Exhibit 99.1

 

LOGO

 

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

UNION FIRST MARKET BANKSHARES REPORTS THIRD QUARTER RESULTS

Richmond, Va., October 22, 2012 – Union First Market Bankshares Corporation (the “Company”) (NASDAQ: UBSH) today reported net income of $9.6 million and earnings per share of $0.37 for its third quarter ended September 30, 2012. The quarterly results represent an increase of $1.2 million, or 14.3%, in net income from the most recent quarter and an increase of $555,000, or 6.1%, from the same quarter of the prior year. Reported earnings per share of $0.37 for the current quarter represents an increase of $0.05, or 15.6%, from the most recent quarter and $0.04, or 12.1%, from the prior year’s third quarter which included preferred dividends and discount accretion on preferred stock of $528,000.

“The third quarter results show the continued success of our business strategy as well as the early results of our teammates efficiency ratio improvement efforts as Union strives to achieve top quartile financial performance nationally and provide our shareholders with above average returns on their investment,” said G. William Beale, Chief Executive Officer of Union First Market Bankshares. “We remain committed to delivering top tier financial performance by increasing revenues through new products and services, with loan and deposit growth and disciplined pricing as well as pursuing opportunities to more efficiently deliver best in class service to our customers, diligently managing our overall expense base and continuing our efforts to improve asset quality.”

“During the quarter, we analyzed our branch network and decided to close 4 branches by the end of the year, which will reduce expenses while maintaining our strong customer relationships. On the bank side, our growth strategy continues to show results with more than 750 net new households joining Union during the quarter bringing total new households to nearly 3,000 year-to-date. The company experienced loan growth for the fourth consecutive quarter and continued strong growth at Union Mortgage. Finally, asset quality trends continue to improve as non-performing loan and OREO balance levels continued to decline in the latest quarter. All in all, it was another solid quarter for Union and one that we expect to build upon to show even more progress in the quarters ahead,” Beale concluded.

Select highlights:

 

 

The Company earned a Return on Average Equity (“ROE”) of 8.70% and Return on Average Assets (“ROA”) of 0.96% for the quarter ended September 30, 2012. This represents continued improvement in ROE and ROA compared to 7.84% and 0.86%, respectively, for the quarter ended June 30, 2012 and 8.02% and 0.93% respectively, for the quarter ended September 30, 2011.

 

 

Gains on sales of mortgage loans increased $1.6 million from the prior quarter due to a $65.7 million, or 25.5%, increase in origination volume as mortgage rates remain at historic low levels and the additional mortgage loan originators added in 2012 continued to ramp up to full production capacity.

 

 

Nonperforming assets (“NPAs”) decreased $8.4 million, or 11.2%, from the second quarter and decreased $19.8 million, or 22.9%, compared to the same period a year ago. NPAs as a percentage of total outstanding loans declined 31 basis points to 2.29% from 2.60% last quarter and 78 basis points from 3.07% a year earlier.

 

 

Loan demand continued to improve modestly with an increase in loans outstanding of $20.7 million, or 0.7% (2.9% annualized rate), from the prior quarter.


Third quarter net income increased $1.2 million, or 14.3%, compared to the second quarter. The increase was largely a result of gains on sales of mortgage loans, driven by higher loan production volume and increased net interest income. The increase in net interest income was driven by higher earning asset balances partially offset by the impact of lower net interest margin. In addition, the Company’s provision for loan losses was $600,000 lower than the prior quarter.

Net income for the quarter ended September 30, 2012 increased $555,000, or 6.1%, from the same quarter in the prior year. The increase was principally a result of higher gains on sales of mortgage loans, increased service charges, commissions and fees and a $1.2 million lower provision for loan losses, partially offset by an increase in commission expense related to mortgage loan origination volume. In addition, net interest income decreased as interest income declined at a faster pace than interest expense, a result of lower loan yields and investment opportunities in the current low rate environment.

NET INTEREST INCOME

 

     Three Months Ended
Dollars in thousands
 
     09/30/12     06/30/12     Change     09/30/11     Change  

Average interest-earning assets

   $ 3,671,398      $ 3,615,718      $ 55,680      $ 3,538,752      $ 132,646   

Interest income

   $ 46,555      $ 46,340      $ 215      $ 48,673      $ (2,118

Yield on interest-earning assets

     5.04     5.15     (11 ) bps      5.46     (42 ) bps 

Average interest-bearing liabilities

   $ 2,925,322      $ 2,910,987      $ 14,335      $ 2,873,721      $ 51,601   

Interest expense

   $ 6,740      $ 7,215      $ (475   $ 8,159      $ (1,419

Cost of interest-bearing liabilities

     0.92     1.00     (8 ) bps      1.13     (21 ) bps 

Net Interest Income (FTE)

   $ 39,815      $ 39,125      $ 690      $ 40,514      $ (699

Net Interest Margin (FTE)

     4.31     4.36     (5 ) bps      4.54     (23 ) bps 

On a linked quarter basis, tax-equivalent net interest income was $39.8 million, an increase of $690,000, or 1.8%, from the second quarter of 2012. This increase was principally due to higher loan balances offset by the impact of lower net interest margin. Third quarter tax-equivalent net interest margin declined by 5 basis points to 4.31% from 4.36% in the most recent quarter. The change in net interest margin was principally attributable to the continued decline in net accretion on the acquired net earning assets (3 bps) and lower investment and loan yields outpacing the reduction in the cost of interest-bearing liabilities (2 bps). Loan yields continue to be negatively affected by competitive pricing and a low rate environment while yields on investment securities were impacted by lower reinvestment rates and faster prepayments related to mortgage-backed securities during the quarter. The cost of interest-bearing deposits declined during the quarter driven by a shift in mix from time deposits to transaction deposits, reductions in deposit rates and lower wholesale borrowing costs.

For the three months ended September 30, 2012, tax-equivalent net interest income decreased $699,000, or 1.7%, when compared to the same period last year. The tax-equivalent net interest margin decreased by 23 basis points to 4.31% from 4.54% in the prior year. This decrease was principally due to the continued decline in accretion on the acquired net earning assets (12 bps) and the decline in interest-earning asset yields exceeding the decrease in interest-bearing liabilities rates (11 bps). Lower interest-earning asset income was principally due to lower yields on loans as new and renewed loans are originated and repriced at lower rates, faster prepayments on mortgage backed securities, and cash flows from securities investments reinvested at lower yields.


The Company continues to expect that its net interest margin will 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
Dollars in thousands
Nine Months Ended
 
     09/30/12     09/30/11     Change  

Average interest-earning assets

   $ 3,622,057      $ 3,494,013      $ 128,044   

Interest income

   $ 139,814      $ 146,012      $ (6,198

Yield on interest-earning assets

     5.16     5.59     (43 ) bps 

Average interest-bearing liabilities

   $ 2,915,082      $ 2,864,620      $ 50,462   

Interest expense

   $ 21,485      $ 24,884      $ (3,399

Cost of interest-bearing liabilities

     0.99     1.16     (17 ) bps 

Net Interest Income (FTE)

   $ 118,329      $ 121,128      $ (2,799

Net Interest Margin (FTE)

     4.36     4.63     (27 ) bps 

For the nine months ended September 30, 2012, tax-equivalent net interest income decreased $2.8 million, or 2.3%, when compared to the same period last year. The tax-equivalent net interest margin decreased by 27 basis points to 4.36% from 4.63% 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 (9 bps) and a decline in income from interest-earning assets outpacing lower costs on interest-bearing liabilities (18 bps). Lower interest-earning asset income was principally due to lower yields on loans and investment securities as new loans and renewed loans are originated and repriced at lower rates, faster prepayments on mortgage backed securities, and cash flows from securities investments are reinvested at lower yields.

Acquisition Activity – Impact on Net Interest Margin

The favorable impact of acquisition accounting fair value adjustments on net interest income was $752,000 ($627,000 – First Market Bank (“FMB”); $125,000 – Harrisonburg Branch) and $3.0 million ($2.5 million – FMB; $503,000 – Harrisonburg Branch) for the three and nine months ended September 30, 2012, respectively. If not for this favorable impact, the net interest margin for the third quarter would have been 4.23%, compared to 4.25% from the second quarter of 2012 and 4.34% from the third quarter of 2011.

The third quarter and remaining estimated discount/premium are reflected in the following table (dollars in thousands):

 

     Harrisonburg Branch      First Market Bank        
     Loan
Accretion
     Certificates
of Deposit
     Loan
Accretion
     Investment
Securities
     Borrowings     Total  

For the quarter ended September 30, 2012

   $ 122       $ 3       $ 703       $ 46       $ (122   $ 752   

For the remaining three months of 2012

     95         2         652         46         (122     673   

For the years ending:

                

2013

     148         7         2,142         15         (489     1,823   

2014

     37         4         1,511         —           (489     1,063   

2015

     26         —           903         —           (489     440   

2016

     27         —           345         —           (163     209   

2017

     23         —           18         —           —          41   

Thereafter

     120         —           —           —           —          120   


ASSET QUALITY/LOAN LOSS PROVISION

Overview

During the third quarter, the Company continued to experience improvement in asset quality. Improving market conditions in the Company’s local markets led to a reduction in both OREO and nonaccrual loans, which are at their lowest levels since the fourth quarter of 2009. The Company’s reduction in nonperforming assets and troubled debt restructurings, favorable trends in provisions for loan losses, and decreased allowance to total loans ratio demonstrate that its diligent efforts to improve asset quality are having a positive impact. The allowance to nonperforming loans coverage ratio has continued to increase significantly and is at its highest level since the fourth quarter of 2009. The magnitude of any change in the real estate market and its impact on the Company is still largely dependent upon continued recovery of commercial real estate and residential housing and the pace at which the local economies in the Company’s operating markets improve.

Nonperforming Assets (“NPAs”)

At September 30, 2012, nonperforming assets totaled $66.6 million, a decrease of $8.4 million, or 11.2%, from the second quarter and a decrease of $19.8 million, or 22.9%, from a year ago. In addition, NPAs as a percentage of total outstanding loans declined 31 basis points from 2.60% in the second quarter and 78 basis points from 3.07% in the third quarter of the prior year to 2.29% at September 30, 2012. The current quarter decrease in NPAs from the second quarter related to a net decrease in nonaccrual loans, excluding purchased impaired loans, of $7.0 million as well as a net decrease in OREO of $1.4 million.

Nonperforming assets at September 30, 2012 included $32.2 million in nonaccrual loans (excluding purchased impaired loans), a net decrease of $7.0 million, or 17.9%, from the prior quarter. The following table shows the activity in nonaccrual loans for the quarter ended (dollars in thousands):

 

     September 30,
2012
    June 30,
2012
    March 31,
2012
    December 31,
2011
    September 30,
2011
 

Beginning Balance

   $ 39,171      $ 42,391      $ 44,834      $ 51,965      $ 54,322   

Net customer payments

     (5,774     (3,174     (2,778     (6,556     (2,343

Additions

     2,586        2,568        2,805        5,364        1,751   

Charge-offs

     (3,012     (561     (1,549     (2,304     (1,268

Loans returning to accruing status

     (812     (1,803     —          (1,950     (497

Transfers to OREO

     —          (250     (921     (1,685     —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending Balance

   $ 32,159      $ 39,171      $ 42,391      $ 44,834      $ 51,965   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The nonperforming loans added during the quarter were principally related to commercial loans as borrowers continued to experience financial difficulties with the prolonged economic recovery exhausting their cash reserves and other repayment sources.


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):

 

     September 30,
2012
    June 30,
2012
    March 31,
2012
    December 31,
2011
    September 30,
2011
 

Raw Land and Lots

   $ 10,995      $ 12,139      $ 13,064      $ 13,322      $ 15,997   

Commercial Construction

     7,846        9,763        9,835        10,276        9,818   

Commercial Real Estate

     2,752        5,711        6,299        7,993        9,204   

Single Family Investment Real Estate

     4,081        3,476        4,507        5,048        7,969   

Commercial and Industrial

     2,678        4,715        5,318        5,297        4,000   

Other Commercial

     195        231        233        238        259   

Consumer

     3,612        3,136        3,135        2,660        4,718   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

   $ 32,159      $ 39,171      $ 42,391      $ 44,834      $ 51,965   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Coverage Ratio

     124.05     104.63     94.84     88.04     79.46

Impairment analyses provided appropriate reserves on these nonperforming loans while appropriate reserves on homogenous pools continue to be maintained. The increase in the coverage ratio is primarily related to a decline in nonperforming loans.

Nonperforming assets at September 30, 2012 also included $34.4 million in OREO, a net decrease of $1.4 million, or 3.9%, from the prior quarter. The following table shows the activity in OREO for the quarter ended (dollars in thousands):

 

     September 30,
2012
    June 30,
2012
    March 31,
2012
    December 31,
2011
    September 30,
2011
 

Beginning Balance

   $ 35,802      $ 37,663      $ 32,263      $ 34,464      $ 36,935   

Additions

     929        3,887        6,593        2,543        449   

Capitalized Improvements

     16        23        319        197        241   

Valuation Adjustments

     —          —          —          (530     —     

Proceeds from sales

     (2,071     (5,592     (1,485     (3,674     (3,285

Gains (losses) from sales

     (236     (179     (27     (737     124   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending Balance

   $ 34,440      $ 35,802      $ 37,663      $ 32,263      $ 34,464   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The additions to OREO were principally related to closed branch property and residential real estate; sales from OREO were principally related to residential lots and land, land previously held for branch sites, and commercial property.


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

 

     September 30,
2012
     June 30,
2012
     March 31,
2012
     December 31,
2011
     September 30,
2011
 

Land

   $ 6,953       $ 6,953       $ 6,327       $ 6,327       $ 8,559   

Land Development

     11,034         11,313         11,559         11,309         11,824   

Residential Real Estate

     9,729         10,431         12,482         11,024         11,903   

Commercial Real Estate

     5,640         6,085         6,275         2,583         1,158   

Former Bank Premises (1)

     1,084         1,020         1,020         1,020         1,020   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 34,440       $ 35,802       $ 37,663       $ 32,263       $ 34,464   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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

Included in land development is $9.1 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 valuations are also evaluated at least quarterly by the Bank’s Special Asset Loan Committee and any necessary write downs to fair values are recorded as impairment.

Accruing Past Due Loans

At September 30, 2012, total accruing past due loans were $39.0 million, or 1.34% of total loans, an increase from 1.15% at June 30, 2012 and but down from 1.61% a year ago. The increase in past due loans from the prior quarter is attributable to the addition of three large credit relationships previously identified as impaired and evaluated within the Company’s allowance for loan losses methodology.

Charge-offs

For the quarter ended September 30, 2012, net charge-offs of loans were $3.5 million, or 0.48% on an annualized basis, compared to $2.2 million, or 0.31%, for the second quarter and $1.9 million, or 0.27%, for the same quarter last year. The uptick in charge-offs from the prior quarter and prior year quarter relate to loans that were previously considered impaired and specifically reserved for in prior periods. Of the $3.5 million in net charge-offs, $2.9 million, or 83%, related to impaired loans which had $3.3 million in reserves or credit mark assigned to them. Net charge-offs in the current quarter included commercial loans of $2.7 million and consumer loans of $800,000.

For the nine months ended September 30, 2012, net charge-offs of loans were $8.5 million, or 0.39% on an annualized basis, compared to $11.5 million, or 0.55%, for the nine months ended September 30, 2011. The decrease in charge-offs is related to the reduced levels of nonperforming loans, as management continues to proactively manage problem credits.

Provision

The provision for loan losses for the current quarter was $2.4 million, a decrease of $600,000 from the second quarter and decline of $1.2 million from the same quarter a year ago. The lower provision is largely due to the charge off of loans that had been reserved for in earlier periods. 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.

The allowance for loan losses as a percentage of the total loan portfolio was 1.37% at September 30, 2012, 1.42% at June 30, 2012, and 1.47% at September 30, 2011. The decrease in the allowance and related ratio was primarily attributable to the charge off of loans specifically reserved for in prior periods. 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, adjusted for loans acquired in the FMB and Harrisonburg Branch acquisitions, was 1.66% at September 30, 2012, a decrease from 1.74% at June 30, 2012 and 1.94% from year ago. The nonaccrual loan coverage ratio significantly improved, as it increased from 104.63% at June 30, 2012 and from 79.46% the same quarter last year to 124.05% at September 30,


2012. The rise in the coverage ratio, which is at the highest level since the fourth quarter of 2009, further shows that management’s proactive diligence in working through problem credits is having a positive impact on asset quality.

Troubled Debt Restructurings (“TDRs”)

The total recorded investment in TDRs as of September 30, 2012 was $63.8 million, a decrease of $16.4 million, or 20.5%, from $80.2 million at June 30, 2012 and a decline of $52.6 million, or 45.2%, from $116.4 million at September 30, 2011. Of the $63.8 million of TDRs at September 30, 2012, $51.9 million, or 81.4%, were considered performing while the remaining $11.9 million were considered nonperforming. The decline in the TDR balance from the prior quarter is attributable to $11.0 million being removed from TDR status and $6.4 million in net payments, partially offset by additions of $1.0 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):

 

     September 30,
2012
     June 30,
2012
     March 31,
2012
     December 31,
2011
     September 30,
2011
 

Performing

              

Modified to interest only

   $ 1,437       $ 2,191       $ 1,812       $ 699       $ 839   

Term modification, at a market rate

     39,195         53,905         75,455         87,920         91,039   

Term modification, below market rate

     8,911         9,004         8,797         10,215         10,254   

Interest rate modification, below market rate

     2,390         2,390         —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total performing

   $ 51,933       $ 67,490       $ 86,064       $ 98,834       $ 102,132   

Nonperforming

              

Modified to interest only

   $ 920       $ 642       $ 649       $ 1,190       $ 658   

Term modification, at a market rate

     3,288         3,451         4,290         3,660         4,187   

Term modification, below market rate

     7,672         8,587         8,804         8,954         9,398   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total nonperforming

   $ 11,880       $ 12,680       $ 13,743       $ 13,804       $ 14,243   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total performing & nonperforming

   $ 63,813       $ 80,170       $ 99,807       $ 112,638       $ 116,375   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

NONINTEREST INCOME

 

     For the Three Months Ended
Dollars in thousands
 
     09/30/12     06/30/12      $     %     09/30/11     $     %  

Noninterest income:

               

Service charges on deposit accounts

   $ 2,222      $ 2,291         (69     -3.0   $ 2,294      $ (72     -3.1

Other service charges, commissions and fees

     3,655        3,627         28        0.8     3,254        401        12.3

Losses (gains) on securities transactions, net

     (1     10         (11     NM        499        (500     NM   

Other-than-temporary impairment losses

     —          —           —          0.0     (400     400        NM   

Gains on sales of loans

     8,918        7,315         1,603        21.9     4,861        4,057        83.5

Gains (losses) on bank premises, net

     (309     374         (683     NM        (16     (293     NM   

Other operating income

     1,067        972         95        9.8     919        148        16.1
  

 

 

   

 

 

    

 

 

     

 

 

   

 

 

   

Total noninterest income

   $ 15,552      $ 14,589       $ 963        6.6   $ 11,411      $ 4,141        36.3
  

 

 

   

 

 

    

 

 

     

 

 

   

 

 

   

NM – Not Meaningful

On a linked quarter basis, noninterest income increased $963,000, or 6.6%, to $15.6 million from $14.6 million in the second quarter. Of this increase, gains on sales of mortgage loans increased $1.6 million or 21.9% driven by an increase in loan origination volume as mortgage rates remain attractive at historic lows. Gains on bank premises decreased $683,000 largely due to a sale of a former branch building at a gain in the prior quarter, and a write down on a former branch location in the current quarter. Service charges on deposit accounts and other account fees were largely unchanged from the prior quarter. Excluding mortgage segment operations and the impact of current and prior period bank property sales, noninterest income was comparatively unchanged, increasing 0.7%.


For the quarter ended September 30, 2012, noninterest income increased $4.1 million, or 36.3%, to $15.6 million from $11.4 million in the prior year’s third quarter. Gains on sales of mortgage loans increased $4.1 million, or 83.5%, due to higher origination volume, a result of additional loan originators hired in 2012 and historically low interest rates. Service charges on deposit accounts and other account fees increased $329,000 or 5.9%, driven by higher interchange fee income and higher brokerage commissions. Gains on securities transactions decreased $500,000 as a result of a gain on the sale of municipal securities in the prior year. Also, an other-than-temporary loss of $400,000 related to a single issuer Trust Preferred security was recorded in the prior year. Gains on bank premises decreased $309,000 largely due to a write down of a former branch building during the current quarter. Excluding the mortgage segment operations and the impact of prior period securities transactions and bank premises transactions, noninterest income increased $478,000, or 7.3%, from the same period a year ago.

 

     For the Nine Months Ended
Dollars in thousands
 
     09/30/12      09/30/11     $     %  

Noninterest income:

         

Service charges on deposit accounts

   $ 6,643       $ 6,568        75        1.1

Other service charges, commissions and fees

     10,692         9,529        1,163        12.2

Losses (gains) on securities transactions, net

     4         483        (479     NM   

Other-than-temporary impairment losses

     —           (400     400        NM   

Gains on sales of loans

     21,529         14,132        7,397        52.3

Gains (losses) on bank premises, net

     34         (644     678        NM   

Other operating income

     3,084         2,715        369        13.6
  

 

 

    

 

 

   

 

 

   

Total noninterest income

   $ 41,986       $ 32,383      $ 9,603        29.7
  

 

 

    

 

 

   

 

 

   

NM – Not Meaningful

For the nine months ending September 30, 2012, noninterest income increased $9.6 million, or 29.7%, to $42.0 million, from $32.4 million a year ago. Gains on sales of loans in the mortgage segment increased $7.4 million driven by an increase in loan origination volume, a result of additional loan originators hired in 2012 and historically low interest rates. Service charges on deposit accounts and other account fees increased $1.2 million primarily related to higher interchange fee income, higher brokerage commissions, and higher ATM fee income. In addition, gains on bank premises increased $678,000 as the Company sold a former branch building and recorded a loss on the sale of $626,000 during 2011. Gains on securities transactions decreased $479,000 as a result of a gain on the sale of municipal securities in the prior year. Also, an other-than-temporary loss of $400,000 related to a single issuer Trust Preferred security was recorded in the prior year. Excluding the mortgage segment operations, prior period securities transactions, and the impact of the bank premises related transactions, noninterest income increased $1.6 million or 8.4%, from the same period a year ago.


NONINTEREST EXPENSE

 

     For the Three Months Ended  
     Dollars in thousands  
     09/30/12     06/30/12     $     %     09/30/11     $     %  

Noninterest expense:

              

Salaries and benefits

   $ 21,279      $ 20,418      $ 861        4.2   $ 18,076      $ 3,203        17.7

Occupancy expenses

     3,262        3,092        170        5.5     2,885        377        13.1

Furniture and equipment expenses

     1,809        1,868        (59     -3.2     1,756        53        3.0

OREO and related costs(1)

     1,036        1,310        (274     -20.9     532        504        94.7

Other operating expenses

     10,932        11,256        (324     -2.9     11,255        (323     -2.9
  

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

Total noninterest expense

   $ 38,318      $ 37,944      $ 374        1.0   $ 34,504        3,814        11.1

Mortgage segment operations

   $ (7,839   $ (6,820   $ (1,019     14.9   $ (4,361   $ (3,478     79.8

Intercompany eliminations

     117        117        —          0.0     116        1        0.9
  

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   
   $ 30,596      $ 31,241      $ (645     -2.1   $ 30,259      $ 337        1.1
  

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

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 $374,000, or 1.0%, to $38.3 million from $37.9 million when compared to the second quarter. This increase was primarily driven by salaries and benefit expense, which increased $861,000 due to higher commission expense related to increased loan origination volume in the mortgage segment. Offsetting this increase was a decline in other operating expenses of $324,000 which included lower marketing and advertising expenses, lower employee travel costs, and lower account processing expenses. In addition, OREO and related costs declined $274,000, or 20.9%, due to the Company’s continued proactive diligence in resolving problem credits. Excluding the mortgage segment operations, noninterest expense declined $645,000 or 2.1% compared to the second quarter.

For the quarter ended September 30, 2012, noninterest expense increased $3.8 million, or 11.1%, to $38.3 million from $34.5 million for the third quarter of 2011. Salaries and benefits expenses increased $3.2 million primarily related to increased mortgage origination volume driven commissions and the costs associated with the addition of mortgage loan originators and support personnel in 2012. Occupancy expenses increased $377,000 primarily driven by increased mortgage office space. OREO related costs increased $504,000 from the prior year’s third quarter primarily as a result of current quarter losses on the sale of OREO compared to OREO gains recorded in the prior year. These increases were partially offset by lower other operating expenses of $323,000, related to lower FDIC insurance expense and declining amortization on the acquired deposit portfolio. Excluding the mortgage segment operations and prior year conversion costs, noninterest expense increased $337,000, or 1.1%, compared to the third quarter of 2011.

 

     For the Nine Months Ended  
     Dollars in thousands  
     09/30/12     09/30/11     $     %  

Noninterest expense:

        

Salaries and benefits

   $ 61,204      $ 53,310      $ 7,894        14.8

Occupancy expenses

     9,001        8,307        694        8.4

Furniture and equipment expenses

     5,440        5,097        343        6.7

OREO and related costs(1)

     3,273        3,389        (115     -3.4

Other operating expenses

     32,979        35,502        (2,524     -7.1
  

 

 

   

 

 

   

 

 

   

Total noninterest expense

   $ 111,897      $ 105,605        6,292        6.0

Mortgage segment operations

   $ (19,891   $ (13,614   $ (6,277     46.1

Acquisition and conversion costs

     —          (426     426        NM   

Intercompany eliminations

     351        351        —          0.0
  

 

 

   

 

 

   

 

 

   
   $ 92,357      $ 91,916      $ 441        0.5
  

 

 

   

 

 

   

 

 

   

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 nine months ending September 30, 2012, noninterest expense increased $6.3 million, or 6.0% to $111.9 million, from $105.6 million a year ago. Salaries and benefits expense increased $7.9 million due to


higher mortgage loan origination related commission expense, the addition of mortgage loan originators and support personnel hired in 2012, group insurance cost increases, and severance payments to affected employees. Occupancy costs increased $694,000 due to bank branch rent increases and additional office space in the mortgage segment, and furniture and equipment expense increased $343,000, primarily related to equipment maintenance contracts and software amortization. Partially offsetting these cost increases were other operating expenses which decreased $2.5 million, or 7.1%. Included in the reduction of other operating expenses was a $2.1 million reduction in FDIC insurance due to change in base assessment and rate, lower amortization on the acquired deposit portfolio of $926,000, and a decrease in conversion costs of $426,000 related to acquisition activity during the prior year. Excluding the mortgage segment operations and prior year conversion costs, noninterest expense increased $441,000, or 0.5%, compared to the same period in 2011.

BALANCE SHEET

At September 30, 2012, total assets were $4.0 billion, an increase of $45.9 million compared to the second quarter, and an increase of $121.1 million from December 31, 2011. At September 30, 2012, total cash and cash equivalents were $62.3 million, a decrease of $10.1 million from June 30, 2012, and a decrease of $34.3 million from December 31, 2011. At September 30, 2012, investment in securities decreased $5.5 million on a linked quarter basis and increased $1.9 million from December 31, 2011. At September 30, 2012, loans (net of unearned income) were $2.9 billion, an increase of $20.7 million, or 0.7% (2.9% on an annualized basis), from the prior quarter, and an increase of $89.9 million, or 3.2% (4.3% on an annualized basis), from December 31, 2011. Mortgage loans held for sale were $142.0 million, an increase of $41.9 million when compared to the prior quarter, and an increase of $67.1 million from December 31, 2011, which was primarily due to the increase in origination volume due to the impact of the favorable rate environment and the addition of mortgage loan originators during 2012.

As of September 30, 2012, total deposits were $3.2 billion a decrease of $19.2 million, or 0.6%, when compared to June 30, 2012 and an increase of $24.7 million, or 0.8%, when compared to December 31, 2011. Total short-term borrowings, including FHLB borrowings and repurchase agreements, increased $78.7 million on a linked quarter basis and increased $91.1 million from December 31, 2011, as the Company relied on short-term borrowings to fund loan growth and customer preference for repurchase agreements increased. As of September 30, 2012 long-term borrowings declined $19.4 million and $19.1 million when compared to June 30, 2012 and December 31, 2011. During the current quarter, the Company modified its fixed rate convertible 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 on the original advances 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 had a ratio of total capital to risk-weighted assets of 15.00% and 15.36% on September 30, 2012 and 2011, respectively. The Company’s ratio of Tier 1 capital to risk-weighted assets was 13.44% and 13.71% at September 30, 2012 and 2011, respectively, allowing the Company to exceed the definition of “well capitalized” for regulatory purposes. During the fourth quarter of 2011, the Company paid the U.S.Treasury $35.7 million to redeem the Preferred Stock issued to the Treasury and assumed in the FMB acquisition. This redemption caused the Company’s total capital and Tier 1 capital to risk-weighted assets ratios to decline from the prior year. In addition, the Company’s review of the regulatory risk weightings of the mortgage loans held for sale during the current quarter resulted in a reduction of risk weighted assets. The impact of this change was not considered to be material to the Company’s regulatory capital ratios. The Company’s common equity to asset ratios at September 30, 2012 and 2011 were 11.00% and 10.63%, respectively, while its tangible common equity to tangible assets ratio increased to 9.27% from 8.74% at September 30, 2011.

MORTGAGE SEGMENT INFORMATION

On a linked quarter basis, the mortgage segment net income for the third quarter increased $389,000, or 82.8%, from $470,000 in the second quarter to $859,000. In early 2012, the Company hired additional loan originators and support personnel who were formerly employed by a national mortgage company that exited the mortgage origination business. As new originators have increased their production, and aided by historically low interest rates, mortgage loan originations increased by $65.7 million or 25.5% in the current quarter to $323.1 million from $257.4 million in the second quarter. As a result, gains on the sale of loans increased $1.6 million, or 21.9% to $8.9 million. Salary and benefit expenses increased $1.0 million, or 18.9% to $6.4 million, primarily due to commission expenses related to the increased loan volume levels. Operating expenses increased $105,000, or 35.5%, from the prior quarter due to increased rental expense related to mortgage offices added in 2012. Refinanced loans represented 57.6% of the originations during the third quarter compared to 45.1% during the second quarter.

For the three months ended September 30, 2012, the mortgage segment net income increased $396,000 or 85.5% from $463,000 to $859,000 compared to the same period last year. Originations increased by $147.6 million, or 84.1%, to $323.1 million from $175.5 million due to the additions in production personnel described above and the sustained low interest rate environment which resulted in increased gains on the sale of loans of $4.1 million, or 83.5%, over the same period last year. Salaries and benefits increased $3.1 million, or 93.8%, as a result of personnel additions and higher commissions related to the growth in mortgage loan originations. Refinanced loans represented 57.6% of originations during the third quarter of 2012 compared to 37.5% during the same period a year ago.

For the nine months ended September 30, 2012, the mortgage segment net income increased $605,000, or 63.1%, to $1.6 million from $958,000 during the same period last year. Originations increased by $291.5 million or 61.6% from $472.9 million to $764.4 million during the same period last year due to the addition of mortgage loan originators in 2012 and a sustained low interest rate environment. Gains on sales of loans increased $7.4 million, or 52.3%, while salary and benefit expenses increased $5.6 million, or 53.7%, primarily due to commissions related to the increased loan production. Refinanced loans represented 53.1% of originations during the first nine months of the year compared to 31.6% during the same period a year ago.

* * * * * * *

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 94 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.

 

11


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     Nine Months Ended  
     09/30/12     06/30/12     09/30/11     09/30/12     09/30/11  

Results of Operations

          

Interest and dividend income

   $ 45,503      $ 45,304      $ 47,606      $ 136,681      $ 142,754   

Interest expense

     6,741        7,217        8,160        21,485        24,885   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income

     38,762        38,087        39,446        115,196        117,869   

Provision for loan losses

     2,400        3,000        3,600        8,900        14,400   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income after provision for loan losses

     36,362        35,087        35,846        106,296        103,469   

Noninterest income

     15,552        14,589        11,411        41,986        32,383   

Noninterest expenses

     38,318        37,944        34,504        111,897        105,605   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     13,596        11,733        12,753        36,385        30,247   

Income tax expense

     3,970        3,313        3,682        10,416        8,162   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 9,626      $ 8,420      $ 9,071      $ 25,969      $ 22,085   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Interest earned on loans (FTE)

   $ 40,913      $ 40,371      $ 42,777      $ 121,974      $ 127,406   

Interest earned on securities (FTE)

     5,638        5,937        5,874        17,781        18,550   

Interest earned on earning assets (FTE)

     46,555        46,340        48,673        139,814        146,012   

Net interest income (FTE)

     39,815        39,125        40,514        118,329        121,128   

Interest expense on certificates of deposit

     3,710        3,851        4,205        11,590        13,475   

Interest expense on interest-bearing deposits

     4,725        5,023        5,923        15,084        18,774   

Core deposit intangible amortization

     1,212        1,225        1,496        3,748        4,674   

Net income - community bank segment

   $ 8,767      $ 7,950      $ 8,607      $ 24,406      $ 21,126   

Net income - mortgage segment

     859        470        463        1,563        958   

Key Ratios

          

Return on average assets (ROA)

     0.96     0.86     0.93     0.88     0.77

Return on average equity (ROE)

     8.70     7.84     8.02     8.03     6.70

Efficiency ratio (FTE)

     69.21     70.54     66.54     69.80     68.73

Efficiency ratio - community bank segment (FTE)

     66.18     67.59     64.46     66.83     66.57

Efficiency ratio - mortgage bank segment (FTE)

     84.72     89.63     85.55     88.52     89.92

Net interest margin (FTE)

     4.31     4.36     4.54     4.36     4.63

Net interest margin, core (FTE)1

     4.23     4.25     4.34     4.25     4.43

Yields on earning assets (FTE)

     5.04     5.15     5.46     5.16     5.59

Cost of interest-bearing liabilities (FTE)

     0.92     1.00     1.13     0.99     1.16

Noninterest expense less noninterest income / average assets

     2.27     2.38     2.36     2.37     2.55

Capital Ratios

          

Tier 1 risk-based capital ratio

     13.44     12.99     13.71     13.44     13.71

Total risk-based capital ratio

     15.00     14.55     15.36     15.00     15.36

Leverage ratio (Tier 1 capital to average assets)

     10.53     10.44     11.00     10.53     11.00

Common equity to total assets

     11.00     10.88     10.63     11.00     10.63

Tangible common equity to tangible assets

     9.27     9.11     8.74     9.27     8.74

Per Share Data

          

Earnings per common share, basic

   $ 0.37      $ 0.32      $ 0.33      $ 1.00      $ 0.79   

Earnings per common share, diluted

     0.37        0.32        0.33        1.00        0.79   

Cash dividends paid per common share

     0.10        0.08        0.07        0.25        0.21   

Market value per share

     15.56        14.45        10.72        15.56        10.72   

Book value per common share

     17.11        16.75        16.04        17.11        16.04   

Tangible book value per common share

     14.15        13.74        12.88        14.15        12.88   

Price to earnings ratio, diluted

     10.57        11.23        8.19        11.65        10.15   

Price to book value per common share ratio

     0.91        0.86        0.67        0.91        0.67   

Price to tangible common share ratio

     1.10        1.05        0.83        1.10        0.83   

Weighted average common shares outstanding, basic

     25,884,972        25,868,174        25,986,677        25,894,720        25,971,639   

Weighted average common shares outstanding, diluted

     25,911,987        25,888,151        26,001,900        25,922,261        25,993,611   

Common shares outstanding at end of period

     25,967,705        25,952,035        26,057,501        25,967,705        26,057,501   


     Three Months Ended     Nine Months Ended  
     09/30/12     06/30/12     09/30/11     09/30/12     09/30/11  

Financial Condition

          

Assets

   $ 4,028,193      $ 3,982,288      $ 3,914,457      $ 4,028,193      $ 3,914,457   

Loans, net of unearned income

     2,908,510        2,887,790        2,818,342        2,908,510        2,818,342   

Earning Assets

     3,703,468        3,649,829        3,573,844        3,703,468        3,573,844   

Goodwill

     59,400        59,400        59,400        59,400        59,400   

Core deposit intangibles, net

     16,966        18,178        22,162        16,966        22,162   

Deposits

     3,199,779        3,218,986        3,134,876        3,199,779        3,134,876   

Stockholders’ equity

     442,949        433,436        451,581        442,949        451,581   

Tangible common equity

     366,450        355,625        334,874        366,450        334,874   

Averages

          

Assets

   $ 3,994,830      $ 3,942,727      $ 3,876,740      $ 3,947,279      $ 3,838,747   

Loans, net of unearned income

     2,890,666        2,847,087        2,831,924        2,856,005        2,822,579   

Loans held for sale

     119,190        73,518        48,664        86,989        48,366   

Securities

     651,855        649,121        597,489        647,791        587,186   

Earning assets

     3,671,398        3,615,718        3,538,752        3,622,057        3,494,013   

Deposits

     3,192,239        3,200,016        3,105,792        3,186,656        3,079,347   

Certificates of deposit

     1,080,022        1,112,964        1,160,662        1,110,252        1,183,813   

Interest-bearing deposits

     2,604,760        2,636,390        2,583,864        2,624,664        2,574,685   

Borrowings

     320,562        274,597        289,857        290,418        289,935   

Interest-bearing liabilities

     2,925,322        2,910,987        2,873,721        2,915,082        2,864,620   

Stockholders’ equity

     440,122        431,915        448,618        432,138        440,521   

Tangible common equity

     362,996        353,473        331,170        353,781        322,726   

Asset Quality

          

Allowance for Loan Losses (ALLL)

          

Beginning balance

   $ 40,985      $ 40,204      $ 39,631      $ 39,470      $ 38,406   

Add: Recoveries

     680        350        674        1,371        1,561   

Less: Charge-offs

     4,171        2,569        2,615        9,847        13,077   

Add: Provision for loan losses

     2,400        3,000        3,600        8,900        14,400   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance

   $ 39,894      $ 40,985      $ 41,290      $ 39,894      $ 41,290   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

ALLL / total outstanding loans

     1.37     1.42     1.47     1.37     1.47

ALLL / total outstanding loans, adjusted for acquired2

     1.66     1.74     1.89     1.66     1.89

Net charge-offs / total outstanding loans

     0.48     0.31     0.27     0.39     0.55

Nonperforming Assets

          

Commercial

   $ 28,547      $ 36,035      $ 47,247      $ 28,547      $ 47,247   

Consumer

     3,612        3,136        4,718        3,612        4,718   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Nonaccrual loans

     32,159        39,171        51,965        32,159        51,965   

Other real estate owned

     34,440        35,802        34,464        34,440        34,464   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total nonperforming assets (NPAs)

     66,599        74,973        86,429        66,599        86,429   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Commercial

     1,931        2,324        3,674        1,931        3,674   

Consumer

     7,165        8,444        8,480        7,165        8,480   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loans ³ 90 days and still accruing

     9,096        10,768        12,159        9,096        12,159   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total nonperforming assets and loans ³ 90 days

   $ 75,695      $ 85,741      $ 98,588      $ 75,695      $ 98,588   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

NPAs / total outstanding loans

     2.29     2.60     3.07     2.29     3.07

NPAs / total assets

     1.65     1.88     2.21     1.65     2.21

ALLL / nonperforming loans

     124.05     104.63     79.46     124.05     79.46

ALLL / nonperforming assets

     59.90     54.67     47.77     59.90     47.77


     Three Months Ended     Nine Months Ended  
     09/30/12     06/30/12     09/30/11     09/30/12     09/30/11  

Past Due Detail

          

Commercial

     382        3,022        3,630        382        3,630   

Consumer

     4,625        3,602        6,236        4,625        6,236   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loans 60-89 days past due

   $ 5,007      $ 6,624      $ 9,866      $ 5,007      $ 9,866   

Commercial

     15,421        5,674        11,648        15,421        11,648   

Consumer

     9,486        10,147        11,783        9,486        11,783   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loans 30-59 days past due

   $ 24,907      $ 15,821      $ 23,431      $ 24,907      $ 23,431   

Commercial

     5,431        5,741        9,089        5,431        9,089   

Consumer

     1,006        1,034        1,061        1,006        1,061   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Purchased impaired

   $ 6,437      $ 6,775      $ 10,150      $ 6,437      $ 10,150   

Other Data

          

Mortgage loan originations

   $ 323,077      $ 257,354      $ 176,040      $ 764,409      $ 472,882   

% of originations that are refinances

     57.60     45.10     35.70     53.10     31.60

End of period full-time employees

     1,054        1,084        1,047        1,054        1,047   

Number of full-service branches

     94        94        99        94        99   

Number of full automatic transaction machines (ATMs)

     158        158        167        158        167   

Alternative Performance Measures

          

Cash basis earnings3

          

Net income

   $ 9,626      $ 8,420      $ 9,071      $ 25,969      $ 22,085   

Plus: Core deposit intangible amortization, net of tax

     788        796        972        2,436        3,038   

Plus: Trademark intangible amortization, net of tax

     65        65        65        195        195   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash basis operating earnings

   $ 10,479      $ 9,281      $ 10,108      $ 28,600      $ 25,318   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Average assets

   $ 3,994,830      $ 3,942,727      $ 3,876,740      $ 3,947,279      $ 3,838,748   

Less: Average trademark intangible

     181        281        582        281        681   

Less: Average goodwill

     59,400        59,400        59,400        59,400        58,189   

Less: Average core deposit intangibles

     17,546        18,761        22,890        18,677        24,411   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Average tangible assets

   $ 3,917,704      $ 3,864,285      $ 3,793,868      $ 3,868,922      $ 3,755,467   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Average equity

   $ 440,122      $ 431,915      $ 448,618      $ 432,138      $ 440,521   

Less: Average trademark intangible

     181        281        582        281        681   

Less: Average goodwill

     59,400        59,400        59,400        59,400        58,189   

Less: Average core deposit intangibles

     17,546        18,761        22,890        18,677        24,411   

Less: Average preferred equity

     —          —          34,576        —          34,514   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Average tangible common equity

   $ 362,996      $ 353,473      $ 331,170      $ 353,781      $ 322,726   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash basis operating earnings per share, diluted

   $ 0.40      $ 0.36      $ 0.39      $ 1.10      $ 0.97   

Cash basis operating return on average tangible assets

     1.06     0.97     1.06     0.99     0.90

Cash basis operating return on average tangible common equity

     11.48     10.56     12.11     10.80     10.49

 

(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 (which have been provided for in the ALLL subsequent to acquisition). GAAP requires the acquired allowance for loan losses not be carried over in an acquisition or merger. We believe 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.

 

Gross Loans

   $ 2,908,510      $ 2,887,790      $ 2,818,342      $ 2,908,510      $ 2,818,342   

less acquired loans without additional credit deterioration

     (505,362     (533,087     (635,072     (505,362     (635,072
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross Loans, adjusted for acquired

     2,403,148        2,354,703        2,183,270        2,403,148        2,183,270   

Allowance for loan losses

     39,894        40,985        41,290        39,894        41,290   

ALLL / gross loans, adjusted for acquired

     1.66     1.74     1.89     1.66     1.89

 

(3) 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.

In management’s opinion, cash basis earnings are useful to investors because by excluding non-operating adjustments they allow investors to see clearly the economic impact on the results of Company. These non-GAAP disclosures should not, however, be viewed in direct comparison with non-GAAP measures of other companies.


UNION FIRST MARKET BANKSHARES CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

 

     September 30,      December 31,      September 30,  
     2012      2011      2011  
     (Unaudited)      (Audited)      (Unaudited)  

ASSETS

        

Cash and cash equivalents:

        

Cash and due from banks

   $ 52,095       $ 64,412       $ 57,171   

Interest-bearing deposits in other banks

     10,081         31,930         92,247   

Money market investments

     1         155         199   

Federal funds sold

     157         162         160   
  

 

 

    

 

 

    

 

 

 

Total cash and cash equivalents

     62,334         96,659         149,777   
  

 

 

    

 

 

    

 

 

 

Securities available for sale, at fair value

     622,067         620,166         584,668   

Restricted stock, at cost

     20,687         20,661         21,817   

Loans held for sale

     141,965         74,823         61,786   

Loans, net of unearned income

     2,908,510         2,818,583         2,818,342   

Less allowance for loan losses

     39,894         39,470         41,290   
  

 

 

    

 

 

    

 

 

 

Net loans

     2,868,616         2,779,113         2,777,052   
  

 

 

    

 

 

    

 

 

 

Bank premises and equipment, net

     87,305         90,589         90,936   

Other real estate owned, net of valuation allowance

     34,440         32,263         34,464   

Core deposit intangibles, net

     16,966         20,714         22,162   

Goodwill

     59,400         59,400         59,400   

Other assets

     114,413         112,699         112,395   
  

 

 

    

 

 

    

 

 

 

Total assets

   $ 4,028,193       $ 3,907,087       $ 3,914,457   
  

 

 

    

 

 

    

 

 

 

LIABILITIES

        

Noninterest-bearing demand deposits

   $ 604,274       $ 534,535       $ 542,692   

Interest-bearing deposits:

        

NOW accounts

     418,988         412,605         395,822   

Money market accounts

     898,625         904,893         858,426   

Savings accounts

     204,317         179,157         176,531   

Time deposits of $100,000 and over

     534,797         551,349         561,303   

Other time deposits

     538,778         592,566         600,102   
  

 

 

    

 

 

    

 

 

 

Total interest-bearing deposits

     2,595,505         2,640,570         2,592,184   
  

 

 

    

 

 

    

 

 

 

Total deposits

     3,199,779         3,175,105         3,134,876   
  

 

 

    

 

 

    

 

 

 

Securities sold under agreements to repurchase

     94,616         62,995         70,450   

Other short-term borrowings

     59,500         —           —     

Trust preferred capital notes

     60,310         60,310         60,310   

Long-term borrowings

     136,260         155,381         155,258   

Other liabilities

     34,779         31,657         41,982   
  

 

 

    

 

 

    

 

 

 

Total liabilities

     3,585,244         3,485,448         3,462,876   
  

 

 

    

 

 

    

 

 

 

STOCKHOLDERS’ EQUITY

        

Preferred stock, $10.00 par value, $1,000 liquidation value, shares authorized 500,000; issued and outstanding, 35,595 shares at September 30, 2011 and zero at December 31, 2011 and September 30, 2012.

     —           —           35,595   

Common stock, $1.33 par value, shares authorized 36,000,000; issued and outstanding, 25,967,705 shares, 26,134,830 shares, and 26,057,500 shares, respectively.

     34,433         34,672         34,581   

Surplus

     186,225         187,493         186,505   

Retained earnings

     209,308         189,824         184,845   

Discount on preferred stock

     —           —           (982

Accumulated other comprehensive income

     12,983         9,650         11,037   
  

 

 

    

 

 

    

 

 

 

Total stockholders’ equity

     442,949         421,639         451,581   
  

 

 

    

 

 

    

 

 

 

Total liabilities and stockholders’ equity

   $ 4,028,193       $ 3,907,087       $ 3,914,457   
  

 

 

    

 

 

    

 

 

 


UNION FIRST MARKET BANKSHARES CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Dollars in thousands, except per share amounts)

 

     Three Months Ended     Nine Months Ended  
     September 30     September 30  
     2012     2011     2012      2011  
     (Unaudited)     (Unaudited)     (Unaudited)      (Unaudited)  

Interest and dividend income:

         

Interest and fees on loans

   $ 40,836      $ 42,664      $ 121,743       $ 126,999   

Interest on Federal funds sold

     1        1        1         1   

Interest on deposits in other banks

     6        24        64         60   

Interest and dividends on securities:

         

Taxable

     2,846        3,146        9,482         10,400   

Nontaxable

     1,814        1,771        5,391         5,294   
  

 

 

   

 

 

   

 

 

    

 

 

 

Total interest and dividend income

     45,503        47,606        136,681         142,754   
  

 

 

   

 

 

   

 

 

    

 

 

 

Interest expense:

         

Interest on deposits

     4,726        5,924        15,084         18,774   

Interest on Federal funds purchased

     28        —          29         7   

Interest on short-term borrowings

     69        92        160         258   

Interest on long-term borrowings

     1,918        2,144        6,212         5,846   
  

 

 

   

 

 

   

 

 

    

 

 

 

Total interest expense

     6,741        8,160        21,485         24,885   
  

 

 

   

 

 

   

 

 

    

 

 

 

Net interest income

     38,762        39,446        115,196         117,869   

Provision for loan losses

     2,400        3,600        8,900         14,400   
  

 

 

   

 

 

   

 

 

    

 

 

 

Net interest income after provision for loan losses

     36,362        35,846        106,296         103,469   
  

 

 

   

 

 

   

 

 

    

 

 

 

Noninterest income:

         

Service charges on deposit accounts

     2,222        2,294        6,643         6,568   

Other service charges, commissions and fees

     3,655        3,254        10,692         9,529   

Gains (losses) on securities transactions, net

     (1     499        4         483   

Other-than-temporary impairment losses

     —          (400     —           (400

Gains on sales of mortgage loans

     8,918        4,861        21,529         14,132   

Gains (losses) on bank premises, net

     (309     (16     34         (644

Other operating income

     1,067        919        3,084         2,715   
  

 

 

   

 

 

   

 

 

    

 

 

 

Total noninterest income

     15,552        11,411        41,986         32,383   
  

 

 

   

 

 

   

 

 

    

 

 

 

Noninterest expenses:

         

Salaries and benefits

     21,279        18,076        61,204         53,310   

Occupancy expenses

     3,262        2,885        9,001         8,307   

Furniture and equipment expenses

     1,809        1,756        5,440         5,097   

Other operating expenses

     11,968        11,787        36,252         38,891   
  

 

 

   

 

 

   

 

 

    

 

 

 

Total noninterest expenses

     38,318        34,504        111,897         105,605   
  

 

 

   

 

 

   

 

 

    

 

 

 

Income before income taxes

     13,596        12,753        36,385         30,247   

Income tax expense

     3,970        3,682        10,416         8,162   
  

 

 

   

 

 

   

 

 

    

 

 

 

Net income

   $ 9,626      $ 9,071      $ 25,969       $ 22,085   

Dividends paid and accumulated on preferred stock

     —          462        —           1,386   

Accretion of discount on preferred stock

     —          66        —           195   
  

 

 

   

 

 

   

 

 

    

 

 

 

Net income available to common shareholders

   $ 9,626      $ 8,543      $ 25,969       $ 20,504   
  

 

 

   

 

 

   

 

 

    

 

 

 

Earnings per common share, basic

   $ 0.37      $ 0.33      $ 1.00       $ 0.79   
  

 

 

   

 

 

   

 

 

    

 

 

 

Earnings per common share, diluted

   $ 0.37      $ 0.33      $ 1.00       $ 0.79   
  

 

 

   

 

 

   

 

 

    

 

 

 


UNION FIRST MARKET BANKSHARES CORPORATION AND SUBSIDIARIES

SEGMENT REPORTING

 

     Community
Bank
     Mortgage      Eliminations     Consolidated  

Three Months Ended September 30, 2012

          

Net interest income

   $ 38,428       $ 334       $ —        $ 38,762   

Provision for loan losses

     2,400         —           —          2,400   
  

 

 

    

 

 

    

 

 

   

 

 

 

Net interest income after provision for loan losses

     36,028         334         —          36,362   

Noninterest income

     6,750         8,919         (117     15,552   

Noninterest expenses

     30,596         7,839         (117     38,318   
  

 

 

    

 

 

    

 

 

   

 

 

 

Income before income taxes

     12,182         1,414         —          13,596   

Income tax expense

     3,415         555         —          3,970   
  

 

 

    

 

 

    

 

 

   

 

 

 

Net income

   $ 8,767       $ 859       $ —        $ 9,626   
  

 

 

    

 

 

    

 

 

   

 

 

 

Total assets

   $ 4,020,661       $ 154,181       $ (146,649   $ 4,028,193   
  

 

 

    

 

 

    

 

 

   

 

 

 

Three Months Ended September 30, 2011

          

Net interest income

   $ 39,208       $ 238       $ —        $ 39,446   

Provision for loan losses

     3,600         —           —          3,600   
  

 

 

    

 

 

    

 

 

   

 

 

 

Net interest income after provision for loan losses

     35,608         238         —          35,846   

Noninterest income

     6,665         4,862         (116     11,411   

Noninterest expenses

     30,259         4,361         (116     34,504   
  

 

 

    

 

 

    

 

 

   

 

 

 

Income before income taxes

     12,014         739         —          12,753   

Income tax expense

     3,407         275         —          3,682   
  

 

 

    

 

 

    

 

 

   

 

 

 

Net income

   $ 8,607       $ 464       $ —        $ 9,071   
  

 

 

    

 

 

    

 

 

   

 

 

 

Total assets

   $ 3,902,362       $ 70,055       $ (57,960   $ 3,914,457   
  

 

 

    

 

 

    

 

 

   

 

 

 

Nine Months Ended September 30, 2012

          

Net interest income

   $ 114,258       $ 938       $ —        $ 115,196   

Provision for loan losses

     8,900         —           —          8,900   
  

 

 

    

 

 

    

 

 

   

 

 

 

Net interest income after provision for loan losses

     105,358         938         —          106,296   

Noninterest income

     20,805         21,532         (351     41,986   

Noninterest expenses

     92,357         19,891         (351     111,897   
  

 

 

    

 

 

    

 

 

   

 

 

 

Income before income taxes

     33,806         2,579         —          36,385   

Income tax expense

     9,400         1,016         —          10,416   
  

 

 

    

 

 

    

 

 

   

 

 

 

Net income

   $ 24,406       $ 1,563       $ —        $ 25,969   
  

 

 

    

 

 

    

 

 

   

 

 

 

Total assets

   $ 4,020,661       $ 154,181       $ (146,649   $ 4,028,193   
  

 

 

    

 

 

    

 

 

   

 

 

 

Nine Months Ended September 30, 2011

          

Net interest income

   $ 116,862       $ 1,007       $ —        $ 117,869   

Provision for loan losses

     14,400         —           —          14,400   
  

 

 

    

 

 

    

 

 

   

 

 

 

Net interest income after provision for loan losses

     102,462         1,007         —          103,469   

Noninterest income

     18,599         14,135         (351     32,383   

Noninterest expenses

     92,342         13,614         (351     105,605   
  

 

 

    

 

 

    

 

 

   

 

 

 

Income before income taxes

     28,719         1,528         —          30,247   

Income tax (benefit) expense

     7,593         569         —          8,162   
  

 

 

    

 

 

    

 

 

   

 

 

 

Net income

   $ 21,126       $ 959       $ —        $ 22,085   
  

 

 

    

 

 

    

 

 

   

 

 

 

Total assets

   $ 3,902,362       $ 70,055       $ (57,960   $ 3,914,457   
  

 

 

    

 

 

    

 

 

   

 

 

 


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

 

    For the Three Months Ended September 30,  
    2012     2011     2010  
    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

  $ 470,563      $ 2,848        2.41   $ 429,780      $ 3,148        2.91   $ 420,394      $ 3,176        3.00

Tax-exempt

    181,292        2,790        6.12     167,709        2,726        6.45     151,622        2,527        6.61
 

 

 

   

 

 

     

 

 

   

 

 

     

 

 

   

 

 

   

Total securities (2)

    651,855        5,638        3.44     597,489        5,874        3.90     572,016        5,703        3.96

Loans, net (3) (4)

    2,890,666        40,026        5.51     2,831,924        42,323        5.93     2,827,451        43,062        6.04

Loans held for sale

    119,190        887        2.96     48,664        454        3.70     75,261        675        3.56

Federal funds sold

    315        0        0.23     519        0        0.24     12,960        2        0.22

Money market investments

    (24     —          0.00     48        —          0.00     160        —          0.00

Interest-bearing deposits in other banks

    9,396        4        0.18     60,108        22        0.15     35,830        48        0.53

Other interest-bearing deposits

    —          —          0.00     —          —          0.00     —          —          0.00
 

 

 

   

 

 

     

 

 

   

 

 

     

 

 

   

 

 

   

Total earning assets

    3,671,398        46,555        5.04     3,538,752        48,673        5.46     3,523,678        49,490        5.57
   

 

 

       

 

 

       

 

 

   

Allowance for loan losses

    (41,122         (40,320         (34,486    

Total non-earning assets

    364,554            378,308            376,057       
 

 

 

       

 

 

       

 

 

     

Total assets

  $ 3,994,830          $ 3,876,740          $ 3,865,249       
 

 

 

       

 

 

       

 

 

     

Liabilities and Stockholders’ Equity:

                 

Interest-bearing deposits:

                 

Checking

  $ 413,753        99        0.10   $ 383,452        173        0.18   $ 354,590        196        0.22

Money market savings

    909,920        757        0.33     863,022        1,373        0.63     754,238        1,652        0.87

Regular savings

    201,065        159        0.31     176,728        172        0.39     152,219        124        0.32

Certificates of deposit: (5)

                 

$100,000 and over

    528,359        1,979        1.49     561,755        2,168        1.53     665,980        3,110        1.85

Under $100,000

    551,663        1,731        1.25     598,907        2,037        1.35     664,248        2,873        1.72
 

 

 

   

 

 

     

 

 

   

 

 

     

 

 

   

 

 

   

Total interest-bearing deposits

    2,604,760        4,725        0.72     2,583,864        5,923        0.91     2,591,275        7,955        1.22

Other borrowings (6)

    320,562        2,015        2.50     289,857        2,236        3.06     323,207        1,836        2.25
 

 

 

   

 

 

     

 

 

   

 

 

     

 

 

   

 

 

   

Total interest-bearing liabilities

    2,925,322        6,740        0.92     2,873,721        8,159        1.13     2,914,482        9,791        1.33
   

 

 

       

 

 

       

 

 

   

Noninterest-bearing liabilities:

                 

Demand deposits

    587,478            521,928            489,633       

Other liabilities

    41,908            32,473            32,008       
 

 

 

       

 

 

       

 

 

     

Total liabilities

    3,554,708            3,428,122            3,436,123       

Stockholders’ equity

    440,122            448,618            429,126       
 

 

 

       

 

 

       

 

 

     

Total liabilities and stockholders’ equity

  $ 3,994,830          $ 3,876,740          $ 3,865,249       
 

 

 

       

 

 

       

 

 

     

Net interest income

    $ 39,815          $ 40,514          $ 39,699     
   

 

 

       

 

 

       

 

 

   

Interest rate spread (7)

        4.13         4.33         4.24

Interest expense as a percent of average earning assets

        0.73         0.91         1.10

Net interest margin (8)

        4.31         4.54         4.47

 

(1) Rates and yields are annualized and calculated from actual, not rounded amounts in thousands, which appear above.
(2) Interest income on securities includes $46 thousand in accretion of the fair market value adjustments related to the acquisition of FMB. Remaining estimated accretion for 2012 is $46 thousand.
(3) Nonaccrual loans are included in average loans outstanding.
(4) Interest income on loans includes $825 thousand in accretion of the fair market value adjustments related to the acquisitions. Remaining estimated accretion for 2012 is $747 thousand.
(5) Interest expense on certificates of deposits includes $3 thousand in accretion of the fair market value adjustments related to the Harrisonburg branch. Remaining estimated accretion for 2012 is $2 thousand.
(6) Interest expense on borrowings includes $122 thousand in amortization of the fair market value adjustments related to the acquisition of FMB. Remaining estimated amortization for 2012 is $122 thousand.
(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 4.23% for the quarter ending 9/30/12.


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

 

    For the Nine Months Ended September 30,  
    2012     2011     2010  
    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

  $ 471,255      $ 9,488        2.69   $ 420,743      $ 10,405        3.31   $ 402,771      $ 10,218        3.39

Tax-exempt

    176,536        8,293        6.28     166,443        8,145        6.54     137,019        6,983        6.81
 

 

 

   

 

 

     

 

 

   

 

 

     

 

 

   

 

 

   

Total securities (2)

    647,791        17,781        3.67     587,186        18,550        4.22     539,790        17,201        4.26

Loans, net (3) (4)

    2,856,005        119,851        5.61     2,822,579        125,920        5.96     2,723,904        124,969        6.13

Loans held for sale

    86,989        2,123        3.26     48,366        1,486        4.11     60,020        1,838        4.09

Federal funds sold

    369        1        0.24     318        1        0.24     16,132        17        0.14

Money market investments

    8        —          0.00     120        —          0.00     160        —          0.00

Interest-bearing deposits in other banks

    30,895        58        0.25     35,444        55        0.21     37,151        71        0.26

Other interest-bearing deposits

    —          —          0.00     —          —          0.00     971        —          0.00
 

 

 

   

 

 

     

 

 

   

 

 

     

 

 

   

 

 

   

Total earning assets

    3,622,057        139,814        5.16     3,494,013        146,012        5.59     3,378,128        144,096        5.69
   

 

 

       

 

 

       

 

 

   

Allowance for loan losses

    (40,595         (39,701         (33,419    

Total non-earning assets

    365,817            384,436            373,398       
 

 

 

       

 

 

       

 

 

     

Total assets

  $ 3,947,279          $ 3,838,748          $ 3,718,107       
 

 

 

       

 

 

       

 

 

     

Liabilities and Stockholders’ Equity:

                 

Interest-bearing deposits:

                 

Checking

  $ 415,615        347        0.11   $ 381,470        489        0.17   $ 339,910        579        0.23

Money market savings

    904,068        2,635        0.39     838,289        4,343        0.69     707,334        4,852        0.92

Regular savings

    194,729        512        0.35     171,113        467        0.36     150,326        440        0.39

Certificates of deposit: (5)

                 

$100,000 and over

    542,174        6,143        1.51     577,281        6,868        1.59     638,249        8,997        1.88

Under $100,000

    568,078        5,447        1.28     606,532        6,607        1.46     642,657        8,188        1.70
 

 

 

   

 

 

     

 

 

   

 

 

     

 

 

   

 

 

   

Total interest-bearing deposits

    2,624,664        15,084        0.77     2,574,685        18,774        0.97     2,478,476        23,056        1.24

Other borrowings (6)

    290,418        6,401        2.94     289,935        6,110        2.82     340,474        5,648        2.22
 

 

 

   

 

 

     

 

 

   

 

 

     

 

 

   

 

 

   

Total interest-bearing liabilities

    2,915,082        21,485        0.99     2,864,620        24,884        1.16     2,818,950        28,704        1.36
   

 

 

       

 

 

       

 

 

   

Noninterest-bearing liabilities:

                 

Demand deposits

    561,992            504,662            459,015       

Other liabilities

    38,067            28,945            28,341       
 

 

 

       

 

 

       

 

 

     

Total liabilities

    3,515,141            3,398,227            3,306,306       

Stockholders’ equity

    432,138            440,521            411,801       
 

 

 

       

 

 

       

 

 

     

Total liabilities and stockholders’ equity

  $ 3,947,279          $ 3,838,748          $ 3,718,107       
 

 

 

       

 

 

       

 

 

     

Net interest income

    $ 118,329          $ 121,128          $ 115,392     
   

 

 

       

 

 

       

 

 

   

Interest rate spread (7)

        4.17         4.43         4.33

Interest expense as a percent of average earning assets

        0.79         0.95         1.13

Net interest margin (8)

        4.36         4.63         4.56

 

(1) Rates and yields are annualized and calculated from actual, not rounded amounts in thousands, which appear above.
(2) Interest income on securities includes $154 thousand in accretion of the fair market value adjustments related to the acquisition of FMB. Remaining estimated accretion for 2012 is $46 thousand.
(3) Nonaccrual loans are included in average loans outstanding.
(4) Interest income on loans includes $3.0 million in accretion of the fair market value adjustments related to the acquisitions. Remaining estimated accretion for 2012 is $747 thousand.
(5) Interest expense on certificates of deposits includes $231 thousand in accretion of the fair market value adjustments related to the acquisitions. Remaining estimated accretion for 2012 is $2 thousand.
(6) Interest expense on borrowings includes $366 thousand in amortization of the fair market value adjustments related to the acquisition of FMB. Remaining estimated amortization for 2012 is $122 thousand.
(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 4.25% for the nine months ending 9/30/12.