10-K: Atlantic Union Bankshares Reports 2024 Results, Announces Pending Sandy Spring Merger

Atlantic Union Bankshares Corporation reports its 2024 financial results, highlighting the American National acquisition and the pending merger with Sandy Spring Bancorp.

Summary

• Atlantic Union Bankshares Corporation (AUB) reported its financial results for the year ended December 31, 2024.
• Key events include the acquisition of American National Bankshares Inc. on April 1, 2024, and a pending merger with Sandy Spring Bancorp, Inc. expected to close on April 1, 2025.
• AUB's net income available to common shareholders was $197.3 million, with basic EPS at $2.29 and diluted EPS at $2.24.
• Adjusted operating earnings available to common shareholders were $241.3 million, and adjusted diluted operating EPS was $2.74.
• Total assets reached $24.6 billion, an increase of $3.4 billion from the previous year, primarily due to the American National acquisition.
• Loans held for investment (LHFI) totaled $18.5 billion, up $2.8 billion from the prior year.
• Total deposits increased to $20.4 billion, a $3.6 billion increase from the previous year.
• The company entered into forward sale agreements relating to 11,338,028 shares of common stock in connection with the Sandy Spring merger.
• The Federal Reserve lowered rates in late 2024 by 100 bps, resulting in the current Federal Funds target rate range of 4.25% to 4.50%.

Sentiment

Score: 6

Explanation: The document presents a mixed picture. While there's growth in assets and deposits, profitability metrics are down, and there are concerns about credit quality and the economic outlook. The pending merger adds complexity and risk.

Positives

• Net income available to common shareholders increased by $7.3 million to $197.3 million.
• Total assets increased by $3.4 billion to $24.6 billion.
• Loans held for investment increased by $2.8 billion to $18.5 billion.
• Total deposits increased by $3.6 billion to $20.4 billion.
• The company completed the acquisition of American National Bankshares Inc.
• The company expects its merger with Sandy Spring to close on April 1, 2025.

Negatives

• Diluted EPS decreased from $2.53 in 2023 to $2.24 in 2024.
• Net interest margin decreased by 6 bps to 3.27%.
• The ACL increased by $46.5 million to $193.7 million.
• Nonperforming assets increased by $21.5 million to $58.4 million.
• The company recorded a valuation allowance of $4.4 million against certain state net operating loss carryforwards.

Risks

• The pending merger with Sandy Spring may not be completed or may face integration challenges.
• The company faces risks related to Sandy Spring's CRE loan portfolio.
• The company's ACL may be insufficient to cover credit losses.
• The company is exposed to risks associated with CRE, construction, and commercial lending.
• Changes in interest rates could adversely affect income and cash flows.
• Cybersecurity threats and data breaches could disrupt business and result in losses.
• The company is subject to extensive regulation and potential legal and regulatory changes.

Future Outlook

The company expects to physically settle the Forward Sale Agreements and receive proceeds from the sale of those shares of common stock upon one or more forward settlement dates within approximately 18 months from the date of the Forward Sale Agreements.

Management Comments

• Management continues to consider the current economic environment and potential future economic conditions, including the threat of an economic recession on our performance, while also seeking to address nonperforming assets, control costs, and work with borrowers to mitigate and protect against risk of loss.
• Our management also continues to review the pricing of our products and services, in light of current and expected costs due to inflation, to seek to mitigate the inflationary impact on our financial performance.

Industry Context

The financial services industry remains highly competitive and is constantly evolving, with increasing competition from large national and regional financial institutions, credit unions, and fintech companies.

Comparison to Industry Standards

• The document does not explicitly compare Atlantic Union Bankshares Corporation's results to specific industry standards or benchmarks.
• However, it mentions competition from large national and regional financial institutions, credit unions, and fintech companies, suggesting that these entities serve as implicit benchmarks.
• Sandy Spring's CRE loan portfolio totaled $7.9 billion, or 68% of its total loan portfolio, which includes $1.7 billion of commercial owner-occupied real estate loans.

Legal Proceedings

• The company consented to the issuance of a Consent Order by the CFPB and agreed to implement a redress and compliance plan to pay at least $5 million to certain current and former customers and pay a $1.2 million civil monetary penalty.

Stakeholder Impact

• Shareholders may experience dilution due to the issuance of new shares in connection with the Sandy Spring merger.
• Customers may benefit from the expanded services and branch network resulting from the American National acquisition.
• Employees may experience uncertainty due to the pending merger with Sandy Spring.

Next Steps

• The company expects to close the merger with Sandy Spring on April 1, 2025, subject to customary closing conditions.
• The company expects to physically settle the Forward Sale Agreements and receive proceeds from the sale of those shares of common stock upon one or more forward settlement dates within approximately 18 months from the date of the Forward Sale Agreements.
• The company will continue to monitor the economic environment and adjust its strategies accordingly.

Key Dates