Atlantic Union Bankshares (AUB) - 2025 Q2 - Quarterly Results

Q2 2025 Financial Performance and Strategic Update Financial Highlights The company reported Q2 2025 net income of $16.8 million, heavily impacted by acquisition-related costs Q2 2025 Earnings Summary | Metric | GAAP | Adjusted (Non-GAAP) | | :--- | :--- | :--- | | Net Income to Common Shareholders | $16.8 million | $135.1 million | | Diluted EPS | $0.12 | $0.95 | Key Pre-Tax Adjustments for Q2 2025 | Adjustment Item | Amount (Pre-tax) | | :--- | :--- | | Merger-related costs (Sandy Spring) | $78.9 million | | CECL Day 1 initial provision (Sandy Spring) | $100.9 million | | Gain on sale of CRE loans | $15.7 million | | Gain on sale of Cary Street Partners equity | $14.3 million | Strategic Activities The quarter was defined by the Sandy Spring acquisition, a major CRE loan sale, and other capital actions - Completed the acquisition of Sandy Spring Bancorp on April 1, 2025, adding $13.0 billion in total assets, $8.6 billion in loans held for investment (LHFI), and $11.2 billion in deposits, resulting in preliminary goodwill of $496.9 million[2] - Completed the sale of approximately $2.0 billion of performing CRE loans acquired from Sandy Spring, generating a pre-tax gain of $15.7 million[6][8] - Received net proceeds of approximately $385.0 million from the full physical settlement of forward sale agreements by delivering 11,338,028 shares of common stock[4][38] - Sold its equity interest in Cary Street Partners LLC (CSP), resulting in a pre-tax gain of $14.3 million[5][8] Detailed Financial Analysis Net Interest Income Net interest income rose substantially to $321.4 million, driven by the Sandy Spring acquisition and purchase accounting Net Interest Income and Margin (Q2 2025 vs Q1 2025) | Metric | Q2 2025 | Q1 2025 | Change | | :--- | :--- | :--- | :--- | | Net Interest Income | $321.4M | $184.2M | +$137.2M | | Net Interest Margin (NIM) | 3.78% | 3.38% | +40 bps | | NIM (FTE) | 3.83% | 3.45% | +38 bps | | Earning Asset Yields | 6.05% | 5.68% | +37 bps | | Cost of Funds | 2.22% | 2.23% | -1 bp | Impact of Acquisition Accounting on NII (in thousands) | For the quarter ended | Loan Accretion | Deposit Accretion | Borrowings (Amortization) | Total | | :--- | :--- | :--- | :--- | :--- | | March 31, 2025 | $13,286 | $(415) | $(287) | $12,584 | | June 30, 2025 | $45,744 | $1,884 | $(2,256) | $45,372 | Asset Quality Asset quality metrics shifted due to acquired PCD loans, with NPAs rising and the ACL growing significantly - The Allowance for Credit Losses (ACL) increased by $133.3 million to $342.4 million, primarily due to the Sandy Spring acquisition[12][15] - Net charge-offs were minimal at $666,000, or 0.01% of total average loans (annualized) for Q2 2025[18] - The provision for credit losses was $105.7 million, which included $100.9 million in Day 1 initial provision expense related to the Sandy Spring acquisition[19] Nonperforming Assets (NPAs) NPAs increased to $163.4 million, primarily driven by PCD loans from the Sandy Spring acquisition Nonperforming Assets (in thousands) | Period | Nonaccrual loans | Foreclosed properties | Total NPAs | | :--- | :--- | :--- | :--- | | June 30, 2025 | $162,615 | $774 | $163,389 | | March 31, 2025 | $69,015 | $404 | $69,419 | - The increase in NPAs was primarily due to PCD loans acquired from Sandy Spring, including $49.4 million in construction and land development and $27.1 million in commercial real estate non-owner occupied loans[13] - Accruing past due loans increased to 0.28% of total LHFI, up from 0.27% in the prior quarter[14] Allowance for Credit Losses (ACL) The ACL grew to $342.4 million, reflecting the acquisition and a significant CECL Day 1 provision - The initial ACL related to the Sandy Spring acquisition was $129.2 million, consisting of a $117.8 million ALLL and an $11.4 million RUC[3][15] - An additional $89.5 million reserve on acquired non-PCD loans was established through provision expense, representing the CECL "double count"[3][16] ACL Ratios | Metric | June 30, 2025 | March 31, 2025 | | :--- | :--- | :--- | | ACL as % of total LHFI | 1.25% | 1.13% | | ALLL as % of total LHFI | 1.15% | 1.05% | Noninterest Income Noninterest income surged to $81.5 million, boosted by gains on asset sales and acquired fee businesses - Total noninterest income increased by $52.3 million to $81.5 million in Q2 2025 compared to Q1 2025[20] - Key drivers of the increase were a $15.7 million gain on a CRE loan sale and a $14.3 million gain on the sale of an equity interest in CSP[20] - Adjusted operating noninterest income increased by $22.2 million to $51.5 million, largely due to the Sandy Spring acquisition, which led to an $11.0 million increase in fiduciary and asset management fees[21] Noninterest Expense Noninterest expense increased to $279.7 million, largely due to $78.9 million in merger-related costs - Total noninterest expense increased by $145.5 million to $279.7 million in Q2 2025, driven by $78.9 million in merger-related costs[22][23] - Adjusted operating noninterest expense increased by $58.6 million to $182.4 million, primarily due to the impact of the Sandy Spring acquisition[23] - The largest component of the adjusted expense increase was a $34.5 million rise in salaries and benefits[23] Income Taxes The annual effective tax rate rose to 21.7% post-acquisition, with a one-time benefit impacting the quarterly rate - The estimated annual effective tax rate (AETR) increased from 19.0% in Q1 to 21.7% in Q2 due to the Sandy Spring acquisition[24] - The effective tax rate for Q2 2025 was (13.2%), reflecting an $8.0 million income tax benefit related to the re-evaluation of state deferred tax assets post-acquisition[25] Balance Sheet and Capital Balance Sheet Overview Total assets grew to $37.3 billion following the Sandy Spring acquisition, with significant increases in loans and deposits Balance Sheet Highlights (as of June 30, 2025) | Metric | June 30, 2025 | March 31, 2025 | Change | | :--- | :--- | :--- | :--- | | Total Assets | $37.3B | $24.6B | +$12.7B | | LHFI | $27.3B | $18.4B | +$8.9B | | Total Deposits | $31.0B | $20.5B | +$10.5B | | Cash and cash equivalents | $1.6B | $0.4B | +$1.2B | - The Sandy Spring acquisition added assets with a fair value of $13.0 billion and liabilities with a fair value of $12.2 billion[31] Capital and Dividends Capital ratios remained strong post-acquisition, with a CET1 ratio of 9.77% and a continued quarterly dividend Regulatory Capital Ratios (Estimated) | Ratio | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :--- | :--- | :--- | :--- | | Common equity Tier 1 | 9.77% | 10.07% | 9.47% | | Tier 1 capital | 10.32% | 10.87% | 10.26% | | Total capital | 13.73% | 13.88% | 12.99% | | Tangible common equity / Tangible assets | 7.39% | 7.39% | 6.71% | - Declared and paid a quarterly cash dividend of $0.34 per common share, a 6.3% increase from the second quarter of 2024[37] Supplementary Information About the Company & Conference Call Atlantic Union Bankshares, now operating across three states, scheduled a conference call to discuss Q2 results - Atlantic Union Bankshares Corporation (NYSE: AUB) is the holding company for Atlantic Union Bank, with operations in Virginia, Maryland, and North Carolina[39] - A conference call to review Q2 2025 financial results was scheduled for 9:00 a.m. Eastern Time on Thursday, July 24, 2025[40] Non-GAAP Financial Measures The report uses non-GAAP measures like adjusted earnings to clarify underlying operational performance - The company uses non-GAAP measures to supplement GAAP financial statements, which should not be considered in isolation[42] - Management believes these measures provide additional understanding of ongoing operations and enhance comparability with prior periods[42] Forward-Looking Statements The report contains forward-looking statements subject to risks including economic conditions and integration challenges - Statements regarding the benefits of the Sandy Spring acquisition and future operating results are forward-looking and subject to risk[43] - Key risks include changes in market interest rates, economic conditions, integration challenges with Sandy Spring, and regulatory changes[43][45] Financial Tables Key Financial Results (Unaudited) This section provides detailed unaudited tables on operations, performance ratios, capital, and asset quality Consolidated Balance Sheets The balance sheets detail the company's financial position, reflecting significant growth from the recent acquisition Consolidated Statements of Income (Unaudited) This table itemizes revenues and expenses for the three and six months ended June 30, 2025, and prior periods Average Balances, Yields, and Rates (Taxable Equivalent Basis) This analysis breaks down the components of net interest income and margin drivers on a taxable equivalent basis