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

May 10, 2010 | About:
10qk

10qk

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Union Bankshares Corp. (UBSH) filed Quarterly Report for the period ended 2010-03-31.

Union Bankshares Corp. has a market cap of $389.19 million; its shares were traded at around $15.01 with a P/E ratio of 68.23 and P/S ratio of 2.41. The dividend yield of Union Bankshares Corp. stocks is 1.6%. Union Bankshares Corp. had an annual average earning growth of 1.7% over the past 10 years.

Highlight of Business Operations:

The transaction has been 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 $1.7 million for the quarter ended March 31, 2010, down slightly from the same quarter a year ago. The slight decline in net income of $54 thousand is principally a result of $6.9 million in nonrecurring costs associated with the acquisition of First Market Bank, partially offset by the earnings contribution from First Market Bank, strong net interest income and increases in mortgage segment revenue. Net income available to common shareholders, which deducts from net income the dividends and discount accretion on preferred stock, was $1.3 million for the current quarter compared to $892 thousand for the same quarter last year. This represented a decrease in earnings per share, on a diluted basis, of $0.01, to $0.06 from $0.07.

On a linked quarter basis, tax-equivalent net interest income increased $11.6 million, or 49.2%, to $35.1 million due principally to increased interest-earning asset volumes related to the acquisition of First Market Bank, the accretion of fair value adjustments from acquisition accounting and declines in costs of interest-bearing liabilities. The tax-equivalent net interest margin increased 62 basis points to 4.59% from 3.97% in the prior quarter. The net interest margin increase was principally attributable to the accretion of fair value market adjustments of acquired loans and deposits and decreases in the cost of interest-bearing liabilities. Average interest-earning assets and related interest income increased $754.9 million and $10.5 million, respectively. Average interest-bearing liabilities increased $683.1 million with related interest expense declining $1.0 million. Costs of interest-bearing liabilities declined 66 basis points to 1.42% while yields on interest-earning assets increased 9 basis points to 5.78%. Improvements in the cost of funds were principally a result of accretion of fair value adjustments from acquisition accounting, declining costs on certificates of deposit (higher rate certificates of deposit matured and repriced at lower rates) and lower costs related to FHLB borrowings.

For the three months ended March 31, 2010, net interest income, on a tax-equivalent basis, increased $16.5 million, or 88.4%, to $35.1 million compared to the same period last year. This increase was principally attributable to increased interest-earning asset volumes related to the acquisition of First Market Bank as well as declines in costs of interest-bearing liabilities and lower deposit costs and lower wholesale funding volumes. The tax-equivalent net interest margin increased 137 basis points to 4.59% from 3.22% in the prior year. Average interest-earning assets and related interest income increased $761.4 million and $12.0 million, respectively. Average interest-bearing liabilities increased $621.8 million with related interest expense declining $4.5 million. Costs of interest-bearing liabilities declined 135 basis points to 1.42% while yields on interest-earning assets increased 19 basis points to 5.78%. Improvements in the cost of funds were principally a result of fair value adjustments from acquisition accounting, declining costs on certificates of deposit (higher rate certificates of deposit matured and repriced at lower rates) and lower costs related to FHLB borrowings.

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. Total 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.

The acquired loan and investment security portfolios of First Market Bank were marked-to-market with a fair value discount to market rates. The performing loan and investment security accretion of the discount was $1.4 million and $92 thousand, respectively, for the quarter ended March 31, 2010. The accretion is recognized into 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. The estimated fair value of these liabilities was also marked-to-market on acquisition date. FHLB borrowings were purchased at a premium to market rates and $408 thousand was recorded as a reduction in interest expense since the acquisition. Subordinated debt was purchased at a discount to market rates and $82 thousand recorded as an increase to interest expense since the acquisition. Certificates of deposit were purchased at a premium to market rates and $901 thousand recorded as a reduction in interest expense since the acquisition. The related discount (or premium) to market is recorded as an increase (or decrease) to interest expense over the estimated lives of the liabilities.

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