8-K: Atlantic Union Bankshares Reports Q1 2025 Results, Completes Sandy Spring Merger

Atlantic Union Bankshares announced its first quarter 2025 financial results, highlighted by the completion of its merger with Sandy Spring Bancorp.

Summary

• Atlantic Union Bankshares Corporation (AUB) reported net income available to common shareholders of $46.9 million, with basic and diluted earnings per common share at $0.53 and $0.52, respectively, for Q1 2025.
• Adjusted operating earnings available to common shareholders were $51.6 million, with adjusted diluted operating earnings per common share at $0.57.
• The company completed its merger with Sandy Spring Bancorp on April 1, 2025, acquiring 53 branches and strengthening its presence in Virginia and Maryland.
• AUB physically settled forward sale agreements, receiving net proceeds of approximately $385.0 million before expenses.
• Net interest income was $184.2 million, an increase of $916,000 from the previous quarter.
• The net interest margin increased by 12 basis points to 3.38% compared to the fourth quarter of 2024.
• Nonperforming assets (NPAs) as a percentage of total loans held for investment (LHFI) was 0.38%, an increase of 6 basis points from the prior quarter.
• The allowance for credit losses (ACL) totaled $209.0 million, a $15.3 million increase from the prior quarter.
• Total assets were $24.6 billion, an increase of $47.3 million from December 31, 2024.
• Total deposits were $20.5 billion, an increase of $105.3 million from the prior quarter.
• The company declared and paid cash dividends of $0.34 per common share.

Sentiment

Score: 7

Explanation: The sentiment is moderately positive. While the company reported a decrease in net income compared to the previous quarter, the successful merger with Sandy Spring, expansion of net interest margin, and solid asset quality contribute to a positive outlook. The company is also taking proactive steps to manage risks associated with economic uncertainty.

Positives

• The merger with Sandy Spring was completed ahead of schedule, expected to accelerate cost savings.
• Net interest margin expanded due to lower deposit costs.
• Average loan and customer deposit balance growth was experienced during the quarter.
• Asset quality remained solid with negligible net charge-offs.
• The company is well-capitalized with capital ratios above regulatory requirements.
• Demand deposits increased by $194.1 million, while brokered deposits decreased.

Negatives

• Noninterest income decreased by $6.0 million due to lower loan-related interest rate swap fees and other operating income.
• Noninterest expense increased by $4.5 million due to seasonal increases in salaries and benefits, technology expenses, and occupancy expenses.
• Nonperforming assets increased, primarily due to one new nonaccrual loan within the commercial and industrial portfolio of $9.4 million.
• Loan held for investment decreased $42.9 million or 0.9% (annualized) from December 31, 2024.

Risks

• The economic outlook became more uncertain, financial markets became more volatile, and governmental policies changed abruptly.
• The company took proactive steps to fortify loan loss reserves in recognition of the increased uncertainty surrounding the macroeconomic environment.
• The company faces risks related to market interest rates, economic conditions, trade policies, and volatility in the financial services sector.
• The company faces risks related to legislative or regulatory changes and requirements.
• The company faces risks related to technological risks and developments, and cyber threats, attacks, or events.

Future Outlook

The company expects to close the proposed CRE loan sale by June 30, 2025, and anticipates the Federal Reserve Bank will cut the Fed Funds rate by 25 bps three times in 2025 starting in June. The company expects Virginia, Maryland and North Carolina unemployment rate to rise but remain below the national unemployment rate in 2025.

Management Comments

• It was an eventful first quarter for Atlantic Union, said John C. Asbury, president and chief executive officer of Atlantic Union.
• We were pleased to close our acquisition of Sandy Spring on April 1st, a full quarter ahead of our original expectations due to our receipt of required regulatory approvals earlier than anticipated.
• The earlier close is expected to accelerate the achievement of our anticipated cost savings from the transaction.
• It was also a good start to the year as we experienced net interest margin expansion and average loan and customer deposit balance growth for the quarter.
• Asset quality also remained solid with negligible net charge offs.
• Over the quarter, however, the economic outlook became more uncertain, financial markets became more volatile, and governmental policies changed abruptly.
• Consequently, we took proactive steps to fortify our loan loss reserves in recognition of the increased uncertainty surrounding the macroeconomic environment.
• Atlantic Union is a story of transformation from a Virginia community bank to the largest regional bank headquartered in the lower Mid-Atlantic with operations throughout Virginia, Maryland and a growing presence in North Carolina.
• Operating under the mantra of soundness, profitability, and growth in that order of priority Atlantic Union remains committed to generating sustainable, profitable growth, and building long-term value for our shareholders.

Industry Context

The merger positions Atlantic Union as the largest regional bank headquartered in the lower Mid-Atlantic, increasing its competitive presence in Virginia, Maryland, and North Carolina.

Comparison to Industry Standards

• Atlantic Union Bankshares is now the #1 largest regional bank in the Mid-Atlantic, Maryland and Virginia.
• Regional banks are defined as U.S. Banks with <$100 Billion in assets; Mid-Atlantic is defined as Delaware, Maryland, New Jersey, Pennsylvania, Virginia, Washington D.C., and West Virginia.
• The company's financial metrics, such as ROTCE and ROAA, are targeted to be in the top tier of peer performance.
• The company's efficiency ratio is targeted to be around 45% by 2026, indicating strong operational efficiency.

Stakeholder Impact

• Shareholders can expect continued dividends and potential for long-term value creation.
• Employees will be involved in the integration of Sandy Spring and the ongoing operations of the combined company.
• Customers will benefit from the expanded branch network and enhanced services resulting from the merger.
• The company's commitment to soundness, profitability, and growth aims to benefit all stakeholders.

Next Steps

• Complete the CRE loan sale process by June 30.
• Continue integration of Sandy Spring, with core systems conversion scheduled for October 2025.
• Focus on performance of the core banking franchise and building out North Carolina teams.
• Maintain disciplined expense management.

Key Dates

Keywords

merger, Sandy Spring Bancorp, financial results, net income, earnings, net interest margin, asset quality, deposits, loans, capital ratios, Atlantic Union Bankshares