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Atlantic Union Bancshares Corp (AUB), a mid-sized bank with a market capitalization of $2.47 billion, reported strong financial results for the second quarter of 2025, surpassing Wall Street expectations with an earnings per share (EPS) of $0.95, compared to the forecast of $0.80. Revenue for the quarter reached $402.89 million, exceeding projections of $368.09 million. Despite this positive performance, the company’s stock fell 1.72% to close at $33.68. According to InvestingPro analysis, the stock currently appears fairly valued, with several positive indicators including strong revenue growth of 16.62% over the last twelve months.
Key Takeaways
- Atlantic Union’s EPS exceeded expectations by 18.75%.
- The company completed the acquisition of Sandy Spring Bank.
- Stock price declined by 1.72% despite strong earnings.
- Loan and deposit growth were significant, with increases of $8.9 billion and $10.5 billion, respectively.
Company Performance
Atlantic Union demonstrated robust performance in Q2 2025, with adjusted operating earnings totaling $135.1 million. The bank’s strategic acquisition of Sandy Spring Bank and a focus on expanding operations in North Carolina contributed to its growth. The company’s strong presence in Virginia and Maryland, along with a positive business sentiment, further bolstered its competitive position.
Financial Highlights
- Revenue: $402.89 million, up from expectations of $368.09 million.
- Earnings per share: $0.95, surpassing the forecast of $0.80.
- Total loans increased by $8.9 billion to $27.3 billion.
- Total deposits rose by $10.5 billion to $31.0 billion.
Earnings vs. Forecast
Atlantic Union’s EPS of $0.95 significantly beat the forecasted $0.80, marking an 18.75% surprise. Revenue also exceeded expectations by 9.45%, indicating strong operational execution and effective integration of recent acquisitions.
Market Reaction
Despite the earnings beat, Atlantic Union’s stock declined by 1.72% to $33.68, possibly influenced by overall market conditions and investor profit-taking. The stock remains within its 52-week range, with a high of $44.54 and a low of $22.85. Analyst consensus suggests potential upside, with price targets ranging from $33 to $46. InvestingPro data reveals the company has maintained dividend payments for 32 consecutive years and raised them for 14 straight years, demonstrating strong financial stability.
Outlook & Guidance
The company projects a 2025 loan balance of $28.0 billion to $28.5 billion and a deposit balance of $31.0 billion to $31.5 billion. Atlantic Union anticipates three Federal Reserve rate cuts in 2025, which could impact its net interest margin, expected to range between 3.75% and 4.0%. InvestingPro analysts forecast continued growth, with both net income and sales expected to increase this year. For comprehensive analysis of Atlantic Union’s growth prospects and financial health metrics, investors can access the detailed Pro Research Report, available exclusively to InvestingPro subscribers.
Executive Commentary
CEO John Asbury stated, "We have intentionally and carefully built a uniquely valuable franchise," highlighting the strategic importance of recent expansions. He also noted, "We are well positioned to realize the potential of the new markets," underscoring confidence in the company’s growth trajectory.
Risks and Challenges
- Interest rate fluctuations could affect net interest margins.
- Integration challenges post-acquisition may impact operational efficiency.
- Economic conditions in core markets could influence loan demand.
- Regulatory changes could pose compliance challenges.
- Competitive pressures in key regions may affect market share.
Q&A
During the earnings call, analysts focused on loan growth prospects and the potential for a share repurchase program in early 2026. Executives expressed optimism about the government contract finance segment and anticipated gradual margin improvements.
Atlantic Union’s Q2 2025 performance reflects its strategic initiatives and market positioning, though investor sentiment remains cautious amid broader economic uncertainties.
Full transcript - Atlantic Union Bankshares Corp (AUB) Q2 2025:
Jonathan, Conference Call Operator: Thank you for standing by and welcome to the Atlantic Union Bancshares Second Quarter twenty twenty five Earnings Call. At this time, all participants are in a listen only mode. After the speakers’ presentation, there will be a question and answer session. As a reminder, today’s program is being recorded. And now I’d like to introduce your host for today’s program, Bill Cimino, Senior Vice President, Investor Relations.
Please go ahead, sir.
John Asbury, President and CEO, Atlantic Union Bancshares: Thank you, Jonathan, and good morning, everyone. I have Atlantic Union Bankshares’ President and CEO, John Asbury and Executive Vice President and CFO, Rob Gorman, with me today. We also have other members of our executive management team with us for the question and answer period. Please note that today’s earnings release and the accompanying slide presentation we are going through on this webcast are available to download on our investor website, investors.atlanticunionbank.com. During today’s call, we will comment on our financial performance using both GAAP metrics and non GAAP financial measures.
Important information about these non GAAP financial measures, including reconciliations to comparable GAAP measures, is included in the appendix to our slide presentation in our earnings release for the second quarter of twenty twenty five. In our remarks on today’s call, we will also make forward looking statements, which are not statements of historical facts and are subject to risks and uncertainties. There can be no assurance that actual performance will not differ materially from any future expectations or results expressed or implied from these forward looking statements. We undertake no obligation to publicly revise or update any forward looking statement except as required by law. Please refer to our earnings release and slide presentation issued today and our other SEC filings for further discussion of the company’s risk factors and other important information regarding our forward looking statements, including factors that could cause actual results to differ from those expressed or implied in the forward looking statement.
All comments made during today’s call are subject to that Safe Harbor statement. At the end of the call, we’ll take questions from the research analyst community. And now I’ll turn the call over to John Asbury. Thank you, Bill. Good morning, everyone.
Thank you for joining us today. It was a productive and eventful quarter for Atlantic Union Bank shares marked by the acquisition of Sandy Spring Bank, which closed on April 1. As anticipated, the acquisition introduced some merger accounting noise this quarter and Q2 will serve as a better starting point for future linked quarter comparisons. We do believe our operating results demonstrate the strong earnings potential of our franchise as we envisioned when we announced the Sandy Spring acquisition. We are pleased that our operating performance following the merger is meeting our expectations.
The integration of Sandy Spring is progressing smoothly and we benefited from the two companies strong cultural alignment leading into the merger. The sale of approximately $2,000,000,000 of commercial real estate loans acquired from Sandy Spring Bank closed on June 26 and exceeded our initial pricing estimates. We also physically settled in full the forward sales of common equity in April concurrent with the merger closing, receiving approximately $385,000,000 before expenses. We are working diligently on integration activities and are on track for our fourth quarter core systems conversion, leveraging our experience from past acquisitions, including last year’s conversion of American National Bank, we are confident in our integration efforts and systems preparations. Our shareholder value proposition remains unchanged.
We believe Atlantic Union is well positioned to deliver sustainable growth, top tier financial performance and long term shareholder value. The strategic benefits from the Sandy Spring acquisition along with organic growth opportunities will bolster our position as the premier regional bank in the Lower Mid Atlantic with a strong presence in attractive markets. I will summarize key aspects of our second quarter results and provide insights into market conditions before handing over to Rob for a detailed financial review. I will then discuss our organic growth initiatives in North Carolina, which we’re excited about before opening the call for questions. Here are the highlights from our second quarter.
Our quarter end loan to deposit ratio was approximately 88%, Our CET1 capital ratio was 9.8% and our bank level CRE concentration ratio was 284%. The Sandy Spring acquisition closed one quarter earlier than anticipated, a positive development, though it gave us one quarter less capital accumulation than planned at announcement. Our reported FTE net interest margin expanded by 38 basis points to 3.83%. Notably, our core net interest margin, which excludes the impact of accretion income, improved by eight basis points. Assuming the Sandy Spring acquisition closed on March 31 instead of April 1 and excluding the negative fair loan loan fair value marks on the acquired loans and the effect of the commercial real estate loan sale, our loan growth was approximately 4% annualized quarter over quarter.
This exceeded our internal expectations given the economic uncertainties and we observed growing business confidence with a robust loan pipeline and strong production, particularly later in the quarter. Our pipelines indicate that we should have solid loan growth in the second half of the year. We continue to project year end loan balances between 28,000,000,000 and $28,500,000,000 inclusive of the negative impact of loan fair value marks. Deposit growth tends to be seasonally slow in the second quarter, and we also paid down broker deposits by approximately $340,000,000 in Q2 and intentionally reduced some higher cost non relationship deposits acquired in the Sandy Spring portfolio. The commercial real estate loan sale process was complex, but it yielded a strong outcome better than planned and reflected the quality of Sandy Springs client base and markets.
Completion of the sale removes the risk element, reduced our commercial real estate concentration, lowered the loan to deposit ratio and increased capacity for future growth, while providing a positive start to our integration efforts. Credit quality remained solid as we reported only one basis point of annualized net charge offs and past due loans remained low. Second quarter NPAs as a percentage of loans held for investment were 0.6%. The increase reflects AUB’s more conservative approach to loan rating and marking under acquisition accounting as Sandy Springs loans were added to AUB’s loan portfolio. We remain confident in our asset quality and market conditions.
We have lowered our forecast for the 2025 net charge off ratio to be between fifteen and twenty basis points for the full year, inclusive of a few non performing assets with specific reserves that we expect to charge off later this year. We are well distributed across Virginia, Maryland and North Carolina with a presence in Washington DC. These regions are highly attractive to operate in. In the Greater Washington DC region, despite continuing headlines about government employee employment reductions, the economic data and our observations suggest resilience. The region with a population of about 6,400,000 people remains robust and we view changes in government employment to date as manageable, although there continues to be uncertainty about where it may all end up.
For perspective, approximately 23% of our total loans are in the Washington Metro Area, with the remaining 77% across other parts of our footprint. As we stated last quarter, the credit exposures that have been most in focus in the Greater Washington region are government contractors and office buildings. We updated disclosures on these categories on pages 22, twenty three and twenty four of our supplemental presentation. Our government contractor finance portfolio, primarily national security and defense related is performing well, as you can see on slide 24 of our supplemental presentation. Of note, the recent budget reconciliation bill will increase defense spending to a record level.
And we believe defense modernization spending will be an overall benefit to our government contract portfolio. Regarding the office loan portfolio, AUB does not and Sandy Spring did not finance large office properties as evidenced by our $1,900,000 average loan size, and we have only $71,000,000 of exposure in the District Of Columbia. The portfolio is performing well, as you can see on Slide 22 of the supplemental presentation. More broadly, it is also worth pointing out that as of the most current unemployment data for June, there remains no more populous state in America with a lower unemployment rate than Maryland at 3.3. Virginia is the third most populous state in the country with the lowest unemployment rate at 3.5%.
With strong pipelines and an expanded footprint in attractive markets supplemented by our specialty lines, we believe we are positioned well for solid organic growth in the second half twenty twenty five. Rob will now provide further details on the quarter, and I will then return with comments on our future direction before opening the call for questions. Rob? Well, you, John, and
Rob Gorman, Executive Vice President and CFO, Atlantic Union Bancshares: good morning, everyone. Thanks for joining us today. I’ll now take a few minutes to provide you with some details of Atlantic Union’s financial results for the second quarter. Here are some key data points related to Sandy Spring acquisition that should be kept in mind as we review the second quarter’s results. The fair value of assets acquired totaled $13,000,000,000 and included loans held for investment of $8,600,000,000 and loans held for sale of $1,900,000,000 which primarily consisted of the CRE loans sold during the quarter subsequent to the acquisition.
The total loan portfolio fair value of mark discount was $789,700,000 comprised of a credit mark of $162,800,000 and an interest rate mark of $626,800,000 The fair value of liabilities assumed totaled $12,200,000,000 and included total deposits of $11,200,000,000 Core deposit intangibles and other intangibles acquired totaled $290,700,000 and the preliminary goodwill arising from the transaction totaled $496,900,000 Also, note that for the most part, my commentary or focus on Atlantic Union second quarter financial results on a non GAAP adjusted operating basis, which excludes the following items. The $89,500,000 negative pretax impact of the CECL day one initial provision for credit loss expense on purchased non credit deteriorated or non PCD loans acquired from Sandy Spring, which represents the CECL double count of the non PCD loan credit mark and the $11,400,000 negative pretax impact of provisioning expense on unfunded commitments acquired from Sandy Spring. Also excludes pre tax merger related costs of $78,900,000 in the second quarter associated with the merger and the $15,700,000 pre tax gain on the sale of $2,000,000,000 of CRE loan sales acquired in the Sandy Spring acquisition, as well as the $14,300,000 pre tax gain on the sale of our equity interest in Cary Street Partners.
That said, in the second quarter, reported net income available to common shareholders was $16,800,000 and earnings per common share were $0.12 Adjusted operating earnings available to common shareholders were $135,100,000 or $0.95 per common share for the second quarter, resulting in an adjusted operating return on tangible common equity of 23.8%, an adjusted operating return on assets of 1.46% and an adjusted operating efficiency ratio of 48.3% in the second quarter. Now turning to credit loss reserves at the end of the second quarter, the total allowance for credit losses was $342,400,000 which was an increase of approximately $133,000,000 from the first quarter, primarily due to the initial allowance related to the Sandy Spring acquired loans of $129,200,000 which includes a $28,300,000 loan loss reserve on PCD loans and the CECL double count of the non PCD loan credit mark and provision expense on acquired unfunded commitments totaling $100,900,000 The total allowance for credit losses as a percentage of total loans held investment increased to 125 basis points at the end of the second quarter, and that was up from 113 basis points at the end of the first quarter. Provision for credit losses of $105,700,000 in the second quarter includes the acquisition related CECL double count of 100,900,000 Excluding the day one initial provision recorded on non PCD loans and unfunded commitments acquired from Sandy Spring, the second quarter provision for credit losses was down from the prior quarter, primarily reflecting the impact of the overall build in the allowance for loan losses due to heightened uncertainty in the economic outlook in the prior quarter, as well as lower net charge offs in the second quarter.
Net charge offs decreased to $666,000 or one basis point annualized in the second quarter, down from $2,300,000 or 5 basis points annualized in the first quarter. Now turning to the pretax pre provision components of the income statement for the second quarter. Tax equivalent net interest income was $325,700,000 which was an increase of $137,800,000 from the first quarter, primarily driven by the addition of Sandy Spring acquired loans and deposits, merger related net accretion interest income related to acquisition accounting as well as by organic loan growth. As John noted, the second quarter’s tax equivalent net interest margin was 3.83, that was an increase of 38 basis points from the previous quarter, primarily driven by the incremental net accretion of purchase accounting adjustments on loans, deposits and long term borrowings related to the Sandy Spring acquisition. Earning asset yields for the second quarter increased 37 basis points to 6.05% compared to the first quarter and the cost of funds decreased by one basis point to 2.2% compared to the prior quarter.
The loan portfolio yield increased 47 basis points to 6.48% in the second quarter from 6.01% in the first quarter, primarily driven by the incremental merger related loan accretion income of $32,500,000 which added approximately 39 basis points to the loan yield from the prior quarter, which was in addition to an increase in linked quarter core loan yields of nine basis points, driven by back book fixed rate loans repricing higher. Securities and other earning asset yield increases in the second quarter added one basis point to the earning asset yield primarily driven by the restructuring of Sandy Springs investment portfolio and fair value accounting adjustments arising from the acquisition. These earning asset yield increases were partially offset by a two basis point decline due to shifts in the earning asset mix. One basis point decline in the second quarter’s cost of funds to 2.22% was due primarily to the nine basis points decrease in the cost of deposits at 2.2%, partially offset by higher borrowing costs primarily due to increased long term subordinated debt as a result of the CME Spring acquisition. Non interest income increased $52,300,000 to $81,500,000 for the second quarter, primarily driven by the $15,700,000 pre tax gain on the sale of the $2,000,000,000 of CRE loans and the $14,300,000 pre tax gain on the sale of our equity interest in Cary Street Partners, as well as the full quarter impact of the Sandy Spring acquisition.
Excluding the realized gains on sale during the quarter, adjusted operating non interest income increased $22,200,000 from the first quarter of $51,500,000 primarily due to the impact of the Sandy Spring acquisition, which drove the majority of increases in fiduciary and asset management fees, service charges on deposit accounts and interchange fees. In addition to acquisition impacts, the quarterly bank owned life insurance income increase of $3,800,000 included $2,400,000 in death benefits received in the second quarter. And the mortgage banking income increase of $1,800,000 included the impact of Sandy Springs mortgage business as well as a seasonal increase in mortgage loan origination volumes. In addition, other operating income increased 2,400,000 primarily due to an increase in equity method investment income. Reported non interest expense increased $145,500,000 to $279,700,000 for the second quarter of twenty twenty five, primarily driven by a 74,000,000 increase in merger related costs, as well as other increases in non interest expense due to the full quarter impact of the Sandy Spring acquisition.
Adjusted operating non interest expense, which excludes merger related costs in the first quarter first and second quarters and amortization of intangible assets in both quarters increased $58,600,000 to $182,400,000 for the second quarter, up from $123,800,000 in the prior quarter, primarily due to the impact of the Sandy Spring acquisition, which drove the majority of the increases in several non interest expense categories compared to the prior quarter. Company’s effective tax rate in the second quarter was a negative 13.2%, reflecting the impact of an $8,000,000 income tax benefit recorded during the quarter related to the company’s reevaluation of its state deferred tax asset as a result of the Sandy Spring acquisition. Going forward, the company’s estimated annual effective tax rate is projected to increase within a range of 21% to 22% from approximately 19.5% in the prior year, reflecting the impact of the Sandy Spring acquisition as Sandy Spring operate in a higher state tax jurisdiction, which now impacts a large proportion of the company’s consolidated pretax income. At June 30, loans held for investment net of deferred fees and costs were $27,300,000,000 which was an increase of $8,900,000,000 from the prior quarter, again primarily driven by the Sandy Spring acquisition.
Assuming the Sandy Spring acquisition closed on March 31 instead of April 1, and excluding both the negative loan fair value marks on the acquired loans and the effect of the CRE loan sale transaction pro form a loan growth was approximately 4% annualized. At June 30, total deposits stood at $31,000,000,000 which was an increase of $10,500,000,000 from
John Asbury, President and CEO, Atlantic Union Bancshares: the prior quarter due to
Rob Gorman, Executive Vice President and CFO, Atlantic Union Bancshares: increases in interest bearing customer deposits and demand deposits primarily related to the addition of Sandy Spring acquired deposits. Assuming the Sandy Spring acquisition closed on March 31 instead of April 1, pro form a deposits decreased $752,800,000 or approximately 9.5% annualized from the prior quarter, which is primarily due to lower brokered deposits, which declined by approximately $340,000,000 as well as declines in time deposit balances of approximately $143,000,000 as we intentionally let maturing higher cost non relationship time deposits acquired from Sandy Spring to run off during the second quarter. At the end of the second quarter, Atlantic Union Bank’s years and Atlantic Union Bank’s regulatory capital ratios were comfortably above well capitalized levels. In addition, on an adjusted basis, we remain well capitalized as of the end of the second quarter if you include the negative impact of ALCI and held to maturity securities unrealized losses in the calculation of the regulatory capital ratios. During the second quarter, the company paid a common stock dividend of $0.34 per share, which was an increase of 6.3% for the previous year’s second quarter dividend amount.
As noted on Slide 16, we’ve updated our full year 2025 financial outlook for AUB, which includes estimates of purchase accounting adjustments with respect to Sandy Spring that are subject to change. We expect loan balances to end the year between $28,000,000,000 and $28,500,000,000 while year end deposit balances are projected to be between $31,000,000,000 and $31,500,000,000 The allowance for credit losses to loans is expected to fall between 1.21.3%. And our full year net charge off ratio is projected to be between fifteen and twenty basis points. Fully tax equivalent net interest income for the full year is projected to come in between $1,150,000,000 and $1,200,000,000 As a result, we are projecting that the full year fully tax equivalent net interest margin will fall in the range between 3.754% driven by our baseline assumption that the Federal Reserve Bank will cut the Fed funds rate by 25 basis points in September, November and December. In addition, the fully tax equivalent net interest margin projection includes the impact of our estimate of net accretion income from the C and E Spring acquisition, which can be volatile and subject to change.
On a full year basis, adjusted operating non interest income is expected to fall between 175,000,000 and $185,000,000 and the adjusted operating non interest expenses for the full year, which excludes amortization of intangible assets expense of approximately $60,000,000 are estimated to fall in the range of $670,000,000 to $680,000,000 Based on these projections, we expect to produce financial returns that will place us within the top quartile of our peer group and meet our objective of delivering top tier financial performance for our shareholders. In summary, Atlantic Union delivered solid operating results in the second quarter, inclusive of Sandy Spring despite the noise of acquisition accounting. We are on track and confident that we will achieve the anticipated financial benefits of the combination with Sandy Spring, some of which were evident in the second quarter financial results. As a result, we believe we are well positioned to continue to generate sustainable, profitable growth and to build long term value for our shareholders in 2025 and beyond. I’ll now turn the call back over to John.
John Asbury, President and CEO, Atlantic Union Bancshares: Thank you, Rob. In December, we’ll host an Analyst Day at the New York Stock Exchange and Bill will send out more information on that shortly. This will be our third Analyst Day since I’ve been here And we’ll share our new three year strategic plan, which we expect to finalize and approve this fall. While you should not expect anything dramatic in terms of changes, it will be the next phase of the strategy we have articulated and consistently executed over the years. Although I don’t want to front run too much of what we’ll share in December, I do want to highlight our geographic footprint expansion strategy, because it’s a question we frequently receive.
For background, and as a reminder, I’ve often described the AUV story and our transformation as chapters in a book. Chapter one involved consolidating Virginia and securing our position as Virginia’s bank. We believe we have now accomplished that. Chapter two was extending the Virginia franchise to secure a similar footing in the Lower Mid Atlantic, which we believe was achieved with our acquisition of Sandy Spring. We now have the number one regional bank by depository market share in both Maryland and Virginia, a feat we believe unprecedented and likely not replicable in our markets.
Chapter three, which is already underway, focuses on the organic expansion of our presence in North Carolina. The acquisition of American National Bank last year was pivotal for densifying our presence in Western And Southern Virginia, as well as providing us a meaningful entry into North Carolina. We acquired American National, we clearly stated our intention to invest in North Carolina’s growth markets and we now plan to accelerate those investments. The Sandy Spring acquisition has provided us with significant growth opportunities in the large markets of Maryland and Northern Virginia. As evidenced by this quarter’s operating results, we believe it also provides us with the financial capacity to accelerate investments in our company, including organic expansion in North Carolina.
We will build on the North Carolina base we enhanced with American National’s Piedmont Triad presence and Raleigh office in addition to AUB’s existing branches in the Outer Banks, our longstanding Charlotte Loan Production Office and the Wilmington Loan Production Office we established after the American National merger. These are attractive markets where we believe we can successfully utilize our model to drive incremental growth. Starting in 2026, we plan to open 10 new branches in North Carolina with seven in the Research Triangle and three in Wilmington. We also plan to expand our commercial banking wealth and mortgage teams there. We believe these actions will provide us with a critical mass to compete in those markets and offer new supplemental organic growth opportunities in some of the best population growth markets in the country.
The branch build out is expected to be completed over a three year period. In sum, we have intentionally and carefully built a uniquely valuable franchise that we envisioned in our strategic plans over the past nearly nine years. We believe we are well positioned to realize the potential of the new markets acquired through the Sandy Spring acquisition to continue our growth in Virginia and to execute on attractive organic growth opportunities in North Carolina. Also plan to continue to supplement organic growth with our existing specialty lines. We’ll have more details during our Investor Day in December, but I hope this provides a clear picture of the next chapter in the AUB story.
And I would like to close by acknowledging our Chief Financial Officer, Rob Gorman’s planned retirement, which we announced in the second quarter. We have launched a nationwide search and are looking both internally and externally for our next CFO. Rob joined us in 2012, when we were a well regarded $4,000,000,000 asset Virginia Community Bank. His vision for the company’s potential predates my tenure, and he has been instrumental to our success. Rob’s leadership, expertise and friendship have been invaluable.
He’s not done yet. And for those of you who know him, he’ll run through the finish line. I’ll now turn the call over to Bill to see if there are any questions from our research analyst community. Thank you, John. And we’re, Jonathan, we’re ready for our first caller, please.
Jonathan, Conference Call Operator: Certainly. And our first question for today comes from the line of Russell Gunther from Stephens. Your question, please.
Russell Gunther, Analyst, Stephens: Good morning, Russell. Hey, good morning, Hey, good morning, John. Maybe to start on the loan growth discussion. Appreciate the commentary, about being well positioned for the back half of this year. We have those kind of guideposts.
How should we think about the pro form a growth outlook on a larger balance sheet and as we think about your plans for The Carolinas as a piece of that?
John Asbury, President and CEO, Atlantic Union Bancshares: Yes. I think that we’re in The Carolinas right now, as you know. And the Charlotte LPO, which is now nine years old, is actually the single largest piece of it. We picked up an additional presence in teams, of course, with the American National Bank merger, and we’re very happy with them. We have the new relatively new Wilmington LPO.
So that’s all rolled in, if you will, to our forecast. David Ring, who is our head of Wholesale Banking, which all of our various commercial businesses is here. Maybe I’ll ask Dave to comment. But Dave, my view is, as I look at the I’ll call it the I hate to use this term, but the legacy AUB pipeline excluding Sandy, it is at a record level. And Sandy Spring, that piece of the franchise, soon to be rebranded in the fall as AUB is looking pretty good too.
So what is your take in terms of what to expect?
David Ring, Head of Wholesale Banking, Atlantic Union Bancshares: So in the back half of the year, we do have good momentum coming in, especially starting in June, it really started. And like John said, the pipeline is as strong as it’s ever been. And so if you do the math and calculate your runoff and your health faster pipeline turns, we should be in good shape for the rest of the year.
Russell Gunther, Analyst, Stephens: Thank you, guys. And then maybe switching gears onto the expense outlook beyond what you’ve provided for this year and as you consider the Carolinas. I think pro form a for Sandy Spring you talked to an efficiency ratio in the 45% range. Is that still the right way to think about this going forward into 2026 or could we see that creep up as you build out the Carolinas organically?
Rob Gorman, Executive Vice President and CFO, Atlantic Union Bancshares: Yeah, Russell, this is Rob. Yeah, we’re still targeting that mid 45 mid 40 efficiency ratio. That’s inclusive of the investment we’re making in The Carolinas. So we looked at that very carefully. It still would reconfirm our thoughts on 2026 in terms of the metrics return on assets in the 150 range ROTC 20 plus percent and then the business ratio mid 40s inclusive of the investment we’re making down in The Carolinas.
John Asbury, President and CEO, Atlantic Union Bancshares: And that also includes some additional investment on the technology front in particular. I think every group of the bank seems to have shown up with AI related requests, for example. And while we can’t do everything, we do have the financial capacity to continue to invest in the company. So mid-40s looks good. I will note, as you can see, Russell, on an operating basis, we achieved what is a personal long term goal for me.
We broke 50. So we think we are solidly in the 40 something efficiency ratio category now, which is pretty good for a bank with a relatively large retail footprint.
Russell Gunther, Analyst, Stephens: I appreciate your thoughts, both of you on that. And then just the last one for me would be how you’re thinking about capital levels here. Is there any interest in exploring the reversal of the CECL double count? And then given this capital does accrete quickly with the pro form a return profile, how are you thinking about that related deployment? Is that all organic growth pegged?
Is there consideration of buybacks? Just helpful to
John Asbury, President and CEO, Atlantic Union Bancshares: get your big business capital thoughts.
Rob Gorman, Executive Vice President and CFO, Atlantic Union Bancshares: Yes. So if you look at the CET1 ratio, we’re about 9.8% at the end of this quarter. We’re looking forward, we think that will continue to increase by about 25 to 30 basis points a quarter. So pretty heavy internally generated capital increases. In terms of the CECL double count, we’ll evaluate that or that the change in the accounting there.
We’ll evaluate that, Russell, but it’s probably about a 30 basis point impact if we didn’t have that issue or the change had been made prior to this quarter. We’ll evaluate that. I don’t think we will make that change, but we’ll see how that plays out. In terms of deployment, yes, we’ll continue to obviously invest in the organic growth of the company. That’s number one.
And then continue to look at our dividend payout ratio, which is in the 35% to 45% target range. And then beyond that, as we start to get up closer to between 10.511%, we’ll look at other deployment options beyond those two, which would could be repurchasing shares, put a program in place to repurchase shares. That’s probably something we could evaluate probably in the first quarter of second quarter of next year.
Russell Gunther, Analyst, Stephens: Okay, great. Thank you both for taking my question.
John Asbury, President and CEO, Atlantic Union Bancshares: Russell. And Jonathan, we’re ready for our next caller please.
Jonathan, Conference Call Operator: Certainly. Our next question comes from the line of David Bishop from Hope Group. Your question please.
John Asbury, President and CEO, Atlantic Union Bancshares: Morning David. Hey,
David Bishop, Analyst, Hope Group: good morning John. Good morning Rob and congratulations Rob on the news. Just curious from a credit quality perspective, John, maybe on the you have the marks on the legacy Sandy Spring front. But just curious what you saw from a credit quality perspective on a sort of legacy Atlantic Union basis, maybe sort of color on what happened on criticized, classified and new NPA formation. Looks like it was pretty low, but just wanted to make sure did the numbers right.
John Asbury, President and CEO, Atlantic Union Bancshares: Yes, think the increase in NPA, as we stated, really was simply the Sandy Spring portfolio coming in. The overall credit looked quite stable. Doug Woolley is here, Chief Credit Officer. Doug, do you want to share a perspective on that?
Russell Gunther, Analyst, Stephens: Yes. What John said, David, is that it’s a reflection of our work on the Sandy portfolio. Rest of footprint looks fine. No, nothing material noticeable in a creditor’s profile anywhere.
David Bishop, Analyst, Hope Group: Got it. Then John, know in the past couple quarters, there’s been
John Asbury, President and CEO, Atlantic Union Bancshares: some headwinds,
David Bishop, Analyst, Hope Group: especially within the GovCon segment. Just curious what you’re seeing there in terms of the pipeline and rebuild of that portfolio, any sort of stabilization in that headwind?
John Asbury, President and CEO, Atlantic Union Bancshares: GovCon is performing fine. As I indicated, most, not all, but most of our government contract finance portfolio is national security and defense related, and they’re arguably winners. Now that we have a record defense spending bill, the modernization of defense spending, the shift toward drone warfare, anti drone defense, unmanned vehicles, unmanned ships, cybersecurity, missile defense in general, all of that tends to favor the types of contractors that we deal with. And it looks pretty good. One of the issues we faced in government contract finance has been, you know, we saw a lot of activity with private credit, you know, that was paying it down.
But overall, you know, it looks pretty good. Dave, do you have
David Ring, Head of Wholesale Banking, Atlantic Union Bancshares: anything to add in terms of opportunities there? I’ll just say that we do a lot of due diligence on a weekly basis on that portfolio. So in other words, we look at contracts that are approved and contracts that are taken away from our clients on a weekly basis and update cash flows to make sure that those clients are able to pay and the portfolio looks really strong. Yep.
John Asbury, President and CEO, Atlantic Union Bancshares: Client selectivity matters. We’ve been in that business for fifteen years. Knock on wood, we’ve never had a charge off. Not saying that will always be the case, but it’s, I think we’re in the right segment.
David Bishop, Analyst, Hope Group: Got it. And one final question, maybe Rob, from a housekeeping perspective. I know there’s lumpiness in terms of purchase accounting accretion income levels, any sort of sense where that could be trending over the near term here? Is this a good estimate moving forward into the latter half of the year? Thanks.
Rob Gorman, Executive Vice President and CFO, Atlantic Union Bancshares: Yes. If you look at this quarter, we had about $45,000,000 of accretion income come through. That’s pretty good run rate the way we’re looking at our projections. So I would go with that. It could be volatile as you know, it could be a card of prepayments and things of that nature.
But we think the $45,000,000 is pretty good number to run with.
David Bishop, Analyst, Hope Group: Great. Appreciate the color.
John Asbury, President and CEO, Atlantic Union Bancshares: Thanks, Dave. And Jonathan, we’re ready for our next caller, please.
Jonathan, Conference Call Operator: Certainly. Our next question comes from the line of Brian Wilczynski from Morgan Stanley. Your question, please.
John Asbury, President and CEO, Atlantic Union Bancshares: Morning, Hey,
Brian Wilczynski, Analyst, Morgan Stanley: good morning. Thanks for taking my question. Maybe just going back to the loan growth side. So you’re at $27,300,000,000 today. Can you just talk about what you’re hearing from your commercial borrowers about the environment?
And specifically how you’re thinking about the drivers of loan growth from here for both C and I and also CREs separately?
John Asbury, President and CEO, Atlantic Union Bancshares: Dave, want to take that? Sure.
David Ring, Head of Wholesale Banking, Atlantic Union Bancshares: The way I characterize the market that we’re dealing with right now is still a little they’re still holding back thinking about tariffs and other things. We’ve seen our borrowers actually investor borrow more for inventory buildup before tariffs would come across to them. But there has been like a break in optimism and it’s move we’re starting to see our sales cycles shorten and closings happen more quickly. On the real estate side, that’s a little trickier for us because we manage that very closely and we look at how construction and development works. And we peeled that back a little bit and we see those pipelines shrinking.
But we’re doing more deals on stabilized properties. And so we do see the both the CRE business growing this year and the C and I business growing. And we’re seeing that right now. But we expect that to continue. Yeah, I agree.
John Asbury, President and CEO, Atlantic Union Bancshares: There’s no question the mood improved over the course of the quarter. I think some of that was just people getting more accustomed to the uncertainty. The tariff issue, it’s not that our markets are somehow particularly susceptible to tariffs as we’ve argued before and had Federal Reserve data to back it up, we’re probably less impacted by tariffs in our markets than most places. It’s really more business sentiment. But I think that the mood has clearly improved as people have gotten more accustomed to the volatility and generally feeling more optimistic about where we go from here and that’s showing up.
I see clear evidence of that. So I think that we’re, to Dave’s earlier point, I think we’re on a pretty good footing, Brian, where I think that we’re looking at a reasonable growth trajectory for the remainder of the year.
Brian Wilczynski, Analyst, Morgan Stanley: That’s really helpful. Thank you. And then as a follow-up, maybe on the funding side. So you have about $1,600,000,000 of cash on the balance sheet post loan sale. Can you just dig into how you’re going to deploy that in terms of paying down higher cost sources of funding?
How much you can do there? And how quickly you can move on it? Thanks.
Rob Gorman, Executive Vice President and CFO, Atlantic Union Bancshares: Yes, Brian. So in terms of we’ve got about $1,600,000,000 of cash, which is about $1,000,000,000 probably $1.1 higher than we typically would have. That’s obviously comes from late in the quarter where we received the proceeds from the CRE sale. Our game plan there is to continue to pay down high cost brokered deposits, and those are maturing in the third quarter. $200 to $300,000,000 maybe a little higher than that over the next quarter.
And then there’s a bit more in the fourth quarter. In addition to that, we’re going to be investing a bit more in the investment portfolio, probably about $500,000,000 or so would be going into there. We’re kind of laddering that in over this quarter. And then we’re hoping that loan growth continues to be higher to get to that $28,000,000,000 So we’ll be using some of that cash for funding loans. So that’s how we’re planning to utilize it.
Brian Wilczynski, Analyst, Morgan Stanley: And is it fair to assume that the loan to deposit ratio maybe ticks up a little bit from here? Yes, given the option to do
Rob Gorman, Executive Vice President and CFO, Atlantic Union Bancshares: it will. I mean, we’re comfortable in the 90 percent to 95%. That’s historically where we’ve run. We’re 88% now. So you can see that tick up a bit higher as you take out certainly take out the broker deposit numbers or take those down.
Brian Wilczynski, Analyst, Morgan Stanley: Got it. That’s really helpful. Thank you for taking my questions.
Rob Gorman, Executive Vice President and CFO, Atlantic Union Bancshares: Certainly. Thank you, Brian.
John Asbury, President and CEO, Atlantic Union Bancshares: Thanks, Brian. And we’re ready for the next caller, Jonathan.
Jonathan, Conference Call Operator: Certainly. Our next question comes from the line of Steve Moss from Raymond James. Your question, please.
John Asbury, President and CEO, Atlantic Union Bancshares: Good morning, Steve.
David Bishop, Analyst, Hope Group: Hey, guys. This is Chase
Chase, Analyst Representative, Raymond James: on for Steve. Good morning.
Rob Gorman, Executive Vice President and CFO, Atlantic Union Bancshares: Hey, good morning. Are you doing?
John Asbury, President and CEO, Atlantic Union Bancshares: Chase, yeah. We know Steve’s got a good excuse for being on
Rob Gorman, Executive Vice President and CFO, Atlantic Union Bancshares: the call.
Russell Gunther, Analyst, Stephens: Thank you for reminding me.
Chase, Analyst Representative, Raymond James: Yeah. First one for me, I’ve been hearing a lot about pricing competition. Where are loan yields coming in at now, either in terms of blended or AUB and legacy SaaS or markets separately? Thanks.
Rob Gorman, Executive Vice President and CFO, Atlantic Union Bancshares: Yes. So in terms of where we see loan yields coming in this quarter, it hasn’t really changed too much. If you look at the fixed rate portfolio, I think we’re at about the 6.25% to 6.5 That’s the back book fixed rate increase in pricing we’re seeing. We’ve about a 5.1% average yield on those loans and we’re repricing, as I said, the 6.25% to 6.5 range. So that’s continued for the last several quarters in the same kind of range.
So nothing really materially has changed there on negative side.
Chase, Analyst Representative, Raymond James: Gotcha. And I see in your, your 2025 financial outlook slide that you have three cuts rest of year baked in the modeling there. Did you happen to run a two cut scenario? And if so, is there anything you can share on how different it was from the three cut scenario?
Rob Gorman, Executive Vice President and CFO, Atlantic Union Bancshares: Yes. So we did run we’ve been in a scenario where we had no cuts, zero cuts, which could happen. And it’s about a one to two basis point improvement in the margin this year. So if we don’t get those cuts, because our variable rate loan book, which is about 50% of our loan book, will reprice down. So it’ll pick up a couple of basis points.
If that plays out into 2026, where we had three cuts in 2026, if we delay those cuts, it’s probably a three to four basis point, five basis point improvement in 2026 outlook.
Chase, Analyst Representative, Raymond James: Thanks for that. One last one for me. Now you’re actively working on integrating all of SASS, what opportunities are you most excited about? Thanks.
John Asbury, President and CEO, Atlantic Union Bancshares: I would say that and we have numerous other leaders here at the table. I I would say, first of all, what we bring to the table for the former Sandy Spring franchise is liquidity. They’re unconstrained in terms of their ability. We bring new products and capabilities, particularly on the commercial and industrial side. So and I think we’ve got a wonderful group of people up there.
So I think that we couldn’t be happier with the cultural fit. So I feel really good about that. I am super excited about what we’re talking about doing in North Carolina. And I feel good about the Virginia market. So I’m feeling pretty optimistic across the board.
I think that any sort of calm that comes to the markets in terms of the hesitancy that we’ve seen, which appears to be abating, is going to be good for us. Because I think we’re meaningful in these markets. These are good markets and we play an important point. Anyone have anything to add to that? And the stage is set.
We we should be able to deliver.
Chase, Analyst Representative, Raymond James: That’s all for me. Thank you guys for all the color.
John Asbury, President and CEO, Atlantic Union Bancshares: Thank you. Thanks, Chase. Thanks, Chase. And Jonathan we’re ready for our next caller please.
Jonathan, Conference Call Operator: Certainly our next question comes from the line of Catherine Mealor from KBW. Your question please.
Catherine Mealor, Analyst, KBW: Hi Catherine. Good morning.
Chase, Analyst Representative, Raymond James: Hey. Good morning.
Catherine Mealor, Analyst, KBW: Maybe just one on the follow-up what you were just talking about in terms of kind of C and I and growth in the DC market. You just talk a little bit about the opportunity for growth maybe in kind of two buckets in DC? I think maybe one in terms of bringing your kind of C and I products, maybe what kind of growth rate would you expect to see in C and I in some of Sandy Springs markets and what that kind of ramp and transition happens. Do we need to hire more lenders or can you do it with the team you’ve got? Just kind of paint a picture for what that looks like.
And secondly on the CRE side, are there opportunities within the clients or some of the relationships that they had with the 2,000,000,000 of loans that you just sold that you’re still servicing. Is there an inherent kind of growth opportunity within that client base as you’re willing to lean in and kind of grow CRE as you build capital over time? Thanks.
John Asbury, President and CEO, Atlantic Union Bancshares: Yes, certainly Catherine. One thing I’ll point out politely is that we don’t think about it as the DC market, we think about it as the state of Maryland. Because Sandy was the Maryland bank, not the DC bank. We have two branches in DC, far more
Catherine Mealor, Analyst, KBW: than Thank you for that clarification.
John Asbury, President and CEO, Atlantic Union Bancshares: Yes, thank you. You know why I’m sensitive to that.
Catherine Mealor, Analyst, KBW: I do, I do.
John Asbury, President and CEO, Atlantic Union Bancshares: Yes, so state of Maryland and then more broadly Northern Virginia. We think we do have a great team up there and we feel good about that team and under Jay O’Brien’s leadership. Dave, I think as we’ve looked at the size of the team and capabilities, we feel pretty good. Do you have anything you would want to add to that?
David Ring, Head of Wholesale Banking, Atlantic Union Bancshares: Yeah, when we look at the teams, we also look at their book sizes and their support, the support levels that we give them and we think it’s fully staffed at this point and we don’t really need to add unless somebody leaves. On the CRE side, just remember CRE has multiple transactions with customers. So even if there’s a customer in the book of business that we just sold, we don’t necessarily have to take that deal out. We can just do another transaction with them. That’s the beautiful part of the CRE banking is as you manage those relationships, you get multiple opportunities.
John Asbury, President and CEO, Atlantic Union Bancshares: Yeah, I agree. And so Catherine, good thing, single best part of the commercial real estate sale was that we’re servicing those credits. And I do think we had a great partner in Blackstone who certainly delivered. But we are still managing those relationships. And as they have additional opportunities, it frees up capacity.
So if there were a hold limit issue, for example, where we might have had too much exposure or limited upside or additional capacity, is now resolved with the sale. And then opportunities may come up over time with them. So I think it kind of reloads the opportunities for us. And there, as you know, because you covered them, good bank that they were a bit constrained in terms of liquidity and commercial real estate concentration, and those are no longer a factor. And we think we’re in a really good position to continue to pick and choose, and we think we’ll see opportunity up there and then elsewhere too.
Catherine Mealor, Analyst, KBW: And then maybe one follow-up just on the margin. Is it fair to, I mean, you’ve got a big range within the margin and we’re kinda starting a little bit on the lower end of where we thought we’d be, which was kinda where we had painted the picture. Is it fair to think that as we move through the year and kind of growth improves and you kind of work through some of the liquidity and pay down brokered that the margin just gradually kind of trends towards the higher end of the range? What’s the risk that we kind of stay stagnant in the margin near term? Maybe that’s the way to put it.
Rob Gorman, Executive Vice President and CFO, Atlantic Union Bancshares: Yeah. I think what as we said, the margin should grind higher on a core basis and that’s really what we should be seeing. We saw that about eight basis points of core margin improvement expansion this quarter. In terms of going forward, we’ve
John Asbury, President and CEO, Atlantic Union Bancshares: kind
Rob Gorman, Executive Vice President and CFO, Atlantic Union Bancshares: of played out the reduced cost of the CD book. Previously, we’re in the 440s in terms of the CD rates paid and maturing CDs going on in the 3.75% to 4% range. We’re kind of playing that out. There’s probably another quarter’s worth of that to bring down deposit costs. We will continue to do bring those deposit costs down as the Fed brings rates down.
Of course, we have an offset to that with the variable rate loan book repricing as well. So the grind higher is probably going to slow a bit, but it’s still a little grind higher, but it’s not going to be eight to 10 basis points per quarter. So that’s kind of why we’re kind of have that range there. But to your point, it should grind higher from here. But that outlook was on a full year basis, 3.75% to 4%.
So as you go into the third and fourth quarter, you should see that a bit higher than where we are today.
John Asbury, President and CEO, Atlantic Union Bancshares: Yeah. The fact that we were sitting on 1,000,000,000 point dollars of cash at quarter end because of portfolio sales happened days before quarter end. We didn’t have the opportunity to deploy much of it. That sets up opportunity for sure.
Catherine Mealor, Analyst, KBW: That’s great. Okay, thank you. Great first one. Thank you, Katherine. Appreciate it.
John Asbury, President and CEO, Atlantic Union Bancshares: Yep. And Jonathan, we’re ready for our next caller, please.
Jonathan, Conference Call Operator: Certainly. We have a follow-up question from the line of Brian Wiltzinski from Morgan Stanley. Your question, please.
Brian Wilczynski, Analyst, Morgan Stanley: Hi, Hey, just circling back with one more question on credit. So credit was clearly really positive this quarter. It sounds like you’re not seeing anything in terms of signs of weakness across the portfolio. The guidance for the year, 15 to 20 basis points of NCOs, is significantly higher than where you’ve been trending. And I know there’s one potential idiosyncratic loss that could get resolved in the second half.
But aside from that, can you just comment on any conservatism that’s baked into that guidance? Is there anything you’re seeing right now that would indicate that losses are going to move higher? Are you just being conservative with that outlook? Thanks.
Rob Gorman, Executive Vice President and CFO, Atlantic Union Bancshares: Yes, Brian, I’d say that it’s a conservative outlook, but it does include a couple of loans where we have specific reserves on them and expect to see those resolved in the second half of the year. So that’s kind of playing into that 15 to 20 range, if those play out the way we think they might based on the specific reserves we have. So it’s probably a bit conservative. It may not hit that 15 basis point charge off ratio. But not knowing there’s nothing beyond the things that I just mentioned that would suggest it should be higher.
But just thought that range made sense for us in case something came through in the second half of
John Asbury, President and CEO, Atlantic Union Bancshares: the year. That’s right. We don’t have a line of sight to that, but we’ll review it again after this quarter.
Brian Wilczynski, Analyst, Morgan Stanley: Got it. Thank you again.
John Asbury, President and CEO, Atlantic Union Bancshares: Thanks, Brian. And thanks for everyone who called in today. We appreciate your questions and we look forward to talking with you next quarter. Have a good day. Thank you.
Jonathan, Conference Call Operator: Thank you, ladies and gentlemen, your participation in today’s conference. This does conclude the program. You may now disconnect. Good day.
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