Atlantic Union Bankshares Corp Q2 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: David Bishop - Hovde Group LLC - Analyst : Yes. Hey. Good morning, John. Good morning, Rob. And congratulations, Rob, on the news. Just curious from a credit quality perspective, John, maybe on the -- you have the marks on the legacy Sandy Spring front. But just curious what you saw from a credit quality perspective on a sort of legacy Atlantic Union basis? Maybe sort of color on what happened on criticized classified and new NPA formation looks like it was pretty low, but I just wanted to make sure I did the numbers right. John Asbury - Atlantic Union Bankshares Corp - President, Chief Executive Officer, Director, Chief Executive Officer - Atlantic Union Bank Yes. I think the increase in NPA, as we stated, really was simply the Sandy Spring portfolio coming in. Overall credit looked quite stable. Doug Woolley is here, Chief Credit Officer. Doug, do you want to share a perspective on that?

Question: David Bishop - Hovde Group LLC - Analyst : Got it. And then, John, I know in the past couple of quarters, there's been some headwinds, especially within the GovCon segment. Just curious what you're seeing there in terms of the pipeline and rebuild of that portfolio. Any sort of stabilization in that headwind? John Asbury - Atlantic Union Bankshares Corp - President, Chief Executive Officer, Director, Chief Executive Officer - Atlantic Union Bank GovCon is performing fine. As I indicated, most -- not all, but most of our government contract finance portfolio is national security and defense related, and they're arguably winners. Now that we have a record defense spending bill, the modernization of defense spending, the shift toward drone, warfare, anti-drone defense, unmanned vehicles, unmanned ships, cybersecurity, missile defense in general, all of that tends to favor the types of contractors that we deal with, and it looks pretty good. One of the issues we faced in government contract finance has been, we saw a lot of activity with private credit that was paying it down. But overall, it looks pretty good. Dave, do you have anything to add in terms of opportunities there? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JULY 24, 2025 / 1:00PM, AUB.N - Q2 2025 Atlantic Union Bankshares Corp Earnings Call

Question: David Bishop - Hovde Group LLC - Analyst : Got it. And one final question, maybe, Rob, from a housekeeping perspective. I know there's lumpiness in terms of purchase accounting accretion income levels, so to speak, but any sort of sense where that could be trending over the near term here? Is this a good estimate moving forward into the latter half of the year? John Asbury - Atlantic Union Bankshares Corp - President, Chief Executive Officer, Director, Chief Executive Officer - Atlantic Union Bank Yes. If you look at this quarter, we had about $45 million of accretion income come through. That's a pretty good run rate the way we're looking at our projections so I would go with that. It could be volatile, as you know, it could be higher prepayments and things of that nature. But we think the $45 million is a pretty good number to run with.

Question: Brian Wilczynski - Morgan Stanley - Analyst : Hey. Good morning. Thanks for taking my question. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JULY 24, 2025 / 1:00PM, AUB.N - Q2 2025 Atlantic Union Bankshares Corp Earnings Call Maybe just going back to the loan growth side. So you're at $27.3 billion today. Can you just talk about what you're hearing from your commercial borrowers about the environment? And specifically, how you're thinking about the drivers of loan growth from here for both C&I and also CRE separately? John Asbury - Atlantic Union Bankshares Corp - President, Chief Executive Officer, Director, Chief Executive Officer - Atlantic Union Bank Dave you want to take that?

Question: Brian Wilczynski - Morgan Stanley - Analyst : That's really helpful. Thank you. And then as a follow-up, maybe on the funding side. So you have about $1.6 billion of cash on the balance sheet post loan sale. Can you just dig into how you're going to deploy that in terms of paying down higher cost source of funding? How much you can do there and how quickly you can move on it? Thanks.

Question: Brian Wilczynski - Morgan Stanley - Analyst : And is it fair to assume that the loan-to-deposit ratio maybe ticks up a little bit from here, just given the actions you took?

Question: Brian Wilczynski - Morgan Stanley - Analyst : Got it. That's really helpful. Thank you for taking my questions.

Question: Steve Moss - Raymond James - Analyst : Hey, guys. This is Chase on for Steve. Good morning.

Question: Steve Moss - Raymond James - Analyst : Thank you for reminding me. First one for me. I've been hearing a lot about pricing competition. Where are loan yields coming in at now, either in terms of blended or AUB in legacy SASR or markets separately? Thanks.

Question: Steve Moss - Raymond James - Analyst : Got you. And I see in your 2025 financial outlook slide that you have three cuts rest of the year baked into the modeling there. Did you happen to run a two-cut scenario? And if so, is there anything you can share on how different it was from the three-cut scenario? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JULY 24, 2025 / 1:00PM, AUB.N - Q2 2025 Atlantic Union Bankshares Corp Earnings Call I see in your 2025 financial outlook slide that you have 3 cuts rest of the year, based in the modeling there. Did you happen to run a two-cut scenario and if so, is there anything you can share on how different it was from the three-cut scenario?

Question: Steve Moss - Raymond James - Analyst : Thanks for that. One last one for me. Now that you're actively working on integrating all of SASR, what opportunities are you most excited about? Thanks. John Asbury - Atlantic Union Bankshares Corp - President, Chief Executive Officer, Director, Chief Executive Officer - Atlantic Union Bank I would say -- and we have numerous other leaders here at the table. I would say, first of all, what we bring to the table for the former Sandy Spring franchise is liquidity. They're unconstrained in terms of their ability. We bring new products and capabilities, particularly on the commercial and industrial side. So -- and I think we've got a wonderful group of people up there. So I think that we couldn't be happier with the cultural fit, so I feel really good about that. I am super excited about what we're talking about doing in North Carolina, and I feel good about the Virginia market. So I'm feeling pretty optimistic across the board. I think that any sort of calm that comes to the markets in terms of the hesitancy that we've seen, which appears to be abating is going to be good for us because I think we're meaningful in these markets. These are good markets, and we play an important point. Anyone have anything to add to that? I mean, the stage is set, we should be able to deliver.

Question: Catherine Mealer - KBW - Analyst : Hey. Maybe just one on -- to follow up on what you were just talking about in terms of kind of C&I and growth in the D.C. market. Can you just talk a little bit about the opportunity for growth maybe in kind of two buckets in D.C. I think maybe one, in terms of bringing your kind of C&I products, maybe what kind of growth rate would you expect to see in C&I in some of Sandy Springs markets? And what that kind of ramp and transition happens? Do we need to hire more lenders, or can you do it with the team you've got? Just kind of paint a picture for what that looks like. And then secondly, on the CRE side, are there opportunities within the clients or some of the relationships that they had with the $2 billion of loans that you just sold that you're still servicing? Is there an inherent kind of growth opportunity within that client base as you're willing to lean in and kind of grow CRE as you build capital over time? Thanks. John Asbury - Atlantic Union Bankshares Corp - President, Chief Executive Officer, Director, Chief Executive Officer - Atlantic Union Bank Yes. Certainly, Catherine. One thing I'll point out politely is that we don't think about it as the D.C. market. We think about it as the state of Maryland because Sandy was the Maryland bank, not the D.C. bank. We have two branches in D.C., but far more.

Question: Catherine Mealer - KBW - Analyst : I do. John Asbury - Atlantic Union Bankshares Corp - President, Chief Executive Officer, Director, Chief Executive Officer - Atlantic Union Bank Yes. So State of Maryland and then more broadly, Northern Virginia, we think we do have a great team up there, and we feel good about that team and under Jay O'Brien's leadership. Dave, I think as we've looked at the size of the team and capabilities, we feel pretty good. Do you have anything you would want to add to that?

Question: Catherine Mealer - KBW - Analyst : And then maybe one follow-up just on the margin. Is it fair to -- I mean, you've kind of range within the margin, and we're kind of starting a little bit on the lower end of where we thought we'd be, which was kind of where we had painted the picture. But is it fair to think that as we move through the year and kind of growth improves and you kind of work through some of the liquidity and pay down brokered that the margin just gradually kind of trends towards the higher end of the range? Is there -- I guess, what's the risk that we kind of stay stagnant in the margin near term? Maybe that is the way to put it.

Question: Catherine Mealer - KBW - Analyst : That's great. Okay. Thank you. Appreciate it.

Question: Brian Wilczynski - Morgan Stanley - Analyst : Just circling back with one more question on credit. So credit was clearly really positive this quarter. It sounds like you're not seeing anything in terms of signs of weakness across the portfolio. The guidance for the year, 15 to 20 basis points of NCOs is significantly higher than where you've been trending. And I know there's one potential idiosyncratic loss that could get resolved in the second half. But aside from that, can you just comment on any conservatism that's baked into that guidance? Is there anything you're seeing right now that would indicate that losses are going to move higher or are you just being conservative with that outlook? Thanks.

Question: Brian Wilczynski - Morgan Stanley - Analyst : Got it. Thank you again.