Atlantic Union Bankshares (AUB) - 2019 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION This section provides the unaudited consolidated financial statements, management's analysis of financial condition and results of operations, market risk disclosures, and controls and procedures for the company Item 1. Financial Statements This section presents the unaudited consolidated financial statements, including balance sheets and income statements, reflecting significant growth from the Access National Corporation acquisition Consolidated Balance Sheet Highlights (Unaudited, in thousands) | Metric | June 30, 2019 (in thousands) | December 31, 2018 (in thousands) | Change | | :--- | :--- | :--- | :--- | | Total Assets | $17,159,384 | $13,765,599 | +24.7% | | Net Loans Held for Investment | $12,178,051 | $9,675,162 | +25.9% | | Goodwill | $930,449 | $727,168 | +28.0% | | Total Deposits | $12,515,544 | $9,970,960 | +25.5% | | Total Liabilities | $14,647,089 | $11,841,018 | +23.7% | Consolidated Statement of Income Highlights (Unaudited, in thousands) | Metric | Three Months Ended June 30, 2019 (in thousands) | Three Months Ended June 30, 2018 (in thousands) | Six Months Ended June 30, 2019 (in thousands) | Six Months Ended June 30, 2018 (in thousands) | | :--- | :--- | :--- | :--- | :--- | | Net Interest Income | $138,594 | $108,168 | $266,141 | $211,640 | | Provision for Credit Losses | $5,300 | $2,147 | $9,092 | $5,671 | | Noninterest Income | $30,578 | $40,597 | $55,515 | $60,865 | | Noninterest Expenses | $105,608 | $85,140 | $212,335 | $186,885 | | Net Income | $48,823 | $47,327 | $84,453 | $63,966 | | Diluted EPS | $0.59 | $0.72 | $1.06 | $0.97 | Notes to Consolidated Financial Statements This section details accounting policies, the impact of the Access National acquisition, and specifics on portfolios, allowances, and new accounting standards - Effective May 17, 2019, Union Bankshares Corporation changed its name to Atlantic Union Bankshares Corporation, and its primary banking subsidiary changed its name to Atlantic Union Bank[33] - On February 1, 2019, the Company completed the acquisition of Access National Corporation for a purchase price of approximately $500.0 million, resulting in the recording of $203.3 million in goodwill and $43.5 million in amortizable intangible assets[36][37] - The Company adopted ASU No. 2016-02, "Leases (Topic 842)" on January 1, 2019, which resulted in the recognition of right-of-use assets of $48.9 million and lease liabilities of $53.2 million on the Consolidated Balance Sheet[39] - On July 10, 2019, subsequent to the reporting period, the Board of Directors authorized a share repurchase program for up to $150 million of the Company's common stock through June 30, 2021[217] Management's Discussion and Analysis of Financial Condition and Results of Operations Management analyzes the company's financial performance, highlighting the Access National Corporation acquisition's impact on income, expenses, and balance sheet growth - The acquisition of Access National Corporation on February 1, 2019, was a primary driver of financial results and balance sheet growth in the first half of 2019[234] - The company rebranded to Atlantic Union Bankshares Corporation on May 20, 2019, incurring rebranding costs of $4.0 million in Q2 2019[234] Q2 2019 Performance Metrics | Metric | Q2 2019 | Q2 2018 | | :--- | :--- | :--- | | Net Income | $48.8M | $47.3M | | EPS (Diluted) | $0.59 | $0.72 | | Net Operating Earnings (Non-GAAP) | $57.1M | $53.9M | | Operating EPS (Non-GAAP) | $0.70 | $0.82 | | ROA | 1.15% | 1.44% | | ROE | 7.86% | 10.28% | Six Months 2019 Performance Metrics | Metric | H1 2019 | H1 2018 | | :--- | :--- | :--- | | Net Income | $84.5M | $64.0M | | EPS (Diluted) | $1.06 | $0.97 | | Net Operating Earnings (Non-GAAP) | $107.6M | $92.7M | | Operating EPS (Non-GAAP) | $1.36 | $1.41 | | ROA | 1.04% | 0.98% | | ROE | 7.16% | 7.03% | Quantitative and Qualitative Disclosures About Market Risk This section details the company's primary market risk, interest rate risk, and its management through ALCO models, indicating asset sensitivity Net Interest Income Sensitivity Analysis (12-Month Horizon) | Change in Interest Rates | Estimated Change in NII (as of June 30, 2019) | | :--- | :--- | | +300 bps | +9.79% | | +200 bps | +6.73% | | +100 bps | +3.45% | | -100 bps | -4.08% | | -200 bps | -7.81% | - From a net interest income perspective, the Company was less asset sensitive as of June 30, 2019, compared to its position as of June 30, 2018. This shift is partly due to changing market characteristics of deposit products and other balance sheet strategies[342] Item 4. Controls and Procedures The CEO and CFO concluded that disclosure controls and procedures were effective, with no material changes to internal control over financial reporting - Management concluded that as of June 30, 2019, the Company's disclosure controls and procedures were effective at the reasonable assurance level[347] - No changes occurred during the quarter ended June 30, 2019, that materially affected, or are reasonably likely to materially affect, the internal control over financial reporting[349] PART II - OTHER INFORMATION This section addresses legal proceedings, risk factors, unregistered equity sales, and a list of exhibits filed with the report Item 1. Legal Proceedings The company is involved in ordinary course legal proceedings, with management anticipating no material adverse effect on financial condition or operations - Management believes that the ultimate outcome of various legal proceedings will not have a material adverse effect on the business, financial condition, or results of operations of the Company[351] Item 1A. Risk Factors No material changes have occurred regarding the risk factors previously disclosed in the company's 2018 Form 10-K - There have been no material changes with respect to the risk factors disclosed in the Company's 2018 Form 10-K[352] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During Q2 2019, the company issued 21,479 common shares from warrant exercises for $601,627 in unregistered sales to accredited investors - During Q2 2019, the Company issued 21,479 shares of common stock from warrant exercises for cash consideration of approximately $601,627. These were unregistered sales to accredited investors[353] Item 6. Exhibits This section provides a comprehensive list of all exhibits filed as part of the Form 10-Q, including agreements and certifications