XBKS Xenith Bankshares, Inc.

Xenith Bankshares, Inc. (Nasdaq:XBKS), parent company of Xenith Bank, announced financial results for the three and nine months ended September 30, 2017.

The company reported net income of $7.158 million, or $0.30 per diluted share, for the third quarter of 2017. Results for the third quarter of 2017 included costs of $0.930 million ($0.031 per diluted share) incurred in connection with the previously-announced proposed merger with Union Bankshares Corporation (Union). The company reported $19.088 million of net income, or $0.81 per diluted share, for the nine months ended September 30, 2017. Results for the nine months ended September 30, 2017 included merger-related costs of $2.895 million ($0.081 per diluted share).

Results for the three- and nine-month periods ended September 30, 2016 include the operations of the company since the date of the merger with legacy Xenith Bankshares, Inc. (legacy Xenith), which was effective on July 29, 2016, and thus are not comparable to the same periods in 2017. The company exited the mortgage banking business beginning in the fourth quarter of 2016, and as such, the results of the mortgage banking business are reported as discontinued operations. The following discussion relates to continuing operations only.

T. Gaylon Layfield, III, Chief Executive Officer, commented:  “The third quarter continued to demonstrate the benefits of the merger with legacy Xenith, as the company reported a record pre-tax income for the period. Organic loan growth accelerated nicely, as we had expected, with an increase in overall loan yield. Our efficiency ratio, excluding merger-related costs, continued its decline and credit metrics continued their improving trend, now comparing favorably with peer metrics. At the same time, we have made progress on merger integration planning in anticipation of the closing of our merger with Union, which we currently expect to be completed during early January 2018. As previously announced, we have received the necessary regulatory approvals for the merger. As we have communicated with our constituencies, I sense a real enthusiasm that exists for the creation of the only true regional bank headquartered in the Commonwealth of Virginia with a statewide franchise operating in some of the strongest and most diversified economies in the United States.”

Third Quarter and Year-to-Date 2017 Highlights

• Income before income tax from continuing operations was $10.618 million for the three months ended September 30, 2017 compared to $9.092 million for the three months ended June 30, 2017. Income before income tax from continuing operations for the periods ended September 30, 2017 and June 30, 2017 included $0.930 million and $1.715 million, respectively, of merger-related costs.
• Income before income tax from continuing operations for the nine months ended September 30, 2017 was $28.153 million, which included $2.895 million of merger-related costs.
• Net interest income was $25.225 million for the three months ended September 30, 2017 compared to $24.710 million for the three months ended June 30, 2017. Accretion of acquired loan discounts for the three months ended September 30, 2017 and June 30, 2017 was $0.594 million and $1.021 million, respectively.
• The company’s efficiency ratio for the third quarter of 2017 was 64% (61%1 excluding merger-related costs) and 68% (62%1 excluding merger-related costs) for the second quarter of 2017.
• Gross loans were $2.444 billion at September 30, 2017 compared to $2.371 billion at June 30, 2017, an increase of $72.943 million. Excluding guaranteed student loans and the decline in loans held through mortgage origination participation arrangements, gross loans grew $83.944 million to September 30, 2017 from June 30, 2017. Gross loans as of September 30, 2017 decreased $20.519 million from December 31, 2016, and excluding guaranteed student loans and a decline in loans held through mortgage origination participation arrangements gross loans increased $70.963 million to September 30, 2017 from December 31, 2016.
• Average interest-earning assets for the nine months ended September 30, 2017 were $2.865 billion. Total assets were $3.256 billion at September 30, 2017 compared to $3.267 billion at December 31, 2016.
• Average interest-bearing liabilities for the nine months ended September 30, 2017 were $2.198 billion. Total deposits were $2.605 billion at September 30, 2017 compared to $2.572 billion at December 31, 2016.
• Asset quality and coverage for loan losses at September 30, 2017 resulted in ratios of nonperforming assets to total assets of 0.79% and nonperforming loans to gross loans of 0.87%. As of September 30, 2017, the ratio of allowance for loan losses to nonaccrual loans ratio was 77%.
• Net charge-offs as a percentage of average loans were 0.24% for the nine months ended September 30, 2017.
• The company’s capital strength was reflected in ratios that were well above regulatory standards for "well-capitalized" bank holding companies, with a common equity Tier 1 capital ratio of 12.79%, a Tier 1 leverage ratio of 11.93%, a Tier 1 risk-based capital ratio of 12.90%, and a total risk-based capital ratio of 13.77% at September 30, 2017. Xenith Bank had a common equity Tier 1 capital ratio of 12.16%, a Tier 1 leverage ratio of 11.24%, a Tier 1 risk-based capital ratio of 12.16%, and a total risk-based capital ratio of 12.74% at September 30, 2017.

Operating Results

Third Quarter 2017 compared to Second Quarter 2017

Total interest income for the three months ended September 30, 2017 and June 30, 2017 was $30.412 million and $29.586 million, respectively. Average interest-earning assets were $2.862 billion for the third quarter of 2017 compared to $2.834 billion for the second quarter of 2017. Asset yields were 4.23% for the third quarter of 2017 compared to asset yields of 4.21% for the second quarter of 2017.

Total interest expense for the three months ended September 30, 2017 and June 30, 2017 were $5.187 million and $4.876 million, respectively, and the cost of interest-bearing liabilities for the third quarter and second quarter of 2017 were 0.95% and 0.90%, respectively.

Net interest margin was 3.51% for the third quarter of 2017 compared to 3.52% for the second quarter of 2017. Net interest margin excluding accretion of acquired loan discounts was 3.43% for the third quarter of 2017 compared to 3.37% for the second quarter of 2017.

Net interest income after provision for loan losses was $25.225 million for the three months ended September 30, 2017 compared to $24.710 million for the three months ended June 30, 2017. There was no provision for loan loss in the third or second quarters of 2017.

Total noninterest income was $4.172 million for the third quarter of 2017 compared to $3.820 million for the second quarter of 2017. Noninterest income for the third quarter of 2017 reflects $977 thousand of net realized gains from the sale of investment securities.

Total noninterest expense for the third quarter of 2017 was $18.779 million, which included $930 thousand in merger-related costs, compared to $19.438 million for the second quarter of 2017, which included $1.715 million in merger-related costs.

Net income from continuing operations was $7.165 million, or $0.30 per diluted share, for the third quarter of 2017 compared to net income from continuing operations of $6.252 million, or $0.27 per diluted share, for the second quarter of 2017. 

Balance Sheet

Gross loans totaled $2.424 billion as of September 30, 2017, which excluded $19.397 million of guaranteed student loans, which are reported as held for sale as of September 30, 2017, up $74.769 million from $2.349 billion, excluding $21.223 million of guaranteed student loans, as of June 30, 2017. Loans held through mortgage origination participation arrangements declined $9.176 million over this same period. Growth during this period was primarily driven by growth in the commercial real estate, commercial and industrial, and marine loan portfolios. Excluding guaranteed student loans and loans held through mortgage origination participation arrangements, gross loans increased $70.963 million to September 30, 2017 from December 31, 2016.

Securities available for sale were $305.768 million at September 30, 2017 compared to $317.443 million at December 31, 2016. Total securities as a percentage of the company’s total assets were 9.4% at September 30, 2017.

Total assets were $3.256 billion at September 30, 2017 compared to $3.267 billion at December 31, 2016. Total deposits were $2.605 billion at September 30, 2017 compared to $2.572 billion at December 31, 2016.

Asset and Credit Quality

At September 30, 2017, the ratio of nonperforming assets to total assets was 0.79% and the ratio of nonperforming loans to gross loans was 0.87%. The ratio of the company’s allowance for loan losses to nonaccrual loans was 77%. Net charge-offs as a percentage of average loans were 0.24% for the nine months ended September 30, 2017. The company’s allowance for loan losses as a percentage of gross loans was 0.67% at September 30, 2017. Allowance for loan losses plus remaining discounts (fair value adjustments) on acquired loans as a percentage of total loans was 0.90%1 as of September 30, 2017.

Capital and Shareholder Value Measures

The company’s capital strength was reflected in ratios that were well above regulatory standards for "well- capitalized" bank holding companies, with a common equity Tier 1 capital ratio of 12.79%, a Tier 1 leverage ratio of 11.93%, a Tier 1 risk-based capital ratio of 12.90%, and a total risk-based capital ratio of 13.77% at September 30, 2017. Xenith Bank had a common equity Tier 1 capital ratio of 12.16%, a Tier 1 leverage ratio of 11.24%, a Tier 1 risk-based capital ratio of 12.16%, and a total risk-based capital ratio of 12.74% at September 30, 2017.

Total shareholders' equity was $484.261 million at September 30, 2017 compared to $463.638 million at December 31, 2016. Tangible book value was $19.55 per share of common stock at September 30, 2017 compared to $18.72 at December 31, 2016. Return on average assets was 0.89% (0.96%1 excluding merger-related costs) for the third quarter of 2017 and 0.79% (0.93%1 excluding merger-related costs) for the second quarter of 2017. Return on average common equity was 5.86% (6.36%1 excluding merger-related costs) for the third quarter 2017, up from 5.28% (6.22%1 excluding merger-related costs) for the second quarter of 2017.

Layfield concluded: “I anticipate that this will be the company’s last earnings press release, assuming the closing of our merger with Union during early January 2018. With that in mind, I would like to take this opportunity to thank all of our shareholders who have joined us for this journey. It is your confidence and capital that have allowed us to traverse what I believe is a remarkable path. Legacy Xenith began as the 78th largest of approximately 110 banks headquartered in the Commonwealth. In seven years and following the strategic merger with legacy Hampton Roads Bankshares, the combined organization emerged as the 5th largest bank headquartered in the Commonwealth. Through the pending merger with Union Bankshares, our shareholders will own approximately one-third of the largest bank headquartered in Virginia. What a story.

"I would be terribly remiss if I did not also recognize and thank the folks responsible for the company successfully navigating this path, my colleagues at Xenith. From day one, this has been a team effort. Despite a challenging banking and economic environment for most of our existence, our teams from each of the organizations now comprising Xenith have simply performed in exemplary fashion. And I am deeply honored to have been a part of the journey.” 

Profile

Xenith Bankshares, Inc. (the “company” or “Xenith”) is the holding company for Xenith Bank, a full-service commercial bank headquartered in Richmond, Virginia. Xenith Bank specifically targets the banking needs of middle market and small businesses, local real estate developers and investors, and retail banking clients. The company also offers marine finance floorplan and end-user products through its Shore Premier Finance division. Xenith Bank’s regional area of operations spans from greater Baltimore, Maryland to Raleigh and eastern North Carolina, complementing its significant presence in Greater Washington, D.C., Greater Richmond, Virginia, Greater Hampton Roads, Virginia and on the Eastern Shore of Maryland and Virginia. Xenith Bank has 40 full-service branches and two loan production offices located across these areas with its headquarters centrally located in Richmond. The company’s common stock trades on The NASDAQ Stock Market under the symbol “XBKS.”

Additional information about the company and its subsidiaries can be found at www.xenithbank.com.

Additional Information and Where to Find It

In connection with the proposed merger, Union Bankshares Corporation (“Union”) filed with the Securities and Exchange Commission (the “SEC”) a registration statement on Form S-4 to register the shares of Union common stock to be issued to the shareholders of Xenith. The registration statement included a joint proxy statement of Union and Xenith and a prospectus of Union. A definitive joint proxy statement/prospectus was sent to the shareholders of Union and Xenith on September 21, 2017 seeking their approval of the merger and related matters. This release does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval. Before making any voting or investment decision, investors and shareholders of Union and Xenith are urged to read carefully the entire registration statement and joint proxy statement/prospectus, including any amendments thereto, because they will contain important information about the proposed transaction. Free copies of these documents may be obtained as described below.

Investors and shareholders of both companies are urged to read the registration statement on Form S-4 and the joint proxy statement/prospectus included within the registration statement and any other relevant documents to be filed with the SEC in connection with the merger because they contain important information about Union, Xenith and the proposed transaction. Investors and shareholders of both companies are urged to review carefully and consider all public filings by Union and Xenith with the SEC, including but not limited to their Annual Reports on Form 10-K, their proxy statements, their Quarterly Reports on Form 10-Q, and their Current Reports on Form 8-K. Investors and shareholders may obtain free copies of these documents through the website maintained by the SEC at www.sec.gov. Free copies of the joint proxy statement/prospectus and other documents filed with the SEC also may be obtained by directing a request by telephone or mail to Union Bankshares Corporation, 1051 East Cary Street, Suite 1200, Richmond, VA  23219, Attention:  Investor Relations (telephone: (804) 633-5031), or Xenith Bankshares, Inc., 901 E. Cary Street Richmond, Virginia, 23219, Attention: Thomas W. Osgood (telephone: (804) 433-2200), or by accessing Union’s website at www.bankatunion.com under “Investor Relations” or Xenith’s website at www.xenithbank.com under “Investor Relations” under “About Us.” The information on Union’s and Xenith’s websites is not, and shall not be deemed to be, a part of this release or incorporated into other filings either company makes with the SEC.

Union and Xenith and their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from the shareholders of Union and/or Xenith in connection with the merger. Information about the directors and executive officers of Union is set forth in the proxy statement for Union’s 2017 annual meeting of shareholders filed with the SEC on March 21, 2017. Information about the directors and executive officers of Xenith is set forth in Xenith’s Annual Report on Form 10-K, as amended, filed with the SEC on May 1, 2017. Additional information regarding the interests of these participants and other persons who may be deemed participants in the merger may be obtained by reading the joint proxy statement/prospectus regarding the merger when it becomes available. Free copies of these documents may be obtained as described above.

Caution About Forward-Looking Statements

All statements other than statements of historical facts contained in this press release are forward-looking statements. Forward-looking statements made in this press release reflect beliefs, assumptions and expectations of future events or results, taking into account the information currently available to Xenith. These beliefs, assumptions and expectations may change as a result of many possible events, circumstances or factors, not all of which are currently known to Xenith. If a change occurs, Xenith’s business, financial condition, liquidity, results of operations and prospects may vary materially from those expressed in, or implied by, the forward-looking statements. Accordingly, you should not place undue reliance on these forward-looking statements. Factors include among others: the possibility that any of the anticipated benefits of the merger with Union will not be realized or will not be realized within the expected time period, the businesses of Xenith and Union may not be integrated successfully or such integration may be more difficult, time-consuming or more costly than expected, the expected revenue synergies and cost savings from the merger may not be fully realized or realized within the expected timeframe, revenues following the merger may be lower than expected, customer and employee relationships and business operations may be disrupted by the merger, or obtaining required shareholder approvals, or completing the merger in the expected timeframe may be more difficult, time-consuming or costly than expected; changes in asset quality and credit risk; the inability to sustain revenue and earnings growth; changes in interest rates and capital markets; inflation; customer borrowing, repayment, investment and deposit practices; customer disintermediation; the introduction, withdrawal, success and timing of business initiatives; competitive conditions; the inability to realize cost savings or revenues or to implement integration plans and other consequences associated with mergers, acquisitions and divestitures; economic conditions; the inability to realize deferred tax assets within expected time frames or at all; and the impact, extent and timing of technological changes, capital management activities and other actions of the Federal Reserve Board and legislative and regulatory actions and reforms; and the risks discussed in Xenith’s public filings with the SEC, including those outlined under “Risk Factors” in Xenith’s Annual Report on Form 10-K for the year ended December 31, 2016. Except as required by applicable law or regulations, Xenith does not undertake, and specifically disclaims any obligation, to update or revise any forward-looking statement.

_______________________1 Please see the discussion of non-GAAP financial measures at the end of the financial tables.

Contact:

Thomas W. OsgoodExecutive Vice President, Chief Financial Officer, Chief Administrative Officer and Treasurer(804) 433-2209tosgood@xenithbank.com

Xenith Bankshares, Inc.
Consolidated Balance Sheets
(unaudited)
(in thousands, except share data)	September 30, 2017				December 31, 2016
Assets
Cash and due from banks	$	14,960			$	18,825
Interest-bearing deposits in other banks		13,398				4,797
Overnight funds sold and due from Federal Reserve Bank		136,795				103,372
Investment securities available for sale, at fair value		305,768				317,443
Restricted equity securities, at cost		22,044				24,313
Loans held for sale		19,397				—
Loans		2,424,140				2,464,056
Allowance for loan losses		(16,265	)			(21,940	)
Net loans		2,407,875				2,442,116
Premises and equipment, net		55,178				56,996
Interest receivable		8,673				8,806
Other real estate owned and repossessed assets,   net of valuation allowance		4,817				5,345
Goodwill		26,931				26,931
Core deposit intangible, net		3,393				3,787
Net deferred tax assets, net of valuation allowance		148,425				157,825
Bank-owned life insurance		73,431				72,104
Other assets		14,686				13,969
Assets of discontinued operations		—				10,563
Totals assets	$	3,255,771			$	3,267,192
Liabilities and Shareholders' Equity
Deposits:
Noninterest-bearing demand	$	541,275			$	501,678
Interest-bearing:
Demand and money market		1,187,551				1,113,453
Savings		95,053				86,739
Time deposits Less than $250		713,527				785,303
Time deposits $250 or more		67,984				84,797
Total deposits		2,605,390				2,571,970
Federal Home Loan Bank borrowings		105,000				172,000
Other borrowings		39,197				38,813
Interest payable		812				829
Other liabilities		20,439				19,093
Liabilities of discontinued operations		672				849
Total liabilities		2,771,510				2,803,554
Commitments and contingencies
Shareholders' equity:
Preferred stock, 1,000,000 shares authorized; none issued and   outstanding		—				—
Common stock, $0.01 par value; 1,000,000,000 shares   authorized; 23,215,318 and 23,123,518 shares issued   and outstanding on September 30, 2017 and December 31, 2016,   respectively		232				231
Capital surplus		711,376				710,916
Accumulated deficit		(226,251	)			(245,538	)
Accumulated other comprehensive income, net of tax		(1,096	)			(2,428	)
Total shareholders' equity before non-controlling interest		484,261				463,181
Non-controlling interest of discontinued operations		—				457
Total shareholders' equity		484,261				463,638
Total liabilities and shareholders' equity	$	3,255,771			$	3,267,192

 

Xenith Bankshares, Inc.
Consolidated Statements of Income
(unaudited)	Three Months Ended										Nine Months Ended
(in thousands)	September 30, 2017			September 30, 2016			June 30, 2017				September 30, 2017			September 30, 2016
Interest Income
Loans, including fees	$	28,168		$	25,513		$	27,150			$	82,676		$	58,797
Investment securities		1,986			1,763			2,196				6,251			4,476
Overnight funds sold and deposits in other banks		258			96			240				734			179
Total interest income		30,412			27,372			29,586				89,661			63,452
Interest Expense
Deposits:
Demand		1,822			1,391			1,676				5,082			3,075
Savings		63			40			61				180			81
Time deposits		2,265			2,169			2,307				6,890			5,746
Interest on deposits		4,150			3,600			4,044				12,152			8,902
Federal Home Loan Bank borrowings		299			109			123				594			109
Other borrowings		738			652			709				2,128			1,706
Total interest expense		5,187			4,361			4,876				14,874			10,717
Net interest income		25,225			23,011			24,710				74,787			52,735
Provision for loan losses		—			10,685			—				9			10,704
Net interest income after provision for loan losses		25,225			12,326			24,710				74,778			42,031
Noninterest Income
Service charges on deposit accounts		1,258			1,191			1,143				3,561			3,447
Earnings from bank-owned life insurance		426			395			425				1,327			1,046
Gain on sale of loans		—			—			19				38			—
Net gain on sale of investment securities available for sale		977			—			—				977			15
Visa check card income		806			709			840				2,399			2,056
Other		705			575			1,393				2,822			1,430
Total noninterest income		4,172			2,870			3,820				11,124			7,994
Noninterest Expense
Salaries and employee benefits		9,914			9,880			9,784				30,186			24,990
Professional and consultant fees		830			978			623				2,792			2,101
Occupancy		1,802			1,594			1,803				5,586			4,428
FDIC insurance		349			679			420				1,498			1,524
Data processing and technology		1,367			1,446			1,516				3,909			3,985
Problem loan and repossessed asset costs		(1	)		219			208				306			420
Impairments and (gains) and losses on sales of other realestate owned and repossessed assets, net		(48	)		685			42				63			41
Equipment		322			309			393				1,049			812
Board fees		350			493			115				596			1,133
Advertising and marketing		158			398			285				667			503
Merger-related		930			12,910			1,715				2,895			15,555
Other		2,806			2,944			2,534				8,202			6,925
Total noninterest expense		18,779			32,535			19,438				57,749			62,417
Income (loss) from continuing operations before provisionfor income taxes		10,618			(17,339	)		9,092				28,153			(12,392	)
Provision (benefit) for income taxes - continuing operations		3,453			(64,840	)		2,840				8,997			(62,794	)
Net income from continuing operations		7,165			47,501			6,252				19,156			50,402
Net (loss) income from discontinued operations beforeprovision for income taxes		(26	)		2,011			20				(262	)		3,900
(Benefit) provision for income taxes - discontinued operations		(5	)		842			(4	)			(65	)		877
Net (loss) income  from discontinued operations attributableto non-controlling interest		(14	)		806			8				(129	)		1,556
Net (loss) income from discontinued operations		(7	)		363			16				(68	)		1,467
Net income attributable to Xenith Bankshares, Inc.	$	7,158		$	47,864		$	6,268			$	19,088		$	51,869

 

CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
($ in thousands, except per share data)
PERFORMANCE MEASURES
	Quarter Ended												Year Ended
	September 30,			June 30,		March 31,		December 31,		September 30,			December 31,
		2017		2017		2017		2016		2016			2016
Net interest margin (1)		3.51	%	3.52	%	3.49	%	3.27	%	3.59	%		3.38	%
Return on average assets (2)		0.89	%	0.79	%	0.71	%	0.62	%	6.67	%		2.22	%
Return on average common equity (3)		5.86	%	5.28	%	4.90	%	4.42	%	51.42	%		15.98	%
Efficiency ratio (4)		64	%	68	%	70	%	68	%	126	%		92	%
Efficiency ratio, excluding merger-related costs (5)		61	%	62	%	69	%	63	%	76	%		73	%
Accretion of acquired loan discounts	$	594		1,021		1,015		1,411		1,509			2,920
Income (loss) from continuing operations before income taxes	$	10,618		9,092		8,443		8,177		(17,339	)		(4,214	)
Net income	$	7,158		6,268		5,663		5,173		47,864			57,042
Earnings per common share (basic)-continuing operations (6)	$	0.31		0.27		0.25		0.22		2.26			2.82
Earnings per common share (diluted)-continuing operations (6)	$	0.30		0.27		0.25		0.22		2.25			2.81
Earnings per common share (basic)-discontinued operations (6)	$	-		-		-		-		0.02			0.08
Earnings per common share (diluted)-discontinued operations (6)	$	-		-		-		-		0.02			0.08
Earnings per common share (basic) (6)	$	0.31		0.27		0.24		0.22		2.28			2.90
Earnings per common share (diluted) (6)	$	0.30		0.27		0.24		0.22		2.27			2.89
______________________________
(1) Net interest margin is net interest income (from continuing and discontinued operations) divided by average interest-earning assets. For the purposes of this calculation, tax-exempt interest income from tax-exempt municipal securities is computed on a taxable-equivalent yield basis.
(2) Return on average assets is net income for the respective period (annualized for quarter periods) divided by average assets for the respective period.
(3) Return on average common equity is net income for the respective period (annualized for quarter periods) divided by average common equity (excluding non-controlling interest) for the respective period.
(4) Efficiency ratio is noninterest expense divided by the sum of net interest income and noninterest income from continuing operations.
(5) Ratio is a non-GAAP financial measure calculated as noninterest expense less merger-related costs divided by the sum of net interest income and noninterest income. See discussion of non-GAAP financial measures below.
(6) The Company completed a 1-for10 reverse stock split on December 13, 2016.  Per share data for periods prior to the date of the reverse stock split have been adjusted and are presented on a comparative basis.
ASSET QUALITY MEASURES	Quarter Ended
	September 30,			June 30,		March 31,		December 31,		September 30,
		2017		2017		2017		2016		2016
Net charge-offs as a percentage of average loans (year to date)		0.24	%	0.21	%	0.15	%	0.65	%	0.01	%
Allowance for loan losses (ALL) as a percentage of loans (1)		0.67	%	0.72	%	0.78	%	0.89	%	1.37	%
ALL plus remaining discounts on acquired loans as a percentage of gross loans (2)		0.90	%	0.99	%	1.10	%	1.25	%	1.77	%
ALL to nonaccrual loans (1)		77.45	%	72.45	%	69.81	%	67.78	%	77.65	%
Nonperforming loans as a percentage of gross loans		0.87	%	0.99	%	1.11	%	1.31	%	1.76	%
Nonperforming assets as a percentage of total assets		0.79	%	0.90	%	0.98	%	1.15	%	1.50	%
Troubled debt restructurings	$	25,490		26,320		28,159		28,872		28,981
______________________________
(1) ALL excludes discounts (fair value adjustments) on acquired loans.
(2) Ratio is a non-GAAP financial measure calculated as the sum of ALL and discounts (fair value adjustments) on acquired loans divided by the sum of gross loans and discounts on loans. See discussion of non-GAAP financial measures below.
CAPITAL MEASURES	Quarter Ended
	September 30,			June 30,		March 31,		December 31,		September 30,
		2017		2017		2017		2016		2016
Common Equity Tier 1 capital ratio - Consolidated		12.79	%	13.04	%	12.76	%	12.15	%	12.14	%
Common Equity Tier 1 capital ratio - Bank only		12.16	%	12.19	%	11.93	%	11.25	%	11.20	%
Tier 1 risk-based capital ratio - Consolidated		12.90	%	13.14	%	12.86	%	12.15	%	12.14	%
Tier 1 risk-based capital ratio - Bank only		12.16	%	12.19	%	11.93	%	11.25	%	11.20	%
Total risk-based capital ratio - Consolidated		13.77	%	14.07	%	13.85	%	13.23	%	13.62	%
Total risk-based capital ratio - Bank only		12.74	%	12.82	%	12.61	%	12.03	%	12.39	%
Tier 1 leverage ratio - Consolidated		11.93	%	11.78	%	11.17	%	10.74	%	12.50	%
Tier 1 leverage ratio - Bank only		11.24	%	10.91	%	10.35	%	9.93	%	11.55	%
Book value per common share (1) (2)	$	20.86		20.65		20.32		20.05		20.15
Tangible book value per common share (2) (3)	$	19.55		19.34		19.00		18.72		18.84
______________________________
(1) Book value per common share is total shareholders' equity divided by common shares outstanding at the end of the respective period.
(2) The Company completed a 1-for10 reverse stock split on December 13, 2016.  Per share data for periods prior to the date of the reverse stock split have been adjusted and are presented on a comparative basis.
(3) Tangible book value per common share is total shareholders' equity less goodwill and intangible assets, net divided by common shares outstanding at the end of the respective period.
AVERAGE BALANCES	Quarter Ended												Year Ended
	September 30,			June 30,		March 31,		December 31,		September 30,			December 31,
		2017		2017		2017		2016		2016			2016
Total assets (1)	$	3,199,595		3,172,843		3,247,129		3,320,516		2,854,920			2,568,744
Interest-earning assets (1)	$	2,861,996		2,833,702		2,900,544		2,956,592		2,593,037			2,296,457
Interest-bearing liabilities (1)	$	2,168,894		2,163,472		2,262,635		2,311,586		2,031,105			1,806,835
Loans, net of allowance for loan losses (1)	$	2,395,898		2,359,409		2,398,848		2,418,825		2,117,627			1,891,345
Total deposits (1)	$	2,556,578		2,585,973		2,611,528		2,604,622		2,298,600			2,065,933
Shareholders' equity (1)	$	484,282		476,393		469,344		466,254		371,007			357,552
Common shares outstanding - diluted (2)		23,519,351		23,492,798		23,407,469		23,196,438		21,120,850			19,753,969
______________________________
(1) Average balances are computed on a daily basis.
(2) Common shares outstanding are computed on a weighted average and fully diluted basis.
END OF PERIOD BALANCES	Quarter Ended
	September 30,			June 30,		March 31,		December 31,		September 30,
		2017		2017		2017		2016		2016
Total assets	$	3,255,771		3,176,461		3,198,580		3,267,192		3,325,467
Loans, net of allowance for loan losses	$	2,407,875		2,353,567		2,338,533		2,442,116		2,437,302
Total deposits	$	2,605,390		2,639,189		2,619,643		2,571,970		2,586,608
Shareholders' equity	$	484,261		478,781		470,492		463,638		464,956
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
	Quarter Ended					Nine Months Ended
Earnings per common share effect of merger-related costs	September 30, 2017			June 30, 2017		September 30, 2017
Net income	$	7,158		6,268		19,088
Add: After-tax merger-related costs
Merger-related costs	$	930		1,715		2,895
Tax effect of merger-related costs (1)	$	326		600		1,013
After-tax merger-related costs	$	604		1,115		1,882
Net income, excluding after-tax effect of merger-related costs	$	7,762		7,383		20,970
Weighted average shares outstanding, diluted (in thousands)		23,519		23,493		23,486
Earnings per common share, excluding merger-related costs (diluted)	$	0.33		0.31		0.89
Earnings per common share (diluted)	$	0.30		0.27		0.81
Earnings per common share effect of merger-related costs (diluted)	$	0.03		0.04		0.08
______________________________
(1) Assumes an incremental tax rate of 35% for all periods presented.
	Quarter Ended
Return on average assets and return on average common equity, excluding merger-related costs	September 30, 2017			June 30, 2017
Net income	$	7,158		6,268
Add: After-tax merger-related costs
Merger-related costs	$	930		1,715
Tax effect of merger-related costs (1)	$	326		600
After-tax merger-related costs	$	604		1,115
Net income, excluding after-tax effect of merger-related costs	$	7,762		7,383
Average assets	$	3,199,595		3,172,843
Return on average assets, excluding merger-related costs (annualized)		0.96	%	0.93	%
Average common equity	$	484,282		476,393
Return on average common equity, excluding merger-related costs (annualized)		6.36	%	6.22	%
______________________________
(1) Assumes an incremental tax rate of 35% for all periods presented.
	Quarter Ended
Efficiency ratio, excluding merger-related costs (continuing operations)	September 30, 2017			June 30, 2017		March 31, 2017		December 31, 2016		September 30, 2016
Noninterest expense	$	18,779		19,438		19,532		18,461		32,535
Less: Merger-related costs	$	930		1,715		250		1,162		12,910
Noninterest expense, excluding merger-related costs	$	17,849		17,723		19,282		17,299		19,625
Net interest income	$	25,225		24,710		24,852		24,134		23,011
Noninterest income	$	4,172		3,820		3,132		3,130		2,870
Efficiency ratio, excluding merger-related costs		61	%	62	%	69	%	63	%	76	%
	Quarter Ended
	September 30,			June 30,		March 31,		December 31,		September 30,
		2017		2017		2017		2016		2016
Fair Value Adjusted ALL/ Gross Loans
Allowance for loan losses	$	16,265		17,027		18,275		21,940		33,730
Add:  Discounts (fair value adjustments) on acquired loans	$	5,677		6,472		7,715		9,030		10,075
Total fair value adjusted ALL	$	21,942		23,499		25,990		30,970		43,805
Gross loans + discounts (fair value adjustments) on acquired loans	$	2,429,817		2,377,066		2,364,523		2,473,086		2,481,107
Fair value adjusted ALL/gross loans		0.90	%	0.99	%	1.10	%	1.25	%	1.77	%
______________________________
Return on average assets and return on average common equity, excluding merger-related costs, efficiency ratio, excluding merger-related costs, and earnings per common share effect of merger-related costs, are non-GAAP financial measures.  Supplemental non-GAAP financial measures are not required by or presented in accordance with GAAP. Management believes these measures are meaningful as they present the performance of the Company without merger costs that are nonrecurring and would not be incurred if the Company had not consummated the merger with Xenith Bankshares, Inc. (July 29, 2016) or the Company were not expecting to be merged with Union Bankshares, Inc. (announced on May 22, 2017). Allowance for loan losses (ALL) plus discounts on acquired loans as a percentage of gross loans is a supplemental financial measures that is not required by or presented in accordance with GAAP. Management believes the fair value adjusted ALL as a percentage of gross loans is meaningful because it is a measure management uses to assess asset quality. Set forth above are calculations of each of these non-GAAP financial measures. Calculations of these non-GAAP financial measures may not be comparable to the calculation of similarly titled measures reported by other companies.