Atlantic Union Bankshares Reports Fourth Quarter Financial Results

RICHMOND, Va.–(BUSINESS WIRE)–Atlantic Union Bankshares Corporation (NYSE: AUB) reported net income available to common shareholders and adjusted operating earnings available to common shareholders⁽¹⁾ of $67.6 million and basic and diluted earnings per common share of $0.90 for the fourth quarter ended December 31, 2022. Pre-tax pre-provision adjusted operating earnings available to common shareholders⁽¹⁾ totaled $85.6 million for the fourth quarter ended December 31, 2022. 

“Atlantic Union Bankshares delivered strong fourth quarter financial results as we hit our profitability and efficiency targets – with low double-digit annualized loan growth, strong credit quality, an expanding net interest margin and positive operating leverage,” said John C. Asbury, president and chief executive officer of Atlantic Union. “Our markets continue to show resiliency and positive dynamics, which combined with our asset sensitivity lead us to believe we are well-positioned for 2023.”

“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.”

NET INTEREST INCOME

For the fourth quarter of 2022, net interest income was $163.8 million, an increase of $13.1 million from $150.7 million for the third quarter of 2022. Net interest income (FTE)⁽¹⁾ was $168.0 million in the fourth quarter of 2022, an increase of $13.4 million from the third quarter of 2022. The increases in net interest income and net interest income (FTE)⁽¹⁾ were primarily driven by higher loan yields on the Company’s variable rate loans due to rising market interest rates, average loan growth, and increases in investment income primarily due to higher yield on taxable securities. These increases were partially offset by an increase in interest expense due to higher cost of funds, primarily due to an increase in short-term interest rates on borrowings and deposits, increased use of short-term funding and higher average deposits from the prior quarter. The fourth quarter net interest margin and net interest margin (FTE)⁽¹⁾ increased 27 basis points from the prior quarter to 3.61% and 3.70%, respectively, at December 31, 2022. Earning asset yields increased by 66 basis points in the fourth quarter of 2022 compared to the third quarter of 2022 due to the impact of rising market interest rates on loans and investment securities yields. The cost of funds increased from the prior quarter by 39 basis points to 84 basis points at December 31, 2022, driven by higher deposit and borrowing costs as noted above.

The Company’s net interest margin (FTE) ⁽¹⁾ includes the impact of acquisition accounting fair value adjustments. Net accretion related to acquisition accounting was $1.3 million for the quarter ended December 31, 2022, representing an increase of $157,000 from the prior quarter. The four quarters of 2022 and the remaining estimated net accretion impact are reflected in the following table (dollars in thousands):

ASSET QUALITY

Overview

Nonperforming assets (“NPAs”) as a percentage of loans decreased 2 basis points to 0.19% at December 31, 2022, compared to the prior quarter. Accruing past due loan levels as a percentage of total loans held for investment at December 31, 2022 totaled 21 basis points, which is consistent with September 30, 2022, and represents a 2 basis point decrease from December 31, 2021. Net charge-off levels remained low at 0.02% of total average loans (annualized) for the fourth quarter of 2022, consistent with the quarters ended September 30, 2022 and December 31, 2021. The allowance for credit losses (“ACL”) totaled $124.4 million at December 31, 2022, a $5.4 million increase from the prior quarter.

Nonperforming Assets

At December 31, 2022, NPAs totaled $27.1 million, a decrease of $1.5 million from September 30, 2022. The following table shows a summary of NPA balances at the quarter ended (dollars in thousands):

The following table shows the activity in nonaccrual loans for the quarter ended (dollars in thousands):

Past Due Loans

Past due loans still accruing interest totaled $30.0 million or 0.21% of total loans held for investment at December 31, 2022, compared to $29.0 million or 0.21% of total loans held for investment at September 30, 2022, and $29.9 million or 0.23% of total loans held for investment at December 31, 2021. Of the total past due loans still accruing interest, $7.5 million or 0.05% of total loans held for investment were loans past due 90 days or more at December 31, 2022, compared to $7.4 million or 0.05% of total loans held for investment at September 30, 2022, and $9.1 million or 0.07% of total loans held for investment at December 31, 2021.

Allowance for Credit Losses

At December 31, 2022, the ACL was $124.4 million and included an allowance for loan and lease losses (“ALLL”) of $110.8 million and a reserve for unfunded commitments (“RUC”) of $13.6 million. The ACL at December 31, 2022 increased $5.4 million from September 30, 2022 due to increased uncertainty in the macroeconomic outlook and the impact of loan growth in the fourth quarter of 2022.

The ACL as a percentage of total loans was 0.86% at December 31, 2022, consistent with September 30, 2022. The ALLL as a percentage of total loans was 0.77% at December 31, 2022, compared to 0.78% at September 30, 2022.

Net Charge-offs

Net charge-offs were $810,000 or 0.02% of total average loans on an annualized basis for the quarter ended December 31, 2022, compared to $587,000 or 0.02% (annualized) for the third quarter of 2022, and $511,000 or 0.02% (annualized) for the fourth quarter of 2021. On a year-to-date basis through December 31, 2022, net charge-offs totaled $2.3 million or 0.02% of total average loans.

Provision for Credit Losses

For the quarter ended December 31, 2022, the Company recorded a provision for credit losses of $6.3 million, compared to a provision for credit losses of $6.4 million in the previous quarter, and a negative provision for credit losses of $1.0 million in the fourth quarter of 2021. The provision for credit losses for the fourth quarter of 2022 reflected a provision of $3.6 million for loan losses and a $2.7 million provision for unfunded commitments.

NONINTEREST INCOME

Noninterest income decreased $1.1 million to $24.5 million for the quarter ended December 31, 2022 from $25.6 million in the prior quarter primarily due to declines in equity method investment income, partially offset by increases in loan syndication, Small Business Administration (“SBA”) 7a, and foreign exchange revenues, each included within other operating income. In addition, mortgage banking income decreased $1.0 million from the prior quarter due to lower mortgage origination volumes and gain on sale margins, and bank owned life insurance income decreased $796,000, reflecting the impact of the prior quarter’s mortality benefit. These noninterest income category decreases were partially offset by increases in loan-related interest rate swap fees of $1.6 million due to an increase in average deal size among swaps executed in the current quarter.

NONINTEREST EXPENSE

Noninterest expense for the quarter ended December 31, 2022 decreased to $99.8 million from $99.9 million in the prior quarter. Notable noninterest expense activity in the fourth quarter of 2022 included a gain related to the sale and leaseback of an office building, refunds of prior period FDIC assessment expenses, costs related to the closure of five branches expected to close in the first quarter of 2023 and other restructuring expenses, the write-down of obsolete software, increased variable incentive compensation and profit-sharing expenses, as well as professional services increases related to strategic projects.

INCOME TAXES

The effective tax rate for the three months ended December 31, 2022 was 14.3%, compared to 17.0% for the three months ended September 30, 2022. The decrease in the effective tax rate reflects the impact of changes in the proportion of tax-exempt income to pre-tax income.

BALANCE SHEET

At December 31, 2022, total assets were $20.5 billion, an increase of $510.9 million or approximately 10.2% (annualized) from September 30, 2022, and an increase of $396.3 million or approximately 2.0% from December 31, 2021. Total assets increased from the prior quarter primarily due to the $530.4 million increase in total loans held for investment (net of deferred fees and costs) driven by loan growth, which was funded primarily by a $1.0 billion increase in short-term borrowings and partially by a $70.1 million decrease in cash and cash equivalents.

At December 31, 2022, loans held for investment (net of deferred fees and costs) totaled $14.4 billion, including $7.3 million in Paycheck Protection Program (“PPP”) loans, an increase of $530.4 million or 15.1% (annualized) from $13.9 billion, including $12.1 million in PPP loans, at September 30, 2022. Average loans held for investment (net of deferred fees and costs) totaled $14.1 billion at December 31, 2022, an increase of $384.0 million or 11.1% (annualized) from the prior quarter. Excluding PPP loans (net of deferred fees and costs)⁽¹⁾, adjusted loans held for investment (net of deferred fees and costs) at December 31, 2022 increased $535.3 million or 15.3% (annualized) from September 30, 2022 and adjusted average loans increased $390.0 million or 11.3% (annualized) from the prior quarter. At December 31, 2022, loans held for investment (net of deferred fees and costs) increased $1.3 billion or 9.5% from December 31, 2021, and quarterly average loans increased $1.0 billion or 7.9% from the same period in the prior year. Excluding PPP loans (net of deferred fees and costs)⁽¹⁾, adjusted loans held for investment (net of deferred fees and costs) at December 31, 2022 increased $1.4 billion or 10.7% from December 31, 2021, and adjusted quarterly average loans during the fourth quarter of 2022 increased $1.3 billion or 10.3% from the fourth quarter of 2021.

At December 31, 2022, total deposits were $15.9 billion, a decrease of $614.5 million or approximately 14.7% (annualized) from September 30, 2022. Average deposits at December 31, 2022 increased from the prior quarter by $123.5 million or 3.0% (annualized). Total deposits at December 31, 2022 decreased $679.4 million or 4.1% from December 31, 2021, and quarterly average deposits during the fourth quarter of 2022 also decreased $249.5 million or 1.5% from the fourth quarter of 2021. Total deposits decreased from the prior quarter and prior year primarily due to the impact of customer behavior in response to inflation and higher market interest rates, in addition to seasonal outflows.

The following table shows the Company’s capital ratios at the quarters ended:

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At December 31, 2022, the Company’s common equity to total assets capital ratio and tangible common equity to tangible assets capital ratio decreased from the prior year primarily due to the unrealized losses on the available for sale (“AFS”) securities portfolio recorded in other comprehensive income due to market interest rate increases, while these ratios increased from the prior quarter due to the increase in the value of the AFS securities portfolio, as long-term rates decreased during the fourth quarter of 2022.

During the fourth quarter of 2022, the Company declared and paid a quarterly dividend on the outstanding shares of Series A Preferred Stock of $171.88 per share (equivalent to $0.43 per outstanding depositary share), consistent with the third quarter of 2022 and the fourth quarter of 2021. During the fourth quarter of 2022, the Company also declared and paid cash dividends of $0.30 per common share, consistent with the third quarter of 2022 and an increase of $0.02 or approximately 7.1% from the fourth quarter of 2021.

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⁽¹⁾ These are financial measures not calculated in accordance with generally accepted accounting principles (“GAAP”). For a reconciliation of these non-GAAP financial measures, see Alternative Performance Measures (non-GAAP) section of the Key Financial Results.

⁽²⁾ All ratios at December 31, 2022 are estimates and subject to change pending the Company’s filing of its FR Y9-C. All other periods are presented as filed.

ABOUT ATLANTIC UNION BANKSHARES CORPORATION

Headquartered in Richmond, Virginia, Atlantic Union Bankshares Corporation (NYSE: AUB) is the holding company for Atlantic Union Bank. Atlantic Union Bank has 114 branches and approximately 130 ATMs located throughout Virginia, and in portions of Maryland and North Carolina. Certain non-bank financial services affiliates of Atlantic Union Bank include: Atlantic Union Equipment Finance, Inc., which provides equipment financing; Atlantic Union Financial Consultants, LLC, which provides brokerage services; and Union Insurance Group, LLC, which offers various lines of insurance products.

On January 18, 2023, the Company completed the transfer of the listing of its common stock and its depositary shares, each representing a 1/400^th interest in a share of the Company’s 6.875% Perpetual Non-Cumulative Preferred Stock, Series A, from The Nasdaq Stock Market LLC to the New York Stock Exchange, under the ticker symbols of “AUB” and “AUB.PRA”, respectively.