Atlantic Union Bankshares 8K Reports Second Quarter Results | AUB 23 Jul 20

Exhibit 99.1

Contact: Robert M. Gorman - (804) 523-7828

Executive Vice President / Chief Financial Officer

ATLANTIC UNION BANKSHARES REPORTS SECOND QUARTER RESULTS

Richmond, Va., July 23, 2020 – Atlantic Union Bankshares Corporation (the “Company” or “Atlantic Union”) (Nasdaq: AUB) today reported net income of $30.7 million and diluted earnings per share of $0.39 for its second quarter ended June 30, 2020. Pre-tax pre-provision earnings⁽¹⁾ were $70.4 million, or $0.89 per share⁽¹⁾, in the second quarter ended June 30, 2020.

Net income was $37.8 million and earnings per share were $0.48 for the six months ended June 30, 2020. Pre-tax pre-provision earnings⁽¹⁾ were $138.7 million, or $1.76 per share⁽¹⁾, in the six months ended June 30, 2020.

“During the second quarter Atlantic Union demonstrated resilience, agility and innovation along with its willingness to make the tough decisions required to successfully navigate through the challenges of COVID-19,” said John C. Asbury, President and Chief Executive Officer of Atlantic Union. “We have remained focused on helping our customers and our communities weather the storm as exemplified by our team’s ability to process more than 11,000 loans which provided approximately $1.7 billion to businesses through the Small Business Administration’s Paycheck Protection Program during the second quarter.

“Operating under the mantra of soundness, profitability and growth – in that order of priority – we believe that Atlantic Union continues to be in a strong financial position with ample liquidity and a well-fortified capital base further enhanced by the issuance of preferred stock during the quarter. We also took action to better align our expense run rate to the revenue reality of the much lower for longer than expected interest rate environment. This includes the consolidation of 14 branches, or nearly 10% of our branch network, that is expected to close in September.”

Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”)

During the second quarter of 2020, the Company continued to participate in the SBA PPP under the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, which was intended to provide economic relief to small businesses that have been adversely impacted by the COVID-19 global pandemic (“COVID-19”). The Company processed over 11,000 loans, which totaled $1.7 billion with a recorded investment of $1.6 billion as of June 30, 2020. The loans carry a 1% interest rate and the Company recorded net PPP loan origination fees of approximately $50.2 million which are being amortized over a 24-month period.

Expense Reduction Measures and Balance Sheet Repositioning

During the second quarter of 2020, the Company undertook several actions, including a planned consolidation of 14 branches expected to occur in September, to reduce expenses in light of the current and expected operating environment. These actions resulted in expenses during the second quarter of $1.8 million of severance costs and also $1.6 million related to the real estate write-downs.

In response to the current rate environment, the Company prepaid a Federal Home Loan Bank (“FHLB”) advance, which resulted in a prepayment penalty of approximately $10.3 million, and sold several securities, which resulted in a gain of approximately $10.3 million.

On June 9, 2020, the Company issued and sold 6,900,000 depositary shares, each representing a 1/400th ownership interest in a share of the Company’s 6.875% Perpetual Non-Cumulative Preferred Stock, Series A (“Series A Preferred Stock”), par value $10.00 per share of Series A Preferred Stock, with a liquidation preference of $10,000 per share of Series A Preferred Stock. The net proceeds received from the issuance of the Series A Preferred Stock were approximately $166.4 million, after deducting the underwriting discount and other offering expenses payable by the Company.

⁽¹⁾ These are financial measures not calculated in accordance with generally accepted accounting principles (“GAAP”). For a reconciliation of these non-GAAP financial measures, see Alternative Performance Measures (non-GAAP) section of the Key Financial Results.

NET INTEREST INCOME

For the second quarter of 2020, net interest income was $137.3 million, an increase from $135.0 million reported in the first quarter of 2020. Net interest income (FTE)⁽¹⁾was $140.1 million in the second quarter of 2020, an increase of $2.3 million from the first quarter of 2020. The second quarter net interest margin decreased 26 basis points to 3.23% from 3.49% in the previous quarter, while the net interest margin (FTE)⁽¹⁾decreased 27 basis points to 3.29% from 3.56% during the same period. The decreases in the net interest margin and net interest margin (FTE) were principally due to a 60 basis point decrease in the yield on earning assets (FTE)⁽¹⁾ offset by a 33 basis point decrease in cost of funds. The decline in the Company’s earning asset yields was driven by the impact of the lower yielding PPP loans originated during the second quarter and the full quarter impact of the lower interest rate environment. The cost of funds decline was driven by lower deposit costs and wholesale borrowing costs driven by lower market interest rates and a favorable funding mix.

The Company’s net interest margin (FTE) includes the impact of acquisition accounting fair value adjustments. During the second quarter of 2020, net accretion related to acquisition accounting decreased $3.1 million from the prior quarter to $6.3 million for the quarter ended June 30, 2020. The first and second quarters of 2020, and the remaining estimated net accretion impact are reflected in the following table (dollars in thousands):


			Deposit
	Loan		Accretion		Borrowings
	Accretion		(Amortization)		Amortization		Total
For the quarter ended March 31, 2020	$	9,528	$	50	$	(138)	$	9,440
For the quarter ended June 30, 2020		6,443		34		(140)		6,337
For the remaining six months of 2020 (estimated)		5,400		49		(355)		5,094
For the years ending (estimated):
2021		9,405		14		(807)		8,612
2022		7,569		(43)		(829)		6,697
2023		5,415		(32)		(852)		4,531
2024		4,406		(4)		(877)		3,525
2025		3,322		(1)		(900)		2,421
Thereafter		14,931		—		(9,873)		5,058

⁽¹⁾ These are financial measures not calculated in accordance with GAAP. For a reconciliation of these non-GAAP financial measures, see Alternative Performance Measures (non-GAAP) section of the Key Financial Results.

ASSET QUALITY

Overview

During the second quarter of 2020, the Company experienced decreases in nonperforming assets (“NPAs”) primarily due to nonaccrual loan customer payments. Past due loan levels as a percentage of total loans held for investment at June 30, 2020 were down from past due loan levels at March 31, 2020 and June 30, 2019. Net charge-off levels and the provision for loan losses decreased from the first quarter of 2020.

Loan Modifications for Borrowers Affected by COVID-19

On March 22, 2020, the five federal bank regulatory agencies and the Conference of State Bank Supervisors issued joint

guidance (subsequently revised on April 7, 2020) with respect to loan modifications for borrowers affected by COVID-19 (the “March 22 Joint Guidance”). The March 22 Joint Guidance encourages banks, savings associations, and credit unions to make loan modifications for borrowers affected by COVID-19 and, importantly, assures those financial institutions that they will not (i) receive supervisory criticism for such prudent loan modifications and (ii) be required by examiners to automatically categorize COVID-19-related loan modifications as TDRs. The federal banking regulators have confirmed with the Financial Accounting Standards Board (or FASB) that short-term loan modifications made on a

good faith basis in response to COVID-19 to borrowers who were current (i.e., less than 30 days past due on contractual payments) prior to any loan modification are not TDRs.

In addition, Section 4013 of the CARES Act provides banks, savings associations, and credit unions with the ability to make loan modifications related to COVID-19 without categorizing the loan as a TDR or conducting the analysis to make the determination, which is intended to streamline the loan modification process. Any such suspension is effective for the term of the loan modification; however, the suspension is only permitted for loan modifications made during the effective period of Section 4013 and only for those loans that were not more than thirty days past due as of December 31, 2019.

The Company has made certain loan modifications pursuant to the March 22 Joint Guidance or Section 4013 of the CARES Act and as of June 30, 2020 approximately $1.6 billion remain under their modified terms.

Nonperforming Assets

At June 30, 2020, NPAs totaled $44.0 million, a decrease of $4.4 million from March 31, 2020. NPAs as a percentage of total outstanding loans at June 30, 2020 were 0.31%, a decrease of 7 basis points from 0.38% at March 31, 2020. Excluding the impact of the PPP loans⁽¹⁾, NPAs as a percentage of total outstanding loans were 0.35%, a decrease of 3 basis points from March 31, 2020. The Company’s adoption of current expected credit loss (“CECL”) on January 1, 2020 resulted in a change in the accounting and reporting related to purchased credit impaired (“PCI”) loans, which are now defined as purchased credit deteriorated (“PCD”) and evaluated at the loan level instead of being evaluated in pools under PCI accounting. All prior period nonaccrual and past due loan metrics discussed herein have not been restated for CECL accounting and exclude PCI-related loan balances.

The following table shows a summary of nonperforming asset balances at the quarter ended (dollars in thousands):


	June 30,		March 31,		December 31,		September 30,		June 30,
	2020		2020		2019		2019		2019
Nonaccrual loans	$	39,624	$	44,022	$	28,232	$	30,032	$	27,462
Foreclosed properties		4,397		4,444		4,708		6,385		6,506
Total nonperforming assets	$	44,021	$	48,466	$	32,940	$	36,417	$	33,968

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


	June 30,		March 31,		December 31,		September 30,		June 30,
	2020		2020		2019		2019		2019
Beginning Balance	$	44,022	$	28,232	$	30,032	$	27,462	$	24,841
Net customer payments		(6,524)		(3,451)		(5,741)		(3,612)		(3,108)
Additions		3,206		6,059		5,631		8,327		6,321
Impact of CECL adoption		—		14,381		—		—		—
Charge-offs		(1,088)		(1,199)		(1,690)		(884)		(592)
Loans returning to accruing status		8		—		—		(1,103)		—
Transfers to foreclosed property		—		—		—		(158)		—
Ending Balance	$	39,624	$	44,022	$	28,232	$	30,032	$	27,462

The following table shows the activity in foreclosed properties for the quarter ended (dollars in thousands):


	June 30,		March 31,		December 31,		September 30,		June 30,
	2020		2020		2019		2019		2019
Beginning Balance	$	4,444	$	4,708	$	6,385	$	6,506	$	7,353
Additions of foreclosed property		—		615		62		645		271
Valuation adjustments		—		(44)		(375)		(62)		(433)
Proceeds from sales		(55)		(854)		(1,442)		(737)		(638)
Gains (losses) from sales		8		19		78		33		(47)
Ending Balance	$	4,397	$	4,444	$	4,708	$	6,385	$	6,506

Past Due Loans

Past due loans still accruing interest totaled $40.5 million or 0.28% of total loans held for investment at June 30, 2020, compared to $75.1 million or 0.59% of total loans held for investment at March 31, 2020, and $43.1 million or 0.35% of total loans held for investment at June 30, 2019. Excluding the impact of the PPP loans⁽¹⁾, past due loans still accruing interest were 0.32% of total loans held for investment at June 30, 2020. Of the total past due loans still accruing interest, $19.3 million or 0.13% of total loans held for investment were loans past due 90 days or more at June 30, 2020, compared to $12.9 million or 0.10% of total loans held for investment at March 31, 2020, and $8.8 million or 0.07% of total loans held for investment at June 30, 2019.

Net Charge-offs

For the second quarter of 2020, net charge-offs were $3.3 million, or 0.09% of total average loans on an annualized basis, compared to $5.0 million, or 0.16%, for the prior quarter, and $4.3 million, or 0.14%, for the second quarter last year. Excluding the impact of the PPP loans⁽¹⁾, net charge-offs were 0.10% of total average loans on an annualized basis. The majority of net charge-offs in the second quarter of 2020 were related to the third-party consumer loan portfolio.

Provision for Credit Losses

The provision for credit losses for the second quarter of 2020 was $34.2 million, a decrease of $26.0 million compared to the previous quarter. The provision for credit losses for the second quarter of 2020 consisted of $32.2 million in provision for loan losses and $2.0 million in provision for unfunded commitments.

Allowance for Credit Losses (“ACL”)

At June 30, 2020, the ACL was $181.0 million and included an allowance for loan and lease losses (“ALLL”) of $170.0 million and a reserve for unfunded commitments (“RUC”) of $11.0 million. The ACL increased $30.9 million from March 31, 2020, primarily due to the worsening economic forecast related to COVID-19.

The ALLL increased $28.9 million and the RUC increased $2.0 million from March 31, 2020, due to the worsening economic forecast related to COVID-19. The ALLL as a percentage of the total loan portfolio was 1.19% at June 30, 2020 and 1.10% at March 31, 2020, and the ACL as percentage of total loans was 1.26% at June 30, 2020. When excluding PPP loans⁽¹⁾, which are 100% guaranteed by the SBA, the ALLL as a percentage of adjusted loans increased 24 bps to 1.34% from the prior quarter and the ACL as a percentage of adjusted loans increased 24 bps to 1.42% from the prior quarter. The ratio of the ALLL to nonaccrual loans was 429.0% at June 30, 2020, compared to 320.4% at March 31, 2020.

NONINTEREST INCOME

Noninterest income increased $7.0 million to $35.9 million for the quarter ended June 30, 2020 from $28.9 million in the prior quarter primarily driven by a $10.3 million gain on sale of investment securities recorded during the quarter and an increase of $1.5 million in loan related interest rate swap income. In addition, mortgage banking income was higher by $3.8 million primarily due to increased mortgage loan refinance volumes due to the current low interest rate environment. Partially offsetting these increases was a decline in service charges on deposit accounts of $2.6 million primarily due to lower NSF and overdraft incident fees, $2.5 million in unrealized losses related to equity method investments due to the current economic environment related to COVID-19, and a decline of $469,000 in fiduciary and asset management fees.

NONINTEREST EXPENSE

Noninterest expense increased $7.2 million to $102.8 million for the quarter ended June 30, 2020 from $95.6 million in the prior quarter primarily driven by the recognition of approximately $10.3 million loss on debt extinguishment resulting from the prepayment of approximately $200.0 million in long-term FHLB advances. The increases were partially offset by a decline in marketing and advertising expense of approximately $696,000 and training and other personnel costs of approximately $695,000. Noninterest expense also included approximately $1.6 million in real estate-related branch closure costs and approximately $1.8 million in severance expenses related to the Company’s expense reduction plans. Also included in noninterest expense are costs related to the Company’s response to COVID-19 of approximately $620,000.

INCOME TAXES

The effective tax rate for the three months ended June 30, 2020 was 15.2% compared to 12.2% for the three months ended March 31, 2020. The increase in the effective tax rate was primarily due to tax benefits related to stock compensation during the first quarter of 2020 in accordance with ASU 2016-09, “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting” as well as tax-exempt income being a higher component of pre-tax income in the first quarter of 2020 compared to the second quarter of 2020.

BALANCE SHEET

At June 30, 2020, total assets were $19.8 billion, an increase of $1.9 billion, or approximately 42.9% (annualized), from March 31, 2020, and an increase of $2.6 billion, or approximately 15.1% from June 30, 2019. The increase in assets from the prior quarter was driven by PPP loans while growth from the prior year was primarily a result of both organic and PPP loan growth.

At June 30, 2020, loans held for investment (net of deferred fees and costs) were $14.3 billion, an increase of $1.5 billion, or 48.5% (annualized), from March 31, 2020, while average loans increased $1.4 billion, or 43.6% (annualized), from the prior quarter. Excluding the effects of the PPP⁽²⁾, loans held for investment (net of deferred fees and costs) declined $58.9 million, or 1.9% (annualized), while average loans increased $89.9 million, or 2.9% (annualized) during this period. Loans held for investment (net of deferred fees and costs) increased $2.1 billion, or 17.1% from June 30, 2019, while quarterly average loans increased $1.9 billion, or 15.5% from the prior year. Excluding the effects of the PPP⁽²⁾, loans held for investment (net of deferred fees and costs) increased $489.4 million, or 4.0%, while quarterly average loans increased $598.9 million, or 5.0% from the prior year.

At June 30, 2020, total deposits were $15.6 billion, an increase of $2.1 billion, or approximately 60.9% (annualized), from March 31, 2020, while average deposits increased $1.6 billion, or 48.6% (annualized), from the prior quarter. Deposits increased $3.1 billion, or 24.7% from June 30, 2019, while quarterly average deposits increased $2.5 billion, or 20.1% from the prior year. The increase in deposits from the prior quarter was primarily due to the impact of PPP loan related deposits and government stimulus check deposits.

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


	June 30,		March 31,		June 30,
	2020		2020		2019
Common equity Tier 1 capital ratio ⁽¹⁾	9.81	%	9.74	%	10.53	%
Tier 1 capital ratio ⁽¹⁾	10.95	%	9.74	%	10.53	%
Total capital ratio ⁽¹⁾	13.71	%	12.37	%	13.00	%
Leverage ratio (Tier 1 capital to average assets) ⁽¹⁾	8.82	%	8.44	%	9.00	%
Common equity to total assets	12.41	%	13.59	%	14.64	%
Tangible common equity to tangible assets ⁽²⁾	7.74	%	8.43	%	9.28	%

(1)	All ratios at June 30, 2020 are estimates and subject to change pending the Company’s filing of its FR Y9-C. All other periods are presented as filed.

(2)	These are financial measures not calculated in accordance with GAAP. For a reconciliation of these non-GAAP financial measures, see Alternative Performance Measures (non-GAAP) section of the Key Financial Results.

On June 9, 2020, the Company issued and sold 6,900,000 depositary shares, each representing a 1/400th ownership interest in a share of the Company’s 6.875% Series A Preferred Stock, par value $10.00 per share of Series A Preferred Stock, with a liquidation preference of $10,000 per share of Series A Preferred Stock. The net proceeds received from the issuance of the Series A Preferred Stock was approximately $166.4 million, after deducting the underwriting discount and other offering expenses payable by the Company. The Series A Preferred Stock is included in Tier 1 capital.

During the second quarter of 2020, the Company declared and paid cash dividends of $0.25 per common share, consistent with the first quarter of 2020 and an increase of $0.02, or 8.7% compared to the second quarter of 2019. On July 10, 2019, the Company announced that its Board of Directors had authorized a share repurchase program (effective July 8, 2019) to purchase up to $150 million of the Company’s common stock through June 30, 2021 in open market transactions or privately negotiated transactions. On March 20, 2020, the Company suspended its share repurchase program, which had $20 million remaining in the authorization when it was suspended. The Company repurchased an aggregate of approximately 3.7 million shares, at an average price of $35.48 per share, under the authorization prior to the suspension.

ABOUT ATLANTIC UNION BANKSHARES CORPORATION

Headquartered in Richmond, Virginia, Atlantic Union Bankshares Corporation (Nasdaq: AUB) is the holding company for Atlantic Union Bank. Atlantic Union Bank has 149 branches and approximately 170 ATMs located throughout Virginia, and in portions of Maryland and North Carolina. Middleburg Financial is a brand name used by Atlantic Union Bank and certain affiliates when providing trust, wealth management, private banking, and investment advisory products and services. Certain non-bank affiliates of Atlantic Union Bank include: Old Dominion Capital Management, Inc., and its subsidiary, Outfitter Advisors, Ltd., Dixon, Hubard, Feinour, & Brown, Inc., and Middleburg Investment Services, LLC, which provide investment advisory and/or brokerage services; and Union Insurance Group, LLC, which offers various lines of insurance products.

SECOND QUARTER 2020 EARNINGS RELEASE CONFERENCE CALL

The Company will hold a conference call on Thursday, July 23, 2020 at 9:00 a.m. Eastern Daylight Time during which management will review the second quarter 2020 financial results and provide an update on recent activities. Interested parties may participate in the call toll-free by dialing (866) 220-4170; international callers wishing to participate may do so by dialing (864) 663-5235. The conference ID number is 6176635. Management will conduct a listen-only webcast with accompanying slides, which can be found at: https://edge.media-server.com/mmc/p/7vrpdxva.

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 of the quarter ended June 30, 2020, 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) section of the Key Financial Results.

FORWARD-LOOKING STATEMENTS

Certain statements in this press release may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements, including without limitation, statements made in Mr. Asbury’s quotes, are statements that include, without limitation, projections, predictions, expectations, or beliefs about future events or results that are not statements of historical fact. Such forward-looking statements are based on various 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 accompanied by words that convey projected future events or outcomes such as “expect,” “believe,” “estimate,” “plan,” “project,” “anticipate,” “intend,” “will,” “may,” “view,” “opportunity,” “potential,” or words of similar meaning or other statements concerning opinions or judgment of the Company and its management about future events. Although the Company believes that its expectations with respect to forward-looking statements are based upon reasonable assumptions within the bounds of its existing knowledge of its business and operations, there can be no assurance that actual results, performance, or achievements of, or trends affecting, the Company will not differ materially from any projected future results, performance, or achievements 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:

●

changes in interest rates;

●

general economic and financial market conditions, in the United States generally and particularly in the markets in which the Company operates and which its loans are concentrated, including the effects of declines in real estate values, an increase in unemployment levels and slowdowns in economic growth, including as a result of COVID-19;

●

the quality or composition of the loan or investment portfolios and changes therein;

●

demand for loan products and financial services in the Company’s market area;

●

the Company’s ability to manage its growth or implement its growth strategy;

●

planned branch consolidations;

●

the introduction of new lines of business or new products and services;

●

the Company’s ability to recruit and retain key employees;

●

the incremental cost and/or decreased revenues associated with exceeding $10 billion in assets;

●

real estate values in the Bank’s lending area;

●

an insufficient ACL;

●

changes in accounting principles relating to loan loss recognition (CECL);

●

the Company’s liquidity and capital positions;

●

concentrations of loans secured by real estate, particularly commercial real estate;

●

the effectiveness of the Company’s credit processes and management of the Company’s credit risk;

●

the Company’s ability to compete in the market for financial services;

●

technological risks and developments, and cyber threats, attacks, or events;

●

the potential adverse effects of unusual and infrequently occurring events, such as weather-related disasters, terrorist acts or public health events (such as COVID-19), and of governmental and societal responses thereto; these potential adverse effects may include, without limitation, adverse effects on the ability of the Company's borrowers to satisfy their obligations to the Company, on the value of collateral securing loans, on the demand for the Company's loans or its other products and services, on incidents of cyberattack and fraud, on the Company’s liquidity or capital positions, on risks posed by reliance on third-party service providers, on other aspects of the Company's business operations and on financial markets and economic growth;

●

the effect of steps the Company takes in response to COVID-19, the severity and duration of the pandemic, including whether there is a “second wave” as a result of the loosening of governmental restrictions, the pace of recovery when the pandemic subsides and the heightened impact it has on many of the risks described herein;

●

performance by the Company’s 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, including the impact of the CARES Act and other legislative and regulatory reactions to COVID-19;

●

potential claims, damages, and fines related to litigation or government actions, including litigation or actions arising from the Company’s participation in and administration of programs related to COVID-19, including, among other things, the CARES Act;

●

the effects of changes in federal, state or local tax laws and regulations;

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monetary and fiscal policies of the U.S. government, including policies of the U.S. Department of the Treasury and the Federal Reserve;

●

changes to applicable accounting principles and guidelines; and

●

other factors, many of which are beyond the control of the Company.

Please refer to the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 and comparable “Risk Factors” sections of the Company’s Quarterly Reports on Form 10-Q and related disclosures in other filings, which have been filed with the SEC and are available on the SEC’s website at www.sec.gov. All of the forward-looking statements made in this press release are expressly qualified by the cautionary statements contained or referred to herein. 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 its businesses or operations. Readers are cautioned not to rely too heavily on the forward-looking statements contained in this press release. Forward-looking statements speak only as of the date they are made and the Company does not undertake any obligation to update, revise or clarify these forward-looking statements, whether as a result of new information, future events or otherwise.

ATLANTIC UNION BANKSHARES CORPORATION AND SUBSIDIARIES

KEY FINANCIAL RESULTS

(Dollars in thousands, except share data)


	As of & For Three Months Ended									As of & For Six Months Ended
	06/30/20			03/31/20			06/30/19			06/30/20			06/30/19
Results of Operations	(unaudited)			(unaudited)			(unaudited)			(unaudited)			(unaudited)
Interest and dividend income	$	162,867		$	171,325		$	181,125		$	334,193		$	346,777
Interest expense		25,562			36,317			42,531			61,880			80,636
Net interest income		137,305			135,008			138,594			272,313			266,141
Provision for credit losses		34,200			60,196			5,300			94,396			9,092
Net interest income after provision for credit losses		103,105			74,812			133,294			177,917			257,049
Noninterest income		35,932			28,907			30,578			64,838			55,515
Noninterest expenses		102,814			95,645			105,608			198,459			212,335
Income before income taxes		36,223			8,074			58,264			44,296			100,229
Income tax expense		5,514			985			9,356			6,498			15,606
Income from continuing operations		30,709			7,089			48,908			37,798			84,623
Discontinued operations, net of tax		—			—			(85)			—			(170)
Net income available to common shareholders	$	30,709		$	7,089		$	48,823		$	37,798		$	84,453

Interest earned on earning assets (FTE) ⁽¹⁾	$	165,672		$	174,083		$	184,045		$	339,755		$	352,445
Net interest income (FTE) ⁽¹⁾		140,110			137,766			141,514			277,875			271,809
Total revenue (FTE) ⁽¹⁾		176,042			166,673			172,092			342,713			327,324
Pre-tax pre-provision earnings ⁽⁸⁾		70,423			68,270			73,862			138,692			138,064

Key Ratios
Earnings per common share, diluted	$	0.39		$	0.09		$	0.59		$	0.48		$	1.06
Return on average assets (ROA)		0.64	%		0.16	%		1.15	%		0.41	%		1.04	%
Return on average equity (ROE)		4.96	%		1.15	%		7.86	%		3.06	%		7.16	%
Efficiency ratio		59.35	%		58.35	%		62.43	%		58.86	%		66.01	%
Net interest margin		3.23	%		3.49	%		3.71	%		3.35	%		3.71	%
Net interest margin (FTE) ⁽¹⁾		3.29	%		3.56	%		3.78	%		3.42	%		3.79	%
Yields on earning assets (FTE) ⁽¹⁾		3.90	%		4.50	%		4.92	%		4.18	%		4.92	%
Cost of interest-bearing liabilities		0.84	%		1.23	%		1.50	%		1.03	%		1.46	%
Cost of deposits		0.53	%		0.86	%		0.93	%		0.68	%		0.90	%
Cost of funds		0.61	%		0.94	%		1.14	%		0.76	%		1.13	%

Operating Measures⁽⁴⁾
Net operating earnings	$	30,709		$	7,089		$	57,089		$	37,798		$	107,607
Net operating earnings available to common shareholders		30,709			7,089			57,089			37,798			107,607
Operating earnings per share, diluted	$	0.39		$	0.09		$	0.70		$	0.48		$	1.36
Operating ROA		0.64	%		0.16	%		1.35	%		0.41	%		1.33	%
Operating ROE		4.96	%		1.15	%		9.20	%		3.06	%		9.12	%
Operating ROTCE ^{(2) (3)}		9.46	%		2.87	%		16.58	%		6.13	%		16.48	%
Operating efficiency ratio (FTE) ⁽¹⁾⁽⁷⁾		56.00	%		54.74	%		52.46	%		55.39	%		53.24	%

Per Share Data
Earnings per common share, basic	$	0.39		$	0.09		$	0.59		$	0.48		$	1.06
Earnings per common share, diluted		0.39			0.09			0.59			0.48			1.06
Cash dividends paid per common share		0.25			0.25			0.23			0.50			0.46
Market value per share		23.16			21.90			35.33			23.16			35.33
Book value per common share		31.32			30.99			30.78			31.32			30.78
Tangible book value per common share ⁽²⁾		18.54			18.15			18.36			18.54			18.36
Price to earnings ratio, diluted		14.77			60.50			14.93			23.99			16.37
Price to book value per common share ratio		0.74			0.71			1.15			0.74			1.15
Price to tangible book value per common share ratio ⁽²⁾		1.25			1.21			1.92			1.25			1.92
Weighted average common shares outstanding, basic		78,711,765			79,290,352			82,062,585			79,001,058			79,282,830
Weighted average common shares outstanding, diluted		78,722,690			79,317,382			82,125,194			79,020,036			79,344,573
Common shares outstanding at end of period		78,713,056			78,710,448			82,086,736			78,713,056			82,086,736


	As of & For Three Months Ended									As of & For Six Months Ended
	06/30/20			03/31/20			06/30/19			06/30/20			06/30/19
Capital Ratios	(unaudited)			(unaudited)			(unaudited)			(unaudited)			(unaudited)
Common equity Tier 1 capital ratio ⁽⁵⁾		9.81	%		9.74	%		10.53	%		9.81	%		10.53	%
Tier 1 capital ratio ⁽⁵⁾		10.95	%		9.74	%		10.53	%		10.95	%		10.53	%
Total capital ratio ⁽⁵⁾		13.71	%		12.37	%		13.00	%		13.71	%		13.00	%
Leverage ratio (Tier 1 capital to average assets) ⁽⁵⁾		8.82	%		8.44	%		9.00	%		8.82	%		9.00	%
Common equity to total assets		12.41	%		13.59	%		14.64	%		12.41	%		14.64	%
Tangible common equity to tangible assets ⁽²⁾		7.74	%		8.43	%		9.28	%		7.74	%		9.28	%

Financial Condition
Assets	$	19,752,317		$	17,847,376		$	17,159,384		$	19,752,317		$	17,159,384
Loans held for investment		14,308,646			12,768,841			12,220,514			14,308,646			12,220,514
Securities		2,672,557			2,655,306			2,703,856			2,672,557			2,703,856
Earning Assets		17,680,876			15,813,780			15,140,370			17,680,876			15,140,370
Goodwill		935,560			935,560			930,449			935,560			930,449
Amortizable intangibles, net		65,105			69,298			82,976			65,105			82,976
Deposits		15,605,139			13,553,035			12,515,544			15,605,139			12,515,544
Borrowings		1,125,030			1,514,464			1,909,171			1,125,030			1,909,171
Stockholders' equity		2,618,226			2,425,450			2,512,295			2,618,226			2,512,295
Tangible common equity ⁽²⁾		1,451,197			1,420,592			1,498,870			1,451,197			1,498,870

Loans held for investment, net of deferred fees and costs
Construction and land development	$	1,247,939		$	1,318,252		$	1,267,712		$	1,247,939		$	1,267,712
Commercial real estate - owner occupied		2,067,087			2,051,904			1,966,776			2,067,087			1,966,776
Commercial real estate - non-owner occupied		3,455,125			3,328,012			3,104,823			3,455,125			3,104,823
Multifamily real estate		717,719			679,390			602,115			717,719			602,115
Commercial & Industrial		3,555,971			2,177,932			2,032,799			3,555,971			2,032,799
Residential 1-4 Family - Commercial		715,384			721,800			723,636			715,384			723,636
Residential 1-4 Family - Consumer		841,051			854,550			928,130			841,051			928,130
Residential 1-4 Family - Revolving		627,765			652,135			660,621			627,765			660,621
Auto		380,053			358,039			311,858			380,053			311,858
Consumer		311,362			352,572			383,653			311,362			383,653
Other Commercial		389,190			274,255			238,391			389,190			238,391
Total loans held for investment	$	14,308,646		$	12,768,841		$	12,220,514		$	14,308,646		$	12,220,514

Deposits
NOW accounts	$	3,618,523		$	3,180,913		$	2,552,159		$	3,618,523		$	2,552,159
Money market accounts		4,158,325			3,817,959			3,592,523			4,158,325			3,592,523
Savings accounts		824,164			745,402			749,472			824,164			749,472
Time deposits of $250,000 and over		689,693			696,520			579,786			689,693			579,786
Other time deposits		1,968,474			2,044,668			2,026,708			1,968,474			2,026,708
Time deposits		2,658,167			2,741,188			2,606,494			2,658,167			2,606,494
Total interest-bearing deposits	$	11,259,179		$	10,485,462		$	9,500,648		$	11,259,179		$	9,500,648
Demand deposits		4,345,960			3,067,573			3,014,896			4,345,960			3,014,896
Total deposits	$	15,605,139		$	13,553,035		$	12,515,544		$	15,605,139		$	12,515,544

Averages
Assets	$	19,157,238		$	17,559,921		$	16,997,531		$	18,358,579		$	16,352,222
Loans held for investment		13,957,711			12,593,923			12,084,961	��		13,275,817			11,608,821
Loans held for sale		56,846			50,721			47,061			53,783			31,119
Securities		2,648,967			2,621,437			2,738,528			2,635,202			2,692,236
Earning assets		17,106,132			15,563,670			15,002,726			16,334,901			14,450,057
Deposits		14,960,386			13,346,857			12,453,702			14,153,621			11,964,536
Time deposits		2,667,268			2,755,500			2,562,498			2,711,384			2,444,513
Interest-bearing deposits		10,941,368			10,421,419			9,555,093			10,681,393			9,285,895
Borrowings		1,344,994			1,442,525			1,847,325			1,395,539			1,819,147
Interest-bearing liabilities		12,286,362			11,863,944			11,402,418			12,076,932			11,105,042
Stockholders' equity		2,489,969			2,485,646			2,490,049			2,487,807			2,379,834
Tangible common equity ⁽²⁾		1,446,948			1,478,803			1,475,028			1,462,875			1,404,929


		As of & For Three Months Ended									As of & For Six Months Ended
		06/30/20			03/31/20			06/30/19			06/30/20			06/30/19
Asset Quality		(unaudited)			(unaudited)			(unaudited)			(unaudited)			(unaudited)
Allowance for Credit Losses (ACL)
Beginning balance, Allowance for loan and lease losses (ALLL)		$	141,043		$	42,294		$	40,827		$	42,294		$	41,045
Add: Day 1 impact from adoption of CECL			—			47,484			—			47,484			—
Add: Recoveries			1,411			2,160			1,670			3,571			3,366
Less: Charge-offs			4,677			7,151			5,934			11,828			11,873
Add: Provision for loan losses			32,200			56,256			5,900			88,456			9,925
Ending balance, ALLL		$	169,977		$	141,043		$	42,463		$	169,977		$	42,463

Beginning balance, Reserve for unfunded commitment (RUC)		$	9,000		$	900		$	1,700			900			900
Add: Day 1 impact from adoption of CECL			—			4,160			—			4,160			—
Add: Impact of acquisition accounting			—			—			—			—			1,033
Add: Provision for unfunded commitments			2,000			3,940			(600)			5,940			(833)
Ending balance, RUC		$	11,000		$	9,000		$	1,100			11,000			1,100
Total ACL		$	180,977		$	150,043		$	43,563		$	180,977		$	43,563

ACL / total outstanding loans			1.26	%		1.18	%		0.36	%		1.26	%		0.36	%
ACL / total adjusted loans⁽⁹⁾			1.42	%		1.18	%		0.36	%		1.42	%		0.36	%
ALLL / total outstanding loans			1.19	%		1.10	%		0.35	%		1.19	%		0.35	%
ALLL / total adjusted loans⁽⁹⁾			1.34	%		1.10	%		0.35	%		1.34	%		0.35	%
Net charge-offs / total average loans			0.09	%		0.16	%		0.14	%		0.13	%		0.15	%
Net charge-offs / total adjusted average loans⁽⁹⁾			0.10	%		0.16	%		0.14	%		0.14	%		0.15	%
Provision for loan losses/ total average loans			0.93	%		1.80	%		0.20	%		1.34	%		0.17	%
Provision for loan losses/ total adjusted average loans⁽⁹⁾			1.02	%		1.80	%		0.20	%		1.48	%		0.17	%
	`
Nonperforming Assets⁽⁶⁾
Construction and land development		$	3,977		$	3,234		$	5,619		$	3,977		$	5,619
Commercial real estate - owner occupied			8,924			11,250			4,062			8,924			4,062
Commercial real estate - non-owner occupied			1,877			1,642			1,685			1,877			1,685
Multifamily real estate			33			53			—			33			—
Commercial & Industrial			2,708			3,431			1,183			2,708			1,183
Residential 1-4 Family - Commercial			5,784			7,040			4,135			5,784			4,135
Residential 1-4 Family - Consumer			12,029			13,088			8,677			12,029			8,677
Residential 1-4 Family - Revolving			3,626			3,547			1,432			3,626			1,432
Auto			584			550			449			584			449
Consumer and all other			82			187			220			82			220
Nonaccrual loans		$	39,624		$	44,022		$	27,462		$	39,624		$	27,462
Foreclosed property			4,397			4,444			6,506			4,397			6,506
Total nonperforming assets (NPAs)		$	44,021		$	48,466		$	33,968		$	44,021		$	33,968
Construction and land development		$	473		$	317		$	855		$	473		$	855
Commercial real estate - owner occupied			7,851			1,690			2,540			7,851			2,540
Commercial real estate - non-owner occupied			878			2,037			1,489			878			1,489
Multifamily real estate			366			377			—			366			—
Commercial & Industrial			178			517			295			178			295
Residential 1-4 Family - Commercial			578			777			863			578			863
Residential 1-4 Family - Consumer			5,099			4,407			845			5,099			845
Residential 1-4 Family - Revolving			1,995			2,005			658			1,995			658
Auto			181			127			122			181			122
Consumer and all other			1,656			622			1,161			1,656			1,161
Loans ≥ 90 days and still accruing		$	19,255		$	12,876		$	8,828		$	19,255		$	8,828
Total NPAs and loans ≥ 90 days		$	63,276		$	61,342		$	42,796		$	63,276		$	42,796
NPAs / total outstanding loans			0.31	%		0.38	%		0.28	%		0.31	%		0.28	%
NPAs / total adjusted loans⁽⁹⁾			0.35	%		0.38	%		0.28	%		0.35	%		0.28	%
NPAs / total assets			0.22	%		0.27	%		0.20	%		0.22	%		0.20	%
ALLL / nonaccrual loans			428.97	%		320.39	%		154.62	%		428.97	%		154.62	%
ALLL/ nonperforming assets			386.13	%		291.01	%		125.01	%		386.13	%		125.01	%
Past Due Detail⁽⁶⁾
Construction and land development		$	1,683		$	2,786		$	2,327		$	1,683		$	2,327
Commercial real estate - owner occupied			1,679			10,779			1,707			1,679			1,707
Commercial real estate - non-owner occupied			930			2,087			141			930			141
Multifamily real estate			—			623			1,218			—			1,218
Commercial & Industrial			1,602			4,893			3,223			1,602			3,223
Residential 1-4 Family - Commercial			480			4,145			1,622			480			1,622
Residential 1-4 Family - Consumer			1,229			15,667			5,969			1,229			5,969
Residential 1-4 Family - Revolving			1,924			4,308			4,978			1,924			4,978
Auto			1,176			1,967			2,120			1,176			2,120
Consumer and all other			1,300			1,613			2,824			1,300			2,824
Loans 30-59 days past due		$	12,003		$	48,868		$	26,129		$	12,003		$	26,129


	As of & For Three Months Ended									As of & For Six Months Ended
	06/30/20			03/31/20			06/30/19			06/30/20			06/30/19
Past Due Detail cont'd⁽⁶⁾	(unaudited)			(unaudited)			(unaudited)			(unaudited)			(unaudited)
Construction and land development	$	294		$	316		$	318		$	294		$	318
Commercial real estate - owner occupied		430			1,444			—			430			—
Commercial real estate - non-owner occupied		369			2,765			164			369			164
Multifamily real estate		—			1,994			—			—			—
Commercial & Industrial		296			1,218			1,175			296			1,175
Residential 1-4 Family - Commercial		2,105			1,066			651			2,105			651
Residential 1-4 Family - Consumer		3,817			570			2,801			3,817			2,801
Residential 1-4 Family - Revolving		1,048			1,286			1,336			1,048			1,336
Auto		290			311			299			290			299
Consumer and all other		561			2,362			1,423			561			1,423
Loans 60-89 days past due	$	9,210		$	13,332		$	8,167		$	9,210		$	8,167

Troubled Debt Restructurings
Performing	$	15,303		$	14,865		$	19,144		$	15,303		$	19,144
Nonperforming		5,042			5,491			4,536			5,042			4,536
Total troubled debt restructurings	$	20,345		$	20,356		$	23,680		$	20,345		$	23,680

Alternative Performance Measures (non-GAAP)
Net interest income (FTE)
Net interest income (GAAP)	$	137,305		$	135,008		$	138,594		$	272,313		$	266,141
FTE adjustment		2,805			2,758			2,920			5,562			5,668
Net interest income (FTE) (non-GAAP)⁽¹⁾	$	140,110		$	137,766		$	141,514		$	277,875		$	271,809
Noninterest income (GAAP)		35,932			28,907			30,578			64,838			55,515
Total revenue (FTE) (non-GAAP) ⁽¹⁾	$	176,042		$	166,673		$	172,092		$	342,713		$	327,324

Average earning assets	$	17,106,132		$	15,563,670		$	15,002,726		$	16,334,901		$	14,450,057
Net interest margin		3.23	%		3.49	%		3.71	%		3.35	%		3.71	%
Net interest margin (FTE) ⁽¹⁾		3.29	%		3.56	%		3.78	%		3.42	%		3.79	%

Tangible Assets
Ending assets (GAAP)	$	19,752,317		$	17,847,376		$	17,159,384		$	19,752,317		$	17,159,384
Less: Ending goodwill		935,560			935,560			930,449			935,560			930,449
Less: Ending amortizable intangibles		65,105			69,298			82,976			65,105			82,976
Ending tangible assets (non-GAAP)	$	18,751,652		$	16,842,518		$	16,145,959		$	18,751,652		$	16,145,959

Tangible Common Equity ⁽²⁾
Ending equity (GAAP)	$	2,618,226		$	2,425,450		$	2,512,295		$	2,618,226		$	2,512,295
Less: Ending goodwill		935,560			935,560			930,449			935,560			930,449
Less: Ending amortizable intangibles		65,105			69,298			82,976			65,105			82,976
Less: Perpetual preferred stock		166,364			—			—			166,364			—
Ending tangible common equity (non-GAAP)	$	1,451,197		$	1,420,592		$	1,498,870		$	1,451,197		$	1,498,870

Average equity (GAAP)	$	2,489,969		$	2,485,646		$	2,490,049		$	2,487,807		$	2,379,834
Less: Average goodwill		935,560			935,560			929,455			935,560			894,252
Less: Average amortizable intangibles		67,136			71,283			85,566			69,210			80,653
Less: Average perpetual preferred stock		40,325			—			—			20,162			—
Average tangible common equity (non-GAAP)	$	1,446,948		$	1,478,803		$	1,475,028		$	1,462,875		$	1,404,929

Operating Measures⁽⁴⁾
Net income (GAAP)	$	30,709		$	7,089		$	48,823		$	37,798		$	84,453
Plus: Merger and rebranding-related costs, net of tax		—			—			8,266			—			23,154
Net operating earnings (non-GAAP)		30,709			7,089			57,089			37,798			107,607
Less: Dividends on preferred stock		—			—			—			—			—
Net operating earnings available to common shareholders (non-GAAP)	$	30,709		$	7,089		$	57,089		$	37,798		$	107,607

Noninterest expense (GAAP)	$	102,814		$	95,645		$	105,608		$	198,459		$	212,335
Less: Merger Related Costs		—			—			6,371			—			24,493
Less: Rebranding Costs		—			—			4,012			—			4,420
Less: Amortization of intangible assets		4,223			4,401			4,937			8,624			9,154
Operating noninterest expense (non-GAAP)	$	98,591		$	91,244		$	90,288		$	189,835		$	174,268

Net interest income (FTE) (non-GAAP)⁽¹⁾	$	140,110		$	137,766		$	141,514		$	277,875		$	271,809
Noninterest income (GAAP)		35,932			28,907			30,578			64,838			55,515
Total revenue (FTE) (non-GAAP) ⁽¹⁾	$	176,042		$	166,673		$	172,092		$	342,713		$	327,324

Efficiency ratio		59.35	%		58.35	%		62.43	%		58.86	%		66.01	%
Operating efficiency ratio (FTE)⁽⁷⁾		56.00	%		54.74	%		52.46	%		55.39	%		53.24	%


	As of & For Three Months Ended									As of & For Six Months Ended
	06/30/20			03/31/20			06/30/19			06/30/20			06/30/19
	(unaudited)			(unaudited)			(unaudited)			(unaudited)			(unaudited)
Operating ROTCE ⁽²⁾⁽³⁾
Net operating earnings available to common shareholders (non-GAAP)	$	30,709		$	7,089		$	57,089		$	37,798		$	107,607
Plus: Amortization of intangibles, tax effected		3,336			3,477			3,900			6,813			7,232
Net operating earnings available to common shareholders before amortization of intangibles (non-GAAP)	$	34,045		$	10,566		$	60,989		$	44,611		$	114,839

Average tangible common equity (non-GAAP)	$	1,446,948		$	1,478,803		$	1,475,028		$	1,462,875		$	1,404,929
Operating return on average tangible common equity (non-GAAP)		9.46	%		2.87	%		16.58	%		6.13	%		16.48	%

Pre-tax pre-provision earnings ⁽⁸⁾
Net income (GAAP)	$	30,709		$	7,089		$	48,823		$	37,798		$	84,453
Plus: Provision for credit losses		34,200			60,196			5,300			94,396			9,092
Plus: Income tax expense		5,514			985			9,356			6,498			15,606
Plus: Merger and rebranding-related costs		—			—			10,383			—			28,913
Pre-tax pre-provision earnings (non-GAAP)	$	70,423		$	68,270		$	73,862		$	138,692		$	138,064

Paycheck Protection Program adjustment impact ⁽⁹⁾
Loans held for investment (net of deferred fees and costs)(GAAP)	$	14,308,646		$	12,768,841		$	12,220,514		$	14,308,646		$	12,220,514
Less: PPP adjustments		1,598,718			—			—			1,598,718			—
Loans held for investment (net of deferred fees and costs),net adjustments, excluding PPP (non-GAAP)	$	12,709,928		$	12,768,841		$	12,220,514		$	12,709,928		$	12,220,514

Average loans held for investment (GAAP)	$	13,957,711		$	12,593,923		$	12,084,961		$	13,275,817		$	11,608,821
Less: Average PPP adjustments		1,273,883			—			—			1,273,883			—
Average loans held for investment, net adjustments, excluding PPP (non-GAAP)	$	12,683,828		$	12,593,923		$	12,084,961		$	12,001,934		$	11,608,821

Mortgage Origination Volume
Refinance Volume	$	163,737		$	68,382		$	27,870		$	232,120		$	39,839
Construction Volume		12,966			7,837			360			20,802			360
Purchase Volume		83,248			64,492			84,225			147,740			116,332
Total Mortgage loan originations	$	259,951		$	140,711		$	112,455		$	400,662		$	156,531
% of originations that are refinances		63.0	%		48.6	%		24.8	%		57.9	%		25.5	%

Wealth
Assets under management ("AUM")	$	5,271,288		$	4,783,228		$	5,332,203		$	5,271,288		$	5,332,203

Other Data
End of period full-time employees		1,973			2,011			1,931			1,973			1,931
Number of full-service branches		149			149			153			149			153
Number of full automatic transaction machines ("ATMs")		169			169			197			169			197

(1)

These are non-GAAP financial measures. Net interest income (FTE) and total revenue (FTE), which are used in computing net interest margin (FTE) and operating efficiency ratio (FTE), respectively, provide valuable additional insight into the net interest margin and the efficiency ratio by adjusting for differences in tax treatment of interest income sources. The entire FTE adjustment is attributable to interest income on earning assets, which is used in computing yield on earning assets. Interest expense and the related cost of interest-bearing liabilities and cost of funds ratios are not affected by the FTE components.

(2)

These are non-GAAP financial measures. Tangible common equity is used in the calculation of certain profitability, capital, and per share ratios. The Company believes tangible common equity and the related ratios are meaningful measures of capital adequacy because they provide a meaningful base for period-to-period and company-to-company comparisons, which the Company believes will assist investors in assessing the capital of the Company and its ability to absorb potential losses.

(3)

These are non-GAAP financial measures. The Company believes that ROTCE is a meaningful supplement to GAAP financial measures and useful to investors because it measures the performance of a business consistently across time without regard to whether components of the business were acquired or developed internally.

(4)

These are non-GAAP financial measures. Operating measures exclude merger and rebranding-related costs unrelated to the Company’s normal operations. The Company believes these measures are useful to investors as they exclude certain costs resulting from acquisition activity and allow investors to more clearly see the combined economic results of the organization’s operations.

(5)	All ratios at June 30, 2020 are estimates and subject to change pending the Company’s filing of its FR Y9-C. All other periods are presented as filed.

(6)

Amounts are not directly comparable due to the Company’s adoption of CECL on January 1, 2020. Prior to January 1, 2020, nonaccrual and past due loan information excluded PCI-related loan balances. These balances also reflect the impact of the CARES Act and the joint supervisory guidance issued by five federal bank regulatory agencies and the Conference of State Bank Supervisors (updated April 7^th) which provides relief for TDR designations and also provides guidance on past due reporting for modified loans.

(7)

The operating efficiency ratio (FTE) excludes the amortization of intangible assets and merger-related costs. This measure is similar to the measure utilized by the Company when analyzing corporate performance and is also similar to the measure utilized for incentive compensation. The Company believes this measure is useful to investors as it excludes certain costs resulting from acquisition activity allowing for greater comparability with others in the industry and allowing investors to more clearly see the combined economic results of the organization’s operations.

(8)

This is a non-GAAP financial measure. Pre-tax pre-provision earnings excludes the provision for credit losses, which can fluctuate significantly from period-to-period under the recently adopted CECL methodology, merger and rebranding-related costs unrelated to the Company’s normal operations, and income tax expense. The Company believes this measure is useful to investors as it excludes certain costs resulting from acquisition activity as well as the potentially volatile provision measure, and allows for greater comparability with others in the industry and for investors to more clearly see the combined economic results of the organization’s operations.

(9)

These are non-GAAP financial measures. Paycheck Protection Program adjustment impact excludes the SBA guaranteed loans funded during the first half of 2020. The Company believes loans held for investment (net of deferred fees and costs), excluding PPP is useful to investors as it provides more clarity on the Company’s organic growth. The Company also believes that the related non-GAAP financial measures of past due loans still accruing interest as a percentage of total loans held for investment (net of deferred fees and costs), excluding PPP, are useful to investors as loans originated under the PPP carry an SBA guarantee. The Company believes that the ALLL as a percentage of loans held for investment (net of deferred fees and costs), excluding PPP, is useful to investors because of the size of the Company’s PPP originations and the impact of the embedded credit enhancement provided by the SBA guarantee.

ATLANTIC UNION BANKSHARES CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except share data)


	June 30,		March 31,		December 31,		June 30,
	2020		2020		2019		2019
ASSETS		(unaudited)		(unaudited)		(audited)		(unaudited)
Cash and cash equivalents:
Cash and due from banks	$	202,947	$	197,521	$	163,050	$	171,441
Interest-bearing deposits in other banks		636,211		292,154		234,810		146,514
Federal funds sold		2,862		15,284		38,172		2,523
Total cash and cash equivalents		842,020		504,959		436,032		320,478
Securities available for sale, at fair value		2,019,164		1,972,903		1,945,445		1,999,494
Securities held to maturity, at carrying value		547,561		552,176		555,144		558,503
Restricted stock, at cost		105,832		130,227		130,848		145,859
Loans held for sale, at fair value		55,067		76,690		55,405		62,908
Loans held for investment, net of deferred fees and costs		14,308,646		12,768,841		12,610,936		12,220,514
Less allowance for loan and lease losses		169,977		141,043		42,294		42,463
Total loans held for investment, net		14,138,669		12,627,798		12,568,642		12,178,051
Premises and equipment, net		164,321		161,139		161,073		168,514
Goodwill		935,560		935,560		935,560		930,449
Amortizable intangibles, net		65,105		69,298		73,669		82,976
Bank owned life insurance		327,075		324,980		322,917		318,734
Other assets		551,943		491,646		378,255		393,418
Total assets	$	19,752,317	$	17,847,376	$	17,562,990	$	17,159,384
LIABILITIES
Noninterest-bearing demand deposits	$	4,345,960	$	3,067,573	$	2,970,139	$	3,014,896
Interest-bearing deposits		11,259,179		10,485,462		10,334,842		9,500,648
Total deposits		15,605,139		13,553,035		13,304,981		12,515,544
Securities sold under agreements to repurchase		77,216		56,781		66,053		70,870
Other short-term borrowings		—		380,000		370,200		618,050
Long-term borrowings		1,047,814		1,077,683		1,077,495		1,220,251
Other liabilities		403,922		354,427		231,159		222,374
Total liabilities		17,134,091		15,421,926		15,049,888		14,647,089
Commitments and contingencies
STOCKHOLDERS' EQUITY
Preferred stock, $10.00 par value		173		—		—		—
Common stock, $1.33 par value		104,126		104,086		105,827		108,560
Additional paid-in capital		1,911,985		1,743,429		1,790,305		1,862,716
Retained earnings		540,638		529,606		581,395		512,952
Accumulated other comprehensive income (loss)		61,304		48,329		35,575		28,067
Total stockholders' equity		2,618,226		2,425,450		2,513,102		2,512,295
Total liabilities and stockholders' equity	$	19,752,317	$	17,847,376	$	17,562,990	$	17,159,384
Common shares outstanding		78,713,056		78,710,448		80,001,185		82,086,736
Common shares authorized		200,000,000		200,000,000		200,000,000		200,000,000
Preferred shares outstanding		17,250		-		-		-
Preferred shares authorized		500,000		500,000		500,000		500,000

ATLANTIC UNION BANKSHARES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Dollars in thousands, except share data)


	Three Months Ended						Six Months Ended
	June 30,		March 31,		June 30,		June 30,		June 30,
	2020		2020		2019		2020		2019
	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Interest and dividend income:
Interest and fees on loans	$	143,234	$	151,127	$	158,838	$	294,361	$	302,952
Interest on deposits in other banks		155		862		544		1,017		1,017
Interest and dividends on securities:
Taxable		11,267		11,627		13,353		22,895		26,434
Nontaxable		8,211		7,709		8,390		15,920		16,374
Total interest and dividend income		162,867		171,325		181,125		334,193		346,777
Interest expense:
Interest on deposits		19,861		28,513		28,809		48,375		53,239
Interest on short-term borrowings		186		1,340		5,563		1,526		12,114
Interest on long-term borrowings		5,515		6,464		8,159		11,979		15,283
Total interest expense		25,562		36,317		42,531		61,880		80,636
Net interest income		137,305		135,008		138,594		272,313		266,141
Provision for credit losses		34,200		60,196		5,300		94,396		9,092
Net interest income after provision for credit losses		103,105		74,812		133,294		177,917		257,049
Noninterest income:
Service charges on deposit accounts		4,930		7,578		7,499		12,508		14,656
Other service charges, commissions and fees		1,354		1,624		1,702		2,978		3,367
Interchange fees		1,697		1,625		5,612		3,321		10,656
Fiduciary and asset management fees		5,515		5,984		5,698		11,499		10,752
Mortgage banking income		5,826		2,022		2,785		7,847		4,240
Gains (losses) on securities transactions		10,339		1,936		51		12,275		202
Bank owned life insurance income		2,027		2,049		2,075		4,076		4,129
Loan-related interest rate swap fees		5,484		3,948		3,716		9,432		5,176
Other operating income		(1,240)		2,141		1,440		902		2,337
Total noninterest income		35,932		28,907		30,578		64,838		55,515
Noninterest expenses:
Salaries and benefits		49,896		50,117		50,390		100,013		98,398
Occupancy expenses		7,224		7,133		7,534		14,357		14,935
Furniture and equipment expenses		3,406		3,741		3,542		7,147		6,938
Printing, postage, and supplies		999		1,290		1,252		2,289		2,494
Technology and data processing		6,454		6,169		5,739		12,623		11,415
Professional services		2,989		3,307		2,630		6,297		5,587
Marketing and advertising expense		2,043		2,739		2,908		4,782		5,291
FDIC assessment premiums and other insurance		2,907		2,861		2,601		5,768		5,239
Other taxes		4,120		4,120		4,044		8,240		7,808
Loan-related expenses		2,501		2,697		2,396		5,198		4,685
OREO and credit-related expenses		411		688		1,473		1,099		2,157
Amortization of intangible assets		4,223		4,401		4,937		8,624		9,154
Training and other personnel costs		876		1,571		1,477		2,446		2,621
Merger-related costs		—		—		6,371		—		24,493
Rebranding expense		—		—		4,012		—		4,420
Loss on debt extinguishment		10,306		—		—		10,306		—
Other expenses		4,459		4,811		4,302		9,270		6,700
Total noninterest expenses		102,814		95,645		105,608		198,459		212,335
Income from continuing operations before income taxes		36,223		8,074		58,264		44,296		100,229
Income tax expense		5,514		985		9,356		6,498		15,606
Income from continuing operations	$	30,709	$	7,089	$	48,908	$	37,798	$	84,623
Discontinued operations:
Income (loss) from operations of discontinued mortgage segment	$	—	$	—	$	(114)	$	—	$	(229)
Income tax expense (benefit)		—		—		(29)		—		(59)
Income (loss) on discontinued operations		—		—		(85)		—		(170)
Net income available to common shareholders	$	30,709	$	7,089	$	48,823	$	37,798	$	84,453

Basic earnings per common share	$	0.39	$	0.09	$	0.59	$	0.48	$	1.06
Diluted earnings per common share	$	0.39	$	0.09	$	0.59	$	0.48	$	1.06

AVERAGE BALANCES, INCOME AND EXPENSES, YIELDS AND RATES (TAXABLE EQUIVALENT BASIS)


	For the Quarter Ended
	June 30, 2020					March 31, 2020
	Average Balance		Interest Income / Expense ⁽¹⁾		Yield / Rate ⁽¹⁾⁽²⁾	Average Balance		Interest Income / Expense ⁽¹⁾		Yield / Rate ⁽¹⁾⁽²⁾

	(unaudited)						(unaudited)
Assets:
Securities:
Taxable	$	1,626,426	$	11,267	2.79%	$	1,664,449	$	11,627	2.81%
Tax-exempt		1,022,541		10,394	4.09%		956,988		9,759	4.10%
Total securities		2,648,967		21,661	3.29%		2,621,437		21,386	3.28%
Loans, net ^{(3) (4)}		13,957,711		143,339	4.13%		12,593,923		151,313	4.83%
Other earning assets		499,454		672	0.54%		348,310		1,384	1.60%
Total earning assets		17,106,132	$	165,672	3.90%		15,563,670	$	174,083	4.50%
Allowance for credit losses		(150,868)					(90,141)
Total non-earning assets		2,201,974					2,086,392
Total assets	$	19,157,238				$	17,559,921

Liabilities and Stockholders' Equity:
Interest-bearing deposits:
Transaction and money market accounts	$	7,474,210	$	7,303	0.39%	$	6,933,345	$	14,521	0.84%
Regular savings		799,890		123	0.06%		732,574		157	0.09%
Time deposits ⁽⁵⁾		2,667,268		12,435	1.88%		2,755,500		13,835	2.02%
Total interest-bearing deposits		10,941,368		19,861	0.73%		10,421,419		28,513	1.10%
Other borrowings ⁽⁶⁾		1,344,994		5,701	1.70%		1,442,525		7,804	2.18%
Total interest-bearing liabilities		12,286,362	$	25,562	0.84%		11,863,944	$	36,317	1.23%

Noninterest-bearing liabilities:
Demand deposits		4,019,018					2,925,438
Other liabilities		361,889					284,893
Total liabilities		16,667,269					15,074,275
Stockholders' equity		2,489,969					2,485,646
Total liabilities and stockholders' equity	$	19,157,238				$	17,559,921
Net interest income			$	140,110				$	137,766

Interest rate spread					3.06%					3.27%
Cost of funds					0.61%					0.94%
Net interest margin					3.29%					3.56%

(1)	Income and yields are reported on a taxable equivalent basis using the statutory federal corporate tax rate of 21%.

(2)	Rates and yields are annualized and calculated from actual, not rounded amounts in thousands, which appear above.

(3)	Nonaccrual loans are included in average loans outstanding.

(4)	Interest income on loans includes $6.4 million and $9.5 million for the three months ended June 30, 2020 and March 31, 2020, respectively, in accretion of the fair market value adjustments related to acquisitions.

(5)	Interest expense on time deposits includes $34,000 and $50,000 for the three months ended June 30, 2020 and March 31, 2020, respectively, in accretion of the fair market value adjustments related to acquisitions.

(6)	Interest expense on borrowings includes $140,000 and $138,000 for the three months ended June 30, 2020 and March 31, 2020, in amortization of the fair market value adjustments related to acquisitions.

Atlantic Union Bankshares (AUB) 8-KAtlantic Union Bankshares Reports Second Quarter Results