UNION FIRST MARKET BANKSHARES CORP. 
By RICHMOND, Va., Jan. 28, 2014 /PRNewswire/ -- Union First Market Bankshares Corporation (the "Company" or "Union") (NASDAQ: UBSH) today reported net income of $8.1 million and earnings per share of $0.32 for its fourth quarter ended December 31, 2013. Excluding after-tax acquisition-related expenses of $651,000, operating earnings((1)) for the quarter were $8.8 million and operating earnings per share((1)) was $0.35. The quarterly results represent an increase of $339,000, or 4.0%, in operating earnings from the prior quarter and a decrease of $686,000, or 7.3%, from the quarter ended December 31, 2012. Operating earnings per share of $0.35 for the current quarter increased $0.01, or 2.9%, from the most recent quarter and declined $0.02, or 5.4%, from the prior year's fourth quarter.
(Logo: http://photos.prnewswire.com/prnh/20091027/NE00206LOGO)
For the year ended December 31, 2013 the Company reported net income of $34.5 million and earnings per share of $1.38. Excluding after-tax acquisition-related expenses of $2.0 million, operating earnings for 2013 were $36.5 million and operating earnings per share was $1.46. The annual results represent an increase of $1.1 million, or 3.2%, in operating earnings and $0.09 per share, or 6.6%, from 2012 levels. These fourth quarter and year to date financial results do not include the financial results of StellarOne Corporation ("StellarOne"), which the Company acquired on January 1, 2014, and are prior to the effective date of the merger with StellarOne.
"2013 was a year of significant progress and change at Union and with the closing of the StellarOne acquisition on January 1, 2014, Union became the largest community bank headquartered in Virginia," said G. William Beale, president and chief executive officer of Union First Market Bankshares, "The combination of two of Virginia's largest community banks provides Union with the growth opportunities, asset base and footprint 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."
"Union's operating financial performance in the fourth quarter continued to be mixed as the sustained positive performance in the Company's community banking segment was muted by the poor results from our mortgage segment. The community bank segment turned in another quarter of operating earnings growth fueled by gains in core deposit households, loan growth and improvements in credit quality. However, overall financial results were negatively impacted by continuing losses from the mortgage business driven by declining mortgage loan originations and the impact of a large, non-recurring indemnification charge in the fourth quarter. Although not included in Union's 2013 consolidated financial results, StellarOne turned in solid financial results in its final quarter as a stand-alone company driven by strong loan growth and improving credit quality metrics."
"Union remains committed to achieving top-quartile financial performance and providing our shareholders with above average returns on their investment. In 2014, the company is focused on smoothly integrating StellarOne into Union to achieve cost savings, generating sustainable growth in the combined community banking franchise and returning the mortgage banking segment to profitability as quickly as possible."
Select highlights:
-- The Company's community banking segment reported operating earnings of
$10.7 million (or $0.43 per share), an increase of $2.2 million (or
$0.10 per share) from the same quarter in the prior year and an increase
of $1.0 million (or $0.04 per share) from the prior quarter. For the
year ended December 31, 2013, the community bank segment reported
operating earnings of $39.2 million ($1.57 per share), an increase of
$6.3 million ($0.30 per share), or 19.3%, from 2012.
-- The Company's mortgage segment reported a net loss of $1.9 million (or
$0.08 per share), a decrease of $2.9 million (or $0.12 per share) and
$662,000 (or $0.03 per share) from the same quarter in the prior year
and the prior quarter, respectively. For the year ended December 31,
2013, the mortgage segment reported a net loss of $2.7 million ($0.11
per share) compared to net income of $2.5 million ($0.10 per share)
during 2012.
-- Operating Return on Average Equity((1)) ("ROE") was 7.89% for the
quarter ended December 31, 2013 compared to operating ROE((1)) of 8.41%
and 7.74% for the same quarter of the prior year and the third quarter
of 2013, respectively. Including current quarter acquisition-related
costs, ROE was 7.30%. The operating ROE((1)) of the community bank
segment was 9.79% compared to the prior quarter of 9.08% and 7.68% at
December 31, 2012. For the year ended December 31 2013, operating ROE
for the community bank segment was 9.18% compared to 7.67% for 2012.
-- Operating Return on Average Assets((1)) ("ROA") was 0.85% for the
quarter ended December 31, 2013 compared to operating ROA((1)) of 0.93%
and 0.83% for the same quarter of the prior year and the third quarter
of 2013, respectively. Including current quarter acquisition-related
costs, ROA was 0.79%. The operating ROA((1)) of the community bank
segment was 1.04% compared to the prior quarter of 0.95% and 0.83% at
December 31, 2012. For the year ended December 31, 2013, operating ROA
for the community bank segment was 0.97% compared to 0.83% for 2012.
-- Average loans outstanding increased $109.8 million, or 3.8%, in 2013
over 2012. Ending loan balances increased $37.1 million, or 4.9% on an
annualized basis, from the prior quarter.
-- During the quarter, the Company added 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 $11.9
million, or 0.4%, from September 30, 2013 while deposit balances
declined $60.9 million since year end 2012 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 and prior 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
For the Three Months Ended
Dollars in thousands
--------------------
12/31/13 09/30/13 Change 12/31/12 Change
-------- -------- ------ -------- ------
Average interest-earning assets $3,715,003 $3,703,449 $11,554 $3,732,685 $(17,682)
Interest income (FTE) $44,702 $44,157 $545 $46,272 $(1,570)
Yield on interest-earning assets 4.77% 4.73% 4 bps 4.93% (16) bps
Average interest-bearing liabilities $2,900,658 $2,892,957 $7,701 $2,944,086 $(43,428)
Interest expense $4,702 $4,983 $(281) $6,023 $(1,321)
Cost of interest-bearing liabilities 0.64% 0.68% (4) bps 0.81% (17) bps
Cost of funds 0.50% 0.53% (3) bps 0.64% (14) bps
Net Interest Income (FTE) $40,000 $39,174 $826 $40,249 $(249)
Net Interest Margin (FTE) 4.27% 4.20% 7 bps 4.29% (2) bps
Core Net Interest Margin (FTE) (1) 4.24% 4.16% 8 bps 4.22% 2 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 $40.0 million, an increase of $826,000, or 2.1%, from the third quarter of 2013. The fourth quarter tax-equivalent net interest margin increased by 7 basis points to 4.27% from 4.20% in the previous quarter. The increase in net interest margin was principally attributable to the increase in earning asset yields (+4 bps), the decline in cost of funds (+4 bps) and the continued decline in accretion on the acquired net earning assets (-1 bps). The increase in net interest income was driven by higher average investment balances and higher yields on taxable securities and a decline in the cost of funds. Loan yields and average balances were largely unchanged from the prior quarter. Yields on investment securities increased on higher average balances and a higher rate on taxable investments as prepayment speeds slowed. The cost of interest-bearing liabilities declined during the quarter largely driven by lower time deposit account balances.
For the three months ended December 31, 2013, tax-equivalent net interest income decreased $249,000, or 0.6%, when compared to the same period last year. The tax-equivalent net interest margin decreased by 2 basis points to 4.27% from 4.29% 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 (-4 bps) and declines in cost of funds exceeding the reduction in earning asset yields (+2 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 and cash flows from securities investments reinvested at lower yields. The decline in the cost of interest-bearing liabilities from the prior year's fourth quarter was driven by a shift in mix from time deposits to demand deposits, reductions in deposit rates and lower wholesale borrowing costs.
The Company continues to believe that 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.
For the Year Ended
Dollars in thousands
--------------------
12/31/13 12/31/12 Change
-------- -------- ------
Average interest-earning assets $3,716,849 $3,649,865 $66,984
Interest income (FTE) $177,383 $186,085 $(8,702)
Yield on interest-earning assets 4.77% 5.10% (33) bps
Average interest-bearing liabilities $2,914,139 $2,922,373 $(8,234)
Interest expense $20,501 $27,508 $(7,007)
Cost of interest-bearing liabilities 0.70% 0.94% (24) bps
Cost of funds 0.55% 0.76% (21) bps
Net Interest Income (FTE) $156,882 $158,577 $(1,695)
Net Interest Margin (FTE) 4.22% 4.34% (12) bps
Core Net Interest Margin (FTE) (1) 4.18% 4.24% (6) bps
(1) Core net interest margin (FTE) excludes the impact of acquisition accounting accretion and amortization adjustments in net
interest income.
For the year ended December 31, 2013, tax-equivalent net interest income was $156.9 million, a decrease of $1.7 million, or 1.1%, when compared to the same period last year. The tax-equivalent net interest margin decreased by 12 basis points to 4.22% from 4.34% 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 (-6 bps) and a decline in the yield on interest-earning assets that outpaced the reduction in the cost of funds (-6 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 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 Certificates Investment
Accretion of Securities
Deposit Borrowings Total
-------- ---------- ---------- ---------- -----
For
the
year
ended
December
31,
2013 $2,065 $7 $15 $(489) $1,598
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 132 - - - 132
ASSET QUALITY/LOAN LOSS PROVISION
Overview
During the fourth quarter, the Company continued to reduce the levels of impaired loans, troubled debt restructurings, past due loans, and nonperforming assets, which were at their lowest levels since the fourth quarter of 2009. Net charge-offs, the related ratio of net charge-offs to total loans, and the loan loss provision also decreased from the same quarter of the previous year. Net charge-offs increased from the prior quarter due to the charge-off of loans specifically reserved for in prior periods, while the provision decreased from the prior quarter due to lower historical loss factors. The allowance to nonperforming loans coverage ratio was at its highest level since the first quarter of 2008. 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 December 31, 2013, nonperforming assets totaled $49.2 million, a decline of $9.8 million, or 16.6%, from a year ago and a decrease of $6.5 million, or 11.7%, from the third quarter. In addition, NPAs as a percentage of total outstanding loans declined 37 basis points from 1.99% a year earlier and decreased 23 basis points from 1.85% last quarter to 1.62% in the current quarter.
Nonperforming assets at December 31, 2013 included $15.0 million in nonaccrual loans (excluding purchased impaired loans), a net decrease of $11.2 million, or 42.7%, from December 31, 2012 and a net decrease of $4.9 million, or 24.6%, from the prior quarter. The following table shows the activity in nonaccrual loans for the quarter ended (dollars in thousands):
December 31, September 30, June March
30, 31, December 31,
2013 2013 2013 2013 2012
---- ---- ---- ---- ----
Beginning Balance $19,941 $27,022 $23,033 $26,206 $32,159
Net customer payments (1,908) (5,574) (3,196) (1,715) (1,898)
Additions 3,077 3,020 7,934 2,694 2,306
Charge-offs (4,336) (1,669) (476) (2,262) (3,388)
Loans returning to accruing status (1,018) (1,068) - (632) (840)
Transfers to OREO (721) (1,790) (273) (1,258) (2,133)
---- ------ ---- ----- ------
Ending Balance $15,035 $19,941 $27,022 $23,033 $26,206
===== ======= ===== ===== =======
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):
December 31, September 30, June 30, March December
31, 31,
2013 2013 2013 2013 2012
---- ---- ---- ---- ----
Raw Land and Lots $2,560 $3,087 $4,573 $6,353 $8,760
Commercial Construction 1,596 1,167 5,103 4,547 5,781
Commercial Real Estate 2,212 3,962 2,716 2,988 3,018
Single Family Investment Real Estate 1,689 2,076 2,859 2,117 3,420
Commercial and Industrial 3,848 6,675 7,291 2,261 2,036
Other Commercial 126 472 471 190 193
Consumer 3,004 2,502 4,009 4,577 2,998
----- ----- ----- ----- -----
Total $15,035 $19,941 $27,022 $23,033 $26,206
======= ======= ======= ======= =======
Coverage Ratio 200.43% 169.89% 127.06% 149.42% 133.24%
Nonperforming assets at December 31, 2013 also included $34.1 million in OREO, an increase of $1.3 million, or 4.0%, from the prior year and down $1.6 million, or 4.5%, from the prior quarter. The following table shows the activity in OREO for the quarter ended (dollars in thousands):
December 31, September 30, June March
30, 31, December 31,
2013 2013 2013 2013 2012
---- ---- ---- ---- ----
Beginning Balance $35,709 $35,153 $35,878 $32,834 $34,440
Additions 1,326 2,841 1,768 3,607 2,866
Capitalized Improvements 101 266 164 30 22
Valuation Adjustments (300) (491) - - (301)
Proceeds from sales (2,483) (1,773) (2,436) (877) (4,004)
Gains (losses) from sales (237) (287) (221) 284 (189)
---- ---- ---- --- ----
Ending Balance $34,116 $35,709 $35,153 $35,878 $32,834
===== ======= ===== ===== =======
The additions to OREO were principally related to residential real estate; sales from OREO were principally related to residential and commercial real estate.
The following table presents the composition of the OREO portfolio at the quarter ended (dollars in thousands):
December 31, September 30, June March
30, 31, December 31,
2013 2013 2013 2013 2012
---- ---- ---- ---- ----
Land $10,310 $10,310 $10,310 $9,861 $8,657
Land Development 10,904 10,901 10,894 11,023 10,886
Residential Real Estate 7,379 7,995 7,274 7,467 7,939
Commercial Real Estate 5,523 6,370 6,542 6,749 5,352
Former Bank Premises (1) - 133 133 778 -
--- --- --- --- ---
Total $34,116 $35,709 $35,153 $35,878 $32,834
======= ======= ===== ===== =======
(1) Includes closed branch property and land previously held for branch sites.
Included in land development is $9.3 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 December 31, 2013, total accruing past due loans were $26.5 million, or 0.87% of total loans, a decline from $32.4 million, or 1.09% of total loans, a year ago and a decrease from $30.5 million, or 1.02% of total loans, at September 30, 2013.
Charge-offs
For the quarter ended December 31, 2013, net charge-offs of loans were $4.9 million, or 0.65% on an annualized basis, compared to $8.3 million, or 1.11%, for the same quarter last year and $2.3 million, or 0.30%, for the third quarter of 2013. The increase in charge-offs from the prior quarter related to loans that were previously considered impaired and specifically reserved for in prior periods. Of the $4.9 million in net charge-offs in the current quarter, $4.7 million, or 96%, related to impaired loans specifically reserved for in the prior period. Net charge-offs in the current quarter included commercial loans of $3.3 million.
Provision
The provision for loan losses for the current quarter was $1.2 million, a decrease of $2.1 million from the same quarter a year ago and a decrease of $594,000 from the previous quarter. The decrease 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 loss factors. The provision to loans ratio for the quarter ended December 31, 2013 was 0.16% on an annualized basis compared to 0.44% for the same quarter a year ago and to 0.24% last quarter.
Allowance for Loan Losses
The allowance for loan losses ("ALL") as a percentage of the total loan portfolio, adjusted for purchase accounting (non-GAAP), was 1.10% at December 31, 2013, a decrease from 1.35% at December 31, 2012 and 1.25% 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 0.99% at December 31, 2013, 1.18% at December 31, 2012, and 1.13% at September 30, 2013. The decrease in the allowance and related ratios was primarily attributable to the charge-off of impaired loans specifically reserved for in prior periods and improving credit quality metrics.
Impaired loans have declined from $155.4 million at December 31, 2012 and from $119.2 million at September 30, 2013 to $112.6 million at December 31, 2013. The nonaccrual loan coverage ratio was at its highest level since the first quarter of 2008 at 200.4% at December 31, 2013, an increase from 133.2% from the same quarter last year and 169.9% at September 30, 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")
The total recorded investment in TDRs as of December 31, 2013 was $41.8 million, a decline of $21.7 million, or 34.2%, from $63.5 million at December 31, 2012 and a decrease of $6.1 million, or 12.7%, from $47.9 million at September 30, 2013. Of the $41.8 million of TDRs at December 31, 2013, $34.5 million, or 82.5%, were considered performing while the remaining $7.3 million were considered nonperforming. The decline in the TDR balance from the prior year is attributable to $13.6 million being removed from TDR status, $11.6 million in net payments, $2.4 million in transfers to OREO, and $1.9 million in charge-offs, partially offset by additions of $7.8 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):
December 31, September 30, June March
30, 31, December 31,
2013 2013 2013 2013 2012
---- ---- ---- ---- ----
Performing
Modified to interest only, at a market rate $1,414 $1,995 $1,883 $2,071 $1,877
Term modification, at a market rate 24,114 28,243 27,829 30,380 38,974
Term modification, below market rate 6,602 6,659 7,724 7,803 8,227
Interest rate modification, below market rate 2,390 2,390 2,390 2,390 2,390
----- ----- ----- ----- -----
Total performing $34,520 $39,287 $39,826 $42,644 $51,468
Nonperforming
Modified to interest only, at a market rate $592 $729 $1,191 $1,275 $672
Term modification, at a market rate 2,623 3,395 4,225 2,940 3,653
Term modification, below market rate 4,089 4,489 7,794 7,797 7,666
----- ----- ----- ----- -----
Total nonperforming $7,304 $8,613 $13,210 $12,012 $11,991
Total performing & nonperforming $41,824 $47,900 $53,036 $54,656 $63,459
======= ======= ======= ======= =======
NONINTEREST INCOME
For the Three Months Ended
Dollars in thousands
--------------------
12/31/13 09/30/13 $ % 12/31/12 $ %
-------- -------- --- --- -------- --- ---
Noninterest income:
Service charges on deposit accounts $2,399 $2,474 $(75) -3.0% $2,390 $9 0.4%
Other service charges, commissions and fees 3,096 3,185 (89) -2.8% 2,784 312 11.2%
(Losses) gains on securities transactions, net (26) 5 (31) NM 185 (211) NM
Gains on sales of mortgage loans, net of commissions 1,319 2,061 (742) -36.0% 5,299 (3,980) -75.1%
Losses on bank premises, net (3) (7) 4 NM (32) 29 NM
Other operating income 1,594 1,498 96 6.4% 1,209 385 31.8%
----- ----- --- ----- ---
Total noninterest income $8,379 $9,216 $(837) -9.1% $11,835 $(3,456) -29.2%
Mortgage segment operations $(1,320) $(2,062) $742 -36.0% $(5,303) $3,983 -75.1%
Intercompany eliminations 167 168 (1) -0.6% 117 50 42.7%
--- --- --- --- ---
Community Bank segment $7,226 $7,322 $(96) -1.3% $6,649 $577 8.7%
====== ====== ==== ====== ====
NM - Not Meaningful
On a linked quarter basis, noninterest income decreased $837,000, or 9.1%, to $8.4 million from $9.2 million in the third quarter. Excluding mortgage segment operations, noninterest income decreased $96,000, or 1.3%. Service charges on deposit accounts decreased $75,000 primarily related to lower overdraft and returned check fees in the current quarter. Other service charges decreased $89,000, or 2.8%, due to lower interchange and letter of credit fees in the current quarter. Gains on sales of mortgage loans, net of commissions, decreased $742,000, or 36.0%, as rising mortgage interest rates led to declines in mortgage loan originations, which decreased by $62.7 million, or 28.6%, in the current quarter to $156.2 million from $218.9 million in the third quarter. Of the loan originations in the current quarter, 30.7% were refinances, which was up slightly from 28.6% in the third quarter. Included in the current quarter gain on sale of mortgage loans was a non-recurring charge of $966,000 for indemnification claims of third party loan purchasers related to prior period errors in mortgage insurance premium calculations in certain mortgage loans.
For the quarter ended December 31, 2013, noninterest income decreased $3.4 million, or 29.2%, to $8.4 million from $11.8 million in the prior year's fourth quarter. Excluding mortgage segment operations, noninterest income increased $577,000, or 8.7%, from the same period a year ago. Other service charges, commissions and fees increased $312,000 primarily due to higher net interchange fee income and fees on letters of credit. Other operating income increased $385,000, or 31.8%, related to increased income on bank owned life insurance. Gains on sales of mortgage loans, net of commissions, decreased $4.0 million, or 75.1%, primarily due to lower loan origination volume and gain on sale margin compression due to rising mortgage interest rates. Mortgage loan originations decreased by $175.6 million, or 52.9%, in the current quarter to $156.2 million from $331.8 million in the fourth quarter of 2012. As noted above, included in the current quarter gain on sale of mortgage loans was a non-recurring charge of $966,000 for indemnification claims of third party loan purchasers related to prior period errors in mortgage insurance premium calculations in certain mortgage loans.
For the Year Ended
Dollars in thousands
--------------------
12/31/13 12/31/12 $ %
-------- -------- --- ---
Noninterest income:
Service charges on deposit accounts $9,492 $9,033 $459 5.1%
Other service charges, commissions and fees 12,309 10,898 1,411 12.9%
Gains on securities transactions 21 190 (169) NM
Gains on sales of mortgage loans, net of commissions 11,900 16,651 (4,751) -28.5%
(Losses) gains on bank premises (340) 2 (342) NM
Other operating income 5,346 4,294 1,052 24.5%
----- ----- -----
Total noninterest income $38,728 $41,068 $(2,340) -5.7%
Mortgage segment operations $(11,906) $(16,660) $4,754 -28.5%
Intercompany eliminations 670 468 202 43.2%
--- --- ---
Community Bank segment $27,492 $24,876 $2,616 10.5%
======= ======= ======
NM - Not Meaningful
For the year ended December 31, 2013, noninterest income decreased $2.4 million, or 5.7%, to $38.7 million, from $41.1 million a year ago. Excluding mortgage segment operations, noninterest income increased $2.6 million, or 10.5%, from last year. Service charges on deposit accounts increased $459,000 primarily related to higher overdraft and returned check fees as well as service charges on savings accounts. Other account service charges and fees increased $1.4 million due to higher net interchange fee income, revenue on retail investment products, and fees on letters of credit. Other operating income increased $1.1 million primarily related to increased income on bank owned life insurance, trust income, and other insurance-related revenues. Conversely, gains on bank premises decreased $342,000 as the Company recorded a loss in the current year on the closure of bank premises coupled with net gains in the prior year related to sale of bank premises. Gains on sales of mortgage loans, net of commissions, decreased $4.8 million driven by lower loan origination volume and lower gain on sale margins in 2013. Mortgage loan originations decreased by $154.8 million, or 14.1%, to $941.4 million in 2013 compared to $1.1 billion in 2012. Of the loan originations in the current year, 38.9% were refinances compared to 54.3% in 2012. Lower gain on sale margins were also partly due to reductions resulting from valuation reserves of $363,000 related to aged mortgage loans held-for-sale as well as the non-recurring charge of $966,000 for the indemnification claims of third party loan purchasers related to prior period errors in mortgage insurance premium calculations in certain mortgage loans.
NONINTEREST EXPENSE
For the Three Months Ended
Dollars in thousands
--------------------
12/31/13 09/30/13 $ % 12/31/12 $ %
-------- -------- --- --- -------- --- ---
Noninterest expense:
Salaries and benefits $17,076 $17,416 $(340) -2.0% $17,620 $(544) -3.1%
Occupancy expenses 3,105 2,820 285 10.1% 3,149 (44) -1.4%
Furniture and equipment expenses 1,633 1,665 (32) -1.9% 1,811 (178) -9.8%
OREO and credit-related expenses (1) 1,721 1,601 120 7.5% 1,366 355 26.0%
Acquisition-related expenses 739 473 266 NM - 739 NM
Other operating expenses 11,101 10,157 944 9.3% 10,390 711 6.8%
------ ------ --- ------ ---
Total noninterest expense $35,375 $34,132 $1,243 3.6% $34,336 $1,039 3.0%
Mortgage segment operations $(4,528) $(4,396) $(132) 3.0% $(4,256) $(272) 6.4%
Intercompany eliminations 167 168 (1) -0.6% 117 50 42.7%
--- --- --- --- ---
Community Bank segment $31,014 $29,904 $1,110 3.7% $30,197 $817 2.7%
======= ======= ==== ======= ====
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 $1.3 million, or 3.6%, to $35.4 million from $34.1 million when compared to the third quarter. Excluding mortgage segment operations and acquisition-related costs, noninterest expense increased $844,000, or 2.9%, compared to the third quarter. Occupancy expenses increased $285,000, or 10.1%, primarily related to lease termination costs. OREO and credit-related costs increased $120,000 from the prior quarter due to increased credit-related legal fees in the current quarter. Other operating expenses increased $944,000, primarily due to increased legal and litigation-related expenses. These increases were partially offset by reduced salary-related expenses of $340,000, primarily related to lower levels of incentive compensation and seasonal payroll taxes in the current quarter.
For the quarter ended December 31, 2013, noninterest expense increased $1.0 million, or 3.0%, to $35.4 million from $34.4 million for the fourth quarter of 2012. Excluding mortgage segment operations and acquisition-related costs, noninterest expense increased $78,000, or 0.3%, compared to the fourth quarter of 2012. OREO and credit-related costs increased $355,000, as the Company incurred higher credit-related legal fees of $237,000, higher foreclosure and OREO expenses of $70,000, and higher losses on the sales of OREO of $48,000 in the current quarter compared to the same quarter in 2012. Other operating expenses increased $711,000, mainly due to increased legal and litigation-related expenses. These increases were partially offset by declines in salaries and benefits expenses of $544,000, primarily related to reduced levels of incentive compensation in the current year, as well as declines in occupancy expenses of $44,000 and furniture and equipment expenses of $178,000, primarily due to branch closures in 2012.
For the Year Ended
Dollars in thousands
--------------------
12/31/13 12/31/12 $ %
-------- -------- --- ---
Noninterest expense:
Salaries and benefits $70,369 $68,648 $1,721 2.5%
Occupancy expenses 11,543 12,150 (607) -5.0%
Furniture and equipment expenses 6,884 7,251 (367) -5.1%
OREO and credit-related expenses (1) 4,880 4,639 241 5.2%
Acquisition-related expenses 2,132 - 2,132 NM
Other operating expenses 41,481 40,791 690 1.7%
------ ------ ---
Total noninterest expense $137,289 $133,479 $3,810 2.9%
Mortgage segment operations $(17,703) $(13,971) $(3,732) 26.7%
Intercompany eliminations 670 468 202 43.2%
--- --- ---
Community Bank segment $120,256 $119,976 $280 0.2%
======== ======== ====
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 year ended December 31, 2013, noninterest expense increased $3.8 million, or 2.9%, to $137.3 million, from $133.5 million a year ago. Excluding mortgage segment operations and acquisition-related costs of $2.1 million incurred in 2013, noninterest expense declined $1.8 million, or 1.5%, compared to 2012. Salaries and benefits expense increased $1.7 million due to costs associated with strategic investments in mortgage segment personnel in 2012 and 2013 and severance expense recorded in the current year related to the relocation of Union Mortgage Group, Inc.'s headquarters to Richmond. Occupancy expenses decreased $607,000 and furniture and equipment expenses declined $367,000, primarily due to branch closures in 2012. OREO and credit-related expenses increased $241,000, or 5.2%, mainly related to valuation adjustments on OREO property in the current year. Other operating expenses increased $690,000, or 1.7%, due to increases in legal and litigation-related expenses of $1.2 million and FDIC insurance expenses of $672,000, partially offset by lower amortization expenses of $1.5 million.
BALANCE SHEET
At December 31, 2013, total assets were $4.2 billion, an increase of $129.5 million from September 30, 2013, and an increase of $80.7 million from December 31, 2012. Total cash and cash equivalents were $73.0 million at December 31, 2013, a decrease of $9.9 million from the same period last year, and a decrease of $2.1 million from September 30, 2013. Investment in securities increased $91.9 million, or 15.7%, from $585.4 million at December 31, 2012 to $677.3 million at December 31, 2013, and increased $87.9 million from September 30, 2013, related to current quarter purchases (primarily mortgage backed and tax-free municipals) in anticipation of the StellarOne merger. Mortgage loans held for sale were $53.2 million, a decrease of $114.5 million from December 31, 2012, and a decline of $5.0 million from September 30, 2013.
At December 31, 2013, loans (net of unearned income) were $3.0 billion, an increase of $72.5 million, or 2.4%, from December 31, 2012, and an increase of $37.1 million, or 4.9% on an annualized basis, from September 30, 2013. Average loans outstanding increased $109.8 million, or 3.8%, year over year and $7.1 million, or 0.2%, from the prior quarter.
As of December 31, 2013, total deposits were $3.2 billion, a decrease of $60.9 million, or 1.8%, when compared to December 31, 2012, and an increase of $11.9 million, or 0.4%, from September 30, 2013. The decline of year over year deposit totals were driven by decreases in time deposits of $160.9 million, partially offset by an increase of lower cost deposit levels of $45.8 million and an increase of NOW accounts of $43.9 million. Linked quarter deposit growth was driven by higher NOW accounts of $34.5 million, partially offset by a decrease in other time deposits of $24.6 million.
Net short term borrowings increased $131.7 million (primarily Federal Home Loan Bank of Atlanta "FHLB") from December 31, 2012, as a result of funding the purchases of securities in advance of the StellarOne merger described above. During the third quarter of 2012, 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, 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 14.17% and 14.57% on December 31, 2013 and 2012, respectively. The Company's ratio of Tier 1 capital to risk-weighted assets was 13.05% and 13.14% at December 31, 2013 and 2012, respectively. The Company's common equity to asset ratios at December 31, 2013 and 2012 were 10.49% and 10.64%, respectively, while its tangible common equity to tangible assets ratio was 8.94% and 8.97% at December 31, 2013 and 2012. During the first quarter of 2013, 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. During the second, third, and fourth quarters of 2013, the Company did not repurchase any shares. The Company's authorization to repurchase an additional 250,000 shares under its current repurchase program authorization expired December 31, 2013. Also, the Company paid a dividend of $0.14 per share during the current quarter, no change from the prior quarter and an increase of $0.02 per share from the same quarter a year ago.
COMMUNITY BANK SEGMENT INFORMATION
On a linked quarter basis, the community bank segment reported net income of $10.0 million for the fourth quarter, an increase of $821,000 from $9.2 in the third quarter. Excluding after-tax acquisition-related expenses, net income increased $1.0 million, or 10.3%, from $9.7 million in the prior quarter to $10.7 million in the fourth quarter. Net interest income was $38.4 million, an increase of $898,000 from $37.5 million in the third quarter of 2013. The increase in net interest income was driven by higher average investment balances and higher yields on taxable securities and a decline in the cost of funds. In addition, the provision for loan losses declined by $594,000 during the current quarter due to improving asset quality metrics and the impact of lower historical loss factors.
Noninterest income was consistent with the prior quarter at $7.2 million. Noninterest expense increased $1.1 million, or 3.7%, to $31.0 million from $29.9 million when compared to the third quarter. Excluding acquisition-related expenses in the current and prior quarters of $739,000 and $473,000, respectively, noninterest expense increased $844,000, or 2.9%, from the prior quarter, primarily due to increased legal and litigation-related expenses.
For the three months ended December 31, 2013, the community bank segment's net income of $10.0 million increased $1.5 million, or 18.2%, from the prior year's fourth quarter; excluding after-tax acquisition-related costs of $651,000, net income increased $2.2 million, or 25.9%. Net interest income declined $404,000, or 1.0%, to $38.4 million due to the impact of net interest margin compression partially offset by loan growth. In addition, the Company's provision for loan losses was $2.1 million lower than the same quarter of the prior year primarily due to continued improvement in asset quality.
Noninterest income increased $577,000, or 8.7%, to $7.2 million from $6.6 million in the prior year's fourth quarter. Other service charges, commissions and fees increased $312,000, primarily due to higher net interchange fee income and fees on letters of credit. Other operating income increased $437,000, primarily related to increased income on bank owned life insurance. Partially offsetting these increases was a decrease in gains on sale of securities of $211,000, as a loss was recognized in the current quarter compared to gains in the fourth quarter of 2012.
Noninterest expense increased $817,000, or 2.7%, to $31.0 million from $30.2 million when compared to the fourth quarter of 2012. The increase is primarily attributable to acquisition-related costs, which were $739,000 in the current quarter. Excluding these acquisition-related costs, noninterest expense was consistent with noninterest expense of the fourth quarter of 2012 at $30.3 million, increasing only $78,000, or 0.3%.
For the year ended December 31, 2013, the community bank segment's net income increased $4.3 million, or 13.0%, to $37.2 million when compared to the prior year; excluding after-tax acquisition-related costs of $2.0 million in 2013, net income increased $6.3 million, or 19.3%. Net interest income decreased $3.0 million, or 2.0%, to $150.0 million when compared to the prior year due to declines in the net interest margin partially offset by loan growth. In addition, the Company's provision for loan losses was $6.1 million lower than the prior year due to continued improvement in asset quality.
Noninterest income increased $2.6 million, or 10.5%, to $27.5 million from $24.9 million last year. Service charges on deposit accounts increased $459,000 primarily related to higher overdraft and returned check fees as well as service charges on savings accounts. Other account service charges and fees increased $1.4 million due to higher net interchange fee income, revenue on retail investment products, and fees on letters of credit. Other operating income increased $1.3 million primarily related to increased income on bank owned life insurance, trust income, and other insurance-related revenues. Partially offsetting these increases were decreases in gains on sale of bank premises of $342,000, as a loss was recognized in the current year compared to gains in 2012, and lower net gains on securities of $169,000.
Noninterest expense increased $280,000, or 0.2%, to $120.3 million in 2013 from $120.0 million in 2012. Excluding acquisition-related costs of $2.1 million in 2013, noninterest expense decreased $1.8 million, or 1.5%, from the prior year. Salaries and benefits declined $475,000 related to lower stock compensation expense. Occupancy expenses and furniture and equipment expenses declined $1.2 million and $367,000, respectively, largely due to branch closures that occurred in 2012.
MORTGAGE SEGMENT INFORMATION
On a linked quarter basis, the mortgage segment reported a net loss of $1.9 million for the fourth quarter compared to a net loss of $1.2 million in the third quarter, representing an increase in losses of $662,000. The increase in mortgage rates that began in May 2013 continued to negatively affect mortgage loan origination volumes. Due to the higher rate environment as well as lower seasonal demand that impacted the current quarter, both refinance and purchase origination volumes have steadily declined since the second quarter. Mortgage originations declined $62.7 million, or 28.6%, from $218.9 million in the third quarter to $156.2 million. Refinance volume, excluding construction loan conversions, decreased $14.7 million, or 23.5%, to $47.9 million, and represented 30.7% of total originations in the fourth quarter.
Gains on sales of mortgage loans, net of commissions decreased $742,000, or 36.0%, to $1.3 million from $2.1 million in the third quarter. Included in gains on sale revenue was a non-recurring $966,000 charge for indemnification claims of third party loan purchasers related to prior period errors in mortgage insurance premium calculations in certain mortgage loans originated pursuant to insured loan programs administered by the United States Department of Agriculture, as previously discussed in the Company's Form 10-Q as of and for the quarter ended September 30, 2013. Excluding this indemnification accrual, gains on sales of loans increased $224,000, or 10.9%, reflecting higher gain on sale margins experienced in the fourth quarter compared to the third quarter, and reflective of a more stable interest rate environment.
For the three months ended December 31, 2013, the mortgage segment reported a net loss of $1.9 million compared to net income of $981,000 for the same period last year, representing a decline of $2.9 million. Mortgage loan originations decreased by $175.6 million, or 52.9%, to $156.2 million from $331.8 million in the prior year driven by higher mortgage interest rates and lower refinance loan demand. Refinance volume decreased $141.2 million, or 74.7%, from $189.1 million in the fourth quarter of 2012, which represented 57.0% of total originations, to $47.9 million in the current quarter, which represented 30.7% of total originations.
During the current quarter, the Company recorded gains on the sale of mortgage loans, net of commission expenses, of $1.3 million, which were $4.0 million, or 75.1%, lower than the same period last year. The current quarter's gain on sale of mortgage loans, net of commissions includes the non-recurring $966,000 charge for indemnification claims described above. Excluding this accrual, net gain on sale revenue decreased $3.0 million, or 56.9%, from the same period last year, primarily due to lower loan origination volumes and gain on sale margin compression driven by the higher interest rate environment in the current quarter. Also, in addition to the indemnification claim described above, indemnification reserves arising from the normal course of selling loans to investors was higher than the comparable prior year quarter by $325,000.
For the year ended December 31, 2013, the mortgage segment incurred a net loss of $2.7 million compared to net income of $2.5 million during the prior year, representing a decline of $5.2 million. Mortgage loan originations decreased by $154.8 million, or 14.1%, to $941.4 million from $1.1 billion during the prior year due to the higher interest rate environment in the second half of 2013 compared to the lower interest rate environment for the full year 2012. The impact of the interest rate environment was offset by a full year impact of the additional mortgage loan officers added in the first half of 2012.
Gains on sales of mortgage loans, net of commission expenses, decreased 28.5%, or $4.8 million, and included the non-recurring $966,000 charge for indemnification claims described above. Excluding this accrual, net gains on sales of loans decreased $3.8 million, or 22.7%, driven by the 14.1% drop in mortgage loan originations at lower margins.
Expenses increased by $3.7 million, or 26.7%, over last year primarily due to increases in salary and benefit expenses of $2.2 million related to the addition of mortgage loan originators and support personnel in 2012, investments made in the current year to enhance the mortgage segment's operating capabilities, and severance related to the relocation of the mortgage segment's headquarters to Richmond. In addition, increases in expenses included higher rent expense of $563,000 related to annual rent increases, lease termination costs, and the headquarters relocation, loan-related expenses of $236,000, primarily related to appraisal and credit reporting expenses, and professional fees of $200,000.
While management continues to recalibrate the mortgage segment's cost structure to align with declining mortgage origination levels, in the near term, the return to profitability in the mortgage segment is dependent on increased mortgage production volumes and/or higher gain on sale margins.
STELLARONE INFORMATION
StellarOne's reported net income was $25.9 million in 2013, an increase of $3.7 million from net income of $22.2 million in 2012. Excluding after-tax acquisition-related costs of $1.9 million, StellarOne's 2013 operating earnings were $27.8 million, an increase of $5.6 million, or 25.2%, compared to $22.2 million in 2012. The increase in year over year operating earnings was driven by increases in net interest income as a result of robust loan growth as well as continued credit quality improvements which resulted in a negative loan loss provision in 2013.
StellarOne's fourth quarter reported earnings increased $1.0 million to $7.3 million from $6.3 million in the third quarter of 2013. Excluding after-tax acquisition-related costs of $577,000, operating earnings increased $1.1 million, or 16.2%, in the current quarter to $7.9 million from operating earnings of $6.8 million in the third quarter of 2013. The primary drivers of the linked quarter earnings increase were continued asset quality improvements resulting in a reduction in the provision for loan losses of $2.1 million partially offset by declines in the gain on sale of mortgage loans, net of commissions, of $331,000.
Average loan balances increased $37.0 million, or 6.6 % annualized, on a linked quarter basis to $2.29 billion and increased by $206.0 million, or 9.8%, as compared to the fourth quarter of 2012.
* * * * * * *
ABOUT UNION FIRST MARKET BANKSHARES CORPORATION
Headquartered in Richmond, Virginia, Union First Market Bankshares Corporation (NASDAQ: UBSH) is the holding company for Union First Market Bank, which has 90 branches and more than 150 ATMs throughout Virginia and StellarOne Bank, which has 54 branches and more than 60 ATMs throughout Virginia as well as trust and wealth management services. Non-bank affiliates of the holding company include: Union Investment Services, Inc., which provides full brokerage services; Union Mortgage Group, Inc., which provides a full line of mortgage products; and Union Insurance Group, LLC, which offers various lines of insurance products.
Additional information on the Company is available at http://investors.bankatunion.com
MERGER WITH STELLARONE CORPORATION
On January 1, 2014, the Company completed its previously announced acquisition of StellarOne Corporation. The Company plans to combine the banking subsidiaries, Union First Market Bank and StellarOne Bank, in May of 2014.
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 Year Ended
12/31/13 09/30/13 12/31/12 12/31/13 12/31/12
-------- -------- -------- -------- --------
Results of Operations
---------------------
Interest and dividend income $43,315 $42,841 $45,183 $172,127 $181,863
Interest expense 4,702 4,983 6,023 20,501 27,508
----- ----- ----- ------ ------
Net interest income 38,613 37,858 39,160 151,626 154,355
Provision for loan losses 1,206 1,800 3,300 6,056 12,200
----- ----- ----- ----- ------
Net interest income after provision for loan losses 37,407 36,058 35,860 145,570 142,155
Noninterest income 8,379 9,216 11,835 38,728 41,068
Noninterest expenses 35,375 34,132 34,336 137,289 133,479
------ ------ ------ ------- -------
Income before income taxes 10,411 11,142 13,359 47,009 49,744
Income tax expense 2,306 3,196 3,917 12,513 14,333
----- ----- ----- ------ ------
Net income $8,105 $7,946 $9,442 $34,496 $35,411
====== ====== ====== ======= =======
Interest earned on loans (FTE) $38,930 $39,083 $40,981 $156,301 $162,955
Interest earned on securities (FTE) 5,769 5,071 5,286 21,064 23,067
Interest earned on earning assets (FTE) 44,702 44,157 46,272 177,383 186,085
Net interest income (FTE) 40,000 39,174 40,249 156,882 158,577
Interest expense on certificates of deposit 2,244 2,556 3,424 10,721 15,015
Interest expense on interest-bearing deposits 3,064 3,371 4,362 14,097 19,446
Core deposit intangible amortization 919 921 1,188 3,797 4,936
Net income - community bank segment $10,002 $9,181 $8,461 $37,155 $32,866
Net income - mortgage segment (1,897) (1,235) 981 (2,659) 2,545
Key Ratios
----------
Return on average assets (ROA) 0.79% 0.78% 0.93% 0.85% 0.89%
Return on average equity (ROE) 7.30% 7.31% 8.41% 7.91% 8.13%
Return on average tangible common equity (ROTCE) 8.73% 8.79% 10.13% 9.51% 9.89%
Efficiency ratio (FTE) 73.12% 70.54% 65.92% 70.19% 66.86%
Efficiency ratio - community bank segment (FTE) 66.02% 64.86% 64.93% 65.81% 65.88%
Efficiency ratio - mortgage bank segment (FTE) 288.43% 179.05% 74.72% 130.58% 77.66%
Net interest margin (FTE) 4.27% 4.20% 4.29% 4.22% 4.34%
Net interest margin, core (FTE) (1) 4.24% 4.16% 4.22% 4.18% 4.24%
Yields on earning assets (FTE) 4.77% 4.73% 4.93% 4.77% 5.10%
Cost of interest-bearing liabilities (FTE) 0.64% 0.68% 0.81% 0.70% 0.94%
Cost of funds 0.50% 0.53% 0.64% 0.55% 0.76%
Noninterest expense less noninterest income / average assets 2.63% 2.45% 2.21% 2.43% 2.32%
Capital Ratios
--------------
Tier 1 risk-based capital ratio 13.05% 13.13% 13.14% 13.05% 13.14%
Total risk-based capital ratio 14.17% 14.40% 14.57% 14.17% 14.57%
Leverage ratio (Tier 1 capital to average assets) 10.70% 10.62% 10.52% 10.70% 10.52%
Common equity to total assets 10.49% 10.72% 10.64% 10.49% 10.64%
Tangible common equity to tangible assets 8.94% 9.09% 8.97% 8.94% 8.97%
Three Months Ended Year Ended
12/31/13 09/30/13 12/31/12 12/31/13 12/31/12
-------- -------- -------- -------- --------
Per Share Data
--------------
Earnings per common share, basic $0.32 $0.32 $0.37 $1.38 $1.37
Earnings per common share, diluted 0.32 0.32 0.37 1.38 1.37
Cash dividends paid per common share 0.14 0.14 0.12 0.54 0.37
Market value per share 24.81 23.37 15.77 24.81 15.77
Book value per common share 17.56 17.52 17.30 17.56 17.30
Tangible book value per common share 14.69 14.60 14.31 14.69 14.31
Price to earnings ratio, diluted 19.54 18.41 10.71 17.98 11.51
Price to book value per common share ratio 1.41 1.33 0.91 1.41 0.91
Price to tangible common share ratio 1.69 1.60 1.10 1.69 1.10
Weighted average common shares outstanding, basic 24,939,360 24,894,664 25,809,667 24,975,077 25,872,316
Weighted average common shares outstanding, diluted 25,028,760 24,962,976 25,854,623 25,030,711 25,900,863
Common shares outstanding at end of period 24,976,434 24,916,425 25,270,970 24,976,434 25,270,970
Financial Condition
-------------------
Assets $4,176,571 $4,047,108 $4,095,865 $4,176,571 $4,095,865
Loans, net of unearned income 3,039,368 3,002,246 2,966,847 3,039,368 2,966,847
Earning Assets 3,802,870 3,678,772 3,752,089 3,802,870 3,752,089
Goodwill 59,400 59,400 59,400 59,400 59,400
Core deposit intangibles, net 11,980 12,900 15,778 11,980 15,778
Deposits 3,236,842 3,224,925 3,297,767 3,236,842 3,297,767
Stockholders' equity 438,239 433,671 435,863 438,239 435,863
Tangible common equity 366,859 361,371 360,652 366,859 360,652
Averages
--------
Assets $4,075,443 $4,037,930 $4,058,455 $4,052,068 $3,975,225
Loans, net of unearned income 3,004,186 2,997,083 2,935,214 2,985,733 2,875,916
Loans held for sale 50,819 97,993 157,177 105,450 104,632
Securities 650,351 598,852 628,626 614,858 642,973
Earning assets 3,715,003 3,703,449 3,732,685 3,716,849 3,649,865
Deposits 3,232,688 3,240,983 3,252,380 3,255,626 3,203,178
Certificates of deposit 892,164 934,302 1,066,492 961,359 1,099,252
Interest-bearing deposits 2,536,769 2,567,160 2,627,741 2,591,423 2,625,438
Borrowings 363,889 325,797 316,345 322,716 296,935
Interest-bearing liabilities 2,900,658 2,892,957 2,944,086 2,914,139 2,922,373
Stockholders' equity 440,344 431,312 446,603 436,064 435,774
Tangible common equity 368,523 358,569 370,775 362,859 357,984
Three Months Ended Year Ended
12/31/13 09/30/13 12/31/12 12/31/13 12/31/12
-------- -------- -------- -------- --------
Asset Quality
-------------
Allowance for Loan Losses (ALL)
------------------------------
Beginning balance $33,877 $34,333 $39,894 $34,916 $39,470
Add: Recoveries 889 337 340 2,781 1,711
Less: Charge-offs 5,837 2,593 8,618 13,618 18,465
Add: Provision for loan losses 1,206 1,800 3,300 6,056 12,200
----- ----- ----- ----- ------
Ending balance $30,135 $33,877 $34,916 $30,135 $34,916
------- ------- ------- ------- -------
ALL / total outstanding loans 0.99% 1.13% 1.18% 0.99% 1.18%
ALL / total outstanding loans, adjusted for purchase accounting (2) 1.10% 1.25% 1.35% 1.10% 1.35%
Net charge-offs / total outstanding loans 0.65% 0.30% 1.11% 0.36% 0.56%
Provision / total outstanding loans 0.16% 0.24% 0.44% 0.20% 0.41%
Nonperforming Assets
--------------------
Commercial $12,031 $17,439 $23,208 $12,031 $23,208
Consumer 3,004 2,502 2,998 3,004 2,998
----- ----- ----- ----- -----
Nonaccrual loans 15,035 19,941 26,206 15,035 26,206
Other real estate owned 34,116 35,709 32,834 34,116 32,834
------ ------ ------ ------ ------
Total nonperforming assets (NPAs) 49,151 55,650 59,040 49,151 59,040
------ ------ ------ ------ ------
Commercial 3,087 3,107 3,191 3,087 3,191
Consumer 3,659 4,219 5,652 3,659 5,652
----- ----- ----- ----- -----
Loans >= 90 days and still accruing 6,746 7,326 8,843 6,746 8,843
Total nonperforming assets and loans >= 90 days $55,897 $62,976 $67,883 $55,897 $67,883
------- ------- ------- ------- -------
NPAs / total outstanding loans 1.62% 1.85% 1.99% 1.62% 1.99%
NPAs / total assets 1.18% 1.38% 1.44% 1.18% 1.44%
ALL / nonperforming loans 200.43% 169.89% 133.24% 200.43% 133.24%
ALL / nonperforming assets 61.31% 60.88% 59.14% 61.31% 59.14%
Past Due Detail
---------------
Commercial $1,017 $4,287 $929 $1,017 $929
Consumer 2,330 2,896 3,748 2,330 3,748
----- ----- ----- ----- -----
Loans 60-89 days past due $3,347 $7,183 $4,677 $3,347 $4,677
Commercial $3,839 $5,575 $5,643 $3,839 $5,643
Consumer 12,592 10,424 13,195 12,592 13,195
------ ------ ------ ------ ------
Loans 30-59 days past due $16,431 $15,999 $18,838 $16,431 $18,838
Commercial $2,732 $3,031 $3,594 $2,732 $3,594
Consumer 890 920 971 890 971
--- --- --- --- ---
Purchased impaired $3,622 $3,951 $4,565 $3,622 $4,565
Mortgage Origination Volume
---------------------------
Refinance Volume $47,887 $62,625 $189,119 $366,262 $595,033
Construction Volume 25,248 33,522 23,500 119,383 67,564
Purchase Volume 83,043 122,741 119,170 455,766 433,598
------ ------- ------- ------- -------
Total Mortgage loan originations $156,178 $218,888 $331,789 $941,411 $1,096,195
% of originations that are refinances 30.70% 28.60% 57.00% 38.90% 54.30%
Other Data
----------
End of period full-time employees 1,024 1,015 1,044 1,024 1,044
Number of full-service branches 90 90 90 90 90
Number of full automatic transaction machines (ATMs) 154 154 155 154 155
Three Months Ended Year Ended
12/31/13 09/30/13 12/31/12 12/31/13 12/31/12
-------- -------- -------- -------- --------
Alternative Performance Measures (non-GAAP)
------------------------------------------
Operating Earnings (non-GAAP) (3)
--------------------------------
Net Income (GAAP) $8,105 $7,946 $9,442 $34,496 $35,411
Plus: Merger and conversion related expense, after tax 651 471 - 2,042 -
--- --- --- ----- ---
Net operating earnings (loss) (non-GAAP) $8,756 $8,417 $9,442 $36,538 $35,411
====== ====== ====== ======= =======
Operating earnings per share - Basic $0.35 $0.34 $0.37 $1.46 $1.37
Operating earnings per share - Diluted 0.35 0.34 0.37 1.46 1.37
Operating ROA 0.85% 0.83% 0.93% 0.90% 0.89%
Operating ROE 7.89% 7.74% 8.41% 8.38% 8.13%
Operating ROTCE 9.43% 9.31% 10.13% 10.07% 9.89%
Community Bank Segment Operating Earnings (non-GAAP) (3)
-------------------------------------------------------
Net Income (GAAP) $10,002 $9,181 $8,461 $37,155 $32,866
Plus: Merger and conversion related expense, after tax 651 471 - 2,042 -
--- --- --- ----- ---
Net operating earnings (loss) (non-GAAP) $10,653 $9,652 $8,461 $39,197 $32,866
======= ====== ====== ======= =======
Operating earnings per share - Basic $0.43 $0.39 $0.33 $1.57 $1.27
Operating earnings per share - Diluted 0.43 0.39 0.33 1.57 1.27
Operating ROA 1.04% 0.95% 0.83% 0.97% 0.83%
Operating ROE 9.79% 9.08% 7.68% 9.18% 7.67%
Operating ROTCE 11.73% 10.97% 9.29% 11.08% 9.37%
Operating Efficiency Ratio FTE (non-GAAP) (3)
--------------------------------------------
Net Interest Income (GAAP) $38,613 $37,858 $39,160 $151,626 $154,355
FTE adjustment 1,387 1,316 1,089 5,256 4,222
----- ----- ----- ----- -----
Net Interest Income (FTE) $40,000 39,174 40,249 156,882 158,577
Noninterest Income (GAAP) 8,379 9,216 11,835 38,728 41,068
Noninterest Expense (GAAP) $35,375 $34,132 $34,336 $137,289 $133,479
Merger and conversion related expense 739 473 - 2,132 -
--- --- --- ----- ---
Noninterest Expense (Non-GAAP) $34,636 $33,659 $34,336 $135,157 $133,479
Operating Efficiency Ratio FTE (non-GAAP) 71.59% 69.56% 65.92% 69.10% 66.86%
Community Bank Segment Operating Efficiency Ratio FTE (non-GAAP) (3)
-------------------------------------------------------------------
Net Interest Income (GAAP) $38,363 $37,465 $38,767 $149,975 $153,024
FTE adjustment 1,387 1,315 1,090 5,256 4,223
----- ----- ----- ----- -----
Net Interest Income (FTE) $39,750 38,780 39,857 155,231 157,247
Noninterest Income (GAAP) 7,226 7,322 6,649 27,492 24,876
Noninterest Expense (GAAP) $31,014 $29,904 $30,197 $120,256 $119,976
Merger and conversion related expense 739 473 - 2,132 -
--- --- --- ----- ---
Noninterest Expense (Non-GAAP) $30,275 $29,431 $30,197 $118,124 $119,976
Operating Efficiency Ratio FTE (non-GAAP) 64.45% 63.84% 64.93% 64.65% 65.88%
Tangible Common Equity (4)
-------------------------
Ending equity $438,239 $433,671 $435,863 $438,239 $435,863
Less: Ending trademark intangible - - 33 - 33
Less: Ending goodwill 59,400 59,400 59,400 59,400 59,400
Less: Ending core deposit intangibles 11,980 12,900 15,778 11,980 15,778
Ending tangible common equity $366,859 $361,371 $360,652 $366,859 $360,652
-------- -------- -------- -------- --------
Average equity $440,344 $431,312 $446,603 $436,064 $435,774
Less: Average trademark intangible - - 82 1 231
Less: Average goodwill 59,400 59,400 59,400 59,400 59,400
Less: Average core deposit intangibles 12,421 13,343 16,346 13,804 18,159
Average tangible common equity $368,523 $358,569 $370,775 $362,859 $357,984
-------- -------- -------- -------- --------
Three Months Ended Year Ended
12/31/13 09/30/13 12/31/12 12/31/13 12/31/12
-------- -------- -------- -------- --------
ALL to loans, adjusted for purchase accounting (non-GAAP)(2)
-----------------------------------------------------------
Allowance for loan losses $30,135 $33,877 $34,916 $30,135 $34,916
Remaining credit mark on purchased loans 3,341 3,780 5,350 3,341 5,350
----- ----- ----- ----- -----
Adjusted allowance for loan losses 33,476 37,657 40,266 33,476 40,266
Loans, net of unearned income 3,039,368 3,002,246 2,966,847 3,039,368 2,966,847
Remaining credit mark on purchased loans 3,341 3,780 5,350 3,341 5,350
----- ----- ----- ----- -----
Adjusted loans, net of unearned income $3,042,709 $3,006,026 $2,972,197 $3,042,709 $2,972,197
ALL / gross loans, adjusted for purcahse accounting 1.10% 1.25% 1.35% 1.10% 1.35%
(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 purchase accounting (non-GAAP) ratio includes an adjustment for the credit mark on purchased performing loans. The purchased performing loans are reported net of the related credit mark in loans, net of unearned income, on the balance sheet; therefore, the credit mark is added back to the balance to represent the total loan portfolio. The adjusted allowance for loan losses, including the credit mark, represents the total reserve on the Company's loan portfolio. 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 purchase accounting 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 and the credit mark on the purchased performing loans represents the allowance associated with those purchased loans. The Company believes that this measure is a better reflection of the reserves on the Company's loan portfolio.
(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) Tangible common equity is used in the calculation of certain capital and per share ratios. The Company believes tangible common equity and the related ratios are meaningful measures of capital adequacy because they provide a meaningful base for period-to-period and company-to-company comparisons, which the Company believes will assist investors in assessing the capital of the Company and its ability to absorb potential losses.
UNION FIRST MARKET BANKSHARES
CORPORATION AND SUBSIDIARIES
CONSOLIDATED
BALANCE
SHEETS
(Dollars in
thousands,
except share
data)
December December
31, 31,
2013 2012
---- ----
ASSETS (Unaudited) (Audited)
------
Cash and cash
equivalents:
Cash and due
from banks $66,090 $71,426
Interest-
bearing
deposits in
other banks 6,781 11,320
Money market
investments 1 1
Federal funds
sold 151 155
--- ---
Total cash
and cash
equivalents 73,023 82,902
------ ------
Securities
available
for sale, at
fair value 677,348 585,382
Restricted
stock, at
cost 26,036 20,687
Loans held
for sale 53,185 167,698
Loans, net of
unearned
income 3,039,368 2,966,847
Less
allowance
for loan
losses 30,135 34,916
------ ------
Net loans 3,009,233 2,931,931
--------- ---------
Bank premises
and
equipment,
net 82,815 85,409
Other real
estate
owned, net
of valuation
allowance 34,116 32,834
Core deposit
intangibles,
net 11,980 15,778
Goodwill 59,400 59,400
Other assets 149,435 113,844
------- -------
Total assets $4,176,571 $4,095,865
======== ========
LIABILITIES
-----------
Noninterest-
bearing
demand
deposits 691,674 645,901
Interest-
bearing
deposits:
NOW accounts 498,068 454,150
Money market
accounts 940,215 957,130
Savings
accounts 235,034 207,846
Time deposits
of $100,000
and over 427,597 508,630
Other time
deposits 444,254 524,110
------- -------
Total
interest-
bearing
deposits 2,545,168 2,651,866
--------- ---------
Total
deposits 3,236,842 3,297,767
--------- ---------
Securities
sold under
agreements
to
repurchase 52,455 54,270
Other short-
term
borrowings 211,500 78,000
Trust
preferred
capital
notes 60,310 60,310
Long-term
borrowings 139,049 136,815
Other
liabilities 38,176 32,840
------ ------
Total
liabilities 3,738,332 3,660,002
--------- ---------
Commitments
and
contingencies
STOCKHOLDERS'
EQUITY
-------------
Common stock,
$1.33 par
value,
shares
authorized
36,000,000; 33,020 33,510
issued and
outstanding,
24,976,434
shares and
25,270,970
shares,
respectively.
Surplus 170,770 176,635
Retained
earnings 236,639 215,634
Accumulated
other
comprehensive
(loss)
income (2,190) 10,084
------ ------
Total
stockholders'
equity 438,239 435,863
------- -------
Total
liabilities
and
stockholders'
equity $4,176,571 $4,095,865
======== ========
UNION FIRST MARKET BANKSHARES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share amounts)
Three Months Ended Year Ended
December 31, December 31,
------------ ------------
2013 2012 2013 2012
---- ---- ---- ----
(Unaudited) (Unaudited) (Unaudited) (Audited)
Interest and dividend income:
Interest and fees on loans $38,741 $40,894 $155,547 $162,637
Interest on Federal funds sold - - 1 1
Interest on deposits in other banks 3 5 17 62
Interest and dividends on securities:
Taxable 2,345 2,424 8,202 11,912
Nontaxable 2,226 1,860 8,360 7,251
----- ----- ----- -----
Total interest and dividend income 43,315 45,183 172,127 181,863
------ ------ ------- -------
Interest expense:
Interest on deposits 3,064 4,362 14,097 19,446
Interest on federal funds purchased 27 21 89 50
Interest on short-term borrowings 95 74 265 234
Interest on long-term borrowings 1,516 1,566 6,050 7,778
----- ----- ----- -----
Total interest expense 4,702 6,023 20,501 27,508
----- ----- ------ ------
Net interest income 38,613 39,160 151,626 154,355
Provision for loan losses 1,206 3,300 6,056 12,200
----- ----- ----- ------
Net interest income after provision for loan losses 37,407 35,860 145,570 142,155
------ ------ ------- -------
Noninterest income:
Service charges on deposit accounts 2,399 2,390 9,492 9,033
Other service charges, commissions and fees 3,096 2,784 12,309 10,898
Gains (losses) on securities transactions, net (26) 185 21 190
Gains on sales of mortgage loans, net of commissions 1,319 5,299 11,900 16,651
Gains (losses) on sales of bank premises (3) (32) (340) 2
Other operating income 1,594 1,209 5,346 4,294
----- ----- ----- -----
Total noninterest income 8,379 11,835 38,728 41,068
----- ------ ------ ------
Noninterest expenses:
Salaries and benefits 17,076 17,620 70,369 68,648
Occupancy expenses 3,105 3,149 11,543 12,150
Furniture and equipment expenses 1,633 1,811 6,884 7,251
Other operating expenses 13,561 11,756 48,493 45,430
------ ------ ------ ------
Total noninterest expenses 35,375 34,336 137,289 133,479
------ ------ ------- -------
Income before income taxes 10,411 13,359 47,009 49,744
Income tax expense 2,306 3,917 12,513 14,333
----- ----- ------ ------
Net income $8,105 $9,442 $34,496 $35,411
====== ====== ======= =======
Earnings per common share, basic $0.32 $0.37 $1.38 $1.37
===== ===== ===== =====
Earnings per common share, diluted $0.32 $0.37 $1.38 $1.37
===== ===== ===== =====
UNION FIRST MARKET BANKSHARES CORPORATION AND SUBSIDIARIES
SEGMENT FINANCIAL INFORMATION
(Dollars in thousands)
Community
Bank Mortgage Eliminations Consolidated
---------- -------- ----------- -----------
Three Months Ended December 31, 2013
------------------------------------
Net interest income $38,363 $250 $ - $38,613
Provision for loan losses 1,206 - - 1,206
----- --- --- -----
Net interest income after provision for loan losses 37,157 250 - 37,407
Noninterest income 7,226 1,320 (167) 8,379
Noninterest expenses 31,014 4,528 (167) 35,375
------ ----- ---- ------
Income before income taxes 13,369 (2,958) - 10,411
Income tax expense 3,367 (1,061) - 2,306
----- ------ --- -----
Net income $10,002 $(1,897) $ - $8,105
Plus: Merger and conversion related expense, after tax 651 - - 651
--- --- --- ---
Net operating earnings (loss) (non-GAAP) $10,653 $(1,897) $ - $8,756
======= ======= === === ======
Total assets $4,170,682 $63,715 $(57,826) $4,176,571
========== ======= ======== ==========
Three Months Ended December 31, 2012
------------------------------------
Net interest income $38,767 $393 $ - $39,160
Provision for loan losses 3,300 - - 3,300
----- --- --- -----
Net interest income after provision for loan losses 35,467 393 - 35,860
Noninterest income 6,649 5,303 (117) 11,835
Noninterest expenses 30,197 4,256 (117) 34,336
------ ----- ---- ------
Income before income taxes 11,919 1,440 - 13,359
Income tax expense 3,458 459 - 3,917
----- --- --- -----
Net income $8,461 $981 $ - $9,442
====== ==== === === ======
Total assets $4,081,544 $187,836 $(173,515) $4,095,865
========== ======== ========= ==========
Year Ended December 31, 2013
----------------------------
Net interest income $149,975 $1,651 $ - $151,626
Provision for loan losses 6,056 - - 6,056
----- --- --- -----
Net interest income after provision for loan losses 143,919 1,651 - 145,570
Noninterest income 27,492 11,906 (670) 38,728
Noninterest expenses 120,256 17,703 (670) 137,289
------- ------ ---- -------
Income before income taxes 51,155 (4,146) - 47,009
Income tax expense 14,000 (1,487) - 12,513
------ ------ --- ------
Net income $37,155 $(2,659) $ - $34,496
Plus: Merger and conversion related expense, after tax 2,042 - - 2,042
----- --- --- -----
Net operating earnings (loss) (non-GAAP) $39,197 $(2,659) $ - $36,538
======= ======= === === =======
Total assets $4,170,682 $63,715 $(57,826) $4,176,571
========== ======= ======== ==========
Year Ended December 31, 2012
----------------------------
Net interest income $153,024 $1,331 $ - $154,355
Provision for loan losses 12,200 - - 12,200
------ --- --- ------
Net interest income after provision for loan losses 140,824 1,331 - 142,155
Noninterest income 24,876 16,660 (468) 41,068
Noninterest expenses 119,976 13,971 (468) 133,479
------- ------ ---- -------
Income before income taxes 45,724 4,020 - 49,744
Income tax expense 12,858 1,475 - 14,333
------ ----- --- ------
Net income $32,866 $2,545 $ - $35,411
======= ====== === === =======
Total assets $4,081,544 $187,836 $(173,515) $4,095,865
========== ======== ========= ==========
AVERAGE BALANCES, INCOME AND EXPENSES, YIELDS AND RATES (TAXABLE EQUIVALENT BASIS)
For the Three Months Ended December 31,
---------------------------------------
2013 2012
---- ----
Average Interest Yield / Average Interest
Balance Income / Balance Income /
Expense Expense Yield /
Rate (1) Rate (1)
(Dollars in thousands)
Assets:
-------
Securities:
Taxable $411,927 $2,345 2.26% $438,399 $2,424 2.20%
Tax-exempt 238,424 3,424 5.70% 190,227 2,862 5.98%
------- ----- ------- -----
Total securities (2) 650,351 5,769 3.52% 628,626 5,286 3.35%
Loans, net (3) (4) 3,004,186 38,455 5.08% 2,935,214 39,831 5.40%
Loans held for sale 50,819 475 3.71% 157,177 1,150 2.91%
Federal funds sold 298 - 0.17% 352 - 0.24%
Money market investments 1 - 0.00% (25) - 0.00%
Interest-bearing deposits in other banks 9,348 3 0.13% 11,341 5 0.16%
Other interest-bearing deposits - - 0.00% - - 0.00%
--- --- --- ---
Total earning assets 3,715,003 44,702 4.77% 3,732,685 46,272 4.93%
------ ------
Allowance for loan losses (33,435) (40,058)
Total non-earning assets 393,875 365,828
------- -------
Total assets $4,075,443 $4,058,455
======== ========
Liabilities and Stockholders' Equity:
-------------------------------------
Interest-bearing deposits:
Checking $481,152 93 0.08% $431,267 98 0.09%
Money market savings 929,816 547 0.23% 925,309 690 0.30%
Regular savings 233,637 180 0.31% 204,673 150 0.29%
Time deposits: (5)
$100,000 and over 436,252 1,200 1.09% 535,519 1,814 1.35%
Under $100,000 455,912 1,044 0.91% 530,973 1,610 1.21%
------- ----- ------- -----
Total interest-bearing deposits 2,536,769 3,064 0.48% 2,627,741 4,362 0.66%
Other borrowings (6) 363,889 1,638 1.79% 316,345 1,661 2.09%
------- ----- ------- -----
Total interest-bearing liabilities 2,900,658 4,702 0.64% 2,944,086 6,023 0.81%
----- -----
Noninterest-bearing liabilities:
Demand deposits 695,919 624,639
Other liabilities 38,522 43,127
------ ------
Total liabilities 3,635,099 3,611,852
Stockholders' equity 440,344 446,603
------- -------
Total liabilities and stockholders' equity $4,075,443 $4,058,455
======== ========
Net interest income $40,000 $40,249
======= =====
Interest rate spread (7) 4.13% 4.12%
Interest expense as a percent of average earning assets 0.50% 0.64%
Net interest margin (8) 4.27% 4.29%
(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 and $46 thousand for the three months ended December 31, 2013 and 2012 in accretion of the fair market value adjustments.
(3) Nonaccrual loans are included in average loans outstanding.
(4) Interest income on loans includes $495 thousand and $717 thousand for the three months ended December 31, 2013 and 2012 in accretion of the fair market value adjustments related to the acquisitions.
(5) Interest expense on certificates of deposits includes $2 thousand for both the three months ended December 31, 2013 and 2012 in accretion of the fair market value adjustments related to the acquisitions.
(6) Interest expense on borrowings includes $122 thousand for both the three months ended December 31, 2013 and 2012 in amortization of the fair market value adjustments related to acquisitions.
(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 4.24% and 4.22% for the three months ended December 31, 2013 and 2012.
AVERAGE BALANCES, INCOME AND EXPENSES, YIELDS AND RATES (TAXABLE EQUIVALENT BASIS)
For the Year Ended December 31,
-------------------------------
2013 2012
---- ----
Average Interest Yield / Average Interest
Balance Income / Balance Income /
Expense Expense Yield /
Rate (1) Rate (1)
(Dollars in thousands)
Assets:
-------
Securities:
Taxable $391,804 $8,202 2.09% $462,996 $11,912 2.57%
Tax-exempt 223,054 12,862 5.77% 179,977 11,155 6.20%
------- ------ ------- ------
Total securities (2) 614,858 21,064 3.43% 642,973 23,067 3.59%
Loans, net (3) (4) 2,985,733 152,868 5.12% 2,875,916 159,682 5.55%
Loans held for sale 105,450 3,433 3.26% 104,632 3,273 3.13%
Federal funds sold 421 1 0.22% 365 1 0.24%
Money market investments 1 - 0.00% - - 0.00%
Interest-bearing deposits in other banks 10,386 17 0.17% 25,979 62 0.24%
Other interest-bearing deposits - - 0.00% - - 0.00%
--- --- --- ---
Total earning assets 3,716,849 177,383 4.77% 3,649,865 186,085 5.10%
------- -------
Allowance for loan losses (34,533) (40,460)
Total non-earning assets 369,752 365,820
------- -------
Total assets $4,052,068 $3,975,225
======== ========
Liabilities and Stockholders' Equity:
-------------------------------------
Interest-bearing deposits:
Checking $461,594 351 0.08% $419,550 445 0.11%
Money market savings 942,127 2,345 0.25% 909,408 3,324 0.37%
Regular savings 226,343 680 0.30% 197,228 662 0.34%
Time deposits: (5)
$100,000 and over 473,244 5,751 1.22% 540,501 7,957 1.47%
Under $100,000 488,115 4,970 1.02% 558,751 7,058 1.26%
------- ----- ------- -----
Total interest-bearing deposits 2,591,423 14,097 0.54% 2,625,438 19,446 0.74%
Other borrowings (6) 322,716 6,404 1.98% 296,935 8,062 2.72%
------- ----- ------- -----
Total interest-bearing liabilities 2,914,139 20,501 0.70% 2,922,373 27,508 0.94%
------ ------
Noninterest-bearing liabilities:
Demand deposits 664,203 577,740
Other liabilities 37,662 39,338
------ ------
Total liabilities 3,616,004 3,539,451
Stockholders' equity 436,064 435,774
------- -------
Total liabilities and stockholders' equity $4,052,068 $3,975,225
======== ========
Net interest income $156,882 $158,577
======== ========
Interest rate spread (7) 4.07% 4.16%
Interest expense as a percent of average earning assets 0.55% 0.76%
Net interest margin (8) 4.22% 4.34%
(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 and $201 thousand for the year ended December 31, 2013 and 2012 in accretion of the fair market value adjustments.
(3) Nonaccrual loans are included in average loans outstanding.
(4) Interest income on loans includes $2.1 million and $3.7 million for the year ended December 31, 2013 and 2012 in accretion of the fair market value adjustments related to the acquisitions.
(5) Interest expense on certificates of deposits includes $7 thousand and $233 thousand for the year ended December 31, 2013 and 2012 in accretion of the fair market value adjustments related to the
acquisitions.
(6) Interest expense on borrowings includes $489 thousand for both the years ended December 31, 2013 and 2012 in amortization of the fair market value adjustments related to acquisitions.
(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 4.18% and 4.24% for the year ended December 31, 2013 and 2012.
STELLARONE CORPORATION
KEY FINANCIAL RESULTS
(in thousands)
Three Months Ended Year Ended
12/31/13 09/30/13 12/31/12 12/31/13 12/31/12
-------- -------- -------- -------- --------
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Audited)
Results of Operations
---------------------
Interest and dividend income $28,431 $28,332 $28,321 $112,709 $115,056
Interest expense 3,440 3,494 4,118 14,409 18,479
----- ----- ----- ------ ------
Net interest income 24,991 24,838 24,203 98,300 96,577
Provision for loan losses (1,862) 200 1,400 (1,347) 5,550
------ --- ----- ------ -----
Net interest income after provision for loan losses 26,853 24,638 22,803 99,647 91,027
Noninterest income 6,847 7,162 9,417 29,275 34,343
Noninterest expenses 23,414 22,820 23,754 92,257 95,128
------ ------ ------ ------ ------
Income before income taxes 10,286 8,980 8,466 36,665 30,242
Income tax expense 2,944 2,691 2,245 10,806 8,079
----- ----- ----- ------ -----
Net income 7,342 6,289 6,221 25,859 22,163
After tax merger costs 577 525 - 1,934 -
--- --- --- ----- ---
Operating net income (Non-GAAP) $7,919 $6,814 $6,221 $27,793 $22,163
====== ====== ====== ======= =======
Net interest margin (FTE) 3.68% 3.70% 3.75% 3.72% 3.80%
------------------------
Financial Condition
-------------------
Assets $3,070,652 $3,082,227 $3,023,204 $3,070,652 $3,023,204
Loans, net of unearned income 2,283,535 2,264,733 2,080,068 2,283,535 2,080,068
Earning Assets 2,759,418 2,767,152 2,709,183 2,759,418 2,709,183
Goodwill 114,167 114,167 113,652 114,167 113,652
Core deposit intangibles, net 2,408 2,728 3,462 2,408 3,462
Deposits 2,469,121 2,446,381 2,484,324 2,469,121 2,484,324
Stockholders' equity 433,313 430,716 431,642 433,313 431,642
Tangible common equity 316,738 313,821 314,528 316,738 314,528
Averages
--------
Loans, net of unearned income $2,290,743 $2,253,777 $2,084,741 $2,217,570 $2,064,552
Deposits 2,459,255 2,453,139 2,433,728 2,456,976 2,413,658
SOURCE Union First Market Bankshares Corporation
