Union Bankshares Corporation Reports Earnings Improvement Over the Most Recent Quarter

BOWLING GREEN, Va., July 22 /PRNewswire-FirstCall/ -- Union Bankshares Corporation (the "Company") (NASDAQ:UBSH) net income for the quarter ended June 30, 2008, as compared to the most recent quarter ending March 31, 2008, improved $681 thousand or 18.6%. Earnings per share, on a diluted basis, increased $.05 to $.32 from $.27, representing an increase of 18.5%. Return on average assets and return on average equity were .74% and 8.10%, respectively. These improvements were largely attributable to lower funding costs, increases in noninterest income and nominal growth in noninterest expenses.

"As we sift through the constant barrage of negative news in the media, I am encouraged by our second quarter results which showed improvement over the first quarter of 2008," said G. William Beale, President and Chief Executive Officer of Union Bankshares Corporation. "During the quarter our deposit growth exceeded loan growth, reducing our reliance on higher cost funding sources. This result was achieved through execution of tighter loan underwriting guidelines and an organizationally focused effort targeted at increasing low costs deposits.

Overall, our loan delinquencies are within historical banking norms and have not increased above the levels reported at the end of the first quarter. While we did see an increase in non-performing loans during the second quarter, our non-performers remain at a manageable level and well below the peer median. Overall our credit quality is good.

Our performance, which showed an improvement over the first quarter of 2008, continues to be impacted by factors affecting our local and national economy. It begins with the housing market, which is slow, however based on recent reports from Union Mortgage, we see signs of increased activity. Nonetheless, the slow housing market has a direct correlation to the performance of our builder and developer clients, and it also reaches into affiliated industries, such as the building trades, advertising, and building suppliers.

We have seen an increase in consumer credit losses as a result of the slowing economy and rising food and fuel costs. We are continuing to monitor closely all borrowers associated with the housing market, as well as our total consumer loan portfolio. As a result of continued uncertainty in the economy, we continue to build our reserves for loan losses that reflect our assessment of risk inherent in our loan portfolio."

For the three months ended June 30, 2008 net income was $4.3 million, down 23.2% from $5.6 million for the same quarter in 2007. Earnings per share, on a diluted basis, decreased $.10, or 23.8%, to $.32 from $.42 for the same quarter a year ago. Return on average equity for the quarter ended June 30, 2008 was 8.10%, while return on average assets for the same period was 0.74%, compared to 11.07% and 1.06%, respectively, for the prior year's same quarter.

This year to year decline was largely the result of increased provisions for loan losses, the costs associated with the purchase of six bank branches, effective September 7, 2007, the opening of one de novo branch and nonrecurring expenses related to merging affiliate banks. These increases were partially offset by increased profitability in the mortgage segment and growth in service charge income on deposit accounts.

For the six months ended June 30, 2008 net income was $8.0 million down $2.8 million or 26.0% from $10.8 million compared to the same period a year ago. This decline represents a decrease in earnings per share, on a diluted basis, of $.21, or 26.3%, from $.80 to $.59. Return on average equity for the six months ended June 30, 2008 was 7.47%, while return on average assets was .69%, compared to 10.73% and 1.03%, respectively, for the same period in 2007. The decrease was partially related to increased provisions for loan losses, noninterest expenses associated with the purchase of six bank branches and the opening of one de novo branch, partially offset by increased profitability in the mortgage segment and growth in service charge income on deposit accounts.

As a supplement to U.S. generally accepted accounting principles ("GAAP"), the Company also uses certain alternate financial measures to review its operating performance. Diluted earnings per share on a cash basis for the quarter ended June 30, 2008 were $.35 as compared to $.44 for the same quarter a year ago and $.29 for the quarter ended December 31, 2007. Additionally, cash basis return on average tangible equity for the quarter ended June 30, 2008 was 12.64% as compared to 16.91% in the prior year's second quarter and 10.93% for the quarter ended December 31, 2007.

NET INTEREST INCOME

The targeted Federal funds rate was lowered to 2.00% on April 30, 2008 by the Federal Open Market Committee ("FOMC") of the Federal Reserve Board of Governors and remained unchanged at the following meeting on June 25th. This marked the first time since September 2007 that the targeted Federal funds rate was not lowered at an FOMC meeting. The previous declines in the targeted Federal funds rate resulted in the immediate repricing of the Company's loans tied to prime, which represent approximately one-third of the loan portfolio, and a resulting reduction in yields on earning assets.

On a linked quarter basis, net interest income increased $703 thousand, or 3.7%, to $19.8 million. The tax-equivalent net interest margin improved 7 basis points from 3.85% to 3.92% over the most recent quarter. This improvement was partially attributable to a faster decline in the cost of interest-bearing liabilities as compared to the decline in yields on interest-earning assets as well as increases in demand deposit accounts. Interest-earning asset yields declined 41 basis points to 6.48% and the cost of interest-bearing liabilities declined 54 basis points to 2.96%. Additionally, total average earning-asset volumes of $33.6 million was funded by interest-bearing deposits and demand deposits as opposed to wholesale borrowings.

For the three months ended June 30, 2008, net interest income, on a tax-equivalent basis, increased $691 thousand, or 3.5%, to $20.6 million compared to the same period last year. This increase in net interest income, was achieved despite a decline in the net interest margin of 28 basis points, from 4.20% to 3.92%. This decline was partially attributable to faster declines in yields on earning-assets as compared to costs on interest-bearing liabilities. Yields on earning-assets declined 106 basis points and the cost of interest-bearing liabilities declined 97 basis points. Of the increase in funding sources, average money market volumes increased $53.5 million, or 34.7%, as did interest-bearing checking account volume, up $19.9 million, or 9.6%, partially offset by lower demand deposit volumes.

For the six months ended June 30, 2008, net interest income, on a tax-equivalent basis, increased by $1.7 million, or 4.5%, to $40.6 million compared to the same period last year. This increase in net interest income was achieved despite a decline in the net interest margin of 25 basis points, from 4.14% to 3.89%. This decline was partially attributable to lower yields on earning-assets as compared to costs of interest-bearing liabilities. Yields on earning-assets declined 81 basis points and the cost of interest-bearing liabilities declined 70 basis points.

For comparative purposes the following occurred during the first and second quarters of 2007. For the six months ended June 30, 2007, approximately $8.0 million ($6.2 million during the first quarter of 2007) of investment securities were called by the issuers resulting in gains of $508 thousand ($301 thousand during the first quarter of 2007). The proceeds from these calls plus additional funds were used to pay off approximately $15.0 million of higher cost (6.3%) Federal Home Loan Bank advances. Penalties of approximately $513 thousand ($316 thousand during the first quarter of 2007) associated with the early payoff of these advances have been reflected as an interest expense adjustment in the net interest margin for the six months ended June 30, 2007. Absent this interest expense adjustment, net interest margin would have been 4.20%, instead of 4.14%, for the six months ending June 30, 2007.

LOAN LOSS PROVISION/ASSET QUALITY

Nationally, industry concerns over asset quality have increased due in large part to issues related to subprime mortgage lending, declining real estate activity and general economic concerns. While the Company has experienced reduced residential real estate activity, the markets in which the Company operates remain relatively stable and there has been no significant deterioration in the quality of the Company's loan portfolio. The Company's loan portfolio does not include exposure to subprime mortgage loans. Residential loan demand has moderated somewhat, but the Company is still experiencing continued loan demand, particularly in commercial real estate. New loan opportunities in the commercial real estate sector are being approached deliberately. Management will continue to monitor delinquencies, risk rating changes, charge-offs, market trends and other indicators of risk in the Company's portfolio, particularly those tied to residential real estate, and adjust the allowance for loan losses accordingly.

Despite increasing industry concerns over credit issues, the Company's asset quality remains strong. Net charge-offs were $478 thousand, or 0.11% of loans, for the quarter ended June 30, 2008, compared to net charge-offs of $88 thousand in the same quarter last year and $484 thousand for the quarter ended March 31, 2008. As of June 30, 2008, total past due loans were $11.7 million, or 0.64%, of total gross loans representing an increase of 0.20% from June 30, 2007. At June 30, 2008, nonperforming assets totaled $12.9 million, including a single credit relationship totaling $7.1 million. Excluding the aforementioned single credit relationship, total nonperforming assets increased $4.5 million since June 30, 2007. Of this increase, $2.1 million occurred during the second quarter ended June 30, 2008, due primarily to one commercial relationship operating in a construction-related industry.

For the quarter ended June 30, 2008, the provision for loan losses increased $1.5 million from June 30, 2007. On a linked quarter basis, the provision for loan losses increased $76 thousand as compared to the first quarter of 2008. The provision for loan losses increased $3.8 million for the six months ending June 30, 2008. During the first quarter of 2007, the Company recaptured $750 thousand in provision for loan losses due to the reduction in the estimated loss exposure on a non-performing loan to a single credit relationship. Absent this recapture, the increase in the provision for loan losses was $3.1 million. The increases in the provision for loan losses and the current levels in the allowance for loan losses reflect continued loan growth, net-charge offs, delinquency trends and uncertainty with regard to general economic and other credit risk factors that the Company considers in assessing the adequacy of the allowance for loan losses.

The Company entered into a workout agreement with the borrower in the aforementioned single credit relationship during March 2004. Under the terms of the agreement, the Company extended further credit secured by additional property with significant equity. During the first quarter of 2007, such equity was extracted from this relationship, reducing nonperforming assets totals on this relationship from $10.6 million as of December 31, 2006 to $7.9 million, and resulting in the recapture of $750 thousand in specific reserves. In the second quarter of 2007, approximately $400 thousand of this relationship returned to accrual status, further reducing the nonperforming balance to $7.5 million as of the end of June 30, 2007. This balance has been further reduced, due to payments from the borrower, to $7.1 million at June 30, 2008. Despite the lengthy nature of this workout, the Company continues to work with the borrower toward a resolution of the affiliated loans and anticipates this workout will result in further reductions of the Company's overall exposure to the borrower. The loans to this relationship continue to be secured by real estate (two assisted living facilities).

NONINTEREST INCOME

Noninterest income for the three months ended June 30, 2008 increased $1.4 million, or 23.2%, from $6.2 million to $7.6 million compared to last year's same quarter. This increase reflected higher mortgage segment income from the sale of loans of approximately $1.1 million and increased revenue from service charges on deposit accounts (primarily overdraft and returned check charges of $412 thousand), from the same quarter a year ago.

On a linked quarter basis, noninterest income increased $308 thousand, or 4.2%, to $7.6 million from $7.3 million for the quarter ended March 31, 2008. These results included $209 thousand related to higher service charges on deposit accounts and fees (brokerage fees, debit card and ATM fees). During the first quarter of 2008, appropriation of Company owned real estate by the Commonwealth of Virginia for a public domain easement resulted in a gain of $127 thousand. Also, the initial public offering of Visa, Inc. common stock during March 2008 resulted in the mandatory redemption of certain classes of common stock to financial institution members of Visa U.S.A. As a result, the Company recorded a gain of $198 thousand related to this redemption of Visa, Inc. common stock. Absent these first quarter transactions and gains on mortgage loan sales, noninterest income increased approximately $444 thousand, or 10.8%, from the quarter ended March 31, 2008.

For the six months ended June 30, 2008, noninterest income increased $2.6 million, or 20.8%, to $15.0 million from $12.4 million for the same period in 2007. This increase included higher gains from the sale of mortgage loans of approximately $1.7 million and increased revenue of $806 thousand from service charges on deposit accounts, from the same period a year ago. During the first six months of 2008, the Company recorded a gain of $127 thousand for a public domain easement and a gain of $198 thousand related to the redemption of Visa common stock as described above. During the same period in 2007, the Company recorded a gain of $508 thousand on the sale of trust preferred securities. Absent these gain transactions, noninterest income increased $2.8 million, or 23.2%, compared to the same period in 2007.

Additionally, the noninterest income associated with the purchase of six bank branches, effective September 7, 2007, and the opening of one de novo bank branch did not exist at the time of June 30, 2007 for comparative purposes. During the first six months of 2008, these branches contributed $196 thousand toward the increase in consolidated service charges on deposit accounts. Absent the noninterest income associated with the purchase of six bank branches, the opening of one de novo bank branch, mortgage segment income, current and prior period gains, noninterest income increased approximately $841 thousand, or 11.3%.

NONINTEREST EXPENSE

Noninterest expense for the three months ended June 30, 2008 increased $2.4 million, or 13.4%, to $20.0 million over last year's same period. This increase primarily related to the acquisition of six bank branches, the opening of one de novo bank branch and mortgage segment operations. The acquisition of six bank branches occurred during the third quarter of 2007 and is not in the comparative results as of June 30, 2007. Salaries and benefits increased $1.7 million for the three months ended June 30, 2008 as compared to the same period a year ago. Of this increase, $707 thousand was at the mortgage segment and related to commissions on increased loan production and $358 thousand related to employees at the acquired six bank branches and the de novo branch. The remaining increase of $596 thousand related to normal compensation increases and benefits on organic growth partially offset by lower profit sharing expenses. Occupancy expenses increased $297 thousand of which $156 thousand related to the six branches and the de novo branch. Furniture and equipment expenses increased $116 thousand of which $74 thousand related to the six branches and the de novo branch. Other operating expenses increased $294 thousand of which $90 thousand related to the six branches and de novo branch. Absent the six branches, the de novo branch and mortgage segment operations the increase in noninterest expense increased approximately $926 thousand, or 5%, over the same quarter a year ago.

On a linked quarter basis, noninterest expense increased by $101 thousand, or .5%, to $20.0 million for the three months ended June 30, 2008. Increases in salaries and benefits of $219 thousand, or 2.0%, were primarily attributable to increased mortgage segment commissions as well as normal compensation increases. Increased costs in media and print production expenses of $113 thousand related to the Company's advertising campaigns (i.e., 3.00% money market campaign) during the second quarter of 2008. Also during the second quarter, the Company recorded a $185 thousand increase in its Federal Deposit Insurance Corporation ("FDIC") insurance assessment due to credits related to prior periods and an overall increase in insurance assessments. Absent merger related expenses and mortgage segment operations, noninterest expenses increased $169 thousand, or 1%, over the prior quarter.

For the six months ended June 30, 2008, noninterest expense increased by $4.3 million, or 12.2 %, to $40.0 million compared to the six months ended June 30, 2007. Increases in salaries and benefits of $2.8 million, or 14.2%, were primarily attributable to increased mortgage segment commissions of $1.1 million as well as additional personnel in acquired and de novo bank branches and normal compensation increases. Occupancy expenses increased $614 thousand, or 21.8%, and were principally attributable to increased facilities costs associated with the Company's new operations center and the acquired and de novo bank branches. Some of these increased costs included depreciation, rental expenses and to a lesser extent, utility costs. Operating expenses increased $746 thousand, or 6.8%, and principally related to ongoing infrastructure enhancements to support the Company's continued growth, advertising campaigns and higher FDIC insurance costs as described above. Infrastructure enhancements included such things as Voice-over Internet Protocol and the associated hardware and software to support this technology. Of this increase, approximately $239 thousand related to conversion costs incurred as part of merging affiliate banks. Prosperity Bank & Trust was merged into Union Bank and Trust Company during the first quarter of 2008. Bay Community Bank will be merged into Union Bank and Trust Company during the fourth quarter of 2008. Furniture and equipment expenses increased $200 thousand, or 8.7%, and were attributable to the related depreciation of the purchased branches, one de novo bank branch and the new operations center.

The noninterest expense associated with the purchase of six bank branches and the opening of one de novo bank branch did not exist at the time of June 30, 2007 reporting for comparative purposes. During the first six months of 2008, these branches contributed $736 thousand toward the increase in salaries and benefits, $312 thousand in occupancy expenses, $207 thousand in other operating expenses and $153 thousand in furniture and equipment. Without the contribution of noninterest expenses associated with the purchase of six bank branches, the opening of one de novo bank branch, merger related costs and mortgage segment operations, noninterest expense increased $1.3 million, or 3.9%.

BALANCE SHEET

At June 30, 2008, total assets were approximately $2.4 billion compared to $2.2 billion and $2.3 billion at June 30, 2007 and December 31, 2007, respectively. Net loans increased $184.1 million, or 11.4%, from June 30, 2007, and increased $73.6 million, or 4.3% from December 31, 2007. Total cash and cash equivalents increased $11.4 million to $66.8 million at June 30, 2008 from $55.4 million a year ago, and increased $8.6 million from $58.3 million at December 31, 2007. Deposits increased $138.7 million, or 8.4%, and increased $127.3 million, or 7.7%, from June 30, 2007 and December 31, 2007, respectively, primarily due to increases in money market accounts and the issuance of approximately $40 million in brokered certificates of deposit in the first quarter of 2008. Total borrowings (including repos) decreased by $36.2 million to $376.5 million from December 31, 2007, but increased $80.8 million from June 30, 2007. The Company's equity to assets ratio was 8.91% at June 30, 2008. The Company's current strategic plan includes a targeted equity to asset ratio between 8% and 9%.

While not immune from the effects of weakening economic conditions, the Company remains focused on maintaining adequate levels of liquidity and capital during this challenging environment, and believes its risk management in underwriting and lending is sound in order to successfully weather this stressed period of economic uncertainty.

SEGMENT INFORMATION Mortgage Segment

For the three months ended June 30, 2008, the mortgage segment reported net income of $88 thousand, a $251 thousand increase from $163 thousand net loss for the same quarter in 2007. Originations increased 32.8% from the same period last year, resulting in an increase in loan revenue of $1.1 million due to strong purchase loan growth within core market areas. Total noninterest expenses increased $765 thousand. Of this increase, $707 thousand related to salaries and benefits, a function of increased commission expense as a result of higher loan originations. Other operating expenses increased $14 thousand principally as a result of the addition of new branch offices since the same period last year.

On a linked quarter basis, mortgage segment net income improved by $118 thousand from a net loss of $30 thousand in the first quarter of 2008 to net income of $88 thousand. Revenue from the sale of loans increased $190 thousand, or 6.3%, while originations rose 16.4%. Salaries and benefits increased $187 thousand correlating to the increase in originations. Operating expenses and furniture and equipment expenses both decreased $50 thousand and $14 thousand, respectively, from the prior quarter. The decline in operating expenses related primarily to cost savings measures implemented during the prior quarter. Occupancy expenses increased $12 thousand due to higher maintenance costs and credits received in the previous quarter.

For the six months ended June 30, 2008, mortgage segment net income increased by $360 thousand from a net loss of $302 thousand to net income of $58 thousand. Revenue from the sale of loans increased $1.7 million, or 38%, while originations rose 22.5% as loan profit margins improved due to consumer demand for more profitable loan products. Salaries and benefits increased $1.1 million and principally due to expenses related to increased loan originations. Operating and occupancy costs increased $75 thousand and $73 thousand, respectively, while furniture and equipment costs increased $28 thousand. These costs were largely driven by origination growth and additions to the branch office network.

ABOUT UNION BANKSHARES CORPORATION

Union Bankshares Corporation is one of the largest community banking organizations based in Virginia, providing full service banking to the Northern, Central, Rappahannock, Tidewater and Northern Neck regions of Virginia through its bank subsidiaries, Union Bank and Trust Company (38 locations in the counties of Albemarle, Caroline, Chesterfield, Fairfax, Fluvanna, Hanover, Henrico, King George, King William, Nelson, Spotsylvania, Stafford, Westmoreland and the cities of Fredericksburg and Charlottesville); Northern Neck State Bank (9 locations in the counties of Richmond, Westmoreland, Essex, Northumberland and Lancaster); Rappahannock National Bank (7 locations in Washington, Front Royal, Middleburg, Warrenton, and Winchester) and Bay Community Bank (4 locations in Williamsburg, Newport News and Grafton). Union Bank and Trust Company also operates a loan production office in Manassas. Union Investment Services, Inc. provides full brokerage services; Union Mortgage Group, Inc. provides a full line of mortgage products; and Union Insurance Group, LLC offers various lines of insurance products. Bay Community Bank also owns a non-controlling interest in Johnson Mortgage Company, LLC.

Additional information is available on the Company's website at http://www.ubsh.com/. The shares of the Company are traded on the NASDAQ Global Select Market under the symbol "UBSH".

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" 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 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 conditions, the interest rate environment, legislative and regulatory requirements, competitive pressures, new products and delivery systems, inflation, changes in the stock and bond markets, technology, and consumer spending and savings habits. The Company does not update any forward-looking statements that may be made from time to time by or on behalf of the Company.

UNION BANKSHARES CORPORATION AND SUBSIDIARIES KEY FINANCIAL RESULTS (in thousands, except share data)

Three Months Ended Six Months Ended 06/30/08 06/30/07 03/31/08 06/30/08 06/30/07

Results of Operations

Interest and dividend income $33,308 $35,129 $34,870 $68,178 $68,756 Interest expense 13,480 15,908 15,745 29,225 31,375 Net interest income 19,828 19,221 19,125 38,953 37,381 Provision for (recapture of) loan losses 1,676 190 1,600 3,276 (545) Net interest income after provision for loan losses 18,152 19,031 17,525 35,677 37,926 Noninterest income 7,656 6,212 7,348 15,004 12,421 Noninterest expenses 20,034 17,666 19,933 39,967 35,625 Income before income taxes 5,774 7,577 4,940 10,714 14,722 Income tax expense 1,441 1,936 1,288 2,729 3,933 Net income $4,333 $5,641 $3,652 $7,985 $10,789

Interest earned on loans (FTE) $29,857 $31,760 $31,389 $61,246 $61,721 Interest earned on securities (FTE) 4,248 3,934 4,220 8,467 8,007 Interest earned on earning assets (FTE) 34,127 35,864 35,671 69,797 70,211 Net interest income (FTE) 20,647 19,956 19,925 40,572 38,835 Interest expense on certificates of deposit 9,025 10,621 10,267 19,292 21,020 Interest expense on interest-bearing deposits 10,676 12,040 11,735 22,411 23,900 Core deposit intangible amortization 487 457 486 973 915

Net income - community bank segment $4,245 $5,804 $3,682 $7,927 $11,091 Net income - mortgage segment 88 (163) (30) 58 (302)

Key Performance Ratios

Return on average assets (ROA) 0.74% 1.06% 0.64% 0.69% 1.03% Return on average equity (ROE) 8.10% 11.07% 6.85% 7.47% 10.73% Efficiency ratio 72.89% 69.46% 75.30% 74.07% 71.53% Efficiency ratio - community bank segment 69.77% 65.47% 71.96% 70.85% 67.62% Net interest margin (FTE) 3.92% 4.20% 3.85% 3.89% 4.14% Yields on earning assets (FTE) 6.48% 7.54% 6.89% 6.68% 7.49% Cost of interest- bearing liabilities (FTE) 2.96% 3.93% 3.50% 3.23% 3.93% Noninterest expense less noninterest income / average assets 2.12% 2.16% 2.19% 2.16% 2.22%

Per Share Data

Earnings per share, basic $0.32 $0.42 $0.27 $0.59 $0.81 Earnings per share, diluted 0.32 0.42 0.27 0.59 0.80 Cash basis earnings per share, diluted 0.35 0.44 0.29 0.64 0.85 Cash dividends paid 0.185 0.180 0.185 0.370 0.355 Market value per share 14.89 23.20 19.37 14.89 23.20 Book value per share 15.81 15.28 15.94 15.81 15.28 Tangible book value per share 10.84 10.54 10.92 10.84 10.54 Price to earnings ratio, diluted 11.57 13.74 17.84 12.55 14.38 Price to book value ratio 0.94 1.52 1.22 0.94 1.52 Weighted average shares outstanding, basic 13,469,589 13,332,263 13,446,973 13,457,911 13,319,455 Weighted average shares outstanding, diluted 13,506,929 13,412,933 13,486,060 13,496,874 13,411,830 Shares outstanding at end of period 13,503,853 13,369,409 13,438,334 13,503,853 13,369,409

Financial Condition

Assets $2,395,930 $2,166,914 $2,362,083 $2,395,930 $2,166,914 Loans, net of unearned income 1,823,706 1,636,345 1,793,816 1,823,706 1,636,345 Earning Assets 2,147,877 1,935,522 2,123,358 2,147,877 1,935,522 Goodwill 56,474 51,881 56,474 56,474 51,881 Core deposit intangibles, net 10,577 11,426 11,064 10,577 11,426 Deposits 1,786,847 1,648,136 1,732,826 1,786,847 1,648,136 Stockholders' equity 213,475 203,905 214,461 213,475 203,905 Tangible equity 146,424 140,598 146,923 146,424 140,598

Three Months Ended Six Months Ended 06/30/08 06/30/07 03/31/08 06/30/08 06/30/07 Averages

Assets $2,345,698 $2,131,153 $2,311,704 $2,328,649 $2,108,832 Loans, net of unearned income 1,794,443 1,612,164 1,768,829 1,781,636 1,589,154 Loans held for sale 31,021 22,332 23,613 27,265 21,989 Securities 287,234 266,880 283,754 285,494 271,853 Earning assets 2,116,639 1,906,823 2,083,057 2,099,796 1,889,618 Deposits 1,738,866 1,652,903 1,685,033 1,711,952 1,649,878 Certificates of deposit 922,909 900,573 931,168 926,581 899,281 Interest-bearing deposits 1,461,568 1,367,489 1,418,192 1,439,882 1,369,448 Borrowings 372,073 256,380 390,484 381,279 239,017 Interest-bearing liabilities 1,833,641 1,623,869 1,808,676 1,821,161 1,608,465 Stockholders' equity 215,223 204,371 214,450 214,836 202,752 Tangible equity 147,937 140,844 146,684 147,311 139,886

Asset Quality

Allowance for Loan Losses Beginning balance of allowance for loan losses $20,452 $18,251 $19,336 $19,336 $19,148 Add: Recoveries 88 84 79 167 215 Less: Charge-offs 566 172 563 1,129 465 Add: Provision for loan losses 1,676 190 1,600 3,276 (545) Ending balance of allowance for loan losses $21,650 $18,353 $20,452 $21,650 $18,353 Allowance for loan losses / total outstanding loans 1.19% 1.12% 1.14% 1.19% 1.12%

Nonperforming Assets Nonaccrual loans $12,135 $8,232 $9,833 $12,135 $8,232 Other real estate and foreclosed properties 781 217 944 781 217 Total nonperforming assets 12,916 8,449 10,777 12,916 8,449 Loans > 90 days and still accruing 2,481 1,176 1,534 2,481 1,176 Total nonperforming assets and loans > 90 days and still accruing $15,397 $9,625 $12,311 $15,397 $9,625 Nonperforming assets / total outstanding loans 0.71% 0.52% 0.60% 0.71% 0.52% Nonperforming assets / allowance for loan losses 59.66% 46.04% 52.69% 59.66% 46.04%

Other Data

Mortgage loan originations $126,916 $95,578 $109,055 $235,971 $192,814 % of originations that are refinances 36.30% 42.47% 52.80% 44.00% 44.39% End of period full-time employees 705 650 699 705 650 Number of full-service branches 58 51 58 58 51 Number of community banks (subsidiaries) 4 5 4 4 5 Number of full automatic transaction machines (ATM's) 147 137 149 147 137

Alternative Performance Measures (1)

Net income $4,333 $5,641 $3,652 $7,985 $10,789 Plus: Core deposit intangible amortization, net of tax 317 297 316 632 595 Cash basis operating earnings $4,650 $5,938 $3,968 $8,617 $11,384

Average assets $2,345,698 $2,131,153 $2,311,704 $2,328,649 $2,108,832 Less: Average goodwill 56,474 51,881 56,474 56,474 50,990 Less: Average core deposit intangibles 10,812 11,646 11,292 11,051 11,876 Average tangible assets $2,278,412 $2,067,626 $2,243,938 $2,261,124 $2,045,966

Average equity $215,223 $204,371 $214,450 $214,836 $202,752 Less: Average goodwill 56,474 51,881 56,474 56,474 50,990 Less: Average core deposit intangibles 10,812 11,646 11,292 11,051 11,876 Average tangible equity $147,937 $140,844 $146,684 $147,311 $139,886

Cash basis earnings per share, diluted $0.35 $0.44 $0.29 $0.64 $0.85 Cash basis return on average tangible assets 0.82% 1.15% 0.71% 0.77% 1.12% Cash basis return on average tangible equity 12.64% 16.91% 10.88% 11.76% 16.41%

(1) As a supplement to accounting principles generally accepted in the United States ("GAAP"), management also reviews operating performance based on its "cash basis earnings" to fully analyze its core business. Cash basis earnings exclude amortization expense attributable to intangibles (goodwill and core deposit intangibles) that do not qualify as regulatory capital. Financial ratios based on cash basis earnings exclude the amortization of nonqualifying intangible assets from earnings and the unamortized balance of nonqualifying intangibles from assets and equity.

In management's opinion, cash basis earnings are useful to investors because by excluding non-operating adjustments stemming from the consolidation of our organization, they allow investors to see clearly the combined economic results of our multi-bank company. These non-GAAP disclosures should not, however, be viewed in direct comparison with non-GAAP measures of other companies.

UNION BANKSHARES CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in thousands, except share amounts)

June 30, December 31, June 30, 2008 2007 2007 ASSETS (Unaudited) (Audited) (Unaudited) Cash and cash equivalents: Cash and due from banks $62,875 $54,716 $51,474 Interest-bearing deposits in other banks 1,054 662 899 Money market investments 223 303 190 Other interest-bearing deposits 2,598 2,598 2,598 Federal funds sold 90 - 236 Total cash and cash equivalents 66,840 58,279 55,397

Securities available for sale, at fair value 288,150 282,699 270,095

Loans held for sale 32,056 25,248 25,159

Loans, net of unearned income 1,823,706 1,747,820 1,636,345 Less allowance for loan losses 21,650 19,336 18,353 Net loans 1,802,056 1,728,484 1,617,992

Bank premises and equipment, net 77,220 75,741 74,044 Other real estate owned 781 694 217 Core deposit intangibles, net 10,577 11,550 11,426 Goodwill 56,474 56,474 51,881 Other assets 61,776 62,228 60,703 Total assets $2,395,930 $2,301,397 $2,166,914

LIABILITIES Noninterest-bearing demand deposits $294,594 $281,405 $293,736 Interest-bearing deposits: NOW accounts 218,747 217,809 206,378 Money market accounts 256,297 156,576 148,527 Savings accounts 102,420 100,885 106,939 Time deposits of $100,000 and over 433,409 453,243 450,133 Other time deposits 481,380 449,660 442,423 Total interest-bearing deposits 1,492,253 1,378,173 1,354,400 Total deposits 1,786,847 1,659,578 1,648,136

Securities sold under agreements to repurchase 79,980 82,049 76,179 Other short-term borrowings 86,750 200,837 76,769 Trust preferred capital notes 60,310 60,310 60,310 Long-term borrowings 149,500 69,500 82,475 Other liabilities 19,068 17,041 19,140 Total liabilities 2,182,455 2,089,315 1,963,009

Commitments and contingencies

STOCKHOLDERS' EQUITY Common stock, $1.33 par value, shares authorized 36,000,000; issued and outstanding, 13,503,852 shares, 13,438,334 shares, and 13,369,409 shares, respectively. 17,962 17,879 17,790 Surplus 41,811 40,758 39,215 Retained earnings 153,630 152,238 148,222 Accumulated other comprehensive income 72 1,207 (1,322) Total stockholders' equity 213,475 212,082 203,905

Total liabilities and stockholders' equity $2,395,930 $2,301,397 $2,166,914

UNION BANKSHARES CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Dollars in thousands, except per share amounts) (Unaudited)

Three Months Ended Six Months Ended June 30 June 30 2008 2007 2008 2007 Interest and dividend income: Interest and fees on loans $29,725 $31,642 $60,989 $61,492 Interest on Federal funds sold 1 122 29 385 Interest on deposits in other banks 6 12 14 27 Interest on money market investments - 1 1 2 Interest on other interest-bearing deposits 15 35 40 69 Interest and dividends on securities: Taxable 2,288 2,173 4,577 4,505 Nontaxable 1,273 1,144 2,528 2,276 Total interest and dividend income 33,308 35,129 68,178 68,756

Interest expense: Interest on deposits 10,676 12,039 22,411 23,899 Interest on Federal funds purchased 96 262 264 568 Interest on short-term borrowings 1,001 1,211 3,037 1,967 Interest on long-term borrowings 1,707 2,396 3,513 4,941 Total interest expense 13,480 15,908 29,225 31,375

Net interest income 19,828 19,221 38,953 37,381 Provision for (recapture of) loan losses 1,676 190 3,276 (545) Net interest income after provision for loan losses 18,152 19,031 35,677 37,926

Noninterest income: Service charges on deposit accounts 2,329 1,917 4,449 3,643 Other service charges, commissions and fees 1,713 1,557 3,181 3,001 Gains on securities transactions, net 5 207 28 508 Gains on sales of loans 3,179 2,132 6,177 4,476 Gains (losses) on sales of other real estate and bank premises, net (2) (6) 135 (9) Other operating income 432 405 1,034 802 Total noninterest income 7,656 6,212 15,004 12,421

Noninterest expenses: Salaries and benefits 11,279 9,618 22,339 19,557 Occupancy expenses 1,719 1,422 3,427 2,813 Furniture and equipment expenses 1,232 1,116 2,497 2,297 Other operating expenses 5,804 5,510 11,704 10,958 Total noninterest expenses 20,034 17,666 39,967 35,625

Income before income taxes 5,774 7,577 10,714 14,722 Income tax expense 1,441 1,936 2,729 3,933 Net income $4,333 $5,641 $7,985 $10,789

Earnings per share, basic $0.32 $0.42 $0.59 $0.81 Earnings per share, diluted $0.32 $0.42 $0.59 $0.80

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

For the Three Months Ended June 30,

2008 Interest Average Income / Yield / Balance Expense Rate (1) (Dollars in thousands) Assets: Securities: Taxable $177,859 $2,289 5.18% Tax-exempt 109,375 1,959 7.20% Total securities 287,234 4,248 5.95% Loans, net (2) (3) 1,794,443 29,408 6.59% Loans held for sale 31,021 449 5.82% Federal funds sold 240 1 2.16% Money market investments 152 - 0.01% Interest-bearing deposits in other banks 951 5 2.29% Other interest-bearing deposits 2,598 16 2.42% Total earning assets 2,116,639 34,127 6.48% Allowance for loan losses (20,746) Total non-earning assets 249,805 Total assets $2,345,698

Liabilities and Stockholders' Equity: Interest-bearing deposits: Checking $228,009 362 0.64% Money market savings 207,603 1,149 2.23% Regular savings 103,047 140 0.54% Certificates of deposit: $100,000 and over 439,298 4,348 3.98% Under $100,000 483,611 4,677 3.89% Total interest-bearing deposits 1,461,568 10,676 2.94% Other borrowings 372,073 2,804 3.03% Total interest-bearing liabilities 1,833,641 13,480 2.96%

Noninterest-bearing liabilities: Demand deposits 277,298 Other liabilities 19,536 Total liabilities 2,130,475 Stockholders' equity 215,223 Total liabilities and stockholders' equity $2,345,698

Net interest income $20,647

Interest rate spread (4) 3.52% Interest expense as a percent of average earning assets 2.56% Net interest margin 3.92%

2007 Interest Average Income / Yield / Balance Expense Rate (1) (Dollars in thousands) Assets: Securities: Taxable $169,359 $2,174 5.15% Tax-exempt 97,521 1,760 7.24% Total securities 266,880 3,934 5.91% Loans, net (2) (3) 1,612,164 31,401 7.81% Loans held for sale 22,332 359 6.45% Federal funds sold 1,802 122 5.49% Money market investments 146 1 1.72% Interest-bearing deposits in other banks 901 12 5.21% Other interest-bearing deposits 2,598 35 5.39% Total earning assets 1,906,823 35,864 7.54% Allowance for loan losses (18,306) Total non-earning assets 242,636 Total assets $2,131,153

Liabilities and Stockholders' Equity: Interest-bearing deposits: Checking $208,068 334 0.64% Money market savings 154,105 885 2.30% Regular savings 104,743 200 0.76% Certificates of deposit: $100,000 and over 448,728 5,535 4.95% Under $100,000 451,845 5,086 4.51% Total interest-bearing deposits 1,367,489 12,040 3.53% Other borrowings 256,380 3,868 6.05% Total interest-bearing liabilities 1,623,869 15,908 3.93%

Noninterest-bearing liabilities: Demand deposits 285,414 Other liabilities 17,499 Total liabilities 1,926,782 Stockholders' equity 204,371 Total liabilities and stockholders' equity $2,131,153

Net interest income $19,956

Interest rate spread (4) 3.61% Interest expense as a percent of average earning assets 3.35% Net interest margin 4.20%

2006 Interest Average Income / Yield / Balance Expense Rate (1) (Dollars in thousands) Assets: Securities: Taxable $196,286 $2,544 5.20% Tax-exempt 88,539 1,614 7.31% Total securities 284,825 4,158 5.85% Loans, net (2) (3) 1,493,093 28,012 7.53% Loans held for sale 29,513 440 5.98% Federal funds sold 14,266 285 5.01% Money market investments 115 - 1.57% Interest-bearing deposits in other banks 1,044 12 4.45% Other interest-bearing deposits 2,598 32 4.91% Total earning assets 1,825,454 32,939 7.24% Allowance for loan losses (18,538) Total non-earning assets 220,365 Total assets $2,027,281

Liabilities and Stockholders' Equity: Interest-bearing deposits: Checking $211,017 201 0.38% Money market savings 180,201 996 2.22% Regular savings 124,880 289 0.93% Certificates of deposit: $100,000 and over 371,493 4,071 4.40% Under $100,000 396,729 3,763 3.80% Total interest-bearing deposits 1,284,320 9,320 2.91% Other borrowings 232,639 3,057 5.27% Total interest-bearing liabilities 1,516,959 12,377 3.27%

Noninterest-bearing liabilities: Demand deposits 305,654 Other liabilities 12,656 Total liabilities 1,835,269 Stockholders' equity 192,012 Total liabilities and stockholders' equity $2,027,281

Net interest income $20,562

Interest rate spread (4) 3.97% Interest expense as a percent of average earning assets 2.72% Net interest margin 4.52%

(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) Foregone interest on previously charged off credits of $76 thousand has been excluded for 2006.

(4) Income and yields are reported on a taxable equivalent basis using the statutory federal corporate tax rate of 35%.

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

For the Six Months Ended June 30,

2008 Interest Average Income/ Yield/ Balance Expense Rate(1) (Dollars in thousands) Assets: Securities: Taxable $177,298 $4,577 5.19% Tax-exempt 108,196 3,890 7.23% Total securities 285,494 8,467 5.96% Loans, net (2) (3) 1,781,636 60,520 6.83% Loans held for sale 27,265 726 5.35% Federal funds sold 1,592 29 3.66% Money market investments 194 1 0.63% Interest-bearing deposits in other banks 1,017 14 2.68% Other interest-bearing deposits 2,598 40 3.12% Total earning assets 2,099,796 69,797 6.68% Allowance for loan losses (20,180) Total non-earning assets 249,033 Total assets $2,328,649

Liabilities and Stockholders' Equity: Interest-bearing deposits: Checking $223,131 736 0.66% Money market savings 187,817 2,075 2.22% Regular savings 102,353 308 0.60% Certificates of deposit: $100,000 and over 444,711 9,420 4.26% Under $100,000 481,870 9,872 4.12% Total interest-bearing deposits 1,439,882 22,411 3.13% Other borrowings 381,279 6,814 3.59% Total interest-bearing liabilities 1,821,161 29,225 3.23%

Noninterest-bearing liabilities: Demand deposits 272,070 Other liabilities 20,582 Total liabilities 2,113,813 Stockholders' equity 214,836 Total liabilities and stockholders' equity $2,328,649

Net interest income $40,572

Interest rate spread (4) 3.45% Interest expense as a percent of average earning assets 2.80% Net interest margin 3.89%

2007 Interest Average Income/ Yield/ Balance Expense Rate(1) (Dollars in thousands) Assets: Securities: Taxable $175,324 $4,505 5.18% Tax-exempt 96,529 3,502 7.32% Total securities 271,853 8,007 5.94% Loans, net (2) (3) 1,589,154 61,061 7.75% Loans held for sale 21,989 660 6.05% Federal funds sold 2,801 385 5.47% Money market investments 205 2 1.97% Interest-bearing deposits in other banks 1,018 27 5.27% Other interest-bearing deposits 2,598 69 5.36% Total earning assets 1,889,618 70,211 7.49% Allowance for loan losses (18,704) Total non-earning assets 237,918 Total assets $2,108,832

Liabilities and Stockholders' Equity: Interest-bearing deposits: Checking $207,137 652 0.63% Money market savings 158,008 1,802 2.30% Regular savings 105,022 426 0.82% Certificates of deposit: $100,000 and over 447,017 10,942 4.94% Under $100,000 452,264 10,078 4.49% Total interest-bearing deposits 1,369,448 23,900 3.52% Other borrowings 239,017 7,476 6.31% Total interest-bearing liabilities 1,608,465 31,376 3.93%

Noninterest-bearing liabilities: Demand deposits 280,430 Other liabilities 17,185 Total liabilities 1,906,080 Stockholders' equity 202,752 Total liabilities and stockholders' equity $2,108,832

Net interest income $38,835

Interest rate spread (4) 3.56% Interest expense as a percent of average earning assets 3.35% Net interest margin 4.14%

2006 Interest Average Income/ Yield/ Balance Expense Rate(1) (Dollars in thousands) Assets: Securities: Taxable $181,954 $4,718 5.23% Tax-exempt 83,246 3,064 7.42% Total securities 265,200 7,782 5.92% Loans, net (2) (3) 1,441,622 52,764 7.38% Loans held for sale 26,649 856 6.48% Federal funds sold 8,106 318 4.88% Money market investments 103 1 2.46% Interest-bearing deposits in other banks 854 18 4.34% Other interest-bearing deposits 2,598 60 4.65% Total earning assets 1,745,132 61,799 7.14% Allowance for loan losses (17,936) Total non-earning assets 196,811 Total assets $1,924,007

Liabilities and Stockholders' Equity: Interest-bearing deposits: Checking $203,147 382 0.38% Money market savings 180,418 2,006 2.24% Regular savings 120,267 549 0.92% Certificates of deposit: $100,000 and over 356,284 7,534 4.26% Under $100,000 386,247 7,062 3.69% Total interest-bearing deposits 1,246,363 17,533 2.84% Other borrowings 204,037 5,086 5.03% Total interest-bearing liabilities 1,450,400 22,619 3.14%

Noninterest-bearing liabilities: Demand deposits 273,480 Other liabilities 13,038 Total liabilities 1,736,918 Stockholders' equity 187,089 Total liabilities and stockholders' equity $1,924,007

Net interest income $39,180

Interest rate spread (4) 4.00% Interest expense as a percent of average earning assets 2.61% Net interest margin 4.53%

(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) Foregone interest on previously charged off credits of $196 thousand has been excluded for 2006.

(4) Income and yields are reported on a taxable equivalent basis using the statutory federal corporate tax rate of 35%.

DATASOURCE: Union Bankshares Corporation

CONTACT: D. Anthony Peay, Executive Vice President-Chief Financial

Officer of Union Bankshares Corporation, +1-804-632-2112

Web site: http://www.ubsh.com/