Atlantic Union Bankshares Corporation Stock

Good day. Thank you for standing by, and welcome to Atlantic Union Bankshares Second Quarter 2026 Earnings Conference Call. [Operator Instructions]

Please be advised that today's conference is being recorded. I will now hand the conference over to your speaker host, Bill Cimino, Senior Vice President of Investor Relations. Please go ahead.

Thank you, Olivia, and good morning, everyone. I have Atlantic Union Bankshares's President and CEO, John Asbury; and Executive Vice President and CFO, Alex Dodd, with me today. We also have other members of our executive management team with us for the question-and-answer period.

Please note that today's earnings release and the accompanying slide presentation we are going through on this webcast are available to download on our investor website, investors.atlanticunionbank.com. During today's call, we will comment on our financial performance using both GAAP metrics and non-GAAP financial measures. Important information about these non-GAAP financial measures, including reconciliations to comparable GAAP measures, is included in the appendix our slide presentation and in our earnings release for the second quarter of 2026.

We will also make forward-looking statements, which are not statements of historical fact and are subject to risks and uncertainties. There can be no assurance that actual performance will not differ materially from any future expectation or results expressed or implied by these forward-looking statements. We undertake no obligation to publicly revise or update any forward-looking statement, except as required by law.

Please refer to our earnings release and slide presentation issued today and our other SEC filings for further discussion of the company's risk factors and other important information regarding our forward-looking statements, including factors that could cause actual results to differ from those expressed or implied in the forward-looking statement. All comments made during today's call are subject to that safe harbor statement.

At the end of the call, we will take questions from the research analyst community. I'll now turn the call over to John.

Thank you, Bill. Good morning, everyone. Thank you so much for joining us today. Atlantic Union Bankshares reported strong second quarter financial results, reflecting disciplined execution and providing an encouraging indication of the earnings power of the franchise we have been building. For the first time in 2 years, we did not incur any merger-related costs. We were also pleased to realize a $32.3 million pretax gain from the sale of our equity interest in Bearing Insurance.

Adjusted operating performance, excluding the gain from the equity interest sale was notable for solid loan growth, margin improvement on both a core and reported basis, disciplined expense management and solid credit performance, along with continued capital generation.

Over the past 2 years, we have deployed capital intentionally to strengthen and expand our franchise. We believe our second quarter results are an encouraging early indication that those investments are beginning to translate into stronger earnings capacity, capital generation and long-term shareholder value. We remain focused on building on this progress through disciplined execution, organic growth and continued attention to soundness, profitability and growth in that order.

Our commitment to creating shareholder value remains unwavering. We believe Atlantic Union is well positioned to deliver sustainable growth, top-tier financial performance and long-term value for our shareholders. We believe that our continued organic growth opportunities due to our robust presence in attractive markets, reinforce our status as the premier regional bank headquartered in the Lower Mid-Atlantic.

I'll briefly cover our Q2 '26 highlights and share market insights before Alex presents the financial review. Before reviewing this quarter's results, I would note that the second quarter was marked by continued uncertainty, particularly around geopolitical developments and the conflict involving Iran. Despite that backdrop, customer confidence remained resilient and economic activity across our footprint held up well. We delivered record loan production during the quarter, exceeding our 2025 fourth quarter production level, which is traditionally our strongest quarter by roughly 8%, while the second quarter is typically one of our seasonally stronger periods, and we expect some moderation in the third quarter due to the normal summer slowdown, our pipelines remain healthy.

Overall, we believe that our underlying credit activity and pipeline depth support our full year outlook, and we currently expect loan growth to finish toward the higher end of our mid-single-digit range. Importantly, this growth reflects strong client activity across our markets, the value of the customer relationships we have built and disciplined execution by our team.

With that context here are the key highlights from the second quarter. Average loans were $28.2 billion and grew approximately 6% annualized during the second quarter, while period-end loans increased approximately 10.4% annualized from Q1 to Q2, ending the quarter at approximately $28.7 billion. Growth was well distributed across the franchise, led by strong client activity in commercial lending, construction lending, multifamily and select consumer categories. Atlantic credit utilization decreased slightly from the first quarter but was up slightly year-over-year.

Year-to-date annualized loan growth was 6.4%. As I mentioned, loan pipelines are healthy and support our expectation that full year loan growth is tracking toward the higher end of our mid-single-digit outlook. Average deposits increased 2.4% annualized during the quarter, and total deposits increased approximately 1% annualized from the end of Q1 to the end of Q2, all consistent with our low single-digit 2026 outlook.

Growth was concentrated in interest-bearing deposits. We also reduced brokered deposits by approximately $53 million during the quarter and roughly $571 million year-to-date. Broker deposits represented only 2% of total deposits at quarter end, giving us flexibility to use them selectively going forward if needed. Our core customer deposit base remains a defining strength to the franchise, and our focus remains on relationship-based deposit growth, expanding share of wallet and maintaining funding discipline.

Core net interest margin, which excludes the purchase accounting adjustments, improved by 1 basis point quarter-over-quarter. Reported FTE net interest margin increased 9 basis points to 3.94% driven primarily by higher accretion income compared with the first quarter. Alex will provide more detail on the factors influencing NIM performance in his section.

Before turning to credit, I do want to highlight the progress we are making in bringing our capital markets capabilities to our expanded footprint. In the second quarter, former Sandy Spring Bank teams generated approximately 27% of our interest rate swap transactions and 32% of our foreign exchange revenue. We believe these fee products should continue to provide opportunities for additional revenue synergies over time.

Credit quality remained strong in the quarter with annualized net charge-offs of just 3 basis points for both the second quarter and year-to-date. Based on our first half performance, current loss expectations and favorable asset quality trends, we are lowering our full year net charge-off guidance, which Alex will discuss later in the call.

Key asset quality indicators remained encouraging. Nonperforming assets increased modestly from the prior quarter but remained low at 39 basis points of loans held for investment, while past dues declined considerably and criticized and classified assets improved to 4.4% of total loans, down from 4.5% in the prior quarter.

With Bureau of Labor statistics scheduled to release June unemployment data shortly, this chart will soon be updated. For now, I'll simply note that Virginia and North Carolina is made unemployment rates remain below the national average, while Maryland was just slightly above it. We continue to expect unemployment levels in Virginia, Maryland and North Carolina to remain manageable and generally comparable to or below the national average, consistent with Moody's current state level forecast. We remain confident in the resilience and long-term attractiveness of our markets.

As I approach my 10th anniversary with Atlantic Union at the end of this quarter, what is clear to me is how far we've come as an organization. We've stayed focused, adapted as conditions changed and consistently executed the strategy we set out and clearly communicated while remaining grounded in the community bank values and local relationships that have always defined Atlantic Union. This quarter's results reflect our continued momentum and most importantly, the dedication of our teammates whose hard work makes it all possible.

With that foundation in place and no additional acquisitions currently planned during this phase of our strategic plan, our focus is squarely on continuing to demonstrate the sustained performance and capital generation capability of the company we have built. Performance that enables us to better serve our customers and communities, invest in our teammates and create long-term value for our shareholders.

With that, I'll turn the call over to our CFO, Alex Dodd, for a detailed review of our quarterly financial results. Before I do, I'd like to note that Alex has now been with the company for nearly 4 months following a deliberate and smooth transition with former CFO, Rob Gorman, who will retire at the end of September. Since this is our last earnings call before Rob's retirement, I want to again thank him for all he's contributed over his 14 years with Atlantic Union. Rob leaves behind a strong legacy and will be missed, but he is able succeeded by Alex.

With that, I'll turn the call over to Alex for his inaugural quarterly earnings comments. Alex?

Thank you, John, and good morning, everyone. Before I begin, I want to thank Rob as well for making this a smooth transition for me. I'll now take a few minutes to provide you with some details on the results. My commentary today will primarily address Atlantic Union's second quarter financial results presented on a non-GAAP adjusted operating basis, which for the second quarter principally excludes the $32.3 million pretax gain associated with the sale of our equity interest in Bearing Insurance.

In the second quarter, reported net income available to common shareholders was $158 million and earnings per common share of $1.11. The adjusted operating earnings available to common shareholders were $134 million or $0.94 per common share for the second quarter, resulting in an adjusted operating return on tangible common equity of 20.1% and an adjusted operating return on assets of 1.47% and an adjusted operating efficiency ratio of 47.47%.

Here's a look at the GAAP year-to-date metrics and trends over the last few years. Looking at the year-to-date adjusted operating numbers at the end of the second quarter, we have already reached the target for ROA and ROTCE medium-term financial targets. We remain confident that we will achieve all 3 of these targets over the medium term, which we define as this year and next.

Turning to the credit loss reserves. At the end of the second quarter, the total allowance for credit losses was $331 million, an increase of $9.1 million, primarily driven by loan growth during the quarter. The total allowance for credit losses as a percentage of total loans held for investment remained flat at 115 basis points at the end of the second quarter. As John mentioned, net charge-offs were $2 million or 3 basis points annualized in the quarter.

Now turning to the pretax pre-provision components of the income statement for the second quarter. Tax equivalent net interest income was $329.7 million, an increase of $12.8 million from the first quarter primarily driven by an increase in loan volumes, higher loan yields and increased loan accretion income. The increase in loan-related interest income was partially offset by an increase in deposit interest expense, primarily from growth in interest-bearing deposit balances and modestly higher deposit costs.

As John noted, the second quarter's tax equivalent net interest margin increased 9 basis points from the prior quarter to 3.94%, primarily due to higher earning asset yields, partially offset by modestly higher cost of deposits. Earning asset yields increased 9 basis points from the prior quarter to 5.88%, primarily due to higher loan accretion income of $5 million and higher loan yields.

Cost of funds was flat from the prior quarter as a 3 basis point increase in the cost of deposits was offset by lower borrowing amortization costs related to past acquisitions. Of note, excluding the impact of accretion income, our core net interest margin increased by 1 basis point to 3.46%. Noninterest income increased $35.5 million to $90.2 million during the second quarter, primarily driven by the gain on sale of our equity interest in Bearing Insurance. Excluding the onetime gain, adjusted operating noninterest income increased $3.1 million to $57.9 million, driven by higher loan-related interest rate swap fees associated with higher loan originations and increased fiduciary and asset management fees, which were partially offset by lower other income.

Noninterest expense decreased $10.7 million to $199.1 million for the second quarter driven by a $9 million decline in merger-related costs. Adjusted operating noninterest expense, which excludes merger-related costs in the first quarter, and amortization of intangible assets in both quarters decreased $1.3 million to $184 million for the second quarter, primarily due to lower marketing costs, along with a decrease in salaries and benefits primarily related to seasonally higher payroll taxes and 401(k) contribution expenses in the prior quarter.

At June 30, loans held for investment net of unearned income were $28.7 billion, an increase of $727 million or 10.4% annualized from the prior quarter. Our average loan growth for the quarter was approximately 6%. At June 30, total deposits were $30.5 billion, an increase of $77 million or approximately 1% annualized from the prior quarter, while average deposits decreased 2.4% for the quarter. Our loan-to-deposit ratio ended the quarter at 94.1% within our preferred range of 90% to 95%.

At the end of the second quarter, Atlantic Union Bankshares and Atlantic Union Bank's regulatory capital ratios were comfortably above well-capitalized levels. In addition, we remain well capitalized on an adjusted basis if you include the negative impact of AOCI and unrealized losses for held to maturity securities in the calculation of the regulatory capital ratios.

On a linked quarter basis, tangible book value per common share increased $0.84 or 4.2% to $20.77 per share at the end of the second quarter. Since Q2 of 2025, tangible book value per share has grown $2.39 or 13% year-over-year.

The CET1 ratio was 10.41% for the second quarter and within our preferred range of 10% to 10.5%. During the second quarter, the company repurchased approximately $10 million of its common shares at an average price of $37.76, leaving approximately $240 million remaining under our share repurchase authorization.

Before turning to the financial outlook, I would emphasize that our second quarter results represented strong operating performance and an encouraging indication of the earnings capacity and capital generation capability of the franchise. At the same time, we believe our updated outlook reflects a disciplined and prudent view of second half funding competition and deposit mix. We expect -- we continue to expect loan balances to end the year between $29 billion and $30 billion, while year-end deposit balances continue to be projected between $31 billion and $32 billion.

On the credit front, the allowance for credit losses is projected to remain in the 115 to 120 basis point range, and we are reducing the range for our projected net charge-off ratio to be between 5 and 10 basis points in 2026. Fully tax equivalent net interest income for the full year is now projected to come in between $1.32 billion and $1.33 billion, inclusive of accretion income. The updated range reflects our expectation of higher interest-bearing deposit mix as well as greater loan and deposit competition in the second half of the year.

We are tightening the range for our 2026 fully tax equivalent net interest margin to between 3.90% and 3.95%. This outlook is supported by our baseline assumption that the Federal Reserve increases rates by 25 basis points in September and that term rates remain stable at current levels. On a full year basis, noninterest income is expected to be between $220 million and $230 million, while adjusted operating noninterest expense is estimated to fall in between the range of $742 million to $752 million, including the expense impact of our North Carolina investment and our other 2026 strategic initiatives.

Based on these projections, including our expected stock repurchase activity, we expect to generate annual growth in tangible book value per share of approximately 12% in 2026 and produce financial returns that will place us within the top quartile of our proxy peer group.

In summary, Atlantic Union delivered strong operating financial results in the second quarter and had a solid first half. We remain focused on generating sustainable, profitable growth and to build long-term value for our shareholders in 2026 and beyond.

I'll now turn the call over to Bill.

Thank you, Alex. And Olivia, we're ready for our first caller, please.

[Operator Instructions]

Now first question coming from the line of Russell Gunther with Stephens.

First question for me, I wanted to kind of start on the margin and really trying to get a sense directionally for loan yields where they're headed. So if you could level set us for where new production came on in 2Q, kind of perhaps where that pipeline yield sits today? And then just remind us of what the fixed rate opportunity -- repricing opportunity is for you guys, kind of relative to what you are putting on new commercial at today?

Sure. Russell. So for the second quarter, our fixed rate loans are coming on, new loan spreads are around 200 basis points, and our variable rate loans are also around 200 basis points. We saw a little bit of lower spreads in the quarter due to larger loans that we completed, and that was more just a function of the size of the loan but around 200 basis points for both variable and fixed.

In terms of the fixed rate opportunity, we have about $800 million to $900 million per quarter of variable rate loans that are maturing with rates around 5%. And we expect to put those back on around 610 basis points. So it's about 100 to 110 basis point benefit for the low maturities each quarter.

Okay. Great. And then maybe just a follow-up with the revised NII guide, including a Fed hike in September, can you quantify for us what, if any, benefit is factored into your kind of revised NIM and NII outlook? And perhaps just kind of package where you would expect kind of the core NIM overall to trend within that guide?

Yes. So we do have in our guidance 125 basis point increase in September. We will see a small benefit in the fourth quarter for the deposit pricing lag. It's about -- it's under 1 basis point for the full year. It's about 3 basis points in the fourth quarter. In terms of core margin, we do expect that to grind higher over time from the benefit of the fixed rate loan repricing. But because of higher funding costs and deposit mix, it's not going to be as high as expected. As we look forward to the next few quarters, we'll see core margin increased modestly because of those dynamics.

Our next question coming from the line of Janet Lee with TD Cowen Securities.

Could you give us a little more color around the deposit competition and the mix shift, what you're expecting in your NII guide and what maybe what pace of deposit cost increase assumed in your 390 to 395 NIM guide?

So we did update our guidance for net interest income, and it's solely coming from the funding side of the balance sheet. What we saw in the quarter was customer migration to our higher-yielding, interest-bearing deposit accounts. And that's informed our guidance. So we're encouraged by the loan growth that we saw in the quarter. But the cost of funding that is getting work is going up higher than we expected. What we saw through the quarter, to give you a perspective on just the month of June, we saw a 2 basis point increase in our cost of deposits. So it was 3 basis points for the full quarter and 2 basis points in the month of June, and that really informed the outlook for the rest of the year.

So I'll guess we'll stop there, Janet and see if you have further questions.

Got it. So 2 basis point increase in the month of June. So that is sort of at this point, the pace at which you would expect for the rest of the year, ballpark?

Not necessarily. We're going to be a little bit under that, if you just play that out for the rest of the year. And that's going to come from the mix that we'll see in CD growth and money market growth as well as some DDA growth that we have in our outlook. So it's PAUSE underneath that pace, but that's what informed our outlook for the rest of the year.

Yes. Alex, is it fair to say what we saw -- what we're seeing is relatively stable deposit rates from a competitive standpoint? Is this more of a mix issue in terms of where is the growth coming?

That's a good point, John. Yes. It really is our deposit mix. It's informing the guide here. The deposit competition is elevated but stable. And so what we're seeing is just the inflow into our deposit portfolio is coming from the higher yielding products.

Got it. And just quick follow-up. PAA for the second quarter came in maybe just slightly above what you guided before, is 145 PAA for 2026 is still a good assumption?

We had said on the last call, the range is 140 to 150 million, and we're still tracking to that. So $145 million being the midpoint is fine.

Our next question coming from David Bishop from Hovde Group.

Curious, John, Alex, it sounds like the loan pipeline continues to be pretty robust. Just curious what you're seeing on the commercial pipeline out of sort of the legacy Sandy Spring Maryland markets, how much that's contributing to the pipeline and maybe the growth we saw this quarter.

Yes, we are growing the former Sandy Spring portfolio, and we're happy to see that. Dave Ring, do you want to just sort of speak directionally?

Sure. I mean we're seeing double-digit growth in the pipeline with -- in the Greater Washington market, Washington, Maryland. Production is up double digits as well. And all the markets in all the markets, all the teams in those markets are also. So we're seeing very balanced stable growth, and we're not seeing any hangover from the acquisition.

The way I think about this, Dave, is that the former Sandy is in round numbers, maybe 1/3 of the overall portfolio. And so you would expect all things being equal for them to be about 1/3 of the pipeline. And they've come a long way closer to that. So we've been very pleased with it. And the teams, to be clear.

Got it. Appreciate that color. And then, John, just maybe an update in progress in terms of the Carolina build-out that you're seeing on those ones.

Yes, there's really 2 -- I think of this -- it's a holistic strategy comprised of both the retail banking effort as well as the investments that we're making in expanding our commercial banking teams, along with some additional investment for mortgage and wealth management, et cetera. It's something I've been saying recently, I want to be clear in terms of the investment. While we do refer to it as a North Carla strategy, you could more specifically refer to it as our densification strategy in Raleigh and the Wilmington because that's where the thrust of the investment and certainly the physical branch network build-out is going on.

So Shawn O'Brien, who's had a consumer business banking. Can you update us on where are we in terms of the branch effort? And then I'll ask Dave Ring to chime in with some perspective on the commercial side?

Yes. So we announced that we were going to open 10 branches, 10 new branches operate to John's point, in Raleigh and Wilmington. And the first of those branches open here this month. So we are very excited.

That's Raleigh.

We have a branch opening. And then we have 2 more opening in Raleigh in October, November of this year. our 3 new Raleigh branches this year, and then we will start to open benches in Wellington as well. If you remember, 7 and now in Wilmington. And we hope to get all 10 done in 2027, a couple may get into 2028, but we are very happy with our site selection. We've hired the first 3 teams. They're completely staffed for Raleigh. So we have all of those teams hired. We're very happy for the talent we found. So we're very excited about it. We have a lot of plans underway for how to grow new customers in those 2 primary markets.

And then, Dave, your perspective on what we call wholesale banking, which are the various commercial businesses?

And we're working really closely with consumer. And so we're seeing double-digit growth again in loan balances in North Carolina plus, we're waiting on announcements of some new hires that are started or recently started that we're very excited about. So overall, we're meeting our talent acquisition plan, and we're meeting our loan growth expectations.

So Dave, more to come on that.

Our next question coming from the line of Catherine Mealor with KBW.

Just one more on the NII. Broking back on this kind of size of the bond book. How should we think about the securities portfolio growth in the back half of the year? Or is it you are to keep that fairly stable?

Yes. I guess I'll start with. In the second quarter, we did bring it down over $200 million to fund lending growth. and we're now at about 13% of total assets, and we plan to keep keeping it stable in the rest of the year.

Okay. So that's shrunk the past 2 quarters. So maybe we can expect as deposit growth improves in the back half of the year. Your loan growth is funded by deposit growth, not the securities book just flat.

Yes, you're correct, yes. We want to fund the loan growth from our core deposit growth going forward.

Perfect. Okay. Great. And then on buybacks, it was great to see that started. How should we think about how much of that $240 million you expect to repurchase over the next -- to the period that you have at authorization?

We plan to complete the whole program. Our forecasting assumption right now is spread out by quarter, but it's obviously going to be dictated by the share price and when we're in the market.

One quick note, Catherine, if you recall, the securities book was elevated after the CRE loan sales. So it coming down is sort of part of our plans to reinvest in core earning out.

Yes. So you'll go back -- you can see how it rose temporarily and that was the plan. And then we intended to draw it down, which is what we've done. And as Alex said, roughly 13% is a pretty good proportion of assets to have in the securities portfolio from our perspective.

Our next question coming from the line of Steve Moss with Raymond James.

Maybe just following up on deposit competition here. Just kind of curious in terms of what's your appetite to maybe increase borrowings over higher-cost CDs and money market? Is the market that competitive that borrowing is cheaper? I know you put on some towards the end of the quarter here.

Yes. What you saw go on at the end of the quarter was essentially a bridge. As we indicated, we had 6% annualized loan growth during the quarter. So we were productive all quarter long, which was great. It was not all back-end loaded. Having said that, it certainly picked up at the end of the quarter and hence that bridge. So Alex, do you want to share any perspective?

Sure. And we ended the quarter with a loan-to-deposit ratio of over 94% and had to increase borrowings as you're calling out. But we would prefer to fund our lending growth through our core deposit growth, including CDs. And then after that, we may support it with broker deposits as well. The borrowings is going to be more of a short-term measure to really balance the overall balance sheet.

And as you know from past history with us, not unlike many others. We do see some seasonality in deposit balances in Q2 due to tax payments. And we also have certain larger commercial depositors that seem to commonly have some sort of downdraft in balances just at quarter end through the natural cycle in flow of their businesses. And you can see that evident and the difference between the spot growth rate for deposits and the average quarter-over-quarter.

Great. Okay. I just wanted to check on that. I appreciate that color there. And then the second thing here, just in terms of on credit, I guess 2 things. One, if you can give color around the C&I loans that were placed in Monaco this quarter. And then with regard to the allowance for credit losses, you guys stated in your guidance that you assume an uptick in unemployment. Just kind of wondering how much that uptick matters to the total ACL for the current year by year-end?

Doug Woolley, Chief Credit Officers here. Do you want to speak to that, Doug?

On the C&I uptick, 2 smaller credits that have gone a little bit sideways. So we're working through that, but obviously not accrual. So we think it's a little bit of a loss there. Doesn't indicate anything not tied to anything else in the portfolio.

It's interesting. We have been impressed with the resilience of the -- not only our local economies, but the client base, you would expect to see some stress, and this isn't much. So nonperformers are low from our perspective at 39 bps of loans held for investment. And it's fair to assume that you could see it go plus or minus a bit in any given quarter. We're actually below where we finished at the end of last year.

No common thread in terms of -- yes, it just -- it happens. Losses are very, very low. I've said for 10 years, that losses across the industry and in the bank are below what I would have expected to be a normalized rate, and that was beginning 10 years ago. So we feel pretty good about losses.

Right. And I appreciate that color there. And just the ACL guide, is it just like maybe 1 to 2 bps in terms of the assumption on the unemployment rate to rise a minor impact maybe on your guidance for 2026.

That's right. This is a minor impact. We're certainly still within our 115 to 120 basis points as you look out to 2027.

Our next question coming from the line Brian Wilczynski with Morgan Stanley.

You mentioned earlier on the call that most of the pressure that you're seeing on deposit cost is coming from the mix of deposits. Can you give any color on what the cost of new interest-bearing deposits that are coming into the bank today?

Yes. The new deposits on a combined basis is going to be over 3%, somewhere between 3% and 3.5% depending on that mix, but it's mostly going to be in CDs and money market and interest-bearing -- I'm sorry, interest checking.

Got it. That's very helpful. And then when we look at the noninterest-bearing deposits as a percentage of total, it sounds like there will be some more migration in the second half of the year. Do you think that you'll see a similar amount of migration in the second half as you saw in the second quarter?

We're actually forecasting some of the interest-bearing -- I'm sorry, noninterest-bearing growth in the second half of the year and maintaining that same percentage of our total deposits around 22%. But obviously, we saw migration happen in the second quarter. So that's our assumption right now based on working with the business leaders, but it could change.

Yes. And the data that we're looking at is suggesting it's less -- it's not about smaller deposit, noninterest-bearing accounts. It's some of the larger ones. Commercial businesses that are making more active use of sweep accounts. I mean the reality is that we do offer a quite sophisticated treasury management services and part of our job is to help them optimize working capital. So we saw some of that movement is they were able to deploy some surplus funds.

But in Alex's camp, we would expect to see some improvement there over time. It's very difficult to forecast in this environment. No question about it.

Got it. And if I could just squeeze in one more, Alex, do you happen to have the spot deposit cost at quarter end?

It was $1.95 for the month of June.

Our next question coming from the line of David Chiaverini with Jefferies.

This is Frank on for Dave. Just one for me. Just one for me on the balance sheet sensitivity. I know you guys mentioned that the NII guide down was coming mostly from the deposit side. But I just kind of want to touch on how your modeled NII sensitivity and how you modeled NII sensitivity has changed relative to last quarter? And just with deposit beta you're now embedding in your guidance?

Yes, the sensitivity changed because of our mix, and that's what you can expect as the mix change versus the prior quarter. It's higher rate-sensitive deposit products. To the second part of your question around the beta, the beta we're pricing in for the 25 basis point increase is about 50% for interest-bearing products and 40% overall. We have -- as I mentioned earlier in the call, there will be a lag. So we'll reprice immediately for some contractual deposits, and then there'll be a 90-day lag for our savings portfolio.

Where we'll see a bit of a benefit that's short-lived, but a benefit in the fourth quarter.

Next question in queue coming from the line of Stephen Scouten with Piper Sandler.

Curious if we could go back to the conversation here around the repurchase briefly. I know you said you plan to utilize the entirety of that. Can you talk a little bit about at a high level how you think about the math there, and whether it's an earn-back perspective, alternate uses of that capital and just kind of potentially how sensitive to price you could be if the stock continues to move higher?

Sure. So in terms of the buyback, there's a couple of things we want to manage at the same time. We want to operate our CET1 ratio between 10% and 10.5%. And our capital management priority -- excuse me, is supporting loan growth. So if we see loan growth outperform our guidance, we will slow down the buyback. But in terms of the buybacks specifically, we have an intrinsic value model on our share price, and we want to get a certain return out of when we'll be in the market.

So if it does trade above our shares trade above where we want to actually be in the market, there will be maybe a pause for a little while in terms of when we're repurchasing shares. Overall, the earn back, though, is about 4 years on the share buyback. So we want to make a good economic decision of when we're in the market and when we're actually doing our repurchase activity. We've modeled, as I said, over the next 12 months to be split by month or evenly distributed. But that's going to depend on where the shares are pricing.

Got it. Very helpful. Appreciate that clarity. And then just maybe one last one, going back to kind of the balance sheet momentum and loan growth and deposit growth. It sounds like overall balance sheet growth should maybe more PAUSE closely match loan growth moving forward, if I'm hearing what you're saying, less potential drawdown in securities, maybe less remix and more just matched growth from that perspective. Is that the right viewpoint in the hope of what you'd be able to deliver?

Well, over time, the guidance that we provided for 26 is mid-single-digit loan growth and low single-digit deposit growth. But certainly, over time, we would expect to fund ones with deposits -- customer deposits have be late.

Thanks, Steven, and thanks, everyone, for joining us today. We appreciate your time and look forward to talking with you next quarter.

Thank you, everyone.

Ladies and gentlemen, that does call conference for today. Thank you for your participation, and you may now disconnect.

Okay. So thank you, everybody, for joining. We're going to get started with Atlantic Union. Very happy to have with us today, John Asbury, CEO; and Alex Dodd, CFO. John, Alex, thank you so much for joining us today.

Thank you so much for having us here.

Yes. Thank you for having us.

Great. And then, John, maybe just starting off at a high level. Atlantic Union has built a leading franchise over the years in its home state of Virginia. Recently, you've complemented that with the Sandy Spring acquisition in Maryland. When you look across the organization today, what has you the most excited about how Atlantic Union is positioned right now?

Brian, this fall will be my 10th year anniversary of the company. And this is what I had aspired to when I joined. So what I'm most excited about is that we have worked very intensely over nearly the last decade to really build what we have today. We've made the investment. We've increased our capabilities. We've established a market share that I would argue could not be replicated.

We're the #1 regional bank by depository market share in the state of Virginia and the State of Maryland. That's never been done before. I can say that since I am a Virginia banker, I would argue it will not be done again. You can't replicate it. We've built the brand that attracts talent and clients. and we've differentiated our financial performance. So punchline is we've built it exactly the way we want it. What I'm most excited about is this is our opportunity to deliver and demonstrate that, that investment has been worthwhile. It's really the shift into the organic phase of the company strategy.

Great. And maybe just thinking about some of the major initiatives across the company, one of them is really about maximizing the potential of the Sandy Spring acquisition. Can you talk a little bit more about some of the progress that you're making on that side?

Yes. We closed the transaction in April of '25, which means we are now over a year into it. So we just celebrated the first anniversary of it. The systems conversion occurred in October. It went very smoothly. And I think most of us would say it was the best that we've ever seen. So we think it has gone well. We've been thrilled with the people. The cultural fit was everything we had expected, and that has certainly been confirmed.

So at this point, we're really delivering on the promise of the merger. From a commercial banking standpoint, the single most important thing that we've done was simply unlock the ability of the company to meet its potential. Sandy was somewhat constrained by a relatively high loan-to-deposit ratio and a CRE concentration. We removed that. We've also brought to the table more capabilities from a treasury management standpoint. On the commercial banking side, we have equipment finance and foreign exchange, interest rate hedging, other capital markets capabilities such as syndications and certainly a larger balance sheet. And so more capacity. So that is really important is that has gone into the hands of the team.

On the consumer bank side, what we've been able to do is to really help to free up and reorientate the branch network personnel to have more of an external or sales focus. We have removed some operational tasks from their standpoint. And we have a very good playbook in terms of how we grow the retail branch deposit base as well that we're implementing. So the stage is set. All of the conversion activity, getting used to the new policies and processes and system, all of that is behind us.

Great. And then the other big initiative, of course, is increasing your presence within North Carolina. North Carolina is a really attractive, but also a very competitive market. When you think about expanding within that part of the country, can you just talk a little bit about the opportunity there and why you think the bank is uniquely positioned to win in North Carolina?

Well, first of all, we are not new to North Carolina. I want to make sure that the market understands that. We're a $3 billion asset bank in North Carolina. And we have been there for actually quite a while. If you look at the 11 branches that we presently have, 7 of those came from the American National Bank merger who've been there for over a decade. American National Bank was based in Danville, Virginia. That's 30 minutes north of Greensboro.

So that is in the Piedmont Triad just across the Virginia line. And we have a nearly 10-year-old commercial real estate LPO out of Charlotte. So -- which has been very successful. We are building off of that base. North Carolina is contiguous to us, and we're already there. So we think of this as more of a densification strategy. And while I've often referred to this as the North Carolina investment, the North Carolina strategy, it's probably better explained as the Raleigh expansion and the Wilmington expansion or densification.

We're in Raleigh right now. We have 1 branch. We have a commercial team. We are building 7 branches in the Greater Raleigh area. We have a 2-year-old commercial LPO, which has been successful in Wilmington, and we're adding 3 branches there. So what we've chosen to do is to add enough density to where we have a reasonable retail branch market share and to be able to field a full-service banking strategy in those markets and not simply operate as a branch-light business bank. So this is exactly the same model that we use in any of the Virginia markets or the Maryland markets, and we're densifying. So it's not just a retail branch strategy. It's a holistic strategy that will serve business and consumer.

We'll add wealth management and mortgage banking operations too. Yes, it's competitive, but all of our markets are competitive. And if you look at those banks that are really making material organic investment in North Carolina, it's super regionals and it's large nationals like JPMorgan. We are doing the organic investment, and we are accustomed to competing against super regionals and large national banks. We go head-to-head with them daily. I don't think there's anything unique. You asked what is unique about our approach. I don't think it's unique, but I do think that we are well able to compete, and this is a tried and true model from our standpoint.

That's great. And then, Alex, since you're new to Atlantic Union, I'd love to ask, what can you tell us about your decision to join the organization? And what have the first few weeks been like for you as you've learned more about the strategy?

Yes. I've been at Atlantic Union now for just coming upon 2 months. I started mid-April. And I joined from TD Bank, where I was at for 20 years. So in my last role, I was the Deputy CFO of the U.S. business for TD. And in joining Atlantic Union, I was attracted of the story and what they've been able to put together through acquisitions and organic growth and very impressive, and it showed me the ability to execute from the leadership team. And that was from afar.

Once I got to know John and Rob and the whole leadership team, it just seems like a group of people I'd want to work with, and I saw fewer layers of decision-making and a real flexibility in being able to change course if needed and make decisions quickly.

That's great. And then maybe moving over to the current day, the macro environment. It would be great to get both of your updated views on what's going on in the economy right now. Can you talk a little bit about what you're seeing across your client base in terms of sentiment, activity levels and just how they're responding to the current moment?

Yes, Brian, the client base, whether it's business or consumer, has demonstrated resilience. And I am pleased with the sort of lack of impact that we've seen thus far from this whole geopolitical environment and the Iranian conflict. I think the best way I can describe it is the markets or the client base seems to be somewhat desensitized to this level of uncertainty. We know from experience, uncertainty tends to lead to hesitation. We've seen that before. In this case, there is uncertainty, but they simply seem to be moving forward with their plans as a result. We see it in our pipelines, which are at record level. Business is steady.

Obviously, we -- I think we all hope that there'll be a near-term resolution to the Iranian conflict in particular. But the markets are holding up well. Business sentiment and consumer sentiment seems to be holding up pretty well at this point.

Yes. I think I'll speak about what we're seeing from deposits. It's a very competitive market out there. It's particularly in our more urban areas like Northern Virginia and Maryland and down North Carolina, very competitive on pricing. And the banks are seeing loan growth. And with that loan growth, they're also bringing up their deposit pricing to be able to fund that loan growth. So that's a little bit of the sentiment though on the deposit side.

And then maybe just staying on the deposit competition point. We've seen some rate cuts get taken out of the forward curve. People are thinking maybe now we'll get -- start to get rate hikes. How are you thinking about the positioning of the deposit franchise and the trajectory of deposit costs across a variety of rate scenarios?

Yes. I think you have to actually look back a little bit to late in 2025 where we had 3 rate reductions. and banks brought down deposit costs with the betas and almost -- we're setting themselves up for rate reductions in 2026. And that changed course to more of the higher for longer. So what we think we're seeing now is more of an overcorrection of that and deposit pricing moving up.

Now the prospect of having a rate increase, I think it's deposits will continue -- pricing will continue to be competitive. We haven't seen it change, I'll say, in the last 60 to 90 days. It's remained competitive. But with a rate increase on the horizon, that competition will remain, and we'll see what happens from there. We're more of a price follower, not a price leader. So we'll take actions accordingly.

So it's a competitive environment, but about as competitive as 1Q, not necessarily getting...

I would agree with that. Yes. And I think Alex makes a good point, which is we saw very aggressive cuts by large competing banks in Q4 on the heels of the Fed's 3 rate cuts. And earlier this quarter, I think as the sentiment shifted that this was not the beginning of a series of rate cuts, we saw it backing up. So in other words, we saw some movement upward as if the banks had perhaps overcorrected. And we certainly were aggressive in the move down as well, but it's been fairly stable since then.

Got it. Got it. And you mentioned loan growth picking up across the industry. Atlantic Union had a strong first quarter from a loan growth perspective. You talked about strong production pipeline going up over the course of the quarter.

Can you talk about the outlook for the year? I believe you've been guiding for a mid-single-digit loan growth for the full year. Does that still feel like the right outlook today? And just where are you seeing the most success?

Yes. Brian, right now, we are still -- we would certainly reiterate our guidance in terms of mid-single-digit loan growth for the full year. We certainly have the pipeline to support it. Momentum has been good quarter-to-date in Q2. So we feel very confident in reiterating mid-single-digit loan growth guidance for the year. We are seeing strength broadly across the franchise.

On the commercial and industrial banking space, the area that has the most strength would be equipment finance. Atlantic Union Equipment Finance, we are a top 30 equipment finance company in America. We built that from scratch beginning about 6 years ago. We're very proud of that and the capabilities of the group. They had a record production quarter in Q1, and we're seeing very strong production again in Q2, and their pipelines look good. We think that is tied to the Big Beautiful Bill and the accelerated depreciation on capital expenditures, which have definitely motivated companies to go do capital expenditures. And so that's been a strong area for us.

Generally, commercial and industrial banking, pretty much across the board and across most markets has actually been quite healthy. On the commercial real estate side, the largest area of -- or I would say, the fastest grower, so to speak, has been the commercial real estate loan production office in Charlotte. Now we've been in North Carolina for 10 years. We have over $2 billion outstanding in that office throughout North and South Carolina, and they've seen a lot of activity across those markets.

By the way, we do operate in South Carolina. We do not often talk about it because we don't have a physical presence there. But for anyone who understands Charlotte and being a North Carolina background banker by background, I began my career in Winston-Salem. I lived in Charlotte twice. Sitting there right on the border of North and South Carolina, it's fairly well integrated. And so we've seen good growth out of that. And we've also had good performance out of construction lending, a good bit of that being multifamily. And so we're seeing pretty good momentum across the board.

So good momentum on the lending side. Are you seeing any difference in terms of competition for new loans, anything new on either pricing or structure?

Markets are competitive. Atlantic Union strategically and it deals with what I would call a better set of credits. You can see this in our own strategy. You can see this in our asset quality performance. We're used to competition for better credits. And so yes, it's competitive. It's very clear that banks have appetite for assets at this point in time.

So pricing is competitive. We're seeing some push on structuring, but nothing that's really too far out of bounds. We'll win our fair share. And occasionally, if something gets too far out there, we simply sit it out.

Yes. And then maybe putting together the pieces for the net interest margin. AUB is one of the highest net interest margins in the group, 3.85%. You're guiding to a range of 3.90% to 4% for the year. Can you just talk about the current rate environment with the belly of the curve moving higher. We talked about potentially a rate hike at some point later in the year. What does that mean for the NIM outlook for AUB? And how do you think about the different pieces?

Yes. I guess I'll start with Q1 was 3.85%. That's the total NIM. It includes accretion. Our core NIM was up 4 basis points from Q4 to Q1. And our guide for the year is 3.90% to 4%, so higher than Q1. And there's a couple of reasons that give us confidence that why we'll get to the guide. And the first is that the accretion income was lower in the first quarter. We had lower prepayments and also had a $3.5 million adjustment to the fair value mark, a negative NII.

And then the second would be that we've got -- every quarter, we have $800 million of fixed loans that are repricing and they're maturing and then the new fixed loans coming on are coming on at about over -- about 110 basis points higher. And then the third would be broker deposits maturing. We have about $200 million this quarter that will mature with rates over 5% and another $80 million coming next quarter with rates over 4%. So those 3 combined will help NIM the rest of the way.

And to your question, that the higher medium-term rates or the belly of the curve will help our loan pricing. But I see the deposit competition offsetting that and not having a material impact on the guide, we'll still be within the guide range. But I see both of those factors offsetting it. In terms of a rate hike, we're pretty neutral on the short end of the curve. So our loans will reprice with a rate hike. And then our deposits will reprice based on the beta, but there may be a lag, so there will be a net positive on a short-term basis.

Alex makes a good point. About half of the loan book is variable rate. So if we see a short-term rate -- the Fed rate hikes rates, half the loan book is going to reprice up immediately.

And then maybe pivoting to expenses. Atlantic Union had a 50% efficiency ratio for 2025. You have a medium-term target of a range of 46% to 48%. There's clearly a lot of opportunity across the footprint right now.

Can you just talk about how you balance positive operating leverage in any given year with the longer-term investments that you're making in the franchise?

Sure. Our financial objective is to drive positive operating leverage. So if we do see revenue growth slowing, we would take the necessary actions on the expense side. But I see those as tactical actions, maybe deferring investments a quarter or something that's short term. But in the long term, we have to invest in the franchise. We have to invest in new capabilities and areas of growth.

And based on the way the environment is right now and some of the trends that we talked about, what do you think is a realistic time frame to hit that expense ratio target?

Yes. The target is for the full year on a full year basis, and we expect to hit it in 2026. So we were just under 50% efficiency ratio in Q1. So we intend to be improving as we go throughout the year and be within the range on a full year basis.

And then maybe moving over to credit. Atlantic Union is well known for its really strong credit quality. You have guidance for the year of between 10 and 15 basis points.

Can you just give us an update on what you're seeing across the portfolio and how you're thinking about the trajectory of losses from here?

Brian, we feel quite confident in credit. We're not seeing any evidence of any material problems or any sort of inflection in the overall credit outlook. We will reiterate our guidance for 10 to 15 basis points of net charge-offs for the year. Having said that, we have no current line of sight to actually achieving 10 to 15 basis points. I don't see anything at this point that would actually take us to that level. That could change, but credit is good.

Got it. And then maybe just moving over to fees. We've covered the drivers of net interest income. And maybe on fees, can you just give us some color on where you see the most opportunity on the fee side, things like wealth management, swap fees, where there's the most opportunity and where you're seeing the most growth?

Yes. We still see opportunity. Let me start with the capital markets group out of the wholesale bank, which is what we refer to as our commercial businesses. For the last 2 quarters, as we've released earnings, I've commented that about 1/4 of all interest rate swap fees have come out of the former Sandy Spring franchise. This is a point I made earlier about delivering additional capabilities to the former Sandy Spring franchise. And we can provide value-added services like interest rate hedging.

Foreign exchange is also a product like interest rate swaps that practically was not offered by Sandy Spring. And given the nature of those markets, we see more foreign exchange opportunity there. We have the loan syndications business, which is relatively small, but it's important. And what that does, of course, is enable us to do larger financings and lay off exposure to other banks, and that is a fee generator for us as well. We also have the SBA financing group, which we're expanding, and that allows us to originate and sell 7(a) loans on a flow basis. Treasury management services, we think is a significant opportunity within the former Sandy Spring franchise.

AUB brings to the table a more robust or comprehensive set of offerings. To Sandy's credit, they had some niche products that we did not offer that we've adopted, which is helpful to the entire franchise. So we see the opportunity to really drive treasury management services, particularly as we grow the commercial industrial client base there. And wealth management is also on a pretty good trajectory. We effectively doubled our assets under management with the merger. Sandy had an excellent wealth management group. And we also have some additional capabilities that we can bring to the table, too, including in areas like institutional asset management, for example.

So we think that across the board, we are in a position to be able to grow the fee business at a pretty good clip, which has certainly been a strategic objective for us. As you move into -- further into North Carolina, add additional branches there, what opportunity does that present on the wealth side? Well, more relationships really mean more client opportunity. The way we think about wealth management is for the mass market consumer within the retail branch network, we do have Atlantic Union Financial Advisors, which we do jointly with Raymond James.

By the way, I should point that out, that is not a product offering that Sandy Spring had. So we are and intend to continue to add to Atlantic Union Financial consultants or financial advisers in the former Sandy Spring franchise. Same thing will happen in North Carolina. And then in terms of the asset management side, which is really dealing with affluent and above clients, people with investable assets of several million dollars and up that are so often clients of the commercial bank. And so as we expand the commercial book of business in North Carolina, we would expect to see additional wealth management opportunity as well.

And we also have a very robust fiduciary trust business. So that also creates opportunities. This is my point about the North Carolina expansion. It's really a holistic approach. It's the ability to offer a complete strategy, a comprehensive set of products. It's not simply a de novo branch strategy, and it's not simply a branch-light business bank strategy.

Great. And a big topic of conversation at the conference has been artificial intelligence, both opportunities and risk. Would be great to get your perspective on how you're thinking about deploying AI across the organization and specifically this debate around what AI means for deposit pricing. Any thoughts from your perspective?

Yes, that's a big -- there's a set of questions there. First of all, we are excited about artificial intelligence and what it can do for us. We do view it as opportunity and threat. I think that we have done a good job in terms of establishing the risk governance framework for the use of AI within the company, and we do have AI within Atlantic Union now. I don't believe we will be a leader in terms of the use of this. We're going to go about it responsibly and not recklessly. We have many financial technology vendors who have systems where there are AI capabilities or modules that can be added to them.

So from that context, we think about it more as the opportunity to bolt on some additional capability as opposed to a rip and replace approach from a system standpoint, at least at this point in time. Initially, we're mostly focused in terms of operational activities, back office, improving efficiency and improving our ability to mitigate fraud and fulfill our BSA/AML requirements and things like that. All of our personnel have access to basic tools like Microsoft Copilot, for example. But it does need to be risk managed. And we also have to understand the total cost of ownership. There's a lot of press out there about the cost of token usage sort of running away from companies, and that is not something we're interested in doing here. So we see lots of opportunities.

Every leader in the company is at the table and has been at the table since the budgeting process began last fall with various AI-enabled capabilities they want to bring to the table. Now he may want to join in here. But I think the real question is at what cost. It's a cost-benefit analysis.

Absolutely. Like we don't want to get too deep into AI without understanding the cost. You hear about the token use. We want to make sure we fully understand that, but also understand the tangible benefits that we're going to get from it, right?

And tangible benefit has to be more than we're more productive and our people have more free time to do other things. It really comes down to can we remove hard costs because we're incurring hard costs when we take on AI. Obviously, we're interested in improving quality and reducing cycle times. Time to revenue matters, by the way. This is the point Alex made that I certainly agree with.

If we can reduce cycle times to get financings closed, that is a revenue pickup. And so we'll put that into the conversation as well. But we need to make sure that we're not simply running up our expense base. We also can't do all things at once. So we have a lot of good work underway now to really focus the priorities on the big initiatives that we think will have the most impact and the highest payoff. And it's here to stay.

Yes. And any thoughts on what these AI cash sorting tools could mean for deposit pricing pressure across the industry?

There's a lot of conversation about this one, and it's hard to tell, Brian, you and I were talking just ahead of this recording about a lot of what's being described sounds like a cash sweep account to me, which we've had for decades and decades in the industry. So typically, questions we're receiving have to do with, could you use agentic tools in order to optimize balances in your checking account, which if it's interest-bearing would have a relatively low interest rate or maybe it's noninterest-bearing, can you literally optimize and move money out, surplus funds and go invest elsewhere?

Well, first of all, on the consumer side, you have to think about what's the average or median depository account balance? And does it really make sense for consumers to be moving single thousands of dollars out, trying to pick up additional yield on that, does it really matter to them? On the business side, our average deposit is about $122,000. And so businesses are generally doing a pretty good job of optimizing their surplus cash. I think this is why you saw noninterest-bearing balances begin to normalize and come down certainly as a percentage of the bank's total deposits.

So I'm not at all dismissive of it. I think that fundamentally, if these tools make sense and if they're cost effective and if you're talking about enough dollars to actually matter, could it apply some additional pressure on bank depository costs? Yes, it could. What could banks do if there were an opportunity for customers to effectively Zap using perhaps some tokenized deposit mechanism or blockchain-enabled rail to move your money out instantaneously so it can go be invested at the highest possible market rate somewhere else. I think what it would simply mean is banks would need to make sure they had a competitive option.

I myself moved some money out of my checking account this morning. It was above the personal target that I have, and I put it in my AUB money market and a lot of people do that. So I wouldn't be -- I don't want to be dismissive of it. It's possible, but it's going to automate some things people are already doing. And we just don't see that many examples anymore of businesses or individuals that have huge amounts of low interest surplus funds or noninterest-bearing accounts.

That's great color. And then maybe moving over to capital for a moment. Atlantic Union has a pretty healthy CET1 ratio of 10.2%. You've talked about managing that in the range of about 10% to 10.5%. The Board announced a buyback authorization in May. You also sold a stake in an insurance company, which frees up some additional capital.

How should investors think about the pace of capital return from here given the outlook for loan growth and some of the other things we discussed earlier?

Yes, you're right. We were at 10.21% coming out of the first quarter, and you mentioned the bearing insurance gain. So we look at it as including the gain, we're over 10.3% starting the buyback. And the buyback of $250 million, we intend to spread that out over the next 4 quarters, next 12 months. And we will operate within that 10% to 10.5% CET1 range, as you mentioned, Brian.

And then to your question around loan growth, and that's a great thing. If we have accelerated loan growth, we will manage the buyback or slow down the buyback potentially to maintain within the 10% to 10.5% CET1. At the same time, we're very focused on growing tangible book value, and our outlook is a growth of 12% to 15%. With the repurchase, we'll be on the lower end of that, but that's also something we want to make sure we accomplish as well within the outlook.

Got it. And then maybe just in the time we have left to wrap up, John, at Investor Day, you expressed your confidence in the outlook. You acknowledge that the stock is sort of a show-me story. What do you see as the 2 to 3 proof points that you think investors should be most focused on over the next 12 months that you think will help drive a higher valuation on the stock?

Thank you, Brian. I think it is as simple as AUB delivering on the guidance that we've provided on a clean reported basis. I am excited that for the first time in 2 years, this quarter, we will report numbers where we are not talking about merger-related expenses. And so AUB is a show-me story. AUB has done what it said it would do, and we will do that again.

Great. Well, I think that's a great place to wrap up. John, Alex, thank you so much for joining us today.

Thank you so much for having us. Thank

Hello, and welcome to the Annual Meeting of Shareholders of Atlantic Union Bankshares Corporation. Please note that today's meeting is being recorded. It is my pleasure to turn today's meeting over to Ron Tillett, Chair of the Board of Atlantic Union Bankshares Corporation. Chair Tillett, the floor is yours.

Good morning, everyone. I'm Ron Tillett, Chair of the Board of Directors of Atlantic Union Bankshares Corporation. I would like to welcome you, each of you and hereby call to order the company's Annual Meeting of Shareholders.

As you know, today, we are holding this virtual meeting on the Internet. Thank you very much to those who are participating in our virtual meeting online today. I hope that you will find this to be an informative meeting. In accordance with the company's bylaws, as Chair of the Board, I will act as Chair of this meeting. The company's General Counsel and Corporate Secretary, Rachael Lape, will act as Secretary of the meeting. I would like to call your attention to the rules of conduct and procedures. The meeting will be conducted in accordance with the rules of conduct and procedures, which are available on the meeting site.

First, we have a few administrative matters. Each of you should have access to the meeting agenda, which is located in the Documents tab in the upper right corner of the meeting screen. After an overview of meeting logistics and introductions, we will first conduct the formal business of the meeting, and I will give shareholders an opportunity to submit any final votes online.

After the polls close and while the votes are being tabulated, I will provide a brief report from the Board, followed by the announcement of the preliminary voting results. Following the conclusion of the official portion of this meeting, we will hear a report from management on operating results.

Following management's report, shareholders will be given an opportunity to submit questions for management. As a shareholder, if you entered your control number when you logged into the meeting, you may submit questions online by clicking on the Q&A icon in the upper right corner of the meeting screen. Please note that we will give shareholders an opportunity to ask questions about the proposals themselves after all proposals have been presented. If you have a question or comment not related to a proposal on the agenda, you will have an opportunity to raise your question or comment following management's report.

If you have questions regarding the type and scope of questions that are appropriate and may be addressed at the meeting, please review the rules of conduct and procedures. Thank you for your cooperation.

The Board of Directors fixed the close of business on March 11, 2026, as the record date for determining shareholders of record entitled to vote at this meeting. We mailed applicable shareholders a Notice of Intent availability of our proxy materials with instructions on how to access our proxy materials and how to vote. The Notice of Intent, Internet availability, our proxy statement and the company's 2025 annual report were first mailed or made available on or about March 25, 2026, to our shareholders of record as of the record date. Copies of these documents will be filed with the minutes of this meeting and are each available now online in the Documents tab in the upper right corner of the meeting screen.

In accordance with Virginia law, a list of shareholders of record as of the record date is available on the meeting site and may be inspected during the meeting by any shareholder. The minutes of the May 6, 2025 Annual Meeting are also available on the meeting site for inspection by any shareholder who would like to see them.

The Corporate Secretary will file the minutes of the 2025 Annual Meeting as presented. The Board has appointed Amelia Regan as Inspector of Election for this meeting and any adjournment of this meeting. Ms. Regan is a representative of our transfer agent, Computershare Inc. The inspector is here to determine whether a quorum is present to ascertain the validity of proxies and to tabulate the votes and certify the counts of all proxies.

For purposes of the meeting, more than 50% of the voting power of our issued and outstanding shares of common stock must be represented at the meeting, whether in person or by proxy to constitute a quorum. The Inspector of Election has advised me that shares of our common stock, representing more than 86% of the issued and outstanding shares entitled to vote at this meeting are present or represented by proxy.

A certificate of the inspector of elections to that effect will be filed with the minutes of this meeting. As a result, we have a quorum and can proceed with the business of the meeting.

I would like to take a moment to outline the voting procedures. Online voting is currently open. Any shareholder who has already voted and does not want to change or revoke their vote, need not take any further action. If you have not voted or wish to change or revoke your vote, you may do so now by clicking on the Vote icon in the upper right corner of the meeting screen. Online voting will remain open until I am finished describing the formal proposals before shareholders on the agenda. At that point, I will officially close the polls for voting, and online voting will close.

I would like to introduce the company's directors now. In addition to myself, all of the company's other directors are in attendance virtually today as well, including John Asbury, the company's Chief Executive Officer; Mona Stephenson; Nancy Agee; Pat Corbin, who retires effective at this meeting; Rilla Delorier; Russ Ellett; Paul Engola; Don Kimble; Pat McCann; Mark Micklem, Michelle O'Hara; Linda Schreiner, the Vice Chair of the Board; Dan Schrider; Joel Shepherd, Keith Wampler; and Blair Wimbush. I would like to thank our directors for their dedication and service to the company.

Mike Williams, representative from Ernst & Young, the company's registered public accounting firm, is also in attendance online today and is available to respond to any questions you may have during the question-and-answer session of the meeting. Thank you for attending our Annual Meeting today.

Now we will turn to the business of the day. There are 5 proposals for shareholder action that were listed in the company's proxy statement sent or made available to our shareholders for this meeting. The first proposal is the election of 16 directors. All our elected directors will serve a 1-year term until the company's 2027 Annual Meeting of the Shareholders. The 16 director nominees named in the proxy statement standing for election are: Mona Stephenson; Nancy Agee, John Asbury, Rilla Delorier, Russ Ellett, Paul Engola, Don Kimble, Pat McCann, Mark Micklem, Michelle O'Hara, Linda Schreiner Dan Schrider, Joel Shepherd, Keith Wampler, and Blair Wimbush and myself, Ron Tillett.

Additional information about each nominee is contained in your proxy materials, and the Board unanimously recommends you vote for each nominee. The second proposal is the approval of the amendment to the company's amended and restated Articles of Incorporation to remove the supermajority voting requirement in Article V related to the removal of directors by shareholders. The Board unanimously recommends that you vote for this proposal.

The third proposal is the approval of an amendment to the company's articles to remove the supermajority voting requirement in Article VII related to amendments to the article.

The fourth proposal is the ratification of the appointment of Ernst & Young as the company's independent registered public accounting firm for 2026. Based on the recommendation of the Audit Committee, the Board of Directors has reappointed Ernst & Young as the company's independent registered public accounting firm for 2026 and is requesting shareholder ratification of this appointment at this meeting and unanimously recommends you vote for the proposal.

The fifth and final proposal is an advisory nonbinding vote on the compensation of the company's named executive officers, commonly referred to as Say on Pay resolution. As described in our proxy statement, the company's executive compensation program is designed to align executive pay with the company's financial performance and the creation of sustainable long-term shareholder value.

The Board unanimously recommends that you approve the following Say on Pay resolution. Resolved, that the shareholders of Atlantic Union Bankshares Corporation approve on an advisory basis, the compensation of our named executive officers as disclosed in the compensation discussion and analysis, the tabular disclosure regarding named executive officer compensation and the accompanying narrative disclosure in the proxy statement.

As there have been no director nominations or other proposals properly made by shareholders pursuant to our bylaws, this concludes all proposals on the agenda for shareholder action at this meeting. Are there any questions on any of the 5 proposals?

Chair Tillett, we have not received any questions. .

Hearing no questions, then I will proceed with the agenda. Any shareholder who has not yet voted or wishes to change their vote, should do so now by clicking on the Vote icon in the upper right corner of the meeting screen. Shareholders who have sent in proxies or voted by way of the telephone or the Internet and do not want to change their vote do not need to take any further action. We will pause for a moment to allow shareholders to submit their votes.

[Voting]

Now that everyone has had the opportunity to vote, I now declare the polls closed for the 2026 Annual Meeting of Shareholders. This concludes the formal business of today's meeting.

The Inspector of Election will now finish tabulating votes and provide me with a preliminary vote tabulation when it is ready.

At this time, I would like to say a few words about Pat Corbin. As you know, Pat is retiring from service on the Board of Directors as of today. Pat Corbin joined the Atlantic Union Bankshares Board of Directors in 2018 and has contributed substantially to the business and success of this company. He has served on the Executive Committee since 2019, the Trust Committee since 2022, and has chaired the Audit Committee since 2019. In addition, Pat has been a member of our ad hoc committees involved in our M&A work, our deal pricing, and our succession planning as well as corporate governance during his tenure on the Board. On behalf of the Board and our shareholders, I would like to express our appreciation for Pat's dedicated service to this Board and wish him the best as he now retires from our Board of Directors.

I understand that all votes have been counted. And based on the preliminary review of the votes cast, the Inspector of Elections has informed me that all nominees for director have been elected. Both amendments to the company's articles have been approved, the appointment of Ernst & Young LLP as the company's independent auditor for 2026 has been ratified, and the Say on Pay resolution regarding named executive officer compensation has been approved. We will file the final voting results of this meeting on a Form 8-K with the SEC.

We will also file the final report of the Inspector of Elections with the minutes of this meeting. On behalf of the company's directors and teammates, I thank you for your loyal support, your business and your attendance at today's meeting. I now declare that the official portion of the meeting is hereby adjourned.

Before I invite our management team to provide their report on our operating results, I would like to acknowledge Rob Gorman. Last year, we announced that Rob would retire as CFO after nearly 14 years at the company. Rob has been a great partner and a strategic CFO for the company. Alex Dodd started on April 13, and Rob will stay on until September 30 to assist with the transition. Alex has hit the ground running, but since our Annual Meeting remarks focused on 2025 and the first quarter of 2026 results, we felt that Rob should make today's presentation. I want to thank Rob for all he's done and for his work to create a remarkable franchise that we have today. And now I'll turn it over to our CEO, John Asbury.

Good morning, and thank you, Chair, Tillett. I'd also like to welcome our new CFO, Alex Dodd and add my thanks to Rob Gorman for all he's done for the company over the last 14 years. I know Rob is excited to spend more time with his grandkids, but we still have more work for him to do here. So we're not ready to say goodbye yet, Rob.

Before I start with our slides, our lawyers would like for me to remind you that we will make forward-looking statements on today's call. Please refer to Slides 2 and 3 as well as our regulatory filings for additional details about our forward-looking statements. All comments made today are subject to the information on Slides 2 and 3 and future performance may differ materially from our forward-looking statements.

Now I wanted to start off with a high-level view of our company. Over the past 9 years, Atlantic Union Bank has transformed, evolving from a Virginia Community Bank into the largest regional bank headquartered in the Lower Mid-Atlantic. This intentional transformation was achieved through deliberate organic growth and 4 targeted mergers and acquisitions over the 9-year period. AUB runs a traditional bank strategy that is focused on building a dense, compact and contiguous presence in our core markets with room for further growth and densification. We're especially excited about our organic expansion now underway in North Carolina.

And let me add that while we have certainly grown in size and more importantly, capability, we've not lost sight of our community bank roots that have served us well for 124 years. The enabler behind our growth is the AUB culture. I've been in banking for 39 years, and I can sincerely say that AUB has a unique and very special culture. At the center of that culture are our core values of caring, courageous and committed. Caring is evidenced by how our teammates consistently go above and beyond, demonstrating genuine concern for our customers and for one another. This is evident in the thoughtful support and attention they provide every day.

Courageous is about owning our opportunities and doing what is right. We are an organization of people. And as such, we will never be perfect, but we must be humble enough to own our mistakes, learn from them and seek improvements and efficiencies in all we do.

And then there's committed. None of our other efforts matter unless we bring the necessary drive and accountability to do what's right for all our stakeholders, including you, our investors.

And finally, we're proud of the awards and recognitions that Atlantic Union Bank has received, consistently acknowledging us as a great place to work and highlighting the outstanding service we provide to meet our customers' needs. I'll reiterate what we've been saying for some time, which is with the franchise we've long desired and worked so hard to build, now established. Now is the time to demonstrate the organic earnings power of the franchise. To demonstrate our organic growth capability, we believe we have the franchise and the momentum to do so. Shift from capital investment and deployment to capital creation, targeting top-tier financial performance on an organic basis and maintain disciplined execution and demonstrate the earnings power of our company.

We spent years building our company, and now is the time to demonstrate what it can achieve. I'll now speak to some perspective on Atlantic Union Bank before I turn it over to Rob. Here's a year-over-year comparison of our total shareholder return relative to the Keefe Regional Banking Index, or the KRX. Last year, our stock was buffeted early in the year by macroeconomic concerns over recently announced tariffs and the potential impacts of cuts to the federal government workforce. We managed our way through those concerns. And as you'll see in Rob's remarks, delivered top quartile operating financial results for return on tangible common equity and performed well by other measures.

As I just said, there have been concerns about the potential macroeconomic shifts in certain of our markets, but you can see that our core markets are generally strong and resilient. And in our opinion, are some of the most attractive in the country. And you can see on the slide that we have ample opportunity to grow our market share as we become an agile competitor to the large national banks that dominate these markets by market share.

This slide highlights our opportunities to increase our market share as we've built a bank that is strong, resourceful and agile, able to take on the large national banks dominating these states while also being more capable than our smaller competitors.

In sum, AUB is well positioned today to deliver top-tier financial performance, which we believe will create long-term shareholder value. We have built the franchise we have long desired, and we're eager to demonstrate that all of our efforts have been worthwhile. At this point, I will turn it over to Rob Gorman. Rob?

Well, thank you, John, and good morning, everyone. Let me start off my comments by briefly reviewing Atlantic Union's financial results for 2025 and the first quarter of 2026. For the year ended 2025, reported net income available to common shareholders was $262 million, or $2.03 per diluted common share. For the full year of 2025, non-GAAP adjusted operating earnings available to common shareholders, which excludes pretax merger-related costs of $157.3 million related to our acquisition of Sandy Spring and other non-GAAP adjustments were $444.8 million or $3.44 per diluted common share, which resulted in an adjusted operating return on tangible common equity of 20.4% and adjusted operating return on assets of 1.33% and an adjusted operating efficiency ratio of 49.7% in 2025.

As recently reported in the first quarter of 2026, our reported net income available to common shareholders was $119.2 million, and earnings per common share were $0.84. Adjusted operating earnings available to common shareholders, which excludes approximately $9 million in pretax merger-related costs related to Sandy Spring acquisition and other non-GAAP adjustments were $126.2 million, or $0.89 per common share for the first quarter, which resulted in an adjusted operating return on tangible common equity of 19.6%, and adjusted operating return on assets of 1.41% and an adjusted operating efficiency ratio of 49.9% in the quarter.

Of note, the first quarter of 2026 will be the last quarter we will be reporting merger-related noise from the Sandy Spring acquisition in our financial results.

Turning to Slide 14. This slide shows our GAAP performance over time. Now turning to the next slide. As we have said many times in the past, we are committed to generating top-tier financial results on a sustainable basis versus our proxy peer banks as measured by adjusted operating return on tangible common equity, adjusted operating return on assets and the adjusted operating efficiency ratio.

As you can see on this slide, the company has made material improvements on each of these metrics since 2022, and we are pleased to note that our adjusted operating return on tangible common equity ratio, and our adjusted operating efficiency ratio metrics placed us firmly in the top quartile of our proxy peer group's financial results in 2024 and 2025, and we are off to a good start in the first quarter of 2026.

From a shareholder stewardship and capital management perspective, we remain committed to managing the company's capital resources prudently as the deployment of capital for the enhancement of long-term shareholder value remains one of our highest priorities. Regarding the company's capital management strategy, capital ratio targets are set to maintain the company's designation as a well-capitalized financial institution and to ensure that capital levels are commensurate with the company's risk profile, capital stress test projections and strategic plan growth objectives.

Our current capital levels, coupled with our expected ongoing capacity to generate significant levels of internal capital provides us with the confidence that we have ample capital available to support our organic growth objectives. At the end of the first quarter, Atlantic Union Bankshares and Atlantic Union Bank's regulatory capital ratios remain comfortably above well-capitalized levels. In addition, we remain well capitalized as of the end of the first quarter if you adjust for the negative impact of AOCI and held-to-maturity securities unrealized losses in the calculation of the regulatory capital ratios.

As noted on this slide, our capital management priorities are first to support our organic growth; and second, to maintain a competitive and sustainable common shareholder dividend payout ratio target of between 35% and 45%. In addition, we may deploy excess capital that is generated to repurchase common shares if we believe such capital deployment will create shareholder value.

We define excess capital as common equity Tier 1 capital ratio at the holding company that is greater than 10.5%, which is expected to be achieved in the second quarter of 2026. Since 2018, the company has returned approximately $1.1 billion, or 53% of total adjusted operating earnings to common shareholders, while maintaining strong capital ratio levels, which was through common dividend payments totaling approximately $823 million as the annual common dividend per share has been increased at a compound annual growth rate of approximately 7% since 2018 and the repurchase of common shares totaling approximately $303 million from 2019 through 2022.

As noted, Atlantic Union is committed to achieving top-tier financial performance and providing our shareholders with above-average returns on their investment regardless of the operating environment. And as such, we have set our medium-term financial targets to the following: return on tangible common equity within a range of 19% to 20%; return on assets in the range of 1.4% to 1.5%; and an efficiency ratio of between 46% and 48%.

Our financial performance targets are dynamic and are set to be consistently in the top quartile among our proxy peer group, regardless of the operating environment. As such, we reset these targets periodically to ensure they are reflective of the financial metrics required to achieve top-tier financial performance versus our peer -- proxy peer banks in the prevailing economic environment.

As noted on Slide 19, we provided our full year 2026 financial outlook for AUB on our April 21 earnings call. While I won't address the outlook for each of the balance sheet and income statement line items on this slide, I did want to note that based on these projections, we expect to generate annual growth in tangible book value per share of 12% to 15%, produce financial returns that will place us within the top quartile of our proxy peer group and meet our objective of delivering top-tier financial performance for our shareholders.

In summary, we have created the largest regional bank headquartered in the Lower Mid-Atlantic, operating in what we believe are some of the most attractive markets in the country. We are well capitalized with a strong balance sheet and conservative credit culture, and we expect to benefit from significant future capital generation, which will support our organic growth and strategic objectives, and we are committed to achieving top-tier financial metrics on a sustainable basis.

Our executive management team remains focused on leveraging this valuable Atlantic Union Bank franchise to generate sustainable, profitable growth and is firmly committed to building long-term value for our shareholders. Thank you for your continued support and your investment in Atlantic Union Bankshares. Now let me turn the floor back over to Chair Tillett.

Thank you, Rob and John, for those insights and comments regarding Atlantic Union Bankshares Corporation. If you have any questions for John or Rob about the information you've heard here today, you may now submit your questions online by clicking on the Dialogue icon in the upper right corner of the meeting screen. I would like to ask Bill Cimino, the company's Director of Investor Relations, to present any shareholder questions regarding the company.

Mr. Chair, we have not received any shareholder questions regarding the company.

Thank you, Bill. If you have any other questions about the company not answered here today, please feel free to reach out to our Director of Investor Relations, Bill Cimino, using the Investor Relations contact information listed on the company's website. This concludes the meeting. You may now disconnect.

Good day, and thank you for standing by. Welcome to the Atlantic Union Bankshares First Quarter 2026 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Bill Cimino, Senior Vice President, Investor Relations. Please go ahead, sir.

Thank you, [ Michelle, ] and good morning, everyone. I have Atlantic Union Bankshares' President and CEO, John Asbury; and Executive Vice President and CFO, Alex Dodd, with me today. Since Alex is only 8 days into his job, former CFO, Rob Gorman, will cover the first quarter financial results in his transition capacity as a senior financial adviser to the company until his September 30 retirement. We also have other members of our executive management team with us for the question-and-answer period.

Please note that today's earnings release and the accompanying slide presentation we are going through on this webcast are available to download on our Investor website, investors.atlanticunionbank.com. During today's call, we will comment on our financial performance using both GAAP metrics and non-GAAP financial measures. Important information about these non-GAAP financial measures, including reconciliations to comparable GAAP measures, is included in the appendix to our slide presentation and in our earnings release for the first quarter of 2026.

We will also make forward-looking statements, which are not statements of historical fact and are subject to risks and uncertainties. There can be no assurance that actual performance will not differ materially from any future expectations or results expressed or implied by these forward-looking statements. We undertake no obligation to publicly revise or update any forward-looking statement, except as required by law.

Please refer to our earnings release and slide presentation issued today and our other SEC filings for further discussion of the company's risk factors and other important information regarding our forward-looking statements, including factors that could cause actual results to differ from those expressed or implied in the forward-looking statements. All comments made during today's call are subject to that safe harbor statement. And at the end of the call, we will take questions from the research analyst community. And now I'll turn the call over to John.

Thank you, Bill. Good morning, everyone, and thank you for joining us today. I am pleased to introduce Alex Dodd as our new Chief Financial Officer. Alex brings a wealth of experience, having successfully helped guide a smaller institution through its transformation into a larger, more complex financial organization. His background aligns well with our executive leadership team, and I am confident he will add tremendous value as we continue to drive growth and innovation. Over the next few months, we look forward to having Alex meet many of you during our active Investor Relations calendar.

While Rob Gorman will remain with us full time until his retirement at the end of September, I do want to extend my sincere gratitude to Rob for his invaluable contributions and his dedication to ensuring a seamless CFO transition. Atlantic Union Bankshares reported solid first quarter financial results, reflecting disciplined execution and a successful conclusion of the integration of Sandy Spring Bank. We believe the adjusted operating financial results for the quarter showcased the organization's earnings capacity. While we had a final set of merger-related charges impact this quarter's results, the underlying operating performance supports our continued confidence in achieving the financial outlook for adjusted operating return on assets, return on tangible common equity and efficiency ratio that we have set for 2026.

We do look forward to reporting results without the merger noise starting next quarter, which we believe should more clearly demonstrate the financial strength and operational efficiency we are committed to delivering for our shareholders. Our commitment to creating shareholder value remains unwavering. We believe Atlantic Union is well positioned to deliver sustainable growth, top-tier financial performance and long-term value for our shareholders. We believe the strategic advantages gained from the Sandy Spring acquisition, combined with continued organic growth opportunities due to our robust presence in attractive markets, reinforce our status as the premier regional bank headquartered in the lower Mid-Atlantic.

I'll briefly cover the Q1 2026 highlights and share market insights before Rob presents the financial review. And here are the highlights from the first quarter. Quarterly loan growth was approximately 2.2% annualized during the typically slow first quarter with total loans ending at $27.9 billion. For additional context, quarterly loan growth averaged roughly 5.9% annualized over this year's first quarter. Loan production remained strong and when compared to the previous 4 quarters was second only to the fourth quarter of last year.

We were pleased to see record level fundings from Atlantic Union Equipment Finance and record level production from our North Carolina-based commercial real estate team. However, we also experienced elevated payoffs late in the quarter, particularly within our commercial real estate portfolio due to a number of property sales. This activity highlights the strength of our CRE markets, robust investor demand and the availability of ample liquidity. The first quarter saw a slight increase in line of credit utilization from the fourth quarter and was relatively flat year-over-year.

At the end of the first quarter, our loan pipelines were noticeably higher than at the beginning, giving us confidence that we are pacing to meet our loan growth targets for 2026. A deeper look at the pipeline report reveals that our construction and development pipeline has achieved a record high. For those familiar with my construction lending bathtub analogy, this means our pipeline is filling up at a faster rate than draining, which positions us well for continued growth in construction lending balances throughout the year.

While forecasting loan growth remains challenging in this uncertain macroeconomic environment, particularly with the recent energy price shocks, we continue to expect 2026 year-end loan balances to range between $29 billion and $30 billion. Our deposit base demonstrated strong customer deposit growth this quarter, nearly offsetting the planned reduction in high-cost broker deposits. Broker deposits currently represent just 2% of total deposits and play a purposeful role in our liquidity strategy.

We believe this approach provides us flexibility to add broker deposits in the future if needed. And depending on cost and market conditions, we anticipate any new additions, if any, would be at lower rates than those currently rolling off. Above all, our core customer deposit base remains the crown jewel of the franchise, and our primary focus is on growing customer deposits and expanding our share of wallet. Net interest margin, excluding the impact of accretion income, which can be volatile, improved by 4 basis points quarter-over-quarter, matching our expectations. Our reported FTE net interest margin declined 11 basis points to 3.85%, mainly because accretion income was lower compared to the elevated levels seen in Q4 '25.

Rob will provide more detail about the factors influencing NIM performance in his section. Credit quality continues to show strength and improvement. Our first quarter annualized net charge-off ratio was just 2 basis points. For the year, we are still projecting a range of 10 to 15 basis points, although we do not yet have full visibility into reaching that range. Key asset quality indicators remain robust and are improving. Nonperforming assets as a percentage of loans held for investment declined by 6 basis points to 0.36% from 0.42% in the prior quarter, bringing us closer to our historical operating levels.

Criticized and classified assets also improved, decreasing to 4.5% of total loans from 4.7% last quarter. And looking at the most current unemployment data, the Bureau of Labor Statistics reported January -- Virginia's January unemployment rate remained stable at 3.7%, Maryland's unemployment rate was 4.3% and North Carolina's was 3.8%, all of which are at or below January's national average of 4.3%. We continue to expect unemployment levels in Virginia, Maryland and North Carolina to stay manageable and comparable to or below the national average, consistent with Moody's current state-level forecast.

We remain confident in our markets and consider them among the most attractive in the country. I do want to acknowledge the ongoing conflict in Iran and its potential impact on our bank and the markets we serve. We are closely monitoring the geopolitical developments and their effects on the broader economy. The most immediate consequence has been the sharp increase in petroleum prices. Should this trend persist over an extended period, our primary concern is not a direct credit event given our portfolio's limited sensitivity to energy prices, but rather a possible decline in consumer and business confidence.

At present, our loan pipelines remain strong. Business sentiment across our markets is positive and the underlying economy in our footprint continues to be favorable. Additionally, it appears likely that defense spending will rise as a result of the geopolitical situation, which should provide a stimulative effect for certain areas of our markets. We remain vigilant and believe we're well positioned to navigate these challenges while supporting our clients and our communities.

We have deliberately and thoughtfully built a distinctive valuable franchise outlined in our strategic plan, delivering on our commitments and establishing the banking platform we set out to create. With a strong foundation, we believe we are well positioned to capitalize on our expanded markets, drive continued growth in Virginia and pursue new organic opportunities in North Carolina and in our specialty lines. With disciplined execution of our prior acquisitions and no additional acquisitions currently planned during this phase of our strategic plan, our focus has shifted to demonstrating the franchise's earnings power and capital generation ability.

After dedicating capital to strategic investments over the past 2 years to complete the company we envisioned and worked diligently to build and consistently communicated our plans to do so, we believe we are well positioned to demonstrate clear and tangible benefits from these efforts. In summary, we had a good start to 2026, and we believe that our full year results will demonstrate the differentiated financial performance compared to our peers, which in turn will help build long-term shareholder value.

With that, I'll turn the call over to Rob for a detailed review of our quarterly financial results. Rob?

Well, thank you, John, and good morning, everyone. I'll now take a few minutes to provide you with some details of Atlantic Union's financial results for the first quarter of 2026. My commentary today will primarily address Atlantic Union's first quarter financial results presented on a non-GAAP adjusted operating basis, which for the first quarter excludes $9 million in pretax merger-related costs. As John noted, we don't expect to incur any additional Sandy Spring merger-related costs going forward.

In addition, in the first quarter, we finalized the fair value assets acquired and liabilities assumed related to the Sandy Spring acquisition, inclusive of measurement period adjustments primarily related to loans, other assets and other liabilities. The 1-year measurement period related to the Sandy Spring acquisition concluded and related goodwill was finalized as of March 31 at $541 million. In the fourth quarter, reported net income available to common shareholders was $119.2 million and earnings per common share were $0.84.

Adjusted operating earnings available to common shareholders were $126.2 million or $0.89 per common share for the first quarter, which resulted in an adjusted operating return on tangible common equity of 19.6%, and adjusted operating return on assets of 1.41% and an adjusted operating efficiency ratio of 49.9% in the quarter. Turning to credit loss reserves at the end of the first quarter. The total allowance for credit losses was $321.9 million. Please note that effective January 1, 2026, the company made certain changes to its allowance for credit losses methodology as part of the continued enhancement of its credit modeling practices, resulting in the company moving from 2 loan portfolio segments, Commercial and Consumer to 3 loan portfolio segments, Commercial Real Estate, Commercial and Industrial and Consumer.

These model enhancements enable more dynamic and precise modeling and allow for more granularity in monitoring our estimated credit losses. As a result, and paired with portfolio mix changes, the total allowance for credit losses as a percentage of total loans held for investment decreased 1 basis point to 115 basis points at the end of the first quarter. The allowance for loan losses as a percentage of total loans held for investment decreased by 2 basis points from the prior quarter to 104 basis points, while the reserve for unfunded commitments coverage ratio increased 1 basis point to 11 basis points on March 31, which was primarily driven by higher construction and land development unfunded commitments.

As John mentioned, net charge-offs were $1.6 million or only 2 basis points annualized in the first quarter. Now turning to the pretax pre-provision components of the income statement for the first quarter. Tax equivalent net interest income was $316.9 million, which was a decrease of $17.9 million from the fourth quarter, primarily driven by a decrease in loan accretion income, the lower day count in the first quarter, lower average earning assets and the full quarter impact on variable-rate loan yields following the cumulative 75 basis point reduction in the Fed funds rate between September and December 2025.

The decreases in tax equivalent net interest income were partially offset by a decrease in interest expense, primarily from lower deposit costs. As John noted, the first quarter's tax equivalent net interest margin declined by 11 basis points from the prior quarter to 3.85% due to lower earning asset yields, which were partially offset by lower cost of funds. Earning asset yields decreased 20 basis points from the prior quarter to 5.79%, primarily due to lower loan accretion income of $13 million, which was inclusive of the impact of a $3.5 million nonrecurring loan fair value measurement period adjustment related to the Sandy Spring acquisition and lower yields on variable-rate loans as previously noted.

Cost of funds decreased 9 basis points from the prior quarter to 1.94% for the first quarter due primarily to lower deposit costs of 13 basis points, which reflected the impact of Fed funds rate reductions on customer deposit rates and the decline in higher cost in average broker deposit balances. Of note, excluding the impact of net accretion income, our core net interest margin increased by 4 basis points to 3.45% from 3.41% in the prior quarter, which is primarily driven by lower deposit costs, partially offset by lower core loan yields.

Noninterest income declined by $2.2 million to $54.8 million for the first quarter, primarily driven by lower loan-related interest rate swap fees due to seasonally lower transaction volumes, which was partially offset by higher capital markets income. Reported noninterest expenses decreased by $33.4 million to $209.8 million for the first quarter, primarily driven by a $29.6 million decline in merger-related costs and a $2.3 million decrease in amortization of intangible assets.

Adjusted operating noninterest expense, which excludes merger-related costs in the fourth quarter of '25 and the first quarter of '26 and the amortization of intangible assets in both quarters decreased by $1.6 million to $185.3 million for the first quarter. This decrease was primarily due to $3.1 million reduction in other expenses, primarily due to lower noncredit-related losses on customer transactions, a $2.3 million decrease in professional services expenses related to strategic projects that occurred in the prior quarter and a $1.9 million decrease in technology and data processing expenses.

These decreases were partially offset by a $5 million increase in salaries and benefits expense, primarily due to seasonal increases in payroll taxes and 401(k) contribution expenses. At March 31, loans held for investment net of unearned income were $27.9 billion, which was an increase of $150.3 million or 2.2% annualized from the prior quarter. At March 31, total deposits were $30.4 billion, which was a decrease of $80.4 million or approximately 1% annualized from the prior quarter, primarily due to decreases of $517.9 million in broker deposits, partially offset by an increase of $438.5 million in interest-bearing customer deposits. At the end of the first quarter, Atlantic Union Bankshares and Atlantic Union Bank's regulatory capital ratios were comfortably above well-capitalized levels.

In addition, on an adjusted basis, we remain well capitalized as of the end of the first quarter if you include the negative impact of AOCI and held-to-maturity securities unrealized losses in the calculation of the regulatory capital ratios. AOCI increased [indiscernible] million during the first quarter as term interest rates increased from the prior quarter. Company paid a common stock dividend of $0.37 per share in the first quarter, in line with the fourth quarter's dividend amount and an increase of 8.8% from the previous year's first quarter dividend amount of $0.34 per common share.

On a linked quarterly basis, tangible book value per common share increased $0.24 or 1% to $19.93 per share in the first quarter despite the headwinds caused by the increase in the AOCI unrealized losses. We estimate that the increase in AOCI had a negative impact to our tangible book value of $0.16 per share in the first quarter. As noted on Slide 17, we are updating our full year 2026 financial outlook for AUB to the following: we expect loan balances to end the year between $29 billion and $30 billion, while year-end deposits balances are projected to be between $31 billion and $32 billion.

On the credit front, the allowance for credit losses to loan balances is projected to remain at current levels in the 115 to 120 basis points range, and the net charge-off ratio is expected to fall between 10 and 15 basis points in 2026, although we don't currently have a line of sight to reaching that range this year. Fully taxable equivalent net interest income for the full year is projected to come in between $1.34 billion and $1.35 billion, inclusive of accretion income of between $140 million and $145 million.

As a result, we are projecting that full year tax equivalent net interest margin will fall in a range between 3.90% and 4% for the full year, driven by our baseline assumption that the Federal Reserve Bank will not cut the Fed funds rate in 2026 and that term rates will remain stable at current levels. On a full year basis, noninterest income is expected to be between $220 million and $230 million, while adjusted operating noninterest expense is estimated to fall in the range of $742 million to $752 million, including the expense impact of our North Carolina investment and other 2026 strategic initiatives.

Based on these projections, we expect to generate annual growth in tangible book value per share of 12% to 15%, produce financial returns that will place us within the top quartile of our proxy peer group and meet our objective of delivering top-tier financial performance for our shareholders. In summary, Atlantic Union delivered solid operating results in the first quarter and 2026 is off to a good start.

We remain firmly focused on leveraging this valuable Atlantic Union Bank franchise to generate sustainable, profitable growth and to build long-term value for our shareholders in 2026 and beyond. Before I transition the call back to Bill, I would like to briefly reflect on my tenure at AUB. When I joined the organization in 2012, AUB had approximately $4 billion in total assets with a market capitalization of around $360 million. Currently, our assets have grown to nearly $40 billion, and our market capitalization exceeds $5 billion, establishing us as the largest regional bank headquartered in lower Mid-Atlantic.

It's been a great privilege to have played a part in the company's growth and financial success over the past 14 years. And looking ahead, I'm pleased to have Alex step into the role of CFO as my successor, and I'm confident that his extensive financial leadership experience will contribute significantly to Atlantic Union's future success.

I'll now turn the call over to Bill to see if there are any questions from our research analyst community.

Thanks, Rob. And [ Michelle, ] we're ready for our first caller, please.

[Operator Instructions] And our first question is going to come from the line of Russell Gunther with Stephens.

Wanted to start on the core margin, please. Nice to see that up a little bit this quarter. Would be helpful to get a sense for how you expect that to trend over the course of the year and particularly touching on the direction of deposit costs from here with the Fed on pause. Just wondering if you have the ability to lower further or if there's an upward bias to deposit costs.

Yes. In terms of the core margin, Russell, we do expect it can grind higher from here and we do expect that. As I mentioned in my comments, we don't expect the Fed to cut this year. So there shouldn't be an impact on our variable-rate loan yields on a negative -- from a negative perspective. However, it also means longer for -- or higher for longer rates will impact our ability to reduce deposit costs meaningfully lower from here, basically saying that it's probably going to be stable.

Maybe there's a little -- we may see that tick up a bit on the customer deposit side. The good news there is we do have some broker deposits that are still outstanding that are maturing this quarter and next quarter. And those broker deposits are paying about 5.15% currently. So we will get a pickup on that if you look at what current broker rates are or even customer deposit CD rates and money market rates are. So we will get some positive out of that in the near term.

The real impact of the grind higher in core net interest income or net interest margin is basically, we've got the continuing back book -- fixed rate loan back book repricing, and that will continue throughout the year. As we mentioned, we're projecting that term rates, 5-year term rates are pretty -- will stay pretty stable going forward here. And we've got about $850 million to $900 million of maturing fixed rate loans on the legacy AUB side per quarter through the rest of this year. So you see about a pickup of call it, 90 to 100 basis points from portfolio yields on that portfolio on the 5.10%, 5.15% level repricing into the 6% to 6.10% range. So that's really the underlying context of our thoughts that core margin will grind a bit higher.

Got it. Okay. Rob, that's helpful detail. And then last one for me would be on the expense front, solid result this quarter. You lowered that guide. At the Investor Day in December, that deck had mentioned considering some additional branch rationalization in '26. So wondering if that is at all contemplated in the lower guide? And if not, given the lower NII outlook, is that on the cards at all as a potential offset?

Yes. It's certainly not in the guidance that we just provided in those numbers on the noninterest expense side. There's always some thoughts around that where we could be looking at that if we really thought the revenue growth was not going to materialize. But we do think we've got a pretty good handle on the expense -- discipline around expenses. That's why we did lower that. Part of that was this first -- the first quarter, we came in better than we expected. That should continue as we go forward.

As you know, we said that the first quarter is of the seasonally high expense quarter for the year. So you should see that stuff coming -- things coming down, especially on payroll taxes and 401(k), which are at the high end. I mean, that was an increase of over $5 million quarter-to-quarter. That's going to come down over time. It's just elevated due to incentive payments, et cetera, which drive those higher in the first quarter. So you should see those costs come down.

Now we did mention that we do have investments being made primarily in the North Carolina franchise, opening 10 new branches, not all this year, probably 3 branches will be opened by year-end, another 5 or 6 next year and then the remainder early in 2028, but that expense will start coming on board later this year, call it, second, third and fourth quarter will start to increase. So those are somewhat offset to this reduced level of payroll taxes and 401(k) that we'll see going into the next 3 quarters.

Our [ Michelle, ] we're ready for our next caller please.

Our question will come from the line of Janet Lee with TD Cowen.

So I want to get some clarification. Much of the deposit decline in the quarter seems to be driven by a runoff of broker deposits. I assume that lower broker deposits is partly attributing to your lower deposit guide for the full year, but it would be great to hear the direction of travel for core customer deposits and broker deposits over the course of '26 that's assumed in your updated deposit guide.

Yes. So on the customer deposit side, we're looking for 3% to 4% growth on that front. In brokered deposits, we paid down quite a bit. I think quarter-to-quarter, we were down about $500 million. Those are high cost, obviously. And from a funding perspective, with a lower loan growth quarter, we did not need to refinance those or fund those with new brokerage.

So that was a positive. And as I said, we got about [ $200 million ] this quarter in brokered that are maturing at high cost and another [ $80 million ] or so in the third quarter. We'll see how that plays out in terms of brokered, but that is part of the reason -- maybe a lot of the reason why we've lowered our deposit -- total deposit costs, including brokered. Now we'll see what happens there, Janet, really depends on seeing a pickup in loan growth over the next several quarters and maybe see if we're on the higher end and maybe producing the higher end, we may have to go back and bring in some brokered deposits to fund the gap there.

Got it. And the accretion income declined $13 million quarter-over-quarter and looks like it included some onetime measurement period adjustments of $3.5 million. Is it fair to -- are you still maintaining your PAA guide of $150 million to $160 million for the full year? Or is that impacting your NII guide? I know it's harder to forecast the accretion, but I wanted to see where that should trend going forward.

Yes. We have lowered that, Janet, to, call it, $145 million to $150 million accretion. Part of that was the $3.5 million onetime, which wasn't anticipated in the earlier guide. And we do expect kind of more of a normalization of prepayments on that portfolio, was a pretty low quarter compared to the fourth quarter in terms of prepayments and accelerated accretion.

On a baseline perspective, excluding any early or prepayments accelerated accretion, it's about $10 million to $11 million on the loan accretion side on a -- from a baseline, you can expect that per quarter. And then the wildcard is what's the accelerated prepayments look like and the accretion that comes through related to that. And it's been running probably normalized, is probably more in the $3 million a month kind of thing. So that's kind of what is in our projection for that.

[ Michelle, ] we are ready for our next caller, please.

Our next question comes from the line of David Chiaverini with Jefferies.

So I wanted to touch on loans. You mentioned about the loan pipelines being strong. Can you talk about customer sentiment and what you're seeing there in terms of drivers?

Yes. Dave Ring, our Head of all of our Commercial-related businesses, which we call wholesale is here. Dave, do you want to speak to what you're seeing? I can give my perspective, too. But...

Sure. Like you said, pipelines are significantly higher than they were this time last year or even at the end of the quarter, first quarter. The sentiment is -- we are not seeing a lot of companies not doing transactions, but we're seeing companies sometimes pause them, and it's largely driven by interest rates, not some of the other things going on in the economy. So as interest rates kind of stabilize, we will see, I think, our pipeline convert pretty quickly.

Yes. I think -- and Dave, when you say interest rates, you mean people are -- we've heard some feedback that clients were sort of waiting, right, on lower rates. And now we're in what appears to be a higher for longer environment. And as they see that rates are likely not about to come down, they move forward. It is important to point out, as I commented, that we saw our record quarter, best ever in Atlantic Union Equipment Finance fundings in Q1. We saw record production out of the North Carolina-based commercial real estate team that operates throughout the Carolinas.

Pipelines look really good. And I also mentioned that the construction lending pipeline looks really good, too. So we are seeing activity out there. And despite all the uncertainty and concern about what's going on with this Iranian situation, doesn't really seem to have impacted sentiment. I agree with Dave, we've heard more comments on people that were kind of speculating on what rates might do. So we feel good about the outlook from here. The fundamentals are pretty good across the footprint.

Great. And then shifting over to capital management. Can you comment on to what extent, if any, the Basel III endgame proposal could have on Atlantic Union? And then also touch on your buyback appetite and timing, is later this year still in the cards?

Yes. In terms of the first question on the Basel III impact, we've estimated that, that impact based on what's out there today and the proposal is -- would reduce risk-weighted assets in the 6% to 6.5% range, which translates into from a CET1 regulatory capital ratio of an increase of 65 to 70 -- 75 basis points. So we'll see where that comes out in the final rules or what's approved, but that's our current estimate of the impact there.

So pretty positive from a regulatory capital ratio perspective. In terms of potential buybacks, yes, so as we've said, we look at anything over 10.5% CET1 as excess capital available for us to buy back shares and kind of manage between 10% and 10.5% CET1. We haven't come off our plans to -- well, I should say, we are projecting that we will hit that 10.5% mark coming out of Q2. Nothing's changed really there into Q3. So we're in a position to request an authorization from our Board of Directors subject to their approval. And we would expect to be in the market, assuming approval there in the near future.

And [ Michelle, ] we are ready for our next caller, please.

Our next question is going to come from the line of David Bishop with Hovde Group.

Congratulations, Rob, on the retirement. Enjoyed working with you. John, Dave, just curious from the net charge-off guidance I see in the slide deck, you're still sticking with the 10 to 15 basis points guidance. Just curious, is there any line of sight into reaching even that lower end, just given what's happening on a high-level basis? And maybe what could get you there on sort of a worst-case scenario, maybe what the portfolios can drive that higher?

We don't see anything. We have no line of sight to meeting even the lower end of the guide at this moment, meaning we don't see anything coming. Having said that, we know from experience, it's usually the [ infamous ] one-off which can happen from time to time. Doug Woolley is here as well. So Doug, you may want to -- our Chief Credit Officer, do you see anything that would be sort of a systemic or kind of secular concern?

Yes. No portfolios at risk. Like John said, they inevitably end up being one-offs, sometimes larger than we expect, but always resolved quickly once identified.

As a $38 billion bank, we're not going to run the bank with 2 bps of annualized net charge-offs. Having said that, I've made similar comments for 9.5 years. So I mean, it would be great. We would love to do that very thing, but we'll see. We think it's a reasonable assumption based on what we know right now, Dave.

Got it. And one follow-up. I know you mentioned the seasonal impact on swap fees were down this quarter. If we do see maybe stability in the term structure of rates, do you think that impacts the overall level of swap fees this year from a go-forward basis?

And again, Dave, the term rates, I didn't catch the...

Yes, I think you're saying that you expect sort of relative stability in the outlook for interest rates. Does that have a depressive impact if rates aren't volatile on the outlook for swap fees moving forward?

Yes. I think -- yes, so on swaps, yes, we had a pretty good quarter. We'll continue to see how that plays out. But I think you're right, the volatility will play into that. I don't know if Dave has anything -- Dave Ring has anything to add to that, but...

Yes. I mean for swaps, we're actually not seeing -- volatility doesn't normally play a role in our swap sales. It's really a function of new transactions getting booked. So we have a pretty strong -- very strong methodology around making sure we're eyeballing all transactions that are coming in the bank, and we're trying to help clients decide whether to manage the interest rates or not. But we -- I think the way -- the reason we're so successful in swap production is our methodology and the fact that we are -- we close a lot of new transactions every quarter.

I would say that if there's no expectation that rates are about to drop, that's generally helpful based on my experience, meaning there's not much to wait for those people aren't sort of betting on lower rates.

[ Michelle, ] we are ready for our next caller, please.

Our next question comes from the line of Brian Wilczynski with Morgan Stanley.

I wanted to just quickly go back to the net interest income outlook for the year. For 2026, it looks like you brought that down by about $18 million at the midpoint. It sounds like the lower purchase accounting accretion explains a portion of that. But I was just wondering if you could speak to any change in the core net interest income outlook and anything new that you're seeing on that front specifically?

Yes. So Brian, yes, the bulk of the adjustment there is accretion income that you saw in the first quarter that we brought that down a bit. The other driver there is we've increased our deposit rate outlook from our original guidance earlier in the year. We're seeing some competition in some of our markets. We do regional pricing. But in terms of the regions where we're seeing some increases, and we've raised rates in those regions is the Metro D.C. area, former Sandy Spring footprint.

And then some impact, even though it's not as large for us is North Carolina. We've also seen heavy competition from our -- from the bigger players in those markets and some of our peers. So we did increase those rates a bit. For instance, we now have CD specials in the 4% range or CDs offerings in the 4% range for 3 and 6 months. And we also now have an advantaged money market rate, which is in the 3.80% range. That requires new money to come in, but those are increasing deposit rate outlook as we go through this year.

Rob, on the accretion income expectations, is it fair to say that's more of a timing issue?

Well, it's a timing issue in terms of -- yes, will the acceleration of accretion income come through prepayments from the Sandy Spring acquired portfolio, those activities. And it could be more higher, it could be lower. I'd say, we were high in the fourth quarter, as we talked about last quarter, and we were lower this quarter excluding that $3.5 million adjustment that was nonrecurring. So it kind of does fluctuate quarter-to-quarter depending on what prepayments we get.

Yes. You still have that -- as you pointed out, you still have this base level that's a pretty good accounting tailwind and then the volatility comes in with prepayment activity, which is very difficult to predict.

Yes, that's right.

And maybe just to clarify on the PAA, the updated expectation, is it $145 million to $150 million? I may have misheard, but I think earlier in the call, you might have said $140 million to $145 million. So just wanted to clarify what the new expectation is.

It's really $140 million to $150 million, Brian, I kind of misstated that. So midpoint of about $145 million is what we're thinking.

Got it. Got it. And then you mentioned the strong production during the quarter on the loan side. It sounds like loan pipelines are quite strong, albeit with some paydowns towards the end of the quarter. I'm wondering, to the extent that loan growth surprises negatively over the course of the year, say, in a scenario where paydowns remain elevated, do you think that the NII guidance is still achievable? Would there be more offsets maybe on the deposit side? Or would the NII guidance become more challenging in that scenario?

Yes. I think the range that we put out there assumes that there's much lower growth than what we're projecting internally. So the range is what 3% to 7% if you look at the loan guidance and then the net interest income related to that is kind of on the low end. But certainly, if it comes in lower or it's flat, that will have some impact on that guidance and likely bring it lower, but we're not projecting that flat growth rate. But certainly, as I said earlier, we may then take other actions maybe from an expense point of view, maybe on the deposit cost perspective to maintain that net interest margin. But we do have some other levers on the expense side we could pull if the revenue growth doesn't come through.

Just for market clarity, Rob has not retired yet. So -- like we're going to get our money's worth out of him until September, but Alex is CFO as of now, and we'll go through a very planful transition, as you know.

And [ Michelle, ] we are ready for our next caller, please.

Our next question will come from the line of Catherine Mealor with KBW.

One more on the loan side or on the NIM side. Could you repeat what loan maturities you have maturing per quarter? And then on average, where new loan yields are coming on the books today?

Yes, it's about -- just speak to the fixed rate portfolio, it's about $850 million to $900 million maturing on a quarterly basis. And those new loans are those loans refis or new loans coming on are in the 6% to 6.10% range versus the portfolio at about 5% to 5.10%.

Okay. And are those just legacy...

Yes, just legacy, yes...

Okay. That doesn't include...

Yes. So if we bring in Sandy Spring, it's about that $900 million goes up to about $1.2 billion to $1.3 billion quarterly.

Great. So you're seeing that going from about 5% to 6.10%.

Yes.

Yes, right.

Got it. Great. And then are you -- we talked a lot about deposit cost competition on this call. What about loan competition? Are you still seeing -- can you talk about the competitive dynamic in lending, both on how that impacts volumes and how that impacts rate today?

It's competitive. It's always competitive, particularly for a bank like us that deals with what I would call the higher quality set of credit. Dave, do you want to comment on what you're seeing?

Yes. It's competitive in structure and price. So it really depends on the asset. The better the organization or better the company or better the prospect, the more competitive it gets for sure. What we're seeing now is the larger banks are very active in the markets we're in now, and so we feel like we compete best against them actually. So we feel like strong competition, but we're teed up to compete against them.

Yes, we'll get our fair share, Catherine.

Great. And then maybe one more question on just the growth. You've left your end-of-period growth guide unchanged. Is there -- I know this is a hard question, but it matters for the full year NII guide relative to the growth. I mean, do you feel like that growth is back-end loaded? Or do you feel like we're -- I know paydowns are kind of heavy in the back part of this quarter? Or do you feel like we're going to get -- as you see it today, a big improvement in growth even starting in the second quarter. So we see that kind of ramp to growth starting sooner rather than later?

Yes. Truthfully, Q1 was better than I would have expected based on production. And we were looking -- we were approaching 4% point-to-point annualized loan growth until literally the last week of Q1. Notice that the average loan growth for Q1 versus Q4 was 5.8%, which would be a very strong number for Q1, which is seasonally slow coming off a very strong Q4. So the productivity is there. We're off to a very good start in Q2.

And I would say we're on pace to where we'll continue to see it ramp. We're not effectively saying we don't see much happening until we get into the second half of the year, for example. Do you have anything to add on that, Dave? I mean we can see it in the pipeline.

Yes. The pipeline, if you were to just look at quarter-over-quarter pipeline is up 26%, even though we had a really strong fourth quarter. And so I think it's just a matter of conversion, and we're doing that. Like John said, we already had a good start to the second quarter. So we're confident that our conversion rates will be good.

So Catherine, right now, we feel pretty good in terms of being on pace to meet our expectations. It's not all back-end loaded. Having said that, Q4 is traditionally -- in my 37-year career, Q4 is always the best quarter of the year, but it's not like we're waiting on that.

And [ Michelle, ] we're ready for our last caller.

And our last question will come from the line of Steve Moss with Raymond James.

Just maybe not to beat dead horse, but just following up on deposit costs. Just kind of curious, how are you thinking about the marginal cost of deposits for you guys? I hear you on the 4% CD rate, but just think about the blended holistic dynamic what you're bringing in, where does that roughly shake out these days?

Yes. So if you look at the mix of deposit growth, it's going to be in the money market and the CD book. And as I said, those are probably -- on a marginal cost basis, those would be in the ranges that I just mentioned. So they'll start to tick up -- the average cost of deposits will tick up a bit. On the money market side, that's not repricing the back book. So that's not as big an impact at all, but it will grind higher over a period of time.

And then CDs as they mature, you'll see that coming in again over time. So I think that's kind of the way to think about it. Those are the growth engines at this point from the deposit other than we are bringing on some operating accounts and things of that nature. Of course, we always look for that from a growth point of view. But in terms of the drivers of the growth, it's going to be in those categories.

Okay. And then maybe just kind of think along the lines, just given how high the cost is, just curious if you guys are thinking about maybe running off more securities here as the year goes on just to fund growth, if we see remix that way, maybe how low are you guys willing to take securities and cash here?

Yes. Yes, that's a good question, Steve. Yes, we are bringing down the securities portfolio as a percentage of total assets. That's part of the equation to help fund any gaps between deposit growth and loan growth. Right now, we're about 13.5% of the securities portfolio as a percentage of total assets, and we're expecting to see that come down to about 12.5% -- 12% to 12.5%, which historically is where we've been. So there is that funding from the maturities coming out of the securities portfolio. Cash flows are about $75 million a month out of the securities portfolio. So that gives us some good funding opportunity for loan growth moving that to the loan book.

Okay. And then just on the reserve methodology change here. Kind of curious, maybe just explain kind of underneath what the dynamic is that how this could impact the way your reserve behaves in future periods? Or -- and I know you guys said it wasn't a material benefit. Is it just like $1 million, $2 million to the provision? Just kind of curious how we think about the dynamics for this quarter and just like the way sensitivity changes going forward.

Yes. The big change there, as we said, is we now have modeling on 3 segments. We split Commercial Real Estate and the Commercial and Industrial portfolios. And the real benefit there is that we now have loan-level credit modeling available to us on the Commercial Real Estate side, and that can get very granular in terms of where collateral is and things like -- of that nature.

The other component here is if you look at our allowance for credit losses under the previous modeling, we had about 50% of our reserve was what we considered qualitative factors versus quantitative modeling. And now under the new modeling, we still have qualitative factors, but they're more in the 20% to 25% range. And the quantitative model, the more granular model is producing 75% of the, give or take, of the total allowance.

So it's really a much better, more detailed model for us, and we feel like it's -- I don't think you'll see very much volatility in it going forward, depending on the economic forecast. I mean that can change it a bit going forward, but that would be under the old model as well. So we feel good about the changes that we made. We've continued to evolve. This is -- we have 3 models. This is the fourth model, and this is probably -- this is obviously the best model we've had. And interestingly enough, it kind of underpinned what we are putting as qualitative because the new model wasn't that really much different from the ACL levels that we have on the balance sheet.

Okay. That's helpful. I'll take a little more offline there, but I appreciate all that color. And then maybe just in terms of -- John, I heard you on the loan pipeline or talked about good dynamics in North Carolina, I believe you said. Just kind of curious what is that looking like these days? And just kind of what percentage of the loan pipeline or maybe size it up a little more would be helpful.

You mean coming out of the Carolinas?

Correct.

Yes. And when I say North Carolina, I should say broadly Carolinas because the commercial real estate team covers both of the Carolinas. Dave, do you want to speak to like how do you think about that in terms of how much of a broadly North Carolina, where Carolinas are as a part of the overall equation in terms of pipeline?

No. I mean it certainly helped this quarter that Carolinas was our second largest growth engine for the company for commercial. So that kind of speaks for itself. I think the pipelines are strong enough to replicate this performance in the Carolinas. So we feel really good about it.

And we're expanding. It used to be -- and a few years ago, when we talked about Carolinas, what we really meant was the commercial real estate team based in Charlotte. And so thanks to the acquisition of American National Bank that gave us a base principally in the Piedmont Triad. We have our Wilmington LPO, which is doing well, which we did post-American National acquisition. We've been expanding in Raleigh. We've got the branch investment going on in the Greater Raleigh area and Wilmington, and we're continuing to expand the team at a reasonable pace.

So Steve, I think it will become more important over time. It is arguably one of the best growth markets in the country. And they're gaining employment faster than most places as well, and it's right next door. So we feel really good. It's very important to understand how diversified Atlantic Union Bank is. I don't think we get credit for that. We need to do a better job of explaining we are a diversified bank over 3 very good states. And we have specialty lines as well that can go beyond like equipment finance. So we feel good about our opportunity.

Great. Thank you all so much...

Thanks, everyone, for joining us, and we look forward to talking with you next quarter.

This concludes today's conference call. Thank you for participating, and you may now disconnect. Everyone, have a great day.

Good day, and thank you for standing by. Welcome to Atlantic Union Bankshares Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions]. Please note that today's conference is being recorded.

I will now hand the conference over to your speakers Bill Cimino, Senior Vice President of Investor Relations. Please go ahead.

Thank you, Olivia, and good morning, everyone. I have Atlantic Union Bankshares' President and CEO, John Asbury; and Executive Vice President and CFO, Rob Gorman, with me today. We also have other members of our executive management team with us for the question-and-answer period.

Please note that today's earnings release and the accompanying slide presentation we are going through on this webcast are available to download on our investor website, investors.atlanticunionbank.com. During today's call, we will comment on our financial performance using both GAAP metrics and non-GAAP financial measures. Important information about these non-GAAP financial measures, including reconciliations to comparable GAAP measures, is included in the appendix our slide presentation and in our earnings release for the fourth quarter and full year 2025.

You'll also make forward-looking statements, which are not statements of historical fact and are subject to risks and uncertainties. We -- there can be no assurance that actual performance will not differ materially from any future expectations or results expressed or implied by these forward-looking statements.

We undertake no obligation to publicly revise or update any forward-looking statement, except as required by law. Please refer to our earnings release and our slide presentation issued today. as well as our other SEC filings for further discussion of the company's risk factors, including and other information regarding the forward-looking statements, including factors that could cause actual results to differ from those expressed or implied in the forward-looking statement.

All comments made during today's call are subject to that safe harbor statement. And at the end of today's call, we will take questions from the research analyst community.

I'll now turn the call over to John.

Thanks, Bill. Good morning, everyone, and thank you for joining us today. Atlantic Union Bankshares reported strong fourth quarter financial results, reflecting disciplined execution and successful integration of the Sandy Springs acquisition.

We believe the adjusted operating and financial results for the quarter showcased the organization's earning capacity. While merger-related charges continue to affect this quarter's results, the underlying operating performance supports our continued confidence in achieving the strategic goals associated with the Sandy Spring acquisition, namely the targets for adjusted operating return on assets, return on tangible common equity and efficiency ratio.

With the core systems conversion completed in October and only modest residual merger-related expenses anticipated in the first quarter, we expect in the ways associated with our merger-related expenses to decline. This means that we will be positioned beginning with Q1 2026 to report unadjusted results demonstrate the financial strength and operating efficiency we are committed to delivering for our shareholders.

Our commitment to creating shareholder value remains unwavering. We believe Atlantic Union is well positioned to deliver sustainable growth top-tier financial performance and long-term value creation for our shareholders. We believe the strategic advantages gained from the Sandy Spring acquisition, combined with continued organic growth opportunities due to our robust presence in attractive markets reinforce our status as the premier regional bank headquartered in the Lower Mid-Atlantic.

I'll briefly cover our Q4 and full year 2025 highlights and share market insights before Rob presents the financial review. And here are the highlights for our fourth quarter. Quarterly loan growth was approximately 6.3% annualized, ending the year at $27.8 billion. Our pipelines were higher at the end of the fourth quarter than they were at the start of the quarter, which suggests we are on track for loan growth consistent with our full year 2026 outlook.

While forecasting loan growth remains challenging and the still uncertain economic environment, we continue to expect 2026 year-end loan balances to range between $29 million and $30 billion, inclusive of the negative impact from loan fair value marks. We observed a return to more typical commercial line utilization levels in the fourth quarter. Loan production reached a record high in Q4 as our team gained momentum despite ongoing economic uncertainty the Sandy Spring core systems conversion and the CRE loan sale executed at the end of the second quarter of 2025.

Additionally, we observed growing confidence among our client base which, combined with seasonally strong lending trends further supported our robust performance in the quarter. Our deposit base experienced typical year-end fluctuations due to activity from large commercial depositors with some of these balances returning during the early weeks of the first quarter.

Our FTE net interest margin increased by 13 basis points to 3.96%. While improvement in accretion income contributed modestly, the main driver was our ability to reduce deposit costs while holding loan yields relatively flat compared to the prior quarter. On yield stayed relatively steady despite the Fed rate cuts and its impact on our variable rate loan yields due to increased accretion income, higher loan fees and the repricing of renewed and new fixed rate loans at current market rates.

Importantly, this also demonstrates we are putting our interest rate accretion income and principal repayments from the acquired fixed rate loan portfolios to work as those loans renew, are repriced to higher market rates.

Fee income was strong, primarily driven by loan-related interest rate swap fees and fiduciary and asset management fees with both benefiting from the Sandy Spring acquisition. About 27% of interest rate swap income this quarter came from former Sandy Spring customers. While Sandy Spring had a native swap program, AUB swap program is well established and mature, we expect ongoing growth in this area, though it's important to note that swap income may vary from quarter-to-quarter.

Overall, credit quality showed continued strength and improvement with our fourth quarter annualized net charge-off ratio coming in at 1 basis point. The net charge-off ratio for the full year was within our guidance at 17 basis points. Leading asset quality indicators remain encouraging. Fourth quarter nonperforming assets as a percentage of loans held for investment declined a further 7 basis points to 0.42% from 0.49% in the prior quarter.

Criticized and classified assets remained low at 4.7%. We believe credit underwriting, client selectivity and loan loss performance have consistently been traditional strengths of AEB, Sandy Spring Bank and American National Bank reinforcing our continued confidence in asset quality.

Before we discuss unemployment rates, I want to clarify, we are comparing November to September figures since October data is unavailable due to the government shutdown. Taking a step back, Virginia's unemployment rate remained unchanged at 3.5% in November, compared to September, demonstrating notable resilience, especially since the national unemployment rate rose by 0.2 percentage points to 4.6% during the same time frame.

Maryland's unemployment rate rose to 4.2%, a 0.4 percentage point increase in September. This change aligns with our expectations, particularly considering the November data now includes federal government workers who took buyout plants. Despite the uptick, Maryland continues to outperform the national average during the same period.

North Carolina's unemployment rate edged up 0.1 percentage point to 3.8%, remaining well below the national average. Although we do anticipate some further increases in unemployment across our markets in our CECL modeling, we expect these levels in Virginia and Maryland and North Carolina stay manageable and below the national average consistent with Moody's current state level forecast.

We remain confident in our markets and consider them among the most attractive in the country. For those who missed our Investor Day last month, I want to revisit a key slide from our Investor Day presentation as its message remains essential. We have deliberately and thoughtfully built the distinctive, valuable franchise outlined in our strategic plan delivering on our commitments and establishing the banking platform we set out to create.

With this strong foundation, we believe we're well positioned to capitalize on the expanded markets gained through the Sandy Spring acquisition, drive continued growth in Virginia and pursue new organic opportunities in North Carolina and across our specialty lines. Our full Investor Day presentation details our market approach for the next 3 years, and I encourage everyone to watch it.

With disciplined execution of our prior acquisitions and no additional acquisitions currently planned during this phase of our strategic plan, our focus now shifts to demonstrating the franchise's earnings power and capital generation ability. It's time to show that our efforts and investments have been worthwhile.

After dedicating capital to strategic investments over the past 2 years to complete the company we envisioned and work diligently to build and consistently communicated our plans to do so we believe we are now seeing clear tangible benefits from these efforts.

In summary, 2025 was a pivotal year for AUB. We remained agile and responsive while managing a significant merger integration a major CRE loan sale and navigating macroeconomic headwinds, including federal government restructuring and unpredictable tariff policies. Despite these challenges, we delivered operating results that we believe will stand out among our peers.

With that, I'll turn the call over to Rob for a detailed review of our quarterly financial results before we open the floor for questions. Rob?

Well, thank you, John, and good morning, everyone. I'll now take a few minutes to provide you with some details of Atlantic Union, its financial results for the fourth quarter and full year 2025.

My commentary today will primarily address Atlantic Union's fourth quarter and 2025 financial results presented on a non-GAAP adjusted operating basis, which for the fourth quarter excludes $38.6 million in pretax merger-related costs from the Sandy Spring acquisition. And for the full year 2025 [ supports ] the following items: pretax merger-related cost of $157.3 million, pretax gain on the sale of CRE loans of $10.9 million and the pretax gain on the sale of our equity interest in Cary Street Partners of $14.8 million.

That said, in the fourth quarter, reported net income available to common shareholders was $109 million, and earnings per common share were $0.77. For the full year 2025, reported net income available to common shareholders was $261.8 million and earnings per common share were $2.03.

Adjusted operating earnings available to common shareholders were $138.4 million or $0.97 per common share in the fourth quarter, resulting in an adjusted operating return on tangible common equity of 22.1% and adjusted operating return on assets of 1.5% and an adjusted operating efficiency ratio of 47.8% in the quarter.

For the full year 2025, adjusted operating earnings available to common shareholders were $444.8 million or $3.44 per common share, resulting in an adjusted operating return on tangible common equity of 20.4%, and an adjusted operating return on assets of 1.33% and an adjusted operating efficiency ratio of 49.7%.

As John mentioned, we believe these adjusted operating results for return on tangible common equity and the efficiency ratio puts us in the upper quartile of our peer group for the full year of 2025.

Turning to credit loss reserves at the end of the fourth quarter. The allowance -- the total allowance for credit losses was $321.3 million, which was an increase of approximately $1.3 million from the third quarter, primarily driven by loan growth in the fourth quarter. As a result, the total allowance for credit losses as a percentage of total loans held for investment decreased 1 basis point to 116 basis points at the end of the fourth quarter.

Net charge-offs decreased to $916,000 or 1 basis point annualized in the fourth quarter from $38.6 million or 56 basis points annualized in the third quarter due to the charge-off of 2 commercial and industrial loans in the third quarter. Net charge-off ratio for the year came in at 17 basis points, in line with our 15 to 20 basis points guidance.

Now turning to the pretax pre-provision components of the income statement for the fourth quarter. Tax equivalent net interest income was $334.8 million, which was an increase of $11.2 million from the third quarter primarily driven by a decrease in interest expense resulting from lower deposit costs and increases in interest income on loans held for investment in the securities portfolio, which was partially offset by a decline in other earning asset interest income, primarily driven by lower average cash and cash equivalent balances in the fourth quarter.

As John noted, the fourth quarter's tax equivalent net interest margin increased 13 basis points from the prior quarter to 3.96% primarily due to lower cost of funds, partially offset by a slight decrease in earning asset yields.

Cost of funds decreased 14 basis points from the prior quarter to $2.03 for the fourth quarter due primarily to lower deposit costs, reflecting the impact of Fed funds rate decreases starting in September of 2025. Earning asset yields for the fourth quarter decreased 1 basis point to 5.99% as compared to the third quarter due primarily to lower investment and other earning asset yields, partially offset by slightly higher loan yields.

As John mentioned, loan yield stayed relatively steady despite the Fed rate cuts and its impact on our variable rate loan yields due to increased accretion income, higher loan fees and the repricing of renewed and new fixed rate loans at current market rates.

Noninterest income increased $5.2 million to $57 million for the fourth quarter from $51.8 million in the prior quarter, primarily driven by a $4.8 million pretax loss in the prior quarter related to the final settlement of the sale of CRE loans executed at the end of the second quarter of 2025 as part of the Sandy Spring acquisition.

Adjusted operating noninterest income, which excludes the pretax loss on the CRE loan sale in the third quarter, the pretax gain on sale of our equity interest in Cary Street Partners in the fourth quarter and the pretax gains on the sale of securities in both the third and fourth quarters remained relatively consistent with the prior quarter at $56.5 million, primarily due to a decline in service charges on deposit accounts of $1.1 million which was driven by temporary post-conversion fee waivers for Sandy Spring customers.

A decrease in other operating income of $807,000 primarily due to lower equity method investment income and seasonally lower mortgage banking income of $727,000, offset by higher loan-related interest rate swap fees of $2.5 million due to higher transaction volumes and increases in fiduciary and asset management fees of $1.3 million, primarily due to increases in state fees, personal trust income and investment advisory fees.

Reported noninterest expense increased $4.8 million to $243.2 million for the fourth quarter of 2025, primarily driven by a $3.8 million increase in merger-related costs associated with the Sandy Spring acquisition. Adjusted operating noninterest expense, which excludes merger-related costs in the third and fourth quarters and amortization of intangible assets in both quarters increased $1.4 million to $186.9 million for the fourth quarter, up from $185.5 million in the prior quarter.

This was primarily due to a $2.4 million increase in other expenses which was driven by an increase in noncredit-related losses on customer transactions and a $1.7 million increase in marketing and advertising expense. These increases were partially offset by a $1.4 million decrease and FDIC assessment premiums due to lower assessments in the fourth quarter of 2025 and a $1.2 million decline in furniture and equipment expenses, which was primarily driven by lower software amortization expense related to the integration of Sandy Spring.

At December 31, loans held for investment net of deferred fees and costs were $27.8 billion, which was an increase of $435 million or 6.3% annualized from the prior quarter. At December 31, total deposits were $30.5 billion, a decrease of $193.7 million or 2.5% annualized from the prior quarter. primarily due to decreases of $260 million in demand deposits, largely driven by typical seasonal patterns and $14.5 million in interest-bearing customer deposits which were partially offset by an increase of approximately $81 million in broker deposits.

At the end of the fourth quarter, Atlantic Union Bankshares and Atlantic Union Bank's regulatory capital ratios were comfortably above well-capitalized levels. In addition, on an adjusted basis, we remain well capitalized as of the end of the fourth quarter if you include the negative impact of AOCI and held-to-maturity securities unrealized losses in the calculation of the regulatory capital ratios.

During the fourth quarter, the company paid a common stock dividend of $0.37 per share, which was an increase of 8.8% from the third quarter's and previous year's fourth quarter dividend amount.

Of note, on a linked quarterly basis, tangible book value per common share increased approximately 4% to 19.6 -- $19.69 per share in the fourth quarter. As noted on Slide 17, we are maintaining our full year 2026 financial outlook for AUB that was provided at our Investor Day in December. We expect loan balances to end the year between $29 million and $30 billion while year-end deposit balances are projected to be between $31.5 billion and $32.5 billion.

On the credit front, the allowance for credit losses to loan balances is projected to remain at current levels in the 115 to 120 basis point range, and the net charge-off ratio is expected to fall between 10 and 15 basis points in 2026. Full tax equivalent net interest income for the full year is projected to come in between $1.350 billion and $1.375 billion, inclusive of accretion income.

As a reminder, we considered accretion income resulting from acquired loan interest rate marks as a built-in scheduled accounting tailwind to our GAAP earnings and net interest margin as the accretion income related to the loan interest rate marks gradually transitions to core cash earnings over time as the loans obtained through acquisitions either mature or get renewed at current market rates.

As a result, we are projecting that the full year fully tax equivalent net interest margin will fall in a range between 3.90% and 4% for the full year, driven by our baseline assumption that the Federal Reserve Bank will cut the Fed funds rate by 25 basis points in April and September in 2026 and that term rates will remain stable at current levels.

On a full year basis, noninterest income is expected to be between $220 million and $230 million, while adjusted operating noninterest expense is expected to fall in the range of $750 million to $760 million, which includes the expense impact of our North Carolina investment and other 2026 strategic initiatives.

Based on these projections, we expect to generate annual growth in tangible book value per share of between 12% and 15% produced financial returns that will place us within the top quartile of our proxy peer group and meet our objective of delivering top-tier financial performance for our shareholders.

In summary, Atlantic Union delivered strong operating financial results in the fourth quarter and in 2025, and we remain firmly focused on leveraging this valuable Atlantic Union Bank franchise to generate sustainable profitable growth and to build long-term value for our shareholders in 2026 and beyond.

I'll now turn the call over to Bill to see if there are any questions from our research analyst community.

Thanks, Rob. And Olivia, we're ready for our first caller, please.

[Operator Instructions]. The first question coming from the line of Janet Lee with TD Cowen.

To give some -- I want some more clarifications on your 2026 guide, which was reiterated from your Investor Day in December. Is there any sort of range that you're gravitating towards whether that's higher end or lower end of net interest income given the higher launching point for NIM, but although I do expect that NIM will grind down from there. in 2026.

And it looks like there are different puts and takes in terms of deposits were coming in below given seasonality and loans are a little bit above what you guided. So I wanted to see what would put you at the higher end versus lower and what your baseline expectation is?

Yes. So as we've said, Janet, we're guiding to net interest income between $1.35 billion and $1.375 billion. to come on the higher end of that, it's really going to depend on somewhat of -- do we get elevated accretion income as we saw this quarter. We're not modeling that. going forward into 2026. We've got that coming down a bit.

Also, I think the other component there is can we continue to lower deposit costs as the Fed reduces the Fed funds rate. We're taking a bit of a conservative approach on that. Of course, that's dependent on the competition out there and the need for funding the loan growth that we anticipate.

So really, we're kind of in that range, but on the higher end, if we could see cost of funds come down a bit more than we're projecting that would probably lead us to the higher end and accretion income we'd also add to that confidence if we see that coming in a bit higher.

Also, as you know, loan growth would also play a part in that. We guided to mid-single digits if we see a higher loan growth and term rates kind of remain high with a steep curve we could see that be coming in at the higher end as well.

Got it. And if my calculation is correct, I see that the cumulative interest-bearing deposit beta to the rates coming down in the high 40% range. Do you still forecast that mid-50s beta? Or is that little lower heading into 2026. And also, I see that there was a deposit remix into more interest-bearing checking, which I assume are lower cost than the other ones, what kind of -- wanted to see what kind of -- what drove that remix in the quarter and whether that's going to reverse in the quarters ahead?

Yes. So on that Janet, in terms of the betas, we're still guiding to an interest-bearing deposit guidance of mid-50s, 50% to 55%, which is in line with wind rates were going up I think we ended up the prior through the cycle, beta was around 55% for interest-bearing deposits.

On a total deposit basis, we're in that 40% to 45% range. I calculate that we're about 50% betas to date, if you go back to when the Fed started cutting in September and about 40% total deposits. So we're kind of staying in that range. We have seen we've been aggressive on lowering deposit rates, about $12 billion to $13 billion.

We've been able to reprice fairly quickly as the Feds come down. That's been a good thing to offset our beta rate reloan book that reprices with Fed funds. So that kind of is a balancing act there. So -- but in terms of what was the other -- the end of the other question you had.

Deposit remix?

Yes. So there has been some reclasses that have occurred post the Sandy Spring conversion. So there's some of that, that's kind of moved in 1 category to another. That's primarily probably the main driver of that. So not expected that to shift too much going forward, kind of level set that now.

Next question coming from the line of David Bishop with Hovde Group.

John, are you I think I heard you say during the preamble that the loan pipeline had increased relative to that coming into the quarter. Just curious if there's any numbers you can put around it or percent increase and how you're thinking about near-term loan growth here as you talk to your commercial clients, so you're starting to see some traction across the legacy Sandy Spring portfolio? And is that some of the drivers we saw in the C&I growth this quarter.

Yes, I would say that we had a modest increase in the total pipeline by end of year -- end of quarter versus beginning of quarter. That's really important and a bit unusual for Q4 because, as you can see, Q4 was a big quarter.

Now as we expected, it was very much back-end loaded. We were -- teams were super busy over the month of December the typical phenomenon is you would expect to see the pipeline somewhat clean down.

In other words, normally, it takes a while for it to rebuild. So we were pretty excited to see that it was continuing to refill, so to speak, over the course of the quarter. And I would just say that what we're hearing, we can see the pipeline the feedback we're getting from our market leaders is quite encouraging.

So we feel pretty good about things in terms of the outlook. That's part of what's giving us confidence in our mid-single-digit guidance. And it feels pretty -- Dave ring you can comment on this, but what we heard is pretty broad-based in what we see.

Yes, I guess I would -- I'd only add that our folks are very optimistic going into the year with good pipeline across the program. Itt's not in 1 place.

Yes, including the former Sandy Spring franchise to be clear.

Great. And then, John, maybe a holistic question. change in the governor mansion there. Just your view here from a business-friendly climate, do you think that's going to have much of an impact in terms of the Commonwealth growth capacity in business climate?

Yes. Thank you. No, we feel good about the outlook here in our home state of Virginia, Virginia has a long tradition of business-oriented moderates in the statewide offices, governor, U.S. Senate -- and I feel quite confident that the new governor will continue that tradition.

Our next question coming from the line of Steve Moss with Raymond James.

Maybe just following up on the loan pipeline here. Just kind of curious where are you guys seeing loan pricing shake out these days? And also wondering where deposit costs were at quarter end.

Yes. So on the loan pricing side, we're seeing about $6 to $6.20 loan pricing, both on the variable and the fixed rate loans. So -- we expect that will continue. It really depends on where short-term rates are, obviously, on the variable rate side and where term rates are. But but the spreads seem to be holding up pretty well on top of those indexes. And in terms of the the deposit cost at the end of December is what you're asking, Steve. Yes, we're below 2% on that, it's about -- I think it was about $1.96 coming out of December.

Okay. Appreciate that. And then in terms of just kind of thinking about the core margin here, I apologize if I missed it, but just curious, do you continue to expect core margin expansion here throughout the year? And kind of just how you're thinking about the cadence, if that's the case.

Yes. We think core margin will expand a bit. Some of that's coming off where we talked about the acquired loan book is repricing and coming in back into core. So from a loan yield point of view, that's helpful. In terms of fixed rate loans coming on about 100 basis points or so higher than what the portfolio yield is.

If Fed cuts more than a couple of times, we probably will see some stable loan yields or margin or we could see some contraction a bit. But our call is a couple of cuts next year, which is manageable and as I mentioned, we're able to reduce similar deposit costs, which I think that's the Fed funds fairly quickly, which will offset some of the variable rate loan impacts of further cuts.

So all in all, I think we'll see some modest core margin expansion based on those factors.

Okay. Appreciate that. And then just in terms of following up on the purchase account accretion, just curious, any updated thoughts around the full year number for that?

In terms of 2026, Steve?

Yes.

Yes. We're currently modeling between $150 million and $160 million in 2026. Well, as you know, that can fluctuate. We saw a bit higher than than expected in the fourth quarter. So that can fluctuate, but give or take, our baseline modeling in the guidance we're providing from a margin perspective and net interest income perspective. is in the 150 to 160 range.

Okay. Appreciate that. And John, maybe just one for you on North Carolina expansion. I know you talked about it a fair amount last month. Just kind of curious as you continue to expand down there in the market, what are the good things you're seeing? Maybe what are some of the challenges as you're building out down there?

Yes. Well, I think that we're making good progress in terms of the efforts to expand the commercial teams -- and Shawn O'Brien is here, Head of Consumer and Business Banking. Shawn, you can speak to just sort of the latest in terms of the branch build-out.

Yes. We continue to move quickly have plans for our 10 branches to be open in Raleigh and Wilmington here in the next 1.5 years, 2 years. And we're hiring staffing across the bank to make sure there's teams to support on both the wholesale and consumer side. So progress have been very good there as far as finding good sites and finding teammates.

So we think we're on track, Steve.

Our next question coming from the line of Brian Wilczynski with Morgan Stanley.

So sticking with the loan growth. So at Investor Day last month, you talked about several different focus areas for organic loan growth over the next few years. the Sandy Spring footprint, North Carolina and also the specialty banking businesses. I was wondering if you could talk a little bit about where you're seeing the most traction in the fourth quarter given how strong growth was what you see as sort of the near-term driver across those 3 buckets versus what may take some more time to materialize.

Dave, do you want to give some color on that?

Yes. We could talk for hours on this one.

Let's not do that.

We've seen the Sandy Spring part of the franchise really turned the corner from integrating the bank and getting trained up to positive results in the fourth quarter and a really good pipeline going into the first quarter. North Carolina steady as she goes there. We're hiring into that market. So there's ramp-up periods for folks that we'll see, I think, really nice results over the course of '26, but they also have turn the corner. They're also growing and their pipelines are good as well.

On the specialty side, we have hired the Head of Healthcare banking, which we talked about in that meeting. And the other specialty businesses actually contributed largely to some of the growth we've had.

And then here in Virginia, which would be the single largest concentration, what we were so pleased to hear this week as we did our check on with all of the commercial market leaders and credit officers is we're seeing strength across the state, not -- and so that's actually really good to see. So we feel pretty good about the setup on Brian. It feels pretty well diversified.

That's great to hear. And you highlighted the 6% annualized growth in the fourth quarter pipelines up sounds like production is up. At any puts and takes in terms of how we think about, say, the first half of 2026 relative to what you just did in the fourth quarter. Is there any seasonal benefit in the fourth quarter was -- and does the government shut down a material tailwind? Or does it feel like you can sort of maintain this cadence over the course of the year?

Q4 is traditionally seasonally strong in my experience across the industry, and that's because businesses are strongly motivated to get things done before year-end for reporting purposes, planning purposes, tax purposes, you name it. So you can always expect to see a seasonally high Q4.

Q1 traditionally is somewhat slow, normally just because so much goes on at the very end of the year. So we would expect to see the typical pattern, which is all kind of build as the year goes on. There's usually a little dip in Q3 as people go on vacation, frankly. There are some -- there's normally some element of seasonality, but we see the opportunities there. So we'll see what happens.

Really appreciate the detail.

Next question coming from the line of Catherine Mealor with KBW.

This is Hanan stepping in for Katherine. I had a question on deposits. We saw a decline in deposits this quarter. And I was wondering if you could provide any guidance on the outlook for deposit growth into next year.

Yes. Let me start by saying we saw the typical for us, end of year decline that happens really in the last 2 weeks, if not last week of December. It's not at all uncommon. And we saw it again to where some of the larger commercial depositors will have various payments that they're making.

And so you see this downdraft and noninterest-bearing deposits that happens late and that's what was going on. over the course of the quarter, we did continue to run down some higher cost sort of less relationship-oriented deposits that came out of Sandy Spring in particular, -- so you've got a seasonal element going in there and you see the deposit base kind of settling in. Rob, do you want to speak to outlook for the, I guess, for 2026.

Yes. So if you look at our guidance, we're really guiding to about -- off the fourth quarter base, about 3% to 4% deposit growth for the year. We think that's achievable both on the commercial and on the consumer side. We've got more treasury management opportunities in the former Sandy Spring footprint. So there's some opportunities to grow there. So we're feeling pretty good because really low single digits is what we're going for.

Our next question coming from the line of Stephen Scouten with Piper Sandler.

So 1 quick clarification, John. I think you said most of the cost saves related to the Sandy Spring dealer kind of in the numbers here, maybe some marginal benefit in 1Q. How should we think about -- I know we've got the full year guide, but just the run rate for expenses in the first quarter off of this, what I think was around $200 million, $205 million here this quarter on an adjusted basis.

Yes. So Steve, the way to think about it is you're going to see kind of a flattish quarter in the way we're modeling it, last quarter, first quarter, and it starts coming down a bit. over the remainder of the year is, of course, you understand the -- there is some seasonality in the first quarter as the FICA resets, bonus payments are made unemployment taxes go up and then we have some merit increases going in.

So that will be kind of the high watermark as we will, which is typical and then start to come down. If you look at it from an operating -- excluding the amortization of intangible expense, we're calling for, on average, call it about $188 million a quarter going forward, but it will skew a bit higher in the first quarter. It starts to drop off in the subsequent quarters.

Rob, what can we say about what's left of Sandy Spring related expenses?

Yes. So our -- well, I think it's not all in the numbers yet, but we've achieved the cost savings. About $80 million is what we had projected, 27.5%. In the numbers, it's probably about annualized about 60-some-odd million there, call it, $60 million. We're getting another $5 million coming out of the fourth quarter. So that will get you to that $80 million mark.

So there is some benefit that you'll see in the first quarter. That's why we're kind of calling for flattish in the first quarter because it's offset by some of these other seasonal items. But you should see that come through going out in the second to fourth quarter. Of course, we also have investments that are being made in North Carolina and some strategic investments we made, which we noted in Investor Day. So those are kind of all in the numbers that I'm talking about.

And I referenced there's some residual remaining expenses in Q1, which is I think...

From a merger related.

Like merger on.

Yes, we have a couple of some IT decommissioning expenses and you related to some leases that we're getting out of maybe less than $5 million is our projection for the first quarter for merger related.

That's it. It's all over. That is the guidance.

That's great. That's extremely helpful detail. I appreciate it. And maybe I know you kind of noted the progression in North Carolina and that potential expansion is still pretty much on path for build out over the next 1.5 years to 2 years. Is there any impetus to kind of accelerate any of your plans or push maybe deeper into hiring activity that seems to be the norm across the spectrum today. Everybody seems to want to hire as many people as they can, with the dislocation we're seeing across the industry.

So just wondering if that -- any of your plans there could accelerate? Or if you feel like there's a lot of capacity still within the team, just given the integration with legacy Sandy brings into the AUB platform?

That would principally be, I think, a commercial or wholesale banking question. Do you want to answer that, Dave?

Yes. I mean this is not the time you necessarily want to hire a banker because going to have to pay their bonus.

Even this time of the year.

We had this time of year. But we have a pipeline, a strong pipeline of people that we would expect to bring on board after bonuses are paid at the other institutions. And we currently have a lot of capacity within the team. We have 20 bankers sitting in the market already.

In Carolina.

In Carolinas. And they're very active. And so we're going to continue to grow using those bankers but also build out the rest over time. But you should expect to hear about more hiring March -- between March and August during the year?

We do feel good about the team. Our capacity, we're sort of always in the market to some extent. But we wouldn't expect to see like some big announcement that there's some big expansion per se, but we'll see how it goes.

But there's no constraints on hiring. It's higher you can...

We have a long track record as we can expand with the right talent. We tend to do that and make it work out.

A little harder to accelerate on the consumer side because you got the branch build-out and things -- so it's more on the wholesale side. We'll push as hard as we can, but it's depending on the hiring of capabilities there.

Great. And then just maybe lastly for me. I mean, you've got a lot on your plate, clearly, in terms of the North Carolina expansion. Obviously, hoping to accelerate growth overall. -- in terms of uses of capital. But as earnings continue to ramp higher and capital build should accelerate here, at what point do you think you entertain maybe share repurchases or other paths for that soon to be building excess capital over time. And is there a kind of a threshold you want to hit from a capital level first before you'd entertain that?

Yes. I think we've been clear that we will entertain a share repurchase probably in the second half of 2026 of this year. Really looking at excess capital, anything beyond the 0.5 million percent CET1 would be what we'd be looking for to utilize -- consider excess capital to be in the repurchase market. So we're on track for that as we go through the first -- for the second quarter of this year. So as we said, we could be in the market late in the second quarter or in the third quarter.

And I'm glad you asked that question. You saw that we grew tangible capital about 4%, approximately 4% in 1 quarter. And we're doing exactly what we said we would do. We've invested capital to build the franchise, to secure our positioning to put us on this profitability and capital generation footing. And now we're receiving the benefit of that.

And we've been clear that we are guiding towards 12% to 15% annualized tangible capital growth. So we are going to be in a good position, as Rob said, where we'll be able to consider share buybacks.

Yes, fantastic. It feels like everything is laid out before.

We have a follow-up question from David Bishop.

John, real quick, I guess, a question for Rob. You noted the -- in other expenses noncredit-related customer losses. Is that that fraudulent type losses? Just curious what sort of drove those other expenses higher?

Yes. That's mostly what that is. Fraud is episodic and it can come and fit in spurts and that's what you're looking at.

Yes, it was elevated just a couple of items issues that came up in the fourth quarter. Hopefully, they don't recur, but they're here. It's become...

You get these scams that move around the industry -- and then there'll be something else, but that's episode. Yes, think that's what's the run rate issue.

Got it. So within your OpEx guidance for the first quarter, the flattish, would that be flattish off the reported sort of $204.6 on an adjusted basis? Or would it be sort of 202 adjusting for the fraud.

Yes. It's kind of kind of around that range, 203 -- 202, 203, including the amortization, just because there's ads Think about it is, yes, we may not see that level, but there's other things that will come in from a seasonal point of view.

Thanks, Dave, and thanks, everyone, for calling. We look forward to speaking with you in 3 months. Have a good day.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.

Please welcome Bill Cimino, Senior Vice President, Investor Relations.

Good morning, everyone. It's good to see so many of you in person, and welcome to those listening to us online today. Please note that today's slide presentation is available to download through the investor website link, which can be easily found on our investor website, investors.atlanticunionbank.com.

To download today's presentation, if you're watching online, just scroll down and click the download button. And for those of you in the room, you can scan the QR code provided on the printed agenda. During today's presentation, we will make comments on our financial performance using both GAAP metrics and non-GAAP financial measures.

Important information about these non-GAAP financial measures, including reconciliations to comparable GAAP measures, is included in the appendix to our presentation. I would like to remind everyone that we will make forward-looking statements today, which are not statements of historical fact and are subject to risks and uncertainties.

There can be no assurance that actual performance will not differ materially from any future expectations or results expressed or implied by these forward-looking statements. We undertake no obligation to publicly revise or update any forward-looking statement, except as required by law.

And please refer to the forward-looking statement slide in our presentation and our other SEC filings for further discussion of the company's risk factors and other important information regarding our forward-looking statements, including factors that could cause actual results to differ from those expressed or implied in the forward-looking statement.

And all comments made during today's call are subject to the safe harbor statement. Finally, before we begin, I'd like to cover a few housekeeping items. We built in time at the end of the day for questions, so please hold off until then. That will help keep us on schedule as I know some of you have some plane to catch later today. And for our virtual attendees to submit a question during the Q&A session, scroll down to the bottom of the screen and click the Q&A button.

As you'll see from today's presentations, we have come a long way in our journey to become the premier Mid-Atlantic regional bank. We've assembled a strong team. And even though we've accomplished a lot, we believe there's still opportunity for us to grow and evolve as a company. And now I'll turn it over to John Asbury. John?

Thank you, Bill, and good afternoon, everyone. First of all, let me say thank you so much for making the time to come here to New York, for the New York Stock Exchange. We realize that many of you have actually traveled to be here for this. We are happy to be back to tell our story. The Street is accustomed to hearing from myself, Chief Financial Officer, Rob Gorman; and Head of Investor Relations, Bill Cimino, but more important than us will be the other leaders that you'll hear from today.

I also want to point out that, as Bill mentioned, once we get into Q&A later, nearly the entire executive leadership team is here. Almost all roles are represented. And so I'll do my very best to make sure that you hear from them to the extent that we can to any questions you may have. So why don't we begin? And I'll start with a good visual of the Atlantic Union Bank franchise.

This is the third Investor Day that I have been part of. I've been a part of the company for 9 years now. And over the past 9 years, AUB has been a story of transformation. We've evolved from a Virginia community bank into the regional bank of the lower Mid-Atlantic. Now this has been a very intentional strategy. Many of you know us well, and you've been around for the journey. And we've achieved this through deliberate organic growth and 4 targeted mergers and acquisitions over a 9-year period.

AUB runs a very traditional bank strategy. We focused on building a dense compact presence in core markets, and we do believe we have room for further densification in North Carolina. We do leverage specialized commercial banking capabilities to better compete with the larger players and to provide supplemental growth opportunities beyond our 3-state branch footprint.

Dave Ring will share more on this in his presentation. Having said all of this, the main thrust and strength of our franchise does, in fact, remain our core footprint in the states of Maryland, Virginia and North Carolina, it should be evident from looking at this slide. Now as often point out, we do recognize the scarcity value of our franchise. We built it. We recognize it, and we do not believe it to be replicable.

My comments today are going to focus on our journey to reach this point and what to expect next from Atlantic Union Bank. Following that, we'll get into other key executives who will dive into a greater level of detail on our operating strategies and our financial performance and objectives.

Now here's a time line that provides a very good reminder of key milestones in our strategic journey going all the way back to 2018 and key things I will call out and I only call out a few would certainly be crossing the $10 billion asset threshold, acquiring quality banks that expanded our scale and our market reach and securing our Virginia franchise and later entering North Carolina's Piedmont Triad and Raleigh markets and extending the franchise to secure a similar footing in the contiguous Maryland markets and densifying Virginia's largest market, Northern Virginia.

We've been disciplined and at times, we've been bold in doing what we did, knowing that this would be an ambitious undertaking. And this has been a deliberate and a disciplined transformation journey. Here's a very good view of the company's growth over time. We've been a combination of both organic growth and select acquisitions. And I do want to point out that while many people perceive us as simply an acquirer, the 9-year compound annual growth rate for our company on an organic-only basis is 7%. That's a high single-digit number. That is a good number for a franchise like us.

In green, you can see the 4 acquisitions that we've undertaken during my time here. And I do want to point out there is a pattern that should be evident. The first 2 acquisitions were closed roughly 1 year apart in early 2018 and in early 2019, and that accelerated our transformation and enabled the successful $10 billion crossing.

And I believe not well remembered is the 5-year gap between the closing of Access National Bank in February of 2019 and our acquisition of American National Bank in April of 2024. The gap period did, in fact, include the pandemic years, but we needed this time to digest the first acquisitions to fuel the right leadership team to shore up the bank's infrastructure and risk management to more rigorous regional bank standards and to improve financial performance in the face of numerous and unprecedented challenges.

With our more recent 2 acquisitions also completed 1 year apart, we have now secured our position as the leading regional bank of the Lower Mid-Atlantic. With that now accomplished, we believe the next chapter for us will very much be an organic strategy with the goal of proving out the potential and the earnings power of the franchise that we have built to demonstrate it's all been worthwhile.

And here's a different way of visualizing the role of the planful and intentional acquisitions we've used to build our franchise. The slide to the left shows the franchise that I joined in late 2016. And to the right, the color coding represents the banks that we have acquired, each filling a missing piece of the puzzle that we were solving for.

Danville, Virginia-based American National Bank based along the Southern Virginia border and North Central North Carolina, it accomplished multiple objectives, densifying our presence in Western Virginia, adding new markets in Southern Virginia, where we did not operate and importantly, providing a meaningful presence in the Piedmont Triad region of North Carolina and an entry point in Raleigh, which we viewed as a base that we could build from.

I pointed all of this out when we acquired American National Bank, and I stated we would further invest in North Carolina as our most promising growth market, and we have. More recently, the Sandy Spring Bank acquisition also served a dual purpose of extending the footprint into Maryland and densifying our limited presence in Virginia's largest market, which is Northern Virginia.

And of note, the bank's compound annual growth rate for assets has been 20% over the course of these years, yet the branch footprint only grew at a 6% compound annual growth rate. And that demonstrates how aggressively we have optimized the retail branch network for efficiency. And I will call back this slide from 7 years ago, standing here in New York, the 2018 Investor Day presentation, at which time we had completed our acquisition of Zenith Bank and we announced the acquisition of Access National Bank.

And this was intended to respond to questions that I was receiving about future M&A intentions. I stood here and stated that we saw 3 options. Since that time, we have executed on all 3. On the left, we did nothing for 5 years following the closing of Access National Bank in terms of bank M&A. We then moved to further consolidate Virginia with the acquisition of American National Bank, which largely completed that strategy.

And as mentioned, this also had the added benefit of providing a critical mass in North Carolina, which we viewed as a longer-term organic growth opportunity that we could build from. And finally, 7 years ago, we clearly stated that we saw the potential to extend the franchise to the north and to secure AUB's footing as the regional bank of the lower Mid-Atlantic. We have done exactly what we said we would do.

And here's a current version of a slide that you've seen from us for many years. We always have this in our investor presentations. It's important. It highlights our position as the #1 regional bank by depository market share in our home state of Virginia and now in Maryland, and it demonstrates that we're still a small player in North Carolina.

What should be obvious from this is the dominance of the larger banks in those markets and how we're positioned against them in Virginia and in Maryland. And this answer is an important question. It reinforces why we sought to position AUB as both a challenger and an alternative to the larger players, while still maintaining the flexibility to compete against the smaller players, too. And you'll hear more on this from Maria Tedesco, David Ring and Sean O'Brien momentarily.

And I also want to point out an important point. While many bank management teams will talk about their scarcity value in our opinion, this is what scarcity value looks like. And moving on to our markets. We've long believed that our markets in this 3-state footprint represent among the most attractive in the country.

All 3 states are top 20 by GDP and population. Maryland and Virginia are among the more affluent markets in the nation by median household income. In fact, Maryland, notably is close to -- it is a close second to New Jersey as having the highest median household income of any state in America. And finally, all 3 states have among the lowest unemployment rates of any of the more populous states in the country.

So bottom line, we do operate in large, affluent and low unemployment states. We believe there's growth upside in all of these markets. And again, this further explains why our strategy has remained focused on having a dense and a compact and a meaningful franchise in our region versus scattering our franchise across a much broader region. And over the course of our transformation journey, we have set out a number of key milestone objectives, and we've been disciplined in executing against them.

In my opinion, among the most important has been elevating the bank's financial performance from good to top tier. That is the price of independence. And then on to the next chapter. I'll reiterate at this point what I've been saying for some time, and that's with the franchise that we have long desired and worked so hard to build complete, now is the time to demonstrate the organic earnings power of our company.

And the focus of the recently approved 3-year strategic plan is precisely as you see outlined here. 1, demonstrate our organic growth capability. We believe we have the franchise, we believe we have the momentum to do so; 2, shift from capital investment and deployment to capital creation and top-tier financial performance on an organic basis; and 3, maintain disciplined execution and demonstrate earnings power of this franchise.

This is exactly what we've been building for, and the presentations that you will now hear should give you insight into how we intend to accomplish this. And those will begin with President and Chief Operating Officer, Maria Tedesco.

Thank you, John.

7-year veteran of the company. Maria?

Thank you. It's nice to be here with all of you. Good afternoon because it is exactly noon, I think. So let's take a moment to focus on our strategic priorities, which you will hear many of the details in the presentations that follow mine. These priorities are going to guide us as we move forward. Our most immediate focus is to fully integrate the Sandy Spring franchise.

The goal is to realize the full potential of this acquisition operationally, culturally and financially. We are continuing to invest in the infrastructure into risk, workplace processes and capabilities. These investments are designed to support the sustainable scaling over time. By doing so, it will allow us to efficiently manage growth and maintain high standards.

On the heels of a successful integration, our #1 priority is organic growth, and we're going to do that by leveraging this terrific core franchise that we have and deepen relationships and grow market share. We're going to remain focused on relationship-driven expansion and, of course, new customer acquisition. Today, you're going to hear from Sean O'Brien, Head of Consumer and Business Banking; and Dave Ring, Head of Wholesale Banking, on their plans for organic growth.

You'll also hear from Matt Lindeman, our Chief Information Officer, on technology strategy. But I'm going to provide a very high-level insight into this important topic, our technology strategy. We're capitalizing on technology to enhance organic growth and efficiency to exceed our customers' expectations. We want to deliver enhanced services, coupled with smoother experiences for them. Innovation is central to that strategy, whether it's digital payments or process improvements because there is a plethora of options out there for us and particularly around the changing payment environment that we're going to really need to stay on top of and watch what's happening.

As we navigate a crowded landscape of technology options, our fintech partnerships are key in helping us make sense of this increasingly complex marketplace. With so many emerging technologies and vendors, having these trusted partners is absolutely essential to separating sort of the real value from the noise that's out there. So through firms like Mendon, Canopy, FINTOP, BankTech Ventures, we're tapping into deep market intelligence.

Their ongoing research and deal flow and trend analysis gives us visibility into what's coming and where should we actually be paying attention. They keep us plugged into the heart of the fintech ecosystem and helps keep us informed of those changes that could impact our business as well as our clients.

Ultimately, these relationships help us innovate more confidently, and it reduces risk and accelerating our evaluations. So driving meaningful operational efficiency by leveraging fintech partnerships has enabled us to introduce digital capabilities that streamline operations, reduce manual work, enhances both our teammate and our customers' experiences.

For example, we implemented nCino platform a couple of years ago. And it's been a major step forward for our commercial lending operations. It's provided digital end-to-end paperless process and an automated workflow. So what does that do? It makes our teammates work faster and with greater accuracy, while the customers experience a smoother, more transparent process.

Another example is built. It's a real game changer for the CRA and our construction lending space. That platform accelerates the draw and spending processes by eliminating what you normally see are these siloed systems and reducing manual error-prone work. With great transparency, faster turnaround times and improved collaboration across internal teams and external partners, we're really delivering a much better customer experience, real value, while reducing operational risk.

These capabilities represent transformative shifts in how we operate our business today. And by curating the right fintech partners, we are creating a more agile and modern banking experience for both our teams and our clients. To that end, we are looking ahead to the changing payment landscape and considering our strategies.

As many of you know, the Genius Act establishes a clear regulatory framework for emerging digital asset capabilities, and it creates those sort of guardrails that banks need in order to safely and responsibly participate in the new payment rails, tokenized deposits or stablecoin transactions.

It opens the door for secure innovation, while maintaining strong compliance. AUB is actively reviewing, which of these digital asset capabilities really make sense for us, including 1 or 2 tokenized deposit options that we have and the ability, obviously, to send and receive stablecoin payments. It's going to be critical for us in the future.

As our customer value proposition is at really the heart of our success, at the end of the day, our job is to create easier, better experiences for our clients so that they're choosing us all the time over the competition. And we believe the winning formula is about being authentically human, but having a digital-enabled experience.

So what do we mean by that? It means bringing human touch to the relationship and making a genuine and knowledgeable bankers that care about their clients each and every day. But it's also about arming our customers with the right digital tools in this fast-paced world. It's not lost on us that some of the people choose community banks because they provide that lovely human element.

And then others choose the bigger banks because they believe, well, I can get more technology and products if I get serviced by the larger banks. Well, we proudly sit right between these 2. We're fully capable of providing those great digital experiences and specialized product solutions, but without sacrificing the people side, you can talk to a human and the individuals you know that you can count on at AUB.

The enabler behind the value proposition is our culture. I've been in banking for a few years, but I can sincerely say that AUB is very unique, and we do have a special culture. At the center of that is our core values: caring, courageous, committed. Caring comes alive every day with our teammates, who demonstrate true caring for our customers and each other and going that extra mile if we need it.

Courageous is really about owning the opportunities, and we will never be perfect. We know that. We strive every day to be better and better and better, but we must be humble enough to own any mistakes that we make, learn from them and seek improvements and efficiencies in all that we do. And then there's committed. None of the stuff that we're talking about matters, if we don't bring the necessary drive and the accountability in doing what's right for all of our stakeholders, including you, our investors.

And finally, we're proud to be recognized repeatedly as a great place to work and for the great work we do for our clients every single day. On the last point, delivering against our value proposition requires relentless focus on the client experience. This is really at the heart of where we find our success, and we're still maturing in that regard. We're shifting from a more sort of reactive approach to being proactive and thinking ahead, what is it going to take to make sure our delivery of a service or product is seamless.

We're designing new experiences by anticipating resolving customer friction points even before they occur versus waiting for them to happen and then try to fix it. And for our existing experiences, we're leaning into insights that our own teammates bring us and tell us ways we can improve.

And we're going to leverage data in new ways to help us identify and drive prioritization of those things that really are going to matter the most. At the end of the day, making banking easier for our customers will lead to the behaviors we're all looking for.

Greater retention, advocacy that leads to even more business through deeper relationships and referrals. And as we dive a bit into the strategies of our business units, I want to just provide a little context. We are largely organized around 2 primary lines of business, surrounded by each of our back office functions largely structured to enable their success. They are our priority. The core of our Wholesale division is our commercial banking team with additional specialty business lines that include capital markets and wealth management.

And our consumer and business banking team is built around more than 170 retail branches, and it includes our retail business, home loans, business banking and our Raymond James brokerage business. So with that, I'll ask our next speaker, David Ring, to come up and talk about Wholesale Banking and Wealth. Thank you, David.

Thank you, Maria. It's great to see so many familiar faces here, and thank you for the opportunity to provide an overview and outlook for the wholesale and wealth groups. I'm David Ring, and I joined Atlantic Union Bank just over 8 years ago, when we were a smaller bank, mainly serving the local markets in Central Virginia and Western Virginia.

Over the years, we've invested in the business to generate more diverse revenue streams and to seize opportunities as the market expanded across multiple states. We've continued to operate as a local bank, while positioning ourselves as the alternative to the largest banks in our region. You can see on the slide here how diversified we have become and how we've segmented.

We've assembled a strong team of commercial and industrial bankers and commercial real estate bankers with specialty teams that support and independently drive business as well. Our business and the wholesale organization are continually evolving. For example, this slide looks a lot different than it did 7 years ago.

7 years ago, we had 7 regions in Virginia with generalist bankers managing everything, making scaling very difficult and processes in each area very inconsistent. We've since segmented the group, centralized some of the functions and added a lot of support. Our teams help companies manage their working capital, reduce interest expenses, provide valuable ideas, valuable insights, capital and help clients meet their business and personal goals.

You see wealth in the far end there that's very connected to the wholesale bank. We prospect about 8,750 companies across our enterprise with new clients making up 30% to 40% of production each quarter. We supplement the bankers' calling efforts with a cold calling team, so we have continuous market presence. Bankers follow a relationship planning model, forming tailored teams that adapt as client needs change.

Basic teams include an RM, credit partner and treasury management officer, while transitioning or growing firms get a specialized larger team assigned to them. We believe this approach is a thoughtful process and a differentiator in our market. This is reinforced by a Greenwich -- recent Greenwich -- now they're called Coalition Greenwich survey that said 3/4 of our clients in the $10 million to $500 million revenue segment gave our bankers a rating of 5 out of 5, which is significantly higher than the 4 major national banks that participate in our market.

And 91% of our clients in this survey gave us either above average or excellent ratings in overall satisfaction. I'd normally want to drop the mic right there because I'm so proud of the team. But the major drivers of this rating are responses to the following dimensions: likelihood to recommend, ease of doing business, quality of customer service, a bank you could trust and a bank that values long-term relationships, and that's who we are.

Another area where we're keenly focused is to take advantage of the recent Sandy Spring Bank acquisition. We believe we've set ourselves up well to be successful there. We've maintained continuity retaining the commercial leadership team and most of the RMs. They have a deep knowledge of the market, strong local relationships and give us a large commercial presence we never had before.

If you competed with us in that market, you could see we had gaps and weaknesses, and this really cements our participation in the market up there. This helps us avoid the disruption and customer attrition. All team members have already been trained on our processes, risk appetite and our procedures and are building significant pipelines. We've had early success bringing our working capital management capabilities, insights, including providing more treasury -- a larger treasury management platform, expanded capital markets offerings and specialty subject matter expertise.

The vast majority of Sandy Spring clients would have fallen within our core commercial segment and at the lower end of the middle market. As we move upmarket, we anticipate considerable untapped opportunities for loans and fee income generation.

In addition to Maryland, North Carolina is an emerging market for us as well. You may be aware, we have had a presence in North Carolina for about 9 years with a very successful Charlotte real estate office. Plus we have bankers covering the Triad Triangle markets, since our acquisition of American National Bank 19 months ago.

And we've added a Wilmington office serving the fast-growing markets in Pender, New Hanover and Brunswick counties. While we have 20 producing bankers already executing and winning in North Carolina, we plan to fill in some gaps by hiring several middle market bankers and the wealth management staff to complement the existing teammates that are already there.

As most of you know, we have had 3 main markets, and Virginia is where we've had the strongest presence and have successfully competed for business against local banks and large banks for several years. If you were to look at our book of business and how it's grown, it's the model for what we're going to do in our newer markets, leveraging our people, products and strong brand. We continue to have opportunities to acquire new relationships in Virginia across all segments.

We cover local and smaller companies, and we cover large companies, too. And we've had opportunities to add a number of lead bank relationships across Virginia. We have a designated commercial, middle market and corporate banking teams that are having success, taking away clients from large banks and small banks, again, leveraging our people, our brand and our strong collection of products and services.

Sometimes it starts with traditional loans, but more and more, we're leading with our treasury management platform, equipment finance capabilities and sometimes we even get in the company's foreign exchange rotation to start a relationship. Local real estate lending remains a fundamental strength for Atlantic Union Bank rooted in our deep history as a community bank. This expertise extends to the community banks we have acquired, reinforcing a consistent approach to real estate lending across our organization.

In recent years, we have broadened our reach beyond traditional community lending. Our team has established robust partnerships with larger institutional developers who bring significant financial resources and liquidity to the table. These relationships have enabled us to partner in larger, more complex transactions, further diversifying and strengthening our real estate lending portfolio.

Certainty of execution and a consistent market approach is a differentiator in this space. As our Chief Credit Officer says, we never go pencils down, and we don't run hot and cold in all the product types. Plus, our in-house construction management team is often cited as a tiebreaker in winning deals. Our real estate syndication capability serves as a significant strength within our organization.

This approach allows us to support larger transactions by collaborating with other banks, effectively distributing exposure and minimizing our overall risk. As a result, we're able to continue growing these relationships, while maintaining prudent risk management across our portfolio. Through syndication, we reinforce our ability to serve clients with complex financial needs, ensuring sustained partnerships and business expansion.

We are well positioned to continue increasing syndication revenue, particularly in the Greater Washington, Maryland region. Our recent expansion into this area is strengthened by the fact that Sandy Spring did not previously offer syndication capabilities. However, the bankers, who joined us from Sandy Spring bring with them a wealth of established client relationships.

These relationships are primed to benefit from our syndication offering, creating new opportunities for growth and further solidifying our presence in this market. This is true for our interest rate management capabilities as well. Other opportunities for us include some perimeter expansion, bridge to agency deals, some student housing. I'm looking at Mike Clark right there because we do some with him and low-income housing tax credits.

Specialization has a positive impact on client acquisition and relationship management, and it remains a significant focus for us -- strategic focus for us. Our experience clearly demonstrates that focusing on specialized industry segments significantly increases our success in winning new clients. By concentrating our efforts and resources, we're able to streamline the sales process, making it more efficient and effective.

This targeted approach also strengthens our ability to retain key relationships, ensuring long-term partnerships and sustained growth. Specialty bankers play a critical role in this strategy by offering deep industry knowledge, providing valuable insights during client engagements. Their expertise enables us to better understand client needs, tailor solutions and deliver superior service across various markets.

We remain dedicated to investing further in established specialty lines. such as asset-based lending and equipment finance, which are already in place. These areas have already demonstrated considerable success for us and continue to present significant opportunities for growth. At the same time, we're actively developing new specialty areas guided by trends within our own portfolio and evolving market opportunities.

The specialties listed on the slide here represent those currently in development as well as sectors, where we believe there is substantial potential for future expansion and value creation. We currently operate 4 specialty banking businesses, government contractor banking, asset-based lending, equipment finance and a small corporate banking group.

Among these, equipment finance has shown remarkable growth, launched just before the onset of COVID, 6 years ago, it has progressed to become the 29th largest bank-owned equipment finance company in the United States. In addition to these specialty lines, our teams benefit from the guidance of in-house subject matter experts, who help us focus on specific market segments.

These segments include medical and veterinary and legal practices, shipbuilding and repair as well as cash-centric businesses such as title companies. By leveraging deep expertise in these areas, we have seen a notable increase in client win rates and in some cases, a reduction in the sales cycle.

Looking ahead, our strategy involves adding more specialty lines. Typically, we begin by starting small, developing some expertise and then expanding over time. Areas such as senior living, dealer finance, financial sponsor coverage, debt capital markets have reached a level in-house, where we believe we've accumulated significant experience and have achieved the necessary scale to support a specialist approach.

With this foundation, we plan to formalize our strategy and incorporate these sectors into a list of specialty businesses. Additionally, we're committed -- you could see right towards the bottom. Additionally, we're committed to a cross-enterprise initiative aimed at building a competitive payments platform. This platform is designed to meet the demands for faster payments and provide access to new payment rails, enhancing our ability to serve the evolving client need.

Our Capital Markets business has positively influenced our financial results by increasing fee-based revenue. The close alignment and delivery to the client of our capital markets services and treasury management distinguishes us from other banks. These groups maintain close collaboration by relationship planning with bankers and actively reviewing banker pipelines and prospect list to identify new business potential.

In other words, the relationship manager doesn't have to do it all themselves. They have these specialties huddled around clients to make sure we're servicing their needs. Our Capital Markets business is comprised of interest rate derivatives, foreign exchange and loan syndications. It's built to expand our fee capabilities that allow us to serve more sophisticated clients, improve returns and reduce balance sheet dependency.

We already have had early success generating new capital markets income from both markets in Maryland and North Carolina. We have 2 initiatives to enhance our services. The first nearly complete is an enhanced full-service foreign exchange platform, where clients will be able to easily purchase foreign exchange on their own or they'll be able to speak to somebody.

The other initiative is to set up an intermediary that will place real estate debt with third parties such as insurance companies and pension funds for a fee. We've partnered with a third party to provide this service for several years now, again, that toe in the water approach. And we believe we can improve our execution and profitability by taking this in-house at this point.

We've invested significantly in treasury management through new products, staff and a specialized call center. Our TM platform is an important component for building a strong commercial and industrial business and has delivered annual growth of over 20% in recent years. Our plan calls for continued focus on modernizing and monetizing our payments platform by offering legacy and new payment rails to meet the changing demand of the client base.

The new rails will be based on speed, security and digital money movement. Additionally, we provide advanced solutions designed to streamline and automate our clients' back-office workflows and payment operations. These include integrated payables and integrated receivables as well as an effort to provide API-based services.

Over the next 5 years, experts expect API-driven banking will unlock revenue streams, enhance client engagement and position banks as solution providers versus service providers. We want clients to be able to operate our solutions within their own systems versus toggling into ours and going back to theirs.

Banks not focused on doing this may be left behind. We're preparing to launch real-time payments and FedNow at this point and are spending more time looking at other payment methodologies such as stablecoin and tokenized deposits.

Okay. So this is a first slide of 2 wealth slides. This is how our wealth group is set up. What's interesting about wealth is it's aligned with wholesale banking. It's unusual to do that, but we found that the wholesale bank is a great source, a great feeder source into the wealth business. And putting them at the same table, there are brothers and sisters, they're not our cousins and they're third uncle down the line.

So we put them all together, and it works so much better as they're orchestrating the client relationship plan. So it's comprised of an asset management group, very sophisticated trust and estate services, wealth banking, which would be loans and deposits to wealthy people, as we called certified rich people, CRPs. And we have registered investment advisers, 2 firms.

If you remember, we had a couple of registered investment advisers. These were part of Sandy Spring, and we are very happy that they're part of our team today. And they are used to working in a bank structure, which is fantastic. 1 of the 2 actually has been in a bank structure for 18 years. So they're very used to being managed and working with a bank structure, which is terrific.

The Wealth Management group has become a really substantial source of fee income for us now. This progress is supported by an integration of talented professionals. So as we've been building the group, we've had folks from Sandy Spring and American National Wealth Groups join us as well as developing a whole bunch of new products within the Wealth group.

Collectively, these efforts are strengthening our position and driving continued growth in our Wealth segment. We've successfully converted Atlantic Union Bank and American National Bank clients into a new, highly sophisticated wealth management platform. This upgrade offers very sophisticated client portal, enhancing the client experience while simultaneously increasing our operating efficiency in our back office.

The transition process was executed smoothly in October, and we are planning to convert the Sandy Spring clients to this platform in 2026. In the past few years, we have broadened our range of services by introducing new business lines and products within wealth. These include institutional and municipal services, a capability to offer 401(k) plans and the short-term money management product we call Virginia Mint, which allows municipalities to invest excess cash flows with us instead of the local government funds.

All these offerings have been well received, and our clients are already contributing to the growth of fee income in '25. Now this concludes my comments today. I hope you can see we have evolved into a full-service commercial bank and a meaningful -- and we've developed a meaningful growing wealth business.

We're excited about the next few years, and what we can do to continue to add value. I think this differentiates our bank from the competition and further enhances our client offerings. So looking ahead, we remain committed to operational excellence and expanding our capabilities to meet the evolving client needs.

By investing in technology, recruiting top talent and refining our product suite, we're confident in our ability to deliver superior service and maintain our competitive edge in this marketplace. Thank you for your interest as well as listening to us and how we're pursuing new opportunities, driving lasting growth for you, our shareholders, our investors and our clients.

Thank you very much. And let me turn this over to Shawn O'Brien, Head of Consumer and Business Banking.

All right. Well, thank you so much, Dave. Just so you know in the run through this morning, Dave asked what I did here. So he's really being nice now, but we've worked together for 7 years now at the bank. Dave and I, we have been -- had a great partnership running the 2 lines of business.

As he said, I run consumer and business banking. And I want to walk you through a little bit what that looks like because it is a big diverse group that handles a lot of different areas of the bank. So we have business banking in our world, which is handling any businesses with up to $10 million in annual revenue.

We have the consumer lending group. And so that is mortgage, that's things like home equity, all our auto lending and our unsecured lending is in the consumer lending group. And then we have our wealth management team that is a partnership with Raymond James. And so that is financial advisers for our -- primarily our branches, our mass affluent customers in our branches, and that is a growing business.

And then we have a lot of support teams. We have community impact, which is our CRA team. We have our call center for the bank, which handles pretty much all of the incoming customer calls, except for the new call center Dave has opened up. We have consumer administration, which is operations, things like our regional operations manager. Also, we have a call center for our teammates within that group.

And then we have consumer banking solutions and sales. That's things like product management, digital strategy, a lot of our training for the organization, ATM and card sits there as well as our sales and service process. And so a large group, as you can see, really all around the branch network.

And you heard Maria talk a little bit about focusing on the customer, making sure that it's always about the human touch. And that is what we believe in my line of business as well. So everything really centers on our branch network. And today, that's 3 regions. It's 13 markets. We have 178 branches and 327 ATMs.

And so about half of those ATMs sit at our branches. The other half are through a partnership with NCR, primarily, where it is branded in large retailers and kind of expands our presence in many of our markets. We have 1,400 teammates, so a rapidly growing team. And at the end of the day, the whole group, primarily the role here is to make sure that we provide low-cost, high-quality deposits for the bank.

And you can see that reflected in the balance sheet, $18 billion in deposit balances. We have $5.3 billion in loans. That's mortgages, home equity, business banking loans primarily make up that $5.3 billion. We have now 581,000 customers. So that number has grown a lot in my time here. And we have $54 million in fee income through the third quarter, so a large fee income generator as well.

Raymond James has $2.8 billion, that Raymond James partnership, $2.8 billion in assets under management. I want to walk you through a little bit of our strategy, both some of the things we've accomplished and the things that we are currently working on. Clearly, the focus here for the last couple of years for us has been the acquisitions, right? So when you think about American National and Sandy Spring, that has been a big part of our time, whether that's training, process and procedure work, the culture piece of bringing people on board, that has been the primary focus for my organization.

But at the same time, we've also done a lot of development for our process procedures tools. One of those is Q2. That is our new online and mobile banking tool. We've replaced our entire online and mobile banking suite of products. We did have a system for commercial and business, and we had a system for consumer banking.

We combine those 2 under Q2. It's a great modern platform, has a great mobile app and is a great foundation for growth for us. We've also done a lot in the CRM space. We've started using Salesforce here in the last several years. Salesforce as a tool started out as things like referrals, things like customer needs analysis.

And now we've added a lot of functionality there. It has become kind of the primary place for case management as well for the organization. And so that means if you're a frontline banker and you cannot do something yourself, you can't fix something or service something yourself, you do the case through Salesforce. And it has a really nice capability of sending things to operations, fraud, risk and telling you where it is in the process. It's a big step forward for us as far as automation.

And we continue to add function and features to what our customers see. So we've added Roundup savings that is something that American National have, and that's growing very quickly. We have a treasury management bundled product now for our business customers, for our smaller businesses. And we're relying on things like Refer a Friend and Solutions Banking, which is our Bank at Work program to organically grow customers.

Now you can see we have plans for the future. Lots of plans actually. I'll talk more about them here in a minute. But for 1, for sure that we are focusing on is business banking small lending, small dollar lending. So when you look at nCino, which is a tool that a lot of our RMs use today, we are working on adding a suite of products to that, that allow very fast, efficient and easy lending to small businesses.

And so that will really expand both the businesses we go after and the bankers who can do that lending. We also are going to replace our online origination, that's account opening and our in-branch origination account opening. That's what we're looking to do. We're looking at the right vendor for that. But that will do a lot of things. It will speed up both the work that a banker does and allow us to do more online origination.

I want to talk more about the North Carolina expansion, but I'll do that here in a minute. And then as Maria has mentioned, customer experience, customer focus is kind of how you drive business in our market today in my line of business. And having Q2 as a foundation really helps us with that.

And so to give you a feel for that, there's a marketplace in Q2 and an accelerator that -- where they partner with fintechs, and you can use those fintechs to do anything from a tool for the youth market. You could add services around card activation and chargebacks. You can do charitable giving. You can do goal-based savings. There's lots of functionality that we can add.

So I think that allows us to move into new segments and also keep up with some of the fintech banks that are out there today. All right. So this slide really tells the story of the 2 things that have remained a priority for me and my line of business, since I joined the bank. 1 is efficiency.

And so for sure, we have worked really hard to make sure that our branch network is efficient in 2019, early in my tenure, we had 15 branches, and those branches had $79 million in customer deposits per branch. We work to bring that number down. We optimized the branch network. We looked at places that were underperforming and didn't have a lot of transactions. And you can see we grew that over time.

And then you add in a couple of acquisitions where we are fortunate enough to have overlap -- so branches sometimes are right across the street from each other, and we continue to grow that average balance per branch. So we're up to $167 million in customer deposits per branch and 178 branches. We're very happy with that.

That looks a lot like a large bank organization. And so at the same time, we do have a little bit of growth planned here, and I'll talk about that in a minute. We are going to add a few branches in North Carolina, but we will continue to focus on efficiency here. That is kind of a primary goal. But the other side of that is making sure that we continue to be known for our customer service.

And that is something that we've had a long history of, and we certainly didn't want to lose it as we became more efficient. And I think we can say we have not. I think we have done a really good job in that space. Our attrition -- our customer attrition percentage is some of the lowest of any of our peer group. So we continue to keep our customers for longer than most other banks. And when it comes to things like J.D. Power, we've won that several times for best retail bank. We're almost always in the top 3 each year from a J.D. Power perspective. And so I think we've balanced that pretty well.

All right. Talking about our strategic objectives. Organic growth, you've heard a lot about that today. Core deposits, that will always be a primary goal for us. We always have to maintain strong deposits for the bank, lending and lending growth, making sure that we have a good source of fee income and continue to be a fee income driver, building for scale and customer engagement.

But the 3 that I want to kind of highlight for all of you today are organic customer growth. And a big part of that is the acquisition we just completed and the integration we just completed and how do we really leverage that. And then new-to-bank customers, how do we bring in more new-to-bank customers in my line of business.

On the lending side, I talked about a new tool for business lending. That will help us grow. HELOC has been a good business, and that is something that we should continue to grow. And then SBA lending is something we're relatively new at, but we see a lot of promise with. And then on the customer journey side, if -- when we get to the point where we've upgraded online origination, in-branch origination and continue to expand our mobile and banking capabilities, we will be in a very good space.

All right. So how do we do it? How do we deliver on the great opportunity we got with Sandy Spring. We have an excellent teammate base in that market, and we have got fantastic customers. There's tons of prospects in the market. And so what we bring is kind of a clear separation of operation and sales and service. And so we have what we call ROMs, regional operations managers. For each market, there is a ROM, who handles all of the operational and regulatory issues a branch may have.

And then the market leader, their role is all about sales and service. And so they are there to make sure that our service is excellent, that our service playbook is being followed and that we see really good sales. And when we say sales, that means deepening customer relationships, that means organic growth of new customers. That will really be the goal there.

And we'll know we've been successful there when those metrics for those branches we've acquired start to look like the metrics that we see in the rest of our legacy footprint. So that's what we'll be looking for is that our model has driven those increases in metrics. And we can't just grow in the Sandy Spring footprint. We have to also grow in our legacy footprint as well.

And so we have been very, very focused as an organization on deposit growth as most banks have been. And so we are also going to make sure that we don't fully pivot, but pivot a little bit to a focus on operating accounts, on checking account origination, new customer origination. And so that's something that we'll do with promotional offers. We will double down on the referral friend piece that we're using.

Our solutions banking team will work really hard to bring in more business. And then online origination is something that we can expand and we can expect to grow. I've talked a little about lending to really see success there in my world, we will add to our mortgage team. We're going to add originators, both in footprint and out of footprint to grow -- to continue to grow that business.

For those of you who don't know, we inherited a very nice mortgage business from Sandy Spring. And so combined with our legacy business, that is a real growth opportunity for us. But that won't be the primary driver, obviously, of loans for our organization, but it's still a good business. And then we will have a good chance to grow home equity, both online and in branch just because there is so much opportunity right now in home equity lending.

And then on the business side, I think the biggest opportunity for us, the one that I guess I would take away from this is when we bring in new tools that allow us to originate small business loans easily, quickly, get really, really fast approvals and fast closings, that means we now have 178 branch managers, who essentially become business lenders.

And so it takes a relatively small team of business bankers and expands them 3 or 4x and gives us the chance to much more quickly grow our business banking portfolio. I've already talked a lot about technology. You can tell that we spend a lot of time on it with the mobile and online banking with Salesforce.

We've also completely replaced our call center technology. So 8x8 has been something we've had in place for a couple of years. That's all the telephony that is used in the call center. That is something that has already been completed. And then I've talked about the fact that we're going to add a new origination tool. We're going to add new lending capabilities and then AI.

So AI in my space is largely right now around call center opportunities. And so if you think of things like quality control, think of things like training of new agents and you think of things like chat, those are all very much in the AI space. We haven't made any decisions there yet, but that is certainly something we're looking at about what we can do to become more efficient and add value in the call center space.

You've heard a little about North Carolina today. It is a big opportunity for us. I'd say it's still not as big as making sure that our integrations are all complete and that we've grown there the way we want to, but it's something we are focused on. To tell you kind of where we came from, where we're headed, we had some legacy branches here on the coast of North Carolina. And then we've also had some in the Piedmont Triad that we've gotten recently through a recent acquisition.

And so we have 11 branches today in North Carolina. And those are kind of spread out. You can see geographically, we're on the coast and we're on the Piedmont Triad. There's really nothing in the middle. And so this gives us the opportunity. Raleigh is one of the fastest-growing markets in the country. Wilmington is the same. It helps us kind of start to fill in the state a little bit. And we were very careful as we look at this to make sure that as we went through it, we thought we would get enough scale in these markets.

That's why we picked 2 is because we thought we'd get enough scale in these markets to compete. And so we are adding 10 branches. We've already are in some form of contract or some form of negotiation on all 10 of those branches. Some are new build, some are existing buildings. But over the next 3 years, we will build those out. We will have 86 ATMs here relatively shortly with a partnership with NCR.

And so that, again, will add to our brand there. It's in major retailers throughout North Carolina. And then we have the support of wholesale bankers, mortgage bankers, business bankers, both sides of the wealth teams, the financial advisers and the trust folks, all will be supporting these teams. So we think there's a really good plan for growth in these markets.

I'm not going to talk a lot about SBA. SBA is something that was relatively new to Atlantic Union, and it was also relatively new to Sandy Spring. But our program had been the legacy program, I should say, had been mostly focused just in footprint, whereas Sandy Spring was working on a program that was multistate.

So we've combined those 2 capabilities. And so now we have an SBA program that is both in footprint and multistate. It's a great opportunity for fee income. It's a great opportunity for growth, but it is something that is still a work in progress.

I'm not going to talk too much about AUFC, the financial consultant business other than to say that the opportunity is up in Maryland. And so today, there are no financial advisers supporting those branches. And so we will add capacity and capability up there, both for fee income and for kind of depth of wallet of our customers in those markets.

And last but not least, we are working a lot in building for scale. We spent a lot of time and energy thinking about our technology stack. Matt is going to talk a lot more about that. But we really want to make sure, first and foremost, that we consolidate systems. I think that's a really important thing for my teams. Generally, my teams don't have super long tenures. And so they need to learn the systems quickly. Our customers need to be able to understand the systems very quickly. So making sure that we have as few systems as possible to do as many things is kind of the goal.

And that's why things like Q2, where we take 1 business banking system and 1 consumer system and combine them or Salesforce, which has now started to take a lot of different systems roles, that is the goal here so that we have as few systems as possible to interact with as little to train on as possible, and I think we're making a lot of progress on that.

So that's a little bit about my line of business. I will next invite Matt Linderman to join us. And maybe I'll even change it for him and Chief Information Officer for -- of course, Atlantic Union Bank...

Appreciate it. Good afternoon. Thank you for the opportunity to talk a little bit about the technology portion of our corporate strategy, move over here. I joined Atlantic Union Bank approximately 3 years ago, 3 years ago in February. I'm extremely proud of a lot of the accomplishments we've made. I would say I'm equally excited about the agenda ahead, which is really what we're here to talk about today.

We know that technology is critical to the business. We aim to be the trusted choice to deliver that technology to our business partners and ultimately to our customers. So since we last talked, we have made some changes. So we've evolved the technology organization. We've brought together what was a digital organization and an information technology organization into a single organization, really getting the efficiency and synergy of bringing all of technology together.

On this slide, you'll see a representation of the key areas that are in the scope of that technology organization. We've also focused on a really clear vision. I touched on it a bit ago, but it's really about this vision of we want to be the trusted choice internally to bring solutions to the business that meet or exceed their expectations and our customers' expectations. And you see the word delight there. We aim that very intentionally. That is our goal.

In the last road map, we laid out a number of areas, goals and objectives that we were aiming for. And I'm happy to report we've made really good progress on those. I'll highlight a couple, I would say, the most notable successes on those. #1, we did a very robust industry evaluation and selection, which led to the implementation of what you've heard as Q2, replacing all of our online and mobile digital channels.

We've created a much more modern and seamless experience, particularly for consumers that spread that line between consumer and commercial. As you've heard in both -- in all of Maria and Dave and Sean's presentations, we've delivered on a number of modernization initiatives. You've heard about Salesforce, you've heard about nCino. There's multiple other examples of that where we've moved to a much more modernized technology platform.

Finally, over this period, we had 2 of the major acquisitions, as you're well aware of, and the system conversions of those went very, very well. A great indication I use that is after the Sandy Spring conversion, we were back to BAU business-as-usual call volumes in our care centers within 6 business days.

So very, very good system conversions in both of those. As I look forward, we've refreshed those objectives, and you'll see those here. In no particular order, I'll touch base on those very quickly. So first is leading with data. So we continue to focus on leveraging high-quality data internal to our organization. We know that, that's a competitive differentiator. We actually know that, that's going to become increasingly important as we think about the rise of artificial intelligence. The data underneath that is critically important.

Soundness. So we continue to be stewards of data security and data quality internal to the company. We know that's critical. That will always be a priority for us. Build or buy. So as we grow, we expect that we're going to see some shift from where we're at today, where we primarily buy vendor solutions, we will see a shift to where we start to build some of those solutions where it's competitive. And what I mean by that would be -- if we find that the vendor product doesn't offer the capability that we think is competitive or if we think there's a time-to-market play, we may choose to build some of that capability versus buy it.

Leveraging and elevating customer experience. With the new modernized platforms you've heard about today, we want to continue to leverage those now to bring up the customer experience. So if you think about Q2, we moved to that platform. Now it's about how do we continue to leverage that. On the modernized front, you heard a lot today from Maria, from Shawn, from Dave, there are still a number of capability opportunities that we know tech needs to be brought to bear on. I think we're very well aligned on those, and it is our goal to continue to drive modernization into those areas.

Lastly, the topic of AI. So it's everywhere. We see and embrace the power and importance of AI here at Atlantic Union Bank. I continue to say we're going to pursue it aggressively, but not recklessly. I think that's very intentional and important. We'll talk more about that shortly. But now I'll dive a little deeper into a few of those areas. We'll start with leading with data.

As I mentioned, we continue to see data as a competitive differentiator for us. We have spent a lot of time and energy really building our data environment. We will continue to do that to aim to be a very strong data-driven organization, really putting data into the facets of all of our business areas. Our goal is to ensure that the business has the data they need with high quality when and how they need it, and we'll continue to do that.

As I mentioned, as we continue to see AI rise, the data underneath it, the quality of that data is critically important. So we are continuing to focus on bolstering our data governance and data quality programs and processes to make sure that we're ready for that journey. When we look at AI, we're taking a phased approach to AI.

We've started by really looking internally and defining the right governance structures and processes around AI. We know it's a powerful technology. We have to make sure we have the right policy and probably more importantly, education and fluency across our teammates of how to use AI and how to not use AI. We're really in what I consider a test-and-learn phase now around AI, where we are pursuing AI use cases that I will call lower risk. These are typically going to be internally facing teammate productivity use cases.

Examples I would give are -- how do we put AI in the hands of our teammates for daily activities to improve their productivity. It might be drafting e-mails. It might be summarizing documents. We're leveraging Microsoft Copilot to provide that capability out to our teammates in a controlled and governed manner.

We're also looking at things like code development. So we leverage a product called [ Claud ] Code that we are now starting to use in our development communities. We're seeing roughly a 10x increase in productivity around coding exercise. We've actually sort of piloted against an application that was previously built without it and then leveraged [ Claud ] Code, and we saw about a 10x increase, which is excellent.

As we gain more learning in these safer use cases, we're going to start to expand that out and think about more business and customer use cases. Probably one of the front ones that's top of mind is exactly what Shawn mentioned around the care center. We think there's some really good application of AI into the care center, and that will be one of our fast followers, we expect.

I think it's worth noting we are treating deployments of AI much similar to as we think about deployment of other technology. There's this notion of what's the value, what's the cost, what's the risk. So we are taking a measured approach to make sure that we are getting the value out of our AI deployments, which I think is important.

On this slide, you'll see a reflection of -- as I mentioned, we're focused on operational efficiency. There are multiple categories that I fully expect us to examine from an AI standpoint. I know that those will happen over time. But I think it was worth calling out there are a number of areas that we know will become important as we think about AI, and we expect to likely dabble into all of those as we move forward.

I talked a little bit about the progression of AI. What you'll see here is reflective of pretty much what I said, which is we're really in this near-term, intermediate term, which is a lot of the building the internal readiness for AI. It's about deploying those lower-risk use cases, preparing for that longer term where we see some of those potentially more customer-facing type use cases to follow.

Okay. As I mentioned, we're just -- we're formalizing that governance and building fluency. I think you'll continue to see more and more of these targeted AI solutions as we move forward. I'm going to talk a little bit about elevate customer experience. As we heard in Shawn's presentation, we did spend the last year migrating over from multiple digital solutions to our target state platform of Q2.

Very excited about that. Now it's about how do we continue to build on that platform, leveraging the marketplace, which you heard from Shawn, how do we continue to build the customer experience and set of capabilities now that we're on to that target state platform. So I think you'll continue to see us increase our focus on that, building that out as we move, starting to look at things like adoption and utilization, which we fully expect to increase as we build out more and more capabilities there.

The other piece I wanted to call out around customer experience is this notion of availability and quality. It's really critical that we ensure that the solutions we put out there are up and available when our customers need them. To that end, we are increasing our focus on how we ensure the availability of those systems. It's our goal to ensure that we always know first, if there is a technology issue that's impacting our customers. We want to be that early warning and that system whereby we can react quickly to mitigate any customer impact around availability or quality.

To do that, we're building capabilities that really blend technology and teammates to have a really strong early warning system and first line of defense, where we're tracking that customer experience. We know, when it starts to degradate or there are issues, and we react very quickly.

The last topic for today for me is around cybersecurity. Certainly not because it's not important. It is always a top priority to ensure that we remain sound and safe. We continue to put strong focus on cyber security. We all know that cyber security environment is want to rapid change and increase risk, we are ready to rise to meet that threat.

We are ensuring we have the right people, process and technology to allow us to remain well positioned against this. One thing we are doing what we think about security. And what I mean by that is we are trying to be intentional about making sure that security is part of how we do all of technology from the start. So as business develop ideas and start to move into thinking about building technology solutions, we need security engaged so that we're building things right from the start with security as a birth right within it. So we'll continue to do that. We believe that's going to yield great dividends from a security standpoint.

Lastly, security is one that we need to continue to prove and be able to demonstrate our capability and then demonstrate that we're doing the right things. So we're spending a lot of time thinking about how do we improve how we measure and prove out our security posture. We think that's going to ultimately allow us to not only have that posture, but to be able to communicate that and really measure that and ensure we're hitting the right mark and protecting our stakeholders, our customers, all of the above.

So in closing, we're coming off what I would consider some really great wins for the technology organization here. We are leveraging that momentum going forward. As you heard, we've got a lot of exciting things lined up with our business partners to leverage technology. I'm incredibly excited about the role the technology organization is going to play in that. And with that, I will now hand off to Rob Gorman, our Chief Financial Officer.

Well, thank you, Matt. And thanks for everybody being here today. We really appreciate that and those on the line as well. So as Matt said, I'm Rob Gorman, the company's Chief Financial Officer, a position that I've held -- had the pleasure of holding, since Atlantic Union at Atlantic Union for almost 14 years when it was known then as Union Bank and Trust.

As I can tell you that the bank has been transformed, and you've heard that today significantly since then. Let me start off my comments by noting that what I hope you heard throughout the presentations today is that we believe that Atlantic Union is built to differentiate itself from the competition in our markets and is well positioned to generate above-average returns for our shareholders. As noted throughout the day, we believe we have a dense uniquely valuable presence across several attractive markets with significant organic growth potential.

Combined with a strong balance sheet, a conservative credit mindset and ample capital to support our organic growth objectives, we believe that Atlantic Union is primed to generate top-tier financial performance and long-term shareholder value.

As John noted, over the past 8 years, AUB has transformed significantly, evolving from Virginia Community Bank into the #1 regional bank headquartered in the lower Mid-Atlantic based on deposit market share. This was an intentional strategy that was achieved through deliberate organic growth and 4 targeted acquisitions over the past 8 years.

With that now accomplished, we are laser-focused on demonstrating our organic growth capability, shifting away from the deployment of capital for bank acquisitions to capital creation and tangible book value per share growth with the goal of proving out the potential and earnings power of the franchise we have built.

We have created a banking franchise that we believe can't be replicated with strong scarcity value underlying the company's valuation. That said, our executive leadership team understands that we must earn the company's independence by consistently delivering top-tier financial performance and creating shareholder value.

We think Atlantic Union has been a successful growth story. When I started with the Union Bank & Trust, as I said, in 2012, we were a $4 billion organization. Fast forward 13 years, we are now approximately 10x that size in terms of assets, loans and deposits. More recently, since 2017, we have grown loans at a compound annual growth rate of 19%, while deposits have grown at a 21% annual clip through the third quarter of 2025.

Of course, part of that balance sheet growth was driven by the acquisitions of Zenith and AXIS in 2018 and 2019, respectively. and American National and Sandy Spring in 2024 and 2025, respectively. Excluding the impact of these acquisitions on an organic basis, we estimate that loans and deposits each have grown a respectable 7% annually since 2017.

One of the themes that we hope came through today is that now that we are a midsized bank with $37 billion in assets, we believe we have the scale to make the necessary investments to further grow our business lines and to invest in next-generation technology that will allow us to remain competitive.

And as you all know, scale is critically important. It will allow us to invest in the numerous opportunities to grow our business lines by expanding the products and services that our clients and customers want and to enhance our omnichannel capabilities through further investments in digital technology and fintech solutions.

We also have the scale that will allow us to invest in AI and other tools that will make our teammates' jobs easier and make them more effective and efficient as they serve our clients across the franchise. As we've said many times in the past, we are committed to generating top-tier financial performance results on a sustainable basis versus our proxy peer group -- peer banks as measured by adjusted operating return on tangible common equity, adjusted -- adjusted operating return on assets and adjusted operating efficiency ratio.

As you can see on this slide, the company has made significant improvements on each of these metrics since 2022, and we are pleased to note that our adjusted operating return on tangible common equity ratio and our adjusted operating efficiency ratio metrics placed us firmly in the top quartile of our proxy peer group's financial results in 2024 and through the third quarter of 2025.

From a shareholder stewardship and capital management perspective, we remain committed to managing the company's capital resources prudently as the deployment of capital for the enhancement of long-term shareholder value remains one of our highest priorities. Regarding the company's capital management strategy, capital ratio targets are set to maintain the company's designation as a well-capitalized financial institution and ensure that capital levels are commensurate with the company's risk profile, capital stress test projections and strategic plan growth objectives.

At the end of the third quarter of 2025, Atlantic Union Bankshares and Atlantic Union Bank's regulatory capital ratios were comfortably above well-capitalized levels. In addition, on an adjusted basis, we remain well capitalized as of the end of the third quarter, if you include the negative impact of AOCI and held-to-maturity securities unrealized losses in the calculation of those regulatory capital ratios.

As noted earlier, our current capital levels, coupled with our expected ongoing capacity to generate significant levels of internal capital provides us with confidence that we have ample capital available to support our organic growth objectives that we've discussed today.

As noted on this slide, our capital management priorities are first to support organic growth; and second, to seek to maintain a competitive and sustainable common share dividend payout ratio target of between 35% and 45%. In addition, we may deploy excess capital that is generated to repurchase common shares if we believe such capital deployment will create shareholder value. We define excess capital as common equity Tier 1 capital ratio at the holding company level that is greater than 10.5%, which is expected to be achieved in the second quarter of 2026.

Since 2017, the company has returned just under $1.1 billion or 55% of total operating earnings to common shareholders while maintaining strong capital ratio levels, both through common dividend payments totaling approximately $753 million, which has increased at a compound annual growth rate of approximately 7% since 2017.

And we also repurchased shares amounting to $303 million from 2019 through 2022. Atlantic Union is committed to achieving top-tier financial performance and providing our shareholders with above-average returns on their investment regardless of the operating environment.

And as such, we have set our medium-term financial targets to the following: Return on tangible common equity within the range of 19% to 20%, a return on assets in the range of 1.4% to 1.5% and an efficiency ratio of between 46% and 48%. Our financial performance targets are dynamic and are set to be consistently in the top quartile among our proxy peer group, regardless of the operating environment.

As such, we reset these targets periodically to ensure they are reflective of the financial metrics required to achieve top-tier financial performance versus our proxy peer banks in the prevailing economic environment. As noted on this slide, we are maintaining our full year 2025 financial outlook and our financial outlook for the fourth quarter discussed during our third quarter earnings call. At this time, we believe we are on track to meet these near-term expectations.

As noted on the next slide, we've provided our full year 2026 financial outlook for AUB. We currently expect loan balances to end the year between $29 billion and $30 billion, while year-end deposit balances are projected to be between $31.5 billion and $32.5 billion.

On the credit front, the allowance for credit losses to loan balances are projected to remain at current levels in the 115 to 120 basis point range, and that net charge-off ratio is expected to fall between 10 and 15 basis points in 2026. Fully taxable equivalent net interest income for the full year is projected to come in between $1.35 billion and $1.375 billion.

And as a reminder, we consider accretion income resulting from acquired loan interest rate marks as a built-in scheduled accounting tailwind to our GAAP earnings and net interest margin as the accretion income related to the loan interest rate mark is expected to gradually transition to core cash earnings over time as the loans obtained through acquisitions either mature or get renewed at current market rates.

As a result, we are projecting that the full year fully tax equivalent net interest margin will fall in a range between 3.90% and 4% based on the assumption that the Fed Reserve Bank will cut Fed funds rates by 25 basis points in March and June and that term rates will remain stable at current levels.

On a full year basis, noninterest income is expected to be between $220 million and $230 million, while our adjusted operating noninterest expense is estimated to fall in the range of $750 million to $760 million, including the expense impact of our North Carolina investment and other 2026 strategic initiatives, many of which were highlighted today.

Based on these projections, we expect to generate growth in tangible book value per share of between 12% and 15%, produce financial returns that will achieve the medium-term financial targets I just outlined in 2026, which would place us within the top quartile of our proxy peer group and meet our objective of delivering top-tier financial performance for our shareholders.

In summary, we have created the largest regional bank headquartered in the lower Mid-Atlantic, operating in what we believe are some of the most attractive markets in the country. We are well capitalized with a strong balance sheet and conservative credit culture, and we expect to benefit from the significant future capital generation, which will support our organic growth and strategic objectives, and we are committed to achieving top-tier financial metrics on a medium-term basis.

In closing, our executive management team remains focused on leveraging the valuable Atlantic Union Bank franchise to generate sustainable profitable growth and is firmly committed to building long-term value for our shareholders. With that, let me turn the stage back over to John for his closing comments. Thank you, John.

Okay, Rob, thank you very much. I'll make this quick, and then we'll handle questions. It should be evident by now that Atlantic Union Bank has, in fact, been a story of transformation. We have done exactly what we said we would do. We have evolved into what is effectively a small regional bank that still maintains the heart and the soul and the characteristics of a community bank, but it is far more capable.

We are built to be an alternative and a challenger to the larger banks, who dominate these markets while still being flexible enough and responsible enough and flexible, responsive and knowledgeable to compete with the community banks, too. Now this is coming off of a 3-year strategic plan. That is the basis of what you've seen today.

What will Atlantic Union Bank look like in 3 more years? Recall, we've been very clear, very transparent in terms of what we intend to do. It's a pretty simple story. 2028, our vision, maintain a dense and contiguous franchise, expand and diversify our business lines, differentiate the customer value proposition through personal and digital delivery, optimize, digitize, automate operations, soundly manage enterprise risk and preserve the trust, which is strong that we have with our regulatory partners, acquire, retain equipment and empower our talent, optimize the operating leverage and consistently deliver top-tier financial performance.

We may supplement organic growth through strategic opportunities. Traditionally, this has meant whole bank acquisition, but there's been a lot more to it than that. Financial technology investments that we've made in various funds, the RIAs that we invested in and in fact, later divested because they were subscale. So there are other initiatives that we may look into that are not a whole bank acquisition that could make sense from a strategic standpoint that can help us meet our accomplishments.

Said differently, we're still going to look like us. We should have been able to demonstrate reasonable organic growth and put up top-tier financial performance. That's what you should expect to see from Atlantic Union Bank. I hope what you've heard today gives you a degree of confidence that we do have a plan, and we do have the momentum, and we have really reached a critical mass in the company where we can do this. And we are excited for the new year.

I acknowledge that we have had 2 years that have had merger-related expenses in our financials. And I think what you will begin to see in 2026 will be much cleaner numbers demonstrating top-tier financial performance. At that point, we are ready. Rob, I'll ask you to join me. I suspect that you may get a few questions. Bill, do you want to give any guidance for us in terms of fielding questions?

Yes, we'll do questions. I know people do have a time line to try to get out of here. So we'll try to do 1 question at least per person. I know there's a lot of people who want to ask questions. So we'll go as long as we can, but let's just try to.

Thank you, and I will point out, as I mentioned before, essentially the whole executive leadership team is here in the room. And so depending upon the nature of your question, I may call on some of the leaders, who you did not hear from today, but everything is fair game.

So if you have a question, maybe the best way to do it, given the construct of the room, feel simply raise your hand, we'll bring a mic over. Remembering that we are being recorded, so that it's important that we use the microphone, so those who are watching on the recording, be it live or later can hear you. What can we answer for you? David? Sorry, we'll come back to you.

Brian Wilczynski from Morgan Stanley. Thank you for all the great presentations today. John, when you think about the organic growth outlook, clearly, a lot of great work going on at AUB. What are the maybe 2 or 3 areas that you're really most excited about where you're seeing the most momentum today that you think will really show through over the next 12 to 18 months, especially when you think about the 2026 outlook that Rob delivered before?

I think Dave Ring ask you to come join in on this one. The wholesale business, which wholesale by the way, means the commercial businesses. We call it wholesale banking because if I said to you, commercial banking that is but one of many related businesses that are business to business. That has really been arguably the fastest-growing part of the company.

And things like the equipment finance division has been a tremendous success for us. I think about the additional capabilities that we bring to the table for the former Sandy Spring franchise, bring more tools, we're not constrained about liquidity, by capital. What are your thoughts in terms of where do you see the most excitement and opportunity, Dave?

Well, it's hard to answer that like where is the most. But -- so when we look at organic growth opportunities, Virginia is still -- our market share in Virginia is still relatively low and rooms are when you move upmarket. So upmarket capabilities and upmarket opportunities in Virginia.

In Maryland, we do have a great team there over 40 bankers there now. That's leverage we never had before in Maryland. And then when you look in North Carolina, there are very few banks that play the way we play in a state. And so when we're -- we feel like we're very differentiated even though there are a lot of banks like in Charlotte, there are 48 banks competing, for instance.

We feel like we have a place there that we could take share where we don't have any share at all. So there's a lot of open opportunities, where we have very low share. We can move up to the middle market. But then we have the specialty businesses, which we are expanding. And those businesses typically grow faster, shorter sales cycle less -- you don't have to wait 6 years to get an opportunity.

So we feel like those are very good, too. And then the last thing is the fee opportunities we have. We've been growing our fee business as fast, and we always like to look at fees as a complementary income stream to net interest income. So we're really focused on that we see great opportunities there, too.

And Brian, one thing I would add from my perspective. I'm going to "Dave Ring" you said something which was made an impact on me a while back. You've been here 8 years date if you didn't know this joined us from Huntington where he ran middle market.

Dave used to be the regional head for Wachovia from Virginia up to Massachusetts. We go way back. You were commenting on the number of levers we have to pull in the company today. What we saw when you and I got here. You came a year after me.

That's why it's hard to answer that question...

So we don't want to say here's the one thing we're going to do, and it's going to make it all work. That is not us. This is a diversified company with a diversified set of businesses. Base hits are okay. It's a good thing.

So Brian, I think what you'll see is we've got a pretty diverse set of opportunities. No one is going to be just a knock it out of the park kind of thing. But we should be able to grow pretty much all these businesses. We are big enough now to where we do have diversification across the markets, across the business lines.

And Shawn, I don't want to put him on the spot too much, but small business lending, we can do better at that. And the tools that are coming online that should unlock the retail branch network to be more productive there will be helpful, too. No one big thing. David, I think was next.

Dave Sokol with Teton Capital. As you know, we've been a long-term shareholder and a supportive shareholder, I think, in fact, we've purchased shares over the last several months significantly, an observation than a recommendation.

The observation is the presentation is great. You got a great market, you're well positioned in that market. You've got a good team, I believe. But the slide dismissing is shareholder return. If you go the same 2017 until today, even with today's move in the market and your stock, we've underperformed any index out there in banking, S&P, Dow, you name it.

And basically, the return has been the dividend, which over that period has averaged a little under 3%. But without that, it would be a negative return for that period. I think one of the reasons for that is your Board is focusing you all on the wrong metrics.

Top tier performance, to be honest, in the companies I've run, I would never be satisfied being top tier. Being the best would be the target. And the problem with top tier is it moves all over the place. And if you look at last year, by your numbers, you all made the top tier, even though that index substantially outperformed AUB.

And yes, bonuses were enhanced based on "meeting top tier". I think you've got to start getting down to the same digital level of management that you're doing elsewhere in the bank on what you commit to with your shareholders. I think it's correct, you have 34 some elements to caveat any projections you give.

You can't control the world. We get that. But with that, there's no reason at all not to be giving a range of 2026 earnings per share numbers that we can get our mind around and that we can measure management against. Recognizing, let's say, $4, $4.25 a share coming into that, the economy will play a role, an employee will play a role, we get that. But it gives us something to measure against versus today, the numbers, we can't frankly make head or tails out of them, given that there's a lot of accounting adjustments for the mergers that will continue for another period.

So I would really urge that the Board move away from this top tier. I mean I think it's useful, but as an example, tangible book value return, when your tangible book value hasn't moved in 7 or 8 years is kind of a phony metric because if you keep reducing your tangible book, the return on it probably goes up, but that doesn't mean it's good for shareholders.

So I'm just suggesting that more analytics available and transparency I think we'll -- because frankly, the stock should be in the mid-40s. If this slide presentation is what I think it is, which it can reflect the future. But you've got to chase those earnings per share numbers as hard as the customer numbers and all of that.

Okay. There's a lot in there. I appreciate that. I agree with you that the -- well, that's one long question. Let's try to break it apart into pieces. Let me start by saying I absolutely agree that the stock value should be higher than it is, and we've been disappointed about that.

We have seen underperformance in the share price, since the Sandy Spring merger was announced, that was a fact. Specifically, we saw that gap out not so much at the announcement began with a lot of the Washington job cut noise, which has really not been an impact to us, certainly not been a credit event.

And then it further materially gapped out on the liberation day tariff announcement, which has been curious to me because we've not had any meaningful tariff impacts, probably less so than most markets. But nevertheless, David, we are a show-me story. Your point that you're making about taking today's share price and benchmarking back in time, that is a different analysis from a time series of what has the stock done year after year after year over, say, the last 10 years or so, that will paint a different story.

So I think we're a show-me story right now. We do think that we have the fundamentals, which we expect to deliver on that hopefully the market will respond to. I'll start with that point. Rob, anything?

Yes. Certainly, on the guidance that we talked about, we gave a lot of line item type things that kind of get you to -- you have to do the work to get to the EPS. We'll certainly consider that. I think it's a good point, David, that we'll take a look at whether we provide a range, to your point, about EPS expectations in 2026 and in 2027, alongside those top-tier returns that we're talking about. That's a good thought, yes.

Yes. And also regarding the -- I understand your point as well on growth in tangible capital. Remember, this bank has returned just under $1.1 billion of capital to shareholders, 75% of which was done through dividends, since 2017, 30% of which was done through share buybacks, which I think some forget that we did a few years ago.

If we had a much lower dividend or no dividend and did no share buybacks, we would have more capital for sure. I think what you're really pointing to, though, is we have invested capital over the last 2 years, tangible capital and the acquisitions that we've made that is true.

I clearly pointed out, we have invested capital and we have deployed capital to build this franchise. This franchise would not be as powerful from a market and economic standpoint or as profitable, have we not done that. We now move, as I clearly said, from capital investment and capital deployment into capital generation.

We've been very clear on that point. And so I think what you will see now is we'll demonstrate the power of the franchise make the case that it was worth the investment. So I agree with you on that point. I hope that point is clear.

And I would say I have a separate topic, but my comment I wanted to say is I really was encouraged that you added tangible book value per share growth to your list of targets because that's new as this is the third Investor Day, I've been with you, and that's a new line, which shows our commitment to book value growth...

It's exactly what that means, right. Back now to capital generation versus capital deployment.

But my question is just if you could take a step back on the Sandy Spring acquisition. There are a couple of dynamics there that I think is -- that we've been waiting to see. So one is that was a very CRE-heavy bank. And there's a little bit of a story that there's more of a C&I growth opportunity in the Maryland, not DC, the Maryland market.

And so have you hired more C&I lenders? What does that look like? And so can you just talk about kind of the talent shift in that market? And then separately, it's kind of along the same lines, but I'm just going to put in one question. Is Den in North Carolina, if we think about hiring efforts down in North Carolina. So Pinnacle Synovus is on a spree to hire 225 to 250 revenue producers a year, right?

And it's across a bigger geography, but North Carolina and D.C. are in that geography. You've also got other, but you've got towns, [indiscernible] where you've got other banks kind of in those markets, and they're hiring -- they're aggressively hiring and building talent.

So how do you think about growing those markets and adding new talent? And what do you bring versus some of those other peers that are being just as aggressive. And within that, is the cost of new revenue producing, is that cost become higher as you have to bring on really good talent.

So Dave, I'm going to ask you to start. Jay O'Brien is here in the room, too. So Jay, it might be good to have you weigh in. Jay was Chief Banking Officer at Sandy Spring is now a member of our executive leadership team. And Jay leads the Maryland and Greater Washington markets, which mean Northern Virginia as well.

So that -- think of that as the former Sandy Spring franchise. From my perspective, we'll start with Maryland and then we'll move south. Sandy had very good skill we do bring more capabilities and products to the table, be it foreign exchange, equipment finance, ABL, you name it. Jay, what's your perspective in terms of the outlook for C&I and the former Sandy Spring branch?

Yes. And I would say, overall, the merger integration work have gone really, really well. We focused on banker retention as a means for client retentions, easier to maintain clients when you don't disrupt relationships. And that's gone really, really well.

Obviously, we're through a successful conversion everything has gone very well in convenience with clients, who are in the dozens, not thousands. So it allows us to get back to more business as usual. We've had very good success. As Dave mentioned earlier, bringing the fullness and capabilities of the bank to this new client base, particularly in the Maryland markets, in the form of capital markets and treasury services and just having more scale to lend.

Some of the strategies that Sandy Spring had employed premerger in the C&I growth have continued on and are showing good progress as well. So we're quite bullish I'm very encouraged as I travel around the footprint in talking with our market presidents and group leaders. There's not one that doesn't think we can be the dominant player in each of their market areas with a real focus on the commercial side of the house. So we're excited about it.

Sandy was not just a community bank. Sandy was not a small community bank that mostly did real estate. So they had good skill and capability in there.

I would just add, they segmented the business between real estate and C&I before we acquired the bank. So they already were moving in the same direction we've been moving. So the assimilation to the way we do business and all that stuff, was easier to kind of overlay on that group people. So it's made the adoption very much better and much faster. So that's why we think that's going to be very helpful in that space.

And then take on to the Carolinas. There's strong demand for commercial bankers everywhere. But yes, you specifically referenced Pinnacle, we would mostly see them in the Carolinas in our footprint.

It's an expensive place to hire right now. We -- but we had a good number of people in place already. So we feel like we have kind of that, call it, $1 million to $75 million size company covered with the names we already have with the number of people we already have. It's -- we want to get that higher layer the people that go at the higher layer. We've already added a couple, and we're fighting all those other banks that made announcements for the same people.

But what they like about our model is really our bank culture. It's a different place to work. And so that's kind of -- that's where we're able to attract talent when they start meeting our people, learning about the culture. And we just hired somebody that started yesterday that took less money to come here.

So because of the culture, because of the opportunity they thought they had. So we're playing the culture game and the rest of the stuff that everybody wants pay and all that kind of things. So plus since we don't have what is established prospects over a certain dollar amount, these bankers can bring names into the equation that they already bank, and it's going to be very helpful to us.

Okay. We're going to do Dave Bishop and then Stephen Scouten.

John, and maybe a question for Dave as well. I appreciate the guidance. It looks like you're holding the expectations for fee income around that 14% level in '26. Just curious where you introduced some of these new products on the Sandy Spring platform in North Carolina, where you maybe could take that target to? Could it get to the mid to upper teens eventually?

Do you want to handle that?

Yes. So in terms of the fee income growth, you've really talked about asset management and capital markets income. So we think there's a lot of opportunity there. especially within -- on the capital market side within the Sandy Spring footprint where they didn't really have a lot of capital market activity.

So I think that's where we'd be looking for the growth. In terms of that's kind of off -- you only had 3 quarters of see any spring in there. So that might be a little elevated. I think we'll be a bit lower than that on an apples-to-apples basis state.

Stephen Scouten with Piper Sandler. So John, you talked about making the case, it was worth the investment, right?

Yes.

And I think as we look back, it would help me, if you could reconcile kind of what was laid out in the initial slide deck with Sandy Springs versus the guidance here, presuming that was kind of apples-to-apples. It looks like we're either at a little bit lower point maybe from efficiency ratio, ROA and so forth or maybe we're just behind schedule. I'm not sure if you could speak to maybe what's caused that delta if it is just a timing issue, not a realization issue.

That being like, I think it's 44%, 50% ratio in the deck. Now it's 46% to 48%, ROA was 150, now we're 140 to 150. So not by large numbers, but -- but kind of if you could speak to that and then kind of how you'd use data to create the catalyst to maybe get to those initially disclosed...

Your question is clear to me. You're asking what is different between today's expectations and what was announced in October of 2024.

Yes. So Stephen, to that point, we are a bit lower than what we said in announcement where we'd be in 2026. And it's really on the back of loan growth, we saw lower loan growth coming onto the 2025. So that's kind of put a damper on average balances as you go into '26 and '27.

So there's that element of it. The interest rate environment has changed a bit too because we had -- at the time of the announcement, I believe we have 4 to 5 cuts for the -- from the Fed in from the fourth quarter of '24 into '25. And we only saw 2 so far late in the year. So how that impacts net interest income issue and net interest how that plays out is that we weren't able to lower our deposit costs as quickly as we had expected. Now we're in the process of doing that. So there's some element to your point, timing here. the loan growth is going to come, and we'll get back on track. And we expect that the Fed will, as I mentioned a couple of times, well, I don't know what happened today to yet. When you assume there's cuts today and then 2 more in 2026. So we'll get back on track from that point of view. The other point that wasn't contemplated at the time of the announcement was our investment in the Carolinas. So there's some additional expenses related to that, which kind of impacts the efficiency ratio a bit as we build that out. So those are kind of the moving parts there. We still think if we look at those ranges, we still think there's potential to get to the top of those ranges, which would pretty much be in line with what we're thinking when we announced the deal.

The payback is very good and comparable. The metrics are excellent. It is true. I agree with Rob, 3 things that are different from a year and roughly a quarter ago. It is true that the rate environment has behaved differently than expected. I agree with this point on loan growth A lot has changed in our environment.

The all of the drama around tariff strategies, et cetera, the uncertainty with or without that transaction, we would still be seeing the same dynamic weaker loan growth than we would have expected prior to all of that. And I think we appropriately made the decision to do some additional investment in the company, not just North Carolina, there's some technology investment as well. Everything you heard the leaders talk about earlier is baked into this forecast.

And if something changes, if we have some sort of adverse outcome or something is not meeting expectations, we'll simply reduce spend. We've done it before, and we'll do it again. So it is modestly off. I acknowledge that, and that's why.

We're going to do Steve Moss and then we'll do Janet.

Okay. Steve?

First question here for Dave. In terms of the specialty banking evolution here, you have asset-based lending, senior living, dealer finance and other verticals that you're looking to grow, I guess, from it sounds like in you incubation, if you will, to a bigger place. And could you maybe size those up in terms of what you see for how big those lines could get? And what the lending side is maybe the deposit side as well?

Well, to be determined. But sure you can speculate.

So a couple of a few years ago, we hired the head of formerly SunTrust Dealer Finance group. He's been in place and we have been nurturing relationships ever since. So we do real estate, we do treasury management for car dealerships and all that stuff.

The big push now is we'll be developing floor planning and so the full range of services for that. So that will be a nice lift in lending because floor planning goes pretty fast. We are working with our vendors now to make sure we have the right systems in place for that business. But that -- we have the people in place there. We're not going to add anybody to that. We're ready to go.

So that's moving -- that move to the top of the heap, along with senior living. The person that I was referring to just started the other day, is going to be our Head of Senior Living, and his practice is very well known. When you hear the name, you might know them in the space. he will be leading a charge that also goes contiguous to our footprint. So outside of the bank's footprint. So we could toggle that up and down as much as we feel like the like the environment for lending into that space makes sense. So again, that's another one that we can toggle up, toggle down depending upon the environment. And what was the other one that you mentioned, sorry?

I think he was just asking about loans and deposits.

Yes. I mean we just like -- we like to look at all this stuff as levers to pull when we need to.

Walk before you run.

Yes. And we'd just like to stay consistent in the space with our clients to make sure they're supported. And then we can toggle things up and down based on the environment. And so I can't really tell you I mean we have internal projections on how it's going to work, but we can't -- I don't think it's appropriate to do that.

But we do have a history as we've tried extensions of our business lines, generally filling gaps, go way back, go back and look at our Investor Day, the very first one we did all those years ago, you will clearly see us talk about, we will continue to fill gaps vis-a-vis super regional and large national banks into the middle market because we're the alternative to them, and we've done that. And so Steve, these are just essentially additional gaps that we see as we go to market, what before you run.

Just in terms of just one question on the margin guidance here, Rob, what are you thinking for loan origination yields in 2026, just as you think about...

Yes. So we're putting on new loans in the, call it, 6.15 to 6.25. That's really what we're projecting. We're not looking for -- and that kind of on the fixed rate loan portfolio that's probably about right. We'll see variable rate notes will come down as the Fed boost and that's about 50% of our portfolio. So call it 6.25, 6.50 on the fixed rate. And then I think we're, give or take, 5.75 or so on the variable rate book that we're booking as those reprice. So blended, call it about 6% and a little over 6%.

Janet Lee from TD Cowen. I'm just following up on David's, David? A question earlier. I think that actually, the 3 most important metrics that actually matter most for bank stock performance are reported EPS growth, tangible book value growth and revenue growth.

And if I look at -- I mean -- and those metrics have been suppressed for many years. I believe some of that has to do with tariffs and other external situation, but a lot of that has to do with merger disruptions. And if I look at 2026, those metrics look to be inflecting assuming things are going the way you're describing. So if I were to look at 2026, are you pledging that you're not going to -- I think you made your point clear in your slides, but you're pledging that you're not going to do any mergers over the next few years?

And also, can I -- is there any -- are you seeing that much of the disruptions that you saw from the mergers in the past few years? Is that in the eighth inning? Or is there some more to go? How should we think about the impact of that merger destruction is going away?

We still see -- let me take the last question first. We still see plenty of opportunity. We think we have a durable business model in terms of our ability to compete against larger players. And it's not as dramatic as what you would see on the heels of 2 super regionals doing a merger of equals, but we still see plenty of opportunity there.

And if anything, we've only gained in brand and power and capability at a point I made earlier, which is that we are the alternative. It's important to understand we are more than a community bank that just mostly finances real estate. Yes, we do that, and we're good at it. But we're really built to be the alternative in a challenger to the larger institutions. And so I think we're very well positioned to do that.

Now this -- your interesting question about pledges and that sort of thing. I've been here 9 years. In 9 years, I would challenge anyone to give me an example of where I said we're going to do one thing and then turned around and did something else, like we have never done that. I was very clear that we are at a phase in the company's life cycle where we will be focused on organic performance and really demonstrating that the investment has been worth it.

I think Maria said it pretty clearly that we do not contemplate a whole bank acquisition in this strategic planning period. And I did not say never ever, but that should be a clear statement. Yes.

I think we have time for one more question. Brian?

Maybe just a -- just circling back to the net interest income outlook, you spoke about NIM a moment ago, but maybe just taking NIM and loan growth. Loan growth guidance implies about 6% end-of-period growth. If you could just talk about how quickly does that ramp over the course of the year? And then maybe just a broader discussion on NIM rates coming down, your guidance implies NIM moving higher. What are the puts and takes there, key drivers?

Yes. So in terms of the cadence of that coming in on loan growth, you're talking about, yes, it's probably a slower period in the first quarter, typically, and then it starts to ramp up. But we've kind of just have a kind of gradually going up through the first quarter and getting to that 6% over a period of time, I average over the full year.

In terms of the net interest margin guidance, yes, so there's a couple of things. As we said, we expect the Fed to continue to cut rates. That's going to have a -- that's a headwind on our net interest loan yields on the variable rate now, which tied to one month SOFR in Prime. So that will be a headwind.

Offsetting that is though we've got a bunch -- a lot of deposits that we're repricing really quickly. We've got about $5 billion or so of indexed Fed fund index deposits that reprice very quickly. And a number of what we call negotiated rates, exception rates for large commercial clients that also moves down fairly quickly.

So for instance, if you -- in the first 2 -- first cut and second cut, we've actually on those balances, we've seen an 85% beta on call it, $12 billion to $13 billion of deposits. That offsets the impact of the variable rate loan book. Potential expansion, the way we're looking at that is we don't think term rates are moving down. we're kind of leaving those kind of where they are today stable.

And we've got a fixed rate book of loans and the portfolio is about 5.10. We're repricing those, as I mentioned a little while ago, 6.25. So we're picking up 50% of our loan book, I should say, 50% of the legacy AUB book, we marked Sandy Spring, we marked American National.

And that's about $1 billion a quarter that's repricing at that level. So -- so that's why we think there's potentially if you say, we're neutral on a short end asset sensitive on the long end with this repricing, we could see some expansion. That's how we look at it.

Catherine?

The only equity research analyst who was here when I arrived 9 years ago. We'll go ahead over time for you. Thank you for still being here.

Just a capital question. So if you look at your ROA target is 14% to 15% in both years for '26, '27 and so your -- and your ROTCE is also in that 19% range. But your -- I mean, as we've seen, you're building capital at call it, 20 bps a quarter because of that higher level.

And so for me to keep my ROA at 14%, let's even say. But for me to get my ROTCE to also stay in that range, I've got to really push the buyback starting mid near which you hit a 10.5% CET1. So are you also committing to being really kind of active in the buyback in the back half of this year and really through '27? And how sensitive to your price are you as you do?

Well, I wouldn't say we...

I wouldn't say we're committed, we will consider.

First of all, the Board of Directors approves that -- yes we would recommend something like that, that the Board approved. But yes, plans are, as you mentioned, excess capital will be defined anything over 10.5% CET1, common equity Tier 1 ratio. We expect that to be in the second quarter. We would anticipate that we would have hopefully, the Board would approve a repurchase program and then we would be in the market -- in the market means depending on the share price.

We look at it as a return on investment. A 15% [indiscernible]. So we have a we run an intrinsic valuation that you guys do and internally with our internal projections to say, we think the company's valuation is this on a per share basis. So we would look at that and say, okay, we're not going to buy less than 14%. I mean, 15%, we'll buy if we can get that return.

The lower the price, we'll buy a lot more, obviously. The higher the price, we may not buy any. So kind of -- we do look at it that way. It's not a -- put a $200 million repurchase and we're going to buy every share no matter what the price is.

Yes. So Catherine, I think back to your point, we have been a good generator of capital because we've run a good profitable company. We have returned capital, $1.1 billion since 2017 through dividend. We pay an above-average dividend we have done share buybacks in the past. And yes, we've done investment through the deployment through M&A. I think to your very good point. We do think we'll be accreting capital on a quarterly basis at the level that you're pointing to. You can clearly see that in the guidance that we're providing. The question becomes how high do capital levels really need to be for a bank with a risk profile like ours and for one who is not contemplating additional M&A at this point in our life cycle. So I do think it clearly sets up the opportunity to look at share buybacks. And it's exactly is right.

Depends. If we have excess larger growth in the loan book, we will put it to that.

That's the first use of capital should be great scenario. Okay. Bill is letting me know that we are now over time. So I do want to say thank you all very much for being here. I'm very proud of the people at Atlantic Union Bank. I'm very proud of our customers, who have supported us through this transformation. There have been plenty of stories of transformation of community banks into something more across the industry, but I do think we're a very good example of that.

We matter to the communities that we serve. We help people, we help businesses, we help our communities. We have a responsibility to deliver for our shareholders, and we are confident that we will do that. So we appreciate your support. We'll be around for a few minutes as we're done, if you have any further questions that we're able to answer and thank you for being here. Thank you for your support.

Good day, and thank you for standing by. Welcome to the Atlantic Union Bankshares Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I'd now like to hand the conference over to your speaker today, Bill Cimino, Senior Vice President of Investor Relations. Please go ahead.

Thank you, Daniel, and good morning, everyone. I have Atlantic Union Bankshares' President and CEO, John Asbury; and Executive Vice President and CFO, Rob Gorman, with me today. We also have other members of our executive management team with us for the question-and-answer period.

Please note that today's earnings release and the accompanying slide presentation we are going through on this webcast are available to download on our investor website, investors.atlanticunionbank.com.

During today's call, we will comment on our financial performance using both GAAP metrics and non-GAAP financial measures. Important information about these non-GAAP financial measures, including reconciliations to comparable GAAP measures, is included in the appendix to our slide presentation and our earnings release for the third quarter of 2025.

In our remarks on today's call, we will also make forward-looking statements, which are not statements of historical fact and are subject to risks and uncertainties. There can be no assurance that actual performance will not differ materially from any future expectations or results expressed or implied by these forward-looking statements.

We undertake no obligation to publicly revise or update any forward-looking statements except as required by law. Please refer to our earnings release and the slide presentation issued today and our other SEC filings for further discussion of the company's risk factors and other important information regarding our forward-looking statements, including factors that could cause actual results to differ from those expressed or implied in the forward-looking statement.

All comments made during today's call are subject to that safe harbor statement. And at the end of the call, we'll take questions from the research analyst community.

Now I'll turn the call over to John.

Thank you, Bill. Good morning, everyone, and thank you for joining us today. Atlantic Union Bankshares delivered a solid third quarter, while maintaining our focus on execution and integration of the Sandy Spring acquisition. Our quarterly operating results illustrate the earnings potential of the company we envisioned. While merger-related costs continued to create a noisy quarter, we believe we are on a path to deliver on the expectations related to the acquisition of Sandy Spring for adjusted operating return on assets, return on tangible common equity and efficiency ratio.

The Sandy Spring integration is progressing smoothly. Over the weekend of October 11, we successfully completed our core systems conversion and closed 5 overlapping branches as planned. We are experienced acquirers, and I want to recognize our outstanding and dedicated team for their commitment and diligence in executing this complex process. We have now unified Sandy Spring Bank under the Atlantic Union Bank brand and operate as one integrated team. While some merger-related impacts will persist in our fourth quarter results, we expect to enter 2026 having achieved our cost savings targets from the acquisition and with our enhanced earnings power visible on a reported basis.

Our commitment to creating shareholder value remains unwavering. We believe Atlantic Union is well positioned to deliver sustainable growth, top-tier financial performance and long-term value for our shareholders. The strategic advantages gained from the Sandy Spring acquisition, combined with continued organic growth opportunities, reinforce our status as the premier regional bank headquartered in the lower Mid-Atlantic. We have a robust presence in attractive markets, providing us with further growth opportunities.

I will now summarize the key highlights from our third quarter performance and share insights into current market conditions before turning the call over to Rob for a detailed financial review. Here are the highlights from our third quarter. Quarterly loan growth was approximately 0.5% annualized in the typically seasonally slower third quarter. Notably, lending production increased modestly versus the second quarter. However, in the latter part of the quarter, an uptick in loan paydowns had a decline in revolving credit utilization from 44% to 41% offset some of the increased production. Average loan growth quarter-over-quarter was a good story at 4.3% annualized.

Our pipelines indicate we should have loan growth consistent with the seasonally strong fourth quarter. While forecasting loan growth remains challenging and the still uncertain economic environment, we currently expect year-end loan balances to range between $27.7 billion and $28 billion, inclusive of the negative impact of the fair value loan mark. We paid down approximately $116 million in broker deposits during the quarter and continued to reduce higher cost nonrelationship deposits from the Sandy Spring portfolio. By moving quickly to lower our deposit rates, we anticipate further improvement in our cost of deposits in the fourth quarter. We were pleased to see approximately 4% annualized growth in noninterest-bearing deposits in the third quarter.

Our reported FTE net interest margin remained steady at 3.83%, reflecting a modest decrease in accretion income quarter-over-quarter. As a reminder, some quarterly fluctuation in accretion income is to be expected. Importantly, if you exclude the impact of accretion income, our net interest margin improved compared to last quarter.

I'd also like to point out the strength we saw in fee income, especially with interest rate swaps and in wealth management. Opportunities in both lines were augmented by the Sandy Spring acquisition. And during the quarter, approximately $1 million of swap income is attributed to the former Sandy Spring Bank. Sandy Spring did not offer interest rate swaps for the acquisition, and we believe that will provide upside to the combined entity going forward. Overall, credit quality improved despite an increase in charge-offs largely driven by 2 commercial and industrial loans that have been partially reserved for in prior quarters. One was the larger credit first disclosed in the fourth quarter of 2024 involving a borrowing base misrepresentation. Ongoing uncertainty in its resolution led us to charge off the remaining balance of approximately $15 million in addition to the previously incurred specific reserve of $14 million.

Leading asset quality indicators are encouraging. Third quarter nonperforming assets as a percentage of loans held for investment remained low at 0.49%. Past dues remained low and criticized asset levels improved by more than $250 million or 16%, which brings criticized loans as a percentage of total loans down to 4.9% at the end of the third quarter from 5.9% at the end of the second quarter. As typical, we'll present more details in our third quarter 10-Q filing. We do remain confident in our asset quality and reaffirm our forecast for the full year 2025 net charge-off ratio to be between 15 and 20 basis points, in line with prior guidance.

In the Greater Washington, D.C. region, recent headlines have focused on government deployment reductions and the government shutdown. However, we believe both our economic data and on-the-ground observations indicate resilience in the market. Atlantic Union maintains a well-diversified portfolio with approximately 23% of total loans of the Washington metro area and the remaining 77% across our broader footprint. The exposures that prompt the most inquiries are government contractors and office buildings in the Washington metro area, updated disclosures on these segments can be found on Pages 21 through 23 of our supplemental presentation, and these portfolios are performing well.

Our government contractor finance portfolio is predominantly focused on national security and defense. We believe these businesses are well positioned, supported by a record high defense budget and ongoing defense modernization efforts. Government shutdowns are not new to us. With more than 15 years in the specialty, we have seen many. Most contractors we finance provide essential services and have historically continued to operate during shutdowns, typically drawing on lines of credit to maintain payroll and repaying those lines when government funding resumes. We are certainly monitoring the shutdown and its duration.

More broadly, August unemployment rates for Maryland and Virginia stood at 3.6%, well below the national average of 4.3% and among the lowest for states with larger populations. Official government September data is not yet available due to the shutdown. While we anticipate some increases in unemployment rates across our markets, we expect this to remain manageable and below the national average, consistent with the current Moody's state level forecast.

With the Sandy Spring systems conversion now behind us, strong pipelines and expanded footprint in attractive markets, specialty lines and increased investment in North Carolina, we believe we are well positioned for continued organic growth.

In summary, it was a good quarter as we continued our focus on disciplined execution and the integration of Sandy Spring. This quarter also marks my ninth year with the company. Over this time, we have intentionally and carefully built the distinctive and uniquely valuable franchise that we envisioned in our strategic plan and have consistently communicated for years. We have done what we said we do in establishing the banking platform we set out to create. With this foundation in place, we believe we are well positioned to capitalize on the expanded markets gained through the Sandy Spring acquisition, continue our growth in Virginia and pursue new organic growth opportunities in North Carolina and across our specialty lines.

We are set up well to demonstrate the organic earnings power of the franchise we have worked so hard to build on a reported basis, absent merger-related noise in 2026, and that's what we intend to do. Looking ahead, our focus remains on delivering sustainable top quarter performance relative to our peers and creating long-term value for our shareholders.

With that, I'll turn the call over to Rob for a detailed review of our quarterly results before opening the call for questions. Rob?

Well, thank you, John, and good morning, everyone. I'll now take a few minutes to provide you with some details of Atlantic Union's financial results for the third quarter. A commentary today will primarily address Atlantic Union's third quarter financial results presented on a non-GAAP adjusted operating basis, which excludes $34.8 million in pretax merger-related costs from the Sandy Spring acquisition and a $4.8 million pretax loss recorded in the third quarter for the final CRE loan settlement related to the approximately $2 billion of Sandy Spring acquired CRE loans that we sold in the second quarter. As a result, the final net pretax gain from the CRE sale transaction was $10.9 million.

That said, in the third quarter, reported net income available to common shareholders was $89.2 million, and earnings per common share were $0.63. Adjusted operating earnings available to common shareholders for $119.7 million or $0.84 per common share for the third quarter, resulting in an adjusted operating return on tangible common equity of 20.1% and adjusted operating return on assets of 1.3% and an adjusted operating efficiency ratio of 48.8% in the third quarter.

Turning to credit loss reserves. At the end of the third quarter, the total allowance for credit losses was $320 million, which is a decrease of approximately $22.4 million from the second quarter, primarily driven by the net charge-off of two individually assessed commercial and industrial loans that were partially reserved for in the prior quarter, as John noted. As a result, the total allowance for credit losses as a percentage of total loans held for investment decreased to 117 basis points at the end of the third quarter, down from 125 basis points at the end of the prior quarter. Net charge-offs increased to $38.6 million or 56 basis points annualized in the third quarter from $666,000, only 1 basis point annualized in the second quarter, primarily due to the net charge-off of the two commercial industrial loans that we've discussed. This brought the annualized year-to-date net charge-off ratio through the third quarter to 23 basis points although we are maintaining our full year net charge-off ratio guidance to be in the 15 to 20 basis point range.

Now turning to the pretax pre-provision components of the income statement for the third quarter, tax equivalent net interest income was $323.6 million. That's a decrease of $2.1 million from the second quarter, primarily driven by lower interest income on loans held for sale due to the impacts of the CLO approximately $2 billion of performing CRE loans at the end of the second quarter and lower net accretion income, partially offset by lower borrowing costs and higher investment income as we used proceeds from the CRE loan sale to pay down short-term borrowings and brokered deposits and to purchase additional investment securities in the third quarter.

As John noted, the third quarter's tax equivalent net interest margin remained at 3.83% as lower earning asset yields were fully offset by declines in the cost of funds. Earning asset yields for the third quarter declined by 5 basis points to 6% compared to the second quarter due primarily to lower accretion income and the impacts from the CRE loan sale, which resulted in a decrease in average loans held for sale balances and an increase in lower-yielding cash and investment average balances. The cost of funds declined by 5 basis points in the third quarter to 2.17%, primarily due to the impact of the 4 basis point drop in the cost of interest-bearing liabilities to 2.93% from 2.97% in the second quarter driven by lower average short-term borrowings and broker deposit balances as well as lower customer time deposit rates.

Noninterest income decreased $29.7 million to $51.8 million for the third quarter, primarily driven by the $15.7 million preliminary pretax gain on the CRE loan sale in the prior quarter compared to a $4.8 million pretax loss in the third quarter of 2025, related to the final CRE loan sale settlement accounting, as well as by the $14.3 million pretax gain on the sale of our equity interest in Cary Street Partners which was recorded in the second quarter.

Adjusted operating noninterest income, which excludes the pretax loss and gain on the CRE loan sale in both quarters, the pretax gain on the sale of our equity interest in Care Street Partners in the second quarter and pretax gains on sales of securities in both quarters increased $5.1 million from the second quarter to $56.6 million, primarily due to a $4.2 million increase in loan-related interest rate swap fees due to higher transaction volumes and a $1.2 million increase in other operating income primarily due to an increase in equity method investment income. These increases were partially offset by a $2.2 million decrease in bank-owned life insurance income due to debt benefits of $2.4 million that was received in the second quarter.

Reported noninterest expense decreased $41.3 million to $238.4 million for the third quarter, primarily driven by a $44.1 million decline in merger-related costs associated with the Sandy Spring acquisition. Adjusted operating noninterest expense, which excludes merger-related cost in the second and third quarters and the amortization of intangible assets in both quarters increased $3.1 million to $185.5 million for the third quarter, primarily due to a $1.3 million increase in marketing and advertising expense, a $966,000 increase in professional service expenses related to strategic projects, $874,000 increase in other expenses, primarily due to an increase in other real estate owned and credit-related expenses and an $800,000 increase in occupancy expense. These increases were partially offset by a $1.6 million decrease in salaries and benefits expense, primarily driven by reductions in full-time equivalent employees and lower group insurance expenses which was partially offset by an increase in variable incentive compensation expenses.

At September 30, loans held for investments, net of deferred fees and costs were $27.4 billion, that was an increase of $32.8 million from the prior quarter, while average loans held for investment increased $291.8 million or 4.3% annualized from the prior quarter. At September 30, total deposits stood at $30.7 billion, a decrease of $306.9 million or 3.9% annualized from the prior quarter, primarily due to declines of $256.3 million in interest-bearing customer deposits and $116.1 million in broker deposits. This was partially offset by an increase of $65.5 million in demand deposits.

At the end of the third quarter, Atlantic Union Bankshares and Atlantic Union Bank's regulatory capital ratios were comfortably above well-capitalized levels. In addition, on an adjusted basis, we remain well capitalized, as of the end of the third quarter, if you include the negative impact of AOCI and held-to-maturity securities unrealized losses in the calculation of the regulatory capital ratios. During the third quarter, the company paid a common stock dividend of $0.34 per share, which was an increase of 6.3% from the previous year's third quarter dividend amount.

As noted on Slide 16, we've updated our full year 2025 financial outlook for AUV and have also provided our financial outlook for the fourth quarter. Please note that the final outlook for 2025 and the fourth quarter include preliminary estimates of purchase accounting adjustments with respect to the Sandy Spring acquisition that are subject to change. We now expect loan balances to end the year between $27.7 billion to $28 billion while year-end deposit balances are projected to be between $30.8 billion and $31 billion, driven by mid-single-digit annualized growth in loans and low single-digit annualized growth in deposits in the fourth quarter.

Fully tax equivalent with net interest income for the full year is projected to come in between $1.160 billion and $1.165 billion that we are targeting the fourth quarter fully tax equivalent net interest income run rate to fall between $325 million and $330 million. As a result, we are projecting that the full year fully tax equivalent net interest margin will fall in a range between 3.75% and 3.8% for the full year and between 3.85% and 3.9% in the fourth quarter driven by our baseline assumption that the Federal Reserve Bank will cut the Fed funds rate by 25 basis points in October and December, and that term rates remain stable.

In addition, the projected fully tax equivalent net interest margin ranges include the impact of our estimate of the net accretion income from the Sandy Spring acquisition, which are volatile and subject to change. On a full year basis, adjusted operating noninterest income is expected to be between $185 million and $190 million, and we're targeting the fourth quarter adjusted operating noninterest income run rate to fall between $50 million and $55 million. Adjusted operating noninterest expenses for the full year are estimated to fall in a range of $675 million to $680 million, while the fourth quarter adjusted operating noninterest expense run rate is expected to be between $183 million and $188 million. Based on these projections, we expect to produce financial returns that will place us within the top quartile of our peer group on an operating basis and meet our objective of delivering top-tier financial performance for our shareholders.

In summary, Atlantic Union delivered solid operating financial results in the third quarter. We continue to be on track and confident that we will achieve the anticipated financial benefits of the combination with Sandy Spring. As a result, we believe we are well positioned to continue to generate sustainable, profitable growth and to build long-term value for our shareholders in 2025 and beyond.

I'll now turn the call over to Bill to see if there are any questions from our research analyst community.

Thanks, Rob. And Daniel, we're ready for our first caller, please.

[Operator Instructions] Our first question comes from Russell Gunther with Stephens.

First question for me is on the loan growth front. I appreciate your guys' thoughts in terms of what transpired this quarter in the mid-single-digit outlook for NEXT. Wondering, is that mid-single-digit sustainable outcome for 2026 based on where pipelines and investor sentiment stands today? And as you look out, is a high single-digit possibility on this larger pro forma balance sheet? Then I guess an adjacent question, John, I think you mentioned whether it's an increased appetite or expectation for growth within specialty lines, so I'd be curious if you could expand upon that as well.

Sure. To answer your questions, we do expect at this point, mid-single-digit loan growth on the total company for next year. Based on past experience, we certainly believe that we're capable of doing high single-digit loan growth. And what I will refer to as a more normalized environment, assuming we see such a thing again, which I think we will eventually, but there's still a lot of uncertainty out there, obviously. And we do see strength in our specialty lines. And as part of our strategic planning process. And as a reminder, we're going to do an Investor Day in early December, and we'll take you into more detail we continue to look at additional opportunities to further grow and expand our specialty lines such as equipment finance and others. Dave, do you have anything to add to that?

Yes. I mean we're still seeing production for new client acquisition and growing at a slightly higher rate, 35% of our production this quarter came from new clients. Coming into the bank, that's a great trend and positive momentum. The pipelines at Sandy Spring now that they've been converted here since April 1 have grown dramatically, three or fourfold. And our pipeline within the legacy bank is higher than it normally is as well. So if pull-through is what we expected to be, we think we'll have a good solid fourth quarter.

Yes. And as you saw, loans averaged up 4.3% Q-over-Q, which is good. But what really happened is in the back half of the quarter, we saw paydowns, which are always an issue to some extent. But the line utilization drop was kind of what really hit us towards the end of the quarter, and that should come back over time.

I appreciate that. And then just last question for me, switching gears a bit on to the expense outlook. I appreciate the thoughts on where 4Q could shake out. And I believe you guys mentioned cost saves for Sandy Spring will fully be in the run rate in early 2026. So I just wanted to circle back to what was a, I believe, the efficiency guide for the pro forma franchise, about 45%, excluding amortization expense. Is that still on the cards for 2026? And as it relates to the expense side of the house, how are you guys thinking about keeping a lid on the absolute expense base as you organically build out North Carolina over the next few years?

Yes. Russell, I'll take that one. Yes, we still -- we're, of course, in the middle of our 2026 planning process, but we fully expect to see mid-single -- mid-40s on the efficiency ratio, inclusive of the investments in the North Carolina franchise. Coming out of the -- you see our guide in the fourth quarter is $183 million to $188 million. If you annualize that at some inflation to that and additional costs associated with North Carolina. We should be flat year-over-year to pro forma first quarter. If you include the first quarter run rate for seeing spring in 2025 should be flattish, which would basically be able to provide us with the mid-40s efficiency ratio. So feel good about that. Of course, if we don't see the revenue come in, but the other part of that is revenue growing at high single-digit level going into next year. If we don't see that, we're obviously focused on positive operating leverage. So we would take some actions on the expense side, maybe have to delay some things. But at this point in time, we don't anticipate that happening.

Our next question comes from Stephen Scouten with Piper Sandler.

Rob, I wanted to just follow back on that expense messaging you just gave there. So if we're looking at $190 million and then you said add North Carolina, add inflation and then it should be flat from there? Or is there a baseline like of a 1Q '26 kind of all in? I'm assuming all cost saves out kind of run rate you can give us as a starting point?

Yes. So what I would say is it's probably about the $190 million give or take level would be a good run rate for going forward on excluding any of the related or amortization of intangibles. That's how we're kind of looking at it. So you've got, call it, a 185-ish run rate at another 5-or-so annualize that for those items that we talked about inflation, et cetera, so it would be pretty good run rate.

Got it. And that 1Q '26 run rate shouldn't calculate all the Sandy Spring cost saves at that point in time, correct -- more or less?

Yes. We don't see it all in the fourth quarter because there's -- we just finished the conversion, there's cleanup going on. There's some related systems disengagement that's happening. We still got some duplicate costs there. So that will all come up by the end of the fourth quarter.

Got it. Got it. Okay. And on the -- John, you noted there were a higher level of paydowns and I think you guys noted in the press release to lower line utilization there at quarter end. Do you have any data in terms of kind of what paydown levels were this quarter maybe versus any prior quarters? And kind of what would lead you to believe that maybe that paydown activity would slow a bit? Or is the better growth not so much about paydown levels slowing but production levels continue to ramp higher?

Yes. I think it's probably more about production levels continuing to ramp higher. And let's see, I'll call on Dave Ring here, who leads all our commercial businesses. But -- we've seen for a while higher levels of paydowns. But as I think about Q3 versus Q2, I don't think it was out of line.

No. No. Production in both quarters was very close, is a little higher this quarter than last quarter. Paydowns were relatively the same over the quarter. There are just more players right now in our markets, and we're going to see some of the on activity that we're seeing today probably throughout the rest of the year and into next year, but we're relying on higher production cost.

And so often on paydowns, you'll see commercial real estate that is sold or refinanced into the institutional nonrecourse term markets like some of the Fannie or Freddie programs, for example, for multifamily. And the pullback that we've seen in term yields tends to create more of that. But we feel good about the overall setup.

Got it. And then last thing for me, just around the margin, obviously, the low end of that range kind of remained at the [ $3.75 ], but obviously, the range was tightened kind of removing some theoretical upside there. What kind of changed quarter-over-quarter that kind of takes that higher level off the table? Is it just where we ended up here in the third quarter? Or is it more rate cuts being baked in or kind of end, any color there to what's leading to that?

Yes. It's more about where we came out in the third quarter, kind of dialed back some of the impacts of the accretion income in the fourth quarter. That would have been driving it, it could be higher on the higher end. So we dialed that back a bit. But we feel like on the core basis, we should see some expansion. That's why we're guiding to [ 385 to 390 ] in the fourth quarter. So it's a bit higher than when we came in at [ 383 ] in the third quarter. But that [ 375 to 380 ] is for the full year. Stephen, so that's kind of where we are. So it's going to -- we see it going up, but not quite as much as we had -- We had a 3.75% to 4% coming into this year. But accretion hasn't been coming in as high as we were expecting.

Yes, it is somewhat difficult to predict that with precision because it's influenced, as you know, by payoffs and that sort of thing. And so you'll see a little bit of volatility. And obviously, as we get a few more quarters under our belt, we'll have a better sense for the sort of what to normally expect. But there's always an element of fluctuation in that, be it up or down.

Yes, no doubt. All this modeling is a little bit a little bit since. So definitely...

Correct, Stephen.

Our next question comes from Catherine Mealor with KBW.

My question is just back to the margin, maybe just getting into the piece of it on the deposit side, I guess as we think about another couple of rate cuts, I think if you as asset-sensitive, but Sandy Spring lessens that a little bit, right? And so then as we think about on the NIM expansion over the next few quarters even with rate cuts. Can you help us think about, first, on the deposit side, how much room you think you can lower deposit costs to keep the margin kind of in that level? And then secondly, if you could give us just some color on new loan yield rates and kind of where you see -- where you think loan yields go outside of some of the purchase accounting noise?

Yes. So Catherine, we think we have a lot of room on the deposit cost side as the Fed gives us cover and continues to lower rates, we're expecting. Obviously, we saw a 25 basis point cut in September. We're expecting one in late October and then in December. Just to give you a perspective on that, we had about $13 billion of deposits that reprice pretty quickly, following that cut like an 85 basis of that population, about 85% betas. The good news that we're seeing is on the deposit side, we can lower rates pretty quickly. We're talking probably in mid-50s betas on interest-bearing deposits in mid-40s through the cycle on total deposits. If you look at the short-term rate changes we just made, those pretty much offset the variable rate note loan book that we have, which is about $13 billion, $14 billion. So those kind of are offsetting each other in terms of reducing or having the impact of lower yields on the loan side versus lower deposit costs. So the real impact as we go forward here in terms of looking for a core margin expansion is what's happening with term loans and the back book fixed rate and new loans coming on, what rates are those coming on? We think as a result of our average portfolio yields of, call it, [ 5.10 to 5.15 ] on our fixed loan portfolio today, repricing in the, call it, [ 6.10 to 6.20 ] range in the last quarter. we should be able to see a pickup in terms of the core margin, primarily due to lower deposit costs, lower variable rate loan yields offset by higher fixed rate loan yields.

Okay. That's awesome. And then my second question is just on credit. I know you were -- you didn't like having these two C&I losses this quarter. Just kind of curious if you could give just a broader perception of any of the credit trends you're seeing within the portfolio. I think there's especially within D.C. and just kind of the health of the Sandy Spring portfolio now that you've got a couple of quarters under your belt with that portfolio. Just any kind of credit -- additional credit commentary would be helpful. Just to try to figure out whether those two are isolated events or if there's anything else we should be aware of happening within the portfolio?

Yes. Those are certainly the two that you saw that had specific reserves. One of them was partially reserved and it was just an unusual situation that -- both actually were identified and partial reserves were taken in Q4 of last year. One in the end was fully reserved, actually slightly more than the ultimate resolution. The other just due to ongoing uncertainty, we elected to charge the rest of it all as we work to maximize recovery. So that's totally unrelated. Broadly speaking, the overall credit trends look good. You can see that in our numbers. You can see, obviously, 0.49 nonperforming assets as a percentage of the total loan book is a pretty good number. Past dues down criticized down. And we feel pretty good. Obviously, we're well aware of all the headlines that go on in the greater Washington region, but we're hard-pressed to point to any real problems as a result of that. The client base is actually quite resilient. So we feel pretty good about it. Doug, anything you would add?

Now all the leading indicators of those kinds of big problems all look very good and moving in the right direction. Like John said, criticized noticeably lower since the second quarter past dues continue to be low. So we all feel very good about where we are. Obviously, we're paying attention to what's going on in and around D.C. with the shutdown. We just don't see any weakness anywhere, and we'll be prepared for anything supporting customers and whatnot. And I was the Chief Credit Officer, Doug Woolley.

Great. Was it fair to say the D.C. noise is maybe more of a growth issue than a credit issue for that?

Yes, I would say so. I do think that it impacts confidence to some extent. But as pointed out, the pipelines are growing. And you've heard me make this point before, don't think of us as a DC Bank about 23% of the total portfolio would be in the broad Greater Washington metro area. But Sandy itself was -- is and always has been the Bank of Maryland. And we are seeing opportunities there. So overall, we think that we're in the right spot. As you know, we do not finance larger office buildings, which definitely could be problematic. And from a government contract finance standpoint, I would expect to see more opportunity there over time since it's mostly focused on national security and defense. And even interestingly, we were talking to the head of government contract finance yesterday, even with the government shutdown because the defense department is still operating, we're seeing contracts awarded like right now. So we do feel pretty good about the opportunity there over time. But yes, it's -- I think it does put a damper on growth, particularly as it relates to commercial real estate investment, but it's very submarket specific as well, even in that Greater Metro D.C. area.

Our next question comes from Janet Lee with TD Cowen.

Janet, we're glad. Thank you for picking up coverage on this.

Of course. I believe you guys touched on it a little bit. Apologies if I missed it. So you're attributing all of the loan decline that you saw on the C&I side to lower utilization? And basically, are you also referring to the loan growth coming back in that mid-single digits as the utilization picks back up seasonally in the fourth quarter to the mid-single digits range? Or is that more so in a typical environment, you'd be a mid-single digit to high single-digit grower?

Yes. I wouldn't say all of it was a result of the reduced line utilization, but that was a material number contributing toward that. And I think they bring you off the way in here. From my standpoint, we've got the pipeline right now to support the targets that we laid out, which are roughly mid-single-digit loan growth based on what we're seeing in Q4. So that's not really predicated on a reversal and line utilization, although that would be helpful. Is that accurate?

Yes. We're -- we have the pipeline to -- it's just pull through. We just have to pull it through. And sometimes it takes longer than others and things creep into other quarters. But we have the pipeline that will -- that implies...

Big makes a good point. We actually had some financings that were slated and expected to have closed in Q3 that did not. And we're seeing that come through now. We're actually off to a pretty good start in Q4.

Got it. That's a helpful color. So on a core basis, I guess you're not guiding to 2026, but -- should I think of the core NIM trajectory based on your comment as being able to stay stable as rates come down with an upper bias if the yield curve steepens? Or would it be a sort of board pressure given your asset sensitivity profile? How should I think about that?

Yes. The way we're thinking about it is we think there's opportunity for core expansion, give or take, in the low single digits per quarter. That's predicated on that the fixed rate loan portfolio back book and new fixed loans coming on are repricing higher, call it, 100 or so basis points higher. So that really depends on where term rates go. So if we do have a steeper curve, that would be very helpful to that projection that goes -- if it increases more, that will be more beneficial. So we are calling for in our baseline for the Fed to cut 2x here in the remainder of this year, 2x next year, but we do expect to see some expansion in the margin, again, not material. If term rates were to drop materially from really looking at, call it, the 5-year term rate, we could see some contraction in that projection that I'm talking about either a flat margin or it could be down depending on the term rate structure.

And we are certainly less asset sensitive than we used to be. Sandy -- a bit of a natural hedge. And as you can see on Slide 11 of the supplemental presentation, where we break out the drivers of net interest margin change. To Rob's earlier point, the core net interest margin actually went up 2, it was really just fluctuation in accretion that caused the reported net interest margin to be stable.

If I could just ask one more question. For those of us including myself, who was newer to the name, you made it clear that the government contractor finance group is doing fine. I mean, it's more security like national security and defense focus or more protected there. If the government shut down is prolonged, hopefully not. But if it does get extended, like what would you be -- in what way could it -- or could it impact you the most in terms of -- like what would you be most worried about? Is it the consumers in your -- the consumer customers in your market? Or is it just lower commercial activity? Could you just elaborate on what would you be most worried about or maybe not?

Yes. Sure. The government contractors should be fine. We have lived through many shutdowns before. The longer shutdown was 35 days in the first Trump administration. We've never had an issue as it relates to government shutdowns they have to wait to be paid, but most of them are doing essential services. And so they will continue to work, as I indicated. Normally, what we would expect to see them do is they'll draw on their lines as they await payment. It creates a timing difference. To the extent that they -- we have any that are working on nonessential services, what they do, it's a variable cost structure. They would furlough workers. You're already seeing that in some cases up there. So I think broadly, it certainly could sort of, I guess, I would say, further slow things down, we should be fine. The one thing we -- the only thing we can say with certainty is the U.S. government will reopen. That will happen. The question is how long it's going to take? Interestingly, I was just looking at some data. As of end today yesterday, we had 50 consumers contact us, I want to talk about some sort of potential relief because they've been impacted. And the most common thing that you would see might be a payment deferral or a fee deferral. And that's on the consumer side, and we're very happy to work with customers if there's any sort of event weather like this in that region. So we do not have any reason at this point in time to be particularly concerned about it.

Our next question comes from Brian Wilczynski with Morgan Stanley.

Maybe just sticking with the loan growth. I think during your prepared remarks, you talked a little bit about higher competition that you saw in the third quarter across some of your markets. I was wondering if you could give some more detail on that, where it's coming from and just what you're seeing broadly?

Yes. We're certainly a cost of the competition. I'm a 38-year commercial banker by background, and I don't ever remember a time when it's not been competitive, at least for the better credits, which is the types of things that we do. We sometimes see other banks kind of turn it on and turned it off, which we've never done. We've always been a consistent provider of capital, and that's part of how we differentiate ourselves in the marketplace. We are definitely in a turned-on environment right now, where some who had pulled back or fully open for business. We see that show up in terms of an element of pricing pressure, not that we've ever been the low-cost provider. But it's -- the banks are eager for business. Dave, anything to add?

In the first couple of quarters, we were impacted a bit by private credit.

Yes, particularly in the government contract space.

Competitor in some of the specialty businesses, but that slowed down a little bit, frankly. And it's really the traditional banks coming in back in turning it on again, like John said. And one of the things we're very proud of is we're consistently in the market. We don't turn it on and turn it off. And -- but we're seeing some of those banks come back in, in terms of...

That's really helpful. And then maybe just on Sandy Spring. You mentioned that the integration is now complete. I was wondering if you could talk a little bit more about some of the revenue-related synergies. I think you mentioned briefly that swap income was higher. But as you look out to Sandy Spring, what are the opportunities that you see on the revenue side that you can lean into a little bit more over the next few quarters?

Yes, sort of moving -- starting at the top of the house, the single best opportunity is simply the fact that they're no longer constrained by commercial real estate concentration or liquidity issues, which means they are, in fact, fully open for business. So that's good from a lending standpoint. They do pick up additional capabilities. Interest rate hedging is a great example. Other examples that we'll see as it begins to mature, will be foreign exchange, where we have a good offering broadly. They had a good treasury management offering, but we brought additional capabilities to the table as well. Dave, do you want to pick up from their specialty lines? We've already seen equipment finance business up there.

I mean the biggest probably help over the next, call it, 15 months is just them getting back into the market. We've retained almost all of their bankers. And most of them have stayed on their own as well without us having to work hard to retain them. And they are back to business back and calling. So new client acquisition is going to be a real important thing in that market for us. The things we bring to the table around talking at a higher level to clients, bringing in products like John said, plus loan syndications, asset-based lending and some other things into that market. That's a really good asset-based lending market, for instance, which we will penetrate deeper because of our acquisition of Sandy Spring. So there are a lot of things just -- but I would think of it just holistically as two good banks coming together, combining products and services, they had some that we didn't have, correct? They had some really interesting offerings, some niche treasury management capabilities that we now have right?

And they've brought some really good leadership to the table as well. And so we really think we're just stronger in that market because of the combination.

Our next question comes from David Bishop with Hovde Group.

Staying on that topic in terms of the Sandy Spring opportunity. John and Rob and Dave, as you expand maybe their pure commercial C&I lending capabilities, do you see the opportunity to sort of harvest more deposits behind new loan relationships and maybe what legacy Sandy Spring is bringing to the table?

Overall, they did a pretty good job gathering deposits. And we've done a pretty good job since April 1 of retaining those and trying to deepen and enhance relationships to get more. But -- they actually brought some products to the table that we're going to leverage in that market around escrow, the title businesses, litigation services, things like that, that will bring pretty chunky, nice big deposits into the bank. But in general, if you acquire a C&I client and you're giving them a line of credit, it comes with the deposits. It comes with the treasury management fees. And so we're really focused on new client acquisition in that market. And we do think we give them the capacity and the ability to do more faster new client acquisition. Like I said earlier, 35% of our production this quarter was from new client acquisition, and we expect that to kind of ramp up with Sandy over time.

It's a good team with great leadership, and we complement each other.

Got it. And then a follow-up, maybe, John, I think you mentioned in the preamble some pretty material movement, I think it was $250 million decline in criticized. Maybe curious any sort of color you can give on where you saw that improvement types of credits, segments, et cetera?

Pretty much across the board. Part of what we did in part just a function of the environment, we continue to dig pretty deeply in terms of scrutinizing the portfolio, not that we don't do that in the normal course. We've especially done that with the Sandy Spring portfolio being new to us. And the reality is we call them as we see them. The overall health of our client base is pretty good. And so we've seen it pretty much across the board. Doug Woolley, the Chief Credit Officer is here, is that a fair assessment?

Dave, the improvement in credit is at the client level. There are no industries or markets that are of any concern. It's just individual clients that may suffer difficulties. And of course, we work with them all the way through, and that's where the improvement comes from, the improvement of their operations. And we do believe we are conservative risk raters.

Our final question comes from Steve Moss with Raymond James.

Maybe going back to loan growth here, John, I hear you on the mid-single digits with potential to be doing higher single digits over time here. And obviously, the pipeline has increased. Just curious here with the North Carolina expansion, what kind of contribution could you see next year from that from loan growth, if any, that could be additive?

Dave?

So we're adding bankers in North Carolina. We've actually seen North Carolina turn to positive growth after...

Initial Americas...

Yes. And there's very positive momentum there. What we like about North Carolina is it is a real active market, and you could drive down any highway and see multiple manufacturing distribution facilities. And -- we have now -- we think we placed a lot of talent in that market to go after that business. We have pretty low market share. So there's a lot of upside in that state.

Yes. It's arguably from an economic development standpoint, it's arguably the best of the growth markets where we have a physical presence, which we're expanding. So Steve, that is potential upside. We're being very conservative in terms of how we think about it. We're speaking to loan growth expectations for the entirety of the franchise. But Dave, you and I have a conversation yesterday even or 8 years. And we think about how diversified the bank is now versus what we first saw and all the -- I think you referred to it as the levers that we have to pull now. So this is a very diversified franchise. And so we see opportunities really in all markets, but North Carolina will have the fastest rising tide.

And we do have roughly 20 bankers now in that market going at it, which is an increase over time. So we're very excited about the opportunity there. We're in Wilmington, we're all we try out and triangle markets, and we have a presence in Charlotte and in South Carolina as well. So we're pretty excited about that.

Okay. Appreciate that color there. And then one last one for me. Most of my questions been asked and answered. But I'm not sure if I missed it. Curious, Rob, as to the purchase accounting assumptions for the fourth quarter and for 2026?

Yes. So in terms of the accretion income, I think you could -- if you take a look at the third quarter, it's kind of what we're anticipating for the fourth quarter, call it about $40 million, $41 million which was down from the third quarter, as we mentioned. It's probably going to continue to decline as we go through next year. But call it between $35 million and $40 million run rate -- quarterly run rate going throughout next year and continue to come down as we go into '27.

And of course, that's being replaced, that cash income has been reinvested.

Yes, exactly. Turning into core.

Since it's mostly interest rate marks.

Okay. And actually, maybe just one last one for me here. John, with regard to capital return here, profitability, you're talking about -- you're definitely building capital. Just curious, you talked about a buyback as well, how to think about maybe the timing of a buyback starting next year?

Yes. We're definitely going to be accreting capital at a good rate. And even more so as we get through Q4 once all of the Sandy Spring related expenses are out. And you can see we have pretty handsome operating metrics right now, which should get better still. So Rob, do you want to talk about how we would think about the -- Well, actually, let me say this, clearly, as always, first priority for capital is simply to reinvest in the business and fund lending growth. But what we're guiding to implies that we're going to be accumulating capital faster than we needed. Therefore, capital will continue to rise.

Yes. Taking into consideration our growth on the balance sheet, the investment in strategic initiatives and things, assuming we've got the capital for that. We're comfortable managing with a CET1 between 10% and 10.5%. So anything beyond, call it, 10.5% would be available for buybacks, excess capital, if you will. Our projection call for that is probably be in that position probably in the second half of next year. So likely we would export for an authorization to repurchase shares sometime in that time frame.

Thank you, Steve. And thanks, everyone, for joining us today. We look forward to talking with you at our Investor Day in December. Have a good day.

This concludes today's conference call. Thank you for participating. You may now disconnect.