Description: UFMBs_logo_2c_354_k_p

 

 

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

 

UNION FIRST MARKET BANKSHARES REPORTS SECOND QUARTER RESULTS

 

Richmond, Va., July 22, 2013 - Union First Market Bankshares Corporation (the “Company”) (NASDAQ: UBSH) today reported net income of $9.5 million and earnings per share of $0.38 for its second quarter ended June 30, 2013. Excluding acquisition-related expenses of $919,000, operating earnings(1) for the quarter were $10.4 million and operating earnings per share(1) was $0.42. The quarterly results represent an increase of $2.0 million, or 23.3%, in operating earnings from the same quarter of the prior year and an increase of $1.4 million, or 15.6%, from the quarter ended March 31, 2013. Operating earnings per share of $0.42 for the current quarter increased $0.10, or 31.3%, from the prior year’s second quarter and increased $0.06, or 16.7%, from the most recent quarter.

 

"Second quarter results demonstrate the progress Union First Market Bankshares is making to deliver top quartile financial performance nationally and provide our shareholders with above average returns on their investment over the long term,” said G. William Beale, chief executive officer of Union First Market Bankshares. “In addition to reporting continued improvements in key financial performance metrics, the Company saw consistent growth in net new deposit households and in loan balances. Overall asset quality continues to improve and quarterly net charge-offs were at a four year low. The mortgage company results reflect the changing interest rate environment as well as additional expenses associated with moving the mortgage company’s headquarters to Richmond and our proactive efforts to improve the mortgage segment’s operating capabilities and profitability. Overall, we are pleased with the Company’s performance in the first half of 2013 and are poised to generate strong financial results during the second half of the year.”

 

“During the quarter, we announced the signing of a definitive merger agreement to acquire StellarOne Corporation, which is expected to create the largest community banking institution in the Commonwealth of Virginia. This is exciting news for Union as the combination of two of Virginia’s largest community banks provides Union with the growth and synergies to continue to deliver a best in class customer experience, offer superior financial services and solutions, provide a rewarding experience for our teammates and generate top-tier financial performance for our shareholders. We have already started the integration planning work with StellarOne and continue to expect to close the transaction on or around January 1, 2014, subject to customary closing conditions, including regulatory and shareholder approvals. “

 

Select highlights:

·Operating Return on Average Equity(1) increased to 9.58% for the quarter ended June 30, 2013 compared to Return on Average Equity (“ROE”) of 7.84% and 8.32% for the same quarter of the prior year and the first quarter of 2013, respectively. Including current quarter acquisition-related costs, ROE was 8.73%.
·Operating Return on Average Assets(1) increased to 1.03% for the quarter ended June 30, 2013 compared to Return on Average Assets (“ROA”) of 0.86% and 0.90% for the same quarter of the prior year and the first quarter of 2013, respectively. Including current quarter acquisition-related costs, ROA was 0.94%.
·Operating efficiency ratio(1) of 66.73% declined 185 basis points when compared to the prior quarter and 134 basis points when compared to the same quarter of the prior year.
·Loan demand continued to improve with an increase in loans outstanding of $113.1 million, or 3.9%, since June 30, 2012. Loan balances increased $27.3 million, or 3.6% on an annualized basis from the prior quarter.

 

 
 

 

·During the quarter, the Company added almost 1,100 net new core household accounts consistent with growth in the prior quarter and the 4.4% annualized growth rate in 2012. Deposit balances increased $47.0 million, or 1.5%, from June 30, 2012 while deposit balances declined $31.8 million since year end primarily due to net run-off in higher cost time deposits.
·Credit quality metrics continued to improve as nonperforming assets (“NPAs”) and the ratio of NPAs compared to total loans declined from the same quarter last year. Net charge-offs declined materially from the same quarter last year and from the most recent quarter.

 

(1)For a reconciliation of the non-GAAP measures operating earnings, ROA, ROE, EPS, and efficiency ratio, see “Alternative Performance Measures (non-GAAP)” section of the Key Financial Results.

  

NET INTEREST INCOME

  

   Three Months Ended   
   Dollars in thousands   
   06/30/13   03/31/13   Change     06/30/12   Change   
                         
Average interest-earning assets  $3,713,392   $3,735,926   $(22,534)    $3,615,718   $97,674   
Interest income (FTE)  $43,981   $44,543   $(562)    $46,340   $(2,359)  
Yield on interest-earning assets   4.75%   4.84%   (9)  bps   5.15%   (40)  bps
Average interest-bearing liabilities  $2,907,523   $2,956,261   $(48,738)    $2,910,987   $(3,464)  
Interest expense  $5,283   $5,532   $(249)    $7,215   $(1,932)  
Cost of interest-bearing liabilities   0.73%   0.76%   (3)  bps   1.00%   (27)  bps
Cost of funds   0.57%   0.60%   (3)  bps   0.79%   (22)  bps
Net Interest Income (FTE)  $38,698   $39,011   $(313)    $39,125   $(427)  
Net Interest Margin (FTE)   4.18%   4.23%   (5)  bps   4.36%   (18)  bps
Core Net Interest Margin (FTE) (1)   4.14%   4.18%   (4)  bps   4.25%   (11)  bps

 

(1)  Core net interest margin (FTE) excludes the impact of acquisition accounting accretion and amortization adjustments in net interest income.  

 

On a linked quarter basis, tax-equivalent net interest income was $38.7 million, a decrease of $313,000, or 0.8%, from the first quarter of 2013. The second quarter tax-equivalent net interest margin declined by 5 basis points to 4.18% from 4.23% in the previous quarter. The change in net interest margin was principally attributable to the continued decline in net accretion on the acquired net earning assets (1 bp) and lower investment and loan yields outpacing the reduction in the cost of interest-bearing liabilities (4 bps). Loan yields continued to be negatively affected by the low rate environment as new and renewed loans were originated and repriced at lower rates. Yields on investment securities were primarily impacted by lower reinvestment rates during the quarter, offset by a shift in mix from taxable securities to higher yielding tax-exempt securities. The cost of interest-bearing liabilities declined during the quarter largely driven by lower time deposit account balances.

 

For the three months ended June 30, 2013, tax-equivalent net interest income decreased $427,000, or 1.1%, when compared to the same period last year. The tax-equivalent net interest margin decreased by 18 basis points to 4.18% from 4.36% in the prior year. The decline in net interest margin was principally due to the continued decline in accretion on the acquired net earning assets (7 bps) and declines in earning asset yields exceeding the reduction in interest-bearing liabilities rates paid (11 bps). Lower earning asset interest income was principally due to lower yields on loans as new and renewed loans were originated and repriced at lower rates, faster prepayments on mortgage-backed securities, and cash flows from securities investments reinvested at lower yields. The decline in the cost of interest-bearing liabilities from the prior year’s first quarter was driven by a shift in mix from time deposits to low cost deposits, reductions in deposit rates and lower wholesale borrowing costs.

 

The Company believes that its net interest margin will continue to decline modestly over the next several quarters as decreases in earning asset yields are projected to outpace declines in interest-bearing liabilities rates.

 

 
 

 

   Year-over-year results   
   For the Six Months Ended   
   Dollars in thousands   
   06/30/13   06/30/12   Change   
               
Average interest-earning assets  $3,724,597   $3,597,115   $127,482   
Interest income (FTE)  $88,524   $93,259   $(4,735)  
Yield on interest-earning assets   4.79%   5.21%   (42)  bps
Average interest-bearing liabilities  $2,931,758   $2,909,904   $21,854   
Interest expense  $10,816   $14,744   $(3,928)  
Cost of interest-bearing liabilities   0.74%   1.02%   (28)  bps
Cost of funds   0.59%   0.82%   (23)  bps
Net Interest Income (FTE)  $77,708   $78,515   $(807)  
Net Interest Margin (FTE)   4.21%   4.39%   (18)  bps
Core Net Interest Margin (FTE) (1)   4.16%   4.26%   (10)  bps

 

(1)  Core net interest margin (FTE) excludes the impact of acquisition accounting accretion and amortization adjustments in net interest income.    

 

For the six months ended June 30, 2013, tax-equivalent net interest income was $77.7 million, a decrease of $807,000, or 1.0%, when compared to the same period last year. The tax-equivalent net interest margin decreased by 18 basis points to 4.21% from 4.39% in the prior year. The decline in the net interest margin was principally due to the continued decline in accretion on the acquired net earning assets (8 bps) and a decline in the yield on interest-earning assets that outpaced the reduction in the cost of interest-bearing liabilities (10 bps). Lower interest-earning asset income was principally due to lower yields on loans as new loans and renewed loans were originated and repriced at lower rates and declining investment securities yields driven by faster prepayments on mortgage-backed securities and cash flows from securities investments reinvested at lower yields.

 

The Company’s fully taxable equivalent net interest margin includes the impact of acquisition accounting fair value adjustments. The 2013 and remaining estimated discount/premium and net accretion impact are reflected in the following table (dollars in thousands):

 

   Loan Accretion   Certificates of Deposit   Borrowings   Total 
                 
For the quarter ended June 30, 2013  $534   $2   $(122)  $414 
For the remaining six months of 2013   932    3    (245)   690 
For the years ending:                    
2014   1,459    4    (489)   974 
2015   1,002    -    (489)   513 
2016   557    -    (163)   394 
2017   172    -    -    172 
2018   19    -    -    19 
Thereafter   101    -    -    101 

 

 
 

 

ASSET QUALITY/LOAN LOSS PROVISION

 

Overview

During the second quarter, the Company continued to reduce the levels of impaired loans and troubled debt restructurings. Nonperforming assets and past due loans also declined from the same quarter last year. Net charge-offs, the related ratio of net charge-offs to total loans, and the loan loss provision decreased materially from the prior quarter and from the same quarter of the previous year. The allowance to nonperforming loans coverage ratio remained at consistently high levels. The magnitude of any change in the real estate market and its impact on the Company is still largely dependent upon continued recovery of residential housing and commercial real estate and the pace at which the local economies in the Company’s operating markets improve.

 

Nonperforming Assets (“NPAs”)

At June 30, 2013, nonperforming assets totaled $62.2 million, a decline of $12.8 million, or 17.1%, from a year ago and an increase of $3.3 million, or 5.6%, from the first quarter. In addition, NPAs as a percentage of total outstanding loans declined 53 basis points from 2.60% a year earlier and increased 9 basis points from 1.98% last quarter to 2.07% in the current quarter.

 

Nonperforming assets at June 30, 2013 included $27.0 million in nonaccrual loans (excluding purchased impaired loans), a net decrease of $12.2 million, or 31.1%, from June 30, 2012 and an increase of $4.0 million, or 17.4%, from the prior quarter. The current quarter increase relates to one loan relationship, totaling $5.5 million, being placed on nonaccrual status during the second quarter. The following table shows the activity in nonaccrual loans for the quarter ended (dollars in thousands):

 

   June 30,   March 31,   December 31,   September 30,   June 30, 
   2013   2013   2012   2012   2012 
Beginning Balance  $23,033   $26,206   $32,159   $39,171   $42,391 
Net customer payments   (3,196)   (1,715)   (1,898)   (5,774)   (3,174)
Additions   7,934    2,694    2,306    2,586    2,568 
Charge-offs   (476)   (2,262)   (3,388)   (3,012)   (561)
Loans returning to accruing status   -    (632)   (840)   (812)   (1,803)
Transfers to OREO   (273)   (1,258)   (2,133)   -    (250)
Ending Balance  $27,022   $23,033   $26,206   $32,159   $39,171 
                          

 

The following table presents the composition of nonaccrual loans (excluding purchased impaired loans) and the coverage ratio, which is the allowance for loan losses expressed as a percentage of nonaccrual loans, at the quarter ended (dollars in thousands):

 

   June 30,   March 31,   December 31,   September 30,   June 30, 
   2013   2013   2012   2012   2012 
Raw Land and Lots  $4,573   $6,353   $8,760   $10,995   $12,139 
Commercial Construction   5,103    4,547    5,781    7,846    9,763 
Commercial Real Estate   2,716    2,988    3,018    2,752    5,711 
Single Family Investment Real Estate   2,859    2,117    3,420    4,081    3,476 
Commercial and Industrial   7,291    2,261    2,036    2,678    4,715 
Other Commercial   471    190    193    195    231 
Consumer   4,009    4,577    2,998    3,612    3,136 
Total  $27,022   $23,033   $26,206   $32,159   $39,171 
                          
Coverage Ratio   127.06%   149.42%   133.24%   124.05%   104.63%

 

 
 

 

 

Nonperforming assets at June 30, 2013 also included $35.2 million in OREO, a decrease of $649,000, or 1.8%, from the prior year and down $725,000, or 2.0%, from the prior quarter. The following table shows the activity in OREO for the quarter ended (dollars in thousands):

 

   June 30,   March 31,   December 31,   September 30,   June 30, 
   2013   2013   2012   2012   2012 
Beginning Balance  $35,878   $32,834   $34,440   $35,802   $37,663 
Additions   1,768    3,607    2,866    929    3,887 
Capitalized Improvements   164    30    22    16    23 
Valuation Adjustments   -    -    (301)   -    - 
Proceeds from sales   (2,515)   (877)   (4,004)   (2,071)   (5,592)
Gains (losses) from sales   (142)   284    (189)   (236)   (179)
Ending Balance  $35,153   $35,878   $32,834   $34,440   $35,802 

 

The additions to OREO were principally related to raw land and residential real estate; sales from OREO were principally related to residential real estate and former branch property.

 

The following table presents the composition of the OREO portfolio at the quarter ended (dollars in thousands):

 

   June 30,   March 31,   December 31,   September 30,   June 30, 
   2013   2013   2012   2012   2012 
Land  $10,310   $9,861   $8,657   $6,953   $6,953 
Land Development   10,894    11,023    10,886    11,034    11,313 
Residential Real Estate   7,274    7,467    7,939    9,729    10,431 
Commercial Real Estate   6,542    6,749    5,352    5,640    6,085 
Former Bank Premises (1)   133    778    -    1,084    1,020 
Total  $35,153   $35,878   $32,834   $34,440   $35,802 

 

(1) Includes closed branch property and land previously held for branch sites.

                                         

Included in land development is $9.4 million related to a residential community in the Northern Neck region of Virginia, which includes developed residential lots, a golf course, and undeveloped land. Foreclosed properties were adjusted to their fair values at the time of each foreclosure and any losses were taken as loan charge-offs against the allowance for loan losses at that time. OREO asset balances are evaluated at least quarterly by the Bank’s Special Asset Loan Committee and any necessary write downs to fair values are recorded as impairment.

 

Past Due Loans

At June 30, 2013, total accruing past due loans were $29.7 million, or 0.99% of total loans, a decrease from $33.2 million, or 1.15% of total loans, a year ago and an increase from $24.7 million, or 0.83% of total loans, at March 31, 2013.

 

Charge-offs

For the quarter ended June 30, 2013, net charge-offs of loans were $1.1 million, or 0.14% on an annualized basis, compared to $2.2 million, or 0.31%, for the same quarter last year and $2.6 million, or 0.35%, for the first quarter of 2013. Nearly all net charge-offs in the current quarter were related to consumer loans.

 

Provision

The provision for loan losses for the current quarter was $1.0 million, a decrease of $2.0 million from the same quarter a year ago and a decrease of $1.1 million from the previous quarter. The decline in provision for loan losses in the current quarter compared to the prior periods is driven by improving asset quality and the impact of lower historical charge-off factors. The provision to loans ratio for the quarter ended June 30, 2013 was 0.13% on an annualized basis compared to 0.42% for the same quarter a year ago and to 0.28% last quarter.

 

Allowance for Loan Losses

The allowance for loan losses (“ALL”) as a percentage of the total loan portfolio, adjusted for acquired loans (non-GAAP), was 1.33% at June 30, 2013, a decrease from 1.74% at June 30, 2012 and 1.36% from the prior quarter. In acquisition accounting, there is no carryover of previously established allowance for loan losses. The allowance for loan losses as a percentage of the total loan portfolio was 1.14% at June 30, 2013, 1.42% at June 30, 2012, and 1.16% at March 31, 2013. The decrease in the allowance and related ratios was primarily attributable to the reduced levels of provision and improving credit quality metrics. The following table shows the loans and related allowance for loans individually and collectively evaluated for impairment for the quarter ended (dollars in thousands):

 

 
 

 

   June 30,   March 31,   December 31,   September 30,   June 30, 
   2013   2013   2012   2012   2012 
Loans individually evaluated for impairment  $112,484   $133,861   $142,415   $161,196   $189,399 
Related allowance   6,109    5,712    6,921    11,438    11,500 
ALL to loans individually evaluated for impairment   5.43%   4.27%   4.86%   7.10%   6.07%
                          
Loans collectively evaluated for impairment  $2,888,371   $2,839,686   $2,824,432   $2,747,314   $2,698,391 
Related allowance   28,224    28,703    27,995    28,456    29,485 
ALL to loans collectively evaluated for impairment   0.98%   1.01%   0.99%   1.04%   1.09%
                          
Total loans  $3,000,855   $2,973,547   $2,966,847   $2,908,510   $2,887,790 
Related allowance   34,333    34,415    34,916    39,894    40,985 
ALL to total loans   1.14%   1.16%   1.18%   1.37%   1.42%

 

Impaired loans (individually and collectively evaluated for impairment) have declined from $201.3 million at June 30, 2012 and from $145.7 million at March 31, 2013 to $133.8 million at June 30, 2013. The nonaccrual loan coverage ratio remained strong at 127.1% at June 30, 2013, an increase from 104.6% the same quarter last year but a decrease from 149.4% at March 31, 2013. 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 in assessing the adequacy of the allowance for loan losses.

 

Troubled Debt Restructurings (“TDRs”)

Loans classified as TDRs as of June 30, 2013 totaled $53.0 million, a decline of $27.2 million, or 33.9%, from $80.2 million at June 30, 2012 and a decrease of $1.7 million, or 3.1%, from $54.7 million at March 31, 2013. Of the $53.0 million of TDRs at June 30, 2013, $39.8 million, or 75.1%, were considered performing while the remaining $13.2 million were considered nonperforming. The decline in the TDR balance from the prior quarter is attributable to $4.7 million being removed from TDR status and $2.9 million in net payments, partially offset by additions of $5.9 million. Loans removed from TDR status represent restructured loans with a market rate of interest at the time of the restructuring, which were performing in accordance with their modified terms for a consecutive twelve month period and that were no longer considered impaired.

 

The following table shows the Company’s performing and nonperforming TDRs by modification type for the quarter ended (dollars in thousands):

 

   June 30,   March 31,   December 31,   September 30,   June 30, 
   2013   2013   2012   2012   2012 
Performing                         
Modified to interest only, at a market rate  $1,883   $2,071   $1,877   $1,437   $2,191 
Term modification, at a market rate   27,829    30,380    38,974    39,195    53,905 
Term modification, below market rate   7,724    7,803    8,227    8,911    9,004 
Interest rate modification, below market rate   2,390    2,390    2,390    2,390    2,390 
Total performing  $39,826   $42,644   $51,468   $51,933   $67,490 
                          
Nonperforming                         
Modified to interest only, at a market rate  $1,191   $1,275   $672   $920   $642 
Term modification, at a market rate   4,225    2,940    3,653    3,288    3,451 
Term modification, below market rate   7,794    7,797    7,666    7,672    8,587 
Total nonperforming  $13,210   $12,012   $11,991   $11,880   $12,680 
                          
Total performing & nonperforming  $53,036   $54,656   $63,459   $63,813   $80,170 

 

 
 

 

NONINTEREST INCOME

 

   For the Three Months Ended 
   Dollars in thousands 
   06/30/13   03/31/13   $   %   06/30/12   $   % 
Noninterest income:                                   
Service charges on deposit accounts  $2,346   $2,272   $74    3.3%  $2,291   $55    2.4%
Other service charges, commissions and fees   3,222    2,807    415    14.8%   2,774    448    16.1%
Losses (gains) on securities transactions, net   53    (11)   64    NM    10    43    430.0%
Gains on sales of mortgage loans, net of commissions   4,668    3,852    816    21.2%   3,832    836    21.8%
Gains (losses) on bank premises, net   (34)   (296)   262    NM    373    (407)   NM 
Other operating income   1,044    1,211    (167)   -13.8%   973    71    7.3%
Total noninterest income  $11,299   $9,835   $1,464    14.9%  $10,253   $1,046    10.2%
                                    
Mortgage segment operations  $(4,668)  $(3,856)  $(812)   21.1%  $(3,833)  $(835)   21.8%
Intercompany eliminations   167    167    -    0.0%   117    50    42.7%
Community Bank segment  $6,798   $6,146   $652    10.6%  $6,537   $261    4.0%

 

NM - Not Meaningful                                                        

 

On a linked quarter basis, noninterest income increased $1.5 million, or 14.9%, to $11.3 million from $9.8 million in the first quarter. Other services charges, commissions and fees, increased $415,000 primarily due to increased revenue on retail investment products and higher net interchange fees. Gains on sales of mortgage loans, net of commissions, increased $816,000, or 21.2%, as mortgage loan originations increased by $30.0 million, or 11.2%, in the current quarter to $298.2 million from $268.2 million in the first quarter. Losses on bank premises decreased $262,000 largely due to the write down of a former branch location in the first quarter. Other operating income decreased $167,000 primarily due to elevated insurance related revenue during the first quarter. Excluding mortgage segment operations, noninterest income increased $652,000, or 10.6%.

 

For the quarter ended June 30, 2013, noninterest income increased $1.0 million, or 10.2%, to $11.3 million from $10.3 million in the prior year’s second quarter. Other service charges, commissions and fees increased $448,000 primarily due to increased revenue on retail investment products and letter of credit related fees. Gains on sales of mortgage loans, net of commissions, increased $836,000, or 21.8%, due to higher origination volumes, primarily a result of additional loan originators hired in 2012. Gains on bank premises declined due to branch sales gains recognized during the second quarter of 2012. Excluding mortgage segment operations, noninterest income increased $261,000, or 4.0%, from the same period a year ago.

 

   For the Six Months Ended 
   Dollars in thousands 
   06/30/13   06/30/12   $   % 
Noninterest income:                    
Service charges on deposit accounts
  $4,618   $4,421   $197    4.5%
Other service charges, commissions and fees
   6,029    5,346    683    12.8%
Gains on securities transactions
   42    5    37    NM 
Gains on sales of mortgage loans, net of commissions   8,520    6,597    1,923    29.1%
Gains (losses) on bank premises   (330)   343    (673)   NM 
Other operating income   2,254    2,017    237    11.8%
Total noninterest income  $21,133   $18,729   $2,404    12.8%
                     
Mortgage segment operations  $(8,522)  $(6,600)  $(1,922)   29.1%
Intercompany eliminations   334    234    100    42.7%
Community Bank segment  $12,945   $12,363   $582    4.7%

 

NM - Not Meaningful                 

 

For the six months ending June 30, 2013, noninterest income increased $2.4 million, or 12.8%, to $21.1 million, from $18.7 million a year ago. Service charges on deposit accounts increased $197,000 primarily related to higher overdraft and returned check fees. Other account service charges and fees increased $683,000 due to higher net interchange fee income, revenue on retail investment products, and fees on letters of credit. Gains on sales of mortgage loans, net of commissions, increased $1.9 million driven by an increase in loan origination volume, a result of additional loan originators hired in 2012 and historically low interest rates. Conversely, gains on bank premises decreased $673,000 as the Company recorded a loss in the current year on the closure of bank premises coupled with gains in the prior year related to sale of bank premises. Other operating income increased $237,000 primarily related to increased income on bank owned life insurance and insurance related revenues. Excluding mortgage segment operations, noninterest income increased $582,000, or 4.7%, from the same period a year ago.

 

 
 

NONINTEREST EXPENSE

 

   For the Three Months Ended 
   Dollars in thousands 
   06/30/13   03/31/13   $   %   06/30/12   $   % 
Noninterest expense:                                   
Salaries and benefits  $17,912   $17,966   $(54)   -0.3%  $16,935   $977    5.8%
Occupancy expenses   2,764    2,855    (91)   -3.2%   3,092    (328)   -10.6%
Furniture and equipment expenses   1,741    1,845    (104)   -5.6%   1,868    (127)   -6.8%
OREO and credit-related expenses (1)   984    574    410    71.4%   1,310    (326)   -24.9%
Acquisition-related expenses   919    -    919    NM    -    919    NM 
Other operating expenses   9,963    10,261    (298)   -2.9%   10,402    (439)   -4.2%
Total noninterest expense  $34,283   $33,501   $782    2.3%  $33,607   $676    2.0%
                                    
Mortgage segment operations  $(4,657)  $(4,124)  $(533)   12.9%  $(3,338)  $(1,319)   39.5%
Intercompany eliminations   167    167    -    0.0%   117    50    42.7%
Community Bank segment  $29,793   $29,544   $249    0.8%  $30,386   $(593)   -2.0%

 

NM - Not Meaningful                                         

 

 (1) OREO related costs include foreclosure related expenses, gains/losses on the sale of OREO, valuation reserves, and asset resolution related legal expenses.  

 

On a linked quarter basis, noninterest expense increased $782,000, or 2.3%, to $34.3 million from $33.5 million when compared to the first quarter. Excluding acquisition-related expenses of $919,000 incurred in the second quarter, noninterest expense decreased $137,000, or 0.4%, from the prior quarter. OREO and credit-related costs increased $410,000 as the Company incurred a loss on the sale of OREO in the current quarter while generating a gain during the prior quarter. Other operating expense decreased $298,000 primarily due to declining core deposit intangible amortization expense. Excluding mortgage segment operations and acquisition related costs, noninterest expense decreased $670,000, or 2.3%, compared to the first quarter.

 

For the quarter ended June 30, 2013, noninterest expense increased $676,000, or 2.0%, to $34.3 million from $33.6 million for the second quarter of 2012. Excluding of acquisition-related expenses of $919,000, noninterest expense decreased $243,000, or 0.7%, from the prior year. Salaries and benefits expenses increased $997,000 primarily related to the costs associated with the addition of mortgage loan originators and support personnel in 2012 and management incentive payments related to higher earnings. Occupancy expenses decreased $328,000 primarily due to branch closures in 2012. OREO and credit-related costs decreased $326,000 from the prior year’s second quarter primarily due to declines in problem loan related legal fees and foreclosure related costs as asset quality continues to improve. Other operating expenses were lower by $439,000 primarily related to declining core deposit intangible amortization expense. Excluding mortgage segment operations and acquisition related costs, noninterest expense decreased $1.5 million, or 5.0%, compared to the second quarter of 2012.

 

 
 

 

   For the Six Months Ended 
   Dollars in thousands 
   06/30/13   06/30/12   $   % 
Noninterest expense:                    
Salaries and benefits  $35,878   $33,911   $1,967    5.8%
Occupancy expenses   5,619    5,739    (120)   -2.1%
Furniture and equipment expenses   3,585    3,631    (46)   -1.3%
OREO and credit-related expenses (1)   1,558    2,238    (680)   -30.4%
Acquisition-related expenses   919    -    919    NM 
Other operating expenses   20,224    20,355    (131)   -0.6%
Total noninterest expense  $67,783   $65,874   $1,909    2.9%
                     
Mortgage segment operations  $(8,779)  $(6,039)  $(2,740)   45.4%
Intercompany eliminations   334    234    100    42.7%
Community Bank segment  $59,338   $60,069   $(731)   -1.2%

 

NM - Not Meaningful

 

 (1) OREO related costs include foreclosure related expenses, gains/losses on the sale of OREO, valuation reserves, and asset resolution related legal expenses.

 

For the six months ending June 30, 2013, noninterest expense increased $1.9 million, or 2.9% to $67.8 million, from $65.9 million a year ago. Excluding acquisition-related expenses of $919,000, noninterest expense increased $990,000, or 1.5%, from the prior year period. Salaries and benefits expense increased $2.0 million due to the addition of mortgage loan originators and support personnel hired in 2012, group insurance cost increases, and severance expense recorded in the current quarter related to the relocation of Union Mortgage Group’s headquarters to Richmond. OREO and related costs decreased $680,000, or 30.4%, due to gains on sales of OREO and declines in problem loan legal fees and foreclosure related costs as asset quality continues to improve. Excluding mortgage segment operations and acquisition related costs, noninterest expense declined $1.7 million, or 2.7%, compared to the same period in 2012.

 

BALANCE SHEET

 

At June 30, 2013, total assets were $4.1 billion, an increase of $5.4 million from March 31, 2013, and an increase of $74.3 million from June 30, 2012. Total cash and cash equivalents were $71.5 million at June 30, 2013, a decrease of $837,000 from the same period last year, and a decrease of $5.3 million from March 31, 2013. Investment in securities declined $45.2 million, or 7.2%, from $627.5 million at June 30, 2012 to $582.3 million at June 30, 2013, and decreased $905,000 from March 31, 2013. Mortgage loans held for sale were $109.4 million, an increase of $9.3 million from June 30, 2012, but a decline of $17.7 million from March 31, 2013.

 

At June 30, 2013, loans (net of unearned income) were $3.0 billion, an increase of $113.1 million, or 3.9% from June 30, 2012, and an increase of $27.3 million, or 0.9%, from March 31, 2013.

 

As of June 30, 2013, total deposits were $3.3 billion, an increase of $47.0 million, or 1.5%, when compared to June 30, 2012, and a decrease of $45.8 million from March 31, 2013. Year over year deposit growth was driven by increases in low cost deposit levels, which grew $76.5 million, while the drop in linked quarter deposits was driven by lower time deposit balances of $39.7 million.

 

Net short term borrowings declined as a result of lower mortgage loans held for sale funding requirements during the quarter. During the third quarter of 2012, the Company modified its fixed rate convertible Federal Home Loan Bank of Atlanta (“FHLB”) advances to floating rate advances, which resulted in reducing the Company’s FHLB borrowing costs. In connection with this modification, the Company incurred a prepayment penalty of $19.6 million which is being amortized, as a component of interest expense on borrowing, over the life of the advances. The prepayment amount is reported as a component of long-term borrowings in the Company’s consolidated balance sheet.

 

 
 

 

The Company’s capital ratios continued to be considered “well capitalized” for regulatory purposes. The Company’s ratio of total capital to risk-weighted assets was 14.37% and 14.55% on June 30, 2013 and 2012, respectively. The Company’s ratio of Tier 1 capital to risk-weighted assets was 13.08% and 12.99% at June 30, 2013 and 2012, respectively. The Company’s common equity to asset ratios at June 30, 2013 and 2012 were 10.56% and 10.88%, respectively, while its tangible common equity to tangible assets ratio was 8.92% and 9.11% at June 30, 2013 and 2012. During the first quarter, the Company entered into an agreement to purchase 500,000 shares of its common stock from Markel Corporation, the Company’s largest shareholder, for an aggregate purchase price of $9,500,000, or $19.00 per share. The repurchase was funded with cash on hand and the shares were retired. The Company is authorized to repurchase an additional 250,000 shares under its current repurchase program authorization, which expires December 31, 2013. Also, the Company paid a dividend of $0.13 per share during the current quarter, no change from the prior quarter and $0.05 per share, or 62.5%, from the same quarter a year ago.

 

MORTGAGE SEGMENT INFORMATION

 

On a linked quarter basis, the mortgage segment’s net income of $294,000 for the second quarter represents an increase of $117,000, or 66.1%, from $177,000 in the first quarter.  Current quarter results include severance expenses of $186,000 related to the recently announced plan to relocate Union Mortgage Group’s headquarters to Richmond, Virginia. The linked quarter net income increase was primarily due to increased mortgage loan origination volumes of $30.0 million, driven by higher seasonal demand during the second quarter. As a result of the higher volumes and stronger gain on sale margins, gains on the sale of loans, net of commission expenses, increased $816,000 or 21.2%, to $4.7 million. Refinanced loans represented 38.4% of the mortgage loan originations during the second quarter compared to 52.7% during the first quarter.

 

For the three months ended June 30, 2013, net income of $294,000 for the mortgage segment declined by $176,000 or 37.4% from net income of $470,000 in the same period last year. Excluding the severance expense impact noted above, net income would have decreased $57,000 or 12.1% over the same period last year. Mortgage loan originations increased by $40.8 million, or 15.9%, to $298.2 million from $257.4 million in the prior year driven by additions in production personnel in 2012 and lower mortgage interest rates. In early 2012, the Company significantly increased its mortgage loan production capacity by hiring additional loan originators and support personnel. During the current quarter, the Company recorded gains on the sale of mortgage loans, net of commission expenses that were $836,000, or 21.8%, higher than the same period last year primarily due to higher loan origination volumes. Excluding severance expenses, year over year expenses increased $1.1 million driven by the personnel additions in 2012 as well as investments made in the current quarter to enhance the mortgage segment’s operating capabilities and improve profitability. Refinanced loans represented 38.4% of mortgage loan originations during the second quarter of 2013 compared to 45.1% during the same period last year.

 

For the six months ended June 30, 2013, the mortgage segment net income decreased $231,000, or 32.8%, from $704,000 during the same period last year to $473,000.  Net income for the current year includes the impact of the severance accrual described above. Mortgage loan originations increased by $125.0 million, or 28.3%, to $566.3 million from $441.3 million during the same period last year due to the addition of mortgage loan originators in 2012 noted above and the low interest rate environment.  Gains on sales of loans, net of commission expenses, increased $1.9 million, or 29.1%, a result of the increased mortgage loan origination volumes. Excluding severance expenses, year over year expenses increased by $2.5 million, or 45.3%, due to higher salary and benefit expenses of $2.1 million related to the addition of mortgage loan originators and support personnel in early 2012 as well as investments made in the current year to enhance the mortgage segment’s operating capabilities. Refinanced loans represented 45.2% of mortgage loan originations during the year compared to 49.8% during 2012.

 

* * * * * * *

 

 
 

 

ABOUT UNION FIRST MARKET BANKSHARES CORPORATION

 

Headquartered in Richmond, Virginia, Union First Market Bankshares Corporation is the holding company for Union First Market Bank, which has 90 branches and more than 150 ATMs 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. Union First Market Bank also owns a non-controlling interest in Johnson Mortgage Company, L.L.C.

 

Additional information is available on the Company’s website at http://investors.bankatunion.com. Shares of the Company’s common stock are traded on the NASDAQ Global Select Market under the symbol UBSH.

 

FORWARD-LOOKING STATEMENTS

 

Certain statements in this report 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 and 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 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, changes in the stock and bond markets, accounting standards or interpretations of existing standards, mergers and acquisitions, technology, and consumer spending and savings habits.  More information is available on the Company’s website, http://investors.bankatunion.com and on the Securities and Exchange Commission’s website, www.sec.gov.  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 FIRST MARKET BANKSHARES CORPORATION AND SUBSIDIARIES

KEY FINANCIAL RESULTS

(in thousands, except share data)                            

 

   Three Months Ended   Six Months Ended 
   06/30/13   03/31/13   06/30/12   06/30/13   06/30/12 
Results of Operations                    
Interest and dividend income  $42,686   $43,285   $45,302   $85,973   $91,178 
Interest expense   5,283    5,532    7,215    10,816    14,744 
Net interest income   37,403    37,753    38,087    75,157    76,434 
Provision for loan losses   1,000    2,050    3,000    3,050    6,500 
Net interest income after provision for loan losses   36,403    35,703    35,087    72,107    69,934 
Noninterest income   11,299    9,835    10,253    21,133    18,729 
Noninterest expenses   34,283    33,501    33,607    67,783    65,874 
Income before income taxes   13,419    12,037    11,733    25,457    22,789 
Income tax expense   3,956    3,054    3,313    7,011    6,446 
Net income  $9,463   $8,983   $8,420   $18,446   $16,343 
                          
Interest earned on loans (FTE)  $38,876   $39,413   $40,371   $78,288   $81,061 
Interest earned on securities (FTE)   5,099    5,125    5,937    10,224    12,143 
Interest earned on earning assets (FTE)   43,981    44,543    46,340    88,524    93,259 
Net interest income (FTE)   38,698    39,011    39,125    77,708    78,515 
Interest expense on certificates of deposit   2,863    3,058    3,851    5,921    7,880 
Interest expense on interest-bearing deposits   3,701    3,962    5,023    7,663    10,358 
Core deposit intangible amortization   921    1,036    1,225    1,957    2,535 
                          
Net income - community bank segment  $9,169   $8,806   $7,950   $17,973   $15,639 
Net income - mortgage segment   294    177    470    473    704 
                          
Key Ratios                         
Return on average assets (ROA)   0.94%   0.90%   0.86%   0.92%   0.84%
Return on average equity (ROE)   8.73%   8.32%   7.84%   8.53%   7.68%
Efficiency ratio (FTE)   68.57%   68.58%   68.07%   68.58%   67.74%
Efficiency ratio - community bank segment (FTE)   66.13%   66.26%   66.98%   66.19%   66.54%
Efficiency ratio - mortgage bank segment (FTE)   91.11%   93.25%   80.87%   92.10%   83.83%
                          
Net interest margin (FTE)   4.18%   4.23%   4.36%   4.21%   4.39%
Net interest margin, core (FTE) (1)   4.14%   4.18%   4.25%   4.16%   4.26%
Yields on earning assets (FTE)   4.75%   4.84%   5.15%   4.79%   5.21%
Cost of interest-bearing liabilities (FTE)   0.73%   0.76%   1.00%   0.74%   1.02%
Cost of funds   0.57%   0.60%   0.79%   0.59%   0.82%
Noninterest expense less noninterest income / average assets   2.28%   2.37%   2.38%   2.32%   2.42%
                          
Capital Ratios                         
Tier 1 risk-based capital ratio   13.08%   13.02%   12.99%   13.08%   12.99%
Total risk-based capital ratio   14.37%   14.44%   14.55%   14.37%   14.55%
Leverage ratio (Tier 1 capital to average assets)   10.45%   10.21%   10.44%   10.45%   10.44%
Common equity to total assets   10.56%   10.63%   10.88%   10.56%   10.88%
Tangible common equity to tangible assets   8.92%   8.97%   9.11%   8.92%   9.11%

 

 
 

 

   Three Months Ended   Six Months Ended 
   06/30/13   03/31/13   06/30/12   06/30/13   06/30/12 
                     
Per Share Data                         
Earnings per common share, basic  $0.38   $0.36   $0.32   $0.74   $0.63 
Earnings per common share, diluted   0.38    0.36    0.32    0.74    0.63 
Cash dividends paid per common share   0.13    0.13    0.08    0.26    0.15 
Market value per share   20.59    19.56    14.45    20.59    14.45 
Book value per common share   17.32    17.43    16.75    17.32    16.75 
Tangible book value per common share   14.36    14.43    13.74    14.36    13.74 
Price to earnings ratio, diluted   13.51    13.40    11.23    13.80    11.41 
Price to book value per common share ratio   1.19    1.12    0.86    1.19    0.86 
Price to tangible common share ratio   1.43    1.36    1.05    1.43    1.05 
Weighted average common shares outstanding, basic   24,721,771    25,063,426    25,868,174    24,891,655    25,899,648 
Weighted average common shares outstanding, diluted   24,802,231    25,138,003    25,888,151    24,961,431    25,923,505 
Common shares outstanding at end of period   24,880,403    24,859,729    25,952,035    24,880,403    25,952,035 
                          
Financial Condition                         
Assets  $4,056,557   $4,051,135   $3,982,288   $4,056,557   $3,982,288 
Loans, net of unearned income   3,000,855    2,973,547    2,887,790    3,000,855    2,887,790 
Earning Assets   3,722,199    3,726,703    3,649,829    3,722,199    3,649,829 
Goodwill   59,400    59,400    59,400    59,400    59,400 
Core deposit intangibles, net   13,821    14,742    18,178    13,821    18,178 
Deposits   3,265,963    3,311,749    3,218,986    3,265,963    3,218,986 
Stockholders' equity   428,429    430,773    433,436    428,429    433,436 
Tangible common equity   355,209    356,631    355,625    355,209    355,625 
                          
Averages                         
Assets  $4,037,696   $4,057,156   $3,942,727   $4,047,372   $3,923,243 
Loans, net of unearned income   2,975,200    2,965,918    2,847,087    2,970,584    2,838,484 
Loans held for sale   117,467    156,766    73,518    137,008    70,712 
Securities   609,592    600,262    649,121    604,953    645,736 
Earning assets   3,713,392    3,735,926    3,615,718    3,724,597    3,597,115 
Deposits   3,265,128    3,284,435    3,200,016    3,274,728    3,183,834 
Certificates of deposit   979,011    1,041,903    1,112,964    1,010,283    1,125,532 
Interest-bearing deposits   2,608,408    2,654,918    2,636,390    2,631,535    2,634,724 
Borrowings   299,115    301,343    274,597    300,223    275,180 
Interest-bearing liabilities   2,907,523    2,956,261    2,910,987    2,931,758    2,909,904 
Stockholders' equity   434,640    437,981    431,915    436,301    428,102 
Tangible common equity   360,974    363,355    353,473    362,157    348,985 

 

 
 

 

   Three Months Ended   Six Months Ended 
   06/30/13   03/31/13   06/30/12   06/30/13   06/30/12 
Asset Quality                         
Allowance for Loan Losses (ALL)                         
Beginning balance  $34,415   $34,916   $40,204   $34,916   $39,470 
Add: Recoveries   721    834    350    1,555    691 
Less: Charge-offs   1,803    3,385    2,569    5,188    5,676 
Add: Provision for loan losses   1,000    2,050    3,000    3,050    6,500 
Ending balance  $34,333   $34,415   $40,985   $34,333   $40,985 
                          
Components of ALL:                         
ALL for Loans individually evaluated for impairment  $6,109   $5,712   $11,500   $6,109   $11,500 
ALL for Loans collectively evaluated for impairment   28,224    28,703    29,485    28,224    29,485 
   $34,333   $34,415   $40,985   $34,333   $40,985 
                          
ALL / total outstanding loans   1.14%   1.16%   1.42%   1.14%   1.42%
ALL / total outstanding loans, adjusted for acquired (2)   1.33%   1.36%   1.74%   1.33%   1.74%
Net charge-offs / total outstanding loans   0.14%   0.35%   0.31%   0.24%   0.35%
Provision / total outstanding loans   0.13%   0.28%   0.42%   0.21%   0.45%
Nonperforming Assets                         
Commercial  $23,013   $18,456   $36,035   $23,013   $36,035 
Consumer   4,009    4,577    3,136    4,009    3,136 
Nonaccrual loans   27,022    23,033    39,171    27,022    39,171 
                          
Other real estate owned   35,153    35,878    35,802    35,153    35,802 
Total nonperforming assets (NPAs)   62,175    58,911    74,973    62,175    74,973 
                          
Commercial   1,353    2,105    2,324    1,353    2,324 
Consumer   4,938    4,082    8,444    4,938    8,444 
Loans 90 days and still accruing   6,291    6,187    10,768    6,291    10,768 
                          
Total nonperforming assets and loans 90 days  $68,466   $65,098   $85,741   $68,466   $85,741 
NPAs / total outstanding loans   2.07%   1.98%   2.60%   2.07%   2.60%
NPAs / total assets   1.53%   1.45%   1.88%   1.53%   1.88%
ALL / nonperforming loans   127.06%   149.42%   104.63%   127.06%   104.63%
ALL / nonperforming assets   55.22%   58.42%   54.67%   55.22%   54.67%
                          
Past Due Detail                         
Commercial  $1,093   $1,844   $3,022   $1,093   $3,022 
Consumer   3,729    2,650    3,602    3,729    3,602 
Loans 60-89 days past due  $4,822   $4,494   $6,624   $4,822   $6,624 
Commercial  $7,392   $4,173   $5,674   $7,392   $5,674 
Consumer   11,215    9,890    10,147    11,215    10,147 
Loans 30-59 days past due  $18,607   $14,063   $15,821   $18,607   $15,821 
Commercial  $3,039   $3,078   $5,741   $3,039   $5,741 
Consumer   934    941    1,034    934    1,034 
Purchased impaired  $3,973   $4,019   $6,775   $3,973   $6,775 
                          
Mortgage Origination Volume                         
Total Mortgage loan originations  $298,180   $268,161   $257,354   $566,341   $441,329 
% of originations that are refinances   38.40%   52.70%   45.10%   45.20%   49.80%
                          
Other Data                         
End of period full-time employees   1,044    1,028    1,084    1,044    1,084 
Number of full-service branches   90    90    94    90    94 
Number of full automatic transaction machines (ATMs)   155    156    158    155    158 

 

 
 

 

   Three Months Ended   Six Months Ended 
   06/30/13   03/31/13   06/30/12   06/30/13   06/30/12 
Alternative Performance Measures (non-GAAP)                         
Operating Earnings (non-GAAP) (3)                         
Net Income (GAAP)  $9,463   $8,983   $8,420   $18,446   $16,343 
Plus: Merger and conversion related expense   919    -    -    919    - 
Net operating earnings (loss) (non-GAAP)  $10,382   $8,983   $8,420   $19,365   $16,343 
                          
Operating earnings per share - Basic  $0.42   $0.36   $0.32   $0.78   $0.63 
Operating earnings per share - Diluted   0.42    0.36    0.32    0.78    0.63 
                          
Operating earnings - ROA   1.03%   0.90%   0.86%   0.96%   0.84%
Operating earnings - ROE   9.58%   8.32%   7.84%   8.95%   7.68%
                          
Operating Efficiency Ratio FTE (non-GAAP) (3)                         
Net Interest Income (GAAP)  $37,403   $37,753   $38,087   $75,157   $76,434 
FTE adjustment   1,295    1,258    1,038    2,552    2,081 
Net Interest Income (FTE)  $38,698    39,011    39,125    77,709    78,515 
Noninterest Income (GAAP)   11,299    9,835    10,253    21,133    18,729 
Noninterest Expense (GAAP)  $34,283   $33,501   $33,607   $67,783   $65,874 
Merger and conversion related expense   919    -    -    919    - 
Noninterest Expense (Non-GAAP)  $33,364   $33,501   $33,607   $66,864   $65,874 
                          
Operating Efficiency Ratio FTE (non-GAAP)   66.73%   68.58%   68.07%   67.65%   67.74%
                          
Cash basis earnings (non-GAAP) (4)                         
Net income  $9,463   $8,983   $8,420   $18,446   $16,343 
Plus: Core deposit intangible amortization, net of tax   599    673    796    1,272    1,648 
Plus: Trademark intangible amortization, net of tax   -    22    65    22    130 
Cash basis earnings  $10,062   $9,678   $9,281   $19,740   $18,121 
                          
Average assets  $4,037,696   $4,057,156   $3,942,727   $4,047,372   $3,923,243 
Less: Average trademark intangible   -    5    281    3    331 
Less: Average goodwill   59,400    59,400    59,400    59,400    59,400 
Less: Average core deposit intangibles   14,266    15,221    18,761    14,741    19,386 
Average tangible assets  $3,964,030   $3,982,530   $3,864,285   $3,973,228   $3,844,126 
                          
Average equity  $434,640   $437,981   $431,915   $436,301   $428,102 
Less: Average trademark intangible   -    5    281    3    331 
Less: Average goodwill   59,400    59,400    59,400    59,400    59,400 
Less: Average core deposit intangibles   14,266    15,221    18,761    14,741    19,386 
Average tangible common equity  $360,974   $363,355   $353,473   $362,157   $348,985 
                          
Cash basis earnings per share, diluted  $0.41   $0.38   $0.36   $0.79   $0.70 
Cash basis return on average tangible assets   1.02%   0.99%   0.97%   1.00%   0.95%
Cash basis return on average tangible common equity   11.18%   10.80%   10.56%   10.99%   10.44%
                          
ALL to legacy loans (non-GAAP) (2)                         
Gross Loans  $3,000,855   $2,973,547   $2,887,790   $3,000,855   $2,887,790 
Less:  Acquired loans without additional credit deterioration   (424,402)   (447,406)   (533,087)   (424,402)   (533,087)
Gross Loans, adjusted for acquired   2,576,453    2,526,141    2,354,703    2,576,453    2,354,703 
Allowance for loan losses   34,333    34,415    40,985    34,333    40,985 
ALL / gross loans, adjusted for acquired   1.33%   1.36%   1.74%   1.33%   1.74%

 

 
 

 

(1) The core net interest margin, fully taxable equivalent (“FTE”) excludes the impact of acquisition accounting accretion and amortization adjustments in net interest income.

(2) The allowance for loan losses, adjusted for acquired loans (non-GAAP) ratio includes the allowance for loan losses to the total loan portfolio less acquired loans without additional credit deterioration above the original credit mark. Loans with credit deterioration subsequent to being acquired have been provided for in accordance with the Company's ALL methodology. 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, adjusted for acquired loans ratio 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. Therefore, acquired loans without additional credit deterioration above the original credit mark are adjusted out of the loan balance denominator.

(3) The Company has provided supplemental performance measures which the Company believes may be useful to investors as they exclude non-operating adjustments resulting from acquisition 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.

(4) As a supplement to GAAP, management also reviews operating performance based on its "cash basis earnings" to fully analyze its core business. Cash basis earnings exclude amortization expense attributable to intangibles (goodwill and core deposit intangibles) that do not qualify as regulatory capital. Financial ratios based on cash basis earnings exclude the amortization of nonqualifying intangible assets from earnings and the unamortized balance of nonqualifying intangibles from assets and equity.

 

 
 

 

UNION FIRST MARKET BANKSHARES CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except share data)                

 

   June 30,   December 31,   June 30, 
   2013   2012   2012 
ASSETS  (Unaudited)   (Audited)   (Unaudited) 
Cash and cash equivalents:               
Cash and due from banks  $59,867   $71,426   $57,245 
Interest-bearing deposits in other banks   11,526    11,320    14,975 
Money market investments   1    1    1 
Federal funds sold   153    155    163 
Total cash and cash equivalents   71,547    82,902    72,384 
                
Securities available for sale, at fair value   582,312    585,382    627,543 
Restricted stock, at cost   17,956    20,687    19,291 
                
Loans held for sale   109,395    167,698    100,066 
                
Loans, net of unearned income   3,000,855    2,966,847    2,887,790 
Less allowance for loan losses   34,333    34,916    40,985 
Net loans   2,966,522    2,931,931    2,846,805 
                
Bank premises and equipment, net   82,857    85,409    91,122 
Other real estate owned, net of valuation allowance   35,153    32,834    35,802 
Core deposit intangibles, net   13,821    15,778    18,178 
Goodwill   59,400    59,400    59,400 
Other assets   117,594    113,844    111,697 
Total assets  $4,056,557   $4,095,865   $3,982,288 
                
LIABILITIES               
Noninterest-bearing demand deposits   668,303    645,901    591,757 
Interest-bearing deposits:               
NOW accounts   456,459    454,150    425,188 
Money market accounts   953,978    957,130    905,739 
Savings accounts   225,821    207,846    198,728 
Time deposits of $100,000 and over   468,263    508,630    534,682 
Other time deposits   493,139    524,110    562,892 
Total interest-bearing deposits   2,597,660    2,651,866    2,627,229 
Total deposits   3,265,963    3,297,767    3,218,986 
                
Securities sold under agreements to repurchase   101,418    54,270    75,394 
Other short-term borrowings   28,000    78,000    - 
Trust preferred capital notes   60,310    60,310    60,310 
Long-term borrowings   137,919    136,815    155,625 
Other liabilities   34,518    32,840    38,537 
Total liabilities   3,628,128    3,660,002    3,548,852 
                
Commitments and contingencies               
                
STOCKHOLDERS' EQUITY               
Common stock, $1.33 par value, shares authorized 36,000,000; issued and outstanding, 24,880,403 shares, 25,270,970 shares, and 25,952,035 shares, respectively.   32,901    33,510    34,415 
Surplus   168,600    176,635    185,733 
Retained earnings   227,563    215,634    202,278 
Accumulated other comprehensive income   (635)   10,084    11,010 
Total stockholders' equity   428,429    435,863    433,436 
                
Total liabilities and stockholders' equity  $4,056,557   $4,095,865   $3,982,288 

  

 
 

 

UNION FIRST MARKET BANKSHARES CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Dollars in thousands, except per share amounts)

                        

   Three Months Ended   Six Months Ended 
   June 30,   June 30, 
   2013   2012   2013   2012 
   (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited) 
Interest and dividend income:                    
Interest and fees on loans  $38,687   $40,299   $77,912   $80,907 
Interest on Federal funds sold   -    -    1    - 
Interest on deposits in other banks   6    32    11    54 
Interest and dividends on securities:                    
Taxable   1,939    3,184    4,008    6,640 
Nontaxable   2,054    1,787    4,041    3,577 
Total interest and dividend income   42,686    45,302    85,973    91,178 
                     
Interest expense:                    
Interest on deposits   3,701    5,023    7,663    10,358 
Interest on federal funds purchased   21    1    36    1 
Interest on short-term borrowings   54    47    108    91 
Interest on long-term borrowings   1,507    2,144    3,009    4,294 
Total interest expense   5,283    7,215    10,816    14,744 
                     
Net interest income   37,403    38,087    75,157    76,434 
Provision for loan losses   1,000    3,000    3,050    6,500 
Net interest income after provision for loan losses   36,403    35,087    72,107    69,934 
                     
Noninterest income:                    
Service charges on deposit accounts   2,346    2,291    4,618    4,421 
Other service charges, commissions and fees   3,222    2,774    6,029    5,346 
Losses on securities transactions, net   53    10    42    5 
Gains on sales of mortgage loans, net of commissions   4,668    3,832    8,520    6,597 
Losses on sales of bank premises   (34)   373    (330)   343 
Other operating income   1,044    973    2,254    2,017 
Total noninterest income   11,299    10,253    21,133    18,729 
                     
Noninterest expenses:                    
Salaries and benefits   17,912    16,935    35,878    33,911 
Occupancy expenses   2,764    3,092    5,619    5,739 
Furniture and equipment expenses   1,741    1,868    3,585    3,631 
Other operating expenses   11,866    11,712    22,701    22,593 
Total noninterest expenses   34,283    33,607    67,783    65,874 
                     
Income before income taxes   13,419    11,733    25,457    22,789 
Income tax expense   3,956    3,313    7,011    6,446 
Net income  $9,463   $8,420   $18,446   $16,343 
Earnings per common share, basic  $0.38   $0.32   $0.74   $0.63 
Earnings per common share, diluted  $0.38   $0.32   $0.74   $0.63 

 

 
 

 

UNION FIRST MARKET BANKSHARES CORPORATION AND SUBSIDIARIES

SEGMENT FINANCIAL INFORMATION

(Dollars in thousands)                      

 

   Community Bank   Mortgage   Eliminations   Consolidated 
Three Months Ended June 30,  2013                    
Net interest income  $36,960   $443   $-   $37,403 
Provision for loan losses   1,000    -    -    1,000 
Net interest income after provision for loan losses   35,960    443    -    36,403 
Noninterest income   6,798    4,668    (167)   11,299 
Noninterest expenses   29,793    4,657    (167)   34,283 
Income before income taxes   12,965    454    -    13,419 
Income tax expense   3,796    160    -    3,956 
Net income  $9,169   $294   $-   $9,463 
Total assets  $4,045,163   $121,392   $(109,998)  $4,056,557 
                     
Three Months Ended June 30,  2012                    
Net interest income  $37,792   $295   $-   $38,087 
Provision for loan losses   3,000    -    -    3,000 
Net interest income after provision for loan losses   34,792    295    -    35,087 
Noninterest income   6,537    3,833    (117)   10,253 
Noninterest expenses   30,386    3,338    (117)   33,607 
Income before income taxes   10,943    790    -    11,733 
Income tax expense   2,993    320    -    3,313 
Net income  $7,950   $470   $-   $8,420 
Total assets  $3,967,690   $110,374   $(95,776)  $3,982,288 
                     
Six Months Ended June 30,  2013                    
Net interest income  $74,147   $1,010   $-   $75,157 
Provision for loan losses   3,050    -    -    3,050 
Net interest income after provision for loan losses   71,097    1,010    -    72,107 
Noninterest income   12,945    8,522    (334)   21,133 
Noninterest expenses   59,338    8,779    (334)   67,783 
Income before income taxes   24,704    753    -    25,457 
Income tax expense   6,731    280    -    7,011 
Net income  $17,973   $473   $-   $18,446 
Total assets  $4,045,163   $121,392   $(109,998)  $4,056,557 
                     
Six Months Ended June 30,  2012                    
Net interest income  $75,830   $604   $-   $76,434 
Provision for loan losses   6,500    -    -    6,500 
Net interest income after provision for loan losses   69,330    604    -    69,934 
Noninterest income   12,363    6,600    (234)   18,729 
Noninterest expenses   60,069    6,039    (234)   65,874 
Income before income taxes   21,624    1,165    -    22,789 
Income tax (benefit) expense   5,985    461    -    6,446 
Net income  $15,639   $704   $-   $16,343 
Total assets  $3,967,690   $110,374   $(95,776)  $3,982,288 

 

 
 

 

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

                                                

   For the Three Months Ended June 30, 
   2013   2012   2011 
   Average Balance   Interest Income / Expenset   Yield / Rate (1)   Average Balance   Interest Income / Expense   Yield / Rate (1)   Average Balance   Interest Income / Expense   Yield / Rate (1) 
   (Dollars in thousands) 
Assets:                                             
Securities:                                             
Taxable  $389,662   $1,939    2.00%  $473,158   $3,185    2.71%  $419,747   $3,627    3.47%
Tax-exempt   219,930    3,160    5.76%   175,963    2,752    6.29%   166,660    2,722    6.55%
Total securities (2)   609,592    5,099    3.35%   649,121    5,937    3.68%   586,407    6,349    4.34%
Loans, net (3) (4)   2,975,200    37,928    5.11%   2,847,087    39,734    5.61%   2,823,186    42,004    5.97%
Loans held for sale   117,467    948    3.24%   73,518    637    3.48%   42,341    468    4.43%
Federal funds sold   446    -    0.23%   380    0    0.24%   165    (0)   0.22%
Money market investments   1    -    0.00%   10    -    0.00%   153    -    0.00%
Interest-bearing deposits in other banks   10,686    6    0.23%   45,602    32    0.28%   34,697    27    0.32%
Other interest-bearing deposits   -    -    0.00%   -    -    0.00%   -    -    0.00%
Total earning assets   3,713,392    43,981    4.75%   3,615,718    46,340    5.15%   3,486,949    48,848    5.62%
Allowance for loan losses   (34,874)             (40,635)             (39,999)          
Total non-earning assets   359,178              367,644              383,836           
Total assets  $4,037,696             $3,942,727             $3,830,786           
                                              
Liabilities and Stockholders' Equity:                         
                                              
Interest-bearing deposits:                                             
Checking  $454,652    79    0.07%  $423,044    116    0.11%  $386,107    157    0.16%
Money market savings   948,992    590    0.25%   903,682    881    0.39%   840,696    1,465    0.70%
Regular savings   225,753    169    0.30%   196,700    175    0.36%   175,869    192    0.44%
Time deposits: (5)                                             
$100,000 and over   479,274    1,527    1.28%   543,271    2,054    1.52%   569,587    2,217    1.56%
Under $100,000   499,737    1,336    1.07%   569,693    1,797    1.27%   600,754    2,135    1.43%
Total interest-bearing deposits   2,608,408    3,701    0.57%   2,636,390    5,023    0.77%   2,573,013    6,166    0.96%
Other borrowings (6)   299,115    1,582    2.12%   274,597    2,192    3.21%   288,554    1,967    2.73%
Total interest-bearing liabilities   2,907,523    5,283    0.73%   2,910,987    7,215    1.00%   2,861,567    8,133    1.14%
                                              
Noninterest-bearing liabilities:                                             
Demand deposits   656,720              563,626              504,810           
Other liabilities   38,813              36,199              24,050           
Total liabilities   3,603,056              3,510,812              3,390,427           
Stockholders' equity   434,640              431,915              440,359           
Total liabilities and stockholders' equity  $4,037,696             $3,942,727             $3,830,786           
                                              
Net interest income       $38,698             $39,125             $40,715      
                                              
Interest rate spread (7)             4.02%             4.16%             4.48%
Interest expense as a percent of average earning assets             0.57%             0.79%             0.94%
Net interest margin (8)             4.18%             4.36%             4.68%

 

(1)Rates and yields are annualized and calculated from actual, not rounded amounts in thousands, which appear above.
(2)Interest income on securities includes $0, $46 thousand, and $93 thousand for the three months ended June 30, 2013, 2012, and 2011 in accretion of the fair market value adjustments.
(3)Nonaccrual loans are included in average loans outstanding.
(4)Interest income on loans includes $534 thousand, $915 thousand, and $1.6 million for the three months ended June 30, 2013, 2012, and 2011 in accretion of the fair market value adjustments related to the acquisitions.
(5)Interest expense on certificates of deposits includes $2 thousand, $111 thousand, and $216 thousand for the three months ended June 30, 2013, 2012, and 2011 in accretion of the fair market value adjustments related to the acquisitions.
(6)Interest expense on borrowings includes $122 thousand for the three months ended June 30, 2013, 2012, and 2011.
(7)Income and yields are reported on a taxable equivalent basis using the statutory federal corporate tax rate of 35%.
(8)Core net interest margin excludes purchase accounting adjustments and was 4.14%, 4.25%, and 4.47% for the three months ended June 30, 2013, 2012, and 2011.

     

 
 

 

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

                                                

   For the Six Months Ended June 30, 
   2013   2012   2011 
   Average Balance   Interest Income / Expense   Yield / Rate (1)   Average Balance   Interest Income / Expense   Yield / Rate (1)   Average Balance   Interest Income / Expense   Yield / Rate (1) 
   (Dollars in thousands) 
Assets:                                             
Securities:                                             
Taxable  $389,986   $4,008    2.07%  $471,605   $6,640    2.83%  $416,150   $7,257    3.52%
Tax-exempt   214,967    6,216    5.83%   174,131    5,503    6.36%   165,799    5,420    6.59%
Total securities (2)   604,953    10,224    3.41%   645,736    12,143    3.78%   581,949    12,677    4.39%
Loans, net (3) (4)   2,970,584    76,142    5.17%   2,838,484    79,825    5.66%   2,817,829    83,597    5.98%
Loans held for sale   137,008    2,146    3.16%   70,712    1,236    3.51%   48,214    1,032    4.32%
Federal funds sold   486    1    0.24%   397    1    0.24%   215    0    0.23%
Money market investments   1    -    0.00%   24    -    0.00%   157    -    0.00%
Interest-bearing deposits in other banks   11,565    11    0.19%   41,762    54    0.26%   25,103    33    0.26%
Other interest-bearing deposits   -    -    0.00%   -    -    0.00%   -    -    0.00%
Total earning assets   3,724,597    88,524    4.79%   3,597,115    93,259    5.21%   3,473,467    97,339    5.65%
Allowance for loan losses   (35,208)             (40,328)             (39,386)          
Total non-earning assets   357,983              366,456              385,355           
Total assets  $4,047,372             $3,923,243             $3,819,436           
                                              
Liabilities and Stockholders' Equity:                                             
Interest-bearing deposits:                                             
Checking  $451,107    172    0.08%  $416,557    247    0.12%  $380,463    316    0.17%
Money market savings   949,035    1,244    0.26%   901,110    1,878    0.42%   825,717    2,970    0.73%
Regular savings   221,110    326    0.30%   191,525    353    0.37%   168,259    295    0.35%
Time deposits: (5)                                             
$100,000 and over   502,595    3,193    1.28%   549,157    4,164    1.52%   585,173    4,700    1.62%
Under $100,000   507,688    2,728    1.08%   576,375    3,716    1.30%   610,407    4,570    1.51%
Total interest-bearing deposits   2,631,535    7,663    0.59%   2,634,724    10,358    0.79%   2,570,019    12,851    1.01%
Other borrowings (6)   300,223    3,153    2.12%   275,180    4,386    3.21%   289,976    3,874    2.69%
Total interest-bearing liabilities   2,931,758    10,816    0.74%   2,909,904    14,744    1.02%   2,859,995    16,725    1.18%
                                              
Noninterest-bearing liabilities:                                             
Demand deposits   643,193              549,109              495,886           
Other liabilities   36,120              36,128              27,150           
Total liabilities   3,611,071              3,495,141              3,383,031           
Stockholders' equity   436,301              428,102              436,405           
Total liabilities and stockholders' equity  $4,047,372             $3,923,243             $3,819,436           
                                              
Net interest income       $77,708             $78,515             $80,614      
                                              
Interest rate spread (7)             4.05%             4.19%             4.47%
Interest expense as a percent of average earning assets             0.59%              0.82%             0.97%
Net interest margin (8)             4.21%             4.39%             4.68%

 

(1)Rates and yields are annualized and calculated from actual, not rounded amounts in thousands, which appear above.
(2)Interest income on securities includes $15 thousand, $108 thousand, and $201 thousand for the six months ended June 30, 2013, 2012, and 2011 in accretion of the fair market value adjustments.
(3)Nonaccrual loans are included in average loans outstanding.
(4)Interest income on loans includes $1.1 million, $2.2 million, and $3.2 million for the six months ended June 30, 2013, 2012, and 2011 in accretion of the fair market value adjustments related to the acquisitions.
(5)Interest expense on certificates of deposits includes $4 thousand, $228 thousand, and $474 thousand for the six months ended June 30, 2013, 2012, and 2011 in accretion of the fair market value adjustments related to the acquisitions.
(6)Interest expense on borrowings includes $244 thousand for the six months ended June 30, 2013, 2012, and 2011.
(7)Income and yields are reported on a taxable equivalent basis using the statutory federal corporate tax rate of 35%.
(8)Core net interest margin excludes purchase accounting adjustments and was 4.16%, 4.26%, and 4.47% for the six months ended June 30, 2013, 2012, and 2011.