10-Q: Atlantic Union Bankshares Reports Q3 2024 Results, Announces Merger with Sandy Spring Bancorp

Atlantic Union Bankshares Corporation announced its third quarter 2024 results, including the impact of the American National acquisition, and a proposed merger with Sandy Spring Bancorp.

Summary

• Atlantic Union Bankshares Corporation reported a net income available to common shareholders of $73.4 million, or $0.82 per share, for the third quarter of 2024, compared to $51.1 million, or $0.68 per share, for the same period in 2023.
• For the first nine months of 2024, net income available to common shareholders was $142.4 million, or $1.68 per share, compared to $136.0 million, or $1.81 per share, for the same period in 2023.
• The results include the impact of the acquisition of American National, which closed on April 1, 2024, and contributed to increases in average balances, net interest income, and expenses.
• The company's total assets reached $24.8 billion at September 30, 2024, including $18.3 billion in loans held for investment.
• Total deposits were $20.3 billion at the end of the quarter, with a significant increase in interest-bearing deposits and brokered deposits.
• The company also announced a proposed merger with Sandy Spring Bancorp, expected to close by the third quarter of 2025, and a related forward sale agreement for 11.3 million shares of common stock.

Sentiment

Score: 6

Explanation: The document presents a mixed picture. While the company shows growth in assets and deposits, the decrease in net interest margin and increase in credit loss provisions, along with the complexities of the merger, temper the positive aspects. The forward sale agreement also introduces some uncertainty.

Positives

• The company experienced a significant increase in net interest income, driven by higher average earning assets and net accretion income.
• The company's total assets and deposits increased substantially, reflecting the impact of the American National acquisition.
• The company's regulatory capital ratios continue to exceed the minimum requirements.
• The company's net interest margin increased slightly year-over-year.
• The company's noninterest income increased due to the American National acquisition and higher BOLI income.

Negatives

• The company's noninterest expenses increased, primarily due to the American National acquisition.
• The company's net interest margin decreased slightly for the nine months ended September 30, 2024 compared to the same period in 2023.
• The company's provision for credit losses increased for the nine months ended September 30, 2024 compared to the same period in 2023.
• The company's other operating income decreased due to a gain on sale-leaseback transaction in the prior year.

Risks

• The company faces risks related to the integration of American National and the proposed merger with Sandy Spring.
• The company is exposed to interest rate risk, which could impact its net interest income and net economic value.
• The company has significant credit exposure in commercial real estate, which may expose it to additional credit risks.
• The company's results could be affected by changes in economic conditions, inflation, and market interest rates.
• The company's goodwill could be impaired, which could negatively impact earnings.
• The company's ability to realize the anticipated benefits of the proposed merger with Sandy Spring is subject to a number of uncertainties.

Future Outlook

The company expects to complete the merger with Sandy Spring Bancorp by the third quarter of 2025 and anticipates receiving proceeds from the forward sale agreement within approximately 18 months. The company will continue to monitor the impact of various global and national events on its results of operations and financial condition.

Management Comments

• Management believes that the non-GAAP financial measures provide additional understanding of ongoing operations, enhance comparability of our results of operations with prior periods and show the effects of significant gains and charges in the periods presented without the impact of items or events that may obscure trends in our underlying performance.
• Management believes our overall liquidity to be sufficient to satisfy our depositors requirements and to meet our customers credit needs.

Industry Context

The announcement comes amid ongoing macroeconomic and industry-specific headwinds, including a higher-for-longer interest rate environment and heightened competition for deposits. The company is actively managing its balance sheet and liquidity to navigate these challenges.

Comparison to Industry Standards

• The company's net interest margin of 3.31% for Q3 2024 is within the range of other regional banks, but the company's asset sensitivity may be higher than some peers.
• The company's capital ratios exceed regulatory requirements, indicating a strong capital position compared to industry benchmarks.
• The company's loan portfolio is heavily concentrated in commercial real estate, which is a common risk factor for regional banks, but the company has implemented risk management strategies to mitigate this risk.
• The company's deposit growth is strong, but the shift towards higher-cost deposits is a trend seen across the industry.

Legal Proceedings

• The company has a recorded probable and estimable liability in connection with its settlement with the CFPB.

Stakeholder Impact

• Shareholders will be impacted by the proposed merger with Sandy Spring, including potential dilution and changes in stock price.
• Customers may experience changes in services and products as a result of the merger.
• Employees may experience uncertainty about their future roles and relationships following the completion of the merger.

Next Steps

• The company will seek regulatory and shareholder approvals for the proposed merger with Sandy Spring Bancorp.
• The company will continue to integrate American National into its operations.
• The company will monitor the impact of economic conditions and interest rate changes on its business.
• The company will manage its liquidity and capital resources to meet its obligations and support growth.

Key Dates

Keywords

merger, acquisition, net interest income, deposits, loans, capital, asset quality, interest rate risk, financial results, bank, commercial real estate, noninterest income, noninterest expense