RICHMOND, Va., April 24, 2019 (GLOBE NEWSWIRE) -- Union Bankshares Corporation (Nasdaq: UBSH) today reported net income of $35.6 million and earnings per share of $0.47 for its first quarter ended March 31, 2019. Net operating earnings⁽¹⁾ were $50.2 million and operating earnings per share⁽¹⁾ were $0.66 for its first quarter ended March 31, 2019; these operating results exclude $14.6 million in after-tax merger-related costs but include after tax losses from discontinued operations of $85,000 and approximately $322,000 in after-tax expenses related to the Company's previously announced re-branding to be effective in May 2019.

The Company's results for the first quarter of 2019 include two months of financial results of Access National Corporation ("Access"), which the Company acquired on February 1, 2019.

“Union delivered solid financial results in the first quarter of 2019, while continuing our transformation to become the preeminent mid-Atlantic regional bank,” said John C. Asbury, President and CEO of Union Bankshares Corporation. “During the quarter, we achieved year over year improvements in our operating profitability metrics and delivered strong deposit growth while loan growth was muted by seasonality and elevated commercial real estate pay downs. It was an eventful quarter as we closed the acquisition of Access National Corporation, substantially completing the Virginia jigsaw puzzle by adding a strong franchise in Northern Virginia, and announced that we will rebrand to Atlantic Union Bank, concurrent with the Access systems conversion in mid-May. We are pleased with the first quarter’s financial results and are off to a good start in 2019.”

Select highlights for the first quarter of 2019

• Performance metrics
  • Return on Average Assets (“ROA”) was 0.92% compared to 1.29% in the fourth quarter of 2018 and 0.52% in the first quarter of 2018. Operating ROA⁽¹⁾ was 1.30% compared to 1.36% in the fourth quarter of 2018 and 1.21% in the first quarter of 2018.
  • Return on Average Equity (“ROE”) was 6.37% compared to 9.21% in the fourth quarter of 2018 and 3.70% in the first quarter of 2018. Operating ROE⁽¹⁾ was 8.97% compared to 9.66% in the fourth quarter of 2018 and 8.64% in the first quarter of 2018.
  • Return on Average Tangible Common Equity (“ROTCE”)⁽¹⁾ was 11.84% compared to 16.42% in the fourth quarter of 2018 and 7.41% in the first quarter of 2018. Operating ROTCE⁽¹⁾ was 16.27% compared to 17.18% in the fourth quarter of 2018 and 16.00% in the first quarter of 2018.
  • Efficiency ratio increased to 69.99% compared to 56.22% in the fourth quarter of 2018 and decreased from 82.22% in the first quarter of 2018. Operating efficiency ratio (FTE)⁽¹⁾ increased to 54.36% compared to 51.34% in the fourth quarter of 2018 and decreased from 56.42% in the first quarter of 2018.
• On February 1, 2019, the Company announced that it will re-brand to Atlantic Union Bankshares Corporation (subject to shareholder approval) in May 2019. During the current quarter, in preparation for the re-branding, the Company incurred $407,000 in re-branding costs.

⁽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 first quarter of 2019, net interest income was $127.5 million, an increase of $18.5 million from the fourth quarter of 2018. Net interest income (FTE)⁽¹⁾ was $130.3 million in the first quarter of 2019, an increase of $18.9 million from the fourth quarter of 2018. The increases in both net interest income and net interest income (FTE) were primarily the result of a $1.9 billion increase in average interest earning assets and a $1.4 billion increase in average interest bearing liabilities from the acquisition of Access. The first quarter net interest margin increased 10 basis points to 3.72% from 3.62% in the previous quarter, while the net interest margin (FTE)⁽¹⁾ increased 10 basis points to 3.80% from 3.70% during the same periods. The increase in the net interest margin and net interest margin (FTE) were principally due to an approximately 18 basis point increase in the yield on earnings assets, partially offset by an approximately 8 basis point increase in the cost of funds.

The Company’s net interest margin (FTE) includes the impact of acquisition accounting fair value adjustments. During the first quarter of 2019, net accretion related to acquisition accounting increased $2.0 million from the prior quarter to $5.8 million for the quarter ended March 31, 2019. The fourth quarter of 2018, first quarter of 2019, and the remaining estimated net accretion impact are reflected in the following table (dollars in thousands):

⁽¹⁾ For the reconciliation of these non-GAAP financial measures, see Alternative Performance Measures (non-GAAP) section of Key Financial Results.

ASSET QUALITY/LOAN LOSS PROVISION

Overview
During the first quarter of 2019, the Company experienced decreases in nonperforming asset (“NPA”) balances from the prior quarter, primarily due to nonaccrual customer payments and charge-offs. The nonaccrual charge-offs related to two credit relationships composed of commercial & industrial as well as construction and land development loans. Past due loan levels as a percentage of total loans held for investment at March 31, 2019 were lower than past due loan levels at December 31, 2018 and higher than past due levels at March 31, 2018. Charge-off levels and the provision for loan losses decreased from the fourth quarter of 2018.

All nonaccrual and past due loan metrics discussed below exclude purchased credit impaired (“PCI”) loans totaling $99.9 million (net of fair value mark of $23.1 million) at March 31, 2019.

Nonperforming Assets
At March 31, 2019, NPAs totaled $32.2 million, a decline of $1.5 million, or 4.4%, from December 31, 2018 and a decrease of $1.0 million, or 3.1%, from March 31, 2018. NPAs as a percentage of total outstanding loans at March 31, 2019 were 0.27%, a decrease of 8 basis points from 0.35% at December 31, 2018 and a decline of 7 basis points from 0.34% at March 31, 2018. 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.

Past Due Loans
Past due loans still accruing interest totaled $51.4 million, or 0.43% of total loans, at March 31, 2019 compared to $61.9 million, or 0.64% of total loans, at December 31, 2018 and $41.6 million, or 0.42% of total loans, at March 31, 2018. Of the total past due loans still accruing interest, $11.0 million, or 0.09% of total loans, were loans past due 90 days or more at March 31, 2019, compared to $8.9 million, or 0.09% of total loans, at December 31, 2018 and $2.6 million, or 0.03% of total loans, at March 31, 2018.

Net Charge-offs
For the first quarter of 2019, net charge-offs were $4.2 million, or 0.15% of total average loans on an annualized basis, compared to $5.0 million, or 0.21%, for the prior quarter and $1.1 million, or 0.05%, for the first quarter of 2018. The majority of net charge-offs in the first quarter of 2019 were related to consumer loans.

Provision for Loan Losses
The provision for loan losses for the first quarter of 2019 was $4.0 million, a decrease of $775,000 compared to the previous quarter and an increase of $501,000 compared to first quarter of 2018. The decrease in the provision for loan losses from the previous quarter was primarily due to lower net charge offs and lower loan growth.

Allowance for Loan Losses (“ALL”)
The ALL decreased $218,000 from December 31, 2018 to $40.8 million at March 31, 2019 primarily due to a decrease in historical loss rates. The ALL as a percentage of the total loan portfolio was 0.34% at March 31, 2019, 0.42% at December 31, 2018, and 0.41% at March 31, 2018. The decline in the allowance ratio was primarily attributable to the acquisition of Access. In acquisition accounting, there is no carryover of previously established allowance for loan losses.

The ratio of the ALL to nonaccrual loans was 164.4% at March 31, 2019, compared to 152.3% at December 31, 2018 and 161.6% at March 31, 2018. 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 increased $1.4 million to $24.9 million for the quarter ended March 31, 2019 from $23.5 million in the prior quarter. The increase in noninterest income was primarily driven by the acquisition of Access on February 1, 2019, partially offset by a decline in other operating income of $1.4 million primarily due to life insurance proceeds of approximately $976,000 recognized in the fourth quarter of 2018.

NONINTEREST EXPENSE

Noninterest expense increased $32.2 million to $106.7 million for the quarter ended March 31, 2019 from $74.5 million in the prior quarter. Excluding merger-related costs and amortization of intangible assets, operating noninterest expense⁽¹⁾increased $15.1 million, or 21.8%, in the first quarter of 2019, to $84.4 million when compared to the fourth quarter of 2018. The increase in operating noninterest expense was primarily due to the acquisition of Access on February 1, 2019. The Company also incurred $407,000 of re-branding costs in the first quarter of 2019.

⁽¹⁾ For a reconciliation of this non-GAAP financial measure, see Alternative Performance Measures (non-GAAP) section of the Key Financial Results.

INCOME TAXES

The effective tax rate for the quarter ended March 31, 2019 was 14.9% compared to 16.5% for the quarter ended December 31, 2018 and 10.3% for the quarter ended March 31, 2018. The decrease in the effective tax rate as compared to the previous quarter was primarily due to an increase in merger-related expenses related to the acquisition of Access. The increase from the prior year was primarily due to lower tax benefits related to stock based compensation.

BALANCE SHEET

At March 31, 2019, total assets were $16.9 billion, an increase of $3.1 billion from December 31, 2018, and an increase of $3.7 billion from March 31, 2018, reflecting the impact of the Access acquisition.

On February 1, 2019 the Company completed its acquisition of Access. Below is a summary of the transaction and related impact on the Company's balance sheet.

• The fair value of assets acquired equaled to $2.858 billion, and the fair value of the liabilities assumed equaled $2.559 billion
• Total loans acquired totaled $2.217 billion with a fair value of $2.176 billion
• Total deposits assumed totaled $2.228 billion with a fair value of $2.227 billion
• Total goodwill arising from the transaction equaled $200.6 million
• Core deposit intangibles acquired totaled $40.9 million

Fair values are preliminary and subject to refinement for up to one year after the closing date of the acquisition, in accordance with ASC 805, Business Combinations.

At March 31, 2019, loans held for investment (net of deferred fees and costs) were $12.0 billion, an increase of $2.2 billion from December 31, 2018, while average loans increased $1.6 billion, or 65.7% (annualized), from the prior quarter. The increase in loans held for investment was primarily a result of the Access acquisition.

At March 31, 2019, total deposits were $12.5 billion, an increase of $2.5 billion from December 31, 2018, while average deposits increased $1.5 billion, or 61.0% (annualized), from the prior quarter. The increase in deposits from the prior quarter was primarily a result of the Access acquisition.

ABOUT UNION BANKSHARES CORPORATION

Headquartered in Richmond, Virginia, Union Bankshares Corporation (Nasdaq: UBSH) is the holding company for Union Bank & Trust. Union Bank & Trust has 155 branches, 15 of which are operated as Access National Bank, a division of Union Bank & Trust of Richmond, Virginia, or Middleburg Bank, a division of Union Bank & Trust of Richmond, Virginia, and seven of which are operated as Xenith Bank, a division of Union Bank & Trust of Richmond, Virginia, and approximately 200 ATMs located throughout Virginia, and in portions of Maryland and North Carolina. Certain non-bank affiliates of the Company include: Old Dominion Capital Management, Inc., and its subsidiary Outfitter Advisors, Ltd., Dixon, Hubard, Feinour, & Brown, Inc., Capital Fiduciary Advisors, LLC, and Middleburg Investment Services, LLC, all of which provide investment advisory and/or brokerage services; Union Insurance Group, LLC, which offers various lines of insurance products; and Middleburg Trust Company, which provides trust services.