Atlantic Union Bankshares Corporation ((AUB)) has held its Q3 earnings call. Read on for the main highlights of the call.
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Atlantic Union Bankshares Corporation’s recent earnings call exuded a generally positive sentiment, highlighting the successful integration of Sandy Spring, robust fee income, and improved credit quality. However, the call also acknowledged challenges such as merger-related costs, increased charge-offs, and heightened competition in lending markets.
Successful Sandy Spring Integration
The integration of Sandy Spring is progressing smoothly, with the core systems conversion completed and the closure of five overlapping branches. This strategic move has unified the bank under the Atlantic Union Bank brand, marking a significant milestone in the company’s expansion efforts.
Loan and Deposit Growth
Atlantic Union Bankshares reported a quarterly loan growth of approximately 0.5% annualized, with a more substantial average loan growth of 4.3% annualized quarter-over-quarter. Additionally, noninterest-bearing deposits saw an annualized growth of about 4% in the third quarter, indicating a healthy financial position.
Improvement in Credit Quality
The bank’s credit quality showed notable improvement, with third-quarter nonperforming assets at 0.49% of loans and a significant decrease in criticized asset levels by over $250 million, or 16%. This reflects the company’s effective risk management strategies.
Steady Net Interest Margin
The reported FTE net interest margin remained steady at 3.83%, with improvements noted when excluding accretion income impacts. This stability is a positive indicator for the bank’s financial health.
Strong Fee Income
Fee income was robust, with approximately $1 million of swap income attributed to the former Sandy Spring Bank. The bank also noted increased wealth management opportunities, contributing to its strong financial performance.
Merger-Related Costs Impact
Merger-related costs continued to impact the quarter, creating some noise in the financial results. Despite these costs, the bank remains focused on achieving its cost savings targets from the Sandy Spring acquisition.
Increase in Charge-Offs
The bank experienced an increase in net charge-offs due to two commercial and industrial loans, one of which involved a borrowing base misrepresentation. This highlights the challenges in maintaining loan quality amidst a competitive market.
Competition in Loan Markets
Increased competition in lending markets has been noted, affecting the bank’s loan growth potential. This competitive landscape poses challenges for sustaining growth in the lending sector.
Potential Government Shutdown Impact
Concerns were raised about the potential impact of a prolonged government shutdown on consumer customers and commercial activity, particularly in the Greater Washington, D.C. region. This remains a risk factor for the bank’s operations.
Forward-Looking Guidance
Looking ahead, Atlantic Union Bankshares provided guidance on several financial metrics. The company expects the net interest margin to improve in the fourth quarter, with year-end loan balances projected between $27.7 billion and $28 billion. Despite a decrease in deposits, noninterest-bearing deposits grew by about 4% annualized. The bank reaffirmed its full-year net charge-off ratio guidance and anticipates maintaining strong financial performance into 2026.
In summary, Atlantic Union Bankshares Corporation’s earnings call reflected a positive outlook with successful integration efforts and improved credit quality. While challenges such as merger-related costs and competitive pressures persist, the bank remains optimistic about its financial performance and growth prospects.