10-Q: Atlantic Union Bankshares Reports Strong Q3 Growth Post-Acquisition

Atlantic Union Bankshares Corporation reported significant financial growth for the third quarter and first nine months of 2025, driven primarily by the successful integration of Sandy Spring Bancorp, Inc. acquisition.

Summary

• Net income available to common shareholders was $89.2 million for the third quarter of 2025, an increase from $73.4 million in the third quarter of 2024.
• Basic and diluted earnings per common share (EPS) for the third quarter of 2025 were $0.63, a decrease from $0.82 in the third quarter of 2024, primarily due to increased common shares outstanding from acquisitions.
• Adjusted diluted operating EPS was $0.84 for the third quarter of 2025, compared to $0.83 for the third quarter of 2024.
• Total assets reached $37.1 billion at September 30, 2025, an increase of $12.5 billion from December 31, 2024.
• Loans held for investment (LHFI) grew to $27.4 billion at September 30, 2025, up $8.9 billion from December 31, 2024.
• Total deposits increased to $30.7 billion at September 30, 2025, an increase of $10.3 billion from December 31, 2024.
• Net interest income for the third quarter of 2025 was $319.2 million, a substantial increase of $136.3 million from $182.9 million in the third quarter of 2024.
• Net interest margin (NIM) improved to 3.77% in the third quarter of 2025, up 46 basis points from 3.31% in the third quarter of 2024.
• Preliminary goodwill associated with the Sandy Spring acquisition totaled $512.3 million at September 30, 2025, including a $15.4 million increase from measurement period adjustments.
• The company completed the sale of $2.0 billion of performing commercial real estate (CRE) loans acquired in the Sandy Spring acquisition, generating a $10.9 million pre-tax gain for the nine months ended September 30, 2025.
• Net charge-offs for the third quarter of 2025 were $38.6 million, significantly higher than $0.67 million in the same period of 2024, primarily due to two individually assessed commercial and industrial loans.
• The provision for credit losses for the nine months ended September 30, 2025, was $139.6 million, including an $89.5 million Day 1 initial provision expense on non-PCD loans from the Sandy Spring acquisition.
• Nonaccrual LHFI increased to $131.2 million at September 30, 2025, from $58.0 million at December 31, 2024, primarily due to purchased credit deteriorated (PCD) loans acquired from Sandy Spring.
• The Board of Directors adopted amended and restated bylaws on October 30, 2025, enhancing procedural mechanics for shareholder nominations and proposals.

Sentiment

Score: 7

Explanation: The company demonstrated substantial growth in assets, loans, and deposits, and a significant increase in net interest income and margin, primarily driven by the Sandy Spring acquisition. The successful integration of the acquisition and strong capital ratios are positive. However, EPS declined due to share dilution, and asset quality metrics, including nonaccrual loans and net charge-offs, deteriorated, albeit partly due to acquired portfolios. The increase in credit losses warrants close monitoring.

Positives

• Total assets increased by $12.5 billion to $37.1 billion at September 30, 2025, primarily driven by the Sandy Spring acquisition and organic loan growth.
• Loans held for investment (LHFI) grew by $8.9 billion to $27.4 billion at September 30, 2025, reflecting acquisition impact and organic growth.
• Total deposits increased by $10.3 billion to $30.7 billion at September 30, 2025, largely due to the Sandy Spring acquisition.
• Net interest income for the third quarter of 2025 increased by $136.3 million to $319.2 million, and for the nine months ended September 30, 2025, increased by $309.5 million to $824.7 million.
• Net interest margin (NIM) improved by 46 basis points to 3.77% in Q3 2025 and by 40 basis points to 3.68% for 9M 2025, driven by lower cost of funds and higher loan accretion.
• The successful integration of Sandy Spring branches and operations was completed on October 14, 2025.
• The sale of performing CRE loans generated a $10.9 million pre-tax gain for the nine months ended September 30, 2025.
• Regulatory capital ratios continue to exceed the standards to be considered well-capitalized.
• Total net unrealized losses on the available-for-sale (AFS) securities portfolio decreased by $75.0 million from December 31, 2024.
• Cost of funds decreased by 39 basis points in Q3 2025 and 29 basis points in 9M 2025.
• A $14.3 million pre-tax gain was realized from the sale of the equity interest in Cary Street Partners LLC (CSP).
• Bank owned life insurance (BOLI) income increased by $3.9 million for the nine months ended September 30, 2025, including $2.4 million in death benefits.

Negatives

• Basic and diluted EPS decreased in Q3 2025 to $0.63 from $0.82 in Q3 2024, and for 9M 2025 to $1.23/$1.22 from $1.68 in 9M 2024, primarily due to the dilutive effect of shares issued for acquisitions.
• Net charge-offs increased significantly to $38.6 million in Q3 2025 and $41.5 million in 9M 2025, mainly due to two individually assessed commercial and industrial loans.
• Provision for credit losses rose substantially to $16.2 million in Q3 2025 and $139.6 million in 9M 2025, partly due to the Day 1 initial provision from the Sandy Spring acquisition.
• Nonaccrual LHFI increased to $131.2 million at September 30, 2025, from $58.0 million at December 31, 2024, largely due to acquired PCD loans.
• Non-performing assets (NPAs) as a percentage of LHFI increased to 0.49% at September 30, 2025, from 0.32% at December 31, 2024.
• Consumer Banking income before income taxes decreased by $3.8 million in Q3 2025 and $22.9 million in 9M 2025.
• Merger-related costs were substantial, totaling $34.8 million in Q3 2025 and $118.7 million in 9M 2025.
• The valuation allowance for deferred tax assets increased to $11.9 million at September 30, 2025, from $4.4 million at December 31, 2024, due to the Sandy Spring acquisition.

Risks

• Changes in economic conditions, including inflation and recessionary conditions, and their related impacts on net interest margin, loan demand, and credit losses.
• Volatility in the financial services sector, including failures or rumors of failures of other depository institutions, affecting the ability to attract and retain depositors and to borrow or raise capital.
• Legislative or regulatory changes and requirements, including changes in federal, state, or local tax laws and changes impacting the rulemaking, supervision, examination, and enforcement priorities of federal banking agencies.
• The sufficiency of liquidity and changes in the company's capital position.
• General economic and financial market conditions, particularly in the markets where the company operates, including declines in real estate values and increases in unemployment levels.
• The possibility that the anticipated benefits of acquisition activity, including the Sandy Spring and American National acquisitions, are not realized when expected or at all, or that problems arise from the integration of the acquired companies.
• Potential adverse reactions or changes to business or employee relationships resulting from acquisitions.
• The ability to identify, recruit, and retain key employees.
• The quality or composition of the loan or investment portfolios and changes in these portfolios.
• An insufficient allowance for credit losses (ACL) or volatility in the ACL resulting from the Current Expected Credit Losses (CECL) methodology.
• Concentrations of loans secured by real estate, particularly commercial real estate (CRE), which are generally viewed as having more risk of default.
• The effectiveness of credit processes and management of credit risk.
• The ability to compete in the market for financial services and increased competition from fintech companies.
• Technological risks and developments, and cyber threats, attacks, or events.
• Operational, technological, cultural, regulatory, legal, credit, and other risks associated with the exploration, consummation, and integration of potential future acquisitions.
• The potential adverse effects of unusual and infrequently occurring events, such as weather-related disasters, terrorist acts, geopolitical conflicts, or public health events.
• Performance by counterparties or vendors.
• Actual or potential claims, damages, and fines related to litigation or government actions, such as the CFPB Consent Order regarding overdraft practices.
• Any event or development that would cause the company to conclude that there was an impairment of any asset, including intangible assets such as goodwill.

Future Outlook

The company plans to continue deploying various asset liability management strategies to manage interest rate risk and monitor balance sheet trends, deposit flows, and liquidity needs to meet customer demands and maintain financial flexibility. Management expects net interest income to increase with an immediate rise in market rates, while a decline is anticipated in a decreasing interest rate environment as interest-earning assets re-price more quickly than interest-bearing deposits. Overall liquidity is believed to be sufficient to satisfy depositor requirements and meet customer credit needs, with cash requirements expected to be sourced from general liquidity and future debt/capital issuances.

Management Comments

• Management believes that non-GAAP financial measures provide additional understanding of ongoing operations, enhance comparability, and show the effects of significant gains and charges without obscuring underlying performance trends.
• Our overall liquidity is believed to be sufficient to satisfy our depositors' requirements and to meet our customers' credit needs.
• We review pricing of our products and services, in light of current and expected costs due to inflation, to seek to mitigate the inflationary impact on our financial performance.
• Management believes that the ultimate outcome in legal proceedings, in the aggregate, will not have a material adverse effect on our business or the financial condition or results of operations.

Industry Context

The banking industry continues to navigate a 'higher-for-longer' interest rate environment and heightened competition for deposits, leading to a shift towards higher-cost products. The Federal Open Market Committee (FOMC) initiated policy rate cuts in September and October 2025, reducing the Federal Funds rate by a total of 50 basis points in response to slowing job growth, higher unemployment, and moderating economic activity. The enactment of the 'One Big Beautiful Bill Act' in July 2025, while impacting tax reform, did not materially affect the company's tax balances. Ongoing U.S. trade policies and tariffs continue to introduce uncertainty, posing risks to economic growth and potentially increasing credit losses across the financial sector.

Comparison to Industry Standards

• Regulatory capital ratios continued to exceed the standards to be considered well-capitalized under regulatory requirements, indicating strong capital adequacy relative to industry benchmarks.

Corporate Governance

Legal Proceedings

• As previously disclosed, on February 9, 2022, the CFPB Office of Enforcement notified the Bank of potential legal action regarding alleged violations of Regulation E and the Consumer Financial Protection Act in connection with overdraft practices.
• In March 2023, settlement discussions commenced with the CFPB.
• On December 7, 2023, the Bank entered into a Consent Order with the CFPB to resolve the matter.
• The Consent Order requires a redress plan to pay restitution of at least $5.0 million to certain current and former customers who opted-in to the Bank's discretionary overdraft service.
• A $1.2 million civil monetary penalty was paid.
• As of September 30, 2025, the Company maintained a probable and estimable liability in connection with this matter.

Stakeholder Impact

• Shareholders: Experienced dilution in EPS due to shares issued for acquisitions, but will receive increased common stock dividends ($0.37/share vs. $0.34/share in Q3 2024). Potential for long-term value creation from acquisition synergies.
• Customers: Benefit from an expanded branch network and services due to the Sandy Spring acquisition. Certain customers will receive restitution payments of at least $5.0 million as per the CFPB Consent Order.
• Employees: Merger-related costs include employee severance and other employee-related costs, indicating some workforce adjustments. The integration of Sandy Spring operations has been completed.
• Creditors: The company's long-term borrowings increased due to assumed subordinated debt from the Sandy Spring acquisition.
• Regulatory Authorities: The company is actively complying with the CFPB Consent Order and continues to maintain regulatory capital ratios above minimum requirements.

Next Steps

• Continue to deploy asset liability management strategies to manage interest rate risk.
• Monitor balance sheet trends, deposit flows, and liquidity needs to meet customer demands and maintain financial flexibility.
• Monitor the performance of Troubled Loan Modifications (TLMs).
• The Board of Directors will continue to review and approve policies for interest rate sensitivity.
• The company will continue to monitor its exposure to office space within its non-owner occupied CRE portfolio.
• Quarterly dividends for preferred and common stock have been declared, payable in November and December 2025.

Key Dates

Recommendation

The company has demonstrated substantial growth in its balance sheet and net interest income following the Sandy Spring acquisition, which is a positive strategic move. The successful integration of operations and strong capital ratios provide a solid foundation. However, the dilution of EPS and the notable increase in nonaccrual loans and net charge-offs, even if partially attributable to acquired portfolios, introduce a degree of uncertainty regarding asset quality and future profitability. While the long-term synergies from the acquisition are promising, the immediate impact on per-share earnings and credit metrics suggests a 'hold' position until the company demonstrates sustained improvement in asset quality and a clearer path to accretion in per-share earnings post-integration. The recent FOMC rate cuts could also impact future net interest margin, requiring careful monitoring.

Keywords

Banking, Financial Services, Regional Bank, Commercial Real Estate, Mergers & Acquisitions, Net Interest Margin, Credit Quality, Deposits, Loans, Capital Ratios, SEC Filing, 10-Q, Atlantic Union Bankshares, Sandy Spring Acquisition, Financial Performance, Earnings, EPS, Asset Quality, Liquidity, Corporate Governance