Atlantic Union Bankshares Corporation (the “Company” or “Atlantic Union”) (NYSE: AUB) reported net income available to common shareholders of $53.9 million and basic and diluted earnings per common share of $0.72 for the fourth quarter of 2023 and adjusted operating earnings available to common shareholders⁽¹⁾ of $58.9 million and adjusted diluted operating earnings per common share⁽¹⁾ of $0.78 for the fourth quarter of 2023.

Net income available to common shareholders was $190.0 million and basic and diluted earnings per common share were $2.53 for the year ended December 31, 2023. Adjusted operating earnings available to common shareholders⁽¹⁾ were $221.2 million and adjusted diluted operating earnings per common share⁽¹⁾ were $2.95 for the year ended December 31, 2023.

In the fourth quarter of 2023, the Company’s adjusted operating earnings⁽¹⁾ included the following main pre-tax adjustments:

• a $3.4 million Federal Deposit Insurance Corporation (“FDIC“) special assessment;
• an additional $3.3 million legal reserve related to the previously disclosed settlement with the Consumer Financial Protection Bureau (“CFPB”);
• $1.0 million in merger related costs associated with our pending merger with American National Bankshares Inc. (“American National”); and
• $1.9 million gain related to a sale-leaseback transaction executed in the quarter.

“Looking back at 2023, it was a successful year for Atlantic Union, as we made good progress against our strategic plan, successfully responded to challenges within the banking industry, and delivered strong operating results,” said John C. Asbury, president and chief executive officer of Atlantic Union. “We undertook important actions that we believe will better position Atlantic Union for the future and preserve positive operating leverage, including a meaningful reduction to our structural expense base, our pending acquisition of American National Bank in Danville, Virginia, and balance sheet restructuring. Additionally, our strong customer relationships, our stable deposit base, and strong asset quality have served us well in this demanding operating environment.”

“We believe that our model of a diversified, traditional, full-service bank that delivers the products and services that our customers want and need, combined with local decision making, responsiveness, and client service orientation positively sets us apart from other banks, both larger and smaller. Operating under the mantra of soundness, profitability, and growth – in that order of priority – Atlantic Union remains committed to generating sustainable, profitable growth, and building long-term value for our shareholders.”

NET INTEREST INCOME

For the fourth quarter of 2023, net interest income was $153.5 million, an increase of $1.6 million from $151.9 million in the third quarter of 2023. Net interest income (FTE)⁽¹⁾ was $157.3 million in the fourth quarter of 2023, an increase of $1.6 million from $155.7 million in the third quarter of 2023. The increases in net interest income and net interest income (FTE)^{( 1)} were driven by higher yields on both available for sale (“AFS”) securities and the loan portfolio, as well as growth in average loans held for investment (“LHFI”). These increases were partially offset by higher deposit costs driven by continued competition for deposits, which drove higher customer deposit rates, changes in the deposit mix, as depositors continue to migrate to higher costing interest bearing deposit accounts, and growth in average deposit balances. Our net interest margin decreased 1 basis point from the prior quarter to 3.26% for the quarter ended December 31, 2023, and our net interest margin (FTE)⁽¹⁾ decreased 1 basis point to 3.34% for the quarter ended December 31, 2023. Earning asset yields for the fourth quarter of 2023 increased 20 basis points to 5.59% compared to the third quarter of 2023, primarily due to higher yields on loans and investments, as well as loan growth. Our cost of funds increased by 21 basis points to 2.25% at December 31, 2023 compared to the prior quarter, due primarily to higher deposit costs driven by higher rates and changes in the deposit mix as noted above.

The Company’s net interest margin (FTE) ⁽¹⁾ includes the impact of acquisition accounting fair value adjustments. Net accretion related to acquisition accounting was $718,000 for the quarter ended December 31, 2023, representing a decrease of $361,000. The impact of net accretion in the third and fourth quarters of 2023 are reflected in the following table (dollars in thousands):

ASSET QUALITY

Overview

At December 31, 2023, nonperforming assets (“NPAs”) as a percentage of total LHFI was 0.24%, an increase of 5 basis points from the prior quarter and included nonaccrual loans of $36.9 million. The increase in NPAs was primarily due to two new nonaccrual loans within the commercial real estate – non owner occupied and commercial and industrial portfolios. Accruing past due loans as a percentage of total LHFI totaled 31 basis points at December 31, 2023, an increase of 4 basis points from September 30, 2023, and an increase of 10 basis points from December 31, 2022. The increase in past due loan levels from September 30, 2023 was primarily within the 30-59 days past due category, primarily driven by a seasonal increase in residential 1-4 family – consumer loans that were 30 days past due as of year-end, the majority of which subsequently became current. Net charge-offs were 0.03% of total average LHFI (annualized) for the fourth quarter of 2023, an increase of 2 basis points from September 30, 2023, and an increase of 1 basis point from December 31, 2022. The allowance for credit losses (“ACL”) totaled $148.5 million at December 31, 2023, a $7.5 million increase from the prior quarter.

Nonperforming Assets

At December 31, 2023, NPAs totaled $36.9 million, compared to $28.8 million in the prior quarter. The following table shows a summary of NPA balances at the quarter ended (dollars in thousands):

The following table shows the activity in nonaccrual loans for the quarter ended (dollars in thousands):

Past Due Loans

At December 31, 2023, past due loans still accruing interest totaled $48.4 million or 0.31% of total LHFI, compared to $40.6 million or 0.27% of total LHFI at September 30, 2023, and $30.0 million or 0.21% of total LHFI at December 31, 2022. The increase in past due loan levels at December 31, 2023 from September 30, 2023 was primarily within the 30-59 days past due category, primarily driven by a seasonal increase related to residential 1-4 family – consumer loans that were 30 days past due at year-end, the majority of which subsequently became current. Of the total past due loans still accruing interest, $13.9 million or 0.09% of total LHFI were loans past due 90 days or more at December 31, 2023, compared to $11.9 million or 0.08% of total LHFI at September 30, 2023, and $7.5 million or 0.05% of total LHFI at December 31, 2022. The increase in loans past due 90 days or more at December 31, 2023 from both September 30, 2023 was primarily due to one credit relationship within the residential 1-4 family – commercial portfolio and two credit relationships within the residential 1-4 family – consumer portfolio.

Allowance for Credit Losses

At December 31, 2023, the ACL was $148.5 million and included an allowance for loan and lease losses (“ALLL”) of $132.2 million and a reserve for unfunded commitments of $16.3 million. The ACL at December 31, 2023 increased $7.5 million from September 30, 2023 primarily due to loan growth in the fourth quarter of 2023 and an increase in the allowance on two individually assessed loans due to changes in borrower-specific circumstances. The reserve for unfunded commitments at December 31, 2023 increased $967,000 from September 30, 2023, primarily driven by an increase in unfunded commitments.

The ACL as a percentage of total LHFI was 0.95% at December 31, 2023, an increase of 3 basis points from September 30, 2023. The ALLL as a percentage of total LHFI was 0.85% at December 31, 2023, compared to 0.82% at September 30, 2023.

Net Charge-offs

Net charge-offs were $1.2 million or 0.03% of total average LHFI on an annualized basis for the fourth quarter of 2023, compared to $294,000 or 0.01% (annualized) for the third quarter of 2023, and $810,000 or 0.02% (annualized) for the fourth quarter of 2022. The majority of net charge-offs in the fourth quarter of 2023 were related to overdrawn deposit accounts and third-party lending loans within the consumer portfolio.

Provision for Credit Losses

For the fourth quarter of 2023, the Company recorded a provision for credit losses of $8.7 million, compared to a provision for credit losses of $5.0 million in the prior quarter, and a provision for credit losses of $6.3 million in the fourth quarter of 2022.

NONINTEREST INCOME

Noninterest income increased $2.9 million to $30.0 million for the fourth quarter of 2023 from $27.1 million in the prior quarter, primarily driven by a $1.9 million gain related to a sale-leaseback transaction associated with one branch location executed during the fourth quarter, a $893,000 increase in loan-related interest rate swap fees in the fourth quarter due to several new swap transactions, and a $679,000 increase in loan syndication revenue in the fourth quarter (included in other operating income). In addition, other service charges, commissions, and fees decreased $843,000 in the fourth quarter, primarily due to a merchant vendor contract signing bonus realized in the prior quarter. Noninterest income in the prior quarter also included a $27.7 million gain related to the sale-leaseback transaction, included in other operating income, which was almost wholly offset by $27.6 million of losses incurred on the sale of AFS securities.

NONINTEREST EXPENSE

Noninterest expense decreased $579,000 to $107.9 million for the fourth quarter of 2023 from $108.5 million in the prior quarter, primarily driven by a decrease in other expenses due to costs associated with our strategic cost savings initiatives in the third quarter and lower merger-related costs associated with our pending merger with American National in the fourth quarter, partially offset by an increase in FDIC assessment premiums and other insurance due to a special assessment fee incurred in the fourth quarter and an increase in legal reserve related to our previously disclosed settlement with the CFPB (included in other expenses).

Adjusted operating noninterest expense,⁽¹⁾ which excludes amortization of intangible assets ($2.1 million in the fourth quarter and $2.2 million in the third quarter), a FDIC special assessment ($3.4 million recognized in the fourth quarter), the legal reserve related to our previously disclosed settlement with the CFPB ($3.3 million in the fourth quarter), merger-related costs associated with our pending merger with American National ($1.0 million in the fourth quarter and $2.0 million in the third quarter), and expenses associated with strategic cost savings initiatives ($8.7 million in the third quarter), increased $2.5 million to $98.2 million for the fourth quarter from $95.7 million in the prior quarter, primarily due to a $1.2 million increase in other expenses reflecting an increase in OREO and credit related expenses, higher teammate training and travel expenses, and annual debit card inventory purchases, a $1.1 million increase in professional services expense primarily in support of strategic initiatives in the fourth quarter and higher legal fees, a $799,000 increase in marketing and advertising expense primarily due to annual customer disclosure mailings, and a $591,000 increase in occupancy expense driven by the increased lease payments related to the sale-leaseback transaction executed in the third quarter. These increases were partially offset by a $763,000 decrease in salaries and benefits, reflecting the impact of headcount reductions from our strategic cost savings initiatives.

INCOME TAXES

The effective tax rate for the three months ended December 31, 2023 and 2022 was 14.9% and 14.3%, respectively, and the effective tax rate for the years ended December 31, 2023 and 2022 was 15.9% and 16.2%, respectively. The changes in the effective tax rate for the quarter ended and year ended December 31, 2023, compared to December 31, 2022 are primarily driven by the changes in the proportion of tax-exempt income to pre-tax income.

BALANCE SHEET

At December 31, 2023, total assets were $21.2 billion, an increase of $430.0 million or approximately 8.2% (annualized) from September 30, 2023, and an increase of $705.1 million or approximately 3.4% from December 31, 2022. Total assets increased from the prior quarter primarily due to a $351.4 million increase in LHFI (net of deferred fees and costs). In addition, investment securities increased $151.1 million primarily due to a decrease in unrealized losses in the AFS securities portfolio due to the impact of declining market interest rates. Total assets increased from the same period in the prior year primarily due to a $1.2 billion increase in LHFI (net of deferred fees and costs), partially offset by a $525.7 million decrease in investment securities due primarily to the sale of AFS securities in the first quarter of 2023.

At December 31, 2023, LHFI (net of deferred fees and costs) totaled $15.6 billion, an increase of $351.4 million or 9.1% (annualized) from $15.3 billion at September 30, 2023, and an increase of $1.2 billion or 8.2% from December 31, 2022. Quarterly average LHFI (net of deferred fees and costs) totaled $15.4 billion at December 31, 2023, an increase of $254.7 million or 6.7% (annualized) from the prior quarter, and an increase of $1.3 billion or 9.0% from December 31, 2022. LHFI (net of deferred fees and costs) increased from both the prior quarter and the prior year, primarily due to increases in the commercial and industrial and the multifamily real estate portfolios.

At December 31, 2023, total investments were $3.2 billion, an increase of $151.1 million from September 30, 2023 and a decrease of $525.7 million from December 31, 2022. AFS securities totaled $2.2 billion at December 31, 2023, $2.1 billion at September 30, 2023, and $2.7 billion at December 31, 2022. Total net unrealized losses on the AFS securities portfolio were $384.3 million at December 31, 2023, compared to $523.1 million at September 30, 2023 and $462.5 million at December 31, 2022. Held to maturity securities are carried at cost and totaled $837.4 million at December 31, 2023, $843.3 million at September 30, 2023, and $847.7 million at December 31, 2022 and had net unrealized losses of $29.3 million at December 31, 2023, compared to $81.2 million at September 30, 2023 and $45.8 million at December 31, 2022.

At December 31, 2023, total deposits were $16.8 billion, a slight increase compared to the prior quarter. Average deposits at December 31, 2023 increased from the prior quarter by $317.8 million or 7.5% (annualized). Total deposits at December 31, 2023 increased $886.5 million or 5.6% from December 31, 2022, and quarterly average deposits at December 31, 2023 increased $501.6 million or 3.0% from the same period in the prior year. Total deposits increased from the prior quarter and the same period in the prior year primarily due to increases in interest bearing customer deposits and brokered deposits, partially offset by decreases in demand deposits.

At December 31, 2023, total borrowings were $1.3 billion, an increase of $291.2 million from September 30, 2023, and a decrease of $396.8 million from December 31, 2022. Total borrowings increased from the prior quarter primarily due to increased short-term borrowings used to fund loan growth and decreased from the same period in the prior year due to paydowns of short-term borrowings due to deposit growth.

The following table shows the Company’s capital ratios at the quarters ended:

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During the fourth quarter of 2023, the Company declared and paid a quarterly dividend on the outstanding shares of Series A Preferred Stock of $171.88 per share (equivalent to $0.43 per outstanding depositary share), consistent with the third quarter of 2023 and the fourth quarter of 2022. During the fourth quarter of 2023, the Company also declared and paid cash dividends of $0.32 per common share, a $0.02 increase or approximately 6.7% from both the third quarter of 2023 and the fourth quarter of 2022.

ABOUT ATLANTIC UNION BANKSHARES CORPORATION

Headquartered in Richmond, Virginia, Atlantic Union Bankshares Corporation (NYSE: AUB) is the holding company for Atlantic Union Bank. Atlantic Union Bank has 109 branches and 123 ATMs located throughout Virginia and in portions of Maryland and North Carolina as of December 31, 2023. Certain non-bank financial services affiliates of Atlantic Union Bank include: Atlantic Union Equipment Finance, Inc., which provides equipment financing; Atlantic Union Financial Consultants, LLC, which provides brokerage services; and Union Insurance Group, LLC, which offers various lines of insurance products.

FOURTH QUARTER AND FULL YEAR 2023 EARNINGS RELEASE CONFERENCE CALL

The Company will hold a conference call and webcast for investors at 9:00 a.m. Eastern Time on Tuesday, January 23, 2024, during which the Company’s management will review the Company’s financial results for the fourth quarter and full year 2023 and provide an update on recent activities.

The listen-only webcast and the accompanying slides can be accessed at:

https://edge.media-server.com/mmc/p/7yyvrwjv.

For analysts who wish to participate in the conference call, please register at the following URL:

https://register.vevent.com/register/BIfcd55f61c1d2456f9533b66bb36886b9. To participate in the conference call, you must use the link to receive an audio dial-in number and an Access PIN.

A replay of the webcast, and the accompanying slides, will be available on the Company’s website for 90 days at: https://investors.atlanticunionbank.com/.

NON-GAAP FINANCIAL MEASURES

In reporting the results as of and for the period ended December 31, 2023, the Company has provided supplemental performance measures on a tax-equivalent, tangible, operating, adjusted or pre-tax pre-provision basis. These non-GAAP financial measures are a supplement to GAAP, which is used to prepare the Company’s financial statements, and should not be considered in isolation or as a substitute for comparable measures calculated in accordance with GAAP. In addition, the Company’s non-GAAP financial measures may not be comparable to non-GAAP financial measures of other companies. The Company uses the non-GAAP financial measures discussed herein in its analysis of the Company’s performance. The Company’s management believes that these non-GAAP financial measures provide additional understanding of ongoing operations, enhance comparability of results of operations with prior periods and show the effects of significant gains and charges in the periods presented without the impact of items or events that may obscure trends in the Company’s underlying performance. For a reconciliation of these measures to their most directly comparable GAAP measures and additional information about these non-GAAP financial measures, see “Alternative Performance Measures (non-GAAP)” in the tables within the section “Key Financial Results.”

FORWARD-LOOKING STATEMENTS

This press release and statements by our management may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements that include, without limitation, statements made in Mr. Asbury’s quotations, statements regarding our expectations with regard to our business, financial and operating results, including our deposit base and funding, the impact of future economic conditions, changes in economic conditions, our asset quality, our customer relationships, the expected impact of our cost saving measures initiated in the second quarter of 2023, and statements that include other projections, predictions, expectations, or beliefs about future events or results or otherwise are not statements of historical fact. Such forward-looking statements are based on certain assumptions as of the time they are made, and are inherently subject to known and unknown risks, uncertainties, and other factors, some of which cannot be predicted or quantified, that may cause actual results, performance, or achievements to be materially different from those expressed or implied by such forward-looking statements. Forward-looking statements are often characterized by the use of qualified words (and their derivatives) such as “expect,” “believe,” “estimate,” “plan,” “project,” “anticipate,” “intend,” “will,” “may,” “view,” “opportunity,” “potential,” “continue,” “confidence,” or words of similar meaning or other statements concerning opinions or judgment of the Company and our management about future events. Although we believe that our expectations with respect to forward-looking statements are based upon reasonable assumptions within the bounds of our existing knowledge of our business and operations, there can be no assurance that actual future results, performance, or achievements of, or trends affecting, us will not differ materially from any projected future results, performance, achievements or trends expressed or implied by such forward-looking statements. Actual future results, performance, achievements or trends may differ materially from historical results or those anticipated depending on a variety of factors, including, but not limited to, the effects of or changes in:

• market interest rates and their related impacts on macroeconomic conditions, customer and client behavior, our funding costs and our loan and securities portfolios;
• inflation and its impacts on economic growth and customer and client behavior;
• adverse developments in the financial industry generally, such as bank failures, responsive measures to mitigate and manage such developments, related supervisory and regulatory actions and costs, and related impacts on customer and client behavior;
• the sufficiency of liquidity;
• general economic and financial market conditions, in the United States generally and particularly in the markets in which we operate and which our loans are concentrated, including the effects of declines in real estate values, an increase in unemployment levels and slowdowns in economic growth;
• the failure to close our previously announced merger with American National when expected or at all because required regulatory approvals and other conditions to closing are not received or satisfied on a timely basis or at all, and the risk that any regulatory approvals may result in the imposition of conditions that could adversely affect the combined company or the expected benefits of the proposed merger;
• the occurrence of any event, change or other circumstances that could give rise to the right of one or both of the parties to terminate the merger agreement between the Company and American National;
• any change in the purchase accounting assumptions used regarding the American National assets acquired and liabilities assumed to determine the fair value and credit marks, particularly in light of the current interest rate environment;
• the possibility that the anticipated benefits of the proposed merger, including anticipated cost savings and strategic gains, are not realized when expected or at all;
• the proposed merger being more expensive or taking longer to complete than anticipated, including as a result of unexpected factors or events;
• the diversion of management’s attention from ongoing business operations and opportunities do to the proposed merger;
• potential adverse reactions or changes to business or employee relationships, including those resulting from the announcement or completion of the proposed merger;
• the dilutive effect of shares of the Company’s common stock to be issued at the completion of the proposed merger;
• changes in the Company’s or American National’s share price before closing;
• monetary and fiscal policies of the U.S. government, including policies of the U.S. Department of the Treasury and the Federal Reserve;
• the quality or composition of our loan or investment portfolios and changes therein;
• demand for loan products and financial services in our market areas;
• our ability to manage our growth or implement our growth strategy;
• the effectiveness of expense reduction plans;
• the introduction of new lines of business or new products and services;
• our ability to recruit and retain key employees;
• real estate values in our lending area;
• changes in accounting principles, standards, rules, and interpretations, and the related impact on our financial statements;
• an insufficient ACL or volatility in the ACL resulting from the CECL methodology, either alone or as that may be affected by inflation, changing interest rates, or other factors;
• our liquidity and capital positions;
• concentrations of loans secured by real estate, particularly commercial real estate;
• the effectiveness of our credit processes and management of our credit risk;
• our ability to compete in the market for financial services and increased competition from fintech companies;
• technological risks and developments, and cyber threats, attacks, or events;
• operational, technological, cultural, regulatory, legal, credit, and other risks associated with the exploration, consummation and integration of potential future acquisitions, whether involving stock or cash considerations;
• the potential adverse effects of unusual and infrequently occurring events, such as weather-related disasters, terrorist acts, geopolitical conflicts or public health events, and of governmental and societal responses thereto; these potential adverse effects may include, without limitation, adverse effects on the ability of our borrowers to satisfy their obligations to us, on the value of collateral securing loans, on the demand for our loans or our other products and services, on supply chains and methods used to distribute products and services, on incidents of cyberattack and fraud, on our liquidity or capital positions, on risks posed by reliance on third-party service providers, on other aspects of our business operations and on financial markets and economic growth;
• performance by our counterparties or vendors;
• deposit flows;
• the availability of financing and the terms thereof;
• the level of prepayments on loans and mortgage-backed securities;
• legislative or regulatory changes and requirements;
• actual or potential claims, damages, and fines related to litigation or government actions, which may result in, among other things, additional costs, fines, penalties, restrictions on our business activities, reputational harm, or other adverse consequences;
• the effects of changes in federal, state or local tax laws and regulations;
• any event or development that would cause us to conclude that there was an impairment of any asset, including intangible assets, such as goodwill; and
• other factors, many of which are beyond our control.

Please also refer to such other factors as discussed throughout Part I, Item 1A. “Risk Factors” and Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10‑K for the year ended December 31, 2022, Part II, Item 1A. Risk Factors in our Quarterly Reports on Form 10-Q for the quarters ended June 30, 2023 and March 31, 2023, and related disclosures in other filings, which have been filed with the U.S. Securities and Exchange Commission (“SEC”) and are available on the SEC’s website at www.sec.gov. All risk factors and uncertainties described herein and therein should be considered in evaluating forward-looking statements, and all of the forward-looking statements are expressly qualified by the cautionary statements contained or referred to herein and therein. The actual results or developments anticipated may not be realized or, even if substantially realized, they may not have the expected consequences to or effects on the Company or our businesses or operations. Readers are cautioned not to rely too heavily on the forward-looking statements, and undue reliance should not be placed on such forward-looking statements. Forward-looking statements speak only as of the date they are made. We do not intend or assume any obligation to update, revise or clarify any forward-looking statements that may be made from time to time by or on behalf of the Company, whether as a result of new information, future events or otherwise.