Atlantic Union Bankshares Corporation Q4 FY2025 earnings call

Management Statement and Operational Highlights

• Acquisition Integration: Strong Q4 financial results due to successful Sandy Springs acquisition integration. Core systems conversion completed in October, with residual merger-related expenses expected to decline in Q1 2026.
• Loan Performance: Quarterly loan growth ~6.3% annualized, pipelines higher at end of Q4, indicating track for 2026 loan growth.
• Net Interest Margin: Increase driven by lower deposit costs, with loan yields steady despite Fed rate cuts.
• Fee Income: Driven by loan-related interest rate swaps and fiduciary/asset management fees, benefiting from Sandy Spring acquisition.
• Credit Quality: Continued strength with low net charge-off ratio and improving non-performing assets.
• Market Insights: Unemployment rates in Virginia, Maryland, and North Carolina discussed, with Virginia and North Carolina outperforming national average.
• Strategic Focus: Emphasis on sustainable growth, capital generation, and expansion in North Carolina, with investments in specialty lines.

Segment Performance

• Loan Growth: Quarterly loan growth was approximately 6.3% annualized, ending the year at $27.8 billion. Pipelines were higher at the end of Q4 than the start, with expected 2026 year-end loan balances ranging between $29 billion and $30 billion.
• Deposits: Total deposits at end of Q4 were $30.5 billion, a decrease of $193.7 million annualized. Projected 2026 year-end deposit balances are between $31.5 billion and $32.5 billion.
• Net Interest Margin: FTE net interest margin increased by 13 basis points to 3.96% in Q4, driven by reduced deposit costs while holding loan yields relatively flat.
• Fee Income: Strong, primarily from loan-related interest rate swap fees and fiduciary/asset management fees, with ~27% of interest rate swap income from former Sandy Spring customers.
• Credit Quality: Annualized net charge-off ratio in Q4 was 1 basis point, full year 17 basis points. Non-performing assets as a percentage of loans held for investment declined to 0.42% in Q4.
• Adjusted Operating Results: Q4 adjusted operating earnings available to common shareholders were $138.4 million ($0.97 per share), with adjusted operating return on tangible common equity 22.1%, return on assets 1.5%, and efficiency ratio 47.8%. Full year 2025 adjusted operating earnings available to common shareholders were $444.8 million ($3.44 per share), with return on tangible common equity 20.4%, return on assets 1.33%, and efficiency ratio 49.7%.

Guidance

• Loans and Deposits: Expect 2026 year-end loan balances between $29 billion and $30 billion, and deposit balances between $31.5 billion and $32.5 billion.
• Credit Metrics: Allowance for credit losses to loans projected to remain in 115 to 120 basis point range. Net charge-off ratio expected to fall between 10 and 15 basis points in 2026.
• Income Projections: Full tax equivalent net interest income projected $1.35 billion to $1.375 billion. Noninterest income expected $220 million to $230 million, adjusted operating noninterest expense $750 million to $760 million.
• Tangible Book Value: Projected annual growth of 12-15% in tangible book value per share.

Risks

• Macroeconomic Headwinds: Federal government restructuring and unpredictable tariff policies.
• Episodic Fraud: Noncredit related customer losses, which are episodic.
• Economic Uncertainty: Uncertainty in loan growth forecasting due to still-uncertain economic environment.
• Swap Income Volatility: Swap income may vary from quarter to quarter.

Question and Answer

Q: Janet Lee asks about 2026 interest income guidance and deposit remix.

A: Rob Gorman responds that interest income is guided mid-$1.35 billion to $1.375 billion range, dependent on cost of funds, accretion income, and loan growth; deposit remix post-Sandy Spring conversion reclasses, not expected to shift much going forward.

Q: David Bishop asks about loan pipeline and North Carolina expansion.

A: John Asbury and David Ring state pipeline increased from start to end of Q4, with encouraging feedback from market leaders; North Carolina branch build-out on track with 10 branches planned in Raleigh and Wilmington over 1.5-2 years.

Q: Steve Moss asks about loan pricing, deposit costs, core margin, and North Carolina expansion.

A: Rob Gorman says loan pricing ~$6-$6.20, deposit cost end of Q4 below 2%; core margin expected to expand with acquired loan book repricing; North Carolina branch build-out and team hiring in progress.

Q: Brian Wudzinski asks about loan growth drivers and seasonality.

A: John Asbury notes Q4 is seasonally strong, with typical dip in Q3, expecting loan growth to build as year progresses, diversified across Sandy Spring, North Carolina, and specialty lines.

Q: Hannah Wen asks about deposit growth outlook.

A: John Asbury and Rob Gorman explain seasonal end-of-year deposit decline, projecting 2026 deposit growth 3-4% with opportunities in commercial and consumer sides.

Q: Steven Skun asks about merger-related expenses and North Carolina hiring, capital use.

A: Rob Gorman says first quarter merger-related expenses flattish due to seasonality, then declining; North Carolina expansion on track, with share repurchases considered when excess capital (CET1 >10.5%) is achieved.

Q: David Bishop asks about noncredit customer losses in OpEx.

A: Rob Gorman explains noncredit customer losses are episodic fraud-related issues, expected to be temporary and not recurring significantly.