8-K: Atlantic Union Bankshares Q3 2025 Update & 2025 Outlook

Atlantic Union Bankshares Corporation provides an investor presentation detailing Q3 2025 performance, strategic priorities, and a revised full-year 2025 financial outlook, including the impact of the Sandy Spring acquisition.

Summary

• Q3 2025 loan growth was approximately 0.5% annualized, with average loan growth quarter over quarter of 4.3% annualized.
• Non-interest bearing deposits remained at 23% of total deposits, and the Loan/Deposit ratio was 89.2% at September 30, 2025.
• Adjusted operating return on tangible common equity (ROTCE) was 20.1%, adjusted operating return on assets (ROA) was 1.30%, and adjusted operating efficiency ratio (FTE) was 48.8% in Q3 2025.
• Net charge-offs were 56 basis points in Q3 2025 and 23 basis points year-to-date, with a full-year outlook of 15-20 basis points.
• The Allowance for Credit Loss (ACL) as a percentage of loans held for investment was 1.17% at September 30, 2025.
• The company successfully converted the core systems of Sandy Spring and concurrently closed 5 branches on October 11, 2025.
• The full-year 2025 outlook includes nine months of impact from the Sandy Spring acquisition, and the company remains on track for a 27% cost-savings target from the merger.
• Key assumptions for 2025 include two more 25 bps Fed Funds rate cuts and stable term rates, with Virginia, Maryland, and North Carolina unemployment rates expected to rise but remain below the national rate.
• Full-year 2025 outlook projects loans between $27.7 $28.0 billion and deposits between $30.8 $31.0 billion (period end).
• Net Interest Income (FTE) is projected at ~$1.160 $1.165 billion, and Net Interest Margin (FTE) at ~3.75% 3.80% for full-year 2025.
• Strategic organic expansion in North Carolina is planned for 2026, with 10 new branches over the next 3 years, focusing on Raleigh and Wilmington.
• Total assets were $37.1 billion, total loans $27.4 billion, and total deposits $30.7 billion as of September 30, 2025.
• The company paid a common stock dividend of 34 cents per share in Q3 2025, a 6.3% increase from Q3 2024, and $171.88 per outstanding share of Series A Preferred Stock.
• The total securities portfolio was $5.1 billion with a total unrealized loss of $363.3 million as of September 30, 2025.

Sentiment

Score: 7

Explanation: The filing presents a generally positive outlook with strong capital, successful acquisition integration, and strategic growth plans. However, the higher-than-expected Q3 net charge-offs and significant unrealized losses in the securities portfolio introduce some caution, preventing a higher score.

Positives

• Maintains a strong capital position, with capital ratios well above regulatory well-capitalized levels, including a Common Equity Tier 1 Ratio of 9.9% for Bankshares and 12.8% for Atlantic Union Bank.
• Demonstrates peer-leading performance with a Q3 2025 adjusted operating return on tangible common equity (ROTCE) of 20.1% and adjusted operating return on assets (ROA) of 1.30%.
• Successfully completed the core system conversion and branch consolidation for the Sandy Spring franchise on October 11, 2025, indicating effective integration.
• On track to achieve the targeted 27% cost savings from the Sandy Spring acquisition, enhancing operational efficiency.
• Reports healthy lending pipelines, suggesting future loan growth potential.
• Offers an attractive financial profile with a solid dividend yield and payout ratio, including a 6.3% increase in the common stock dividend in Q3 2025.
• Strategic organic expansion plans in North Carolina, targeting attractive submarkets in Raleigh and Wilmington with 10 new branches over three years, capitalize on growth opportunities.
• Identified as the #1 largest regional bank in the Mid-Atlantic, Maryland, and Virginia based on deposit market share, highlighting a strong market presence.
• Maintains a high liquidity coverage ratio of uninsured/uncollateralized deposits at approximately 157% as of September 30, 2025.
• Possesses an attractive core deposit base, with 91% core deposits and 46% transactional accounts, contributing to a lower cost of funding.

Negatives

• Q3 2025 net charge-offs were 56 basis points, significantly higher than the full-year outlook of 15-20 basis points, primarily due to two individually assessed Commercial & Industrial (C&I) loans.
• The total securities portfolio held an unrealized loss of $363.3 million as of September 30, 2025, which could impact future earnings or capital if realized.
• Q3 2025 loan growth was modest at 0.5% annualized, described as 'seasonally slow.'
• The outlook anticipates unemployment rates in Virginia, Maryland, and North Carolina to rise in 2025, although remaining below the national average.

Risks

• Changes in market interest rates and their related impacts on macroeconomic conditions, customer behavior, funding costs, and loan and securities portfolios.
• Economic conditions, including inflation and recessionary conditions, and their related impacts on economic growth and customer behavior.
• Volatility in the financial services sector, including failures or rumors of failures of other depository institutions, and the effects on 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 regulatory priorities.
• The sufficiency of liquidity and changes in capital position.
• General economic and financial market conditions in the United States and particularly in the markets of operation, including declines in real estate values, increased unemployment levels, and U.S. fiscal matters.
• The possibility that the anticipated benefits of acquisition activity, including the Sandy Spring acquisition, are not realized when expected or at all.
• Potential adverse reactions or changes to business or employee relationships resulting from acquisitions.
• Ability to identify, recruit, and retain key employees.
• Monetary, fiscal, and regulatory policies of the U.S. government.
• The quality or composition of loan or investment portfolios and changes in these portfolios.
• Demand for loan products and financial services in market areas.
• Ability to manage growth or implement growth strategy.
• The effectiveness of expense reduction plans.
• The introduction of new lines of business or new products and services.
• Real estate values in the lending area, particularly commercial real estate concentrations.
• Changes in accounting principles, standards, rules, and interpretations, and the related impact on financial statements.
• An insufficient Allowance for Credit Loss (ACL) or volatility in the ACL resulting from the CECL methodology.
• 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 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.
• Deposit flows and the availability of financing.
• The level of prepayments on loans and mortgage-backed securities.
• Actual or potential claims, damages, and fines related to litigation or government actions.
• Any event or development that would cause an impairment of any asset, including intangible assets such as goodwill.

Future Outlook

The company projects mid-single-digit annualized loan growth and low-single-digit annualized deposit growth for Q4 2025. For the full year 2025, it anticipates net interest income (FTE) between $1.160 $1.165 billion and a net interest margin (FTE) of 3.75% 3.80%. The outlook includes the nine-month impact of the Sandy Spring acquisition and expects to achieve 27% cost savings from the merger. The Federal Reserve is projected to cut the Fed Funds rate by 25 bps two more times in 2025. Strategic organic expansion in North Carolina is planned for 2026, with 10 new branches over three years in Raleigh and Wilmington.

Management Comments

• "We are focused on three strategic priorities: Organic Growth, Strategic Investments, and Innovation and Transformation."
• "Lending pipelines remain healthy."
• "Focused on generating positive operating leverage."
• "Successfully converted core systems of Sandy Spring over weekend of October 11 and concurrently closed 5 branches."
• "Remain on track for cost-savings target of 27% of Sandy Spring non-interest expense."
• "Our initial focus [in North Carolina] will be in Raleigh and Wilmington, with plans to open highly visible locations targeting attractive submarkets combined with AUB branded ATMs at high-traffic retailers and paired with expanded commercial, wealth and mortgage teams."

Industry Context

Atlantic Union Bankshares operates in a competitive Mid-Atlantic banking market, positioning itself as a strong regional alternative to large national banks while being more capable than smaller local institutions. Its strategic focus on organic growth, fintech partnerships, and targeted acquisitions like Sandy Spring Bancorp, Inc. aligns with broader industry trends of consolidation and technology adoption to enhance customer experience and efficiency. The planned expansion into North Carolina leverages the state's strong business climate and growth potential, a common strategy for regional banks seeking to expand their footprint in attractive markets. The expectation of further Fed rate cuts in 2025 suggests a broader industry environment of potentially easing monetary policy, which could influence net interest margins and loan demand.

Comparison to Industry Standards

• The company positions itself as the #1 largest regional bank in the Mid-Atlantic, Maryland, and Virginia based on deposit market share, indicating a leading position among its peer group (U.S. Banks with <$100 Billion in assets).
• In Virginia, Atlantic Union Bankshares Corp. holds 8.9% of the total market deposit share and 23.9% among banks headquartered in Virginia, outperforming many regional competitors like TowneBank (5.6% total, 14.9% VA-headquartered) and Capital One Financial Corp. (1.8% total, 4.8% VA-headquartered).
• In Maryland, the company has a 5.4% deposit market share, ranking 7th, behind larger institutions like Bank of America (16.1%) and Truist (12.5%), but ahead of many smaller regional players.
• In North Carolina, the company has a 0.4% deposit market share, ranking 29th, indicating significant room for growth compared to dominant players like Truist (18.0%) and Wells Fargo (16.2%), which justifies its expansion strategy.
• The adjusted operating ROTCE of 20.1% and ROA of 1.30% in Q3 2025 are presented as "peer-leading performance," suggesting strong profitability relative to its regional banking peers.
• The company's capital ratios (e.g., CET1 of 9.9% for Bankshares, 12.8% for Atlantic Union Bank) are well above regulatory minimums (6.5%), demonstrating robust capital adequacy compared to industry requirements.

Stakeholder Impact

• Shareholders: Potential for long-term value creation through strategic growth and acquisitions, continued dividend payments (34 cents/share common, $171.88/share preferred in Q3 2025), but also exposure to unrealized losses in the securities portfolio and higher Q3 net charge-offs.
• Employees: Integration of Sandy Spring employees, potential for new hires in North Carolina expansion, but also branch closures (5 branches on Oct 11, 2025) and potential for severance charges from strategic cost savings initiatives (mentioned in non-GAAP adjustments for prior periods).
• Customers: Enhanced service through integrated systems, expanded branch network in growth markets, and a "differentiated client experience" as an alternative to large national banks.
• Creditors: Strong capital position and liquidity coverage provide reassurance.
• Suppliers: Potential for changes in vendor contracts due to strategic cost savings initiatives.

Next Steps

• Continue execution and integration of the Sandy Spring franchise.
• Begin organic expansion in North Carolina in 2026.
• Open 10 new branches over the next 3 years, focusing on Raleigh and Wilmington.
• Leverage FinTech partnerships, strategic partner equity investments, and non-bank/whole-bank acquisition opportunities.
• Maximize operating leverage, productivity, efficiency, and scale.
• Attract and retain top talent in alignment with broader business goals and strategic priorities.
• Continue to monitor economic conditions, including unemployment rates and interest rate changes.

Key Dates

Recommendation

While Atlantic Union Bankshares demonstrates strong capital, successful integration of Sandy Spring, and a clear growth strategy, the higher Q3 net charge-offs and substantial unrealized losses in the securities portfolio introduce near-term uncertainties. The positive long-term outlook is balanced by these immediate concerns and the broader economic environment of rising unemployment and potential interest rate cuts. A "hold" recommendation allows investors to monitor the execution of the North Carolina expansion and the trajectory of asset quality and net interest margin in the coming quarters.

Keywords

Banking, Regional Bank, Financial Services, Atlantic Union Bankshares, AUB, Investor Presentation, Q3 2025 Results, Financial Outlook, Sandy Spring Acquisition, Loan Growth, Deposit Growth, Net Interest Margin, Capital Ratios, Credit Quality, North Carolina Expansion, Virginia Banking, Maryland Banking, Commercial Real Estate, Corporate Governance, Risk Management