Xenith Bankshares — Merger or Acquisition (July 2017)
43 slides from Xenith Bankshares's merger presentation, Jul 24, 2017
Slide 1: Rule 425 filing legend
The following presentation materials will be used by Union Bankshares Corporation at one or more investor relations events, or meetings with analysts or existing or potential investors, during the third quarter of 2017. 1 FILED BY UNION BANKSHARES CORPORATION PURSUANT TO RULE 425 UNDER THE SECURITIE
Slide 2: Investor Presentation July 2017
Investor Presentation July 2017
Slide 3: Forward Looking Statements
3 Forward Looking Statements Certain statements in this presentation may constitute “forward - looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward - looking statements are statements that include projections, predictions, expectations, o r beliefs
Slide 4: Company Snapshot
Company Snapshot 4 Overview Branch Map • Shares listed under “UBSH” on NASDAQ • Headquartered in Richmond, VA • 100+ years of banking history • 112 branches across more than 50 counties and 10 MSAs throughout Virginia - Only Virginia - based bank with a statewide footprint - Largest community bankin
Slide 5: Diversity Supports Growth in Virginia
Diversity Supports Growth in Virginia 5 • State Capital, Fortune 500 headquarters (6), VCU & VCU Medical Center Richmond • Defense and security contractors, Health care, Real Estate development Fredericksburg • University of Virginia & Medical College, High - tech, Real Estate development Charlottes
Slide 6: Union Bank & Trust Key Statistics
Union Bank & Trust Key Statistics • 112 ( - 10 in 2016; - 2 YTD 2017) Branches • 1,319 Full Time Equivalent • 56 Commercial Bankers • $6.77 billion Loans • $6.76 billion Deposits • 180+ thousand Consumer Households 6 Union is the only Virginia - based bank with a statewide footprint
Slide 7: MSA Market Share
MSA Market Share Rank Company Deposits Total Market Deposits Market Share Roanoke Deposits: $378 mm Market Tot.: $7.3 bn Mkt. Share: 5.2% Rank: #6 Branches: 8 Staunton / Harrisonburg Rank: #2 Deposits: $516 mm Market Tot.: $ 4 .0 bn Mkt. Share: 12.9% Branches: 11 Blacksburg Rank: #2 Deposits: $614 m
Slide 8: Second Quarter Financial Highlights
Second Quarter Financial Highlights • $20.3 million, or $0.46 per share • +$1.2 million, or $0.02 from Q1 Net Operating Income • +217.4 million or 13.3% (annualized) from Q1 Loan Growth • $150.2 million, or 9.1% (annualized) from Q1 Deposit Growth • 0.93%; +1 bps from Q1 Operating ROA • 11.48%; +28
Slide 9: Year-to-Date Financial Highlights
Year - to - Date Financial Highlights • $39.4 million, or $0.90 per share • +$3.1 million, or $0.08, 10%, from 1H16 Net Operating Income • +830.4 million or 14% from 1H16 Loan Growth • $668.6 million, or 11% from 1H16 Deposit Growth • 0.92% ; - 1 bps from 1H16 Operating ROA • 11.34%; +48 bps from 1H
Slide 10: Balance Sheet Trends
Balance Sheet Trends 10 $0 $1,000,000 $2,000,000 $3,000,000 $4,000,000 $5,000,000 $6,000,000 $7,000,000 2012 2013 2014 2015 2016 1Q2017 2Q2017 $2,967 $3,039 $5,346 $5,671 $6,307 $6,554 $6,771 Loans ($M) $0 $1,000,000 $2,000,000 $3,000,000 $4,000,000 $5,000,000 $6,000,000 $7,000,000 2012 2013 2014 20
Slide 11: Capital Management
0.00% 2.00% 4.00% 6.00% 8.00% 10.00% 12.00% 14.00% 16.00% 2013 2014 2015 2016 1Q2017 2Q2017 14.16% 13.38% 12.46% 13.56% 13.30% 13.00% 8.93% 9.27% 9.20% 8.41% 8.36% 8.32% Total capital ratio Tangible Equity/Tangible Assets Capital Management 11 • Quarterly Dividend of $0.20/share; 2.5% dividend yield
Slide 12: Profitability Ratios and Income Trends
Profitability Ratios and Income Trends * excludes after - tax acquisition expenses and acquisition accounting impact 12 0.20% 0.40% 0.60% 0.80% 1.00% 1.20% 2013* 2014* 2015* 2016* 1Q17* 2Q17* 0.90% 0.91% 0.90% 0.96% 0.92% 0.93% Operating Return on Average Assets (ROA) 6.00% 7.00% 8.00% 9.00% 10.00%
Slide 13: 2017 Outlook
2017 Outlook • Expect stable economy in Virginia footprint Economy • Low double digit Loan Growth • Stable in second half of 2017 Net Interest Margin • Expect improvement in return on assets, return on tangible common equity and efficiency ratio vs. 2016 Key Financial Metrics 13
Slide 14: 2017 Priorities
2017 Priorities 14 • Loan portfolio • Revenue streams Diversification • Pace loan growth with deposit growth • Target 95% loan to deposit ratio over time Core Funding • Drive efficiency ratio <60% • More revenue + lower cost structure Efficiency • Finalize preparations in 2017 $10 billion asset cros
Slide 15: Value Proposition
Value Proposition • Statewide branch footprint is a competitive advantage and brings a unique franchise value Scale • Balance sheet and Capital levels Strength • Organic and acquisition opportunities Growth • Committed to top - tier financial performance Opportunity • Solid dividend yield and payout
Slide 16: Merger Details
Merger Details
Slide 17: Additional Merger Information
17 Additional Merger Information Additional Information and Where to Find It In connection with the proposed merger, Union will file with 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
Slide 18: Transaction Highlights
x Solidifies position as Virginia’s preeminent community bank with ~$12 billion in pro forma assets x Provides breadth and depth across Virginia, including significant expansion in the attractive Hampton Roads market x Leverages Xenith’s C&I expertise throughout the combined footprint Transaction Hi
Slide 19: Overview of Xenith Bankshares, Inc.
FINANCIAL HIGHLIGHTS Headquarters Richmond, VA Year Established 1987 Branches 42 CEO (Age) T. Gaylon Layfield III (65) Total Assets $3,199 Total Loans 2,357 Deposits 2,620 Loans / Deposits 90.0 % ROAA 0.70 % Net Interest Margin 3.45 Efficiency Ratio 67.8 NPAs / Assets 1.82 % Reserves / NPLs 34.4 Res
Slide 20: Combined branch footprint map
Virginia North Carolina Maryland Staunton Staunton Staunton Staunton Staunton Staunton Staunton Staunton Staunton Staunton Staunton Staunton Staunton Staunton Staunton Staunton Staunton Staunton Staunton Staunton Staunton Staunton Staunton Staunton Staunton Staunton Staunton Staunton Staunton Staunt
Slide 21: Enhanced Presence in Key Markets
Deposits Market Rank Institution ($mm) Share Branches 1 Wells Fargo & Co. $38,613 20.32% 284 2 Bank of America Corp. 26,154 13.76 130 3 BB&T Corp. 22,631 11.91 344 4 SunTrust Banks Inc. 19,015 10.01 193 5 Capital One Financial Corp. 14,812 7.79 59 Pro Forma 8,105 4.26 143 6 United Bankshares Inc. 7,
Slide 22: Market Demographics
Market Demographics Deposits (1) UBSH XBKS Pro Forma '17-'22 2022 Proj. Gross Population Household Domestic Number Market 2017 Growth Income Product (2) of Deposits Deposits Deposits Share Market UBSH XBKS Population (%) ($) ($bn) Businesses ($mm) ($mm) ($mm) (%) Washington, D.C. 6,203,724 5.5% $95,
Slide 23: Hampton Roads Market Highlights
Hampton Roads Market Highlights Source: SNL Financial; Hampton Roads Chamber of Commerce; Hampton Roads Economic Development Alliance (1) Includes companies in the Virginia Beach MSA with NAICs as Healthcare and Social Assistance, Wholesale Trade, Manufacturing o r T ransportation and Warehousing. D
Slide 24: Achieves 2017 Priorities for Union
Achieves 2017 Priorities for Union • Lowers CRE concentration and increases C&I portfolio • Adds dedicated C&I team in Northern Virginia and significant C&I opportunity in Hampton Roads and Raleigh • Lowers loan to deposit ratio to 97% • Adds meaningful retail presence in Hampton Roads • Expands com
Slide 25: Transaction Structure and Key Terms
Consideration (2) Pro Forma Ownership Executive Management Board of Directors Anticipated Close Transaction Structure and Key Terms Note: Financial data as of 3/31/2017, unless otherwise noted Dollars in millions (1) Combined represents the sum of UBSH and XBKS data and excludes any purchase account
Slide 26: Key Assumptions
Key Assumptions Cost Savings Credit Mark ▪ Gross loan credit mark of approximately 1.5%, or $37 million ▪ Expected to be approximately $28 million pre - tax (fully phased - in) − ~40 % of XBKS ’ 2018 estimated noninterest expense − 80% realized in 2018, 100% annually thereafter Merger & Integration
Slide 27: Estimated Pro Forma Financial Metrics
Estimated Pro Forma Financial Metrics (1) Estimated financial impact is presented solely for illustrative purposes using mean analyst estimates. Includes purchase acco unt ing marks and deal related expenses (2) Projected bank level total capital Key Transaction Impacts to UBSH (1) 2018E & 2019E EPS
Slide 28: Comprehensive Due Diligence and Preparation
Comprehensive Due Diligence and Preparation Deferred Tax Asset ▪ Tax advisors completed thorough analysis on Xenith’s $154.9 million deferred tax asset ‒ Expect no impairment of Xenith’s deferred tax asset due to Section 382 ‒ Anticipate up to $42 million write - off under an assumed federal tax rat
Slide 29: Preparing to Grow Through $10 Billion in Assets
▪ Union has been preparing to grow through $10 billion in assets since 2014 − Union has invested approximately $5 million pre - tax annual run rate in people, systems and infrastructure in IT, Enterprise Risk and DFAST (Dodd Frank Stress Test) − Accelerates Union’s growth over $10 billion in assets
Slide 30: Deal Summary
x Creates Virginia’s preeminent community bank with more than $12 billion in pro forma assets at closing x Enhances presence in key markets and provides a platform for future growth x Financially attractive transaction for all shareholders with conservative assumptions x Proven track record of succe
Slide 31: Value Proposition
Value Proposition • Statewide branch footprint is a competitive advantage and brings a unique franchise value Scale • Balance sheet and Capital levels Strength • Organic and acquisition opportunities Growth • Committed to top - tier financial performance Opportunity • Solid dividend yield and payout
Slide 32: Appendix
APPENDIX UNION
Slide 33: Top-Tier Financial Performance Focus
Top - Tier Financial Performance Focus • Union is committed to achieving top tier financial performance and providing our shareholders with above average returns on their investment • Key financial performance metrics benchmarked against top quartile peers • Top Tier Financial Performance targets: 3
Slide 34: Diversified Loan Portfolio (Union)
Diversified Loan Portfolio (Union) 34 Source: SNL Financial, Company documents Loan Composition at June 30, 2017 – $6.771 Billion Portfolio Characteristics Average loan size $145,225 Weighted average maturity 83 months Yield YTD (Tax Equivalent) 4.39% Composition By Type Composition By Region NOO CR
Slide 35: Commercial Real Estate Portfolio (Union)
Commercial Real Estate Portfolio (Union) 35 Source: SNL Financial, Company documents CRE Composition at June 30, 2017 - $2.953 Billion Portfolio Characteristics 10 largest loans 6.8% of CRE portfolio 10 largest loans 2.4% of total loan portfolio Weighted average maturity 61 months Weighted average c
Slide 36: Construction and Development Loans (Union)
Construction and Development Loans (Union) 36 Source: Company documents C&D Composition at June 30, 2017 - $799 million Portfolio Characteristics 10 largest loans 17.0% of C&D portfolio 10 largest loans 2.7% of total loan portfolio Weighted average maturity 21 months Weighted average coupon 4.30% C&
Slide 37: Core Deposit Base (Union)
Core Deposit Base (Union) 37 (1) Time deposits greater than $100,000 Note: Minimal exposure to CDARS/ICS deposits Source: SNL Financial, Company documents Deposit Composition at June 30, 2017 - $6.764 Billion Deposit Base Characteristics Average cost of interest bearing deposits 44 basis points Aver
Slide 38: Pro Forma Loan Portfolio
C&D 12% 1 - 4 Family 24% Multifamily 5% Owner - Occupied CRE 13% Non Owner - Occupied CRE 25% C&I 9% Consumer & Other 11% Pro Forma Loan Portfolio Source: SNL Financial Dollars in millions Data as of or for the three months ended 3/31/2017 (1) Excludes purchase accounting adjustments UBSH XBKS Pro F
Slide 39: Pro Forma Deposit Composition
Pro Forma Deposit Composition Source: SNL Financial Dollars in millions Data as of or for the three months ended 3/31/2017 Note: Jumbo time deposits defined as time deposits greater than $250,000 (1) Excludes purchase accounting adjustments UBSH XBKS Pro Forma (1) Demand Deposits 23% NOW Accounts 27
Slide 40: Non-GAAP Measures
Non - GAAP Measures In reporting the results of the quarter ended June 30, 2017, and in prior periods, the Company has provided supplemental performance measures on a tax - equivalent, tangible, or operating basis. These measures are a supplement to GAAP used to prepare the Company’s financial state
Slide 41: Reconciliation to GAAP
Reconciliation to GAAP Net interest income (FTE), which is used in computing net interest margin (FTE), provides valuable additional insight into th e n et interest margin by adjusting for differences in tax treatment of interest income sources. Core net interest income (FTE), which is used in compu
Slide 42: Reconciliation to GAAP
Reconciliation to GAAP The Company believes tangible common equity is an important indication of its ability to grow organically and through busines s c ombinations as well as its ability to pay dividends and to engage in various capital management strategies. Tangible common equity is used in the c
Slide 43: Operating measures reconciliation
Operating measures exclude acquisition and conversion costs unrelated to the Company’s normal operations. The Company believe s t hese measures are useful to investors as they exclude certain costs resulting from acquisition activity and allow investors to more clearly see the combined economic resu
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