For Atlantic Union Bankshares, the key factor in its $417 million, all-stock deal for American National Bankshares in Danville, Virginia, is the platform it offers for further growth in neighboring North Carolina.
"It's something we've long sought," John Asbury, Atlantic Union's president and CEO, said Tuesday on a conference call with analysts. His $20.6 billion-asset company is based in Richmond, Virginia.
"The critical mass this achieves creates something we can build on for years to come," Asbury added.
The largest community bank headquartered in Virginia, Atlantic Union has four branches in eastern North Carolina, along with a loan production office in the state's capital and largest city, Charlotte. Acquiring the $3.1 billion-asset American National would give Atlantic Union seven additional branches in the Piedmont Triad region — where Asbury began his career 35 years ago.
"I still consider myself a North Carolina banker," Asbury said. "I learned this business in the Piedmont Triad. I'm excited to expand there."
Tuesday's deal announcement adds Atlantic Union to the growing list of banks seeking to boost their presence in the Tar-heel state. F.N.B. Corp. in Pittsburgh has focused on raising its North Carolina profile for six years. In December, it completed a
TD Bank, JPMorgan Chase and U.S. Bancorp also recently announced North Carolina expansion plans.
Acquiring American National would also bolster Atlantic Union's industry-leading Virginia presence. The pro forma company would hold $17.8 billion of deposits in Virginia, amounting to about 8% of the state's $236 billion deposit market. North Carolina deposits would total $1.1 billion.
"It's a hand-in-glove fit to our franchise," Asbury said.
According to both Asbury and Jeff Haley, American National's chairman, president and CEO, the two companies have maintained friendly relations for years. And though neither characterized Tuesday's deal as a negotiated transaction, Atlantic Union was a natural partner once American National's board made the decision to sell, Haley said.
"I, along with our board, got to the point where even with our incredible performance, our incredible reputation, we felt as though we were losing relevance not to just our shareholders but our customers in the way this industry is changing rapidly," Haley said on the conference call. "We needed to do something, and there were really no other better options … than taking two of the best banks in Virginia, over 200 years of experience, both high-performing companies [and] putting them together."
"These are not new people to us," Haley said about Atlantic Union's management team. "These are dear, dear friends of ours. … It's like cousins going into business together."
Branch foot traffic at American National has "declined considerably" in the wake of the COVID-19 pandemic, Haley added on a subsequent conference call. "It's been a massive change in the way people use banking services. … Eighty-five percent of our transactions are being done digitally."
Credit metrics are deteriorating as more cardholders fall behind on their payments. But bank CEOs detect few causes for alarm, saying they plan to stay in growth mode since most consumers have stayed current.
Before Tuesday, it had been a
The Atlantic Union-American National transaction's $417 million price tag amounts to 174% of American National's tangible book value per share and a 7.2% core deposit premium. While both metrics are significantly above average for 2023 deals, Atlantic Union Chief Financial Officer Robert Gorman called the payout "a fair price to pay to acquire such an outstanding franchise."
The deal is expected to be 19% accretive to Atlantic Union's 2024 earnings. Atlantic Union estimates it will earn back a projected 9.7% tangible-book-value dilution in three years.
Through the first six months of 2023, American National reported earnings of $16.3 million, down 5% year over year. American National's 1.06% return on average assets and 10% return on average common equity outpaced Atlantic Union's year-to-date numbers, which totaled 0.90% and 7.51%, respectively.
American National's nonperforming assets totaled $1.1 million on June 30, about 0.04% of total assets. "Historically, they've been a very clean bank from a credit perspective," Gorman said.
Atlantic Union is forecasting closing the deal in the first quarter of 2024, with systems conversion to follow in the second quarter. The company plans to add two American National directors, Nancy Agee and Joel Shepherd, to its board. Haley has agreed to serve as a consultant for two years.
Haley described the merger as a bittersweet moment for American National, with sadness at giving up independence balanced by what he described as an "incredible transaction."
"I'm a little sad, but I am so excited for everyone involved," Haley said.
"This is a group of people and an institution we've long admired," Asbury said.
