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Union Bankshares Corp. Reports Operating Results (10-Q)

August 09, 2010 | About:
10qk

10qk

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Union Bankshares Corp. (UBSH) filed Quarterly Report for the period ended 2010-06-30.

Union Bankshares Corp. has a market cap of $350.79 million; its shares were traded at around $13.53 with a P/E ratio of 25.53 and P/S ratio of 2.17. The dividend yield of Union Bankshares Corp. stocks is 1.77%. Union Bankshares Corp. had an annual average earning growth of 1.7% over the past 10 years.UBSH is in the portfolios of Tom Gayner of Markel Gayner Asset Management Corp.

Highlight of Business Operations:

The transaction was accounted for using the acquisition method of accounting and, accordingly, assets acquired, liabilities assumed and consideration exchanged were recorded at estimated fair values on the acquisition date. Assets acquired totaled $1.4 billion, including $981.5 million in net loans and $218.7 million in investment securities. Liabilities assumed were $1.3 billion, including $1.2 billion of deposits. In connection with the acquisition, the Company recorded $1.1 million of goodwill and $26.4 million of core deposit intangible. The core deposit intangible is being amortized over an average of 4.3 years using an accelerated method. In addition, the Company recorded $1.2 million related to a trademark intangible. This is being amortized over a three year time period.

The Company reported net income of $8.7 million for the quarter ended June 30, 2010, an increase of $7.8 million from the same quarter a year ago. The increase in net income largely relates to improvements in the net interest margin and the provision for loan losses, as well as the addition of the operations of the former First Market Bank. The results for the quarter and six months ended June 30, 2010 include the operations of the former First Market Bank for three and five months, respectively since the combination on February 1, 2010. Net income available to common shareholders, which deducts from net income the dividends and discount accretion on preferred stock, was $8.2 million for the current quarter compared to $91 thousand for the same quarter last year. This represented an increase in earnings per share, on a diluted basis, of $0.31, to $0.32 from $0.01.

For the three months ended June 30, 2010, tax-equivalent net interest income increased $20.9 million, or 106.6%, to $40.6 million compared to the same period last year. This improvement was principally attributable to declines in costs of interest-bearing liabilities, as well as increased interest-earning assets related to the acquisition of FMB. The tax-equivalent net interest margin increased 135 basis points to 4.65% from 3.30% in the prior year. Average interest-earning assets and related interest income increased $1.1 billion and $17.4 million, respectively. Average interest-bearing liabilities increased $891.1 million with related interest expense declining $3.5 million. Costs of interest-bearing liabilities declined 129 basis points to 1.34% while yields on interest-earning assets increased 24 basis points to 5.77%. Improvements in

For the six months ended June 30, 2010, tax-equivalent net interest income increased $37.4 million, or 97.7%, to $75.7 million compared to the same period last year. This improvement was principally attributable to declines in costs of interest-bearing liabilities as well as increased interest-earning assets related to the acquisition of FMB. The tax-equivalent net interest margin increased 134 basis points to 4.60% from 3.26% in the prior year. Average interest-earning assets and related interest income increased $937.6 million and $29.4 million, respectively. Average interest-bearing liabilities increased $757.1 million with related interest expense declining $8.0 million. Costs of interest-bearing liabilities declined 133 basis points to 1.37% while yields on interest-earning assets increased 19 basis points to 5.75%. The improvement in the cost of funds was principally a result of declining costs on certificates of deposit and money market accounts, fair value adjustments from acquisition accounting and lower costs related to FHLB borrowings.

The acquired loan and investment security portfolios of FMB were marked-to-market with a fair value discount to market rates. The performing loan and investment security accretion of the discount was $2.1 million and $139.2 thousand, respectively, for the quarter ended June 30, 2010 and $3.5 million and $232 thousand, respectively, since acquisition. The accretion is recognized as interest income over the estimated remaining life of the loans and investment securities under an accelerated method. The Company also assumed FHLB borrowings, subordinated debt and certificates of deposit. These liabilities were marked-to-market with estimates of fair value on acquisition date. FHLB borrowings were purchased at a premium to market rates and interest expense was reduced by $503.1 thousand and $911.5 thousand for the quarter ended June 30, 2010 and since acquisition, respectively. Subordinated debt was purchased at a discount to market rates and interest expense was increased by $122.3 thousand and $203.8 thousand for the quarter ended June 30, 2010 and since the acquisition, respectively. Certificates of deposit were purchased at a premium to market rates and interest expense was reduced by $1.0 million and $1.9 million for the quarter ended June 30, 2010 and since the acquisition, respectively. The related discount (or premium) to market is recorded as an increase (or decrease) to interest expense over the estimated lives of the liabilities.

Total net loans and investment securities acquired in the First Market Bank transaction were recorded at their estimated fair values of $981.5 million and $218.7 million, respectively. The fair value of noninterest and interest-bearing liabilities assumed were $171.1 million and $1.0 billion, respectively. Borrowings assumed were $75.8 million, of which $61.4 million and $14.4 million consisted of FHLB advances and subordinated debt, respectively. Following the acquisition of First Market Bank, the Company reduced wholesale funding by approximately $159.0 million through the sale of $103.0 million in acquired investment securities and excess cash balances.

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