Atlantic Union Bankshares (US:AUB)2020-11-03 21:46Part I Item 1. Financial Statements Unaudited financials as of September 30, 2020, reflect $19.9 billion in assets, $61.0 million net income, and higher credit loss allowance Consolidated Balance Sheet Highlights (unaudited) | Metric | September 30, 2020 ($) | December 31, 2019 ($) | | :--- | :--- | :--- | | Total Assets | $19,930,650 | $17,562,990 | | Total Loans Held for Investment, net | $14,209,093 | $12,568,642 | | Total Deposits | $15,576,098 | $13,304,981 | | Total Liabilities | $17,269,765 | $15,049,888 | | Total Stockholders' Equity | $2,660,885 | $2,513,102 | Consolidated Income Statement Highlights (unaudited) | Metric | Three Months Ended Sep 30, 2020 (in thousands) | Three Months Ended Sep 30, 2019 (in thousands) | Nine Months Ended Sep 30, 2020 (in thousands) | Nine Months Ended Sep 30, 2019 (in thousands) | | :--- | :--- | :--- | :--- | :--- | | Net Interest Income | $137,381 | $136,601 | $409,694 | $402,743 | | Provision for Credit Losses | $6,558 | $9,100 | $100,954 | $18,192 | | Noninterest Income | $34,407 | $48,106 | $99,245 | $103,621 | | Net Income | $61,000 | $53,238 | $98,798 | $137,692 | | Diluted Earnings Per Common Share | $0.74 | $0.65 | $1.22 | $1.72 | - The company adopted ASC 326 (CECL) on January 1, 2020, resulting in a $39.1 million net decrease to retained earnings and an initial increase in the Allowance for Credit Losses of $51.6 million3336 - In response to COVID-19, the company made $1.8 billion in loan modifications under the CARES Act and regulatory guidance. As of September 30, 2020, approximately $769.6 million of these loans remained under their modified terms30 - The bank processed over 11,000 Paycheck Protection Program (PPP) loans totaling $1.7 billion, with a recorded investment of $1.6 billion as of September 30, 202031 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management's discussion highlights COVID-19's financial impact, CECL's effect on credit losses, and capital strengthening Q3 2020 vs Q3 2019 Performance Metrics | Metric | Q3 2020 ($) | Q3 2019 ($) | | :--- | :--- | :--- | | Net Income to Common Shareholders | $58.3 million | $53.2 million | | Diluted EPS | $0.74 | $0.65 | | Net Interest Margin (FTE) | 3.14% | 3.64% | | Pre-tax Pre-provision Operating Earnings | $78.6 million | $76.6 million | - The Allowance for Credit Losses (ACL) increased from $43.2 million at year-end 2019 to $186.1 million at September 30, 2020. This was driven by the adoption of ASC 326 (CECL) and a worsening economic forecast related to COVID-19248344 - As of September 30, 2020, approximately $769.6 million in loans remained under COVID-19 related modifications. By October 16, 2020, this balance had declined by 32% to approximately $522.6 million261 - The company completed the consolidation of 14 branches in September 2020 as part of an expense reduction plan, incurring $2.6 million in related expenses during Q3 2020250 - On June 9, 2020, the company issued $166.4 million in net proceeds from Series A preferred stock to be used for general corporate purposes, strengthening its capital position249354 Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate risk, with net interest income showing less asset sensitivity than prior year Net Interest Income Sensitivity Analysis (as of Sep 30) | Rate Shock | 2020 % Change | 2019 % Change | | :--- | :--- | :--- | | +300 bps | +11.39% | +13.16% | | +200 bps | +8.26% | +8.71% | | +100 bps | +4.37% | +4.48% | | -100 bps | -0.97% | -5.39% | Economic Value of Equity Sensitivity Analysis (as of Sep 30) | Rate Shock | 2020 % Change | 2019 % Change | | :--- | :--- | :--- | | +300 bps | -1.30% | -4.13% | | +200 bps | +0.49% | -2.44% | | +100 bps | +1.39% | -0.97% | | -100 bps | -5.24% | -3.43% | - Compared to September 30, 2019, the company was less asset sensitive from a net interest income perspective as of September 30, 2020, due to changes in market characteristics of loan and deposit products and other balance sheet strategies396 Item 4. Controls and Procedures Management concluded disclosure controls and procedures were effective as of September 30, 2020, with no material internal control changes - The CEO and CFO concluded that as of September 30, 2020, the company's disclosure controls and procedures were effective at the reasonable assurance level400 - No changes in internal control over financial reporting occurred during the quarter ended September 30, 2020, that have materially affected or are reasonably likely to materially affect internal controls402 Part II Item 1. Legal Proceedings The company is involved in various legal proceedings, with management expecting no material adverse effect on financials or operations - Management does not expect the aggregate outcome of various legal proceedings to have a material adverse effect on the company's business, financial condition, or results of operations404 Item 1A. Risk Factors No material changes to risk factors were reported from prior 2019 Form 10-K and Q2 2020 Form 10-Q disclosures - No material changes to risk factors were reported during the quarter ended September 30, 2020, from those previously disclosed in the 2019 Form 10-K and Q2 2020 Form 10-Q405 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company had no unregistered equity sales, and its share repurchase program remains suspended since March 20, 2020 - The company's share repurchase program, authorized through June 30, 2021, was suspended on March 20, 2020, with approximately $20 million remaining in authorization407 Issuer Purchases of Securities (Q3 2020) | Period | Total Shares Purchased | Average Price Paid per Share ($) | Shares Purchased as Part of Program | | :--- | :--- | :--- | :--- | | Jul-20 | 294 | $22.02 | - | | Aug-20 | 450 | $25.04 | - | | Sep-20 | 281 | $22.03 | - | | Total | 1,025 | $23.35 | - | Item 6. Exhibits This section lists the exhibits filed as part of the Quarterly Report, including various agreements and certifications