Union Bankshares Reports Third Quarter Results

RICHMOND, Va., Oct. 17, 2018 (GLOBE NEWSWIRE) -- Union Bankshares Corporation (the “Company” or “Union”) (Nasdaq: UBSH) today reported net income of $38.2 million and earnings per share of $0.58 for its third quarter ended September 30, 2018.  Net operating earnings(1) were $39.3 million and operating earnings per share(1) was $0.60 for its third quarter ended September 30, 2018; these operating results exclude $1.1 million in after-tax merger-related costs but include losses from discontinued operations of $565,000.

Net income was $102.2 million and earnings per share was $1.55 for the nine months ended September 30, 2018.  Net operating earnings(1) were $132.1 million and operating earnings per share(1) was $2.01 for the nine months ended September 30, 2018; these operating results exclude $29.9 million in after-tax merger-related costs but include losses from discontinued operations of $3.0 million.

Union made further progress on our stated priorities during the third quarter and we remain on track to deliver our top tier financial performance metrics in the fourth quarter of 2018,” said John C. Asbury, President and CEO of Union Bankshares Corporation.  “Loan growth increased in each month of the quarter as we are beginning to see the impact of our commercial and industrial banking efforts on the commercial loan portfolio.  Our commercial and industrial banking buildout is largely complete and our team is starting to gain traction in the market.  This bodes well for the fourth quarter and more importantly, for 2019 and beyond.

“After the quarter closed, we announced our agreement to acquire Access National Corporation, which is nearly a perfect fit with our previously stated M&A strategic and financial objectives.  We’re pleased with the enthusiasm about Access becoming a part of Union which substantially completes our Virginia franchise and irrefutably positions Union as Virginia’s bank.  While it has been less than two weeks from the announcement, we have already stood up our integration team and work has begun to ensure a smooth transition.  Having just completed the Xenith integration, this is a process we know well.  We will share more about the implications of this powerful addition to our targeted financial metrics and business strategy at our investor day scheduled in New York on November 14.

On October 5, 2018, the Company announced it has entered into a definitive merger agreement to acquire Access National Corporation (“Access”) in an all-stock transaction (the “Pending Merger”) that is expected to close in the first quarter of 2019.

Select highlights for the third quarter of 2018

  • Performance metrics - Changes in all metrics below were primarily related to the net gain on the sale of the Shore Premier Finance division in the second quarter of 2018.
    • Return on Average Assets (“ROA”) was 1.17% compared to 1.44% in the second quarter of 2018. Operating ROA(1) was 1.21% compared to 1.63% in the second quarter of 2018.
    • Return on Average Equity (“ROE”) was 8.06% compared to 10.28% in the second quarter of 2018. Operating ROE(1) was 8.30% compared to 11.69% in the second quarter of 2018.
    • Return on Average Tangible Common Equity (“ROTCE”)(1) was 13.73% compared to 17.74% in the second quarter of 2018. Operating ROTCE(1) was 14.14% compared to 20.19% in the second quarter of 2018.
    • Efficiency ratio increased to 60.7% compared to 57.2% in the second quarter of 2018 and the efficiency ratio (fully taxable equivalent (“FTE”))(1) increased to 59.7% compared to 56.5% in the second quarter of 2018.  Operating efficiency ratio (FTE)(1) increased to 58.6% compared to 51.0% in the second quarter of 2018.
  • Notable activity during the third quarter
    • On July 1, 2018, Old Dominion Capital Management, Inc., a subsidiary of Union Bank & Trust, completed its acquisition of Outfitter Advisors, Inc., a McLean, Virginia based investment advisory firm with approximately $400 million in assets under management and advisement.
    • The Company consolidated seven branches during the third quarter of 2018, which resulted in additional after-tax branch closure costs of approximately $375,000 that were recorded in the third quarter of 2018.
    • The Company incurred approximately $565,000 in after-tax costs related to executive management changes during the quarter.
    • On June 29, 2018, Union Bank & Trust entered into an agreement to sell substantially all of the assets and certain specific liabilities of its Shore Premier Finance division, consisting primarily of marine loans totaling $383.9 million, for a purchase price consisting of approximately $375.0 million in cash and 1,250,000 shares of the purchasing company's common stock. The initial estimated after-tax gain recorded in the second quarter of 2018 was $16.5 million, net of transaction and other related costs, which was subsequently reduced by $737,000 in the third quarter based on updated information obtained and wind-down costs incurred.

(1) These are financial measures not calculated in accordance with generally accepted accounting principles (“GAAP”). For a reconciliation of these non-GAAP financial measures, see Alternative Performance Measures (non-GAAP) section of the Key Financial Results.

NET INTEREST INCOME

For the third quarter of 2018, net interest income was $106.0 million, a decrease of $2.2 million from the second quarter of 2018.  Net interest income (FTE)(2) was $108.0 million in the third quarter of 2018, a decrease of $2.2 million from the second quarter of 2018. The decreases in both net interest income and net interest income (FTE) were primarily driven by lower acquisition accounting accretion during the three months ended September 30, 2018 compared to the three months ended June 30, 2018. The third quarter net interest margin decreased 3 basis points to 3.69% from 3.72% in the previous quarter, while the net interest margin (FTE)(2) decreased 3 basis points to 3.76% from 3.79% during the same periods.  The decreases in the net interest margin and net interest margin (FTE) were principally due to a 6 basis point increase in the cost of funds, partially offset by a 3 basis point increase in the yield on earnings assets, which was lower by 6 basis points due to the reduced level of earning asset accretion income recorded during the third quarter of 2018 compared to the prior quarter.

The Company’s net interest margin (FTE) includes the impact of acquisition accounting fair value adjustments.  During the third quarter of 2018, net accretion related to acquisition accounting decreased $2.0 million from the prior quarter to $3.9 million for the quarter ended September 30, 2018.  The second and third quarters of 2018 and the remaining estimated net accretion impact are reflected in the following table (dollars in thousands):

        
 Loan
Accretion
 Deposit
Accretion
 Borrowings
Amortization
 Total
For the quarter ended June 30, 2018$5,324 $685 $(104) $5,905 
For the quarter ended September 30, 2018 3,496  592  (143)  3,945 
For the remaining three months of 2018 (estimated) 2,401  445  (161)  2,685 
For the years ending (estimated):             
2019 8,481  1,170  (660)  8,991 
2020 6,880  284  (734)  6,430 
2021 5,520  108  (805)  4,823 
2022 4,157  21  (827)  3,351 
2023 2,710    (850)  1,860 
Thereafter 9,751    (11,633)  (1,882)
              

(2) For a reconciliation of these non-GAAP financial measures, see Alternative Performance Measures (non-GAAP) section of the Key Financial Results.

ASSET QUALITY/LOAN LOSS PROVISION

Overview
During the third quarter of 2018, the Company experienced increases in nonperforming asset (“NPA”) balances from the prior quarter, primarily due to nonaccrual additions related to one credit relationship composed of construction loans.  Past due loan levels as a percentage of total loans held for investment at September 30, 2018 were higher than past due loan levels at June 30, 2018 and were down slightly from September 30, 2017.  Charge-off levels increased from the second quarter of 2018 and were primarily related to the consumer loan portfolio; as a result, the provision for loan losses increased from the second quarter of 2018.

All nonaccrual and past due loan metrics discussed below exclude purchased credit impaired (“PCI”) loans totaling $94.7 million (net of fair value mark of $24.3 million) at September 30, 2018.

Nonperforming Assets
At September 30, 2018, NPAs totaled $34.9 million, an increase of $2.0 million, or 6.1%, from June 30, 2018 and an increase of $8.3 million, or 31.4%, from September 30, 2017.  NPAs as a percentage of total outstanding loans at September 30, 2018 was 0.37%, an increase of 2 basis points from 0.35% at June 30, 2018 and a decline of 2 basis points from 0.39% at September 30, 2017.  As the Company's NPAs have been at or near historic lows over the last several quarters, certain changes from quarter to quarter might stand out in comparison to one another but do not have a significant impact on the Company's overall asset quality position.

The following table shows a summary of nonperforming asset balances at the quarter ended (dollars in thousands):

          
 September 30, June 30, March 31, December 31, September 30,
 2018 2018 2018 2017 2017
Nonaccrual loans$28,110  $25,662  $25,138  $21,743  $20,122 
Foreclosed properties6,800  7,241  8,079  5,253  6,449 
Total nonperforming assets$34,910  $32,903  $33,217  $26,996  $26,571 
                    

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

          
 September 30, June 30, March 31, December 31, September 30,
 2018 2018 2018 2017 2017
Beginning Balance$25,662  $25,138  $21,743  $20,122  $24,574 
Net customer payments(2,459) (2,651) (1,455) (768) (4,642)
Additions6,268  5,063  5,451  4,335  4,114 
Charge-offs(1,137) (539) (403) (1,305) (3,376)
Loans returning to accruing status(70) (1,349) (182) (448)  
Transfers to foreclosed property(154)   (16) (193) (548)
Ending Balance$28,110  $25,662  $25,138  $21,743  $20,122 
                    

Of the nonaccrual additions in the third quarter of 2018, the majority related to one credit relationship, which consisted of construction loans.

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

          
 September 30, June 30, March 31, December 31, September 30,
 2018 2018 2018 2017 2017
Beginning Balance$7,241  $8,079  $5,253  $6,449  $6,828 
Additions of foreclosed property165  283  44  325  621 
Acquisitions of foreclosed property (1)  (162) 4,204     
Valuation adjustments(42) (383) (759) (1,046) (249)
Proceeds from sales(889) (580) (684) (479) (648)
Gains (losses) from sales325  4  21  4  (103)
Ending Balance$6,800  $7,241  $8,079  $5,253  $6,449 
(1) Includes subsequent measurement period adjustments.
                    

Past Due Loans
Past due loans still accruing interest totaled $46.6 million, or 0.49% of total loans, at September 30, 2018 compared to $38.2 million, or 0.41% of total loans, at June 30, 2018 and $34.4 million, or 0.50% of total loans, at September 30, 2017.  Of the total past due loans still accruing interest, $9.5 million, or 0.10% of total loans, were loans past due 90 days or more at September 30, 2018, compared to $6.9 million, or 0.07% of total loans, at June 30, 2018 and $4.5 million, or 0.07% of total loans, at September 30, 2017.

Net Charge-offs
For the third quarter of 2018, net charge-offs were $3.2 million, or 0.13% of total average loans on an annualized basis, compared to $1.8 million, or 0.07%, for the prior quarter and $4.1 million, or 0.24%, for the same quarter last year.  The majority of net charge-offs in the third quarter of 2018 were related to consumer loans.

Provision for Loan Losses
The provision for loan losses for the third quarter of 2018 was $3.1 million, an increase of $440,000 compared to the previous quarter and an increase of $44,000 compared to the same quarter in 2017.  The increase in provision for loan losses from the second quarter of 2018 was primarily driven by higher levels of net charge-offs in the third quarter of 2018.

Allowance for Loan Losses (“ALL”)
The ALL at September 30, 2018 was consistent with the prior quarter at $41.3 million.  The ALL as a percentage of the total loan portfolio was 0.44% at both September 30, 2018 and June 30, 2018 and was 0.54% at September 30, 2017.  The year-over-year decline in the allowance ratio was primarily attributable to the acquisition of Xenith.  In acquisition accounting, there is no carryover of previously established allowance for loan losses.

The ratio of the ALL to nonaccrual loans was 146.9% at September 30, 2018, compared to 160.8% at June 30, 2018 and 184.7% at September 30, 2017.  The current level of the allowance for loan losses reflects specific reserves related to nonperforming loans, current risk ratings on loans, net charge-off activity, loan growth, delinquency trends, and other credit risk factors that the Company considers important in assessing the adequacy of the allowance for loan losses.

NONINTEREST INCOME

Noninterest income decreased $20.7 million to $19.9 million for the quarter ended September 30, 2018 from $40.6 million in the prior quarter, primarily driven by the net gain on sale of the Shore Premier Finance division recognized during the second quarter of 2018.  The initial estimated gain recorded in the second quarter of 2018 was $20.9 million, which was subsequently reduced by $933,000 in the third quarter based on updated information obtained and wind-down costs incurred.  Excluding this gain and its subsequent adjustment from their respective quarters, noninterest income increased $1.1 million, or 5.7%, for the quarter ended September 30, 2018 when compared to the prior quarter.  Customer-related fee income increased $1.1 million, primarily due to the acquisition of Outfitter Advisors, Inc. as well as higher overdraft, letter of credit, and debit card interchange fees.

NONINTEREST EXPENSE

Noninterest expense decreased $8.8 million to $76.3 million for the quarter ended September 30, 2018 from $85.1 million in the prior quarter.  Excluding merger-related costs of $1.4 million and $8.3 million in the third and second quarters of 2018, respectively, operating noninterest expense(3) decreased $1.9 million, or 2.5%, to $74.9 million when compared to the second quarter of 2018.  The decrease in operating noninterest expense included a decline in salaries and benefits of $1.5 million, primarily due to planned synergies arising from the core system conversion from the Xenith acquisition that occurred in the second quarter, partially offset by increased incentive plan expenses of $408,000 recorded in the third quarter of 2018.  Other real estate owned (“OREO”) and credit-related expenses declined $670,000 related to higher gains on sales of property and lower valuation adjustments in the third quarter compared to the second quarter of 2018. Additionally, FDIC premiums and other insurance costs declined $519,000 compared to the second quarter of 2018.  Included in operating noninterest expense were branch closure costs of approximately $475,000 related to the consolidation of seven branches in the third quarter of 2018, $714,000 in costs related to executive management changes during the quarter, as well as operating losses of $463,000 related to a community development investment fund.

(3) For a reconciliation of this non-GAAP financial measure, see Alternative Performance Measures (non-GAAP) section of the Key Financial Results.

INCOME TAXES

The Tax Cuts and Jobs Act of 2017 (the “Tax Act”) was signed into law in December 2017.  The Company's preliminary estimate of the impact of the Tax Act is based on currently available information and interpretation of its provisions.  The actual results may differ from the current estimate due to, among other things, further guidance that may be issued by U.S. tax authorities or regulatory bodies and/or changes in interpretations and assumptions that the Company has made on a preliminary basis.   The Company's evaluation of the impact of the Tax Act is subject to refinement for up to one year after enactment.  No additional adjustments related to the Tax Act were recorded in the third quarter of 2018.

The effective tax rate for the three months ended September 30, 2018 was 15.9% compared to 19.0% for the three months ended June 30, 2018. The decrease in the effective tax rate was primarily due to tax-exempt income being a higher component of pre-tax income in the third quarter of 2018 compared to the second quarter of 2018.

BALANCE SHEET

At September 30, 2018, total assets were $13.4 billion, an increase of $305.6 million from June 30, 2018, primarily a result of increases in the investment securities portfolio and loan growth during the third quarter of 2018, partially offset by lower cash and cash equivalent balances.

At September 30, 2018, total investments were $2.3 billion, an increase of $519.6 million from June 30, 2018, primarily the result of reinvesting the proceeds received at the end of the second quarter from the sale of Shore Premier Finance loans and certain third party lending loans into the investment securities portfolio during the third quarter of 2018.

At September 30, 2018, loans held for investment (net of deferred fees and costs) were $9.4 billion, an increase of $121.3 million, or 5.2% (annualized), from June 30, 2018, while average loans decreased $511.9 million from the prior quarter.  Adjusted for the sale of the Shore Premier Finance loans and certain third party lending programs loans in the second quarter of 2018, average loans increased $66.8 million, or 2.9% (annualized), during the third quarter of 2018 compared to the prior quarter.

At September 30, 2018, total deposits were $9.8 billion, an increase of $37.4 million, or 1.5% (annualized), from June 30, 2018, while average deposits increased $158.3 million, or 6.6% (annualized), from the prior quarter.

The following table shows the Company's capital ratios at the quarters ended:

      
 September 30, June 30, September 30,
 2018 2018  2017
Common equity Tier 1 capital ratio (1)9.92% 9.80% 9.40%
Tier 1 capital ratio (1)11.12% 11.02% 10.56%
Total capital ratio (1)12.97% 12.89% 12.94%
Leverage ratio (Tier 1 capital to average assets) (1)9.89% 9.46% 9.52%
Common equity to total assets14.06% 14.27% 11.53%
Tangible common equity to tangible assets (2)8.74% 8.86% 8.34%
      
(1) All ratios at September 30, 2018 are estimates and subject to change pending the Company’s filing of its FR Y9-C. All other periods are presented as filed.
(2) For a reconciliation of this non-GAAP financial measure, see Alternative Performance Measures (non-GAAP) section of the Key Financial Results.
 

During the third quarter of 2018, the Company declared and paid cash dividends of $0.23 per common share, an increase of $0.02, or 9.5%, compared to the second quarter of 2018 and an increase of $0.03, or 15.0%, compared to the third quarter of 2017.

ABOUT UNION BANKSHARES CORPORATION

Headquartered in Richmond, Virginia, Union Bankshares Corporation (Nasdaq: UBSH) is the holding company for Union Bank & Trust, which has 140 branches, seven of which are operated as Xenith Bank, a division of Union Bank & Trust of Richmond, Virginia, and approximately 190 ATMs located throughout Virginia and in portions of Maryland and North Carolina.  Non-bank affiliates of the holding company include: Old Dominion Capital Management, Inc. and Dixon, Hubard, Feinour, & Brown, Inc., which both provide investment advisory services, and Union Insurance Group, LLC, which offers various lines of insurance products.

THIRD QUARTER 2018 EARNINGS RELEASE CONFERENCE CALL

Union will hold a conference call on Wednesday, October 17th, 2018 at 9:00 a.m. Eastern Time during which management will review the third quarter 2018 financial results.  Interested parties may participate in the call toll-free by dialing (877) 668-4908; international callers wishing to participate may do so by dialing (973) 453-3058.  The conference ID number is 8775497.

NON-GAAP FINANCIAL MEASURES

In reporting the results of the quarter and nine months ended September 30, 2018, the Company has provided supplemental performance measures on a tax-equivalent, tangible, or operating basis.  These non-GAAP financial measures are a supplement to GAAP, which is used to prepare the Company’s financial statements, and should not be considered in isolation or as a substitute for comparable measures calculated in accordance with GAAP.  In addition, the Company’s non-GAAP financial measures may not be comparable to non-GAAP financial measures of other companies.  The Company uses the non-GAAP financial measures discussed herein in its analysis of the Company’s performance. The Company’s management believes that these non-GAAP financial measures provide additional understanding of ongoing operations, enhance comparability of results of operations with prior periods and show the effects of significant gains and charges in the periods presented without the impact of items or events that may obscure trends in the Company’s underlying performance.  For a reconciliation of these measures to their most directly comparable GAAP measures and additional information about these non-GAAP financial measures, see Alternative Performance Measures (non-GAAP) section of the Key Financial Results.

FORWARD-LOOKING STATEMENTS

Certain statements in this press release may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.  Forward-looking statements include, without limitation, projections, predictions, expectations, or beliefs about future events or results that are not statements of historical fact. Such forward-looking statements are based on various assumptions as of the time they are made, and are inherently subject to known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from those expressed or implied by such forward-looking statements.  Forward-looking statements are often accompanied by words that convey projected future events or outcomes such as “expect,” “believe,” “estimate,” “plan,” “project,” “anticipate,” “intend,” “will,” “may,” “view,” “opportunity,” “potential,” or words of similar meaning or other statements concerning opinions or judgment of Union and its management about future events.  Although Union 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 Union will not differ materially from any projected future results, performance, or achievements expressed or implied by such forward-looking statements.  Actual future results, performance or achievements may differ materially from historical results or those anticipated depending on a variety of factors, including, but not limited to:

  • changes in interest rates;
  • general economic and financial market conditions in the United States generally and particularly in the markets in which Union operates and which its loans are concentrated, including the effects of declines in real estate values, an increase in unemployment levels and slowdowns in economic growth;
  • Union’s ability to manage its growth or implement its growth strategy;
  • the ability to obtain regulatory, shareholder or other approvals or other conditions to closing the Pending Merger on a timely basis or at all, the ability to close the Pending Merger on the expected timeframe, or at all, that closing may be more difficult, time-consuming or costly than expected, and that if the Pending Merger is consummated, the businesses of Union and Access may not be integrated successfully or such integration may be more difficult, time-consuming or costly than expected;
  • Union’s ability to recruit and retain key employees;
  • an insufficient allowance for loan losses;
  • the quality or composition of the loan or investment portfolios;
  • concentrations of loans secured by real estate, particularly commercial real estate;
  • the effectiveness of Union’s credit processes and management of Union’s credit risk;
  • demand for loan products and financial services in Union’s market area;
  • Union’s ability to compete in the market for financial services;
  • technological risks and developments, and cyber threats, attacks, or events;
  • performance by Union’s counterparties or vendors;
  • deposit flows;
  • the availability of financing and the terms thereof;
  • the level of prepayments on loans and mortgage-backed securities;
  • legislative or regulatory changes and requirements;
  • the impact of the Tax Act, including, but not limited to, the effect of the lower corporate tax rate, including on the valuation of Union's tax assets and liabilities;
  • any future refinements to Union's preliminary analysis of the impact of the Tax Act on Union;
  • changes in the effect of the Tax Act due to issuance of interpretive regulatory guidance or enactment of corrective or supplement legislation;
  • monetary and fiscal policies of the U.S. government including policies of the U.S. Department of the Treasury and the Board of Governors of the Federal Reserve System;
  • changes to applicable accounting principles and guidelines; and
  • other factors, many of which are beyond the control of Union.

Please refer to the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of Union’s Annual Report on Form 10-K for the year ended December 31, 2017 and comparable “Risk Factors” sections of Union’s Quarterly Reports on Form 10-Q and related disclosures in other filings, which have been filed with the SEC and are available on the SEC’s website at www.sec.gov. All of the forward-looking statements made in this press release are expressly qualified by the cautionary statements contained or referred to herein. The actual results or developments anticipated may not be realized or, even if substantially realized, they may not have the expected consequences to or effects on Union or its businesses or operations. Readers are cautioned not to rely too heavily on the forward-looking statements contained in this press release. Forward-looking statements speak only as of the date they are made and Union does not undertake any obligation to update, revise or clarify these forward-looking statements, whether as a result of new information, future events or otherwise.

     
UNION BANKSHARES CORPORATION AND SUBSIDIARIES    
KEY FINANCIAL RESULTS    
(Dollars in thousands, except share data)    
 As of & For Three Months Ended As of & For Nine Months Ended
 9/30/18 6/30/18 9/30/17 9/30/18 9/30/17
Results of Operations(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
Interest and dividend income$131,363  $132,409  $84,499  $388,151  $241,865 
Interest expense25,400  24,241  13,652  70,549  35,947 
Net interest income105,963  108,168  70,847  317,602  205,918 
Provision for credit losses3,340  2,147  3,056  9,011  7,344 
Net interest income after provision for credit losses102,623  106,021  67,791  308,591  198,574 
Noninterest income19,887  40,597  15,230  80,752  47,305 
Noninterest expenses76,349  85,140  55,204  263,234  167,871 
Income before income taxes46,161  61,478  27,817  126,109  78,008 
Income tax expense7,399  11,678  7,397  20,973  20,924 
Income from continuing operations38,762  49,800  20,420  105,136  57,084 
Discontinued operations, net of tax(565) (2,473) 238  (2,973) 653 
Net income$38,197  $47,327  $20,658  $102,163  $57,737 
          
Interest earned on earning assets (FTE) (1)$133,377  $134,417  $87,498  $394,011  $250,548 
Net interest income (FTE) (1)107,977  110,176  73,846  323,462  214,601 
          
Key Ratios         
Earnings per common share, diluted$0.58  $0.72  $0.47  $1.55  $1.32 
Return on average assets (ROA)1.17% 1.44% 0.91% 1.05% 0.88%
Return on average equity (ROE)8.06% 10.28% 7.90% 7.38% 7.53%
Return on average tangible common equity (ROTCE) (2)13.73% 17.74% 11.34% 12.71% 10.90%
Efficiency ratio60.67% 57.23% 64.13% 66.08% 66.29%
Efficiency ratio (FTE) (1)59.71% 56.47% 61.97% 65.12% 64.10%
Net interest margin3.69% 3.72% 3.44% 3.69% 3.47%
Net interest margin (FTE) (1)3.76% 3.79% 3.59% 3.76% 3.62%
Yields on earning assets (FTE) (1)4.65% 4.62% 4.25% 4.58% 4.23%
Cost of interest-bearing liabilities (FTE) (1)1.15% 1.06% 0.85% 1.05% 0.78%
Cost of funds (FTE) (1)0.89% 0.83% 0.66% 0.82% 0.61%
          
Operating Measures (3)         
Net operating earnings$39,326  $53,864  $21,319  $132,065  $60,757 
Operating earnings per share, diluted$0.60  $0.82  $0.49  $2.01  $1.39 
Operating ROA1.21% 1.63% 0.94% 1.35% 0.93%
Operating ROE8.30% 11.69% 8.15% 9.54% 7.93%
Operating ROTCE14.14% 20.19% 11.70% 16.44% 11.47%
Operating efficiency ratio (FTE) (1)58.59% 50.98% 61.15% 55.87% 62.77%
          
Per Share Data         
Earnings per common share, basic$0.58  $0.72  $0.47  $1.55  $1.32 
Earnings per common share, diluted0.58  0.72  0.47  1.55  1.32 
Cash dividends paid per common share0.23  0.21  0.20  0.65  0.60 
Market value per share38.53  38.88  35.30  38.53  35.30 
Book value per common share28.68  28.47  24.00  28.68  24.00 
Tangible book value per common share (2)16.79  16.62  16.76  16.79  16.76 
Price to earnings ratio, diluted16.74  13.46  18.93  18.59  20.00 
Price to book value per common share ratio1.34  1.37  1.47  1.34  1.47 
Price to tangible book value per common share ratio (2)2.29  2.34  2.11  2.29  2.11 
Weighted average common shares outstanding, basic65,974,702  65,919,055  43,706,635  65,817,668  43,685,045 
Weighted average common shares outstanding, diluted66,013,152  65,965,577  43,792,058  65,873,202  43,767,502 
Common shares outstanding at end of period65,982,669  65,939,375  43,729,229  65,982,669  43,729,229 
               


    
 As of & For Three Months Ended As of & For Nine Months Ended
 9/30/18 6/30/18 9/30/17 9/30/18 9/30/17
Capital Ratios(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
Common equity Tier 1 capital ratio (4)9.92% 9.80% 9.40% 9.92% 9.40%
Tier 1 capital ratio (4)11.12% 11.02% 10.56% 11.12% 10.56%
Total capital ratio (4)12.97% 12.89% 12.94% 12.97% 12.94%
Leverage ratio (Tier 1 capital to average assets) (4)9.89% 9.46% 9.52% 9.89% 9.52%
Common equity to total assets14.06% 14.27% 11.53% 14.06% 11.53%
Tangible common equity to tangible assets (2)8.74% 8.86% 8.34% 8.74% 8.34%
                    
Financial Condition                   
Assets$13,371,742  $13,066,106  $9,029,436  $13,371,742  $9,029,436 
Loans held for investment9,411,598  9,290,259  6,898,729  9,411,598  6,898,729 
Earning Assets11,808,717  11,494,113  8,232,413  11,808,717  8,232,413 
Goodwill727,699  725,195  298,191  727,699  298,191 
Amortizable intangibles, net51,563  51,211  16,017  51,563  16,017 
Deposits9,834,695  9,797,272  6,881,826  9,834,695  6,881,826 
Stockholders' equity1,880,029  1,864,870  1,041,371  1,880,029  1,041,371 
Tangible common equity (2)1,100,767  1,088,464  727,163  1,100,767  727,163 
          
Loans held for investment, net of deferred fees and costs         
Construction and land development$1,178,054  $1,250,448  $841,738  $1,178,054  $841,738 
Commercial real estate - owner occupied1,283,125  1,293,791  903,523  1,283,125  903,523 
Commercial real estate - non-owner occupied2,427,251  2,318,589  1,748,039  2,427,251  1,748,039 
Multifamily real estate542,662  541,730  368,686  542,662  368,686 
Commercial & Industrial1,154,583  1,093,771  554,522  1,154,583  554,522 
Residential 1-4 Family - commercial719,798  723,945  602,937  719,798  602,937 
Residential 1-4 Family - mortgage611,728  607,155  480,175  611,728  480,175 
Auto306,196  296,706  276,572  306,196  276,572 
HELOC612,116  626,916  535,446  612,116  535,446 
Consumer345,320  298,021  396,971  345,320  396,971 
Other Commercial230,765  239,187  190,120  230,765  190,120 
Total loans held for investment$9,411,598  $9,290,259  $6,898,729  $9,411,598  $6,898,729 
          
Deposits         
NOW accounts$2,205,262  $2,147,999  $1,851,327  $2,205,262  $1,851,327 
Money market accounts2,704,480  2,758,704  1,621,443  2,704,480  1,621,443 
Savings accounts635,788  643,894  553,082  635,788  553,082 
Time deposits of $100,000 and over1,078,448  1,019,577  621,070  1,078,448  621,070 
Other time deposits1,020,830  1,034,171  699,755  1,020,830  699,755 
Total interest-bearing deposits$7,644,808  $7,604,345  $5,346,677  $7,644,808  $5,346,677 
Demand deposits2,189,887  2,192,927  1,535,149  2,189,887  1,535,149 
Total deposits$9,834,695  $9,797,272  $6,881,826  $9,834,695  $6,881,826 
          
Averages         
Assets$12,947,352  $13,218,227  $8,973,964  $13,061,453  $8,730,815 
Loans held for investment9,297,213  9,809,083  6,822,498  9,594,094  6,613,078 
Securities1,966,010  1,625,273  1,243,904  1,720,978  1,227,220 
Earning assets11,383,320  11,661,189  8,167,919  11,506,200  7,922,944 
Deposits9,803,475  9,645,186  6,797,840  9,638,698  6,615,718 
Time deposits2,079,686  2,063,414  1,289,794  2,076,320  1,250,180 
Interest-bearing deposits7,635,710  7,549,953  5,302,226  7,559,053  5,166,163 
Borrowings1,155,093  1,617,322  1,080,226  1,460,685  1,030,500 
Interest-bearing liabilities8,790,803  9,167,275  6,382,452  9,019,738  6,196,663 
Stockholders' equity1,880,582  1,847,366  1,037,792  1,851,072  1,024,853 
Tangible common equity (2)1,103,530  1,069,886  722,920  1,074,303  708,478 
               


    
 As of & For Three Months Ended As of & For Nine Months Ended
 9/30/18 6/30/18 9/30/17 9/30/18 9/30/17
Asset Quality(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
Allowance for Loan Losses (ALL)         
Beginning balance$41,270  $40,629  $38,214  $38,208  $37,192 
Add: Recoveries1,401  1,201  887  4,082  2,559 
Less: Charge-offs4,560  2,980  4,989  10,099  9,949 
Add: Provision for loan losses3,100  2,660  3,056  9,284  7,359 
Add: Provision for loan losses included in discontinued operations83  (240) (6) (181) 1 
Ending balance$41,294  $41,270  $37,162  $41,294  $37,162 
          
ALL / total outstanding loans0.44% 0.44% 0.54% 0.44% 0.54%
Net charge-offs / total average loans0.13% 0.07% 0.24% 0.08% 0.15%
Provision / total average loans0.13% 0.11% 0.18% 0.13% 0.15%
          
Total PCI loans, net of fair value mark$94,746  $101,524  $51,041  $94,746  $51,041 
Remaining fair value mark on purchased performing loans33,428  36,207  14,602  33,428  14,602 
          
Nonperforming Assets         
Construction and land development$9,221  $6,485  $5,671  $9,221  $5,671 
Commercial real estate - owner occupied3,202  2,845  2,205  3,202  2,205 
Commercial real estate - non-owner occupied1,812  3,068  2,701  1,812  2,701 
Commercial & Industrial1,404  1,387  1,252  1,404  1,252 
Residential 1-4 Family10,491  9,550  6,163  10,491  6,163 
Auto525  463  174  525  174 
HELOC1,273  1,669  1,791  1,273  1,791 
Consumer and all other182  195  165  182  165 
Nonaccrual loans$28,110  $25,662  $20,122  $28,110  $20,122 
Foreclosed property6,800  7,241  6,449  6,800  6,449 
Total nonperforming assets (NPAs)$34,910  $32,903  $26,571  $34,910  $26,571 
Construction and land development$442  $144  $54  $442  $54 
Commercial real estate - owner occupied3,586  2,512  679  3,586  679 
Commercial real estate - non-owner occupied    298    298 
Commercial & Industrial256  100  101  256  101 
Residential 1-4 Family2,921  2,801  2,360  2,921  2,360 
Auto211  121  143  211  143 
HELOC1,291  570  709  1,291  709 
Consumer and all other825  673  188  825  188 
Loans ≥ 90 days and still accruing$9,532  $6,921  $4,532  $9,532  $4,532 
Total NPAs and loans ≥ 90 days$44,442  $39,824  $31,103  $44,442  $31,103 
NPAs / total outstanding loans0.37% 0.35% 0.39% 0.37% 0.39%
NPAs / total assets0.26% 0.25% 0.29% 0.26% 0.29%
ALL / nonaccrual loans146.90% 160.82% 184.68% 146.90% 184.68%
ALL / nonperforming assets118.29% 125.43% 139.86% 118.29% 139.86%
          
Past Due Detail         
Construction and land development$1,351  $648  $7,221  $1,351  $7,221 
Commercial real estate - owner occupied4,218  3,775  1,707  4,218  1,707 
Commercial real estate - non-owner occupied492  44  909  492  909 
Multifamily real estate553  86    553   
Commercial & Industrial2,239  1,921  1,558  2,239  1,558 
Residential 1-4 Family7,041  7,142  5,633  7,041  5,633 
Auto2,414  2,187  2,415  2,414  2,415 
HELOC4,783  2,505  1,400  4,783  1,400 
Consumer and all other2,640  2,722  3,469  2,640  3,469 
Loans 30-59 days past due$25,731  $21,030  $24,312  $25,731  $24,312 
                    


    
 As of & For Three Months Ended As of & For Nine Months Ended
 9/30/18 6/30/18 9/30/17 9/30/18 9/30/17
Past Due Detail cont'd(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
Construction and land development$1,826  $292  $54  $1,826  $54 
Commercial real estate - owner occupied539  1,819  679  539  679 
Commercial real estate - non-owner occupied    298    298 
Commercial & Industrial428  1,567  101  428  101 
Residential 1-4 Family5,685  3,742  2,360  5,685  2,360 
Auto299  419  143  299  143 
HELOC1,392  1,622  709  1,392  709 
Consumer and all other1,140  761  188  1,140  188 
Loans 60-89 days past due$11,309  $10,222  $4,532  $11,309  $4,532 
          
Troubled Debt Restructurings         
Performing$19,854  $15,696  $16,519  $19,854  $16,519 
Nonperforming8,425  4,001  2,725  8,425  2,725 
Total troubled debt restructurings$28,279  $19,697  $19,244  $28,279  $19,244 
          
Alternative Performance Measures (non-GAAP)         
Net interest income (FTE)         
Net interest income (GAAP)$105,963  $108,168  $70,847  $317,602  $205,918 
FTE adjustment2,014  2,008  2,999  5,860  8,683 
Net interest income (FTE) (non-GAAP) (1)$107,977  $110,176  $73,846  $323,462  $214,601 
Average earning assets11,383,320  11,661,189  8,167,919  11,506,200  7,922,944 
Net interest margin3.69% 3.72% 3.44% 3.69% 3.47%
Net interest margin (FTE) (1)3.76% 3.79% 3.59% 3.76% 3.62%
          
Tangible Assets         
Ending assets (GAAP)$13,371,742  $13,066,106  $9,029,436  $13,371,742  $9,029,436 
Less: Ending goodwill727,699  725,195  298,191  727,699  298,191 
Less: Ending amortizable intangibles51,563  51,211  16,017  51,563  16,017 
Ending tangible assets (non-GAAP)$12,592,480  $12,289,700  $8,715,228  $12,592,480  $8,715,228 
          
Tangible Common Equity (2)         
Ending equity (GAAP)$1,880,029  $1,864,870  $1,041,371  $1,880,029  $1,041,371 
Less: Ending goodwill727,699  725,195  298,191  727,699  298,191 
Less: Ending amortizable intangibles51,563  51,211  16,017  51,563  16,017 
Ending tangible common equity (non-GAAP)$1,100,767  $1,088,464  $727,163  $1,100,767  $727,163 
          
Average equity (GAAP)$1,880,582  $1,847,366  $1,037,792  $1,851,072  $1,024,853 
Less: Average goodwill723,785  726,934  298,191  724,940  298,191 
Less: Average amortizable intangibles53,267  50,546  16,681  51,829  18,184 
Average tangible common equity (non-GAAP)$1,103,530  $1,069,886  $722,920  $1,074,303  $708,478 
          
Operating Measures (3)         
Net income (GAAP)$38,197  $47,327  $20,658  $102,163  $57,737 
Plus: Merger-related costs, net of tax1,129  6,537  661  29,902  3,020 
Net operating earnings (non-GAAP)$39,326  $53,864  $21,319  $132,065  $60,757 
          
Noninterest expense (GAAP)$76,349  $85,140  $55,204  $263,234  $167,871 
Less: Merger-related costs1,429  8,273  732  37,414  3,476 
Operating noninterest expense (non-GAAP)$74,920  $76,867  $54,472  $225,820  $164,395 
          
Net interest income (FTE) (non-GAAP) (1)$107,977  $110,176  $73,846  $323,462  $214,601 
Noninterest income (GAAP)19,887  40,597  15,230  80,752  47,305 
          
Efficiency ratio60.67% 57.23% 64.13% 66.08% 66.29%
Efficiency ratio (FTE) (1)59.71% 56.47% 61.97% 65.12% 64.10%
Operating efficiency ratio (FTE)58.59% 50.98% 61.15% 55.87% 62.77%
               


    
 As of & For Three Months Ended As of & For Nine Months Ended
 9/30/18 6/30/18 9/30/17 9/30/18 9/30/17
Other Data(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
End of period full-time employees1,621  1,702  1,427  1,621  1,427 
Number of full-service branches140  147  111  140  111 
Number of full automatic transaction machines ("ATMs")190  199  173  190  173 

(1) These are non-GAAP financial measures. Net interest income (FTE), which is used in computing net interest margin (FTE) and efficiency ratio (FTE), provides valuable additional insight into the net interest margin and the efficiency ratio by adjusting for differences in tax treatment of interest income sources.  The entire FTE adjustment is attributable to interest income on earning assets, which is used in computing yield on earning assets.  Interest expense and the related cost of interest-bearing liabilities and cost of funds ratios are not affected by the FTE components.

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

(3) These are non-GAAP financial measures. Operating measures exclude merger-related costs unrelated to the Company’s normal operations. The Company believes these measures are useful to investors as they exclude certain costs resulting from acquisition activity and allow investors to more clearly see the combined economic results of the organization's operations.

(4) All ratios at September 30, 2018 are estimates and subject to change pending the Company’s filing of its FR Y9-C. All other periods are presented as filed.

   
UNION BANKSHARES CORPORATION AND SUBSIDIARIES  
CONSOLIDATED BALANCE SHEETS (UNAUDITED)  
(Dollars in thousands, except share data)     
 September 30, December 31, September 30,
 2018 2017 2017
ASSETS     
Cash and cash equivalents:     
Cash and due from banks$143,693  $117,586  $115,776 
Interest-bearing deposits in other banks130,098  81,291  60,294 
Federal funds sold8,421  496  891 
Total cash and cash equivalents282,212  199,373  176,961 
Securities available for sale, at fair value1,883,141  974,222  968,361 
Securities held to maturity, at carrying value235,333  199,639  204,801 
Marketable equity securities, at fair value27,375     
Restricted stock, at cost112,390  75,283  68,441 
Loans held for investment, net of deferred fees and costs9,411,598  7,141,552  6,898,729 
Less allowance for loan losses41,294  38,208  37,162 
Net loans held for investment9,370,304  7,103,344  6,861,567 
Premises and equipment, net155,001  119,604  120,380 
Goodwill727,699  298,528  298,191 
Amortizable intangibles, net51,563  14,803  16,017 
Bank owned life insurance261,874  182,854  181,451 
Other assets262,716  102,871  97,990 
Assets of discontinued operations2,134  44,658  35,276 
Total assets$13,371,742  $9,315,179  $9,029,436 
LIABILITIES     
Noninterest-bearing demand deposits$2,189,887  $1,502,208  $1,535,149 
Interest-bearing deposits7,644,808  5,489,510  5,346,677 
Total deposits9,834,695  6,991,718  6,881,826 
Securities sold under agreements to repurchase40,624  49,152  43,337 
Other short-term borrowings1,016,250  745,000  574,000 
Long-term borrowings497,768  425,262  434,750 
Other liabilities99,757  54,008  51,385 
Liabilities of discontinued operations2,619  3,710  2,767 
Total liabilities11,491,713  8,268,850  7,988,065 
Commitments and contingencies     
STOCKHOLDERS' EQUITY     
Common stock, $1.33 par value, shares authorized 100,000,000; issued and outstanding, 65,982,669 shares, 43,743,318 shares, and 43,729,229 shares, respectively.87,192  57,744  57,708 
Additional paid-in capital1,378,940  610,001  608,884 
Retained earnings438,513  379,468  373,468 
Accumulated other comprehensive income (loss)(24,616) (884) 1,311 
Total stockholders' equity1,880,029  1,046,329  1,041,371 
Total liabilities and stockholders' equity$13,371,742  $9,315,179  $9,029,436 
            


     
UNION BANKSHARES CORPORATION AND SUBSIDIARIES    
CONSOLIDATED STATEMENTS OF INCOME    
(Dollars in thousands, except share data)         
 Three Months Ended Nine Months Ended
 September 30, June 30, September 30, September 30, September 30,
 2018 2018 2017 2018 2017
Interest and dividend income:(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
Interest and fees on loans$115,817  $119,540  $75,597  $348,009  $215,797 
Interest on deposits in other banks492  676  181  1,815  367 
Interest and dividends on securities:         
Taxable10,145  8,012  5,175  25,229  15,081 
Nontaxable4,909  4,181  3,546  13,098  10,620 
Total interest and dividend income131,363  132,409  84,499  388,151  241,865 
Interest expense:         
Interest on deposits15,928  13,047  7,234  40,187  18,410 
Interest on short-term borrowings3,379  5,166  1,871  12,794  4,221 
Interest on long-term borrowings6,093  6,028  4,547  17,568  13,316 
Total interest expense25,400  24,241  13,652  70,549  35,947 
Net interest income105,963  108,168  70,847  317,602  205,918 
Provision for credit losses3,340  2,147  3,056  9,011  7,344 
Net interest income after provision for credit losses102,623  106,021  67,791  308,591  198,574 
Noninterest income:         
Service charges on deposit accounts6,483  6,189  4,795  18,566  13,924 
Other service charges and fees1,625  1,278  1,131  4,137  3,391 
Interchange fees, net4,882  4,792  3,756  14,163  11,205 
Fiduciary and asset management fees4,411  4,040  2,794  11,507  8,313 
Gains (losses) on securities transactions, net97  (88) 184  222  782 
Bank owned life insurance income1,732  1,728  1,377  5,126  4,837 
Loan-related interest rate swap fees562  898  416  2,178  2,627 
Gain on Shore Premier sale(933) 20,899    19,966   
Other operating income1,028  861  777  4,887  2,226 
Total noninterest income19,887  40,597  15,230  80,752  47,305 
Noninterest expenses:         
Salaries and benefits39,279  40,777  28,187  120,797  87,740 
Occupancy expenses6,551  6,159  4,678  18,778  13,783 
Furniture and equipment expenses2,983  3,103  2,454  9,024  7,518 
Printing, postage, and supplies1,183  1,282  1,139  3,525  3,664 
Communications expense872  1,009  796  2,976  2,567 
Technology and data processing4,841  4,322  4,148  13,722  11,793 
Professional services2,875  2,671  1,948  8,101  5,611 
Marketing and advertising expense3,109  3,288  1,931  7,834  5,933 
FDIC assessment premiums and other insurance1,363  1,882  1,141  5,430  2,793 
Other taxes2,878  2,895  2,022  8,660  6,065 
Loan-related expenses1,939  1,843  1,193  5,097  3,484 
OREO and credit-related expenses452  1,122  1,139  3,106  2,023 
Amortization of intangible assets3,490  3,215  1,480  9,885  4,661 
Training and other personnel costs1,024  1,125  861  3,155  2,829 
Merger-related costs1,429  8,273  732  37,414  3,476 
Other expenses2,081  2,174  1,355  5,730  3,931 
Total noninterest expenses76,349  85,140  55,204  263,234  167,871 
Income from continuing operations before income taxes46,161  61,478  27,817  126,109  78,008 
Income tax expense7,399  11,678  7,397  20,973  20,924 
Income from continuing operations$38,762  $49,800  $20,420  $105,136  $57,084 
                    


     
UNION BANKSHARES CORPORATION AND SUBSIDIARIES    
CONSOLIDATED STATEMENTS OF INCOME (continued)    
(Dollars in thousands, except share data)         
 Three Months Ended Nine Months Ended
 September 30, June 30, September 30, September 30, September 30,
 2018 2018 2017 2018 2017
Discontinued operations:(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
Income (loss) from operations of discontinued mortgage segment$(761) $(3,085) $371  $(3,768) 1,021 
Income tax expense (benefit)(196) (612) 133  (795) 368 
Income (loss) on discontinued operations(565) (2,473) 238  (2,973) 653 
Net income$38,197  $47,327  $20,658  $102,163  $57,737 
Basic earnings per common share$0.58  $0.72  $0.47  $1.55  $1.32 
Diluted earnings per common share$0.58  $0.72  $0.47  $1.55  $1.32 
                    


 
AVERAGE BALANCES, INCOME AND EXPENSES, YIELDS AND RATES (TAXABLE EQUIVALENT BASIS)
 For the Quarter Ended
 September 30, 2018 June 30, 2018
 Average
Balance
 Interest
Income /
Expense (1)
 Yield /
Rate (1)(2)
 Average
Balance
 Interest
Income /
Expense (1)
 Yield /
Rate (1)(2)
    
Assets:(unaudited) (unaudited)
Securities:           
Taxable$1,333,960  $10,145 3.02% $1,077,656  $8,012 2.98%
Tax-exempt632,050  6,214 3.90% 547,617  5,293 3.88%
Total securities1,966,010  16,359 3.30% 1,625,273  13,305 3.28%
Loans, net (3) (4)9,297,213  116,266 4.96% 9,809,083  120,039 4.91%
Other earning assets120,097  752 2.49% 226,833  1,073 1.90%
Total earning assets11,383,320  $133,377 4.65% 11,661,189  $134,417 4.62%
Allowance for loan losses(41,799)     (41,645)    
Total non-earning assets1,605,831      1,598,683     
Total assets$12,947,352      $13,218,227     
            
Liabilities and Stockholders' Equity:           
Interest-bearing deposits:           
Transaction and money market accounts$4,915,070  $8,789 0.71% $4,836,642  $6,790 0.56%
Regular savings640,954  209 0.13% 649,897  217 0.13%
Time deposits (5)2,079,686  6,930 1.32% 2,063,414  6,040 1.17%
Total interest-bearing deposits7,635,710  15,928 0.83% 7,549,953  13,047 0.69%
Other borrowings (6)1,155,093  9,472 3.25% 1,617,322  11,194 2.78%
Total interest-bearing liabilities8,790,803  25,400 1.15% 9,167,275  24,241 1.06%
            
Noninterest-bearing liabilities:           
Demand deposits2,167,765      2,095,233     
Other liabilities108,202      108,353     
Total liabilities11,066,770      11,370,861     
Stockholders' equity1,880,582      1,847,366     
Total liabilities and stockholders' equity$12,947,352      $13,218,227     
            
Net interest income  $107,977     $110,176  
            
Interest rate spread    3.50%     3.56%
Cost of funds    0.89%     0.83%
Net interest margin    3.76%     3.79%
            
(1) Income and yields are reported on a taxable equivalent basis using the statutory federal corporate tax rate of 21%.
(2) Rates and yields are annualized and calculated from actual, not rounded amounts in thousands, which appear above.
(3) Nonaccrual loans are included in average loans outstanding.
(4) Interest income on loans includes $3.5 million and $5.3 million for the three months ended September 30, 2018 and June 30, 2018, respectively, in accretion of the fair market value adjustments related to acquisitions.
(5) Interest expense on time deposits includes $592,000 and $685,000 for the three months ended September 30, 2018 and June 30, 2018, respectively, in accretion of the fair market value adjustments related to acquisitions.
(6) Interest expense on borrowings includes $143,000 and $104,000 for the three months ended September 30, 2018 and June 30, 2018, respectively, in amortization of the fair market value adjustments related to acquisitions.
 

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

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