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Atlantic Union Bankshares Reports Second Quarter Results

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RICHMOND, Va., July 23, 2020 (GLOBE NEWSWIRE) -- Atlantic Union Bankshares Corporation (the "Company" or "Atlantic Union") (NASDAQ:AUB) today reported net income of $30.7 million and diluted earnings per share of $0.39 for its second quarter ended June 30, 2020.  Pre-tax pre-provision earnings(1) were $70.4 million, or $0.89 per share(1), in the second quarter ended June 30, 2020.

Net income was $37.8 million and earnings per share were $0.48 for the six months ended June 30, 2020.  Pre-tax pre-provision earnings(1) were $138.7 million, or $1.76 per share(1), in the six months ended June 30, 2020.

"During the second quarter Atlantic Union demonstrated resilience, agility and innovation along with its willingness to make the tough decisions required to successfully navigate through the challenges of COVID-19," said John C. Asbury, President and Chief Executive Officer of Atlantic Union. "We have remained focused on helping our customers and our communities weather the storm as exemplified by our team's ability to process more than 11,000 loans which provided approximately $1.7 billion to businesses through the Small Business Administration's Paycheck Protection Program during the second quarter. 

"Operating under the mantra of soundness, profitability and growth – in that order of priority – we believe that Atlantic Union continues to be in a strong financial position with ample liquidity and a well-fortified capital base further enhanced by the issuance of preferred stock during the quarter.  We also took action to better align our expense run rate to the revenue reality of the much lower for longer than expected interest rate environment.  This includes the consolidation of 14 branches, or nearly 10% of our branch network, that is expected to close in September."

Small Business Administration ("SBA") Paycheck Protection Program ("PPP")

During the second quarter of 2020, the Company continued to participate 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 loans, which totaled $1.7 billion with a recorded investment of $1.6 billion as of June 30, 2020. The loans carry a 1% interest rate and the Company recorded net PPP loan origination fees of approximately $50.2 million which are being amortized over a 24-month period.

Expense Reduction Measures and Balance Sheet Repositioning

During the second quarter of 2020, the Company undertook several actions, including a planned consolidation of 14 branches expected to occur in September, to reduce expenses in light of the current and expected operating environment. These actions resulted in expenses during the second quarter of $1.8 million of severance costs and also $1.6 million related to the real estate write-downs. 

In response to the current rate environment, the Company prepaid a Federal Home Loan Bank ("FHLB") advance, which resulted in a prepayment penalty of approximately $10.3 million, and sold several securities, which resulted in a gain of approximately $10.3 million.

On June 9, 2020, the Company issued and sold 6,900,000 depositary shares, each representing a 1/400th ownership interest in a share of the Company's 6.875% Perpetual Non-Cumulative Preferred Stock, Series A ("Series A Preferred Stock"), par value $10.00 per share of Series A Preferred Stock, with a liquidation preference of $10,000 per share of Series A Preferred Stock. The net proceeds received from the issuance of the Series A Preferred Stock were approximately $166.4 million, after deducting the underwriting discount and other offering expenses payable by the Company.


(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.

NET INTEREST INCOME

For the second quarter of 2020, net interest income was $137.3 million, an increase from $135.0 million reported in the first quarter of 2020. Net interest income (FTE)(1) was $140.1 million in the second quarter of 2020, an increase of $2.3 million from the first quarter of 2020. The second quarter net interest margin decreased 26 basis points to 3.23% from 3.49% in the previous quarter, while the net interest margin (FTE)(1)  decreased 27 basis points to 3.29% from 3.56% during the same period. The decreases in the net interest margin and net interest margin (FTE) were principally due to a 60 basis point decrease in the yield on earning assets (FTE)(1) offset by a 33 basis point decrease in cost of funds. The decline in the Company's earning asset yields was driven by the impact of the lower yielding PPP loans originated during the second quarter and the full quarter impact of the lower interest rate environment. The cost of funds decline was driven by lower deposit costs and wholesale borrowing costs driven by lower market interest rates and a favorable funding mix.

The Company's net interest margin (FTE) includes the impact of acquisition accounting fair value adjustments. During the second quarter of 2020, net accretion related to acquisition accounting decreased $3.1 million from the prior quarter to $6.3 million for the quarter ended June 30, 2020. The first and second quarters of 2020, 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, 2020   $  9,528   $  50     $  (138 )   $  9,440
For the quarter ended June 30, 2020      6,443      34        (140 )      6,337
For the remaining six months of 2020 (estimated)      5,400      49        (355 )      5,094
For the years ending (estimated):                        
2021      9,405      14        (807 )      8,612
2022      7,569      (43 )      (829 )      6,697
2023      5,415      (32 )      (852 )      4,531
2024      4,406      (4 )      (877 )      3,525
2025      3,322      (1 )      (900 )      2,421
Thereafter      14,931      —        (9,873 )      5,058



(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 Results.

ASSET QUALITY

Overview
During the second quarter of 2020, the Company experienced decreases in nonperforming assets ("NPAs") primarily due to nonaccrual loan customer payments. Past due loan levels as a percentage of total loans held for investment at June 30, 2020 were down from past due loan levels at March 31, 2020 and June 30, 2019.  Net charge-off levels and the provision for loan losses decreased from the first 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) prior to any loan modification are not TDRs.

In addition, Section 4013 of the CARES Act provides banks, savings associations, and credit unions with the ability to make loan modifications related to COVID-19 without categorizing the loan as a TDR or conducting the analysis to make the determination, which is intended to streamline the loan modification process. Any such suspension is effective for the term of the loan modification; however, the suspension is only permitted for loan modifications made during the effective period of Section 4013 and only for those loans that were not more than thirty days past due as of December 31, 2019.

The Company has made certain loan modifications pursuant to the March 22 Joint Guidance or Section 4013 of the CARES Act and as of June 30, 2020 approximately $1.6 billion remain under their modified terms.

Nonperforming Assets
At June 30, 2020, NPAs totaled $44.0 million, a decrease of $4.4 million from March 31, 2020. NPAs as a percentage of total outstanding loans at June 30, 2020 were 0.31%, a decrease of 7 basis points from 0.38% at March 31, 2020. Excluding the impact of the PPP loans(1), NPAs as a percentage of total outstanding loans were 0.35%, a decrease of 3 basis points from March 31, 2020. The Company's adoption of current expected credit loss ("CECL") on January 1, 2020 resulted in a change in the accounting and reporting related to purchased credit impaired ("PCI") loans, which are now defined as purchased credit deteriorated ("PCD") and evaluated at the loan level instead of being evaluated in pools under PCI accounting.  All prior period nonaccrual and past due loan metrics discussed herein have not been restated for CECL accounting and exclude PCI-related loan balances.


(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 Results.

The following table shows a summary of nonperforming asset balances at the quarter ended (dollars in thousands):

                               
    June 30,    March 31,    December 31,    September 30,    June 30, 
    2020   2020   2019   2019   2019
Nonaccrual loans   $  39,624   $  44,022   $  28,232   $  30,032   $  27,462
Foreclosed properties      4,397      4,444      4,708      6,385      6,506
Total nonperforming assets   $  44,021   $  48,466   $  32,940   $  36,417   $  33,968

The following table shows the activity in nonaccrual loans for the quarter ended (dollars in thousands):

                               
    June 30,    March 31,    December 31,    September 30,    June 30, 
    2020
  2020
  2019
  2019
  2019
Beginning Balance   $  44,022     $  28,232     $  30,032     $  27,462     $  24,841  
Net customer payments      (6,524 )      (3,451 )      (5,741 )      (3,612 )      (3,108 )
Additions      3,206        6,059        5,631        8,327        6,321  
Impact of CECL adoption      —        14,381        —        —        —  
Charge-offs      (1,088 )      (1,199 )      (1,690 )      (884 )      (592 )
Loans returning to accruing status      8        —        —        (1,103 )      —  
Transfers to foreclosed property      —        —        —        (158 )      —  
Ending Balance   $  39,624     $  44,022     $  28,232     $  30,032     $  27,462  

The following table shows the activity in foreclosed properties for the quarter ended (dollars in thousands):

                               
    June 30,    March 31,    December 31,    September 30,    June 30, 
    2020
  2020
  2019
  2019    2019 
Beginning Balance   $  4,444     $  4,708     $  6,385     $  6,506     $  7,353  
Additions of foreclosed property      —        615        62        645        271  
Valuation adjustments      —        (44 )      (375 )      (62 )      (433 )
Proceeds from sales      (55 )      (854 )      (1,442 )      (737 )      (638 )
Gains (losses) from sales      8        19        78        33        (47 )
Ending Balance   $  4,397     $  4,444     $  4,708     $  6,385     $  6,506  

Past Due Loans
Past due loans still accruing interest totaled $40.5 million or 0.28% of total loans held for investment at June 30, 2020, compared to $75.1 million or 0.59% of total loans held for investment at March 31, 2020, and $43.1 million or 0.35% of total loans held for investment at June 30, 2019. Excluding the impact of the PPP loans(1), past due loans still accruing interest were 0.32% of total loans held for investment at June 30, 2020. Of the total past due loans still accruing interest, $19.3 million or 0.13% of total loans held for investment were loans past due 90 days or more at June 30, 2020, compared to $12.9 million or 0.10% of total loans held for investment at March 31, 2020, and $8.8 million or 0.07% of total loans held for investment at June 30, 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 Results.

Net Charge-offs
For the second quarter of 2020, net charge-offs were $3.3 million, or 0.09% of total average loans on an annualized basis, compared to $5.0 million, or 0.16%, for the prior quarter, and $4.3 million, or 0.14%, for the second quarter last year. Excluding the impact of the PPP loans(1), net charge-offs were 0.10% of total average loans on an annualized basis. The majority of net charge-offs in the second quarter of 2020 were related to the third-party consumer loan portfolio.

(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 Results.

Provision for Credit Losses
The provision for credit losses for the second quarter of 2020 was $34.2 million, a decrease of $26.0 million compared to the previous quarter. The provision for credit losses for the second quarter of 2020 consisted of $32.2 million in provision for loan losses and $2.0 million in provision for unfunded commitments.  

Allowance for Credit Losses ("ACL")
At June 30, 2020, the ACL was $181.0 million and included an allowance for loan and lease losses ("ALLL") of $170.0 million and a reserve for unfunded commitments ("RUC") of $11.0 million. The ACL increased $30.9 million from March 31, 2020, primarily due to the worsening economic forecast related to COVID-19.

The ALLL increased $28.9 million and the RUC increased $2.0 million from March 31, 2020, due to the worsening economic forecast related to COVID-19. The ALLL as a percentage of the total loan portfolio was 1.19% at June 30, 2020 and 1.10% at March 31, 2020, and the ACL as percentage of total loans was 1.26% at June 30, 2020. When excluding PPP loans(1), which are 100% guaranteed by the SBA, the ALLL as a percentage of adjusted loans increased 24 bps to 1.34% from the prior quarter and the ACL as a percentage of adjusted loans increased 24 bps to 1.42% from the prior quarter. The ratio of the ALLL to nonaccrual loans was 429.0% at June 30, 2020, compared to 320.4% at March 31, 2020.


(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 Results.

NONINTEREST INCOME

Noninterest income increased $7.0 million to $35.9 million for the quarter ended June 30, 2020 from $28.9 million in the prior quarter primarily driven by a $10.3 million gain on sale of investment securities recorded during the quarter and an increase of $1.5 million in loan related interest rate swap income. In addition, mortgage banking income was higher by $3.8 million primarily due to increased mortgage loan refinance volumes due to the current low interest rate environment. Partially offsetting these increases was a decline in service charges on deposit accounts of $2.6 million primarily due to lower NSF and overdraft incident fees, $2.5 million in unrealized losses related to equity method investments due to the current economic environment related to COVID-19, and a decline of $469,000 in fiduciary and asset management fees.

NONINTEREST EXPENSE

Noninterest expense increased $7.2 million to $102.8 million for the quarter ended June 30, 2020 from $95.6 million in the prior quarter primarily driven by the recognition of approximately $10.3 million loss on debt extinguishment resulting from the prepayment of approximately $200.0 million in long-term FHLB advances. The increases were partially offset by a decline in marketing and advertising expense of approximately $696,000 and training and other personnel costs of approximately $695,000. Noninterest expense also included approximately $1.6 million in real estate-related branch closure costs and approximately $1.8 million in severance expenses related to the Company's expense reduction plans.  Also included in noninterest expense are costs related to the Company's response to COVID-19 of approximately $620,000.

INCOME TAXES

The effective tax rate for the three months ended June 30, 2020 was 15.2% compared to 12.2% for the three months ended March 31, 2020. The increase in the effective tax rate was primarily due to tax benefits related to stock compensation during the first quarter of 2020 in accordance with ASU 2016-09, "Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting" as well as tax-exempt income being a higher component of pre-tax income in the first quarter of 2020 compared to the second quarter of 2020.

BALANCE SHEET

At June 30, 2020, total assets were $19.8 billion, an increase of $1.9 billion, or approximately 42.9% (annualized), from March 31, 2020, and an increase of $2.6 billion, or approximately 15.1% from June 30, 2019. The increase in assets from the prior quarter was driven by PPP loans while growth from the prior year was primarily a result of both organic and PPP loan growth.

At June 30, 2020, loans held for investment (net of deferred fees and costs) were $14.3 billion, an increase of $1.5 billion, or 48.5% (annualized), from March 31, 2020, while average loans increased $1.4 billion, or 43.6% (annualized), from the prior quarter. Excluding the effects of the PPP(2), loans held for investment (net of deferred fees and costs) declined $58.9 million, or 1.9% (annualized), while average loans increased $89.9 million, or 2.9% (annualized) during this period. Loans held for investment (net of deferred fees and costs) increased $2.1 billion, or 17.1% from June 30, 2019, while quarterly average loans increased $1.9 billion, or 15.5% from the prior year. Excluding the effects of the PPP(2), loans held for investment (net of deferred fees and costs) increased $489.4 million, or 4.0%, while quarterly average loans increased $598.9 million, or 5.0% from the prior year.

At June 30, 2020, total deposits were $15.6 billion, an increase of $2.1 billion, or approximately 60.9% (annualized), from March 31, 2020, while average deposits increased $1.6 billion, or 48.6% (annualized), from the prior quarter.  Deposits increased $3.1 billion, or 24.7% from June 30, 2019, while quarterly average deposits increased $2.5 billion, or 20.1% from the prior year. The increase in deposits from the prior quarter was primarily due to the impact of PPP loan related deposits and government stimulus check deposits.

The following table shows the Company's capital ratios at the quarters ended:

               
    June 30,    March 31,    June 30,   
    2020   2020   2019  
Common equity Tier 1 capital ratio (1)    9.81  9.74  10.53 %
Tier 1 capital ratio (1)    10.95  9.74  10.53 %
Total capital ratio (1)    13.71  12.37  13.00 %
Leverage ratio (Tier 1 capital to average assets) (1)    8.82  8.44  9.00 %
Common equity to total assets    12.41  13.59  14.64 %
Tangible common equity to tangible assets (2)    7.74  8.43  9.28 %

(1)       All ratios at June 30, 2020 are estimates and subject to change pending the Company's filing of its FR Y9-C. All other periods are presented as filed.
(2)       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 Results.

On June 9, 2020, the Company issued and sold 6,900,000 depositary shares, each representing a 1/400th ownership interest in a share of the Company's 6.875% Series A Preferred Stock, par value $10.00 per share of Series A Preferred Stock, with a liquidation preference of $10,000 per share of Series A Preferred Stock. The net proceeds received from the issuance of the Series A Preferred Stock was approximately $166.4 million, after deducting the underwriting discount and other offering expenses payable by the Company. The Series A Preferred Stock is included in Tier 1 capital.  

During the second quarter of 2020, the Company declared and paid cash dividends of $0.25 per common share, consistent with the first quarter of 2020 and an increase of $0.02, or 8.7% compared to the second quarter of 2019. On July 10, 2019, the Company announced that its Board of Directors had authorized a share repurchase program (effective July 8, 2019) to purchase up to $150 million of the Company's common stock through June 30, 2021 in open market transactions or privately negotiated transactions.  On March 20, 2020, the Company suspended its share repurchase program, which had $20 million remaining in the authorization when it was suspended.  The Company repurchased an aggregate of approximately 3.7 million shares, at an average price of $35.48 per share, under the authorization prior to the suspension.

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 149 branches and approximately 170 ATMs located throughout Virginia, and in portions of Maryland and North Carolina. Middleburg Financial is a brand name used by Atlantic Union Bank and certain affiliates when providing trust, wealth management, private banking, and investment advisory products and services. Certain non-bank affiliates of Atlantic Union Bank include: Old Dominion Capital Management, Inc., and its subsidiary, Outfitter Advisors, Ltd., Dixon, Hubard, Feinour, & Brown, Inc., and Middleburg Investment Services, LLC, which provide investment advisory and/or brokerage services; and Union Insurance Group, LLC, which offers various lines of insurance products.

SECOND QUARTER 2020 EARNINGS RELEASE CONFERENCE CALL

The Company will hold a conference call on Thursday, July 23, 2020 at 9:00 a.m. Eastern Daylight Time during which management will review the second quarter 2020 financial results and provide an update on recent activities. Interested parties may participate in the call toll-free by dialing (866) 220‑4170; international callers wishing to participate may do so by dialing (864) 663‑5235. The conference ID number is 6176635.   Management will conduct a listen-only webcast with accompanying slides, which can be found at: https://edge.media-server.com/mmc/p/7vrpdxva.

A replay of the webcast, and the accompanying slides, will be available on the Company's website for 90 days at: https://investors.atlanticunionbank.com/.

NON-GAAP FINANCIAL MEASURES

In reporting the results of the quarter ended June 30, 2020, the Company has provided supplemental performance measures on a tax-equivalent, tangible, operating, adjusted or pre-tax pre-provision basis. These non-GAAP financial measures are a supplement to GAAP, which is used to prepare the Company's financial statements, and should not be considered in isolation or as a substitute for comparable measures calculated in accordance with GAAP. In addition, the Company's non-GAAP financial measures may not be comparable to non-GAAP financial measures of other companies. The Company uses the non-GAAP financial measures discussed herein in its analysis of the Company's performance. The Company's management believes that these non-GAAP financial measures provide additional understanding of ongoing operations, enhance comparability of 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 the Company's underlying performance. For a reconciliation of these measures to their most directly comparable GAAP measures and additional information about these non-GAAP financial measures, see Alternative Performance Measures (non-GAAP) section of the Key Financial Results.

FORWARD-LOOKING STATEMENTS

Certain statements in this press release may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements, including without limitation, statements made in Mr. Asbury's quotes, are statements that include, without limitation, projections, predictions, expectations, or beliefs about future events or results that are not statements of historical fact. Such forward-looking statements are based on various assumptions as of the time they are made, and are inherently subject to known and unknown risks, uncertainties, and other factors, some of which cannot be predicted or quantified, that may cause actual results, performance, or achievements to be materially different from those expressed or implied by such forward-looking statements. Forward-looking statements are often accompanied by words that convey projected future events or outcomes such as "expect," "believe," "estimate," "plan," "project," "anticipate," "intend," "will," "may," "view," "opportunity," "potential," or words of similar meaning or other statements concerning opinions or judgment of the Company and its management about future events. Although the Company believes that its expectations with respect to forward-looking statements are based upon reasonable assumptions within the bounds of its existing knowledge of its business and operations, there can be no assurance that actual results, performance, or achievements of, or trends affecting, the Company will not differ materially from any projected future results, performance, or achievements expressed or implied by such forward-looking statements. Actual future results, performance, achievements or trends may differ materially from historical results or those anticipated depending on a variety of factors, including, but not limited to:

  • changes in interest rates;
  • general economic and financial market conditions, in the United States generally and particularly in the markets in which the Company operates and which its loans are concentrated, including the effects of declines in real estate values, an increase in unemployment levels and slowdowns in economic growth, including as a result of COVID-19;
  • the quality or composition of the loan or investment portfolios and changes therein;
  • demand for loan products and financial services in the Company's market area;
  • the Company's ability to manage its growth or implement its growth strategy;
  • planned branch consolidations;
  • the introduction of new lines of business or new products and services;
  • the Company's ability to recruit and retain key employees;
  • the incremental cost and/or decreased revenues associated with exceeding $10 billion in assets;
  • real estate values in the Bank's lending area;
  • an insufficient ACL;
  • changes in accounting principles relating to loan loss recognition (CECL);
  • the Company's liquidity and capital positions;
  • concentrations of loans secured by real estate, particularly commercial real estate;
  • the effectiveness of the Company's credit processes and management of the Company's credit risk;
  • the Company's ability to compete in the market for financial services;
  • technological risks and developments, and cyber threats, attacks, or events;
  • the potential adverse effects of unusual and infrequently occurring events, such as weather-related disasters, terrorist acts or public health events (such as COVID-19), and of governmental and societal responses thereto; these potential adverse effects may include, without limitation, adverse effects on the ability of the Company's borrowers to satisfy their obligations to the Company, on the value of collateral securing loans, on the demand for the Company's loans or its other products and services, on incidents of cyberattack and fraud, on the Company's liquidity or capital positions, on risks posed by reliance on third-party service providers, on other aspects of the Company's business operations and on financial markets and economic growth;
  • the effect of steps the Company takes in response to COVID-19, the severity and duration of the pandemic, including whether there is a "second wave" as a result of the loosening of governmental restrictions, the pace of recovery when the pandemic subsides and the heightened impact it has on many of the risks described herein;
  • performance by the Company's counterparties or vendors;
  • deposit flows;
  • the availability of financing and the terms thereof;
  • the level of prepayments on loans and mortgage-backed securities;
  • legislative or regulatory changes and requirements, including the impact of the CARES Act and other legislative and regulatory reactions to COVID-19;
  • potential claims, damages, and fines related to litigation or government actions, including litigation or actions arising from the Company's participation in and administration of programs related to COVID-19, including, among other things, the CARES Act;
  • the effects of changes in federal, state or local tax laws and regulations;
  • monetary and fiscal policies of the U.S. government, including policies of the U.S. Department of the Treasury and the Federal Reserve;
  • changes to applicable accounting principles and guidelines; and
  • other factors, many of which are beyond the control of the Company.

Please refer to the "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" sections of the Company's Annual Report on Form 10‑K for the year ended December 31, 2019 and comparable "Risk Factors" sections of the Company's Quarterly Reports on Form 10‑Q and related disclosures in other filings, which have been filed with the SEC and are available on the SEC's website at www.sec.gov. All of the forward-looking statements made in this press release are expressly qualified by the cautionary statements contained or referred to herein. The actual results or developments anticipated may not be realized or, even if substantially realized, they may not have the expected consequences to or effects on the Company or its businesses or operations. Readers are cautioned not to rely too heavily on the forward-looking statements contained in this press release. Forward-looking statements speak only as of the date they are made and the Company does not undertake any obligation to update, revise or clarify these forward-looking statements, whether as a result of new information, future events or otherwise.

ATLANTIC UNION BANKSHARES CORPORATION AND SUBSIDIARIES
KEY FINANCIAL RESULTS
(Dollars in thousands, except share data)

                               
    As of & For Three Months Ended   As of & For Six Months Ended
    06/30/20   03/31/20   06/30/19   06/30/20   06/30/19
Results of Operations   (unaudited)   (unaudited)   (unaudited)   (unaudited)   (unaudited)
Interest and dividend income   $  162,867   $  171,325   $  181,125     $  334,193   $  346,777  
Interest expense      25,562      36,317      42,531        61,880      80,636  
Net interest income      137,305      135,008      138,594        272,313      266,141  
Provision for credit losses      34,200      60,196      5,300        94,396      9,092  
Net interest income after provision for credit losses      103,105      74,812      133,294        177,917      257,049  
Noninterest income      35,932      28,907      30,578        64,838      55,515  
Noninterest expenses      102,814      95,645      105,608        198,459      212,335  
Income before income taxes      36,223      8,074      58,264        44,296      100,229  
Income tax expense      5,514      985      9,356        6,498      15,606  
Income from continuing operations      30,709      7,089      48,908        37,798      84,623  
Discontinued operations, net of tax      —      —      (85 )      —      (170 )
Net income available to common shareholders   $  30,709   $  7,089   $  48,823     $  37,798   $  84,453  
                               
Interest earned on earning assets (FTE) (1)   $  165,672   $  174,083   $  184,045     $  339,755   $  352,445  
Net interest income (FTE) (1)      140,110      137,766      141,514        277,875      271,809  
Total revenue (FTE) (1)      176,042      166,673      172,092        342,713      327,324  
Pre-tax pre-provision earnings (8)      70,423      68,270      73,862        138,692      138,064  
                               
Key Ratios                              
Earnings per common share, diluted   $ 0.39   $ 0.09   $ 0.59     $ 0.48   $ 1.06  
Return on average assets (ROA)     0.64   0.16   1.15 %     0.41   1.04 %
Return on average equity (ROE)     4.96   1.15   7.86 %     3.06   7.16 %
Efficiency ratio     59.35   58.35   62.43 %     58.86   66.01 %
Net interest margin     3.23   3.49   3.71 %     3.35   3.71 %
Net interest margin (FTE) (1)     3.29   3.56   3.78 %     3.42   3.79 %
Yields on earning assets (FTE) (1)     3.90   4.50   4.92 %     4.18   4.92 %
Cost of interest-bearing liabilities     0.84   1.23   1.50 %     1.03   1.46 %
Cost of deposits     0.53   0.86   0.93 %     0.68   0.90 %
Cost of funds     0.61   0.94   1.14 %     0.76   1.13 %
                               
Operating Measures (4)                              
Net operating earnings   $  30,709   $  7,089   $  57,089     $  37,798   $  107,607  
Net operating earnings available to common shareholders      30,709      7,089      57,089        37,798      107,607  
Operating earnings per share, diluted   $ 0.39   $ 0.09   $ 0.70     $ 0.48   $ 1.36  
Operating ROA     0.64   0.16   1.35 %     0.41   1.33 %
Operating ROE     4.96   1.15   9.20 %     3.06   9.12 %
Operating ROTCE (2)(3)     9.46   2.87   16.58 %     6.13   16.48 %
Operating efficiency ratio (FTE) (1)(7)     56.00   54.74   52.46 %     55.39   53.24 %
                               
Per Share Data                              
Earnings per common share, basic   $ 0.39   $ 0.09   $ 0.59     $ 0.48   $ 1.06  
Earnings per common share, diluted     0.39     0.09     0.59       0.48     1.06  
Cash dividends paid per common share     0.25     0.25     0.23       0.50     0.46  
Market value per share     23.16     21.90     35.33       23.16     35.33  
Book value per common share     31.32     30.99     30.78       31.32     30.78  
Tangible book value per common share (2)     18.54     18.15     18.36       18.54     18.36  
Price to earnings ratio, diluted     14.77     60.50     14.93       23.99     16.37  
Price to book value per common share ratio     0.74     0.71     1.15       0.74     1.15  
Price to tangible book value per common share ratio (2)     1.25     1.21     1.92       1.25     1.92  
Weighted average common shares outstanding, basic      78,711,765      79,290,352      82,062,585        79,001,058      79,282,830  
Weighted average common shares outstanding, diluted      78,722,690      79,317,382      82,125,194        79,020,036      79,344,573  
Common shares outstanding at end of period      78,713,056      78,710,448      82,086,736        78,713,056      82,086,736  


                                 
    As of & For Three Months Ended   As of & For Six Months Ended  
    06/30/20   03/31/20   06/30/19   06/30/20   06/30/19  
Capital Ratios   (unaudited)   (unaudited)   (unaudited)   (unaudited)   (unaudited)  
Common equity Tier 1 capital ratio (5)     9.81   9.74   10.53 %   9.81   10.53 %
Tier 1 capital ratio (5)     10.95   9.74   10.53 %   10.95   10.53 %
Total capital ratio (5)     13.71   12.37   13.00 %   13.71   13.00 %
Leverage ratio (Tier 1 capital to average assets) (5)     8.82   8.44   9.00 %   8.82   9.00 %
Common equity to total assets     12.41   13.59   14.64 %   12.41   14.64 %
Tangible common equity to tangible assets (2)     7.74   8.43   9.28 %   7.74   9.28 %
                                 
Financial Condition                                
Assets   $  19,752,317   $  17,847,376   $  17,159,384   $  19,752,317   $  17,159,384  
Loans held for investment      14,308,646      12,768,841      12,220,514      14,308,646      12,220,514  
Securities      2,672,557      2,655,306      2,703,856      2,672,557      2,703,856  
Earning Assets      17,680,876      15,813,780      15,140,370      17,680,876      15,140,370  
Goodwill      935,560      935,560      930,449      935,560      930,449  
Amortizable intangibles, net      65,105      69,298      82,976      65,105      82,976  
Deposits      15,605,139      13,553,035      12,515,544      15,605,139      12,515,544  
Borrowings      1,125,030      1,514,464      1,909,171      1,125,030      1,909,171  
Stockholders' equity      2,618,226      2,425,450      2,512,295      2,618,226      2,512,295  
Tangible common equity (2)      1,451,197      1,420,592      1,498,870      1,451,197      1,498,870  
                                 
Loans held for investment, net of deferred fees and costs                                
Construction and land development   $  1,247,939   $  1,318,252   $  1,267,712   $  1,247,939   $  1,267,712  
Commercial real estate - owner occupied      2,067,087      2,051,904      1,966,776      2,067,087      1,966,776  
Commercial real estate - non-owner occupied      3,455,125      3,328,012      3,104,823      3,455,125      3,104,823  
Multifamily real estate      717,719      679,390      602,115      717,719      602,115  
Commercial & Industrial      3,555,971      2,177,932      2,032,799      3,555,971      2,032,799  
Residential 1-4 Family - Commercial      715,384      721,800      723,636      715,384      723,636  
Residential 1-4 Family - Consumer      841,051      854,550      928,130      841,051      928,130  
Residential 1-4 Family - Revolving      627,765      652,135      660,621      627,765      660,621  
Auto      380,053      358,039      311,858      380,053      311,858  
Consumer      311,362      352,572      383,653      311,362      383,653  
Other Commercial      389,190      274,255      238,391      389,190      238,391  
Total loans held for investment   $  14,308,646   $  12,768,841   $  12,220,514   $  14,308,646   $  12,220,514  
                                 
Deposits                                
NOW accounts   $  3,618,523   $  3,180,913   $  2,552,159   $  3,618,523   $  2,552,159  
Money market accounts      4,158,325      3,817,959      3,592,523      4,158,325      3,592,523  
Savings accounts      824,164      745,402      749,472      824,164      749,472  
Time deposits of $250,000 and over      689,693      696,520      579,786      689,693      579,786  
Other time deposits      1,968,474      2,044,668      2,026,708      1,968,474      2,026,708  
Time deposits      2,658,167      2,741,188      2,606,494      2,658,167      2,606,494  
Total interest-bearing deposits   $  11,259,179   $  10,485,462   $  9,500,648   $  11,259,179   $  9,500,648  
Demand deposits      4,345,960      3,067,573      3,014,896      4,345,960      3,014,896  
Total deposits   $  15,605,139   $  13,553,035   $  12,515,544   $  15,605,139   $  12,515,544  
                                 
Averages                                
Assets   $  19,157,238   $  17,559,921   $  16,997,531   $  18,358,579   $  16,352,222  
Loans held for investment      13,957,711      12,593,923      12,084,961      13,275,817      11,608,821  
Loans held for sale      56,846      50,721      47,061      53,783      31,119  
Securities      2,648,967      2,621,437      2,738,528      2,635,202      2,692,236  
Earning assets      17,106,132      15,563,670      15,002,726      16,334,901      14,450,057  
Deposits      14,960,386      13,346,857      12,453,702      14,153,621      11,964,536  
Time deposits      2,667,268      2,755,500      2,562,498      2,711,384      2,444,513  
Interest-bearing deposits      10,941,368      10,421,419      9,555,093      10,681,393      9,285,895  
Borrowings      1,344,994      1,442,525      1,847,325      1,395,539      1,819,147  
Interest-bearing liabilities      12,286,362      11,863,944      11,402,418      12,076,932      11,105,042  
Stockholders' equity      2,489,969      2,485,646      2,490,049      2,487,807      2,379,834  
Tangible common equity (2)      1,446,948      1,478,803      1,475,028      1,462,875      1,404,929  


                                 
    As of & For Three Months Ended   As of & For Six Months Ended  
    06/30/20   03/31/20   06/30/19   06/30/20   06/30/19  
Asset Quality   (unaudited)   (unaudited)   (unaudited)   (unaudited)   (unaudited)  
Allowance for Credit Losses (ACL)                                
Beginning balance, Allowance for loan and lease losses (ALLL)   $  141,043   $  42,294   $  40,827     $  42,294   $  41,045    
Add: Day 1 impact from adoption of CECL      —      47,484      —        47,484      —    
Add: Recoveries      1,411      2,160      1,670        3,571      3,366    
Less: Charge-offs      4,677      7,151      5,934        11,828      11,873    
Add: Provision for loan losses      32,200      56,256      5,900        88,456      9,925    
Ending balance, ALLL   $  169,977   $  141,043   $  42,463     $  169,977   $  42,463    
                                 
Beginning balance, Reserve for unfunded commitment (RUC)   $  9,000   $  900   $  1,700        900      900    
Add: Day 1 impact from adoption of CECL      —      4,160      —        4,160      —    
Add: Impact of acquisition accounting      —      —      —        —      1,033    
Add: Provision for unfunded commitments      2,000      3,940      (600 )      5,940      (833 )  
Ending balance, RUC   $  11,000   $  9,000   $  1,100        11,000      1,100    
Total ACL   $  180,977   $  150,043   $  43,563     $  180,977   $  43,563    
                                 
ACL / total outstanding loans     1.26   1.18   0.36   %   1.26   0.36   %
ACL / total adjusted loans(9)     1.42   1.18   0.36   %   1.42   0.36   %
ALLL / total outstanding loans     1.19   1.10   0.35   %   1.19   0.35   %
ALLL / total adjusted loans(9)     1.34   1.10   0.35     1.34   0.35  
Net charge-offs / total average loans     0.09   0.16   0.14   %   0.13   0.15   %
Net charge-offs / total adjusted average loans(9)     0.10   0.16   0.14   %   0.14   0.15   %
Provision for loan losses/ total average loans     0.93   1.80   0.20   %   1.34   0.17   %
Provision for loan losses/ total adjusted average loans(9)     1.02   1.80   0.20   %   1.48   0.17   %
  `                              
Nonperforming Assets(6)                                
Construction and land development   $  3,977   $  3,234   $  5,619     $  3,977   $  5,619    
Commercial real estate - owner occupied      8,924      11,250      4,062        8,924      4,062    
Commercial real estate - non-owner occupied      1,877      1,642      1,685        1,877      1,685    
Multifamily real estate      33      53      —        33      —    
Commercial & Industrial      2,708      3,431      1,183        2,708      1,183    
Residential 1-4 Family - Commercial      5,784      7,040      4,135        5,784      4,135    
Residential 1-4 Family - Consumer      12,029      13,088      8,677        12,029      8,677    
Residential 1-4 Family - Revolving      3,626      3,547      1,432        3,626      1,432    
Auto      584      550      449        584      449    
Consumer and all other      82      187      220        82      220    
Nonaccrual loans   $  39,624   $  44,022   $  27,462     $  39,624   $  27,462    
Foreclosed property      4,397      4,444      6,506        4,397      6,506    
Total nonperforming assets (NPAs)   $  44,021   $  48,466   $  33,968     $  44,021   $  33,968    
Construction and land development   $  473   $  317   $  855     $  473   $  855    
Commercial real estate - owner occupied      7,851      1,690      2,540        7,851      2,540    
Commercial real estate - non-owner occupied      878      2,037      1,489        878      1,489    
Multifamily real estate      366      377      —        366      —    
Commercial & Industrial      178      517      295        178      295    
Residential 1-4 Family - Commercial      578      777      863        578      863    
Residential 1-4 Family - Consumer      5,099      4,407      845        5,099      845    
Residential 1-4 Family - Revolving      1,995      2,005      658        1,995      658    
Auto      181      127      122        181      122    
Consumer and all other      1,656      622      1,161        1,656      1,161    
Loans ≥ 90 days and still accruing   $  19,255   $  12,876   $  8,828     $  19,255   $  8,828    
Total NPAs and loans ≥ 90 days   $  63,276   $  61,342   $  42,796     $  63,276   $  42,796    
NPAs / total outstanding loans      0.31   0.38   0.28   %    0.31   0.28   %
NPAs / total adjusted loans(9)      0.35    0.38    0.28      0.35    0.28  
NPAs / total assets      0.22   0.27   0.20   %    0.22   0.20   %
ALLL / nonaccrual loans     428.97   320.39   154.62   %   428.97   154.62   %
ALLL/ nonperforming assets     386.13   291.01   125.01   %   386.13   125.01   %
Past Due Detail(6)                                
Construction and land development   $  1,683   $  2,786   $  2,327     $  1,683   $  2,327    
Commercial real estate - owner occupied      1,679      10,779      1,707        1,679      1,707    
Commercial real estate - non-owner occupied      930      2,087      141        930      141    
Multifamily real estate      —      623      1,218        —      1,218    
Commercial & Industrial      1,602      4,893      3,223        1,602      3,223    
Residential 1-4 Family - Commercial      480      4,145      1,622        480      1,622    
Residential 1-4 Family - Consumer      1,229      15,667      5,969        1,229      5,969    
Residential 1-4 Family - Revolving      1,924      4,308      4,978        1,924      4,978    
Auto      1,176      1,967      2,120        1,176      2,120    
Consumer and all other      1,300      1,613      2,824        1,300      2,824    
Loans 30-59 days past due   $  12,003   $  48,868   $  26,129     $  12,003   $  26,129    


                                 
    As of & For Three Months Ended   As of & For Six Months Ended  
    06/30/20   03/31/20   06/30/19   06/30/20   06/30/19  
Past Due Detail cont'd(6)   (unaudited)   (unaudited)   (unaudited)   (unaudited)   (unaudited)  
Construction and land development   $  294   $  316   $  318   $  294   $  318  
Commercial real estate - owner occupied      430      1,444      —      430      —  
Commercial real estate - non-owner occupied      369      2,765      164      369      164  
Multifamily real estate      —      1,994      —      —      —  
Commercial & Industrial      296      1,218      1,175      296      1,175  
Residential 1-4 Family - Commercial      2,105      1,066      651      2,105      651  
Residential 1-4 Family - Consumer      3,817      570      2,801      3,817      2,801  
Residential 1-4 Family - Revolving      1,048      1,286      1,336      1,048      1,336  
Auto      290      311      299      290      299  
Consumer and all other      561      2,362      1,423      561      1,423  
Loans 60-89 days past due   $  9,210   $  13,332   $  8,167   $  9,210   $  8,167  
                                 
Troubled Debt Restructurings                                
Performing   $  15,303   $  14,865   $  19,144   $  15,303   $  19,144  
Nonperforming      5,042      5,491      4,536      5,042      4,536  
Total troubled debt restructurings   $  20,345   $  20,356   $  23,680   $  20,345   $  23,680  
                                 
Alternative Performance Measures (non-GAAP)                                
Net interest income (FTE)                                
Net interest income (GAAP)   $  137,305   $  135,008   $  138,594   $  272,313   $  266,141  
FTE adjustment      2,805      2,758      2,920      5,562      5,668  
Net interest income (FTE) (non-GAAP) (1)   $  140,110   $  137,766   $  141,514   $  277,875   $  271,809  
Noninterest income (GAAP)      35,932      28,907      30,578      64,838      55,515  
Total revenue (FTE) (non-GAAP) (1)   $  176,042   $  166,673   $  172,092   $  342,713   $  327,324  
                                 
Average earning assets   $  17,106,132   $  15,563,670   $  15,002,726   $  16,334,901   $  14,450,057  
Net interest margin     3.23   3.49   3.71 %   3.35   3.71 %
Net interest margin (FTE) (1)     3.29   3.56   3.78 %   3.42   3.79 %
                                 
Tangible Assets                                
Ending assets (GAAP)   $  19,752,317   $  17,847,376   $  17,159,384   $  19,752,317   $  17,159,384  
Less: Ending goodwill      935,560      935,560      930,449      935,560      930,449  
Less: Ending amortizable intangibles      65,105      69,298      82,976      65,105      82,976  
Ending tangible assets (non-GAAP)   $  18,751,652   $  16,842,518   $  16,145,959   $  18,751,652   $  16,145,959  
                                 
Tangible Common Equity (2)                                
Ending equity (GAAP)   $  2,618,226   $  2,425,450   $  2,512,295   $  2,618,226   $  2,512,295  
Less: Ending goodwill      935,560      935,560      930,449      935,560      930,449  
Less: Ending amortizable intangibles      65,105      69,298      82,976      65,105      82,976  
Less: Perpetual preferred stock      166,364      —      —      166,364      —  
Ending tangible common equity (non-GAAP)   $  1,451,197   $  1,420,592   $  1,498,870   $  1,451,197   $  1,498,870  
                                 
Average equity (GAAP)   $  2,489,969   $  2,485,646   $  2,490,049   $  2,487,807   $  2,379,834  
Less: Average goodwill      935,560      935,560      929,455      935,560      894,252  
Less: Average amortizable intangibles      67,136      71,283      85,566      69,210      80,653  
Less: Average perpetual preferred stock      40,325      —      —      20,162      —  
Average tangible common equity (non-GAAP)   $  1,446,948   $  1,478,803   $  1,475,028   $  1,462,875   $  1,404,929  
                                 
Operating Measures (4)                                
Net income (GAAP)   $  30,709   $  7,089   $  48,823   $  37,798   $  84,453  
Plus: Merger and rebranding-related costs, net of tax      —      —      8,266      —      23,154  
Net operating earnings (non-GAAP)      30,709      7,089      57,089      37,798      107,607  
Less: Dividends on preferred stock      —      —      —      —      —  
Net operating earnings available to common shareholders (non-GAAP)   $  30,709   $  7,089   $  57,089   $  37,798   $  107,607  
                                 
Noninterest expense (GAAP)   $  102,814   $  95,645   $  105,608   $  198,459   $  212,335  
Less: Merger Related Costs      —      —      6,371      —      24,493  
Less: Rebranding Costs      —      —      4,012      —      4,420  
Less: Amortization of intangible assets      4,223      4,401      4,937      8,624      9,154  
Operating noninterest expense (non-GAAP)   $  98,591   $  91,244   $  90,288   $  189,835   $  174,268  
                                 
Net interest income (FTE) (non-GAAP) (1)   $  140,110   $  137,766   $  141,514   $  277,875   $  271,809  
Noninterest income (GAAP)      35,932      28,907      30,578      64,838      55,515  
Total revenue (FTE) (non-GAAP) (1)   $  176,042   $  166,673   $  172,092   $  342,713   $  327,324  
                                 
Efficiency ratio     59.35   58.35   62.43 %   58.86   66.01 %
Operating efficiency ratio (FTE)(7)     56.00   54.74   52.46 %   55.39   53.24 %


                                 
    As of & For Three Months Ended   As of & For Six Months Ended  
    06/30/20   03/31/20   06/30/19   06/30/20   06/30/19  
    (unaudited)   (unaudited)   (unaudited)   (unaudited)   (unaudited)  
Operating ROTCE (2)(3)                                
Net operating earnings available to common shareholders  (non-GAAP)   $  30,709   $  7,089   $  57,089   $  37,798   $  107,607  
Plus: Amortization of intangibles, tax effected      3,336      3,477      3,900      6,813      7,232  
Net operating earnings available to common shareholders before amortization of intangibles (non-GAAP)   $  34,045   $  10,566   $  60,989   $  44,611   $  114,839  
                                 
Average tangible common equity (non-GAAP)   $  1,446,948   $  1,478,803   $  1,475,028   $  1,462,875   $  1,404,929  
Operating return on average tangible common equity (non-GAAP)     9.46   2.87   16.58 %   6.13   16.48 %
                                 
Pre-tax pre-provision earnings (8)                                
Net income (GAAP)   $  30,709   $  7,089   $  48,823   $  37,798   $  84,453  
Plus: Provision for credit losses      34,200      60,196      5,300      94,396      9,092  
Plus: Income tax expense      5,514      985      9,356      6,498      15,606  
Plus: Merger and rebranding-related costs      —      —      10,383      —      28,913  
Pre-tax pre-provision earnings (non-GAAP)   $  70,423   $  68,270   $  73,862   $  138,692   $  138,064  
                                 
Paycheck Protection Program adjustment impact (9)                                
Loans held for investment (net of deferred fees and costs)(GAAP)   $  14,308,646   $  12,768,841   $  12,220,514   $  14,308,646   $  12,220,514  
Less: PPP adjustments      1,598,718      —      —      1,598,718      —  
Loans held for investment (net of deferred fees and costs),net adjustments, excluding PPP (non-GAAP)   $  12,709,928   $  12,768,841   $  12,220,514   $  12,709,928   $  12,220,514  
                                 
Average loans held for investment (GAAP)   $  13,957,711   $  12,593,923   $  12,084,961   $  13,275,817   $  11,608,821  
Less: Average PPP adjustments      1,273,883      —      —      1,273,883      —  
Average loans held for investment, net adjustments, excluding PPP (non-GAAP)   $  12,683,828   $  12,593,923   $  12,084,961   $  12,001,934   $  11,608,821  
                                 
Mortgage Origination Volume                                
Refinance Volume   $  163,737   $  68,382   $  27,870   $  232,120   $  39,839  
Construction Volume      12,966      7,837      360      20,802      360  
Purchase Volume      83,248      64,492      84,225      147,740      116,332  
Total Mortgage loan originations   $  259,951   $  140,711   $  112,455   $  400,662   $  156,531  
% of originations that are refinances     63.0   48.6   24.8 %   57.9   25.5 %
                                 
Wealth                                
Assets under management ("AUM")   $  5,271,288   $  4,783,228   $  5,332,203   $  5,271,288   $  5,332,203  
                                 
Other Data                                
End of period full-time employees      1,973      2,011      1,931      1,973      1,931  
Number of full-service branches      149      149      153      149      153  
Number of full automatic transaction machines ("ATMs")      169      169      197      169      197  

(1) These are non-GAAP financial measures. Net interest income (FTE) and total revenue (FTE), which are used in computing net interest margin (FTE) and operating efficiency ratio (FTE), respectively, provide valuable additional insight into the net interest margin and the efficiency ratio by adjusting for differences in tax treatment of interest income sources. The entire FTE adjustment is attributable to interest income on earning assets, which is used in computing yield on earning assets. Interest expense and the related cost of interest-bearing liabilities and cost of funds ratios are not affected by the FTE components.
(2) These are non-GAAP financial measures. Tangible common equity is used in the calculation of certain profitability, capital, and per share ratios. The Company believes tangible common equity and the related ratios are meaningful measures of capital adequacy because they provide a meaningful base for period-to-period and company-to-company comparisons, which the Company believes will assist investors in assessing the capital of the Company and its ability to absorb potential losses.
(3) These are non-GAAP financial measures. The Company believes that ROTCE is a meaningful supplement to GAAP financial measures and useful to investors because it measures the performance of a business consistently across time without regard to whether components of the business were acquired or developed internally.
(4) These are non-GAAP financial measures. Operating measures exclude merger and rebranding-related costs unrelated to the Company's normal operations.  The Company believes these measures are useful to investors as they exclude certain costs resulting from acquisition activity and allow investors to more clearly see the combined economic results of the organization's operations.
(5) All ratios at June 30, 2020 are estimates and subject to change pending the Company's filing of its FR Y9‑C. All other periods are presented as filed.
(6) Amounts are not directly comparable due to the Company's adoption of CECL on January 1, 2020. Prior to January 1, 2020, nonaccrual and past due loan information excluded PCI-related loan balances. These balances also reflect the impact of the CARES Act and the joint supervisory guidance issued by five federal bank regulatory agencies and the Conference of State Bank Supervisors (updated April 7th) which provides relief for TDR designations and also provides guidance on past due reporting for modified loans.
(7) The operating efficiency ratio (FTE) excludes the amortization of intangible assets and merger-related costs. This measure is similar to the measure utilized by the Company when analyzing corporate performance and is also similar to the measure utilized for incentive compensation. The Company believes this measure is useful to investors as it excludes certain costs resulting from acquisition activity allowing for greater comparability with others in the industry and allowing investors to more clearly see the combined economic results of the organization's operations.
(8) This is a non-GAAP financial measure. Pre-tax pre-provision earnings excludes the provision for credit losses, which can fluctuate significantly from period-to-period under the recently adopted CECL methodology, merger and rebranding-related costs unrelated to the Company's normal operations, and income tax expense.  The Company believes this measure is useful to investors as it excludes certain costs resulting from acquisition activity as well as the potentially volatile provision measure, and allows for greater comparability with others in the industry and for investors to more clearly see the combined economic results of the organization's operations.
(9) These are non-GAAP financial measures. Paycheck Protection Program adjustment impact excludes the SBA guaranteed loans funded during the first half of 2020.  The Company believes loans held for investment (net of deferred fees and costs), excluding PPP is useful to investors as it provides more clarity on the Company's organic growth. The Company also believes that the related non-GAAP financial measures of past due loans still accruing interest as a percentage of total loans held for investment (net of deferred fees and costs), excluding PPP, are useful to investors as loans originated under the PPP carry an SBA guarantee. The Company believes that the ALLL as a percentage of loans held for investment (net of deferred fees and costs), excluding PPP, is useful to investors because of the size of the Company's PPP originations and the impact of the embedded credit enhancement provided by the SBA guarantee.


ATLANTIC UNION BANKSHARES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share data)

                       
  June 30,   March 31,   December 31,   June 30,
  2020   2020   2019   2019
ASSETS   (unaudited)     (unaudited)     (audited)     (unaudited)
Cash and cash equivalents:                      
Cash and due from banks $  202,947   $  197,521   $  163,050   $  171,441
Interest-bearing deposits in other banks    636,211      292,154      234,810      146,514
Federal funds sold    2,862      15,284      38,172      2,523
Total cash and cash equivalents    842,020      504,959      436,032      320,478
Securities available for sale, at fair value    2,019,164      1,972,903      1,945,445      1,999,494
Securities held to maturity, at carrying value    547,561      552,176      555,144      558,503
Restricted stock, at cost    105,832      130,227      130,848      145,859
Loans held for sale, at fair value    55,067      76,690      55,405      62,908
Loans held for investment, net of deferred fees and costs    14,308,646      12,768,841      12,610,936      12,220,514
Less allowance for loan and lease losses    169,977      141,043      42,294      42,463
Total loans held for investment, net    14,138,669      12,627,798      12,568,642      12,178,051
Premises and equipment, net    164,321      161,139      161,073      168,514
Goodwill    935,560      935,560      935,560      930,449
Amortizable intangibles, net    65,105      69,298      73,669      82,976
Bank owned life insurance    327,075      324,980      322,917      318,734
Other assets    551,943      491,646      378,255      393,418
Total assets $  19,752,317   $  17,847,376   $  17,562,990   $  17,159,384
LIABILITIES                      
Noninterest-bearing demand deposits $  4,345,960   $  3,067,573   $  2,970,139   $  3,014,896
Interest-bearing deposits    11,259,179      10,485,462      10,334,842      9,500,648
Total deposits    15,605,139      13,553,035      13,304,981      12,515,544
Securities sold under agreements to repurchase    77,216      56,781      66,053      70,870
Other short-term borrowings    —      380,000      370,200      618,050
Long-term borrowings    1,047,814      1,077,683      1,077,495      1,220,251
Other liabilities    403,922      354,427      231,159      222,374
Total liabilities    17,134,091      15,421,926      15,049,888      14,647,089
Commitments and contingencies                      
STOCKHOLDERS' EQUITY                      
Preferred stock, $10.00 par value    173      —      —      —
Common stock, $1.33 par value    104,126      104,086      105,827      108,560
Additional paid-in capital    1,911,985      1,743,429      1,790,305      1,862,716
Retained earnings    540,638      529,606      581,395      512,952
Accumulated other comprehensive income (loss)    61,304      48,329      35,575      28,067
Total stockholders' equity    2,618,226      2,425,450      2,513,102      2,512,295
Total liabilities and stockholders' equity $  19,752,317   $  17,847,376   $  17,562,990   $  17,159,384
Common shares outstanding    78,713,056      78,710,448      80,001,185      82,086,736
Common shares authorized    200,000,000      200,000,000      200,000,000      200,000,000
Preferred shares outstanding    17,250      -      -      -
Preferred shares authorized    500,000      500,000      500,000      500,000


ATLANTIC UNION BANKSHARES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except share data)

                             
  Three Months Ended   Six Months Ended
  June 30,   March 31,   June 30,   June 30,   June 30,
  2020
  2020   2019
  2020   2019
  (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)
Interest and dividend income:                            
Interest and fees on loans $  143,234     $  151,127   $  158,838     $  294,361   $  302,952  
Interest on deposits in other banks    155        862      544        1,017      1,017  
Interest and dividends on securities:                            
Taxable    11,267        11,627      13,353        22,895      26,434  
Nontaxable    8,211        7,709      8,390        15,920      16,374  
Total interest and dividend income    162,867        171,325      181,125        334,193      346,777  
Interest expense:                            
Interest on deposits    19,861        28,513      28,809        48,375      53,239  
Interest on short-term borrowings    186        1,340      5,563        1,526      12,114  
Interest on long-term borrowings    5,515        6,464      8,159        11,979      15,283  
Total interest expense    25,562        36,317      42,531        61,880      80,636  
Net interest income    137,305        135,008      138,594        272,313      266,141  
Provision for credit losses    34,200        60,196      5,300        94,396      9,092  
Net interest income after provision for credit losses    103,105        74,812      133,294        177,917      257,049  
Noninterest income:                            
Service charges on deposit accounts    4,930        7,578      7,499        12,508      14,656  
Other service charges, commissions and fees    1,354        1,624      1,702        2,978      3,367  
Interchange fees    1,697        1,625      5,612        3,321      10,656  
Fiduciary and asset management fees    5,515        5,984      5,698        11,499      10,752  
Mortgage banking income    5,826        2,022      2,785        7,847      4,240  
Gains (losses) on securities transactions    10,339        1,936      51        12,275      202  
Bank owned life insurance income    2,027        2,049      2,075        4,076      4,129  
Loan-related interest rate swap fees    5,484        3,948      3,716        9,432      5,176  
Other operating income    (1,240 )      2,141      1,440        902      2,337  
Total noninterest income    35,932        28,907      30,578        64,838      55,515  
Noninterest expenses:                            
Salaries and benefits    49,896        50,117      50,390        100,013      98,398  
Occupancy expenses    7,224        7,133      7,534        14,357      14,935  
Furniture and equipment expenses    3,406        3,741      3,542        7,147      6,938  
Printing, postage, and supplies    999        1,290      1,252        2,289      2,494  
Technology and data processing    6,454        6,169      5,739        12,623      11,415  
Professional services    2,989        3,307      2,630        6,297      5,587  
Marketing and advertising expense    2,043        2,739      2,908        4,782      5,291  
FDIC assessment premiums and other insurance    2,907        2,861      2,601        5,768      5,239  
Other taxes    4,120        4,120      4,044        8,240      7,808  
Loan-related expenses    2,501        2,697      2,396        5,198      4,685  
OREO and credit-related expenses    411        688      1,473        1,099      2,157  
Amortization of intangible assets    4,223        4,401      4,937        8,624      9,154  
Training and other personnel costs    876        1,571      1,477        2,446      2,621  
Merger-related costs    —        —      6,371        —      24,493  
Rebranding expense    —        —      4,012        —      4,420  
Loss on debt extinguishment    10,306        —      —        10,306      —  
Other expenses    4,459        4,811      4,302        9,270      6,700  
Total noninterest expenses    102,814        95,645      105,608        198,459      212,335  
Income from continuing operations before income taxes    36,223        8,074      58,264        44,296      100,229  
Income tax expense    5,514        985      9,356        6,498      15,606  
Income from continuing operations $  30,709     $  7,089   $  48,908     $  37,798   $  84,623  
Discontinued operations:                            
  Income (loss) from operations of discontinued mortgage segment $  —     $  —   $  (114 )   $  —   $  (229 )
  Income tax expense (benefit)    —        —      (29 )      —      (59 )
Income (loss) on discontinued operations    —        —      (85 )      —      (170 )
Net income available to common shareholders $  30,709     $  7,089   $  48,823     $  37,798   $  84,453  
                             
Basic earnings per common share $  0.39     $  0.09   $  0.59     $  0.48   $  1.06  
Diluted earnings per common share $  0.39     $  0.09   $  0.59     $  0.48   $  1.06  


AVERAGE BALANCES, INCOME AND EXPENSES, YIELDS AND RATES (TAXABLE EQUIVALENT BASIS)

                               
  For the Quarter Ended
  June 30, 2020   March 31, 2020
  Average
Balance
  Interest
Income /
 Expense (1)
  Yield /
Rate (1)(2)
  Average
Balance
  Interest
Income /
 Expense (1)
  Yield /
Rate (1)(2)
  (unaudited)     (unaudited)
Assets:                              
Securities:                              
Taxable $  1,626,426     $  11,267   2.79 %   $  1,664,449     $  11,627   2.81 %
Tax-exempt    1,022,541        10,394   4.09 %      956,988        9,759   4.10 %
Total securities    2,648,967        21,661   3.29 %      2,621,437        21,386   3.28 %
Loans, net (3) (4)    13,957,711        143,339   4.13 %      12,593,923        151,313   4.83 %
Other earning assets    499,454        672   0.54 %      348,310        1,384   1.60 %
Total earning assets    17,106,132     $  165,672   3.90 %      15,563,670     $  174,083   4.50 %
Allowance for credit losses    (150,868 )                (90,141 )          
Total non-earning assets    2,201,974                  2,086,392            
Total assets $  19,157,238               $  17,559,921            
                               
Liabilities and Stockholders' Equity:                              
Interest-bearing deposits:                              
Transaction and money market accounts $  7,474,210     $  7,303   0.39 %   $  6,933,345     $  14,521   0.84 %
Regular savings    799,890        123   0.06 %      732,574        157   0.09 %
Time deposits (5)    2,667,268        12,435   1.88 %      2,755,500        13,835   2.02 %
Total interest-bearing deposits    10,941,368        19,861   0.73 %      10,421,419        28,513   1.10 %
Other borrowings (6)    1,344,994        5,701   1.70 %      1,442,525        7,804   2.18 %
Total interest-bearing liabilities    12,286,362     $  25,562   0.84 %      11,863,944     $  36,317   1.23 %
                               
Noninterest-bearing liabilities:                              
Demand deposits    4,019,018                  2,925,438            
Other liabilities    361,889                  284,893            
Total liabilities    16,667,269                  15,074,275            
Stockholders' equity    2,489,969                  2,485,646            
Total liabilities and stockholders' equity $  19,157,238               $  17,559,921            
Net interest income       $  140,110             $  137,766    
                               
Interest rate spread             3.06 %               3.27 %
Cost of funds             0.61 %               0.94 %
Net interest margin             3.29 %               3.56 %

(1)       Income and yields are reported on a taxable equivalent basis using the statutory federal corporate tax rate of 21%.
(2)       Rates and yields are annualized and calculated from actual, not rounded amounts in thousands, which appear above.
(3)       Nonaccrual loans are included in average loans outstanding.
(4)       Interest income on loans includes $6.4 million and $9.5 million for the three months ended June 30, 2020 and March 31, 2020, respectively, in accretion of the fair market value adjustments related to acquisitions.
(5)       Interest expense on time deposits includes $34,000 and $50,000 for the three months ended June 30, 2020 and March 31, 2020, respectively, in accretion of the fair market value adjustments related to acquisitions.
(6)       Interest expense on borrowings includes $140,000 and $138,000 for the three months ended June 30, 2020 and March 31, 2020, in amortization of the fair market value adjustments related to acquisitions.

Contact:  Robert M. Gorman - (804) 523‑7828
  Executive Vice President / Chief Financial Officer

      

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