Atlantic Union Bankshares (US:AUB)2023-04-25 17:38Financial Data and Key Metrics Changes - The company reported net income available to common shareholders of $32.7 million, with earnings per common share at $0.44, while adjusted operating earnings were $47.2 million or $0.63 per common share, reflecting a 5% increase year-over-year [27][28] - The adjusted operating return on tangible common equity was 15.2%, up from 12.7% in the prior year's first quarter [27] - The efficiency ratio was 56% in the first quarter, down from 58.9% in the same quarter last year [28] - Total assets decreased by $358 million or approximately 7% annualized from December 31 levels, primarily due to the decline in the investment securities portfolio [36] Business Line Data and Key Metrics Changes - The loan portfolio yield increased to 5.35% in the first quarter, up from 4.9% in the fourth quarter [32] - Annualized loan growth was approximately 3.8% in the first quarter, following a seasonally high fourth quarter [20] - Noninterest income decreased by $14.9 million to $9.6 million, primarily due to a $13.4 million pretax loss on the sale of securities [33] Market Data and Key Metrics Changes - The unemployment rate in Virginia was reported at 3.2%, unchanged from February and below the national average of 3.5% [15] - Non-owner occupied office exposure totaled $729 million, comprising 5% of the total loan portfolio, with 25% of this being medical office [16] Company Strategy and Development Direction - The company aims to maintain soundness, profitability, and growth as its priority, emphasizing a diversified, traditional, full-service banking model [8] - The company executed a balance sheet restructuring by selling $506 million of available-for-sale securities to reduce funding costs and improve liquidity [13] - The company expects loan growth of 4% to 6% during 2023, with a focus on managing capital resources prudently [39] Management's Comments on Operating Environment and Future Outlook - Management noted that the macroeconomic environment remains solid, with healthy markets and strong lending pipelines, despite rising expectations for a mild recession [14] - The company anticipates an uptick in the full-year net charge-off ratio to 10 basis points in 2023, up from 2 basis points in 2022, due to elevated net charge-offs in the first quarter [40] - Management expressed confidence in navigating challenges and identified opportunities in the current environment [23] Other Important Information - The company paid a stock dividend of $0.30 per share and did not purchase any shares during the quarter to preserve capital for organic loan growth [39] - The total allowance for credit losses was $131.7 million, an increase of approximately $7.3 million from the fourth quarter [29] Q&A Session Summary Question: What kind of assumption should be made for the loan swap fees? - Management expects loan swap fees to bounce back, projecting them in the $10 million to $12 million range for the full year [44] Question: What are some of the expense levers that can be pulled with the low revenue outlook? - Management indicated they would reduce the rate of expense growth and consider various hiring delays and incentive expenses adjustments [46][47] Question: How are deposit costs expected to trend in the next couple of months? - Management noted that the cost of deposits was up to 1.43% in March and expected betas to increase, projecting a total deposit beta of around 40% by year-end [56] Question: Can you walk us through where deposit costs were towards the end of the quarter? - The cost of deposits was reported at 1.43% in March, with expectations for continued increases throughout the year [56] Question: What is the outlook for service charges for the back half of the year? - Management expects service charges to remain flattish, with no significant impact from the ongoing CFPB matter [54] Question: What is the current loan pricing for new production? - New commercial loan yields are averaging around 6.75% for new production, with a mix of variable and fixed rates [61]