8-K: Atlantic Union Bankshares Reports Solid Full Year 2024 Results Amidst Strategic Growth Initiatives

Atlantic Union Bankshares Corporation announced its fourth quarter and full year 2024 financial results, highlighting strategic acquisitions and solid adjusted operating performance.

Summary

• Atlantic Union Bankshares reported a net income available to common shareholders of $54.8 million for the fourth quarter of 2024, with basic and diluted earnings per share at $0.61 and $0.60, respectively.
• Adjusted operating earnings available to common shareholders for the fourth quarter were $61.4 million, with adjusted diluted operating earnings per share at $0.67.
• For the full year 2024, net income available to common shareholders was $197.3 million, with basic and diluted earnings per share at $2.29 and $2.24, respectively.
• Adjusted operating earnings available to common shareholders for the full year were $241.3 million, with adjusted diluted operating earnings per share at $2.74.
• Net interest income for the fourth quarter was $183.2 million, a slight increase from the previous quarter, while net interest income (FTE) was $187.0 million.
• The company's net interest margin and net interest margin (FTE) decreased by 5 basis points to 3.26% and 3.33%, respectively, due to lower yields on earning assets.
• Nonperforming assets increased to $58.4 million, primarily due to a new nonaccrual loan of $27.7 million, for which a specific reserve of $13.1 million was recorded.
• The allowance for credit losses totaled $193.7 million, an increase of $16.1 million from the prior quarter.
• Noninterest income increased to $35.2 million, driven by a $3.6 million increase in loan-related interest rate swap fees.
• Noninterest expense increased to $129.7 million, primarily due to a $5.6 million increase in merger-related costs.
• Total assets were $24.6 billion, a decrease of $218.4 million from the prior quarter, but an increase of $3.4 billion from the previous year.
• Loans held for investment totaled $18.5 billion, an increase of $133.3 million from the prior quarter.
• Total deposits were $20.4 billion, an increase of $92.3 million from the prior quarter.
• The company declared a cash dividend of $0.34 per common share, a 6.3% increase from the previous quarter.

Sentiment

Score: 6

Explanation: The sentiment is moderately positive due to solid adjusted operating results and strategic growth initiatives, but there are concerns about the decrease in net interest margin, increase in nonperforming assets, and merger-related costs.

Positives

• The company achieved solid adjusted operating earnings for the fourth quarter and full year 2024.
• The acquisition of American National Bankshares Inc. was successfully closed and integrated.
• The proposed acquisition of Sandy Spring Bancorp, Inc. is progressing with merger approvals received.
• Loan and deposit growth continued, indicating a healthy business trajectory.
• The company increased its common stock dividend, demonstrating confidence in its financial position.
• Noninterest income increased due to higher loan-related interest rate swap fees.

Negatives

• Net interest margin decreased due to lower yields on earning assets.
• Nonperforming assets increased significantly due to a large commercial loan default.
• Noninterest expenses increased due to merger-related costs.
• Total assets decreased slightly from the prior quarter.

Risks

• The company faces risks related to market interest rates, inflation, and general economic conditions.
• There are risks associated with the pending merger with Sandy Spring, including potential delays or failure to close.
• The company is exposed to risks related to its commercial real estate portfolio.
• There is a risk of an insufficient allowance for credit losses or volatility in the allowance due to changing economic conditions.
• The company faces competition from fintech companies and other financial institutions.
• There are operational, technological, and cyber risks that could impact the company's performance.

Future Outlook

The company anticipates mid-single-digit growth in loans and deposits for 2025, with a net interest margin between 3.45% and 3.60%. The outlook does not include the impact of the pending Sandy Spring acquisition.

Management Comments

• 2024 was a good year, and a consequential year, for Atlantic Union, said John C. Asbury, president and chief executive officer of Atlantic Union.
• We were excited to close our acquisition of American National Bankshares Inc. on April 1st and we announced the proposed acquisition of Sandy Spring Bancorp, Inc. on October 21st.
• While our results for the fourth quarter were noisy with merger-related costs and a larger than typical specific reserve on an impaired loan, we delivered solid adjusted operating financial results for the year and the fourth quarter.
• We continue to be on a steady loan and deposit growth path.
• Operating under the mantra of soundness, profitability, and growth in that order of priority Atlantic Union remains committed to generating sustainable, profitable growth, and building long-term value for our shareholders.

Industry Context

This announcement reflects a trend of consolidation in the regional banking sector, with Atlantic Union actively pursuing strategic acquisitions to expand its market presence and become the largest regional bank headquartered in the lower Mid-Atlantic.

Comparison to Industry Standards

• Atlantic Union's net interest margin of 3.33% (FTE) is within the range of other regional banks, but the decrease of 5 basis points from the previous quarter indicates some pressure on yields.
• The increase in nonperforming assets to 0.32% of total LHFI is slightly higher than some peers, but the company has taken a specific reserve to address the issue.
• The adjusted operating return on tangible common equity of 15.30% for Q4 and 16.12% for the full year is competitive with other well-performing regional banks.
• The company's efficiency ratio of 58.34% (FTE) for Q4 and 60.95% for the full year is in line with industry averages, but the adjusted operating efficiency ratio of 52.67% for Q4 and 53.31% for the full year shows the impact of excluding merger-related costs and other items.
• The loan-to-deposit ratio of 90.6% is a common metric used to assess a bank's liquidity and is within a healthy range for regional banks.

Stakeholder Impact

• Shareholders will be impacted by the increased dividend and the potential for future growth.
• Employees may be affected by the ongoing integration of acquired companies.
• Customers will benefit from the expanded branch network and services.
• Creditors will be impacted by the company's capital management strategy.

Next Steps

• The company will hold a conference call and webcast on January 23, 2025, to discuss the financial results.
• The company will continue to work towards closing the acquisition of Sandy Spring Bancorp, Inc.
• The company will focus on managing its loan portfolio and deposit base.
• The company will continue to manage expenses and improve efficiency.

Key Dates

Keywords

Atlantic Union Bankshares, Financial Results, Merger, Acquisition, Net Interest Income, Nonperforming Assets, Loan Growth, Deposit Growth, Earnings Per Share, Dividends, Banking, Regional Bank