Atlantic Union Bankshares (US:AUB)2022-04-21 16:48Financial Data and Key Metrics Changes - Reported net income available to common shareholders was $40.7 million, with earnings per common share at $0.54, down approximately $4.1 million or $0.05 per common share from the fourth quarter [24] - Non-GAAP adjusted operating earnings available to common shareholders were $45.1 million, with adjusted operating earnings per common share at $0.60, down approximately $8.7 million or $0.11 per common share from the prior quarter [24] - Non-GAAP adjusted operating return on tangible common equity was 12.69%, and return on assets was 0.98% [24] Business Line Data and Key Metrics Changes - Loan growth was approximately 10.8% annualized, excluding PPP loans, with average loans on a linked-quarter annualized basis growing 12.8% [12] - New construction loan originations remained strong, with C&I line utilization increasing each month of the quarter [12][13] - Non-interest income declined to $30.2 million from $36.4 million in the prior quarter, primarily due to a gain from the sale of Visa Class B common stock in the previous quarter [30] Market Data and Key Metrics Changes - Total assets were $19.8 billion, a decrease of approximately 5.7% from December 31 levels [32] - Total deposits stood at $16.5 billion, a decline of $127 million or approximately 3% annualized from the prior quarter [33] - The unemployment rate in Virginia was reported at 3%, down from 3.4% in November, which is better than the national average of 3.6% [15] Company Strategy and Development Direction - The company aims to diversify income streams, focusing on both net interest income and non-interest income, with expected reductions in non-interest income due to changes in overdraft policies [19] - The strategic priorities include driving organic growth, leveraging financial technology, and selectively considering M&A opportunities [20] - The company plans to maintain top-tier financial performance regardless of the operating environment, with a focus on efficiency and scalability [21] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about economic growth despite challenges such as high inflation and geopolitical uncertainties [11] - The company anticipates that the Federal Reserve's rate hikes will positively impact net interest margins, projecting a potential increase in margins by the end of the year [44][36] - Management noted that American businesses have shown resilience and that the current economic environment is manageable [11] Other Important Information - The company closed 16 branches, reducing its retail branch network by approximately 25% since the pandemic began [17] - The effective tax rate for the first quarter increased to 17.5% from 14.4% in the fourth quarter [31] - The company repurchased approximately 630,000 common shares for $25 million during the first quarter [35] Q&A Session Summary Question: Capital management and buybacks - Management indicated that the AOCI impact did not materially affect the tangible common equity ratio and that they are evaluating capital management actions, including share buybacks [41][42] Question: Impact of rate hikes on margin - Management explained that for every 25 basis points increase in the Fed funds rate, there would be an approximate five basis points increase in core margin, projecting a potential margin of 345 to 350 by year-end [44][45] Question: Non-interest income guidance - Management confirmed that the guidance for non-interest income remains at $385 million to $390 million for the full year, with expectations of a decrease in seasonal expenses in the upcoming quarters [48][50] Question: Changes in overdraft policies - Management clarified that the expected reduction in fees due to changes in overdraft policies would be between $4.5 million to $6.5 million annually, with changes anticipated to begin in Q3 [60][62]