UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended ~~September 30, 2015~~March 31, 2016

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 0-20293

UNION BANKSHARES CORPORATION

(Exact name of registrant as specified in its charter)

VIRGINIA	54-1598552
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

1051 East Cary Street

Suite 1200

Richmond, Virginia 23219

(Address of principal executive offices) (Zip Code)

(804) 633-5031

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ~~Yes~~x No¨

YesxNo¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ~~Yes~~xNo¨

YesxNo¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	x	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ~~Yes~~¨Nox

Yes¨Nox

The number of shares of common stock outstanding as of ~~November~~May 2, ~~2015~~2016 was ~~44,923,602.~~43,762,691.

UNION BANKSHARES CORPORATION

FORM 10-Q

INDEX

ITEM		PAGE

	PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements

	Consolidated Balance Sheets as of ~~September 30, 2015~~March 31, 2016 and December 31, ~~2014~~2015	2

	Consolidated Statements of Income for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2016 and 2015 ~~and 2014~~	3

	Consolidated Statements of Comprehensive Income for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2016 and 2015 ~~and 2014~~	4

	Consolidated Statements of Changes in Stockholders’ Equity for the ~~nine~~three months ended ~~September 30,~~March 31, 2016 and 2015 ~~and 2014~~	5

	Consolidated Statements of Cash Flows for the ~~nine~~three months ended ~~September 30,~~March 31, 2016 and 2015 ~~and 2014~~	6

	Notes to Consolidated Financial Statements	7

	Report of Independent Registered Public Accounting Firm	4743

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4844

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	7561

Item 4.	Controls and Procedures	7764

	PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	7864

Item 1A.	Risk Factors	7864

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	7864

Item 6.	Exhibits	7966

	Signatures	8067

Glossary of Acronyms

AFS	–	Available for sale
ALCO	–	Asset Liability Committee
ALL	–	Allowance for loan losses
ASC	–	Accounting Standards Codification
ASU	–	Accounting Standards Update
ATM	–	Automated teller machine
the Bank	–	Union Bank & Trust, formerly known as Union First Market Bank
bps	–	Basis points
the Company	–	Union Bankshares Corporation
Dodd-Frank Act	–	Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010
EPS	–	Earnings per share
Exchange Act	–	Securities Exchange Act of 1934
FASB	–	Financial Accounting Standards Board
FDIC	–	Federal Deposit Insurance Corporation
Federal Reserve	–	Board of Governors of the Federal Reserve System
Federal Reserve Bank	–	Federal Reserve Bank of Richmond
FHLB	–	Federal Home Loan Bank of Atlanta
U.S. GAAP or GAAP	–	Accounting principles generally accepted in the United States
HELOC	–	Home equity line of credit
HTM	–	Held to maturity
LIBOR	–	London Interbank Offered Rate
NPA	–	Nonperforming assets
OREO	–	Other real estate owned
OTTI	–	Other than temporary impairment
PCI	–	Purchased credit impaired
~~SEC~~	–	~~U.S. Securities and Exchange Commission~~
StellarOne	–	StellarOne Corporation
TDR	–	Troubled debt restructuring
UMG	–	Union Mortgage Group, Inc.

PART I – FINANCIAL INFORMATION

ITEM 1 – FINANCIAL STATEMENTS

UNION BANKSHARES CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS ~~(UNAUDITED)~~

(Dollars in thousands, except share data)

September 30, December 31,
2015 2014
ASSETS
Cash and cash equivalents:
Cash and due from banks $ 102,955 $ 112,752
Interest-bearing deposits in other banks 76,001 19,344
Money market investments 1 1
Federal funds sold 237 1,163
Total cash and cash equivalents 179,194 133,260

Securities available for sale, at fair value 888,692 1,102,114
Securities held to maturity, at carrying value 199,363 -
Restricted stock, at cost 52,721 54,854

Loans held for sale 65,713 42,519

Loans held for investment, net of deferred fees and costs 5,543,621 5,345,996
Less allowance for loan losses 33,269 32,384
Net loans held for investment 5,510,352 5,313,612

Premises and equipment, net 129,191 135,247
Other real estate owned, net of valuation allowance 22,094 28,118
Core deposit intangibles, net 25,320 31,755
Goodwill 293,522 293,522
Bank owned life insurance 142,433 139,005
Other assets 85,718 84,637
Total assets $ 7,594,313 $ 7,358,643

LIABILITIES
Noninterest-bearing demand deposits $ 1,338,045 $ 1,199,378
Interest-bearing deposits 4,480,808 4,439,392
Total deposits 5,818,853 5,638,770

Securities sold under agreements to repurchase 99,417 44,393
Other short-term borrowings 332,000 343,000
Long-term borrowings 290,732 299,542
Other liabilities 58,299 55,769
Total liabilities 6,599,301 6,381,474

Commitments and contingencies (Note 7)

STOCKHOLDERS' EQUITY
Common stock, $1.33 par value, shares authorized 100,000,000; issued and outstanding, 44,990,569 shares and 45,162,853 shares, respectively. 59,514 59,795
Surplus 638,511 643,443
Retained earnings 288,841 261,676
Accumulated other comprehensive income 8,146 12,255
Total stockholders' equity 995,012 977,169

Total liabilities and stockholders' equity $ 7,594,313 $ 7,358,643
March 31, December 31,
2016 2015
(Unaudited) (Audited)
ASSETS
Cash and cash equivalents:
Cash and due from banks $ 95,462 $ 111,323
Interest-bearing deposits in other banks 37,227 29,670
Federal funds sold 650 1,667
Total cash and cash equivalents 133,339 142,660

Securities available for sale, at fair value 939,409 903,292
Securities held to maturity, at carrying value 204,444 205,374
Restricted stock, at cost 58,211 51,828
Loans held for sale 25,109 36,030
Loans held for investment, net of deferred fees and costs 5,780,502 5,671,462
Less allowance for loan losses 34,399 34,047
Net loans held for investment 5,746,103 5,637,415

Premises and equipment, net 125,357 126,028
Other real estate owned, net of valuation allowance 14,246 15,299
Core deposit intangibles, net 21,430 23,310
Goodwill 293,522 293,522
Bank owned life insurance 175,033 173,687
Other assets 96,408 84,846
Total assets $ 7,832,611 $ 7,693,291

LIABILITIES
Noninterest-bearing demand deposits $ 1,363,243 $ 1,372,937
Interest-bearing deposits 4,582,739 4,590,999
Total deposits 5,945,982 5,963,936

Securities sold under agreements to repurchase 91,977 84,977
Other short-term borrowings 466,000 304,000
Long-term borrowings 291,662 291,198
Other liabilities 56,012 53,813
Total liabilities 6,851,633 6,697,924

Commitments and contingencies (Note 6)

STOCKHOLDERS' EQUITY
Common stock, $1.33 par value, shares authorized 100,000,000; issued and outstanding, 43,854,381 shares and 44,785,674 shares, respectively. 57,850 59,159
Additional paid-in capital 610,084 631,822
Retained earnings 306,685 298,134
Accumulated other comprehensive income 6,359 6,252
Total stockholders' equity 980,978 995,367
Total liabilities and stockholders' equity $ 7,832,611 $ 7,693,291

See accompanying notes to consolidated financial statements.

~~- 2 -~~
- 2 -

UNION BANKSHARES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(Dollars in thousands, except share data) Three Months Ended Nine Months Ended
September 30, September 30, September 30, September 30,
2015 2014 2015 2014
Interest and dividend income:
Interest and fees on loans $ 62,651 $ 62,340 $ 185,706 $ 184,996
Interest on federal funds sold - - 1 1
Interest on deposits in other banks 23 21 64 41
Interest and dividends on securities:
Taxable 3,954 3,883 11,621 11,391
Nontaxable 3,372 3,347 10,062 10,005
Total interest and dividend income 70,000 69,591 207,454 206,434

Interest expense:
Interest on deposits 4,204 3,027 11,204 7,833
Interest on federal funds purchased 1 3 6 49
Interest on short-term borrowings 223 108 728 373
Interest on long-term borrowings 2,128 1,974 6,287 6,226
Total interest expense 6,556 5,112 18,225 14,481

Net interest income 63,444 64,479 189,229 191,953
Provision for credit losses 2,062 1,800 7,561 3,300
Net interest income after provision for credit losses 61,382 62,679 181,668 188,653

Noninterest income:
Service charges on deposit accounts 4,965 4,458 13,800 13,281
Other service charges and fees 3,983 3,773 11,618 11,281
Fiduciary and asset management fees 2,304 2,120 6,835 6,753
Gains on sales of mortgage loans, net of commissions 2,630 2,598 7,582 7,925
Gains on securities transactions, net 75 995 672 1,449
Other-than-temporary impairment losses (300 ) - (300 ) -
Bank owned life insurance income 1,161 1,195 3,431 3,467
Other operating income 1,907 1,179 4,352 2,229
Total noninterest income 16,725 16,318 47,990 46,385

Noninterest expenses:
Salaries and benefits 25,853 25,636 78,905 82,466
Occupancy expenses 4,915 4,902 15,220 15,184
Furniture and equipment expenses 3,015 3,050 8,818 8,555
Printing, postage, and supplies 1,191 1,290 3,970 3,682
Communications expense 1,159 1,291 3,481 3,740
Technology and data processing 3,549 3,280 10,020 9,145
Professional services 1,991 1,400 5,008 3,897
Marketing and advertising expense 1,781 2,064 5,841 4,821
FDIC assessment premiums and other insurance 1,351 1,577 4,030 4,563
Other taxes 1,569 1,460 4,674 4,352
Loan-related expenses 935 814 2,306 1,987
OREO and credit-related expenses 1,263 6,559 4,415 10,254
Amortization of intangible assets 2,074 2,391 6,435 7,462
Acquisition and conversion costs - 1,695 - 19,524
Other expenses 2,679 2,004 9,282 6,033
Total noninterest expenses 53,325 59,413 162,405 185,665

Income before income taxes 24,782 19,584 67,253 49,373
Income tax expense 6,566 4,767 17,989 12,174
Net income $ 18,216 $ 14,817 $ 49,264 $ 37,199
Basic earnings per common share $ 0.40 $ 0.32 $ 1.09 $ 0.80
Diluted earnings per common share $ 0.40 $ 0.32 $ 1.09 $ 0.80
Dividends declared per common share $ 0.17 $ 0.15 $ 0.49 $ 0.43
Basic weighted average number of common shares outstanding 45,087,409 45,649,309 45,107,290 46,268,996
Diluted weighted average number of common shares outstanding 45,171,610 45,738,554 45,189,578 46,367,156
UNION BANKSHARES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(Dollars in thousands, except share data)

Three Months Ended
March 31, March 31,
2016 2015
Interest and dividend income:
Interest and fees on loans $ 62,947 $ 60,452
Interest on deposits in other banks 47 17
Interest and dividends on securities:
Taxable 4,316 3,807
Nontaxable 3,439 3,324
Total interest and dividend income 70,749 67,600

Interest expense:
Interest on deposits 4,195 3,321
Interest on federal funds purchased 2 1
Interest on short-term borrowings 621 249
Interest on long-term borrowings 2,200 2,060
Total interest expense 7,018 5,631

Net interest income 63,731 61,969
Provision for credit losses 2,604 1,750
Net interest income after provision for credit losses 61,127 60,219

Noninterest income:
Service charges on deposit accounts 4,734 4,214
Other service charges and fees 4,156 3,584
Fiduciary and asset management fees 2,138 2,219
Mortgage banking income, net 2,146 2,379
Gains on securities transactions, net 143 193
Bank owned life insurance income 1,372 1,135
Other operating income 1,225 1,330
Total noninterest income 15,914 15,054

Noninterest expenses:
Salaries and benefits 28,048 27,492
Occupancy expenses 4,976 5,133
Furniture and equipment expenses 2,636 2,813
Printing, postage, and supplies 1,139 1,370
Communications expense 1,089 1,179
Technology and data processing 3,814 3,255
Professional services 1,989 1,348
Marketing and advertising expense 1,938 1,687
FDIC assessment premiums and other insurance 1,362 1,398
Other taxes 1,618 1,551
Loan-related expenses 599 684
OREO and credit-related expenses 569 1,186
Amortization of intangible assets 1,880 2,222
Training and other personnel costs 744 721
Other expenses 1,871 1,801
Total noninterest expenses 54,272 53,840

Income before income taxes 22,769 21,433
Income tax expense 5,808 5,732
Net income $ 16,961 $ 15,701
Basic earnings per common share $ 0.38 $ 0.35
Diluted earnings per common share $ 0.38 $ 0.35
Dividends declared per common share $ 0.19 $ 0.15
Basic weighted average number of common shares outstanding 44,251,276 45,105,969
Diluted weighted average number of common shares outstanding 44,327,229 45,187,516

See accompanying notes to consolidated financial statements.

~~- 3 -~~
- 3 -

UNION BANKSHARES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
(Dollars in thousands)

Three Months Ended Nine Months Ended Three Months Ended
September 30, September 30, March 31,
2015 2014 2015 2014 2016 2015

Net income $ 18,216 $ 14,817 $ 49,264 $ 37,199 $ 16,961 $ 15,701
Other comprehensive income (loss):
Cash flow hedges:
Change in fair value of cash flow hedges (2,328 ) (228 ) (2,009 ) (431 ) (2,681 ) (1,490 )
Reclassification adjustment for losses included in net income (net of tax, $84 and $89 for the three months and $253 and $231 for the nine months ended September 30, 2015 and 2014) 157 164 470 428
Reclassification adjustment for losses (gains) included in net income (net of tax, $76 and $146 for the three months ended March 31, 2016 and 2015, respectively) 141 272
AFS securities:
Unrealized holding gains (losses) arising during period (net of tax, $673 and $968 for the three months and $976 and $7,992 for the nine months ended September 30, 2015 and 2014) 1,250 1,798 (1,812 ) 14,843
Reclassification adjustment for (gains) losses included in net income (net of tax, $79 and $348 for the three months and $130 and $367 for the nine months ended September 30, 2015 and 2014) 146 (647 ) (242 ) (682 )
Unrealized holding gains (losses) arising during period (net of tax, $1,633 and $2,037 for the three months ended March 31, 2016 and 2015, respectively) 3,032 3,783
Reclassification adjustment for losses (gains) included in net income (net of tax, $50 and $68 for the three months ended March 31, 2016 and 2015, respectively) (93 ) (125 )
HTM securities:
Accretion of unrealized gain for AFS securities transferred to HTM (net of tax, $166 and $0 for the three months and $278 and $0 for the nine months ended September 30, 2015 and 2014). (308 ) - (516 ) -
Accretion of unrealized gain for AFS securities transferred to HTM (net of tax, $157 and $0 for the three months ended March 31, 2016 and 2015, respectively) (292 ) -
Other comprehensive income (loss) (1,083 ) 1,087 (4,109 ) 14,158 107 2,440
Comprehensive income $ 17,133 $ 15,904 $ 45,155 $ 51,357 $ 17,068 $ 18,141

See accompanying notes to consolidated financial statements.

~~- 4 -~~
- 4 -

UNION BANKSHARES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)
~~NINE~~THREE MONTHS ENDED ~~SEPTEMBER 30,~~MARCH 31, 2016 AND 2015 ~~AND 2014~~
(Dollars in thousands, except share amounts)

Common
Stock Surplus Retained
Earnings⁽¹⁾ Accumulated
Other
Comprehensive
Income (Loss) Total

Balance - December 31, 2013 $ 33,020 $ 170,770 $ 236,210 $ (2,190 ) $ 437,810
Net income - 2014 37,199 37,199
Other comprehensive income (net of taxes of $7,625) 14,158 14,158
Issuance of common stock in regard to acquisition (22,147,874 shares) 29,457 520,066 549,523
Dividends on common stock ($0.43 per share) (19,021 ) (19,021 )
Stock purchased under stock repurchase plan (1,731,025 shares) (2,303 ) (41,174 ) (43,477 )
Issuance of common stock under Dividend Reinvestment Plan (37,489 shares) 50 828 (878 ) -
Issuance of common stock under Equity Compensation Plans (67,057 shares) 89 983 1,072
Issuance of common stock for services rendered (14,374 shares) 19 343 362
Vesting of restricted stock under Equity Compensation Plans (14,707 shares) 20 (20 ) -
Net settle for taxes on Restricted Stock Awards (63,916 shares) (85 ) (1,480 ) (1,565 )
Stock-based compensation expense 862 862
Balance - September 30, 2014 $ 60,267 $ 651,178 $ 253,510 $ 11,968 $ 976,923

Balance - December 31, 2014 $ 59,795 $ 643,443 $ 261,676 $ 12,255 $ 977,169
Net income - 2015 49,264 49,264
Other comprehensive income (net of taxes of $1,130) (4,109 ) (4,109 )
Dividends on common stock ($0.49 per share) (21,000 ) (21,000 )
Stock purchased under stock repurchase plan (347,021 shares) (460 ) (7,535 ) (7,995 )
Issuance of common stock under Dividend Reinvestment Plan (52,201 shares) 69 1,030 (1,099 ) -
Issuance of common stock under Equity Compensation Plans (37,124 shares) 49 517 566
Issuance of common stock for services rendered (19,417 shares) 26 420 446
Vesting of restricted stock under Equity Compensation Plans (39,652 shares) 52 (52 ) -
Net settle for taxes on Restricted Stock Awards (13,076 shares) (17 ) (269 ) (286 )
Stock-based compensation expense 957 957
Balance - September 30, 2015 $ 59,514 $ 638,511 $ 288,841 $ 8,146 $ 995,012
⁽¹⁾ ~~Retained earnings as of December 31, 2013 and 2014 includes the cumulative impact of $429,000 and $856,000, respectively, resulting from the adoption of ASU 2014-01 “~~~~Accounting For Investments in Qualified Affordable Housing Projects~~~~.” See “Note 1 - Accounting Policies” for additional information.~~
Common
Stock Additional
Paid-In
Capital Retained
Earnings Accumulated
Other
Comprehensive
Income (Loss) Total

Balance - December 31, 2014 $ 59,795 $ 643,443 $ 261,676 $ 12,255 $ 977,169
Net income - 2015 15,701 15,701
Other comprehensive income (net of taxes of $2,115) 2,440 2,440
Dividends on common stock ($0.15 per share) (6,431 ) (6,431 )
Stock purchased under stock repurchase plan (102,843 shares) (137 ) (2,250 ) (2,387 )
Issuance of common stock under Dividend Reinvestment Plan (15,781 shares) 21 307 (328 ) -
Issuance of common stock under Equity Compensation Plans (7,686 shares) 10 137 147
Issuance of common stock for services rendered (4,576 shares) 6 94 100
Vesting of restricted stock, including tax effects, under Equity Compensation Plans (19,271 shares) 26 (239 ) (213 )
Stock-based compensation expense 390 390
Balance - March 31, 2015 $ 59,721 $ 641,882 $ 270,618 $ 14,695 $ 986,916

Balance - December 31, 2015 $ 59,159 $ 631,822 $ 298,134 $ 6,252 $ 995,367
Net income - 2016 16,961 16,961
Other comprehensive income (net of taxes of $1,502) 107 107
Dividends on common stock ($0.19 per share) (8,410 ) (8,410 )
Stock purchased under stock repurchase plan (1,040,612 shares) (1,384 ) (22,344 ) (23,728 )
Issuance of common stock under Equity Compensation Plans (21,804 shares) 29 288 317
Issuance of common stock for services rendered (4,400 shares) 6 94 100
Vesting of restricted stock, including tax effects, under Equity Compensation Plans (30,299 shares) 40 (417 ) (377 )
Stock-based compensation expense 641 641
Balance - March 31, 2016 $ 57,850 $ 610,084 $ 306,685 $ 6,359 $ 980,978

See accompanying notes to consolidated financial statements.

~~- 5 -~~
- 5 -

UNION BANKSHARES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS ~~(UNAUDITED)~~
~~NINE~~THREE MONTHS ENDED ~~SEPTEMBER 30,~~MARCH 31, 2016 AND 2015 ~~AND 2014~~
(Dollars in thousands)

2015 2014 2016 2015
Operating activities:
Net income $ 49,264 $ 37,199 $ 16,961 $ 15,701
Adjustments to reconcile net income to net cash and cash equivalents provided by (used in) operating activities:
Depreciation of bank premises and equipment 8,097 8,160
Depreciation of premises and equipment 2,511 2,705
Writedown of OREO 1,773 7,265 126 590
Other-than-temporary impairment recognized in earnings 300 -
Amortization, net 10,080 10,891 2,958 3,625
Amortization related to acquisition, net 1,175 (410 )
Provision for loan losses 7,561 3,300
(Gains) on securities transactions, net (672 ) (1,449 )
Decrease in loans held for sale, net 3,206 33,093
Gains (losses) on sales of other real estate owned, net 80 (128 )
Losses on sales of bank premises, net 98 384
Amortization (accretion) related to acquisition, net 734 371
Provision for credit losses 2,604 1,750
Losses (gains) on securities transactions, net (143 ) (193 )
Decrease (increase) in loans held for sale, net 10,921 (3,529 )
Losses (gains) on sales of other real estate owned, net (7 ) (38 )
Losses (gains) on sales of premises, net 45 57
Stock-based compensation expenses 957 862 641 390
Issuance of common stock for services 446 362 100 100
Net (increase) decrease in other assets (3,892 ) 12,347
Net decrease (increase) in other assets (14,594 ) (1,031 )
Net increase (decrease) in other liabilities 691 (3,703 ) (441 ) 80
Net cash and cash equivalents provided by operating activities 79,164 108,173
Net cash and cash equivalents provided by (used in) operating activities 22,416 20,578
Investing activities:
Purchases of securities (171,203 ) (351,153 )
Proceeds from sales of securities 63,928 273,447
Purchases of securities available for sale (83,735 ) (29,863 )
Proceeds from sales of securities available for sale 14,532 12,499
Proceeds from maturities, calls and paydowns of securities available for sale 110,132 111,390 29,151 34,133
Proceeds from maturities, calls and paydowns of securities held to maturity 795 -
Net (increase) decrease in loans (228,839 ) 100,844
Net (increase) in bank premises and equipment (2,541 ) (5,262 )
Net decrease (increase) in loans held for investment (110,513 ) (44,401 )
Net decrease (increase) in premises and equipment (1,885 ) (2,346 )
Proceeds from sales of other real estate owned 6,374 9,929 1,339 2,714
Improvements to other real estate owned (308 ) (262 ) - (56 )
Cash paid for equity-method investments (355 ) - - (355 )
Cash acquired in bank acquisitions - 49,989
Net cash and cash equivalents (used in) provided by investing activities (222,017 ) 188,922
Net cash and cash equivalents provided by (used in) investing activities (151,111 ) (27,675 )
Financing activities:
Net increase in noninterest-bearing deposits 138,667 100,629
Net increase (decrease) in noninterest-bearing deposits (9,694 ) 75,557
Net increase (decrease) in interest-bearing deposits 43,259 (175,918 ) (8,260 ) (43,024 )
Net increase (decrease) in short-term borrowings 44,024 (84,665 ) 169,000 (12,959 )
Net (decrease) increase in long-term borrowings (8,448 ) 1,518
Net increase (decrease) in long-term borrowings 526 509
Cash dividends paid - common stock (21,000 ) (19,020 ) (8,410 ) (6,431 )
Repurchase of common stock (7,995 ) (43,477 ) (23,728 ) (2,387 )
Issuance of common stock 566 1,072 317 147
Taxes paid related to net share settlement of equity awards (286 ) (1,565 )
Vesting of restricted stock, including tax effects (377 ) (213 )
Net cash and cash equivalents provided by (used in) financing activities 188,787 (221,426 ) 119,374 11,199
Increase in cash and cash equivalents 45,934 75,669
Increase (decrease) in cash and cash equivalents (9,321 ) 4,102
Cash and cash equivalents at beginning of the period 133,260 73,023 142,660 133,260
Cash and cash equivalents at end of the period $ 179,194 $ 148,692 $ 133,339 $ 137,362

Supplemental Disclosure of Cash Flow Information
Cash payments for:
Interest $ 20,720 $ 21,210 $ 6,998 $ 6,925
Income taxes 13,800 12,400 10,500 3,000

Supplemental schedule of noncash investing and financing activities
Unrealized (losses) gains on securities available for sale $ (3,160 ) $ 21,786 $ 4,522 $ 5,627
Transfer from securities available for sale to securities held to maturity 201,822 -
Transfer from loans held for investment to loans held for sale 26,400 -
Changes in fair value of interest rate swap loss (1,539 ) (3 ) (2,540 ) (1,218 )
Transfers between loans and other real estate owned 1,493 5,257 405 124
Transfers from bank premises to other real estate owned 402 10,866 - 402
Issuance of common stock in exchange for net assets in acquisition - 549,523

Transactions related to bank acquisition
Assets acquired - 2,957,521
Liabilities assumed - 2,642,120

See accompanying notes to consolidated financial statements.

~~- 6 -~~
- 6 -

UNION BANKSHARES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)

1. ACCOUNTING POLICIES

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Significant inter-company accounts and transactions have been eliminated in consolidation.

The unaudited consolidated financial statements have been prepared in accordance with U.S. GAAP for interim financial information and follow general practice within the banking industry. Accordingly, the unaudited consolidated financial statements do not include all the information and footnotes required by U.S. GAAP for complete financial statements. However, in the opinion of management, all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation of the results of the interim periods presented have been made. The results of operations for the interim periods are not necessarily indicative of the results that may be expected for the full year.

These financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s ~~2014~~2015 Annual Report on Form 10-K. Certain prior period amounts have been reclassified to conform to current period presentation.

~~Adoption of New Accounting Standards~~Loans
The Company ~~adopted ASU 2014-01, “~~~~Accounting~~originates commercial and consumer loans to customers. A substantial portion of the loan portfolio is represented by commercial and residential real estate loans (including acquisition and development loans and residential construction loans) throughout its market area. The ability of the Company’s debtors to honor their contracts is dependent upon the real estate and general economic conditions in those markets.
Loans that management has the intent and ability to hold for ~~Investments in Qualified Affordable Housing Projects~~”the foreseeable future or until maturity or pay-off generally are reported at their outstanding unpaid principal balances adjusted for any charge-offs, the allowance for loan losses, and any deferred fees or costs on originated loans. Interest income is accrued on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, are deferred and recognized as an adjustment of the related loan yield using the interest method.
As of January 1, ~~2015. As permitted by the guidance,~~2016, the Company ~~adopted~~enhanced the ~~proportional amortization method~~loan portfolio segmentation to better align with how the Company manages credit risk and to better align with industry practice. Below is a summary of ~~accounting~~the new loan segmentation.
Construction and Land Development – construction loans generally made to commercial and residential builders for ~~qualified~~specific construction projects. The successful repayment of these types of loans is generally dependent upon (a) a commitment for permanent financing from the Company, or (b) from the sale of the constructed property. These loans carry more risk than both types of commercial real estate term loans due to the dynamics of construction projects, changes in interest rates, the long-term financing market, and state and local government regulations. As in commercial real estate term lending, the Company manages risk by using specific underwriting policies and procedures for these types of loans and by avoiding excessive concentrations to any one business or industry.
Also, included in this category are loans generally made to residential home builders to support their lot and home inventory needs. Repayment relies upon the successful performance of the underlying residential real estate project. This type of lending carries a higher level of risk as compared to other commercial lending. This class of lending manages risks related to residential real estate market conditions, a functioning first and secondary market in which to sell residential properties, and the borrower’s ability to manage inventory and run projects. The Company manages this risk by lending to experienced builders and developers, by using specific underwriting policies and procedures for these types of loans, and by avoiding excessive concentrations with any particular customer or geographic region.
Commercial Real Estate – Owner Occupied- term loans made to support owner occupied real estate properties that rely upon the successful operation of the business occupying the property for repayment. General market conditions and economic activity may affect these types of loans. In addition to using specific underwriting policies and procedures for these types of loans, the Company manages risk by avoiding concentrations to any one business or industry.
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Commercial Real Estate – Non-Owner Occupied - term loans typically made to borrowers to support income producing properties that rely upon the successful operation of the property for repayment. General market conditions and economic activity may impact the performance of these types of loans. In addition to using specific underwriting policies and procedures for these types of loans, the Company manages risk by diversifying the lending to various lines of businesses, such as retail, office, office warehouse, and hotel as well as avoiding concentrations to any one business or industry.
Residential 1-4 Family – loans generally made to both commercial and residential borrowers. Mortgage loan portfolios carry risks associated with the creditworthiness of the borrower or the tenant and changes in loan-to-value ratios. The Company manages these risks through policies and procedures such as limiting loan-to-value ratios at origination, experienced underwriting, requiring standards for appraisers, and not making subprime loans.
Multi-Family Real Estate – loans made to real estate investors to support permanent financing for multifamily family residential income producing properties that rely on the successful operation of the property for repayment. This management mainly involves property maintenance and collection of rents due from tenants. This type of lending carries a lower level of risk as compared to other commercial lending. In addition, underwriting requirements for multifamily are stricter than for other non-owner-occupied property types. The Company manages this risk by avoiding concentrations with any particular customer.
Commercial and Industrial – generally support the Company’s borrowers’ need for equipment/vehicle purchases and other short-term or seasonal cash flow needs. Repayment relies upon the successful operation of the business. This type of lending carries a lower level of commercial credit risk as compared to other commercial lending. The Company manages this risk by using general underwriting policies and procedures for these types of loans and by avoiding concentrations to any one business or industry.
HELOC – the consumer HELOC portfolio carries risks associated with the creditworthiness of the borrower and changes in loan-to-value ratios. The Company manages these risks through policies and procedures such as limiting loan-to-value ratios at origination, experienced underwriting, requiring standards for appraisers, and not making subprime loans.
Auto – the consumer indirect auto lending portfolio generally carries certain risks associated with the values of the collateral that management must mitigate. The Company focuses its indirect auto lending on one to two year old used vehicles where substantial depreciation has already occurred thereby minimizing the risk of significant loss of collateral values in the future. This type of lending places reliance on computer-based loan approval systems to supplement other underwriting standards.
Consumer and all other - portfolios carry risks associated with the creditworthiness of the borrower and changes in the economic environment. The Company manages these risks through policies and procedures such as experienced underwriting, maximum debt to income ratios, and minimum borrower credit scores. Also included in this category are loans that generally support small business lines of credit and agricultural lending neither of which are a material source of business for the Company.
Affordable Housing Entities
The Company invests in private investment funds that make equity investments in multifamily affordable housing ~~projects. The proportional amortization method amortizes the cost of the investment over the period in which the Company will receive~~properties that provide affordable housing tax credits for these investments. The activities of these entities are financed with a combination of invested equity capital and other tax benefits, and the resulting amortization is recognized as a component of income taxes attributable to continuing operations. Historically, these investments were accounted for under the equity method of accounting and the passive losses related to the investments were recognized within noninterest expense. The Company adopted this guidance in the first quarter of 2015 with retrospective application as required by the ASU. Prior period results and related metrics have been recast to conform to this presentation. The recast of prior period information did not have a material impact on the Company’s financial condition or results of operations.
debt. For the three ~~and nine~~ months ended ~~September 30,~~March 31, 2016 and 2015, the Company recognized amortization of ~~$118,000~~$130,000 and ~~$397,000,~~$175,000, respectively, and tax credits of ~~$213,000~~$210,000 and ~~$641,000,~~$257,000, respectively, associated with these investments within “Income tax expense” on the Company’s Consolidated Statements of Income. The carrying value of the Company’s investments in these qualified affordable housing projects was ~~$10.1~~$8.3 million and ~~$10.4~~$8.5 million as of ~~September 30, 2015~~March 31, 2016 and December 31, ~~2014,~~2015, respectively. The Company recorded a liability of ~~$5.1~~$5.5 million for the related unfunded commitments as of ~~September 30, 2015,~~March 31, 2016, which are expected to be paid from ~~2015~~2016 to 2019.

~~Recent~~Adoption of New Accounting ~~Pronouncements~~Standards
~~In January 2015, the FASB issued ASU No. 2015-01, “~~~~Income Statement—Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items~~~~.” The amendments in this ASU eliminate from U.S. GAAP the concept of extraordinary items. Subtopic 225-20,~~~~Income Statement - Extraordinary and Unusual Items~~, required that an entity separately classify, present, and disclose extraordinary events and transactions. Presently, an event or transaction is presumed to be an ordinary and usual activity of the reporting entity unless evidence clearly supports its classification as an extraordinary item. If an event or transaction meets the criteria for extraordinary classification, an entity is required to segregate the extraordinary item from the results of ordinary operations and show the item separately in the income statement, net of tax, after income from continuing operations. The entity also is required to disclose applicable income taxes and either present or disclose earnings-per-share data applicable to the extraordinary item. The amendments in this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted provided that the guidance is applied from the beginning of the fiscal year of adoption. The Company does not expect the adoption of ASU 2015-01 to have a material impact on its consolidated financial statements.
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In February 2015, the FASB issued revised guidance to simplify the consolidation assessment required to evaluate whether organizations should consolidate certain legal entities such as limited partnerships, limited liability corporations, and securitization structures. The guidance also removed the indefinite deferral of specialized guidance for certain investment funds. The Company adopted ASU No. 2015-02, “Amendments to the Consolidation Analysis.” during the first quarter of 2016. The ~~amendments in this~~adoption of ASU ~~amend the consolidation requirements in ASC 810,~~~~Consolidation~~, and significantly change the consolidation analysis required under U.S. GAAP. Under this guidance, limited partnerships will be considered variable interest entities (“VIEs”) unless the limited partners2015-02 did not have ~~either substantive kick-out or participating rights; this amendment will result in more partnerships being considered VIEs, but it will be less likely that~~ a ~~general partner will consolidate a limited partnership. The amendments also change the effect that fees paid to a decision maker or service provider have~~material impact on the consolidation analysis; it is less likely that the fees themselves will be considered a variable interest, that an entity will be a VIE, or that consolidation will result. The changes modify how a reporting entity considers how its variable interests affect its consolidation process; the related party tiebreaker test and mandatory consolidation by one of the related parties will have to be performed less frequently than under current U.S. GAAP. For entities other than limited partnerships, the amendments clarify how to determine whether the equity holders have power over the entity and could affect whether the entity is a VIE. The amendments are expected to result in the deconsolidation of many entities. The amendments in this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted provided that the guidance is applied from the beginning of the fiscal year of adoption. The Company is currently assessing the impact that ASU 2015-02 will have on itsCompany’s consolidated financial statements.

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Recent Accounting Pronouncements
In ~~April 2015,~~January 2016, the FASB issued ASU No. ~~2015-03,~~2016-01, “~~Interest – Imputation~~Recognition and Measurement of ~~Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs~~Financial Assets and Financial Liabilities.” This ASU requires an entity to: (i) measure equity investments at fair value through net income, with certain exceptions; (ii) present in OCI the changes in instrument-specific credit risk for financial liabilities measured using the fair value option; (iii) present financial assets and financial liabilities by measurement category and form of financial asset; (iv) calculate the fair value of financial instruments for disclosure purposes based on an exit price and; (v) assess a valuation allowance on deferred tax assets related to unrealized losses of AFS debt securities in combination with other deferred tax assets. The ASU ~~does not change the existing recognition~~provides an election to subsequently measure certain nonmarketable equity investments at cost less any impairment and ~~measurement guidance~~adjusted for ~~debt issuance costs but~~certain observable price changes. The ASU also requires ~~that debt issuance costs related to~~ a ~~debt liability recorded on the balance sheet be present in the balance sheet as a direct deduction from the carrying amount~~qualitative impairment assessment of ~~that debt liability. The amendments should be disclosed consistent with the~~such equity investments and amends certain fair value disclosure ~~requirement of a change in accounting principle and applied on a retrospective basis.~~requirements. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, ~~2015.~~2017. Early adoption is ~~permitted. The Company does not expect the adoption of ASU 2015-03 to have a material impact on its consolidated financial statements.~~
~~In April 2015, the FASB issued ASU No. 2015-05, “~~~~Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40: Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement~~~~.” This ASU clarifies the circumstances under which a cloud computing customer would account~~only permitted for the arrangement as a license of internal-use software. If a cloud computing arrangement includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses; otherwise, the customer should account for the arrangement as a service contract. The amendments in this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted.provision related to instrument-specific credit risk. The Company is currently assessing the impact of ASU ~~2015-05~~2016-01 will have on its consolidated financial statements.

In ~~August 2015,~~February 2016, the FASB issued ASU No. ~~2015-15,~~2016-02, “~~Interest—Imputation of Interest (Subtopic 835-30): Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements.~~Leases (Topic 842).”This ASU ~~clarifies~~requires lessees to put most leases on their balance sheets but recognize expenses in the income statement in a manner similar to today’s accounting. The guidance also eliminates the real estate-specific provisions and changes the guidance ~~issued within ASU 2015-03 described above. Given~~on sale-leaseback transactions, initial direct costs and lease executory costs for all entities. For lessors, the ~~absence of authoritative guidance within Update 2015-03~~standard modifies the classification criteria and the accounting for debt issuance costs related to line-of-credit arrangements, the SEC staff would not object to an entity presenting the cost of securing a revolving line of credit as an asset, regardless of whether a balance is outstanding. The costs should be amortized over the term of the arrangement.sales-type and direct financing leases. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, ~~2015.~~2018. Early adoption is permitted. The Company is currently assessing the impact ASU 2016-02 will have on its consolidated financial statements.
In March 2016, the FASB issued ASU No. 2016-05, “Derivatives and Hedging (Topic 815): Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships.” This ASU clarifies that a change in the counterparty to a derivative instrument that has been designated as the hedging instrument in an existing hedging relationship would not, in and of itself, be considered a termination of the derivative instrument or a change in a critical term of the hedging relationship. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. Early adoption is permitted. The Company does not expect the adoption of ASU ~~2015-15~~2016-05 to have a material impact on its consolidated financial statements.

In March 2016, the FASB issued ASU No. 2016-06, “Derivatives and Hedging (Topic 815): Contingent Put and Call Options in Debt Instruments.” This ASU clarifies that in assessing whether an embedded contingent put or call option is clearly and closely related to the debt host, an entity is required to perform only the four-step decision sequence in ASC 815-15-25-42 (as amended by the ASU). The entity does not have to separately assess whether the event that triggers its ability to exercise the contingent option is itself indexed only to interest rates or credit risk. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. Early adoption is permitted. The Company does not expect the adoption of ASU 2016-06 to have a material impact on its consolidated financial statements.
In March 2016, the FASB issued ASU No. 2016-07, “Investments – Equity Method and Joint Ventures (Topic 323): Simplifying the Transition to the Equity Method of Accounting.” This ASU simplifies the equity method of accounting by eliminating the requirement to retrospectively apply the equity method to an investment that subsequently qualifies for such accounting as a result of an increase in the level of ownership interest or degree of influence. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. The amendments should be applied prospectively and early adoption is permitted. The Company does not expect the adoption of ASU 2016-07 to have a material impact on its consolidated financial statements.
In March 2016, the FASB issued ASU No. 2016-08, “Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net).” This ASU amends the principal-versus-agent implementation guidance and illustrations in the FASB’s new revenue standard (ASU 2014-09) and clarifies that an entity should evaluate whether it is the principal or the agent for each specified good or service promised in a contract with a customer. The ASU has the same effective date as the new revenue standard (as amended by the one-year deferral and the early adoption provisions in ASU 2015-14). In addition, entities are required to adopt the ASU by using the same transition method they used to adopt the new revenue standard. The Company is currently assessing the impact ASU 2016-08 will have on its consolidated financial statements.
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In March 2016, the FASB issued ASU No. 2016-09, “Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.” This ASU simplifies several aspects of the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. Early adoption is permitted; however, if the Company elects to early adopt, then all amendments must be adopted in the same period. The Company is currently assessing the impact ASU 2016-09 will have on its consolidated financial statements.
In April 2016, the FASB issued ASU No. 2016-10, “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing.” This ASU amends certain aspects of the FASB’s new revenue standard, specifically the standard’s guidance on identifying performance obligations and the implementation guidance on licensing. The amendments in this update affect the guidance in ASU 2014-09,Revenue from Contracts with Customers, which is not yet effective. The ASU has the same effective date as the new revenue standard (as amended by the one-year deferral and the early adoption provisions in ASU 2015-14). The Company is currently assessing the impact ASU 2016-10 will have on its consolidated financial statements.
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2. ~~ACQUISITIONS~~
The Company’s merger and acquisition strategy focuses on high-growth areas with strong market demographics and targets organizations that have a comparable corporate culture, strong performance, and good asset quality, among other factors. On January 1, 2014, the Company completed the acquisition of StellarOne, a bank holding company based in Charlottesville, Virginia, in an all-stock transaction. StellarOne’s common shareholders received 0.9739 shares of the Company’s common stock in exchange for each share of StellarOne’s common stock, resulting in the Company issuing 22,147,874 shares of common stock at a fair value of $549.5 million. The fair value of assets acquired totaled $2.96 billion and liabilities assumed totaled $2.64 billion. As a result of the transaction, StellarOne’s former bank subsidiary, StellarOne Bank, became a wholly owned bank subsidiary of the Company. On May 9, 2014, StellarOne Bank was merged with and into the Bank. Information regarding this acquisition is included in the Company’s 2014 Annual Report on Form 10-K. The Company has not completed any acquisitions of businesses in 2015.
The net effect of the amortization and accretion of premiums and discounts associated with the Company’s acquisition accounting adjustments had the following impact on the Consolidated Statements of Income during the three and nine months ended September 30, 2015 and 2014 (dollars in thousands):
For the Three Months Ended
September 30, For the Nine Months Ended
September 30,
2015 2014 2015 2014
Loans⁽¹⁾ $ 1,364 $ 846 $ 3,055 $ 82
Core deposit intangible⁽²⁾ (2,074 ) (2,391 ) (6,435 ) (7,462 )
Borrowings⁽³⁾ 87 262 362 413
Time deposits⁽⁴⁾ 154 1,998 1,843 7,377
Net impact to income before taxes $ (469 ) $ 715 $ (1,175 ) $ 410

~~(1)~~~~Loan discount accretion is included in "Interest and fees on loans" in the "Interest and dividend income" section of the Company's Consolidated Statements of Income.~~
~~(2)~~~~Core deposit intangible premium amortization is included in "Amortization of intangible assets" in the "Noninterest expense" section of the Company's Consolidated Statements of Income.~~
~~(3)~~~~Borrowings discount accretion is included in "Interest on long-term borrowings" in the "Interest Expense" section of the Company's Consolidated Statements of Income.~~
~~(4)~~ ~~Certificate of deposit discount accretion is included in "Interest on deposits" in the "Interest expense" section of the Company's Consolidated Statements of Income.~~
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3. SECURITIES

Available for Sale
The amortized cost, gross unrealized gains and losses, and estimated fair values of securities available for sale as of ~~September 30, 2015~~March 31, 2016 and December 31, ~~2014~~2015 are summarized as follows (dollars in thousands):

Amortized Gross Unrealized Estimated
Cost Gains (Losses) Fair Value
September 30, 2015
U.S. government and agency securities $ 8,068 $ 343 $ - $ 8,411
Obligations of states and political subdivisions 241,655 8,750 (512 ) 249,893
Corporate bonds 73,917 70 (1,525 ) 72,462
Mortgage-backed securities 539,230 9,122 (635 ) 547,717
Other securities 10,181 28 - 10,209
Total available for sale securities $ 873,051 $ 18,313 $ (2,672 ) $ 888,692

December 31, 2014
U.S. government and agency securities $ 8,313 $ 166 $ (25 ) $ 8,454
Obligations of states and political subdivisions 427,483 18,885 (721 ) 445,647
Corporate bonds 78,744 244 (308 ) 78,680
Mortgage-backed securities 550,716 9,411 (798 ) 559,329
Other securities 9,979 31 (6 ) 10,004
Total available for sale securities $ 1,075,235 $ 28,737 $ (1,858 ) $ 1,102,114
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Amortized Gross Unrealized Estimated
Cost Gains (Losses) Fair Value
March 31, 2016
Obligations of states and political subdivisions $ 254,851 $ 11,267 $ (149 ) $ 265,969
Corporate bonds 95,468 287 (1,989 ) 93,766
Mortgage-backed securities 561,466 8,502 (1,406 ) 568,562
Other securities 11,085 27 - 11,112
Total available for sale securities $ 922,870 $ 20,083 $ (3,544 ) $ 939,409

December 31, 2015
Obligations of states and political subdivisions $ 257,740 $ 10,479 $ (140 ) $ 268,079
Corporate bonds 77,628 55 (1,704 ) 75,979
Mortgage-backed securities 544,823 6,127 (2,779 ) 548,171
Other securities 11,085 - (22 ) 11,063
Total available for sale securities $ 891,276 $ 16,661 $ (4,645 ) $ 903,292

The following table shows the gross unrealized losses and fair value (in thousands) of the Company’s available for sale investments with unrealized losses that are not deemed to be other-than-temporarily ~~impaired.~~impaired as of March 31, 2016 and December 31, 2015. These are aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position.

Less than 12 months More than 12 months Total Less than 12 months More than 12 months Total
Fair Unrealized Fair Unrealized Fair Unrealized Fair Unrealized Fair Unrealized Fair Unrealized
Value Losses Value Losses Value Losses Value Losses Value Losses Value Losses
September 30, 2015
March 31, 2016
Obligations of states and political subdivisions $ 33,742 $ (252 ) $ 6,610 $ (260 ) $ 40,352 $ (512 ) $ 8,407 $ (62 ) $ 2,337 $ (87 ) $ 10,744 $ (149 )
Mortgage-backed securities 118,679 (459 ) 28,026 (176 ) 146,705 (635 ) 167,203 (1,073 ) 27,198 (333 ) 194,401 (1,406 )
Corporate bonds and other securities 24,782 (832 ) 17,886 (693 ) 42,668 (1,525 ) 21,536 (606 ) 28,194 (1,383 ) 49,730 (1,989 )
Total available for sale $ 177,203 $ (1,543 ) $ 52,522 $ (1,129 ) $ 229,725 $ (2,672 ) $ 197,146 $ (1,741 ) $ 57,729 $ (1,803 ) $ 254,875 $ (3,544 )

December 31, 2014
U.S. government and agency securities $ 7,055 $ (25 ) $ - $ - $ 7,055 $ (25 )
December 31, 2015
Obligations of states and political subdivisions 13,602 (93 ) 42,514 (628 ) 56,116 (721 ) $ 8,114 $ (70 ) $ 4,950 $ (70 ) $ 13,064 $ (140 )
Mortgage-backed securities 60,151 (362 ) 49,581 (436 ) 109,732 (798 ) 287,113 (2,442 ) 21,660 (337 ) 308,773 (2,779 )
Corporate bonds and other securities 43,923 (244 ) 4,309 (70 ) 48,232 (314 ) 36,157 (751 ) 19,558 (975 ) 55,715 (1,726 )
Total available for sale $ 124,731 $ (724 ) $ 96,404 $ (1,134 ) $ 221,135 $ (1,858 ) $ 331,384 $ (3,263 ) $ 46,168 $ (1,382 ) $ 377,552 $ (4,645 )

As of ~~September 30, 2015,~~March 31, 2016, there were ~~$52.5~~$57.7 million, or 2218 issues, of individual available for sale securities that had been in a continuous loss position for more than 12 months. ~~Additionally, these~~These securities had an unrealized loss of ~~$1.1~~$1.8 million and consisted of municipal obligations, mortgage-backed securities, and corporate bonds. As of December 31, ~~2014,~~2015, there were ~~$96.4~~$46.2 million, or 6020 issues, of individual securities that had been in a continuous loss position for more than 12 months. ~~Additionally, these~~These securities had an unrealized loss of ~~$1.1~~$1.4 million and consisted of municipal obligations, mortgage-backed securities, corporate bonds, and other securities. The Company has determined that these securities are temporarily impaired as of ~~September 30, 2015~~March 31, 2016 and December 31, ~~2014~~2015 for the reasons set out below:

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~~U.S. Government agencies and corporations.~~ The unrealized losses in this category of investments were caused by interest rate fluctuations. The contractual terms of the investments do not permit the issuer to settle the securities at a price less than the cost basis of each investment. Because the Company does not intend to sell any of the investments and the accounting standard of “more likely than not” has not been met for the Company to be required to sell any of these investments before recovery of its amortized cost basis, which may be maturity, the Company does not consider these investments to be other-than-temporarily impaired.

Mortgage-backed securities. This category’s unrealized losses are primarily the result of interest rate fluctuations. ~~Since~~Because the decline in market value is attributable to changes in interest rates and not credit quality, the Company does not intend to sell the investments, and it is not likely that the Company will be required to sell the investments before recovery of their amortized cost basis, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired. Also, the majority of the Company’s mortgage-backed securities are agency-backed securities, which have a government guarantee.

~~State~~Obligations of state and political subdivisions. This category’s unrealized losses are primarily the result of interest rate fluctuations and also a certain few ratings downgrades brought about by the impact of the economic downturn on states and political subdivisions. The contractual terms of the investments do not permit the issuer to settle the securities at a price less than the cost basis of each investment. Because the Company does not intend to sell any of the investments and the accounting standard of “more likely than not” has not been met for the Company to be required to sell any of the investments before recovery of its amortized cost basis, which may be maturity, the Company does not consider these investments to be other-than-temporarily impaired. ~~As discussed below, one security was identified as containing credit-related OTTI.~~
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Corporate ~~debt securities.~~bonds. The Company’s unrealized losses in corporate debt securities are related to both interest rate fluctuations and ratings downgrades for a limited number of securities. The majority of the securities remain investment grade and the Company’s analysis did not indicate the existence of a credit loss. The contractual terms of the investments do not permit the issuer to settle the securities at a price less than the cost basis of each investment. Because the Company does not intend to sell any of the investments before recovery of its amortized cost basis, which may be maturity, the Company does not consider these investments to be other-than-temporarily impaired.

The following table presents the amortized cost and estimated fair value of available for sale securities as of ~~September 30, 2015~~March 31, 2016 and December 31, ~~2014,~~2015, by contractual maturity (dollars in thousands). Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

September 30, 2015 December 31, 2014 March 31, 2016 December 31, 2015
Amortized Estimated Amortized Estimated Amortized Estimated Amortized Estimated
Cost Fair Value Cost Fair Value Cost Fair Value Cost Fair Value
Due in one year or less $ 16,840 $ 16,904 $ 19,345 $ 19,434 $ 9,703 $ 9,792 $ 8,380 $ 8,370
Due after one year through five years 60,862 62,790 41,545 43,070 94,153 96,641 65,326 66,996
Due after five years through ten years 263,108 269,177 306,900 314,044 316,897 323,902 296,864 301,920
Due after ten years 532,241 539,821 707,445 725,566 502,117 509,074 520,706 526,006
Total securities available for sale $ 873,051 $ 888,692 $ 1,075,235 $ 1,102,114 $ 922,870 $ 939,409 $ 891,276 $ 903,292

The following table presents available for sale securities which were pledged to secure public deposits, repurchase agreements, and for other purposes as permitted or required by law as of ~~September 30, 2015~~March 31, 2016 and December 31, ~~2014~~2015 (dollars in thousands):

March 31, 2016 December 31, 2015
September 30, 2015 December 31, 2014 Estimated Estimated
Fair Value Fair Value Fair Value Fair Value
Public deposits $ 150,632 $ 312,793 $ 182,313 $ 184,635
Repurchase agreements 118,249 51,842 120,351 126,120
Other purposes⁽¹⁾ 30,256 32,360 25,486 26,546
Total pledged securities $ 299,137 $ 396,995 $ 328,150 $ 337,301

(1)The "Other purposes" category consists of borrowings, derivatives, and accounts held at the Bank.
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Held to Maturity
During the second quarter of 2015, the Company transferred securities, which it intends and has the ability to hold until maturity, with a fair value of $201.8 million on the date of transfer, from securities available for sale to securities held to maturity. The Company transferred these securities to held to maturity to reduce the impact of price volatility on capital and in consideration of changes to the regulatory environment. The securities included net pre-tax unrealized gains of $8.1 million at the date of transfer with a remaining balance of ~~$7.3~~$6.4 million as of ~~September 30, 2015.~~March 31, 2016.

The Company reports securities held to maturity on the Consolidated Balance Sheets at carrying value. Carrying value is amortized cost which includes any unamortized unrealized gains and losses recognized in accumulated other comprehensive income prior to reclassifying the securities from securities available for sale to securities held to maturity. Investment securities transferred into the held to maturity category from the available for sale category are recorded at fair value at the date of transfer. The unrealized holding gain or loss at the date of transfer is retained in accumulated other comprehensive income and in the carrying value of the securities held to maturity. Such unrealized gains/(losses) are accreted over the remaining life of the security with no impact on future net income.

~~- 12 -~~
The carrying value, gross unrealized gains and losses, and estimated fair values of securities held to maturity as of ~~September 30,~~March 31, 2016 and December 31, 2015 are summarized as follows (dollars in thousands):

Carrying Gross Unrealized Estimated Carrying Gross Unrealized Estimated
Value⁽¹⁾ Gains (Losses) Fair Value Value⁽¹⁾ Gains (Losses) Fair Value
September 30, 2015
March 31, 2016
Obligations of states and political subdivisions $ 199,363 $ 2,882 $ (1,926 ) $ 200,319 $ 204,444 $ 7,436 $ (1,531 ) $ 210,349

December 31, 2015
Obligations of states and political subdivisions $ 205,374 $ 5,748 $ (1,685 ) $ 209,437

⁽¹⁾The carrying value includes ~~$7.3~~$6.4 million of net unrealized gains ~~and losses~~ present at the time of transfer from available for securities, net of any accretion.

The following table shows the gross unrealized losses and fair value (in thousands) of the Company’s held to maturity securities with unrealized losses that are not deemed to be other-than-temporarily ~~impaired.~~impaired as of March 31, 2016 and December 31, 2015. These are aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position.

Less than 12 months More than 12 months Total Less than 12 months More than 12 months Total
Fair Unrealized Fair Unrealized Fair Unrealized Fair Unrealized Fair Unrealized Fair Unrealized
Value Losses Value Losses Value Losses Value Losses Value Losses Value Losses
September 30, 2015
March 31, 2016
Obligations of states and political subdivisions $ 28,727 $ (1,926 ) $ - $ - $ 28,727 $ (1,926 ) $ 3,210 $ (1,531 ) $ - $ - $ 3,210 $ (1,531 )

December 31, 2015
Obligations of states and political subdivisions $ 7,056 $ (1,685 ) $ - $ - $ 7,056 $ (1,685 )
- 13 -

The following table presents the amortized cost and estimated fair value of held to maturity securities as of ~~September 30,~~March 31, 2016 and December 31, 2015, by contractual maturity (dollars in thousands). Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

September 30, 2015 March 31, 2016 December 31, 2015
Carrying Estimated Carrying Estimated Carrying Estimated
Value⁽¹⁾ Fair Value Value⁽¹⁾ Fair Value Value⁽¹⁾ Fair Value
Due in one year or less $ 1,314 $ 1,321 $ 1,477 $ 1,479 $ 1,488 $ 1,491
Due after one year through five years 5,217 5,267 7,907 8,046 4,294 4,348
Due after five years through ten years 39,392 39,521 49,884 51,178 44,736 45,501
Due after ten years 153,440 154,210 145,176 149,646 154,856 158,097
Total securities held to maturity $ 199,363 $ 200,319 $ 204,444 $ 210,349 $ 205,374 $ 209,437

⁽¹⁾ The carrying value includes ~~$7.3~~$6.4 million of net unrealized gains ~~and losses~~ present at the time of transfer from available for securities, net of any accretion.

The following table presents held to maturity securities which were pledged to secure public deposits as permitted or required by law as of ~~September 30,~~March 31, 2016 and December 31, 2015 (dollars in thousands):
September 30, 2015 March 31, 2016 December 31, 2015
Fair Estimated Estimated
Value Fair Value Fair Value
Public deposits $ 200,319 $ 210,349 $ 207,140
Total pledged securities $ 200,319 $ 210,349 $ 207,140
~~- 13 -~~
Restricted Stock, at cost
Due to restrictions placed upon the Bank’s common stock investment in the Federal Reserve Bank and FHLB, these securities have been classified as restricted equity securities and carried at cost. These restricted securities are not subject to the investment security classifications and are included as a separate line item on the Company’s Consolidated Balance Sheets. At ~~September 30,~~March 31, 2016 and December 31, 2015, the FHLB required the Bank to maintain stock in an amount equal to 4.25% ~~of outstanding borrowings and a specific percentage of the Bank’s total assets. At December 31, 2014, the FHLB required the Bank to maintain stock in an amount equal to 4.5%~~ of outstanding borrowings and a specific percentage of the Bank’s total assets. The Federal Reserve Bank required the Bank to maintain stock with a par value equal to 6% of its outstanding capital at both ~~September 30, 2015~~March 31, 2016 and December 31, ~~2014.~~2015. Restricted equity securities consist of Federal Reserve Bank stock in the amount of $23.8 million for both ~~September 30, 2015~~March 31, 2016 and December 31, ~~2014~~2015 and FHLB stock in the amount of ~~$28.9~~$34.4 million and ~~$31.0~~$28.0 million as of ~~September 30, 2015~~March 31, 2016 and December 31, ~~2014,~~2015, respectively.

Other-Than-Temporary-Impairment
During each quarter, the Company conducts an assessment of the securities portfolio for OTTI consideration. The assessment considers factors such as external credit ratings, delinquency coverage ratios, market price, management’s judgment, expectations of future performance, and relevant industry research and analysis. An impairment is other-than-temporary if any of the following conditions exist: the entity intends to sell the security; it is more likely than not that the entity will be required to sell the security before recovery of its amortized cost basis; or the entity does not expect to recover the security’s entire amortized cost basis (even if the entity does not intend to sell). If a credit loss exists, but an entity does not intend to sell the impaired debt security and is not more likely than not to be required to sell before recovery, the impairment is other-than-temporary and should be separated into a credit portion to be recognized in earnings and the remaining amount relating to all other factors recognized as other comprehensive loss. Based on the assessment for the quarter ended ~~September 30, 2015~~March 31, 2016, and in accordance with the guidance, no OTTI was recognized. For the year ended December 31, 2015, the Company determined that a municipal security in the available for sale portfolio incurred credit-related OTTI of ~~$300,000, which was recognized in earnings for~~$300,000. During the quarter ended ~~September 30, 2015.~~March 31, 2016, the municipal security was sold. As a result, the Company recognized an additional loss on sale of the previously written down security.
- 14 -
Realized Gains and Losses
The following table presents the gross realized gains and losses on the sale of securities available for sale and the proceeds from the sale of securities during the three ~~and nine~~ months ended ~~September 30,~~March 31, 2016 and 2015 (dollars in thousands). The Company did not sell any investment securities that are held to maturity.

Three months ended Nine months ended
September 30, 2015 September 30, 2015
Realized gains (losses):
Gross realized gains $ 75 $ 759
Gross realized losses - (87 )
Net realized gains $ 75 $ 672

Proceeds from sales of securities $ 5,771 $ 63,928
The following table presents the gross realized gains and losses on the sale of securities available for sale and the proceeds from the sale of securities during the three and nine months ended September 30, 2014 (dollars in thousands).
Three months ended Nine months ended
September 30, 2014 September 30, 2014
Realized gains (losses):
Gross realized gains $ 1,034 $ 1,498
Gross realized losses (39 ) (49 )
Net realized gains $ 995 $ 1,449

Proceeds from sales of securities $ 14,370 $ 273,447
~~- 14 -~~
Three months ended
March 31, 2016 March 31, 2015
Realized gains (losses):
Gross realized gains $ 239 $ 193
Gross realized losses (96 ) -
Net realized gains $ 143 $ 193

Proceeds from sales of securities $ 14,532 $ 12,499

4.3. LOANS AND ALLOWANCE FOR LOAN LOSSES

Loans are stated at their face amount, net of deferred fees and costs, and consist of the following at ~~September 30, 2015~~March 31, 2016 and December 31, ~~2014 (dollars in thousands):~~
September 30, December 31,
2015 2014
Commercial:
Commercial Construction $ 429,645 $ 341,280
Commercial Real Estate - Owner Occupied 863,551 875,443
Commercial Real Estate - Non-Owner Occupied 1,586,334 1,509,159
Raw Land and Lots 187,182 211,225
Single Family Investment Real Estate 436,340 412,494
Commercial and Industrial 444,199 393,776
Other Commercial 89,344 81,106
Consumer:
Mortgage 466,418 478,151
Consumer Construction 55,718 74,168
Indirect Auto 217,928 199,411
Indirect Marine 42,763 43,190
HELOCs 492,202 500,579
Credit Card - 24,225
Other Consumer 231,997 201,789
Total $ 5,543,621 $ 5,345,996
~~The following table shows the aging of the Company’s loan portfolio, by class, at September 30,~~ 2015 (dollars in thousands):

March 31, December 31,
2016 2015
Construction and Land Development $ 776,698 $ 749,720
Commercial Real Estate - Owner Occupied 849,202 860,086
Commercial Real Estate - Non-Owner Occupied 1,296,251 1,270,480
Multifamily Real Estate 323,270 322,528
Commercial & Industrial 453,208 435,365
Residential 1-4 Family 978,478 978,469
Auto 241,737 234,061
HELOC 517,122 516,726
Consumer and all other 344,536 304,027
Total loans held for investment, net⁽¹⁾ $ 5,780,502 $ 5,671,462
30-59 Days
Past Due 60-89 Days
Past Due Greater Than 90
Days and still
Accruing PCI Nonaccrual Current Total Loans
Commercial:
Commercial Construction $ 296 $ - $ 126 $ 2,459 $ 1,786 $ 424,978 $ 429,645
Commercial Real Estate - Owner Occupied 1,148 165 680 28,695 3,989 828,874 863,551
Commercial Real Estate - Non-Owner Occupied 752 974 1,821 15,172 200 1,567,415 1,586,334
Raw Land and Lots 93 - - 5,141 493 181,455 187,182
Single Family Investment Real Estate 536 35 228 15,167 1,157 419,217 436,340
Commercial and Industrial 721 696 494 2,249 903 439,136 444,199
Other Commercial 643 - - 793 61 87,847 89,344
Consumer:
Mortgage 2,485 5,079 875 5,561 2,276 450,142 466,418
Consumer Construction 250 - - 251 819 54,398 55,718
Indirect Auto 1,319 270 116 - 89 216,134 217,928
Indirect Marine 150 - 94 - - 42,519 42,763
HELOCs 3,192 1,085 282 1,812 611 485,220 492,202
Other Consumer 1,521 966 448 1,306 582 227,174 231,997
Total $ 13,106 $ 9,270 $ 5,164 $ 78,606 $ 12,966 $ 5,424,509 $ 5,543,621
⁽¹⁾ Loans, as presented, are net of deferred fees and costs totaling $3.6 million and $3.0 million as of March 31, 2016 and December 31, 2015, respectively.

~~- 15 -~~
- 15 -

The following table shows the aging of the Company’s loan portfolio, by ~~class,~~segment, at ~~December~~March 31, ~~2014~~2016 (dollars in thousands):

30-59 Days
Past Due 60-89 Days
Past Due Greater Than
90 Days and
still Accruing PCI Nonaccrual Current Total Loans
Commercial:
Commercial Construction $ 815 $ - $ - $ 3,782 $ 968 $ 335,715 $ 341,280
Commercial Real Estate - Owner Occupied 621 1,542 1,683 31,167 1,060 839,370 875,443
Commercial Real Estate - Non-Owner Occupied 3,984 237 91 28,869 5,902 1,470,076 1,509,159
Raw Land and Lots 145 44 194 7,427 2,359 201,056 211,225
Single Family Investment Real Estate 2,825 338 734 16,879 2,070 389,648 412,494
Commercial and Industrial 1,250 529 549 3,855 3,286 384,307 393,776
Other Commercial 42 2 - 2,256 74 78,732 81,106
Consumer:
Mortgage 12,851 4,300 4,095 7,394 2,485 447,026 478,151
Consumer Construction 120 - 844 516 - 72,688 74,168
Indirect Auto 1,593 263 317 - - 197,238 199,411
Indirect Marine 150 - - - 201 42,839 43,190
HELOCs 3,082 955 820 2,000 258 493,464 500,579
Credit Card 232 108 219 - - 23,666 24,225
Other Consumer 1,587 412 501 1,643 592 197,054 201,789
Total $ 29,297 $ 8,730 $ 10,047 $ 105,788 $ 19,255 $ 5,172,879 $ 5,345,996
30-59 Days
Past Due 60-89 Days
Past Due Greater than 90
Days and still
Accruing PCI Nonaccrual Current Total Loans
Construction and Land Development $ 2,676 $ 724 $ 544 $ 5,137 $ 2,156 $ 765,461 $ 776,698
Commercial Real Estate - Owner Occupied 1,787 963 196 27,260 2,816 816,180 849,202
Commercial Real Estate - Non-Owner Occupied 24 276 723 13,636 - 1,281,592 1,296,251
Multifamily Real Estate 155 - - 2,132 - 320,983 323,270
Commercial & Industrial 985 284 422 1,571 810 449,136 453,208
Residential 1-4 Family 13,711 1,111 2,247 18,305 5,696 937,408 978,478
Auto 1,519 126 53 - 162 239,877 241,737
HELOC 1,870 388 1,315 1,535 973 511,041 517,122
Consumer and all other 736 1,996 223 529 479 340,573 344,536
Total Loans Held For Investment $ 23,463 $ 5,868 $ 5,723 $ 70,105 $ 13,092 $ 5,662,251 $ 5,780,502

The following table shows the ~~PCI commercial and consumer~~aging of the Company’s loan ~~portfolios,~~portfolio, by ~~class and their delinquency status,~~segment, at
~~September 30,~~ December 31, 2015 (dollars in thousands):

30-89 Days
Past Due Greater than
90 Days Current Total
Commercial:
Commercial Construction $ - $ 459 $ 2,000 $ 2,459
Commercial Real Estate - Owner Occupied 1,024 1,752 25,919 28,695
Commercial Real Estate - Non-Owner Occupied 1,202 392 13,578 15,172
Raw Land and Lots 196 70 4,875 5,141
Single Family Investment Real Estate 1,225 646 13,296 15,167
Commercial and Industrial 412 69 1,768 2,249
Other Commercial 31 63 699 793
Consumer:
Mortgage 597 1,612 3,352 5,561
Consumer Construction - 251 - 251
HELOCs 244 365 1,203 1,812
Other Consumer 47 60 1,199 1,306
Total $ 4,978 $ 5,739 $ 67,889 $ 78,606
30-59 Days
Past Due 60-89 Days
Past Due Greater than 90
Days and still
Accruing PCI Nonaccrual Current Total Loans
Construction and Land Development $ 3,155 $ 380 $ 128 $ 5,986 $ 2,113 $ 737,958 $ 749,720
Commercial Real Estate - Owner Occupied 1,714 118 103 27,388 3,904 826,859 860,086
Commercial Real Estate - Non-Owner Occupied 771 - 723 13,519 100 1,255,367 1,270,480
Multifamily Real Estate - - 272 1,555 - 320,701 322,528
Commercial & Industrial 1,056 27 124 1,813 429 431,916 435,365
Residential 1-4 Family 15,023 6,774 3,638 21,159 3,563 928,312 978,469
Auto 2,312 233 60 - 192 231,264 234,061
HELOC 2,589 1,112 762 1,791 1,348 509,124 516,726
Consumer and all other 1,167 689 19 526 287 301,339 304,027
Total Loans Held For Investment $ 27,787 $ 9,333 $ 5,829 $ 73,737 $ 11,936 $ 5,542,840 $ 5,671,462

~~- 16 -~~
- 16 -

The following table shows the PCI ~~commercial and consumer~~ loan portfolios, by ~~class~~segment and their delinquency status, at March 31, 2016 (dollars in thousands):
30-89 Days Past
Due Greater than 90
Days Current Total
Construction and Land Development $ 354 $ 239 $ 4,544 $ 5,137
Commercial Real Estate - Owner Occupied 1,401 1,425 24,434 27,260
Commercial Real Estate - Non-Owner Occupied 745 205 12,686 13,636
Multifamily Real Estate - - 2,132 2,132
Commercial & Industrial 196 39 1,336 1,571
Residential 1-4 Family 1,917 1,048 15,340 18,305
HELOC 163 546 826 1,535
Consumer and all other - - 529 529
Total $ 4,776 $ 3,502 $ 61,827 $ 70,105
The following table shows the PCI loan portfolios, by segment and their delinquency status, at December 31, ~~2014~~2015 (dollars in thousands):

30-89 Days
Past Due Greater than
90 Days Current Total
Commercial:
Commercial Construction $ - $ 652 $ 3,130 $ 3,782
Commercial Real Estate - Owner Occupied 1,138 843 29,186 31,167
Commercial Real Estate - Non-Owner Occupied 523 1,255 27,091 28,869
Raw Land and Lots 522 - 6,905 7,427
Single Family Investment Real Estate 1,327 1,311 14,241 16,879
Commercial and Industrial 144 538 3,173 3,855
Other Commercial 107 1,133 1,016 2,256
Consumer:
Mortgage 1,975 2,866 2,553 7,394
Consumer Construction - 516 - 516
HELOCs 356 728 916 2,000
Other Consumer 89 171 1,383 1,643
Total $ 6,181 $ 10,013 $ 89,594 $ 105,788
30-89 Days Past
Due Greater than 90
Days Current Total
Construction and Land Development $ 369 $ 241 $ 5,376 $ 5,986
Commercial Real Estate - Owner Occupied 1,139 1,412 24,837 27,388
Commercial Real Estate - Non-Owner Occupied 755 202 12,562 13,519
Multifamily Real Estate - - 1,555 1,555
Commercial & Industrial 209 21 1,583 1,813
Residential 1-4 Family 2,143 1,923 17,093 21,159
HELOC 410 458 923 1,791
Consumer and all other - - 526 526
Total $ 5,025 $ 4,257 $ 64,455 $ 73,737

~~- 17 -~~
- 17 -

The Company measures the amount of impairment by evaluating loans either in their collective homogeneous pools or individually. The following table shows the Company’s impaired loans, excluding PCI loans related to the StellarOne acquisition, by ~~class~~segment at ~~September 30,~~March 31, 2016 and December 31, 2015 (dollars in thousands):

Recorded
Investment Unpaid
Principal
Balance Related
Allowance YTD
Average
Investment Interest
Income
Recognized
Loans without a specific allowance
Commercial:
Commercial Construction $ 5,760 $ 6,036 $ - $ 5,126 $ 187
Commercial Real Estate - Owner Occupied 11,801 11,998 - 11,602 356
Commercial Real Estate - Non-Owner Occupied 6,854 7,166 - 7,025 212
Raw Land and Lots 24,762 24,896 - 25,595 1,290
Single Family Investment Real Estate 2,295 2,721 - 2,455 99
Commercial and Industrial 1,983 2,532 - 2,115 47
Other Commercial 876 876 - 895 41
Consumer:
Mortgage 333 333 - 333 8
Consumer Construction 819 821 - 822 29
HELOCs 196 331 - 310 10
Other Consumer 216 339 - 285 15
Total impaired loans without a specific allowance $ 55,895 $ 58,049 $ - $ 56,563 $ 2,294

Loans with a specific allowance
Commercial:
Commercial Construction $ 561 $ 561 $ 40 $ 629 $ 16
Commercial Real Estate - Owner Occupied 6,763 7,874 677 7,107 191
Commercial Real Estate - Non-Owner Occupied 6,863 6,864 178 6,870 304
Raw Land and Lots 1,224 1,221 60 978 34
Single Family Investment Real Estate 3,018 3,035 212 3,052 113
Commercial and Industrial 2,581 2,640 330 2,684 100
Other Commercial 423 451 32 475 16
Consumer:
Mortgage 3,273 3,522 362 3,495 64
Indirect Auto 89 95 1 121 5
HELOCs 1,008 1,038 5 1,032 24
Other Consumer 525 720 115 635 17
Total impaired loans with a specific allowance $ 26,328 $ 28,021 $ 2,012 $ 27,078 $ 884
Total impaired loans $ 82,223 $ 86,070 $ 2,012 $ 83,641 $ 3,178
~~- 18 -~~
March 31, 2016 December 31, 2015
Recorded
Investment Unpaid
Principal
Balance Related
Allowance Recorded
Investment Unpaid
Principal
Balance Related
Allowance
Loans without a specific allowance
Construction and Land Development $ 28,854 $ 29,141 $ - $ 33,250 $ 33,731 $ -
Commercial Real Estate - Owner Occupied 14,081 15,627 - 7,781 8,983 -
Commercial Real Estate - Non-Owner Occupied 3,931 3,931 - 5,328 5,325 -
Multifamily Real Estate 3,803 3,803 - 3,828 3,828 -
Commercial & Industrial 1,233 1,559 - 711 951 -
Residential 1-4 Family 10,196 11,113 - 7,564 8,829 -
Auto - - - 7 7 -
HELOC 1,944 2,054 - 1,786 2,028 -
Consumer and all other 716 819 - 211 211 -
Total impaired loans without a specific allowance $ 64,758 $ 68,047 $ - $ 60,466 $ 63,893 $ -

Loans with a specific allowance
Construction and Land Development $ 1,925 $ 2,139 $ 500 $ 3,167 $ 3,218 $ 538
Commercial Real Estate - Owner Occupied 1,945 1,983 81 3,237 3,239 358
Commercial Real Estate - Non-Owner Occupied 272 272 1 907 907 75
Commercial & Industrial 2,068 2,242 467 1,952 1,949 441
Residential 1-4 Family 4,362 4,541 414 6,065 6,153 418
Auto 162 214 1 192 199 1
HELOC 889 942 28 769 925 76
Consumer and all other 53 361 1 363 512 95
Total impaired loans with a specific allowance $ 11,676 $ 12,694 $ 1,493 $ 16,652 $ 17,102 $ 2,002
Total impaired loans $ 76,434 $ 80,741 $ 1,493 $ 77,118 $ 80,995 $ 2,002

The following table shows the year-to-date average balance and interest income recognized for the Company’s impaired loans, excluding PCI loans related to the StellarOne acquisition, by ~~class, at December~~segment for the three months ended March 31, ~~2014~~2016 and 2015 (dollars in thousands):

Recorded
Investment Unpaid
Principal
Balance Related
Allowance YTD
Average
Investment Interest
Income
Recognized
Loans without a specific allowance
Commercial:
Commercial Construction $ 5,281 $ 5,367 $ - $ 5,755 $ 165
Commercial Real Estate - Owner Occupied 15,722 16,430 - 16,774 737
Commercial Real Estate - Non-Owner Occupied 22,917 22,917 - 23,209 1,116
Raw Land and Lots 44,790 47,662 - 47,988 2,124
Single Family Investment Real Estate 4,197 4,881 - 6,534 170
Commercial and Industrial 4,453 7,933 - 5,070 121
Other Commercial 1,536 1,538 - 1,624 90
Consumer:
Mortgage 1,571 1,582 - 1,583 58
Indirect Auto - 6 - 4 -
Indirect Marine 201 505 - 281 -
HELOCs 559 699 - 573 8
Other Consumer 89 208 - 107 -
Total impaired loans without a specific allowance $ 101,316 $ 109,728 $ - $ 109,502 $ 4,589

Loans with a specific allowance
Commercial:
Commercial Construction $ 570 $ 570 $ 51 $ 506 $ 13
Commercial Real Estate - Owner Occupied 5,951 5,999 355 5,946 280
Commercial Real Estate - Non-Owner Occupied 10,575 10,572 2,017 10,823 474
Raw Land and Lots 1,343 1,373 98 1,472 59
Single Family Investment Real Estate 4,125 4,144 562 4,293 159
Commercial and Industrial 2,938 3,009 582 3,125 138
Other Commercial 359 378 32 442 29
Consumer:
Mortgage 3,323 3,375 481 3,381 60
Consumer Construction 375 375 34 373 19
Indirect Marine 192 192 5 199 15
HELOCs 434 434 4 436 17
Other Consumer 679 706 310 686 19
Total impaired loans with a specific allowance $ 30,864 $ 31,127 $ 4,531 $ 31,682 $ 1,282
Total impaired loans $ 132,180 $ 140,855 $ 4,531 $ 141,184 $ 5,871
Three Months Ended
March 31, 2016 Three Months Ended
March 31, 2015
YTD Average
Investment Interest Income
Recognized YTD Average
Investment Interest Income
Recognized
Construction and Land Development $ 30,569 $ 484 $ 49,087 $ 556
Commercial Real Estate - Owner Occupied 16,510 157 23,757 265
Commercial Real Estate - Non-Owner Occupied 4,214 41 18,664 147
Multifamily Real Estate 3,817 60 4,596 69
Commercial & Industrial 3,663 37 6,054 50
Residential 1-4 Family 15,301 106 14,566 116
Auto 218 - 4 -
HELOC 2,933 21 1,411 7
Consumer and all other 982 6 1,177 11
Total impaired loans without a specific allowance $ 78,207 $ 912 $ 119,316 $ 1,221
- 18 -

The Company considers TDRs to be impaired loans. A modification of a loan’s terms constitutes a TDR if the creditor grants a concession that it would not otherwise consider to the borrower for economic or legal reasons related to the borrower’s financial difficulties. TDRs totaled ~~$11.6~~$13.0 million and ~~$26.8~~$12.7 million as of ~~September 30, 2015~~March 31, 2016 and December 31, ~~2014,~~2015, respectively. All loans that are considered to be TDRs are evaluated for impairment in accordance with the Company’s allowance for loan loss methodology and are included in the preceding impaired loan tables. For the quarter ended ~~September 30, 2015,~~March 31, 2016, the recorded investment in restructured loans prior to modifications was not materially impacted by the modification.

~~- 19 -~~
The following table provides a summary, by ~~class,~~segment, of modified loans that continue to accrue interest under the terms of the restructuring agreement, which are considered to be performing, and modified loans that have been placed on nonaccrual status, which are considered to be nonperforming, as of ~~September 30, 2015~~March 31, 2016 and December 31, ~~2014~~2015 (dollars in thousands):

September 30, 2015 December 31, 2014
No. of
Loans Recorded
Investment Outstanding
Commitment No. of
Loans Recorded
Investment Outstanding
Commitment
Performing
Commercial:
Commercial Construction 1 $ 296 $ - 1 $ 707 $ -
Commercial Real Estate - Owner Occupied 5 1,608 - 3 682 -
Commercial Real Estate - Non-Owner Occupied 2 2,390 - 3 3,362 -
Raw Land and Lots 5 3,081 - 9 14,777 -
Single Family Investment Real Estate 2 444 - 6 1,046 -
Commercial and Industrial 3 103 - 9 722 -
Other Commercial 1 128 - 1 191 -
Consumer:
Mortgage 7 1,331 - 7 1,244 -
Other Consumer 2 87 - 3 98 -
Total performing 28 $ 9,468 $ - 42 $ 22,829 $ -

Nonperforming
Commercial:
Commercial Construction 1 $ 126 $ - 1 $ 253 $ -
Commercial Real Estate - Owner Occupied 1 140 - 2 153 -
Commercial Real Estate - Non-Owner Occupied 1 200 - 1 539 -
Raw Land and Lots 1 33 - 2 1,053 -
Single Family Investment Real Estate 2 234 - 1 433 -
Commercial and Industrial 3 485 - 5 616 -
Other Commercial 1 61 - 1 74 -
Consumer:
Mortgage 3 771 - 2 770 -
Other Consumer 1 37 - 1 57 -
Total nonperforming 14 $ 2,087 $ - 16 $ 3,948 $ -

Total performing and nonperforming 42 $ 11,555 $ - 58 $ 26,777 $ -
March 31, 2016 December 31, 2015
No. of
Loans Recorded
Investment Outstanding
Commitment No. of
Loans Recorded
Investment Outstanding
Commitment
Performing
Construction and Land Development 6 $ 3,320 $ - 6 $ 3,349 $ -
Commercial Real Estate - Owner Occupied 6 2,223 - 5 1,530 -
Commercial Real Estate - Non-Owner Occupied 2 2,390 - 2 2,390 -
Commercial & Industrial 4 229 - 5 261 -
Residential 1-4 Family 26 3,249 - 27 3,173 -
Consumer and all other 1 75 - 1 77 -
Total performing 45 $ 11,486 $ - 46 $ 10,780 $ -

Nonperforming
Construction and Land Development 2 $ 215 $ - 2 $ 321 $ -
Commercial Real Estate - Owner Occupied 1 132 - 1 137 -
Commercial & Industrial - - - 1 2 -
Residential 1-4 Family 6 1,123 - 6 1,142 -
HELOC - - - 1 319 -
Total nonperforming 9 $ 1,470 $ - 11 $ 1,921 $ -

Total performing and nonperforming 54 $ 12,956 $ - 57 $ 12,701 $ -

The Company considers a default of a restructured loan to occur when the borrower is 90 days past due following the restructure or a foreclosure and repossession of the applicable collateral occurs. During the three ~~and nine~~ months ended ~~September 30,~~March 31, 2016 and 2015, the Company did not identify any restructured loans that went into default that had been restructured in the twelve-month period prior to default. During the three months ended September 30, 2014, the Company did not identify any restructured loans that went into default that had been restructured in the twelve-month period prior to default. During the nine months ended September 30, 2014, the Company identified one loan, totaling approximately $24,000, that went into default that had been restructured in the twelve-month period prior to the time of default. This loan was a mortgage loan which had a term modification at a market rate.
~~- 20 -~~

The following table shows, by ~~class~~segment and modification type, TDRs that occurred during the three ~~and nine~~ months ended ~~September 30,~~March 31, 2016 and 2015 (dollars in thousands):

Three months ended Nine months ended
September 30, 2015 September 30, 2015
No. of
Loans Recorded
Investment at
Period End No. of
Loans Recorded
Investment at
Period End
Term modification, at a market rate
Commercial:
Commercial Real Estate - Owner Occupied - $ - 1 $ 117
Commercial and Industrial - - 1 17
Total loan term extended at a market rate - $ - 2 $ 134

Term modification, below market rate
Commercial:
Commercial Real Estate - Owner Occupied - $ - 1 $ 871
Raw Land and Lots 1 400 1 400
Consumer:
Mortgage 2 619 2 619
Other Consumer 1 55 1 55
Total loan term extended at a below market rate 4 $ 1,074 5 $ 1,945

Total 4 $ 1,074 7 $ 2,079
~~The following table shows, by class and modification type, TDRs that occurred during the three and nine months ended September 30, 2014 (dollars in thousands):~~
Three months ended Nine months ended
September 30, 2014 September 30, 2014
No. of
Loans Recorded
Investment at
Period End No. of
Loans Recorded
Investment at
Period End
Term modification, at a market rate
Commercial:
Commercial Real Estate - Non-Owner Occupied 1 $ 989 1 $ 989
Single Family Investment Real Estate - - 1 110
Commercial and Industrial - - 1 33
Other Commercial - - 2 269
Total loan term extended at a market rate 1 $ 989 5 $ 1,401

Total 1 $ 989 5 $ 1,401
Three months ended Three months ended
March 31, 2016 March 31, 2015
No. of
Loans Recorded
Investment at
Period End No. of
Loans Recorded
Investment at
Period End
Term modification, at a market rate
Commercial Real Estate - Owner Occupied 1 $ 709 - $ -
Commercial & Industrial - - 1 19
Residential 1-4 Family 1 378 - -
Total loan term extended at a market rate 2 $ 1,087 1 $ 19

Total 2 $ 1,087 1 $ 19

~~- 21 -~~
- 19 -

The following table shows the allowance for loan loss activity, balances for allowance for loan losses, and loan balances based on impairment methodology by ~~portfolio~~ segment for the ~~nine~~three months ended and as of ~~September 30, 2015.~~March 31, 2016. The table below includes the provision for loan losses. As discussed in Note 1 “Accounting Policies,” the Company enhanced its loan segmentation for purposes of the allowance calculation as well as its disclosures. The impact of this enhancement is reflected in the provision amounts in the table below. In addition, a ~~$300,000~~$100,000 provision was recognized during the ~~nine~~three months ended ~~September 30, 2015~~March 31, 2016 for unfunded loan commitments for which the reserves are recorded as a component of “Other Liabilities” on the Company’s Consolidated Balance Sheets. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories (dollars in thousands):

Commercial Consumer Total
Allowance for loan losses:
Balance, beginning of the year $ 22,352 $ 10,032 $ 32,384
Recoveries credited to allowance 1,921 1,073 2,994
Loans charged off (6,013 ) (3,357 ) (9,370 )
Provision charged to operations 5,364 1,897 7,261
Balance, end of period $ 23,624 $ 9,645 $ 33,269

Ending Balance, ALL:
Loans individually evaluated for impairment $ 1,529 $ 483 $ 2,012
Loans collectively evaluated for impairment 22,095 9,162 31,257
Loans acquired with deteriorated credit quality - - -
Total $ 23,624 $ 9,645 $ 33,269

Ending Balance, Loans:
Loans individually evaluated for impairment $ 75,308 $ 6,310 $ 81,618
Loans collectively evaluated for impairment 3,891,611 1,491,786 5,383,397
Loans acquired with deteriorated credit quality 69,676 8,930 78,606
Total $ 4,036,595 $ 1,507,026 $ 5,543,621
Allowance for loan losses
Balance,
beginning of the
year Recoveries
credited to
allowance Loans charged
off Provision
charged to
operations Balance, end of
period

Construction and Land Development $ 6,040 $ 19 $ (93 ) $ 5,055 $ 11,021
Commercial Real Estate - Owner Occupied 4,614 46 (772 ) (477 ) 3,411
Commercial Real Estate - Non-Owner Occupied 6,929 - - (2,445 ) 4,484
Multifamily Real Estate 1,606 - - (204 ) 1,402
Commercial & Industrial 3,163 238 (617 ) 1,441 4,225
Residential 1-4 Family 5,414 243 (153 ) 471 5,975
Auto 1,703 84 (365 ) (615 ) 807
HELOC 2,934 83 (409 ) (1,325 ) 1,283
Consumer and all other 1,644 115 (571 ) 603 1,791
Total $ 34,047 $ 828 $ (2,980 ) $ 2,504 $ 34,399
Loans individually evaluated
for impairment Loans collectively evaluated for
impairment Loans acquired with
deteriorated credit quality Total
Loans ALL Loans ALL Loans ALL Loans ALL

Construction and Land Development $ 30,779 $ 500 $ 740,782 $ 10,521 $ 5,137 $ - $ 776,698 $ 11,021
Commercial Real Estate - Owner Occupied 16,026 81 805,916 3,330 27,260 - 849,202 3,411
Commercial Real Estate - Non-Owner Occupied 4,203 1 1,278,412 4,483 13,636 - 1,296,251 4,484
Multifamily Real Estate 3,803 - 317,335 1,402 2,132 - 323,270 1,402
Commercial & Industrial 3,301 467 448,336 3,758 1,571 - 453,208 4,225
Residential 1-4 Family 14,558 414 945,615 5,561 18,305 - 978,478 5,975
Auto 162 1 241,575 806 - - 241,737 807
HELOC 2,833 28 512,754 1,255 1,535 - 517,122 1,283
Consumer and all other 769 1 343,238 1,790 529 - 344,536 1,791
Total loans held for investment, net $ 76,434 $ 1,493 $ 5,633,963 $ 32,906 $ 70,105 $ - $ 5,780,502 $ 34,399
- 20 -

The following table shows the allowance for loan loss activity, balances for allowance for loan losses, and loan balances based on impairment methodology by ~~portfolio~~ segment for the ~~nine~~three months ended and as of ~~September 30, 2014.~~March 31, 2015. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories (dollars in thousands):

Commercial Consumer Total
Allowance for loan losses:
Balance, beginning of the year $ 19,908 $ 10,227 $ 30,135
Recoveries credited to allowance 1,999 866 2,865
Loans charged off (1,991 ) (2,200 ) (4,191 )
Provision charged to operations 1,507 1,793 3,300
Balance, end of period $ 21,423 $ 10,686 $ 32,109

Ending Balance, ALL:
Loans individually evaluated for impairment $ 3,183 $ 922 $ 4,105
Loans collectively evaluated for impairment 18,240 9,764 28,004
Loans acquired with deteriorated credit quality - - -
Total $ 21,423 $ 10,686 $ 32,109

Ending Balance, Loans:
Loans individually evaluated for impairment $ 125,310 $ 8,855 $ 134,165
Loans collectively evaluated for impairment 3,430,451 1,486,644 4,917,095
Loans acquired with deteriorated credit quality 106,021 13,722 119,743
Total $ 3,661,782 $ 1,509,221 $ 5,171,003
Allowance for loan losses
Balance,
beginning of the
year Recoveries
credited to
allowance Loans charged
off Provision
charged to
operations Balance, end of
period

Construction and Land Development $ 4,856 $ 64 $ - $ (111 ) $ 4,809
Commercial Real Estate - Owner Occupied 4,640 2 (33 ) 260 4,869
Commercial Real Estate - Non-Owner Occupied 7,256 40 (2,253 ) 894 5,937
Multifamily Real Estate 1,374 - - 81 1,455
Commercial & Industrial 2,610 97 (671 ) 781 2,817
Residential 1-4 Family 5,607 159 (250 ) (330 ) 5,186
Auto 1,297 82 (183 ) 131 1,327
HELOC 2,675 42 (60 ) (52 ) 2,605
Consumer and all other 2,069 186 (379 ) 96 1,972
Total $ 32,384 $ 672 $ (3,829 ) $ 1,750 $ 30,977
Loans individually evaluated
for impairment Loans collectively evaluated for
impairment Loans acquired with
deteriorated credit quality Total
Loans ALL Loans ALL Loans ALL Loans ALL

Construction and Land Development $ 48,624 $ 132 $ 599,428 $ 4,677 $ 9,529 $ - $ 657,581 $ 4,809
Commercial Real Estate - Owner Occupied 24,577 526 842,641 4,343 31,004 - 898,222 4,869
Commercial Real Estate - Non-Owner Occupied 14,949 146 1,148,867 5,791 16,648 - 1,180,464 5,937
Multifamily Real Estate 4,591 - 291,039 1,455 3,021 - 298,651 1,455
Commercial & Industrial 5,743 440 400,873 2,377 3,251 - 409,867 2,817
Residential 1-4 Family 13,484 432 932,790 4,754 24,654 - 970,928 5,186
Auto 1 - 211,292 1,327 - - 211,293 1,327
HELOC 1,226 12 511,635 2,593 1,889 - 514,750 2,605
Consumer and all other 910 16 243,739 1,956 1,350 - 245,999 1,972
Total loans held for investment, net $ 114,105 $ 1,704 $ 5,182,304 $ 29,273 $ 91,346 $ - $ 5,387,755 $ 30,977

~~- 22 -~~
- 21 -

The Company uses ~~the~~a risk rating system and past due status ~~and delinquency trends~~ as the primary credit quality ~~indicator~~indicators for the ~~consumer~~ loan ~~portfolio segment while a~~categories. The risk rating system ~~is utilized for commercial loans. Commercial loans are graded~~ on a scale of 0 through 9.9 is used to determine risk level as used in the calculation of the allowance for loan losses; on those loans without a risk rating, the Company uses past due status to determine risk level. The risk levels, as described below, do not necessarily follow the regulatory definitions of risk levels with the same name. A general description of the characteristics of the risk ~~grades~~levels follows:
Pass is determined by the following criteria:
· Risk rated 0 loans have little or no risk and are generally secured by General Obligation Municipal Credits;
· Risk rated 1 loans have little or no risk and are generally secured by cash or cash equivalents;
· Risk rated 2 loans have minimal risk to well qualified borrowers and no significant questions as to safety;
· Risk rated 3 loans are satisfactory loans with strong borrowers and secondary sources of repayment;
· Risk rated 4 loans are satisfactory loans with borrowers not as strong as risk rated 3 loans and may exhibit a greater degree of financial risk based on the type of business supporting the loan; or
· Loans that are not risk rated but that are 0 to 29 days past due.
Special Mention is determined by the following criteria:
· Risk rated 5 loans are watch loans that warrant more than the normal level of supervision and have the possibility of an event occurring that may weaken the borrower’s ability to repay;
· Risk rated 6 loans have increasing potential weaknesses beyond those at which the loan originally was granted and if not addressed could lead to inadequately protecting the Company’s credit position; or
· Loans that are not risk rated but that are 30 to 89 days past due.
Substandard is determined by the following criteria:
· Risk rated 7 loans are substandard loans and are inadequately protected by the current sound worth or paying capacity of the obligor or the collateral pledged; these have well defined weaknesses that jeopardize the liquidation of the debt with the distinct possibility the Company will sustain some loss if the deficiencies are not corrected; or
· Loans that are not risk rated but that are 90 to 149 days past due.
Doubtful is determined by the following criteria:
· Risk rated 8 loans are doubtful of collection and the possibility of loss is high but pending specific borrower plans for recovery, its classification as a loss is deferred until its more exact status is determined; ~~and~~
· Risk rated 9 loans are loss loans which are considered uncollectable and of such little value that their continuance as bankable assets is not ~~warranted.~~warranted; or
· Loans that are not risk rated but that are over 149 days past due.

The following table shows the recorded investment in all loans, excluding PCI loans, ~~in the commercial portfolios~~ by ~~class~~segment with their related risk ~~rating current~~level as of ~~September 30, 2015~~March 31, 2016 (dollars in thousands):

0-3 4 5 6 7 8 Total
Commercial Construction $ 37,671 $ 355,150 $ 22,661 $ 8,857 $ 2,847 $ - $ 427,186
Commercial Real Estate - Owner Occupied 179,846 622,852 13,967 6,526 9,433 2,232 834,856
Commercial Real Estate - Non-Owner Occupied 467,026 1,048,396 19,654 22,369 13,717 - 1,571,162
Raw Land and Lots 12,036 122,236 7,307 15,792 24,670 - 182,041
Single Family Investment Real Estate 63,146 339,683 8,430 5,210 4,704 - 421,173
Commercial and Industrial 186,807 235,543 10,732 4,669 4,199 - 441,950
Other Commercial 43,355 40,386 2,613 898 1,299 - 88,551
Total $ 989,887 $ 2,764,246 $ 85,364 $ 64,321 $ 60,869 $ 2,232 $ 3,966,919
Pass Special Mention Substandard Doubtful Total
Construction and Land Development $ 698,360 $ 43,994 $ 29,207 $ - $ 771,561
Commercial Real Estate - Owner Occupied 791,197 22,297 6,685 1,763 821,942
Commercial Real Estate - Non-Owner Occupied 1,253,617 24,794 4,204 - 1,282,615
Multifamily Real Estate 315,361 1,975 3,802 - 321,138
Commercial & Industrial 434,139 14,668 2,740 90 451,637
Residential 1-4 Family 918,919 30,514 8,170 2,570 960,173
Auto 239,838 1,688 77 134 241,737
HELOC 509,833 3,283 1,535 936 515,587
Consumer and all other 339,759 3,573 223 452 344,007
Total $ 5,501,023 $ 146,786 $ 56,643 $ 5,945 $ 5,710,397
- 22 -

The following table shows the recorded investment in all loans, excluding PCI loans, ~~in the commercial portfolios~~ by ~~class~~segment with their related risk ~~rating current~~level as of December 31, ~~2014~~2015 (dollars in thousands):

1-3 4 5 6 7 8 Total
Commercial Construction $ 22,512 $ 289,064 $ 11,932 $ 10,906 $ 3,084 $ - $ 337,498
Commercial Real Estate - Owner Occupied 185,789 620,587 15,003 7,688 15,209 - 844,276
Commercial Real Estate - Non-Owner Occupied 356,263 1,041,515 22,358 28,388 31,766 - 1,480,290
Raw Land and Lots 11,162 128,281 16,803 4,783 42,769 - 203,798
Single Family Investment Real Estate 59,638 311,900 9,750 6,680 7,647 - 395,615
Commercial and Industrial 138,973 230,084 9,392 4,383 7,089 - 389,921
Other Commercial 31,571 40,913 3,818 844 1,704 - 78,850
Total $ 805,908 $ 2,662,344 $ 89,056 $ 63,672 $ 109,268 $ - $ 3,730,248
~~- 23 -~~
Pass Special Mention Substandard Doubtful Total
Construction and Land Development $ 663,067 $ 52,650 $ 27,980 $ 37 $ 743,734
Commercial Real Estate - Owner Occupied 800,979 20,856 8,931 1,932 832,698
Commercial Real Estate - Non-Owner Occupied 1,228,956 22,341 5,664 - 1,256,961
Multifamily Real Estate 315,128 2,017 3,828 - 320,973
Commercial & Industrial 414,333 16,724 2,396 99 433,552
Residential 1-4 Family 912,839 34,728 8,037 1,706 957,310
Auto 230,670 3,109 194 88 234,061
HELOC 507,514 4,801 1,611 1,009 514,935
Consumer and all other 299,014 3,996 231 260 303,501
Total $ 5,372,500 $ 161,222 $ 58,872 $ 5,131 $ 5,597,725

The following table shows the recorded investment in only PCI loans ~~in the commercial portfolios~~ by ~~class~~segment with their related risk ~~rating and credit quality indicator information current~~level as of ~~September 30, 2015~~March 31, 2016 (dollars in thousands):

4 5 6 7 8 Total
Commercial Construction $ - $ - $ 2,000 $ - $ 459 $ 2,459
Commercial Real Estate - Owner Occupied 5,203 700 9,016 13,776 - 28,695
Commercial Real Estate - Non-Owner Occupied 3,492 6,288 2,867 2,525 - 15,172
Raw Land and Lots 1,425 517 2,317 882 - 5,141
Single Family Investment Real Estate 4,598 1,689 4,322 4,558 - 15,167
Commercial and Industrial 357 12 360 1,498 22 2,249
Other Commercial 86 - 387 320 - 793
Total $ 15,161 $ 9,206 $ 21,269 $ 23,559 $ 481 $ 69,676
Pass Special Mention Substandard Doubtful Total
Construction and Land Development $ 1,539 $ 1,918 $ 1,441 $ 239 $ 5,137
Commercial Real Estate - Owner Occupied 5,495 15,014 6,751 - 27,260
Commercial Real Estate - Non-Owner Occupied 5,943 6,457 1,236 - 13,636
Multifamily Real Estate 357 1,775 - - 2,132
Commercial & Industrial 127 326 1,098 20 1,571
Residential 1-4 Family 8,794 5,470 3,593 448 18,305
HELOC 826 163 - 546 1,535
Consumer and all other 52 408 69 - 529
Total $ 23,133 $ 31,531 $ 14,188 $ 1,253 $ 70,105

The following table shows the recorded investment in only PCI loans ~~in the commercial portfolios~~ by ~~class~~segment with their related risk ~~rating and credit quality indicator information current~~level as of December 31, ~~2014~~2015 (dollars in thousands):

4 5 6 7 8 Total
Commercial Construction $ - $ - $ 3,130 $ 194 $ 458 $ 3,782
Commercial Real Estate - Owner Occupied 1,525 3,546 10,880 15,216 - 31,167
Commercial Real Estate - Non-Owner Occupied 2,837 934 18,736 6,362 - 28,869
Raw Land and Lots 1,564 189 3,148 2,526 - �� 7,427
Single Family Investment Real Estate 2,807 1,253 6,462 6,357 - 16,879
Commercial and Industrial 437 - 913 2,477 28 3,855
Other Commercial - - 510 1,746 - 2,256
Total $ 9,170 $ 5,922 $ 43,779 $ 34,878 $ 486 $ 94,235
Pass Special Mention Substandard Doubtful Total
Construction and Land Development $ 2,059 $ 1,778 $ 1,908 $ 241 $ 5,986
Commercial Real Estate - Owner Occupied 5,260 15,530 6,598 - 27,388
Commercial Real Estate - Non-Owner Occupied 4,442 7,827 1,250 - 13,519
Multifamily Real Estate 356 1,199 - - 1,555
Commercial & Industrial 144 359 1,289 21 1,813
Residential 1-4 Family 9,098 6,380 4,605 1,076 21,159
HELOC 923 410 20 438 1,791
Consumer and all other 57 379 90 - 526
Total $ 22,339 $ 33,862 $ 15,760 $ 1,776 $ 73,737

Loans acquired are originally recorded at fair value, with certain loans being identified as impaired at the date of purchase. The fair values were determined based on the credit quality of the portfolio, expected future cash flows, and timing of those expected future cash flows.

- 23 -
The following shows changes in the accretable yield for loans accounted for under ASC 310-30, Receivables – Loans and Debt Securities Acquired with Deteriorated Credit Quality, for the periods presented (dollars in thousands):

For the Nine Months ended
September 30,
2015 2014
Balance at beginning of period $ 28,956 $ 2,980
Additions - 34,653
Accretion (4,707 ) (5,681 )
Reclass of nonaccretable difference due to improvement in expected cash flows 3,168 -
Other, net⁽¹⁾ (5,624 ) (2,150 )
Balance at end of period $ 21,793 $ 29,802
For the Three Months Ended
March 31,
2016 2015
Balance at beginning of period $ 22,139 $ 28,956
Additions - -
Accretion (1,390 ) (1,501 )
Reclass of nonaccretable difference due to improvement in expected cash flows 1,266 2,695
Other, net⁽¹⁾ (1,510 ) (5,619 )
Balance at end of period $ 20,505 $ 24,531

⁽¹⁾This line item represents changes in the cash flows expected to be collected due to the impact of non-credit changes such as prepayment assumptions, changes in interest rates on variable rate PCI loans, and discounted payoffs that occurred in the quarter.

The carrying value of the Company’s PCI loan portfolio, accounted for under ASC 310-30, totaled ~~$78.6~~$70.1 million at ~~September 30, 2015~~March 31, 2016 and ~~$105.8~~$73.7 million at December 31, ~~2014.~~2015. The outstanding balance of the Company’s PCI loan portfolio totaled ~~$95.7~~$86.3 million at ~~September 30, 2015~~March 31, 2016 and ~~$126.3~~$90.3 million at December 31, ~~2014.~~2015. The carrying value of the Company’s acquired performing loan portfolio, accounted for under ASC 310-20, Receivables – Nonrefundable Fees and Other Costs, totaled ~~$1.5~~$1.3 billion at ~~September 30, 2015~~March 31, 2016 and ~~$1.8~~$1.4 billion at December 31, ~~2014;~~2015; the remaining discount on these loans totaled ~~$21.9~~$20.0 million at ~~September 30, 2015~~March 31, 2016 and ~~$24.3~~$20.8 million at December 31, ~~2014, respectively.~~2015.
~~- 24 -~~

5.4. INTANGIBLE ASSETS

The Company’s intangible assets consist of core deposits and goodwill arising from previous acquisitions. The Company has determined that core deposit intangibles have a finite ~~life~~lives and amortizes them over their estimated useful ~~life.Core~~lives.Core deposit intangible assets are being amortized over the period of expected benefit, which ranges from 4 to 14 years, using an accelerated method. On January 1, 2014, the Company completed the acquisition of StellarOne and acquired intangible assets of $29.6 million and recorded $234.1 million of goodwill.

In accordance with ASC 350,Intangibles-Goodwill and Other,the Company reviews the carrying value of indefinite lived intangible assets at least annually or more frequently if certain impairment indicators exist. The Company performed its annual impairment testing in the second quarter of 2015 and determined that there was no impairment to its goodwill or intangible assets.

Information concerning intangible assets with a finite life is presented in the following table (dollars in thousands):

Gross Carrying
Value Accumulated
Amortization Net Carrying
Value Gross Carrying
Value Accumulated
Amortization Net
Carrying
Value
September 30, 2015
March 31, 2016
Amortizable core deposit intangibles $ 76,185 $ 50,865 $ 25,320 $ 76,185 $ 54,755 $ 21,430

December 31, 2014
December 31, 2015
Amortizable core deposit intangibles $ 76,185 $ 44,430 $ 31,755 $ 76,185 $ 52,875 $ 23,310

September 30, 2014
March 31, 2015
Amortizable core deposit intangibles $ 76,185 $ 42,096 $ 34,089 $ 76,185 $ 46,652 $ 29,533
- 24 -

Amortization expense of core deposit intangibles for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2016 and 2015, ~~totaled $2.1 million and $6.4 million, respectively; for the three and nine months ended September 30, 2014 totaled $2.4 million and $7.5 million, respectively;~~ and for the year ended December 31, ~~2014 was $9.8 million.~~2015 totaled $1.9 million, $2.2 million, and $8.4 million, respectively. As of ~~September 30, 2015,~~March 31, 2016, the estimated remaining amortization expense of core deposit intangibles is as follows (dollars in thousands):

For the remaining three months of 2015 $ 2,011
For the year ending December 31, 2016 6,932
For the remaining nine months of 2016 $ 5,052
For the year ending December 31, 2017 5,590 5,590
For the year ending December 31, 2018 4,144 4,144
For the year ending December 31, 2019 3,093 3,093
For the year ending December 31, 2020 2,027 2,028
For the year ending December 31, 2021 1,035
Thereafter 1,523 488
Total estimated amortization expense $ 25,320 $ 21,430

~~- 25 -~~
6.5. BORROWINGS

Short-term Borrowings

The Company classifies all borrowings that will mature within a year from the date on which the Company enters into them as short-term borrowings. Total short-term borrowings consist primarily of advances from the FHLB, federal funds purchased (which are secured overnight borrowings from other financial institutions), and other lines of credit. Also included in total short-term borrowings are securities sold under agreements to repurchase, which are secured transactions with customers and generally mature the day following the date sold. Total short-term borrowings consist of the following as of ~~September 30, 2015~~March 31, 2016 and December 31, ~~2014~~2015 (dollars in thousands):

September 30, December 31, March 31, December 31,
2015 2014 2016 2015
Securities sold under agreements to repurchase $ 99,417 $ 44,393 $ 91,977 $ 84,977
Other short-term borrowings 332,000 343,000 466,000 304,000
Total short-term borrowings $ 431,417 $ 387,393 $ 557,977 $ 388,977

Maximum month-end outstanding balance $ 445,761 $ 387,393 $ 574,050 $ 445,761
Average outstanding balance during the period 383,554 237,896 525,503 379,783
Average interest rate during the period 0.26 % 0.24 % 0.48 % 0.25 %
Average interest rate at end of period 0.24 % 0.31 % 0.36 % 0.27 %

Other short-term borrowings:
Federal funds purchased $ 5,000 $ - $ 3,000 $ -
FHLB $ 325,000 $ 335,000 $ 447,000 $ 304,000
Other lines of credit 2,000 8,000 16,000 -

The Bank maintains federal funds lines with several correspondent banks; the remaining available balance was ~~$170~~$172.0 million and ~~$150.0~~$175.0 million at ~~September 30, 2015~~March 31, 2016 and December 31, ~~2014,~~2015, respectively. The Company has certain restrictive covenants related to certain asset quality, capital, and profitability metrics associated with these lines and is considered to be in compliance with these covenants. Additionally, the Company had a collateral dependent line of credit with the FHLB of up to $1.5 billion ~~and $1.4 billion~~ at ~~September 30, 2015~~March 31, 2016 and December 31, ~~2014,~~2015, respectively.
- 25 -
Long-term Borrowings

In connection with two bank acquisitions prior to 2006, the Company issued trust preferred capital notes to fund the cash portion of those acquisitions, collectively totaling $58.5 million. In connection with the acquisition of StellarOne, the Company acquired trust preferred capital notes totaling $32.0 million with a remaining fair value discount of ~~$7.0~~$6.9 million at ~~September 30, 2015.~~March 31, 2016. The trust preferred capital notes currently qualify for Tier 1 capital of the Company for regulatory purposes.

Principal Investment⁽¹⁾ Spread to
3-Month LIBOR Rate Maturity
Trust Preferred Capital Note - Statutory Trust I $ 22,500,000 $ 696,000 2.75 % 3.08 % 6/17/2034
Trust Preferred Capital Note - Statutory Trust II 36,000,000 1,114,000 1.40 % 1.73 % 6/15/2036
VFG Limited Liability Trust I Indenture 20,000,000 619,000 2.73 % 3.06 % 3/18/2034
FNB Statutory Trust II Indenture 12,000,000 372,000 3.10 % 3.43 % 6/26/2033
Total $ 90,500,000 $ 2,801,000
Trust
Preferred
Capital
Securities⁽¹⁾ Investment⁽¹⁾ Spread to
3-Month LIBOR Rate Maturity
Trust Preferred Capital Note - Statutory Trust I $ 22,500,000 $ 696,000 2.75 % 3.38 % 6/17/2034
Trust Preferred Capital Note - Statutory Trust II 36,000,000 1,114,000 1.40 % 2.03 % 6/15/2036
VFG Limited Liability Trust I Indenture 20,000,000 619,000 2.73 % 3.36 % 3/18/2034
FNB Statutory Trust II Indenture 12,000,000 372,000 3.10 % 3.73 % 6/26/2033
Total $ 90,500,000 $ 2,801,000

(1) The total of the trust preferred capital securities and investments in the respective trusts represents the principal asset of the Company's junior subordinated debt securities with like maturities and like interest rates to the capital securities. The Company's investment in the trusts is reported asin "Other Assets" within the Consolidated Balance Sheets.

As part of a prior acquisition, the Company assumed subordinated debt with terms of LIBOR plus 1.45% and a maturity date of April 2016. At ~~September 30, 2015,~~March 31, 2016, the carrying value of the subordinated debt was $17.5 million, with a remaining fair value discount of ~~$285,000.~~$41,000.

On August 23, 2012, the Company modified its fixed rate FHLB advances to floating rate advances, which resulted in reducing the Company’s FHLB borrowing costs. In connection with this modification, the Company incurred a prepayment penalty of $19.6 million on the original advances, which is included as a component of long-term borrowings in the Company’s Consolidated Balance Sheets. In accordance with ASC 470-50,Modifications and Extinguishments, the Company will amortize this prepayment penalty over the term of the modified advances using the effective rate method. The amortization expense is included as a component of interest expense on long-term borrowings in the Company’s Consolidated Statements of Income. Amortization expense for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2016 and 2015 ~~and 2014~~ was $463,000 and ~~$1.4 million and $452,000 and $1.3 million,~~$447,000, respectively.

In connection with the StellarOne acquisition, the Company assumed $70.0 million in long-term borrowings with the FHLB of which there is $60.0 million remaining at ~~September 30, 2015~~March 31, 2016 that had a remaining fair value premium of ~~$1.4~~$1.1 million.
~~- 26 -~~

As of ~~September 30, 2015,~~March 31, 2016, the Company had long-term advances from the FHLB consisting of the following (dollars in thousands):

Long-term Type Spread to
3-Month LIBOR Interest Rate Maturity Date Advance Amount Spread to
3-Month LIBOR Interest Rate Maturity Date Advance Amount

Adjustable Rate Credit 0.44 % 0.77 % 8/23/2022 $ 55,000 0.44 % 1.07 % 8/23/2022 $ 55,000
Adjustable Rate Credit 0.45 % 0.78 % 11/23/2022 65,000 0.45 % 1.08 % 11/23/2022 65,000
Adjustable Rate Credit 0.45 % 0.78 % 11/23/2022 10,000 0.45 % 1.08 % 11/23/2022 10,000
Adjustable Rate Credit 0.45 % 0.78 % 11/23/2022 10,000 0.45 % 1.08 % 11/23/2022 10,000
Fixed Rate - 3.62 % 11/28/2017 10,000 - 3.62 % 11/28/2017 10,000
Fixed Rate - 3.75 % 7/30/2018 5,000 - 3.75 % 7/30/2018 5,000
Fixed Rate - 3.97 % 7/30/2018 5,000 - 3.97 % 7/30/2018 5,000
Fixed Rate Hybrid - 2.11 % 10/5/2016 25,000 - 2.11 % 10/5/2016 25,000
Fixed Rate Hybrid - 0.91 % 7/25/2016 15,000 - 0.91 % 7/25/2016 15,000
$ 200,000 $ 200,000
- 26 -

As of December 31, ~~2014,~~2015, the Company had long-term advances from the FHLB consisting of the following (dollars in thousands):

Long-term Type Spread to
3-Month LIBOR Interest Rate Maturity Date Advance Amount Spread to
3-Month LIBOR Interest Rate Maturity Date Advance Amount

Adjustable Rate Credit 0.44 % 0.70 % 8/23/2022 $ 55,000 0.44 % 1.05 % 8/23/2022 $ 55,000
Adjustable Rate Credit 0.45 % 0.71 % 11/23/2022 65,000 0.45 % 1.07 % 11/23/2022 65,000
Adjustable Rate Credit 0.45 % 0.71 % 11/23/2022 10,000 0.45 % 1.07 % 11/23/2022 10,000
Adjustable Rate Credit 0.45 % 0.71 % 11/23/2022 10,000 0.45 % 1.07 % 11/23/2022 10,000
Fixed Rate - 3.62 % 11/28/2017 10,000 - 3.62 % 11/28/2017 10,000
Fixed Rate - 3.44 % 7/28/2015 10,000 - 3.75 % 7/30/2018 5,000
Fixed Rate - 3.75 % 7/30/2018 5,000 - 3.97 % 7/30/2018 5,000
Fixed Rate - 3.97 % 7/30/2018 5,000
Fixed Rate Hybrid - 2.11 % 10/5/2016 25,000 - 2.11 % 10/5/2016 25,000
Fixed Rate Hybrid - 0.91 % 7/25/2016 15,000 - 0.91 % 7/25/2016 15,000
$ 210,000 $ 200,000

The carrying value of the loans and securities pledged as collateral for FHLB advances totaled ~~$1.8 billion and $1.2~~$1.9 billion as of ~~September 30, 2015~~March 31, 2016 and December 31, ~~2014,~~2015, respectively.

As of ~~September 30, 2015,~~March 31, 2016, the contractual maturities of long-term debt are as follows for the years ending (dollars in thousands):

Trust
Preferred
Capital Notes Subordinated
Debt FHLB
Advances Fair Value
Premium
(Discount) Prepayment
Penalty Total Long-term
Borrowings
Remaining three months in 2015 $ - $ - $ - $ - $ (466 ) $ (466 )
2016 - 17,500 40,000 271 (1,882 ) 55,889
2017 - - 10,000 170 (1,922 ) 8,248
2018 - - 10,000 (143 ) (1,970 ) 7,887
2019 - - - (286 ) (2,018 ) (2,304 )
2020 - - - (301 ) (2,074 ) (2,375 )
Thereafter 93,301 - 140,000 (5,622 ) (3,826 ) 223,853
Total Long-term borrowings $ 93,301 $ 17,500 $ 200,000 $ (5,911 ) $ (14,158 ) $ 290,732
~~- 27 -~~
Trust
Preferred
Capital
Notes Subordinated
Debt FHLB
Advances Fair Value
Premium
(Discount) Prepayment
Penalty Total Long-term
Borrowings
Remaining nine months in 2016 $ - $ 17,500 $ 40,000 $ 271 $ (1,418 ) $ 56,353
2017 - - 10,000 170 (1,922 ) 8,248
2018 - - 10,000 (143 ) (1,970 ) 7,887
2019 - - - (286 ) (2,018 ) (2,304 )
2020 - - - (301 ) (2,074 ) (2,375 )
2021 - - - (316 ) (2,119 ) (2,435 )
Thereafter 93,301 - 140,000 (5,306 ) (1,707 ) 226,288
Total Long-term borrowings $ 93,301 $ 17,500 $ 200,000 $ (5,911 ) $ (13,228 ) $ 291,662

7.6. COMMITMENTS AND CONTINGENCIES

Litigation Matters
In the ordinary course of its operations, the Company and its subsidiaries are parties to various legal proceedings. Based on the information presently available, and after consultation with legal counsel, management believes that the ultimate outcome in such proceedings, in the aggregate, will not have a material adverse effect on the business, financial condition, or results of operations of the Company.

Financial Instruments with Off-Balance Sheet Risk
The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers and to reduce its own exposure to fluctuations in interest rates. These financial instruments include commitments to extend credit and standby letters of credit. These instruments involve elements of credit and interest rate risk in excess of the amount recognized in the Company’s Consolidated Balance Sheets. The contractual amounts of these instruments reflect the extent of the Company’s involvement in particular classes of financial instruments.
- 27 -

The Company’s exposure to credit loss in the event of nonperformance by the other party to the financial instruments for commitments to extend credit and letters of credit written is represented by the contractual amount of these instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments. Unless noted otherwise, the Company does not require collateral or other security to support off-balance sheet financial instruments with credit risk. The Company considers credit losses related to off-balance sheet commitments by undergoing a similar process in evaluating losses for loans that are carried on balance sheet. The Company considers historical loss rates, current economic conditions, risk ratings, and past due status among other factors in the consideration of whether credit losses are inherent in the Company’s off-balance sheet commitments to extend credit. The Company does not expect credit losses arising from off-balance sheet commitments to have a material adverse impact on the Company’s consolidated financial statements.

Commitments to extend credit are agreements to lend to customers as long as there are no violations of any conditions established in the contracts. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Because many of the commitments may expire without being completely drawn upon, the total commitment amounts do not necessarily represent future cash requirements.

Letters of credit are conditional commitments issued by the Company to guarantee the performance of customers to third parties. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loans to customers.

UMG, a wholly owned subsidiary of the Bank, uses rate lock commitments and best efforts contracts during the origination process and for loans held for sale. These best efforts contracts are designed to mitigate UMG’s exposure to fluctuations in interest rates in connection with rate lock commitments and loans held for sale. The Company held approximately $2.1 million and $2.6 million in loans held for sale in which the related rate lock commitment had expired as of September 30, 2015 and December 31, 2014, respectively. At September 30, 2015 and December 31, 2014, the reserves associated with these loans held for sale were $102,000 and $104,000, respectively, and are reflected on the balance sheet of the mortgage segment.
~~- 28 -~~

The following table presents the balances of commitments and contingencies (dollars in thousands):

September 30, December 31, March 31, December 31,
2015 2014 2016 2015
Commitments with off-balance sheet risk:
Commitments to extend credit⁽¹⁾ $ 1,569,094 $ 1,601,287 $ 1,506,231 $ 1,557,350
Standby letters of credit 142,848 117,988 74,814 139,371
Mortgage loan rate lock commitments 61,015 49,552 62,975 50,369
Total commitments with off-balance sheet risk $ 1,772,957 $ 1,768,827 $ 1,644,020 $ 1,747,090
Commitments with balance sheet risk:
Loans held for sale $ 65,713 $ 42,519 $ 25,109 $ 36,030
Total other commitments $ 1,838,670 $ 1,811,346 $ 1,669,129 $ 1,783,120

(1) Includes unfunded overdraft protection.

The Company must maintain a reserve against its deposits in accordance with Regulation D of the Federal Reserve Act. For the final weekly reporting period in the periods ended ~~September 30, 2015~~March 31, 2016 and December 31, ~~2014,~~2015, the aggregate amount of daily average required reserves was approximately ~~$41.4~~$48.3 million and $48.7 million, respectively.

~~The~~As of March 31, 2016, the Company ~~has~~had approximately ~~$24.6~~$38.1 million in deposits in other financial institutions, of which ~~$10.0~~$15.1 million and ~~$3.8~~$9.8 million serve as collateral for the cash flow hedges and loan swaps, respectively, as discussed in Note 87 “Derivatives”. The Company had approximately ~~$9.7~~$11.7 million in deposits in other financial institutions that were uninsured at ~~September 30, 2015.~~March 31, 2016. On an annual basis, the Company’s management evaluates the loss risk of its uninsured deposits in financial counterparties.

For asset/liability management purposes, the Company uses interest rate swap agreements to hedge various exposures or to modify the interest rate characteristics of various balance sheet accounts. See Note 87 “Derivatives” for additional information.

In the ordinary course of business, the Company records an indemnification reserve relating to mortgage loans previously sold based on historical statistics and loss rates; as of ~~September 30, 2015~~March 31, 2016 and December 31, ~~2014,~~2015, the Company’s indemnification reserve for such mortgage loans was ~~$384,000~~$423,000 and ~~$662,000,~~$450,000, respectively.
- 28 -

8.7. DERIVATIVES

The Company is exposed to economic risks arising from its business operations and uses derivatives primarily to manage risk associated with changing interest rates, and to assist customers with their risk management objectives. The Company designates ~~its~~certain derivatives ~~either~~ as hedging instruments in a qualifying hedge accounting relationship (cash flow or fair value hedge) or. The remaining are classified as a free standing ~~derivative such as~~derivatives consisting of customer accommodation loan swaps and interest rate lock commitments that do not qualify for hedge accounting. The Company uses interest rate derivatives to manage its exposure to interest rate movements and add stability to interest income and expense. The Company also enters into back-to-back loan swaps to assist customers in managing the risks due to changing interest rates.

Cash Flow Hedges
~~As part of its~~The Company designates derivatives as cash flow ~~hedging strategy, the~~hedges when they are used to manage exposure to variability in cash flows related to forecasted transactions on variable rate borrowings such as trust preferred capital notes, FHLB borrowings, and prime commercial loans. The Company uses interest rate swap agreements ~~to limit the variability~~as part of ~~expected future cash flows (primarily associated with the Company’s variable rate borrowings)~~its hedging strategy by exchanging a notional amount, equal to the principal amount of the borrowings, for fixed-rate interest based on benchmarked interest rates. ~~As of September 30, 2015, the Company had 11 interest rate swaps designated as cash flow hedges with an aggregate notional amount of $263.0 million.~~
The Company has entered into three interest rate swap agreements (the “trust swaps”) to mitigate the variable interest rate risk related to the trust preferred capital notes further described in Note 6 “Borrowings.” The Company receives interest of LIBOR from a counterparty and pays a weighted average fixed rate of 2.77% to the same counterparty calculated on a notional amount of $68.0 million. The original terms of the trust swaps range from three to six years.
~~- 29 -~~
The Company has entered into four interest rate swap agreements (the “prime loan swaps”) to mitigate the variable interest rate risks of certain prime commercial loans. The Company receives a fixed interest rate ranging from 4.71% to 5.20% from the counterparty and pays interest based on the Wall Street Journal prime index, with a spread of up to 0.49%, to the same counterparty calculated on a notional amount of $55.0 million. One of the four prime loan swaps contains a floor rate of 4.00%. The original terms of the four prime loan swaps is six years with a fixed rate that started September 17, 2013.
The Company has entered into four interest rate swap agreements (“FHLB advance swaps”) to mitigate variable interest rate risk on certain designated variable rate FHLB borrowings. The Company receives an interest rate based on the three month LIBOR from the counterparty and pays an interest rate ranging from 3.16% to 3.46% to the same counterparty calculated on a notional amount of $140.0 million. The FHLB advance swaps are deferred starting swaps with terms of six years and five years and effective dates of February 23, 2017 and February 23, 2018, respectively.

All swaps were entered into with counterparties that met the Company’s credit standards and the agreements contain collateral provisions protecting the at-risk party. The Company believes that the credit risk inherent in the contract is not significant. As of September 30, 2015, the Company had $10.0 million of cash pledged as collateral for the cash flow hedges and securities with a market value of $4.3 million pledged as collateral for the prime loan swaps and FHLB advance swaps.

~~Amounts~~The terms and conditions of the interest rate swaps vary and amounts receivable or payable are recognized as accrued under the terms of the agreements. The Company assesses the effectiveness of each hedging relationship on a periodic basis using statistical regression analysis. The Company also measures the ineffectiveness of each hedging relationship using the change in variable cash flows method which compares the cumulative changes in cash flows of the hedging instrument relative to cumulative changes in the hedged item’s cash flows. In accordance with ASC 815,Derivatives and Hedging, the ~~Company has designated the trust swaps, prime loan swaps, and FHLB advance swaps as cash flow hedges, with the~~ effective portions of the derivatives’ unrealized gains or losses are recorded as a component of other comprehensive income. ~~The ineffective portions of~~Based on the ~~unrealized gains or losses, if~~Company’s assessment its cash flow hedges are highly effective, but to the extent that any ineffectiveness exists in the hedge relationships, the amounts would be recorded in interest income and interest expense in the Company’s Consolidated Statements of Income. The Company has assessed the effectiveness of each hedging relationship by comparing the changes in cash flows of the hedging instrument. Based on the Company’s assessment, its cash flow hedges are highly effective. At September 30, 2015, the fair value of the Company’s cash flow hedges was a net unrealized loss of $10.4 million, the amount the Company would have expected to pay if the contracts were terminated.
~~Shown below is a summary of the derivatives designated as cash flow hedges at September 30, 2015 and December 31, 2014 (dollars in thousands):~~
Weighted
Average
Positions Notional
Amount Asset Liability Receive
Rate Pay
Rate Life
(Years)
As of September 30, 2015
Pay fixed - receive floating interest rate swaps 7 $ 208,000 $ - $ 11,911 0.33 %⁽¹⁾ 2.77 %⁽¹⁾ 1.38 ⁽¹⁾

Receive fixed - pay floating interest rate swaps 4 $ 55,000 $ 1,553 $ - 4.93 % 3.55 % 3.97
~~(1)~~~~Due to their deferred nature, the rates and the life exclude the four FHLB advance swaps.~~
Weighted
Average
Positions Notional
Amount Asset Liability Receive
Rate Pay
Rate Life
(Years)
As of December 31, 2014
Pay fixed - receive floating interest rate swaps 7 $ 208,000 $ - $ 8,433 0.26 %⁽¹⁾ 2.77 %⁽¹⁾ 2.12 ⁽¹⁾

Receive fixed - pay floating interest rate swaps 4 $ 55,000 $ 580 $ - 4.93 % 3.55 % 4.72
~~(1)~~~~Due to their deferred nature, the rates and the life exclude the four FHLB advance swaps.~~
~~- 30 -~~

Fair Value Hedge
Derivatives are designated as fair value hedges when they are used to manage exposure to changes in the fair value of certain financial assets and liabilities, referred to as the hedged items, which fluctuate in value as a result of movements in interest rates. During the normal course of business, the Company enters into interest rate swaps to convert certain long-term fixed-rate loans to floating rates to hedge the Company’s exposure to interest rate risk. The Company pays a fixed interest rate to the counterparty and receives a floating rate from the same counterparty calculated on the aggregate notional amount. At March 31, 2016 and December 31, 2015, the aggregate notional amount of the related hedged items was $61.2 million for both periods, with fair value amounts of $3.3 million and $689,000, respectively.
The Company applies hedge accounting in accordance with ASC 815 and the fair value hedge and the underlying hedged item, attributable to the risk being hedged, are recorded at fair value with unrealized gains and losses being recorded in the Company’s Consolidated Statements of Income. The ineffective portions of the unrealized gains or losses, if any, would be recorded in interest income and interest expense in the Company’s Consolidated Statements of Income. The Company uses statisticalStatistical regression analysis is used to assess hedge effectiveness, both at inception of the hedging relationship and on an ongoing basis. The regression analysis involves regressing the periodic change in fair value of the hedging instrument against the periodic changes in fair value of the asset being hedged due to changes in the hedged risk.
As of September 30, 2015, the Company had three swaps constituting fair value hedges, whereby the Company pays a fixed interest rate ranging from 3.23% to 3.53% to the counterparty and receives interest of one month LIBOR plus a spread of up to 2.13% from the same counterparty calculated on an aggregate notional amount of $53.6 million with terms ranging from 15 to 17 years. At December 31, 2014, the Company had one fair value hedge with an aggregate notional amount of $38.3 million. At September 30, 2015, the fair value of the Company’s fair value hedges was an unrealized loss of $1.4 million, the amount the Company would have expected to pay if the contract was terminated; the liability is reported in “Other Liabilities” in the Company’s Consolidated Balance Sheets. At September 30, 2015, the aggregate notional amount of the hedged items was $53.6 million with a fair value of $1.4 million. At December 31, 2014, the Company had one hedged item with an aggregate notional amount and fair value of $38.3 million. The Company’s fair value hedges continue to be highly effective and had no material impact on the Consolidated Statements of Income, but if any ineffectiveness exists, portions of the unrealized gains or losses would be recorded in interest income and interest expense in the Company’s Consolidated Statements of Income.

Loan Swaps
During the normal course of business, the Company enters into interest rate swap loan relationships (“loan swaps”) with borrowers to meet their financing needs. Upon entering into the loan swaps, the Company enters into offsetting positions with ~~counterparties~~a third party in order to minimize interest rate risk. These back-to-back loan swaps qualify as financial derivatives with fair values as reported in “Other Assets” and “Other Liabilities” in the Company’s Consolidated Balance Sheets. ~~As of September 30, 2015, the Company had cash and securities with a market value of $6.6 million pledged as collateral for the loan swaps.~~

~~Shown below is a summary regarding loan swap derivative activities at September 30, 2015 and December 31, 2014 (dollars in thousands):~~
Weighted
Average
Positions Notional
Amount Asset Liability Receive
Rate Pay
Rate Life
(Years)
As of September 30, 2015
Receive fixed - pay floating interest rate swaps 35 $ 141,055 $ 5,470 $ - 4.26 % 2.45 % 6.84
Pay fixed - receive floating interest rate swaps 35 $ 141,055 $ - $ 5,470 2.45 % 4.26 % 6.84
Weighted
Average
Positions Notional
Amount Asset Liability Receive
Rate Pay
Rate Life
(Years)
As of December 31, 2014
Receive fixed - pay floating interest rate swaps 30 $ 122,793 $ 2,681 $ - 4.29 % 2.50 % 7.14
Pay fixed - receive floating interest rate swaps 30 $ 122,793 $ - $ 2,681 2.50 % 4.29 % 7.14
~~- 31 -~~
Interest Rate Lock Commitments
During the normal course of business, the Company enters into commitments to originate mortgage loans whereby the interest rate on the loan is determined prior to funding (“rate lock commitments”). Rate lock commitments on mortgage loans that are intended to be sold in the secondary market are considered to be derivatives. The period of time between issuance of a loan commitment, closing, and sale of the loan generally ranges from 30 to 120 days. The Company protects itself from changes in interest rates through the use of best efforts forward delivery commitments, whereby the Company commits to sell a loan at the time the borrower commits to an interest rate with the intent that the buyer has assumed interest rate risk on the loan. The correlation between the rate lock commitments and the best efforts contracts is high due to their similarity.

- 29 -
The market values of rate lock commitments and best efforts forward delivery commitments is not readily ascertainable with precision because rate lock commitments and best efforts contracts are not actively traded in stand-alone markets. The Company determines the fair value of rate lock commitments and best efforts contracts by measuring the change in the value of the underlying asset while taking into consideration the probability that the rate lock commitments will close. The fair value of the rate lock commitments ~~as of September 30, 2015 was $1.3 million and~~ is reported as a component of “Other Assets” in the Company’s Consolidated Balance Sheets; the fair value of the Company’s best efforts forward delivery commitments ~~was $544,000 and~~ is recorded as a component of “Other Liabilities” in the Company’s Consolidated Balance Sheets. Any impact to income is recorded in current period earnings as a component of ~~“Gain on sale of mortgage loans, net of commissions”~~“Mortgage banking income, net” in the Company’s Consolidated Statements of Income.
The ~~aggregate notional amount~~following table summarizes key elements of ~~these derivatives was $61.0 million and $49.6 million at September 30, 2015~~the Company’s derivative instruments as of March 31, 2016 and December 31, ~~2014, respectively.~~2015, segregated by derivatives that are considered accounting hedges and those that are not (dollars in thousands):
March 31, 2016 December 31, 2015
Derivative⁽²⁾ Derivative⁽²⁾
Notional or
Contractual
Amount⁽¹⁾ Positions Assets Liabilities
Collateral
Pledged⁽³⁾
Notional or
Contractual
Amount⁽¹⁾ Positions Assets Liabilities Collateral
Pledged⁽³⁾
Derivatives designated as accounting hedges:
Interest rate contracts:
Cash flow hedges $ 263,000 11 $ 1,797 $ 15,279 $ 18,562 $ 263,000 11 $ 946 $ 10,352 $ 14,449
Fair value hedges 61,150 4 - 3,418 - 61,150 4 - 888 -
Total 324,150 15 1,797 18,697 18,562 324,150 15 946 11,240 14,449

Derivatives not designated as accounting hedges:
Interest rate contracts:
Loan Swaps 153,107 74 7,540 7,540 11,296 138,969 68 3,758 3,758 5,983
Other contracts:
Interest rate lock commitments 62,975 258 1,252 - - 50,369 199 701 - -
Total 216,082 332 8,792 7,540 11,296 189,338 267 4,459 3,758 5,983
Total derivatives $ 540,232 347 $ 10,589 $ 26,237 $ 29,858 $ 513,488 282 $ 5,405 $ 14,998 $ 20,432
(1)Notional amounts are not recorded on the balance sheet and are generally used only as a basis on which interest and other payments are determined.
(2)Balancesrepresent fair value of derivative financial instruments.
(3)Collateral pledged is comprised of both cash and securities.
- 30 -

98. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The change in accumulated other comprehensive income (loss) for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2016 is summarized as follows, net of tax (dollars in thousands):
Unrealized
Gains (Losses)
on AFS
Securities Unrealized Gain
for AFS
Securities
Transferred to
HTM Change in Fair
Value of Cash
Flow Hedge Total
Balance - December 31, 2015 $ 7,777 $ 4,432 $ (5,957 ) $ 6,252

Other comprehensive income (loss) 3,032 (292 ) (2,681 ) 59
Amounts reclassified from accumulated other comprehensive income (93 ) - 141 48
Net current period other comprehensive income (loss) 2,939 (292 ) (2,540 ) 107

Balance - March 31, 2016 $ 10,716 $ 4,140 $ (8,497 ) $ 6,359
The change in accumulated other comprehensive income (loss) for the three months ended March 31, 2015 is summarized as follows, net of tax (dollars in thousands):

Unrealized
Gains (Losses)
on AFS
Securities Unrealized Gain
for AFS
Securities
Transferred to
HTM Change in Fair
Value of Cash
Flow Hedge Total
Balance - June 30, 2015 $ 8,738 $ 5,043 $ (4,552 ) $ 9,229

Other comprehensive income (loss) 1,250 (308 ) (2,328 ) (1,386 )
Amounts reclassified from accumulated other comprehensive income 146 - 157 303
Net current period other comprehensive income (loss) 1,396 (308 ) (2,171 ) (1,083 )
Balance - September 30, 2015 $ 10,134 $ 4,735 $ (6,723 ) $ 8,146
Unrealized
Gains (Losses)
on AFS
Securities Unrealized
Gain for AFS
Securities
Transferred
to HTM Change in Fair
Value of Cash
Flow Hedges Total
Balance - December 31, 2014 $ 17,439 $ - $ (5,184 ) $ 12,255

Unrealized gain transferred from AFS to HTM (5,251 ) 5,251 - -
Other comprehensive income (loss) (1,812 ) (516 ) (2,009 ) (4,337 )
Amounts reclassified from accumulated other comprehensive income (242 ) - 470 228
Net current period other comprehensive income (loss) (2,054 ) (516 ) (1,539 ) (4,109 )
Balance - September 30, 2015 $ 10,134 $ 4,735 $ (6,723 ) $ 8,146
~~- 32 -~~
~~The change in accumulated other comprehensive income (loss) for the three and nine months ended September 30, 2014 is summarized as follows, net of tax (dollars in thousands):~~
Unrealized Gains
(Losses) on AFS
Securities Change in Fair
Value of Cash
Flow Hedge Total
Balance - June 30, 2014 $ 14,202 $ (3,321 ) $ 10,881
Other comprehensive income (loss) 1,798 (228 ) 1,570
Amounts reclassified from accumulated other comprehensive income (647 ) 164 (483 )
Net current period other comprehensive income (loss) 1,151 (64 ) 1,087
Balance - September 30, 2014 $ 15,353 $ (3,385 ) $ 11,968
Unrealized Gains
(Losses) on AFS
Securities Change in Fair
Value of Cash
Flow Hedges Total Unrealized Gains
(Losses) on AFS
Securities Change in Fair
Value of Cash
Flow Hedge Total
Balance - December 31, 2013 $ 1,192 $ (3,382 ) $ (2,190 )
Balance - December 31, 2014 $ 17,439 $ (5,184 ) $ 12,255

Other comprehensive income (loss) 14,843 (431 ) 14,412 3,783 (1,490 ) 2,293
Amounts reclassified from accumulated other comprehensive income (682 ) 428 (254 ) (125 ) 272 147
Net current period other comprehensive income (loss) 14,161 (3 ) 14,158 3,658 (1,218 ) 2,440
Balance - September 30, 2014 $ 15,353 $ (3,385 ) $ 11,968

Balance - March 31, 2015 $ 21,097 $ (6,402 ) $ 14,695

Reclassifications of unrealized gains (losses) on available for sale securities are reported in the Company’s Consolidated Statements of Income as “Gains on securities transactions, net” with the corresponding income tax effect being reflected as a component of income tax expense. The Company reported gains of ~~$75,000~~$143,000 and ~~$672,000~~$193,000 for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2016 and 2015, respectively, related to the sale of securities. Excluding OTTI recovery of $400,000 in the second quarter of 2014, the Company reported net gains of $995,000 and $1.0 million for the three and nine months ended September 30, 2014, respectively, related to the sale of securities. The Company recorded $300,000 in other-than-temporary impairment in the current quarter on a municipal security in the available for sale portfolio. The tax effect of these transactions during the three ~~and nine~~ months ended ~~September 30,~~March 31, 2016 and 2015 were $50,000 and ~~2014 were $79,000 and $130,000 and $348,000 and $367,000,~~$68,000, respectively, which amounts were included as a component of income tax expense.

Reclassifications of the change in fair value of cash flow hedges are reported in interest income and interest expense in the Company’s Consolidated Statements of Income with the corresponding income tax effect being reflected as a component of income tax expense. The Company reported net interest expense of ~~$241,000~~$217,000 and ~~$723,000 and $253,000 and $659,000~~$418,000 for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2016 and 2015, ~~and 2014,~~ respectively. The tax effect of these transactions during the three ~~and nine~~ months ended ~~September 30,~~March 31, 2016 and 2015 were $76,000 and ~~2014 were $84,000 and $253,000 and $89,000 and $231,000,~~$146,000, respectively, which ~~amounts~~ were included as a component of income tax expense.

~~- 33 -~~
- 31 -

~~10.~~9. FAIR VALUE MEASUREMENTS

The Company follows ASC 820,Fair Value Measurements and Disclosures, to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. This codification clarifies that fair value of certain assets and liabilities is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between willing market participants.

ASC 820 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. The three levels of the fair value hierarchy under ASC 820 based on these two types of inputs are as follows:

Level 1 Valuation is based on quoted prices in active markets for identical assets and liabilities.

Level 2 Valuation is based on observable inputs including quoted prices in active markets for similar assets and liabilities, quoted prices for identical or similar assets and liabilities in less active markets, and model-based valuation techniques for which significant assumptions can be derived primarily from or corroborated by observable data in the markets.

Level 3 Valuation is based on model-based techniques that use one or more significant inputs or assumptions that are unobservable in the market. These unobservable inputs reflect the Company’s assumptions about what market participants would use and information that is reasonably available under the circumstances without undue cost and effort.

The following describes the valuation techniques used by the Company to measure certain financial assets and liabilities recorded at fair value on a recurring basis in the financial statements.

Derivative instruments
As discussed in Note 87 “Derivatives”, the Company records derivative instruments at fair value on a recurring basis. The Company utilizes derivative instruments as part of the management of interest rate risk to modify the re-pricing characteristics of certain portions of the Company’s interest-bearing assets and liabilities. The Company has contracted with a third party vendor to provide valuations for derivatives using standard valuation techniques and therefore classifies such valuations as Level 2. Third party valuations are validated by the Company using Bloomberg Valuation Service’s derivative pricing functions. The Company has considered counterparty credit risk in the valuation of its derivative assets and has considered its own credit risk in the valuation of its derivative liabilities.

During the ordinary course of business, the Company enters into interest rate lock commitments related to the origination of mortgage loans held for sale as well as best effort forward delivery commitments to mitigate interest rate risk; these instruments are recorded at estimated fair value based on the value of the underlying loan, which in turn is based on quoted prices for similar loans in the secondary market. However, this value is adjusted by a pull-through rate which considers the likelihood that the loan in a lock position will ultimately close. The pull-through rate is derived from the Company’s internal data and is adjusted using significant management judgment. The pull-through rate is largely dependent on the loan processing stage that a loan is currently in and the change in prevailing interest rates from the time of the rate lock. As such, interest rate lock commitments are classified as Level 3. An increase in the pull-through rate utilized in the fair value measurement of the interest rate lock commitment derivative will result in positive fair value adjustments while a decrease in the pull-through rate will result in a negative fair value adjustment. The Company’s weighted average pull-through rate was approximately 80% as of ~~September 30, 2015~~March 31, 2016 and ~~approximately 90% as of~~ December 31, ~~2014.~~2015. As of ~~September 30, 2015,~~March 31, 2016, the interest rate lock commitments are recorded as a component of “Other Assets” ~~and the best effort forward delivery commitments are recorded as a component of “Other Liabilities”~~ on the Company’s Consolidated Balance Sheets.

Securities available for sale
Securities available for sale are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted market prices, when available (Level 1). If quoted market prices are not available, fair values are measured utilizing independent valuation techniques of identical or similar securities for which significant assumptions are derived primarily from or corroborated by observable market data (Level 2). If the inputs used to provide the evaluation for certain securities are unobservable and/or there is little, if any, market activity, then the security would fall to the lowest level of the hierarchy (Level 3).

~~- 34 -~~
- 32 -

The Company’s investment portfolio is primarily valued using fair value measurements that are considered to be Level 2. The Company has contracted with a third party portfolio accounting service vendor for valuation of its securities portfolio. The vendor’s primary source for security valuation is Interactive Data Corporation (“IDC”), which evaluates securities based on market data. IDC utilizes evaluated pricing models that vary by asset class and include available trade, bid, and other market information. Generally, the methodology includes broker quotes, proprietary models, vast descriptive terms and conditions databases, as well as extensive quality control programs.

The vendor utilizes proprietary valuation matrices for valuing all municipals securities. The initial curves for determining the price, movement, and yield relationships within the municipal matrices are derived from industry benchmark curves or sourced from a municipal trading desk. The securities are further broken down according to issuer, credit support, state of issuance, and rating to incorporate additional spreads to the industry benchmark curves.

The Company primarily uses Bloomberg Valuation Service, an independent information source that draws on quantitative models and market data contributed from over 4,000 market participants, to validate third party valuations. Any material differences between valuation sources are researched by further analyzing the various inputs that are utilized by each pricing source. No material differences were identified during the validation as of ~~September 30, 2015~~March 31, 2016 and December 31, ~~2014.~~2015.

The carrying value of restricted Federal Reserve Bank and FHLB stock approximates fair value based on the redemption provisions of each entity and is therefore excluded from the following table.

Loans held for sale
Loans held for sale are carried at fair value. These loans currently consist of residential loans originated for sale in the secondary market. Fair value is based on the price secondary markets are currently offering for similar loans using observable market data which is not materially different than cost due to the short duration between origination and sale (Level 2). Gains and losses on the sale of loans are recorded within the mortgage segment and are reported on a separate line item in the Company’s Consolidated Statements of Income.
~~- 35 -~~
- 33 -

The following table presents the balances of financial assets and liabilities measured at fair value on a recurring basis at ~~September 30, 2015~~March 31, 2016 and December 31, ~~2014~~2015 (dollars in thousands):

Fair Value Measurements at September 30, 2015 using Fair Value Measurements at March 31, 2016 using
Quoted Prices in
Active Markets for
Identical Assets Significant
Other
Observable
Inputs Significant
Unobservable
Inputs Quoted Prices in
Active Markets for
Identical Assets Significant
Other
Observable
Inputs Significant
Unobservable
Inputs
Level 1 Level 2 Level 3 Balance Level 1 Level 2 Level 3 Balance
ASSETS
Securities available for sale:
U.S. government and agency securities $ - $ 8,411 $ - $ 8,411
Obligations of states and political subdivisions - 249,893 - 249,893 $ - $ 265,969 $ - $ 265,969
Corporate and other bonds - 72,462 - 72,462 - 93,766 - 93,766
Mortgage-backed securities - 547,717 - 547,717 - 568,562 - 568,562
Other securities - 10,209 - 10,209 - 11,112 - 11,112
Loans held for sale - 25,109 - 25,109
Derivatives:
Interest rate swap - 5,470 - 5,470 - 7,540 - 7,540
Cash flow hedges - 1,553 - 1,553 - 1,797 - 1,797
Interest rate lock commitments - - 1,321 1,321 - - 1,252 1,252

LIABILITIES
Derivatives:
Interest rate swap $ - $ 5,470 $ - $ 5,470 $ - $ 7,540 $ - $ 7,540
Cash flow hedges - 11,911 - 11,911 - 15,279 - 15,279
Best effort forward delivery commitments - - 544 544
Fair value hedges - 3,418 - 3,418

Fair Value Measurements at December 31, 2014 using
Quoted Prices in
Active Markets for
Identical Assets Significant
Other
Observable
Inputs Significant
Unobservable
Inputs
Level 1 Level 2 Level 3 Balance
ASSETS
Securities available for sale:
U.S. government and agency securities $ - $ 8,454 $ - $ 8,454
Obligations of states and political subdivisions - 445,647 - 445,647
Corporate bonds - 78,680 - 78,680
Mortgage-backed securities - 559,329 - 559,329
Other securities - 10,004 - 10,004
Derivatives:
Interest rate swap - 2,681 - 2,681
Cash flow hedges - 580 - 580
Interest rate lock commitments - - 513 513

LIABILITIES
Derivatives:
Interest rate swap $ - $ 2,681 $ - $ 2,681
Cash flow hedges - 8,433 - 8,433
Fair Value Measurements at December 31, 2015 using
Quoted Prices in
Active Markets for
Identical Assets Significant
Other
Observable
Inputs Significant
Unobservable
Inputs
Level 1 Level 2 Level 3 Balance
ASSETS
Securities available for sale:
Obligations of states and political subdivisions $ - $ 268,079 $ - $ 268,079
Corporate and other bonds - 75,979 - 75,979
Mortgage-backed securities - 548,171 - 548,171
Other securities - 11,063 - 11,063
Loans held for sale - 36,030 - 36,030
Derivatives:
Interest rate swap - 3,758 - 3,758
Cash flow hedges - 946 - 946
Interest rate lock commitments - - 701 701

LIABILITIES
Derivatives:
Interest rate swap $ - $ 3,758 $ - $ 3,758
Cash flow hedges - 10,352 - 10,352
Fair value hedges - 888 - 888

~~- 36 -~~
- 34 -

Certain assets are measured at fair value on a nonrecurring basis in accordance with U.S. GAAP. Adjustments to the fair value of these assets usually result from the application of lower-of-cost-or-market accounting or write-downs of individual assets.

The following describes the valuation techniques used by the Company to measure certain assets recorded at fair value on a nonrecurring basis in the financial statements.
~~Loans held for sale~~
Loans held for sale are carried at the lower of cost or market value. These loans currently consist of residential loans originated for sale in the secondary market and the credit card portfolio that was transferred from loans held for investment during the quarter. See Note 13 “Subsequent Events” for additional information. Fair value is based on the price secondary markets are currently offering for similar loans using observable market data which is not materially different than cost due to the short duration between origination and sale (Level 2). As such, the Company records any fair value adjustments on a nonrecurring basis. Gains and losses on the sale of loans are recorded within the mortgage segment and are reported on a separate line item in the Company’s Consolidated Statements of Income.

Impaired loans
Loans are designated as impaired when, in the judgment of management based on current information and events, it is probable that all amounts due according to the contractual terms of the loan agreements will not be collected. The measurement of loss associated with impaired loans can be based on either the observable market price of the loan or the fair value of the collateral. Collateral dependent loans are reported at the fair value of the underlying collateral if repayment is solely from the underlying value of the collateral. Collateral may be in the form of real estate or business assets including equipment, inventory, and accounts receivable. The vast majority of the Company’s collateral is real estate. The value of real estate collateral is determined utilizing an income or market valuation approach based on an appraisal conducted by an independent, licensed appraiser using observable market data. When evaluating the fair value, management may discount the appraisal further if, based on their understanding of the market conditions, it is determined the collateral is further impaired below the appraised value (Level 3). For the periods ending March 31, 2016 and December 31, 2015, the Level 3 weighted averages related to impaired loans were 0.0% and 7.0%, respectively. The value of business equipment is based upon an outside appraisal, of one year or less, if deemed significant, or the net book value on the applicable business’s financial statements if not considered significant using observable market data. Likewise, values for inventory and accounts receivables collateral are based on financial statement balances or aging reports (Level 3). Collateral dependent impaired loans allocated to the allowance for loan losses are measured at fair value on a nonrecurring basis. Any fair value adjustments are recorded in the period incurred as provision for loan losses on the Company’s Consolidated Statements of Income.

Other real estate owned
OREO is evaluated for impairment at least quarterly by the Bank’s Special Asset Loan Committee and any necessary write downs to fair values are recorded as impairment and included as a component of noninterest expense. Fair values of OREO are carried at fair value less selling costs. Fair value is based upon independent market prices, appraised values of the collateral, or management’s estimation of the value of the collateral. When an appraised value is not available or management determines the fair value of the collateral is further impaired below the appraised value and there is no observable market price, the Company records the foreclosed asset as Level 3 valuation. For the periods ending March 31, 2016 and December 31, 2015, the Level 3 weighted averages related to OREO were approximately 31.0% and 32.0%, respectively.

Total valuation expenses related to OREO properties for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2016 and 2015 totaled ~~$473,000~~$126,000 and ~~$1.8 million, respectively, and for the three and nine months ended September 30, 2014 totaled $6.2 million and $7.3 million,~~$590,000, respectively.

~~- 37 -~~
- 35 -

The following tables summarize the Company’s financial assets that were measured at fair value on a nonrecurring basis at ~~September 30, 2015~~March 31, 2016 and December 31, ~~2014 (dollars in thousands):~~
Fair Value Measurements at September 30, 2015 using
Quoted Prices in
Active Markets
for Identical
Assets Significant
Other
Observable
Inputs Significant
Unobservable
Inputs
Level 1 Level 2 Level 3 Balance
ASSETS
Loans held for sale $ - $ 65,713 $ - $ 65,713
Impaired loans - - 10,416 10,416
Other real estate owned - - 22,094 22,094
Fair Value Measurements at December 31, 2014 using
Quoted Prices in
Active Markets
for Identical
Assets Significant
Other
Observable
Inputs Significant
Unobservable
Inputs
Level 1 Level 2 Level 3 Balance
ASSETS
Loans held for sale $ - $ 42,519 $ - $ 42,519
Impaired loans - - 15,797 15,797
Other real estate owned - - 28,118 28,118
~~The following table displays quantitative information about Level 3 Fair Value Measurements at September 30,~~ 2015 (dollars in thousands):

Fair Value Measurements at September 30, 2015
Fair Value Valuation Technique(s) Unobservable Inputs Weighted
Average
ASSETS
Impaired Loans $ 10,416 Market comparables Discount applied to market comparables⁽¹⁾ 7 %
Other real estate owned 22,094 Market comparables Discount applied to market comparables⁽¹⁾ 21 %
Total $ 32,510
Fair Value Measurements at March 31, 2016 using
Quoted Prices in
Active Markets for
Identical Assets Significant
Other
Observable
Inputs Significant
Unobservable
Inputs
Level 1 Level 2 Level 3 Balance
ASSETS
Impaired loans $ - $ - $ 4,191 $ 4,191
Other real estate owned - - 14,246 14,246

⁽¹⁾~~A discount percentage (in addition to expected selling costs) is applied based on the age of independent appraisals, current market conditions, and experience within the local market.~~
~~- 38 -~~
~~The following table displays quantitative information about Level 3 Fair Value Measurements at December 31, 2014 (dollars in thousands):~~
Fair Value Measurements at December 31, 2014
Fair Value Valuation Technique(s) Unobservable Inputs Weighted
Average
ASSETS
Impaired Loans $ 15,797 Market comparables Discount applied to market comparables⁽¹⁾ 13 %
Other real estate owned 28,118 Market comparables Discount applied to market comparables⁽¹⁾ 32 %
Total $ 43,915
⁽¹⁾~~A discount percentage (in addition to expected selling costs) is applied based on the age of independent appraisals, current market conditions, and experience within the local market.~~
Fair Value Measurements at December 31, 2015 using
Quoted Prices in
Active Markets for
Identical Assets Significant
Other
Observable
Inputs Significant
Unobservable
Inputs
Level 1 Level 2 Level 3 Balance
ASSETS
Impaired loans $ - $ - $ 2,214 $ 2,214
Other real estate owned - - 15,299 15,299

ASC 825,Financial Instruments, requires disclosure about fair value of financial instruments for interim periods and excludes certain financial instruments and all non-financial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company.

Cash and cash equivalents
For those short-term instruments, the carrying amount is a reasonable estimate of fair value.

Held to Maturity Securities
The Company’s investment portfolio is primarily valued using fair value measurements that are considered to be Level 2. The Company has contracted with a third party portfolio accounting service vendor for valuation of its securities portfolio. The vendor’s primary source for security valuation is IDC, which evaluates securities based on market data. IDC utilizes evaluated pricing models that vary by asset class and include available trade, bid, and other market information. Generally, the methodology includes broker quotes, proprietary models, vast descriptive terms and conditions databases, as well as extensive quality control programs.

The vendor utilizes proprietary valuation matrices for valuing all municipals securities. The initial curves for determining the price, movement, and yield relationships within the municipal matrices are derived from industry benchmark curves or sourced from a municipal trading desk. The securities are further broken down according to issuer, credit support, state of issuance, and rating to incorporate additional spreads to the industry benchmark curves.

The Company primarily uses Bloomberg Valuation Service, an independent information source that draws on quantitative models and market data contributed from over 4,000 market participants, to validate third party valuations. Any material differences between valuation sources are researched by further analyzing the various inputs that are utilized by each pricing source. No material differences were identified during the validation as of ~~September 30, 2015~~March 31, 2016 and December 31, ~~2014.~~2015.

~~- 39 -~~
- 36 -

Loans
The fair value of performing loans is estimated by discounting expected future cash flows using a yield curve that is constructed by adding a loan spread to a market yield curve. Loan spreads are based on spreads currently observed in the market for loans of similar type and structure. Fair value for impaired loans and their respective level within the fair value hierarchy, are described in the previous disclosure related to fair value measurements of assets that are measured on a nonrecurring basis.

Bank owned life insurance
The carrying value of bank owned life insurance approximates fair value. The Company records these policies at their cash surrender value, which is estimated using information provided by insurance carriers.

Deposits
The fair value of demand deposits, savings accounts, and certain money market deposits is the amount payable on demand at the reporting date. The fair value of certificates of deposit is estimated by discounting the future cash flows using the rates currently offered for deposits of similar remaining maturities.

Borrowings
The carrying value of the Company’s repurchase agreements is a reasonable estimate of fair value. Other borrowings are discounted using the current yield curve for the same type of borrowing. For borrowings with embedded optionality, a third party source is used to value the instrument. The Company validates all third party valuations for borrowings with optionality using Bloomberg’s derivative pricing functions.

Accrued interest
The carrying amounts of accrued interest approximate fair value.

~~Commitments to extend credit and standby letters of credit~~
The fair value of commitments is estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties. For fixed-rate loan commitments, fair value also considers the difference between current levels of interest rates and the committed rates. The fair value of letters of credit is based on fees currently charged for similar agreements or on the estimated cost to terminate them or otherwise settle the obligations with the counterparties at the reporting date. At September 30, 2015 and December 31, 2014, the fair value of loan commitments and standby letters of credit was immaterial.
~~- 40 -~~
- 37 -

The carrying values and estimated fair values of the Company’s financial instruments at ~~September 30, 2015~~March 31, 2016 and December 31, ~~2014~~2015 are as follows (dollars in thousands):

Fair Value Measurements at September 30, 2015 using Fair Value Measurements at March 31, 2016 using
Quoted Prices in
Active Markets
for Identical
Assets Significant
Other
Observable
Inputs Significant
Unobservable
Inputs Total Fair
Value Quoted Prices
in Active
Markets for
Identical Assets Significant
Other
Observable
Inputs Significant
Unobservable
Inputs Total Fair
Value
Carrying Value Level 1 Level 2 Level 3 Balance Carrying Value Level 1 Level 2 Level 3 Balance
ASSETS
Cash and cash equivalents $ 179,194 $ 179,194 $ - $ - $ 179,194 $ 133,339 $ 133,339 $ - $ - $ 133,339
Securities available for sale 888,692 - 888,692 - 888,692 939,409 - 939,409 - 939,409
Held to maturity securities 199,363 - 200,319 - 200,319 204,444 - 210,349 - 210,349
Restricted stock 52,721 - 52,721 - 52,721 58,211 - 58,211 - 58,211
Loans held for sale 65,713 - 65,713 - 65,713 25,109 - 25,109 - 25,109
Net loans 5,510,352 - - 5,536,118 5,536,118 5,746,103 - - 5,781,970 5,781,970
Derivatives:
Interest rate lock commitments 1,321 - - 1,321 1,321 1,252 - - 1,252 1,252
Interest rate swap 5,470 - 5,470 - 5,470 7,540 - 7,540 - 7,540
Cash flow hedges 1,553 - 1,553 - 1,553 1,797 - 1,797 - 1,797
Accrued interest receivable 21,488 - 21,488 - 21,488 22,018 - 22,018 - 22,018
Bank owned life insurance 142,433 - 142,433 - 142,433 175,033 - 175,033 - 175,033

LIABILITIES
Deposits $ 5,818,853 $ - $ 5,817,840 $ - $ 5,817,840 $ 5,945,982 $ - $ 5,944,634 $ - $ 5,944,634
Borrowings 722,149 - 699,804 - 699,804 849,638 - 827,558 - 827,558
Accrued interest payable 1,610 - 1,610 - 1,610 1,660 - 1,660 - 1,660
Derivatives:
Interest rate swap 5,470 - 5,470 - 5,470 7,540 - 7,540 - 7,540
Cash flow hedges 11,911 - 11,911 - 11,911 15,279 - 15,279 - 15,279
Best effort forward delivery commitments 544 - - 544 544
Fair value hedges 3,418 - 3,418 - 3,418

~~- 41 -~~
- 38 -


Fair Value Measurements at December 31, 2014 using Fair Value Measurements at December 31, 2015 using
Quoted Prices in
Active Markets
for Identical
Assets Significant
Other
Observable
Inputs Significant
Unobservable
Inputs Total Fair
Value Quoted Prices
in Active
Markets for
Identical Assets Significant
Other
Observable
Inputs Significant
Unobservable
Inputs Total Fair
Value
Carrying Value Level 1 Level 2 Level 3 Balance Carrying Value Level 1 Level 2 Level 3 Balance
ASSETS
Cash and cash equivalents $ 133,260 $ 133,260 $ - $ - $ 133,260 $ 142,660 $ 142,660 $ - $ - $ 142,660
Securities available for sale 1,102,114 - 1,102,114 - 1,102,114 903,292 - 903,292 - 903,292
Held to maturity securities 205,374 - 209,437 - 209,437
Restricted stock 54,854 - 54,854 - 54,854 51,828 - 51,828 - 51,828
Loans held for sale 42,519 - 42,519 - 42,519 36,030 - 36,030 - 36,030
Net loans 5,313,612 - - 5,340,759 5,340,759 5,637,415 - - 5,671,155 5,671,155
Derivatives:
Interest rate lock commitments 513 - - 513 513 701 - - 701 701
Interest rate swap 2,681 - 2,681 - 2,681 3,758 - 3,758 - 3,758
Cash flow hedges 580 - 580 - 580 946 - 946 - 946
Accrued interest receivable 21,775 - 21,775 - 21,775 20,760 - 20,760 - 20,760
Bank owned life insurance 139,005 - 139,005 - 139,005 173,687 - 173,687 - 173,687

LIABILITIES
Deposits $ 5,638,770 $ - $ 5,637,929 $ - $ 5,637,929 $ 5,963,936 $ - $ 5,957,484 $ - $ 5,957,484
Borrowings 686,935 - 666,224 - 666,224 680,175 - 659,364 - 659,364
Accrued interest payable 1,899 - 1,899 - 1,899 1,578 - 1,578 - 1,578
Derivatives:
Interest rate swap 2,681 - 2,681 - 2,681 3,758 - 3,758 - 3,758
Cash flow hedges 8,433 - 8,433 - 8,433 10,352 - 10,352 - 10,352
Fair value hedges 888 - 888 - 888

The Company assumes interest rate risk (the risk that general interest rate levels will change) as a result of its normal operations. As a result, the fair values of the Company’s financial instruments will change when interest rate levels change and that change may be either favorable or unfavorable to the Company. Management attempts to match maturities of assets and liabilities to the extent believed necessary to minimize interest rate risk. However, borrowers with fixed rate obligations are less likely to prepay in a rising rate environment and more likely to prepay in a falling rate environment. Conversely, depositors who are receiving fixed rates are more likely to withdraw funds before maturity in a rising rate environment and less likely to do so in a falling rate environment. Management monitors rates and maturities of assets and liabilities and attempts to minimize interest rate risk by adjusting terms of new loans and deposits and by investing in securities with terms that mitigate the Company’s overall interest rate risk.

~~- 42 -~~
- 39 -

~~11.~~10. EARNINGS PER SHARE

Basic EPS is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted EPS is computed using the weighted average number of common shares outstanding during the period, including the effect of dilutive potential common shares outstanding attributable to stock awards.

There were approximately ~~51,179~~76,583 and ~~155,433~~159,460 shares underlying anti-dilutive awards for the three months ended ~~September 30,~~March 31, 2016 and 2015, ~~and 2014, respectively, and there were approximately 54,475 and 130,499 shares underlying anti-dilutive awards for the nine months ended September 30, 2015 and 2014,~~ respectively. Anti-dilutive awards were excluded from the calculation of diluted EPS.

The following is a reconciliation of the denominators of the basic and diluted EPS computations for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2016 and 2015 ~~and 2014~~ (in thousands except per share data):

Net Income Available to
Common Shareholders
(Numerator) Weighted
Average
Common Shares
(Denominator) Per Share
Amount Net Income Available to
Common Shareholders
(Numerator) Weighted
Average
Common Shares
(Denominator) Per Share
Amount
For the three months ended September 30, 2015
For the three months ended March 31, 2016
Net income, basic $ 18,216 45,087 $ 0.40 $ 16,961 44,251 $ 0.38
Add: potentially dilutive common shares - stock awards - 84 - - 76 -
Diluted $ 18,216 45,171 $ 0.40 $ 16,961 44,327 $ 0.38

For the three months ended September 30, 2014
For the three months ended March 31, 2015
Net income, basic $ 14,817 45,649 $ 0.32 $ 15,701 45,106 $ 0.35
Add: potentially dilutive common shares - stock awards - 89 - - 82 -
Diluted $ 14,817 45,738 $ 0.32 $ 15,701 45,188 $ 0.35

For the nine months ended September 30, 2015
Net income, basic $ 49,264 45,107 $ 1.09
Add: potentially dilutive common shares - stock awards - 82 -
Diluted $ 49,264 45,189 $ 1.09

For the nine months ended September 30, 2014
Net income, basic $ 37,199 46,269 $ 0.80
Add: potentially dilutive common shares - stock awards - 98 -
Diluted $ 37,199 46,367 $ 0.80

~~- 43 -~~
- 40 -

~~12.~~11. SEGMENT REPORTING DISCLOSURES

The Company has two reportable segments: a traditional full service community bank segment and a mortgage loan origination business segment. The community bank segment includes one subsidiary bank, the Bank, which provides loan, deposit, investment, and trust services to retail and commercial customers throughout its 124 retail locations in Virginia. The mortgage segment includes UMG, which provides a variety of mortgage loan products principally in Virginia, North Carolina, Maryland, and the Washington D.C. metro area. These loans are originated and sold primarily in the secondary market through purchase commitments from investors, which serves to mitigate the Company’s exposure to interest rate risk.

Profit and loss is measured by net income after taxes including realized gains and losses on the Company’s investment portfolio. The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies. Inter-segment transactions are recorded at cost and eliminated as part of the consolidation process.

Both of the Company’s reportable segments are service-based. The mortgage business is a primarily fee-based business while the bank is driven principally by net interest income. The bank segment provides a distribution and referral network through its customers for the mortgage loan origination business. The mortgage segment offers a more limited referral network for the bank segment.

The community bank segment provides the mortgage segment with the short-term funds needed to originate mortgage loans through a warehouse line of credit and charges the mortgage banking segment interest. The interest rate on the warehouse line of credit for both the three ~~and nine~~ months ended ~~September 30,~~March 31, 2016 and 2015 was the three month LIBOR rate plus 0.15% with no floor. During 2014, the interest rate on the warehouse line of credit was the three month LIBOR rate plus 1.5% with a floor of 2.0% through May 31, 2014; beginning on June 1, 2014, the interest rate was one month LIBOR rate plus 1.5% with no floor. These transactions are eliminated in the consolidation process.
During 2015, the mortgage segment began originating loans with the intent that they be held for investment purposes. The community bank segment provides the mortgage segment with the long-term funds needed to originate these loans through a long-term funding facility and charges the mortgage segment interest. The interest charged is determined by the community bank segment based on the cost of funds available to the community bank segment for similar durations of the loans being funded by the mortgage segment.
A management fee for operations and administrative support services is charged to all subsidiaries and eliminated in the consolidated totals.

~~- 44 -~~
- 41 -

Information about reportable segments and reconciliation of such information to the consolidated financial statements for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2016 and 2015 ~~and 2014~~ is as follows (dollars in thousands):

UNION BANKSHARES CORPORATION AND SUBSIDIARIES
SEGMENT FINANCIAL INFORMATION

Community Bank Mortgage Eliminations Consolidated
Three Months Ended September 30, 2015
Net interest income $ 63,075 $ 369 $ - $ 63,444
Provision for credit losses 2,000 62 - 2,062
Net interest income after provision for credit losses 61,075 307 - 61,382
Noninterest income 14,287 2,608 (170 ) 16,725
Noninterest expenses 50,674 2,821 (170 ) 53,325
Income (loss) before income taxes 24,688 94 - 24,782
Income tax expense (benefit) 6,531 35 - 6,566
Net income (loss) $ 18,157 $ 59 $ - $ 18,216
Total assets $ 7,588,606 $ 62,127 $ (56,420 ) $ 7,594,313

Three Months Ended September 30, 2014
Net interest income $ 64,162 $ 317 $ - $ 64,479
Provision for credit losses 1,800 - - 1,800
Net interest income after provision for credit losses 62,362 317 - 62,679
Noninterest income 13,884 2,604 (170 ) 16,318
Noninterest expenses 55,680 3,903 (170 ) 59,413
Income (loss) before income taxes 20,566 (982 ) - 19,584
Income tax expense (benefit) 5,121 (354 ) - 4,767
Net income (loss) $ 15,445 $ (628 ) $ - $ 14,817
Total assets $ 7,188,596 $ 41,857 $ (36,570 ) $ 7,193,883

Nine Months Ended September 30, 2015
Net interest income $ 188,240 $ 989 $ - $ 189,229
Provision for credit losses 7,450 111 - 7,561
Net interest income after provision for credit losses 180,790 878 - 181,668
Noninterest income 40,658 7,844 (512 ) 47,990
Noninterest expenses 154,011 8,906 (512 ) 162,405
Income (loss) before income taxes 67,437 (184 ) - 67,253
Income tax expense (benefit) 18,060 (71 ) - 17,989
Net income (loss) $ 49,377 $ (113 ) $ - $ 49,264
Total assets $ 7,588,606 $ 62,127 $ (56,420 ) $ 7,594,313

Nine Months Ended September 30, 2014
Net interest income $ 191,090 $ 863 $ - $ 191,953
Provision for credit losses 3,300 - - 3,300
Net interest income after provision for credit losses 187,790 863 - 188,653
Noninterest income 38,964 7,932 (511 ) 46,385
Noninterest expenses 173,268 12,908 (511 ) 185,665
Income (loss) before income taxes 53,486 (4,113 ) - 49,373
Income tax expense (benefit) 13,678 (1,504 ) - 12,174
Net income (loss) $ 39,808 $ (2,609 ) $ - $ 37,199
Total assets $ 7,188,596 $ 41,857 $ (36,570 ) $ 7,193,883
~~- 45 -~~
Community Bank Mortgage Eliminations Consolidated
Three Months Ended March 31, 2016
Net interest income $ 63,425 $ 306 $ - $ 63,731
Provision for credit losses 2,500 104 - 2,604
Net interest income after provision for credit losses 60,925 202 - 61,127
Noninterest income 13,608 2,477 (171 ) 15,914
Noninterest expenses 51,844 2,599 (171 ) 54,272
Income before income taxes 22,689 80 - 22,769
Income tax expense 5,782 26 - 5,808
Net income $ 16,907 $ 54 $ - $ 16,961
Total assets $ 7,825,652 $ 55,069 $ (48,110 ) $ 7,832,611

Three Months Ended March 31, 2015
Net interest income $ 61,723 $ 246 $ - $ 61,969
Provision for credit losses 1,750 - - 1,750
Net interest income after provision for credit losses 59,973 246 - 60,219
Noninterest income 12,848 2,376 (170 ) 15,054
Noninterest expenses 50,972 3,038 (170 ) 53,840
Income (loss) before income taxes 21,849 (416 ) - 21,433
Income tax expense (benefit) 5,881 (149 ) - 5,732
Net income (loss) $ 15,968 $ (267 ) $ - $ 15,701
Total assets $ 7,382,266 $ 55,380 $ (49,087 ) $ 7,388,559

~~13.~~12. SUBSEQUENT EVENTS

~~Sale of Credit Card Portfolio~~
~~During the third quarter of 2015, the Company concluded~~On April 5, 2016, Union Bankshares Corporation announced that ~~it met the pertinent criteria for transferring the credit card portfolio from loans held for investment to loans held for sale.~~
~~On October 16, 2015, the Company~~its subsidiary bank, Union Bank & Trust, entered into an agreement to ~~sell the credit card portfolio, approximately $26.4~~acquire Old Dominion Capital Management, Inc., a Charlottesville, Virginia based registered investment advisor with nearly $300 million in outstanding balances, and enter into an outsourced partnership solution with Elan Financial Services. The company sold these loans at a premium which is not expected to have a material impact on the Company’s Consolidated Statements of Income. As part of the agreement, the Company will continue to share in interchange fee income and finance charges.
~~Share Repurchase Authorization~~
On October 29, 2015, the Company’s Board of Directors authorized a share repurchase program to purchase up to $25.0 million worth of the Company’s common stock on the open market or in privately negotiated transactions. The repurchase program is authorized through December 31, 2016.assets under management.

~~- 46 -~~
- 42 -

Review Report of Independent Registered Public Accounting Firm

The Shareholders and Board of Directors of Union Bankshares Corporation

We have reviewed the consolidated balance sheet of Union Bankshares Corporation (the “Company”) as of ~~September 30, 2015,~~March 31, 2016, and the related consolidated statements of income, ~~and~~ comprehensive income, ~~for the three- and nine-month periods ended September 30, 2015 and the related consolidated statements of~~ changes in stockholders’ equity and cash flows for the ~~nine-month period~~three-month periods ended ~~September 30,~~March 31, 2016 and 2015. These financial statements are the responsibility of the Company's management. The consolidated financial statements of the Company as of September 30, 2014, and for the three- and nine-month periods then ended, were reviewed by other auditors whose report dated November 5, 2014 stated that based on their review they were not aware of any material modifications that should be made to those statements for them to be in conformity with U.S. generally accepted accounting principles. The consolidated balance sheet of the Company as of December 31, 2014, and the related consolidated statements of income, comprehensive income, shareholders' equity and cash flows for the year then ended (not presented herein) were audited by other auditors whose report dated February 27, 2015 expressed an unqualified opinion on those statements.

We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to the ~~2015~~ consolidated financial statements referred to above for them to be in conformity with U.S. generally accepted accounting principles.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of the Company as of December 31, 2015, and the related consolidated statements of income, comprehensive income, changes in stockholders' equity, and cash flows for the year then ended, not presented herein and we expressed an unqualified audit opinion on those consolidated financial statements in our report dated February 25, 2016. In our opinion, the accompanying consolidated balance sheet of the Company as of December 31, 2015, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.
/s/ Ernst & Young LLP

Richmond, Virginia
~~November~~May 5, ~~2015~~ 2016

~~- 47 -~~
- 43 -

ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Management’s discussion and analysis is presented to aid the reader in understanding and evaluating the financial condition and results of operations of Union Bankshares Corporation and its subsidiaries (collectively, the “Company”). This discussion and analysis should be read with the consolidated financial statements, the notes to the financial statements, and the other financial data included in this report, as well as the Company’s Annual Report on Form 10-K and management’s discussion and analysis for the year ended December 31, ~~2014.~~2015. Highlighted in the discussion are material changes from prior reporting periods and any identifiable trends affecting the Company. Results of operations for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2016 and 2015 ~~and 2014~~ are not necessarily indicative of results that may be attained for any other period. Amounts are rounded for presentation purposes while some of the percentages presented are computed based on unrounded amounts.

FORWARD-LOOKING STATEMENTS
Certain statements in this report 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, or beliefs about future events or results or otherwise are not statements of historical fact. Such statements are often characterized by the use of qualified words (and their derivatives) such as “expect,” “believe,” “estimate,” “plan,” “project,” “anticipate,” “intend,” “will,” or words of similar meaning or other statements concerning opinions or judgment of the Company and its management about future events. Although the Company believes that its expectations with respect to forward-looking statements are based upon reasonable assumptions within the bounds of its existing knowledge of its business and operations, there can be no assurance that actual results, performance, or achievements of the Company will not differ materially from any projected future results, performance, or achievements expressed or implied by such forward-looking statements. Actual future results and trends may differ materially from historical results or those anticipated depending on a variety of factors, including, but not limited to, the effects of and changes in: general economic and bank industry conditions, the interest rate environment, legislative and regulatory requirements, competitive pressures, new products and delivery systems, inflation, stock and bond markets, accounting standards or interpretations of existing standards, mergers and acquisitions, technology, information security, and consumer spending and savings habits. More information is available on the Company’s website,http://investors.bankatunion.com and on the Securities and Exchange Commission’s website,www.sec.gov. The information on the Company’s website is not a part of this Form 10-Q. The Company does not intend or assume any obligation to update or revise any forward-looking statements that may be made from time to time by or on behalf of the Company.

CRITICAL ACCOUNTING POLICIES
~~General~~
The accounting and reporting policies of the Company are in accordance with U.S. GAAP and conform to general practices within the banking industry. The Company’s financial position and results of operations are affected by management’s application of accounting policies, including estimates, assumptions, and judgments made to arrive at the carrying value of assets and liabilities and amounts reported for revenues, expenses, and related disclosures. Different assumptions in the application of these policies could result in material changes in the Company’s consolidated financial position and/or results of operations. The Company evaluates its critical accounting estimates and assumptions on an ongoing basis and updates them, as needed. Management has discussed the Company’s critical accounting policies and estimates with the Audit Committee of the Board of Directors.

The ~~more~~ critical accounting and reporting policies include the Company’s accounting for the allowance for loan losses, ~~mergers and acquisitions,~~acquired loans, and goodwill and intangible assets. The Company’s accounting policies are fundamental to understanding the Company’s consolidated financial position and consolidated results of operations. Accordingly, the Company’s significant accounting policies are discussed in detail in Note 1 “Summary of Significant Accounting Policies” in the “Notes to the Consolidated Financial Statements” contained in Item 8 of the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2014.~~
~~The following is a summary of the Company’s critical accounting policies that are highly dependent on estimates, assumptions, and judgments.~~
~~- 48 -~~
~~Allowance for Loan Losses~~
The provision for loan losses charged to operations is an amount sufficient to bring the allowance for loan losses to an estimated balance that management considers adequate to absorb incurred losses in the portfolio. Loans are charged against the allowance when management believes the collectability of the principal is unlikely. Recoveries of amounts previously charged-off are credited to the allowance. Management’s determination of the adequacy of the allowance is based on an evaluation of the composition of the loan portfolio, the value and adequacy of collateral, current economic conditions, historical loan loss experience, and other risk factors. Management believes that the allowance for loan losses is adequate. While management uses available information to recognize losses on loans, future additions to the allowance may be necessary based on changes in economic conditions, particularly those affecting real estate values. In addition, regulatory agencies, as an integral part of their examination process, periodically review the Company’s allowance for loan losses. Such agencies may require the Company to make adjustments to the allowance based on their judgments about information available to them at the time of their examination.2015.

The Company ~~performs regular credit reviews of the loan portfolio to review the credit quality~~provides additional information on its critical accounting policies and adherence to its underwriting standards. The credit reviews consist of reviews by its Loan Review group and reviews performed by an independent third party. Upon origination, each commercial loan is assigned a risk rating ranging from one to nine, with loans closer to one having less risk. This risk rating scale is the Company’s primary credit quality indicator. Consumer loans are generally not risk rated; the primary credit quality indicator for this portfolio segment is delinquency status. The Company has various committees that review and ensure that the allowance for loan losses methodology isestimates listed above under “MD&A—Critical Accounting Policies” in ~~accordance with U.S. GAAP and loss factors used appropriately reflect the risk characteristics of the loan portfolio.~~our 2015 Form 10-K.

~~The Company’s ALL consists of specific and general components.~~
~~Specific Reserve Component~~ – The specific reserve component relates to impaired loans. A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Upon being identified as impaired, for loans not considered to be collateral dependent, an allowance is established when the discounted cash flows of the impaired loan are lower than the carrying value of that loan. Nonaccrual loans under $100,000 and other impaired loans under $500,000 are aggregated based on similar risk characteristics. The level of credit impairment within the pool(s) is determined based on historical loss factors for loans with similar risk characteristics, taking into consideration environmental factors specifically related to the underlying pool. The impairment of collateral dependent loans is measured based on the fair value of the underlying collateral (based on independent appraisals), less selling costs, compared to the carrying value of the loan. If the Company determines that the value of an impaired collateral dependent loan is less than the recorded investment in the loan, it either recognizes an impairment reserve as a specific component to be provided for in the allowance for loan losses or charges off the deficiency if it is determined that such amount represents a confirmed loss. Typically, a loss is confirmed when the Company is moving towards foreclosure (or final disposition) of the underlying collateral, the collateral deficiency has not improved for two consecutive quarters, or when there is a payment default of 180 days, whichever occurs first.
The Company obtains independent appraisals from a pre-approved list of independent, third party appraisal firms located in the market in which the collateral is located. The Company’s approved appraiser list is continuously maintained to ensure the list only includes such appraisers that have the experience, reputation, character, and knowledge of the respective real estate market. At a minimum, it is ascertained that the appraiser is currently licensed in the state in which the property is located, experienced in the appraisal of properties similar to the property being appraised, has knowledge of current real estate market conditions and financing trends, and is reputable. The Company’s internal Real Estate Valuation Group, which reports to the Risk and Compliance Group, performs either a technical or administrative review of all appraisals obtained. A technical review will ensure the overall quality of the appraisal, while an administrative review ensures that all of the required components of an appraisal are present. Generally, independent appraisals are updated every 12 to 24 months or more frequently as necessary. The Company’s impairment analysis documents the date of the appraisal used in the analysis, whether the officer preparing the report deems it current, and, if not, allows for internal valuation adjustments with justification. Adjustments to appraisals generally include discounts for continued market deterioration subsequent to the appraisal date. Any adjustments from the appraised value to carrying value are documented in the impairment analysis, which is reviewed and approved by senior credit administration officers and the Special Assets Loan Committee. External appraisals are the primary source to value collateral dependent loans; however, the Company may also utilize values obtained through broker price opinions or other valuations sources. These alternative sources of value are used only if deemed to be more representative of value based on updated information regarding collateral resolution. Impairment analyses are updated, reviewed, and approved on a quarterly basis at or near the end of each reporting period.
~~- 49 -~~
~~General Reserve Component~~– The general reserve component covers non-impaired loans and is derived from an estimate of credit losses adjusted for various environmental factors applicable to both commercial and consumer loan segments. The estimate of credit losses is a function of the product of net charge-off historical loss experience to the loan balance of the loan portfolio averaged during the preceding twelve quarters, as management has determined this to adequately reflect the losses inherent in the loan portfolio. The environmental factors consist of national, local, and portfolio characteristics and are applied to both the commercial and consumer segments. The following table shows the types of environmental factors management considers:
~~ENVIRONMENTAL FACTORS~~
~~Portfolio~~ ~~National~~ ~~Local~~
~~Experience and ability of lending team~~ ~~Interest rates~~ ~~Level of economic activity~~
~~Depth of lending team~~ ~~Inflation~~ ~~Unemployment~~
~~Pace of loan growth~~ ~~Unemployment~~ ~~Competition~~
~~Franchise expansion~~ ~~Gross domestic product~~ ~~Military/government impact~~
~~Execution of loan risk rating process~~ ~~General market risk and other concerns~~
~~Degree of oversight / underwriting standards~~ ~~Legislative and regulatory environment~~
~~Value of real estate serving as collateral~~
~~Delinquency levels in portfolio~~
~~Charge-off levels in portfolio~~
~~Credit concentrations / nature and volume of the portfolio~~ - 44 -
~~Impaired Loans~~
A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. A loan that is classified substandard or worse is considered impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan-by-loan basis by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price, or the fair value of the collateral if the loan is collateral dependent. The impaired loan policy is the same for each of the seven classes within the commercial portfolio segment.
For the consumer loan portfolio segment, large groups of smaller balance homogeneous loans are collectively evaluated for impairment. This evaluation subjects each of the Company’s homogenous pools to a historical loss factor derived from net charge-offs experienced over the preceding twelve quarters. The Company applies payments received on impaired loans to principal and interest based on the contractual terms until they are placed on nonaccrual status. All payments received are then applied to reduce the principal balance and recognition of interest income is terminated.
~~Business Combinations and Acquired Loans~~
The Company’s merger and acquisition strategy focuses on high-growth areas with strong market demographics and targets organizations that have a comparable corporate culture, strong performance, and good asset quality, among other factors.
~~Business combinations are accounted for under ASC 805,~~~~Business Combinations~~, using the acquisition method of accounting. The acquisition method of accounting requires an acquirer to recognize the assets acquired and the liabilities assumed at the acquisition date measured at their fair values as of that date. To determine the fair values, the Company will continue to rely on third party valuations, such as appraisals, or internal valuations based on discounted cash flow analyses or other valuation techniques. Under the acquisition method of accounting, the Company will identify the acquirer and the closing date and apply applicable recognition principles and conditions. If they are necessary to implement its plan to exit an activity of an acquiree, costs that the Company expects, but is not obligated, to incur in the future are not liabilities at the acquisition date, nor are costs to terminate the employment of or relocate an acquiree’s employees. The Company does not recognize these costs as part of applying the acquisition method. Instead, the Company recognizes these costs as expenses in its post-combination financial statements in accordance with other applicable U.S. GAAP.
~~- 50 -~~

Acquisition-related costs are incremental costs the Company incurs to effect a business combination. Those costs include advisory, legal, accounting, valuation, and other professional or consulting fees. Some other examples of acquisition-related costs to the Company include systems conversions, integration planning consultants, and advertising costs. The Company will account for acquisition-related costs as expenses in the periods in which the costs are incurred and the services are received, with one exception. The costs to issue debt or equity securities will be recognized in accordance with other applicable U.S. GAAP. These acquisition-related costs are included within the Consolidated Statements of Income classified within the noninterest expense caption.
~~Loans acquired in a business combination are recorded at fair value on the date of the acquisition. Loans acquired with deteriorated credit quality are accounted for in accordance with ASC 310-30,~~~~Receivables – Loans and Debt Securities Acquired with Deteriorated Credit Quality~~, and are initially measured at fair value, which includes estimated future credit losses expected to be incurred over the life of the loans. Loans acquired in business combinations with evidence of credit deterioration are not considered to be impaired unless they deteriorate further subsequent to the acquisition. Certain acquired loans, including performing loans and revolving lines of credit (consumer and commercial), are accounted for in accordance with ASC 310-20,~~Receivables – Nonrefundable Fees and Other Costs~~~~, where the discount is accreted through earnings based on estimated cash flows over the estimated life of the loan.~~
~~Goodwill and Intangible Assets~~
~~The Company follows ASC 350,~~~~Intangibles~~– ~~Goodwill and Other,~~ which prescribes the accounting for goodwill and intangible assets subsequent to initial recognition. Goodwill resulting from business combinations prior to January 1, 2009 represents the excess of the purchase price over the fair value of the net assets of businesses acquired. Goodwill resulting from business combinations after January 1, 2009, is generally determined as the excess of the fair value of the consideration transferred, plus the fair value of any noncontrolling interests in the acquiree, over the fair value of the net assets acquired and liabilities assumed as of the acquisition date. Goodwill and intangible assets acquired in a purchase business combination and determined to have an indefinite useful life are not amortized, but tested for impairment at least annually or more frequently if events and circumstances exists that indicate that a goodwill impairment test should be performed. The Company has selected April 30th as the date to perform the annual impairment test. Intangible assets with definite useful lives are amortized over their estimated useful lives, which range from 4 to 14 years, to their estimated residual values. Goodwill is the only intangible asset with an indefinite life on the Company’s Consolidated Balance Sheets.
~~The Company performed its annual impairment testing in the second quarter of 2015 and determined that there was no impairment to its goodwill or intangible assets.~~
Long-lived assets, including purchased intangible assets subject to amortization, such as the core deposit intangible asset, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized in the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of would be separately presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell, and are no longer depreciated. Management concluded that no circumstances indicating an impairment of these assets existed as of the balance sheet date.
ABOUT UNION BANKSHARES CORPORATION

Headquartered in Richmond, Union Bankshares Corporation is the largest community banking organization headquartered in Virginia and operates in all major banking markets of the Commonwealth. Union Bankshares Corporation is the holding company for Union Bank & Trust, which provides banking, trust, and wealth management services and has a statewide presence of ~~124~~121 bank branches and ~~202~~approximately 200 ATMs. Non-bank affiliates of the holding company include: ~~Union Investment Services, Inc., which provides full brokerage services;~~ Union Mortgage Group, Inc., which provides a full line of mortgage ~~products;~~products, and Union Insurance Group, LLC, which offers various lines of insurance products.

~~The Company announced that, effective February 16, 2015, it had changed its subsidiary bank’s name from “Union First Market Bank” to “Union Bank & Trust”.~~
~~- 51 -~~
Shares of the Company’s common stock are traded on the NASDAQ Global Select Market under the symbol UBSH. Additional information is available on the Company’s website athttp://investors.bankatunion.com. The information contained on the Company’s website is not a part of or incorporated into this report.

RESULTS OF OPERATIONS

Executive Overview
For the quarter ended ~~September 30, 2015,~~March 31, 2016, the Company reported net income of ~~$18.2~~$17.0 million and earnings per share of ~~$0.40.~~$0.38. These results represent an increase of ~~$3.4~~$1.3 million, or ~~22.9%~~8.0%, from ~~$14.8~~$15.7 million in earnings from the ~~third~~first quarter of ~~2014. Excluding after-tax acquisition-related expenses of $1.1 million incurred during the third quarter of 2014, operating earnings~~⁽¹⁾ ~~increased $2.3 million, or 14.4%, primarily a result of lower operating expenses. Operating earnings per share~~⁽¹⁾ ~~were $0.40 and $0.35 for the quarters ended September 30, 2015 and 2014, respectively.~~
~~For the nine months ended September 30, 2015, the Company reported net income of $49.3 million and earnings~~2015. Earnings per share of ~~$1.09. These results~~$0.38 for the current quarter represent an increase of ~~$12.1 million,~~$0.03, or ~~32.4%~~8.6%, in earnings per share from ~~$37.2 million for~~ the first ~~nine months~~quarter of ~~2014. Excluding after-tax acquisition-related expenses of $13.2 million incurred during the first nine months of 2014, operating earnings~~⁽¹⁾ ~~declined $1.1 million,~~2015. This increase is primarily ~~a result of an increase~~attributable to increases in ~~provision for loan losses, and lower~~ net interest income, ~~partially offset by lower noninterest expenses. Operating earnings per share~~⁽¹⁾~~were $1.09 for the nine months ended September 30, 2015 and 2014, respectively.~~resulting from higher average loan balances.

· Net income for the ~~third~~first quarter of ~~2015~~2016for the community bank segment was ~~$18.2~~$16.9 million, or ~~$0.40~~$0.38 per share, compared to ~~operating earnings~~⁽¹⁾ ~~of $16.5~~$16.0 million, or $0.36 per share, in the ~~third~~first quarter of ~~2014. Net income for the community bank segment for the nine months ended September 30, 2015 was $49.4 million, or $1.09 per share.~~2015.
· The mortgage segment reported net income of ~~$59,000~~$54,000 for the ~~third~~first quarter of ~~2015,~~2016, an improvement of ~~$687,000~~$321,000 from a loss of ~~$628,000 in the third quarter of 2014. The mortgage segment reported a net loss of $113,000 for the first nine months of 2015, an improvement of $2.5 million from a loss of $2.6 million~~$267,000 in the first ~~nine months~~quarter of ~~2014.~~2015. The improvement waslargely a result of cost control initiatives in personnel ~~costs, loan production costs, and other operating expenses.~~costs.
· ~~During~~Net income for the first quarter of 2016 included after-tax branch closure costs of approximately $195,000 related to the previously announced 2016 branch closures.
· Adjusted for the sale of the credit card portfolio that occurred in the third quarter of 2015, ~~the Company transferred its credit card portfolio, totaling $26.4 million at September 30, 2015, from~~ loans held for investment ~~to loans held for sale, resulting from management’s decision to sell the loans in the fourth quarter of 2015.~~
· ~~Excluding credit cards from the prior period loan portfolio, loans~~ grew ~~$396.4~~$417.4 million, or ~~7.7%~~7.8%, from ~~September 30, 2014,~~March 31, 2015, while ~~year-to-date~~ average loan balances increased ~~$204.6~~$373.8 million, or ~~3.9%~~7.0%, from ~~September 30, 2014.~~the prior year. Period end loan balances grew ~~$221.9~~$109.0 million, or ~~5.6%~~7.7% (annualized), from December 31, ~~2014.~~2015.
· Deposits grew ~~$184.8~~$275.8 million, or ~~3.3%~~4.9%, from ~~September 30, 2014,~~March 31, 2015, while ~~year-to-date~~ average deposit balances increased ~~$41.5~~$259.5 million, or ~~0.7%~~4.6%, from ~~September 30, 2014.~~the prior year. Period end deposit balances ~~grew $180.1~~decreased $18.0 million, or ~~4.3%~~1.2% (annualized), from December 31, ~~2014.~~2015.
· Asset quality continued to improve due to reductions in nonperforming assets and past due loan levels.

⁽¹⁾~~These supplementary measures are provided because the Company believes they may be valuable to investors.For~~~~a reconciliation of the non-GAAP measures operating earnings, EPS, ROA, ROTCE, and efficiency ratio, see “NON-GAAP MEASURES” included in this Item 2.~~
~~- 52 -~~
- 45 -

Net Interest Income
For the Three Months Ended For the Three Months Ended
September 30, March 31,
2015 2014 Change 2016 2015 Change
(Dollars in thousands) (Dollars in thousands)
Average interest-earning assets $ 6,751,654 $ 6,423,743 $ 327,911 $ 6,968,988 $ 6,576,415 $ 392,573
Interest income (FTE) $ 72,287 $ 71,649 $ 638 $ 73,238 $ 69,761 $ 3,477
Yield on interest-earning assets 4.25 % 4.43 % (18 )bps 4.23 % 4.30 % (7 )bps
Core yield on interest-earning assets (1) 4.17 % 4.37 % (20 )bps 4.16 % 4.26 % (10 )bps
Average interest-bearing liabilities $ 5,162,928 $ 5,015,129 $ 147,799 $ 5,379,799 $ 5,096,040 $ 283,759
Interest expense $ 6,556 $ 5,112 $ 1,444 $ 7,018 $ 5,631 $ 1,387
Cost of interest-bearing liabilities �� 0.50 % 0.40 % 10 bps 0.52 % 0.45 % 7 bps
Core cost of interest-bearing liabilities (1) 0.52 % 0.58 % (6 )bps 0.53 % 0.54 % (1 )bps
Cost of funds 0.39 % 0.32 % 7 bps 0.41 % 0.35 % 6 bps
Core cost of funds (1) 0.40 % 0.45 % (5 )bps 0.40 % 0.42 % (2 )bps
Net Interest Income (FTE) $ 65,731 $ 66,537 $ (806 ) $ 66,220 $ 64,130 $ 2,090
Net Interest Margin (FTE) 3.86 % 4.11 % (25 )bps 3.82 % 3.95 % (13 )bps
Core Net Interest Margin (FTE) (1) 3.77 % 3.92 % (15 )bps 3.76 % 3.84 % (8 )bps

(1)Core metrics exclude the impact of acquisition accounting accretion and amortization adjustments in net interest income.

For the ~~third~~first quarter of ~~2015,~~2016, tax-equivalent net interest income was ~~$65.7~~$66.2 million, ~~a decrease~~an increase of ~~$806,000~~$2.1 million from the ~~third~~first quarter of ~~2014,~~2015, primarily driven by the impact of declines in net interest margin and lower net accretion related to acquisition accounting, partially offset by lower interest expense as growth in low cost deposits outpaced the net run-off in higher ~~cost certificates of deposit.~~average loan balances. Net accretion related to acquisition accounting decreased ~~$1.5 million~~$705,000 from the ~~third~~first quarter of ~~2014~~2015 to ~~$1.6~~$1.1 million in the ~~third~~first quarter of ~~2015.~~2016. The ~~third~~first quarter ~~2015~~2016 tax-equivalent net interest margin decreased by 2513 basis points to ~~3.86%~~3.82% compared to ~~4.11%~~3.95% in the comparable quarter in the prior year. Core tax-equivalent net interest margin (which excludes the 96 basis point impact of acquisition accounting accretion in the ~~third~~first quarter of ~~2015~~2016 and 1911 basis points in the ~~third~~first quarter of ~~2014)~~2015) decreased by 158 basis points to ~~3.77%~~3.76% in the ~~third~~first quarter of ~~2015~~2016 from ~~3.92%~~3.84% in the ~~third~~first quarter of ~~2014.~~2015. The decrease in core tax-equivalent net interest margin was driven by the 2010 basis point decline in interest-earning asset yields outpacing the 52 basis point reduction in cost of funds. The decline in interest-earning asset yields was primarily driven by lower loan yields, as new and renewed loans were originated and re-priced at lower rates.

~~- 53 -~~
For the Nine Months Ended
September 30,
2015 2014 Change
(Dollars in thousands)
Average interest-earning assets $ 6,668,812 $ 6,438,924 $ 229,888
Interest income (FTE) $ 214,195 $ 212,556 $ 1,639
Yield on interest-earning assets 4.29 % 4.41 % (12 )bps
Core yield on interest-earning assets (1) 4.23 % 4.41 % (18 )bps
Average interest-bearing liabilities $ 5,131,338 $ 5,072,398 $ 58,940
Interest expense $ 18,225 $ 14,481 $ 3,744
Cost of interest-bearing liabilities 0.47 % 0.38 % 9 bps
Core cost of interest-bearing liabilities (1) 0.53 % 0.59 % (6 )bps
Cost of funds 0.36 % 0.30 % 6 bps
Core cost of funds (1) 0.41 % 0.46 % (5 )bps
Net Interest Income (FTE) $ 195,970 $ 198,075 $ (2,105 )
Net Interest Margin (FTE) 3.93 % 4.11 % (18 )bps
Core Net Interest Margin (FTE) (1) 3.82 % 3.95 % (13 )bps
  ~~(1)~~~~Core metrics exclude the impact of acquisition accounting accretion and amortization adjustments in net interest income.~~
For the nine months ended September 30, 2015, tax-equivalent net interest income was $196.0 million, a decrease of $2.1 million from the same period of 2014, primarily driven by the impact of declines in net interest margin and lower net accretion related to acquisition accounting. Net accretion related to acquisition accounting decreased $2.6 million from the first nine months of 2014 to $5.3 million in the first nine months of 2015. The year-to-date tax-equivalent net interest margin decreased by 18 basis points to 3.93% compared to 4.11% in the prior year. Core tax-equivalent net interest margin (which excludes the 11 basis point impact of acquisition accounting in 2015 and 16 basis points in 2014) decreased by 13 basis points from 3.95% for the nine months ended September 30, 2014 to 3.82% for the nine months ended September 30, 2015. The decrease in core tax-equivalent net interest margin was driven by the 18 basis point decline in interest-earning asset yields outpacing the 5 basis point reduction in the cost of funds. The decline in interest-earning asset yields was primarily driven by lower loan yields, as new and renewed loans were originated and re-priced at lower rates.
The Company continues to believe that net interest margin will decline modestly over the next several quarters as decreases in interest-earning asset yields are projected to outpace any further declines in interest-bearing liabilities rates.
~~- 54 -~~
- 46 -

The following tables show interest income on earning assets and related average yields as well as interest expense on interest-bearing liabilities and related average rates paid for the periods indicated (dollars in thousands):

AVERAGE BALANCES, INCOME AND EXPENSES, YIELDS AND RATES (TAXABLE EQUIVALENT BASIS)

For the Three Months Ended September 30, For the Three Months Ended March 31,
2015 2014 2016 2015
Average Balance Interest
Income /
Expense Yield /
Rate (1) Average
Balance Interest
Income /
Expense Yield /
Rate (1) Average Balance Interest
Income /
Expense Yield /
Rate (1) Average
Balance Interest
Income /
Expense Yield /
Rate (1)
(Dollars in thousands) (Dollars in thousands)
Assets:
Securities:
Taxable $ 710,583 $ 3,954 2.21 % $ 738,932 $ 3,883 2.08 % $ 743,724 $ 4,316 2.33 % $ 730,404 $ 3,807 2.11 %
Tax-exempt 427,879 5,187 4.81 % 404,371 5,150 5.05 % 443,426 5,291 4.80 % 413,228 5,114 5.02 %
Total securities 1,138,462 9,141 3.19 % 1,143,303 9,033 3.13 % 1,187,150 9,607 3.25 % 1,143,632 8,921 3.16 %
Loans, net (2) (3) 5,525,119 62,745 4.51 % 5,196,116 62,082 4.74 % 5,709,998 63,326 4.46 % 5,360,676 60,527 4.58 %
Loans held for sale 44,904 378 3.34 % 50,393 513 4.04 % 27,304 257 3.79 % 38,469 296 3.12 %
Federal funds sold 807 - 0.20 % 684 - 0.18 % 813 1 0.47 % 792 - 0.20 %
Money market investments 1 - 0.00 % 1 - 0.00 % - - 0.00 % 1 - 0.00 %
Interest-bearing deposits in other banks 42,361 23 0.22 % 33,246 21 0.24 % 43,723 47 0.44 % 32,845 17 0.20 %
Total earning assets 6,751,654 $ 72,287 4.25 % 6,423,743 $ 71,649 4.43 % 6,968,988 $ 73,238 4.23 % 6,576,415 $ 69,761 4.30 %
Allowance for loan losses (32,857 ) (31,631 ) (35,034 ) (32,992 )
Total non-earning assets 803,044 849,261 830,876 819,260
Total assets $ 7,521,841 $ 7,241,373 $ 7,764,830 $ 7,362,683

Liabilities and Stockholders' Equity:
Interest-bearing deposits:
Transaction and money market accounts $ 2,706,542 $ 1,289 0.19 % $ 2,582,746 $ 1,247 0.19 % $ 2,809,961 $ 1,393 0.20 % $ 2,591,991 $ 1,160 0.18 %
Regular savings 567,034 248 0.17 % 554,202 275 0.20 % 580,923 217 0.15 % 555,356 268 0.20 %
Time deposits (4) 1,227,835 2,667 0.86 % 1,370,299 1,505 0.44 % 1,171,972 2,585 0.89 % 1,269,352 1,893 0.60 %
Total interest-bearing deposits 4,501,411 4,204 0.37 % 4,507,247 3,027 0.27 % 4,562,856 4,195 0.37 % 4,416,699 3,321 0.30 %
Other borrowings (5) 661,517 2,352 1.41 % 507,882 2,085 1.63 % 816,943 2,823 1.39 % 679,341 2,310 1.38 %
Total interest-bearing liabilities 5,162,928 $ 6,556 0.50 % 5,015,129 $ 5,112 0.40 % 5,379,799 $ 7,018 0.52 % 5,096,040 $ 5,631 0.45 %

Noninterest-bearing liabilities:
Demand deposits 1,312,735 1,194,505 1,336,548 1,223,218
Other liabilities 50,715 52,830 59,069 60,877
Total liabilities 6,526,378 6,262,464 6,775,416 6,380,135
Stockholders' equity 995,463 978,909 989,414 982,548
Total liabilities and stockholders' equity $ 7,521,841 $ 7,241,373 $ 7,764,830 $ 7,362,683
��
Net interest income $ 65,731 $ 66,537 $ 66,220 $ 64,130

Interest rate spread (6) 3.75 % 4.03 %
Interest rate spread (6) 3.71 % 3.85 %
Cost of funds 0.39 % 0.32 % 0.41 % 0.35 %
Net interest margin (7) 3.86 % 4.11 % 3.82 % 3.95 %

(1)Rates and yields are annualized and calculated from actual, not rounded, amounts in thousands, which appear above.
(2) Nonaccrual loans are included in average loans outstanding.
(3) Interest income on loans includes ~~$1.4~~$1.1 million and ~~$846,000~~$639,000 for the three months ended ~~September 30,~~March 31, 2016 and 2015, ~~and 2014,~~ respectively, in accretion of the fair market value adjustments related to acquisitions.
(4) Interest expense on certificates of deposits includes ~~$154,000~~$0 and ~~$2.0~~$1.1 million for the three months ended ~~September 30,~~March 31, 2016 and 2015, ~~and 2014,~~ respectively, in accretion of the fair market value adjustments related to acquisitions.
(5) Interest expense on borrowings includes ~~$87,000~~$62,000 and ~~$262,000~~$137,000 for the three months ended ~~September 30,~~March 31, 2016 and 2015, ~~and 2014,~~ respectively, in accretion of the fair market value adjustments related to acquisitions.
(6) Income and yields are reported on a taxable equivalent basis using the statutory federal corporate tax rate of 35%.
(7) Core net interest margin excludes purchase accounting adjustments and was ~~3.77%~~3.76% and ~~3.92%~~3.84% for the three months ended ~~September 30,~~March 31, 2016 and 2015, ~~and 2014,~~ respectively.

~~- 55 -~~
- 47 -

~~AVERAGE BALANCES, INCOME AND EXPENSES, YIELDS AND RATES (TAXABLE EQUIVALENT BASIS)~~
For the Nine Months Ended September 30,
2015 2014
Average
Balance Interest Income
/ Expense Yield /
Rate (1) Average
Balance Interest
Income /
Expense Yield /
Rate (1)
(Dollars in thousands)
Assets:
Securities:
Taxable $ 720,569 $ 11,621 2.16 % $ 716,996 $ 11,391 2.12 %
Tax-exempt 421,224 15,480 4.91 % 401,111 15,392 5.13 %
Total securities 1,141,793 27,101 3.17 % 1,118,107 26,783 3.20 %
Loans, net (2) (3) 5,445,243 185,959 4.57 % 5,240,610 184,257 4.70 %
Loans held for sale 42,250 1,070 3.39 % 51,021 1,474 3.86 %
Federal funds sold 724 1 0.19 % 493 1 0.17 %
Money market investments 1 - 0.00 % 1 - 0.00 %
Interest-bearing deposits in other banks 38,801 64 0.22 % 28,692 41 0.19 %
Total earning assets 6,668,812 $ 214,195 4.29 % 6,438,924 $ 212,556 4.41 %
Allowance for loan losses (32,507 ) (31,128 )
Total non-earning assets 812,268 847,157
Total assets $ 7,448,573 $ 7,254,953 ��

Liabilities and Stockholders' Equity:
Interest-bearing deposits:
Transaction and money market accounts $ 2,644,209 $ 3,649 0.18 % $ 2,568,357 $ 3,536 0.18 %
Regular savings 562,288 777 0.18 % 553,501 785 0.19 %
Time deposits (4) 1,243,546 6,778 0.73 % 1,414,674 3,512 0.33 %
Total interest-bearing deposits 4,450,043 11,204 0.34 % 4,536,532 7,833 0.23 %
Other borrowings (5) 681,295 7,021 1.38 % 535,866 6,648 1.66 %
Total interest-bearing liabilities 5,131,338 $ 18,225 0.47 % 5,072,398 $ 14,481 0.38 %

Noninterest-bearing liabilities:
Demand deposits 1,271,937 1,143,942
Other liabilities 55,549 53,959
Total liabilities 6,458,824 6,270,299
Stockholders' equity 989,749 984,654
Total liabilities and stockholders' equity $ 7,448,573 $ 7,254,953

Net interest income $ 195,970 $ 198,075

Interest rate spread (6) 3.82 % 4.03 %
Cost of funds 0.36 % 0.30 %
Net interest margin (7) 3.93 % 4.11 %
~~(1)~~~~Rates and yields are annualized and calculated from actual, not rounded, amounts in thousands, which appear above.~~
~~(2)~~ ~~Nonaccrual loans are included in average loans outstanding.~~
~~(3)~~ Interest income on loans includes $3.1 million and $81,000 for the nine months ended September 30, 2015 and 2014, respectively, in accretion of the fair market value adjustments related to acquisitions.
~~(4)~~ Interest expense on certificates of deposits includes $1.8 million and $7.4 million for the nine months ended September 30, 2015 and 2014, respectively, in accretion of the fair market value adjustments related to acquisitions.
~~(5)~~ Interest expense on borrowings includes $362,000 and $412,000 for the nine months ended September 30, 2015 and 2014, respectively, in accretion of the fair market value adjustments related to acquisitions.
~~(6)~~ ~~Income and yields are reported on a taxable equivalent basis using the statutory federal corporate tax rate of 35%.~~
~~(7)~~~~Core net interest margin excludes purchase accounting adjustments and was 3.82% and 3.95% for the nine months ended September 30, 2015 and 2014, respectively.~~
~~- 56 -~~

The Volume Rate Analysis table below presents changes in interest income and interest expense and distinguishes between the changes related to increases or decreases in average outstanding balances of interest-earning assets and interest-bearing liabilities (volume), and the changes related to increases or decreases in average interest rates on such assets and liabilities (rate). Changes attributable to both volume and rate have been allocated proportionally. Results, on a taxable equivalent basis, are as follows (dollars in thousands):

Three Months Ended Nine Months Ended Three Months Ended
September 30, 2015 vs. September 30, 2014 September 30, 2015 vs. September 30, 2014 March 31, 2016 vs. March 31, 2015
Increase (Decrease) Due to Change in: Increase (Decrease) Due to Change in: Increase (Decrease) Due to Change in:
Volume Rate Total Volume Rate Total Volume Rate Total
Earning Assets:
Securities:
Taxable $ (156 ) $ 227 $ 71 $ 51 $ 179 $ 230 $ 71 $ 438 $ 509
Tax-exempt 289 (252 ) 37 753 (665 ) 88 365 (188 ) 177
Total securities 133 (25 ) 108 804 (486 ) 318 436 250 686
Loans, net (1) 3,820 (3,157 ) 663 7,056 (5,354 ) 1,702 3,889 (1,090 ) 2,799
Loans held for sale (52 ) (83 ) (135 ) (236 ) (168 ) (404 ) (92 ) 53 (39 )
Federal funds sold - - - - - - - 1 1
Interest-bearing deposits in other banks 4 (2 ) 2 16 7 23 7 23 30
Total earning assets $ 3,905 $ (3,267 ) $ 638 $ 7,640 $ (6,001 ) $ 1,639 $ 4,240 $ (763 ) $ 3,477

Interest-Bearing Liabilities:
Interest-bearing deposits:
Transaction and money market accounts $ 50 $ (8 ) $ 42 $ 63 $ 50 $ 113 $ 102 $ 131 $ 233
Regular savings 7 (34 ) (27 ) 12 (20 ) (8 ) 12 (63 ) (51 )
Time Deposits (2) (171 ) 1,333 1,162 (470 ) 3,736 3,266 (155 ) 847 692
Total interest-bearing deposits (114 ) 1,291 1,177 (395 ) 3,766 3,371 (41 ) 915 874
Other borrowings (3) 573 (306 ) 267 1,619 (1,246 ) 373 475 38 513
Total interest-bearing liabilities 459 985 1,444 1,224 2,520 3,744 434 953 1,387

Change in net interest income $ 3,446 $ (4,252 ) $ (806 ) $ 6,416 $ (8,521 ) $ (2,105 ) $ 3,806 $ (1,716 ) $ 2,090

(1) The rate-related change in interest income on loans includes the impact of higher accretion of the acquisition-related fair market value adjustments of ~~$518,000 and $3.0 million for the three- and nine-month change, respectively.~~$445,000.
(2) The rate-related change in interest expense on time deposits includes the impact of lower accretion of the acquisition-related fair market value adjustments of ~~$1.8 million and $5.5 million for the three- and nine-month change, respectively.~~$1.1 million.
(3)The rate-related change in interest expense on other borrowings includes the impact of lower accretion of the acquisition-related fair market value adjustments of ~~$175,000 and $50,000 for the three- and nine-month change, respectively.~~$75,000.

The Company’s fully taxable equivalent net interest margin includes the impact of acquisition accounting fair value adjustments. The net accretion impact for the quarters ended March 31, 2015 and 2016 as well as the remaining estimated net accretion impact are reflected in the following table (dollars in thousands):
Accretion Accretion
(Amortization)
Loan Certificates of
Deposit Borrowings Total

For the quarter ended March 31, 2015 $ 639 $ 1,075 $ 137 $ 1,851
For the quarter ended March 31, 2016 1,084 - 62 1,146
For the remaining nine months of 2016 3,047 - 271 3,318
For the years ending:
2017 4,018 - 170 4,188
2018 3,572 - (143 ) 3,429
2019 2,718 - (286 ) 2,432
2020 2,067 - (301 ) 1,766
2021 1,879 - (316 ) 1,563
Thereafter 8,910 - (5,306 ) 3,604

Accretion Accretion
(Amortization)
Loan Certificates of
Deposit Borrowings Total

For the quarter ended March 31, 2015 $ 639 $ 1,075 $ 137 $ 1,851
For the quarter ended June 30, 2015 1,052 614 137 1,803
For the quarter ended September 30, 2015 1,364 154 87 1,605
For the remaining three months of 2015 1,051 - - 1,051
For the years ending:
2016 3,808 - 271 4,079
2017 3,516 - 170 3,686
2018 2,996 - (143 ) 2,853
2019 2,349 - (286 ) 2,063
2020 1,904 - (301 ) 1,603
Thereafter 10,538 - (5,622 ) 4,916
~~- 57 -~~
- 48 -

Noninterest Income

For the Three Months Ended
September 30, Change
2015 2014 $ %
(Dollars in thousands)
Noninterest income:
Service charges on deposit accounts $ 4,965 $ 4,458 $ 507 11.4 %
Other service charges, commissions and fees 3,983 3,773 210 5.6 %
Fiduciary and asset management fees 2,304 2,120 184 8.7 %
Gains on sales of mortgage loans, net of commissions 2,630 2,598 32 1.2 %
Gains on securities transactions, net 75 995 (920 ) (92.5 )%
Other-than-temporary impairment losses (300 ) - (300 ) NM
Bank owned life insurance income 1,161 1,195 (34 ) (2.8 )%
Other operating income 1,907 1,179 728 61.7 %
Total noninterest income $ 16,725 $ 16,318 $ 407 2.5 %

Mortgage segment operations $ (2,608 ) $ (2,604 ) $ (4 ) 0.2 %
Intercompany eliminations 170 170 - 0.0 %
Community Bank segment $ 14,287 $ 13,884 $ 403 2.9 %
~~NM - Not Meaningful~~
For the Three Months Ended
March 31, Change
2016 2015 $ %
(Dollars in thousands)
Noninterest income:
Service charges on deposit accounts $ 4,734 $ 4,214 $ 520 12.3 %
Other service charges, commissions and fees 4,156 3,584 572 16.0 %
Fiduciary and asset management fees 2,138 2,219 (81 ) -3.7 %
Mortgage banking income, net 2,146 2,379 (233 ) -9.8 %
Gains on securities transactions, net 143 193 (50 ) -25.9 %
Bank owned life insurance income 1,372 1,135 237 20.9 %
Other operating income 1,225 1,330 (105 ) -7.9 %
Total noninterest income $ 15,914 $ 15,054 $ 860 5.7 %

Mortgage segment operations $ (2,477 ) $ (2,376 ) $ (101 ) 4.3 %
Intercompany eliminations 171 170 1 0.6 %
Community Bank segment $ 13,608 $ 12,848 $ 760 5.9 %

For the quarter ended ~~September 30, 2015,~~March 31, 2016, noninterest income increased ~~$407,000,~~$860,000, or ~~2.5%~~5.7%, to ~~$16.7~~$15.9 million from ~~$16.3~~$15.1 million in the ~~third~~first quarter of ~~2014. Customer-related~~2015. The main drivers of the increase in noninterest income include an increase in customer-related noninterest income (service ~~charge~~charges on deposit accounts and ~~fiduciary and asset management fees) increased $901,000~~other service charges), primarily due to higher overdraft fees and interchange fees, and ~~brokerage income. Gains of sales of mortgage loans, net of commissions, and~~an increase in income from bank owned life ~~insurance~~insurance. These increases were partially offset by a decrease in mortgage banking income ~~remained constant with the prior period. Other noninterest income decreased $494,000, as~~driven by lower ~~gains on sales of securities of $920,000 and a $300,000 OTTI charge on a municipal security in the available-for-sale portfolio~~originations in the current ~~quarter was partially offset by increases in other operating income related to the resolution of a problem credit resulting in a note sale.~~
For the Nine Months Ended
September 30, Change
2015 2014 $ %
(Dollars in thousands)
Noninterest income:
Service charges on deposit accounts $ 13,800 $ 13,281 $ 519 3.9 %
Other service charges, commissions and fees 11,618 11,281 337 3.0 %
Fiduciary and asset management fees 6,835 6,753 82 1.2 %
Gains on sales of mortgage loans, net of commissions 7,582 7,925 (343 ) (4.3 )%
Gains on securities transactions, net 672 1,449 (777 ) (53.6 )%
Other-than-temporary impairment losses (300 ) - (300 ) NM
Bank owned life insurance income 3,431 3,467 (36 ) (1.0 )%
Other operating income 4,352 2,229 2,123 95.2 %
Total noninterest income $ 47,990 $ 46,385 $ 1,605 3.5 %

Mortgage segment operations $ (7,844 ) $ (7,932 ) $ 88 (1.1 )%
Intercompany eliminations 512 511 1 0.2 %
Community Bank segment $ 40,658 $ 38,964 $ 1,694 4.3 %
~~NM - Not Meaningful~~
~~- 58 -~~
~~For the nine months ended September 30, 2015, noninterest income increased $1.6~~quarter. Mortgage loan originations declined $40.5 million, or ~~3.5%~~29.2%, ~~to $48.0~~from $138.7 million from $46.4 million in the first nine months of 2014. Customer-related fee income increased $856,000 primarily related to higher overdraft and interchange fees. Other operating income increased $2.1 million primarily driven by higher loan swap fees in 2015, gains from the dissolution of a limited partnership in the first quarter of 2015 ~~and gains on~~to $98.2 million for the ~~resolution of a problem credit in the third~~ quarter of 2015. These increases were partially offset by declines in gains on sales of mortgage loans, net of commissions, of $343,000, primarily driven by lower mortgage loan originations. Mortgage loan origination volume decreased $95.1 million from $522.2 million in the first nine months of 2014 to $427.1 million in the first nine months of 2015. Additionally, gains on sales of securities were $777,000 lower compared to the prior year and there was a $300,000 OTTI charge on a municipal security in the available-for-sale portfolio in the current year.ended March 31, 2016.

Noninterest expense

For the Three Months Ended For the Three Months Ended
September 30, Change March 31, Change
2015 2014 $ % 2016 2015 $ %
(Dollars in thousands) (Dollars in thousands)
Noninterest expense:
Salaries and benefits $ 25,853 $ 25,636 $ 217 0.8 % $ 28,048 $ 27,492 $ 556 2.0 %
Occupancy expenses 4,915 4,902 13 0.3 % 4,976 5,133 (157 ) -3.1 %
Furniture and equipment expenses 3,015 3,050 (35 ) (1.1 )% 2,636 2,813 (177 ) -6.3 %
Technology and data processing 3,549 3,280 269 8.2 % 3,814 3,255 559 17.2 %
Professional services 1,991 1,400 591 42.2 % 1,989 1,348 641 47.6 %
Marketing and advertising expense 1,781 2,064 (283 ) (13.7 )% 1,938 1,687 251 14.9 %
OREO and credit-related expenses⁽¹⁾ 1,263 6,559 (5,296 ) (80.7 )% 569 1,186 (617 ) -52.0 %
Acquisition-related expenses - 1,695 (1,695 ) (100.0 )%
Other operating expenses 10,958 10,827 131 1.2 % 10,302 10,926 (624 ) -5.7 %
Total noninterest expense $ 53,325 $ 59,413 $ (6,088 ) (10.2 )% $ 54,272 $ 53,840 $ 432 0.8 %

Mortgage segment operations $ (2,821 ) $ (3,903 ) $ 1,082 (27.7 )% $ (2,599 ) $ (3,038 ) $ 439 -14.5 %
Intercompany eliminations 170 170 - 0.0 % 171 170 1 0.6 %
Community Bank segment $ 50,674 $ 55,680 $ (5,006 ) (9.0 )% $ 51,844 $ 50,972 $ 872 1.7 %

(1) OREO related costs include foreclosure related expenses, gains/losses on the sale of OREO, valuation reserves, and asset resolution related legal expenses.

For the quarter ended ~~September 30, 2015,~~March 31, 2016, noninterest expense ~~decreased $6.1 million~~increased $432,000 to ~~$53.3~~$54.3 million from $59.4 million when compared to the third quarter of 2014, partially driven by acquisition expenses incurred in the third quarter of 2014. Excluding acquisition-related costs of $1.7 million in 2014, noninterest expense decreased $4.4 million, or 7.6%. The decrease in noninterest expense is primarily due to a decrease in OREO and credit-related expenses of $5.3 million related to lower valuation adjustments of $5.6 million. In the third quarter of 2014, $6.2 million in valuation adjustments were recorded in connection with a shift in strategy to more aggressively market OREO in inactive rural markets. These decreases were partially offset by increased professional fees of $591,000 relating to consulting fees and higher technology and data processing fees of $269,000 related to software maintenance.
~~- 59 -~~
For the Nine Months Ended
September 30, Change
2015 2014 $ %
(Dollars in thousands)
Noninterest expense:
Salaries and benefits $ 78,905 $ 82,466 $ (3,561 ) (4.3 )%
Occupancy expenses 15,220 15,184 36 0.2 %
Furniture and equipment expenses 8,818 8,555 263 3.1 %
Technology and data processing 10,020 9,145 875 9.6 %
Professional services 5,008 3,897 1,111 28.5 %
Marketing and advertising expense 5,841 4,821 1,020 21.2 %
OREO and credit-related expenses⁽¹⁾ 4,415 10,254 (5,839 ) (56.9 )%
Acquisition-related expenses - 19,524 (19,524 ) (100.0 )%
Branch closure expenses 1,280 - 1,280 NM
Other operating expenses 32,898 31,819 1,079 3.4 %
Total noninterest expense $ 162,405 $ 185,665 $ (23,260 ) (12.5 )%

Mortgage segment operations $ (8,906 ) $ (12,908 ) $ 4,002 (31.0 )%
Intercompany eliminations 512 511 1 0.2 %
Community Bank segment $ 154,011 $ 173,268 $ (19,257 ) (11.1 )%
~~NM - Not Meaningful~~
~~(1) OREO related costs include foreclosure related expenses, gains/losses on the sale of OREO, valuation reserves, and asset resolution related legal expenses.~~
~~For the nine months ended September 30, 2015, noninterest expense decreased $23.3 million to $162.4 million from $185.7~~$53.8 million when compared to the first ~~nine months~~quarter of ~~2014, largely driven by acquisition expenses incurred in 2014. Excluding acquisition-related costs~~2015. The main drivers of ~~$19.5 million, noninterest expense decreased $3.8 million, or 2.2%. The decrease~~the increase in noninterest expense isinclude an increase in salaries and benefits expense of $556,000 primarily related to annual merit adjustments and increases in equity-based compensation, an increase in technology and software costs of $559,000 due to ~~a decrease~~investments in infrastructure as the Company prepares for growth, and an increase in professional fees of $641,000 due to higher audit and project-related consulting expenses. These increases were offset by declines in OREO and credit-related ~~expenses~~costs of ~~$5.8 million~~$617,000 related to lower valuation adjustments and OREO expenses, lower CDI amortization expense of ~~$5.5 million. In the third quarter~~$342,000, and decreases in printing and postage costs of 2014, $6.2 million in valuation adjustments were recorded in connection with a shift in strategy to more aggressively market OREO in inactive rural markets. Salaries and benefits expenses declined $3.6 million due to lower salaries and profit sharing expenses, partially offset by increased incentive compensation. Amortization of core deposit intangible decreased $1.0 million when compared to the same period in the prior year. The decreases were partially offset by $1.1 million in higher professional fees related to consulting and legal fees, $1.0 million in higher marketing expenses related to advertising campaigns in the current year, $919,000 in increased fraud-related losses, $875,000 in higher technology expenses related to online banking and data processing fees, and $630,000 in increased expenses related to employee training.$231,000.

- 49 -
SEGMENT INFORMATION

Community Bank Segment

For the three months ended ~~September 30, 2015,~~March 31, 2016, the community bank segment reported net income of ~~$18.2~~$16.9 million, which was ~~$2.7 million~~$939,000 higher than net income in ~~third~~the first quarter of ~~2014. Excluding after-tax acquisition-related costs of $1.1~~2015. Net interest income increased $1.7 million from $61.7 million in the ~~third~~first quarter of ~~2014, net income increased $1.6 million, or 9.7%. Net interest income decreased $1.1 million from $64.2~~2015 to $63.4 million in the ~~third~~first quarter of ~~2014 to $63.1 million,~~2016, primarily driven by ~~the impact of declines in net interest margin and lower net accretion related to acquisition accounting.~~loan growth. The provision for ~~loan~~credit losses for the quarter ended ~~September 30, 2015~~March 31, 2016 was ~~$1.9~~$2.5 million, an increase of ~~$100,000~~$750,000 compared to the same quarter a year ago. The increase in the provision for loan losses in the current ~~periods~~period compared to the same periods in the prior year was primarily driven by higher loan balances in ~~2015.~~2016.

Noninterest income increased ~~$403,000,~~$760,000, or ~~2.9%~~5.9%, from ~~$13.9~~$12.9 million in the ~~third~~first quarter of ~~2014~~2015 to ~~$14.3~~$13.6 million in the ~~third~~first quarter of ~~2015.~~2016. Customer-related noninterest income (service ~~charge~~charges on deposit accounts and ~~fiduciary and asset management fees)~~other service charges) increased ~~$901,000~~$1.1 million primarily due to higher overdraft fees and interchange ~~fees, and brokerage income.~~fees. Other increases in noninterest income decreased $495,000, as lower gains on sales of securities of $920,000 and a $300,000 OTTI charge on a municipal security in the available-for-sale portfolio in the current quarter was partially offset by increases in other operating incomewere related to ~~the resolution of a problem credit resulting in a note sale.~~
~~- 60 -~~
Noninterest expense decreased $5.0 million from $55.7 million in the third quarter of 2014 to $50.7 million in the current quarter. Excluding prior year third quarter acquisition-related costs of $1.7 million, noninterest expense decreased $3.3 million, or 6.1%, compared to the third quarter of 2014. The decrease in noninterest expense is primarily due to a decrease in OREO and credit-related expenses of $5.3 million related to lower valuation adjustments of $5.6 million. In the third quarter of 2014, $6.2 million in valuation adjustments were recorded in connection with a shift in strategy to more aggressively market OREO in inactive rural markets. These decreases were offset by increased salaries and benefits expenses of $836,000 due to higher salaries, incentive compensation, and group insurance costs; higher professional and consulting fees of $720,000; increased employee training costs of $458,000; and higher technology and data processing fees of $326,000 related to software maintenance. The community banking segment’s operating efficiency ratio was 63.7% compared to 67.4% for the third quarter of 2014.
~~For the nine months ended September 30, 2015, the community bank segment reported net income of $49.4 million,~~ an increase in income from bank owned life insurance of $9.6 million from $39.8 million for the first nine months of 2014. Excluding after-tax acquisition-related costs of $13.2 million in the first nine months of 2014, net income decreased $3.6 million, or 6.8%. Net interest income decreased $2.9 million from the same period last year, largely a result of lower core net interest margin and lower net accretion related to acquisition accounting. The provision for credit losses increased $4.2 million compared to the first nine months of 2014, primarily driven by higher loan balances in 2015$237,000 and an increase in ~~net charge-offs in 2015, primarily due to a net recovery in the first quarter of 2014.~~
Noninterest income increased $1.7 million, or 4.3%, from $39.0 million in the first nine months of 2014 to $40.7 million in the first nine months of 2015. Customer-related fee income increased $937,000 primarily related to higher overdraft and interchange fees. Other operating income increased $774,000 primarily driven by higher loan interest-rate swap fees of $451,000. These increases in ~~2015, gains~~noninterest income were partially offset by a nonrecurring gain from the dissolution of a limited partnership that occurred in the first quarter of 2015.
Noninterest expense increased $872,000, or 1.7%, from $51.0 million in the first quarter of 2015 ~~and gains on the resolution of a problem credit~~to $51.8 million in the ~~third~~current quarter. The increase in noninterest expense is driven by an increase in salaries and benefits expense primarily related to annual merit adjustments and increases in equity-based compensation, an increase in technology and software costs, and an increase in professional fees due to higher audit and project-related consulting expenses. Noninterest expense in the first quarter included branch closure costs of ~~2015.~~approximately $300,000 related to previously announced 2016 branch closures. These increases in noninterest expense were partially offset by ~~declines~~decreases in gains on sales of securities compared to the prior year, OTTI charge on a municipal security in the available-for-sale portfolio in the current year, and declines in interest recognized on previously charged off loans.
Noninterest expense decreased $19.3 million from $173.3 million in the first nine months of 2014 to $154.0 million in 2015, largely driven by acquisition expenses incurred in 2014. Excluding the prior year acquisition-related costs of $19.5 million, noninterest expense increased $267,000, or 0.2%, compared to the first nine months of 2014. Salaries and benefits declined $936,000, or 1.3%, primarily due to cost savings from the StellarOne acquisition being realized in the current year and lower profit-sharing expense in the current year. OREO and ~~credit-related~~credit related expenses declined $5.8 million related to lower valuation adjustments of $5.5 million. In the third quarter of 2014, $6.2 million in valuation adjustments were recorded in connection with a shift in strategy to more aggressively market OREO in inactive rural markets. The decreases in noninterest expense were offset by $1.3 million in higher professional fees related to consulting and legal fees, $1.1 million in higher marketing expenses related to advertising campaigns in the current year, $1.1 million in higher technology expenses related to online banking and data processing fees, $916,000 in branch closure costs in the current year, $786,000 in increased fraud-related losses, and $630,000 in increased expenses related to employee training.other operating expenses. The community banking segment’s ~~operating~~ efficiency ratio (tax-effected) was ~~65.4%~~65.3% compared to ~~65.1%~~66.4% for the first ~~nine months~~quarter of ~~2014.~~2015.

Mortgage Segment

The mortgage segment reported net income of ~~$59,000~~$54,000 for the ~~third~~first quarter of ~~2015,~~2016, an improvement of ~~$687,000~~$321,000 from a net loss of ~~$628,000~~$267,000 in the ~~third~~first quarter of ~~2014.~~2015. The improvement was due to a reduction in noninterest expense of ~~$1.1 million,~~$439,000, largely a result of cost control initiatives in personnel costs ~~occupancy expenses, loan production costs, and other operating~~as well as volume-driven expenses. ~~Gains on sales of mortgage loans,~~Mortgage banking income, net of commissions, ~~remained consistent with~~declined $233,000 from the ~~third~~first quarter of ~~2014 at $2.6 million.~~2015 due to lower origination volume of 29.2%.

The mortgage segment reported a net loss of $113,000 for the first nine months of 2015, an improvement of $2.5 million from a loss of $2.6 million in the first nine months of 2014. The improvement was due to a reduction in noninterest expense of $4.0 million, largely a result of cost control initiatives in personnel costs, occupancy expenses, loan production costs, and other operating expenses. Gains on sales of mortgage loans, net of commissions, declined ~~$343,000, or 4.3 %,~~primarily driven by lower mortgage loan originations. Mortgage loan origination volume decreased $95.1 million from $522.2 million in the first nine months of 2014 to $427.1 million in the first nine months of 2015.
~~- 61 -~~
Income Taxes
The provision for income taxes is based upon the results of operations, adjusted for the effect of certain tax-exempt income and non-deductible expenses. In addition, certain items of income and expense are reported in different periods for financial reporting and tax return purposes. The tax effects of these temporary differences are recognized currently in the deferred income tax provision or benefit. Deferred tax assets or liabilities are computed based on the difference between the financial statement and income tax bases of assets and liabilities using the applicable enacted marginal tax rate.

In assessing the ability to realize deferred tax assets, management considers the scheduled reversal of temporary differences, projected future taxable income, and tax planning strategies. Management continues to believe that it is not likely that the Company will realize its deferred tax asset related to net operating losses generated at the state level and accordingly has established a valuation allowance. The Company’s bank subsidiary is not subject to a state income tax in its primary place of business (Virginia). The Company’s other subsidiaries are subject to state income taxes and have generated losses for state income tax purposes which the Company is currently unable to utilize. State net operating loss carryovers will begin to expire after 2026.

The effective tax rate for the three months ended ~~September 30,~~March 31, 2016 and 2015 was 25.5% and ~~2014 was 26.5% and 24.3%, respectively; the effective tax rate for the nine months ended September 30, 2015 and 2014 was~~ 26.7% ~~and 24.7%~~, respectively. The ~~increase~~decrease in the effective tax rate is primarily related to increases in tax-exempt interest income on the investment portfolio and tax-exempt bank-owned life insurance ~~income being a larger percentage of pre-tax income during 2014 due to elevated merger-related costs included in pre-tax~~ income.

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BALANCE SHEET

Assets
At ~~September 30, 2015,~~March 31, 2016, total assets were ~~$7.6~~$7.8 billion, an increase of ~~$235.7~~$139.3 million, from $7.7 billion at December 31, 2015. The increase in assets was mostly related to loan growth.
Loans held for investment, net of deferred fees and costs, were $5.8 billion at March 31, 2016, an increase of $109.0 million, or 7.7% (annualized), from December 31, ~~2014. The following is a general discussion of changes~~2015.The increase was primarily driven by growth in ~~certain of the more significant asset line items of~~construction/land development, non-owner occupied commercial real estate, and consumer loans. Average loans increased $97.6 million, or 7.0% (annualized), from December 31, 2015. For additional information on the Company’s ~~Consolidated Balance Sheets.~~loan activity, please refer to “Loan Portfolio” below or Note 3 “Loans and Allowance for Loan Losses” in Part I, Item 1 – Financial Statements, of this report.
· Investment in securities decreased from $1.2 billion at December 31, 2014 to $1.1 billion at September 30, 2015, mainly due to a decrease in mortgage backed securities, restricted stock, and corporate issues, partially offset by increases in securities issued by states and political subdivisions. For additional information on the Company’s investments, please refer to “Securities” below or Note 3 “Securities” in Part I, Item 1 – Financial Statements, of this report.
· At September 30, 2015, loans held for sale were $65.7 million, an increase of $23.2 million from December 31, 2014. During the third quarter, the Company moved its credit card portfolio, totaling $26.4 million at September 30, 2015, from loans held for investment to loans held for sale, resulting from management’s decision to sell the loans in the fourth quarter of 2015.
· Total loans, net of deferred fees and costs, were $5.5 billion at September 30, 2015, an increase of $197.6 million, or 4.9% (annualized), from December 31, 2014. The increase was primarily driven by a 7.4% (annualized) growth in the commercial loan portfolio, partially offset by a decline in mortgage loans and equity lines. Excluding the credit card portfolio transfer, loans grew $396.4 million, or 7.7%, from September 30, 2014, while year-to-date average loan balances increased $204.6 million, or 3.9%, from September 30, 2014. For additional information on the Company’s loan activity, please refer to “Loan Portfolio” below or Note 4 “Loans and Allowance for Loan Losses” in Part I, Item 1 – Financial Statements, of this report.

Liabilities and Stockholders’ Equity
At ~~September 30, 2015,~~March 31, 2016, total liabilities were ~~$6.6~~$6.9 billion, an increase of ~~$217.8~~$153.7 million from December 31, 2014. The following is a general discussion of changes in certain of the more significant line items in the liability and stockholders’ equity sections of the Company’s Consolidated Balance Sheets.2015.
~~- 62 -~~

· Total deposits at ~~September 30, 2015~~March 31, 2016 were ~~$5.8~~$5.9 billion, ~~an increase~~a decrease of ~~$180.1~~$18.0 million, or ~~4.3%~~1.2% (annualized), when compared to ~~$5.6~~$6.0 billion at December 31, ~~2014, and were one of the predominate sources that funded asset growth for the three quarters of 2015. Deposits grew $184.8~~2015, while average deposits decreased $6.0 million, or ~~3.3%~~0.4% (annualized), from ~~September 30, 2014, while year-to-date average deposit balances increased $41.5 million, or 0.7%,~~December 31, 2015. The net decrease in deposits from ~~September 30, 2014. The Company continues~~year-end 2015 was primarily related to ~~experience a shift from~~declines in noninterest-bearing deposits, NOW accounts, and time deposits, ~~into noninterest bearing demand accounts, driven~~partially offset by ~~the Company’s focus on acquiring low cost funding sources~~increases in money markets and ~~customer preference for liquidity in response to current market conditions.~~savings accounts. For further discussion on this topic, see “Deposits” below.

· The Company’s short term borrowings generally include secured financing transactions, such as customer repurchase agreements, advances from the FHLB, and other lines of credit. Short-term borrowings at ~~September 30, 2015~~March 31, 2016 were ~~$431.4~~$558.0 million, an increase of ~~$44.0~~$169.0 million from December 31, ~~2014,~~2015, primarily due to ~~increases in customer repurchase agreements, partially offset by declines~~an increase in FHLB advances. For additional information on the Company’s borrowings activity, please refer to Note 65 “Borrowings” in Part I, Item 1 – Financial Statements, of this report.

At ~~September 30, 2015,~~March 31, 2016, stockholders’ equity was ~~$995.0~~$981.0 million, ~~an increase~~a decrease of ~~$17.8~~$14.4 million from ~~$977.2~~$995.4 million reported at December 31, ~~2014.~~2015. The Company’s capital ratios continue to exceed the minimum capital requirements for regulatory ~~purposes.~~purposes but have decreased from prior periods primarily due to share repurchases. The total risk-based capital ratios at ~~September 30, 2015~~March 31, 2016 and December 31, ~~2014~~2015 were ~~12.69%~~12.16% and ~~13.38%~~12.46%, respectively. The Tier 1 risk-based capital ratios were ~~12.16%~~11.63% and ~~12.76%~~11.93% at ~~September 30, 2015~~March 31, 2016 and December 31, ~~2014,~~2015, respectively. The common equity Tier 1 risk-based capital ratios were 10.25% and 10.55% at March 31, 2016 and December 31, 2015, respectively. The Company’s common equity to total asset ratios at ~~September 30, 2015~~March 31, 2016 and December 31, ~~2014~~2015 were ~~13.10%~~12.52% and ~~13.28%~~12.94%, respectively, while its tangible common equity to tangible assets ratios were ~~9.29%~~8.86% and ~~9.27%~~9.20%, respectively, at the same dates.

On ~~January 30, 2014,~~October 29, 2015, the Company’s Board of Directors authorized a new share repurchase program to purchase up to ~~$65.0~~$25.0 million worth of the Company’s common stock on the open market or in privately negotiated transactions. This share repurchase program was completed on February 19, 2016. On February 25, 2016, the Company’s Board of Directors authorized another share repurchase program to purchase up to $25.0 million worth of the Company’s common stock on the open market or in privately negotiated transactions. The ~~repurchase program is authorized through December~~Company repurchased approximately 1.0 million shares during the quarter ended March 31, ~~2015. During the nine months ended September 30, 2015,~~2016 and had approximately ~~347,000 common shares were repurchased and approximately $4.5~~$22.4 million ~~remained~~ available for repurchase under the current program. Additionally, on October 29, 2015, the Company’s Board of Directors authorized a new share repurchase program to purchase to to $25.0 million worth of the Company’s common stock. This repurchase program is authorized through December 31, 2016.

Also, the Company declared and paid a cash dividend of ~~$0.17~~$0.19 per share during the ~~third~~first quarter of ~~2015,~~2016, consistent with the ~~same~~ dividend ~~level as~~paid in the prior quarter, and ~~a $0.02~~an increase of $0.04 per share, or ~~13%~~26.7%, ~~increase over~~compared to the same quarter in the prior ~~year quarterly dividend rate. The dividends paid year-to-date of $0.49 per share represent a $0.06 per share, or 14%, increase over the first nine months of 2014.~~year.

Securities
At ~~September 30, 2015,~~March 31, 2016, the Company had total investments in the amount of ~~$1.1~~$1.2 billion, or ~~15.0%~~15.3% of total assets, as compared to $1.2 billion, or ~~15.7%~~15.1% of total assets, at December 31, ~~2014.~~2015. The Company seeks to diversify its portfolio to minimize risk. It focuses on purchasing mortgage-backed securities for cash flow and reinvestment opportunities and securities issued by states and political subdivisions due to the tax benefits and the higher yield offered from these securities. The majority of the Company’s mortgage-backed securities are investment grade. The investment portfolio has a high percentage of municipals and mortgage-backed securities; therefore a higher taxable equivalent yield exists on the portfolio compared to its peers. The Company does not engage in structured derivative or hedging activities within the investment portfolio.

- 51 -
During the second quarter of 2015, the Company transferred securities, which it intends and has the ability to hold until maturity, with a fair value of $201.8 million on the date of transfer, from securities available for sale to securities held to maturity. The Company transferred these securities to held to maturity to reduce the impact of price volatility on capital and in consideration of changes to the regulatory environment. The securities included net pre-tax unrealized gains of $8.1 million at the date of transfer with a remaining balance of ~~$7.3~~$6.4 million as of ~~September 30, 2015.~~March 31, 2016.
~~- 63 -~~

The table below sets forth a summary of the securities available for sale, securities held to maturity, and restricted stock, at fair value for the following periods (dollars in thousands):

September 30, December 31, March 31, December 31,
2015 2014 2016 2015
Available for Sale:
U.S. government and agency securities $ 8,411 $ 8,454
Obligations of states and political subdivisions 249,893 445,647 $ 265,969 $ 268,079
Corporate and other bonds 72,462 78,680 93,766 75,979
Mortgage-backed securities 547,717 559,329 568,562 548,171
Other securities 10,209 10,004 11,112 11,063
Total securities available for sale, at fair value 888,692 1,102,114 939,409 903,292

Held to Maturity:
Obligations of states and political subdivisions 199,363 - 204,444 205,374

Federal Reserve Bank stock 23,809 23,834 23,808 23,808
Federal Home Loan Bank stock 28,912 31,020 34,403 28,020
Total restricted stock 52,721 54,854 58,211 51,828
Total investments $ 1,140,776 $ 1,156,968 $ 1,202,064 $ 1,160,494

During each quarter and at year end, the Company conducts an assessment of the securities portfolio for OTTI consideration. ~~Based on the assessment~~No OTTI was recognized for the quarter ended ~~September 30,~~March 31, 2016. For the year ended December 31, 2015, ~~and in accordance with the guidance,~~ the Company determined that a municipal security in the available for sale portfolio incurred credit-related OTTI of ~~$300,000, which was recognized in earnings for~~$300,000. During the quarter ended ~~September 30, 2015. No OTTI~~March 31, 2016, the municipal security was sold. As a result, the Company recognized ~~in 2014 or for~~an additional loss on sale of the ~~first six months of 2015.~~previously written down security. The Company monitors the portfolio, which is subject to liquidity needs, market rate changes, and credit risk changes, to determine whether adjustments are needed. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

~~- 64 -~~
- 52 -

The following table summarizes the contractual maturity of securities available for sale at fair value and their weighted average yields as of ~~September 30, 2015~~March 31, 2016 (dollars in thousands):

1 Year or Less 1 - 5 Years 5 - 10 Years Over 10 Years Total 1 Year or Less 1 - 5 Years 5 - 10 Years Over 10 Years Total
U.S. government and agency securities:
Amortized cost $ 978 $ 7,070 $ - $ 20 $ 8,068
Fair value 984 7,220 - 207 8,411
Weighted average yield⁽¹⁾ 2.98 1.99 - - 2.11

Mortgage backed securities:
Amortized cost 14 27,821 131,323 380,072 539,230 $ - $ 49,089 $ 183,381 $ 328,996 $ 561,466
Fair value 14 28,219 133,479 386,005 547,717 - 49,497 185,824 333,241 568,562
Weighted average yield⁽¹⁾ 4.24 2.05 2.13 2.15 2.14 - 1.98 2.18 2.16 2.15

Obligations of states and political subdivisions:
Amortized cost 5,667 25,916 105,280 104,792 241,655 3,618 40,024 93,959 117,250 254,851
Fair value 5,697 27,296 109,660 107,240 249,893 3,680 42,104 98,820 121,365 265,969
Weighted average yield⁽¹⁾ 2.76 4.67 4.89 4.47 4.63 7.08 4.68 4.74 4.17 4.50

Corporate bonds and other securities:
Amortized cost 10,181 55 26,505 47,357 84,098 6,085 5,040 39,557 55,871 106,553
Fair value 10,209 55 26,038 46,369 82,671 6,112 5,040 39,258 54,468 104,878
Weighted average yield⁽¹⁾ 2.00 4.49 2.88 1.47 1.98 0.36 0.31 3.91 1.99 2.53

Total securities available for sale:
Amortized cost 16,840 60,862 263,108 532,241 873,051 9,703 94,153 316,897 502,117 922,870
Fair value 16,904 62,790 269,177 539,821 888,692 9,792 96,641 323,902 509,074 939,409
Weighted average yield⁽¹⁾ 2.32 3.16 3.31 2.55 2.82 2.87 3.04 3.15 2.61 2.84

⁽¹⁾ Yields on tax-exempt securities have been computed on a tax-equivalent basis.

The following table summarizes the contractual maturity of securities held to maturity at carrying value and their weighted average yields as of ~~September 30, 2015~~March 31, 2016 (dollars in thousands):

1 Year or Less 1 - 5 Years 5 - 10 Years Over 10 Years Total 1 Year or Less 1 - 5 Years 5 - 10 Years Over 10 Years Total
Obligations of states and political subdivisions:
Carrying Value $ 1,314 $ 5,217 $ 39,392 $ 153,440 $ 199,363 $ 1,477 $ 7,907 $ 49,884 $ 145,176 $ 204,444
Fair value 1,321 5,267 39,521 154,210 200,319 1,479 8,046 51,178 149,646 210,349
Weighted average yield⁽¹⁾ 2.23 0.53 2.97 3.28 3.14 1.38 1.59 3.00 3.40 3.22

⁽¹⁾ Yields on tax-exempt securities have been computed on a tax-equivalent basis.

As of ~~September 30, 2015,~~March 31, 2016, the Company maintained a diversified municipal bond portfolio with approximately ~~74%~~73% of its holdings in general obligation issues and the remainder backed by revenue bonds. Issuances within the State of Texas represented 13%, the State of Washington represented 12%, and the Commonwealth of Virginia represented 12% of the municipal portfolio; no other state had a concentration above 10%. Substantially all municipal holdings are considered investment grade by Moody’s or Standard & Poor’s. The non-investment grade securities are principally insured Texas municipalities with no underlying rating. When purchasing municipal securities, the Company focuses on strong underlying ratings for general obligation issuers or bonds backed by essential service revenues.

~~- 65 -~~
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Liquidity

Liquidity represents an institution’s ability to meet present and future financial obligations through either the sale or maturity of existing assets or the acquisition of additional funds through liability management. Liquid assets include cash, interest-bearing deposits with banks, money market investments, federal funds sold, securities available for sale, loans held for sale, and loans maturing or re-pricing within one year. Additional sources of liquidity available to the Company include its capacity to borrow additional funds when necessary through federal funds lines with several correspondent banks, a line of credit with the FHLB, the purchase of brokered certificates of deposit, and a corporate line of credit with a large correspondent bank. Management considers the Company’s overall liquidity to be sufficient to satisfy its depositors’ requirements and to meet its customers’ credit needs.

As of ~~September 30, 2015,~~March 31, 2016, the cash, interest-bearing deposits in other banks, money market investments, federal funds sold, loans held for sale, and loans that mature within one year totaled $1.9 billion, or ~~27.3 %,~~27.6%, of total earning assets. As of ~~September 30, 2015,~~March 31, 2016, approximately ~~$1.6~~$1.8 billion, or ~~29.2%~~30.5%, of total loans are scheduled to mature within one year based on contractual maturity, adjusted for expected prepayments.

Loan Portfolio

Loans, net of deferred fees and costs, were ~~$5.5~~$5.8 billion at ~~September 30, 2015, $5.3~~March 31, 2016, $5.7 billion at December 31, ~~2014,~~2015, and ~~$5.2~~$5.4 billion at ~~September 30, 2014.~~March 31, 2015. Loans secured by real estate continue to represent the Company’s largest category, comprising ~~83.7%~~82.6% of the total loan portfolio at ~~September 30, 2015.~~March 31, 2016.

The following table presents the Company’s composition of loans, net of deferred fees and costs, in dollar amounts and as a percentage of total gross loans as of the quarter ended (dollars in thousands):

September 30, June 30, March 31, December 31, September 30, March 31, December 31, September 30, June 30, March 31,
2015 2015 2015 2014 2014 2016 2015 2015 2015 2015
Loans secured by real estate:
Residential 1-4 family $ 935,266 16.9 % $ 937,557 17.0 % $ 916,557 17.0 % $ 925,371 17.3 % $ 931,672 18.0 % $ 926,556 16.0 % $ 925,490 16.3 % $ 935,266 16.9 % $ 937,557 17.0 % $ 916,557 17.0 %
Commercial 2,087,186 37.6 % 2,092,228 38.0 % 2,078,688 38.6 % 2,051,943 38.3 % 1,994,138 38.5 % 2,145,454 37.2 % 2,130,566 37.6 % 2,087,186 37.6 % 2,092,228 38.0 % 2,078,688 38.6 %
Construction, land development and other land loans 694,644 12.5 % 671,233 12.2 % 657,581 12.2 % 656,418 12.3 % 611,737 11.8 % 776,698 13.4 % 749,720 13.2 % 694,644 12.5 % 671,233 12.2 % 657,581 12.2 %
Second mortgages 52,547 0.9 % 54,224 1.0 % 54,371 1.0 % 57,650 1.1 % 61,372 1.2 % 51,921 0.9 % 52,977 0.9 % 52,547 0.9 % 54,224 1.0 % 54,371 1.0 %
Equity lines of credit 514,730 9.3 % 512,499 9.3 % 515,187 9.6 % 523,808 9.8 % 514,705 10.0 % 517,122 9.0 % 517,050 9.1 % 514,730 9.3 % 512,499 9.3 % 515,187 9.6 %
Multifamily 329,959 6.0 % 316,474 5.7 % 298,651 5.5 % 297,289 5.6 % 280,116 5.4 % 323,270 5.6 % 322,528 5.7 % 329,959 6.0 % 316,474 5.7 % 298,651 5.5 %
Farm land 26,984 0.5 % 25,061 0.5 % 27,029 0.5 % 26,043 0.5 % 28,724 0.6 % 29,724 0.5 % 28,963 0.5 % 26,984 0.5 % 25,061 0.5 % 27,029 0.5 %
Total real estate loans 4,641,316 83.7 % 4,609,276 83.7 % 4,548,064 84.4 % 4,538,522 84.9 % 4,422,464 85.5 % 4,770,745 82.6 % 4,727,294 83.3 % 4,641,316 83.7 % 4,609,276 83.7 % 4,548,064 84.4 %

Commercial Loans 409,654 7.4 % 426,024 7.7 % 409,867 7.6 % 374,080 7.0 % 362,361 7.0 %
Commercial & industrial loans 453,208 7.8 % 435,366 7.7 % 409,654 7.4 % 426,024 7.7 % 409,867 7.6 %

Consumer installment loans
Personal 389,379 7.0 % 354,485 6.4 % 335,649 6.2 % 333,126 6.2 % 308,719 6.0 % 447,341 7.7 % 403,857 7.1 % 389,379 7.0 % 354,485 6.4 % 335,649 6.2 %
Credit cards - 0.0 % 26,349 0.5 % 24,691 0.5 % 24,225 0.5 % 23,736 0.5 % - 0.0 % - 0.0 % - 0.0 % 26,349 0.5 % 24,691 0.5 %
Total consumer installment loans 389,379 7.0 % 380,834 6.9 % 360,340 6.7 % 357,351 6.7 % 332,455 6.5 % 447,341 7.7 % 403,857 7.1 % 389,379 7.0 % 380,834 6.9 % 360,340 6.7 %

All other loans 103,272 1.9 % 94,251 1.7 % 69,484 1.3 % 76,043 1.4 % 53,723 1.0 % 109,208 1.9 % 104,945 1.9 % 103,272 1.9 % 94,251 1.7 % 69,484 1.3 %
Gross loans $ 5,543,621 100.0 % $ 5,510,385 100.0 % $ 5,387,755 100.0 % $ 5,345,996 100.0 % $ 5,171,003 100.0 % $ 5,780,502 100.0 % $ 5,671,462 100.0 % $ 5,543,621 100.0 % $ 5,510,385 100.0 % $ 5,387,755 100.0 %

~~- 66 -~~
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The following table presents the remaining maturities, based on contractual maturity, by loan type and by rate type (variable or fixed), as of ~~September 30, 2015~~March 31, 2016 (dollars in thousands):

Variable Rate Fixed Rate Variable Rate Fixed Rate
Total
Maturities Less than 1
year Total 1-5 years More than 5
years Total 1-5 years More than 5
years Total
Maturities Less than 1
year Total 1-5 years More than 5
years Total 1-5 years More than 5
years
Loans secured by real estate:
Residential 1-4 family $ 935,266 $ 92,458 $ 344,157 $ 17,955 $ 326,202 $ 498,651 $ 277,875 $ 220,776 $ 926,556 $ 74,401 $ 345,251 $ 15,558 $ 329,693 $ 506,904 $ 281,108 $ 225,796
Commercial 2,087,186 171,604 618,803 145,975 472,828 1,296,779 977,828 318,951 2,145,454 228,577 619,302 150,196 469,106 1,297,575 964,668 332,907
Construction, land development and other land loans 694,644 395,711 187,012 165,255 21,757 111,921 95,594 16,327 776,698 457,310 203,081 174,218 28,863 116,307 92,031 24,276
Second mortgages 52,547 3,887 7,677 2,502 5,175 40,983 14,375 26,608 51,921 4,096 5,396 1,075 4,321 42,429 15,313 27,116
Equity lines of credit 514,730 35,168 478,761 45,010 433,751 801 667 134 517,122 36,306 480,586 40,858 439,728 230 102 128
Multifamily 329,959 39,134 89,458 20,736 68,722 201,367 151,349 50,018 323,270 24,399 89,895 20,676 69,219 208,976 163,620 45,356
Farm land 26,984 7,278 10,244 6,297 3,947 9,462 9,203 259 29,724 8,165 9,047 5,456 3,591 12,512 12,338 174
Total real estate loans 4,641,316 745,240 1,736,112 403,730 1,332,382 2,159,964 1,526,891 633,073 4,770,745 833,254 1,752,558 408,037 1,344,521 2,184,933 1,529,180 655,753

Commercial Loans 409,654 143,455 104,027 98,353 5,674 162,172 122,880 39,292

Consumer installment loans
Personal 389,379 98,357 3,744 3,535 209 287,278 124,669 162,609
Total consumer installment loans 389,379 98,357 3,744 3,535 209 287,278 124,669 162,609

Commercial & industrial loans 453,208 136,167 122,979 116,287 6,692 194,062 135,483 58,579
Consumer loans 447,341 140,072 4,925 4,719 206 302,344 131,122 171,222
All other loans 103,272 8,370 33,640 21,008 12,632 61,262 17,468 43,794 109,208 27,103 22,891 11,338 11,553 59,214 23,330 35,884
Gross loans $ 5,543,621 $ 995,422 $ 1,877,523 $ 526,626 $ 1,350,897 $ 2,670,676 $ 1,791,908 $ 878,768 $ 5,780,502 $ 1,136,596 $ 1,903,353 $ 540,381 $ 1,362,972 $ 2,740,553 $ 1,819,115 $ 921,438

While the current economic environment is challenging, the Company remains committed to originating soundly underwritten loans to qualifying borrowers within its markets. The Company is focused on providing community-based financial services and discourages the origination of portfolio loans outside of its principal trade areas. As reflected in the loan table, at ~~September 30, 2015,~~March 31, 2016, the largest component of the Company’s loan portfolio consisted of real estate loans, concentrated in commercial, construction, and residential 1-4 family. The risks attributable to these concentrations are mitigated by the Company’s credit underwriting and monitoring processes, including oversight by a centralized credit administration function and credit policy and risk management committee, as well as seasoned bankers focusing their lending to borrowers with proven track records in markets with which the Company is familiar. UMG serves as a mortgage brokerage operation, selling the majority of its loan production in the secondary market or selling loans to meet the Bank’s current asset/liability management needs.

Asset Quality

Overview
During the first ~~nine months~~quarter of ~~2015,~~2016, the Company experienced declines in total past due and nonaccrual loan levels and OREO balances from the prior year. OREO balances declined from December 31, ~~2014. The decline in OREO balances was mostly attributable to~~2015 primarily as a result of sales of ~~closed bank premises and~~ foreclosed ~~residential real estate property and land~~property. Past due loans decreased while nonaccrual loans increased from December 31, 2015, as loans were moved from past due status to nonaccrual status during the ~~period.~~current quarter. The combined past due and nonaccrual loan balances decreased $6.7 million, or 12.3%, from December 31, 2015. The loan loss provision ~~increased from the same period in the prior year driven by higher loan balances in 2015~~ and ~~an increase in net charge-offs in 2015, primarily due to a net recovery in the first quarter of 2014. The~~ allowance for loan losses ~~to total loans ratios (both unadjusted and adjusted for acquisition accounting) decreased~~increased from ~~both~~ December 31, ~~2014 and September 30, 2014. All nonaccrual and past~~2015 due to loan ~~metrics discussed below exclude PCI loans totaling $78.6 million (net of fair value mark).~~growth in the current quarter.

Troubled Debt Restructurings
The total recorded investment in TDRs as of ~~September 30, 2015~~March 31, 2016 was ~~$11.6~~$13.0 million, ~~a decrease~~an increase of ~~$15.2 million,~~$255,000, or ~~56.8%~~2.0%, from ~~$26.8~~$12.7 million at December 31, ~~2014~~2015 and a decline of ~~$17.4~~$11.1 million, or ~~60.1%~~46.1%, from ~~$29.0~~$24.1 million at ~~September 30, 2014.~~March 31, 2015. Of the ~~$11.6~~$13.0 million of TDRs at ~~September 30, 2015, $9.5~~March 31, 2016, $11.5 million, or ~~81.9%~~88.5%, were considered performing while the remaining ~~$2.1~~$1.5 million were considered nonperforming. The decrease in the TDR balance from December 31, 2014 is primarily attributable to $12.0 million being removed from TDR status, $50,000 transferred to OREO, $4.7 million in net payments, and $522,000 in charge-offs, partially offset by $2.1 million in additions. Loans removed from TDR status represent restructured loans with a market rate of interest at the time of the restructuring. These loans have performed in accordance with their modified terms for twelve consecutive months and were no longer considered impaired. Loans removed from TDR status are collectively evaluated for impairment; due to the significant improvement in the expected future cash flows, these loans are grouped based on their primary risk characteristics, typically using the Company’s internal risk rating system as its primary credit quality indicator. Impairment is measured based on historical loss experience taking into consideration environmental factors. The significant majority of these loans have been subject to new credit decisions due to the improvement in the expected future cash flows, the financial condition of the borrower, and other factors considered during re-underwriting. The TDR activity during the quarter did not have a material impact on the Company’s allowance for loan losses, financial condition, or results of operations.

~~- 67 -~~
- 55 -

Nonperforming Assets
At ~~September 30, 2015,~~March 31, 2016, nonperforming assets totaled ~~$35.1~~$27.3 million, ~~a decrease~~an increase of ~~$12.3 million,~~$103,000, or ~~26.0%~~0.4%, from December 31, ~~2014~~2015 and a ~~decrease~~decline of ~~$23.0~~$15.5 million, or ~~39.6%~~36.2%, from a year ago. In addition, NPAs as a percentage of total outstanding loans decreased 261 basis ~~points~~point to ~~0.63%~~0.47% in the current quarter from ~~0.89%~~0.48% as of December 31, ~~2014~~2015 and declined 4932 basis points from ~~1.12%~~0.79% a year earlier. All nonaccrual and past due loan metrics discussed below exclude PCI loans, which totaled $70.1 million (net of fair value mark of $16.2 million) at March 31, 2016.

The following table shows a summary of ~~assets~~asset quality balances and related ratios as of and for the quarters ended (dollars in thousands):

September 30, June 30, March 31, December 31, September 30, March 31, December 31, September 30, June 30, March 31,
2015 2015 2015 2014 2014 2016 2015 2015 2015 2015
Nonaccrual loans, excluding PCI loans $ 12,966 $ 9,521 $ 17,385 $ 19,255 $ 20,279 $ 13,092 $ 11,936 $ 12,966 $ 9,521 $ 17,385
Foreclosed properties 18,789 18,917 21,727 23,058 28,783 10,941 11,994 18,789 18,917 21,727
Former bank premises 3,305 3,305 3,707 5,060 8,971 3,305 3,305 3,305 3,305 3,707
Total nonperforming assets 35,060 31,743 42,819 47,373 58,033 27,338 27,235 35,060 31,743 42,819
Loans past due 90 days and accruing interest 5,164 10,903 7,932 10,047 16,118 5,723 5,829 5,164 10,903 7,932
Total nonperforming assets and loans past due 90 days and accruing interest $ 40,224 $ 42,646 $ 50,751 $ 57,420 $ 74,151 $ 33,061 $ 33,064 $ 40,224 $ 42,646 $ 50,751

Performing Restructurings $ 9,468 $ 19,880 $ 21,336 $ 22,829 $ 26,243 $ 11,486 $ 10,780 $ 9,468 $ 19,880 $ 21,336

Balances
Allowance for loan losses $ 33,269 $ 32,344 $ 30,977 $ 32,384 $ 32,109 $ 34,399 $ 34,047 $ 33,269 $ 32,344 $ 30,977
Average loans, net of deferred fees and costs 5,525,119 5,448,126 5,360,676 5,220,223 5,196,116 5,709,998 5,612,366 5,525,119 5,448,126 5,360,676
Loans, net of deferred fees and costs 5,543,621 5,510,385 5,387,755 5,345,996 5,171,003 5,780,502 5,671,462 5,543,621 5,510,385 5,387,755

Ratios
NPAs to total loans 0.63 % 0.58 % 0.79 % 0.89 % 1.12 % 0.47 % 0.48 % 0.63 % 0.58 % 0.79 %
NPAs & loans 90 days past due to total loans 0.73 % 0.77 % 0.94 % 1.07 % 1.43 % 0.57 % 0.58 % 0.73 % 0.77 % 0.94 %
NPAs to total loans & OREO 0.63 % 0.57 % 0.79 % 0.88 % 1.11 % 0.47 % 0.48 % 0.63 % 0.57 % 0.79 %
NPAs & loans 90 days past due to total loans & OREO 0.72 % 0.77 % 0.94 % 1.07 % 1.42 % 0.57 % 0.58 % 0.72 % 0.77 % 0.94 %
ALL to nonaccrual loans 256.59 % 339.71 % 178.18 % 168.18 % 158.34 % 262.75 % 285.25 % 256.59 % 339.71 % 178.18 %
ALL to nonaccrual loans & loans 90 days past due 183.50 % 158.36 % 122.36 % 110.52 % 88.22 % 182.83 % 191.65 % 183.50 % 158.36 % 122.36 %

Nonperforming assets at ~~September 30, 2015~~March 31, 2016 included ~~$13.0~~$13.1 million in nonaccrual loans, ~~(excluding PCI loans),~~ a net ~~decrease~~increase of ~~$6.3~~$1.2 million, or ~~32.7%~~9.7%, from December 31, ~~2014~~2015 and a decline of ~~$7.3~~$4.3 million, or ~~36.1%~~24.7%, from ~~September 30, 2014.~~March 31, 2015. The following table shows the activity in nonaccrual loans for the quarter ended (dollars in thousands):

September 30, June 30, March 31, December 31, September 30,
2015 2015 2015 2014 2014
Beginning Balance $ 9,521 $ 17,385 $ 19,255 $ 20,279 $ 23,099
Net customer payments (1,104 ) (4,647 ) (2,996 ) (4,352 ) (1,654 )
Additions 5,213 581 4,379 7,413 1,099
Charge-offs (541 ) (2,171 ) (3,107 ) (1,839 ) (604 )
Loans returning to accruing status (123 ) (919 ) (53 ) (2,246 ) (723 )
Transfers to OREO - (708 ) (93 ) - (938 )
Ending Balance $ 12,966 $ 9,521 $ 17,385 $ 19,255 $ 20,279
~~- 68 -~~
March 31, December 31, September 30, June 30, March 31,
2016 2015 2015 2015 2015
Beginning Balance $ 11,936 $ 12,966 $ 9,521 $ 17,385 $ 19,255
Net customer payments (1,204 ) (1,493 ) (1,104 ) (4,647 ) (2,996 )
Additions 5,150 2,344 5,213 581 4,379
Charge-offs (1,446 ) (1,245 ) (541 ) (2,171 ) (3,107 )
Loans returning to accruing status (932 ) (402 ) (123 ) (919 ) (53 )
Transfers to OREO (412 ) (234 ) - (708 ) (93 )
Ending Balance $ 13,092 $ 11,936 $ 12,966 $ 9,521 $ 17,385

The ~~majority of the~~ additions to nonaccrual loans in the first quarter of 2015 were attributable to three credit relationships. During the second quarter of 2015, the decline in nonaccrual loans was largely due to payments received in settlements, sales of collateral, and liquidation of customer assets. The majority of additions to nonaccrual loans in the third quarter of 20152016 were comprised of several smaller credit ~~relationships.~~relationships, the majority of which were secured by residential 1-4 family property.
- 56 -

The following table presents the composition of nonaccrual loans ~~(excluding PCI loans)~~ and the coverage ratio, which is the allowance for loan losses expressed as a percentage of nonaccrual loans, at the quarters ended (dollars in thousands):

September 30, June 30, March 31, December 31, September 30,
2015 2015 2015 2014 2014
Raw Land and Lots $ 493 $ 403 $ 1,059 $ 2,359 $ 5,074
Commercial Construction 1,786 1,907 1,953 968 672
Commercial Real Estate 4,189 3,825 7,609 6,962 1,821
Single Family Investment Real Estate 1,157 782 1,302 2,070 4,202
Commercial and Industrial 903 1,074 2,540 3,286 3,005
Other Commercial 61 65 69 74 62
Consumer 4,377 1,465 2,853 3,536 5,443
Total $ 12,966 $ 9,521 $ 17,385 $ 19,255 $ 20,279

Coverage Ratio 256.59 % 339.71 % 178.18 % 168.18 % 158.34 %
March 31, December 31, September 30, June 30, March 31,
2016 2015 2015 2015 2015
Construction and Land Development $ 2,156 $ 2,113 $ 3,142 $ 2,401 $ 3,104
Commercial Real Estate - Owner Occupied 2,816 3,904 3,989 3,625 4,954
Commercial Real Estate - Non-owner Occupied - 100 200 200 2,655
Commercial and Industrial 810 429 403 564 2,018
Residential 1-4 Family 5,696 3,563 3,960 2,128 4,000
HELOC 973 1,348 937 493 544
Consumer and All Other 641 479 335 110 110
Total $ 13,092 $ 11,936 $ 12,966 $ 9,521 $ 17,385

Coverage Ratio 262.75 % 285.25 % 256.59 % 339.71 % 178.18 %

Nonperforming assets at ~~September 30, 2015~~March 31, 2016 also included ~~$22.1~~$14.2 million in OREO, a decrease of ~~$6.0~~$1.1 million, or ~~21.4%~~6.9%, from December 31, ~~2014~~2015 and a decrease of ~~$15.7~~$11.2 million, or ~~41.5%~~44.0%, from the prior year. The following table shows the activity in OREO for the quarters ended (dollars in thousands):

September 30, June 30, March 31, December 31, September 30, March 31, December 31, September 30, June 30, March 31,
2015 2015 2015 2014 2014 2016 2015 2015 2015 2015
Beginning Balance $ 22,222 $ 25,434 $ 28,118 $ 37,754 $ 38,494 $ 15,299 $ 22,094 $ 22,222 $ 25,434 $ 28,118
Additions of foreclosed property 1,082 904 158 367 2,553 456 234 1,082 904 158
Additions of former bank premises - - 402 63 4,814 - 1,822 - - 402
Capitalized improvements 9 243 56 424 203 - - 9 243 56
Valuation adjustments (473 ) (710 ) (590 ) (381 ) (6,192 ) (126 ) (4,229 ) (473 ) (710 ) (590 )
Proceeds from sales (767 ) (3,511 ) (2,748 ) (11,362 ) (2,216 ) (1,390 ) (4,961 ) (767 ) (3,511 ) (2,748 )
Gains (losses) from sales 21 (138 ) 38 1,253 98 7 339 21 (138 ) 38
Ending Balance $ 22,094 $ 22,222 $ 25,434 $ 28,118 $ 37,754 $ 14,246 $ 15,299 $ 22,094 $ 22,222 $ 25,434

During the first ~~nine months~~quarter of ~~2015,~~2016, the majority of sales of OREO were related to ~~closed bank premises~~land and ~~foreclosed~~ residential real ~~estate and land.~~estate.

The following table presents the composition of the OREO portfolio at the quarter ended (dollars in thousands):

September 30, June 30, March 31, December 31, September 30, March 31, December 31, September 30, June 30, March 31,
2015 2015 2015 2014 2014 2016 2015 2015 2015 2015
Land $ 7,139 $ 7,254 $ 8,412 $ 8,726 $ 9,054 $ 4,874 $ 5,731 $ 7,139 $ 7,254 $ 8,412
Land Development 6,700 7,013 7,192 7,162 7,585 2,616 2,918 6,700 7,013 7,192
Residential Real Estate 3,517 3,217 4,794 5,736 6,696 2,707 2,601 3,517 3,217 4,794
Commercial Real Estate 1,433 1,433 1,329 1,434 5,448 744 744 1,433 1,433 1,329
Former Bank Premises⁽¹⁾ 3,305 3,305 3,707 5,060 8,971 3,305 3,305 3,305 3,305 3,707
Total $ 22,094 $ 22,222 $ 25,434 $ 28,118 $ 37,754 $ 14,246 $ 15,299 $ 22,094 $ 22,222 $ 25,434

⁽¹⁾Includes closed branch property and land previously held for branch sites.
~~- 69 -~~

Past Due Loans
At ~~September 30, 2015,~~March 31, 2016, total accruing past due loans ~~excluding PCI loans,~~ were ~~$27.5~~$35.1 million, or ~~0.50%~~0.61% of total loans, compared to ~~$48.1~~$42.9 million, or ~~0.90%~~0.76%, at December 31, ~~2014~~2015 and ~~$58.4~~$42.7 million, or ~~1.13%~~0.79%, a year ago. At ~~September 30, 2015,~~March 31, 2016, loans past due 90 days or more and accruing interest ~~excluding PCI loans,~~ totaled ~~$5.2~~$5.7 million, or ~~0.09%~~0.10% of total loans, compared to ~~$10.0~~$5.8 million, or ~~0.19%~~0.10%, at December 31, ~~2014~~2015 and ~~$16.1~~$7.9 million, or ~~0.31%~~0.15%, a year ago.

Charge-offs and delinquencies
For the quarter ended ~~September 30, 2015,~~March 31, 2016, net charge-offs were ~~$1.0 million, or 0.07% on an annualized basis, compared to $1.1 million, or 0.08%, for the same quarter last year. For the nine months ended September 30, 2015, net charge-offs were $6.4~~$2.2 million, or 0.15% on an annualized basis, compared to ~~$1.3~~$3.2 million, or ~~0.03% annualized,~~0.24%, for the ~~nine months ended September 30, 2014. Of the $6.4 million~~same quarter last year. The decrease in ~~loans charged off~~net charge-off levels is attributable to improving asset quality. The majority of net charge-offs in the first ~~nine months~~quarter of ~~2015, $4.7 million, or 73.4%,~~2016 were related to ~~loans specifically reserved for in the prior period.~~commercial real estate and consumer loans.
- 57 -
Provision
The provision for loan losses for the quarter ended ~~September 30, 2015~~March 31, 2016 was ~~$2.0~~$2.5 million, an increase of ~~$162,000~~$754,000 compared to the same quarter a year ago. ~~During the nine months ended September 30, 2015, the provision for loan losses was $7.3 million, an increase of $4.0 million compared to the first nine months of 2014.~~ The increase in the provision for loan losses in the current ~~periods~~year compared to ~~the same periods in~~ the prior year was primarily driven by higher loan balances in ~~2015 and an increase in net charge-offs in 2015, primarily due to a net recovery in the first quarter of 2014.~~2016. Additionally, a ~~$300,000~~$100,000 provision was recognized during the current ~~year~~quarter for unfunded loan ~~commitments.~~commitments, resulting in a total of $2.6 million in provision for credit losses for the quarter.

Allowance for Loan Losses
The allowance for loan losses of ~~$33.3~~$34.4 million at ~~September 30, 2015,~~March 31, 2016, is an increase of ~~$885,000~~$352,000 compared to the allowance for loan losses at December 31, ~~2014.~~2015. The allowance for loan losses as a percentage of the total loan portfolio, unadjusted for acquisition accounting, was 0.60% at March 31, 2016, 0.60% at December 31, 2015, and 0.57% at March 31, 2015. The ALL as a percentage of the total loan portfolio, adjusted for acquisition accounting (non-GAAP), was ~~1.01%~~0.95% at ~~September 30, 2015,~~March 31, 2016, a decrease from ~~1.08%~~0.98% at December 31, ~~2014~~2015 and ~~1.12%~~1.03% at ~~September 30, 2014. The allowance for loan losses as a percentage of the total loan portfolio was 0.60% at September 30, 2015, 0.61% at December~~March 31, ~~2014, and 0.62% at September 30, 2014.~~2015. In acquisition accounting, there is no carryover of previously established allowance for loan losses, as acquired loans are recorded at fair value.

~~Due to the decline in nonaccrual loans during 2015, the~~The nonaccrual loan coverage ratio ~~significantly increased to 256.6%~~was 262.8% at ~~September 30, 2015,~~March 31, 2016, compared to ~~168.2%~~285.3% at December 31, ~~2014,~~2015, and ~~158.3%~~178.2% at ~~September 30, 2014.~~March 31, 2015. The current level of the allowance for loan losses reflects specific reserves related to nonperforming loans, current risk ratings on loans, net charge-off activity, loan growth, delinquency trends, and other credit risk factors that the Company considers important in assessing the adequacy of the allowance for loan losses.

~~- 70 -~~
The following table summarizes activity in the allowance for loan losses during the quarters ended (dollars in thousands):

September 30, June 30, March 31, December 31, September 30, March 31, December 31, September 30, June 30, March 31,
2015 2015 2015 2014 2014 2016 2015 2015 2015 2015
Balance, beginning of period $ 32,344 $ 30,977 $ 32,384 $ 32,109 $ 31,379 $ 34,047 $ 33,269 $ 32,344 $ 30,977 $ 32,384
Loans charged-off:
Commercial 388 1,022 671 879 132 617 280 388 1,022 671
Real estate 1,480 1,722 2,596 3,584 1,138 1,427 1,360 1,480 1,722 2,596
Consumer 468 461 562 365 495 936 525 468 461 562
Total loans charged-off 2,336 3,205 3,829 4,828 1,765 2,980 2,165 2,336 3,205 3,829
Recoveries:
Commercial 559 120 97 59 108 238 182 559 120 97
Real estate 565 720 308 318 411 391 561 565 720 308
Consumer 175 183 267 226 176 199 190 175 183 267
Total recoveries 1,299 1,023 672 603 695 828 933 1,299 1,023 672
Net charge-offs 1,037 2,182 3,157 4,225 1,070 2,152 1,232 1,037 2,182 3,157
Provision for loan losses 1,962 3,549 1,750 4,500 1,800 2,504 2,010 1,962 3,549 1,750
Balance, end of period $ 33,269 $ 32,344 $ 30,977 $ 32,384 $ 32,109 $ 34,399 $ 34,047 $ 33,269 $ 32,344 $ 30,977

Allowance for loan losses to loans 0.60 % 0.59 % 0.57 % 0.61 % 0.62 % 0.60 % 0.60 % 0.60 % 0.59 % 0.57 %
ALL to loans, adjusted for acquisition accounting (Non-GAAP) 1.01 % 1.02 % 1.03 % 1.08 % 1.12 % 0.95 % 0.98 % 1.01 % 1.02 % 1.03 %
Net charge-offs to total loans 0.07 % 0.16 % 0.24 % 0.31 % 0.08 %
Provision to total loans 0.14 % 0.26 % 0.13 % 0.33 % 0.14 %
Net charge-offs to average loans 0.15 % 0.09 % 0.07 % 0.16 % 0.24 %
Provision to average loans 0.18 % 0.14 % 0.14 % 0.26 % 0.13 %

The following table shows both an allocation of the allowance for loan losses among loan categories based upon the loan portfolio’s composition and the ratio of the related outstanding loan balances to total loans as of the quarters ended (dollars in thousands):

September 30, June 30, March 31, December 31, September 30, March 31, December 31, September 30, June 30, March 31,
2015 2015 2015 2014 2014 2016 2015 2015 2015 2015
$ %(1) $ %(1) $ %(1) $ %(1) $ %(1) $ % (1) $ % (1) $ % (1) $ % (1) $ % (1)
Commercial $ 2,462 7.4 % $ 2,490 7.7 % $ 2,354 7.6 % $ 2,266 7.0 % $ 2,250 7.0 % $ 4,225 7.8 % $ 3,163 7.7 % $ 2,790 7.4 % $ 3,092 7.7 % $ 2,817 7.6 %
Real estate 27,846 83.7 % 27,072 83.7 % 26,145 84.4 % 27,493 84.9 % 27,461 85.5 % 27,576 82.6 % 27,537 83.3 % 26,638 83.7 % 25,731 83.7 % 24,861 84.4 %
Consumer 2,961 8.9 % 2,782 8.6 % 2,478 8.0 % 2,625 8.1 % 2,398 7.5 % 2,598 9.6 % 3,347 9.0 % 3,841 8.9 % 3,521 8.6 % 3,299 8.0 %
Total $ 33,269 100.0 % $ 32,344 100.0 % $ 30,977 100.0 % $ 32,384 100.0 % $ 32,109 100.0 % $ 34,399 100.0 % $ 34,047 100.0 % $ 33,269 100.0 % $ 32,344 100.0 % $ 30,977 100.0 %

(1) The percent represents the loan balance divided by total loans.
~~(1) The percent represents the loan balance divided by total loans.~~ - 58 -
Deposits
As of ~~September 30, 2015,~~March 31, 2016, total deposits were ~~$5.8~~$5.9 billion, ~~an increase~~a decrease of ~~$180.1~~$18.0 million, or ~~3.2%~~1.2% (annualized), from December 31, ~~2014.~~2015. Total interest-bearing deposits consist of NOW, money market, savings, and time deposit account balances. Total time deposit balances of $1.2 billion accounted for ~~27.0%~~25.4% of total interest-bearing deposits at September 30, 2015. The Company continues to experience a shift from time deposits into lower cost transaction accounts (NOW, money market, savings and noninterest bearing demand accounts), driven by the Company’s focus on acquiring low cost funding sources and customer preference for liquidity in response to current market conditions.March 31, 2016.
~~- 71 -~~

The following table presents the deposit balances by major categories as of the quarters ended (dollars in thousands):

September 30, December 31, March 31, December 31,
2015 2014 2016 2015
Deposits: Amount % of total
deposits Amount % of total
deposits Amount % of total
deposits Amount % of total
deposits
Non-interest bearing $ 1,338,045 23.0 % $ 1,199,378 21.3 % $ 1,363,243 22.9 % $ 1,372,937 23.0 %
NOW accounts 1,382,891 23.8 % 1,332,029 23.6 % 1,504,227 25.3 % 1,521,906 25.5 %
Money market accounts 1,318,229 22.7 % 1,261,520 22.4 % 1,323,192 22.3 % 1,312,612 22.0 %
Savings accounts 569,667 9.8 % 548,526 9.7 % 589,542 9.9 % 572,800 9.6 %
Time deposits of $100,000 and over 527,642 9.0 % 550,842 9.8 % 508,153 8.5 % 514,286 8.7 %
Other time deposits 682,379 11.7 % 746,475 13.2 % 657,625 11.1 % 669,395 11.2 %
Total Deposits $ 5,818,853 100.0 % $ 5,638,770 100.0 % $ 5,945,982 100.0 % $ 5,963,936 100.0 %

The Company may also borrow additional funds by purchasing certificates of deposit through a nationally recognized network of financial institutions. The Company utilizes this funding source when rates are more favorable than other funding sources. As of ~~September 30, 2015~~March 31, 2016 and December 31, ~~2014, none were~~2015, the Company did not have purchased ~~and~~certificates of deposit included in certificates of deposit on the Company’s Consolidated Balance Sheets. Maturities of time deposits as of ~~September 30, 2015~~March 31, 2016 are as follows (dollars in thousands):

Within 3
Months 3 - 12
Months Over 12
Months Total Within 3
Months 3 - 12
Months Over 12
Months Total
Maturities of time deposits of $100,000 and over $ 62,328 $ 192,874 $ 272,440 $ 527,642 $ 52,648 $ 181,501 $ 274,004 $ 508,153
Maturities of other time deposits 93,810 278,326 310,243 682,379 82,690 272,387 302,548 657,625
Total time deposits $ 156,138 $ 471,200 $ 582,683 $ 1,210,021 $ 135,338 $ 453,888 $ 576,552 $ 1,165,778

Capital Resources

Capital resources represent funds, earned or obtained, over which financial institutions can exercise greater or longer control in comparison with deposits and borrowed funds. The adequacy of the Company’s capital is reviewed by management on an ongoing basis with reference to size, composition, and quality of the Company’s resources and consistency with regulatory requirements and industry standards. Management seeks to maintain a capital structure that will assure an adequate level of capital to support anticipated asset growth and to absorb potential losses, yet allow management to effectively leverage its capital to maximize return to shareholders.

In July 2013, the Federal Reserve issued a final ~~rule that makes~~rules to include technical changes to its market risk capital ~~rule~~rules to align itthem with the Basel III regulatory capital framework and meet certain requirements of the Dodd-Frank Act. Effective January 1, 2015, the final ~~rule requires~~rules require the Company and the Bank to comply with the following minimum capital ratios: (i) a new common equity Tier 1 capital ratio of 4.5% of risk-weighted assets; (ii) a Tier 1 capital ratio of 6.0% of risk-weighted assets (increased from the prior requirement of 4.0%); (iii) a total capital ratio of 8.0% of risk-weighted assets (unchanged from the prior requirement); and (iv) a leverage ratio of 4.0% of total assets (unchanged from the prior requirement). These are the initial capital requirements, ~~applicable to the Company. All such capital requirements~~which will be phased in over a four-year ~~period; the next phase does not take effect until~~period. When fully phased in on January 1, ~~2016. The~~2019, the rules will require the Company and the Bank to maintain (i) a minimum ratio of common equity Tier 1 to risk-weighted assets of at least 4.5%, plus a 2.5% “capital conservation buffer” (which is added to the 4.5% common equity Tier 1 ratio as that buffer is phased in, effectively resulting in a minimum ratio of common equity Tier 1 to risk-weighted assets of at least 7.0% upon full implementation), (ii) a minimum ratio of Tier 1 capital ~~requirements contained~~to risk-weighted assets of at least 6.0%, plus the 2.5% capital conservation buffer (which is added to the 6.0% Tier 1 capital ratio as that buffer is phased in, effectively resulting in a minimum Tier 1 capital ratio of 8.5% upon full implementation), (iii) a minimum ratio of total capital to risk-weighted assets of at least 8.0%, plus the ~~final rule also include changes~~2.5% capital conservation buffer (which is added to the 8.0% total capital ratio as that buffer is phased in, effectively resulting in a minimum total capital ratio of 10.5% upon full implementation), and (iv) a minimum leverage ratio of 4.0%, calculated as the ~~risk weights~~ratio of ~~assets~~Tier 1 capital to ~~better reflect credit risk and other risk exposures.~~average assets.

~~- 72 -~~
- 59 -

Beginning January 1, ~~2015,~~2016, the ~~Company calculates its regulatory~~ capital ~~under~~conservation buffer requirement is being phased in at 0.625% of risk-weighted assets, and will increase by the ~~U.S. Basel III Standardized Approach.~~same amount each year until fully implemented at 2.5% on January 1, 2019. The ~~Company calculated regulatory~~ capital ~~measures for~~conservation buffer is designed to absorb losses during periods ~~prior~~of economic stress. Banking institutions with a ratio of common equity Tier 1 to ~~2015 under previous regulatory requirements.~~risk-weighted assets above the minimum but below the conservation buffer will face constraints on dividends, equity repurchases, and compensation based on the amount of the shortfall. The table summarizes the Company’s regulatory capital and related ratios for the periods presented (dollars in thousands):

September 30, December 31, September 30, March 31, December 31, March 31,
2015 2014 2014 2016 2015 2015
Common equity Tier 1 capital $ 674,498 $ 691,195 $ 672,369
Tier 1 capital $ 778,876 $ 734,755 $ 729,084 764,998 781,695 762,869
Tier 2 capital 33,666 35,830 35,713 34,811 34,346 31,093
Total risk-based capital 812,542 770,585 764,797 799,809 816,041 793,962
Risk-weighted assets 6,403,685 5,758,071 5,583,373 6,577,394 6,551,028 6,191,268

Capital ratios:
Common equity Tier 1 capital ratio 10.75 % N/A N/A 10.25 % 10.55 % 10.86 %
Tier 1 capital ratio 12.16 % 12.76 % 13.06 % 11.63 % 11.93 % 12.32 %
Total capital ratio 12.69 % 13.38 % 13.70 % 12.16 % 12.46 % 12.82 %
Leverage ratio (Tier 1 capital to average assets) 10.80 % 10.62 % 10.54 % 10.25 % 10.68 % 10.79 %
Capital conservation buffer ratio⁽¹⁾ 4.16 % N/A N/A
Common equity to total assets 13.10 % 13.28 % 13.58 % 12.52 % 12.94 % 13.36 %
Tangible common equity to tangible assets 9.29 % 9.27 % 9.41 % 8.86 % 9.20 % 9.40 %
(1)Calculated by subtracting the regulatory minimum capital ratio requirements from the Company's actual ratio results for Common equity, Tier 1, and Total risk based capital. The lowest of the three measures represents the Company's capital conservation buffer ratio.

NON-GAAP MEASURES

In reporting the Company’s results as of and for the periods ended ~~September 30,~~March 31, 2016 and 2015, ~~and 2014,~~ the Company has provided supplemental performance measures on ~~an operating or~~a tangible basis. Operating measures exclude acquisition costs unrelated to the Company’s normal operations. The Company believes these measures are useful to investors as they exclude non-operating adjustments resulting from acquisition activity and allow investors to see the combined economic results of the organization. Tangible common equity is used in the calculation of certain capital and per share ratios. The Company believes tangible common equity and the related ratios are meaningful measures of capital adequacy because they provide a meaningful base for period-to-period and company-to-company comparisons, which the Company believes will assist investors in assessing the capital of the Company and its ability to absorb potential losses.

These measures are a supplement to U.S. GAAP used to prepare the Company’s financial statements and should not be viewed as a substitute for U.S. GAAP measures. In addition, the Company’s non-GAAP measures may not be comparable to non-GAAP measures of other companies.

~~- 73 -~~
- 60 -

The following table reconciles these non-GAAP measures from their respective U.S. GAAP basis measures for each of the periods presented (dollars in thousands, except per share amounts):
Three Months Ended Nine Months Ended
September 30, September 30,
2015 2014 2015 2014
Operating Earnings
Net Income (GAAP) $ 18,216 $ 14,817 $ 49,264 $ 37,199
Plus: Merger and conversion related expense, after tax - 1,102 - 13,161
Net operating earnings (non-GAAP) $ 18,216 $ 15,919 $ 49,264 $ 50,360
Operating earnings per share - Basic $ 0.40 $ 0.35 $ 1.09 $ 1.09
Operating earnings per share - Diluted 0.40 0.35 1.09 1.09
Operating ROA 0.96 % 0.87 % 0.88 % 0.93 %
Operating ROE 7.26 % 6.45 % 6.65 % 6.84 %
Operating ROTCE 10.70 % 9.77 % 9.86 % 10.36 %

Community Bank Segment Operating Earnings
Net Income (GAAP) $ 18,157 $ 15,445 $ 49,377 $ 39,808
Plus: Merger and conversion related expense, after tax - 1,102 - 13,161
Net operating earnings (non-GAAP) $ 18,157 $ 16,547 $ 49,377 $ 52,969
Operating earnings per share - Basic $ 0.40 $ 0.36 $ 1.09 $ 1.14
Operating earnings per share - Diluted 0.40 0.36 1.09 1.14
Operating ROA 0.96 % 0.91 % 0.89 % 0.98 %
Operating ROE 7.26 % 6.73 % 6.69 % 7.25 %
Operating ROTCE 10.71 % 10.21 % 9.93 % 11.04 %

Operating Efficiency Ratio FTE
Net Interest Income (GAAP) $ 63,444 $ 64,479 $ 189,229 $ 191,953
FTE adjustment 2,287 2,058 6,741 6,122
Net Interest Income (FTE) $ 65,731 $ 66,537 $ 195,970 $ 198,075
Noninterest Income (GAAP) 16,725 16,318 47,990 46,385
Noninterest Expense (GAAP) $ 53,325 $ 59,413 $ 162,405 $ 185,665
Merger and conversion related expense - 1,695 - 19,524
Noninterest Expense (Non-GAAP) $ 53,325 $ 57,718 $ 162,405 $ 166,141
Operating Efficiency Ratio FTE (non-GAAP) 64.67 % 69.66 % 66.57 % 67.96 %

Community Bank Segment Operating Efficiency Ratio FTE
Net Interest Income (GAAP) $ 63,075 $ 64,162 $ 188,240 $ 191,090
FTE adjustment 2,256 2,058 6,707 6,122
Net Interest Income (FTE) $ 65,331 $ 66,220 $ 194,947 $ 197,212
Noninterest Income (GAAP) 14,287 13,884 40,658 38,964
Noninterest Expense (GAAP) $ 50,674 $ 55,680 $ 154,011 $ 173,268
Merger and conversion related expense - 1,695 - 19,524
Noninterest Expense (Non-GAAP) $ 50,674 $ 53,985 $ 154,011 $ 153,744
Operating Efficiency Ratio FTE (non-GAAP) 63.65 % 67.39 % 65.37 % 65.10 %

Tangible Common Equity
Ending equity $ 995,012 $ 976,923 $ 995,012 $ 976,923
Less: Ending goodwill 293,522 296,876 293,522 296,876
Less: Ending core deposit intangibles 25,320 34,089 25,320 34,089
Ending tangible common equity $ 676,170 $ 645,958 $ 676,170 $ 645,958

Average equity $ 995,463 $ 978,909 $ 989,749 $ 984,654
Less: Average goodwill 293,522 296,876 293,522 296,876
Less: Average core deposit intangibles 26,323 35,310 28,435 37,888
Average tangible common equity $ 675,618 $ 646,723 $ 667,792 $ 649,890
~~- 74 -~~
Three Months Ended
March 31,
2016 2015
Tangible Common Equity
Ending equity $ 980,978 $ 986,916
Less: Ending goodwill 293,522 293,522
Less: Ending core deposit intangibles 21,430 29,533
Ending tangible common equity (non-GAAP) $ 666,026 $ 663,861

Average equity $ 989,414 $ 982,548
Less: Average goodwill 293,522 293,522
Less: Average core deposit intangibles 22,330 30,597
Average tangible common equity (non-GAAP) $ 673,562 $ 658,429

The allowance for loan losses ratio, adjusted for acquisition accounting (non-GAAP), includes an adjustment for the fair value mark on acquired performing loans. The acquired performing loans are reported net of the related fair value mark in loans, net of deferred fees and costs, on the Company’s Consolidated Balance Sheets; therefore, the fair value mark is added back to the balance to represent the total loan portfolio. The adjusted allowance for loan losses, including the fair value mark, represents the total reserve on the Company’s loan portfolio. The PCI loans, net of the respective fair value mark, are removed from the loans, net of deferred fees and costs, as these PCI loans are not covered by the allowance established by the Company unless changes in expected cash flows indicate that one of the PCI loan pools is impaired, at which time an allowance for PCI loans will be established. U.S. GAAP requires the acquired allowance for loan losses not be carried over in an acquisition or merger. The Company believes the presentation of the allowance for loan losses ratio, adjusted for acquisition accounting, is useful to investors because the acquired loans were purchased at a market discount with no allowance for loan losses carried over to the Company, and the fair value mark on the purchased performing loans represents the allowance associated with those purchased loans. The Company believes that this measure is a better reflection of the reserves on the Company’s loan portfolio. The following table shows the allowance for loan losses as a percentage of the total loan portfolio, adjusted for acquisition accounting, as of the quarters ended (dollars in thousands):

September 30, December 31, September 30, March 31, December 31, March 31,
2015 2014 2014 2016 2015 2015
Allowance for loan losses $ 33,269 $ 32,384 $ 32,109 $ 34,399 $ 34,047 $ 30,977
Remaining fair value mark on acquired performing loans 21,884 24,340 25,064 19,994 20,819 23,794
Adjusted allowance for loan losses $ 55,153 $ 56,724 $ 57,173 $ 54,393 $ 54,866 $ 54,771

Loans, net of unearned income $ 5,543,621 $ 5,345,996 $ 5,171,003
Loans, net of deferred fees $ 5,780,502 $ 5,671,462 $ 5,387,755
Remaining fair value mark on acquired performing loans 21,884 24,340 25,064 19,994 20,819 23,794
Less: PCI loans, net of fair value mark 78,606 105,788 119,743 70,105 73,737 91,346
Adjusted loans, net of unearned income $ 5,486,899 $ 5,264,548 $ 5,076,324
Adjusted loans, net of deferred fees $ 5,730,391 $ 5,618,544 $ 5,320,203

Allowance for loan losses ratio 0.60 % 0.61 % 0.62 % 0.60 % 0.60 % 0.57 %
Allowance for loan losses ratio, adjusted for acquisition accounting 1.01 % 1.08 % 1.12 % 0.95 % 0.98 % 1.03 %

ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the risk of loss arising from adverse changes in the fair value of financial instruments due to changes in interest rates, exchange rates, and equity prices. The Company’s market risk is composed primarily of interest rate risk. The ALCO of the Company is responsible for reviewing the interest rate sensitivity position of the Company and establishing policies to monitor and limit exposure to this risk. The Company’s Board of Directors reviews and approves the guidelines established by ALCO.

Interest rate risk is monitored through the use of three complementary modeling tools: static gap analysis, earnings simulation modeling, and economic value simulation (net present value estimation). Each of these models measures changes in a variety of interest rate scenarios. While each of the interest rate risk models has limitations, taken together they represent a reasonably comprehensive view of the magnitude of interest rate risk in the Company, the distribution of risk along the yield curve, the level of risk through time, and the amount of exposure to changes in certain interest rate relationships. Static gap, which measures aggregate re-pricing values, is less utilized because it does not effectively measure the options risk impact on the Company and is not addressed here. Earnings simulation and economic value models, which more effectively measure the cash flow and optionality impacts, are utilized by management on a regular basis and are explained below.

- 61 -
The Company determines the overall magnitude of interest sensitivity risk and then formulates policies and practices governing asset generation and pricing, funding sources and pricing, and off-balance sheet commitments. These decisions are based on management’s expectations regarding future interest rate movements, the states of the national, regional, and local economies, and other financial and business risk factors. The Company uses simulation modeling to measure and monitor the effect of various interest rate scenarios and business strategies on net interest income. This modeling reflects interest rate changes and the related impact on net interest income and net income over specified time horizons.
~~- 75 -~~

EARNINGS SIMULATION ANALYSIS

Management uses simulation analysis to measure the sensitivity of net interest income to changes in interest rates. The model calculates an earnings estimate based on current and projected balances and rates. This method is subject to the accuracy of the assumptions that underlie the process, but it provides a better analysis of the sensitivity of earnings to changes in interest rates than other analyses, such as the static gap analysis discussed above.

Assumptions used in the model are derived from historical trends and management’s outlook and include loan and deposit growth rates and projected yields and rates. Such assumptions are monitored by management and periodically adjusted as appropriate. All maturities, calls, and prepayments in the securities portfolio are assumed to be reinvested in like instruments. Mortgage loans and mortgage-backed securities prepayment assumptions are based on industry estimates of prepayment speeds for portfolios with similar coupon ranges and seasoning. Different interest rate scenarios and yield curves are used to measure the sensitivity of earnings to changing interest rates. Interest rates on different asset and liability accounts move differently when the prime rate changes and are reflected in the different rate scenarios.

The Company uses its simulation model to estimate earnings in rate environments where rates are instantaneously shocked up or down around a “most likely” rate scenario, based on implied forward rates. The analysis assesses the impact on net interest income over a 12 month time horizon after an immediate increase or “shock” in rates, of 100 basis points up to 300 basis points. The shock down 200 or 300 basis points analysis is not as meaningful as interest rates across most of the yield curve are at historic lows and cannot decrease another 200 or 300 basis points. The model, under all scenarios, does not drop the index below zero.

The following table represents the interest rate sensitivity on net interest income for the Company across the rate paths modeled for balances as of ~~September 30,~~March 31, 2016 and 2015 ~~and 2014~~ (dollars in thousands):

Change In Net Interest Income Change In Net Interest Income
September 30, March 31,
2015 2014 2016 2015
% $ % $ % $ % $
Change in Yield Curve:
+300 basis points 6.03 16,192 6.06 15,746 5.14 14,241 4.74 12,460
+200 basis points 4.07 10,933 4.19 10,898 3.72 10,304 3.29 8,640
+100 basis points 1.72 4,611 1.75 4,540 2.05 5,683 1.32 3,472
Most likely rate scenario - - - - - - - -
-100 basis points (1.72 ) (4,626 ) (1.89 ) (4,914 ) (1.77 ) (4,912 ) (1.59 ) (4,171 )
-200 basis points (3.85 ) (10,334 ) (4.59 ) (11,943 ) (3.59 ) (9,934 ) (3.71 ) (9,740 )
-300 basis points (4.03 ) (10,824 ) (5.16 ) (13,414 ) (3.71 ) (10,267 ) (3.81 ) (10,020 )

Asset sensitivity indicates that in a rising interest rate environment the Company’s net interest income would increase and in a decreasing interest rate environment the Company’s net interest income would decrease. Liability sensitivity indicates that in a rising interest rate environment the Company’s net interest income would decrease and in a decreasing interest rate environment the Company’s net interest income would increase.

- 62 -
As of ~~September 30, 2015,~~March 31, 2016, the Company became more asset ~~sensitivity is relatively unchanged~~sensitive in a rising interest rate environment scenario when compared to ~~September 30, 2014~~March 31, 2015 due to the composition of the balance sheet. The Company ~~expects~~would expect net interest income to increase aswith an immediate increase or shock in market ~~rates increase.~~rates. In the decreasing interest rate environments, the Company ~~shows~~would expect a decline in net interest income as interest-earning assets re-price at lower rates and interest-bearing deposits remain at or near their floors. It should be noted that although net interest income simulation results are presented through the down 300 basis points interest rate environments, the Company does not believe the down 200 and 300 basis point scenarios are plausible given the current level of interest rates.
~~- 76 -~~

ECONOMIC VALUE SIMULATION

Economic value simulation is used to calculate the estimated fair value of assets and liabilities over different interest rate environments. Economic values are calculated based on discounted cash flow analysis. The net economic value of equity is the economic value of all assets minus the economic value of all liabilities. The change in net economic value over different rate environments is an indication of the longer-term earnings capability of the balance sheet. The same assumptions are used in the economic value simulation as in the earnings simulation. The economic value simulation uses instantaneous rate shocks to the balance sheet.

The following chart reflects the estimated change in net economic value over different rate environments using economic value simulation for the balances at the quarterly periods ended ~~September 30,~~March 31, 2016 and 2015 ~~and 2014~~ (dollars in thousands):

Change In Economic Value of Equity Change In Economic Value of Equity
September 30, March 31,
2015 2014 2016 2015
% $ % $ % $ % $
Change in Yield Curve:
+300 basis points (0.41 ) (5,407 ) (1.66 ) (21,897 ) (1.23 ) (16,345 ) 0.44 5,675
+200 basis points 0.68 9,006 (0.29 ) (3,768 ) 0.06 757 1.43 18,365
+100 basis points 1.00 13,244 0.35 4,617 0.55 7,341 1.32 16,964
Most likely rate scenario - - - - - - - -
-100 basis points (3.54 ) (47,052 ) (2.93 ) (38,731 ) (3.31 ) (43,817 ) (3.90 ) (50,216 )
-200 basis points (8.94 ) (118,937 ) (8.07 ) (106,701 ) (7.21 ) (95,510 ) (8.96 ) (115,286 )
-300 basis points (9.30 ) (123,658 ) (9.79 ) (129,462 ) (6.19 ) (82,106 ) (8.03 ) (103,270 )

The shock down 200 or 300 basis points analysis is not as meaningful since interest rates across most of the yield curve are at historic lows and cannot decrease another 200 or 300 basis points. While management considers this scenario highly unlikely, the natural floor increases the Company’s sensitivity in rates down scenarios.

Compared to ~~September 30, 2014,~~March 31, 2015, the Company’s economic value of equity model as of ~~September 30, 2015~~March 31, 2016 projects that aan instantaneous change in market interest rates would result in ~~a greater~~less overall variation in the Company’s estimated economic value of equity in the shock up 100 or 200 basis point and shock down 100 basis point interest rate scenarios, while the Company is ~~less~~more sensitive to market interest rates in a shock up 300 basis point scenario. The Company believes the down 200 and 300 basis point scenarios are not plausible given the current low level of interest rates.
- 63 -

ITEM 4 – CONTROLS AND PROCEDURES

The Company maintains “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) under the Exchange Act, that are designed to ensure that information required to be disclosed in reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating its disclosure controls and procedures, management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable assurance that the objectives of the disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, management was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Based on their evaluation as of the end of the period covered by this quarterly report on Form 10-Q, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that the disclosure controls and procedures were effective at the reasonable assurance level. There was no change in the internal control over financial reporting that occurred during the quarter ended ~~September 30, 2015~~March 31, 2016 that has materially affected, or is reasonably likely to materially affect, the internal control over financial reporting.

~~- 77 -~~
PART II – OTHER INFORMATION

ITEM 1 – LEGAL PROCEEDINGS

In the ordinary course of its operations, the Company and its subsidiaries are parties to various legal proceedings. Based on the information presently available, and after consultation with legal counsel, management believes that the ultimate outcome in such proceedings, in the aggregate, will not have a material adverse effect on the business or the financial condition or results of operations of the Company.

ITEM 1A – RISK FACTORS

There have been no material changes with respect to the risk factors disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2014.~~2015.

ITEM 2 – UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(a) Sales of Unregistered Securities – None.
(b) Use of Proceeds – Not Applicable.
(c) Issuer Purchases of Securities
~~(a)~~- 64 - ~~Sales of Unregistered Securities – None.~~

~~(b)~~ ~~Use of Proceeds – Not Applicable~~
~~(c)~~ ~~Issuer Purchases of Securities~~

Stock Repurchase Program

The following information describes the Company’s common stock repurchases ~~during 2014 and~~for the ~~nine~~three months ended ~~September 30, 2015:~~March 31, 2016:
Period Total number of shares
purchased⁽¹⁾ Average price paid
per share ($) Total number of shares
purchased as part of
publicly announced plan
⁽²⁾ Approximate value of
shares that may yet be
purchased under the plan
($)⁽²⁾
January 1 - December 31, 2014 2,125,264 24.72 2,125,264 12,460,000
January 1 - January 31, 2015 102,843 23.17 102,843 10,077,000
February 1 - February 28, 2015 - - - 10,077,000
March 1 - March 31, 2015 - - - 10,077,000
April 1 - April 30, 2015 45,813 21.83 45,813 9,077,000
May 1 - May 31, 2015 - - - 9,077,000
June 1 - June 30, 2015 32,700 22.74 32,700 8,333,000
July 1 - July 31, 2015 9,765 22.91 9,765 8,109,000
August 1 - August 31, 2015 48,400 22.97 48,400 6,998,000
September 1 - September 30, 2015 107,500 23.47 107,500 4,475,000
   Total 2,472,285 24.48 2,472,285
Period Total number of shares purchased⁽¹⁾ Average price paid per
share ($) Approximate value of shares
that may be purchased under
the plan ($)
December 31, 2015 21,139,000
January 1 - January 31, 2016 380,882 23.70 12,114,000
February 1 - February 29, 2016 553,566 21.99 24,942,000
March 1 - March 31, 2016 106,164 23.55 22,442,000
Total 1,040,612 22.77
⁽¹⁾On ~~January 30, 2014,~~October 29, 2015, the Company’s Board of Directors authorized a share repurchase program to purchase up to ~~$65.0~~$25.0 million worth of the Company’s common stock on the open market or in privately negotiated transactions. The repurchase program was authorized through December 31, 2016, and completed in February 2016. On February 25, 2016, the Company’s Board of Directors authorized a new share repurchase program to purchase up to $25.0 million worth of the Company’s common stock on the open market or in privately negotiated transactions. The repurchase program is authorized through December 31, ~~2015.~~
⁽²⁾~~For purposes of the Company’s consolidated financial statements included in this Form 10-Q, the impact of these repurchases is recorded according to settlement dates.~~2016.

~~- 78 -~~
- 65 -

ITEM 6 – EXHIBITS

The following exhibits are filed as part of this Form 10-Q and this list includes the Exhibit Index:

Exhibit No. Description
~~10.12~~3.02 Bylaws of Union Bankshares Corporation, ~~Stock and Incentive Plan (as~~as amended ~~and restated effective April 21, 2015)~~January 28, 2016 (incorporated by reference to Exhibit ~~99.1 to Form S-8 Registration Statement; SEC file no. 333-203580).~~
~~10.23~~ ~~Form of Time-Based Restricted Stock Agreement under Union Bankshares Corporation Stock and Incentive Plan (incorporated by reference to Exhibit 10.23~~3.2 to Current Report on Form 8-K filed on ~~April 27, 2015).~~February 2, 2016)

~~10.24~~10.1
~~Form of Performance Share Unit Agreement under Union Bankshares Corporation Stock and~~2016 Management Incentive ~~Plan (incorporated by reference to Exhibit 10.24 to Current Report on Form 8-K filed on April 27, 2015).~~
~~10.25~~ ~~Letter Agreement, dated September 28, 2015, between Union Bankshares Corporation and John C. Neal~~
~~(incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K filed on October 1, 2015).~~Plan.

15.01 Letter regarding unaudited interim financial information.

31.01 Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.02 Certification of Principal Financial and Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.01 Certification of Principal Executive Officer and Principal Financial and Accounting Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.00 Interactive data files formatted in eXtensible Business Reporting Language for the quarter ended ~~September 30, 2015~~March 31, 2016 pursuant to Rule 405 of Regulation ~~S-T:~~S-T (1): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Income, (iii) the Consolidated Statements of Comprehensive Income, (iv) the Consolidated Statements of Changes in Shareholders’ Equity, (v) the Consolidated Statements of Cash Flows and (vi) the Notes to the Consolidated Financial Statements.

~~- 79 -~~
- 66 -

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Union Bankshares Corporation

(Registrant)

Date: ~~November~~May 5, ~~2015~~2016 By: /s/ G. William Beale
G. William Beale,
President and Chief Executive Officer
(principal executive officer)
Date: ~~November~~May 5, ~~2015~~2016 By: /s/ Robert M. Gorman
Robert M. Gorman,
Executive Vice President and Chief Financial Officer
(principal financial and accounting officer)

~~- 80 -~~
- 67 -

	September 30,		December 31,
	2015		2014
ASSETS
Cash and cash equivalents:
Cash and due from banks	$	102,955	$	112,752
Interest-bearing deposits in other banks		76,001		19,344
Money market investments		1		1
Federal funds sold		237		1,163
Total cash and cash equivalents		179,194		133,260

Securities available for sale, at fair value		888,692		1,102,114
Securities held to maturity, at carrying value		199,363		-
Restricted stock, at cost		52,721		54,854

Loans held for sale		65,713		42,519

Loans held for investment, net of deferred fees and costs		5,543,621		5,345,996
Less allowance for loan losses		33,269		32,384
Net loans held for investment		5,510,352		5,313,612

Premises and equipment, net		129,191		135,247
Other real estate owned, net of valuation allowance		22,094		28,118
Core deposit intangibles, net		25,320		31,755
Goodwill		293,522		293,522
Bank owned life insurance		142,433		139,005
Other assets		85,718		84,637
Total assets	$	7,594,313	$	7,358,643

LIABILITIES
Noninterest-bearing demand deposits	$	1,338,045	$	1,199,378
Interest-bearing deposits		4,480,808		4,439,392
Total deposits		5,818,853		5,638,770

Securities sold under agreements to repurchase		99,417		44,393
Other short-term borrowings		332,000		343,000
Long-term borrowings		290,732		299,542
Other liabilities		58,299		55,769
Total liabilities		6,599,301		6,381,474

Commitments and contingencies (Note 7)

STOCKHOLDERS' EQUITY
Common stock, $1.33 par value, shares authorized 100,000,000; issued and outstanding, 44,990,569 shares and 45,162,853 shares, respectively.		59,514		59,795
Surplus		638,511		643,443
Retained earnings		288,841		261,676
Accumulated other comprehensive income		8,146		12,255
Total stockholders' equity		995,012		977,169

Total liabilities and stockholders' equity	$	7,594,313	$	7,358,643

	March 31,		December 31,
	2016		2015
	(Unaudited)		(Audited)
ASSETS
Cash and cash equivalents:
Cash and due from banks	$	95,462	$	111,323
Interest-bearing deposits in other banks		37,227		29,670
Federal funds sold		650		1,667
Total cash and cash equivalents		133,339		142,660

Securities available for sale, at fair value		939,409		903,292
Securities held to maturity, at carrying value		204,444		205,374
Restricted stock, at cost		58,211		51,828
Loans held for sale		25,109		36,030
Loans held for investment, net of deferred fees and costs		5,780,502		5,671,462
Less allowance for loan losses		34,399		34,047
Net loans held for investment		5,746,103		5,637,415

Premises and equipment, net		125,357		126,028
Other real estate owned, net of valuation allowance		14,246		15,299
Core deposit intangibles, net		21,430		23,310
Goodwill		293,522		293,522
Bank owned life insurance		175,033		173,687
Other assets		96,408		84,846
Total assets	$	7,832,611	$	7,693,291

LIABILITIES
Noninterest-bearing demand deposits	$	1,363,243	$	1,372,937
Interest-bearing deposits		4,582,739		4,590,999
Total deposits		5,945,982		5,963,936

Securities sold under agreements to repurchase		91,977		84,977
Other short-term borrowings		466,000		304,000
Long-term borrowings		291,662		291,198
Other liabilities		56,012		53,813
Total liabilities		6,851,633		6,697,924

Commitments and contingencies (Note 6)

STOCKHOLDERS' EQUITY
Common stock, $1.33 par value, shares authorized 100,000,000; issued and outstanding, 43,854,381 shares and 44,785,674 shares, respectively.		57,850		59,159
Additional paid-in capital		610,084		631,822
Retained earnings		306,685		298,134
Accumulated other comprehensive income		6,359		6,252
Total stockholders' equity		980,978		995,367
Total liabilities and stockholders' equity	$	7,832,611	$	7,693,291

UNION BANKSHARES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(Dollars in thousands, except share data)	Three Months Ended					Nine Months Ended
	September 30,			September 30,		September 30,			September 30,
	2015			2014		2015			2014
Interest and dividend income:
Interest and fees on loans	$	62,651		$	62,340	$	185,706		$	184,996
Interest on federal funds sold		-			-		1			1
Interest on deposits in other banks		23			21		64			41
Interest and dividends on securities:
Taxable		3,954			3,883		11,621			11,391
Nontaxable		3,372			3,347		10,062			10,005
Total interest and dividend income		70,000			69,591		207,454			206,434

Interest expense:
Interest on deposits		4,204			3,027		11,204			7,833
Interest on federal funds purchased		1			3		6			49
Interest on short-term borrowings		223			108		728			373
Interest on long-term borrowings		2,128			1,974		6,287			6,226
Total interest expense		6,556			5,112		18,225			14,481

Net interest income		63,444			64,479		189,229			191,953
Provision for credit losses		2,062			1,800		7,561			3,300
Net interest income after provision for credit losses		61,382			62,679		181,668			188,653

Noninterest income:
Service charges on deposit accounts		4,965			4,458		13,800			13,281
Other service charges and fees		3,983			3,773		11,618			11,281
Fiduciary and asset management fees		2,304			2,120		6,835			6,753
Gains on sales of mortgage loans, net of commissions		2,630			2,598		7,582			7,925
Gains on securities transactions, net		75			995		672			1,449
Other-than-temporary impairment losses		(300	)		-		(300	)		-
Bank owned life insurance income		1,161			1,195		3,431			3,467
Other operating income		1,907			1,179		4,352			2,229
Total noninterest income		16,725			16,318		47,990			46,385

Noninterest expenses:
Salaries and benefits		25,853			25,636		78,905			82,466
Occupancy expenses		4,915			4,902		15,220			15,184
Furniture and equipment expenses		3,015			3,050		8,818			8,555
Printing, postage, and supplies		1,191			1,290		3,970			3,682
Communications expense		1,159			1,291		3,481			3,740
Technology and data processing		3,549			3,280		10,020			9,145
Professional services		1,991			1,400		5,008			3,897
Marketing and advertising expense		1,781			2,064		5,841			4,821
FDIC assessment premiums and other insurance		1,351			1,577		4,030			4,563
Other taxes		1,569			1,460		4,674			4,352
Loan-related expenses		935			814		2,306			1,987
OREO and credit-related expenses		1,263			6,559		4,415			10,254
Amortization of intangible assets		2,074			2,391		6,435			7,462
Acquisition and conversion costs		-			1,695		-			19,524
Other expenses		2,679			2,004		9,282			6,033
Total noninterest expenses		53,325			59,413		162,405			185,665

Income before income taxes		24,782			19,584		67,253			49,373
Income tax expense		6,566			4,767		17,989			12,174
Net income	$	18,216		$	14,817	$	49,264		$	37,199
Basic earnings per common share	$	0.40		$	0.32	$	1.09		$	0.80
Diluted earnings per common share	$	0.40		$	0.32	$	1.09		$	0.80
Dividends declared per common share	$	0.17		$	0.15	$	0.49		$	0.43
Basic weighted average number of common shares outstanding		45,087,409			45,649,309		45,107,290			46,268,996
Diluted weighted average number of common shares outstanding		45,171,610			45,738,554		45,189,578			46,367,156

	Common Stock			Surplus			Retained Earnings⁽¹⁾			Accumulated Other Comprehensive Income (Loss)			Total

Balance - December 31, 2013	$	33,020		$	170,770		$	236,210		$	(2,190	)	$	437,810
Net income - 2014								37,199						37,199
Other comprehensive income (net of taxes of $7,625)											14,158			14,158
Issuance of common stock in regard to acquisition (22,147,874 shares)		29,457			520,066									549,523
Dividends on common stock ($0.43 per share)								(19,021	)					(19,021	)
Stock purchased under stock repurchase plan (1,731,025 shares)		(2,303	)		(41,174	)								(43,477	)
Issuance of common stock under Dividend Reinvestment Plan (37,489 shares)		50			828			(878	)					-
Issuance of common stock under Equity Compensation Plans (67,057 shares)		89			983									1,072
Issuance of common stock for services rendered (14,374 shares)		19			343									362
Vesting of restricted stock under Equity Compensation Plans (14,707 shares)		20			(20	)								-
Net settle for taxes on Restricted Stock Awards (63,916 shares)		(85	)		(1,480	)								(1,565	)
Stock-based compensation expense					862									862
Balance - September 30, 2014	$	60,267		$	651,178		$	253,510		$	11,968		$	976,923

Balance - December 31, 2014	$	59,795		$	643,443		$	261,676		$	12,255		$	977,169
Net income - 2015								49,264						49,264
Other comprehensive income (net of taxes of $1,130)											(4,109	)		(4,109	)
Dividends on common stock ($0.49 per share)								(21,000	)					(21,000	)
Stock purchased under stock repurchase plan (347,021 shares)		(460	)		(7,535	)								(7,995	)
Issuance of common stock under Dividend Reinvestment Plan (52,201 shares)		69			1,030			(1,099	)					-
Issuance of common stock under Equity Compensation Plans (37,124 shares)		49			517									566
Issuance of common stock for services rendered (19,417 shares)		26			420									446
Vesting of restricted stock under Equity Compensation Plans (39,652 shares)		52			(52	)								-
Net settle for taxes on Restricted Stock Awards (13,076 shares)		(17	)		(269	)								(286	)
Stock-based compensation expense					957									957
Balance - September 30, 2015	$	59,514		$	638,511		$	288,841		$	8,146		$	995,012

	Common Stock			Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)		Total

Balance - December 31, 2014	$	59,795		$	643,443		$	261,676		$	12,255	$	977,169
Net income - 2015								15,701					15,701
Other comprehensive income (net of taxes of $2,115)											2,440		2,440
Dividends on common stock ($0.15 per share)								(6,431	)				(6,431	)
Stock purchased under stock repurchase plan (102,843 shares)		(137	)		(2,250	)							(2,387	)
Issuance of common stock under Dividend Reinvestment Plan (15,781 shares)		21			307			(328	)				-
Issuance of common stock under Equity Compensation Plans (7,686 shares)		10			137								147
Issuance of common stock for services rendered (4,576 shares)		6			94								100
Vesting of restricted stock, including tax effects, under Equity Compensation Plans (19,271 shares)		26			(239	)							(213	)
Stock-based compensation expense					390								390
Balance - March 31, 2015	$	59,721		$	641,882		$	270,618		$	14,695	$	986,916

Balance - December 31, 2015	$	59,159		$	631,822		$	298,134		$	6,252	$	995,367
Net income - 2016								16,961					16,961
Other comprehensive income (net of taxes of $1,502)											107		107
Dividends on common stock ($0.19 per share)								(8,410	)				(8,410	)
Stock purchased under stock repurchase plan (1,040,612 shares)		(1,384	)		(22,344	)							(23,728	)
Issuance of common stock under Equity Compensation Plans (21,804 shares)		29			288								317
Issuance of common stock for services rendered (4,400 shares)		6			94								100
Vesting of restricted stock, including tax effects, under Equity Compensation Plans (30,299 shares)		40			(417	)							(377	)
Stock-based compensation expense					641								641
Balance - March 31, 2016	$	57,850		$	610,084		$	306,685		$	6,359	$	980,978

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2015			2014			2015			2014
Loans⁽¹⁾	$	1,364		$	846		$	3,055		$	82
Core deposit intangible⁽²⁾		(2,074	)		(2,391	)		(6,435	)		(7,462	)
Borrowings⁽³⁾		87			262			362			413
Time deposits⁽⁴⁾		154			1,998			1,843			7,377
Net impact to income before taxes	$	(469	)	$	715		$	(1,175	)	$	410

	Amortized		Gross Unrealized					Estimated
	Cost		Gains		(Losses)			Fair Value
September 30, 2015
U.S. government and agency securities	$	8,068	$	343	$	-		$	8,411
Obligations of states and political subdivisions		241,655		8,750		(512	)		249,893
Corporate bonds		73,917		70		(1,525	)		72,462
Mortgage-backed securities		539,230		9,122		(635	)		547,717
Other securities		10,181		28		-			10,209
Total available for sale securities	$	873,051	$	18,313	$	(2,672	)	$	888,692

December 31, 2014
U.S. government and agency securities	$	8,313	$	166	$	(25	)	$	8,454
Obligations of states and political subdivisions		427,483		18,885		(721	)		445,647
Corporate bonds		78,744		244		(308	)		78,680
Mortgage-backed securities		550,716		9,411		(798	)		559,329
Other securities		9,979		31		(6	)		10,004
Total available for sale securities	$	1,075,235	$	28,737	$	(1,858	)	$	1,102,114

	Less than 12 months					More than 12 months					Total					Less than 12 months					More than 12 months					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized			Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Losses			Value		Losses			Value		Losses			Value		Losses			Value		Losses			Value		Losses
September 30, 2015
March 31, 2016
Obligations of states and political subdivisions	$	33,742	$	(252	)	$	6,610	$	(260	)	$	40,352	$	(512	)	$	8,407	$	(62	)	$	2,337	$	(87	)	$	10,744	$	(149	)
Mortgage-backed securities		118,679		(459	)		28,026		(176	)		146,705		(635	)		167,203		(1,073	)		27,198		(333	)		194,401		(1,406	)
Corporate bonds and other securities		24,782		(832	)		17,886		(693	)		42,668		(1,525	)		21,536		(606	)		28,194		(1,383	)		49,730		(1,989	)
Total available for sale	$	177,203	$	(1,543	)	$	52,522	$	(1,129	)	$	229,725	$	(2,672	)	$	197,146	$	(1,741	)	$	57,729	$	(1,803	)	$	254,875	$	(3,544	)

December 31, 2014
U.S. government and agency securities	$	7,055	$	(25	)	$	-	$	-		$	7,055	$	(25	)
December 31, 2015
Obligations of states and political subdivisions		13,602		(93	)		42,514		(628	)		56,116		(721	)	$	8,114	$	(70	)	$	4,950	$	(70	)	$	13,064	$	(140	)
Mortgage-backed securities		60,151		(362	)		49,581		(436	)		109,732		(798	)		287,113		(2,442	)		21,660		(337	)		308,773		(2,779	)
Corporate bonds and other securities		43,923		(244	)		4,309		(70	)		48,232		(314	)		36,157		(751	)		19,558		(975	)		55,715		(1,726	)
Total available for sale	$	124,731	$	(724	)	$	96,404	$	(1,134	)	$	221,135	$	(1,858	)	$	331,384	$	(3,263	)	$	46,168	$	(1,382	)	$	377,552	$	(4,645	)

	Carrying		Gross Unrealized					Estimated		Carrying		Gross Unrealized					Estimated
	Value⁽¹⁾		Gains		(Losses)			Fair Value		Value⁽¹⁾		Gains		(Losses)			Fair Value
September 30, 2015
March 31, 2016
Obligations of states and political subdivisions	$	199,363	$	2,882	$	(1,926	)	$	200,319	$	204,444	$	7,436	$	(1,531	)	$	210,349

December 31, 2015
Obligations of states and political subdivisions										$	205,374	$	5,748	$	(1,685	)	$	209,437

	Three months ended			Nine months ended
	September 30, 2014			September 30, 2014
Realized gains (losses):
Gross realized gains	$	1,034		$	1,498
Gross realized losses		(39	)		(49	)
Net realized gains	$	995		$	1,449

Proceeds from sales of securities	$	14,370		$	273,447

	Three months ended
	March 31, 2016			March 31, 2015
Realized gains (losses):
Gross realized gains	$	239		$	193
Gross realized losses		(96	)		-
Net realized gains	$	143		$	193

Proceeds from sales of securities	$	14,532		$	12,499

	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days and still Accruing		PCI		Nonaccrual		Current		Total Loans
Commercial:
Commercial Construction	$	296	$	-	$	126	$	2,459	$	1,786	$	424,978	$	429,645
Commercial Real Estate - Owner Occupied		1,148		165		680		28,695		3,989		828,874		863,551
Commercial Real Estate - Non-Owner Occupied		752		974		1,821		15,172		200		1,567,415		1,586,334
Raw Land and Lots		93		-		-		5,141		493		181,455		187,182
Single Family Investment Real Estate		536		35		228		15,167		1,157		419,217		436,340
Commercial and Industrial		721		696		494		2,249		903		439,136		444,199
Other Commercial		643		-		-		793		61		87,847		89,344
Consumer:
Mortgage		2,485		5,079		875		5,561		2,276		450,142		466,418
Consumer Construction		250		-		-		251		819		54,398		55,718
Indirect Auto		1,319		270		116		-		89		216,134		217,928
Indirect Marine		150		-		94		-		-		42,519		42,763
HELOCs		3,192		1,085		282		1,812		611		485,220		492,202
Other Consumer		1,521		966		448		1,306		582		227,174		231,997
Total	$	13,106	$	9,270	$	5,164	$	78,606	$	12,966	$	5,424,509	$	5,543,621

	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days and still Accruing		PCI		Nonaccrual		Current		Total Loans
Commercial:
Commercial Construction	$	815	$	-	$	-	$	3,782	$	968	$	335,715	$	341,280
Commercial Real Estate - Owner Occupied		621		1,542		1,683		31,167		1,060		839,370		875,443
Commercial Real Estate - Non-Owner Occupied		3,984		237		91		28,869		5,902		1,470,076		1,509,159
Raw Land and Lots		145		44		194		7,427		2,359		201,056		211,225
Single Family Investment Real Estate		2,825		338		734		16,879		2,070		389,648		412,494
Commercial and Industrial		1,250		529		549		3,855		3,286		384,307		393,776
Other Commercial		42		2		-		2,256		74		78,732		81,106
Consumer:
Mortgage		12,851		4,300		4,095		7,394		2,485		447,026		478,151
Consumer Construction		120		-		844		516		-		72,688		74,168
Indirect Auto		1,593		263		317		-		-		197,238		199,411
Indirect Marine		150		-		-		-		201		42,839		43,190
HELOCs		3,082		955		820		2,000		258		493,464		500,579
Credit Card		232		108		219		-		-		23,666		24,225
Other Consumer		1,587		412		501		1,643		592		197,054		201,789
Total	$	29,297	$	8,730	$	10,047	$	105,788	$	19,255	$	5,172,879	$	5,345,996

	30-89 Days Past Due		Greater than 90 Days		Current		Total
Commercial:
Commercial Construction	$	-	$	459	$	2,000	$	2,459
Commercial Real Estate - Owner Occupied		1,024		1,752		25,919		28,695
Commercial Real Estate - Non-Owner Occupied		1,202		392		13,578		15,172
Raw Land and Lots		196		70		4,875		5,141
Single Family Investment Real Estate		1,225		646		13,296		15,167
Commercial and Industrial		412		69		1,768		2,249
Other Commercial		31		63		699		793
Consumer:
Mortgage		597		1,612		3,352		5,561
Consumer Construction		-		251		-		251
HELOCs		244		365		1,203		1,812
Other Consumer		47		60		1,199		1,306
Total	$	4,978	$	5,739	$	67,889	$	78,606

	30-89 Days Past Due		Greater than 90 Days		Current		Total
Construction and Land Development	$	354	$	239	$	4,544	$	5,137
Commercial Real Estate - Owner Occupied		1,401		1,425		24,434		27,260
Commercial Real Estate - Non-Owner Occupied		745		205		12,686		13,636
Multifamily Real Estate		-		-		2,132		2,132
Commercial & Industrial		196		39		1,336		1,571
Residential 1-4 Family		1,917		1,048		15,340		18,305
HELOC		163		546		826		1,535
Consumer and all other		-		-		529		529
Total	$	4,776	$	3,502	$	61,827	$	70,105

	Recorded Investment		Unpaid Principal Balance		Related Allowance		YTD Average Investment		Interest Income Recognized
Loans without a specific allowance
Commercial:
Commercial Construction	$	5,760	$	6,036	$	-	$	5,126	$	187
Commercial Real Estate - Owner Occupied		11,801		11,998		-		11,602		356
Commercial Real Estate - Non-Owner Occupied		6,854		7,166		-		7,025		212
Raw Land and Lots		24,762		24,896		-		25,595		1,290
Single Family Investment Real Estate		2,295		2,721		-		2,455		99
Commercial and Industrial		1,983		2,532		-		2,115		47
Other Commercial		876		876		-		895		41
Consumer:
Mortgage		333		333		-		333		8
Consumer Construction		819		821		-		822		29
HELOCs		196		331		-		310		10
Other Consumer		216		339		-		285		15
Total impaired loans without a specific allowance	$	55,895	$	58,049	$	-	$	56,563	$	2,294

Loans with a specific allowance
Commercial:
Commercial Construction	$	561	$	561	$	40	$	629	$	16
Commercial Real Estate - Owner Occupied		6,763		7,874		677		7,107		191
Commercial Real Estate - Non-Owner Occupied		6,863		6,864		178		6,870		304
Raw Land and Lots		1,224		1,221		60		978		34
Single Family Investment Real Estate		3,018		3,035		212		3,052		113
Commercial and Industrial		2,581		2,640		330		2,684		100
Other Commercial		423		451		32		475		16
Consumer:
Mortgage		3,273		3,522		362		3,495		64
Indirect Auto		89		95		1		121		5
HELOCs		1,008		1,038		5		1,032		24
Other Consumer		525		720		115		635		17
Total impaired loans with a specific allowance	$	26,328	$	28,021	$	2,012	$	27,078	$	884
Total impaired loans	$	82,223	$	86,070	$	2,012	$	83,641	$	3,178

	Three Months Ended March 31, 2016				Three Months Ended March 31, 2015
	YTD Average Investment		Interest Income Recognized		YTD Average Investment		Interest Income Recognized
Construction and Land Development	$	30,569	$	484	$	49,087	$	556
Commercial Real Estate - Owner Occupied		16,510		157		23,757		265
Commercial Real Estate - Non-Owner Occupied		4,214		41		18,664		147
Multifamily Real Estate		3,817		60		4,596		69
Commercial & Industrial		3,663		37		6,054		50
Residential 1-4 Family		15,301		106		14,566		116
Auto		218		-		4		-
HELOC		2,933		21		1,411		7
Consumer and all other		982		6		1,177		11
Total impaired loans without a specific allowance	$	78,207	$	912	$	119,316	$	1,221

	September 30, 2015						December 31, 2014
	No. of Loans		Recorded Investment		Outstanding Commitment		No. of Loans		Recorded Investment		Outstanding Commitment
Performing
Commercial:
Commercial Construction		1	$	296	$	-		1	$	707	$	-
Commercial Real Estate - Owner Occupied		5		1,608		-		3		682		-
Commercial Real Estate - Non-Owner Occupied		2		2,390		-		3		3,362		-
Raw Land and Lots		5		3,081		-		9		14,777		-
Single Family Investment Real Estate		2		444		-		6		1,046		-
Commercial and Industrial		3		103		-		9		722		-
Other Commercial		1		128		-		1		191		-
Consumer:
Mortgage		7		1,331		-		7		1,244		-
Other Consumer		2		87		-		3		98		-
Total performing		28	$	9,468	$	-		42	$	22,829	$	-

Nonperforming
Commercial:
Commercial Construction		1	$	126	$	-		1	$	253	$	-
Commercial Real Estate - Owner Occupied		1		140		-		2		153		-
Commercial Real Estate - Non-Owner Occupied		1		200		-		1		539		-
Raw Land and Lots		1		33		-		2		1,053		-
Single Family Investment Real Estate		2		234		-		1		433		-
Commercial and Industrial		3		485		-		5		616		-
Other Commercial		1		61		-		1		74		-
Consumer:
Mortgage		3		771		-		2		770		-
Other Consumer		1		37		-		1		57		-
Total nonperforming		14	$	2,087	$	-		16	$	3,948	$	-

Total performing and nonperforming		42	$	11,555	$	-		58	$	26,777	$	-

	Commercial			Consumer			Total
Allowance for loan losses:
Balance, beginning of the year	$	22,352		$	10,032		$	32,384
Recoveries credited to allowance		1,921			1,073			2,994
Loans charged off		(6,013	)		(3,357	)		(9,370	)
Provision charged to operations		5,364			1,897			7,261
Balance, end of period	$	23,624		$	9,645		$	33,269

Ending Balance, ALL:
Loans individually evaluated for impairment	$	1,529		$	483		$	2,012
Loans collectively evaluated for impairment		22,095			9,162			31,257
Loans acquired with deteriorated credit quality		-			-			-
Total	$	23,624		$	9,645		$	33,269

Ending Balance, Loans:
Loans individually evaluated for impairment	$	75,308		$	6,310		$	81,618
Loans collectively evaluated for impairment		3,891,611			1,491,786			5,383,397
Loans acquired with deteriorated credit quality		69,676			8,930			78,606
Total	$	4,036,595		$	1,507,026		$	5,543,621

	Allowance for loan losses
	Balance, beginning of the year		Recoveries credited to allowance		Loans charged off			Provision charged to operations			Balance, end of period

Construction and Land Development	$	6,040	$	19	$	(93	)	$	5,055		$	11,021
Commercial Real Estate - Owner Occupied		4,614		46		(772	)		(477	)		3,411
Commercial Real Estate - Non-Owner Occupied		6,929		-		-			(2,445	)		4,484
Multifamily Real Estate		1,606		-		-			(204	)		1,402
Commercial & Industrial		3,163		238		(617	)		1,441			4,225
Residential 1-4 Family		5,414		243		(153	)		471			5,975
Auto		1,703		84		(365	)		(615	)		807
HELOC		2,934		83		(409	)		(1,325	)		1,283
Consumer and all other		1,644		115		(571	)		603			1,791
Total	$	34,047	$	828	$	(2,980	)	$	2,504		$	34,399

	Loans individually evaluated for impairment				Loans collectively evaluated for impairment				Loans acquired with deteriorated credit quality				Total
	Loans		ALL		Loans		ALL		Loans		ALL		Loans		ALL

Construction and Land Development	$	30,779	$	500	$	740,782	$	10,521	$	5,137	$	-	$	776,698	$	11,021
Commercial Real Estate - Owner Occupied		16,026		81		805,916		3,330		27,260		-		849,202		3,411
Commercial Real Estate - Non-Owner Occupied		4,203		1		1,278,412		4,483		13,636		-		1,296,251		4,484
Multifamily Real Estate		3,803		-		317,335		1,402		2,132		-		323,270		1,402
Commercial & Industrial		3,301		467		448,336		3,758		1,571		-		453,208		4,225
Residential 1-4 Family		14,558		414		945,615		5,561		18,305		-		978,478		5,975
Auto		162		1		241,575		806		-		-		241,737		807
HELOC		2,833		28		512,754		1,255		1,535		-		517,122		1,283
Consumer and all other		769		1		343,238		1,790		529		-		344,536		1,791
Total loans held for investment, net	$	76,434	$	1,493	$	5,633,963	$	32,906	$	70,105	$	-	$	5,780,502	$	34,399

	0-3		4		5		6		7		8		Total
Commercial Construction	$	37,671	$	355,150	$	22,661	$	8,857	$	2,847	$	-	$	427,186
Commercial Real Estate - Owner Occupied		179,846		622,852		13,967		6,526		9,433		2,232		834,856
Commercial Real Estate - Non-Owner Occupied		467,026		1,048,396		19,654		22,369		13,717		-		1,571,162
Raw Land and Lots		12,036		122,236		7,307		15,792		24,670		-		182,041
Single Family Investment Real Estate		63,146		339,683		8,430		5,210		4,704		-		421,173
Commercial and Industrial		186,807		235,543		10,732		4,669		4,199		-		441,950
Other Commercial		43,355		40,386		2,613		898		1,299		-		88,551
Total	$	989,887	$	2,764,246	$	85,364	$	64,321	$	60,869	$	2,232	$	3,966,919

	Pass		Special Mention		Substandard		Doubtful		Total
Construction and Land Development	$	698,360	$	43,994	$	29,207	$	-	$	771,561
Commercial Real Estate - Owner Occupied		791,197		22,297		6,685		1,763		821,942
Commercial Real Estate - Non-Owner Occupied		1,253,617		24,794		4,204		-		1,282,615
Multifamily Real Estate		315,361		1,975		3,802		-		321,138
Commercial & Industrial		434,139		14,668		2,740		90		451,637
Residential 1-4 Family		918,919		30,514		8,170		2,570		960,173
Auto		239,838		1,688		77		134		241,737
HELOC		509,833		3,283		1,535		936		515,587
Consumer and all other		339,759		3,573		223		452		344,007
Total	$	5,501,023	$	146,786	$	56,643	$	5,945	$	5,710,397

	1-3		4		5		6		7		8		Total
Commercial Construction	$	22,512	$	289,064	$	11,932	$	10,906	$	3,084	$	-	$	337,498
Commercial Real Estate - Owner Occupied		185,789		620,587		15,003		7,688		15,209		-		844,276
Commercial Real Estate - Non-Owner Occupied		356,263		1,041,515		22,358		28,388		31,766		-		1,480,290
Raw Land and Lots		11,162		128,281		16,803		4,783		42,769		-		203,798
Single Family Investment Real Estate		59,638		311,900		9,750		6,680		7,647		-		395,615
Commercial and Industrial		138,973		230,084		9,392		4,383		7,089		-		389,921
Other Commercial		31,571		40,913		3,818		844		1,704		-		78,850
Total	$	805,908	$	2,662,344	$	89,056	$	63,672	$	109,268	$	-	$	3,730,248

	4		5		6		7		8			Total
Commercial Construction	$	-	$	-	$	3,130	$	194	$	458		$	3,782
Commercial Real Estate - Owner Occupied		1,525		3,546		10,880		15,216		-			31,167
Commercial Real Estate - Non-Owner Occupied		2,837		934		18,736		6,362		-			28,869
Raw Land and Lots		1,564		189		3,148		2,526		-	��		7,427
Single Family Investment Real Estate		2,807		1,253		6,462		6,357		-			16,879
Commercial and Industrial		437		-		913		2,477		28			3,855
Other Commercial		-		-		510		1,746		-			2,256
Total	$	9,170	$	5,922	$	43,779	$	34,878	$	486		$	94,235

	For the Nine Months ended
	September 30,
	2015			2014
Balance at beginning of period	$	28,956		$	2,980
Additions		-			34,653
Accretion		(4,707	)		(5,681	)
Reclass of nonaccretable difference due to improvement in expected cash flows		3,168			-
Other, net⁽¹⁾		(5,624	)		(2,150	)
Balance at end of period	$	21,793		$	29,802

	For the Three Months Ended
	March 31,
	2016			2015
Balance at beginning of period	$	22,139		$	28,956
Additions		-			-
Accretion		(1,390	)		(1,501	)
Reclass of nonaccretable difference due to improvement in expected cash flows		1,266			2,695
Other, net⁽¹⁾		(1,510	)		(5,619	)
Balance at end of period	$	20,505		$	24,531

	Gross Carrying Value		Accumulated Amortization		Net Carrying Value		Gross Carrying Value		Accumulated Amortization		Net Carrying Value
September 30, 2015
March 31, 2016
Amortizable core deposit intangibles	$	76,185	$	50,865	$	25,320	$	76,185	$	54,755	$	21,430

December 31, 2014
December 31, 2015
Amortizable core deposit intangibles	$	76,185	$	44,430	$	31,755	$	76,185	$	52,875	$	23,310

September 30, 2014
March 31, 2015
Amortizable core deposit intangibles	$	76,185	$	42,096	$	34,089	$	76,185	$	46,652	$	29,533

For the remaining three months of 2015	$	2,011
For the year ending December 31, 2016		6,932
For the remaining nine months of 2016			$	5,052
For the year ending December 31, 2017		5,590		5,590
For the year ending December 31, 2018		4,144		4,144
For the year ending December 31, 2019		3,093		3,093
For the year ending December 31, 2020		2,027		2,028
For the year ending December 31, 2021				1,035
Thereafter		1,523		488
Total estimated amortization expense	$	25,320	$	21,430

	Principal		Investment⁽¹⁾		Spread to 3-Month LIBOR			Rate			Maturity
Trust Preferred Capital Note - Statutory Trust I	$	22,500,000	$	696,000		2.75	%		3.08	%	6/17/2034
Trust Preferred Capital Note - Statutory Trust II		36,000,000		1,114,000		1.40	%		1.73	%	6/15/2036
VFG Limited Liability Trust I Indenture		20,000,000		619,000		2.73	%		3.06	%	3/18/2034
FNB Statutory Trust II Indenture		12,000,000		372,000		3.10	%		3.43	%	6/26/2033
Total	$	90,500,000	$	2,801,000