
| (FTE - "Fully Taxable Equivalent") | |||||||||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||||||
| 9/30/17 | 6/30/17 | 9/30/16 | 9/30/17 | 9/30/16 | |||||||||||||||
| Results of Operations | (unaudited) | (unaudited) | (unaudited) | (unaudited) | (unaudited) | ||||||||||||||
| Interest and dividend income | $ | 84,850 | $ | 81,221 | $ | 74,433 | $ | 242,712 | $ | 217,964 | |||||||||
| Interest expense | 13,652 | 12,222 | 7,405 | 35,947 | 21,429 | ||||||||||||||
| Net interest income | 71,198 | 68,999 | 67,028 | 206,765 | 196,535 | ||||||||||||||
| Provision for credit losses | 3,050 | 2,173 | 2,472 | 7,345 | 7,376 | ||||||||||||||
| Net interest income after provision for credit losses | 68,148 | 66,826 | 64,556 | 199,420 | 189,159 | ||||||||||||||
| Noninterest income | 17,536 | 18,056 | 18,950 | 54,430 | 52,857 | ||||||||||||||
| Noninterest expenses | 57,496 | 59,930 | 56,913 | 174,821 | 166,436 | ||||||||||||||
| Income before income taxes | 28,188 | 24,952 | 26,593 | 79,029 | 75,580 | ||||||||||||||
| Income tax expense | 7,530 | 6,996 | 6,192 | 21,292 | 18,881 | ||||||||||||||
| Net income | $ | 20,658 | $ | 17,956 | $ | 20,401 | $ | 57,737 | $ | 56,699 | |||||||||
| Interest earned on earning assets (FTE) (1) | $ | 87,498 | $ | 83,869 | $ | 76,860 | $ | 250,548 | $ | 225,331 | |||||||||
| Net interest income (FTE) (1) | 73,846 | 71,647 | 69,455 | 214,601 | 203,902 | ||||||||||||||
| Net income - community bank segment | $ | 20,311 | $ | 17,405 | $ | 19,616 | $ | 56,836 | $ | 55,321 | |||||||||
| Net income - mortgage segment | 347 | 551 | 785 | 901 | 1,378 | ||||||||||||||
| Key Ratios | |||||||||||||||||||
| Earnings per common share, diluted | $ | 0.47 | $ | 0.41 | $ | 0.47 | $ | 1.32 | $ | 1.29 | |||||||||
| Return on average assets (ROA) | 0.91 | % | 0.82 | % | 1.00 | % | 0.88 | % | 0.95 | % | |||||||||
| Return on average equity (ROE) | 7.90 | % | 7.02 | % | 8.14 | % | 7.53 | % | 7.64 | % | |||||||||
| Return on average tangible common equity (ROTCE) (2) | 11.34 | % | 10.15 | % | 12.00 | % | 10.90 | % | 11.25 | % | |||||||||
| Efficiency ratio | 64.80 | % | 68.84 | % | 66.19 | % | 66.93 | % | 66.74 | % | |||||||||
| Efficiency ratio (FTE) (1) | 62.92 | % | 66.81 | % | 64.38 | % | 64.98 | % | 64.82 | % | |||||||||
| Net interest margin | 3.46 | % | 3.49 | % | 3.63 | % | 3.49 | % | 3.67 | % | |||||||||
| Net interest margin (FTE) (1) | 3.59 | % | 3.62 | % | 3.76 | % | 3.62 | % | 3.80 | % | |||||||||
| Yields on earning assets (FTE) (1) | 4.25 | % | 4.24 | % | 4.16 | % | 4.23 | % | 4.20 | % | |||||||||
| Cost of interest-bearing liabilities (FTE) (1) | 0.85 | % | 0.79 | % | 0.52 | % | 0.78 | % | 0.52 | % | |||||||||
| Cost of funds (FTE) (1) | 0.66 | % | 0.62 | % | 0.40 | % | 0.61 | % | 0.40 | % | |||||||||
| Operating Measures (3) | |||||||||||||||||||
| Net operating earnings | $ | 21,319 | $ | 20,314 | $ | 20,401 | $ | 60,757 | $ | 56,699 | |||||||||
| Operating earnings per share, diluted | $ | 0.49 | $ | 0.46 | $ | 0.47 | $ | 1.39 | $ | 1.29 | |||||||||
| Operating ROA | 0.94 | % | 0.93 | % | 1.00 | % | 0.93 | % | 0.95 | % | |||||||||
| Operating ROE | 8.15 | % | 7.94 | % | 8.14 | % | 7.93 | % | 7.64 | % | |||||||||
| Operating ROTCE | 11.70 | % | 11.48 | % | 12.00 | % | 11.47 | % | 11.25 | % | |||||||||
| Operating efficiency ratio (FTE) | 62.12 | % | 63.75 | % | 64.38 | % | 63.69 | % | 64.82 | % | |||||||||
| Community bank segment net operating earnings | $ | 20,972 | $ | 19,763 | $ | 19,616 | $ | 59,856 | $ | 55,321 | |||||||||
| Community bank segment operating earnings per share, diluted | $ | 0.48 | $ | 0.45 | $ | 0.45 | $ | 1.37 | $ | 1.26 | |||||||||
| Per Share Data | |||||||||||||||||||
| Earnings per common share, basic | $ | 0.47 | $ | 0.41 | $ | 0.47 | $ | 1.32 | $ | 1.29 | |||||||||
| Earnings per common share, diluted | 0.47 | 0.41 | 0.47 | 1.32 | 1.29 | ||||||||||||||
| Cash dividends paid per common share | 0.20 | 0.20 | 0.19 | 0.60 | 0.57 | ||||||||||||||
| Market value per share | 35.30 | 33.90 | 26.77 | 35.30 | 26.77 | ||||||||||||||
| Book value per common share | 24.00 | 23.79 | 23.18 | 24.00 | 23.18 | ||||||||||||||
| Tangible book value per common share (2) | 16.76 | 16.50 | 15.75 | 16.76 | 15.75 | ||||||||||||||
| Price to earnings ratio, diluted | 18.93 | 20.61 | 14.32 | 20.00 | 15.54 | ||||||||||||||
| Price to book value per common share ratio | 1.47 | 1.42 | 1.15 | 1.47 | 1.15 | ||||||||||||||
| Price to tangible book value per common share ratio (2) | 2.11 | 2.05 | 1.70 | 2.11 | 1.70 | ||||||||||||||
| Weighted average common shares outstanding, basic | 43,706,635 | 43,693,427 | 43,565,937 | 43,685,045 | 43,853,548 | ||||||||||||||
| Weighted average common shares outstanding, diluted | 43,792,058 | 43,783,952 | 43,754,915 | 43,767,502 | 43,967,725 | ||||||||||||||
| Common shares outstanding at end of period | 43,729,229 | 43,706,000 | 43,556,486 | 43,729,229 | 43,556,486 | ||||||||||||||
| As of & For Three Months Ended | As of & For Nine Months Ended | ||||||||||||||||||
| 9/30/17 | 6/30/17 | 9/30/16 | 9/30/17 | 9/30/16 | |||||||||||||||
| Capital Ratios | (unaudited) | (unaudited) | (unaudited) | (unaudited) | (unaudited) | ||||||||||||||
| Common equity Tier 1 capital ratio (4) | 9.40 | % | 9.39 | % | 9.78 | % | 9.40 | % | 9.78 | % | |||||||||
| Tier 1 capital ratio (4) | 10.56 | % | 10.57 | % | 11.07 | % | 10.56 | % | 11.07 | % | |||||||||
| Total capital ratio (4) | 12.94 | % | 13.00 | % | 11.60 | % | 12.94 | % | 11.60 | % | |||||||||
| Leverage ratio (Tier 1 capital to average assets) (4) | 9.52 | % | 9.61 | % | 9.89 | % | 9.52 | % | 9.89 | % | |||||||||
| Common equity to total assets | 11.53 | % | 11.56 | % | 12.12 | % | 11.53 | % | 12.12 | % | |||||||||
| Tangible common equity to tangible assets (2) | 8.34 | % | 8.32 | % | 8.57 | % | 8.34 | % | 8.57 | % | |||||||||
| Financial Condition | |||||||||||||||||||
| Assets | $ | 9,029,436 | $ | 8,915,187 | $ | 8,258,230 | $ | 9,029,436 | $ | 8,258,230 | |||||||||
| Loans held for investment | 6,898,729 | 6,771,490 | 6,148,918 | 6,898,729 | 6,148,918 | ||||||||||||||
| Earning Assets | 8,232,413 | 8,094,574 | 7,466,956 | 8,232,413 | 7,466,956 | ||||||||||||||
| Goodwill | 298,191 | 298,191 | 298,191 | 298,191 | 298,191 | ||||||||||||||
| Amortizable intangibles, net | 16,017 | 17,422 | 22,343 | 16,017 | 22,343 | ||||||||||||||
| Deposits | 6,881,826 | 6,764,434 | 6,258,506 | 6,881,826 | 6,258,506 | ||||||||||||||
| Stockholders' equity | 1,041,371 | 1,030,869 | 1,000,964 | 1,041,371 | 1,000,964 | ||||||||||||||
| Tangible common equity (2) | 727,163 | 715,256 | 680,430 | 727,163 | 680,430 | ||||||||||||||
| Loans held for investment, net of deferred fees and costs | |||||||||||||||||||
| Construction and land development | $ | 841,738 | $ | 799,938 | $ | 776,430 | $ | 841,738 | $ | 776,430 | |||||||||
| Commercial real estate - owner occupied | 903,523 | 888,285 | 857,142 | 903,523 | 857,142 | ||||||||||||||
| Commercial real estate - non-owner occupied | 1,748,039 | 1,698,329 | 1,454,828 | 1,748,039 | 1,454,828 | ||||||||||||||
| Multifamily real estate | 368,686 | 367,257 | 339,313 | 368,686 | 339,313 | ||||||||||||||
| Commercial & Industrial | 554,522 | 568,602 | 509,857 | 554,522 | 509,857 | ||||||||||||||
| Residential 1-4 Family | 1,083,112 | 1,066,519 | 999,361 | 1,083,112 | 999,361 | ||||||||||||||
| Auto | 276,572 | 274,162 | 255,188 | 276,572 | 255,188 | ||||||||||||||
| HELOC | 535,446 | 535,088 | 524,097 | 535,446 | 524,097 | ||||||||||||||
| Consumer and all other | 587,091 | 573,310 | 432,702 | 587,091 | 432,702 | ||||||||||||||
| Total loans held for investment | $ | 6,898,729 | $ | 6,771,490 | $ | 6,148,918 | $ | 6,898,729 | $ | 6,148,918 | |||||||||
| Deposits | |||||||||||||||||||
| NOW accounts | $ | 1,851,327 | $ | 1,882,287 | $ | 1,635,446 | $ | 1,851,327 | $ | 1,635,446 | |||||||||
| Money market accounts | 1,621,443 | 1,559,895 | 1,398,177 | 1,621,443 | 1,398,177 | ||||||||||||||
| Savings accounts | 553,082 | 558,472 | 596,702 | 553,082 | 596,702 | ||||||||||||||
| Time deposits of $100,000 and over | 621,070 | 580,962 | 528,227 | 621,070 | 528,227 | ||||||||||||||
| Other time deposits | 699,755 | 681,248 | 657,686 | 699,755 | 657,686 | ||||||||||||||
| Total interest-bearing deposits | $ | 5,346,677 | $ | 5,262,864 | $ | 4,816,238 | $ | 5,346,677 | $ | 4,816,238 | |||||||||
| Demand deposits | 1,535,149 | 1,501,570 | 1,442,268 | 1,535,149 | 1,442,268 | ||||||||||||||
| Total deposits | $ | 6,881,826 | $ | 6,764,434 | $ | 6,258,506 | $ | 6,881,826 | $ | 6,258,506 | |||||||||
| Averages | |||||||||||||||||||
| Assets | $ | 8,973,964 | $ | 8,747,377 | $ | 8,153,951 | $ | 8,730,815 | $ | 7,956,841 | |||||||||
| Loans held for investment | 6,822,498 | 6,628,011 | 6,033,723 | 6,613,078 | 5,869,511 | ||||||||||||||
| Loans held for sale | 38,569 | 28,331 | 42,755 | 31,461 | 33,619 | ||||||||||||||
| Securities | 1,243,904 | 1,229,593 | 1,218,552 | 1,227,220 | 1,202,882 | ||||||||||||||
| Earning assets | 8,167,919 | 7,934,405 | 7,354,684 | 7,922,944 | 7,159,813 | ||||||||||||||
| Deposits | 6,797,840 | 6,637,742 | 6,204,958 | 6,615,718 | 6,043,892 | ||||||||||||||
| Certificates of deposit | 1,289,794 | 1,248,818 | 1,181,936 | 1,250,180 | 1,172,856 | ||||||||||||||
| Interest-bearing deposits | 5,302,226 | 5,179,774 | 4,796,505 | 5,166,163 | 4,667,891 | ||||||||||||||
| Borrowings | 1,080,226 | 1,023,599 | 884,597 | 1,030,500 | 860,942 | ||||||||||||||
| Interest-bearing liabilities | 6,382,452 | 6,203,373 | 5,681,102 | 6,196,663 | 5,528,833 | ||||||||||||||
| Stockholders' equity | 1,037,792 | 1,026,148 | 996,668 | 1,024,853 | 991,097 | ||||||||||||||
| Tangible common equity (2) | 722,920 | 709,793 | 676,308 | 708,478 | 673,468 | ||||||||||||||
| As of & For Three Months Ended | As of & For Nine Months Ended | ||||||||||||||||||
| 9/30/17 | 6/30/17 | 9/30/16 | 9/30/17 | 9/30/16 | |||||||||||||||
| Asset Quality | (unaudited) | (unaudited) | (unaudited) | (unaudited) | (unaudited) | ||||||||||||||
| Allowance for Loan Losses (ALL) | |||||||||||||||||||
| Beginning balance | $ | 38,214 | $ | 38,414 | $ | 35,074 | $ | 37,192 | $ | 34,047 | |||||||||
| Add: Recoveries | 887 | 827 | 534 | 2,559 | 2,022 | ||||||||||||||
| Less: Charge-offs | 4,989 | 3,327 | 1,463 | 9,949 | 6,728 | ||||||||||||||
| Add: Provision for loan losses | 3,050 | 2,300 | 2,397 | 7,360 | 7,201 | ||||||||||||||
| Ending balance | $ | 37,162 | $ | 38,214 | $ | 36,542 | $ | 37,162 | $ | 36,542 | |||||||||
| ALL / total outstanding loans | 0.54 | % | 0.56 | % | 0.59 | % | 0.54 | % | 0.59 | % | |||||||||
| Net charge-offs / total average loans | 0.24 | % | 0.15 | % | 0.06 | % | 0.15 | % | 0.11 | % | |||||||||
| Provision / total average loans | 0.18 | % | 0.14 | % | 0.16 | % | 0.15 | % | 0.16 | % | |||||||||
| Total PCI Loans | $ | 51,041 | $ | 56,167 | $ | 62,346 | $ | 51,041 | $ | 62,346 | |||||||||
| Remaining fair value mark on purchased performing loans | 14,602 | 15,382 | 18,154 | 14,602 | 18,154 | ||||||||||||||
| Nonperforming Assets | |||||||||||||||||||
| Construction and land development | $ | 5,671 | $ | 5,659 | $ | 2,301 | $ | 5,671 | $ | 2,301 | |||||||||
| Commercial real estate - owner occupied | 2,205 | 1,279 | 1,609 | 2,205 | 1,609 | ||||||||||||||
| Commercial real estate - non-owner occupied | 2,701 | 4,765 | — | 2,701 | — | ||||||||||||||
| Commercial & Industrial | 1,252 | 4,281 | 1,344 | 1,252 | 1,344 | ||||||||||||||
| Residential 1-4 Family | 6,163 | 6,128 | 5,279 | 6,163 | 5,279 | ||||||||||||||
| Auto | 174 | 270 | 231 | 174 | 231 | ||||||||||||||
| HELOC | 1,791 | 2,059 | 1,464 | 1,791 | 1,464 | ||||||||||||||
| Consumer and all other | 165 | 133 | 449 | 165 | 449 | ||||||||||||||
| Nonaccrual loans | $ | 20,122 | $ | 24,574 | $ | 12,677 | $ | 20,122 | $ | 12,677 | |||||||||
| Other real estate owned | 8,764 | 9,482 | 10,581 | 8,764 | 10,581 | ||||||||||||||
| Total nonperforming assets (NPAs) | $ | 28,886 | $ | 34,056 | $ | 23,258 | $ | 28,886 | $ | 23,258 | |||||||||
| Construction and land development | $ | 54 | $ | 83 | $ | 610 | $ | 54 | $ | 610 | |||||||||
| Commercial real estate - owner occupied | 679 | 56 | 304 | 679 | 304 | ||||||||||||||
| Commercial real estate - non-owner occupied | 298 | 298 | — | 298 | — | ||||||||||||||
| Commercial & Industrial | 101 | 55 | 77 | 101 | 77 | ||||||||||||||
| Residential 1-4 Family | 2,360 | 2,369 | 2,005 | 2,360 | 2,005 | ||||||||||||||
| Auto | 143 | 35 | 28 | 143 | 28 | ||||||||||||||
| HELOC | 709 | 544 | 407 | 709 | 407 | ||||||||||||||
| Consumer and all other | 188 | 185 | 98 | 188 | 98 | ||||||||||||||
| Loans ≥ 90 days and still accruing | $ | 4,532 | $ | 3,625 | $ | 3,529 | $ | 4,532 | $ | 3,529 | |||||||||
| Total NPAs and loans ≥ 90 days | $ | 33,418 | $ | 37,681 | $ | 26,787 | $ | 33,418 | $ | 26,787 | |||||||||
| NPAs / total outstanding loans | 0.42 | % | 0.50 | % | 0.38 | % | 0.42 | % | 0.38 | % | |||||||||
| NPAs / total assets | 0.32 | % | 0.38 | % | 0.28 | % | 0.32 | % | 0.28 | % | |||||||||
| ALL / nonaccrual loans | 184.68 | % | 155.51 | % | 288.25 | % | 184.68 | % | 288.25 | % | |||||||||
| ALL / nonperforming assets | 128.65 | % | 112.21 | % | 157.12 | % | 128.65 | % | 157.12 | % | |||||||||
| Past Due Detail | |||||||||||||||||||
| Construction and land development | $ | 7,221 | $ | 602 | $ | 309 | $ | 7,221 | $ | 309 | |||||||||
| Commercial real estate - owner occupied | 1,707 | 3,148 | 1,411 | 1,707 | 1,411 | ||||||||||||||
| Commercial real estate - non-owner occupied | 909 | 1,530 | 324 | 909 | 324 | ||||||||||||||
| Multifamily real estate | — | 500 | — | — | — | ||||||||||||||
| Commercial & Industrial | 1,558 | 1,652 | 567 | 1,558 | 567 | ||||||||||||||
| Residential 1-4 Family | 5,633 | 2,477 | 4,985 | 5,633 | 4,985 | ||||||||||||||
| Auto | 2,415 | 1,562 | 1,846 | 2,415 | 1,846 | ||||||||||||||
| HELOC | 1,400 | 1,405 | 2,600 | 1,400 | 2,600 | ||||||||||||||
| Consumer and all other | 3,469 | 1,891 | 1,713 | 3,469 | 1,713 | ||||||||||||||
| Loans 30-59 days past due | $ | 24,312 | $ | 14,767 | $ | 13,755 | $ | 24,312 | $ | 13,755 | |||||||||
| As of & For Three Months Ended | As of & For Nine Months Ended | ||||||||||||||||||
| 9/30/17 | 6/30/17 | 9/30/16 | 9/30/17 | 9/30/16 | |||||||||||||||
| Past Due Detail cont'd | (unaudited) | (unaudited) | (unaudited) | (unaudited) | (unaudited) | ||||||||||||||
| Construction and land development | $ | 100 | $ | 26 | $ | 697 | $ | 100 | $ | 697 | |||||||||
| Commercial real estate - owner occupied | 689 | 194 | 365 | 689 | 365 | ||||||||||||||
| Commercial real estate - non-owner occupied | 571 | 571 | — | 571 | — | ||||||||||||||
| Commercial & Industrial | 255 | 113 | 51 | 255 | 51 | ||||||||||||||
| Residential 1-4 Family | 1,439 | 5,663 | 6,345 | 1,439 | 6,345 | ||||||||||||||
| Auto | 293 | 240 | 239 | 293 | 239 | ||||||||||||||
| HELOC | 628 | 964 | 899 | 628 | 899 | ||||||||||||||
| Consumer and all other | 1,445 | 1,242 | 1,037 | 1,445 | 1,037 | ||||||||||||||
| Loans 60-89 days past due | $ | 5,420 | $ | 9,013 | $ | 9,633 | $ | 5,420 | $ | 9,633 | |||||||||
| Troubled Debt Restructurings | |||||||||||||||||||
| Performing | $ | 16,519 | $ | 14,947 | $ | 11,824 | $ | 16,519 | $ | 11,824 | |||||||||
| Nonperforming | 2,725 | 4,454 | 1,452 | 2,725 | 1,452 | ||||||||||||||
| Total troubled debt restructurings | $ | 19,244 | $ | 19,401 | $ | 13,276 | $ | 19,244 | $ | 13,276 | |||||||||
| Alternative Performance Measures (non-GAAP) | |||||||||||||||||||
| Net interest income (FTE) | |||||||||||||||||||
| Net interest income (GAAP) | $ | 71,198 | $ | 68,999 | $ | 67,028 | $ | 206,765 | $ | 196,535 | |||||||||
| FTE adjustment | 2,648 | 2,648 | 2,427 | 7,836 | 7,367 | ||||||||||||||
| Net interest income (FTE) (non-GAAP) (1) | $ | 73,846 | $ | 71,647 | $ | 69,455 | $ | 214,601 | $ | 203,902 | |||||||||
| Average earning assets | 8,167,919 | 7,934,405 | 7,354,684 | 7,922,944 | 7,159,813 | ||||||||||||||
| Net interest margin | 3.46 | % | 3.49 | % | 3.63 | % | 3.49 | % | 3.67 | % | |||||||||
| Net interest margin (FTE) | 3.59 | % | 3.62 | % | 3.76 | % | 3.62 | % | 3.80 | % | |||||||||
| Tangible Assets | |||||||||||||||||||
| Ending assets (GAAP) | $ | 9,029,436 | $ | 8,915,187 | $ | 8,258,230 | $ | 9,029,436 | $ | 8,258,230 | |||||||||
| Less: Ending goodwill | 298,191 | 298,191 | 298,191 | 298,191 | 298,191 | ||||||||||||||
| Less: Ending amortizable intangibles | 16,017 | 17,422 | 22,343 | 16,017 | 22,343 | ||||||||||||||
| Ending tangible assets (non-GAAP) | $ | 8,715,228 | $ | 8,599,574 | $ | 7,937,696 | $ | 8,715,228 | $ | 7,937,696 | |||||||||
| Tangible Common Equity (2) | |||||||||||||||||||
| Ending equity (GAAP) | $ | 1,041,371 | $ | 1,030,869 | $ | 1,000,964 | $ | 1,041,371 | $ | 1,000,964 | |||||||||
| Less: Ending goodwill | 298,191 | 298,191 | 298,191 | 298,191 | 298,191 | ||||||||||||||
| Less: Ending amortizable intangibles | 16,017 | 17,422 | 22,343 | 16,017 | 22,343 | ||||||||||||||
| Ending tangible common equity (non-GAAP) | $ | 727,163 | $ | 715,256 | $ | 680,430 | $ | 727,163 | $ | 680,430 | |||||||||
| Average equity (GAAP) | $ | 1,037,792 | $ | 1,026,148 | $ | 996,668 | $ | 1,024,853 | $ | 991,097 | |||||||||
| Less: Average goodwill | 298,191 | 298,191 | 297,707 | 298,191 | 295,380 | ||||||||||||||
| Less: Average amortizable intangibles | 16,681 | 18,164 | 22,653 | 18,184 | 22,249 | ||||||||||||||
| Average tangible common equity (non-GAAP) | $ | 722,920 | $ | 709,793 | $ | 676,308 | $ | 708,478 | $ | 673,468 | |||||||||
| Operating Measures (3) | |||||||||||||||||||
| Net income (GAAP) | $ | 20,658 | $ | 17,956 | $ | 20,401 | $ | 57,737 | $ | 56,699 | |||||||||
| Plus: Merger-related costs, net of tax | 661 | 2,358 | — | 3,020 | — | ||||||||||||||
| Net operating earnings (non-GAAP) | $ | 21,319 | $ | 20,314 | $ | 20,401 | $ | 60,757 | $ | 56,699 | |||||||||
| Noninterest expense (GAAP) | $ | 57,496 | $ | 59,930 | $ | 56,913 | $ | 174,821 | $ | 166,436 | |||||||||
| Less: Merger-related costs | 732 | 2,744 | — | 3,476 | — | ||||||||||||||
| Operating noninterest expense (non-GAAP) | $ | 56,764 | $ | 57,186 | $ | 56,913 | $ | 171,345 | $ | 166,436 | |||||||||
| Net interest income (FTE) (non-GAAP) (1) | $ | 73,846 | $ | 71,647 | $ | 69,455 | $ | 214,601 | $ | 203,902 | |||||||||
| Noninterest income (GAAP) | 17,536 | 18,056 | 18,950 | 54,430 | 52,857 | ||||||||||||||
| Efficiency ratio | 64.80 | % | 68.84 | % | 66.19 | % | 66.93 | % | 66.74 | % | |||||||||
| Efficiency ratio (FTE) (1) | 62.92 | % | 66.81 | % | 64.38 | % | 64.98 | % | 64.82 | % | |||||||||
| Operating efficiency ratio (FTE) | 62.12 | % | 63.75 | % | 64.38 | % | 63.69 | % | 64.82 | % | |||||||||
| As of & For Three Months Ended | As of & For Nine Months Ended | ||||||||||||||||||
| 9/30/17 | 6/30/17 | 9/30/16 | 9/30/17 | 9/30/16 | |||||||||||||||
| Alternative Performance Measures (non-GAAP) cont'd | (unaudited) | (unaudited) | (unaudited) | (unaudited) | (unaudited) | ||||||||||||||
| Operating Measures cont'd (3) | |||||||||||||||||||
| Community bank segment net income (GAAP) | $ | 20,311 | $ | 17,405 | $ | 19,616 | $ | 56,836 | $ | 55,321 | |||||||||
| Plus: Merger-related costs, net of tax | 661 | 2,358 | — | 3,020 | — | ||||||||||||||
| Community bank segment net operating earnings (non-GAAP) | $ | 20,972 | $ | 19,763 | $ | 19,616 | $ | 59,856 | $ | 55,321 | |||||||||
| Community bank segment earnings per share, diluted (GAAP) | $ | 0.46 | $ | 0.40 | $ | 0.45 | $ | 1.30 | $ | 1.26 | |||||||||
| Community bank segment operating earnings per share, diluted (non-GAAP) | 0.48 | 0.45 | 0.45 | 1.37 | 1.26 | ||||||||||||||
| Mortgage Origination Volume | |||||||||||||||||||
| Refinance Volume | $ | 35,678 | $ | 31,958 | $ | 52,883 | $ | 101,967 | $ | 137,221 | |||||||||
| Construction Volume | 19,966 | 19,909 | 20,760 | 62,545 | 57,405 | ||||||||||||||
| Purchase Volume | 71,694 | 84,713 | 83,014 | 199,622 | 200,323 | ||||||||||||||
| Total Mortgage loan originations | $ | 127,338 | $ | 136,580 | $ | 156,657 | $ | 364,134 | $ | 394,949 | |||||||||
| % of originations that are refinances | 28.0 | % | 23.4 | % | 33.8 | % | 28.0 | % | 34.7 | % | |||||||||
| Other Data | |||||||||||||||||||
| End of period full-time employees | 1,427 | 1,432 | 1,391 | 1,427 | 1,391 | ||||||||||||||
| Number of full-service branches | 111 | 112 | 115 | 111 | 115 | ||||||||||||||
| Number of full automatic transaction machines (ATMs) | 173 | 174 | 193 | 173 | 193 | ||||||||||||||
(1) Net interest income (FTE), which is used in computing net interest margin (FTE) and efficiency ratio (FTE), provides valuable additional insight into the net interest margin and the efficiency ratio by adjusting for differences in tax treatment of interest income sources. The entire FTE adjustment is attributable to interest income on earning assets, which is used in computing yield on earning assets. Interest expense and the related cost of interest-bearing liabilities and cost of funds ratios are not affected by the FTE components.
(2) Tangible common equity is used in the calculation of certain profitability, capital, and per share ratios. The Company believes tangible common equity and the related ratios are meaningful measures of capital adequacy because they provide a meaningful base for period-to-period and company-to-company comparisons, which the Company believes will assist investors in assessing the capital of the Company and its ability to absorb potential losses.
(3) Operating measures exclude merger-related costs unrelated to the Company’s normal operations. Such costs were only incurred during the second and third quarters of 2017; thus each of these operating measures is equivalent to the corresponding GAAP financial measure for the three and nine months ended September 30, 2016. The Company believes these measures are useful to investors as they exclude certain costs resulting from acquisition activity and allow investors to more clearly see the combined economic results of the organization's operations.
(4) All ratios at September 30, 2017 are estimates and subject to change pending the Company’s filing of its FR Y9-C. All other periods are presented as filed.
| UNION BANKSHARES CORPORATION AND SUBSIDIARIES | |||||||||||
| CONSOLIDATED BALANCE SHEETS | |||||||||||
| (Dollars in thousands, except share data) | |||||||||||
| September 30, | December 31, | September 30, | |||||||||
| 2017 | 2016 | 2016 | |||||||||
| ASSETS | (unaudited) | (audited) | (unaudited) | ||||||||
| Cash and cash equivalents: | |||||||||||
| Cash and due from banks | $ | 115,776 | $ | 120,758 | $ | 103,979 | |||||
| Interest-bearing deposits in other banks | 60,294 | 58,030 | 51,303 | ||||||||
| Federal funds sold | 891 | 449 | 893 | ||||||||
| Total cash and cash equivalents | 176,961 | 179,237 | 156,175 | ||||||||
| Securities available for sale, at fair value | 968,361 | 946,764 | 954,984 | ||||||||
| Securities held to maturity, at carrying value | 204,801 | 201,526 | 200,839 | ||||||||
| Restricted stock, at cost | 68,441 | 60,782 | 63,204 | ||||||||
| Loans held for sale, at fair value | 30,896 | 36,487 | 46,814 | ||||||||
| Loans held for investment, net of deferred fees and costs | 6,898,729 | 6,307,060 | 6,148,918 | ||||||||
| Less allowance for loan losses | 37,162 | 37,192 | 36,542 | ||||||||
| Net loans held for investment | 6,861,567 | 6,269,868 | 6,112,376 | ||||||||
| Premises and equipment, net | 120,808 | 122,027 | 123,416 | ||||||||
| Other real estate owned, net of valuation allowance | 8,764 | 10,084 | 10,581 | ||||||||
| Goodwill | 298,191 | 298,191 | 298,191 | ||||||||
| Amortizable intangibles, net | 16,017 | 20,602 | 22,343 | ||||||||
| Bank owned life insurance | 181,451 | 179,318 | 177,847 | ||||||||
| Other assets | 93,178 | 101,907 | 91,460 | ||||||||
| Total assets | $ | 9,029,436 | $ | 8,426,793 | $ | 8,258,230 | |||||
| LIABILITIES | |||||||||||
| Noninterest-bearing demand deposits | $ | 1,535,149 | $ | 1,393,625 | $ | 1,442,268 | |||||
| Interest-bearing deposits | 5,346,677 | 4,985,864 | 4,816,238 | ||||||||
| Total deposits | 6,881,826 | 6,379,489 | 6,258,506 | ||||||||
| Securities sold under agreements to repurchase | 43,337 | 59,281 | 64,225 | ||||||||
| Other short-term borrowings | 574,000 | 517,500 | 601,500 | ||||||||
| Long-term borrowings | 434,750 | 413,308 | 259,902 | ||||||||
| Other liabilities | 54,152 | 56,183 | 73,133 | ||||||||
| Total liabilities | 7,988,065 | 7,425,761 | 7,257,266 | ||||||||
| Commitments and contingencies | |||||||||||
| STOCKHOLDERS' EQUITY | |||||||||||
| Common stock, $1.33 par value, shares authorized 100,000,000; issued and outstanding, 43,729,229 shares, 43,609,317 shares, and 43,556,486 shares, respectively. | 57,708 | 57,506 | 57,444 | ||||||||
| Additional paid-in capital | 608,884 | 605,397 | 603,785 | ||||||||
| Retained earnings | 373,468 | 341,938 | 329,876 | ||||||||
| Accumulated other comprehensive income | 1,311 | (3,809 | ) | 9,859 | |||||||
| Total stockholders' equity | 1,041,371 | 1,001,032 | 1,000,964 | ||||||||
| Total liabilities and stockholders' equity | $ | 9,029,436 | $ | 8,426,793 | $ | 8,258,230 | |||||
| UNION BANKSHARES CORPORATION AND SUBSIDIARIES | |||||||||||||||||||
| CONSOLIDATED STATEMENTS OF INCOME | |||||||||||||||||||
| (Dollars in thousands, except share data) | |||||||||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||||||
| September 30, | June 30, | September 30, | September 30, | September 30, | |||||||||||||||
| 2017 | 2017 | 2016 | 2017 | 2016 | |||||||||||||||
| Interest and dividend income: | (unaudited) | (unaudited) | (unaudited) | (unaudited) | (unaudited) | ||||||||||||||
| Interest and fees on loans | $ | 75,948 | $ | 72,612 | $ | 66,190 | $ | 216,644 | $ | 193,884 | |||||||||
| Interest on deposits in other banks | 181 | 115 | 65 | 367 | 178 | ||||||||||||||
| Interest and dividends on securities: | |||||||||||||||||||
| Taxable | 5,175 | 4,982 | 4,732 | 15,081 | 13,558 | ||||||||||||||
| Nontaxable | 3,546 | 3,512 | 3,446 | 10,620 | 10,344 | ||||||||||||||
| Total interest and dividend income | 84,850 | 81,221 | 74,433 | 242,712 | 217,964 | ||||||||||||||
| Interest expense: | |||||||||||||||||||
| Interest on deposits | 7,234 | 6,100 | 4,552 | 18,410 | 12,945 | ||||||||||||||
| Interest on short-term borrowings | 1,871 | 1,400 | 765 | 4,221 | 2,098 | ||||||||||||||
| Interest on long-term borrowings | 4,547 | 4,722 | 2,088 | 13,316 | 6,386 | ||||||||||||||
| Total interest expense | 13,652 | 12,222 | 7,405 | 35,947 | 21,429 | ||||||||||||||
| Net interest income | 71,198 | 68,999 | 67,028 | 206,765 | 196,535 | ||||||||||||||
| Provision for credit losses | 3,050 | 2,173 | 2,472 | 7,345 | 7,376 | ||||||||||||||
| Net interest income after provision for credit losses | 68,148 | 66,826 | 64,556 | 199,420 | 189,159 | ||||||||||||||
| Noninterest income: | |||||||||||||||||||
| Service charges on deposit accounts | 5,153 | 4,963 | 4,965 | 14,945 | 14,454 | ||||||||||||||
| Other service charges and fees | 4,529 | 4,637 | 4,397 | 13,575 | 12,971 | ||||||||||||||
| Fiduciary and asset management fees | 2,794 | 2,725 | 2,844 | 8,313 | 7,315 | ||||||||||||||
| Mortgage banking income, net | 2,305 | 2,793 | 3,207 | 7,123 | 8,324 | ||||||||||||||
| Gains on securities transactions, net | 184 | 117 | — | 782 | 145 | ||||||||||||||
| Bank owned life insurance income | 1,377 | 1,335 | 1,389 | 4,837 | 4,122 | ||||||||||||||
| Loan-related interest rate swap fees | 416 | 1,031 | 1,303 | 2,627 | 3,056 | ||||||||||||||
| Other operating income | 778 | 455 | 845 | 2,228 | 2,470 | ||||||||||||||
| Total noninterest income | 17,536 | 18,056 | 18,950 | 54,430 | 52,857 | ||||||||||||||
| Noninterest expenses: | |||||||||||||||||||
| Salaries and benefits | 29,769 | 30,561 | 30,493 | 92,499 | 87,061 | ||||||||||||||
| Occupancy expenses | 4,939 | 4,718 | 4,841 | 14,560 | 14,627 | ||||||||||||||
| Furniture and equipment expenses | 2,559 | 2,720 | 2,635 | 7,882 | 7,867 | ||||||||||||||
| Printing, postage, and supplies | 1,154 | 1,406 | 1,147 | 3,710 | 3,566 | ||||||||||||||
| Communications expense | 798 | 872 | 948 | 2,580 | 2,964 | ||||||||||||||
| Technology and data processing | 4,232 | 3,927 | 3,917 | 12,059 | 11,340 | ||||||||||||||
| Professional services | 1,985 | 2,092 | 1,895 | 5,734 | 6,432 | ||||||||||||||
| Marketing and advertising expense | 1,944 | 2,279 | 1,975 | 5,963 | 5,838 | ||||||||||||||
| FDIC assessment premiums and other insurance | 1,141 | 947 | 1,262 | 2,793 | 4,003 | ||||||||||||||
| Other taxes | 2,022 | 2,022 | 639 | 6,065 | 3,864 | ||||||||||||||
| Loan-related expenses | 1,349 | 1,281 | 1,531 | 3,959 | 3,638 | ||||||||||||||
| OREO and credit-related expenses | 1,139 | 342 | 503 | 2,023 | 1,965 | ||||||||||||||
| Amortization of intangible assets | 1,480 | 1,544 | 1,843 | 4,661 | 5,468 | ||||||||||||||
| Training and other personnel costs | 887 | 1,043 | 863 | 2,900 | 2,512 | ||||||||||||||
| Merger-related costs | 732 | 2,744 | — | 3,476 | — | ||||||||||||||
| Other expenses | 1,366 | 1,432 | 2,421 | 3,957 | 5,291 | ||||||||||||||
| Total noninterest expenses | 57,496 | 59,930 | 56,913 | 174,821 | 166,436 | ||||||||||||||
| Income before income taxes | 28,188 | 24,952 | 26,593 | 79,029 | 75,580 | ||||||||||||||
| Income tax expense | 7,530 | 6,996 | 6,192 | 21,292 | 18,881 | ||||||||||||||
| Net income | $ | 20,658 | $ | 17,956 | $ | 20,401 | $ | 57,737 | $ | 56,699 | |||||||||
| Basic earnings per common share | $ | 0.47 | $ | 0.41 | $ | 0.47 | $ | 1.32 | $ | 1.29 | |||||||||
| Diluted earnings per common share | $ | 0.47 | $ | 0.41 | $ | 0.47 | $ | 1.32 | $ | 1.29 | |||||||||
| UNION BANKSHARES CORPORATION AND SUBSIDIARIES | |||||||||||||||
| SEGMENT FINANCIAL INFORMATION | |||||||||||||||
| (Dollars in thousands) | |||||||||||||||
| Community Bank | Mortgage | Eliminations | Consolidated | ||||||||||||
| Three Months Ended September 30, 2017 (unaudited) | |||||||||||||||
| Net interest income | $ | 70,718 | $ | 480 | $ | — | $ | 71,198 | |||||||
| Provision for credit losses | 3,056 | (6 | ) | — | 3,050 | ||||||||||
| Net interest income after provision for credit losses | 67,662 | 486 | — | 68,148 | |||||||||||
| Noninterest income | 15,121 | 2,527 | (112 | ) | 17,536 | ||||||||||
| Noninterest expenses | 55,133 | 2,475 | (112 | ) | 57,496 | ||||||||||
| Income before income taxes | 27,650 | 538 | — | 28,188 | |||||||||||
| Income tax expense | 7,339 | 191 | — | 7,530 | |||||||||||
| Net income | 20,311 | 347 | — | 20,658 | |||||||||||
| Plus: Merger-related costs, net of tax | 661 | — | — | 661 | |||||||||||
| Net operating earnings (non-GAAP) | $ | 20,972 | $ | 347 | $ | — | $ | 21,319 | |||||||
| Total assets | $ | 9,020,486 | $ | 97,154 | $ | (88,204 | ) | $ | 9,029,436 | ||||||
| Three Months Ended June 30, 2017 (unaudited) | |||||||||||||||
| Net interest income | $ | 68,580 | $ | 419 | $ | — | $ | 68,999 | |||||||
| Provision for credit losses | 2,184 | (11 | ) | — | 2,173 | ||||||||||
| Net interest income after provision for credit losses | 66,396 | 430 | — | 66,826 | |||||||||||
| Noninterest income | 15,203 | 2,993 | (140 | ) | 18,056 | ||||||||||
| Noninterest expenses | 57,496 | 2,574 | (140 | ) | 59,930 | ||||||||||
| Income before income taxes | 24,103 | 849 | — | 24,952 | |||||||||||
| Income tax expense | 6,698 | 298 | — | 6,996 | |||||||||||
| Net income | 17,405 | 551 | — | 17,956 | |||||||||||
| Plus: Merger-related costs, net of tax | 2,358 | — | — | 2,358 | |||||||||||
| Net operating earnings (non-GAAP) | $ | 19,763 | $ | 551 | $ | — | $ | 20,314 | |||||||
| Total assets | $ | 8,904,819 | $ | 105,429 | $ | (95,061 | ) | $ | 8,915,187 | ||||||
| Three Months Ended September 30, 2016 (unaudited) | |||||||||||||||
| Net interest income | $ | 66,605 | $ | 423 | $ | — | $ | 67,028 | |||||||
| Provision for credit losses | 2,455 | 17 | — | 2,472 | |||||||||||
| Net interest income after provision for credit losses | 64,150 | 406 | — | 64,556 | |||||||||||
| Noninterest income | 15,589 | 3,501 | (140 | ) | 18,950 | ||||||||||
| Noninterest expenses | 54,353 | 2,700 | (140 | ) | 56,913 | ||||||||||
| Income before income taxes | 25,386 | 1,207 | — | 26,593 | |||||||||||
| Income tax expense | 5,770 | 422 | — | 6,192 | |||||||||||
| Net income | $ | 19,616 | $ | 785 | $ | — | $ | 20,401 | |||||||
| Total assets | $ | 8,251,351 | $ | 90,692 | $ | (83,813 | ) | $ | 8,258,230 | ||||||
| Nine Months Ended September 30, 2017 (unaudited) | |||||||||||||||
| Net interest income | $ | 205,534 | $ | 1,231 | $ | — | $ | 206,765 | |||||||
| Provision for credit losses | 7,344 | 1 | — | 7,345 | |||||||||||
| Net interest income after provision for credit losses | 198,190 | 1,230 | — | 199,420 | |||||||||||
| Noninterest income | 47,080 | 7,743 | (393 | ) | 54,430 | ||||||||||
| Noninterest expenses | 167,643 | 7,571 | (393 | ) | 174,821 | ||||||||||
| Income before income taxes | 77,627 | 1,402 | — | 79,029 | |||||||||||
| Income tax expense | 20,791 | 501 | — | 21,292 | |||||||||||
| Net income | 56,836 | 901 | — | 57,737 | |||||||||||
| Plus: Merger-related costs, net of tax | 3,020 | — | — | 3,020 | |||||||||||
| Net operating earnings (non-GAAP) | $ | 59,856 | $ | 901 | $ | — | $ | 60,757 | |||||||
| Total assets | $ | 9,020,486 | $ | 97,154 | $ | (88,204 | ) | $ | 9,029,436 | ||||||
| Nine Months Ended September 30, 2016 (unaudited) | |||||||||||||||
| Net interest income | $ | 195,508 | $ | 1,027 | $ | — | $ | 196,535 | |||||||
| Provision for credit losses | 7,215 | 161 | — | 7,376 | |||||||||||
| Net interest income after provision for credit losses | 188,293 | 866 | — | 189,159 | |||||||||||
| Noninterest income | 44,137 | 9,185 | (465 | ) | 52,857 | ||||||||||
| Noninterest expenses | 158,964 | 7,937 | (465 | ) | 166,436 | ||||||||||
| Income before income taxes | 73,466 | 2,114 | — | 75,580 | |||||||||||
| Income tax expense | 18,145 | 736 | — | 18,881 | |||||||||||
| Net income | $ | 55,321 | $ | 1,378 | $ | — | $ | 56,699 | |||||||
| Total assets | $ | 8,251,351 | $ | 90,692 | $ | (83,813 | ) | $ | 8,258,230 | ||||||
| AVERAGE BALANCES, INCOME AND EXPENSES, YIELDS AND RATES (TAXABLE EQUIVALENT BASIS) | |||||||||||||||||||||
| For the Quarter Ended | |||||||||||||||||||||
| September 30, 2017 | June 30, 2017 | ||||||||||||||||||||
| Average Balance | Interest Income / Expense (1) | Yield / Rate (1)(2) | Average Balance | Interest Income / Expense (1) | Yield / Rate (1)(2) | ||||||||||||||||
| Assets: | (unaudited) | (unaudited) | |||||||||||||||||||
| Securities: | |||||||||||||||||||||
| Taxable | $ | 774,513 | $ | 5,175 | 2.65 | % | $ | 768,648 | $ | 4,982 | 2.60 | % | |||||||||
| Tax-exempt | 469,391 | 5,455 | 4.61 | % | 460,945 | 5,403 | 4.70 | % | |||||||||||||
| Total securities | 1,243,904 | 10,630 | 3.39 | % | 1,229,593 | 10,385 | 3.39 | % | |||||||||||||
| Loans, net (3) (4) | 6,822,498 | 76,333 | 4.44 | % | 6,628,011 | 73,073 | 4.42 | % | |||||||||||||
| Other earning assets | 101,517 | 535 | 2.09 | % | 76,801 | 411 | 2.15 | % | |||||||||||||
| Total earning assets | 8,167,919 | $ | 87,498 | 4.25 | % | 7,934,405 | $ | 83,869 | 4.24 | % | |||||||||||
| Allowance for loan losses | (38,138 | ) | (38,577 | ) | |||||||||||||||||
| Total non-earning assets | 844,183 | 851,549 | |||||||||||||||||||
| Total assets | $ | 8,973,964 | $ | 8,747,377 | |||||||||||||||||
| Liabilities and Stockholders' Equity: | |||||||||||||||||||||
| Interest-bearing deposits: | |||||||||||||||||||||
| Transaction and money market accounts | $ | 3,457,279 | $ | 3,491 | 0.40 | % | $ | 3,367,008 | $ | 2,729 | 0.33 | % | |||||||||
| Regular savings | 555,153 | 151 | 0.11 | % | 563,948 | 152 | 0.11 | % | |||||||||||||
| Time deposits | 1,289,794 | 3,592 | 1.10 | % | 1,248,818 | 3,219 | 1.03 | % | |||||||||||||
| Total interest-bearing deposits | 5,302,226 | 7,234 | 0.54 | % | 5,179,774 | 6,100 | 0.47 | % | |||||||||||||
| Other borrowings (5) | 1,080,226 | 6,418 | 2.36 | % | 1,023,599 | 6,122 | 2.40 | % | |||||||||||||
| Total interest-bearing liabilities | 6,382,452 | 13,652 | 0.85 | % | 6,203,373 | 12,222 | 0.79 | % | |||||||||||||
| Noninterest-bearing liabilities: | |||||||||||||||||||||
| Demand deposits | 1,495,614 | 1,457,968 | |||||||||||||||||||
| Other liabilities | 58,106 | 59,888 | |||||||||||||||||||
| Total liabilities | 7,936,172 | 7,721,229 | |||||||||||||||||||
| Stockholders' equity | 1,037,792 | 1,026,148 | |||||||||||||||||||
| Total liabilities and stockholders' equity | $ | 8,973,964 | $ | 8,747,377 | |||||||||||||||||
| Net interest income | $ | 73,846 | $ | 71,647 | |||||||||||||||||
| Interest rate spread | 3.40 | % | 3.45 | % | |||||||||||||||||
| Cost of funds | 0.66 | % | 0.62 | % | |||||||||||||||||
| Net interest margin | 3.59 | % | 3.62 | % | |||||||||||||||||
| (1) Income and yields are reported on a taxable equivalent basis using the statutory federal corporate tax rate of 35%. | |||||||||||||||||||||
| (2) Rates and yields are annualized and calculated from actual, not rounded, amounts in thousands, which appear above. | |||||||||||||||||||||
| (3) Nonaccrual loans are included in average loans outstanding. | |||||||||||||||||||||
| (4) Interest income on loans includes $1.7 million and $1.6 million for the three months ended September 30, 2017 and June 30, 2017, respectively, in accretion of the fair market value adjustments related to acquisitions. | |||||||||||||||||||||
| (5) Interest expense on borrowings includes $47,000 for the both three months ended September 30, 2017 and June 30, 2017, respectively, in accretion of the fair market value adjustments related to acquisitions. | |||||||||||||||||||||