Atlantic Union Bankshares Reports Fourth Quarter and Fiscal Year 2020 Results

RICHMOND, Va., Jan. 26, 2021 (GLOBE NEWSWIRE) — Atlantic Union Bankshares Corporation (the “Company” or “Atlantic Union”) (Nasdaq: AUB) today reported net income available to common shareholders of $56.5 million and basic and diluted earnings per common share of $0.72 for the fourth quarter ended December 31, 2020. Adjusted operating earnings available to common shareholders⁽¹⁾ were $72.9 million, diluted operating earnings per common share⁽¹⁾ were $0.93, and pre-tax pre-provision adjusted operating earnings⁽¹⁾ were $77.0 million for the fourth quarter ended December 31, 2020.
Net income available to common shareholders was $152.6 million and basic and diluted earnings per common share were $1.93 for the twelve months ended December 31, 2020. Adjusted operating earnings available to common shareholders⁽¹⁾ were $168.8 million, diluted operating earnings per common share⁽¹⁾ were $2.14, and pre-tax pre-provision adjusted operating earnings⁽¹⁾ were $294.0 million, for the twelve months ended December 31, 2020.“Despite the continued economic disruption caused by the pandemic in 2020, Atlantic Union delivered solid financial results in the fourth quarter and for the full year while demonstrating the flexibility and agility needed for success,” 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 remains in a strong financial position with ample liquidity and a well-fortified capital base.“Our conservative credit culture is serving us well as we help our clients weather the storm. While we continue to face near-term uncertainty, as a result of benign credit quality metrics to date and a more optimistic economic outlook due to the roll-out of COVID-19 vaccines and additional government stimulus inclusive of more PPP funding, we are more confident that credit losses will not be as severe as initially feared.“Looking forward, we are optimistic that the challenges of COVID-19 will ease as 2021 progresses and that Atlantic Union will emerge as a stronger company that is well positioned to generate sustainable, profitable growth and 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 pursuant to the CARES Act, which totaled $1.7 billion with a recorded investment of $1.2 billion and unamortized deferred fees of $17.6 million, each as of December 31, 2020. The loans carry a 1% interest rate. In addition to an insignificant amount of PPP loan pay offs, the Company processed approximately $429.3 million of loan forgiveness on approximately 3,100 PPP loans during the fourth quarter of 2020.Certain provisions of the CARES Act, including additional PPP funding, were extended as a result of the Consolidated Appropriations Act, 2021 (the “CAA”), which was signed into law on December 27, 2020. The Company began accepting applications on January 19, 2021 for additional PPP loans pursuant to the CAA._________________________(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 ResultsDuring 2020, the Company launched several initiatives to reduce expenses in light of the current and expected operating environment, including the consolidation of certain branch locations.The Company completed the consolidation of 14 branches in September 2020 and one branch in December 2020, and five branches are expected to be consolidated in February 2021. These actions resulted in expenses of approximately $6.8 million for the twelve months ended December 31, 2020 with approximately $3.4 million recognized in the second quarter of 2020, approximately $2.6 million in the third quarter of 2020 and approximately $790,000 in the fourth quarter of 2020, primarily related to lease termination costs, severance costs and real estate write-downs.Additionally, in response to the current rate environment, the Company prepaid certain long-term Federal Home Loan Bank (“FHLB”) advances, which resulted in a prepayment penalty of $20.8 million in the fourth quarter of 2020.NET INTEREST INCOMEFor the fourth quarter of 2020, net interest income was $145.6 million, an increase from $137.4 million reported in the third quarter of 2020. Net interest income (FTE)⁽¹⁾ was $148.7 million in the fourth quarter of 2020, an increase of $8.4 million from the third quarter of 2020. The fourth quarter net interest margin increased 17 basis points to 3.25% from 3.08% in the previous quarter, while the net interest margin (FTE)⁽¹⁾  increased 18 basis points to 3.32% from 3.14% during the same period. The increases in the net interest margin and net interest margin (FTE) were principally due to the increase in PPP loan accretion to $15.0 million in the fourth quarter of 2020 from $9.9 million in the third quarter of 2020 driven by PPP loan forgiveness approved by the SBA during the fourth quarter.The Company’s net interest margin (FTE) includes the impact of acquisition accounting fair value adjustments. Net accretion related to acquisition accounting increased $702,000 from the prior quarter to $4.4 million for the quarter ended December 31, 2020. The four quarters of 2020, and the remaining estimated net accretion impact are reflected in the following table (dollars in thousands):ASSET QUALITYOverview
During the fourth quarter of 2020, the Company’s asset quality metrics remained relatively stable. Nonperforming assets (“NPAs”) as a percentage of loans increased slightly, but, remained low at 0.32% at December 31, 2020. Accruing past due loan levels as a percentage of total loans held for investment at December 31, 2020 remained consistent with a 1 basis point increase as compared to September 30, 2020 and lower than accruing past due loan levels at December 31, 2019. Net charge-off levels remained low at 0.05% of average loans for the fourth quarter 2020, which is a 1 basis point increase from the third quarter of 2020 and a 10 basis point decrease from the fourth quarter 2019._________________________⁽¹⁾These are financial measures not calculated in accordance with GAAP. For a reconciliation of these non-GAAP financial measures, see Alternative Performance Measures (non-GAAP) section of the Key Financial ResultsThe allowance for credit losses (“ACL”) decreased from September 30, 2020 due to improvements in the macroeconomic outlook which resulted in a decline in the provision for credit losses for the fourth quarter of 2020, as compared to the third 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.