The Company and StellarOne operated independently until the completion of the mergerlocal markets in January 2014. The success of the merger will depend, in part, on the Company’s ability to realize the anticipated benefits and cost savings from combining and integrating the businesses ofwhich the Company and StellarOne and to do so in a manner that permits growth opportunities and cost savings to be realized without materially disrupting existing customer relationships or decreasing revenues due to loss of customers. The integration processdoes business, as well as conditions in the mergerindustries on which those markets are economically dependent. A deterioration in local economic conditions or in the condition of an industry on which a local market depends could adversely affect such factors as unemployment rates, business formations and expansions, housing demand, apartment vacancy rates and real estate values in the local market, and this could result in, among other things, a decline in loan demand, a reduction in the lossnumber of key employees,creditworthy borrowers seeking loans, an increase in loan delinquencies, defaults and foreclosures, an increase in classified and nonaccrual loans, a decrease in the disruptionvalue of ongoingloan collateral and a decline in the net worth and liquidity of borrowers and guarantors. Any of these factors could hurt the Company’s business inconsistencies in standards, controls, proceduresa material way.

remediate any identified information security vulnerabilities.

As consolidation within the financial services industry continues, the competition for suitable strategic acquisition candidates may increase. The Company will compete with other financial services companies for acquisition and expansion opportunities, and many of those competitors will have greater financial resources than the Company continuesdoes and may be able to pay more for an acquisition than the Company is able or willing to pay. The Company cannot assure that it will have opportunities to acquire other financial institutions or acquire or establish any new branches on attractive terms or at all, or that the Company will be able to negotiate, finance, and complete any opportunities available to it.

Further, acquisitions typically involve the payment of a premium over book and market values and, therefore, some dilution of the Company’s tangible book value and net income per common share may occur in connection with any future acquisitions.

The Company’sBank’s concentration in loans secured by real estate may adversely affect earnings due to changes in the real estate markets.

condition and results of operations.

The Company’s focus on lending to small to mid-sized community-based businesses may increase its credit risk.

2016, which included goodwill recorded with the Company’s acquisition of StellarOne.

Incontinued success depends, in part, upon its ability to address the ordinary course of business, the Company collects and stores sensitive data, including proprietary business information and personally identifiable informationneeds of its customers by using technology to provide products and employeesservices that satisfy customer demands and create efficiencies in systemsits operations. A failure to maintain or enhance a competitive position with respect to technology, whether because of a failure to anticipate customer expectations, substantially fewer resources to invest in technological improvements than larger competitors, or because the Company’s technological developments fail to perform as desired or are not rolled out in a timely manner, may cause the Company to lose market share or incur additional expense.

Legislative or regulatory changes or actions, or significant litigation, couldrecent years reportedly resulting in the thefts of credit and debit card information, online account information, and other financial data of tens of millions of the retailers’ customers. Retailer incursions affect cards issued and deposit accounts maintained by many banks, including the Bank. Although neither the Company’s nor the Bank’s systems are breached in retailer incursions, such incursions can still cause customers to be dissatisfied with the Bank and otherwise adversely affect the Company orCompany's and the businesses in whichBank's reputation. These events can also cause the Company is engaged.

The Company is subjectBank to extensive statereissue a significant number of cards and federal regulation, supervision,take other costly steps to avoid significant theft loss to the Bank and legislation that govern almost all aspects of its operations. Laws and regulations change from timecustomers. In some cases, the Bank may be required to time and are primarily intendedreimburse customers for the protectionlosses they incur. Other possible points of consumers, depositors, and the FDIC’s DIF. The impact of any changes to laws and regulationsintrusion or other actions by regulatory agencies may negatively affect the Company or its ability to increase the value of its business. Such changes could include higher capital requirements, increased insurance premiums, increased compliance costs, reductions of non-interest income, and limitations on services that can be provided. Actions by regulatory agencies or significant litigation against the Company could cause it to devote significant time and resources to defend itself and may lead to liability or penalties that materially affect the Company and its shareholders. Future changes in the laws or regulations or their interpretations or enforcement could be materially adverse to the Company and its shareholders.

The Dodd-Frank Act substantially changes the regulation of the financial services industry and it could have a material adverse effect upon the Company.

The Dodd-Frank Act provides wide-ranging changes in the way banks and financial services firms generally are regulated and affects the way the Company and its customers and counterparties do business with each other. Among other things, it requires increased capital and regulatory oversight for banks and their holding companies, changes the deposit insurance assessment system, changes responsibilities among regulators, establishes the new CFPB, and makes various changes in the securities laws and corporate governance that affect public companies, including the Company. The Dodd-Frank Act also requires numerous studies and regulations related to its implementation. The Company is continually evaluating the effects of the Dodd-Frank Act, together with implementing the regulations that have been proposed and adopted. The ultimate effects of the Dodd-Frank Act and the resulting rulemaking cannot be predicted at this time, but it has increased our operating and compliance costs in the short-term, and it could have a material adverse effect ondisruption not within the Company’s results of operationnor the Bank’s control include internet service providers, electronic mail portal providers, social media portals, distant-server (“cloud”) service providers, electronic data security providers, telecommunications companies, and financial condition.

The Company will be subject to more stringent capital and liquidity requirements as a result of the Basel III regulatory capital reforms and the Dodd-Frank Act, the short-term and long-term impact of which is uncertain.

smart phone manufacturers.

Changes

be negatively affected by rapid and widespread distribution of publicity through social media channels. The authorities that promulgate accounting standards, includingCompany’s reputation could also be affected by the FASB, SEC, andCompany’s association with clients affected negatively through social media distribution, or other regulatory authorities, periodically change the financial accounting and reporting standards that govern the preparationthird parties, or by circumstances outside of the Company’s consolidated financial statements. These changes are difficultcontrol. Negative publicity, whether true or untrue, could affect the Company’s ability to predict and can materially impact how the Company records and reports its financial condition and results of operations. In some cases, the Company could be required to apply a newattract or revised standard retroactively, resulting in the restatement of financial statements for prior periods. Such changes could also requireretain customers, or cause the Company to incur additional liabilities or costs, or result in additional regulatory scrutiny.

Failure to maintain effective systems of internal control over financial reporting and disclosure controlcontrols and procedures could have a material adverse effect on the Company’s results of operation and financial condition.

condition and the trading price of the Company's securities.

Consumers may increasingly decide not to use the Subsidiary Banks to complete their financial transactions, which would have a material adverse impact on the Company’s financial condition and operations.

Technology and other changes are allowing parties to complete financial transactions through alternative methods that historically have involved banks. For example, consumers can now maintain funds that would have historically been held as bank deposits in brokerage accounts, mutual funds or general-purpose reloadable prepaid cards. Consumers can also complete transactions such as paying bills and/or transferring funds directly without the assistance of banks. The process of eliminating banks as intermediaries, known as “disintermediation,” could result in the loss of fee income, as well as the loss of customer deposits and the related income generated from those deposits. The loss of these revenue streams and the lower cost of deposits as a source of funds could have a material adverse effect on our financial condition and results of operations.

stronger credit ratings.

On November 20, 2013,

The Company is not restricted from issuing additional shares of common stock, including any securities that are convertible into or exchangeable for, or that represent the right to receive, shares of common stock. Issuances of a substantial number of shares of common stock, or the expectation that such issuances might occur, including in connection with acquisitions by the Company, could materially adversely affect the market price of the shares of the common stock and could be dilutive to shareholders. Because the Company’s decision to issue common stock in the future will depend on market conditions and other factors, it cannot predict or estimate the amount, timing, or nature of possible future issuances of its common stock. Accordingly, the Company’s shareholders bear the risk that future issuances of common stock will reduce the market price of the common stock and dilute their stock holdings in the Company.

- 20 -

Common stock is equity and is subordinate to the Company’s existing and future indebtedness and preferred stock and effectively subordinated to all the indebtedness and other non-common equity claims against the Bank and the Company’s other subsidiaries.

Shares of the Company’s common stock are equity interests and do not constitute indebtedness. As such, shares of the common stock will rank junior to all of the Company’s indebtedness and to other non-equity claims against the Company and its assets available to satisfy claims against it, including in the event of the Company’s liquidation. Additionally, holders of the Company’s common stock are subject to prior dividend and liquidation rights of holders of outstanding preferred stock, if any. The Company’s Board of Directors is authorized to issue classes or series of preferred stock without any action on the part of

21

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the holders of the Company’s common stock, and the Company is permitted to incur additional debt. Upon liquidation, lenders and holders of the Company’s debt securities and preferred stock would receive distributions of the Company’s available assets prior to holders of the Company’s common stock. Furthermore, the Company’s right to participate in a distribution of assets upon any of its subsidiaries’ liquidation or reorganization is subject to the prior claims of that subsidiary’s creditors, including holders of any preferred stock of that subsidiary.

The Company’s governing documents and Virginia law contain anti-takeover provisions that could negatively affect its shareholders.

The Company’s Articles of Incorporation and Bylaws and the Virginia Stock Corporation Act contain certain provisions designed to enhance the ability of the Company’s boardBoard of directorsDirectors to deal withrespond to attempts to acquire control of the Company. These provisions and the ability to set the voting rights, preferences, and other terms of any series of preferred stock that may be issued, may be deemed to have an anti-takeover effect and may discourage takeovers (which certain shareholders may deem to be in their best interest). To the extent that such takeover attempts are discouraged, temporary fluctuations in the market price of the Company’s common stock resulting from actual or rumored takeover attempts may be inhibited. These provisions also could discourage or make more difficult a merger, tender offer, or proxy contest, even though such transactions may be favorable to the interests of shareholders, and could potentially adversely affect the market price of the Company’s common stock.

The current economic conditions may cause volatility in the Company’s common stock value.

In the current economic environment, the value of publicly traded stocks in the financial services sector has been volatile.volatile, which may make it more difficult for a holder to sell the Company's common stock when the holder wants and at prices that are attractive. However, even in a more stable economic environment the value of the Company’s common stock can be affected by a variety of factors such as exceptedexpected results of operations, actual results of operations, actions taken by shareholders, news or expectations based on the performance of others in the financial services industry, and expected impacts of a changing regulatory environment. These factors not only impact the value of the Company’s common stock but could also affect the liquidity of the stock given the Company’s size, geographical footprint, and industry.

22

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ITEM 1B. - UNRESOLVED STAFF COMMENTS.

The Company does not have anyhas no unresolved staff comments to report for the year ended December 31, 2013.

report.

ITEM 2. - PROPERTIES.

The Company, through its subsidiaries, owns or leases buildings that are used in the normal course of business. Effective October 31, 2011, theThe Company’s corporate headquarters was relocated from 111 Virginia Street, Suite 200, Richmond, Virginia tois located at 1051 East Cary Street, Suite 1200, Richmond, Virginia. The Company’s subsidiaries own or lease various other offices in the counties and cities in which they operate. At December 31, 2013,2016, the Bank operated 90114 branches throughout Virginia. All of the offices of UMG are leased, either throughfrom a third party or as a result of being within a Bank branch. Effective January 1, 2016, UISI was dissolved as a separate corporate entity and the securities, brokerage, and investment advisory businesses of UISI were integrated into Union Bank & Trust. The vast majority of theUISI offices of UISI arewere located within the retailBank branch properties. The Company’s operations center is in Ruther Glen, Virginia. See the Note 1 “Summary of Significant Accounting Policies” and Note 4 “Bank Premises5 “Premises and Equipment” in the “Notes to the Consolidated Financial Statements” contained in Item 8 of this Form 10-K for information with respect to the amounts at which Bankthe Company’s premises and equipment are carried and commitments under long-term leases.

ITEM 3. - LEGAL PROCEEDINGS.

In the ordinary course of its operations, the Company and its subsidiaries are parties to various legal proceedings. BasedAlthough the amount of any ultimate liability with respect to such matters cannot be determined, based on the information presently available, and after consultation with legal counsel, management believes that the ultimate outcome inof such proceedings, including any liability imposed on the Company thereby, 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 4. - MINE SAFETY DISCLOSURES.

None.

- 21 -

None.

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PART II

ITEM 5. - MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

The following performance graph does not constitute soliciting material and should not be deemed filed or incorporated by reference into any other Company filing under the Securities Act of 1933 or the Exchange Act, except to the extent the Company specifically incorporates the performance graph by reference therein.

Five-Year Stock Performance Graph

The following chart compares the yearly percentage change in the cumulative shareholder return on the Company’s common stock during the five years ended December 31, 2013,2016, with (1) the Total Return Index for the NASDAQ Stock Market andComposite, (2) the Total Return Index for NASDAQ Bank Stocks.Stocks, and (3) the Total Return Index for SNL U.S. Bank NASDAQ. This comparison assumes $100 was invested on December 31, 20082011 in the Company’s common stock and the comparison groups and assumes the reinvestment of all cash dividends prior to any tax effect and retention of all stock dividends.

Union First Market Bankshares Corporation

						Period Ending
Index		12/31/08				12/31/09				12/31/10				12/31/11				12/31/12				12/31/13
Union First Market Bankshares Corporation			100.00				51.04				62.02				57.10				69.52				112.23
NASDAQ Composite			100.00				145.36				171.74				170.38				200.63				281.22
NASDAQ Bank			100.00				83.70				95.55				85.52				101.50				143.84

In prior years, the Company has used the Total Return Index for NASDAQ Bank Stock, which will no longer be available from the Company's service provider in future periods. Going forward, the Company will be using the SNL U.S. Bank NASDAQ index as a replacement. This index includes many of the same companies that are in the NASDAQ Bank Stock index and are also part of the Company's peer group. Both indices are provided for the five years ended December 31, 2016 below.

 

	Period Ending
Index	12/31/2011				12/31/2012				12/31/2013				12/31/2014				12/31/2015				12/31/2016
Union Bankshares Corporation	$	100.00			$	121.76			$	196.56			$	195.39			$	210.82			$	307.66
NASDAQ Composite	100.00				117.45				164.57				188.84				201.98				219.89
NASDAQ Bank	100.00				118.69				168.21				176.48				192.08				265.02
SNL U.S. Bank NASDAQ	100.00				119.19				171.31				177.42				191.53				265.56

Source: SNL Financial Corporation LC, Charlottesville, VA (2014)

- 22 -

(2017)

24

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Information on Common Stock, Market Prices and Dividends

The Company’s common stock is listed on the NASDAQ Global Select Market and is traded under the symbol “UBSH.” There were 24,976,43443,609,317 shares of the Company’s common stock outstanding at the close of business on December 31, 2013,30, 2016, which was the last business day of 2016. The shares were held by 2,3784,469 shareholders of record. The closing price of the Company’s common stock on December 31, 201330, 2016, which was $24.81the last business day of 2016, was $35.74 per share compared to $15.77$25.24 on December 31, 2012.

2015.

The following table summarizes the high and low sales prices and dividends declared for quarterly periods during the years ended December 31, 20132016 and 2012.

																		Dividends
		Sales Prices																Declared
		2013								2012								2013				2012
		High				Low				High				Low
First Quarter		$	20.25			$	15.87			$	14.93			$	13.00			$	0.13			$	0.07
Second Quarter			21.40				18.01				14.75				13.08			$	0.13			$	0.08
Third Quarter			23.54				20.48				15.81				14.31			$	0.14			$	0.10
Fourth Quarter			26.29				22.99				16.29				14.23			$	0.14			$	0.12
																		$	0.54			$	0.37

2015.

	Sales Prices																Dividends Declared
	2016								2015								2016				2015
	High				Low				High				Low
First Quarter	$	25.48			$	20.57			$	24.23			$	19.92			$	0.19			$	0.15
Second Quarter	27.39				23.79				23.75				21.01				$	0.19			$	0.17
Third Quarter	27.96				23.28				25.00				21.77				$	0.19			$	0.17
Fourth Quarter	36.69				26.13				27.25				22.78				$	0.20			$	0.19
																	$	0.77			$	0.68

Regulatory restrictions on the ability of the Bank to transfer funds to the Company at December 31, 20132016 are set forth in Note 19 “Parent Company Financial Information,” contained in the “Notes to the Consolidated Financial Statements” contained in Item 8 of this Form 10-K. A discussion of certain limitations on the ability of the Bank to pay dividends to the Company and the ability of the Company to pay dividends on its common stock, is set forth in Part I.,I, Item 1 - Business,“Business” of this Form 10-K under the headings “Supervision and Regulation – The Company - Limits on Dividends and Other Payments.”

It is anticipated that dividends will continue to be paid on a quarterly basis. In making its decision on the payment of dividends on the Company’s common stock, the Board of Directors considers operating results, financial condition, capital adequacy, regulatory requirements, shareholder returns, and other factors.

Stock Repurchase Program

In December 2011, the Company was authorized to repurchase up to 350,000 shares of its common stock in the open market or in private transactions. No shares were repurchased during 2011.

In February 2012, the Company was authorized to enter into a stock purchase agreement with James E. Ukrop, then a member of

On October 29, 2015, the Company’s Board of Directors andauthorized a trust related to Mr. Ukrop. Pursuant to the agreement, the Company repurchased 335,649 shares of its common stock for an aggregate purchase price of $4,363,437, or $13.00 per share. Theshare repurchase was funded with cash on hand. The Company transferred 115,384 of the repurchased shares to its ESOP for $13.00 per share. The remaining 220,265 shares were retired. On February 6, 2012, the Company filed a Current Report on Form 8-K with respect to the agreement and repurchase.

In December 2012, the Company was authorized to repurchase up to 750,000 shares of the Company’s common stock on the open market or in private transactions. Subsequently, in December 2012, the Company entered into an agreement to purchase 750,000 shares of its common stock from Markel Corporation, the Company’s largest shareholder at that time, for an aggregate purchase price of $11,580,000, or $15.44 per share. Steven A. Markel was a director of the Company and Vice Chairman of Markel Corporation at that time. The repurchase was funded with cash on hand and the Company retired the shares. On December 12 and 21, 2012, the Company filed Current Reports on Form 8-K with respect to the authorization and repurchase.

In March 2013, the Company entered into an agreement to purchase 500,000 shares of its common stock from Markel Corporation, at that time the Company’s largest shareholder, for an aggregate purchase price of $9,500,000, or $19.00 per share. Steven A. Markel was a director of the Company and Vice Chairman of Markel Corporation at that time. The repurchase was funded with cash on hand and the shares were retired. The Company’s authorization to repurchase an additional 250,000 shares under its current repurchase program authorization expired December 31, 2013.

On January 30, 2014, the Company received authorization from its Board of Directors 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 is authorized throughexpired on December 31, 2015.

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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 new repurchase program expired on December 31, 2016.

25

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The following information provides details of the Company’s common stock repurchases for the year ended December 31, 2016: 

Period	Total number of shares purchased			Average price paid per share ($)			Approximate value of shares that may be purchased under the plan ($)
January 1 - January 31, 2016	380,882			23.70			12,114,000
February 1 - February 28, 2016	553,566			21.99			24,942,000
March 1 - March 31, 2016	106,164			23.55			22,442,000
April 1 - April 30, 2016	102,144			24.48			19,942,000
May 1 - May 31, 2016	82,800			26.24			17,769,000
June 1 - June 30, 2016	87,000			26.21			15,489,000
July 1 - July 31, 2016	98,575			25.22			13,003,000
August 1 - August 31, 2016	—			—			13,003,000
September 1 - September 30, 2016	—			—			13,003,000
October 1 - October 31, 2016	—			—			13,003,000
November 1 - November 30, 2016	—			—			13,003,000
December 1 - December 31, 2016	—			—			13,003,000
Total common stock repurchases for the year ended December 31, 2016	1,411,131			23.48

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ITEM 6. –- SELECTED FINANCIAL DATA.

The following table sets forth selected financial data for the Company over each of the past five years ended December 31, (dollars in thousands, except per share amounts):

		2013				2012				2011				2010				2009
Results of Operations(1)
Interest and dividend income		$	172,127			$	181,863			$	189,073			$	189,821			$	128,587
Interest expense			20,501				27,508				32,713				38,245				48,771
Net interest income			151,626				154,355				156,360				151,576				79,816
Provision for loan losses			6,056				12,200				16,800				24,368				18,246
Net interest income after provision for loan losses			145,570				142,155				139,560				127,208				61,570
Noninterest income			38,728				41,068				32,964				34,217				23,442
Noninterest expenses			137,289				133,479				130,815				129,920				75,762
Income before income taxes			47,009				49,744				41,709				31,505				9,250
Income tax expense			12,513				14,333				11,264				8,583				890
Net income		$	34,496			$	35,411			$	30,445			$	22,922			$	8,360
Financial Condition
Assets		$	4,176,571			$	4,095,865			$	3,907,087			$	3,837,247			$	2,587,272
Loans, net of unearned income			3,039,368				2,966,847				2,818,583				2,837,253				1,874,224
Deposits			3,236,842				3,297,767				3,175,105				3,070,059				1,916,364
Stockholders' equity			438,239				435,863				421,639				428,085				282,088
Ratios
Return on average assets(1)			0.85	%			0.89	%			0.79	%			0.61	%			0.32	%
Return on average equity(1)			7.91	%			8.13	%			6.90	%			5.50	%			2.90	%
Efficiency ratio (FTE)(1)			70.19	%			66.86	%			67.55	%			68.19	%			70.81	%
Efficiency ratio - community bank segment (FTE)(1)			65.81	%			65.88	%			66.84	%			68.59	%			71.72	%
Efficiency ratio - mortgage bank segment (FTE)			130.58	%			77.66	%			79.20	%			64.22	%			63.41	%
Common equity to total assets			10.49	%			10.64	%			10.79	%			10.26	%			10.90	%
Tangible common equity / tangible assets			8.94	%			8.97	%			8.91	%			8.22	%			8.64	%
Asset Quality
Allowance for loan losses		$	30,135			$	34,916			$	39,470			$	38,406			$	30,484
Nonaccrual loans		$	15,035			$	26,206			$	44,834			$	61,716			$	22,348
Other real estate owned		$	34,116			$	32,834			$	32,263			$	36,122			$	22,509
ALL / total outstanding loans			0.99	%			1.18	%			1.40	%			1.35	%			1.63	%
ALL / total outstanding loans, adjusted for acquisition accounting(1)			1.10	%			1.35	%			1.71	%			1.82	%			N/A
ALL / nonperforming loans			200.43	%			133.24	%			88.04	%			62.23	%			136.41	%
NPAs / total outstanding loans			1.62	%			1.99	%			2.74	%			3.45	%			2.39	%
Net charge-offs / total outstanding loans			0.36	%			0.56	%			0.56	%			0.58	%			0.71	%
Provision / total outstanding loans			0.20	%			0.41	%			0.60	%			0.86	%			0.97	%
Per Share Data
Earnings per share, basic(1)		$	1.38			$	1.37			$	1.07			$	0.83			$	0.19
Earnings per share, diluted(1)			1.38				1.37				1.07				0.83				0.19
Cash dividends paid			0.54				0.37				0.28				0.25				0.30
Market value per share			24.81				15.77				13.29				14.78				12.39
Book value per common share			17.56				17.30				16.17				15.16				15.34
Price to earnings ratio, diluted			17.98				11.51				12.42				17.81				65.21
Price to book value ratio			1.41				0.91				0.82				0.98				0.81
Dividend payout ratio			39.13	%			27.01	%			26.17	%			30.12	%			157.89	%
Weighted average shares outstanding, basic			24,975,077				25,872,316				25,981,222				25,222,565				15,160,619
Weighted average shares outstanding, diluted			25,030,711				25,900,863				26,009,839				25,268,216				15,201,993

	2016				2015				2014 (1)				2013 (1)				2012 (1)
Results of Operations
Interest and dividend income	$	294,920			$	276,771			$	274,945			$	172,127			$	181,863
Interest expense	29,770				24,937				19,927				20,501				27,508
Net interest income	265,150				251,834				255,018				151,626				154,355
Provision for credit losses	9,100				9,571				7,800				6,056				12,200
Net interest income after provision for credit losses	256,050				242,263				247,218				145,570				142,155
Noninterest income	70,907				65,007				61,287				38,728				41,068
Noninterest expenses	222,703				216,882				238,216				137,047				133,390
Income before income taxes	104,254				90,388				70,289				47,251				49,833
Income tax expense	26,778				23,309				18,125				12,885				14,571
Net income (2)	$	77,476			$	67,079			$	52,164			$	34,366			$	35,262
Financial Condition
Assets	$	8,426,793			$	7,693,291			$	7,358,643			$	4,176,353			$	4,095,692
Loans held for investment, net of deferred fees and costs	6,307,060				5,671,462				5,345,996				3,039,368				2,966,847
Deposits	6,379,489				5,963,936				5,638,770				3,236,842				3,297,767
Securities available for sale, at fair value	946,764				903,292				1,102,114				677,348				585,382
Securities held to maturity, at carrying value	201,526				205,374				—				—				—
Loans held for sale	36,487				36,030				42,519				53,185				167,698
Allowance for loan losses	37,192				34,047				32,384				30,135				34,916
Tangible assets, net (3)	8,108,000				7,376,459				7,033,366				4,104,973				4,020,481
Intangible assets, net	318,793				316,832				325,277				71,380				75,211
Total borrowings	990,089				680,175				686,935				463,314				329,395
Total liabilities	7,425,761				6,697,924				6,381,474				3,783,543				3,660,128
Common stockholders' equity	1,001,032				995,367				977,169				437,810				435,564
Tangible common stockholders' equity (3)	682,239				678,535				651,892				366,430				360,353
Ratios
Net interest margin	3.66		%		3.75		%		3.96		%		4.08		%		4.23		%
Net interest margin (FTE)	3.80		%		3.89		%		4.09		%		4.22		%		4.34		%
Return on average assets (2)	0.96		%		0.90		%		0.72		%		0.85		%		0.89		%
Return on average common stockholders' equity (2)	7.79		%		6.76		%		5.30		%		7.89		%		8.10		%
Return on average tangible common stockholders' equity (2)(3)	11.45		%		10.00		%		8.02		%		9.48		%		9.86		%
Efficiency ratio	66.27		%		68.45		%		75.31		%		72.00		%		68.26		%
Efficiency ratio (FTE) (2)(3)	64.31		%		66.54		%		73.43		%		70.06		%		66.81		%
CET1 capital (to risk weighted assets)	9.72		%		10.55		%		11.20		%		11.26		%		11.27		%
Tier 1 capital (to risk weighted assets)	10.97		%		11.93		%		12.76		%		13.03		%		13.14		%
Total capital (to risk weighted assets)	13.56		%		12.46		%		13.38		%		14.16		%		14.57		%
Leverage Ratio	9.87		%		10.68		%		10.62		%		10.69		%		10.52		%
Common equity to total assets	11.88		%		12.94		%		13.28		%		10.48		%		10.63		%
Tangible common equity / tangible assets (3)	8.41		%		9.20		%		9.27		%		8.93		%		8.96		%

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	2016				2015				2014 (1)				2013 (1)				2012 (1)
Asset Quality
Allowance for loan losses	$	37,192			$	34,047			$	32,384			$	30,135			$	34,916
Nonaccrual loans	$	9,973			$	11,936			$	19,255			$	15,035			$	26,206
OREO	$	10,084			$	15,299			$	28,118			$	34,116			$	32,834
ALL / total outstanding loans	0.59		%		0.60		%		0.61		%		0.99		%		1.18		%
ALL / total outstanding loans, adjusted for acquisition accounting (3)	0.86		%		0.98		%		1.08		%		1.10		%		1.35		%
Nonaccrual loans/total loans	0.16		%		0.21		%		0.36		%		0.49		%		0.88		%
ALL / nonaccrual loans	372.93		%		285.25		%		168.18		%		200.43		%		133.24		%
NPAs / total outstanding loans	0.32		%		0.48		%		0.89		%		1.62		%		1.99		%
Net charge-offs / total average loans	0.09		%		0.14		%		0.11		%		0.36		%		0.58		%
Provision / total average loans	0.15		%		0.17		%		0.15		%		0.20		%		0.42		%
Per Share Data
Earnings per share, basic (2)	$	1.77			$	1.49			$	1.13			$	1.38			$	1.36
Earnings per share, diluted (2)	1.77				1.49				1.13				1.37				1.36
Cash dividends paid per share	0.77				0.68				0.58				0.54				0.37
Market value per share	35.74				25.24				24.08				24.81				15.77
Book value per share	23.15				22.38				21.73				17.63				17.29
Tangible book value per share (3)	15.78				15.25				14.50				14.76				14.30
Price to earnings ratio, diluted	20.19				16.94				21.31				18.11				11.60
Price to book value ratio	1.54				1.13				1.11				1.41				0.91
Dividend payout ratio	43.50		%		45.64		%		51.33		%		39.42		%		27.21		%
Weighted average shares outstanding, basic	43,784,193				45,054,938				46,036,023				24,975,077				25,872,316
Weighted average shares outstanding, diluted	43,890,271			��	45,138,891				46,130,895				25,030,711				25,900,863

⁽¹⁾ Refer Changes to "Item 7. Management's Discussionpreviously reported 2014, 2013, and Analysis2012 amounts were the result of Financial Condition and Resultsthe adoption of Operations", section "NonASU No. 2014-01, "Accounting for Investments in Qualified Affordable Housing Projects."

⁽²⁾ The metrics presented here are presented on a GAAP Measures" forbasis; however, there are related supplemental non-GAAP performance measures whichthat the Company believes may be useful to investors as they exclude non-operating adjustments resulting from acquisitions and allow investors to see the combined economic results of the organization. These measures are a supplement to GAAP used to prepare the Company’s financial statements and should not be viewed as a substitute for GAAP measures. In addition, the Company’s non-GAAP measures may not be comparable to non-GAAP measures of other companies. OperatingRefer to Item 7. - "Management's Discussion and Analysis of Financial Condition and Results of Operations" section "Non-GAAP Measures" of this Form 10-K for operating metrics, which exclude acquisition-related costs, including operating earnings, return on average assets, return on average equity, return on average tangible common equity, efficiency ratio, and earnings per share are shown for the years ended December 31, 2013, 2012,share.

⁽³⁾ Refer to Item 7. - "Management's Discussion and 2011 only.

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Analysis of Financial Condition and Results of Operations" section "Non-GAAP Measures" of this Form 10-K.

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ITEM 7. - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion and analysis provides information about the major components of the results of operations and financial condition, liquidity, and capital resources of the Company and its subsidiaries. This discussion and analysis should be read in conjunction with the “Consolidated Financial Statements” and the “Notes to the Consolidated Financial Statements” presented in Item 8 “Financial Statements and Supplementary Data” contained in this Form 10-K.

CRITICAL ACCOUNTING POLICIES

General

The accounting and reporting policies of the Company and its subsidiaries are in accordance with 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 more critical accounting and reporting policies include the Company’s accounting for the allowance for loan losses, mergers and acquisitions,ALL, 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 this Form 10-K.

The following is a summary of the Company’s critical accounting policies that are highly dependent on estimates, assumptions, and judgments.

Allowance for Loan Losses

- The provision for loan losses charged to operations is an amount sufficient to bring the allowance for loan lossesALL to an estimated balance that management considers adequate to absorb potentialprobable losses inherent in the portfolio. Loans are charged against the allowanceALL when management believes the collectability of the principal is unlikely. Recoveriesunlikely, while recoveries of amounts previously charged-off are credited to the allowance.ALL. Management’s determination of the adequacy of the allowanceALL 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 reviewManagement believes that 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.

ALL is adequate.

The Company performs regular credit reviews of the loan portfolio to review the credit quality and adherence to its underwriting standards. The credit reviews consist of reviews by its Internal Audit group and reviews performed by an independent third party.Loan Review Group. 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 portfolioloan segment is delinquency status. The Company has various committees that review and ensure that the allowance for loan lossesALL methodology is in accordance with GAAP and loss factors used appropriately reflect the risk characteristics of the loan portfolio.

The Company’s ALL consists of specific, general, and unallocatedqualitative 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 allowanceALL is then 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 lossesALL or charge-offcharges 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.

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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 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 valuationsvaluation 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.

General Reserve Component-

The general reserve component covers non-impaired loans and is quantitatively 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 average loan balance of the loan portfolio averaged during the preceding twelve quarters, asa period that management has determined this to be adequately reflectreflective of the losses inherent in the loan portfolio. Effective December 31, 2016, the Company implemented a rolling 20-quarter look back period, which will be re-evaluated on a periodic basis to ensure the reasonableness of period being utilized. Previously, the Company had utilized a 12-quarter look back period. The change to the 20-quarter look back period is due to the protracted recovery in the economy and management's conclusion that a 20-quarter period better reflects a full economic cycle. This change did not have a material impact on the Company's ALL.

The qualitative environmental factors consist of national,portfolio, national/international, and local and portfolio characteristics and are applied to both the commercial and consumer loan segments.

The following table shows the types of environmental factors management considers:

ENVIRONMENTAL FACTORS
Portfolio		National / International		Local
Experience and ability of lending team		Interest rates		Level of economic activity
Depth of lending teamCompare ratio consideration		Inflation		Unemployment
Pace of loan growth		Unemployment		Competition
FranchiseFootprint and 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 collateralUnderwriting standards		International uncertainty
Delinquency levels in portfolio		Home Price Index
Charge-off levels in portfolio		Commercial Real Estate Price Index
Credit concentrations / nature and volume of the portfolio

Unallocated Component– This component may be used to cover uncertainties that could affect management’s estimate of probable losses. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio. Together, the specific, general, and any unallocated allowance for loan loss represents management’s estimate of losses inherent in the current loan portfolio. Though provisions for loan losses may be based on specific loans, the entire allowance for loan losses is available for any loan management deems necessary to charge-off. At December 31, 2013, there were no material amounts considered unallocated as part of the allowance for loan losses.

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Impaired Loans

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 impairedimpairment loan policy is the same for each of the seven classesall segments within the commercial portfolioloan segment.

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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.20 quarters, as previously discussed. 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.

Mergers and Acquisitions

The Company’s merger and acquisition strategy focusesterminated, as previously discussed.

Acquired Loans - Loans acquired in a business combination are recorded at fair value on high-growth areasthe date of the acquisition. Loans acquired with strong market demographics and targets organizations that have a comparable corporate culture, strong performance, and good assetdeteriorated credit 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 GAAP.

Acquisition-related costsASC 310-30, Receivables – Loans and Debt Securities Acquired with Deteriorated Credit Quality and are costsinitially measured at fair value, which includes estimated future credit losses expected to be incurred over the Company incurslife of the loans. Loans acquired in business combinations with evidence of credit deterioration are not considered to effect a business combination. Those costs include advisory, legal, accounting, valuation, and other professional or consulting fees. Some other examples of acquisition-related costsbe impaired unless they deteriorate further subsequent to the Company include systems conversions, integration planning consultants,acquisition. Certain acquired loans, including performing loans and advertising costs. The Company will accountrevolving lines of credit (consumer and commercial), are accounted 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 GAAP. These acquisition-related costs are included withinASC 310-20, Receivables – Nonrefundable Fees and Other Costs, where the Consolidated Statementsdiscount is accreted through earnings based on estimated cash flows over the estimate life of Income classified within the noninterest expense caption.

loan.

Goodwill and Intangible Assets

-The Company follows ASC 350,Goodwill and Other Intangible Assets, which prescribes the accounting for goodwill and intangible assets subsequent to initial recognition. The provisionsGoodwill resulting from business combinations prior to January 1, 2009 represents the excess of this guidance discontinued the amortizationpurchase price over the fair value of goodwillthe 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 withacquired in a purchase business combination and determined to have an indefinite livesuseful life are not amortized, but require antested for impairment review at least annually andor more frequently if certainevents 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.

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.

The Company performed its annual impairment testing as of April 30, 2016 and determined that there was no impairment to its goodwill or intangible assets. The Company also performed a qualitative analysis to determine if any factors necessitated additional testing and no indicators are evident.

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of impairment were noted as of year-end.

RESULTS OF OPERATIONS

Executive Overview

·

The Company reported net income of $34.5 million and earnings per share of $1.38 for its year ended December 31, 2013. Excluding after-tax acquisition-related costs The Company reported net income of $77.5 million and earnings per share of $1.77 for the year ended December 31, 2016. These results represent an increase of $10.4 million, or 15.5%, from $67.1 million and $0.28, or 18.8%, from earnings per share of $1.49 for the year ended December 31, 2015. The Company’s community banking segment reported net income of $75.7 million for the year ended December 31, 2016, an increase of $8.4 million from the prior year, and earnings per share of $1.73, an increase of $0.24 per share from the prior year. The Company’s mortgage segment reported net income of $1.8 million, or $0.04 per share, an improvement of $2.0 million, operating earnings(1) for the year were $36.5 million and operating earnings per share(1)were $1.46. The annual results represent an increase of $1.1 million, or 3.2%, in operating earnings and $0.09 per share, or 6.6%, from 2012 levels. The year to date financial results do not include the financial results of StellarOne, which the Company acquired on January 1, 2014, and are prior to the effective date of the merger with StellarOne.

·

The Company’s community banking segment reported operating earnings of $39.2 million (or $1.57 per share), an increase of $6.3 million (or $0.30 per share) from the prior year. The Company’s mortgage segment reported a net loss of $2.7 million, a decrease of $5.2 million, from net income of $2.5 million in the prior year.

·

The Company experienced continued improvement in asset quality with reduced levels of impaired loans, troubled debt restructurings, past due loans, and nonperforming assets, which were at their lowest levels since the fourth quarter of 2009.

·

Net charge-offs and the loan loss provision, as well as their respective ratios of net charge-offs to total loans and provision to total loans decreased from the prior year. The allowance to nonperforming loans coverage ratio was at the highest level since the first quarter of 2008.

·

Average loans outstanding increased $109.8 million, or 3.8%, in 2013 over 2012.

⁽¹⁾For a reconciliationnet loss of $202,000 in the non-GAAP measures operating earnings, ROA, ROE, EPS,prior year.

The Company experienced continued improvement in asset quality. Nonaccrual loans, past due loans, and efficiency ratio, see “NON-GAAP MEASURES” includedOREO balances declined from December 31, 2015.

Loans held for investment, net of deferred fees and costs, were $6.3 billion at December 31, 2016, an increase of $635.6 million, or 11.2%, from December 31, 2015. The increase was primarily driven by a combined growth of $535.5 million in this Item 7.

commercial real estate, commercial and industrial, and consumer loans. Year-to-date average loan balances increased $468.8 million, or 8.5%, from the prior year.

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Total deposits at December 31, 2016 were $6.4 billion, an increase of $415.6 million, or 7.0%, when compared to $6.0 billion at December 31, 2015. The Company continued to experience a shift from time deposits into lower cost transaction accounts, specifically NOW and money market accounts, driven by the Company’s focus on acquiring low cost funding sources and customer preference for liquidity in response to current market conditions.

Total borrowings at December 31, 2016 were $990.1 million, an increase of $309.9 million, or 45.6%, when compared to $680.2 million at December 31, 2105. The increase was primarily driven by increases in short-term FHLB borrowings of $213.5 million. Additionally, the Company issued $150.0 million of long-term fixed-to-floating rate subordinated notes in the fourth quarter of 2016.

On May 31, 2016, the Company completed the acquisition of ODCM and recorded goodwill of $4.7 million and other amortizable intangible assets of $4.5 million.

Cash dividends per common share increased to $0.77 during 2016 from $0.68 per common share during 2015.

Net Income

2016 compared to 2015

Net income for the year ended December 31, 2013 decreased $915,000,2016 increased $10.4 million, or 2.6%15.5%, from $35.4$67.1 million to $34.5$77.5 million and represented earnings per share of $1.38$1.77 compared to $1.37$1.49 for the prior year. Excluding after-tax acquisition-related expenses of $2.0 million, operating earnings for 2013 were $36.5 million and operating earnings per share was $1.46. Return on average tangible common equity (non-GAAP) for the year ended December 31, 20132016 was 7.91%11.45% compared to 8.13%10.00% for the prior year, while return on average assets was 0.85%0.96% compared to 0.89%0.90% for the prior year;year. For reconciliation of the non-GAAP measures, refer to section “Non-GAAP Measures” included within this Item 7.

Net interest income increased $13.3 million from 2015, primarily driven by an increase in interest and fees on loans due to higher average loan balances, partially offset by higher interest expense on borrowings and the impact of lower accretion of fair value adjustments for deposits. The provision for credit losses decreased $471,000 from $9.6 million in 2015 to $9.1 million in 2016 mainly due to lower charge-off levels and continued improvement in asset quality metrics in 2016.

Noninterest income increased $5.9 million from $65.0 million in 2015 to $70.9 million in 2016. The increase was driven by increases in loan-related interest-rate swap fees, customer-related fee income, mortgage banking income and fiduciary and asset management fees, which were partially offset by declines in other operating return on average equityincome due to nonrecurring income in 2015 related to gains from the dissolution of a limited partnership and the resolution of a problem credit resulting in a note sale.

Noninterest expense increased $5.8 million, or 2.7%, from $216.9 million in 2015 to $222.7 million in 2016. This increase is primarily driven by an increase in salaries and benefits expenses, professional services, and technology expenses, which were partially offset by decreases in OREO and credit-related expenses, and amortization of intangible assets.

2015 compared to 2014

Net income for the year ended December 31, 2013 was 8.38%2015 increased $14.9 million, or 28.6%, from $52.2 million to $67.1 million and represented earnings per share of $1.49 compared to 8.13%$1.13 for the prior year. Excluding after-tax acquisition-related expenses of $13.7 million for the year ended December 31, 2014, operating earnings were $67.1 million and $65.9 million for the years ended December 31, 2015 and 2014, respectively. Operating earnings per share was $1.49 for the year ended December 31, 2015 compared to $1.43 for the year ended December 31, 2014. Operating return on average tangible common equity (which excludes after-tax acquisition-related expenses) for the year ended December 31, 2015 was 10.00% compared to 10.13% for 2014, while operating return on average assets was 0.90% compared to 0.89%0.91% for 2014. For reconciliation of the prior year.

The $915,000 decrease innon-GAAP operating measures, excluding acquisition-related costs, refer to section “Non-GAAP Measures” included within this Item 7.

Net interest income decreased $3.2 million from 2014, primarily driven by the impact of lower loan yields and lower net income was principally a result of a decrease in net interest margin of $2.7 millionaccretion related to a declineacquisition accounting. Excluding the impacts of acquisition accounting, interest expense declined as growth in the yield on interest-earning assets thatlow cost deposits outpaced the reductionnet run-off in thehigher cost certificates of funds, a decreasedeposit. The provision for credit losses increased $1.8 million from $7.8 million in noninterest income of $2.42014 to $9.6 million largelyin 2015 primarily due to lowerloan growth in 2015.

Noninterest income increased $3.7 million from $61.3 million in 2014 to $65.0 million in 2015. The majority of the increase was driven by increases in customer-related fee income and other operating income, which were partially offset by declines in gains on sales of mortgage loans, netsecurities and an OTTI charge in 2015.

Noninterest expense decreased $21.3 million, or 9.0%, from $238.2 million in 2014 to $216.9 million in 2015. Excluding acquisition-related costs of commission expenses, of $4.8$20.3 million and higherin 2014, noninterest expenses of $3.8 millionexpense decreased $989,000, or 0.5%. This decrease is primarily driven by salarya decrease in salaries and benefits expenses, OREO and costs related to the StellarOne merger. These itemscredit-related expenses, and amortization of core deposit intangibles, which were partially offset by a $6.1 million decreaseincreases in provision for loan losses due to continued improvement in asset quality.

Net income for the year ended December 31, 2012 increased $5.0 million, or 16.3%, from 2011. Net income available to common shareholders increased $7.6 million, or 27.5%, from 2011, which included preferred dividendstechnology expenses, marketing costs, professional fees, and discount accretion on preferred stock of $2.7 million. Return on average equity for the year ended December 31, 2012 was 8.13% compared to 6.90% for 2011 while return on average assets was 0.89% compared to 0.79% for 2011. Earnings per share was $1.37, an increase of $0.30, or 28.0%, from $1.07 for the year ended December 31, 2011. Earnings per share included preferred dividends and discount accretion on preferred stock of $2.7 million, or $0.10 per share, in 2011.

The $5.0 million increase in net income was principally a result of higher net gains on sales of mortgage loans driven by higher origination volumes, lower provision for loan losses, reductions in FDIC insurance expense due to changes in the assessment base and rate, lower core deposit intangible amortization expense, and an increase in account service charges and net debit and credit card interchange fees. Partially offsetting these results were higher salaries and benefits related to the addition of mortgage loan originators and support personnel in 2012 and lower net interest income driven by reductions in interest income on interest-earning assets that outpaced the impact of lower costs on interest-bearing liabilities.

- 28 -

fraud-related expenses.

32

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Net Interest Income

Net interest income, which represents the principal source of revenue for the Company, is the amount by which interest income exceeds interest expense. The net interest margin is net interest income expressed as a percentage of average earning assets. Changes in the volume and mix of interest-earning assets and interest-bearing liabilities, as well as their respective yields and rates, have a significant impact on the level of net interest income, the net interest margin, and net income.

The

Short-term interest rates increased gradually during 2016; however, the broader decline in the general level ofmarket interest rates over the last fiveseveral years has placedcontinues to place downward pressure on the Company’s earning asset yields and related interest income. The declineCompany's cost of funds increased slightly in earning asset yields, however, has been offset principally by2016 due to the repricing of money market deposit accounts and certificates of deposits and lower borrowing costs. The Company believes that its netincrease in short-term interest margin will continue to decline modestly overrates as FHLB advances were repriced at higher rates during the next several quarters as decreases in earning asset yields are projected to outpace declines in rates paid on interest-bearing liabilities.

year.

The following table showstables 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):

		For the Year Ended
		Dollars in thousands
		12/31/13				12/31/12				Change
Average interest-earning assets		$	3,716,849			$	3,649,865			$	66,984
Interest income (FTE)		$	177,383			$	186,085			$	(8,702	)
Yield on interest-earning assets			4.77	%			5.10	%			(33	)bps
Average interest-bearing liabilities		$	2,914,139			$	2,922,373			$	(8,234	)
Interest expense		$	20,501			$	27,508			$	(7,007	)
Cost of interest-bearing liabilities			0.70	%			0.94	%			(24	)bps
Cost of funds			0.55	%			0.76	%			(21	)bps
Net Interest Income (FTE)		$	156,882			$	158,577			$	(1,695	)
Net Interest Margin (FTE)			4.22	%			4.34	%			(12	)bps
Core Net Interest Margin (FTE)(1)			4.18	%			4.24	%			(6	)bps

^indicated:

	For the Year Ended December 31,
	2016				2015				Change
	(Dollars in thousands)
Average interest-earning assets	$	7,249,090			$	6,713,239			$	535,851
Interest income (FTE) (1)	$	305,164			$	285,850			$	19,314
Yield on interest-earning assets	4.21		%		4.26		%		(5		)		bps
Average interest-bearing liabilities	$	5,600,174			$	5,147,689			$	452,485
Interest expense	$	29,770			$	24,937			$	4,833
Cost of interest-bearing liabilities	0.53		%		0.48		%		5				bps
Cost of funds	0.41		%		0.37		%		4				bps
Net interest income (FTE) (1)	$	275,394			$	260,913			$	14,481
Net interest margin (FTE) (1)	3.80		%		3.89		%		(9		)		bps
Core net interest margin (FTE) (1) (2)	3.72		%		3.79		%		(7		)		bps

(1)Refer to Item 7. - "Management's Discussion and Analysis of Financial Condition and Results of Operations" section "Non-GAAP Measures" of this Form 10-K.

(2) Core net interest margin (FTE) excludes the impact of acquisition accounting accretion and amortization adjustments in net interest income.

For the year ended December 31, 2013,2016, tax-equivalent net interest income was $156.9$275.4 million, a decreasean increase of $1.7$14.5 million or 1.1%, when comparedfrom the prior year, primarily driven by higher average loan balances. Net accretion related to the same period last year.acquisition accounting decreased $946,000 from $6.6 million in 2015 to $5.7 million in 2016. The tax-equivalent net interest margin decreased by 129 basis points to 4.22%3.80% from 4.34%3.89% in the prior year. Core tax-equivalent net interest margin (which excludes the 8 basis point and 10 basis point impact of acquisition accounting accretion in 2016 and 2015, respectively) decreased by 7 basis points to 3.72% in 2016 from 3.79% in 2015. The decline in the core net interest margin was principally due to the continued5 basis point decrease in interest-earning asset yields and the 2 basis point increase in cost of funds. The decline in accretion on the acquired net earning assets (-6 bps) and a decline in the yield on interest-earning assets that outpaced the reduction in the cost of funds (-6 bps). Lower interest-earning asset incomeyields was principally due toprimarily driven by lower loan yields, on loans as new loans and renewed loans were originated and repricedre-priced at lower rates, as well as lower levels of fees on loans.

33

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	For the Year Ended December 31,
	2015				2014				Change
	(Dollars in thousands)
Average interest-earning assets	$	6,713,239			$	6,437,681			$	275,558
Interest income (FTE) (1)	$	285,850			$	283,072			$	2,778
Yield on interest-earning assets	4.26		%		4.40		%		(14		)		bps
Average interest-bearing liabilities	$	5,147,689			$	5,047,550			$	100,139
Interest expense	$	24,937			$	19,927			$	5,010
Cost of interest-bearing liabilities	0.48		%		0.39		%		9				bps
Cost of funds	0.37		%		0.31		%		6				bps
Net interest income (FTE) (1)	$	260,913			$	263,145			$	(2,232	)
Net interest margin (FTE) (1)	3.89		%		4.09		%		(20		)		bps
Core net interest margin (FTE) (1) (2)	3.79		%		3.93		%		(14		)		bps

 (1) Refer to Item 7. - "Management's Discussion and declining investment securities yields driven by cash flows from securities investments reinvested at lower yields.

- 29 -

Analysis of Financial Condition and Results of Operations" section "Non-GAAP Measures" of this Form 10-K.

		For the Year Ended
		Dollars in thousands
		12/31/12				12/31/11				Change
Average interest-earning assets		$	3,649,865			$	3,523,330			$	126,535
Interest income (FTE)		$	186,085			$	193,399			$	(7,314	)
Yield on interest-earning assets			5.10	%			5.50	%			(40	)bps
Average interest-bearing liabilities		$	2,922,373			$	2,875,242			$	47,131
Interest expense		$	27,508			$	32,713			$	(5,205	)
Cost of interest-bearing liabilities			0.94	%			1.14	%			(20	)bps
Cost of funds			0.76	%			0.93	%			(17	)bps
Net Interest Income (FTE)		$	158,577			$	160,686			$	(2,109	)
Net Interest Margin (FTE)			4.34	%			4.57	%			(23	)bps
Core Net Interest Margin (FTE)(1)			4.24	%			4.37	%			(13	)bps

⁽¹⁾(2) Core net interest margin (FTE) excludes the impact of acquisition accounting accretion and amortization adjustments in net interest income.

For the year ended December 31, 2012,2015, tax-equivalent net interest income was $158.6$260.9 million, a decrease of $2.1$2.2 million or 1.3%, when comparedfrom 2014, primarily driven by the impact of declines in net interest margin and lower net accretion related to acquisition accounting. Excluding the same periodimpacts of acquisition accounting, interest expense declined as growth in 2011.low cost deposits outpaced the net run-off in higher cost certificates of deposit. Net accretion related to acquisition accounting decreased $3.4 million from $10.0 million in 2014 to $6.6 million in 2015. The tax-equivalent net interest margin decreased by 2320 basis points to 4.34%3.89% from 4.57%4.09% in 2011.2014.

Core tax-equivalent net interest margin (which excludes the 10 basis point and 16 basis point impact of acquisition accounting accretion in 2015 and 2014, respectively) decreased by 14 basis points. The decline in the core net interest margin was principally due to the continued20 basis point decrease in interest-earning asset yields outpacing the 6 basis point decline in accretion on the acquired net earning assets (-10 bps) and acost of funds. The decline in the yield on interest-earning assets that outpaced the reduction in the cost of interest-bearing liabilities (-13 bps). Lower interest-earning asset incomeyields was principally due toprimarily driven by lower loan yields, on loans and investment securities as new loans and renewed loans were originated and repricedre-priced at lower rates, faster prepayments on mortgage backed securities, and cash flows from securities investments reinvested at lower yields. The reduction in the cost of interest-bearing liabilities was primarily driven by a shift in the mix of the Company’s deposit accounts as customers moved from certificates of deposits to transaction and money market accounts. During the third quarter of 2012, the Company modified its fixed rate convertible FHLB advances to floating rate advances, which resulted in reducing the Company’s FHLB borrowing costs. The modification of the FHLB advances lowered the 2012 cost of interest-bearing liabilities by 3 bps subsequent to executing the modification during the third quarter of 2012.

- 30 -

rates.

34

---

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

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

		For the Year Ended December 31,
		2013												2012												2011
		Average Balance				Interest Income / Expense				Yield / Rate (1)				Average Balance				Interest Income / Expense				Yield / Rate (1)				Average Balance				Interest Income / Expense				Yield / Rate (1)
Assets:
Securities:
Taxable		$	391,804			$	8,202				2.09	%		$	462,996			$	11,912				2.57	%		$	427,443			$	13,387				3.13	%
Tax-exempt			223,054				12,862				5.77	%			179,977				11,155				6.20	%			167,818				10,897				6.49	%
Total securities (2)			614,858				21,064				3.43	%			642,973				23,067				3.59	%			595,261				24,284				4.08	%
Loans, net (3) (4)			2,985,733				152,868				5.12	%			2,875,916				159,682				5.55	%			2,818,022				166,869				5.92	%
Loans held for sale			105,450				3,433				3.26	%			104,632				3,273				3.13	%			53,463				2,122				3.97	%
Federal funds sold			421				1				0.22	%			365				1				0.24	%			351				1				0.24	%
Money market investments			1				-				0.00	%			-				-				0.00	%			96				-				0.00	%
Interest-bearing deposits in other banks			10,386				17				0.17	%			25,979				62				0.24	%			56,137				123				0.24	%
Other interest-bearing deposits			-				-				0.00	%			-				-				0.00	%			-				-				0.00	%
Total earning assets			3,716,849				177,383				4.77	%			3,649,865				186,085				5.10	%			3,523,330				193,399				5.50	%
Allowance for loan losses			(34,533	)											(40,460	)											(40,105	)
Total non-earning assets			369,752												365,820												378,403
Total assets		$	4,052,068											$	3,975,225											$	3,861,628
Liabilities and Stockholders' Equity:
Interest-bearing deposits:
Checking		$	461,594				351				0.08	%		$	419,550				445				0.11	%		$	385,715				621				0.16	%
Money market savings			942,127				2,345				0.25	%			909,408				3,324				0.37	%			849,676				5,429				0.64	%
Regular savings			226,343				680				0.30	%			197,228				662				0.34	%			172,627				638				0.37	%
Time deposits: (5)
$100,000 and over			473,244				5,751				1.22	%			540,501				7,957				1.47	%			573,276				9,045				1.58	%
Under $100,000			488,115				4,970				1.02	%			558,751				7,058				1.26	%			604,172				8,613				1.43	%
Total interest-bearing deposits			2,591,423				14,097				0.54	%			2,625,438				19,446				0.74	%			2,585,466				24,346				0.94	%
Other borrowings (6)			322,716				6,404				1.98	%			296,935				8,062				2.72	%			289,776				8,367				2.89	%
Total interest-bearing liabilities			2,914,139				20,501				0.70	%			2,922,373				27,508				0.94	%			2,875,242				32,713				1.14	%
Noninterest-bearing liabilities:
Demand deposits			664,203												577,740												513,352
Other liabilities			37,662												39,338												31,994
Total liabilities			3,616,004												3,539,451												3,420,588
Stockholders' equity			436,064												435,774												441,040
Total liabilities and stockholders' equity		$	4,052,068											$	3,975,225											$	3,861,628
Net interest income						$	156,882											$	158,577											$	160,686
Interest rate spread (7)											4.07	%											4.16	%											4.36	%
Interest expense as a percent of average earning assets											0.55	%											0.76	%											0.93	%
Net interest margin (8)											4.22	%											4.34	%											4.57	%

	For the Year Ended December 31,
	2016											2015											2014
	Average Balance				Interest Income / Expense (1)				Yield / Rate (1)(2)			Average Balance				Interest Income / Expense (1)				Yield / Rate (1)(2)			Average Balance				Interest Income / Expense (1)				Yield / Rate (1)(2)
Assets:
Securities:
Taxable	$	754,287			$	18,319			2.43	%		$	717,816			$	15,606			2.17	%		$	722,600			$	15,226			2.11	%
Tax-exempt	448,405				21,216				4.73	%		426,000				20,744				4.87	%		402,402				20,451				5.08	%
Total securities	1,202,692				39,535				3.29	%		1,143,816				36,350				3.18	%		1,125,002				35,677				3.17	%
Loans, net (3) (4)	5,956,125				264,197				4.44	%		5,487,367				248,021				4.52	%		5,235,471				245,529				4.69	%
Other earning assets	90,273				1,432				1.59	%		82,056				1,479				1.80	%		77,208				1,866				2.42	%
Total earning assets	7,249,090				$	305,164			4.21	%		6,713,239				$	285,850			4.26	%		6,437,681				$	283,072			4.40	%
Allowance for loan losses	(36,034		)									(32,779		)									(31,288		)
Total non-earning assets	833,249											812,435											844,101
Total assets	$	8,046,305										$	7,492,895										$	7,250,494
Liabilities and Stockholders' Equity:
Interest-bearing deposits:
Transaction and money market accounts	$	2,952,625			$	6,327			0.21	%		$	2,676,012			$	5,032			0.19	%		$	2,568,425			$	4,714			0.18	%
Regular savings	592,215				850				0.14	%		564,265				1,021				0.18	%		552,756				1,063				0.19	%
Time deposits (5)	1,177,732				10,554				0.90	%		1,231,593				9,500				0.77	%		1,390,308				5,257				0.38	%
Total interest-bearing deposits	4,722,572				17,731				0.38	%		4,471,870				15,553				0.35	%		4,511,489				11,034				0.24	%
Other borrowings (6)	877,602				12,039				1.37	%		675,819				9,384				1.39	%		536,061				8,893				1.66	%
Total interest-bearing liabilities	5,600,174				$	29,770			0.53	%		5,147,689				$	24,937			0.48	%		5,047,550				$	19,927			0.39	%
Noninterest-bearing liabilities:
Demand deposits	1,388,216											1,296,343											1,164,032
Other liabilities	63,130											56,886											55,185
Total liabilities	7,051,520											6,500,918											6,266,767
Stockholders' equity	994,785											991,977											983,727
Total liabilities and stockholders' equity	$	8,046,305										$	7,492,895										$	7,250,494
Net interest income					$275,394											$260,913											$	263,145
Interest rate spread									3.68	%										3.78	%										4.01	%
Cost of funds									0.41	%										0.37	%										0.31	%
Net interest margin (7)									3.80	%										3.89	%										4.09	%

(1) Rates and yields are annualized and calculated from actual, not rounded amounts in thousands, which appear above.

(2) Interest income on securities includes $15 thousand, $201 thousand, and $387 thousand for the year ended December 31, 2013, 2012, and 2011 in accretion of the fair market value adjustments.

(3) Nonaccrual loans are included in average loans outstanding.

(4) Interest income on loans includes $2.1 million, $3.7 million, and $6.2 million for the year ended December 31, 2013, 2012, and 2011 in accretion of the fair market value adjustments related to the acquisitions.

(5) Interest expense on certificates of deposits includes $7 thousand, $233 thousand, and $886 thousand for the year ended December 31, 2013, 2012 and 2011 in accretion of the fair market value adjustments related to the acquisitions.

(6) Interest expense on borrowings includes $489 thousand for the year ended December 31, 2013, 2012, and 2011 in amortization of the fair market value adjustments related to acquisitions.

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

(8)

(2) Rates and yields are annualized and calculated from actual, not rounded amounts in thousands, which appear above.

(3) Nonaccrual loans are included in average loans outstanding.

(4) Interest income on loans includes $5.2 million, $4.4 million, and $586,000 for the years ended December 31, 2016, 2015, and 2014, respectively, in accretion of the fair market value adjustments related to acquisitions.

(5) Interest expense on certificates of deposits includes $0, $1.8 million, and $8.9 million for the years ended December 31, 2016, 2015, and 2014, respectively, in accretion of the fair market value adjustments related to acquisitions.

(6) Interest expense on borrowings includes $458,000, $424,000, and $550,000 for the years ended December 31, 2016, 2015, and 2014 in accretion of the fair market value adjustments related to acquisitions.

(7) Core net interest margin excludes purchase accounting adjustments and was 4.18%3.72%, 4.24%3.79%, and 4.37%3.93% for the yearyears ended December 31, 2013, 20122016, 2015, and 2011.

- 31 -

2014, respectively.

35

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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 earninginterest-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 in this Volume Rate Analysis table for the years ended December 31, (dollars in thousands):

		2013 vs. 2012												2012 vs. 2011
		Increase (Decrease) Due to Change in:												Increase (Decrease) Due to Change in:
		Volume				Rate				Total				Volume				Rate				Total
Earning Assets:
Securities:
Taxable		$	(1,675	)		$	(2,035	)		$	(3,710	)		$	1,050			$	(2,525	)		$	(1,475	)
Tax-exempt			2,523				(816	)			1,707				768				(510	)			258
Total securities			848				(2,851	)			(2,003	)			1,818				(3,035	)			(1,217	)
Loans, net			5,908				(12,722	)			(6,814	)			3,375				(10,562	)			(7,187	)
Loans held for sale			25				135				160				1,678				(527	)			1,151
Interest-bearing deposits in other banks			(31	)			(14	)			(45	)			(62	)			1				(61	)
Total earning assets		$	6,750			$	(15,452	)		$	(8,702	)		$	6,809			$	(14,123	)		$	(7,314	)
Interest-Bearing Liabilities:
Interest-bearing deposits:
Checking		$	42			$	(136	)		$	(94	)		$	50			$	(226	)		$	(176	)
Money market savings			120				(1,099	)			(979	)			358				(2,463	)			(2,105	)
Regular savings			97				(79	)			18				88				(64	)			24
Certificates of deposit:
$100,000 and over			(932	)			(1,274	)			(2,206	)			(501	)			(587	)			(1,088	)
Under $100,000			(834	)			(1,254	)			(2,088	)			(619	)			(936	)			(1,555	)
Total interest-bearing deposits			(1,507	)			(3,842	)			(5,349	)			(624	)			(4,276	)			(4,900	)
Other borrowings			662				(2,320	)			(1,658	)			203				(508	)			(305	)
Total interest-bearing liabilities			(845	)			(6,162	)			(7,007	)			(421	)			(4,784	)			(5,205	)
Change in net interest income		$	7,595			$	(9,290	)		$	(1,695	)		$	7,230			$	(9,339	)		$	(2,109	)

	2016 vs. 2015 Increase (Decrease) Due to Change in:												2015 vs. 2014 Increase (Decrease) Due to Change in:
	Volume				Rate				Total				Volume				Rate				Total
Earning Assets:
Securities:
Taxable	$	821			$	1,892			$	2,713			$	(101	)		$	481			$	380
Tax-exempt	1,071				(599		)		472				1,170				(877		)		293
Total securities	1,892				1,293				3,185				1,069				(396		)		673
Loans, net (1)	20,864				(4,688		)		16,176				11,569				(9,077		)		2,492
Other earning assets	139				(186		)		(47		)		(206		)		(181		)		(387		)
Total earning assets	$	22,895			$	(3,581	)		$	19,314			$	12,432			$	(9,654	)		$	2,778
Interest-Bearing Liabilities:
Interest-bearing deposits:
Transaction and money market accounts	$	550			$	745			$	1,295			$	200			$	118			$	318
Regular savings	49				(220		)		(171		)		22				(64		)		(42		)
Time deposits (2)	(430		)		1,484				1,054				(662		)		4,905				4,243
Total interest-bearing deposits	169				2,009				2,178				(440		)		4,959				4,519
Other borrowings (3)	2,770				(115		)		2,655				2,086				(1,595		)		491
Total interest-bearing liabilities	2,939				1,894				4,833				1,646				3,364				5,010
Change in net interest income	$	19,956			$	(5,475	)		$	14,481			$	10,786			$	(13,018	)		$	(2,232	)

(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 $863,000 and $3.8 million for the 2016 vs. 2015 and 2015 vs. 2014 change, respectively.

(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 $7.1 million for the 2016 vs. 2015 and 2015 vs. 2014 change, respectively.

(3) The rate-related change in interest expense on other borrowings includes the impact of higher (lower) accretion of the acquisition-related fair market value adjustments of $34,000 and ($126,000) for the 2016 vs. 2015 and 2015 vs. 2014 change, respectively.

The Company’s fully taxable equivalent net interest margin includes the impact of acquisition accounting fair value adjustments. The 20132014, 2015, 2016, and remaining estimated discount/premium and net accretion impact are reflected in the following table (dollars in thousands):

		Loan Accretion				Certificates of Deposit				Investment Securities				Borrowings				Total
For the year ended December 31, 2013		$	2,065			$	7			$	15			$	(489	)		$	1,598
For the years ending:
2014			1,459				4				-				(489	)			974
2015			1,002				-				-				(489	)			513
2016			557				-				-				(163	)			394
2017			172				-				-				-				172
2018			19				-				-				-				19
Thereafter			132				-				-				-				132

- 32 -

	Accretion (Amortization)
	Loans				Certificates of Deposit				Borrowings				Total
For the year ended December 31, 2014	$	586			$	8,914			$	550			$	10,050
For the year ended December 31, 2015	4,355				1,843				424				6,622
For the year ended December 31, 2016	5,218				—				458				5,676
For the years ending:
2017	4,657				—				170				4,827
2018	4,120				—				(143		)		3,977
2019	3,320				—				(286		)		3,034
2020	2,810				—				(301		)		2,509
2021	2,236				—				(316		)		1,920
Thereafter	8,461				—				(5,306		)		3,155

36

---

Noninterest Income

		For the Year Ended
		Dollars in thousands
		12/31/13				12/31/12				$				%
Noninterest income:
Service charges on deposit accounts		$	9,492			$	9,033			$	459				5.1	%
Other service charges, commissions and fees			12,309				10,898				1,411				12.9	%
Gains on securities transactions			21				190				(169	)			NM
Gains on sales of mortgage loans, net of commissions			11,900				16,651				(4,751	)			-28.5	%
(Losses) gains on bank premises			(340	)			2				(342	)			NM
Other operating income			5,346				4,294				1,052				24.5	%
Total noninterest income		$	38,728			$	41,068			$	(2,340	)			-5.7	%
Mortgage segment operations		$	(11,906	)		$	(16,660	)		$	4,754				-28.5	%
Intercompany eliminations			670				468				202				43.2	%
Community Bank segment		$	27,492			$	24,876			$	2,616				10.5	%

NM - Not Meaningful

	For the Year Ended December 31,								Change
	2016				2015				$				%
	(Dollars in thousands)
Noninterest income:
Service charges on deposit accounts	$	19,496			$	18,904			$	592			3.1	%
Other service charges, commissions and fees	17,175				15,575				1,600				10.3	%
Fiduciary and asset management fees	10,199				9,141				1,058				11.6	%
Mortgage banking income, net	10,953				9,767				1,186				12.1	%
Gains on securities transactions, net	205				1,486				(1,281		)		(86.2	)%
Other-than-temporary impairment losses	—				(300		)		300				100.0	%
BOLI income	5,513				4,593				920				20.0	%
Loan-related interest rate swap fees	4,254				412				3,842				932.5	%
Other operating income	3,112				5,429				(2,317		)		(42.7	)%
Total noninterest income	$	70,907			$	65,007			$	5,900			9.1	%
Mortgage segment operations	$	(12,008	)		$	(10,044	)		$	(1,964	)		(19.6	)%
Intercompany eliminations	606				682				(76		)		(11.1	)%
Community bank segment	$	59,505			$	55,645			$	3,860			6.9	%

For the year ended December 31, 2013, noninterest income decreased $2.4 million, or 5.7%, to $38.7 million, from $41.1 million a year ago. Excluding mortgage segment operations,2016, noninterest income increased $2.6$5.9 million, or 10.5%9.1%, to $70.9 million, from last year. Service charges$65.0 million for the year ended December 31, 2015. Loan-related interest-rate swap fees increased by $3.8 million, and customer-related fee income increased by $2.2 million due to higher overdraft, debit card interchange, and letter of credit fees. Mortgage banking income, net of commissions, increased $1.2 million related to higher gain on deposit accountssale margins. Fiduciary and asset management fees increased $459,000$1.1 million related to the acquisition of ODCM. These increases were partially offset by a decline of $2.3 million in other operating income mainly due to nonrecurring income in 2015 related to gains from the dissolution of a limited partnership and the resolution of a problem credit resulting in a note sale.

	For the Year Ended December 31,								Change
	2015				2014				$				%
	(Dollars in thousands)
Noninterest income:
Service charges on deposit accounts	18,904				17,721				$	1,183			6.7	%
Other service charges, commissions and fees	15,575				14,983				592				4.0	%
Fiduciary and asset management fees	9,141				9,036				105				1.2	%
Mortgage banking income, net	9,767				9,707				60				0.6	%
Other-than-temporary impairment losses	1,486				1,695				(209		)		(12.3	)%
Gains on securities transactions, net	(300		)		—				(300		)		NM
BOLI income	4,593				4,648				(55		)		(1.2	)%
Loan-related interest rate swap fees	412				293				119				40.6	%
Other operating income	5,429				3,204				2,225				69.4	%
Total noninterest income	$	65,007			$	61,287			$	3,720			6.1	%
Mortgage segment operations	$	(10,044	)		$	(10,091	)		$	47			0.5	%
Intercompany eliminations	682				682				—				—	%
Community bank segment	$	55,645			$	51,878			$	3,767			7.3	%
NM - Not Meaningful

For the year ended December 31, 2015, noninterest income increased $3.7 million, or 6.1%, to $65.0 million, from $61.3 million for the year ended December 31, 2014. This increase was driven primarily by an increase in customer-related fee income of $1.8 million and an increase in other operating income of $2.3 million. The increase in customer-related fee income

37

---

was primarily related to higher overdraft and returned checkinterchange fees, as well as service charges on savings accounts. Other account service charges and fees increased $1.4 million due to higher net interchange fee income, revenue on retail investment products, and fees on letters of credit. Otherwhile the increase in other operating income increased $1.1 million primarily related to increasedis driven by a combination of higher insurance-related income on bank owned life insurance, trust income, and other insurance-related revenues. Conversely,in 2015, gains from the dissolution of a limited partnership in the first quarter of 2015, gains on bank premises decreased $342,000 as the Company recordedresolution of a lossproblem credit in the current year onthird quarter of 2015, and gains from the closuresale of bank premises coupled with net gainsthe credit card portfolio in the prior year related to salefourth quarter of bank premises. Gains2015. These increases were partially offset by declines in gains on sales of mortgage loans, netsecurities of commissions, decreased $4.8 million driven by lower loan origination volume and lower gain on sale margins in 2013. Mortgage loan originations decreased by $154.8 million, or 14.1%, to $941.4 million in 2013$209,000 compared to $1.1 billion in 2012. Of the loan originations2014 and a $300,000 OTTI charge on a municipal security in the current year, 38.9% were refinances compared to 54.3%available for sale portfolio in 2012. Lower gain on sale margins were also partly due to reductions resulting from valuation reserves of $363,000 related to aged mortgage loans held-for-sale as well as a non-recurring charge of $966,000 for contractual indemnifications related to prior period errors in mortgage insurance premium calculations in certain mortgage loans.

		For the Year Ended
		Dollars in thousands
		12/31/12				12/31/11				$				%
Noninterest income:
Service charges on deposit accounts		$	9,033			$	8,826			$	207				2.3	%
Other service charges, commissions and fees			10,898				9,736				1,162				11.9	%
Gains on securities transactions			190				913				(723	)			NM
Other-than-temporary impairment losses			-				(400	)			400				-100.0	%
Gains on sales of mortgage loans, net of commissions			16,651				11,052				5,599				50.7	%
(Losses) gains on bank premises			2				(996	)			998				NM
Other operating income			4,294				3,833				461				12.0	%
Total noninterest income		$	41,068			$	32,964			$	8,104				24.6	%
Mortgage segment operations		$	(16,660	)		$	(11,050	)		$	(5,610	)			50.8	%
Intercompany eliminations			468				468				-				0.0	%
Community Bank segment		$	24,876			$	22,382			$	2,494				11.1	%

NM - Not Meaningful

- 33 -

2015.

For the year ended December 31, 2012, noninterest income increased $8.1 million, or 24.6%, to $41.1 million, from $33.0 million in 2011. Gains on sales of mortgage loans, net of commissions, increased $5.6 million driven by an increase in loan origination volume, a result of additional loan originators hired in 2012 and historically low interest rates. Service charges on deposit accounts and other account fees increased $1.4 million primarily related to higher net interchange fee income, higher brokerage commissions, and higher ATM fee income. In addition, gains on bank premises increased $998,000 as the Company sold a former branch building and recorded a loss on the sale of $626,000 during 2011. Gains on securities transactions decreased $723,000 as a result of a gain on the sale of municipal securities in the prior year. Also, other-than-temporary losses of $400,000 related to a single issuer trust preferred security was recorded in the prior year. Excluding mortgage segment operations, noninterest income increased $2.5 million, or 11.1%, from the same period a year ago.

Noninterest expense

		For the Year Ended
		Dollars in thousands
		12/31/13				12/31/12				$				%
Noninterest expense:
Salaries and benefits		$	70,369			$	68,648			$	1,721				2.5	%
Occupancy expenses			11,543				12,150				(607	)			-5.0	%
Furniture and equipment expenses			6,884				7,251				(367	)			-5.1	%
OREO and credit-related expenses(1)			4,880				4,639				241				5.2	%
Acquisition-related expenses			2,132				-				2,132				NM
Other operating expenses			41,481				40,791				690				1.7	%
Total noninterest expense		$	137,289			$	133,479			$	3,810				2.9	%
Mortgage segment operations		$	(17,703	)		$	(13,971	)		$	(3,732	)			26.7	%
Intercompany eliminations			670				468				202				43.2	%
Community Bank segment		$	120,256			$	119,976			$	280				0.2	%

NM - Not Meaningful

^Expense

	For the Year Ended December 31,								Change
	2016				2015				$				%
	(Dollars in thousands)
Noninterest expense:
Salaries and benefits	$	117,103			$	104,192			$	12,911			12.4	%
Occupancy expenses	19,528				20,053				(525		)		(2.6	)%
Furniture and equipment expenses	10,475				11,674				(1,199		)		(10.3	)%
Printing, postage, and supplies	4,692				5,124				(432		)		(8.4	)%
Communications expense	3,850				4,634				(784		)		(16.9	)%
Technology and data processing	15,368				13,667				1,701				12.4	%
Professional services	8,085				6,309				1,776				28.2	%
Marketing and advertising expense	7,784				7,215				569				7.9	%
FDIC assessment premiums and other insurance	5,406				5,376				30				0.6	%
Other taxes	5,456				6,227				(771		)		(12.4	)%
Loan-related expenses	4,790				4,097				693				16.9	%
OREO and credit-related expenses (1)	2,602				8,911				(6,309		)		(70.8	)%
Amortization of intangible assets	7,210				8,445				(1,235		)		(14.6	)%
Training and other personnel costs	3,435				3,675				(240		)		(6.5	)%
Other operating expenses	6,919				7,283				(364		)		(5.0	)%
Total noninterest expense	$	222,703			$	216,882			$	5,821			2.7	%
Mortgage segment operations	$	(10,535	)		$	(11,571	)		$	1,036			9.0	%
Intercompany eliminations	606				682				(76		)		(11.1	)%
Community bank segment	$	212,774			$	205,993			$	6,781			3.3	%

(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 year ended December 31, 2013,2016, noninterest expense increased $3.8$5.8 million, or 2.9%2.7%, to $137.3$222.7 million, from $133.5$216.9 million afor the year ago. Excluding mortgage segment operations and acquisition-related costs of $2.1 million incurred in 2013, noninterest expense declined $1.8 million, or 1.5%, compared to 2012.ended December 31, 2015. Salaries and benefits expense increased $12.9 million related to annual merit adjustments as well as increases in incentive and equity-based compensation and benefit-related costs; the increase in salaries also relates to investments in key positions to support the Company's long-term growth strategy. Professional services increased $1.8 million due to higher project-related consulting expense, and technology and data processing increased $1.7 million due to costs associated with strategic investments in mortgage segment personnelinfrastructure to support the Company's growth. These increases were partially offset by decreases of $6.3 million in 2012OREO and 2013credit-related expenses as a result of lower valuation adjustments and severance expense recorded in the current yearproperty and legal-related expenses. Other noninterest expenses declines primarily related to the relocationlower amortization of Union Mortgage Group, Inc.’s headquarters to Glen Allen, Virginia. Occupancy expenses decreased $607,000intangible assets, franchise taxes, and furniturecommunication expenses. Furniture and equipment expenses declined $367,000, primarily$1.2 million due to branch closures in 2012. OREOlower depreciation and credit-related expenses increased $241,000, or 5.2%, mainly related to valuation adjustments on OREO property in the current year. Other operating expenses increased $690,000, or 1.7%, due to increases in legal and litigation-related expenses of $1.2 million and FDIC insurance expenses of $672,000, partially offset by lower amortization expenses of $1.5 million.

- 34 -

equipment rental expenses.

		For the Year Ended
		Dollars in thousands
		12/31/12				12/31/11				$				%
Noninterest expense:
Salaries and benefits		$	68,648			$	62,865			$	5,783				9.2	%
Occupancy expenses			12,150				11,104				1,046				9.4	%
Furniture and equipment expenses			7,251				6,920				331				4.8	%
OREO and credit-related expenses(1)			4,639				5,668				(1,029	)			-18.2	%
Acquisition-related expenses			-				426				(426	)			-100.0	%
Other operating expenses			40,791				43,832				(3,041	)			-6.9	%
Total noninterest expense		$	133,479			$	130,815			$	2,664				2.0	%
Mortgage segment operations		$	(13,971	)		$	(9,793	)		$	(4,178	)			42.7	%
Intercompany eliminations			468				468				-				0.0	%
Community Bank segment		$	119,976			$	121,490			$	(1,514	)			-1.2	%

NM - Not Meaningful

38

---

	For the Year Ended December 31,								Change
	2015				2014				$				%
	(Dollars in thousands)
Noninterest expense:
Salaries and benefits	$	104,192			$	107,804			$	(3,612	)		(3.4	)%
Occupancy expenses	20,053				20,136				(83		)		(0.4	)%
Furniture and equipment expenses	11,674				11,872				(198		)		(1.7	)%
Printing, postage, and supplies	5,124				4,924				200				4.1	%
Communications expense	4,634				4,902				(268		)		(5.5	)%
Technology and data processing	13,667				12,465				1,202				9.6	%
Professional services	6,309				5,594				715				12.8	%
Marketing and advertising expense	7,215				6,406				809				12.6	%
FDIC assessment premiums and other insurance	5,376				6,125				(749		)		(12.2	)%
Other taxes	6,227				5,784				443				7.7	%
Loan-related expenses	4,097				3,469				628				18.1	%
OREO and credit-related expenses (1)	8,911				10,164				(1,253		)		(12.3	)%
Amortization of intangible assets	8,445				9,795				(1,350		)		(13.8	)%
Training and other personnel costs	3,675				2,893				782				27.0	%
Acquisition-related expenses	—				20,345				(20,345		)		(100.0	)%
Other operating expenses	7,283				5,538				1,745				31.5	%
Total noninterest expense	$	216,882			$	238,216			$	(21,334	)		(9.0	)%
Mortgage segment operations	$	(11,571	)		$	(16,587	)		$	5,016			30.2	%
Intercompany eliminations	682				682				—				—	%
Community bank segment	$	205,993			$	222,311			$	(16,318	)		(7.3	)%

(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 year ending December 31, 2012, noninterest expense increased $2.7 million, or 2.0%, to $133.5 million, from $130.8 million during 2011. Salaries and benefits expense increased $5.8 million due to the addition of mortgage loan originators and support personnel hired in 2012, group insurance cost increases, and severance expense recorded in the current year. Occupancy costs increased $1.0 million primarily due to the addition of mortgage offices in the first quarter of 2012 and increases in bank branch lease costs. Furniture and equipment expense increased $331,000, primarily related to equipment maintenance contracts and software amortization. Partially offsetting these increases were other operating expenses which decreased $3.5 million, or 7.8%, primarily due to reductions in FDIC insurance expense of $2.6 million resulting from changes in the assessment base and rate as well as lower core deposit intangible amortization expense of $1.2 million. OREO and related costs decreased $1.0 million, or 18.2%, during 2012 due to lower valuation adjustments and losses on sales of OREO and declines in problem loan legal fees as asset quality improved. Excluding mortgage segment operations, noninterest expense decreased $1.5 million, or 1.2%, compared to the same period in 2011.

SEGMENT INFORMATION

Community Bank Segment

2013 compared to 2012

For the year ended December 31, 2013,2015, noninterest expense decreased $21.3 million, or 9.0%, to $216.9 million, from $238.2 million for the year ended December 31, 2014. This decrease is primarily driven by acquisition expenses incurred in 2014. Excluding acquisition-related costs of $20.3 million, noninterest expense decreased $989,000, or 0.5%. Salaries and benefits decreased $3.6 million from 2014 due to lower salaries, as the Company began to recognize full-year benefits of the StellarOne acquisition in 2015, and profit sharing expenses, partially offset by increased incentive compensation. The decrease in OREO and credit-related expenses of $1.3 million is primarily due to lower valuation adjustments of $1.6 million. Amortization of core deposit intangibles decreased $1.4 million when compared to 2014. The decreases were partially offset by $1.2 million in higher technology expenses related to online banking and data processing fees, $809,000 in higher marketing expenses related to advertising campaigns in 2015, $736,000 in increased losses related to data breaches at third party retailers, $715,000 in higher professional fees related to consulting and legal fees, and $701,000 in increased investments related to employee training.

SEGMENT INFORMATION

Community Bank Segment

2016 compared to 2015

For the year ended December 31, 2016, the community bank segment’s net income increased $4.3$8.4 million, or 13.0%12.5%, to $37.2$75.7 million when compared to the prior year; excludingyear. Net interest income increased $13.2 million from 2015, primarily driven by the impact of higher average loan balances. The provision for credit losses decreased $567,000 from $9.5 million in 2015 to $8.9 million in 2016 mainly due to lower charge-off levels and continued improvement in asset quality metrics.

39

---

Noninterest income increased $3.9 million from $55.6 million in 2015 to $59.5 million in 2016. Customer-related fee income increased $2.2 million primarily related to higher overdraft, debit card interchange, and letter of credit fees. Fiduciary and asset management fees increased by $1.1 million related to the acquisition of ODCM. Loan-related interest-rate swap fees increased $3.8 million. These increases were partially offset by a decline in gains on sales of securities in the current year as well as nonrecurring income in 2015 related to gains from the dissolution of a limited partnership and the resolution of a problem credit resulting in a note sale.

Noninterest expense increased $6.8 million, or 3.3%, from $206.0 in 2015 to $212.8 million in 2016. The increases are primarily driven by a $13.5 million increase in salaries and benefits related to annual merit adjustments as well as increases in incentive and equity-based compensation and benefit-related costs; the increase in salaries also relates to investments in key positions to support the Company's long-term growth strategy. Professional fees increased $2.0 million due to higher project-related consulting expense, and technology and data processing increased $1.7 million due to investment in infrastructure to support the Company's growth. These increases in noninterest expense were partially offset by a $6.3 million decrease in OREO and credit-related expenses as a result of lower valuation adjustments and property and legal-related expenses. Furniture and equipment expenses declined $1.2 million due to lower depreciation and equipment rental expense. Other noninterest expenses declines included lower amortization of intangible assets of $1.2 million, declines in franchise taxes of $755,000, and reduced communication expenses of $723,000.

2015 compared to 2014

For the year ended December 31, 2015, the community bank segment’s net income increased $11.6 million, or 20.9%, to $67.3 million when compared to 2014. Excluding after-tax acquisition-related costs of $2.0$13.7 million in 2013,2014, net income increased $6.3decreased $2.1 million, or 19.3%3.0%. Net interest income decreased $3.0$3.4 million or 2.0%,from 2014, primarily driven by the impact of lower loan yields and lower net accretion related to $150.0acquisition accounting. Excluding the impacts of acquisition accounting, interest expense declined as growth in low cost deposits outpaced the net run-off in higher cost certificates of deposit. The provision for credit losses increased $1.7 million when comparedfrom $7.8 million in 2014 to the prior year$9.5 million in 2015 due to declinesloan growth and an increase in net charge-offs, primarily due to a large recovery related to a single credit relationship in the net interest margin partially offset byfirst quarter of 2014. Additionally, a $300,000 provision was recognized during 2015 for unfunded loan growth. In addition, the Company’s provision for loan losses was $6.1 million lower than the prior year due to continued improvement in asset quality.

commitments.

Noninterest income increased $2.6 million, or 10.5%, to $27.5$3.7 million from $24.9$51.9 million last year. Service charges on deposit accountsin 2014 to $55.6 million in 2015. Customer-related fee income increased $459,000$1.8 million primarily related to higher overdraft and returned check fees as well as service charges on savings accounts. Other account service charges and fees increased $1.4 million due to higher net interchange fee income, revenue on retail investment products, and fees on letters of credit.fees. Other operating income increased $1.3$2.4 million primarily related to increaseddriven by higher insurance-related income in 2015, gains from the dissolution of a limited partnership in the first quarter of 2015, gains on bank owned life insurance, trust income,the resolution of a problem credit in the third quarter of 2015, and other insurance-related revenues. Partially offsetting thesegains from the sale of the credit card portfolio in the fourth quarter of 2015. These increases were decreasespartially offset by declines in gains on salesales of bank premises of $342,000, assecurities compared to 2014, an OTTI charge on a loss was recognizedmunicipal security in the current year compared to gainsavailable for sale portfolio in 2012,2015, and lower net gainsdeclines in interest recognized on securities of $169,000.

- 35 -

previously charged off loans.

Noninterest expense increased $280,000,decreased $16.3 million, or 0.2%7.3%, from $222.3 in 2014 to $120.3$206.0 million in 2013 from $120.0 million in 2012.2015. Excluding 2014 acquisition-related costs of $2.1$20.3 million, in 2013, noninterest expense decreased $1.8increased $4.0 million, or 1.5%2.0%, from the prior year.compared to 2014. Salaries and benefits declined $475,000 relateddecreased $287,000 from 2014 due to lower equity based compensation expense. Occupancyprofit sharing expenses, partially offset by increased incentive compensation. The decrease in OREO and furniture and equipmentcredit-related expenses declined $1.2of $1.3 million and $367,000, respectively, largely due to branch closures that occurred in 2012.

2012 compared to 2011

The community bank’s net income for the year ended December 31, 2012 increased $4.1 million, or 14.0%, to $32.9 million compared to $28.8 million for the year ended December 31, 2011 principally a result of lower provision for loan losses, a reduction in FDIC insurance due to change in base assessment and rate, lower amortization on the acquired deposit portfolio, and an increase in account service charges and fees. Partially offsetting these results were higher salaries and benefits costs and lower net interest incomeis primarily due to reductions in interest-earning assets interest income outpacing lower costs on interest-bearing liabilities. Net interest incomevaluation adjustments of $1.6 million. Amortization of core deposit intangibles decreased $2.0$1.4 million or 1.3%, when compared to the same period in 2011. The tax-equivalent net interest margin decreased by 23 basis points to 4.34% from 4.57% in 2011. The decline in the net interest margin was principally due to the continued decline in accretion on the acquired net earning assets and a decline in income from interest-earning assets outpacing lower costs on interest-bearing liabilities. Lower interest-earning asset income was principally due to lower yields on loans and investment securities as new loans and renewed loans were originated and repriced at lower rates, faster prepayments on mortgage backed securities, and cash flows from securities investments were reinvested at lower yields.

Noninterest income increased $2.5 million, or 11.2%, to $24.9 million from $22.4 million during 2011. Service charges on deposit accounts2014. FDIC assessments and other account fees increasedinsurance expenses decreased $742,000. The decreases were partially offset by $1.4 million primarilyin higher technology expenses related to online banking and data processing fees, $1.1 million in higher net interchange fee income, higher brokerage commissions, and higher ATM fee income. In addition, gains on bank premises increased $992,000 as the Company sold a former branch building and recorded a loss on the sale of $626,000 during 2011. Gains on securities transactions decreased $723,000 as a result of a gain on the sale of municipal securities in 2011. Also, an other-than-temporary loss of $400,000professional fees related to a single issuer trust preferred security was recordedconsulting and legal fees, $859,000 in 2011.

Noninterest expense decreased $1.5 million, or 1.2%, to $120.0 million, from $121.5 million during 2011. Salaries and benefits expense increased $2.8 million due to group insurance cost increases and severance payments to affected employees in addition to general salary increases, resulting from merit increases and additional personnel. Occupancy costs increased $747,000 primarily due to bank branch rent increases. Partially offsetting these cost increases were other operatinghigher marketing expenses which decreased $5.2 million, or 11.0%. Included in the reduction of other operating expenses was a $2.6 million reduction in FDIC insurance due to change in base assessment and rate, lower core deposit intangible amortization of $1.2 million, and a decrease in conversion costs related to acquisition activity during 2011.

advertising campaigns in 2015, $701,000 in increased investments in employee training, and $681,000 in increased fraud-related losses.

Mortgage Segment

2013

2016 compared to 2012

2015

For the year ended December 31, 2013,2016, the mortgage segment incurredreported net income of $1.8 million, an improvement of $2.0 million, compared to a net loss of $2.7 million compared to net income of $2.5 million during the prior year, representing a decline of $5.2 million. Mortgage loan originations decreased by $154.8 million, or 14.1%, to $941.4 million from $1.1 billion during$202,000 in the prior year. LoanThe improvement was primarily due to an increase in noninterest income of $2.0 million, primarily driven by increases in mortgage banking income, net of commissions. Mortgage banking income, net of commissions, increased $1.2 million to $11.0 million for year ended 2016 due to higher gain on sale margins. Mortgage origination volume particularly refinance volume, is highly sensitive to changeswas consistent with the prior year. Additionally, there was a reduction in interest rates, and was negatively affected by the higher interest rate environment in the second halfnoninterest expense of 2013 compared to the lower interest rate environment for the full year 2012. As$1.0 million, largely a result of the loan originationscost control initiatives in the current year, 38.9% were refinancespersonnel costs and other operating expenses.

40

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2015 compared to 54.3% in 2012. 

Related to the decline in origination volume, gains on sales of mortgage loans, net of commission expenses, decreased 28.5%, or $4.8 million. The decrease included reductions from valuation reserves of $363,000 related to aged mortgage loans held-for-sale and the non-recurring $966,000 charge for indemnification claims previously discussed. Excluding this accrual, net gains on sales of loans decreased $3.8 million, or 22.7%, driven by the 14.1% drop in mortgage loan originations and lower margins. The year to year comparative decline in net income was affected not only by the impact of the rising interest rate environment, but also the full year impact of the additional mortgage loan officers in 2013, added in the first half of 2012.

Expenses increased by $3.7 million, or 26.7%, over last year primarily due to increases in salary and benefit expenses of $2.2 million related to the addition of personnel to support mortgage loan originators in 2012, investments made in the current year to enhance the mortgage segment’s operating capabilities, and severance related to the relocation of the mortgage segment’s headquarters to Richmond. In addition, increases in expenses included higher rent expense of $563,000 related to annual rent increases, lease termination costs, and the headquarters relocation, loan-related expenses of $236,000, primarily related to appraisal and credit reporting expenses, and professional fees of $200,000.

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2014

2012 compared to 2011

For the year ended December 31, 2012,2015, the mortgage segment reported a net income increased $933,000, or 57.8%, from $1.6loss of $202,000 compared to a loss of $3.5 million in 20112014, representing an improvement of $3.3 million, or 94.2%. The improvement was due to $2.5 million.a reduction in noninterest expense of $5.0 million, largely a result of cost control initiatives in personnel costs and professional fees as well as declines in volume-driven expenses. Noninterest income remained stable during 2015 compared to 2014, despite a decline in origination volume of $137.3 million, or 20.3%, to $540.1 million from $677.4 million during 2014, as gain on sale margins improved from 2014. The significant decline in origination volume was primarily driven by lower construction and purchased volume.

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 early 2012,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 significantly increasedwill realize its mortgage loan production capacity by hiring additional loan originatorsdeferred tax asset related to net operating losses generated at the state level and support personnel who were formerly employed byaccordingly has established a national mortgage company that exitedvaluation 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 mortgage origination business. Originations increased by $436.8 million, or 66.2%Company is currently unable to utilize. State net operating loss carryovers will begin to expire after 2026.

The effective tax rate for the years ended December 31, 2016, 2015, and 2014 was 25.7%, to $1.1 billion from $659.4 million in 2011 due to the addition of mortgage loan originators25.8%, and the historically low interest rate environment.  Gains on sales of loans, net of commission expenses, increased $5.6 million, or 50.7%25.8%, while salary and benefit expenses increased $3.0 million, or 55.4%, primarily due to the addition of mortgage loan originators and support personnel in early 2012.  Refinanced loans represented 54.3% of originations during the year compared to 37.4% during 2011.

respectively.

BALANCE SHEET

Assets

At December 31, 2013,2016, total assets were $4.2$8.4 billion, an increase of $80.7$733.5 million, from $7.7 billion at December 31, 2015. The increase in assets was primarily related to loan growth.

Loans held for investment, net of deferred fees and costs, were $6.3 billion at December 31, 2016, an increase of $635.6 million, or 11.2%, from December 31, 2012. 2015. The increase was primarily driven by a combined growth of $535.5 million in commercial real estate - non-owner occupied loans, commercial and industrial loans, and consumer loans from third party lending programs. Year-to-date average loan balances increased $468.8 million, or 8.5%, from the prior year. For additional information on the Company’s loan activity, please refer to section “Loan Portfolio” included within this Item 7, or Note 4 “Loans and Allowance for Loan Losses” in the “Notes to Consolidated Financial Statements” contained in Item 8 of this Form 10-K.

Liabilities and Stockholders’ Equity

At December 31, 2016, total liabilities were $7.4 billion, an increase of $727.8 million, from $6.7 billion at December 31, 2015.

Total cashdeposits at December 31, 2016 were $6.4 billion, an increase of $415.6 million, or 7.0%, when compared to $6.0 billion at December 31, 2015, and cash equivalents were $73.0one of the predominate sources that funded asset growth in 2016. Year-to-date average deposit balances increased $342.6 million, or 5.9%, from the prior year. The Company continued to experience a shift from time deposits to lower cost transaction accounts, specifically NOW and money market accounts, driven by the Company’s focus on acquiring low cost funding sources and customer preference for liquidity in response to current market conditions. For additional information on this topic, see section “Deposits” included within this Item 7.

Total borrowings at December 31, 2016 were $990.1 million, an increase of $309.9 million, or 45.6%, when compared to $680.2 million at December 31, 2013, a decrease of $9.9 million from the same period last year. Investment in securities increased $91.9 million, or 15.7%, from $585.4 million at December 31, 2012 to $677.3 million at December 31, 2013. Mortgage loans held for sale were $53.2 million, a decrease of $114.5 million from December 31, 2012.

At December 31, 2013, loans (net of unearned income) were $3.0 billion, an2015. The increase of $72.5 million, or 2.4%, from December 31, 2012. Average loans outstanding increased $109.8 million, or 3.8%, from December 31, 2012.

As of December 31, 2013, total deposits were $3.2 billion, a decrease of $60.9 million, or 1.8%, when compared to December 31, 2012.The decline of year over year deposit totals was primarily driven by decreasesincreases in time depositsshort-term FHLB borrowings of $160.9$213.5 million. Additionally, the Company issued $150.0 million partially offset by an increase of lower cost demand deposit levels of $45.8 million and an increase of NOW accounts of $43.9 million.

As of December 31, 2013, net short term borrowings increased $131.7 million, or 99.6% from December 31, 2012, primarily related to securities purchases (primarily mortgage backed and tax-free municipals)long-term fixed-to-floating rate subordinated notes in the fourth quarter of 2013 in anticipation of the StellarOne merger. During the third quarter of 2012, the Company modified its fixed rate convertible FHLB advances to floating rate advances, which resulted in reducing2016. For additional information on the Company’s FHLB borrowing costs. In connection with this modification, the Company incurred a prepayment penalty of $19.6 million which is being amortized, as a component of interest expense on borrowing, over the life of the advances. The prepayment amount is reported as a component of long-term borrowingsactivity, please refer to Note 8 “Borrowings” in the Company’s“Notes to Consolidated Balance Sheet.

During the first quarterFinancial Statements” contained in Item 8 of 2013, the Company entered into an agreement to purchase 500,000 shares of its common stock from Markel Corporation, then the Company’s largest shareholder, for an aggregate purchase price of $9,500,000, or $19.00 per share. The repurchase was funded with cash on hand and the shares were retired. During the remainder of 2013, the Company did not repurchase any shares. The Company’s authorization to repurchase an additional 250,000 shares under its 2013 repurchase program authorization expired December 31, 2013.

On January 30, 2014, the Company’s Board of Directors authorized a share repurchase program to purchase up to $65.0 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.

Securities

this Form 10-K.

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At December 31, 2013,2016, stockholders’ equity was $1.0 billion, an increase of $5.7 million from $995.4 million reported at December 31, 2015. The Company’s capital ratios continue to exceed the minimum capital requirements for regulatory purposes. The total risk-based capital ratios at December 31, 2016 and December 31, 2015 were 13.56% and 12.46%, respectively. The Tier 1 risk-based capital ratios were 10.97% and 11.93% at December 31, 2016 and December 31, 2015, respectively. The common equity Tier 1 risk-based capital ratio was 9.72% and 10.55% at December 31, 2016 and December 31, 2015, respectively. The Company’s common equity to total asset ratios at December 31, 2016 and December 31, 2015 were 11.88% and 12.94%, respectively, while its tangible common equity to tangible assets ratios were 8.41% and 9.20%, respectively, at the same dates. 

During 2016, the Company declared and paid cash dividends of $0.77 per share, an increase of $0.09 per share, or 13.2%, over cash dividends paid in 2015.

Securities

At December 31, 2016, the Company had total investments in the amount of $703.4 million,$1.2 billion, or 16.8%14.3% of total assets, as compared to $606.1 million,$1.2 billion, or 14.8%15.1% of total assets, at December 31, 2012.2015. 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. All of the Company’s mortgage-backed securities are considered 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.

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During 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 $5.2 million and $6.8 million as of December 31, 2016 and 2015.

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):

		2013				2012
U.S. government and agency securities		$	2,153			$	2,849
Obligations of states and political subdivisions			254,830				229,778
Corporate and other bonds			9,434				7,212
Mortgage-backed securities			407,362				342,174
Other securities			3,569				3,369
Total securities available for sale, at fair value			677,348				585,382
Federal Reserve Bank stock			6,734				6,754
Federal Home Loan Bank stock			19,302				13,933
Total restricted stock			26,036				20,687
Total investments		$	703,384			$	606,069

	December 31, 2016				December 31, 2015
Available for Sale:
Obligations of states and political subdivisions	$	275,890			$	268,079
Corporate and other bonds	121,780				75,979
Mortgage-backed securities	535,286				548,171
Other securities	13,808				11,063
Total securities available for sale, at fair value	946,764				903,292
Held to Maturity:
Obligations of states and political subdivisions, at carrying value	201,526				205,374
Restricted Stock:
Federal Reserve Bank stock	23,808				23,808
FHLB stock	36,974				28,020
Total restricted stock, at cost	60,782				51,828
Total investments	$	1,209,072			$	1,160,494

During each quarter and at year end, the Company conducts an assessment of the securities portfolio for OTTI consideration. The Company determined that a single issuer trust preferred security incurred credit-relatedNo OTTI of $400,000 duringwas recognized for the year ended December 31, 2011; there is no remaining unrealized loss for this issue as of2016. For the year ended December 31, 2013. No2015, the Company determined that a municipal security in the available for sale portfolio incurred credit-related OTTI of $300,000. During the first quarter of 2016, the municipal security was sold. As a result, the Company recognized an additional loss on sale of the previously written down security. During 2014, a trust preferred security with OTTI recorded in 2012 or 2013.a prior period was called at a premium.  As a result, the Company recognized a gain on the call of the previously written down security of $400,000 related to the previous OTTI charge. 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.

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The following table summarizes the contractual maturity of securities available for sale at fair value and their weighted average yields as of December 31, 20132016 (dollars in thousands):

		1 Year or Less				1 - 5 Years				5 - 10 Years				Over 10 Years and Equity Securities				Total
U.S. government and agency securities:
Amortized cost		$	-			$	1,594			$	-			$	60			$	1,654
Fair value			-				1,628				-				525				2,153
Weighted average yield(1)			-				2.78				-				-				2.67
Mortgage backed securities:
Amortized cost			209				11,839				67,865				325,476				405,389
Fair value			211				12,248				68,704				326,199				407,362
Weighted average yield(1)			4.21				2.96				2.08				2.02				2.06
Obligations of states and political subdivisions:
Amortized cost			2,965				7,463				48,870				196,037				255,335
Fair value			3,016				7,817				50,565				193,432				254,830
Weighted average yield(1)			6.96				6.32				6.19				5.29				5.51
Corporate bonds and other securities:
Amortized cost			3,617				770				-				8,709				13,096
Fair value			3,569				804				-				8,630				13,003
Weighted average yield(1)			1.99				4.99				-				4.90				4.10
Total securities available for sale:
Amortized cost			6,791				21,666				116,735				530,282				675,474
Fair value			6,796				22,497				119,269				528,786				677,348
Weighted average yield(1)			4.23				4.17				3.80				3.28				3.41

	1 Year or Less				1 - 5 Years				5 - 10 Years				Over 10 Years				Total
Mortgage backed securities:
Amortized cost	$	—			$	51,545			$	165,232			$	319,254			$	536,031
Fair value	$	—			$	51,346			$	164,378			$	319,562			$	535,286
Weighted average yield (1)	—				1.99				2.22				2.45				2.34
Obligations of states and political subdivisions:
Amortized cost	$	10,018			$	56,131			$	73,999			$	133,859			$	274,007
Fair value	$	10,209			$	57,910			$	75,666			$	132,105			$	275,890
Weighted average yield (1)	6.32				4.65				4.59				3.94				4.36
Corporate bonds and other securities:
Amortized cost	$	11,385			$	522			$	61,321			$	64,331			$	137,559
Fair value	$	11,308			$	522			$	61,844			$	61,914			$	135,588
Weighted average yield (1)	1.30				1.24				4.45				2.25				3.15
Total securities available for sale:
Amortized cost	$	21,403			$	108,198			$	300,552			$	517,444			$	947,597
Fair value	$	21,517			$	109,778			$	301,888			$	513,581			$	946,764
Weighted average yield (1)	3.65				3.37				3.26				2.81				3.04

⁽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 December 31, 2016 (dollars in thousands):

	1 Year or Less				1 - 5 Years				5 - 10 Years				Over 10 Years				Total
Obligations of states and political subdivisions:
Carrying Value	$	4,403			$	28,383			$	51,730			$	117,010			$	201,526
Fair value	$	4,440			$	28,763			$	51,522			$	117,590			$	202,315
Weighted average yield (1)	2.80				2.96				3.06				3.82				3.48

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

As of December 31, 2013,2016, the Company maintained a diversified municipal bond portfolio with approximately 70%74% of its holdings in general obligation issues and the remainder backed by revenue bonds. Issuances within the Commonwealth of Virginia and the State of Texas both represented 11%12% and issuances within the State of TexasWashington represented 22%11% of the municipal portfolio; no other state had a concentration above 10%. Approximately 92% ofSubstantially 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.grade. When purchasing municipal securities, the Company focuses on strong underlying ratings for general obligation issuers or bonds backed by essential service revenues.

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Loan Portfolio

Loans held for investment, net of unearned income,deferred fees and costs, were $3.0$6.3 billion and $5.7 billion at both December 31, 20132016 and 2012. Loans secured by2015, respectively. Commercial real estate - non-owner occupied loans continue to represent the Company’s largest category, comprising 83.8%24.8% of the total loan portfolio at December 31, 2013.

2016.

The following table presents the Company’s composition of loans held for investment, net of unearned income,deferred fees and costs, in dollar amounts and as a percentage of total gross loans as of December 31, (dollars in thousands):

		2013								2012								2011								2010								2009
Loans secured by real estate:
Residential 1-4 family		$	475,688				15.7	%		$	472,985				15.9	%		$	447,544				15.9	%		$	431,614				15.2	%		$	349,277				18.6	%
Commercial			1,094,451				36.0	%			1,044,396				35.2	%			985,934				34.9	%			924,548				32.6	%			596,773				31.9	%
Construction, land development and other land loans			470,684				15.5	%			470,638				15.9	%			444,739				15.8	%			489,601				17.3	%			307,726				16.4	%
Second mortgages			34,891				1.1	%			39,925				1.3	%			55,630				2.0	%			64,534				2.3	%			34,942				1.9	%
Equity lines of credit			302,965				10.0	%			307,668				10.4	%			304,320				10.8	%			305,741				10.8	%			182,449				9.7	%
Multifamily			146,433				4.8	%			140,038				4.7	%			108,260				3.8	%			91,397				3.2	%			46,581				2.5	%
Farm land			20,769				0.7	%			22,776				0.8	%			26,962				1.0	%			26,787				0.9	%			26,191				1.4	%
Total real estate loans			2,545,881				83.8	%			2,498,426				84.2	%			2,373,389				84.2	%			2,334,222				82.3	%			1,543,939				82.4	%
Commercial Loans			194,809				6.4	%			186,528				6.3	%			169,695				6.0	%			180,840				6.4	%			126,157				6.8	%
Consumer installment loans
Personal			238,368				7.8	%			222,812				7.5	%			241,753				8.6	%			277,184				9.8	%			148,811				7.9	%
Credit cards			23,211				0.8	%			21,968				0.7	%			19,006				0.7	%			19,308				0.6	%			17,743				0.9	%
Total consumer installment loans			261,579				8.6	%			244,780				8.2	%			260,759				9.3	%			296,492				10.4	%			166,554				8.8	%
All other loans			37,099				1.2	%			37,113				1.3	%			14,740				0.5	%			25,699				0.9	%			37,574				2.0	%
Gross loans		$	3,039,368				100.0	%		$	2,966,847				100.0	%		$	2,818,583				100.0	%		$	2,837,253				100.0	%		$	1,874,224				100.0	%

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	2016							2015							2014							2013							2012
Construction and Land Development	$	751,131			11.9	%		$	749,720			13.2	%		$	656,380			12.3	%		$	470,684			15.5	%		$	470,638			15.9	%
Commercial Real Estate - Owner Occupied	857,805				13.6	%		860,086				15.2	%		869,200				16.3	%		503,318				16.6	%		513,518				17.3	%
Commercial Real Estate - Non-Owner Occupied	1,564,295				24.8	%		1,270,480				22.3	%		1,183,514				22.0	%		591,133				19.4	%		530,878				17.9	%
Multifamily Real Estate	334,276				5.3	%		322,528				5.7	%		297,366				5.6	%		146,433				4.8	%		140,038				4.7	%
Commercial & Industrial	551,526				8.7	%		435,365				7.7	%		374,096				7.0	%		194,809				6.4	%		186,528				6.3	%
Residential 1-4 Family	1,029,547				16.3	%		978,469				17.3	%		983,074				18.4	%		510,579				16.8	%		512,910				17.3	%
Auto	262,071				4.2	%		234,061				4.1	%		207,813				3.9	%		179,976				5.9	%		164,066				5.5	%
HELOC	526,884				8.4	%		516,726				9.1	%		523,341				9.8	%		302,965				10.0	%		307,668				10.4	%
Consumer and all other	429,525				6.8	%		304,027				5.4	%		251,212				4.7	%		139,471				4.6	%		140,603				4.7	%
Total loans held for investment	$	6,307,060			100.0	%		$	5,671,462			100.0	%		$	5,345,996			100.0	%		$	3,039,368			100.0	%		$	2,966,847			100.0	%

The following table presents the remaining maturities, based on contractual maturity, by loan type and by rate type (variable or fixed), as of December 31, 20132016 (dollars in thousands):

										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
Loans secured by real estate:
Residential 1-4 family		$	475,688			$	66,151			$	73,136			$	19,788			$	53,348			$	336,401			$	204,244			$	132,157
Commercial			1,094,451				169,626				95,457				88,130				7,327				829,368				556,863				272,505
Construction, land development and other land loans			470,684				318,623				8,572				5,292				3,280				143,489				120,737				22,752
Second mortgages			34,891				3,401				2,678				2,089				589				28,812				14,231				14,581
Equity lines of credit			302,965				194,977				43				-				43				107,945				17,695				90,250
Multifamily			146,433				18,490				23,644				23,644				-				104,299				83,746				20,553
Farm land			20,769				13,903				493				454				39				6,373				5,888				485
Total real estate loans			2,545,881				785,171				204,023				139,397				64,626				1,556,687				1,003,404				553,283
Commercial Loans			194,809				82,806				137				137				-				111,866				89,840				22,026
Consumer installment loans
Personal			238,368				7,326				-				-				-				231,042				105,715				125,327
Credit cards			23,211				23,211				-				-				-				-				-				-
Total consumer installment loans			261,579				30,537				-				-				-				231,042				105,715				125,327
All other loans			37,099				7,171				3,228				3,228				-				26,700				3,720				22,980
Gross loans		$	3,039,368			$	905,685			$	207,388			$	142,762			$	64,626			$	1,926,295			$	1,202,679			$	723,616

									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
Construction and Land Development	$	751,131			$	455,017			$	175,393			$	146,337			$	29,056			$	120,721			$	97,963			$	22,758
Commercial Real Estate - Owner Occupied	857,805				102,831				254,318				46,648				207,670				500,656				346,702				153,954
Commercial Real Estate - Non-Owner Occupied	1,564,295				142,308				526,982				183,897				343,085				895,005				651,474				243,531
Multifamily Real Estate	334,276				22,219				117,531				27,346				90,185				194,526				160,600				33,926
Commercial & Industrial	551,526				169,959				163,769				119,571				44,198				217,798				139,503				78,295
Residential 1-4 Family	1,029,547				78,524				349,607				14,431				335,176				601,416				327,432				273,984
Auto	262,071				2,237				—				—				—				259,834				125,552				134,282
HELOC	526,884				34,291				492,287				40,356				451,931				306				187				119
Consumer and all other	429,525				38,583				46,820				13,333				33,487				344,122				120,349				223,773
Total loans held for investment	$	6,307,060			$	1,045,969			$	2,126,707			$	591,919			$	1,534,788			$	3,134,384			$	1,969,762			$	1,164,622

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 December 31, 2013,2016, the largest component of the Company’s loan portfolio consisted of commercial real estate loans, concentrated in commercial,residential 1-4 family loans, and construction and residential 1-4 family.land development loans. 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 primarily serves as a secondary mortgage brokeragebanking 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.

44

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Asset Quality

Overview

During 2013, the

The Company continued to see improvement in asset quality with reduced levels of impaired loans, troubled debt restructurings, past due loans, and nonperforming assets, which were at their lowest levels since the fourth quarter of 2009. Net charge-offs and the loan loss provision, as well as their respective ratios of net charge-offs to total loans and provision to total loans, also decreased from the prior year. The allowance to nonperforming loans coverage ratio was at the highest level since the first quarter of 2008. The magnitude of any change in the real estate market andbelieves that its impact on the Company is still largely dependent upon continued recovery of residential housing and commercial real estate and the pace at which the local economies in the Company’s operating markets improve.

The Company’s continued proactive efforts to effectively manage its loan portfolio have contributed to the improvement in asset quality. Efforts include identifying existing problem credits as well as generating new business relationships. Through early identification and diligent monitoring of specific problem credits where the uncertainty has been realized, or conversely, has been reduced or eliminated, the Company’s management has been able to quantify the credit risk in its loan portfolio, adjust collateral dependent credits to appropriate reserve levels, and further identify those credits that are not recoverable. The Company continues to refrain from originating or purchasing loans from foreign entities or loans classified by regulators as highly leveraged transactions. The Company’s loan portfolio generally does not include exposure to option adjustable rate mortgage products, high loan-to-value ratio mortgages, interest only mortgage loans, subprime mortgage loans or mortgage loans with initial teaser rates, which are all considered higher risk instruments.

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During 2016, the Company experienced declines in nonperforming asset balances and past due loan levels as well as lower net charge-off levels. OREO balances declined from the prior year; the declines were mostly attributable to sales in foreclosed land and residential real estate and developed lots. The loan loss provision decreased from the prior year due to lower levels of net charge-offs and continued improvement in credit quality metrics, while the allowance for loan loss increased from the prior year due to loan growth.

Troubled Debt Restructurings

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. The Company generally does notManagement strives to identify borrowers in financial difficulty early and work with them to modify their loan to more affordable terms before their loan reaches nonaccrual status. These modified terms may include rate reductions, principal forgiveness, extension of terms that are considered to be below market, conversion to interest only, and other actions intended to minimize the economic loss and to avoid foreclosure or repossession of the collateral. In cases where borrowers are granted new terms that provide concessionfor a reduction of either interest or principal, management measures any impairment on interest rates,the restructuring accordingly and in accordance with the primary concession being an extension of the term of theimpaired loan from the original maturity date. policy.

Restructured loans for which there was no rate concession, and therefore made at a market rate of interest, may subsequently be eligible to be removed from TDR status in periods subsequent to the restructuring depending on the performance of the loan. The Company reviews previously restructured loans quarterly in order to determine whether any hashave performed, subsequent to the restructure, at a level that would allow for itthem to be removed from TDR status. The Company generally would consider a change in this classification if the borrower is no longer experiencing financial difficulties; the loan has performed under the restructured terms for a consecutive twelve month period.

period, and is no longer considered to be impaired. All changes to TDR designations must be approved by the Bank's Special Asset Loan Committee.

The total recorded investment in TDRs as of December 31, 20132016 was $41.8$15.4 million, a decreasean increase of $21.7$2.7 million, or 34.2%21.3%, from $63.5$12.7 million at December 31, 2012.2015. Of the $15.4 million of TDRs at December 31, 2016, $14.0 million, or 90.7%, were considered performing while the remaining $1.4 million were considered nonperforming. Of the $12.7 million of TDRs at December 31, 2015, $10.8 million, or 84.9%, were considered performing while the remaining $1.9 million were considered nonperforming. The declineincrease in the TDR balance from the prior year is attributable to $13.6$6.6 million in additions, partially offset by $1.3 million being removed from TDR status, $11.6$1.8 million in net payments, $2.4 millionand $810,000 in transfers to OREO, and $1.9 million in charge-offs, partially offset by additions of $7.8 million.charge-offs. Loans are removed from TDR status represent restructured loans with a market rate of interest at the time of the restructuring, which were performing in accordance with their modified terms for a consecutive twelve month periodthe established policy described in Note 1 “Summary of Significant Accounting Policies” in Item 8 – Financial Statements and that were no longer considered impaired. Loans removed from TDR status are collectively evaluated for impairment and 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, and impairment is measured based on historical loss experience taking into consideration environmental factors. The significant majoritySupplementary Data, 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 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.

Of the $41.8 million of TDRs at December 31, 2013, $34.5 million, or 82.5%, were considered performing while the remaining $7.3 million were considered nonperforming. Of the $63.5 million of TDRs at December 31, 2012, $51.5 million, or 81.1%, were considered performing while the remaining $12.0 million were considered nonperforming.

this Form 10-K.

Nonperforming Assets

At December 31, 2013, nonperforming assets2016, NPAs totaled $49.2$20.1 million, a decrease of $9.8$7.2 million, or 16.6%26.4%, from December 31, 2012.2015. In addition, NPAs as a percentage of total outstanding loans declined 3716 basis points to 1.62%0.32% from 1.99%0.48% at the end of the prior year.

All nonaccrual and past due metrics discussed below exclude PCI loans, which aggregated $59.3 million (net of fair value mark of $14.3 million) at December 31, 2016.

45

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The following table shows a summary of assetsasset quality balances and related ratios as of and for the years ended December 31, (dollars in thousands):

		2013				2012				2011				2010				2009
Nonaccrual loans (excluding purchased impaired)		$	15,035			$	26,206			$	44,834			$	61,716			$	22,348
Foreclosed properties			34,116				32,834				31,243				35,102				21,489
Real estate investment			-				-				1,020				1,020				1,020
Total nonperforming assets			49,151				59,040				77,097				97,838				44,857
Loans past due 90 days and accruing interest			6,746				8,843				19,911				15,332				7,296
Total nonperforming assets and Loans past due 90 days and accruing interest		$	55,897			$	67,883			$	97,008			$	113,170			$	52,153
Performing Restructurings		$	34,520			$	51,468			$	98,834			$	13,086			$	-
NPAs to total loans			1.62	%			1.99	%			2.74	%			3.45	%			2.39	%
NPAs & loans 90 days past due to total loans			1.84	%			2.29	%			3.44	%			3.99	%			2.78	%
NPAs to total loans & OREO			1.60	%			1.97	%			2.70	%			3.40	%			2.36	%
NPAs & loans 90 days past due to total loans & OREO			1.82	%			2.26	%			3.40	%			3.94	%			2.75	%
ALLL to nonaccrual loans			200.43	%			133.24	%			88.04	%			62.23	%			136.41	%
ALLL to nonaccrual loans & loans 90 days past due			138.35	%			99.62	%			60.96	%			49.85	%			102.83	%

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	2016				2015				2014				2013				2012
Nonaccrual loans, excluding PCI loans	$	9,973			$	11,936			$	19,255			$	15,035			$	26,206
Foreclosed properties	7,430				11,994				23,058				34,116				32,834
Former bank premises	2,654				3,305				5,060				—				—
Total nonperforming assets	20,057				27,235				47,373				49,151				59,040
Loans past due 90 days and accruing interest	3,005				5,829				10,047				6,746				8,843
Total nonperforming assets and loans past due 90 days and accruing interest	$	23,062			$	33,064			$	57,420			$	55,897			$	67,883
Performing restructurings	$	13,967			$	10,780			$	22,829			$	34,520			$	51,468
PCI loans	59,292				73,737				105,788				3,622				4,565
Balances
Allowance for loan losses	$	37,192			$	34,047			$	32,384			$	30,135			$	34,916
Average loans, net of deferred fees and costs	5,956,125				5,487,367				5,235,471				2,985,733				2,875,916
Loans, net of deferred fees and costs	6,307,060				5,671,462				5,345,996				3,039,368				2,966,847
Ratios
NPAs to total loans	0.32		%		0.48		%		0.89		%		1.62		%		1.99		%
NPAs & loans 90 days past due to total loans	0.37		%		0.58		%		1.07		%		1.84		%		2.29		%
NPAs to total loans & OREO	0.32		%		0.48		%		0.88		%		1.60		%		1.97		%
NPAs & loans 90 days past due to total loans & OREO	0.37		%		0.58		%		1.07		%		1.82		%		2.26		%
ALL to nonaccrual loans	372.93		%		285.25		%		168.18		%		200.43		%		133.24		%
ALL to nonaccrual loans & loans 90 days past due	286.58		%		191.65		%		110.52		%		138.35		%		99.62		%

Nonperforming assets at December 31, 20132016 included $15.0$10.0 million in nonaccrual loans, (excluding purchased impaired loans), a net decrease of $11.2$2.0 million, or 42.7%16.4%, from the prior year. The following table shows the activity in nonaccrual loans for the years ended December 31, (dollars in thousands):

		2013				2012				2011				2010
Beginning Balance		$	26,206			$	44,834			$	61,716			$	22,348
Net customer payments			(12,393	)			(13,624	)			(18,661	)			(8,985	)
Additions			16,725				10,265				19,905				75,099
Charge-offs			(8,743	)			(8,510	)			(8,716	)			(10,005	)
Loans returning to accruing status			(2,718	)			(3,455	)			(3,607	)			(1,017	)
Transfers to OREO			(4,042	)			(3,304	)			(5,803	)			(15,724	)
Ending Balance		$	15,035			$	26,206			$	44,834			$	61,716

The additions during the year were primarily related to commercial and industrial loans and mortgages. The reductions in nonaccrual loans during the year were primarily related to the commercial loan portfolio, particularly commercial construction and raw land loans.

	2016				2015				2014				2013				2012
Beginning Balance	$	11,936			$	19,255			$	15,035			$	26,206			$	44,834
Net customer payments	(7,159		)		(10,240		)		(8,053		)		(12,393		)		(13,624		)
Additions	13,171				12,517				20,961				16,725				10,265
Charge-offs	(4,418		)		(7,064		)		(2,732		)		(8,743		)		(8,510		)
Loans returning to accruing status	(2,390		)		(1,497		)		(3,492		)		(2,718		)		(3,455		)
Transfers to OREO	(1,167		)		(1,035		)		(2,464		)		(4,042		)		(3,304		)
Ending Balance	$	9,973			$	11,936			$	19,255			$	15,035			$	26,206
Nonaccrual loans to total loans	0.16		%		0.21		%		0.36		%		0.49		%		0.88		%

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The following table presents the composition of nonaccrual loans (excluding purchased impaired loans) and the coverage ratio, which is the allowance for loan lossesALL expressed as a percentage of nonaccrual loans, at the years ended December 31, (dollars in thousands):

		2013				2012				2011				2010
Raw Land and Lots		$	2,560			$	8,760			$	13,322			$	22,546
Commercial Construction			1,596				5,781				10,276				11,410
Commercial Real Estate			2,212				3,018				7,993				10,157
Single Family Investment Real Estate			1,689				3,420				5,048				10,226
Commercial and Industrial			3,848				2,036				5,297				4,797
Other Commercial			126				193				238				458
Consumer			3,004				2,998				2,660				2,122
Total		$	15,035			$	26,206			$	44,834			$	61,716
Coverage Ratio			200.43	%			133.24	%			88.04	%			62.23	%

	2016				2015				2014				2013				2012
Construction and Land Development	$	2,037			$	2,113			$	3,419			$	4,156			$	15,108
Commercial Real Estate - Owner Occupied	794				3,904				1,060				2,037				2,206
Commercial Real Estate - Non-owner Occupied	—				100				5,903				175				812
Commercial & Industrial	124				429				2,754				3,475				1,139
Residential 1-4 Family	5,279				3,563				5,144				4,488				4,560
Auto	169				192				—				—				—
HELOC	1,279				1,348				604				416				2,223
Consumer and All Other	291				287				371				288				158
Total	$	9,973			$	11,936			$	19,255			$	15,035			$	26,206
Coverage Ratio	372.93		%		285.25		%		168.18		%		200.43		%		133.24		%

Nonperforming assets at December 31, 20132016 also included $34.1$10.1 million in OREO, an increasea decrease of $1.3$5.2 million, or 4.0%34.1%, from the prior year. The following table shows the activity in OREO for the years ended December 31, (dollars in thousands):

		2013				2012				2011				2010
Beginning Balance		$	32,834			$	32,263			$	36,122			$	22,509
Additions			9,542				14,275				11,625				24,792
Capitalized Improvements			561				380				528				404
Valuation Adjustments			(791	)			(301	)			(707	)			(43	)
Proceeds from sales			(7,569	)			(13,152	)			(14,240	)			(11,747	)
Gains (losses) from sales			(461	)			(631	)			(1,065	)			207
Ending Balance		$	34,116			$	32,834			$	32,263			$	36,122

	2016				2015				2014				2013				2012
Beginning Balance	$	15,299			$	28,118			$	34,116			$	32,834			$	32,263
Additions	2,062				4,602				20,872				9,542				14,274
Capitalized Improvements	—				308				686				561				381
Valuation Adjustments	(1,017		)		(6,002		)		(7,646		)		(791		)		(301		)
Proceeds from sales	(6,602		)		(11,987		)		(21,291		)		(7,569		)		(13,152		)
Gains (losses) from sales	342				260				1,381				(461		)		(631		)
Ending Balance	$	10,084			$	15,299			$	28,118			$	34,116			$	32,834

During 2016, the year ended December 31, 2013, the additions tomajority of sales of OREO were principallyprimarily related to land and residential real estate and raw land; sales from OREO were principally related to residential real estate.

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developed lots.

The following table presents the composition of the OREO portfolio at the years ended December 31, (dollars in thousands):

		2013				2012				2011				2010
Land		$	10,310			$	8,657			$	6,327			$	7,689
Land Development			10,904				10,886				11,309				11,233
Residential Real Estate			7,379				7,939				11,024				13,402
Commercial Real Estate			5,523				5,352				2,583				2,778
Former Bank Premises(1)			-				-				1,020				1,020
Total		$	34,116			$	32,834			$	32,263			$	36,122

	2016				2015				2014				2013				2012
Land	$	3,328			$	5,731			$	8,726			$	10,310			$	8,657
Land Development	2,379				2,918				7,162				10,904				10,886
Residential Real Estate	1,549				2,601				5,736				7,379				7,939
Commercial Real Estate	174				744				1,434				5,523				5,352
Former Bank Premises (1)	2,654				3,305				5,060				—				—
Total	$	10,084			$	15,299			$	28,118			$	34,116			$	32,834

(1) Includes closed branch property and land previously held for future branch sites.

Included in land development is $9.3 million related to a residential community in the Northern Neck region of Virginia, which includes developed residential lots, a golf course, and undeveloped land. Foreclosed properties were adjusted to their fair values at the time of each foreclosure and any losses were taken as loan charge-offs against the allowance for loan losses at that time. OREO asset balances are also evaluated at least quarterly by the subsidiary bank’s Special Asset Loan Committee and any necessary write downs to fair values are recorded as impairment.

Past Due Loans

At December 31, 2013,2016, total accruing past due loans were $26.5$27.9 million, or 0.87%0.44% of total loans, a decrease from $32.4$42.9 million, or 1.09%0.76% of total loans, a year ago. This net decrease of $5.9At December 31, 2016, loans past due 90 days or more and accruing interest totaled $3.0 million, or 18.2%0.05% of total loans, compared to $5.8 million, or 0.10%, is a result of management’s diligence in handling problem loans and an improving economy.

at December 31, 2015.

Net Charge-offs and delinquencies

For the year ended December 31, 2013,2016, net charge-offs of loans were $10.8$5.5 million, or 0.36%0.09%, compared to $16.8$7.6 million, or 0.56%0.13%, lastfor the prior year. Of the $10.8 million inThe lower level of net charge-offs approximately $8.8 million, or 81%, relatedin 2016 is mainly due to impaired loans specifically reserved forcontinued improvement in the prior periods. Net charge-offs in the current year included commercial loans of $7.0 million and consumer loans of $3.8 million.

credit quality metrics.

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Provision

The provision for loan losses for the year ended December 31, 20132016 was $6.1$8.7 million, a decrease of $6.1 million,$596,000, or 50.0%6.4%, from the prior year. The lowerdecrease in provision for loan losses in the current year compared to lastthe prior year iswas primarily driven by lower net charge-off levels and improving assetcredit quality andmetrics. Additionally, a $425,000 provision was recognized during the impact of overall lower historical charge-off factors. The provision to loans ratiocurrent year for the year ended December 31, 2013 was 0.20%unfunded loan commitments compared to 0.41% for$300,000 in the prior year.

Allowance for Loan Losses

The allowanceALL increased $3.1 million from December 31, 2015 to $37.2 million at December 31, 2016. The ALL as a percentage of the total loan portfolio, unadjusted for loan lossesacquisition accounting, was 0.59% at December 31, 2016, compared to 0.60% at December 31, 2015. The ALL as a percentage of the total loan portfolio, adjusted for acquisition accounting (non-GAAP), was 1.10%0.86% at December 31, 2013,2016, a decrease from 1.35%0.98% at December 31, 2015. The decrease in the ALL ratios was primarily attributable to improving credit quality metrics (as a year ago.percentage of total loans). In acquisition accounting, there is no carryover of previously established allowance for loan losses. The allowance for loan lossesALL, as a percentage of the total loan portfolio was 0.99%acquired loans are recorded at December 31, 2013, a decrease from 1.18% at December 31, 2012. The decrease in the allowance and related ratios was primarily attributable to the charge-off of impaired loans specifically reserved for in prior periods and improving credit quality metrics.

Impaired loans have declined from $155.4 million at December 31, 2012 to $112.6 million at December 31, 2013. The nonaccrual loan coverage ratio also improved, as it increased to 200.4% at December 31, 2013 from 133.2% at December 31, 2012. The rise in the coverage ratio, which is at the highest level since the first quarter of 2008, illustrates that management’s proactive diligence in working through problem credits is having a significant impact on asset quality. fair value.

The current level of the allowance for loan lossesALL 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.

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ALL.

The following table summarizes activity in the allowance for loan lossesALL during the years ended December 31, (dollars in thousands):

		2013				2012				2011				2010				2009
Balance, beginning of year		$	34,916			$	39,470			$	38,406			$	30,484			$	25,496
Loans charged-off:
Commercial			3,080				1,439				2,183				2,205				2,039
Real estate			8,596				14,127				12,669				12,581				8,702
Consumer			1,942				2,899				3,014				3,763				3,667
Total loans charged-off			13,618				18,465				17,866				18,549				14,408
Recoveries:
Commercial			746				207				413				551				71
Real estate			1,125				465				571				628				807
Consumer			910				1,039				1,146				924				272
Total recoveries			2,781				1,711				2,130				2,103				1,150
Net charge-offs			10,837				16,754				15,736				16,446				13,258
Provision for loan losses			6,056				12,200				16,800				24,368				18,246
Balance, end of year		$	30,135			$	34,916			$	39,470			$	38,406			$	30,484
ALL to loans			0.99	%			1.18	%			1.40	%			1.35	%			1.63	%
ALL to loans, adjusted for acquisition accounting (Non-GAAP)			1.10	%			1.35	%			1.71	%			1.82	%			N/A
Net charge-offs to total loans			0.36	%			0.56	%			0.56	%			0.58	%			0.71	%
Provision to total loans			0.20	%			0.41	%			0.60	%			0.86	%			0.97	%

	2016				2015				2014				2013				2012
Balance, beginning of year	$	34,047			$	32,384			$	30,135			$	34,916			$	39,470
Loans charged-off:
Commercial	1,920				2,361				1,557				3,080				1,439
Real estate	4,125				7,158				5,855				8,596				14,127
Consumer	2,510				2,016				1,608				1,942				2,899
Total loans charged-off	8,555				11,535				9,020				13,618				18,465
Recoveries:
Commercial	483				958				316				746				207
Real estate	1,781				2,154				2,314				1,125				465
Consumer	761				815				839				910				1,039
Total recoveries	3,025				3,927				3,469				2,781				1,711
Net charge-offs	5,530				7,608				5,551				10,837				16,754
Provision for loan losses	8,675				9,271				7,800				6,056				12,200
Balance, end of year	$	37,192			$	34,047			$	32,384			$	30,135			$	34,916
ALL to loans	0.59		%		0.60		%		0.61		%		0.99		%		1.18		%
ALL to loans, adjusted for acquisition accounting (Non-GAAP)	0.86		%		0.98		%		1.08		%		1.10		%		1.35		%
Net charge-offs to average loans	0.09		%		0.14		%		0.11		%		0.36		%		0.58		%
Provision to average loans	0.15		%		0.17		%		0.15		%		0.20		%		0.42		%

The following table shows both an allocationthe ALL by loan segment and the percentage of the allowance for loan losses among loan categories based upon the loan portfolio’s composition and the ratio ofportfolio that the related outstanding loan balances to total loansALL covers as of December 31, (dollars in thousands):

		2013								2012								2011								2010								2009
		$				% (1)				$				% (1)				$				% (1)				$				% (1)				$				% (1)
Commercial		$	1,932				6.4	%		$	2,195				6.3	%		$	2,376				6.0	%		$	2,448				6.4	%		$	2,052				6.7	%
Real estate			25,242				83.8	%			29,403				84.2	%			33,236				84.2	%			31,597				82.3	%			25,112				82.4	%
Consumer			2,961				9.8	%			3,318				9.5	%			3,858				9.8	%			4,361				11.3	%			3,320				10.9	%
Total		$	30,135				100.0	%		$	34,916				100.0	%		$	39,470				100.0	%		$	38,406				100.0	%		$	30,484				100.0	%

	2016							2015							2014							2013
	$				%(1)			$				%(1)			$				%(1)			$				%(1)
Commercial	$	4,627			8.7	%		$	3,163			7.7	%		$	2,610			7.0	%		$	2,021			6.4	%
Real estate	29,441				80.3	%		27,537				82.8	%		26,408				84.4	%		24,584				83.1	%
Consumer	3,124				11.0	%		3,347				9.5	%		3,366				8.6	%		3,530				10.5	%
Total	$	37,192			100.0	%		$	34,047			100.0	%		$	32,384			100.0	%		$	30,135			100.0	%

(1) The percent represents the loan balance divided by total loans.

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Deposits

As of December 31, 2013,2016, total deposits were $3.2$6.4 billion, down $60.9an increase of $415.6 million, or 1.8%7.0%, fromcompared to December 31, 2012.2015. Total interest-bearing deposits consist of NOW, money market, savings, and time deposit account balances. Total time deposit balances of $871.9 million$1.2 billion accounted for 34.3%23.9% of total interest-bearing deposits at December 31, 2013.2016. The Company continues to experience a shift from time deposits into lower cost transaction (demand deposits,accounts, specifically NOW and money market and savings) accounts. This shift isaccounts, driven by the Company’s focus on acquiring low cost depositsfunding sources and customer preference for liquidity in a historically low interest rate environment.

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response to current market conditions.

The community bank segmentfollowing table presents the deposit balances by major category as of December 31:

	2016							2015
Deposits:	Amount				% of total deposits			Amount				% of total deposits
Non-interest bearing	$	1,393,625			21.8	%		$	1,372,937			23.0	%
NOW accounts	1,765,956				27.7	%		1,521,906				25.5	%
Money market accounts	1,435,591				22.5	%		1,312,612				22.0	%
Savings accounts	591,742				9.3	%		572,800				9.6	%
Time deposits of $100,000 and over	530,275				8.3	%		514,286				8.7	%
Other time deposits	662,300				10.4	%		669,395				11.2	%
Total Deposits	$	6,379,489			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 December 31, 20132016 and 2012, there were $13.7 million and $10.2 million, respectively,2015, the Company did not have purchased andcertificates of deposits included in certificates of deposit on the Company’s Consolidated Balance Sheet. Maturities of time deposits as of December 31, 2013 are2016 were as follows (dollars in thousands):

		Within 3 Months				3 - 12 Months				Over 12 Months				Total				Percent Of Total Deposits
Maturities of time deposits of $100,000 and over		$	102,186			$	169,565			$	155,846			$	427,597				13.21	%
Maturities of other time deposits			71,496				218,350				154,408				444,254				13.72	%
Total time deposits		$	173,682			$	387,915			$	310,254			$	871,851				26.93	%

	Within 3 Months				3 - 12 Months				Over 12 Months				Total
Maturities of time deposits of $100,000 and over	$	54,024			$	122,254			$	353,997			$	530,275
Maturities of other time deposits	92,451				195,155				374,694				662,300
Total time deposits	$	146,475			$	317,409			$	728,691			$	1,192,575

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.

The FRB and the FDIC have adopted capital guidelines to supplement the existing definitions of capital for regulatory purposes and to establish minimum capital standards. Specifically, the guidelines categorize assets and off-balance sheet items into four risk-weighted categories. The minimum ratio of qualifying total assets is 8.0%, of which 4.0% must be Tier 1 capital, consisting of principally common equity, retained earnings and a limited amount of perpetual preferred stock, less certain intangible items. The table below shows the Company exceeded the definition of “well capitalized” for regulatory purposes.

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. The trust preferred capital notes currently qualify for Tier 1 capital of the Company for regulatory purposes.

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The following table summarizes the Company’s regulatory capital and related ratios over the past three years ended December 31, (dollars in thousands):

		2013				2012				2011
Tier 1 Capital:
Common Stock - par value		$	33,020			$	33,510			$	34,672
Surplus			170,770				176,635				187,493
Retained Earnings			236,639				215,634				189,824
Total Equity			440,429				425,779				411,989
Plus: qualifying trust preferred capital notes			58,500				58,500				58,500
Less: disallowed intangibles			71,380				75,211				80,547
Plus: goodwill deferred tax liability			940				810				681
Total Tier 1 Capital		$	428,489			$	409,878			$	390,623
Tier 2 Capital:
Net unrealized gain/loss on equity securities		$	191			$	128			$	83
Subordinated debt			6,544				9,522				12,305
Allowance for loan losses			30,135				34,916				38,007
Total Tier 2 Capital		$	36,870			$	44,566			$	50,395
Total risk-based capital		$	465,359			$	454,444			$	441,018
Risk-weighted assets		$	3,284,430			$	3,119,063			$	3,039,099
Capital ratios:
Tier 1 risk-based capital ratio			13.05	%			13.14	%			12.85	%
Total risk-based capital ratio			14.17	%			14.57	%			14.51	%
Leverage ratio (Tier 1 capital to average adjusted assets)			10.70	%			10.52	%			10.34	%
Common equity to total assets			10.49	%			10.64	%			10.79	%
Tangible common equity to tangible assets			8.94	%			8.97	%			8.91	%

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In July 2013, the FRBFederal Reserve issued revised final rules that maketo include technical changes to its market risk capital rules to align itthem with the Basel III regulatory capital framework and meet certain requirements of the Dodd-Frank Act. TheEffective January 1, 2015, the final new capital rules require the Company and the Bank to comply with the following new minimum capital ratios, effective January 1, 2015: (1)ratios: (i) a new common equity Tier 1 capital ratio of 4.5% of risk-weighted assets; (2)(ii) a Tier 1 capital ratio of 6%6.0% of risk-weighted assets (increased from the currentprior requirement of 4%4.0%); (3)(iii) a total capital ratio of 8%8.0% of risk-weighted assets (unchanged from currentthe prior requirement); and (4)(iv) a leverage ratio of 4%4.0% of total assets.

Ifassets (unchanged from the newprior requirement). These capital requirements will be phased in over a four-year period. When fully phased in on January 1, 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 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 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 ratio of Tier 1 capital to average assets.

Beginning January 1, 2016, the capital conservation buffer requirement is being phased in at 0.625% of risk-weighted assets, and will increase by the same amount each year until fully implemented at 2.5% on January 1, 2019. The capital conservation buffer is designed to absorb losses during periods of economic stress. Banking institutions with a ratio of common equity Tier 1 to 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 ended December 31, (dollars in thousands):

	2016				2015				2014
Common equity Tier 1 capital	$	699,728			$	691,195			N/A
Tier 1 capital	790,228				781,695				$	734,755
Tier 2 capital	185,917				34,346				35,830
Total risk-based capital	976,145				816,041				770,585
Risk-weighted assets	7,200,778				6,551,028				5,758,071
Capital ratios:
Common equity Tier 1 capital ratio	9.72		%		10.55		%		N/A
Tier 1 capital ratio	10.97		%		11.93		%		12.76		%
Total capital ratio	13.56		%		12.46		%		13.38		%
Leverage ratio (Tier 1 capital to average assets)	9.87		%		10.68		%		10.62		%
Capital conservation buffer ratio (1)	4.97		%		N/A				N/A
Common equity to total assets	11.88		%		12.94		%		13.28		%
Tangible common equity to tangible assets	8.41		%		9.20		%		9.27		%

(1) Calculated by subtracting the regulatory minimum capital ratios described above had been effective asratio 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.

During the fourth quarter of 2016, the Company issued $150.0 million of fixed-to-floating rate subordinated notes with a maturity date of December 31, 2013, based on management’s interpretation15, 2026. The notes were sold at par, resulting in net proceeds, after discounts and understandingoffering expenses, of approximately $148.0 million. The subordinated notes are classified as Tier 2 capital for the new rules, the Company would have remained “well capitalized” as of such date.

Company.

Commitments and off-balance sheet obligations

Off-balance Sheet Obligations

In the normal course of business, the Company is a party to financial instruments with off-balance sheet risk 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 Sheet.Sheets. The contractual amounts of these instruments reflect the extent of the Company’s involvement in particular classes of financial instruments. For more information pertaining to these commitments, reference Note 89 “Commitments and Contingencies” in the “Notes to the Consolidated Financial Statements” contained in Item 8 of this Form 10-K.

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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.

At December 31, 2013, UMG had rate lock commitments to originate mortgage loans amounting to $54.8 million and loans held for sale of $53.2 million. UMG has entered into corresponding commitments on a best-efforts basis to sell loans on a servicing-released basis totaling approximately $108.0 million. These commitments to sell loans are designed to reduce the mortgage company’s exposure to fluctuations in interest rates in connection with rate lock commitments and loans held for sale.

The following table represents the Company’s other commitments with balance sheet or off-balance sheet risk as of December 31, (dollars in thousands):

		2013				2012
Commitments with off-balance sheet risk:
Commitments to extend credit (1)		$	891,680			$	844,766
Standby letters of credit			48,107				45,536
Mortgage loan rate lock commitments			54,834				133,326
Total commitments with off-balance sheet risk		$	994,621			$	1,023,628
Commitments with balance sheet risk:
Loans held for sale		$	53,185			$	167,698
Total other commitments		$	1,047,806			$	1,191,326
(1) Includes unfunded overdraft protection.

	2016				2015
Commitments with off-balance sheet risk:
Commitments to extend credit (1)	$	1,924,885			$	1,557,350
Standby letters of credit	84,212				139,371
Total commitments with off-balance sheet risk	$	2,009,097			$	1,696,721

(1) Includes unfunded overdraft protection.

The following table presents the Company’s contractual obligations and scheduled payment amounts due at the various intervals over the next five years and beyond as of December 31, 20132016 (dollars in thousands):

		Total				Less than 1 year				1-3 years				4-5 years				More than 5 years
Long-term debt		$	139,049			$	-			$	16,359			$	-			$	122,690
Trust preferred capital notes			60,310				-				-				-				60,310
Operating leases			32,781				5,380				9,217				7,774				10,410
Other short-term borrowings			211,500				211,500				-				-				-
Repurchase agreements			52,455				52,455				-				-				-
Total contractual obligations		$	496,095			$	269,335			$	25,576			$	7,774			$	193,410

	Total				Less than 1 year				1-3 years				3-5 years				More than 5 years
Long-term debt (1)	$	340,000			$	10,000			$	40,000			$	—			$	290,000
Trust preferred capital notes (1)	93,301				—				—				—				93,301
Operating leases	33,036				6,418				11,234				8,304				7,080
Other short-term borrowings	517,500				517,500				—				—				—
Repurchase agreements	59,281				59,281				—				—				—
Total contractual obligations	$	1,043,118			$	593,199			$	51,234			$	8,304			$	390,381

(1) Excludes related premium/discount amortization.

For more information pertaining to the previous table, reference Note 4 “Bank Premise5 “Premises and Equipment” and Note 78 “Borrowings” in the “Notes to the Consolidated Financial Statements” contained in Item 8 of thethis Form 10-K.

MARKET RISK

Interest Sensitivity

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 the ALCO.

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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

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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.

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 computer 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.

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. These assumptions may not materialize and unanticipated events and circumstances may occur. The model also does not take into account any future actions of management to mitigate the impact of interest rate changes. 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 pointsbps up to 300 basis points.bps. The shock down 200 or 300 basis pointsbps analysis is not as meaningful as interest rates across most of the yield curve are atnear historic lows and cannotare not likely to decrease another 200 or 300 basis points.bps. 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 at the period ended December 31, 20132016 and 2015 (dollars in thousands):

		Change In Net Interest Income
		%				$
Change in Yield Curve:
+300 basis points			(2.01	)			(3,274	)
+200 basis points			(1.16	)			(1,896	)
+100 basis points			(0.86	)			(1,405	)
Most likely rate scenario			-				-
-100 basis points			(1.91	)			(3,118	)
-200 basis points			(5.85	)			(9,546	)
-300 basis points			(7.34	)			(11,980	)

	Change In Net Interest Income December 31,
	2016						2015
	%			$			%			$
Change in Yield Curve:
+300 bps	11.73			34,485			6.53			17,813
+200 bps	7.98			23,459			4.51			12,304
+100 bps	4.10			12,058			2.11			5,745
Most likely rate scenario	—			—			—			—
-100 bps	(4.14	)		(12,162	)		(1.92	)		(5,248	)
-200 bps	(7.57	)		(22,257	)		(5.03	)		(13,708	)
-300 bps	(8.34	)		(24,515	)		(5.34	)		(14,564	)

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.

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During 2016, the Company became more asset sensitive in a rising interest rate environment scenario when compared to the year ended December 31, 2015 in part due to the composition of the balance sheet and in part due to the market characteristics of certain deposit products. The Company would expect net interest income to increase with an immediate increase or shock in market rates. In a decreasing interest rate environment scenario, the Company 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 bps interest rate environments, the Company does not believe the down 300 basis point scenarios is plausible given the current level of interest rates.

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.

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The following chart reflects the estimated change in net economic value over different rate environments using economic value simulation for the balances at the period ended December 31, 20132016 and 2015 (dollars in thousands):

		Change In Economic Value of Equity
		%				$
Change in Yield Curve:
+300 basis points			(11.84	)			(75,364	)
+200 basis points			(7.28	)			(46,371	)
+100 basis points			(3.30	)			(21,002	)
Most likely rate scenario			-				-
-100 basis points			0.35				2,217
-200 basis points			(2.48	)			(15,794	)
-300 basis points			(2.84	)			(18,103	)

	Change In Economic Value of Equity December 31,
	2016						2015
	%			$			%			$
Change in Yield Curve:
+300 bps	2.43			35,121			(0.70	)		(9,740	)
+200 bps	2.13			30,752			0.28			3,875
+100 bps	1.43			20,715			0.71			9,942
Most likely rate scenario							—			—
-100 bps	(3.61	)		(52,094	)		(3.25	)		(45,240	)
-200 bps	(9.93	)		(143,307	)		(8.91	)		(124,214	)
-300 bps	(13.28	)		(191,720	)		(9.91	)		(138,143	)

During 2016, the Company has become more sensitive to market interest rate fluctuations when compared to December 31, 2015. The shock down 200 or 300 basis pointsbps analysis is not as meaningful since interest rates across most of the yield curve are atnear historic lows and cannotare not likely to decrease another 200 or 300 basis points.bps.  While management considers this scenario highly unlikely, the natural floor increases the Company’s sensitivity in rates down scenarios.

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.

At December 31, 2013,2016, the cash and cash equivalents, restricted stock, and securities classified as available for sale comprised 18.6%14.1% of total assets, compared to 16.8%14.3% at December 31, 2012.2015. Asset liquidity is also provided by managing loan and securities maturities and cash flows.

Additional sources of liquidity available to the Company include its capacity to borrow additional funds when necessary. The community bank segment maintains federal funds lines with several regional banks totaling $125.0$175.0 million as ofat both December 31, 2013.2016 and 2015. As of both December 31, 2013,2016 and 2015, there were $31.5 millionno borrowings outstanding on these federal funds lines. The Company had outstanding borrowings pursuant to securities sold under agreements to repurchase transactions

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with a maturity of one day of $52.5$59.3 million as of December 31, 20132016 compared to $54.3$85.0 million as of December 31, 2012.2015. In addition, the Company has an unsecured line of credit with a correspondent bank for up to $25.0 million. There were no borrowings outstanding under this line at December 31, 2016 or 2015. Lastly, the Company had a collateral dependent line of credit with the FHLB for up to $805.2 million.$2.4 billion and $1.5 billion as of December 31, 2016 and 2015. Based on the underlying collateralized loans, the Company has $635.2 millionhad $1.3 billion and $1.2 billion available as of December 31, 2013.2016 and 2015, respectively. There was approximately $320.0$709.4 million outstanding under this line at December 31, 20132016 compared to $494.0$504.9 million as of December 31, 2012.

2015.

The community bank segment may also borrow additional funds by purchasing certificates of deposit through a nationally recognized network of financial institutions. The Bank utilizes this funding source when rates are more favorable than other funding sources. As of both December 31, 2013,2016 and 2015, there were $13.7 million purchased andno borrowed funds included in certificates of deposit on the Company’s Consolidated Balance Sheet.

As ofSheets.

At December 31, 2013,2016, the liquid assetscash, interest-bearing deposits in other banks, money market investments, federal funds sold, loans held for sale, and loans that mature within one year totaled $1.2$2.1 billion, or 30.3%27.5%, of total earning assets. As of December 31, 2013,2016, approximately $976.0 million,$1.9 billion, or 32.1%,30.0% of total loans, are scheduled to mature within one year based on contractual maturity, adjusted for expected prepayments.

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Impact of Inflation and Changing Prices

The Company’s financial statements included in Item 8 of this Form 10-K below have been prepared in accordance with GAAP, which requires the financial position and operating results to be measured principally in terms of historic dollars without considering the change in the relative purchasing power of money over time due to inflation. Inflation affects the Company’s results of operations mainly through increased operating costs, but since nearly all of the Company’s assets and liabilities are monetary in nature, changes in interest rates affect the financial condition of the Company to a greater degree than changes in the rate of inflation. Although interest rates are greatly influenced by changes in the inflation rate, they do not necessarily change at the same rate or in the same magnitude as the inflation rate. The Company’s management reviews pricing of its products and services, in light of current and expected costs due to inflation, to mitigate the inflationary impact on financial performance.

NON-GAAP MEASURES

In reporting the results of December 31, 2013,2016, the Company has provided supplemental performance measures on a tax-equivalent, core, tangible, or operating basis. These measures are a supplement to GAAP used to prepare the Company's financial statements and should not be considered in isolation or as a substitute for comparable measures calculated in accordance with GAAP. In addition, the Company's non-GAAP measures may not be comparable to non-GAAP measures of other companies.

Net interest income (FTE), which is used in computing net interest margin (FTE) and efficiency ratio (FTE), provides valuable additional insight into the net interest margin and the efficiency ratio by adjusting for differences in tax treatment of interest income sources.

Core net interest income (FTE), which is used in computing core net interest margin (FTE), provides valuable additional insight into the net interest margin by adjusting for differences in tax treatment of interest income sources as well as the net accretion of acquisition-related fair value marks.

The Company believes tangible common equity is an operating or tangible basis. important indication of its ability to grow organically and through business combinations as well as its ability to pay dividends and to engage in various capital management strategies. Tangible common equity is used in the calculation of certain profitability, capital, and per share ratios. These 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.

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

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The following table reconciles these non-GAAP measures from their respective GAAP basis measures for the years ended December 31, (dollars in thousands, except per share amounts):

		2013				2012				2011
Operating Earnings
Net Income (GAAP)		$	34,496			$	35,411			$	30,445
Plus: Merger and conversion related expense, after tax			2,042				-				277
Net operating earnings (loss) (non-GAAP)		$	36,538			$	35,411			$	30,722
Operating earnings per share - Basic		$	1.46			$	1.37			$	1.18
Operating earnings per share - Diluted			1.46				1.37				1.18
Operating ROA			0.90	%			0.89	%			0.80	%
Operating ROE			8.38	%			8.13	%			6.97	%
Operating ROTCE			10.07	%			9.89	%			9.42	%
Community Bank Segment Operating Earnings
Net Income (GAAP)		$	37,155			$	32,866			$	28,833
Plus: Merger and conversion related expense, after tax			2,042				-				277
Net operating earnings (loss) (non-GAAP)		$	39,197			$	32,866			$	29,110
Operating earnings per share - Basic		$	1.57			$	1.27			$	1.12
Operating earnings per share - Diluted			1.57				1.27				1.12
Operating ROA			0.97	%			0.83	%			0.75	%
Operating ROE			9.18	%			7.67	%			6.68	%
Operating ROTCE			11.08	%			9.37	%			9.07	%
Operating Efficiency Ratio FTE
Net Interest Income (GAAP)		$	151,626			$	154,355			$	156,360
FTE adjustment			5,256				4,222				4,326
Net Interest Income (FTE)			156,882				158,577				160,686
Noninterest Income (GAAP)			38,728				41,068				32,964
Noninterest Expense (GAAP)		$	137,289			$	133,479			$	130,815
Merger and conversion related expense			2,132				-				426
Noninterest Expense (non-GAAP)		$	135,157			$	133,479			$	130,389
Operating Efficiency Ratio FTE (non-GAAP)			69.10	%			66.86	%			67.33	%
Community Bank Segment Operating Efficiency Ratio FTE
Net Interest Income (GAAP)		$	149,975			$	153,024			$	155,045
FTE adjustment			5,256				4,223				4,325
Net Interest Income (FTE)			155,231				157,247				159,370
Noninterest Income (GAAP)			27,492				24,876				22,382
Noninterest Expense (GAAP)		$	120,256			$	119,976			$	121,490
Merger and conversion related expense			2,132				-				426
Noninterest Expense (non-GAAP)		$	118,124			$	119,976			$	121,064
Operating Efficiency Ratio FTE (non-GAAP)			64.65	%			65.88	%			66.61	%
Tangible Common Equity
Ending equity		$	438,239			$	435,863			$	421,639
Less: Ending trademark intangible			-				33				433
Less: Ending goodwill			59,400				59,400				59,400
Less: Ending core deposit intangibles			11,980				15,778				20,714
Ending tangible common equity		$	366,859			$	360,652			$	341,092
Average equity		$	436,064			$	435,774			$	441,040
Less: Average trademark intangible			1				231				631
Less: Average goodwill			59,400				59,400				58,494
Less: Average core deposit intangibles			13,804				18,159				23,654
Less: Average preferred equity			-				-				32,171
Average tangible common equity		$	362,859			$	357,984			$	326,090

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	2016				2015				2014				2013				2012
Net Interest Income (FTE) & Core Net Interest Income (FTE)
Net Interest Income (GAAP)	$	265,150			$	251,834			$	255,018			$	151,626			$	154,355
FTE adjustment	10,244				9,079				8,127				5,256				4,222
Net Interest Income FTE (non-GAAP)	$	275,394			$	260,913			$	263,145			$	156,882			$	158,577
Less: Net accretion of acquisition fair value marks	5,676				6,622				10,050				1,598				3,662
Core Net Interest Income FTE (non-GAAP)	$	269,718			$	254,291			$	253,095			$	155,284			$	154,915
Average earning assets	7,249,090				6,713,239				6,437,681				3,716,849				3,649,865
Net interest margin	3.66%				3.75%				3.96%				4.08%				4.23%
Net interest margin (FTE)	3.80%				3.89%				4.09%				4.22%				4.34%
Core net interest margin (FTE)	3.72%				3.79%				3.93%				4.18%				4.24%
Tangible Assets
Ending Assets	$	8,426,793			$	7,693,291			$	7,358,643			$	4,176,353			$	4,095,692
Less: Ending goodwill	298,191				293,522				293,522				59,400				59,400
Less: Ending amortizable intangibles	20,602				23,310				31,755				11,980				15,811
Ending tangible assets (non-GAAP)	$	8,108,000			$	7,376,459			$	7,033,366			$	4,104,973			$	4,020,481
Tangible Common Equity
Ending equity	$	1,001,032			$	995,367			$	977,169			$	437,810			$	435,564
Less: Ending goodwill	298,191				293,522				293,522				59,400				59,400
Less: Ending amortizable intangibles	20,602				23,310				31,755				11,980				15,811
Ending tangible common equity (non-GAAP)	$	682,239			$	678,535			$	651,892			$	366,430			$	360,353
Average equity	$	994,785			$	991,977			$	983,727			$	435,635			$	435,475
Less: Average goodwill	296,087				293,522				296,870				59,400				59,400
Less: Average core deposit intangibles	22,044				27,384				36,625				13,805				18,390
Average tangible common equity (non-GAAP)	$	676,654			$	671,071			$	650,232			$	362,430			$	357,685
Operating Earnings & Metrics
Net Income (GAAP)	$	77,476			$	67,079			$	52,164			$	34,366			$	35,262
Plus: Merger and conversion related expense, after tax	—				—				13,724				2,042				—
Net operating earnings (non-GAAP)	$	77,476			$	67,079			$	65,888			$	36,408			$	35,262
Operating earnings per share - Basic	$	1.77			$	1.49			$	1.43			$	1.45			$	1.36
Operating earnings per share - Diluted	1.77				1.49				1.43				1.45				1.36
Operating return on average assets	0.96		%		0.90		%		0.91		%		0.90		%		0.89		%
Operating return on average common stockholders' equity	7.79		%		6.76		%		6.70		%		8.36		%		8.10		%
Operating return on average tangible common stockholders' equity	11.45		%		10.00		%		10.13		%		10.05		%		9.86		%
Operating Efficiency Ratio FTE
Net Interest Income FTE (non-GAAP)	$	275,394			$	260,913			$	263,145			$	156,882			$	158,577
Noninterest Income (GAAP)	70,907				65,007				61,287				38,728				41,068
Noninterest Expense (GAAP)	$	222,703			$	216,882			$	238,216			$	137,047			$	133,390
Merger and conversion related expense	—				—				20,345				2,132				—
Noninterest Expense (Non-GAAP)	$	222,703			$	216,882			$	217,871			$	134,915			$	133,390
Operating Efficiency Ratio FTE (non-GAAP)	64.31		%		66.54		%		67.15		%		68.97		%		66.81		%

The allowance for loan losses,ALL ratio, adjusted for acquisition accounting (non-GAAP) ratio, includes an adjustment for the creditfair value mark on purchasedacquired performing loans. The purchasedacquired performing loans are reported net of the related creditfair value mark in loans, net of unearned income,deferred fees and costs, on the Company’s Consolidated Balance Sheet;Sheets; therefore, the creditfair value mark is added back to the balance to

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represent the total loan portfolio. The adjusted allowance for loan losses,ALL, including the creditfair 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 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. GAAP requires the acquired allowance for loan lossesALL not be carried over in an acquisition or merger. The Company believes the presentation of the allowance for loan losses,ALL ratio, adjusted for acquisition accounting, ratio is useful to investors because the acquired loans were purchased at a market discount with no allowance for loan lossesALL carried over to the Company and the creditfair 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 lossesALL as a percentage of the total loan portfolio, adjusted for acquisition accounting, at December 31, (dollars in thousands):

		2013				2012				2011				2010
Allowance for loan losses		$	30,135			$	34,916			$	39,470			$	38,406
Remaining credit mark on purchased loans			3,341				5,350				9,010				13,589
Adjusted allowance for loan losses		$	33,476			$	40,266			$	48,480			$	51,995
Loans, net of unearned income		$	3,039,368			$	2,966,847			$	2,818,583			$	2,837,253
Remaining credit mark on purchased loans			3,341				5,350				9,010				13,589
Adjusted loans, net of unearned income		$	3,042,709			$	2,972,197			$	2,827,593			$	2,850,842
ALL / gross loans, adjusted for acquisition accounting			1.10	%			1.35	%			1.71	%			1.82	%

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	2016				2015				2014				2013				2012
ALL	$	37,192			$	34,047			$	32,384			$	30,135			$	34,916
Remaining fair value mark on acquired performing loans	16,939				20,819				24,340				3,341				5,350
Adjusted ALL	$	54,131			$	54,866			$	56,724			$	33,476			$	40,266
Loans, net of deferred fees and costs	$	6,307,060			$	5,671,462			$	5,345,996			$	3,039,368			$	2,966,847
Remaining fair value mark on acquired performing loans	16,939				20,819				24,340				3,341				5,350
Less: PCI loans, net of fair value mark	59,292				73,737				105,788				3,622				4,565
Adjusted loans, net of deferred fees and costs	$	6,264,707			$	5,618,544			$	5,264,548			$	3,039,087			$	2,967,632
ALL ratio	0.59		%		0.60		%		0.61		%		0.99		%		1.18		%
ALL ratio, adjusted for acquisition accounting	0.86		%		0.98		%		1.08		%		1.10		%		1.35		%

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QUARTERLY RESULTS

The following table presents the Company’s quarterly performance, as previously filed, for the years ended December 31, 20132016 and 20122015 (dollars in thousands, except per share amounts):

		Quarter
		First				Second				Third				Fourth
For the Year 2013
Interest and dividend income		$	43,285			$	42,686			$	42,841			$	43,315
Interest expense			5,532				5,283				4,983				4,702
Net interest income			37,753				37,403				37,858				38,613
Provision for loan losses			2,050				1,000				1,800				1,206
Net interest income after provision for loan losses			35,703				36,403				36,058				37,407
Noninterest income			9,835				11,299				9,216				8,379
Noninterest expenses			33,501				34,283				34,132				35,375
Income before income taxes			12,037				13,419				11,142				10,411
Income tax expense			3,054				3,956				3,196				2,306
Net income		$	8,983			$	9,463			$	7,946			$	8,105
Earnings per share, basic		$	0.36			$	0.38			$	0.32			$	0.32
Earnings per share, diluted		$	0.36			$	0.38			$	0.32			$	0.32
For the Year 2012
Interest and dividend income		$	45,874			$	45,302			$	45,503			$	45,183
Interest expense			7,527				7,215				6,741				6,023
Net interest income			38,347				38,087				38,762				39,160
Provision for loan losses			3,500				3,000				2,400				3,300
Net interest income after provision for loan losses			34,847				35,087				36,362				35,860
Noninterest income			8,477				10,253				10,502				11,835
Noninterest expenses			32,268				33,607				33,268				34,336
Income before income taxes			11,056				11,733				13,596				13,359
Income tax expense (benefit)			3,133				3,313				3,970				3,917
Net income		$	7,923			$	8,420			$	9,626			$	9,442
Earnings per share, basic		$	0.31			$	0.32			$	0.37			$	0.37
Earnings per share, diluted		$	0.31			$	0.32			$	0.37			$	0.37

	Quarter
	First				Second				Third				Fourth
For the Year 2016
Interest and dividend income	$	70,749			$	72,781			$	74,433			$	76,957
Interest expense	7,018				7,005				7,405				8,342
Net interest income	63,731				65,776				67,028				68,615
Provision for credit losses	2,604				2,300				2,472				1,723
Net interest income after provision for credit losses	61,127				63,476				64,556				66,892
Noninterest income	15,914				17,993				18,950				18,050
Noninterest expenses	54,272				55,251				56,913				56,267
Income before income taxes	22,769				26,218				26,593				28,675
Income tax expense	5,808				6,881				6,192				7,899
Net income	$	16,961			$	19,337			$	20,401			$	20,776
Earnings per share, basic	$	0.38			$	0.44			$	0.47			$	0.48
Earnings per share, diluted	$	0.38			$	0.44			$	0.47			$	0.48
Basic weighted average number of common shares outstanding	44,251,276				43,746,583				43,565,937				43,577,634
Diluted weighted average number of common shares outstanding	44,327,229				43,824,183				43,754,915				43,659,416
For the Year 2015
Interest and dividend income	$	67,600			$	69,854			$	70,000			$	69,317
Interest expense	5,631				6,038				6,556				6,712
Net interest income	61,969				63,816				63,444				62,605
Provision for credit losses	1,750				3,749				2,062				2,010
Net interest income after provision for credit losses	60,219				60,067				61,382				60,595
Noninterest income	15,054				16,212				16,725				17,016
Noninterest expenses	53,840				55,241				53,325				54,476
Income before income taxes	21,433				21,038				24,782				23,135
Income tax expense	5,732				5,690				6,566				5,321
Net income	$	15,701			$	15,348			$	18,216			$	17,814
Earnings per share, basic	$	0.35			$	0.34			$	0.40			$	0.40
Earnings per share, diluted	$	0.35			$	0.34			$	0.40			$	0.40
Basic weighted average number of common shares outstanding	45,105,969				45,128,698				45,087,409				44,899,629
Diluted weighted average number of common shares outstanding	45,187,516				45,209,814				45,171,610				44,988,577

ITEM 7A. –- QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

This information is incorporated herein by reference fromto the information in section "Market Risk" within Item 77. - “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Form 10-K.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the

57

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ITEM 8. - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

Report of Independent Registered Public Accounting Firm on

Consolidated Financial Statements

The Board of Directors and Stockholders

of Union First Market Bankshares Corporation

Richmond, Virginia

Corporation:

We have audited the accompanying consolidated balance sheets of Union First Market Bankshares Corporation and subsidiaries(the “Company”) as of December 31, 20132016 and 2012,2015, and the related consolidated statements of income, comprehensive income, changes in stockholders'stockholders’ equity and cash flows for each of the threetwo years in the period ended December 31, 2013.2016. These consolidated financial statements are the responsibility of the Company'sCompany’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the auditsaudit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Union First Market Bankshares Corporation and subsidiaries as ofat December 31, 20132016 and 2012,2015, and the consolidated results of theirits operations and theirits cash flows for each of the threetwo years in the period ended December 31, 2013,2016, in conformity with U.S. generally accepted accounting principles.

We also have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Union First Market Bankshares Corporation and subsidiaries’Corporation’s internal control over financial reporting as of December 31, 2013,2016, based on criteria established inInternal Control — IntegratedControl-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 1992,(2013 framework) and our report dated March 11, 2014February 28, 2017 expressed an unqualified opinion on the effectivenessthereon.

/s/ Ernst & Young LLP

Richmond, Virginia

February 28, 2017

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Report of Union First Market Bankshares Corporation and subsidiaries’ internal control over financial reporting.

/s/ Yount, Hyde & Barbour, P.C.

Winchester, Virginia

March 11, 2014

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Independent Registered Public Accounting Firm on

Internal Control Over Financial Reporting

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the

The Board of Directors and Stockholders

of Union First Market Bankshares Corporation

Richmond, Virginia

We have audited Union First Market Bankshares and subsidiaries'Corporation’s (the “Company”) internal control over financial reporting as of December 31, 2013,2016, based on criteria established inInternal Control — IntegratedControl-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 1992.(2013 framework) (the COSO criteria). Union First Market Bankshares Corporation and subsidiaries’Corporation’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanyingManagement’s Report on Internal Control over Financial Reporting.Reporting. Our responsibility is to express an opinion on the company'sCompany’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also includedrisk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company'scompany’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company'scompany’s internal control over financial reporting includes those policies and procedures that(a) (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;(b) (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and(c) (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company'scompany’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Union First Market Bankshares Corporation and subsidiaries’ maintained, in all material respects, effective internal control over financial reporting as of December 31, 2013,2016, based on criteria established inInternal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 1992.

COSO criteria.

We also have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Union Bankshares Corporation as of December 31, 20132016 and 2012,2015, and the related consolidated statements of income, comprehensive income, changechanges in stockholders’ equity and cash flows for each of the threetwo years in the period ended December 31, 20132016 and our report dated February 28, 2017 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Richmond, Virginia

February 28, 2017

59

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders

Union Bankshares Corporation

Richmond, Virginia

We have audited the accompanying consolidated statements of income, comprehensive income, changes in stockholders’ equity, and cash flows for the year ended December 31, 2014, of Union First MarketBankshares Corporation and subsidiaries (collectively, the financial statements). These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the results of operations of Union Bankshares Corporation and subsidiaries and our report dated March 11,their cash flows for the year ended December 31, 2014, expressed an unqualified opinion.

in conformity with U.S. generally accepted accounting principles.

/s/ Yount, Hyde & Barbour, P.C.

Winchester, Virginia

March 11, 2014

- 56 -

February 27, 2015

UNION FIRST MARKET BANKSHARES CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

AS OF DECEMBER 31, 2013 AND 2012

(Dollars in thousands, except share data)

		2013				2012
ASSETS
Cash and cash equivalents:
Cash and due from banks		$	66,090			$	71,426
Interest-bearing deposits in other banks			6,781				11,320
Money market investments			1				1
Federal funds sold			151				155
Total cash and cash equivalents			73,023				82,902
Securities available for sale, at fair value			677,348				585,382
Restricted stock, at cost			26,036				20,687
Loans held for sale			53,185				167,698
Loans, net of unearned income			3,039,368				2,966,847
Less allowance for loan losses			30,135				34,916
Net loans			3,009,233				2,931,931
Bank premises and equipment, net			82,815				85,409
Other real estate owned, net of valuation allowance			34,116				32,834
Core deposit intangibles, net			11,980				15,778
Goodwill			59,400				59,400
Other assets			149,435				113,844
Total assets		$	4,176,571			$	4,095,865
LIABILITIES
Noninterest-bearing demand deposits			691,674				645,901
Interest-bearing deposits:
NOW accounts			498,068				454,150
Money market accounts			940,215				957,130
Savings accounts			235,034				207,846
Time deposits of $100,000 and over			427,597				508,630
Other time deposits			444,254				524,110
Total interest-bearing deposits			2,545,168				2,651,866
Total deposits			3,236,842				3,297,767
Securities sold under agreements to repurchase			52,455				54,270
Other short-term borrowings			211,500				78,000
Trust preferred capital notes			60,310				60,310
Long-term borrowings			139,049				136,815
Other liabilities			38,176				32,840
Total liabilities			3,738,332				3,660,002
Commitments and contingencies
STOCKHOLDERS' EQUITY
Common stock, $1.33 par value, shares authorized 36,000,000; issued and outstanding, 24,976,434 shares and 25,270,970 shares, respectively.			33,020				33,510
Surplus			170,770				176,635
Retained earnings			236,639				215,634
Accumulated other comprehensive (loss) income			(2,190	)			10,084
Total stockholders' equity			438,239				435,863
Total liabilities and stockholders' equity		$	4,176,571			$	4,095,865

60

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UNION BANKSHARES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2016 AND 2015
(Dollars in thousands, except share data)
	2016				2015
ASSETS
Cash and cash equivalents:
Cash and due from banks	$	120,758			$	111,323
Interest-bearing deposits in other banks	58,030				29,670
Federal funds sold	449				1,667
Total cash and cash equivalents	179,237				142,660
Securities available for sale, at fair value	946,764				903,292
Securities held to maturity, at carrying value	201,526				205,374
Restricted stock, at cost	60,782				51,828
Loans held for sale, at fair value	36,487				36,030
Loans held for investment, net of deferred fees and costs	6,307,060				5,671,462
Less allowance for loan losses	37,192				34,047
Net loans held for investment	6,269,868				5,637,415
Premises and equipment, net	122,027				126,028
Other real estate owned, net of valuation allowance	10,084				15,299
Goodwill	298,191				293,522
Amortizable intangibles, net	20,602				23,310
Bank owned life insurance	179,318				173,687
Other assets	101,907				84,846
Total assets	$	8,426,793			$	7,693,291
LIABILITIES
Noninterest-bearing demand deposits	$	1,393,625			$	1,372,937
Interest-bearing deposits	4,985,864				4,590,999
Total deposits	6,379,489				5,963,936
Securities sold under agreements to repurchase	59,281				84,977
Other short-term borrowings	517,500				304,000
Long-term borrowings	413,308				291,198
Other liabilities	56,183				53,813
Total liabilities	7,425,761				6,697,924
Commitments and contingencies (Note 9)
STOCKHOLDERS' EQUITY
Common stock, $1.33 par value, shares authorized 100,000,000; issued and outstanding, 43,609,317 shares and 44,785,674 shares, respectively.	57,506				59,159
Additional paid-in capital	605,397				631,822
Retained earnings	341,938				298,134
Accumulated other comprehensive income	(3,809		)		6,252
Total stockholders' equity	1,001,032				995,367
Total liabilities and stockholders' equity	$	8,426,793			$	7,693,291

See accompanying notes to consolidated financial statements.

- 57 -

UNION FIRST MARKET BANKSHARES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

YEARS ENDED DECEMBER 31, 2013, 2012, AND 2011

(Dollars in thousands, except per share amounts)

		2013				2012				2011
Interest and dividend income:
Interest and fees on loans		$	155,547			$	162,637			$	168,479
Interest on Federal funds sold			1				1				1
Interest on deposits in other banks			17				62				123
Interest and dividends on securities:
Taxable			8,202				11,912				13,387
Nontaxable			8,360				7,251				7,083
Total interest and dividend income			172,127				181,863				189,073
Interest expense:
Interest on deposits			14,097				19,446				24,346
Interest on federal funds purchased			89				50				7
Interest on short-term borrowings			265				234				352
Interest on long-term borrowings			6,050				7,778				8,008
Total interest expense			20,501				27,508				32,713
Net interest income			151,626				154,355				156,360
Provision for loan losses			6,056				12,200				16,800
Net interest income after provision for loan losses			145,570				142,155				139,560
Noninterest income:
Service charges on deposit accounts			9,492				9,033				8,826
Other service charges, commissions and fees			12,309				10,898				9,736
Gains on securities transactions, net			21				190				913
Other-than-temporary impairment losses			-				-				(400	)
Gains on sales of mortgage loans, net of commissions			11,900				16,651				11,052
(Losses) gains on sales of bank premises			(340	)			2				(996	)
Other operating income			5,346				4,294				3,833
Total noninterest income			38,728				41,068				32,964
Noninterest expenses:
Salaries and benefits			70,369				68,648				62,865
Occupancy expenses			11,543				12,150				11,104
Furniture and equipment expenses			6,884				7,251				6,920
Other operating expenses			48,493				45,430				49,926
Total noninterest expenses			137,289				133,479				130,815
Income before income taxes			47,009				49,744				41,709
Income tax expense			12,513				14,333				11,264
Net income		$	34,496			$	35,411			$	30,445
Dividends paid and accumulated on preferred stock			-				-				1,499
Accretion of discount on preferred stock			-				-				1,177
Net income available to common shareholders		$	34,496			$	35,411			$	27,769
Earnings per common share, basic		$	1.38			$	1.37			$	1.07
Earnings per common share, diluted		$	1.38			$	1.37			$	1.07

61

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UNION BANKSHARES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 2016, 2015, AND 2014
(Dollars in thousands, except per share amounts)
	2016				2015				2014
Interest and dividend income:
Interest and fees on loans	$	262,567			$	247,587			$	246,366
Interest on deposits in other banks	244				94				60
Interest and dividends on securities:
Taxable	18,319				15,606				15,226
Nontaxable	13,790				13,484				13,293
Total interest and dividend income	294,920				276,771				274,945
Interest expense:
Interest on deposits	17,731				15,553				11,034
Interest on short-term borrowings	2,894				944				566
Interest on long-term borrowings	9,145				8,440				8,327
Total interest expense	29,770				24,937				19,927
Net interest income	265,150				251,834				255,018
Provision for credit losses	9,100				9,571				7,800
Net interest income after provision for credit losses	256,050				242,263				247,218
Noninterest income:
Service charges on deposit accounts	19,496				18,904				17,721
Other service charges, commissions and fees	17,175				15,575				14,983
Fiduciary and asset management fees	10,199				9,141				9,036
Mortgage banking income, net	10,953				9,767				9,707
Gains on securities transactions, net	205				1,486				1,695
Other-than-temporary impairment losses	—				(300		)		—
Bank owned life insurance income	5,513				4,593				4,648
Loan-related interest rate swap fees	4,254				412				293
Other operating income	3,112				5,429				3,204
Total noninterest income	70,907				65,007				61,287
Noninterest expenses:
Salaries and benefits	117,103				104,192				107,804
Occupancy expenses	19,528				20,053				20,136
Furniture and equipment expenses	10,475				11,674				11,872
Printing, postage, and supplies	4,692				5,124				4,924
Communications expense	3,850				4,634				4,902
Technology and data processing	15,368				13,667				12,465
Professional services	8,085				6,309				5,594
Marketing and advertising expense	7,784				7,215				6,406
FDIC assessment premiums and other insurance	5,406				5,376				6,125
Other taxes	5,456				6,227				5,784
Loan-related expenses	4,790				4,097				3,469
OREO and credit-related expenses	2,602				8,911				10,164
Amortization of intangible assets	7,210				8,445				9,795
Training and other personnel costs	3,435				3,675				2,893
Acquisition and conversion costs	—				—				20,345
Other expenses	6,919				7,283				5,538
Total noninterest expenses	222,703				216,882				238,216
Income before income taxes	104,254				90,388				70,289
Income tax expense	26,778				23,309				18,125
Net income	$	77,476			$	67,079			$	52,164
Basic earnings per common share	$	1.77			$	1.49			$	1.13
Diluted earnings per common share	$	1.77			$	1.49			$	1.13
Dividends declared per common share	$	0.77			$	0.68			$	0.58
Basic weighted average number of common shares outstanding	43,784,193				45,054,938				46,036,023
Diluted weighted average number of common shares outstanding	43,890,271				45,138,891				46,130,895

See accompanying notes to consolidated financial statements.

- 58 -

UNION FIRST MARKET BANKSHARES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

YEARS ENDED DECEMBER 31, 2013, 2012, AND 2011

(Dollars in thousands)

		2013				2012				2011
Net income		$	34,496			$	35,411			$	30,445
Other comprehensive income (loss):
Cash flow hedges:
Change in fair value of cash flow hedges			583				(922	)			(3,233	)
Reclassification adjustment for losses included in net income (net of tax, $281, $391, and $223 for the year ended December 31, 2013, 2012, and 2011)			524				726				415
Unrealized (losses) gains on securities:
Unrealized holding (losses) gains arising during period (net of tax, $7,198, $405, and $4,346 for the year ended December 31, 2013, 2012, and 2011)			(13,367	)			753				9,231
Reclassification adjustment for losses included in net income (net of tax, $7, $67, and $179 for the year ended December 31, 2013, 2012, and 2011)			(14	)			(123	)			(334	)
Other comprehensive income (loss)			(12,274	)			434				6,079
Comprehensive income		$	22,222			$	35,845			$	36,524

62

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UNION BANKSHARES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
YEARS ENDED DECEMBER 31, 2016, 2015, AND 2014
(Dollars in thousands)
	2016				2015				2014
Net income	$	77,476			$	67,079			$	52,164
Other comprehensive income (loss):
Cash flow hedges:
Change in fair value of cash flow hedges	270				(1,394		)		(2,393		)
Reclassification adjustment for losses (gains) included in net income (net of tax, $274, $335, and $318 for the years ended December 31, 2016, 2015, and 2014, respectively)	508				621				591
AFS securities:
Unrealized holding gains (losses) arising during period (net of tax, $4,408, $1,960, and $9,202 for the years ended December 31, 2016, 2015, and 2014, respectively)	(8,186		)		(3,640		)		17,089
Reclassification adjustment for losses (gains) included in net income (net of tax, $72, $415, and $453 for the years ended December 31, 2016, 2015, and 2014, respectively)	(133		)		(771		)		(842		)
HTM securities:
Accretion of unrealized gain for AFS securities transferred to HTM (net of tax, $568, $441, and $0 for the years ended December 31, 2016, 2015 and 2014, respectively)	(1,055		)		(819		)		—
Bank owned life insurance:
Unrealized holding losses arising during period	(1,728		)		—				—
Reclassification adjustment for losses included in net income	263				—				—
Other comprehensive income (loss)	(10,061		)		(6,003		)		14,445
Comprehensive income	$	67,415			$	61,076			$	66,609

See accompanying notes to consolidated financial statements.

- 59 -

UNION FIRST MARKET BANKSHARES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

YEARS ENDED DECEMBER

63

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UNION BANKSHARES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 2016, 2015, AND 2014
(Dollars in thousands, except share amounts)
	Common Stock				Additional Paid-In Capital				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									52,164								52,164
Other comprehensive income (net of taxes of $9,067)													14,445				14,445
Issuance of common stock in regard to acquisition (22,147,874 shares)	29,457				520,066												549,523
Dividends on common stock ($0.58 per share)									(25,494		)						(25,494		)
Stock purchased under stock repurchase plan (2,125,264 shares)	(2,826		)		(49,773		)										(52,599		)
Issuance of common stock under Dividend Reinvestment Plan (52,252 shares)	69				1,135				(1,204		)						—
Issuance of common stock under Equity Compensation Plans (75,282 shares)	100				1,130												1,230
Issuance of common stock for services rendered (30,057 shares)	39				674												713
Vesting of restricted stock, including tax effects, under Equity Compensation Plans (47,954 shares)	(64		)		(1,538		)										(1,602		)
Stock-based compensation expense					979												979
Balance - December 31, 2014	59,795				643,443				261,676				12,255				977,169
Net income - 2015									67,079								67,079
Other comprehensive income (net of taxes of $2,481)													(6,003		)		(6,003		)
Dividends on common stock ($0.68 per share)									(29,082		)						(29,082		)
Stock purchased under stock repurchase plan (668,522 shares)	(889		)		(15,371		)										(16,260		)
Issuance of common stock under Dividend Reinvestment Plan (69,628 shares)	93				1,446				(1,539		)						—
Issuance of common stock under Equity Compensation Plans (60,637 shares)	80				848												928
Issuance of common stock for services rendered (23,800 shares)	32				532												564
Vesting of restricted stock, including tax effects, under Equity Compensation Plans (36,373 shares)	48				(464		)										(416		)
Stock-based compensation expense					1,388												1,388
Balance - December 31, 2015	59,159				631,822				298,134				6,252				995,367
Net income - 2016									77,476								77,476
Other comprehensive income (net of taxes of $4,774)													(10,061		)		(10,061		)
Issuance of common stock in regard to acquisition (17,232 shares)	23				430												453
Dividends on common stock ($0.77 per share)									(33,672		)						(33,672		)
Stock purchased under stock repurchase plan (1,411,131 shares)	(1,877		)		(31,300		)										(33,177		)
Issuance of common stock under Equity Compensation Plans (88,409 shares)	118				1,311												1,429
Issuance of common stock for services rendered (19,132 shares)	25				508												533
Vesting of restricted stock, including tax effects, under Equity Compensation Plans (43,620 shares)	58				(644		)										(586		)
Stock-based compensation expense					3,270												3,270
Balance - December 31, 2016	$	57,506			$	605,397			$	341,938			$	(3,809	)		$	1,001,032

⁽¹⁾ Retained earnings as of December 31, 2013, 2012, AND 2011

(Dollarsand 2014 includes the cumulative impact of $429,000, and $856,000, respectively, resulting from the adoption of ASU No. 2014-01 “Investments - Equity Method and Joint Ventures (Topic 323): Accounting For Investments in thousands, except share amounts)

		Preferred Stock				Common Stock				Surplus				Retained Earnings				Discount on Preferred Stock				Accumulated Other Comprehensive Income (Loss)				Total
Balance - December 31, 2010		$	35,595			$	34,532			$	185,763			$	169,801			$	(1,177	)		$	3,571			$	428,085
Net income - 2011															30,445												30,445
Other comprehensive income (net of tax, $4,167)																							6,079				6,079
Cash dividends on common stock ($.28 per share)															(7,284	)											(7,284	)
Tax benefit from exercise of stock awards											15																15
Repurchase of preferred stock (35,595 shares)			(35,595	)																							(35,595	)
Dividends on preferred stock															(1,961	)											(1,961	)
Accretion of discount on preferred stock															(1,177	)			1,177								-
Issuance of common stock under Dividend Reinvestment Plan (11,932 shares)							16				361																377
Issuance of common stock under Equity Compensation Plan (29,625 shares)							39				158																197
Vesting of restricted stock under Equity Compensation Plan (17,312 shares)							23				(23	)															-
Issuance of common stock for services rendered (46,806 shares)							62				502																564
Stock-based compensation expense											717																717
Balance - December 31, 2011			-				34,672				187,493				189,824				-				9,650				421,639
Net income - 2012															35,411												35,411
Other comprehensive income (net of tax, $339)																							434				434
Dividends on Common Stock ($.37 per share)															(8,969	)											(8,969	)
Stock purchased under stock repurchase plan (970,265 shares)							(1,291	)			(13,154	)															(14,445	)
Issuance of common stock under Dividend Reinvestment Plan (45,502 shares)							61				571				(632	)											-
Issuance of common stock under Equity Compensation Plan (2,376 shares)							3				28																31
Vesting of restricted stock under Equity Compensation Plan (15,492 shares)							21				(21	)															-
Issuance of common stock for services rendered (37,134 shares)							49				516																565
Net settle for taxes on Restricted Stock Awards (3,670 shares)							(5	)			(50	)															(55	)
Stock-based compensation expense											1,252																1,252
Balance - December 31, 2012			-				33,510				176,635				215,634				-				10,084				435,863
Net income - 2013															34,496												34,496
Other comprehensive loss (net of tax, $7,205)																							(12,274	)			(12,274	)
Dividends on Common Stock ($.54 per share)															(12,535	)											(12,535	)
Stock purchased under stock repurchase plan (500,000 shares)							(664	)			(8,835	)															(9,499	)
Issuance of common stock under Dividend Reinvestment Plan (47,598 shares)							63				893				(956	)											-
Issuance of common stock under Equity Compensation Plan (50,119 shares)							67				860																927
Vesting of restricted stock under Equity Compensation Plan (19,763 shares)							26				(26	)															-
Issuance of common stock for services rendered (18,815 shares)							25				452																477
Net settle for taxes on Restricted Stock Awards (5,059 shares)							(7	)			(98	)															(105	)
Stock-based compensation expense											889																889
Balance - December 31, 2013		$	-			$	33,020			$	170,770			$	236,639			$	-			$	(2,190	)		$	438,239

Qualified Affordable Housing Projects.” See Note 1 “Summary of Significant Accounting Policies” for additional information.

See accompanying notes to consolidated financial statements.

- 60 -

UNION FIRST MARKET BANKSHARES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31, 2013, 2012, AND 2011

(Dollars in thousands)

		2013				2012				2011
Operating activities:
Net income		$	34,496			$	35,411			$	30,445
Adjustments to reconcile net income to net cash and cash equivalents provided by (used in) operating activities:
Depreciation of bank premises and equipment			6,024				6,631				6,715
Writedown of OREO			791				301				707
Other-than-temporary impairment recognized in earnings			-				-				400
Amortization, net			13,900				15,466				20,172
Provision for loan losses			6,056				12,200				16,800
Gains on the sale of investment securities			(21	)			(190	)			(913	)
Deferred tax expense (benefit)			262				(195	)			(615	)
Decrease (increase) in loans held for sale, net			114,513				(92,875	)			(849	)
Losses on sales of other real estate owned, net			461				631				1,065
Losses (gains) on bank premises, net			340				(2	)			996
Stock-based compensation expenses			889				1,252				717
Issuance of common stock grants for services			477				565				657
Net increase in other assets			(27,422	)			(2,173	)			(3,089	)
Net increase (decrease) in other liabilities			6,263				987				(2,160	)
Net cash and cash equivalents provided by (used in) operating activities			157,029				(21,991	)			71,048
Investing activities:
Purchases of securities available for sale			(300,324	)			(160,751	)			(217,643	)
Proceeds from sales of securities available for sale			43,354				18,944				28,800
Proceeds from maturities, calls and paydowns of securities available for sale			129,942				168,078				126,786
Net (increase) decrease in loans			(91,911	)			(178,639	)			62,126
Net increase in bank premises and equipment			(4,759	)			(2,102	)			(5,466	)
Proceeds from sales of other real estate owned			7,569				13,152				14,240
Improvements to other real estate owned			(561	)			(381	)			(528	)
Cash paid for equity-method investments			(2,000	)			-				-
Cash paid in bank acquisition			-				-				(26,437	)
Cash acquired in bank and branch acquisitions			-				-				230
Net cash and cash equivalents used in investing activities			(218,690	)			(141,699	)			(17,892	)
Financing activities:
Net increase in noninterest-bearing deposits			45,773				111,366				45,302
Net increase in NOW accounts			43,918				41,545				19,374
Net (decrease) increase in money market accounts			(16,915	)			52,237				114,012
Net increase in savings accounts			27,188				28,689				24,515
Net decrease in time deposits of $100,000 and over			(81,033	)			(42,925	)			(74,186	)
Net decrease in other time deposits			(79,856	)			(68,250	)			(72,840	)
Net increase (decrease) in short-term borrowings			131,685				69,275				(29,972	)
Net increase (decrease) in long-term borrowings(1)			2,234				(18,566	)			489
Cash dividends paid - common stock			(12,535	)			(8,969	)			(7,284	)
Cash dividends paid - preferred stock			-				-				(1,961	)
Repurchase of preferred stock			-				-				(35,595	)
Repurchase of common stock			(9,499	)			(14,445	)			-
Issuance of common stock			927				31				574
Taxes paid related to net share settlement of equity awards			(105	)			(55	)			(78	)
Net cash and cash equivalents provided by (used in) financing activities			51,782				149,933				(17,650	)
(Decrease) Increase in cash and cash equivalents			(9,879	)			(13,757	)			35,506
Cash and cash equivalents at beginning of the period			82,902				96,659				61,153
Cash and cash equivalents at end of the period		$	73,023			$	82,902			$	96,659
Supplemental Disclosure of Cash Flow Information
Cash payments for:
Interest		$	21,013			$	27,960			$	33,030
Income taxes			11,500				14,661				8,837
Supplemental schedule of noncash investing and financing activities
Unrealized (loss) gain on securities available for sale		$	(20,586	)		$	968			$	(13,064	)
Changes in fair value of interest rate swap loss			1,107				(196	)			(2,818	)
Transfers from loans to other real estate owned			8,553				13,621				11,625
Transfers from bank premises to other real estate owned			989				653				-
Transactions related to bank and branch acquisitions
Assets acquired			-				-				75,141
Liabilities assumed			-				-				48,934

(1) See Note 7 "Borrowings" related to 2013 activity.

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UNION BANKSHARES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2016, 2015, AND 2014
(Dollars in thousands)
	2016				2015				2014
Operating activities:
Net income	$	77,476			$	67,079			$	52,164
Adjustments to reconcile net income to net cash and cash equivalents provided by (used in) operating activities:
Depreciation of premises and equipment	10,215				10,776				10,742
Writedown of OREO	1,017				6,002				7,646
Other-than-temporary impairment recognized in earnings	—				300				—
Amortization, net	13,555				14,951				16,337
Amortization (accretion) related to acquisition, net	1,534				1,823				(255		)
Provision for credit losses	9,100				9,571				7,800
Gains on securities transactions, net	(205		)		(1,486		)		(1,695		)
Bank owned life insurance income	(5,513		)		(4,593		)		(4,648		)
Deferred tax expense (benefit)	243				(1,212		)		2,644
Decrease (increase) in loans held for sale, net	(457		)		6,489				21,530
Gains on sales of other real estate owned, net	(342		)		(260		)		(1,381		)
Losses on sales of premises, net	125				89				184
Gains on sale of loans held for investment	—				(470		)		—
Stock-based compensation expenses	3,270				1,388				979
Issuance of common stock for services	533				564				713
Net decrease (increase) in other assets	(14,810		)		2,692				9,896
Net increase (decrease) in other liabilities	(1,898		)		(2,780		)		4,564
Net cash and cash equivalents provided by operating activities	93,843				110,923				127,220
Investing activities:
Purchases of securities available for sale and restricted stock	(259,020		)		(259,761		)		(411,916		)
Purchases of securities held to maturity	(2,390		)		(9,830		)		—
Proceeds from sales of securities available for sale and restricted stock	69,516				101,154				289,389
Proceeds from maturities, calls and paydowns of securities available for sale	115,670				142,644				143,656
Proceeds from maturities, calls and paydowns of securities held to maturity	2,686				3,680				—
Net increase in loans held for investment	(637,207		)		(356,300		)		(74,753		)
Proceeds from sale of loans held for investment	—				27,351				—
Net increase in premises and equipment	(6,339		)		(3,870		)		(7,124		)
Proceeds from sales of other real estate owned	5,837				10,309				17,808
Improvements to other real estate owned	—				(308		)		(686		)
Purchases of BOLI policies	—				(30,000		)		—
Cash paid for equity-method investments	—				(355		)		(60		)
Cash paid in acquisition	(4,077		)		—				—
Cash acquired in bank acquisitions	207				—				49,989
Net cash and cash equivalents provided by (used in) investing activities	(715,117		)		(375,286		)		6,303
Financing activities:
Net increase in noninterest-bearing deposits	20,688				173,559				95,664
Net increase (decrease) in interest-bearing deposits	394,865				153,450				(164,696		)
Net increase in short-term borrowings	187,804				1,584				74,211
Proceeds from issuance of long-term debt	178,000				—				—
Repayments of long-term debt	(57,500		)		(10,000		)		—
Cash dividends paid - common stock	(33,672		)		(29,082		)		(25,494		)
Repurchase of common stock	(33,177		)		(16,260		)		(52,599		)
Issuance of common stock	1,429				928				1,230
Vesting of restricted stock, including tax effects	(586		)		(416		)		(1,602		)
Net cash and cash equivalents provided by (used in) financing activities	657,851				273,763				(73,286		)
Increase in cash and cash equivalents	36,577				9,400				60,237
Cash and cash equivalents at beginning of the period	142,660				133,260				73,023
Cash and cash equivalents at end of the period	$	179,237			$	142,660			$	133,260

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UNION BANKSHARES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2016, 2015, AND 2014
(Dollars in thousands)
	2016				2015				2014
Supplemental Disclosure of Cash Flow Information
Cash payments for:
Interest	$	29,576			$	27,526			$	28,394
Income taxes	27,900				21,400				17,500
Supplemental schedule of noncash investing and financing activities
Transfer from securities available for sale to securities held to maturity	—				201,822				—
Transfers between loans and other real estate owned	1,297				700				2,141
Transfers from bank premises to other real estate owned	—				2,224				10,929
Issuance of common stock in exchange for net assets in acquisition	453				—				549,523
Transactions related to bank acquisition
Assets acquired	4,668				—				2,957,521
Liabilities assumed (1)	4,807				—				2,642,120
(1)  2016 includes contingent consideration related to ODCM acquisition.

See accompanying notes to consolidated financial statements.

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UNION FIRST MARKET BANKSHARES CORPORATION AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2013, 2012,2016, 2015, AND 2011

1.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2014

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Effective April 25, 2014, the Company changed its name from “Union First Market Bankshares Corporation” to “Union Bankshares Corporation.” The name change was approved at the Company’s annual meeting of shareholders held April 22, 2014. Effective February 16, 2015, the Company changed its subsidiary bank’s name from “Union First Market Bank” to “Union Bank & Trust.”

The accounting policies and practices of Union First Market Bankshares Corporation and subsidiaries conform to GAAP and follow general practices within the banking industry. Major policies and practices are described below.

Nature of Operations -Union First Market Bankshares Corporation is a financial holding company and a bank holding company headquartered Headquartered in Richmond, Virginia, the Company is the largest community banking organization headquartered in Virginia and committed tooperates in all major banking markets throughout the deliveryCommonwealth. The Company is the holding company for Union Bank & Trust, which provides banking, trust, and wealth management services and has a statewide presence of financial services through its community114 bank subsidiary Union First Market Bankbranches and three non-bank financial services affiliates:approximately 185 ATMs. Non-bank affiliates of the Company include: Union Mortgage Group, Inc., providingwhich provides a varietyfull line of mortgage products,products; Union Insurance Group, LLC, which provides various lines of insurance products; and Old Dominion Capital Management, Inc., which provides investment advisory services. Effective January 1, 2016, Union Investment Services, Inc. providing, which provided securities, brokerage, and investment advisory services, and Union Insurance Group, LLC, an insurance agency, which operates in a joint venturewas fully consolidated with Bankers Insurance, LLC, a large insurance agency owned by community banks across Virginia and managed by the Virginia Bankers Association.

Bank.

Principles of Consolidation - The consolidated financial statements include the accounts of the Company, which is a financial holding company and a bank holding company that owns all of the outstanding common stock of its banking subsidiary, Union First Market Bank & Trust and of Union Investment Services, Inc. The Company also owns a non-controlling interest in The Payments Company which is accounted for under the equity method of accounting.Insurance Group, LLC, Union Mortgage Group, Inc. is a wholly owned subsidiary of Union First Market Bank. Union First Market Bank also has a non-controlling interest in Johnson Mortgage Company, LLC, which is accounted for under the equity method of accounting., and Old Dominion Capital Management, Inc. The Company’s Statutory TrustTrusts I and II, wholly owned subsidiaries of the Company, were formed for the purpose of issuing redeemable Trust Preferred Capital Notestrust preferred capital notes in connection with two of the Company’s acquisitions of Guaranty Financial Corporation and its wholly owned subsidiary, Guaranty Bank, in May 2004 and Prosperity Bank & Trust Company in Aprilprior to 2006. ASC 860,Transfers and Servicing, precludes the Company from consolidating Statutory Trusts I and II. The subordinated debts payable to the trusts are reported as liabilities of the Company. All significant inter-company balances and transactions have been eliminated.

Variable Interest Entities - Current accounting guidance states that if a business enterprise is the primary beneficiary of a variable interest entity, the assets, liabilities, and results of the activities of the variable interest entity should be included in the consolidated financial statements of the business enterprise. This interpretation explains how to identify variable interest entities and how an enterprise assesses its interest in a variable interest entity to decide whether to consolidate the entity. It also requires existing unconsolidated variable interest entities to be consolidated by their primary beneficiaries if the entities do not effectively disperse risks among parties involved. Variable interest entities that effectively disperse risks will not be consolidated unless a single party holds an interest or combination of interests that effectively recombines risks that were previously dispersed. Management has evaluated the Company’s investment in variable interest entities. The Company’s primary exposure to variable interest entities are the trust preferred securities structures.

Currently, other than the impact described above from the deconsolidation of the trust preferred capital notes, this This accounting guidance has not had a material impact on the financial condition or the operating results of the Company.

Use of Estimates - The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from these estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses,ALL, the valuation of goodwill and intangible assets, other real estate owned, deferred tax assets and liabilities, other-than-temporary impairment of securities, and the fair value of financial instruments.

Business Combinations-Business combinations are accounted for underASC 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 onutilizes third party valuations, such as appraisals, orand internal valuations based on discounted cash flow analyses or other valuation techniques. Under the acquisition method of accounting, the Company will identify the acquireracquiree and the closing date and apply applicable recognition principles and conditions. CostsIf 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 to effect its plan to exit an activity of an acquiree or to terminate the employment of or relocate an acquiree’s employees are not liabilities at the acquisition date.date, nor are costs to terminate the employment or relocate an acquiree’s employees. The Company willdoes not recognize these costs as

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part of applying the acquisition method. Instead, the Company will recognizerecognizes these costs as expenses in its post-combination financial statements in accordance with other applicable accounting guidance.

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GAAP.

Acquisition-related costs are 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 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 accounting guidance. These acquisition-related costs are included within the Company’s Consolidated Statements of Income classified within the noninterest expense caption.

On January 1, 2014, the Company completed the acquisition of StellarOne, a bank holding company based in Charlottesville, Virginia, in an all stock transaction. Additional information on this acquisition is disclosed in Note 20, “Subsequent Events.”

Cash and Cash Equivalents - For purposes of reporting cash flows, the Company defines cash and cash equivalents as cash, cash due from banks, interest-bearing deposits in other banks, money market investments, other interest-bearing deposits, and federal funds sold.

Investment Securities- Securities classified as available for sale are those debt and equity securities that management intends to hold for an indefinite period of time, including securities used as part of the Company’s asset/liability strategy, and that may be sold in response to changes in interest rates, liquidity needs, or other similar factors. Securities available for sale are reported at fair value, with unrealized gains or losses, net of deferred taxes, included in accumulated other comprehensive income in stockholders’ equity.

Debt securities that the Company has the positive intent and ability to hold to maturity are classified as held-to-maturityheld to maturity and reported at amortized cost. Transfers of debt securities into the held to maturity category from the available for sale category are made at fair value at the date of transfer. The Company has no securitiesunrealized holding gain or loss at the date of transfer is retained in this category.

other comprehensive income and in the carrying value of the held to maturity securities. Such amounts are amortized over the remaining life of the security.

Securities classified as held for trading are those debt and equity securities that are bought and held principally for the purpose of selling them in the near term and are reported at fair value, with unrealized gains and losses included in earnings. The Company has no securities in this category.

Purchased premiums and discounts are recognized in interest income using the interest method over the terms of the securities. Declines in the fair value of held to maturity and available for sale securities below their cost that are deemed to be other than temporary are reflected in earnings as realized losses. In estimating other-than-temporary impairmentOTTI losses, 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. Gains and losses on the sale of securities are recorded on the trade date and are determined using the specific identification method.

Due to restrictions placed upon the Company’s common stock investmentinvestments 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. The FHLB requiresrequired the Bank to maintain stock in an amount equal to 4.5%4.25% of outstanding borrowings and a specific percentage of the member’s total assets.assets at December 31, 2016 and 2015. The Federal Reserve Bank of Richmond requires the Company to maintain stock with a par value equal to 6% of its outstanding capital.

Loans Held for Sale - LoansFor loans originated prior to 2015, loans originated and intended for sale in the secondary market are sold, servicing released, and carried at the lower of cost or estimated fair value, which is determined in the aggregate based on sales commitments to permanent investors or on current market rates for loans of similar quality and type. During 2015, the Company transitioned from the lower of cost or estimated fair value method and elected the fair value option for loans held for sale. For further information regarding the fair value method and assumptions, refer to Note 13 “Fair Value Measurements.” In addition, the Company requires a firm purchase commitment from a permanent investor before a loan can be closed, thus limiting interest rate risk. As a result, loans held for sale are stated at fair value. Net unrealized losses, if any, are recognized through a valuation allowance by charges to income.

The change in fair value of loans held for sale is recorded as a component of “Mortgage banking income, net” within the Company’s Consolidated Statements of Income.

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Loans - The Company 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 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,ALL, and any deferred fees orand 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.

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The

Beginning January 1, 2016, the Company has twoenhanced the loan portfolio level segmentssegmentation to better align with how the Company manages credit risk and fourteento better align with industry practice. Below is a summary of the new loan class levels for reporting purposes. The two loan portfolio level segments are commercialsegmentation:

Construction and consumer.

Within the commercial loan portfolio segment there are seven loan classes for reporting purposes: commercial construction, commercial real estateLand Development – owner occupied, commercial real estate – non owner occupied, raw land and lots, single family investment real estate, commercial and industrial, and other commercial.

Commercial construction loans are generally made to commercial and residential builders for specific construction projects. The successful repayment of these types of loans is generally dependent upon (a) a pre-planned commitment for permanent financing from the Company, or another lender, 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.

Commercial

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 reflects 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 loans areOwner 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.

Commercial real estateReal Estate – non-owner occupied loans areNon-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, multi-family, office warehouse, and hotel as well as avoiding concentrations to any one business or industry.

Raw land and lot loans are

Residential 1-4 Family – loans generally made to both commercial and residential home builders to support their land and lot inventory needs. Repayment relies uponborrowers. Residential 1-4 family loan portfolios carry risks associated with the successful performancecreditworthiness 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 firstborrower or the tenant and secondary marketchanges in which to sell residential properties, and the borrower’s ability to manage inventory and run projects.loan-to-value ratios. The Company manages this risk by lending to experienced builders and developers, by using specific underwritingthese risks through policies and procedures such as limiting loan-to-value ratios at origination, experienced underwriting, requiring standards for these types of loans,appraisers, and by avoiding concentrations with any particular customer or geographic region.

Single family investment real estate loans are termnot making subprime loans.

Multifamily Real Estate – loans made to real estate investors to support permanent financing for single familymultifamily 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 properties are stricter than for other non-owner-occupied property types. The Company manages this risk by avoiding concentrations with any particular customer or geographic region.

customer.

Commercial and industrial& Industrial – loans generally made to support our borrowersthe 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 within this segment of 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.

Other commercial loans generally support small business lines

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HELOC – the consumer HELOC portfolio carries risks associated with the creditworthiness of creditthe borrower and agricultural lending neither of which are a material source of business for the Company.

The consumer loan portfolio segment is comprised of seven classes; mortgage, consumer construction, indirect auto, indirect marine, HELOCs, credit card, and other consumer. These are generally small loans spread across many borrowers, supported by computer-based loan approval systems and business line policies and procedures that aidchanges in managing risk. The Company’s consumer portfolio consists principally of loans secured by real estate, followed by indirect auto lending and indirect marine lending.

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loan-to-value ratios. The Company manages the uniquethese risks related toconsumer construction to acceptable levels through certain policies and procedures, such as limiting loan-to-value ratios at loan origination, using experienced underwriting, requiring standards for appraisers, and not making subprime loans under any circumstances.

Theloans.

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. Theindirect marine lending is Company manages these risks through policies and procedures such as experienced underwriting, maximum debt to borrowers that are well qualified with ample capacity to repayincome ratios, and typically lends against large marine vessels (i.e., yachts). Risksminimum borrower credit scores. Also included in this classcategory are loans that generally support small business lines of credit and agricultural lending, neither of which are generally related toa material source of business for the borrower’s ability to guard against the effects of economic downturns or sustained levels of unemployment. This type of lending places reliance on computer-based loan approval systems to supplement other underwriting standards.

Company.

Nonaccruals, Past Dues, and Charge-offs

The policy for placing commercial loans on nonaccrual status is generally when the loan is 90 days delinquent unless the credit is well secured and in process of collection but, in any event, nogenerally, not later than 180 days past due. Consumer loans are typically charged-off when management judges the loan to be uncollectible or the borrower files for bankruptcy but generally no later than 120 days past due for non-real estate secured loans and 180 days for real estate secured loans. These loans are generally not placed on nonaccrual status prior to charge off. Commercial loans are typically written down to net realizable value when it is determined that the Company will be unable to collect the principal amount in full and the amount is a confirmed loss, in any event nobut generally not later than 180 days past due. All classes of loans are considered past due or delinquent when a contractual payment has not been satisfied. In all cases, loans are placed on nonaccrual status or charged off at an earlier date if collection of principal and interest is considered doubtful and in accordance with regulatory requirements.

The process for charge-offs of impaired collateral dependent loans is discussed in detail within the “Allowance for Loan Losses” section of this Note.

For both the commercial and consumer loan segments, all interest accrued but not collected for loans placed on nonaccrual status or charged-off is reversed against interest income and accrual of interest income is terminated. Payments and interest on these loans are accounted for using the cost-recovery method by applying all payments received as a reduction to the outstanding principal balance until qualifying for return to accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. The determination of future payments being reasonably assured varies depending on the circumstances present with the loan; however, the timely payment of contractual amounts owed for six consecutive months is a primary indicator. In addition, the return of a loan to accrual status is considered and approved by the Company’s Special Assets Loan Committee.

Allowance for Loan Losses

The provision for loan losses charged to operations is an amount sufficient to bring the allowance for loan lossesALL to an estimated balance that management considers adequate to absorb potentialprobable losses inherent in the portfolio. Loans are charged against the allowance when management believes the collectability of the principal is unlikely. Recoveriesunlikely, while recoveries of amounts previously charged-off are credited to the allowance.ALL. Management’s determination of the adequacy of the allowanceALL 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 reviewManagement believes that the Company’s allowance for loan losses. Such agencies may require the Company to recognize additions to the allowance based on their judgments about information available to them at the time of their examination.

ALL is adequate.

The Company performs regular credit reviews of the loan portfolio to review the credit quality and adherence to its underwriting standards. The credit reviews consist of reviews by its Internal Audit group and reviews performed by an independent third party.Loan Review Group. Upon origination, each commercial loan is assigned a risk rating ranging from one to nine, with loans closer to one having less risk, and thisrisk. 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 portfolioloan segment is delinquency status. The Company has various committees that review and ensure that the allowance for loan lossesALL methodology is in accordance with GAAP and loss factors used appropriately reflect the risk characteristics of the loan portfolio.

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The Company’s ALL consists of specific, general, and unallocatedqualitative components.

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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 allowanceALL 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 lossesALL 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 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 valuationsvaluation 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.

General Reserve Component-

The general reserve component covers non-impaired loans and is quantitatively 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 average loan balance of the loan portfolio averaged during the preceding twelve quarters, asa period that management has determined this to be adequately reflectreflective of the losses inherent in the loan portfolio. Effective December 31, 2016, the Company implemented a rolling 20-quarter look back period, which is re-evaluated on a periodic basis to ensure reasonableness of period being utilized. Previously, the Company had utilized a 12-quarter look back period. The change to the 20-quarter look back period is due to the protracted recovery in the economy and management's conclusion that a 20-quarter period better reflects a full economic cycle. This change did not have a material impact on the Company's ALL.

The qualitative environmental factors consist of national,portfolio, national/international, and local and portfolio characteristics and are applied to both the commercial and consumer loan segments.

The following table shows the types of environmental factors management considers:

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ENVIRONMENTAL FACTORS
Portfolio		National / International		Local
Experience and ability of lending team		Interest rates		Level of economic activity
Depth of lending teamCompare ratio consideration		Inflation		Unemployment
Pace of loan growth		Unemployment		Competition
FranchiseFootprint and 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 collateralUnderwriting standards		International uncertainty
Delinquency levels in portfolio		Home Price Index
Charge-off levels in portfolio		Commercial Real Estate Price Index
Credit concentrations / nature and volume of the portfolio

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Unallocated Component- This component may be used to cover uncertainties that could affect management’s estimate of probable losses. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio. Together, the specific, general, and any unallocated allowance for loan loss represents management’s estimate of losses inherent in the current loan portfolio. Though provisions for loan losses may be based on specific loans, the entire allowance for loan losses is available for any loan management deems necessary to charge-off. At December 31, 2013, there were no material amounts considered unallocated as part of the allowance for loan losses.

Impaired Loans

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 impairment loan policy is the same for each of the seven classesall segments within the commercial portfolioloan 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 twelvetwenty 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 at which time allstatus. All payments received are then applied to reduce the principal balance and recognition of interest income is terminated as previously discussed.

Acquired Loans – Acquired loans are recorded at their fair value at acquisition date without carryover of the acquiree’s previously established ALL, as credit discounts are included in the determination of fair value. The fair value of the loans is determined using market participant assumptions in estimating the amount and timing of both principal and interest cash flows expected to be collected on the loans and then applying a market-based discount rate to those cash flows. During evaluation upon acquisition, acquired loans are also classified as either acquired impaired (or PCI) or acquired performing.

Acquired impaired loans reflect credit quality deterioration since origination, as it is probable at acquisition that the Company will not be able to collect all contractually required payments. These PCI loans are accounted for under ASC 310-30, Receivables – Loans and Debt Securities Acquired with Deteriorated Credit Quality. The PCI loans are segregated into pools based on loan type and credit risk. Loan type is determined based on collateral type, purpose, and lien position. Credit risk characteristics include risk rating groups, nonaccrual status, and past due status. For valuation purposes, these pools are further disaggregated by maturity, pricing characteristics, and re-payment structure. PCI loans are written down at acquisition to fair value using an estimate of cash flows deemed to be collectible. Accordingly, such loans are no longer classified as nonaccrual even though they may be contractually past due because the Company expects to fully collect the new carrying values of such loans, which is the new cost basis arising from purchase accounting.

A loan will be removed from a pool (at its carrying value) only if the loan is sold, foreclosed, or assets are received in full satisfaction of the loan. For purposes of removing the loan from the pool, the carrying value is deemed to equal the amount of principal cash flows received in lieu of the loan balance. This treatment ensures that the percentage yield calculation used to recognize accretable yield on the pool of loans is not affected.

Periodically, management performs a recast of PCI loans based on updated future expected cash flows, which are updated through reassessment of default rates, loss severity, and prepayment speed assumptions. The excess of the cash flows expected

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to be collected over a pool’s carrying value is considered to be the accretable yield and is recognized as interest income over the estimated life of the loan or pool using the effective yield method. The accretable yield may change due to changes in the timing and amounts of expected cash flows; these changes are disclosed in Note 4 “Loans and Allowance for Loan Losses.”

The excess of the undiscounted contractual balances due over the cash flows expected to be collected is considered to be the nonaccretable difference, which represents the estimate of credit losses expected to occur and was considered in determining the fair value of loan at the acquisition date. Any subsequent increases in expected cash flows over those expected at the acquisition date in excess of fair value are adjusted through an increase in the accretable yield on a prospective basis; any decreases in expected cash flows attributable to credit deterioration are recognized by recording a provision for loan losses.

The Company’s policy is to remove an individual loan from a pool based on comparing the amount received from its resolution with its contractual amount. Any difference between these amounts is absorbed by the nonaccretable difference for the entire pool. This removal method assumes that the amount received from resolution approximates pool performance expectations. The remaining accretable yield balance is unaffected and any material change in remaining effective yield caused by this removal method is addressed by the quarterly cash flow evaluation process for each pool. For loans that are resolved by payment in full, there is no release of the nonaccretable difference for the pool because there is no difference between the amount received at resolution and the contractual amount of the loan.

The PCI loans are and will continue to be subject to the Company’s internal and external credit review and monitoring. If further credit deterioration is experienced, such deterioration will be measured and the provision for loan losses will be increased.

At acquisition, loans with active revolving privileges are excluded from the PCI accounting; however, PCI loans do occasionally draw additional funds from the Company. These advances will increase the recorded investment of the PCI loan and will be accounted for with the other PCI loans.

Acquired performing loans are accounted for under ASC 310-20, Receivables – Nonrefundable Fees and Other Costs. The difference between the fair value and unpaid principal balance of the loan at acquisition date (premium or discount) is amortized or accreted into interest income over the life of the loans. If the acquired performing loan has revolving privileges, it is accounted for using the straight line method; otherwise, the effective interest method is used.

Troubled Debt Restructurings - In situations where, for economic or legal reasons related to a borrower’s financial condition, management may grant a concession to the borrower that it would not otherwise consider, the related loan is classified as a TDR. Management strives to identify borrowers in financial difficulty early and work with them to modify their loan to more affordable terms before their loan reaches nonaccrual status. These modified terms may include rate reductions, principal forgiveness, extension of terms that are considered to be below market, conversion to interest only, and other actions intended to minimize the economic loss and to avoid foreclosure or repossession of the collateral. In cases where borrowers are granted new terms that provide for a reduction of either interest or principal, management measures any impairment on the restructuring as noted above for impaired loans. Restructured loans for which there was no rate concession, and therefore made at a market rate of interest, may subsequently be eligible to be removed from TDR status in periods subsequent to the restructuring depending on the performance of the loan. The Company reviews previously restructured loans quarterly in order to determine whether any have performed, subsequent to the restructure, at a level that would allow for them to be removed from TDR status. The Company generally would consider a change in this classification if the borrower is no longer experiencing financial difficulties, the loan has performed under the restructured terms for a consecutive twelve month period, and is no longer considered to be impaired. All changes to TDR designations must be approved by the Bank's Special Asset Loan Committee.

Loans removed from TDR status are collectively evaluated for impairment andimpairment; due to the significant improvement in the expected future cash flows, these loans are grouped based on their primary risk characteristics, typically usingwhich is included in the Company’s internal risk rating system as its primary credit quality indicator, and impairmentCompany's general reserve. Impairment is measured based on historical loss experience taking into consideration environmental factors.

Bank 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 the re-underwriting. The TDR activity during the year did not have a material impact on the Company’s ALL, financial condition, or results of operations.

Premises and Equipment - Land is carried at cost. Bank premisesPremises and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization are computed using the straight-line method based on the type of asset involved. The Company’s policy is to capitalize additions and improvements and to depreciate the cost thereof over their estimated useful lives ranging from 3 to 4050 years. Leasehold improvements are amortized over the shorter of the life of the related lease or the estimated life of the related asset. Maintenance repairs, and renewalsrepairs are expensed as they are incurred.

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Goodwill and Intangible Assets - The Company’s intangibleCompany has an aggregate goodwill balance of $298.2 million associated with previous merger transactions. Goodwill is associated with the both the commercial banking and mortgage segments.

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 are comprised of goodwillbusinesses 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 other intangible assets that were acquired in business combinations. ASC 350,Intangibles-Goodwill and Other, prescribes accounting for goodwillliabilities assumed as of the acquisition date. Goodwill and intangible assets subsequentacquired in a purchase business combination and determined to initial recognition. The provisions of ASC 350 discontinue the amortization of goodwill and intangible assets withhave an indefinite livesuseful life are not amortized, but requiretested for impairment at least an annual impairment review andannually or more frequently if certainevents and circumstances exists that indicate that a goodwill impairment indicators are in evidence.test should be performed. The Company has determined that core deposit intangibles have a finite life, and therefore, will continueselected April 30 as the date to beperform the annual impairment test.

Intangible assets with definite useful lives are amortized over their estimated useful life.

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lives, which range from 4 to 14 years, to their estimated residual values. Goodwill is the only intangible asset with an indefinite life included on the Company’s Consolidated Balance Sheets.

Long-lived assets, including purchased intangible assets subject to amortization 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 on the Company's Consolidated Balance Sheets and reported at the lower of the carrying amount or fair value less costs to sell, would no longer depreciated. Management concluded that no circumstances indicating an impairment of these assets existed as of the balance sheet date.

The Company performed its annual impairment testing in the second quarter of 2013on April 30, 2016 and determined that there was no impairment to its goodwill or intangible assets. Subsequently, the Company determinedManagement performed a review through December 31, 2016 and concluded that an additional evaluation was necessary at year-end due to potential indicators based on the net losses recorded at the mortgage company during the last two quartersno factors indicating impairment existed as of the year. Based on this additional testing, the Company still has recorded no impairment charges to date for goodwill or intangible assets.

balance sheet date.

Other Real Estate Owned - Assets acquired through, or in lieu of, loan foreclosure are held for sale and are initially recorded at fair value less selling costs at the date of foreclosure, establishing a new cost basis. When the carrying amount exceeds the acquisition date fair value less selling costs, the excess is charged off against the allowance for loan losses.ALL. Subsequent to foreclosure, valuations are periodically performed by management and the assets are carried at the lower of carrying amount or fair value less cost to sell, any valuation adjustments occurring from post acquisitionpost-acquisition reviews are charged to expense as incurred. Revenue and expenses from operations and changes in the valuation allowance are included in OREO and credit-related costsexpenses, disclosed in Note 14, “Other Operating Expenses.”

a separate line item on the Company’s Consolidated Statements of Income.

Transfers of Financial Assets - Transfers of financial assets are accounted for as sales, when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Company – put presumptively beyond reach of the transferor and its creditors, even in bankruptcy or other receivership, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and (3) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity or the ability to unilaterally cause the holder to return specific assets.

Bank Owned Life Insurance -The Company has purchased life insurance on certain key employees and directors. These policies are recorded at their cash surrender value ($86.8 million and $54.8 million at December 31, 2013 and 2012, respectively) and are included in “Other assets”a separate line item on the Company’s Consolidated Balance Sheet.Sheets. Income generated from policespolicies is recorded as noninterest income.

At December 31, 2016 and 2015, the Bank also had liabilities for post-retirement benefits payable to other partial beneficiaries under some of these life insurance policies of $5.9 million and $4.0 million, respectively. The Bank is exposed to credit risk to the extent an insurance company is unable to fulfill its financial obligations under a policy.

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Derivatives - Derivatives are recognized as assets and liabilities on the Company’s Consolidated Balance SheetSheets and measured at fair value. The Company’s derivatives are interest rate swap agreements. For asset/liability management purposes,agreements and interest rate lock commitments. The Company’s hedging policies permit the use of various derivative financial instruments to manage interest rate risk or to hedge specified assets and liabilities. All derivatives are recorded at fair value on the balance sheet. The Company may be required to recognize certain contracts and commitments as derivatives when the characteristics of those contracts and commitments meet the definition of a derivative. To qualify for hedge accounting, derivatives must be highly effective at reducing the risk associated with the exposure being hedged and must be designated as a hedge at the inception of the derivative contract. The Company considers a hedge to be highly effective if the change in fair value of the derivative hedging instrument is within 80% to 125% of the opposite change in the fair value of the hedged item attributable to the hedged risk. If derivative instruments are designated as hedges of fair values, and such hedges are highly effective, both the change in the fair value of the hedge and the hedged item are included in current earnings. Fair value adjustments related to cash flow hedges are recorded in other comprehensive income and are reclassified to earnings when the hedged transaction is reflected in earnings. Ineffective portions of hedges are reflected in earnings as they occur. Actual cash receipts and/or payments and related accruals on derivatives related to hedges are recorded as adjustments to the interest income or interest expense associated with the hedged item. During the life of the hedge, the Company uses interest rate swap agreementsformally assesses whether derivatives designated as hedging instruments continue to be highly effective in offsetting changes in the fair value or cash flows of hedged items. If it is determined that a hedge various exposures orhas ceased to modifybe highly effective, the Company will discontinue hedge accounting prospectively. At such time, previous adjustments to the carrying value of the hedged item are reversed into current earnings and the derivative instrument is reclassified to a trading position recorded at fair value.

The Company enters into commitments to originate mortgage loans whereby the interest rate characteristicson the loan is determined prior to funding (rate lock commitments). Rate lock commitments on mortgage loans that are intended to be sold are considered to be derivatives. The period of various balance sheet accounts. For those derivatives designatedtime 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. As a result, the Company is not exposed to material losses and will not realize significant gains related to its rate lock commitments due to changes in interest rates. The correlation between the rate lock commitments and the best efforts contracts is high due to their similarity.

The market value of rate lock commitments and best efforts contracts 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 is reported as a cash flow hedge,component of “Other Assets” in the effective portionCompany’s Consolidated Balance Sheets; the fair value of the derivative’s unrealized gain or lossCompany’s best efforts forward delivery commitments is recorded as a component of other comprehensive income.“Other Liabilities” on the Company’s Consolidated Balance Sheets. Any impact to income is recorded in current period earnings as a component of “Mortgage banking income, net” on the Company’s Consolidated Statements of Income.

Affordable Housing Entities - The Company invests in private investment funds that make equity investments in multifamily affordable housing 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 debt. For the years ended December 31, 2016 and December 31, 2015, the Company recognized amortization of $370,000 and $529,000, respectively, and tax credits of $882,000 and $854,000, respectively, associated with these investments within “Income tax expense” on the Company’s loan swaps, offsetting fair valuesConsolidated Statements of Income. The carrying value of the Company’s investments in these qualified affordable housing projects were $9.9 million for both the years ended December 31, 2016 and December 31, 2015. At December 31, 2016 and December 31, 2015, the Company's recorded liability totaled $7.1 million and $4.9 million, respectively, for the related unfunded commitments, which are recorded in other assets and other liabilities with no net effect on other operating income.

expected to be paid from 2017 to 2019.

Loan Fees -Fees collected and certain costs incurred related to loan originations are deferred and amortized as an adjustment to interest income over the life of the related loans. Deferred fees and costs are recorded as an adjustment to loans outstanding using a method that approximates a constant yield.

Stock Compensation Plan - The Company has adopted ASC 718,Compensation – Stock Compensation, which requires the costs resulting from all stock-based payments to employees be recognized in the financial statements. For stock options, compensation cost is estimated at the date of grant, using the Black-Scholes option valuation model for determining fair value of stock options. No options were granted in 2013.2016 or 2015. The market price of the Company’s common stock at the date of grant is used for nonvested stock awards.

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The Black–Scholes model employs the following assumptions:

Dividend yield - calculated as the ratiofair value of historical dividends paid per share of commonperformance stock to the stock priceunits (“PSUs”) granted in 2016 and 2015 is determined and fixed on the grant date of grant;

Expected life (term of the option) - based on the average of the contractual life and vesting schedule for the respective option;

Expected volatility - based on the monthly historical volatility of the Company’s stock price, overadjusted for the expected lifeexclusion of dividend equivalents. The Monte Carlo simulation valuation model was used to determine the options;grant date fair value of PSUs granted in 2016 and 2015.

Risk-free interest rate - based upon the Treasury bill yield curve, for periods within the contractual life of the option, in effect at the time of grant.

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ASC 718 requires the Company to estimate forfeitures when recognizing compensation expense and that this estimate of forfeitures be adjusted over the requisite service period or vesting schedule based on the extent to which actual forfeitures differ from such estimates. Changes in estimated forfeitures are recognized through a cumulative catch-up adjustment, which is recognized in the period of change, and also will affect the amount of estimated unamortized compensation expense to be recognized in future periods.

For more information and tables refer to Note 13,14 “Employee Benefits.Benefits and Stock Based Compensation.”

Income Taxes - Deferred income tax assets and liabilities are determined using the asset and liability (or balance sheet) method. Under this method, the net deferred tax asset or liability is determined based on the tax effects of the temporary differences between the book and tax bases of the various balance sheet assets and liabilities and gives current recognition to changes in tax rates and laws. Deferred taxes are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50% likely to be realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits inon the accompanyingCompany's Consolidated Balance SheetSheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination.

Interest and penalties associated with unrecognized tax benefits are classified as additional income taxes inon the Company’s Consolidated Statements of Income. The Company did not record any material interest or penalties for the periods ending December 31, 2013, 2012,2016, 2015, or 20112014 related to tax positions taken. As of December 31, 20132016 and 20122015, there were no accruals for uncertain tax positions. The Company and its wholly-owned subsidiaries file a consolidated income tax return. Each entity provides for income taxes based on its contribution to income or loss of the consolidated group. The Internal Revenue Service has examined the Company’s 2010 and 2009 tax returns.

Advertising Costs-The Company follows a policy of charging the cost of advertising to expense as incurred. Advertising costs are disclosed in Note 14, “Other Operating Expenses.”

a separate line item on the Company’s Consolidated Statements of Income.

Earnings Per Common Share – Basic EPS is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding during the year. Net income available to common stockholders deducts from net income the dividends and discount accretion on preferred stock. Diluted earnings per common share reflect additional common shares that would have been outstanding if dilutive potential common shares had been issued, as well as any adjustment to income that would result from the assumed issuance. Potential common shares that may be issued by the Company relate solely to outstanding stock options and nonvestedrestricted stock and are determined using the treasury stock method.

Comprehensive Income (Loss) - Comprehensive income (loss) represents all changes in equity that result from recognized transactions and other economic events of the period. Other comprehensive income (loss) refers to revenues, expenses, gains, and losses under GAAP that are included in comprehensive income but excluded from net income, such as unrealized gains and losses on certain investments in debt and equity securities and interest rate swaps.

Off Balance Sheet Credit Related Financial Instruments- In the ordinary course of business, the Company has entered into commitments to extend credit and standby letters of credit. Such financial instruments are recorded when they are funded.

Rate Lock Commitments For more information and tables refer Note 9 “Commitments and Contingencies.”

Fair Value - The Company enters into commitmentsfollows ASC 820, Fair Value Measurements and Disclosures, to originate mortgage loans wherebyrecord 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 interest rate on the loan is determined prior to funding (rate lock commitments). Rate lock commitments on mortgage loansamount that are intended towould be sold 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 commitsreceived to sell an asset or paid to transfer a loan atliability in an orderly transaction between willing market participants.

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ASC 820 specifies a hierarchy of valuation techniques based on whether the timeinputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the borrower commits to an interest rate with the intent that the buyer has assumed interest rate risk on the loan. As a result, the Company is not exposed to material losses and will not realize significant gains related to its rate lock commitments due to changes in interest rates.Company’s market assumptions. The correlation between the rate lock commitments and the best efforts contracts is high due to their similarity.

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The market valuethree levels of rate lock commitments and best efforts contracts 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 hierarchy under ASC 820 based on these two types of rate lock commitmentsinputs are as follows: Level 1 valuation is based on quoted prices in active markets for identical assets and best efforts contractsliabilities; 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 measuring the changeobservable data in the value ofmarkets; and Level 3 valuation is based on model-based techniques that use one or more significant inputs or assumptions that are unobservable in the underlying asset while taking into considerationmarket. These unobservable inputs reflect the probabilityCompany’s assumptions about what market participants would use and information that is reasonably available under the rate lock commitments will close. Because of the high correlation between rate lock commitmentscircumstances without undue cost and best efforts contracts, no material gain or loss occurseffort.

For more specific information on the rate lock commitments.

Asset Prepayment Rates - Thevaluation techniques used by the Company purchases amortizing loan poolsto measure certain financial assets and investment securities in which the underlying assets are residential mortgage loans subject to prepayments. The actual principal reduction on these assets varies from the expected contractual principal reduction due to principal prepayments resulting from the borrowers’ election to refinance the underlying mortgage based on market and other conditions. The purchase premiums and discounts associated with these assets are amortized or accreted to interest income over the estimated life of the related assets. The estimated life is calculated by projecting future prepayments and the resulting principal cash flows until maturity. Prepayment rate projections utilize actual prepayment speed experience and available market information on similar instruments. The prepayment rates form the basis for income recognition of premiums and discounts on the related assets. Changes in prepayment estimates may cause the earnings recognized on these assets to vary over the term that the assets are held, creating volatilityliabilities recorded at fair value in the net interest margin. Prepayment rate assumptions are monitored monthly and updated periodicallyfinancial statements refer to reflect actual activity and the most recent market projections.

Note 13 “Fair Value Measurements”

Concentrations of Credit Risk - Most of the Company’s activities are with customers located in portions of Central, Southwest, and Tidewater Virginia. Securities available for sale, loans, and loansfinancial instruments with off balance sheet risk also represent concentrations of credit risk and are discussed in Note 2 “Securities” and3 “Securities,” Note 34 “Loans and Allowance for Loan Losses,” and Note 9 “Commitments and Contingencies,” respectively.

Recent

Reclassifications – The accompanying consolidated financial statements and notes reflect certain reclassifications in prior periods to conform to the current presentation.

Adoption of New Accounting Pronouncements-In December 2011,Standards - In February 2015, the FASB issued ASU 2011-11, “Balance Sheet (Topic 210) – Disclosures about Offsetting Assets and Liabilities.” This ASU requires entitiesrevised guidance to disclose both gross information and net information about both instruments and transactions eligible for offset insimplify the balance sheet and instruments and transactions subject to an agreement similar to a master netting arrangement. An entity isconsolidation assessment required to applyevaluate whether organizations should consolidate certain legal entities such as limited partnerships, limited liability corporations, and securitization structures. The guidance also removed the amendmentsindefinite deferral of specialized guidance for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. An entity should providecertain investment funds. The Company adopted ASU No. 2015-02, “Consolidation (Topic 810) Amendments to the disclosures required by those amendments retrospectively for all comparative periods presented.Consolidation Analysis” during the first quarter of 2016. The adoption of ASU 2011-11No. 2015-02 did not have a material impact on the Company'sCompany’s consolidated financial statements.

Recent Accounting Pronouncements

In July 2012,May 2014, the FASB issued ASU 2012-02,No. 2014-09, “Intangibles – Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for ImpairmentRevenue from Contracts with Customers: Topic 606.” This ASU revised guidance for the recognition, measurement, and disclosure of revenue from contracts with customers. The amendmentsoriginal guidance has been amended through subsequent accounting standard updates that resulted in this ASU applytechnical corrections, improvements, and a one-year deferral of the effective date to January 1, 2018. The guidance, as amended, is applicable to all entities that have indefinite-lived intangible assets, other than goodwill, reportedand, once effective, will replace significant portions of existing industry and transaction-specific revenue recognition rules with a more principles-based recognition model. Most revenue associated with financial instruments, including interest income, loan origination fees, and credit card fees, is outside the scope of the guidance. Gains and losses on investment securities, derivatives, and sales of financial instruments are similarly excluded from the scope. Entities can elect to adopt the guidance either on a full or modified retrospective basis. Full retrospective adoption will require a cumulative effect adjustment to retained earnings as of the beginning of the earliest comparative period presented. Modified retrospective adoption will require a cumulative effect adjustment to retained earnings as of the beginning of the reporting period in their financial statements.which the entity first applies the new guidance. The amendments inCompany plans to adopt this guidance on the effective date, January 1, 2018. The Company is finalizing its assessment of the adoption of this ASU provide an entity withand the option to make a qualitative assessment aboutrelated subsequent technical corrections issued; however, based on the likelihoodwork performed, the Company does not anticipate that an indefinite-lived intangible asset is impaired to determine whether it should perform a quantitative impairment test. The amendments also enhance the consistency of impairment testing guidance among long-lived asset categories by permitting an entity to assess qualitative factors to determine whether it is necessary to calculate the asset’s fair value when testing an indefinite-lived intangible asset for impairment. The amendments are effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. Early adoption is permitted. The adoption of ASU 2012-02 did not havethere will be a material impact on the Company'sits consolidated financial statements.

In January 2013,2016, the FASB issued ASU 2013-01,No. 2016-01, “Balance Sheet (Topic 210)Financial Instruments - Overall (Subtopic 825-10): Clarifying the ScopeRecognition and Measurement of Disclosures about OffsettingFinancial Assets and Financial Liabilities.” The amendments in thisThis ASU clarify the scope for derivatives accounted for in accordance with Topic 815,Derivatives and Hedging, including bifurcated embedded derivatives, repurchase agreements and reverse repurchase agreements, and securities borrowing and securities lending transactions that are either offset or subject to netting arrangements. An entity is required to apply the amendments for fiscal years, and interim periods within those years, beginning on or after January 1, 2013. The adoption of ASU 2013-01 did not have a material impact on the Company's consolidated financial statements.

In February 2013, the FASB issued ASU 2013-02, “Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income.” The amendments in this ASU requirerequires an entity to, present (either on the face of the statement whereamong other things: (i) measure equity investments at fair value through net income, is presented orwith certain exceptions; (ii) present in OCI the notes)changes in instrument-specific credit risk for financial liabilities measured using the effectsfair 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 the line items of net income of significant amounts reclassified out of accumulated other comprehensive income. In addition, the amendments requirean exit price and; (v) assess a cross-reference to other disclosures currently required for other reclassification items to be reclassified directly to net income in their entirety in the same reporting period. Companies should apply these amendments for fiscal years, and interim periods within those years, beginningvaluation allowance on or after December 15, 2012. The Company has included the required disclosures from ASU 2013-02 in the consolidated financial statements.

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In July 2013, the FASB issued ASU 2013-10, “Derivatives and Hedging (Topic 815): Inclusion of the Fed Funds Effective Swap Rate (or Overnight Index Swap Rate) as a Benchmark Interest Rate for Hedge Accounting Purposes.” The amendments in this ASU permit the Fed Funds Effective Swap Rate (also referred to as the Overnight Index Swap Rate) to be used as a U.S. benchmark interest rate for hedge accounting purposes under Topic 815, in addition to interest rates on direct Treasury obligations of the U.S. government and the LIBOR. The amendments also remove the restriction on using different benchmark rates for similar hedges. The amendments apply to all entities that elect to apply hedge accounting of the benchmark interest rate under Topic 815. The amendments are effective prospectively for qualifying new or redesignated hedging relationships entered into on or after July 17, 2013. The adoption of ASU 2013-10 did not have a material impact on the Company's consolidated financial statements.

In July 2013, the FASB issued ASU 2013-11, “Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists.” The amendments in this ASU provide guidance on the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, similar tax loss, or tax credit carryforward exists. An unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except as follows. To the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax lawassets related to unrealized losses of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presentedAFS debt securities in the financial statements as a liability and should not be combinedcombination with other deferred tax assets. The amendments in this ASU areprovides an election to subsequently measure certain nonmarketable equity investments at cost less any impairment and adjusted for certain observable price changes. The ASU also requires a qualitative impairment assessment of such equity investments and amends certain fair value disclosure requirements. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2013.2017. Early adoption is only permitted for the provision related to instrument-specific credit risk. The Company is currently assessing the impact ASU No. 2016-01 will have on its consolidated financial statements.

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In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842).” This ASU 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 on sale-leaseback transactions, initial direct costs, and lease executory costs for all entities. For lessors, the standard modifies the classification criteria and the accounting for sales-type and direct financing leases. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted. Upon adoption, the Company will record a right of use asset and a lease payment obligation associated with arrangements previously accounted for as operating leases. The amendments shouldCompany is currently assessing the impact ASU No. 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 applied prospectively to all unrecognized tax benefits that exist atconsidered a termination of the derivative instrument or a change in a critical term of the hedging relationship. This ASU is effective date. Retrospective applicationfor 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 2013-11No. 2016-05 to have a material impact on its consolidated financial statements.

In January 2014,March 2016, the FASB issued ASU 2014-01,No. 2016-06, “Investments—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 has concluded the adoption of ASU No. 2016-06 will not 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): Accounting for Investments in Qualified Affordable Housing Projects (a consensus ofSimplifying the FASB Emerging Issues Task Force).” The amendments in this ASU permit reporting entities to make an accounting policy election to account for their investments in qualified affordable housing projects using the proportional amortization method if certain conditions are met. Under the proportional amortization method, an entity amortizes the initial cost of the investment in proportionTransition to the tax credits and other tax benefits received and recognizesEquity Method of Accounting.” This ASU simplifies the netequity method of accounting by eliminating the requirement to retrospectively apply the equity method to an investment performancethat subsequently qualifies for such accounting as a result of an increase in the income statement as a componentlevel of income tax expense (benefit). The amendments in thisownership interest or degree of influence. This ASU should be applied retrospectively to all periods presented. A reporting entity that uses the effective yield method to account for its investments in qualified affordable housing projects before the date of adoption may continue to apply the effective yield method for those preexisting investments. The amendments in this ASU areis effective for public business entities for annual periodsfiscal years, and interim reporting periods within those annual periods,fiscal years, beginning after December 15, 2014.2016. The amendments should be applied prospectively and early adoption is permitted. The Company has concluded the adoption of ASU No. 2016-07 will not have a material impact on its consolidated financial statements.

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.permitted; however, if the Company elects to early adopt, then all amendments must be adopted in the same period. The Company has concluded the adoption of ASU No. 2016-09 will not have a material impact on its consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.”This ASU updates the existing guidance to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. The amendment replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and required consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The amendment is effective for fiscal years beginning after December 15, 2019. The Company is currently assessing the impact that ASU 2014-01No. 2016-13 will have on its consolidated financial statements.

In January 2014,August 2016, the FASB issued ASU 2014-04,No. 2016-15, “Receivables—Troubled Debt Restructurings by Creditors (Subtopic 310-40)Statement of Cash Flows (Topic 230): ReclassificationClassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon ForeclosureCertain Cash Receipts and Payments (a consensus of the FASB EmergingMerging Issues Task Force).” The amendments in this" This ASUattempts to clarify that an in substance repossession or foreclosure occurs,how certain cash receipts and a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, upon either (1) the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure or (2) the borrower conveying all interestcash payments are presented and classified in the residential real estate propertystatement of cash flows. The purpose of this update is to the creditor to satisfy that loan through completion of a deedreduce existing diversity in lieu of foreclosure or through a similar legal agreement. Additionally, the amendments require interim and annual disclosure of both (1) the amount of foreclosed residential real estate property heldpractice in eight areas addressed by the creditor and (2) the recorded investment in consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure according to local requirements of the applicable jurisdiction.update. The amendments in this ASU areamendment will be effective for public business entitiesthe Company for annual periods, andfiscal years beginning after December 15, 2017, including interim periods within those annual periods,fiscal years. Early adoption is permitted. The Company has concluded the adoption of ASU No. 2016-15 will not have a material impact on its consolidated financial statements.

In October 2016, the FASB issued ASU No. 2016-16, "Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory." This ASU modifies the accounting for intra-entity transfers of assets other than inventory. The amendments will be

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effective for the Company for fiscal years beginning after December 15, 2014.2017 including interim periods within those fiscal years. Early adoption is permitted. The Company is currently assessinghas concluded the impact thatadoption of ASU 2014-04No. 2016-16 will not have a material impact on its consolidated financial statements.

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2.

SECURITIES

In October 2016, the FASB issued ASU No. 2016-17, "Consolidation (Topic 810): Interests Held through Related Parties that are under Common Control." This ASU revises the consolidation guidance on how a reporting entity that is the single decision maker of a variable interest entity should treat indirect interests in the entity held through related parties that are under common control with the reporting entity when determining whether it is the primary beneficiary of that VIE. The amendments will be effective for the Company for fiscal years beginning after December 15, 2016 including interim periods within those fiscal years. Early adoption is permitted. The Company has concluded the adoption of ASU No. 2016-17 will not have a material impact on its consolidated financial statements.

In November 2016, the FASB issued ASU No. 2016-18, "Statement of Cash Flows (Topic 230): Restricted Cash." This ASU clarifies how restricted cash is presented and classified in the statement of cash flows. The amendments will be effective for the Company for fiscal years beginning after December 15, 2017 including interim periods within those fiscal years. Early adoption is permitted. The Company has concluded the adoption of ASU No. 2016-18 will not have a material impact on its consolidated financial statements.

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2. ACQUISITIONS

StellarOne

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. 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.

Acquisition-related expenses associated with the acquisition of StellarOne were $20.3 million for the year ended December 31, 2014.   Such costs included legal and accounting fees, lease and contract termination expenses, system conversion, operations integration, and employee severances, which were expensed as incurred. The Company did not have any acquisition-related expenses in 2015 and no material expenses in 2016. 

A summary of acquisition-related expenses associated with the StellarOne acquisition included on the Consolidated Statements of Income is as follows (dollars in thousands): 

	For the year ended December 31,
	2014
Salaries and employee benefits	$	7,875
Professional services	3,736
Other costs of operations	8,734
Total	$	20,345

ODCM

On May 31, 2016, the Bank completed its acquisition of ODCM, a Charlottesville, Virginia based registered investment advisor with nearly $300.0 million in assets under management at the time of the acquisition. The acquisition date fair value of consideration transferred totaled $9.1 million, which consisted of $4.1 million in cash, $453,000 in stock, and the remainder being subject to a three-year earn out provision and contingent on achieving certain performance metrics. The contingent consideration is carried at fair value and is reported as a component of “Other Liabilities” on the Consolidated Balance Sheet. The fair value of this liability will be assessed at each reporting period. In connection with the transaction, the Company recorded $4.7 million in goodwill and $4.5 million of amortizable assets, which primarily relate to the value of customer relationships. The Company is amortizing these intangibles assets over the period of expected benefit, which ranges from 5 to 10 years using a straight-line method. The transaction was accounted for using the acquisition method of accounting and, accordingly, assets acquired, liabilities assumed, and consideration exchanged were recorded at estimated fair values on the acquisition date. The fair values are subject to refinement for up to one year after the closing date of the acquisition. The Company did not incur any material expenses related to the acquisition of ODCM.

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Fair Value Premiums and Discounts

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 years ended December 31, 2016, 2015, and 2014 (dollars in thousands):

	For the years ended December 31,
	2016				2015				2014
Loans (1)	$	5,218			$	4,355			$	586
Core deposit intangible (2)	(6,930		)		(8,445		)		(9,795		)
Borrowings (3)	458				424				550
Time deposits (4)	—				1,843				8,914
Other amortizable intangibles (2)	(280		)		—				—
Net impact to income before taxes	$	(1,534	)		$	(1,823	)		$	255

(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 and other 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 premium 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 investment securities available for sale as of December 31, 20132016 and 20122015 are summarized as follows (dollars in thousands):

		Amortized				Gross Unrealized								Estimated
		Cost				Gains				(Losses)				Fair Value
December 31, 2013
U.S. government and agency securities		$	1,654			$	499			$	-			$	2,153
Obligations of states and political subdivisions			255,335				6,107				(6,612	)			254,830
Corporate and other bonds			9,479				115				(160	)			9,434
Mortgage-backed securities			405,389				4,954				(2,981	)			407,362
Other securities			3,617				26				(74	)			3,569
Total securities		$	675,474			$	11,701			$	(9,827	)		$	677,348
December 31, 2012
U.S. government and agency securities		$	2,581			$	268			$	-			$	2,849
Obligations of states and political subdivisions			214,980				15,123				(325	)			229,778
Corporate and other bonds			7,353				173				(314	)			7,212
Mortgage-backed securities			335,327				7,383				(536	)			342,174
Other securities			3,277				92				-				3,369
Total securities		$	563,518			$	23,039			$	(1,175	)		$	585,382

Due to restrictions placed upon the Company’s common stock investment in the Federal Reserve Bank of Richmond 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 Sheet. The FHLB requires 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 of Richmond requires the Company to maintain stock with a par value equal to 6% of its outstanding capital. Restricted equity securities consist of Federal Reserve Bank stock in the amount of $6.7 million and $6.8 million as of December 31, 2013 and 2012 and FHLB stock in the amount of $19.3 million and $13.9 million as of December 31, 2013 and 2012, respectively.

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	Amortized				Gross Unrealized								Estimated
	Cost				Gains				(Losses)				Fair Value
December 31, 2016
Obligations of states and political subdivisions	$	274,007			$	4,962			$	(3,079	)		$	275,890
Corporate bonds	123,674				892				(2,786		)		121,780
Mortgage-backed securities	536,031				4,626				(5,371		)		535,286
Other securities	13,885				—				(77		)		13,808
Total available for sale securities	$	947,597			$	10,480			$	(11,313	)		$	946,764
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 investments with unrealized losses that are not deemed to be other-than-temporarily impaired. 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
		Fair				Unrealized				Fair				Unrealized				Fair				Unrealized
		Value				Losses				Value				Losses				Value				Losses
December 31, 2013
Obligations of states and political subdivisions		$	80,368			$	(5,504	)		$	8,886			$	(1,108	)		$	89,254			$	(6,612	)
Mortgage-backed securities			168,297				(2,806	)			24,254				(175	)			192,551				(2,981	)
Corporate bonds and other securities			6,804				(80	)			1,720				(154	)			8,524				(234	)
Totals		$	255,469			$	(8,390	)		$	34,860			$	(1,437	)		$	290,329			$	(9,827	)
December 31, 2012
Obligations of states and political subdivisions		$	22,397			$	(283	)		$	649			$	(42	)		$	23,046			$	(325	)
Mortgage-backed securities			86,183				(536	)			-				-				86,183				(536	)
Corporate bonds and other securities			-				-				1,555				(314	)			1,555				(314	)
Totals		$	108,580			$	(819	)		$	2,204			$	(356	)		$	110,784			$	(1,175	)

The primary purpose

	Less than 12 months								More than 12 months								Total
	Fair Value				Unrealized Losses				Fair Value				Unrealized Losses				Fair Value				Unrealized Losses
December 31, 2016
Obligations of states and political subdivisions	$	108,440			$	(3,007	)		$	588			$	(72	)		$	109,028			$	(3,079	)
Mortgage-backed securities	316,469				(4,979		)		42,096				(392		)		358,565				(5,371		)
Corporate bonds and other securities	47,388				(1,537		)		40,468				(1,326		)		87,856				(2,863		)
Total available for sale	$	472,297			$	(9,523	)		$	83,152			$	(1,790	)		$	555,449			$	(11,313	)
December 31, 2015
Obligations of states and political subdivisions	$	8,114			$	(70	)		$	4,950			$	(70	)		$	13,064			$	(140	)
Mortgage-backed securities	287,113				(2,442		)		21,660				(337		)		308,773				(2,779		)
Corporate bonds and other securities	36,157				(751		)		19,558				(975		)		55,715				(1,726		)
Total available for sale	$	331,384			$	(3,263	)		$	46,168			$	(1,382	)		$	377,552			$	(4,645	)

As of the investment portfolio is to generate incomeDecember 31, 2016, there were $83.2 million, or 30 issues, of individual available for sale securities that had been in a continuous loss position for more than 12 months. Additionally, these securities had an unrealized loss of $1.8 million and meet liquidity needsconsisted of the Company through readily saleable financial instruments. The portfolio includes fixed rate bonds, whose prices move inversely with rates. At the end of any accounting period, the investment portfolio has unrealized gainsmunicipal obligations, mortgage-backed securities, and losses. The Company monitors the portfolio, which is subject to liquidity needs, market rate changes, and credit risk changes, to see if adjustments are needed. The primary cause of temporary impairments was the increase in spreads over comparable Treasurycorporate bonds. As of December 31, 2013,2015, there were $34.9$46.2 million, or 2320 issues, of individual securities that had been in a continuous loss position for more than 12 months. Additionally, these securities had an unrealized loss of $1.4 million and consisted of municipal obligations, mortgage-backed securities, corporate bonds, and other securities. As ofThe Company has determined that these securities are temporarily impaired at December 31, 2012, there were $2.2 million, or 2 issues,2016 and 2015 for the reasons set out below:

Mortgage-backed securities. This category’s unrealized losses are primarily the result of individualinterest rate fluctuations. 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 that hadare agency-backed securities, which have a government

guarantee.

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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.

Corporate bonds. The Company’s unrealized losses in corporate debt securities are related to both interest rate fluctuations and

ratings downgrades for a continuous loss position for morelimited 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 12 months. Additionally, 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 securities had an unrealized loss of $356,000 and consisted of municipal obligations and corporate bonds.

investments to be other-than-temporarily impaired.

The following table presents the amortized cost and estimated fair value of securities as of December 31, 20132016 and 2012,2015, 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.

		December 31, 2013								December 31, 2012
		Amortized				Estimated				Amortized				Estimated
		Cost				Fair Value				Cost				Fair Value
Due in one year or less		$	6,791			$	6,796			$	5,623			$	5,741
Due after one year through five years			21,666				22,497				16,413				17,016
Due after five years through ten years			116,735				119,269				69,164				73,501
Due after ten years			530,282				528,786				472,318				489,124
Total securities available for sale		$	675,474			$	677,348			$	563,518			$	585,382

Securities with an amortized cost of $186.6 million and $183.7 million as of December 31, 2013 and 2012, respectively,

	December 31, 2016								December 31, 2015
	Amortized Cost				Estimated Fair Value				Amortized Cost				Estimated Fair Value
Due in one year or less	$	21,403			$	21,517			$	8,380			$	8,370
Due after one year through five years	108,198				109,778				65,326				66,996
Due after five years through ten years	300,552				301,888				296,864				301,920
Due after ten years	517,444				513,581				520,706				526,006
Total securities available for sale	$	947,597			$	946,764			$	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.

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purposes as permitted or required by law as of December 31, 2016 and 2015 (dollars in thousands): 

	December 31, 2016				December 31, 2015
	Estimated Fair Value				Estimated Fair Value
Public deposits	$	210,546			$	184,635
Repurchase agreements	108,208				126,120
Other purposes (1)	23,350				26,546
Total pledged securities	$	342,104			$	337,301

(1) The "Other purposes" category consists of borrowings, derivatives, and accounts held at the Bank.

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 $5.2 million and $6.8 million as of December 31, 2016 and 2015, respectively.

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

83

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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.

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

	Carrying				Gross Unrealized								Estimated
	Value (1)				Gains				(Losses)				Fair Value
December 31, 2016
Obligations of states and political subdivisions	$	201,526			$	1,617			$	(828	)		$	202,315
December 31, 2015
Obligations of states and political subdivisions	$	205,374			$	5,748			$	(1,685	)		$	209,437

(1) The carrying value includes $5.2 million and $6.8 million of net unrealized gains present at the time of transfer from available for sale securities, net of any accretion, as of December 31, 2016 and 2015, respectively.

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. 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
	Fair Value				Unrealized Losses				Fair Value				Unrealized Losses				Fair Value				Unrealized Losses
December 31, 2016
Obligations of states and political subdivisions	$	92,841			$	(747	)		$	648			$	(81	)		$	93,489			$	(828	)
December 31, 2015
Obligations of states and political subdivisions	$	7,056			$	(1,685	)		$	—			$	—			$	7,056			$	(1,685	)

As of December 31, 2016, there was $648,000, or 1 issue, of an individual held to maturity security that had been in a continuous loss position for more than 12 months. This security had an unrealized loss of $81,000. The Company has determined that the securities in a loss position are temporarily impaired as of December 31, 2016 and 2015 for the reasons set out below:

Obligations of states 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.

The following table presents the amortized cost and estimated fair value of held to maturity securities as of December 31, 2016 and 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. 

	December 31, 2016								December 31, 2015
	Carrying Value (1)				Estimated Fair Value				Carrying Value (1)				Estimated Fair Value
Due in one year or less	$	4,403			$	4,440			$	1,488			$	1,491
Due after one year through five years	28,383				28,763				4,294				4,348
Due after five years through ten years	51,730				51,522				44,736				45,501
Due after ten years	117,010				117,590				154,856				158,097
Total securities held to maturity	$	201,526			$	202,315			$	205,374			$	209,437

(1) The carrying value includes $5.2 million and $6.8 million of net unrealized gains present at the time of transfer from available for sale securities, net of any accretion, as of December 31, 2016 and 2015, respectively.

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The following table presents the estimated fair value of held to maturity securities which were pledged to secure public deposits as permitted or required by law as of December 31, 2016 and 2015 (dollars in thousands):

	December 31, 2016				December 31, 2015
	Estimated				Estimated
	Fair Value				Fair Value
Public deposits	$	197,889			$	207,140
Total pledged securities	$	197,889			$	207,140

Restricted Stock, at cost

Due to restrictions placed upon the Bank’s common stock investment in the Federal Reserve Bank and the 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 December 31, 2016 and 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. The Federal Reserve Bank required the Bank to maintain stock with a par value equal to 6% of its outstanding capital at both December 31, 2016 and 2015. Restricted equity securities consist of Federal Reserve Bank stock in the amount of $23.8 million for both periods December 31, 2016 and 2015 and FHLB stock in the amount of $37.0 million and $28.0 million as of December 31, 2016 and 2015, respectively.

Other-Than-Temporary Impairment

During each quarter and at year end 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 forassessments during the year ended December 31, 2013,2016, and in accordance with the guidance, no OTTI was recognized.

Based on

During the assessment for the quarteryear ended September 30, 2011 and in accordance with the guidance,December 31, 2015, the Company determined that a single issuer trust preferredmunicipal security in the available for sale portfolio incurred credit-related OTTI of $400,000, which$300,000. During the first quarter of 2016, the municipal was recognized in earnings for the quarter ended September 30, 2011. There issold. As a possibility thatresult, the Company will sellrecognized an additional loss on sale of the previously written down security.

During 2014, a trust preferred security before recovering all unamortized costs. The significant inputswith OTTI recorded in a prior period was called at a premium.  As a result, the Company considered in determiningrecognized a gain on the amountcall of the credit loss are as follows:

·

The assessment of security credit rating agencies and research performed by third parties;

·

The continued interest payment deferral by the issuer;

·

The lack of improving asset quality of the issuer and worsening economic conditions; and

·

The security is thinly traded and trading at its historical low, below par.

previously written down security of $400,000 related to the previous OTTI recognizedcharge.

Realized Gains and Losses

The following table presents the gross realized gains and losses on the sale of securities available for sale and the periods presented is summarized as followproceeds from the sale of securities available for sale during the years ended December 31, 2016, 2015, and 2014 (dollars in thousands):

		OTTI Losses
Cumulative credit losses on investment securities, through December 31, 2012		$	400
Cumulative credit losses on investment securities			-
Additions for credit losses not previously recognized			-
Cumulative credit losses on investment securities, through December 31, 2013		$	400

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. The Company did not sell any investment securities that are held to maturity.

3.

LOANS AND ALLOWANCE FOR LOAN LOSSES

	2016				2015				2014
Realized gains (losses):
Gross realized gains	$	302			$	1,597			$	1,757
Gross realized losses	(97		)		(111		)		(62		)
Net realized gains	$	205			$	1,486			$	1,695
Proceeds from sales of securities	$	69,516			$	101,154			$	289,389

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4. LOANS AND ALLOWANCE FOR LOAN LOSSES

Loans are stated at their face amount, net of unearned income,deferred fees and costs, and consist of the following at December 31, 20132016 and 20122015 (dollars in thousands):

		2013				2012
Commercial:
Commercial Construction		$	213,675			$	202,344
Commercial Real Estate - Owner Occupied			500,764				513,671
Commercial Real Estate - Non-Owner Occupied			755,905				682,760
Raw Land and Lots			187,529				205,726
Single Family Investment Real Estate			237,640				233,395
Commercial and Industrial			215,702				217,661
Other Commercial			52,490				47,551
Consumer:
Mortgage			237,414				220,567
Consumer Construction			48,984				33,969
Indirect Auto			174,843				157,518
Indirect Marine			38,633				36,586
HELOCs			281,579				288,092
Credit Card			23,211				21,968
Other Consumer			70,999				105,039
Total		$	3,039,368			$	2,966,847

	2016				2015
Construction and Land Development	$	751,131			$	749,720
Commercial Real Estate - Owner Occupied	857,805				860,086
Commercial Real Estate - Non-Owner Occupied	1,564,295				1,270,480
Multifamily Real Estate	334,276				322,528
Commercial & Industrial	551,526				435,365
Residential 1-4 Family	1,029,547				978,469
Auto	262,071				234,061
HELOC	526,884				516,726
Consumer and all other	429,525				304,027
Total loans held for investment, net (1)	$	6,307,060			$	5,671,462

(1) Loans, as presented, are net of deferred fees and costs totaling $1.8 million and $3.0 million as of December 31, 2016 and 2015, respectively.

On October 16, 2015, the Company entered into an agreement to sell its credit card portfolio, approximating $26.4 million in outstanding balances, and entered into an outsourcing partnership with Elan Financial Services. The Company sold these loans at a premium. The sale of the credit card portfolio resulted in an after-tax benefit of $805,000 on the Company’s Consolidated Statement of Income in 2015. As part of the agreement, the Company will continue to share in interchange fee income and finance charges.

The following table shows the aging of the Company’s loan portfolio, by class,segment, at December 31, 20132016 (dollars in thousands):

		30-59 Days Past Due				60-89 Days Past Due				Greater Than 90 Days and still Accruing				Purchased Impaired (net of credit mark)				Nonaccrual				Current				Total Loans
Commercial:
Commercial Construction		$	-			$	-			$	-			$	-			$	1,596			$	212,079			$	213,675
Commercial Real Estate - Owner Occupied			514				-				258				-				2,037				497,955				500,764
Commercial Real Estate - Non-Owner Occupied			185				42				1,996				-				175				753,507				755,905
Raw Land and Lots			922				545				-				2,457				2,560				181,045				187,529
Single Family Investment Real Estate			1,783				277				563				275				1,689				233,053				237,640
Commercial and Industrial			348				152				220				-				3,848				211,134				215,702
Other Commercial			87				1				50				-				126				52,226				52,490
Consumer:
Mortgage			6,779				1,399				1,141				-				2,446				225,649				237,414
Consumer Construction			-				-				208				-				-				48,776				48,984
Indirect Auto			2,237				252				349				7				-				171,998				174,843
Indirect Marine			459				-				-				-				288				37,886				38,633
HELOCs			2,124				422				1,190				787				43				277,013				281,579
Credit Card			105				133				281				-				-				22,692				23,211
Other Consumer			888				124				490				96				227				69,174				70,999
Total		$	16,431			$	3,347			$	6,746			$	3,622			$	15,035			$	2,994,187			$	3,039,368

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	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	$	1,162			$	232			$	76			$	2,922			$	2,037			$	744,702			$	751,131
Commercial Real Estate - Owner Occupied	1,842				109				35				18,343				794				836,682				857,805
Commercial Real Estate - Non-Owner Occupied	2,369				—				—				17,303				—				1,544,623				1,564,295
Multifamily Real Estate	147				—				—				2,066				—				332,063				334,276
Commercial & Industrial	759				858				9				1,074				124				548,702				551,526
Residential 1-4 Family	7,038				534				2,048				16,200				5,279				998,448				1,029,547
Auto	2,570				317				111				—				169				258,904				262,071
HELOC	1,836				1,140				635				1,161				1,279				520,833				526,884
Consumer and all other	2,522				1,431				91				223				291				424,967				429,525
Total loans held for investment	$	20,245			$	4,621			$	3,005			$	59,292			$	9,973			$	6,209,924			$	6,307,060

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The following table shows the aging of the Company’s loan portfolio, by class,segment, at December 31, 20122015 (dollars in thousands):

		30-59 Days Past Due				60-89 Days Past Due				Greater Than 90 Days and still Accruing				Purchased Impaired (net of credit mark)				Nonaccrual				Current				Total Loans
Commercial:
Commercial Construction		$	-			$	-			$	-			$	-			$	5,781			$	196,563			$	202,344
Commercial Real Estate - Owner Occupied			2,105				153				1,711				247				2,206				507,249				513,671
Commercial Real Estate - Non-Owner Occupied			866				63				207				-				812				680,812				682,760
Raw Land and Lots			277				-				75				2,942				8,760				193,672				205,726
Single Family Investment Real Estate			1,819				261				756				326				3,420				226,813				233,395
Commercial and Industrial			506				270				441				79				2,036				214,329				217,661
Other Commercial			70				182				1				-				193				47,105				47,551
Consumer:
Mortgage			5,610				2,244				3,017				-				747				208,949				220,567
Consumer Construction			157				-				-				-				235				33,577				33,969
Indirect Auto			2,504				276				329				21				-				154,388				157,518
Indirect Marine			67				-				114				-				158				36,247				36,586
HELOCs			3,063				640				1,239				845				1,325				280,980				288,092
Credit Card			269				101				397				-				-				21,201				21,968
Other Consumer			1,525				487				556				105				533				101,833				105,039
Total		$	18,838			$	4,677			$	8,843			$	4,565			$	26,206			$	2,903,718			$	2,966,847

	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

Nonaccrual loans totaled $15.0$10.0 million, $26.2$11.9 million, and $44.8$19.3 million at December 31, 2013, 2012,2016, 2015 and 2011,2014, respectively. Had these loans performed in accordance with their original terms, interest income of approximately $778,000, $1.3 million,$452,000, $487,000, and $1.3 million$795,000 would have been recorded in 2013, 2012,2016, 2015, and 2011,2014, respectively. There were noAll nonaccrual loans excluded fromwere included in the impaired loan disclosure in 2013 or 2012. Loans past due 90 days or more2016 and accruing interest totaled $6.7 million and $8.8 million at December 31, 2013 and 2012, respectively.

2015.

The following table shows purchased impaired commercial and consumerthe PCI loan portfolios, by classsegment and their delinquency status, at December 31, 20132016 (dollars in thousands):

		30-89 Days Past Due				Greater than 90 Days				Current				Total
Commercial:
Raw Land and Lots		$	-			$	-			$	2,457			$	2,457
Single Family Investment Real Estate			-				-				275				275
Consumer:
Indirect Auto			-				-				7				7
HELOCs			-				31				756				787
Other Consumer			40				-				56				96
Total		$	40			$	31			$	3,551			$	3,622

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	30-89 Days Past Due				Greater than 90 Days				Current				Total
Construction and Land Development	$	—			$	84			$	2,838			$	2,922
Commercial Real Estate - Owner Occupied	271				519				17,553				18,343
Commercial Real Estate - Non-Owner Occupied	409				126				16,768				17,303
Multifamily Real Estate	—				—				2,066				2,066
Commercial & Industrial	44				56				974				1,074
Residential 1-4 Family	1,298				945				13,957				16,200
HELOC	175				121				865				1,161
Consumer and all other	—				—				223				223
Total	$	2,197			$	1,851			$	55,244			$	59,292

The following table shows purchased impaired commercial and consumerthe PCI loan portfolios, by classsegment and their delinquency status, at December 31, 20122015 (dollars in thousands):

		30-89 Days Past Due				Greater than 90 Days				Current				Total
Commercial:
Commercial Real Estate - Owner Occupied		$	-			$	193			$	54			$	247
Raw Land and Lots			-				81				2,861				2,942
Single Family Investment Real Estate			-				14				312				326
Commercial and Industrial			-				79				-				79
Consumer:
Indirect Auto			3				2				16				21
HELOCs			-				51				794				845
Other Consumer			-				-				105				105
Total		$	3			$	420			$	4,142			$	4,565

	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

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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, by class,segment at December 31, 20132016 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		$	10,520			$	10,523			$	-			$	9,073			$	282
Commercial Real Estate - Owner Occupied			4,281				4,648				-				4,845				206
Commercial Real Estate - Non-Owner Occupied			15,012				15,100				-				15,288				572
Raw Land and Lots			52,259				52,551				-				61,606				2,024
Single Family Investment Real Estate			5,520				6,021				-				6,396				261
Commercial and Industrial			4,035				6,835				-				7,083				195
Other Commercial			55				134				-				134				-
Consumer:
Mortgage			1,361				1,361				-				1,374				60
Indirect Auto			11				19				-				26				-
Indirect Marine			495				874				-				887				42
HELOCs			1,604				1,755				-				1,921				11
Other Consumer			162				211				-				214				-
Total impaired loans without a specific allowance		$	95,315			$	100,032			$	-			$	108,847			$	3,653
Loans with a specific allowance
Commercial:
Commercial Construction		$	357			$	692			$	135			$	1,136			$	9
Commercial Real Estate - Owner Occupied			3,797				3,937				284				4,000				181
Commercial Real Estate - Non-Owner Occupied			549				597				76				616				40
Raw Land and Lots			1,875				1,905				83				1,985				101
Single Family Investment Real Estate			3,389				3,676				335				3,894				114
Commercial and Industrial			2,722				3,086				204				3,214				84
Other Commercial			255				269				35				254				6
Consumer:
Mortgage			4,041				4,147				660				4,183				123
Other Consumer			321				343				151				350				10
Total impaired loans with a specific allowance		$	17,306			$	18,652			$	1,963			$	19,632			$	668
Total impaired loans		$	112,621			$	118,684			$	1,963			$	128,479			$	4,321

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	December 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	$	13,877			$	14,353			$	—			$	33,250			$	33,731			$	—
Commercial Real Estate - Owner Occupied	5,886				6,042				—				7,781				8,983				—
Commercial Real Estate - Non-Owner Occupied	1,399				1,399				—				5,328				5,325				—
Multifamily Real Estate	—				—				—				3,828				3,828				—
Commercial & Industrial	648				890				—				711				951				—
Residential 1-4 Family	8,496				9,518				—				7,564				8,829				—
Auto	—				—				—				7				7				—
HELOC	1,017				1,094				—				1,786				2,028				—
Consumer and all other	230				427				—				211				211				—
Total impaired loans without a specific allowance	$	31,553			$	33,723			$	—			$	60,466			$	63,893			$	—
Loans with a specific allowance
Construction and Land Development	$	1,395			$	1,404			$	107			$	3,167			$	3,218			$	538
Commercial Real Estate - Owner Occupied	646				646				4				3,237				3,239				358
Commercial Real Estate - Non-Owner Occupied	2,809				2,809				474				907				907				75
Commercial & Industrial	857				880				14				1,952				1,949				441
Residential 1-4 Family	3,335				3,535				200				6,065				6,153				418
Auto	169				235				1				192				199				1
HELOC	323				433				15				769				925				76
Consumer and all other	62				298				1				363				512				95
Total impaired loans with a specific allowance	$	9,596			$	10,240			$	816			$	16,652			$	17,102			$	2,002
Total impaired loans	$	41,149			$	43,963			$	816			$	77,118			$	80,995			$	2,002

88

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The following table shows the average recorded investment and interest income recognized for the Company’s impaired loans,

excluding PCI loans, by class, at December 31, 2012 (dollars in thousands):

		Recorded Investment				Unpaid Principal Balance				Related Allowance				YTD Average Investment				Interest Income Recognized
Loans without a specific allowance
Commercial:
Commercial Construction		$	28,212			$	28,696			$	-			$	28,925			$	1,237
Commercial Real Estate - Owner Occupied			13,573				13,665				-				14,579				787
Commercial Real Estate - Non-Owner Occupied			14,319				14,398				-				15,482				790
Raw Land and Lots			40,421				40,485				-				43,162				1,538
Single Family Investment Real Estate			5,487				6,185				-				7,031				253
Commercial and Industrial			2,201				2,232				-				2,757				154
Other Commercial			189				189				-				191				11
Consumer:
Mortgage			857				857				-				892				43
Indirect Auto			35				42				-				56				-
Indirect Marine			158				283				-				283				3
HELOCs			1,592				1,748				-				1,802				6
Other Consumer			286				329				-				332				-
Total impaired loans without a specific allowance		$	107,330			$	109,109			$	-			$	115,492			$	4,822
Loans with a specific allowance
Commercial:
Commercial Construction		$	4,057			$	4,104			$	643			$	4,914			$	177
Commercial Real Estate - Owner Occupied			4,100				4,239				921				4,300				124
Commercial Real Estate - Non-Owner Occupied			15,084				15,121				848				15,209				851
Raw Land and Lots			10,715				10,953				2,472				11,741				190
Single Family Investment Real Estate			3,341				3,437				711				3,643				147
Commercial and Industrial			4,511				4,728				1,000				4,938				110
Other Commercial			714				722				153				686				33
Consumer:
Mortgage			2,801				2,805				545				2,851				72
Consumer Construction			235				262				106				230				-
HELOCs			1,620				1,687				952				1,897				27
Other Consumer			867				910				273				916				17
Total impaired loans with a specific allowance		$	48,045			$	48,968			$	8,624			$	51,325			$	1,748
Total impaired loans		$	155,375			$	158,077			$	8,624			$	166,817			$	6,570

Forsegment for the years ended December 31, 2013, 2012,2016, 2015 and 2011, the average investment2014 (dollars in impaired loans was $128.5 million, $166.8 million, and $264.5 million, respectively. The interest income recorded on impaired loans was approximately $4.3 million, $6.6 million, and $10.6 million in 2013, 2012, and 2011, respectively.

thousands):

	December 31, 2016								December 31, 2015								December 31, 2014
	Average Investment				Interest  Income Recognized				Average Investment				Interest  Income Recognized				Average Investment				Interest  Income Recognized
Construction and Land Development	$	15,346			$	681			$	36,441			$	2,265			$	56,183			$	2,382
Commercial Real Estate - Owner Occupied	6,290				242				11,409				348				22,719				1,017
Commercial Real Estate - Non-Owner Occupied	4,188				134				6,201				250				29,136				1,292
Multifamily Real Estate	—				—				3,854				244				4,657				284
Commercial & Industrial	2,800				95				3,404				139				6,426				195
Residential 1-4 Family	12,716				291				14,468				410				18,244				571
Auto	244				5				235				6				7				—
HELOC	1,513				19				2,757				54				1,522				35
Consumer and all other	567				8				639				19				2,287				95
Total impaired loans	$	43,664			$	1,475			$	79,408			$	3,735			$	141,181			$	5,871

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 $41.8 million and $63.5 million as of December 31, 2013 and December 31, 2012, respectively. All loans that are considered to be TDRs are evaluated for impairment in accordance with the Company’s allowance for loan loss methodology.methodology and are included in the preceding impaired loan tables. For the year ended December 31, 2013,2016, the recorded investment in restructured loans prior to modifications was not materially impacted by the modification.

- 78 -

89

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The following table provides a summary, by class,segment, of modified loansTDRs that continue to accrue interest under the terms of the restructuring agreement, which are considered to be performing, and modified loansTDRs that have been placed in nonaccrual status, which are considered to be nonperforming, as of December 31, 20132016 and 20122015 (dollars in thousands):

		December 31, 2013												December 31, 2012
		No. of Loans				Recorded Investment				Outstanding Commitment				No. of Loans				Recorded Investment				Outstanding Commitment
Performing
Commercial:
Commercial Construction			1			$	684			$	-				5			$	4,549			$	73
Commercial Real Estate - Owner Occupied			4				2,278				-				11				6,009				-
Commercial Real Estate - Non-Owner Occupied			6				3,771				-				10				13,103				-
Raw Land and Lots			15				20,741				-				13				22,886				-
Single Family Investment Real Estate			13				3,497				-				6				928				-
Commercial and Industrial			7				1,125				-				5				1,041				-
Other Commercial			-				-				-				1				236				-
Consumer:
Mortgage			10				2,318				-				12				2,256				-
Other Consumer			3				106				-				4				460				-
Total performing			59			$	34,520			$	-				67			$	51,468			$	73
Nonperforming
Commercial:
Commercial Construction			3			$	947			$	-				4				4,260				-
Commercial Real Estate - Owner Occupied			3				283				-				3				1,079				-
Commercial Real Estate - Non-Owner Occupied			-				-				-				2				514				-
Raw Land and Lots			2				3,973				-				2				4,032				-
Single Family Investment Real Estate			1				50				-				2				427				-
Commercial and Industrial			8				1,195				-				7				1,251				-
Consumer:
Mortgage			2				794				-				1				202				-
Indirect Marine			-				-				-				1				158				-
Other Consumer			1				62				-				1				68				-
Total nonperforming			20			$	7,304			$	-				23			$	11,991			$	-
Total performing and nonperforming			79			$	41,824			$	-				90			$	63,459			$	73

- 79 -

	December 31, 2016											December 31, 2015
	No. of Loans			Recorded Investment				Outstanding Commitment				No. of Loans			Recorded Investment				Outstanding Commitment
Performing
Construction and Land Development	8			$	3,793			$	—			6			$	3,349			$	—
Commercial Real Estate - Owner Occupied	7			3,106				—				5			1,530				—
Commercial Real Estate - Non-Owner Occupied	2			2,390				—				2			2,390				—
Commercial & Industrial	3			533				—				5			261				—
Residential 1-4 Family	28			4,145				—				27			3,173				—
Consumer and all other	—			—				—				1			77				—
Total performing	48			$	13,967			$	—			46			$	10,780			$	—
Nonperforming
Construction and Land Development	2			$	215			$	—			2			$	321			$	—
Commercial Real Estate - Owner Occupied	2			156				—				1			137				—
Commercial & Industrial	1			116				—				1			2				—
Residential 1-4 Family	8			948				—				6			1,142				—
HELOC	—			—				—				1			319				—
Total nonperforming	13			$	1,435			$	—			11			$	1,921			$	—
Total performing and nonperforming	61			$	15,402			$	—			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 years ended December 31, 2016 and 2015, the Company did not identify any material restructured loans that went into default that had been restructured in the twelve-month period prior to default.

90

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The following table shows, by classsegment and modification type, TDRs that occurred during the yearyears ended December 31, 2013 as well as TDRs that had a payment default during 2013 that had been restructured during the twelve month period preceding the default2016 and 2015 (dollars in thousands):

										Restructurings with
		All Restructurings								payment default
		No. of Loans				Recorded investment at period end				No. of Loans				Recorded investment at period end
Modified to interest only, at a market rate
Commercial:
Raw Land and Lots			1			$	43				1			$	43
Consumer:
Mortgage			2				730				-				-
Total interest only at market rate of interest			3			$	773				1			$	43
Term modification, at a market rate
Commercial:
Commercial Construction			2			$	697				-			$	-
Commercial Real Estate - Owner Occupied			2				1,085				-				-
Commercial Real Estate - Non-Owner Occupied			1				745				-				-
Raw Land and Lots			3				378				-				-
Single Family Investment Real Estate			7				2,488				-				-
Commercial and Industrial			5				649				-				-
Consumer:
Mortgage			3				707				-				-
Other Consumer			1				34				-				-
Total loan term extended at a market rate			24			$	6,783				-			$	-
Term modification, below market rate
Commercial:
Commercial Real Estate - Owner Occupied			1			$	115				-			$	-
Commercial and Industrial			1				8				-				-
Consumer:														��
Mortgage			1				154				-				-
Total loan term extended at a below market rate			3			$	277				-			$	-
Total			30			$	7,833				1			$	43

- 80 -

The following table shows, by class and modification type, TDRs that occurred during the year ended December 31, 2012 as well as TDRs that had a payment default during 2012 that had been restructured during the twelve month period preceding the default (dollars in thousands):

										Restructurings with
		All Restructurings								payment default
		No. of Loans				Recorded investment at period end				No. of Loans				Recorded investment at period end
Modified to interest only, at a market rate
Commercial:
Commercial Real Estate - Owner Occupied			1			$	216				-			$	-
Commercial Real Estate - Non-Owner Occupied			2				759				-				-
Raw Land and Lots			3				257				-				-
Single Family Investment Real Estate			2				173				-				-
Consumer:
Mortgage			1				124				-				-
Indirect Marine			1				158				1				158
Total interest only at market rate of interest			10			$	1,687				1			$	158
Term modification, at a market rate
Commercial:
Commercial Real Estate - Owner Occupied			5			$	5,328				2			$	1,356
Commercial Real Estate - Non-Owner Occupied			2				715				-				-
Raw Land and Lots			1				595				-				-
Commercial and Industrial			6				408				-				-
Consumer:
Mortgage			5				858				-				-
Indirect Marine			-				-				1				26
Other Consumer			4				460				-				-
Total loan term extended at a market rate			23			$	8,364				3			$	1,382
Term modification, below market rate
Commercial:
Commercial Real Estate - Owner Occupied			4			$	647				-			$	-
Raw Land and Lots			1				59				-				-
Consumer:
Mortgage			1				64				-				-
Other Consumer			1				68				-				-
Total loan term extended at a below market rate			7			$	838				-			$	-
Interest rate modification, below market rate
Commercial:
Commercial Real Estate - Non-Owner Occupied			2			$	2,390				-			$	-
Total interest only at below market rate of interest			2			$	2,390				-			$	-
Total			42			$	13,279				4			$	1,540

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	2016							2015
	No. of Loans			Recorded Investment at Period End				No. of Loans			Recorded Investment at Period End
Modified to interest only, at a market rate
Construction and Land Development	2			$	325			—			$	—
Commercial Real Estate - Owner Occupied	2			483				—			—
Commercial & Industrial	1			34				1			19
Residential 1-4 Family	1			158				1			21
Total interest only at market rate of interest	6			$	1,000			2			$	40
Term modification, at a market rate
Construction and Land Development	2			$	1,444			—			$	—
Commercial Real Estate - Owner Occupied	3			1,326				3			282
Commercial & Industrial	1			444				2			162
Residential 1-4 Family	6			980				11			936
Consumer and all other	—			—				1			77
Total loan term extended at a market rate	12			$	4,194			17			$	1,457
Term modification, below market rate
Construction and Land Development	—			$	—			1			$	400
Commercial Real Estate - Owner Occupied	—			—				1			866
Residential 1-4 Family	7			1,309				7			1,039
Total loan term extended at a below market rate	7			$	1,309			9			$	2,305
Interest rate modification, below market rate
Commercial & Industrial	1			$	116			—			$	—
Total interest only at below market rate of interest	1			$	116			—			$	—
Total	26			$	6,619			28			$	3,802

91

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The following table shows the allowance for loan loss activity, balances for allowance for credit losses,ALL, and loansloan balances based on impairment methodology by portfolio segment for the year ended and as of December 31, 2013.2016. The table below includes the provision for loan losses. As discussed in Note 1 “Summary of Significant 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 $425,000 provision was recognized during the year ended December 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				Unallocated				Total
Allowance for loan losses:
Balance, beginning of the year		$	24,821			$	10,107			$	(12	)		$	34,916
Recoveries credited to allowance			1,496				1,285				-				2,781
Loans charged off			(8,534	)			(5,084	)			-				(13,618	)
Provision charged to operations			2,073				3,919				64				6,056
Balance, end of period		$	19,856			$	10,227			$	52			$	30,135
Ending Balance, ALL:
Loans individually evaluated for impairment		$	1,152			$	811			$	-			$	1,963
Loans collectively evaluated for impairment			18,704				9,416				52				28,172
Loans acquired with deteriorated credit quality			-				-				-				-
Total		$	19,856			$	10,227			$	52			$	30,135
Ending Balance, Loans:
Loans individually evaluated for impairment		$	101,894			$	7,105			$	-			$	108,999
Loans collectively evaluated for impairment			2,059,079				867,668				-				2,926,747
Loans acquired with deteriorated credit quality			2,732				890				-				3,622
Total		$	2,163,705			$	875,663			$	-			$	3,039,368

	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			$	505			$	(958	)		$	4,468			$	10,055
Commercial Real Estate - Owner Occupied	4,614				152				(809		)		(156		)		3,801
Commercial Real Estate - Non-Owner Occupied	6,929				80				(1		)		(386		)		6,622
Multifamily Real Estate	1,606				—				—				(370		)		1,236
Commercial & Industrial	3,163				483				(1,920		)		2,901				4,627
Residential 1-4 Family	5,414				585				(900		)		1,300				6,399
Auto	1,703				327				(1,052		)		(32		)		946
HELOC	2,934				459				(1,457		)		(608		)		1,328
Consumer and all other	1,644				434				(1,458		)		1,558				2,178
Total	$	34,047			$	3,025			$	(8,555	)		$	8,675			$	37,192

	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	$	15,272			$	107			$	732,937			$	9,948			$	2,922			$	—			$	751,131			$	10,055
Commercial Real Estate - Owner Occupied	6,532				4				832,930				3,797				18,343				—				857,805				3,801
Commercial Real Estate - Non-Owner Occupied	4,208				474				1,542,784				6,148				17,303				—				1,564,295				6,622
Multifamily Real Estate	—				—				332,210				1,236				2,066				—				334,276				1,236
Commercial & Industrial	1,505				14				548,947				4,613				1,074				—				551,526				4,627
Residential 1-4 Family	11,831				200				1,001,516				6,199				16,200				—				1,029,547				6,399
Auto	169				1				261,902				945				—				—				262,071				946
HELOC	1,340				15				524,383				1,313				1,161				—				526,884				1,328
Consumer and all other	292				1				429,010				2,177				223				—				429,525				2,178
Total loans held for investment, net	$	41,149			$	816			$	6,206,619			$	36,376			$	59,292			$	—			$	6,307,060			$	37,192

92

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The following table shows the allowance for loan loss activity, balances for allowance for creditloan losses, and loansloan balances based on impairment methodology by portfolio segment for the year ended and as of December 31, 2012.2015. In addition, a $300,000 provision was recognized during the year ended December 31, 2015 for unfunded loan commitments. 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				Unallocated				Total
Allowance for loan losses:
Balance, beginning of the year		$	27,891			$	11,498			$	81			$	39,470
Recoveries credited to allowance			589				1,122				-				1,711
Loans charged off			(12,852	)			(5,613	)			-				(18,465	)
Provision charged to operations			9,193				3,100				(93	)			12,200
Balance, end of period		$	24,821			$	10,107			$	(12	)		$	34,916
Ending Balance, ALL:
Loans individually evaluated for impairment		$	6,626			$	1,876			$	-			$	8,502
Loans collectively evaluated for impairment			18,073				8,231				(12	)			26,292
Loans acquired with deteriorated credit quality			122				-				-				122
Total		$	24,821			$	10,107			$	(12	)		$	34,916
Ending Balance, Loans:
Loans individually evaluated for impairment		$	143,330			$	7,480			$	-			$	150,810
Loans collectively evaluated for impairment			1,956,184				855,288				-				2,811,472
Loans acquired with deteriorated credit quality			3,594				971				-				4,565
Total		$	2,103,108			$	863,739			$	-			$	2,966,847

- 82 -

	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			$	720			$	(650	)		$	1,114			$	6,040
Commercial Real Estate - Owner Occupied	4,640				143				(481		)		312				4,614
Commercial Real Estate - Non-Owner Occupied	7,256				239				(3,137		)		2,571				6,929
Multifamily Real Estate	1,374				200				—				32				1,606
Commercial & Industrial	2,610				958				(2,361		)		1,956				3,163
Residential 1-4 Family	5,607				554				(1,789		)		1,042				5,414
Auto	1,297				290				(768		)		884				1,703
HELOC	2,675				298				(1,100		)		1,061				2,934
Consumer and all other	2,069				525				(1,249		)		299				1,644
Total	$	32,384			$	3,927			$	(11,535	)		$	9,271			$	34,047

	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	$	36,417			$	538			$	707,317			$	5,502			$	5,986			$	—			$	749,720			$	6,040
Commercial Real Estate - Owner Occupied	11,018				358				821,680				4,256				27,388				—				860,086				4,614
Commercial Real Estate - Non-Owner Occupied	6,235				75				1,250,726				6,854				13,519				—				1,270,480				6,929
Multifamily Real Estate	3,828				—				317,145				1,606				1,555				—				322,528				1,606
Commercial & Industrial	2,663				441				430,889				2,722				1,813				—				435,365				3,163
Residential 1-4 Family	13,150				418				944,160				4,996				21,159				—				978,469				5,414
Auto	199				1				233,862				1,702				—				—				234,061				1,703
HELOC	2,478				76				512,457				2,858				1,791				—				516,726				2,934
Consumer and all other	574				95				302,927				1,549				526				—				304,027				1,644
Total loans held for investment, net	$	76,562			$	2,002			$	5,521,163			$	32,045			$	73,737			$	—			$	5,671,462			$	34,047

93

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The following table shows the allowance for loan loss activity, balances for allowance for creditloan losses, and loansloan balances based on impairment methodology by portfolio segment for the year ended and as of December 31, 2011.2014. 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				Unallocated				Total
Allowance for loan losses:
Balance, beginning of the year		$	28,255			$	10,189			$	(38	)		$	38,406
Recoveries credited to allowance			924				1,206				-				2,130
Loans charged off			(10,891	)			(6,975	)			-				(17,866	)
Provision charged to operations			9,603				7,078				119				16,800
Balance, end of period		$	27,891			$	11,498			$	81			$	39,470
Ending Balance, ALL:
Loans individually evaluated for impairment		$	10,127			$	1,278			$	-			$	11,405
Loans collectively evaluated for impairment			17,679				10,220				81				27,980
Loans acquired with deteriorated credit quality			85				-				-				85
Total		$	27,891			$	11,498			$	81			$	39,470
Ending Balance, Loans:
Loans individually evaluated for impairment		$	239,853			$	5,334			$	-			$	245,187
Loans collectively evaluated for impairment			1,707,560				855,939				-				2,563,499
Loans acquired with deteriorated credit quality			8,828				1,069				-				9,897
Total		$	1,956,241			$	862,342			$	-			$	2,818,583

	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	$	4,387			$	150			$	(1,095	)		$	1,414			$	4,856
Commercial Real Estate - Owner Occupied	4,716				247				(643		)		320				4,640
Commercial Real Estate - Non-Owner Occupied	5,285				41				(282		)		2,212				7,256
Multifamily Real Estate	1,227				4				(3		)		146				1,374
Commercial & Industrial	2,021				316				(1,557		)		1,830				2,610
Residential 1-4 Family	6,272				1,753				(2,856		)		438				5,607
Auto	1,414				325				(596		)		154				1,297
HELOC	2,697				113				(976		)		841				2,675
Consumer and all other	2,116				520				(1,012		)		445				2,069
Total	$	30,135			$	3,469			$	(9,020	)		$	7,800			$	32,384

	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	$	51,342			$	266			$	593,148			$	4,590			$	11,890			$	—			$	656,380			$	4,856
Commercial Real Estate - Owner Occupied	21,673				355				816,360				4,285				31,167				—				869,200				4,640
Commercial Real Estate - Non-Owner Occupied	28,648				2,017				1,129,032				5,239				25,834				—				1,183,514				7,256
Multifamily Real Estate	4,608				—				289,764				1,374				2,994				—				297,366				1,374
Commercial & Industrial	5,813				570				364,843				2,040				3,440				—				374,096				2,610
Residential 1-4 Family	14,905				1,210				941,550				4,397				26,619				—				983,074				5,607
Auto	2				—				207,811				1,297				—				—				207,813				1,297
HELOC	1,325				12				520,016				2,663				2,000				—				523,341				2,675
Consumer and all other	2,097				101				247,271				1,968				1,844				—				251,212				2,069
Total loans held for investment, net	$	130,413			$	4,531			$	5,109,795			$	27,853			$	105,788			$	—			$	5,345,996			$	32,384

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The Company uses thea risk rating system and past due status and trends as the primary credit quality indicatorindicators for the consumer loan portfolio segment while acategories. The risk rating system is utilized for commercial loans. Commercial loans are graded on a scale of 10 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 gradeslevels follows:

·

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;

·

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;

·

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;

·

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.

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Pass is determined by the following criteria:

•Risk rated 0 loans have little or no risk and are generally General Obligation Municipal Credits with A or better debt ratings;

•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;

•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; 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 purchased impairedPCI loans, in the commercial portfolios by classsegment with their related risk rating currentlevel as of December 31, 20132016 (dollars in thousands):

		1-3				4				5				6				7				8				Total
Commercial Construction		$	24,399			$	148,251			$	20,370			$	13,772			$	6,883			$	-			$	213,675
Commercial Real Estate - Owner Occupied			149,632				324,394				10,017				10,926				5,795				-				500,764
Commercial Real Estate - Non-Owner Occupied			224,702				453,279				21,953				46,084				9,887				-				755,905
Raw Land and Lots			8,648				98,927				14,132				16,439				46,926				-				185,072
Single Family Investment Real Estate			38,327				168,564				12,302				11,522				6,650				-				237,365
Commercial and Industrial			68,748				123,585				8,254				8,752				3,822				2,541				215,702
Other Commercial			18,593				23,160				8,529				1,897				311				-				52,490
Total		$	533,049			$	1,340,160			$	95,557			$	109,392			$	80,274			$	2,541			$	2,160,973

	Pass				Special Mention				Substandard				Doubtful				Total
Construction and Land Development	$	667,018			$	69,311			$	11,857			$	23			$	748,209
Commercial Real Estate - Owner Occupied	801,565				32,364				5,533				—				839,462
Commercial Real Estate - Non-Owner Occupied	1,505,153				37,631				4,208				—				1,546,992
Multifamily Real Estate	312,711				19,499				—				—				332,210
Commercial & Industrial	539,999				9,391				1,062				—				550,452
Residential 1-4 Family	986,973				18,518				4,813				3,043				1,013,347
Auto	258,188				3,648				135				100				262,071
HELOC	519,928				4,225				969				601				525,723
Consumer and all other	425,520				3,491				40				251				429,302
Total	$	6,017,055			$	198,078			$	28,617			$	4,018			$	6,247,768

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The following table shows the recorded investment in all loans, excluding purchased impairedPCI loans, in the commercial portfolios by classsegment with their related risk rating currentlevel as of December 31, 20122015 (dollars in thousands):

		1-3				4				5				6				7				8				Total
Commercial Construction		$	5,504			$	117,769			$	14,637			$	33,815			$	30,619			$	-			$	202,344
Commercial Real Estate - Owner Occupied			145,977				321,486				15,197				19,051				11,713				-				513,424
Commercial Real Estate - Non-Owner Occupied			161,343				417,412				48,840			��	34,646				20,519				-				682,760
Raw Land and Lots			3,943				114,053				13,260				29,194				42,148				186				202,784
Single Family Investment Real Estate			43,705				156,636				12,111				13,150				7,467				-				233,069
Commercial and Industrial			68,308				120,442				10,584				12,064				6,045				139				217,582
Other Commercial			14,189				18,260				10,710				3,489				844				59				47,551
Total		$	442,969			$	1,266,058			$	125,339			$	145,409			$	119,355			$	384			$	2,099,514

	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 purchased impairedPCI loans in the commercial portfolios by classsegment with their related risk rating and credit quality indicator information currentlevel as of December 31, 20132016 (dollars in thousands):

		4				5				6				7				8				Total
Raw Land and Lots		$	-			$	653			$	-			$	1,804			$	-			$	2,457
Single Family Investment Real Estate			275				-				-				-				-				275
Total		$	275			$	653			$	-			$	1,804			$	-			$	2,732

	Pass				Special Mention				Substandard				Doubtful				Total
Construction and Land Development	$	1,092			$	1,432			$	398			$	—			$	2,922
Commercial Real Estate - Owner Occupied	5,520				8,889				3,934				—				18,343
Commercial Real Estate - Non-Owner Occupied	10,927				4,638				1,738				—				17,303
Multifamily Real Estate	343				1,723				—				—				2,066
Commercial & Industrial	107				480				487				—				1,074
Residential 1-4 Family	8,557				4,455				2,672				516				16,200
HELOC	857				183				7				114				1,161
Consumer and all other	166				37				20				—				223
Total	$	27,569			$	21,837			$	9,256			$	630			$	59,292

The following table shows the recorded investment in only purchased impairedPCI loans in the commercial portfolios by classsegment with their related risk rating and credit quality indicator information currentlevel as of December 31, 20122015 (dollars in thousands):

		5				6				7				8				Total
Commercial Real Estate - Owner Occupied		$	-			$	-			$	247			$	-			$	247
Raw Land and Lots			-				-				2,942				-				2,942
Single Family Investment Real Estate			312				-				14				-				326
Commercial and Industrial			-				-				79				-				79
Total		$	312			$	-			$	3,282			$	-			$	3,594

	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.

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96

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The following shows changes in the Company’s acquired impaired loan portfolio and 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 year ended December 31,
	2016				2015
Balance at beginning of period	$	22,139			$	28,956
Accretion	(5,611		)		(6,084		)
Reclass of nonaccretable difference due to improvement in expected cash flows	5,089				3,886
Other, net (1)	(1,878		)		(4,619		)
Balance at end of period	$	19,739			$	22,139

⁽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 year.

The carrying value of the Company’s PCI loan portfolio, accounted for under ASC 310-30, totaled $59.3 million at December 31, 2016 and $73.7 million at December 31, 2015. The outstanding balance of the Company’s PCI loan portfolio totaled $73.6 million at December 31, 2016 and $90.3 million at December 31, 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 $1.1 billion and $1.4 billion at December 31, 2016 and 2015, respectively; the remaining discount for ASC 310-20on these loans for the years ended December 31, 2013totaled $16.9 million and 2012 (dollars in thousands):

		December 31, 2013																December 31, 2012
		ASC 310-30 Loans								ASC 310-20 Loans								ASC 310-30 Loans								ASC 310-20 Loans
		Accretable Yield				Carrying Amount of Loans				Remaining Discount				Carrying Amount of Loans				Accretable Yield				Carrying Amount of Loans				Remaining Discount				Carrying Amount of Loans
Balance at beginning of period		$	3,147			$	4,565			$	5,350			$	473,283			$	5,140			$	9,897			$	9,010			$	663,510
Additions			-				-				-				-				-				-				-				-
Accretion			(55	)			-				(2,009	)			-				(353	)			-				(3,660	)			-
Charge-offs			(112	)			(96	)			-				(1,774	)			(1,640	)			(412	)			-				(2,320	)
Transfers to OREO			-				(201	)			-				(207	)			-				(2,371	)			-				(2,895	)
Payments received, net			-				(646	)			-				(96,806	)			-				(2,549	)			-				(185,012	)
Balance at end of period		$	2,980			$	3,622			$	3,341			$	374,496			$	3,147			$	4,565			$	5,350			$	473,283

4.

BANK PREMISES AND EQUIPMENT

Bank$20.8 million, respectively.

5. PREMISES AND EQUIPMENT

The Company’s premises and equipment as of December 31, 20132016 and 20122015 are as follows (dollars in thousands):

		2013				2012
Land		$	23,652			$	24,493
Land improvements and buildings			62,329				62,721
Leasehold improvements			5,313				5,290
Furniture and equipment			36,133				37,707
Equipment lease			62				62
Construction in progress			9,323				6,634
Total			136,812				136,907
Less accumulated depreciation and amortization			53,997				51,498
Bank premises and equipment, net		$	82,815			$	85,409

	2016				2015
Land	$	29,708			$	29,839
Land improvements and buildings	97,341				96,943
Leasehold improvements	8,760				8,313
Furniture and equipment	54,188				49,914
Construction in progress	8,827				9,030
Total	198,824				194,039
Less accumulated depreciation and amortization	76,797				68,011
Bank premises and equipment, net	$	122,027			$	126,028

Depreciation expense for 2013, 2012,the years ended December 31, 2016, 2015, and 20112014 was $6.0$10.2 million, $6.6$10.8 million, and $6.7$10.7 million, respectively. Future minimum rental payments required under non-cancelable operating leases for bank premises that have initial or remaining terms in excess of one year as of December 31, 20132016 are as follows for the years ending (dollars in thousands):

2014		$	5,380
2015			4,985
2016			4,232
2017			3,967
2018			3,807
Thereafter			10,410
Total of future payments		$	32,781

2017	$	6,418
2018	6,037
2019	5,197
2020	4,345
2021	3,959
Thereafter	7,080
Total of future payments	$	33,036

The leases contain options to extend for periods up to 20 years. Rental expense for the years ended December 31, 2013, 2012,2016, 2015, and 20112014 totaled $5.7$7.1 million, $5.9$7.8 million, and $4.9$8.1 million, respectively.

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5.

INTANGIBLE ASSETS

97

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6. INTANGIBLE ASSETS

The Company’s intangible assets consist of core deposits, trademarks,goodwill, and goodwillother intangibles arising from previous and current acquisitions. The Company has determined that core deposit intangibles and trademarks have a finite lifelives and amortizes them over their estimated useful life.Corelives. 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. On May 31, 2016, the Company completed the acquisition of ODCM and recorded goodwill of $4.7 million and other amortizable intangible assets of $4.5 million. The trademarkCompany is amortizing these intangible acquired through previous acquisitions, was amortizedassets over threethe period of expected benefit, which ranges from 5 to 10 years using thea straight-line method.

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 20132016 and determined that there was no impairment to its goodwill or intangible assets. Subsequently, the Company determined that an additional evaluation was necessary at year-end due to potential indicators based on the net losses recorded at the mortgage company during the last two quarters of the year. Based on this additional testing, the Company still has recorded no impairment charges to date for 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
December 31, 2013
Amortizable core deposit intangibles		$	46,615			$	34,635			$	11,980
Trademark intangible			1,200				1,200				-
December 31, 2012
Amortizable core deposit intangibles		$	46,615			$	30,837			$	15,778
Trademark intangible			1,200				1,167				33

	Gross Carrying Value				Accumulated Amortization				Net Carrying Value
December 31, 2016
Amortizable core deposit intangibles	$	68,367			$	51,987			$	16,380
Other amortizable intangibles	4,502				280				4,222
December 31, 2015
Amortizable core deposit intangibles	$	76,185			$	52,875			$	23,310

Amortization expense of core deposit intangibles for the years ended December 31, 2013, 2012,2016, 2015, and 20112014 totaled $3.8$6.9 million, $4.9$8.4 million, and $6.1$9.8 million, respectively. Amortization expense of the trademarkother intangibles at December 31, 2016 was $280,000. There was no amortization expense of other intangibles for the year ended December 31, 2013 was $33,000 and for both years ended December 31, 20122015 and 2011 totaled $400,000.2014. As of December 31, 2013,2016, the estimated remaining amortization expense of core deposit intangibles is as follows (dollars in thousands):

2014		$	2,898
2015			2,463
2016			1,862
2017			1,437
2018			906
Thereafter			2,414
Total estimated amortization expense		$	11,980

6.

DEPOSITS

2017	$	6,070
2018	4,625
2019	3,573
2020	2,509
2021	1,481
Thereafter	2,344
Total estimated amortization expense	$	20,602

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7. DEPOSITS

The major types of interest-bearing deposits are as follows for the years endingended December 31, (dollars in thousands):

		2013				2012
Interest-bearing deposits:
NOW accounts		$	498,068			$	454,150
Money market accounts			940,215				957,130
Savings accounts			235,034				207,846
Time deposits of $100,000 and over			427,597				508,630
Other time deposits			444,254				524,110
Total interest-bearing deposits		$	2,545,168			$	2,651,866

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	2016				2015
Interest-bearing deposits:
NOW accounts	$	1,765,956			$	1,521,906
Money market accounts	1,435,591				1,312,612
Savings accounts	591,742				572,800
Time deposits of $250,000 and over	189,647				183,520
Other time deposits	1,002,928				1,000,161
Total interest-bearing deposits	$	4,985,864			$	4,590,999

As of December 31, 2013,2016, the scheduled maturities of time deposits are as follows for the years endingended December 31, (dollars in thousands):

2014		$	563,788
2015			141,329
2016			76,595
2017			37,814
2018			52,325
Total scheduled maturities of time deposits		$	871,851

2017	$	463,884
2018	381,063
2019	159,011
2020	141,145
2021	47,472
Total scheduled maturities of time deposits	$	1,192,575

The amount of time deposits held in CDARS accounts was $32.0$1.0 million and $36.7$4.9 million as of December 31, 20132016 and 2012,2015, respectively. These deposits had a maturity of less than one year.

The Company classifies deposit overdrafts as other consumer loans.loans held for investment within the "Consumer and all other" category. As of both December 31, 20132016 and 2012,2015, these deposits totaled $1.8 million and $5.7 million, respectively.

7.

BORROWINGS

$1.2 million.

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8. 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. Also included in total short-term borrowings are federal funds purchased, which are secured overnight borrowings from other financial institutions, and short-term FHLB advances. Total short-term borrowings consist of the following as of December 31, 20132016 and 20122015 (dollars in thousands):

		2013				2012
Securities sold under agreements to repurchase		$	52,455			$	54,270
Other short-term borrowings			211,500				78,000
Total short-term borrowings		$	263,955			$	132,270
Maximum month-end outstanding balance		$	263,955			$	154,116
Average outstanding balance during the period			119,433				91,993
Average interest rate during the period			0.30	%			0.31	%
Average interest rate at end of period			0.30	%			0.28	%
Other short-term borrowings:
Federal Funds purchased		$	31,500			$	38,000
FHLB		$	180,000			$	40,000

	2016				2015
Securities sold under agreements to repurchase	$	59,281			$	84,977
Other short-term borrowings	517,500				304,000
Total short-term borrowings	$	576,781			$	388,977
Maximum month-end outstanding balance	$	678,262			$	445,761
Average outstanding balance during the period	590,074				379,783
Average interest rate during the period	0.49		%		0.25		%
Average interest rate at end of period	0.60		%		0.27		%
Other short-term borrowings:
FHLB	$	517,500			$	304,000
Other lines of credit	—				—

The Bank maintains federal funds lines with several correspondent banks; the remaining available balance was $93.5 million and $87.0$175.0 million at both December 31, 20132016 and 2012, respectively.2015. The Company maintains an alternate line of credit at a correspondent bank; the available balance was $25.0 million at both December 31, 2016 and 2015. 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 $805.2 million$2.4 billion and $802.2 million$1.5 billion at December 31, 20132016 and 2012,2015, respectively.

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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 $6.7 million at December 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	%			3.00	%		6/17/2034
Trust Preferred Capital Note - Statutory Trust II			36,000,000				1,114,000				1.40	%			1.65	%		6/15/2036
Total		$	58,500,000

	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	%		3.75	%		6/17/2034
Trust Preferred Capital Note - Statutory Trust II	36,000,000				1,114,000				1.40	%		2.40	%		6/15/2036
VFG Limited Liability Trust I Indenture	20,000,000				619,000				2.73	%		3.73	%		3/18/2034
FNB Statutory Trust II Indenture	12,000,000				372,000				3.10	%		4.10	%		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 as 'Other Assets' withinin "Other Assets" on the Consolidated Balance Sheets

As part of a prior acquisition,Sheets.

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During 2016, the Company assumedissued $150.0 million of fixed-to-floating rate subordinated debtnotes with termsan initial fixed interest rate of 5.00% through December 15, 2021. The interest rate then changes to a floating rate of LIBOR plus 1.45% and a3.175% through its maturity date of April 2016.in December 2026. At December 31, 2013,2016, the carrying value of the subordinated debt netwas $150.0 million, with a remaining discount of the purchase accounting discount, was $16.4$2.0 million.

On August 23,

During 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 Sheet.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 Income Statement.Statements of Income. Amortization expense for the years ended December 31, 20132016, 2015, and 20122014 was $1.7$1.9 million, $1.8 million, and $612,000,$1.8 million, respectively.

In connection with the StellarOne acquisition, the Company assumed $70.0 million in long-term borrowings with the FHLB of which there is $20.0 million remaining as of December 31, 2016 that had a remaining fair value premium of $559,000.

As of December 31, 2013,2016, the Company had advances from the FHLB consistconsisting of the following (dollars in thousands):

Long Term Type		Spread to  3-Month LIBOR				Interest Rate				Maturity Date		Conversion Date		Option Frequency		Advance Amount
Adjustable Rate Credit			0.44	%			0.69	%		8/23/2022		n/a		n/a		$	55,000
Adjustable Rate Credit			0.45	%			0.70	%		11/23/2022		n/a		n/a			65,000
Adjustable Rate Credit			0.45	%			0.70	%		11/23/2022		n/a		n/a			10,000
Adjustable Rate Credit			0.45	%			0.70	%		11/23/2022		n/a		n/a			10,000
																$	140,000

Long-term Type	Spread to 3-Month LIBOR			Interest Rate			Maturity Date		Advance Amount
Adjustable Rate Credit	0.44	%		1.44	%		8/23/2022		$	55,000
Adjustable Rate Credit	0.45	%		1.45	%		11/23/2022		65,000
Adjustable Rate Credit	0.45	%		1.45	%		11/23/2022		10,000
Adjustable Rate Credit	0.45	%		1.45	%		11/23/2022		10,000
Fixed Rate	—			3.62	%		11/28/2017		10,000
Fixed Rate	—			3.75	%		7/30/2018		5,000
Fixed Rate	—			3.97	%		7/30/2018		5,000
Fixed Rate Hybrid	—			0.99	%		10/19/2018		30,000
									$	190,000

As of December 31, 2012,2015, the Company had advances from the FHLB consistedconsisting of the following (dollars in thousands):

Long Term Type		Spread to  3-Month LIBOR				Interest Rate				Maturity Date		Conversion Date		Option Frequency		Advance Amount
Adjustable Rate Credit			0.44	%			0.75	%		8/23/2022		n/a		n/a		$	55,000
Adjustable Rate Credit			0.45	%			0.76	%		11/23/2022		n/a		n/a			65,000
Adjustable Rate Credit			0.45	%			0.76	%		11/23/2022		n/a		n/a			10,000
Adjustable Rate Credit			0.45	%			0.76	%		11/23/2022		n/a		n/a			10,000
																$	140,000

Long-term Type	Spread to 3-Month LIBOR			Interest Rate			Maturity Date		Advance Amount
Adjustable Rate Credit	0.44	%		1.05	%		8/23/2022		$	55,000
Adjustable Rate Credit	0.45	%		1.07	%		11/23/2022		65,000
Adjustable Rate Credit	0.45	%		1.07	%		11/23/2022		10,000
Adjustable Rate Credit	0.45	%		1.07	%		11/23/2022		10,000
Fixed Rate	—			3.62	%		11/28/2017		10,000
Fixed Rate	—			3.75	%		7/30/2018		5,000
Fixed Rate	—			3.97	%		7/30/2018		5,000
Fixed Rate Hybrid	—			2.11	%		10/5/2016		25,000
Fixed Rate Hybrid	—			0.91	%		7/25/2016		15,000
									$	200,000

The carrying value of the loans and securities pledged as collateral for FHLB advances totaled $1.1$2.0 billion and $1.0$1.9 billion as of December 31, 20132016 and 2012,2015, respectively.

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As of December 31, 2013,2016, the contractual maturities of long-term debt are as follows for the years ending (dollars in thousands):

		Subordinated Debt				FHLB Advances				Prepayment Penalty				Total Long-term Borrowings
2014		$	-			$	-			$	(1,787	)		$	(1,787	)
2015			-				-				(1,831	)			(1,831	)
2016			16,359				-				(1,882	)			14,477
2017			-				-				(1,923	)			(1,923	)
2018			-				-				(1,969	)			(1,969	)
Thereafter			-				140,000				(7,918	)			132,082
Total long-term borrowings		$	16,359			$	140,000			$	(17,310	)		$	139,049

8.

COMMITMENTS AND CONTINGENCIES

	Trust Preferred Capital Notes				Subordinated Debt				FHLB Advances				Premium  (Discount)				Prepayment Penalty				Total Long-term Borrowings
2017	$	—			$	—			$	10,000			$	(30	)		$	(1,922	)		$	8,048
2018	—				—				40,000				(343		)		(1,970		)		37,687
2019	—				—				—				(486		)		(2,018		)		(2,504		)
2020	—				—				—				(501		)		(2,074		)		(2,575		)
2021	—				—				—				(516		)		(2,119		)		(2,635		)
Thereafter	93,301				150,000				140,000				(6,307		)		(1,707		)		375,287
Total Long-term borrowings	$	93,301			$	150,000			$	190,000			$	(8,183	)		$	(11,810	)		$	413,308

9. 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, or the financial condition, or results of operations of the Company.

Litigation Relating to the StellarOne Acquisition

In a joint press release issued on June 10, 2013, the Company announced the signing of a definitive merger agreement for the acquisition of StellarOne Corporation. The Company closed the acquisition of StellarOne on January 1, 2014. On June 14, 2013, in response to the initial announcement of the definitive merger agreement, Jaclyn Crescente, individually and on behalf of all other StellarOne shareholders, filed a class action complaint against StellarOne, its current directors, StellarOne Bank, and the Company, in the U.S. District Court for the Western District of Virginia, Charlottesville Division (Case No. 3:13-cv-00021-NKM) (the “District Court”). The complaint alleges that the StellarOne directors breached their fiduciary duties by approving the merger with the Company and that the Company aided and abetted in such breaches of duty. The complaint seeks, among other things, equitable relief and/or money damages in the event that the transaction is completed. StellarOne and the Company believe that the claims are without merit; however, in order to eliminate the expense and uncertainties of further litigation, StellarOne, the Company, and the other defendants have entered into a memorandum of understanding with the plaintiffs in order to settle the litigation. Under the terms of the memorandum of understanding, plaintiffs agree to settle the lawsuit and release the defendants from all claims relating to the acquisition of StellarOne, subject to approval by the District Court. On February 3, 2014, the District Court granted preliminary approval to the memorandum of understanding and to a class action settlement in the case. If the District Court grants final approval, the lawsuit will be dismissed.

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 inon the Company’s Consolidated Balance Sheet.Sheets. The contractual amounts of these instruments reflect the extent of the Company’s involvement in particular classes of financial instruments.

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.

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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 the 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 written 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 during the origination process and for loans held for sale. These commitments to sell loans are designed to mitigate UMG’s exposure to fluctuations in interest rates in connection with rate lock commitments and loans held for sale. At December 31, 2013, the Company held approximately $2.0 million in loans available for sale in which the related rate lock commitment had expired; accordingly, a valuation adjustment of $94,000 was recorded to properly reflect the lower of cost or market value of these loans. This valuation adjustment was recorded within the mortgage segment; there was a $92,000 valuation adjustment in the prior year.

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The following table presents the balances of commitments and contingenciesas of December 31, (dollars in thousands):

		2013				2012
Commitments with off-balance sheet risk:
Commitments to extend credit (1)		$	891,680			$	844,766
Standby letters of credit			48,107				45,536
Mortgage loan rate lock commitments			54,834				133,326
Total commitments with off-balance sheet risk		$	994,621			$	1,023,628
Commitments with balance sheet risk:
Loans held for sale		$	53,185			$	167,698
Total other commitments		$	1,047,806			$	1,191,326

	2016				2015
Commitments with off-balance sheet risk:
Commitments to extend credit (1)	$	1,924,885			$	1,557,350
Standby letters of credit	84,212				139,371
Total commitments with off-balance sheet risk	$	2,009,097			$	1,696,721

(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 December 31, 20132016 and 2012,2015, the aggregate amount of daily average required reserves waswere approximately $16.0$54.5 million and $14.2$48.7 million, respectively.

The

As of December 31, 2016, the Company hashad approximately $9.6$50.3 million in deposits in other financial institutions, of which $3.1$18.9 million servesand $14.8 million serve as collateral for the trust swap furthercash flow hedges and loan swaps, respectively, as discussed in Note 910 “Derivatives.” The Dodd-Frank Act, which was signed into law on July 21, 2010, provided unlimited deposit insurance coverage for transaction accounts, but such provision expired on December 31, 2012. As of January 1, 2013, the deposit insurance coverage for transaction accounts is up to at least $250,000. The Company had approximately $5.6$15.2 million and $14.7 million in deposits in other financial institutions that were uninsured at December 31, 2013.2016 and 2015, respectively. On an annual basis, the Company’s management evaluates the loss risk of its uninsured deposits in financial counter-parties.

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 910 “Derivatives” in these “Notes to the Consolidated Financial Statements” for additional information.

As disclosed in the Company’s Form 10-Q as of September 30, 2013, UMG has identified errors with respect to disclosures made to certain customers during the period from November 2011 through August 2013 in connection with certain loans originated pursuant to insured loan programs administered by the United States Department of Agriculture and Federal Housing Administration.  These disclosure errors understated to the borrowers the amount of mortgage insurance premiums that were required to be assessed over the life of the loans under guidelines enacted by these loan programs.  The Company has, however, taken certain remedial action with respect to the affected borrowers to address the disclosure errors as permitted under applicable law. Virtually all of these loans were sold to third parties prior to the identification of the errors.  At December 31, 2013, the Company accrued $966,000 for contractual indemnification claims specifically related to these errors in mortgage insurance premium calculations.

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 andrates; as of December 31, 20132016 and 2012,2015, the Company’s indemnification reserve for such mortgage loans was $627,000$379,000 and $446,000,$450,000, respectively.

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9.

DERIVATIVES

During the second quarter

10. 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 certain derivatives as hedging instruments in a qualifying hedge accounting relationship (cash flow or fair value hedge). The remaining are classified as free standing derivatives consisting of 2010, thecustomer accommodation loan swaps and interest rate lock commitments that do not qualify for hedge accounting.

Cash Flow Hedges

The Company entered into andesignates derivatives as cash flow 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 agreement (the “trust swap”)agreements as part of the management of interest rate risk. The Company designated the trust swap as a cash flow hedge intended to protect against the variability of cash flows associated with the aforementioned Statutory Trust II preferred capital securities. The trust swap hedges the interest rate risk, wherein the Company receives interest of LIBOR from a counterparty and pays a fixed rate of 3.51% to the same counterparty calculated onits hedging strategy by exchanging a notional amount, of $36.0 million. The termequal to the principal amount of the trust swap is six years with a fixed rate that started June 15, 2011. The trust swap wasborrowings, for fixed-rate interest based on benchmarked interest rates.

All swaps were entered into with a counterpartycounterparties that met the Company’s credit standards and the agreement containsagreements contain collateral provisions protecting the at-risk party. The Company believes that the credit risk inherent in the contract is not significant. At December 31, 2013,

The terms and conditions of the Company pledged $3.1 million of cash as collateral for the trust swap.

During the third quarter of 2013, the Company entered into eight interest rate swap agreements (the “prime loan swaps”) as part of the management of interest rate risk. The Company designated the prime loan swaps as cash flow hedges intended to protect the Company against the variability in the expected future cash flows on the designated variable rate loan products. The prime loan swaps hedge the underlying cash flows, wherein the Company receives a fixed interest rate ranging from 4.71% to 6.09% from counterpartyvary and pays interest based on the Wall Street Journal prime index, with a spread of up to 1%, to the same counterparty calculated on a notional amount of $100.0 million. Four of the eight prime loan swaps contain floor rates ranging from 4.00% to 5.00%. The term of the prime loan swaps is six years with a fixed rate that started September 17, 2013. The prime loan swaps were entered into with a counterparty that met the Company’s credit standards and the agreement contains collateral provision protecting the at-risk party. The Company believes that the credit risk inherent in the contract is not significant. At December 31, 2013, the Company pledged securities with a market value of $5.7 million as collateral for the prime loan swaps.

Amountsamounts 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 previously discussed derivatives as cash flow hedges, with the effective portions of the derivatives’ unrealized gains or losses are recorded as a component of other comprehensive income. Based on the 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 on the Company’s Consolidated Statements of Income.

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On June 13, 2016, the Company terminated three interest rate swaps designated as cash flow hedges prior to their respective maturity dates. The ineffectiveunrealized gain of $1.3 million within Accumulated Other Comprehensive Income will be reclassified into earnings over a 3 year period, the term of the hedged item, using the effective interest method. The estimated net amount of gains expected to be reclassified into earnings within the next twelve months is $382,000.

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. For the years ended December 31, 2016 and 2015, the aggregate notional amount of the related hedged items was $65.9 million and $61.2 million, respectively, and the fair value of the related hedged items was an unrealized loss of $890,000 and an unrealized gain of $689,000, respectively.

The Company applies hedge accounting in accordance with ASC 815, Derivatives and Hedging, 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. Statistical 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. 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 if any, would be recorded in other expense. The Company has assessed the effectiveness of each hedging relationship by comparing the changes in cash flowsinterest income and interest expense on the designated hedged item. The Company’s cash flow hedges are deemed to be effective. At December 31, 2013, the fair value of the Company’s cash flow hedges was an unrealized loss of $3.6 million, the amount the Company would have expected to pay if the contract was terminated. The below asset and liability are recorded as a component of other comprehensive income recorded in the Company’s Consolidated Statements of Comprehensive Income.

Shown below is a summary of the derivatives designated as cash flow hedges at December 31, 2013 and 2012 (dollars in thousands):

						Notional												Receive				Pay				Life
		Positions				Amount				Asset				Liability				Rate				Rate				(Years)
As of December 31, 2013
Pay fixed - receive floating interest rate swaps			1			$	36,000			$	-			$	3,046				0.25	%			3.51	%			3.46
Receive fixed - pay floating interest rate swaps			8			$	100,000			$	-			$	516				5.17	%*			3.89	%*			5.72

						Notional												Receive				Pay				Life
		Positions				Amount				Asset				Liability				Rate				Rate				(Years)
As of December 31, 2012
Pay fixed - receive floating interest rate swaps			1			$	36,000			$	-			$	4,489				0.31	%			3.51	%			4.46

*This receive rate is a weighted average rate for the 8 loan swaps that have a receive rate range from 4.71% to 6.09%. The pay rate is a weighted average rate taking into consideration the floor rates discussed above.

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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 counterpartiesa 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“Other Assets” and other liabilities. Shown below“Other Liabilities” on the Company’s Consolidated Balance Sheets.

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 summary regarding loan swapcommitment, 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.

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 is reported as a component of “Other Assets” on the Company’s Consolidated Balance Sheets; the fair value of the Company’s best efforts forward delivery commitments is recorded as a component of “Other Liabilities” on the Company’s Consolidated Balance Sheets. Any impact to income is recorded in current period earnings as a component of “Mortgage banking income, net” on the Company’s Consolidated Statements of Income.

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The following table summarizes key elements of the Company’s derivative activities atinstruments as of December 31, 20132016 and 20122015, segregated by derivatives that are considered accounting hedges and those that are not (dollars in thousands):

						Notional												Receive				Pay				Life
		Positions				Amount				Asset				Liability				Rate				Rate				(Years)
As of December 31, 2013
Receive fixed - pay floating interest rate swaps			1			$	718			$	33			$	-				4.58	%			2.92	%			8.59
Pay fixed - receive floating interest rate swaps			1			$	718			$	-			$	33				2.92	%			4.58	%			8.59

						Notional												Receive				Pay				Life
		Positions				Amount				Asset				Liability				Rate				Rate				(Years)
As of December 31, 2012
Receive fixed - pay floating interest rate swaps			1			$	744			$	18			$	-				4.58	%			2.96	%			9.59
Pay fixed - receive floating interest rate swaps			1			$	744			$	-			$	18				2.96	%			4.58	%			9.59

10.

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

	December 31, 2016																December 31, 2015
				Derivative (2)																Derivative (2)
	Notional or Contractual Amount (1)				Assets				Liabilities				Collateral Pledged (3)				Notional or Contractual Amount (1)				Assets				Liabilities				Collateral Pledged (3)
Derivatives designated as accounting hedges:
Interest rate contracts:
Cash flow hedges	$	188,500			$	211			$	9,619			$	21,938			$	263,000			$	946			$	10,352			$	14,449
Fair value hedges	65,920				1,437				296				—				61,150				—				888				—
Derivatives not designated as accounting hedges:
Loan Swaps
Pay fixed-receive floating interest rate swaps	373,355				—				1,005				—				138,969				3,758				—				—
Pay floating-receive fixed interest rate swaps	373,355				1,005				—				16,033				138,969				—				3,758				5,983
Other contracts:
Interest rate lock commitments	48,743				610				—				—				50,369				701				—				—
Best efforts forward delivery commitments	85,400				1,469				—				—				84,050				370				—				—

(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.

11. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The change in accumulated other comprehensive income (loss) for the year ended December 31, 20132016 is summarized as follows, net of tax (dollars in thousands):

		Unrealized Gains (losses) on Securities				Change in FV of Cash Flow Hedges				Total
Balance - December 31, 2012		$	14,573			$	(4,489	)		$	10,084
Other comprehensive income (loss)			(13,367	)			583				(12,784	)
Amounts reclassified from accumulated other comprehensive income			(14	)			524				510
Net current period other comprehensive income (loss)			(13,381	)			1,107				(12,274	)
Balance - December 31, 2013		$	1,192			$	(3,382	)		$	(2,190	)

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	Unrealized Gains (Losses) on AFS Securities				Unrealized Gain for AFS Securities Transferred to HTM				Change in Fair Value of Cash Flow Hedges				Unrealized Gains (Losses) on BOLI				Total
Balance - December 31, 2015	$	7,777			$	4,432			$	(5,957	)		$	—			$	6,252
Other comprehensive income (loss)	(8,186		)		—				270				(1,728		)		(9,644		)
Amounts reclassified from accumulated other comprehensive income	(133		)		(1,055		)		508				263				(417		)
Net current period other comprehensive income (loss)	(8,319		)		(1,055		)		778				(1,465		)		(10,061		)
Balance - December 31, 2016	$	(542	)		$	3,377			$	(5,179	)		$	(1,465	)		$	(3,809	)

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The change in accumulated other comprehensive income (loss) for the year ended December 31, 20122015 is summarized as follows, net of tax (dollars in thousands):

		Unrealized Gains (losses) on Securities				Change in FV of Cash Flow Hedge				Total
Balance - December 31, 2011		$	13,943			$	(4,293	)		$	9,650
Other comprehensive income (loss)			753				(922	)			(169	)
Amounts reclassified from accumulated other comprehensive income			(123	)			726				603
Net current period other comprehensive income (loss)			630				(196	)			434
Balance - December 31, 2012		$	14,573			$	(4,489	)		$	10,084

	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)	(3,640		)		—				(1,394		)		(5,034		)
Amounts reclassified from accumulated other comprehensive income	(771		)		(819		)		621				(969		)
Net current period other comprehensive income (loss)	(4,411		)		(819		)		(773		)		(6,003		)
Balance - December 31, 2015	$	7,777			$	4,432			$	(5,957	)		$	6,252

The change in accumulated other comprehensive income (loss) for the year ended December 31, 20112014 is summarized as follows, net of tax (dollars in thousands):

		Unrealized Gains (losses) on Securities				Change in FV of Cash Flow Hedge				Total
Balance - December 31, 2010		$	5,046			$	(1,475	)		$	3,571
Other comprehensive income (loss)			9,231				(3,233	)			5,998
Amounts reclassified from accumulated other comprehensive income			(334	)			415				81
Net current period other comprehensive income (loss)			8,897				(2,818	)			6,079
Balance - December 31, 2011		$	13,943			$	(4,293	)		$	9,650

	Unrealized Gains (Losses) on AFS Securities				Change in Fair Value of Cash Flow Hedges				Total
Balance - December 31, 2013	$	1,192			$	(3,382	)		$	(2,190	)
Other comprehensive income (loss)	17,089				(2,393		)		14,696
Amounts reclassified from accumulated other comprehensive income	(842		)		591				(251		)
Net current period other comprehensive income (loss)	16,247				(1,802		)		14,445
Balance - December 31, 2014	$	17,439			$	(5,184	)		$	12,255

Reclassifications of unrealized gains (losses) on available-for-saleavailable for sale securities are reported inon the Company’s Consolidated Statements of Income Statement as "Gains“Gains on securities transactions, net"net” with the corresponding income tax effect being reflected as a component of income tax expense. The Company reported gains of $21,000, $190,000,$205,000 and $913,000$1.5 million for the years ended December 31, 2013, 2012,2016 and 2011, respectively,2015, related to gains/losses on the sale of securities. As discussedExcluding the OTTI recovery of $400,000 in Note 2 “Securities”,the second quarter of 2014, the Company determined that a single issuer trust preferred security incurred credit-related OTTIreported gains of $400,000 during$1.3 million for the year ended December 31, 2011, which is included in2014, related to the reclassification above.sale of securities. The tax effect of these transactions during the years ended December 31, 2013, 2012,2016, 2015, and 20112014 were $7,000, $67,000,$72,000, $415,000, and $179,000,$453,000, respectively, which were included as a component of income tax expense.

See Note 3 “Securities” for additional information.

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 securities included net pre-tax unrealized gains of $8.1 million at the date of transfer. Reclassifications of the unrealized gains on transferred securities are reported over time as accretion within interest income on the Company's Consolidated Statements of Income with the corresponding income tax effect being reflected as a component of income tax expense. The Company recorded accretion of $1.6 million and $1.3 million for the years ended December 31, 2016 and 2015, respectively. The tax effect of these transactions during the years ended December 31, 2016 and 2015 were $568,000 and $441,000, respectively, which 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 Statement with the corresponding income tax effect being reflected as a component of income tax expense. The Company reported net interest expense of $805,000, $1.1 million,$782,000, $956,000, and $638,000$909,000 for the years ended December 31, 2013, 2012,2016, 2015, and 2011,2014, respectively. The tax effect of these transactions during the years ended December 31, 2013, 2012,2016, 2015, and 20112014 were $281,000, $391,000,$274,000, $335,000, and $223,000,$318,000, respectively, which were included as a component of income tax expense.

11.

REGULATORY MATTERS AND CAPITAL

Reclassifications of unrealized losses on BOLI are reported in salaries and benefits expense on the Company's Consolidated Statements of Income. The Company reported expenses of $263,000 for the year ended December 31, 2016.

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12. REGULATORY MATTERS AND CAPITAL

Capital resources represent funds, earned or obtained, over which financial institutions can exercise greater or longer control in comparison with deposits and the Bank are subjectborrowed funds. Management seeks to various regulatorymaintain a capital requirements administered by the federal banking agencies.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. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on financial statements of the Company and the subsidiary bank.Bank. Under capital adequacy guidelines and the regulatory framework for prompt corrective action,PCA, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of their assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The capital amounts and classificationclassifications are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Prompt corrective actionPCA provisions are not applicable to financial holding companies and bank holding companies, but only to their bank subsidiaries.

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Quantitative measures established by regulation to ensure capital adequacy require the Company and Bank to maintain minimum amounts and ratios of total risk-weighted assets (as defined) and Tier 1 capital (as defined) to average assets (as defined) and risk-weighted assets.

As of December 31, 2013,2016, the most recent notification from the Federal Reserve Bank categorized the Bank as “well capitalized” under the regulatory framework for prompt corrective action.PCA. To be categorized as “well-capitalized,” an institution must maintain minimum total risk-based, Tier 1 risk-based, and Tier 1 leverage, and common equity Tier 1 ratios as set forth in the following tables. There are no conditions or events since that notification that management believes have changed the Bank’s category.

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The Company and the Bank’s capital amounts and ratios are also presented in the following table at December 31, 20132016 and 20122015 (dollars in thousands):

		Actual								Required for Capital Adequacy Purposes								Required in Order to Be Well Capitalized Under PCA
		Amount				Ratio				Amount				Ratio				Amount				Ratio
As of December 31, 2013
Total capital to risk weighted assets:
Consolidated		$	465,360				14.17	%		$	262,730				8.00	%			NA				NA
Union First Market Bank			442,784				13.56	%			261,229				8.00	%		$	326,537				10.00	%
Tier 1 capital to risk weighted assets:
Consolidated			428,490				13.05	%			131,338				4.00	%			NA				NA
Union First Market Bank			405,925				12.43	%			130,628				4.00	%			195,941				6.00	%
Tier 1 capital to average adjusted assets:
Consolidated			428,490				10.70	%			160,183				4.00	%			NA				NA
Union First Market Bank			405,925				10.19	%			159,342				4.00	%			199,178				5.00	%
As of December 31, 2012
Total capital to risk weighted assets:
Consolidated		$	454,444				14.57	%		$	249,487				8.00	%			NA				NA
Union First Market Bank			438,860				14.14	%			248,294				8.00	%		$	310,367				10.00	%
Tier 1 capital to risk weighted assets:
Consolidated			409,879				13.14	%			124,743				4.00	%			NA				NA
Union First Market Bank			394,296				12.70	%			124,147				4.00	%			186,220				6.00	%
Tier 1 capital to average adjusted assets:
Consolidated			409,879				10.29	%			159,408				4.00	%			NA				NA
Union First Market Bank			394,296				9.94	%			158,631				4.00	%			198,288				5.00	%

In February 2012, the Company repurchased 335,649 shares of its common stock for an aggregate purchase price of $4,363,437, or $13.00 per share. The repurchase was funded with cash on hand. The Company transferred 115,384 of the repurchased shares to its ESOP for $13.00 per share. The remaining 220,265 shares were retired. In December 2012, the Company repurchased and retired 750,000 shares of its common stock for an aggregate purchase price of $11,580,000, or $15.44 per share. The repurchase was funded with cash on hand. In the first quarter 2013, the Company repurchased 500,000 shares of its common stock for an aggregate purchase price of $9,500,000, or $19.00 per share. The repurchase was funded with cash on hand and the shares were retired.

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	Actual							Required for Capital Adequacy Purposes							Required in Order to Be Well Capitalized Under PCA
	Amount				Ratio			Amount				Ratio			Amount			Ratio
As of December 31, 2016
Common equity Tier 1 capital to risk weighted assets:
Consolidated	$	699,728			9.72	%		$	324,035			4.50	%		NA			NA
Union Bank & Trust	901,783				12.58	%		322,531				4.50	%		465,878			6.50	%
Tier 1 capital to risk weighted assets:
Consolidated	790,228				10.97	%		432,047				6.00	%		NA			NA
Union Bank & Trust	901,783				12.58	%		430,042				6.00	%		573,389			8.00	%
Total capital to risk weighted assets:
Consolidated	976,145				13.56	%		576,062				8.00	%		NA			NA
Union Bank & Trust	939,700				13.11	%		573,390				8.00	%		716,737			10.00	%
Tier 1 capital to average adjusted assets:
Consolidated	790,228				9.87	%		320,316				4.00	%		NA			NA
Union Bank & Trust	901,783				11.31	%		319,046				4.00	%		398,807			5.00	%
As of December 31, 2015
Common equity Tier 1 capital to risk weighted assets:
Consolidated	$	691,195			10.55	%		$	294,823			4.50	%		NA			NA
Union Bank & Trust	751,992				11.52	%		293,747				4.50	%		424,301			6.50	%
Tier 1 capital to risk weighted assets:
Consolidated	781,695				11.93	%		393,141				6.00	%		NA			NA
Union Bank & Trust	751,992				11.52	%		391,663				6.00	%		522,217			8.00	%
Total capital to risk weighted assets:
Consolidated	816,041				12.46	%		523,943				8.00	%		NA			NA
Union Bank & Trust	786,339				12.05	%		522,051				8.00	%		652,563			10.00	%
Tier 1 capital to average adjusted assets:
Consolidated	781,695				10.68	%		292,770				4.00	%		NA			NA
Union Bank & Trust	751,992				10.31	%		291,752				4.00	%		364,691			5.00	%

In July 2013, the FRB issued a final rule that makes technical changes to its market risk capital rulerules to align itthem with the Basel III regulatory capital framework and meet certain requirements of the Dodd-Frank Act. The phase-in period for the final new capital rules require the Company to complybegan on January 1, 2015, with full compliance with the following new minimum capital ratios, effectivefinal rules to be phased in by January 1, 2015: (1) a new common equity Tier 1 capital ratio2019. Refer to Item 7. – “Management’s Discussion and Analysis of 4.5%Financial Condition and Results of risk-weighted assets; (2) a Tier 1 capital ratio of 6% of risk-weighted assets (increased from the current requirement of 4%); (3) a total capital ratio of 8% of risk-weighted assets (unchanged from current requirement); and, (4) a leverage ratio of 4% of total assets.

If the new capital ratios described above had been effective as of December 31, 2013, based on management’s interpretation and understanding of the new rules, the Company would have remained “well capitalized” as of such date.

12.

FAIR VALUE MEASUREMENTS

Operations,” section “Capital Resources” in this Form 10-K for additional information.

13. FAIR VALUE MEASUREMENTS

The Company follows ASC 820,Fair Value Measurements and Disclosures (“ASC 820”), 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

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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 910 “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 repricingre-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% at both December 31, 2016 and December 31, 2015. As of December 31, 2016, the interest rate lock commitments are recorded as a component of “Other Assets” 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).

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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

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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 December 31, 20132016 and 2012.

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.

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The following table presents the balances of financial assets and liabilities measured at fair value on a recurring basis at December 31, 2013 and 2012 (dollars in thousands):

		Fair Value Measurements at December 31, 2013 using
		Quoted Prices in Active Markets for Identical Assets				Significant Other Observable Inputs				Significant Unobservable Inputs
		Level 1				Level 2				Level 3				Balance
ASSETS
Interest rate swap - loans		$	-			$	33			$	-			$	33
Securities available for sale:
U.S. government and agency securities			-				2,153				-				2,153
Obligations of states and political subdivisions			-				254,830				-				254,830
Corporate and other bonds			-				9,434				-				9,434
Mortgage-backed securities			-				407,362				-				407,362
Other securities			-				3,569				-				3,569
LIABILITIES
Interest rate swap - loans		$	-			$	33			$	-			$	33
Cash flow hedge - prime loan swap			-				516				-				516
Cash flow hedge - trust preferred			-				3,046				-				3,046

		Fair Value Measurements at December 31, 2012 using
		Quoted Prices in Active Markets for Identical Assets				Significant Other Observable Inputs				Significant Unobservable Inputs
		Level 1				Level 2				Level 3				Balance
ASSETS
Interest rate swap - loans		$	-			$	18			$	-			$	18
Securities available for sale:
U.S. government and agency securities			-				2,849				-				2,849
Obligations of states and political subdivisions			-				229,778				-				229,778
Corporate and other bonds			-				7,212				-				7,212
Mortgage-backed securities			-				342,174				-				342,174
Other securities			-				3,369				-				3,369
LIABILITIES
Interest rate swap - loans		$	-			$	18			$	-			$	18
Cash flow hedge - trust preferred			-				4,489				-				4,489

Certain assets are measured at fair value on a nonrecurring basis in accordance with 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 marketfair 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). As such, the Company records any fair value adjustments on a nonrecurring basis. Nonrecurring fair value adjustments of $363,000 and $0 were recorded on loans held for sale during the years ended December 31, 2013 and 2012, respectively. Gains and losses on the sale of loans are recorded within the mortgage segment and are reported on a separate line item inon the Company’s Consolidated Statements of Income.

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

	Fair Value Measurements at December 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
Securities available for sale:
Obligations of states and political subdivisions	$	—			$	275,890			$	—			$	275,890
Corporate and other bonds	—				121,780				—				121,780
Mortgage-backed securities	—				535,286				—				535,286
Other securities	—				13,808				—				13,808
Loans held for sale	—				36,487				—				36,487
Derivatives:
Interest rate swap	—				1,005				—				1,005
Cash flow hedges	—				211				—				211
Fair value hedge	—				1,437				—				1,437
Interest rate lock commitments	—				—				610				610
Best efforts forward delivery commitments	—				—				1,469				1,469
LIABILITIES
Derivatives:
Interest rate swap	$	—			$	1,005			$	—			$	1,005
Cash flow hedges	—				9,619				—				9,619
Fair value hedges	—				296				—				296

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	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
Best efforts forward delivery commitments	—				—				370				370
LIABILITIES
Derivatives:
Interest rate swap	$	—			$	3,758			$	—			$	3,758
Cash flow hedges	—				10,352				—				10,352
Fair value hedges	—				888				—				888

Certain assets are measured at fair value on a nonrecurring basis in accordance with 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.

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 years ended December 31, 2016 and 2015, the Level 3 weighted average discounts management applied to the appraised value of collateral related to impaired loans were 1.5% 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 lossesALL 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

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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 years ended December 31, 2016 and 2015, the Level 3 weighted averages related to OREO were approximately 25.1% and 32.0%, respectively.

Total valuation expenses related to OREO properties for the years ended December 31, 20132016, 2015, 2014 were $1.0 million, $6.0 million, and 2012 were $791,000 and $301,000,$7.6 million, respectively.

The following tables summarize the Company’s financial assets that were measured at fair value on a nonrecurring basis at December 31, 20132016 and 20122015 (dollars in thousands):

		Fair Value Measurements at December 31, 2013 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		$	-			$	53,185			$	-			$	53,185
Impaired loans			-				-				7,985				7,985
Other real estate owned			-				-				34,116				34,116
		Fair Value Measurements at December 31, 2012 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		$	-			$	167,698			$	-			$	167,698
Impaired loans			-				-				30,104				30,104
Other real estate owned			-				-				32,834				32,834

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The following table displays quantitative information about Level 3 Fair Value Measurements for December 31, 2013 (dollars in thousands):

		Fair Value Measurements at December 31, 2013
		Fair Value				Valuation Technique(s)		Unobservable Inputs		Weighted Average
ASSETS
Commercial Construction		$	219			Market comparables		Discount applied to market comparables(1)			0	%
Commercial Real Estate - Owner Occupied			2,043			Market comparables		Discount applied to market comparables(1)			17	%
Raw Land and Lots			908			Market comparables		Discount applied to market comparables(1)			10	%
Single Family Investment Real Estate			1,332			Market comparables		Discount applied to market comparables(1)			0	%
Commercial and Industrial			1,719			Market comparables		Discount applied to market comparables(1)			28	%
Other(2)			1,764			Market comparables		Discount applied to market comparables(1)			0	%
Total Impaired Loans			7,985
Other real estate owned			34,116			Market comparables		Discount applied to market comparables(1)			33	%
Total		$	42,101

⁽¹⁾ A discount percentage (in addition to expected selling costs) is applied based on age of independent appraisals, current market conditions, and experience within the local market.

⁽²⁾ The "Other" category of the impaired loans section from the table above consists of Other Commercial, Mortgage, Consumer Construction, HELOCs, and Other Consumer.

The following table displays quantitative information about Level 3 Fair Value Measurements for December 31, 2012 (dollars in thousands):

		Fair Value Measurements at December 31, 2012
		Fair Value				Valuation Technique(s)		Unobservable Inputs		Weighted Average
ASSETS
Commercial Construction		$	3,190			Market comparables		Discount applied to market comparables(1)			6	%
Commercial Real Estate - Owner Occupied			2,001			Market comparables		Discount applied to market comparables(1)			13	%
Commercial Real Estate - Non-Owner Occupied			13,100			Market comparables		Discount applied to market comparables(1)			9	%
Raw Land and Lots			7,300			Market comparables		Discount applied to market comparables(1)			6	%
Single Family Investment Real Estate			1,241			Market comparables		Discount applied to market comparables(1)			6	%
Commercial and Industrial			1,810			Market comparables		Discount applied to market comparables(1)			23	%
Other(2)			1,462			Market comparables		Discount applied to market comparables(1)			27	%
Total Impaired Loans			30,104
Other real estate owned			32,834			Market comparables		Discount applied to market comparables(1)			33	%
Total		$	62,938

⁽¹⁾ A discount percentage (in addition to expected selling costs) is applied based on age of independent appraisals, current market conditions, and experience within the local market.

⁽²⁾ The "Other" category of the impaired loans section from the table above consists of Other Commercial, Mortgage, Consumer Construction, HELOCs, and Other Consumer.

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	Fair Value Measurements at December 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	$	—			$	—			$	4,344			$	4,344
Other real estate owned	—				—				10,084				10,084

	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 December 31, 2016.

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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 BOLI 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’sBloomberg Valuation Service’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 December 31, 2013 and 2012, the fair value of loan commitments and standby letters of credit was immaterial.

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The carrying values and estimated fair values of the Company’s financial instruments as of December 31, 20132016 and 20122015 are as follows (dollars in thousands):

						Fair Value Measurements at December 31, 2013 using
						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
ASSETS
Cash and cash equivalents		$	73,023			$	73,023			$	-			$	-			$	73,023
Securities available for sale			677,348				-				677,348				-				677,348
Restricted stock			26,036				-				26,036				-				26,036
Loans held for sale			53,185				-				53,185				-				53,185
Net loans			3,009,233				-				-				3,035,504				3,035,504
Interest rate swap - loans			33				-				33				-				33
Accrued interest receivable			15,000				-				15,000				-				15,000
LIABILITIES
Deposits		$	3,236,843			$	-			$	3,238,777			$	-			$	3,238,777
Borrowings			463,314				-				443,237				-				443,237
Accrued interest payable			902				-				902				-				902
Cash flow hedge - prime loan swap			516				-				516				-				516
Cash flow hedge - trust preferred			3,046				-				3,046				-				3,046
Interest rate swap - loans			33				-				33				-				33
						Fair Value Measurements at December 31, 2012 using
						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
ASSETS
Cash and cash equivalents		$	82,902			$	82,902			$	-			$	-			$	82,902
Securities available for sale			585,382				-				585,382				-				585,382
Restricted stock			20,687				-				20,687				-				20,687
Loans held for sale			167,698				-				167,698				-				167,698
Net loans			2,931,931				-				-				2,956,339				2,956,339
Interest rate swap - loans			18				-				18				-				18
Accrued interest receivable			19,663				-				19,663				-				19,663
LIABILITIES
Deposits		$	3,297,767			$	-			$	3,309,149			$	-			$	3,309,149
Borrowings			329,395				-				309,019				-				309,019
Accrued interest payable			1,414				-				1,414				-				1,414
Cash flow hedge – trust preferred			4,489				-				4,489				-				4,489
Interest rate swap - loans			18				-				18				-				18

					Fair Value Measurements at December 31, 2016 using
					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
ASSETS
Cash and cash equivalents	$	179,237			$	179,237			$	—			$	—			$	179,237
Securities available for sale	946,764				—				946,764				—				946,764
Held to maturity securities	201,526				—				202,315				—				202,315
Restricted stock	60,782				—				60,782				—				60,782
Loans held for sale	36,487				—				36,487				—				36,487
Net loans	6,269,868				—				—				6,265,443				6,265,443
Derivatives:
Interest rate swap	1,005				—				1,005				—				1,005
Cash flow hedges	211				—				211				—				211
Fair value hedges	1,437				—				1,437				—				1,437
Interest rate lock commitments	610				—				—				610				610
Best efforts forward delivery commitments	1,469				—				—				1,469				1,469
Accrued interest receivable	23,448				—				23,448				—				23,448
Bank owned life insurance	179,318				—				179,318				—				179,318
LIABILITIES
Deposits	$	6,379,489			$	—			$	6,370,457			$	—			$	6,370,457
Borrowings	990,089				—				970,195				—				970,195
Accrued interest payable	2,230				—				2,230				—				2,230
Derivatives:
Interest rate swap	1,005				—				1,005				—				1,005
Cash flow hedges	9,619				—				9,619				—				9,619
Fair value hedges	296				—				296				—				296

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					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
	Carrying Value				Level 1				Level 2				Level 3				Balance
ASSETS
Cash and cash equivalents	$	142,660			$	142,660			$	—			$	—			$	142,660
Securities available for sale	903,292				—				903,292				—				903,292
Held to maturity securities	205,374				—				209,437				—				209,437
Restricted stock	51,828				—				51,828				—				51,828
Loans held for sale	36,030				—				36,030				—				36,030
Net loans	5,637,415				—				—				5,671,155				5,671,155
Derivatives:
Interest rate swap	3,758				—				3,758				—				3,758
Cash flow hedges	946				—				946				—				946
Interest rate lock commitments	701				—				—				701				701
Best efforts forward delivery commitments	370				—				—				370				370
Accrued interest receivable	20,760				—				20,760				—				20,760
Bank owned life insurance	173,687				—				173,687				—				173,687
LIABILITIES
Deposits	$	5,963,936			$	—			$	5,957,484			$	—			$	5,957,484
Borrowings	680,175				—				659,364				—				659,364
Accrued interest payable	1,578				—				1,578				—				1,578
Derivatives:
Interest rate swap	3,758				—				3,758				—				3,758
Cash flow hedges	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.

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13.

EMPLOYEE BENEFITS

14. EMPLOYEE BENEFITS AND STOCK BASED COMPENSATION

The Company has a 401(k) Plan designed to qualify under Section 401 of the Internal Revenue Code of 1986 that allows employees to make contributionsdefer a portion of their salary compensation as savings for retirement. The 401(k) Plan provides for the Company to match employee contributions based on each employee’s elected contribution percentage. For each employee’s 1% through 3% dollar contributions, the Company will match 100% of such dollar contributions, and for each employee’s 4% through 5% dollar contributions, the Company will match 50% of such dollar contributions. All employees are eligible to participate in the 401(k) Plan after meeting minimum age and period of service requirements. The Bank also has an ESOP. All full and part-time employees of the Bank with 1,000 hours of service are eligible to participate in the ESOP. The Company makes discretionary profit sharing contributions into the 401(k) Plan, ESOP, and in cash. Company discretionary contributions to both the 401(k) Plan and the ESOP are allocated to participant accounts in proportion to each participant’s compensation and vest over five and six year periods, respectively.according to the respective plan's vesting schedule. Employee contributions to the ESOP are not allowed.

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The following 401(k) match and other discretionary contributions were payments made to the Company’s employees, in accordance with the plans described above, in 2013, 2012,2016, 2015, and 20112014 (dollars in thousands):

		2013								2012								2011
		Bank				UMG				Bank				UMG				Bank				UMG
401(k) Plan		$	2,002			$	569			$	1,427			$	588			$	1,374			$	355
ESOP			1,774				-				1,896				-				1,700				-
Cash			482				-				314				-				315				-
Total		$	4,258			$	569			$	3,637			$	588			$	3,389			$	355

	2016				2015				2014
401(k) Plan	$	3,263			$	3,120			$	3,715
ESOP	1,425				1,146				3,440
Cash	1,496				1,146				983
Total	$	6,184			$	5,412			$	8,138

The Company maintains certain deferred compensation arrangements with employees and certain current and former members of the Bank’s and StellarOne’s Boards of Directors. Under these deferred compensation plans the Company had an obligation to certain members of the Bank’s Board of Directors under deferred compensation plans in the amount of $903,000 and $957,000$10.4 million at December 31, 20132016 and 2012, respectively. The expenses related to the deferred compensation plans were $86,000, $84,000, and $80,000 for the years ended$9.1 million at December 31, 2013, 2012, and 2011,2015, respectively. The Company owns life insurance policies on plan beneficiaries as an informal funding vehicle to meet future benefit obligations.

The Company’s Board of Directors has historically approved an annual short-term cash incentive compensation plan (the Management Incentive Plan, or “MIP”) as a means of attracting, rewarding, and retaining the Company’s key executives. Each annual MIP, as it may be amended from time to time, is based on both corporate and individual objectivesperformance measures established annually for each participant. Each participant is evaluated withinkey executive. Performance under these two categories is assessed for each executive to determine eligibility and ratethe amount of incentive compensation based on performance.paid each year. Salaries and benefits expense for incentive compensation under the MIP was $939,000, $835,000,$2.7 million, $1.2 million, and $711,000$898,000 for the years ended December 31, 2013, 2012,2016, 2015, and 2011,2014, respectively.

The

On January 29, 2015, the Company’s 2011Board of Directors adopted the Union Bankshares Corporation Stock and Incentive Plan (the “Amended and Restated SIP”), which amends and restates the former equity compensation plan (the “2011 Plan”). The Amended and Restated SIP became effective on April 21, 2015 upon shareholder approval. The Company may grant awards under the amended plan until April 20, 2025. The Amended and Restated SIP amends the 2011 Plan to, among other things, increase the maximum number of shares of the Company’s common stock issuable under the plan from 1,000,000 to 2,500,000 and add non-employee directors of the Company and certain subsidiaries, as well as regional advisory boards, as potential participants in the plan. The increase in shares in the Amended and Restated SIP includes shares that had been granted previously under the 2011 Plan. As of December 31, 2016, there were 1,666,637 shares available for future issuance in the Amended and Restated SIP.

The Amended and Restated SIP provides and the 2003 Stock Incentive Plan (the “2003 Plan”) provided until it expired in June 2013, for the granting of stock-based awards to key employees and non-employee directors of the Company and its subsidiaries in the form ofof: (i) for key employees only, incentive stock options intended to comply with the requirements of Section 422 of the Internal Revenue Code of 1986 (“incentive stock options”); (ii) non-qualified stock options; (iii) restricted stock awards (“RSAs”), non-statutory(iv) restricted stock options,units (“RSUs”), (v) stock awards; (vi) performance share units (“PSUs”); and nonvested stock to key employees of the Company and its subsidiaries.performance cash awards. The Company issues new shares to satisfy stock-based awards. Under both plans,For option awards the option price cannot be less than the fair market value of the stock on the grant date, and the stock option’sdate. Stock option awards have a maximum term isof ten years from the date of grantgrant. No stock options have been granted since February 2012. RSAs and vests in equal annual installments of 20%PSUs typically have vesting schedules over a fivethree to four year vesting schedule. The 2011 Plan became effective on January 1, 2011 after its approval by shareholders at the annual meeting of shareholders held on April 26, 2011. The following table summarizes the shares available in the 2011 Plan as of December 31, 2013:

		2011 Plan
Beginning Authorization			1,000,000
Granted			(387,594	)
Expired, forfeited, or cancelled			26,857
Remaining available for grant			639,263

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periods.

For the yearyears ended December 31, 2013,2016, 2015, and 2014, the Company recognized stock-based compensation expense (included in salaries and benefits expense) of approximately $889,000 (or $708,000 net of tax), or $0.04(dollars in thousands, except per common share. For years ended December 31, 2012 and 2011, respectively, the Company recognized stock-based compensation expense of approximately $1.3 million and $717,000 ($943,000 and $552,000, net of tax), or approximately $0.05 per common share for the year ended December 31, 2012 and approximately $0.02 for the year ended December 31, 2011.

data) as follows:

	Year Ended December 31,
	2016				2015				2014
Stock-based compensation expense	$	3,270			$	1,388			$	979
Reduction of income tax expense	1,104				405				234
Per share compensation cost	$	0.05			$	0.02			$	0.02

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Stock Options

The following table summarizes the stock option activity forduring the last three years:

		Stock Options (shares)				Weighted Average Exercise Price				Options Exercisable (shares)				Weighted Average Exercise Price
Balance, December 31, 2010			324,776			$	19.38				183,544			$	20.90
Granted			134,046				12.11
Exercised			(29,625	)			10.21
Forfeited			(6,447	)			17.22
Balance, December 31, 2011			422,750				17.70				184,985				22.28
Granted			131,657				14.40
Exercised			(2,376	)			12.11
Forfeited			(51,453	)			17.11
Balance, December 31, 2012			500,578				16.92				218,825				20.59
Granted			-				-
Exercised			(50,119	)			18.45
Forfeited			(47,513	)			19.04
Balance, December 31, 2013			402,946				16.48				200,904				18.96

A summary of the options outstanding at December 31, 2013 is as follows:

												Options Outstanding												Options Exercisable
Range of Exercise Prices												Number Outstanding (shares)				Weighted Average Remaining Contractual Life				Weighted Average Exercise Price				Number Exercisable (shares)				Weighted Average Exercise Price
								$	12.11				113,045				6.87	yrs		$	12.11				45,044			$	12.11
$	12.59				-			$	14.08				4,558				5.75			$	13.18				3,188			$	13.10
								$	14.40				114,887				8.15			$	14.40				21,569			$	14.40
								$	14.82				1,000				6.42			$	14.82				600			$	14.82
								$	16.45				91,088				6.32			$	16.45				52,135			$	16.45
$	20.41				-			$	22.65				22,335				0.72			$	22.29				22,335			$	22.29
								$	23.50				17,813				1.07			$	23.50				17,813			$	23.50
								$	27.51				3,750				1.58			$	27.51				3,750			$	27.51
								$	27.62				15,995				3.15			$	27.62				15,995			$	27.62
								$	31.57				18,475				2.15			$	31.57				18,475			$	31.57
$	12.11				-			$	31.57				402,946				6.09	yrs		$	16.48				200,904			$	18.96

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The Company issues shares upon option exercise from the Company’s authorized but unissued shares, and the Company expects to issue an insignificant amount of shares for option exercises during 2014.

The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option valuation model that uses the assumptions noted in the following table for the yearsyear ended December 31, 2013, 2012, and 2011. No options have been granted since February of 2012:

		2013				2012				2011
Dividend yield(1)			-				2.47	%			2.36	%
Expected life in years(2)			-				7.0				7.0
Expected volatility(3)			-				41.53	%			41.02	%
Risk-free interest rate(4)			-				1.24	%			2.71	%
Weighted average fair value per option granted		$	-			$	4.76			$	4.31

(1) Calculated as the ratio of historical dividends paid per share of common stock to the stock price on the date of grant.

(2) Based on the average of the contractual life and vesting schedule for the respective option.

(3) Based on the monthly historical volatility of the Company’s stock price over the expected life of the options.

(4) Based upon the U.S. Treasury bill yield curve, for periods within the contractual life of the option, in effect at the time of grant.

The following table summarizes information concerning stock options issued to the Company’s employees that are vested or are expected to vest and stock options exercisable as of December 31, 2013:

		Stock Options Vested or Expected to Vest				Exercisable
Stock options (number of shares)			393,582				200,904
Weighted average remaining contractual life in years			6.05				4.67
Weighted average exercise price on shares above water		$	15.12			$	16.48
Aggregate intrinsic value		$	3,433,532			$	1,355,386

2016:

	Stock Options (shares)			Weighted Average Exercise Price				Weighted Average Remaining Contractual Life		Aggregate Intrinsic Value
Outstanding as of December 31, 2015	298,743			$	16.40
Granted	—			—
Exercised	(88,409	)		16.10
Forfeited	—			—
Expired	(22,074	)		30.12
Outstanding as of December 31, 2016	188,260			14.94				3.67		$	3,915,988
Exercisable as of December 31, 2016	170,466			15.00				3.53		3,536,264

During the year ended December 31, 2013,2016, there were 3088,409 stock option awardsoptions exercised with a total intrinsic value (the amount by which the stock price exceedsexceeded the exercise price) and fair value of approximately $268,000$1.2 million and $1.2$2.6 million, respectively. Cash received from the exercise of stock options for the year ended December 31, 20132016 was approximately $927,000,$1.4 million, and the tax benefit realized from tax deductions associated with options exercised during the year was $54,000.

approximately $381,000.

The fair value of all stock options vested during 20132016 was approximately $335,000$159,000 and the total intrinsic value of all stock options outstanding was $3.5 million.

$3.9 million as of December 31, 2016.

During the year ended December 31, 2012,2015, there were two60,637 stock option awardsoptions exercised with a total intrinsic value (the amount by which the stock price exceeded the exercise price) and fair value of approximately $7,400$544,000 and $36,000,$1.4 million, respectively. Cash received from the exercise of stock options for the year ended December 31, 20122015 was approximately $29,000,$886,000, and the tax benefit realized from tax deductions associated with options exercised during the year was $2,600.

approximately $178,000.

The fair value of all stock options vested during 20122015 was approximately $279,000$316,000 and the total intrinsic value of all stock options outstanding was $623,000.

$2.8 million as of December 31, 2015.

During the year ended December 31, 2011, the2014, there were 75,282 stock options exercised with a total intrinsic value for(the amount by which the stock options exercised was $88,000. The total intrinsic value of stock options outstanding was $1,000. Theprice exceeded the exercise price) and fair value of stock options vested was approximately $238,000.$573,000 and $1.8 million, respectively. Cash received from the exercise of stock options for the year ended December 31, 20112014 was approximately $302,000,$1.2 million, and the tax benefitsbenefit realized from tax deductions associated with options exercised during the year were $15,000.

Nonvested Stock

was $187,000.

The 2011 Plan permits,fair value of all stock options vested during 2014 was approximately $313,000 and the 2003 Plan permitted until it expired in June 2013,total intrinsic value of all stock options outstanding was $3.1 million as of December 31, 2014.

Restricted Stock

The Amended and Restated SIP permits the granting of nonvested stock but are limited to one-third of the aggregate number of total awards granted. This equity component of compensation is divided between restricted (time-based) stock grants and performance-based stock grants. Generally, the restricted stock vestsawards. Generally, RSAs vest 50% on each of the third and fourth anniversaries from the date of the grant. The performance-based stock is subject to vesting based on achieving certain performance metrics; the grant of performance-based stock is subject to approval by the Company’s Compensation Committee at its sole discretion. The value of the nonvestedrestricted stock awards was calculated by multiplying the fair market value of the Company’s common stock on the grant date by the number of shares awarded. Employees have the right to vote the shares and to receive cash or stock dividends (restricted stock),for RSAs, if any, except forany. Nonvested shares of restricted stock are included in the nonvested stock under the performance-based component (performance stock).

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computation of basic earnings per share.

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The following table summarizes the nonvestedrestricted stock activity for the year ended December 31, 2013:

		Number of Shares of Restricted Stock				Weighted Average Grant- Date Fair Value
Balance, December 31, 2012			187,700			$	13.15
Granted			126,172				18.80
Vested			(19,763	)			13.26
Forfeited			(33,346	)			15.22
Balance, December 31, 2013			260,763				16.47

2016:

	Number of Shares of RSAs			Weighted Average Grant-Date Fair Value
Balance, December 31, 2015	305,056			$	22.64
Granted	137,690			23.94
Net settle for taxes	(23,123	)		26.30
Vested	(43,618	)		19.39
Forfeited	(4,567	)		23.05
Balance, December 31, 2016	371,438			23.70

Performance Stock

PSUs are granted to certain employees at no cost to the recipient and are subject to vesting based on achieving certain performance metrics; the grant of PSUs is subject to approval by the Company’s Compensation Committee at its sole discretion. PSUs may be paid in cash or shares of common stock or a combination thereof. Holders of PSUs have no right to vote the shares represented by the units. In 2016, the PSUs awarded were market based awards with the number of PSUs ultimately earned based on the Company’s total shareholder return (“TSR”) as measured over the performance period.

	Number of Shares of PSUs			Weighted Average Grant- Date Fair Value
Balance, December 31, 2015	95,742			$	18.51
Granted	76,469			15.06
Vested	—			—
Forfeited	(29,808	)		18.23
Balance, December 31, 2016	142,403			16.72

During 2016, PSUs were awarded with a market based component based on total shareholder return. The fair value of each PSU granted is estimated on the date of grant using the Monte Carlo simulation lattice model that uses the assumptions noted in the following table.

	2016
Dividend yield(1)	3.36	%
Expected life in years(2)	2.85
Expected volatility(3)	22.16	%
Risk-free interest rate(4)	0.83	%

(1) Calculated as the ratio of the current dividend paid per the stock price on the date of grant.

(2) Represents the remaining performance period as of the grant date

(3) Based on the historical volatility for the period commensurate with the expected life of the PSUs.

(4) Based upon the zero-coupon U.S. Treasury rate commensurate with the expected life of the PSUs on the grant date.

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The estimated unamortized compensation expense, net of estimated forfeitures, related to nonvestedstock options, restricted stock, and performance stock options issued and outstanding as of December 31, 20132016 that will be recognized in future periods is as follows (dollars in thousands):

		Stock Options				Restricted Stock				Total
2014		$	315			$	1,194			$	1,509
2015			241				960				1,201
2016			143				342				485
2017			27				44				71
Total		$	726			$	2,540			$	3,266

	Stock Options				Restricted Stock				Performance Stock				Total
2017	$	13			$	2,353			$	604			$	2,970
2018	—				1,919				395				2,314
2019	—				1,164				—				1,164
2020	—				100				—				100
Total	$	13			$	5,536			$	999			$	6,548

At December 31, 2013,2016, there was $3.3$6.5 million of total unrecognized compensation cost related to nonvested stock-based compensation arrangements granted under the plan.Amended and Restated SIP. The cost is expected to be recognized through 2017.

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2020.

14.

OTHER OPERATING EXPENSES

The following table presents the Consolidated Statement of Income line “Other Operating Expenses” broken into greater detail for the years ended December 31, 2013, 2012 and 2011, respectively (dollars in thousands):

		2013				2012				2011
Printing, postage, and supplies		$	2,970			$	2,649			$	2,179
Communications expense			2,681				3,070				2,931
Technology and data processing			7,754				7,510				7,795
Professional services			3,419				3,035				2,989
Marketing and advertising expense			4,312				5,473				5,869
FDIC assessment premiums and other insurance			3,110				2,373				4,936
Other taxes			3,181				3,017				2,838
Loan related expenses			2,447				2,254				2,058
OREO and credit-related expenses(1)			4,880				4,639				5,668
Amortization of intangible assets			3,831				5,336				6,522
Acquisition and conversion costs			2,132				-				426
Other expenses			7,776				6,074				5,715
Total other operating expenses		$	48,493			$	45,430			$	49,926

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

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15.

INCOME TAXES

15. INCOME TAXES

The Company files income tax returns in the U.S., the Commonwealth of Virginia, and other states. With few exceptions, the Company is no longer subject to U.S. federal or state income tax examinations by tax authorities for years prior to 2010.

2013.

Net deferred tax assets and liabilities consist of the following components as of December 31, 20132016 and 20122015 (dollars in thousands):

		2013				2012
Deferred tax assets:
Allowance for loan losses		$	10,657			$	12,221
Benefit plans			1,385				1,429
Nonaccrual loans			983				1,148
Acquisition accounting			2,252				2,980
Stock grants			1,379				1,232
Other real estate owned			3,282				2,709
Securities available for sale			901				-
Other			1,777				1,018
Total deferred tax assets		$	22,616			$	22,737
Deferred tax liabilities:
Acquisition accounting		$	5,232			$	6,057
Securities available for sale			-				6,101
Other			747				899
Total deferred tax liabilities			5,979				13,057
Net deferred tax asset		$	16,637			$	9,680

	2016				2015
Deferred tax assets:
Allowance for loan losses	$	13,017			$	11,916
Benefit plans	3,898				3,475
Acquisition accounting	11,297				13,888
Stock grants	1,371				1,679
Other real estate owned	3,156				4,589
Securities available for sale	291				105
Prime loan swap	3,147				2,724
Investments in pass through entities	835				1,366
Other	2,408				2,212
Total deferred tax assets	$	39,420			$	41,954
Deferred tax liabilities:
Acquisition accounting	$	11,645			$	13,282
Premises and equipment	4,843				4,588
Securities available for sale	1,818				6,861
Other	806				2,429
Total deferred tax liabilities	19,112				27,160
Net deferred tax asset	$	20,308		��	$	14,794

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. At December 31, 2013,2016, management believedcontinued to believe that it is not likely that the Company would realize its deferred tax asset related to net operating losses generated at the state level and accordingly establishedmaintained a valuation allowance of $828,000.$2.2 million compared to a valuation allowance of $1.7 million at December 31, 2015. The Company’s bank subsidiaryBank 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 for which the Company is currently not able to utilize. The primary changedriver in management’s estimate of the recoverability of the state net operating loss is related to the recent performancecontinued state losses of the Company’s mortgage segment. Stateconsolidated group (excluding the Bank). The Company had state net operating loss carryovers of $57.7 million and $46.3 million for the years ended December 31, 2016 and 2015, respectively, which will begin to expire after 2026.

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The Company has analyzed the tax positions taken or expected to be taken in its tax returns and concluded it has no liability related to uncertain tax positions in accordance with applicable ASC 740, Accounting for Uncertainty in Income Taxes, regulations.

The provision for income taxes charged to operations for the years ended December 31, 2013, 2012,2016, 2015, and 20112014 consists of the following (dollars in thousands):

		2013				2012				2011
Current tax expense		$	12,251			$	14,528			$	11,879
Deferred tax expense (benefit)			262				(195	)			(615	)
Income tax expense		$	12,513			$	14,333			$	11,264

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	2016				2015				2014
Current tax expense	$	26,535			$	24,521			$	15,481
Deferred tax expense (benefit)	243				(1,212		)		2,644
Income tax expense	$	26,778			$	23,309			$	18,125

The income tax expense differs from the amount of income tax determined by applying the U.S. federal income tax rate to pretaxpre-tax income for the years ended December 31, 2013, 2012,2016, 2015, and 2011,2014, due to the following (dollars in thousands):

		2013				2012				2011
Computed "expected" tax expense		$	16,453			$	17,411			$	14,600
(Decrease) in taxes resulting from:
Tax-exempt interest income, net			(3,308	)			(2,614	)			(2,681	)
Other, net			(632	)			(464	)			(655	)
Income tax expense		$	12,513			$	14,333			$	11,264

	2016				2015				2014
Computed "expected" tax expense	$	36,489			$	31,636			$	24,601
(Decrease) in taxes resulting from:
Tax-exempt interest income, net	(6,087		)		(5,865		)		(5,181		)
Other, net	(3,624		)		(2,462		)		(1,295		)
Income tax expense	$	26,778			$	23,309			$	18,125

The effective tax rates were 26.6%25.7%, 28.8%25.8%, and 27.1%,25.8% for years ended December 31, 2013, 2012,2016, 2015, and 2011,2014, respectively. Tax credits totaled approximately $306,000, $217,000,$2.0 million, $913,000, and $203,000$667,000 for the years ended December 31, 2013, 2012,2016, 2015, and 2011,2014, respectively.

16.

EARNINGS PER SHARE

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16. EARNINGS PER SHARE

Basic EPS wasis 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 104,126 shares underlying178 anti-dilutive stock options as offor the year ended December 31, 2013,2016, compared to 309,95279,315 and 383,101169,670 shares as offor the years ended December 31, 2012,2015 and 2011,2014, respectively, which 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 years ended December 31, 2013, 2012,2016, 2015, and 20112014 (in thousands except per share data):

		Net Income Available to Common Stockholders (Numerator)				Weighted Average Shares (Denominator)				Per Share Amount
For the Year Ended December 31, 2013
Basic EPS		$	34,496				24,975			$	1.38
Effect of dilutive stock awards			-				56				-
Diluted EPS		$	34,496				25,031			$	1.38
For the Year Ended December 31, 2012
Basic EPS		$	35,411				25,872			$	1.37
Effect of dilutive stock awards			-				29				-
Diluted EPS		$	35,411				25,901			$	1.37
For the Year Ended December 31, 2011
Basic EPS		$	27,769				25,981			$	1.07
Effect of dilutive stock awards			-				29				-
Diluted EPS		$	27,769				26,010			$	1.07

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17.

SEGMENT REPORTING DISCLOSURES

	Net Income (Numerator)				Weighted Average Shares (Denominator)			Per Share Amount
For the Year Ended December 31, 2016
Basic EPS	$	77,476			43,784			$	1.77
Effect of dilutive stock awards	—				106			—
Diluted EPS	$	77,476			43,890			$	1.77
For the Year Ended December 31, 2015
Basic EPS	$	67,079			45,055			$	1.49
Effect of dilutive stock awards	—				84			—
Diluted EPS	$	67,079			45,139			$	1.49
For the Year Ended December 31, 2014
Basic EPS	$	52,164			46,036			$	1.13
Effect of dilutive stock awards	—				95			—
Diluted EPS	$	52,164			46,131			$	1.13

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17. SEGMENT REPORTING DISCLOSURES

The Company has two reportable segments: a traditional full service community bank segment and a mortgage loan origination business.business segment. The community bank business for 2013segment includes one subsidiary bank, which provides loan, deposit, investment, and trust services to retail and commercial customers throughout its 90114 retail locations in Virginia. The mortgage segment includes one mortgage company,UMG, which provides a variety of mortgage loan products principally in Virginia, North Carolina, South Carolina, Maryland, and the Washington D.C. metro area. These loans are originated and primarily 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 segment’s business is a primarily fee-based business while the bank segment’s 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, due largely to the minimal degree of overlapping geographic markets.

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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 atrate on the warehouse line of credit was the three month LIBOR rate plus 0.15% with no floor for the years ended December 31, 2016 and December 31, 2015. During the year ended December 31, 2014, the interest rate on the warehouse line of credit was the three month LIBOR rate plus 1.5%, with a floor of 2%.2.0% through May 31, 2014; beginning June 1, 2014, the interest rate was the 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.

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Information about reportable segments and reconciliation of such information to the consolidated financial statements for years ended December 31, 2013, 2012,2016, 2015, and 20112014 is as follows (dollars in thousands):

		Community Bank				Mortgage				Eliminations				Consolidated
For the Year Ended December 31, 2013
Net interest income		$	149,975			$	1,651			$	-			$	151,626
Provision for loan losses			6,056				-				-				6,056
Net interest income after provision for loan losses			143,919				1,651				-				145,570
Noninterest income			27,492				11,906				(670	)			38,728
Noninterest expenses			120,256				17,703				(670	)			137,289
Income before income taxes			51,155				(4,146	)			-				47,009
Income tax expense			14,000				(1,487	)			-				12,513
Net income		$	37,155			$	(2,659	)		$	-			$	34,496
Total assets		$	4,170,682			$	63,715			$	(57,826	)		$	4,176,571
For the Year Ended December 31, 2012
Net interest income		$	153,024			$	1,331			$	-			$	154,355
Provision for loan losses			12,200				-				-				12,200
Net interest income after provision for loan losses			140,824				1,331				-				142,155
Noninterest income			24,876				16,660				(468	)			41,068
Noninterest expenses			119,976				13,971				(468	)			133,479
Income before income taxes			45,724				4,020				-				49,744
Income tax expense			12,858				1,475				-				14,333
Net income		$	32,866			$	2,545			$	-			$	35,411
Total assets		$	4,081,544			$	187,836			$	(173,515	)		$	4,095,865
For the Year Ended December 31, 2011
Net interest income		$	155,045			$	1,315			$	-			$	156,360
Provision for loan losses			16,800				-				-				16,800
Net interest income after provision for loan losses			138,245				1,315				-				139,560
Noninterest income			22,382				11,050				(468	)			32,964
Noninterest expenses			121,490				9,793				(468	)			130,815
Income before income taxes			39,137				2,572				-				41,709
Income tax expense			10,304				960				-				11,264
Net income		$	28,833			$	1,612			$	-			$	30,445
Total assets		$	3,904,013			$	84,445			$	(81,371	)		$	3,907,087

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18.

RELATED PARTY TRANSACTIONS

The Company, through its subsidiaries, has entered into loan transactions with its directors, principal officers, and affiliated companies in which they are principal stockholders. Such transactions were made in

UNION BANKSHARES CORPORATION AND SUBSIDIARIES

SEGMENT FINANCIAL INFORMATION

	Community Bank				Mortgage				Eliminations				Consolidated
Year Ended December 31, 2016
Net interest income	$	263,714			$	1,436			$	—			$	265,150
Provision for credit losses	8,883				217				—				9,100
Net interest income after provision for credit losses	254,831				1,219				—				256,050
Noninterest income	59,505				12,008				(606		)		70,907
Noninterest expenses	212,774				10,535				(606		)		222,703
Income before income taxes	101,562				2,692				—				104,254
Income tax expense	25,846				932				—				26,778
Net income	$	75,716			$	1,760			$	—			$	77,476
Total assets	$	8,419,625			$	93,581			$	(86,413	)		$	8,426,793

Year Ended December 31, 2015
Net interest income	$	250,510			$	1,324			$	—			$	251,834
Provision for credit losses	9,450				121				—				9,571
Net interest income after provision for credit losses	241,060				1,203				—				242,263
Noninterest income	55,645				10,044				(682		)		65,007
Noninterest expenses	205,993				11,571				(682		)		216,882
Income (loss) before income taxes	90,712				(324		)		—				90,388
Income tax expense (benefit)	23,431				(122		)		—				23,309
Net income (loss)	$	67,281			$	(202	)		$	—			$	67,079
Total assets	$	7,690,132			$	57,900			$	(54,741	)		$	7,693,291

Year Ended December 31, 2014
Net interest income	$	253,956			$	1,062			$	—			$	255,018
Provision for credit losses	7,800				—				—				7,800
Net interest income after provision for credit losses	246,156				1,062				—				247,218
Noninterest income	51,878				10,091				(682		)		61,287
Noninterest expenses	222,311				16,587				(682		)		238,216
Income (loss) before income taxes	75,723				(5,434		)		—				70,289
Income tax expense (benefit)	20,061				(1,936		)		—				18,125
Net income (loss)	$	55,662			$	(3,498	)		$	—			$	52,164
Total assets	$	7,354,058			$	51,485			$	(46,900	)		$	7,358,643

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18. RELATED PARTY TRANSACTIONS

In the ordinary course of business, the Company may have loans issued to its executive officers, directors, and principal stockholders. Pursuant to its policy, such loans are issued on substantially the same terms including interest rates and collateral, as those prevailing at the same time for comparable transactions with other customers,loans to unrelated persons and diddo not in the opinion of management, involve more than the normal credit risk or present other unfavorable features. There were no changes in terms or loan modifications from the preceding period. The following schedule summarizes the changes in loan amounts outstanding to these persons during the periods indicated (dollars in thousands):

		2013				2012
Loans outstanding at January 1		$	51,543			$	29,416
New loans and advances			8,496				29,132
Loan repayments			(7,440	)			(7,005	)
Reclassification(1)			(17,716	)			-
Balance at December 31		$	34,883			$	51,543

(1)

Primarily loans of $17.5 million to two former directors who retired from the Board in April 2013 and loans to other persons no longer considered related party or loans that were not considered related party in 2012 that subsequently became related party loans in 2013.

The Company, through its subsidiaries, has also entered into deposit transactions with its directors, principal officers, and affiliated companies in which they are principal stockholders, all of which are under the same terms as other customers. The aggregate amount of these deposit accounts was $22.2 million for both years ended December 31, 2013 and 2012, respectively.

 In December 2012, the Company received authorization from its Board of Directors to purchase up to 750,000 shares of the Company’s common stock on the open market or in private transactions. The repurchase program was authorized through December 31, 2013. Subsequently, in December 2012, the Company entered into an agreement to purchase 750,000 shares of its common stock from Markel Corporation, then the Company’s largest shareholder, for an aggregate purchase price of $11,580,000, or $15.44 per share. The repurchase was funded with cash on hand. Steven A. Markel, Vice Chairman of Markel Corporation, was a member of the Company’s Board of Directors as of the purchase date. The Company retired the shares. On December 12 and 20, 2012, the Company filed Current Reports on Form 8-K with respect to authorization and repurchase.

During the first quarter of 2013, the Company entered into an agreement to purchase 500,000 shares of its common stock from Markel Corporation, for an aggregate purchase price of $9,500,000, or $19.00 per share. The repurchase was funded with cash on hand and the shares were retired. The Company was authorized to repurchase an additional 250,000 shares under the repurchase authorization, but the authorization expired December 31, 2013 with no additional share repurchases.

19.

PARENT COMPANY FINANCIAL INFORMATION

collectability.

124

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19. PARENT COMPANY FINANCIAL INFORMATION

The primary source of funds for the dividends paid by Union First Market Bankshares Corporation (for this note only, the “Parent Company”) is dividends received from its subsidiaries. The payments of dividends by the Bank to the Parent Company are subject to certain statutory limitations which contemplate that the current year earnings and earnings retained for the two preceding years may be paid to the Parent Company without regulatory approval. As of December 31, 2013,2016, the aggregate amount of unrestricted funds whichthat could be transferred from the Company’s Bank to the Parent Company without prior regulatory approval totaled approximately $46.8$37.1 million, or 10.7%3.71%, of the consolidated net assets.

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Financial information for the Parent Company is as follows:

PARENT COMPANY

CONDENSED BALANCE SHEETS

AS OF DECEMBER 31, 20132016 and 2012

2015

(Dollars in thousands)

		2013				2012
ASSETS
Cash		$	10,092			$	6,505
Bank premises and equipment, net			12,673				13,141
Other assets			6,662				4,593
Investment in subsidiaries			486,168				490,199
Total assets		$	515,595			$	514,438
LIABILITIES & STOCKHOLDERS' EQUITY
Long-term borrowings		$	8,750			$	9,375
Trust preferred capital notes			60,310				60,310
Other liabilities			8,296				8,890
Total liabilities			77,356				78,575
Common stock			33,020				33,510
Surplus			170,770				176,635
Retained earnings			236,639				215,634
Accumulated other comprehensive income (loss)			(2,190	)			10,084
Total stockholders' equity			438,239				435,863
Total liabilities and stockholders' equity		$	515,595			$	514,438

- 112 -

	2016				2015
ASSETS
Cash	$	10,681			$	10,386
Premises and equipment, net	11,470				11,875
Other assets	10,864				8,462
Investment in subsidiaries	1,213,484				1,067,611
Total assets	$	1,246,499			$	1,098,334
LIABILITIES AND STOCKHOLDERS' EQUITY
Long-term borrowings	148,000				7,500
Trust preferred capital notes	86,559				86,312
Other liabilities	10,908				9,155
Total liabilities	245,467				102,967
Total stockholders' equity	1,001,032				995,367
Total liabilities and stockholders' equity	$	1,246,499			$	1,098,334

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PARENT COMPANY

CONDENSED STATEMENTS OF INCOME

AND COMPREHENSIVE INCOME

YEARS ENDED DECEMBER 31, 2013, 20122016, 2015, and 2011

2014

(Dollars in thousands)

		2013				2012				2011
Income:
Interest and dividend income		$	6			$	8			$	624
Dividends received from subsidiaries			31,323				23,141				8,612
Equity in undistributed net income from subsidiaries			7,685				15,158				23,941
Gains on sale of securities, net			-				-				430
Gains (losses) on sale of fixed assets, net			-				-				(1	)
Other operating income			1,155				1,155				1,616
Total income			40,169				39,462				35,222
Expenses:
Interest expense		$	3,060				3,152				2,627
Occupancy expenses			583				586				590
Furniture and equipment expenses			-				-				1,023
Other operating expenses			2,030				313				537
Total expenses			5,673				4,051				4,777
Net income			34,496				35,411				30,445
Dividends paid on preferred stock		$	-				-				1,499
Amortization of discount on preferred stock		$	-				-				1,177
Net income available to common stockholders		$	34,496			$	35,411			$	27,769

- 113 -

	2016				2015				2014
Income:
Interest and dividend income	$	23			$	8			$	5
Dividends received from subsidiaries	51,439				51,496				75,470
Equity in (distributed) undistributed net income from subsidiaries	31,984				20,800				(15,909		)
Other operating income	1,314				1,228				1,393
Total income	84,760				73,532				60,959
Expenses:
Interest expense	5,656				4,697				4,581
Occupancy expenses	549				556				573
Furniture and equipment expenses	18				9				20
Other operating expenses	1,061				1,191				3,621
Total expenses	7,284				6,453				8,795
Net income	$	77,476			$	67,079			$	52,164
Comprehensive income	$	67,415			$	61,076			$	66,609

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PARENT COMPANY

CONDENSED STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31, 2013, 20122016, 2015, and 2011

2014

(Dollars in thousands)

		2013				2012				2011
Operating activities:
Net income		$	34,496			$	35,411			$	30,445
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in undistributed net income of subsidiaries			(7,685	)			(15,158	)			(23,941	)
Depreciation of bank premises and equipment			468				473				1,089
Gains on sale of investment securities			-				-				(430	)
Tax benefit from exercise of equity-based awards			-				-				15
Issuance of common stock grants for services			477				565				564
Net (increase) decrease in other assets			(2,069	)			(756	)			811
Net (decrease) increase in other liabilities			1,737				2,781				1,744
Net cash and cash equivalents provided by operating activities			27,424				23,316				10,297
Investing activities:
Sale of securities available for sale			-				-				13,588
Net decrease (increase) in bank premises and equipment			-				(23	)			1,455
Payments for equity method investment			(2,000	)			-				-
Payments for investments in and advances to subsidiaries			-				-				(2,391	)
Net cash and cash equivalents provided by (used in) investing activities			(2,000	)			(23	)			12,652
Financing activities:
Payments on long-term borrowings			(625	)			(625	)			(625	)
Cash dividends paid			(12,535	)			(8,969	)			(9,245	)
Repurchase of preferred stock			-				-				(35,595	)
Net Issuance (repurchase) of common stock			(8,677	)			(14,469	)			574
Net cash and cash equivalents used in financing activities			(21,837	)			(24,063	)			(44,891	)
Net increase (decrease) in cash and cash equivalents			3,587				(770	)			(21,942	)
Cash and cash equivalents at beginning of the period			6,505				7,275				29,217
Cash and cash equivalents at end of the period		$	10,092			$	6,505			$	7,275

20.

SUBSEQUENT EVENTS

The Company’s management has evaluated subsequent events through March 11, 2014, the date the financial statements were available to be issued.

StellarOne Acquisition

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 common shares at a fair value of $549.5 million. As a result of the transaction, StellarOne’s former bank subsidiary, StellarOne Bank, became a wholly owned bank subsidiary of the Company. The Company expects to operate StellarOne Bank as a separate wholly-owned bank subsidiary until May 2014, at which time StellarOne Bank is expected to be merged with and into the Bank. As part of the acquisition plan and cost control efforts, the Company decided to consolidate 13 overlapping bank branches into nearby locations during 2014.  In all cases, customers can use branches within close proximity or continue to use the Bank’s other delivery channels including online and mobile banking as the Company works to retain and reassign employees affected by the branch closures.

- 114 -

The transaction was accounted for using the acquisition method of accounting and, accordingly, assets acquired, liabilities assumed, and consideration exchanged were recorded at estimated fair values on the acquisition date. Fair values are preliminary and subject to refinement for up to one year after the closing date of the acquisition. The following table provides a preliminary assessment of the assets purchased, liabilities assumed, and the consideration transferred (dollars in thousands, except share and per share data):

Preliminary Statement of Net Assets Acquired (at fair value) and consideration transferred:

Fair value of assets acquired:
Cash and cash equivalents		$	49,989
Securities available for sale			460,892
Loans held for sale			10,922
Loans			2,239,616
Bank premise and equipment			80,480
OREO			4,319
Core deposit intangible			29,570
Other assets			95,397
Total assets		$	2,971,185
Fair value of liabilities assumed:
Deposits		$	2,479,874
Short-term borrowings			4,227
Long-term borrowings			118,154
Subordinated debt			25,543
Other liabilities			22,576
Total liabilities		$	2,650,374
Net identifiable assets acquired		$	320,811
Preliminary Goodwill(1)			228,711
Net assets acquired		$	549,522
Consideration :
Company's common shares issued			22,147,874
Purchase price per share of the Company's common stock(2)		$	24.81
Value of Company common stock issued		$	549,488
Value of stock options outstanding			34
Fair value of total consideration transferred		$	549,522

(1) - No goodwill is expected to be deductible for federal income tax purposes. The goodwill will be primarily allocated to the community bank segment.

(2) - The value of the shares of common stock exchanged with StellarOne shareholders was based upon the closing price of the Company's common stock at December 31, 2013, the last trading day prior to the date of acquisition.

The estimated fair values of the assets acquired and liabilities assumed at the acquisition date, presented in the table above, include some amounts that are based on preliminary fair value estimates. The following factors led to certain balances having preliminary fair value estimates:

·

The Company engaged third party specialists to assist in valuing certain assets and liabilities and this work (including management’s review and approval) is not yet complete;

·

The proximity of the acquisition date (January 1, 2014) and the date that the Company’s financial statements were issued (March 11, 2014); and

·

The audit of StellarOne’s opening balance sheet has not been completed.

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In many cases, determining the fair value of the acquired assets and assumed liabilities required the Company to estimate cash flows expected to result from those assets and liabilities and to discount those cash flows at appropriate rates of interest. The most significant of those determinations related to the fair valuation of acquired loans. For such loans, the excess of cash flows expected at acquisition over the estimated fair value is recognized as interest income over the remaining lives of the loans. The difference between contractually required payments at acquisition and the cash flows expected to be collected at acquisition reflects the impact of estimated credit losses and other factors, such as prepayments. In accordance with GAAP, there was no carry-over of StellarOne’s previously established allowance for credit losses.

The acquired loans were divided into loans with evidence of credit quality deterioration which are accounted for under ASC 310-30,Receivables – Loans and Debt Securities Acquired with Deteriorated Credit Quality, (acquired impaired) and loans that do not meet this criteria, which are accounted for under ASC 310-20,Receivables – Nonrefundable Fees and Other Costs, (acquired performing). In addition, the loans are further categorized into different loan pools per loan types. The Company determined expected cash flows on the acquired loans based on the best available information at the date of acquisition. If new information is obtained about facts and circumstances about expected cash flows that existed as of the acquisition date, management will adjust accordingly in accordance with accounting for business combinations.

The fair values of the acquired performing loans were $2.1 billion and the fair values of the acquired impaired loans were $137.6 million. The gross contractually required principal and interest payments receivable for acquired performing loans was $2.5 billion. The best estimate of contractual cash flows not expected to be collected related to the acquired performing loans is $35.4 million.

The following table presents the acquired impaired loans receivable at the acquisition date (dollars in thousands):

Contractually required principal and interest payments		$	204,503
Nonaccretable difference			(33,853	)
Cash flows expected to be collected			170,650
Accretable difference			(33,046	)
Fair value of loans acquired with a deterioration of credit quality		$	137,604

The amounts of StellarOne’s revenue and earnings included in the Company’s Consolidated Statement of Income for the year ended December 31, 2013, and the revenue and earnings of the combined entity had the acquisition date been January 1, 2012, are presented in the pro forma table below. These results combine the historical results of StellarOne into the Company’s Consolidated Statement of Income, and while certain adjustments were made for the estimated impact of certain fair value adjustments and other acquisition-related activity, they are not indicative of what would have occurred had the acquisition taken place on January 1, 2012. In particular, no adjustments have been made to adjust provision for loan losses in 2013 on the acquired loan portfolio and related income taxes. In addition, expenses related to systems conversions and other costs of integration are expected to be recorded during 2014 and those costs will be expensed as incurred. The Company expects to achieve further operating cost savings and other business synergies, including branch closures, as a result of the acquisition which are not reflected in the pro forma amounts below (dollars in thousands):

		Pro forma for the year ended
		December 31,
		2013				2012
		(unaudited)				(unaudited)
Total revenues(net interest income plus noninterest income)		$	320,162			$	333,684
Net income		$	56,223			$	57,809

Other Subsequent Events

On January 9, 2013, the Bank finalized a forbearance agreement with a borrower in which the Bank acquired 190,152.5 shares of common stock of Virginia National Bankshares Corporation (formerly Virginia National Bank), a national banking association, with an aggregate value of approximately $2.6 million in partial settlement of certain debt owed to the Bank. The common stock served as collateral securing loans made by the Bank to the borrower. On March 6, 2014 the Bank entered into an agreement to sell all of the above-mentioned shares at an aggregate value of $3.8 million. In accordance with the forbearance agreement the proceeds from the sale of the common stock will be applied to the borrower’s contractually obligated loan amount that remains outstanding. The common stock acquired is recorded in Other Assets on the Company’s Consolidated Balance Sheets as of the years ended December 31, 2013 and 2012.

On January 30, 2014, the Company’s Board of Directors authorized a share repurchase program to purchase up to $65.0 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.

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	2016				2015				2014
Operating activities:
Net income	$	77,476			$	67,079			$	52,164
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in distributed (undistributed) net income of subsidiaries	(31,984		)		(20,800		)		15,909
Depreciation of premises and equipment	438				435				464
Acquisition accounting amortization, net	247				235				224
Issuance of common stock grants for services	533				564				713
Net (increase) decrease in other assets	(2,402		)		902				2,964
Net (decrease) increase in other liabilities	5,533				6,124				(7,286		)
Net cash and cash equivalents provided by operating activities	49,841				54,539				65,152
Investing activities:
Net decrease (increase) in premises and equipment	(33		)		(35		)		863
Payments for equity method investment	—				(355		)		(60		)
Payments for investments in and advances to subsidiaries	(125,000		)		—				—
Repayment of investments in and advances to subsidiaries	540				—				—
Cash received in acquisitions	—				—				4,735
Net cash and cash equivalents provided by (used in) investing activities	(124,493		)		(390		)		5,538
Financing activities:
Advances (repayments) of short-term borrowings	—				(8,000		)		8,000
Repayments of long-term borrowings	(7,500		)		(625		)		(625		)
Proceeds from issuance of long-term borrowings	148,000				—				—
Cash dividends paid	(33,672		)		(29,082		)		(25,494		)
Net Issuance (repurchase) of common stock	(31,881		)		(15,748		)		(52,971		)
Net cash and cash equivalents provided by (used in) financing activities	74,947				(53,455		)		(71,090		)
Net increase (decrease) in cash and cash equivalents	295				694				(400		)
Cash and cash equivalents at beginning of the period	10,386				9,692				10,092
Cash and cash equivalents at end of the period	$	10,681			$	10,386			$	9,692
Supplemental schedule of noncash investing and financing activities
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

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ITEM 9. - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

During the past two years, there have been no changes in or reportable disagreement with the independent registered public accountants for the Company or any of its subsidiaries.

None.

ITEM 9A. - CONTROLS AND PROCEDURES.

Evaluation of Disclosure 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 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 necessarily 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 Annual Report on Form 10-K, 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.

Management’s Report on Internal Control over Financial Reporting. Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) of the Exchange Act. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2013. In making this assessment, management used2016 using the criteria releasedset forth in 1992Internal Control–Integrated Framework issued by the COSOCommittee of Sponsoring Organizations of the Treadway Commission in Internal Control - Integrated Framework.(“COSO”) (2013 framework). Based on the assessment using those criteria, management concluded that the internal control over financial reporting was effective as ofon December 31, 2013. On May 14, 2013, the COSO issued a revised version of the Framework which will supersede the original Framework at the end of 2014. The Company does not anticipate any change in internal control effectiveness during transition to the new framework during 2014.

2016.

The effectiveness of the Company’s internal control over financial reporting as of December 31, 20132016 has been audited by Yount, HydeErnst & Barbour, P.C.,Young LLP, the independent registered public accounting firm which also audited the Company’s consolidated financial statements included in this Annual Report on Form 10-K. Yount, HydeErnst & Barbour, P.C.’sYoung’s attestation report on the Company’s internal control over financial reporting appears on pages 55 through 56 hereof.

is included in Item 8 "Financial Statements and Supplementary Data" of this Form 10-K.

Changes in Internal Control over Financial Reporting. There was no change in the internal control over financial reporting that occurred during the quarteryear ended December 31, 20132016 that has materially affected, or is reasonably likely to materially affect, the internal control over financial reporting.

ITEM 9B. - OTHER INFORMATION.

Not applicable.

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128

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PART III

ITEM 10. - DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

Information regarding directors, the Company’s audit committee and the audit committee financial expert is incorporated by reference from the Company’s definitive proxy statement for the Company’s 20142017 Annual Meeting of Shareholders to be held April 22, 2014May 2, 2017 (“Proxy Statement”), under the captions “Election of Six Class III Directors – Proposal 1,” “Election of One Class II Director – Proposal 2”, “Information About Directors Whose Terms Do Not Expire This Year” and “Corporate Governance, Board Leadership, and Board Diversity.” The executive officers of the Company, and their respective titles and principal occupations, are listed below:

Name (Age)		Title and Principal Occupation During at Least the Past Five Years
John C. Asbury (51)		Chief Executive Officer of the Company since January 2017 and President since October 2016; President and Chief Executive Officer of Union Bank & Trust since October 2016; President and Chief Executive Officer of First National Bank of Santa Fe from February 2015 until August 2016; prior to that, Senior Executive Vice President and Head of the Business Services Group at Regions Bank from May 2010 until July 2014; also served as a Senior Vice President at Bank of America in a variety of roles; received his B.S. degree in Business from Virginia Tech and his M.B.A. from The College of William & Mary.
G. William Beale (64)(67)		Chief Executive Officer of the Company sincefrom February 1, 2010 until January 2017 and President of the Company sincefrom October 1, 2013; Chief Executive Officer of the Company from February 1, 2010 to October 31, 2013;2013 until January 2017; President and Chief Executive Officer of the Company from its inception in 1993 to February 1, 2010; Chief Executive Officer of Union Bank & Trust, the Company’s wholly owned bank subsidiary, from February 2010 to October 2016 and President of Union Bank & Trust from January 2016 to October 2016; President and Chief Executive Officer of Union Bank and Trust Company, a predecessor of Union Bank & Trust, from 1991 to 2004; Chief Executive Officer of Union First Market Bank as of February 1, 2010.2004.
Robert M. Gorman (55)(58)		Executive Vice President and Chief Financial Officer of the Company since joining the Company in July 2012; previously with SunTrust Banks, Inc. as Senior Vice President and Director of Corporate Support Services in 2011, and Senior Vice President and Strategic Financial Officer of SunTrust Banks, Inc., from 2002 until 2011.
John C. Neal (64)		Presidentto 2011; serves as a member of Union First Market Bank since March 2010; Executive Vice President and Chief Banking Officer of the Company from 2005 to 2012; President and Chief Executive Officer of Union Bank and Trust Company from 2004 to March 22, 2010; Executive Vice President and Chief Operating Officer of Union Bank and Trust Company from 1997 to 2004. Mr. Neal serves on the Board of Directors of the Federal Home Loan Bank of Atlanta.Company's affiliate, Old Dominion Capital Management, Inc.
D. Anthony Peay (54)(57)		Executive Vice President andof the Company since 2003; Chief Banking Officer of Union First Market Bank & Trust since April 1, 2012; Chief Financial Officer of the Company from 1994 to July 2012; Executive Vice President of the Company since 2003.June 2012.
Elizabeth M. Bentley (53)(56)		Executive Vice President and Director of the Company since 2007; Chief Retail BankingOfficer of Union Bank & Trust since 2007; Senior Vice President of Union Bank & Trust from 2005 to 2007; Vice President of Union Bank & Trust from 2002 to 2005; joined the Company in 1998 as an Assistant Vice President.
Rex A. Hockemeyer (60)David G. Bilko (58)		Executive Vice President and Chief Risk Officer of the Company since joining the Company in January 2014; Chief Risk Officer of StellarOne Corporation from January 2012 to January 2014; Chief Audit Officer of StellarOne Corporation from June 2011 to January 2012; Corporate Operational Risk Officer of SunTrust Banks, Inc. from May 2010 to May 2011; Chief Audit Executive of SunTrust Banks, Inc. from November 2005 to April 2010; various positions with SunTrust Banks, Inc. since 1987; serves as a member of the Board of Directors of the Company's affiliate, Old Dominion Capital Management, Inc.
M. Dean Brown (52)		Executive Vice President and Chief Information Officer & Head of Bank Operations since joining the Company in February 2015; Chief Information and Back Office Operations Officer of Intersections Inc. from 2012 to 2014; Chief Information Officer of Advance America from 2009 to 2012; Senior Vice President and General Manager of Revolution Money from 2007 to 2008; Executive Vice President, Chief Information Officer and Chief Operating Officer from 2006 to 2007, and Executive Vice President and Chief Information Officer from 2005 to 2007, of Upromise LLC.

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Name (Age)		Title and Principal Occupation During at Least the Past Five Years
Jeffrey W. Farrar (56)		Executive Vice President and Director of Operations and Information Technology; joinedWealth Management, Mortgage & Insurance of the Company in April 2008; previously was responsible for information technology at First Financial Bancorp, Cincinnati, Ohio, and served as that holding company’s operations affiliate’ssince January 2014; Executive Vice President and Chief Financial Officer of StellarOne Corporation from January 2002 to January 2014; Executive Vice President and Chief Financial Officer beginning inof Virginia Commonwealth Financial Corporation and its predecessor, Second National Financial Corporation since 1996; serves as Chairman of the Boards of Directors of the Company’s affiliates, Union Mortgage Group, Inc. and Old Dominion Capital Management, Inc.
Loreen A. Lagatta (48)		Executive Vice President and Chief Human Resources Officer of the Company since 2015; Senior Vice President and Director of Human Resources of Union Bank & Trust from 19992011 to 2008.

- 118 -2015; Director of Human Resources of Capital One Financial Corporation from June 2008 to October 2011; Vice President, Compensation – Brokerage Division of Wells Fargo Securities (formerly, Wachovia Corporation) from 2006 to June 2008; Vice President, Senior HR Business Partner – Alternative Investments of Citigroup Inc. from 2000 to 2006, and various positions with Citigroup, Inc. since 1991.

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Information on Section 16(a) beneficial ownership reporting compliance for the directors and executive officers of the Company is incorporated by reference from the Proxy Statement under the caption “Section 16(a) Beneficial Ownership Reporting Compliance.”

The Company has adopted aCode of Business Conduct and Ethics applicable to all employees and directors. The Company has also adopted aCode of Ethics for Senior Financial Officers and Directors,which is applicable to those directors and senior officers who have financial responsibilities.  Both of these codes may be found athttp://investors.bankatunion.com. In addition, a copy of either of the codes may be obtained without charge by written request to the Company’s Corporate Secretary.

ITEM 11. - EXECUTIVE COMPENSATION.

This information is incorporated by reference from the Proxy Statement under the captions “Corporate Governance, Board Leadership, and Board Diversity,” “Named Executive Officers,” “Compensation Discussion and Analysis,” “Report of the Compensation Committee,” “Ownership of Company Common Stock,” “Executive Compensation,” and “Director Compensation.”

ITEM 12. - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

Other than as set forth below, this information is incorporated by reference from the Proxy Statement under the caption “Ownership of Company Common Stock” and from Note 1314 “Employee Benefits”Benefits and Stock Based Compensation” contained in the “Notes to the Consolidated Financial Statements” contained in Item 8 of this Form 10-K.

The following table summarizes information as of December 31, 2013, relating to the Company’s equity compensation plans, pursuant to which grants of optionoptions to acquire shares of common stock may be awarded from time to time.

		Number of securities to be issued upon exercise of outstanding warrants and rights				Weighted-average exercise price of outstanding options, warrants and rights				Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (A))
		(A)				(B)				(C)(1)
Equity compensation plans approved by security holders			402,946			$	16.48				639,263
Total			402,946			$	16.48				639,263

⁽¹⁾Consiststime, as of shares available for future issuance under the Company's 2011 Stock Incentive Plan.

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December 31, 2016:

	Number of securities to be issued upon exercise of outstanding warrants and rights (A)			Weighted-average exercise price of outstanding options, warrants and rights (B)				Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (A)) (C)
Equity compensation plans approved by security holders	188,260			$	14.94			1,666,637
Total	188,260			$	14.94			1,666,637

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ITEM 13. - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

This information is incorporated by reference from the Proxy Statement under the captions “Corporate Governance, Board Leadership, and Board Diversity” and “Interest of Directors and Officers in Certain Transactions.”

ITEM 14. - PRINCIPAL ACCOUNTING FEES AND SERVICES.

This information is incorporated by reference from the Proxy Statement under the caption “Principal Accounting Fees.”

PART IV

ITEM 15. - EXHIBITS, FINANCIAL STATEMENT SCHEDULES.

The following documents are filed as part of this report:

(a)(1) Financial Statements

The following consolidated financial statements and reports of independent registered public accountants of the Company are in Part II, Item 8:

▪Reports of Independent Registered Public Accounting Firm;

▪Consolidated Balance Sheets - December 31, 20132016 and 2012;2015;

▪Consolidated Statements of Income - Years ended December 31, 2013, 2012,2016, 2015, and 2011;2014;

▪Consolidated Statements of Comprehensive Income – Years ended December 31, 2013, 2012,2016, 2015, and 2011;2014;

▪Consolidated Statements of Changes in Stockholders’Stockholder's Equity - Years ended December 31, 2013, 20122016, 2015, and 2011;2014;

▪Consolidated Statements of Cash Flows - Years ended December 31, 2013, 20122016, 2015, and 2011;2014; and

▪Notes to Consolidated Financial Statements.

(a)(2) Financial Statement Schedules

All schedules are omitted since they are not required, are not applicable, or the required information is shown in the consolidated financial statements or notes thereto.

(a)(3) Exhibits

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

Exhibit No.			Description
2.01
	2.01		Agreement and Plan of Reorganization, dated as of June 9, 2013, between Union First Market Bankshares Corporation and StellarOne Corporation (incorporated by reference to Exhibit 2.1 to Current Report on Form 8-K filed on June 12, 2013)
3.01	3.01		Articles of Incorporation of Union First Market Bankshares Corporation, as amended January 1,April 25, 2014 ( incorporated(incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K filed on April 29, 2014)
3.02			Bylaws of Union Bankshares Corporation, as amended January 2, 2014)21, 2017.
4.01	3.02		BylawsSubordinated Indenture, dated as of December 5, 2016, between Union First Market Bankshares Corporation and U.S. Bank National Association, as amended January 1, 2014( incorporated by reference to Exhibit 3.2 to Current Report on Form 8-K filed on January 2, 2014)
	4.01		Warrant to Purchase up to 422,636 shares of Common StockTrustee (incorporated by reference to Exhibit 4.1 to Current Report on Form 8-K filed on December 23, 2008)5, 2016)
4.02			First Supplemental Indenture, dated as of December 5, 2016, between Union Bankshares Corporation and U.S. Bank National Association as Trustee (incorporated by reference to Exhibit 4.2 to Current Report on Form 8-K filed on December 5, 2016)
4.03			Form of 5.00% Fixed-to-Floating Rate Subordinated Note due 2016 (included as Exhibit A in Exhibit 4.2 filed with, and incorporated herein by reference, to the Company’s Current Report on Form 8-K filed December 5, 2016)
			Certain instruments relating to trust preferred securities not being registered have been omitted in accordance with Item 601(b)(4)(iii) of Regulation S-K. The registrant will furnish a copy of any such instrument to the Securities and Exchange Commission upon its request.

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10.01			Amended and Restated Management Continuity Agreement ofbetween Union Bankshares Corporation and G. William Beale, dated November 21, 2000 (incorporated by reference to Exhibit 10.01 to Annual Report on Form 10-K filed on March 16, 2009)

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10.02			Amended and Restated Employment Agreement ofby and between Union Bankshares Corporation and G. William Beale, dated May 1, 2006 (incorporated by reference to Exhibit 10.02 to Annual Report on Form 10-K filed on March 16, 2009)
10.03	10.03		Amended and Restated Management Continuity Agreement ofbetween Union Bankshares Corporation and D. Anthony Peay, dated November 21, 2000 (incorporated by reference to Exhibit 10.03 to Annual Report on Form 10-K filed on March 16, 2009)
10.04			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)
		10.04
10.05			Amended and Restated Management Continuity Agreement of John C. Neal (incorporated by reference to Exhibit 10.04 to Annual Report on Form 10-K filed on March 16, 2009)
10.06	10.05		Amended and Restated Employment Agreement of John C. Neal (incorporated by reference to Exhibit 10.0810.04 to Annual Report on Form 10-K filed on March 16, 2009)
10.07	10.06		Amended and Restated Employment Agreement ofby and between Union Bankshares Corporation and D. Anthony Peay, dated December 31, 2008 (incorporated by reference to Exhibit 10.09 to Annual Report on Form 10-K filed on March 16, 2009)
10.08	10.07		Amended and Restated Employment Agreement ofby and between Union First Market Bankshares Corporation and Elizabeth M. Bentley, dated October 24, 2011 (incorporated by reference to Exhibit 99.2 to Current Report on Form 8-K filed on October 25, 2011)
10.09	10.08		Management Continuity Agreement ofby and between Union First Market Bankshares Corporation and Elizabeth M. Bentley, dated October 24, 2011 (incorporated by reference to Exhibit 99.3 to Current Report on Form 8-K filed on October 25, 2011)
10.10	10.09		Amended and Restated Management Continuity Agreement ofbetween Union First Market Bankshares Corporation and Robert M. Gorman, dated July 17, 2012 (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on December 11, 2012)
10.11	10.10		Employment Agreement ofby and between Union First Market Bankshares and Robert M. Gorman, dated July 17, 2012 (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on July 20, 2012)
10.12			Management Continuity Agreement of M. Dean Brown (incorporated by Reference to Exhibit 10.12 to Annual Report on Form 10-K filed February 25, 2016)
		10.11
10.13			Union Bankshares Corporation 2003 Stock Incentive Plan (incorporated by reference to Exhibit 99.0 to Form S-8 Registration Statement;Statement filed on March 3, 2004; SEC file no. 333-113839)
10.14	10.12		Union First Market Bankshares Corporation 2011 Stock and Incentive Plan (as amended and restated effective April 21, 2015) (incorporated by reference to Exhibit 99.1 to Form S-8 Registration Statement;Statement filed April 23, 2015; SEC file no. 333-175808)333-203580)
10.15	10.13		1995 Supplemental Compensation Agreement between Union Bankshares Corporation Non-Employee Directors’ Stock PlanBank and Trust Company and G. William Beale, as amended, dated October 20, 2014 (incorporated by reference to Exhibit 99.010.14 to Annual Report on Form S-8 Registration Statement; SEC file no. 333-113842)10-K filed on February 27, 2015)
10.16	10.14		Letter1995 Supplemental Compensation Agreement dated December 19, 2008, including the Securities Purchase Agreement – Standard Terms incorporated by reference therein, between Union Bankshares CorporationBank and the United States Department of the TreasuryTrust Company and Daniel I. Hansen, as amended, dated July 18, 1995 (incorporated by reference to Exhibit 10.110.15 to CurrentAnnual Report on Form 8-K10-K filed on December 23, 2008)February 27, 2015)
10.17			Supplemental Compensation Agreement between Union Bank & Trust and Ronald L. Hicks (incorporated by reference to Exhibit 10.16 to Annual Report on Form 10-K filed on February 27, 2015)
		10.15
10.18			Restated Virginia Bankers Association Non-Qualified Deferred Compensation Plan for Executives of Union Bankshares Corporation, as restated effective January 1, 2008 (incorporated by reference to Exhibit 10.17 to Annual Report on Form 10-K filed on February 27, 2015)
10.19			Restated Virginia Bankers Association Non-Qualified Deferred Compensation Plan for Directors of Union Bankshares Corporation, as restated effective January 1, 2008 (incorporated by reference to Exhibit 10.18 to Annual Report on Form 10-K filed on February 27, 2015)
10.20			Registration Rights Agreement, dated February 1, 2010, by and among Union First Market Bankshares Corporation and the shareholders of First Market Bank, FSB (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on February 5, 2010)
	10.16		Stock Purchase Agreement, dated as of February 2, 2012, by and between Union First Market Bankshares Corporation, and James E. Ukrop and the Third Amended and Restated James Edward Ukrop Revocable Trust Under Trust Agreement Dated as of September 24, 2007 (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on February 6, 2012)
	10.17		Stock Purchase Agreement, dated as of December 20, 2012, by and between Union First Market Bankshares Corporation and Markel Corporation (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on December 21, 2012)

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	10.18
10.21			Stock Purchase Agreement, dated as of March 7, 2013, by and between Union First Market Bankshares Corporation and Markel Corporation (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on March 8, 2013)
10.22	10.19		Form of Time-Based Restricted Stock Repurchase Authorization, dated as of January 30, 2014, by the Board of Directors ofAgreement under Union First Market Bankshares Corporation Stock and Incentive Plan (incorporated by reference to Exhibit 99.110.23 to Current Report on Form 8-K filed on February 3, 2014)April 27, 2015)
10.23			Form of Performance Share Unit Agreement under Union Bankshares Corporation Stock and Incentive Plan (incorporated by reference to Exhibit 10.24 to Current Report on Form 8-K filed on April 27, 2015)
		11.03
10.24			Union Bankshares Corporation Executive Severance Plan (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on December 16, 2015)
10.25			Employment Agreement by and between Union Bankshares Corporation and John C. Asbury, dated August 23, 2016 (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on August 24, 2016).
10.26			Management Continuity Agreement by and between Union Bankshares Corporation and John C. Asbury, dated August 23, 2016 (incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K on August 24, 2016).
10.27			Transition Agreement by and between Union Bankshares Corporation and G. William Beale, dated August 23, 2016 (incorporated by reference to Exhibit 10.3 to Current Report on Form 8-K filed on August 24, 2016).
10.28			Change of Control Waiver between Union Bankshares Corporation and David G. Bilko, dated August 14, 2013 and Change of Control Agreement between StellarOne Corporation and David G. Bilko, dated June 23, 2011
10.29			Schedule of Union Bankshares Corporation Non-Employee Directors' Annual Compensation
10.30			Management Incentive Plan
11.01			Statement re: Computation of Per Share Earnings (incorporated by reference to Note 1316 of the Notes to Consolidated Financial Statements included in this Annual Report)Report on Form 10-K)
12.01	21.01		SubsidiariesComputation of the RegistrantRatios of Earnings to Fixed Charges and Preferred Dividends
21.01			Subsidiaries of Union Bankshares Corporation
23.01			Consent of Ernst & Young LLP
23.02			Consent of Yount, Hyde & Barbour, P.C.
31.01	31.01		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.02	31.02		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.01	32.01		Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.00	101.00		Interactive data filesfiled pursuant to Rule 405 of Regulation S-T: (i) the Consolidated Balance Sheets as of December 31, 20132016 and 2012,2015, (ii) the Consolidated Statements of Income for the years ended December 31, 2013, 2012,2016, 2015, and 2011,2014, (iii) the Consolidated Statements of Comprehensive Income for the years ended December 31, 2013, 2012,2016, 2015, and 2011,2014, (iv) the Consolidated Statements of Changes in Shareholders’ Equity for the years ended December 31, 2013, 2012,2016, 2015, and 2011,2014, (v) the Consolidated Statements of Cash Flows for the years ended December 31, 20132016, 2015, and 20122014 and (vi) the Notes to the Consolidated Financial Statements (furnished herewith).

- 122 -Statements.

ITEM 16. - FORM 10-K SUMMARY.

Not applicable.

134

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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 First Market Bankshares Corporation

By:	/s/ G. William BealeJohn C. Asbury		Date: March 11, 2014February 28, 2017
	G. William Beale John C. Asbury
	President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on March 11, 2014.

February 28, 2017.

Signature
Signature		Title
/s/ L. Bradford Armstrong		Director
L. Bradford Armstrong
/s/ G. William BealeJohn C. Asbury		President and Chief Executive Officer and(principal executive officer)
John C. Asbury
/s/ G. William Beale		Executive Vice Chairman of the Board of Directors
G. William Beale		Director (principal executive officer)
/s/ Glen C. Combs		Director
Glen C. Combs
/s/ Beverley E. Dalton		Director
Beverley E. Dalton
/s/ Gregory L. Fisher		Director
Gregory L. Fisher
/s/ Robert M. Gorman		Executive Vice President and Chief Financial Officer (principal financial and accounting officer)
Robert M. Gorman			Officer (principal financial and accounting officer)
/s/ Daniel I. Hansen		Director
Daniel I. Hansen
/s/ Ronald L. Hicks		Vice Chairman of the Board of Directors
Ronald L. Hicks
/s/ Jan S. Hoover		Director
Jan S. Hoover
/s/ Patrick J. McCann		Director
Patrick J. McCann
/s/ R. Hunter Morin		Director
R. Hunter Morin

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Signature		Title
/s/ W. Tayloe Murphy, Jr.		Director
W. Tayloe Murphy, Jr.
/s/ Alan W. Myers		Director
Alan W. Myers

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Signature		Title
/s/ Thomas P. Rohman		Director
Thomas P. Rohman
/s/ Linda V. Schreiner		Director
Linda V. Schreiner
/s/ Raymond L. Slaughter		Director
Raymond L. Slaughter
/s/ Raymond D. Smoot, Jr.		Chairman of the Board of Directors
Raymond D. Smoot, Jr.
/s/ Charles W. Steger		Director
Charles W. Steger
/s/ Ronald L. Tillett		DirectorVice Chairman of the Board of Directors
Ronald L. Tillett
/s/ Keith L. Wampler		Director
Keith L. Wampler

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136