RICHMOND, Va., Jan. 25, 2022 (GLOBE NEWSWIRE) — Atlantic Union Bankshares Corporation (Nasdaq: AUB) today reported net income available to common shareholders of $44.8 million and basic and diluted earnings per common share of $0.59 for the fourth quarter ended December 31, 2021. Adjusted operating earnings available to common shareholders(1) were $53.8 million, diluted operating earnings per common share(1) were $0.71, and pre-tax pre-provision adjusted operating earnings(1) were $66.2 million for the fourth quarter ended December 31, 2021.
Net income available to common shareholders was $252.0 million and basic and diluted earnings per common share were $3.26 for the twelve months ended December 31, 2021. Adjusted operating earnings available to common shareholders(1) were $273.3 million, diluted operating earnings per common share(1) were $3.53, and pre-tax pre-provision adjusted operating earnings(1) were $284.8 million for the twelve months ended December 31, 2021.
“Looking back at 2021, it was a challenging but successful year for Atlantic Union Bankshares,” said John C. Asbury, president and chief executive officer of Atlantic Union. “While there were ups and downs with the continuing pandemic, Atlantic Union had a strong finish to 2021 and we are optimistic as we enter 2022. We expect that loan growth will continue to show strength and credit losses will remain historically low due to the positive economic outlook. We made difficult choices to position the Company for long-term success through the strategic actions we took throughout the continuing pandemic and in the fourth quarter, and we remain optimistic that the lingering effects of the pandemic will continue to recede in 2022.”
“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.”
Strategic Initiatives
During the fourth quarter of 2021, the Company took certain actions to reduce expenses in light of the current and expected operating environment that included the closure of the Atlantic Union Bankshares operations center and consolidation of 16 branches, all expected to be completed in March 2022. These actions resulted in restructuring expenses in the fourth quarter of 2021 of approximately $16.5 million primarily related to real estate, lease and other asset write downs, as well as severance costs.
Additionally, during the fourth quarter of 2021 the Company sold shares of Visa, Inc. Class B common stock and recorded a gain in other income of $5.1 million.
Subordinated Notes Offering
During the fourth quarter of 2021, the Company issued $250.0 million of fixed-to-floating rate subordinated notes with a maturity date of December 15, 2031 (the “2031 Notes”). The 2031 Notes were sold at par resulting in net proceeds, after underwriting discounts and offering expenses, of approximately $246.9 million.
The Company used a portion of the net proceeds from the 2031 Notes issuance to redeem its outstanding $150 million fixed-to-floating rate subordinated notes that were due to mature in 2026 (the “2026 Notes”), with such redemption effective during the fourth quarter of 2021. As a result of the redemption, the Company recorded additional interest expense of approximately $1.0 million in the fourth quarter of 2021 due to the acceleration of the related unamortized discount.
Share Repurchase Program
During the fourth quarter of 2021, the Company’s Board of Directors authorized a share repurchase program (the “Repurchase Program”) to purchase up to $100 million of the Company’s common stock in either open market or privately negotiated transactions, including pursuant to a trading plan in accordance with Rule 10b5-1 and /or Rule 10b-18 under the Exchange Act. This Repurchase Program replaced the prior $125 million repurchase program that was fully utilized as of September 30, 2021 and was otherwise due to expire on June 30, 2022. There were no share repurchase transactions for the quarter ended December 31, 2021.
Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”)
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 had been adversely impacted by the COVID-19 global pandemic (“COVID-19”). The PPP loan funding program expired on May 31, 2021. The Company had PPP loans with a recorded investment of $154.7 million and unamortized deferred fees of $4.4 million as of December 31, 2021. The loans carry a 1% interest rate.
In addition to an insignificant amount of PPP loan pay offs, the Company has processed $2.0 billion(*) of loan forgiveness on 16,000 PPP loans(*) since the inception of the program through December 31, 2021. In the fourth quarter of 2021, the Company processed $315.0 million(*) on 2,700 PPP loans for forgiveness.
(*) Number and amount of PPP loans processed for forgiveness are rounded and approximate values
NET INTEREST INCOME
For the fourth quarter of 2021, net interest income was $138.3 million, an increase from $137.5 million reported in the third quarter of 2021. Net interest income (FTE)(1) was $141.6 million in the fourth quarter of 2021, an increase of approximately $903,000 from the third quarter of 2021. The increases in net interest income and net interest income (FTE) were primarily driven by higher investment income as a result of growth in the investment portfolio, and marginally higher interest and fees on loans, including PPP loan interest and fees. These increases in net interest income and net interest income (FTE) were partially offset by the previously mentioned unamortized discount acceleration. The fourth quarter net interest margin decreased 2 basis points to 3.03% from the previous quarter, and the net interest margin (FTE)(1) also decreased 2 basis points during the same period to 3.10%. Earning asset yields declined by 1 basis point compared to the third quarter of 2021 due to the impact of the low interest rate environment on core loan and investment securities yields and the elevated but low yielding cash balances due to excess liquidity. The cost of funds increased by 1 basis point compared to the third quarter of 2021, driven by higher borrowing costs, primarily as a result of the previously mentioned acceleration of an unamortized discount.
The Company’s net interest margin (FTE) (1) includes the impact of acquisition accounting fair value adjustments. Net accretion related to acquisition accounting was $4.2 million for the quarter ended December 31, 2021. The four quarters of 2021 and the remaining estimated net accretion impact are reflected in the following table (dollars in thousands):
| Deposit | |||||||||||||||
| Loan | Accretion | Borrowings | |||||||||||||
| Accretion | (Amortization) | Amortization | Total | ||||||||||||
| For the quarter ended March 31, 2021 | $ | 4,287 | $ | 20 | $ | (198 | ) | $ | 4,109 | ||||||
| For the quarter ended June 30, 2021 | 4,132 | 12 | (202 | ) | 3,942 | ||||||||||
| For the quarter ended September 30, 2021 | 4,176 | (8 | ) | (203 | ) | 3,965 | |||||||||
| For the quarter ended December 31, 2021 | 4,449 | (11 | ) | (203 | ) | 4,235 | |||||||||
| Total for the year ended December 31, 2021 | $ | 17,044 | $ | 13 | $ | (806 | ) | $ | 16,251 | ||||||
| For the years ending (estimated): | |||||||||||||||
| 2022 | 5,166 | (43 | ) | (829 | ) | 4,294 | |||||||||
| 2023 | 3,843 | (32 | ) | (852 | ) | 2,959 | |||||||||
| 2024 | 3,108 | (4 | ) | (877 | ) | 2,227 | |||||||||
| 2025 | 2,422 | (1 | ) | (900 | ) | 1,521 | |||||||||
| 2026 | 1,947 | — | (926 | ) | 1,021 | ||||||||||
| Thereafter | 8,562 | — | (8,948 | ) | (386 | ) | |||||||||
| Total remaining acquisition accounting fair value adjustments at December 31, 2021 | $ | 25,048 | $ | (80 | ) | $ | (13,332 | ) | $ | 11,636 | |||||
ASSET QUALITY
Overview
During the fourth quarter of 2021, nonperforming assets (“NPAs”) as a percentage of loans decreased 3 basis points from the prior quarter and remained low at 0.25% at December 31, 2021. Accruing past due loan levels as a percentage of total loans held for investment at December 31, 2021 decreased 7 basis points as compared to September 30, 2021, and were 13 basis points lower than at December 31, 2020. Net charge-off levels remained low at 0.02% of average loans on an annualized basis for the fourth quarter of 2021. The allowance for credit losses (“ACL”) totaled $107.8 million at December 31, 2021, a $1.5 million decrease from the prior quarter primarily due to lower expected losses, reflecting the positive economic outlook, partially offset by the impact of loan growth in the current quarter.
Nonperforming Assets
At December 31, 2021, NPAs totaled $32.8 million, a decrease of $4.4 million from September 30, 2021. NPAs as a percentage of total outstanding loans at December 31, 2021 were 0.25%, a decrease of 3 basis points from September 30, 2021. Excluding the impact of the PPP loans(1), NPAs as a percentage of total adjusted loans held for investment were 0.25% at December 31, 2021, a decrease of 4 basis points from 0.29% at September 30, 2021.
The following table shows a summary of NPA balances at the quarter ended (dollars in thousands):
| December 31, | September 30, | June 30, | March 31, | December 31, | |||||||||||
| 2021 | 2021 | 2021 | 2021 | 2020 | |||||||||||
| Nonaccrual loans | $ | 31,100 | $ | 35,472 | $ | 36,399 | $ | 41,866 | $ | 42,448 | |||||
| Foreclosed properties | 1,696 | 1,696 | 1,696 | 2,344 | 2,773 | ||||||||||
| Total nonperforming assets | $ | 32,796 | $ | 37,168 | $ | 38,095 | $ | 44,210 | $ | 45,221 | |||||
The following table shows the activity in nonaccrual loans for the quarter ended (dollars in thousands):
| December 31, | September 30, | June 30, | March 31, | December 31, | ||||||||||||||||
| 2021 |
2021 |
2021 |
2021 |
2020 |
||||||||||||||||
| Beginning Balance | $ | 35,472 | $ | 36,399 | $ | 41,866 | $ | 42,448 | $ | 39,023 | ||||||||||
| Net customer payments | (5,068 | ) | (4,719 | ) | (9,307 | ) | (4,133 | ) | (4,640 | ) | ||||||||||
| Additions | 1,294 | 4,177 | 4,162 | 3,821 | 8,211 | |||||||||||||||
| Charge-offs | (598 | ) | (385 | ) | (183 | ) | (270 | ) | (146 | ) | ||||||||||
| Loans returning to accruing status | — | — | (153 | ) | — | — | ||||||||||||||
| Transfers to foreclosed property | — | — | 14 | — | — | |||||||||||||||
| Ending Balance | $ | 31,100 | $ | 35,472 | $ | 36,399 | $ | 41,866 | $ | 42,448 | ||||||||||
The following table shows the activity in foreclosed properties for the quarter ended (dollars in thousands):
| December 31, | September 30, | June 30, | March 31, | December 31, | ||||||||||||||
| 2021 | 2021 | 2021 |
2021 |
2020 |
||||||||||||||
| Beginning Balance | $ | 1,696 | $ | 1,696 | $ | 2,344 | $ | 2,773 | $ | 4,159 | ||||||||
| Additions of foreclosed property | — | — | 14 | — | — | |||||||||||||
| Valuation adjustments | — | — | — | — | (35 | ) | ||||||||||||
| Proceeds from sales | — | — | (572 | ) | (419 | ) | (1,357 | ) | ||||||||||
| Gains (losses) from sales | — | — | (90 | ) | (10 | ) | 6 | |||||||||||
| Ending Balance | $ | 1,696 | $ | 1,696 | $ | 1,696 | $ | 2,344 | $ | 2,773 | ||||||||
Past Due Loans
Past due loans still accruing interest totaled $29.9 million or 0.23% of total loans held for investment at December 31, 2021, compared to $38.8 million or 0.30% of total loans held for investment at September 30, 2021, and $49.8 million or 0.36% of total loans held for investment at December 31, 2020. Of the total past due loans still accruing interest, $9.1 million or 0.07% of total loans held for investment were loans past due 90 days or more at December 31, 2021, compared to $11.0 million or 0.08% of total loans held for investment at September 30, 2021, and $13.6 million or 0.10% of total loans held for investment at December 31, 2020.
Net Charge-offs
Net charge-offs totaled $511,000 or 0.02% of total average loans on an annualized basis for the quarter ended December 31, 2021, compared to $113,000 or less than 0.01% for the third quarter of 2021, and $1.8 million or 0.05% for the fourth quarter of 2020.
Provision for Credit Losses
For the quarter ended December 31, 2021, the Company recorded a negative provision for credit losses of $1.0 million, compared to a negative provision for credit losses of $18.8 million in the previous quarter, and a negative provision for credit losses of $13.8 million recorded during the same quarter in 2020. The provision for credit losses for the fourth quarter of 2021 reflected a negative provision of $1.5 million for loan losses and a provision of $500,000 for unfunded commitments.
Allowance for Credit Losses
At December 31, 2021, the ACL was $107.8 million and included an allowance for loan and lease losses (“ALLL”) of $99.8 million and a reserve for unfunded commitments (“RUC”) of $8.0 million. The ACL at December 31, 2021 decreased $1.5 million from September 30, 2021 due to lower expected losses than previously estimated as a result of ongoing economic improvements, benign credit quality metrics to date, risk rating upgrades during the quarter, and a positive macroeconomic outlook, and was comprised of a $2.0 million decrease in the ALLL and a $500,000 increase in the RUC.
The ACL as a percentage of total loans decreased slightly to 0.82% at December 31, 2021, compared to 0.83% at September 30, 2021. The ALLL as a percentage of the total loan portfolio was 0.76% at December 31, 2021 and 0.77% at September 30, 2021.
NONINTEREST INCOME
Noninterest income increased $6.5 million to $36.4 million for the quarter ended December 31, 2021 from $29.9 million in the prior quarter, primarily driven by a $5.1 million gain from the sale of Visa, Inc. Class B common stock and increases in several other noninterest income categories, partially offset by a $1.5 million decline in mortgage banking income reflecting the seasonal drop in mortgage loan origination volumes in the fourth quarter of 2021. The other noninterest income increases from the prior quarter include an increase of $937,000 in unrealized gains on equity method investments, a seasonal increase of $610,000 in service charges on deposit accounts, a $559,000 increase in bank owned life insurance revenue, an increase of $341,000 in loan interest rate swap fee income, and additional asset management fees of $210,000 due to growth in assets under management in the fourth quarter.
NONINTEREST EXPENSE
Noninterest expense increased $24.6 million to $119.9 million for the quarter ended December 31, 2021 from $95.3 million in the prior quarter, primarily driven by restructuring expenses of $16.5 million related to the announced closure of the Company’s operations center and the consolidation of 16 branches planned for March 2022. In addition, salaries and benefits increased $4.4 million from the prior quarter, primarily driven by performance based variable incentive compensation and profit-sharing expenses, including a $500,000 contribution to the Company’s Employee Stock Ownership Plan (“ESOP”). Other notable expenses incurred in the fourth quarter of 2021 include $1.4 million in expenses associated with strategic projects, $1.2 million in severance costs unrelated to branch closures, and approximately $900,000 in technology and data processing costs related to the termination of a software contract.
INCOME TAXES
The effective tax rate for the three months ended December 31, 2021 was 14.4%, compared to 18.0% for the three months ended September 30, 2021, reflecting the impact of changes in the proportion of tax exempt income to pretax income. The effective tax rate for the twelve months ended December 31, 2021 was 17.2%, compared to 15.1% for the twelve months ended December 31, 2020.
BALANCE SHEET
At December 31, 2021, total assets were $20.1 billion, an increase of $129.1 million or approximately 2.6% (annualized) from September 30, 2021, and an increase of $436.3 million or approximately 2.2% from December 31, 2020. Total assets have increased from the prior quarter primarily due to net growth in the investment securities portfolio, as well as growth in the loan portfolio, which was partially offset by PPP loan forgiveness.
At December 31, 2021, loans held for investment (net of deferred fees and costs) totaled $13.2 billion, including $150.4 million in PPP loans, an increase of $56.3 million or 1.7% (annualized) from September 30, 2021, while average loans at December 31, 2021 decreased $369.3 million or 10.9% (annualized) from the prior quarter. Excluding the effects of the PPP(1), loans held for investment (net of deferred fees and costs) at December 31, 2021 increased $372.5 million or 11.7% (annualized) from September 30, 2021, and average loans increased $29.8 million or 0.9% (annualized) from the prior quarter. Loans held for investment (net of deferred fees and costs) decreased $825.5 million or 5.9% from December 31, 2020, and quarterly average loans decreased $1.1 billion or 7.8% from the same period in the prior year. Excluding the effects of the PPP(1), loans held for investment (net of deferred fees and costs) at December 31, 2021 increased $203.7 million or 1.6% from the same period in the prior year, and quarterly average loans during the fourth quarter of 2021 increased $51.1 million or 0.4% from the same period in the prior year. In addition to an insignificant amount of PPP loan payoffs, the Company processed $315.0 million(*) of loan forgiveness on 2,700 PPP loans(*) during the fourth quarter of 2021, compared to $391.8 million(*) of loan forgiveness on 3,000 PPP loans(*) during the third quarter of 2021, and $429.3 million(*) of loan forgiveness on 3,100 PPP loans(*) during the fourth quarter of 2020.
At December 31, 2021, total deposits were $16.6 billion, a decrease of $11.1 million or approximately 0.3% (annualized) from September 30, 2021, while average deposits increased $143.1 million or 3.4% (annualized) from the prior quarter. Deposits at December 31, 2021 increased $888.3 million or 5.6% from December 31, 2020, and quarterly average deposits at December 31, 2021 increased $965.1 million or 6.1% from the same period in the prior year. The increase in deposits from the prior year was primarily due to additional liquidity of bank customers due to higher levels of government assistance programs since the start of COVID and increased savings. The decrease in deposits from the prior quarter is primarily attributable to the run-off of time deposits.
The following table shows the Company’s capital ratios at the quarters ended:
| December 31, | September 30, | December 31, | |||||
| 2021 | 2021 | 2020 | |||||
| Common equity Tier 1 capital ratio (2) | 10.24 | % | 10.37 | % | 10.26 | % | |
| Tier 1 capital ratio (2) | 11.33 | % | 11.49 | % | 11.39 | % | |
| Total capital ratio (2) | 14.18 | % | 13.78 | % | 14.00 | % | |
| Leverage ratio (Tier 1 capital to average assets) (2) | 9.01 | % | 8.97 | % | 8.95 | % | |
| Common equity to total assets | 12.68 | % | 12.68 | % | 12.95 | % | |
| Tangible common equity to tangible assets (1) | 8.20 | % | 8.16 | % | 8.31 | % |
During the fourth quarter of 2021, 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 2021 and the fourth quarter of 2020. During the fourth quarter of 2021, the Company also declared and paid cash dividends of $0.28 per common share, consistent with the third quarter of 2021, and an increase of $0.03, or approximately 12.0%, compared to the fourth quarter of 2020.
On December 10, 2021, the Company’s Board of Directors authorized a Repurchase Program to purchase up to $100 million of the Company’s common stock in open market transactions or privately negotiated transactions, including pursuant to a trading plan in accordance with Rule 10b5-1 and /or Rule 10b-18 under the Exchange Act. There were no share repurchase transactions during the quarter ended December 31, 2021. The Repurchase Program followed a prior $125 million share repurchase authorization that was approved by the Company’s Board of Directors during the second quarter of 2021 and was fully utilized by September 30, 2021.
During the fourth quarter of 2021, the Company issued $250.0 million of 2.875% fixed-to-floating rate subordinated notes with a maturity date of December 15, 2031. The 2031 Notes were sold at par resulting in net proceeds, after underwriting discounts and offering expenses, of approximately $246.9 million. The Company used a portion of the net proceeds from the 2031 Notes issuance to repay its outstanding $150 million of 5.00% fixed-to-floating rate subordinated notes due 2026.
(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, 2021 are estimates and subject to change pending the Company’s filing of its FR Y9-C. All other periods are presented as filed.
(*) Number and amount of PPP loans processed for forgiveness are rounded and approximate values.
ABOUT ATLANTIC UNION BANKSHARES CORPORATION
Headquartered in Richmond, Virginia, Atlantic Union Bankshares Corporation (Nasdaq: AUB) is the holding company for Atlantic Union Bank. Atlantic Union Bank has 130 branches and approximately 150 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; Dixon, Hubard, Feinour & Brown, Inc., which provides investment advisory services; Atlantic Union Financial Consultants, LLC, which provides brokerage services; and Union Insurance Group, LLC, which offers various lines of insurance products.
