Unexpected surge in loan demand provides earnings boost at Union

Union Bankshares in Richmond, Va., reported higher quarterly results that reflected an unexpected surge in loan demand.

The $13.8 billion-asset company said in a press release Tuesday that fourth-quarter profit of $44 million was nearly three times what it earned a year earlier. Results from the fourth quarter of 2017 were tempered by the impact of tax reform and costs associated with an acquisition.

Earning per share of 67 cents were a penny short of the average estimate of analysts polled by FactSet.

Total loans increased by about 13% on an annualized basis, to $9.7 billion.

“That’s a strong number for us and we don’t expect to see that" in 2019, John Asbury, Union's president and CEO, said during a quarterly call to discuss the company's financial results. Union forecast 7% to 9% loan growth this year, along with a comparable increase in deposits.

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The company added more than $136 million in deposits in the fourth quarter, or a 5.5% annualized increase. To maximize future deposit growth, Union plans to replace companywide pricing with a regional pricing model, said Maria Tedesco, president of Union Bank & Trust.

While loans delinquent 30 to 59 days more than doubled, to $41.4 million, Asbury said more than half of those loans returned to performing status this month.

Net charge-offs nearly doubled, to $5 million, or 0.21% of total average loans.

The net charge-off rate is “below our long-term trend line,” Asbury said. “We don’t see any early indications of credit deterioration. We know it will come eventually but we don’t see it happening in 2019.”

Asbury also confirmed that Union will purse a brand redesign tied to its pending purchase of the $2.9 billion-asset Access National.

The change won’t be dramatic, but Asbury said it would be enough to distinguish Union from a similarly named bank that operates in its North Carolina, as well as United Bankshares in Charleston, W.Va., which has branches in Northern Virginia.

“We intend to work toward one brand across our franchise,” Asbury said, though he insisted that he isn't "giving up on Union. It’s who we are.”

Union, which is on pace to complete the Access acquisition on Feb. 1, plans to introduce its new brand in the next few months, Asbury said.

Asbury reiterated that acquisitions are off the table as Union integrates Access, though he said the company will eventually return to M&A.

“It’s very difficult to think about that because we’re so focused on Access,” he said. “That may change later this year.”