Business Overview and History

Atlantic Union Bancshares, headquartered in Richmond, Virginia, is a regional banking powerhouse with a rich 122-year history and an unwavering commitment to serving its communities. As the holding company for Atlantic Union Bank, the institution has evolved from humble roots to become a preeminent player in the Mid-Atlantic banking landscape, consistently delivering top-tier financial performance and positioning itself for long-term growth.

Atlantic Union Bancshares' origins date back to 1902, when it was founded as Union Bank and Trust Company in Richmond, Virginia. Over the decades, the bank steadily grew and expanded its operations throughout the state of Virginia. In 1993, the bank underwent a major transformation when it merged with Guaranty Bank, significantly expanding its footprint across Virginia and solidifying its position as one of the largest independent banks headquartered in the Commonwealth.

The company's evolution continued in the early 2000s, as it expanded its footprint through a series of strategic acquisitions, including the purchases of Prosperity Bank & Trust Company and Southern Community Financial Corporation. These transactions strengthened Atlantic Union's regional presence and diversified its product offerings.

During the 2008 financial crisis, Atlantic Union faced significant challenges like many other financial institutions. However, the bank weathered the economic downturn by implementing cost-saving measures and focusing on risk management. It emerged from this period in a position of strength, maintaining its commitment to serving its local markets.

In 2016, Atlantic Union underwent another major transformation when it merged with Xenith Bankshares, adding critical scale and capabilities. This merger further cemented its status as the preeminent regional bank in Virginia. The smooth integration of Xenith demonstrated Atlantic Union's expertise in mergers and acquisitions.

Throughout its history, Atlantic Union Bancshares has grown from a small community bank to a regional powerhouse, serving commercial and retail customers across Virginia, Maryland, and North Carolina. The bank has remained steadfast in its focus on soundness, profitability, and community engagement - the core pillars that have guided its success for over a century.

Atlantic Union Bancshares operates through two main segments: Wholesale Banking and Consumer Banking. The Wholesale Banking segment provides loan, leasing, and deposit services, as well as treasury management, SBA lending, and capital market services to wholesale customers primarily throughout Virginia, Maryland, North Carolina, and South Carolina. This segment also includes the bank's equipment finance subsidiary, which has nationwide exposure, and the private banking and trust businesses.

The Consumer Banking segment offers loan and deposit services to consumers and small businesses throughout Virginia, Maryland, and North Carolina. It includes the home loan division, which has limited nationwide exposure, as well as investment management and advisory services businesses.

The company continues to focus on its strategy of being a diversified, traditional full-service bank that makes a positive difference in its markets. Atlantic Union has a strong brand and deep client relationships, providing economically beneficial services and financing to help people, businesses, and communities.

Financial Snapshot

Atlantic Union Bancshares' financial performance has been consistently strong, with the bank delivering impressive results across key metrics. As of the latest reporting period, the company's net income stood at $201.82 million, with a robust return on assets (ROA) of 0.95% and a return on equity (ROE) of 7.79%.

The bank's loan portfolio has demonstrated steady growth, reaching $15.64 billion as of December 31, 2023, up from $14.95 billion a year earlier. This expansion has been primarily driven by the bank's commercial and industrial (C&I) lending, which accounted for approximately 23% of the total loan book. The company's asset quality has remained robust, with nonperforming assets representing just 0.24% of total loans as of the end of 2023.

Atlantic Union Bancshares' deposit base has also grown significantly, reaching $16.82 billion as of December 31, 2023, up from $16.43 billion a year earlier. The bank has maintained a well-diversified funding mix, with non-interest-bearing demand deposits accounting for 23.6% of total deposits as of the end of 2023.

Financials

The company's capital position remains strong, with a Tier 1 capital ratio of 10.76% and a total risk-based capital ratio of 13.55% as of December 31, 2023, well above the regulatory minimum requirements. This solid capital base provides the bank with the flexibility to pursue strategic growth opportunities and support its commitment to serving its communities.

For the fiscal year 2023, Atlantic Union Bancshares reported revenue of $696.27 million, net income of $201.82 million, operating cash flow of $263.97 million, and free cash flow of $258.87 million.

In the most recent quarter (Q3 2024), the company reported revenue of $215.77 million, net income of $76.42 million, operating cash flow of $65.70 million, and free cash flow of $62.25 million. This represents a year-over-year increase in revenue, net income, operating cash flow, and free cash flow, primarily driven by the completion of the American National acquisition, which closed on April 1, 2024.

For the three months ended September 30, 2024, the Wholesale Banking segment reported net interest income of $101.10 million, up from $68.05 million in the same period in 2023. The segment's income before income taxes was $60.77 million, a significant increase from $28.17 million in the prior year quarter. As of September 30, 2024, the Wholesale Banking segment had $15.37 billion in loans held for investment and $7.08 billion in total deposits.

The Consumer Banking segment reported net interest income of $79.11 million for Q3 2024, up from $63.91 million in Q3 2023. The segment's income before income taxes was $28.11 million, compared to $26.96 million in the same period of 2023. As of September 30, 2024, the Consumer Banking segment had $3.11 billion in loans held for investment and $11.65 billion in total deposits.

Liquidity

Atlantic Union Bancshares maintains a robust liquidity position, ensuring its ability to meet financial obligations and pursue growth opportunities. The bank's diverse funding sources and strong deposit base contribute to its overall liquidity profile.

As of September 30, 2024, the company reported a debt-to-equity ratio of 0.25 and held $528.07 million in cash. Atlantic Union Bank maintains federal funds lines with several correspondent banks, with an available balance of $597 million at September 30, 2024. The company also has an alternate line of credit at a correspondent bank, with an available balance of $25 million, and a collateral-dependent line of credit with the Federal Home Loan Bank of up to $7.4 billion, of which $2.3 billion was available at September 30, 2024.

The company's current ratio and quick ratio both stood at 8.98 as of September 30, 2024, indicating a strong ability to meet short-term obligations.

Recent Developments and Outlook

The 2024 acquisition of American National Bankshares has been a transformative event for Atlantic Union Bancshares, further strengthening its regional presence and expanding its capabilities. The combined entity, with $21.17 billion in assets as of December 31, 2023, is poised to capitalize on the growth potential in its core markets, leveraging its enhanced scale and synergies to drive shareholder value. The integration of American National was completed in Q2 2024, enhancing Atlantic Union's earnings potential and increasing its presence in attractive growth markets.

Looking ahead, the company has provided guidance for the full year 2024, projecting loan balances to end the year between $18.5 billion and $19 billion, while deposit balances are expected to range between $20 billion and $20.5 billion. The bank also anticipates its fully taxable equivalent net interest margin to fall within the 3.35% to 3.40% range for the full year, with the fourth quarter projected to be in the 3.40% to 3.45% range.

For the full year 2024, Atlantic Union Bancshares expects fully taxable equivalent net interest income between $720 million and $725 million. For the fourth quarter of 2024, the bank is targeting fully taxable equivalent net interest income between $190 million and $195 million, adjusted operating non-interest income between $30 million and $35 million, and adjusted operating non-interest expenses between $115 million and $120 million.

The company has reiterated that it believes it will achieve its planned cost savings from the American National acquisition and is positioned well to deliver top quartile results in the fourth quarter of 2024 on an adjusted operating basis. However, the lower net interest income and net interest margin guidance compared to previous guidance is primarily due to a more aggressive 50 basis point Federal Reserve rate cut in September versus the 25 basis point cut Atlantic Union had assumed, as well as significantly lower term rates impacting new and renewed loan yields and reduced loan accretion income.

Atlantic Union Bancshares' commitment to prudent risk management and a diversified business model has positioned the bank well to navigate the evolving economic landscape. The company's focus on delivering top-tier financial performance, enhancing its product offerings, and expanding its regional presence has been a hallmark of its success, and shareholders can look forward to the bank's continued growth and innovation in the years to come.

Risks and Challenges

While Atlantic Union Bancshares has demonstrated resilience and adaptability, the bank is not immune to the challenges facing the financial services industry. Heightened competition, changing regulatory environments, and the potential for economic volatility could pose risks to the company's future performance.

The bank's significant exposure to the commercial real estate (CRE) market, which accounted for approximately 57% of its total loan portfolio as of December 31, 2023, could also present challenges, particularly if the CRE market experiences a downturn. The company's ability to effectively manage its CRE portfolio will be crucial in maintaining its robust asset quality.

Additionally, the successful integration of American National Bankshares will be a key focus for Atlantic Union Bancshares, as the bank works to capture the anticipated synergies and capitalize on the expanded geographic footprint. Any integration-related hiccups could potentially impact the bank's financial performance and its ability to execute on its strategic objectives.

Conclusion

Atlantic Union Bancshares' rich history, strong financial foundation, and strategic vision position the bank as a regional powerhouse in the Mid-Atlantic banking landscape. The company's unwavering commitment to serving its communities, delivering top-tier financial performance, and pursuing strategic growth opportunities has been the driving force behind its success.

As Atlantic Union Bancshares continues to navigate the evolving banking industry, its proven track record, prudent risk management, and innovative mindset will be critical in ensuring the bank's long-term sustainability and its ability to create value for its shareholders. Investors can look forward to the bank's continued growth and its steadfast focus on delivering exceptional financial results and exceptional customer service in the years to come.