• Loan Growth: Approximately 3% annualized for the fourth quarter.
• Deposit Growth: Approximately 2% annualized for the fourth quarter.
• Net Income: $54.8 million for the fourth quarter.
• Diluted Earnings Per Share (EPS): $0.60 for the fourth quarter.
• Adjusted Operating Earnings: $61.4 million for the fourth quarter.
• Adjusted Operating EPS: $0.67 for the fourth quarter.
• Net Interest Margin (NIM): 3.33% for the fourth quarter.
• Noninterest Income: $35.2 million for the fourth quarter.
• Noninterest Expense: $129.7 million for the fourth quarter.
• Allowance for Credit Losses: $193.7 million at the end of the fourth quarter.
• Provision for Credit Losses: $17.5 million for the fourth quarter.
• Net Charge-Offs: $1.4 million for the fourth quarter.
• Total Loans Held for Investment: $18.5 billion at December 31, 2024.
• Total Deposits: $20.4 billion at December 31, 2024.
• Common Stock Dividend: $0.34 per share for the fourth quarter.

• Warning! GuruFocus has detected 3 Warning Sign with AUB.

Release Date: January 23, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Atlantic Union Bankshares Corp (NYSE:AUB) successfully closed the acquisition of American National Bankshares and announced a proposed acquisition of Sandy Spring Bancorp, which is expected to enhance market presence and product offerings.
• The company received merger approvals from the Federal Reserve Bank of Richmond and is awaiting further approvals, indicating progress in the merger process.
• AUB reported a 29% increase in total loan production quarter-over-quarter, demonstrating strong lending activity.
• The macroeconomic environment in AUB's operating regions remains favorable, with unemployment rates below the national average, supporting economic stability.
• AUB's adjusted operating earnings for the full year 2024 were $241.3 million, reflecting solid financial performance despite challenging conditions.

Negative Points

• AUB's fourth-quarter earnings were negatively impacted by a higher provision for loan losses due to a $13.1 million specific reserve on a problematic C&I loan.
• The net interest margin (NIM) experienced compression due to funding mix dynamics and lower loan yields, impacting profitability.
• Noninterest expense increased due to merger-related costs and higher salaries and benefits, affecting overall cost management.
• The company experienced elevated commercial real estate payoffs, which could impact future loan growth.
• AUB's credit quality was affected by an atypical event involving a misrepresentation of a borrowing base, leading to increased nonperforming assets.

Q & A Highlights

Q: With the Department of Government Efficiency potentially influencing economic activity in Virginia and Maryland, how might these developments impact Atlantic Union Bankshares' business model? A: John Asbury, CEO, explained that while the exact impacts are uncertain, the return of federal workers to offices and a hiring freeze could benefit the local economy. The Greater Washington area, with its low unemployment and affluent population, is expected to absorb any federal workforce reductions into the private sector. The administration's pro-national defense stance is likely to benefit markets, especially government contractors, which Atlantic Union finances.

Q: Can you walk us through the drivers of organic net interest margin (NIM) expansion for 2025, and are there any changes to the pro forma Sandy Springs guide? A: Robert Gorman, CFO, noted that the NIM expansion is expected due to fixed-rate loan repricing and lower CD rates. The bank anticipates two Fed rate cuts in 2025, impacting variable rate loans. The Sandy Spring acquisition might see a combined NIM closer to 4% due to purchase accounting accretion.

Q: How should we think about the impact of the Sandy Spring acquisition on the margin, considering the move in rates since the deal was announced? A: Gorman stated that higher rates since the deal announcement could lead to more accretion income and a slight increase in tangible book value dilution. The combined margin might see a lift, with accretion income potentially closer to 4%.

Q: Regarding the reserve build this quarter, was it primarily related to one C&I loan, and what is the outlook for reserves next year? A: Gorman confirmed that the reserve build was mainly due to a specific C&I loan. The bank is conservatively assuming a modest reserve build for 2025, with no significant changes in asset quality outlook.

Q: Is there potential for the Sandy Spring acquisition to close earlier than April 1, depending on regulatory approvals? A: Asbury mentioned that while regulatory approvals are expected soon, the bank prefers not to close in March due to the complexities of closing a merger at the end of a quarter. The plan remains to close on April 1 for a cleaner transition.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.