Atlantic Union Bankshares Reports Third Quarter Results

RICHMOND, Va., Oct. 22, 2020 (GLOBE NEWSWIRE) — Atlantic Union Bankshares Corporation (the “Company” or “Atlantic Union”) (Nasdaq: AUB) today reported net income available to common shareholders of $58.3 million and diluted earnings per common share of $0.74 for its third quarter ended September 30, 2020. Pre-tax pre-provision operating earnings⁽¹⁾ were $78.6 million for the third quarter ended September 30, 2020.
Net income available to common shareholders was $96.1 million and diluted earnings per common share were $1.22 for the nine months ended September 30, 2020. Pre-tax pre-provision operating earnings ⁽¹⁾ were $217.3 million for the nine months ended September 30, 2020.“During the third quarter, Atlantic Union delivered strong financial results and continued to demonstrate the resilience, agility and innovation required to successfully navigate through the challenging economic, credit and interest rate headwinds of COVID-19,” said John C. Asbury, president and chief executive officer of Atlantic Union.“Operating under the mantra of soundness, profitability and growth – in that order of priority – Atlantic Union continues to be in a strong financial position with ample liquidity and a well-fortified capital base. Our financial performance has and will continue to benefit from the decisive actions the Company has taken to reduce its expense run rate to more closely align with revenue growth pressures driven by the lower for longer interest rate environment. These expense reduction actions include the consolidation of 14 branches in September, or nearly 10% of our branch network.Looking forward, we believe that Atlantic Union will emerge from the challenges of COVID-19 as a stronger company that is well positioned to generate sustainable, profitable growth and is committed to leveraging the Atlantic Union franchise to build long term value for our shareholders.”Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”)During 2020, the Company participated in the SBA PPP under the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, which was intended to provide economic relief to small businesses that have been adversely impacted by the COVID-19 global pandemic (“COVID-19”). The Company processed over 11,000 PPP loans, which totaled $1.7 billion with a recorded investment of $1.6 billion as of September 30, 2020, which included unamortized deferred fees of $32.6 million. The loans carry a 1% interest rate.Expense Reduction MeasuresDuring 2020, the Company undertook several actions, including the consolidation of 14 branches, which was completed in September 2020, to reduce expenses in light of the current and expected operating environment. These actions resulted in expenses during the third quarter of 2020 of approximately $2.6 million, primarily related to lease termination costs and real estate write-downs.⁽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 ResultsNET INTEREST INCOMEFor the third quarter of 2020, net interest income was $137.4 million, an increase from $137.3 million reported in the second quarter of 2020. Net interest income (FTE)⁽¹⁾ was $140.3 million in the third quarter of 2020, an increase of $172,000 from the second quarter of 2020. The third quarter net interest margin decreased 15 basis points to 3.08% from 3.23% in the previous quarter, while the net interest margin (FTE)⁽¹⁾ decreased 15 basis points to 3.14% from 3.29% during the same period. The decreases in the net interest margin and net interest margin (FTE) were principally due to a 31 basis point decrease in the yield on earning assets (FTE)⁽¹⁾ offset by a 16 basis point decrease in cost of funds. The decline in the Company’s earning asset yields was driven by lower loan accretion income, an increase in the earning asset mix of lower yielding investment securities and the impact of lower market interest rates. The cost of funds decline was driven by lower deposit costs and wholesale borrowing costs driven by lower interest rate environment and a favorable funding mix.The Company’s net interest margin (FTE) includes the impact of acquisition accounting fair value adjustments. Net accretion related to acquisition accounting decreased $2.7 million from the prior quarter to $3.7 million for the quarter ended September 30, 2020. The second and third quarters of 2020, and the remaining estimated net accretion impact are reflected in the following table (dollars in thousands):ASSET QUALITYOverview
During the third quarter of 2020, the Company experienced a slight decrease in nonperforming assets (“NPAs”). Past due loan levels as a percentage of total loans held for investment at September 30, 2020 were higher than past due loan levels at June 30, 2020 and lower than past due loan levels at September 30, 2019. The increase in past due loan levels from June 30, 2020 was primarily within the 30-59 days past due category. Net charge-off levels and the provision for loan losses for the third quarter of 2020 decreased from the second quarter of 2020.Loan Modifications for Borrowers Affected by COVID-19
On March 22, 2020, the five federal bank regulatory agencies and the Conference of State Bank Supervisors issued joint guidance (subsequently revised on April 7, 2020) with respect to loan modifications for borrowers affected by COVID-19 (the “March 22 Joint Guidance”). The March 22 Joint Guidance encourages banks, savings associations, and credit unions to make loan modifications for borrowers affected by COVID-19 and, importantly, assures those financial institutions that they will not (i) receive supervisory criticism for such prudent loan modifications and (ii) be required by examiners to automatically categorize COVID-19-related loan modifications as TDRs. The federal banking regulators have confirmed with the Financial Accounting Standards Board (or FASB) that short-term loan modifications made on a good faith basis in response to COVID-19 to borrowers who were current (i.e., less than 30 days past due on contractual payments) when the modification program was implemented are not considered TDRs.