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Atlantic Union Bankshares Corp (AUB)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 diluted EPS was $0.60; adjusted diluted operating EPS was $0.67 as higher provision ($17.5M) and merger costs weighed on GAAP results while core trends remained solid .
  • Net interest margin (FTE) compressed 5 bps q/q to 3.33% on lower variable loan yields, partially offset by lower cost of funds; deposits rose and FHLB borrowings fell sharply, supporting funding mix improvement .
  • Credit quality remained generally benign, but NPAs rose to 0.32% of loans due to a single $27.7M C&I nonaccrual with a $13.1M specific reserve; net charge-offs were 3 bps annualized .
  • 2025 standalone outlook guides to NIM (FTE) ~3.45–3.60%, NII (FTE) ~$775–$800M, mid-single digit loan/deposit growth, ACL 100–110 bps, and adjusted OpEx $475–$490M; common dividend increased to $0.34 (+6.3%) .

What Went Well and What Went Wrong

What Went Well

  • Adjusted operating profitability remained strong: adjusted diluted EPS $0.67, adjusted operating ROA 1.03%, adjusted operating ROTCE 15.30% .
  • Funding and NIM setup improved: cost of funds fell 15 bps q/q to 2.41% and management outlined drivers for organic NIM expansion in 2025 (repricing of fixed-rate back book; lowering CD rates as $3.3B matures) .
  • Strategic progress: Federal Reserve approved the Sandy Spring merger (Jan 13); management expects April 1 close and highlighted cultural/market fit across MD/VA/NC .

What Went Wrong

  • Specific credit issue: NPAs increased to 0.32% of LHFI, driven by one $27.7M asset-based C&I loan; provision rose to $17.5M with a $13.1M specific reserve; NIM/FTE declined 5 bps q/q .
  • Noninterest expense rose: reported OpEx up $7.1M q/q to $129.7M, primarily from a $5.6M increase in merger costs; adjusted OpEx up $1.6M on salaries/benefits and professional services .
  • Securities AFS unrealized losses widened to $402.6M (from $334.5M) as rates moved; total portfolio unrealized loss ~$445.9M (incl. HTM) and investment yield decreased to 3.87% .

Financial Results

MetricQ4 2023Q3 2024Q4 2024
Net Interest Income ($USD Thousands)$153,544 $182,932 $183,248
Noninterest Income ($USD Thousands)$29,959 $34,286 $35,227
Total Revenue (FTE) ($USD Thousands)$187,215 $221,117 $222,266
Diluted EPS ($)$0.72 $0.82 $0.60
Adjusted Diluted Operating EPS ($)$0.78 $0.83 $0.67
Net Interest Margin (FTE %)3.34% 3.38% 3.33%
Efficiency Ratio (FTE %)60.95% 55.44% 58.34%
ROA (%)1.08% 1.24% 0.92%
ROTCE (%)16.72% 18.89% 13.77%

Segment (Loan Portfolio) Breakdown ($USD Thousands, period-end):

CategoryQ4 2023Q3 2024Q4 2024
Construction & Land Development$1,107,850 $1,588,531 $1,731,108
CRE – Owner Occupied$1,998,787 $2,401,807 $2,370,119
CRE – Non-Owner Occupied$4,172,401 $4,885,785 $4,935,590
Multifamily Real Estate$1,061,997 $1,357,730 $1,240,209
Commercial & Industrial$3,589,347 $3,799,872 $3,864,695
Residential 1-4 Family – Commercial$522,580 $729,315 $719,425
Residential 1-4 Family – Consumer$1,078,173 $1,281,914 $1,293,817
Residential 1-4 Family – Revolving$619,433 $738,665 $756,944
Auto$486,926 $354,570 $316,368
Consumer$120,641 $109,522 $104,882
Other Commercial$876,908 $1,089,588 $1,137,464
Total LHFI$15,635,043 $18,337,299 $18,470,621

KPIs

KPIQ3 2024Q4 2024
Total Deposits ($USD Thousands)$20,305,287 $20,397,619
Cost of Deposits (%)2.57% 2.48%
Loan-to-Deposit Ratio (%)90.3% 90.6%
Total Borrowings ($USD Thousands)$852,164 $534,578
NPAs / Total LHFI (%)0.20% 0.32%
ACL / Total LHFI (%)0.97% 1.05%
Net Charge-offs (annualized, %)0.01% 0.03%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Interest Margin (FTE)FY 2025N/A~3.45% – 3.60% New
Net Interest Income (FTE)FY 2025N/A~$775 – $800M New
Loans (EOP Growth)FY 2025N/AMid-single digit New
Deposits (EOP Growth)FY 2025N/AMid-single digit New
ACL / LoansFY 2025N/A~100 – 110 bps New
Net Charge-offsFY 2025N/A~15 – 20 bps New
Adjusted Operating Noninterest IncomeFY 2025N/A~$125 – $135M New
Adjusted Operating Noninterest Expense (ex-amort.)FY 2025N/A~$475 – $490M New
Amortization of IntangiblesFY 2025N/A~$20M New
Common DividendQ4 2024$0.32$0.34 (+6.3%) Raised

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 & Q3 2024)Current Period (Q4 2024)Trend
NIM trajectory & driversQ2: NIM/FTE up to 3.46% on ANB acquisition; Q3: NIM/FTE down to 3.38% on higher cost of funds .NIM/FTE 3.33%; 2025 expansion expected via fixed-rate loan repricing and lower CD rates .Improving setup (near-term compression, 2025 tailwinds)
Deposit pricing & funding mixQ2/Q3: deposit growth; brokered increased; cost of deposits up; borrowings used to fund growth .Cost of deposits down 9 bps q/q to 2.48%; average borrowings down $312M; active repricing of exception-rate deposits .Favorable
Loan growth & productionQ3: average LHFI up; point-to-point flat; CRE owner/multi mix shifts .Point-to-point LHFI up ~2.9% annualized; C&I and construction growth; multifamily down .Mixed (healthy pipelines, selective categories down)
CRE payoffs/refi dynamicsQ3: predicted elevated CRE payoffs/refis into term markets .Elevated CRE payoffs/refis materialized; ~57% payoffs refi to term markets .Playing out as expected
Credit quality & reservesQ2/Q3: ACL ~0.96–0.97%; benign NCOs .Specific $27.7M C&I nonaccrual with $13.1M specific reserve drives ACL to 1.05%; NCOs 3 bps .One-off, otherwise stable
Sandy Spring mergerAnnounced Oct-21 (Q3); strategic logic outlined .FRB approval Jan 13; targeting Apr 1 close; combined margin could be closer to “4 handle” including accretion; $2B CRE sale expected ~$0.90 on the dollar; full forward equity take-down .Advancing toward close

Management Commentary

  • “2024 was a good year, and a consequential year... We were excited to close our acquisition of American National… and announced the proposed acquisition of Sandy Spring... We were pleased to have received merger approvals from the Federal Reserve Bank of Richmond seven weeks after filing...” — CEO John C. Asbury .
  • “Adjusted operating earnings available to common shareholders were $61.4 million or $0.67… adjusted operating ROTCE of 15.3%… adjusted operating ROA of 103 bps… adjusted operating efficiency ratio of 52.7%.” — CFO Rob Gorman .
  • “Loan growth was approximately 3% annualized… deposit growth approximately 2% annualized after reducing brokered deposits by more than $200 million… we’ve been fairly aggressive in moving deposit rates lower.” — CEO John C. Asbury .
  • “The fourth quarter earnings were negatively impacted by a higher provision… driven by a $13.1 million specific reserve on a $27.7 million asset-based C&I loan… NPAs remained low at approximately 0.32%.” — CEO John C. Asbury .
  • “We expect mid-single-digit loan and deposit growth for the full year 2025… NIM (FTE) 3.45%–3.6%… NII (FTE) $775–$800M.” — CFO Rob Gorman .

Q&A Highlights

  • NIM cadence: Management detailed 2025 NIM expansion drivers (back-book fixed-rate repricing + CD repricing; limited Fed cuts assumed), noting accretion effects and combined margin potentially nearer 4% post-Sandy Spring .
  • Deposit pricing strategy: Active engagement to lower exception-priced commercial deposits; lagging effect supports margin stabilization heading into 2025 .
  • Credit clarification: Specific reserve reflects best estimate; outcome being worked through; 2025 NCO outlook (15–20 bps) anticipates potential charge-off tied to the credit .
  • Merger timeline: Despite state approvals pending, company prefers quarter-start close (Apr 1) to avoid stub-period complexity; expects to execute CRE sale (~$2B) around $0.90 on the dollar and take down full forward equity .
  • Market dynamics: Elevated CRE payoffs trending to term markets; private credit activity seen in GovCon clients; healthy C&I pipelines (+31% y/y) .

Estimates Context

  • Wall Street consensus (S&P Global) for Q4 2024 EPS and revenue was unavailable at the time of this analysis due to a data access limitation. As a result, we cannot assess a beat/miss versus consensus for Q4 2024 using SPGI data.
  • Given management’s 2025 outlook (NIM expansion, lower CD costs, stable macro in core markets), Street models may need to adjust upward NIM/NII trajectories and modestly higher OpEx (ex-amortization) while incorporating normalized credit costs (15–20 bps NCOs) .

Key Takeaways for Investors

  • Core earnings power intact: Despite credit-specific noise, adjusted metrics (EPS/ROA/ROTCE) remain solid, and funding mix improved; monitor execution on CD repricing and fixed-rate back-book renewals .
  • Margin setup favorable into 2025: Expect NIM uplift from loan repricing and deposit cost relief; limited expected Fed cuts and proactive pricing should support the guide .
  • Credit remains manageable: One-off C&I issue elevated NPAs and provision; broader credit metrics (NCOs, ACL coverage) remain conservative; watch path from specific reserve to potential charge-off .
  • Merger catalysts: FRB approval in hand; April 1 close targeted; combined margin uplift via accretion and strategic CRE portfolio actions could be a stock catalyst upon close .
  • Capital and dividend: Dividend increased to $0.34; regulatory capital levels above well-capitalized; tangible metrics sensitive to AOCI; consider pro forma scenarios including HTM unrealized losses .
  • Liquidity robust: Liquidity sources of ~$8.4B imply ~140% coverage of uninsured/uncollateralized deposits; supports confidence in funding stability .
  • Near-term focus: Track Q1 2025 NIM stabilization, deposit rate actions, and resolution of the specific C&I loan; sandbag effects from brokered deposit reductions vs. core deposit growth .