Is Atlantic Union Bankshares (AUB) a Buy After the Sandy Spring Merger?

The recent $1.3 billion merger between Atlantic Union Bankshares (NYSE:AUB) and Sandy Spring Bancorp has reshaped the regional banking landscape, creating one of the most formidable financial institutions in the lower Mid-Atlantic. As of April 1, 2025, the combined entity boasts a pro forma asset base of $38.7 billion and a dominant presence in Virginia and Maryland. For investors, the question now is: Is AUB a compelling buy after this strategic acquisition? The answer lies in its post-merger financial performance, valuation metrics, and long-term growth potential.

Strategic Growth: A Regional Powerhouse Emerges

The Sandy Spring merger was not just a transaction—it was a strategic masterstroke. By absorbing a regional bank with $13 billion in assets, AUB has expanded its deposit base by $10.5 billion to $31 billion and its loan portfolio by $8.9 billion to $27.3 billion. This scale has allowed AUB to strengthen its balance sheet and diversify its revenue streams. The integration has also unlocked geographic synergies, with the combined bank now operating 165 branches across Virginia, Maryland, and North Carolina.

The cost synergies from this merger are equally impressive. The Sandy Spring core system conversion, expected to be completed in October 2025, is projected to deliver 27% in cost savings by year-end. This is critical for a regional bank navigating a post-merger environment where operational efficiency often determines success. While Q2 2025 noninterest expenses rose 67% to $279.7 million (largely due to merger-related costs), adjusted operating expenses increased a more manageable 47% to $182.4 million. These figures suggest AUB is on track to realize meaningful cost reductions in the coming quarters.

Valuation: A Discounted Opportunity in a Competitive Sector

AUB's post-merger valuation appears attractively positioned. As of July 2025, the stock trades at a trailing P/E of 13.24 and a forward P/E of 13.06—well below the S&P 500's average P/E of 20. Analysts project earnings to grow from $2.90 to $2.98 per share in the next year, a modest but stable 2.76% increase. This growth is supported by a robust net interest margin of 3.78% in Q2 2025, up 40 basis points from the prior quarter.

Despite these fundamentals, AUB's stock price closed at $33.68 in July 2025, down 1.72% after the Q2 earnings report. This underperformance relative to its strong financial results suggests a potential disconnect between fundamentals and market sentiment. The stock remains within its 52-week range (high of $44.54, low of $22.85), indicating it is neither overvalued nor undervalued. However, the market's cautious stance—likely due to merger integration complexities and broader economic uncertainties—presents an opportunity for long-term investors.

Long-Term Shareholder Value: A Track Record of Resilience

AUB's long-term appeal lies in its ability to generate consistent shareholder value. The bank has maintained dividend payments for 32 consecutive years and increased them for 14 straight years, with a current yield of 2.5%. This track record underscores its financial stability and commitment to rewarding shareholders.

Looking ahead, AUB's guidance for 2025 is optimistic. It anticipates three Federal Reserve rate cuts, which could stabilize its net interest margin (projected to remain between 3.75% and 4.0%). The bank also expects loan and deposit balances to reach $28–29 billion and $31–32 billion, respectively, by year-end. These figures suggest a solid foundation for organic growth, even as the integration of Sandy Spring continues.

However, risks remain. The allowance for credit losses increased to 1.25% of total loans in Q2 2025, reflecting higher risk in certain portfolios, such as construction and land development. Additionally, the efficiency ratio of 69.4%—well above the analyst estimate of 55.5%—highlights the need for tighter cost controls. Investors must weigh these challenges against AUB's strategic advantages and strong capital ratios (CET1 at 9.77%, total capital at 13.73%).

Investment Thesis: A Buy for Patient Investors

AUB's merger with Sandy Spring has created a regional banking powerhouse with a strong balance sheet, growing asset base, and attractive valuation. While near-term challenges—such as integration costs and asset quality concerns—may weigh on earnings, the long-term outlook is positive. The bank's disciplined approach to cost synergies, geographic expansion, and shareholder returns makes it a compelling candidate for investors with a multi-year horizon.

Key Takeaways for Investors:
1. Buy on Dips: AUB's stock price has remained flat post-merger despite strong earnings, offering a potential entry point for undervalued growth.
2. Monitor Integration Progress: The October 2025 core system conversion is critical to unlocking cost savings. Investors should watch for operational improvements in Q4 2025.
3. Assess Interest Rate Sensitivity: AUB's net interest margin is projected to remain stable despite expected rate cuts, but investors should track its ability to adapt to a lower-rate environment.

In conclusion, Atlantic Union Bankshares is a buy for investors seeking a regional bank with strategic momentum and a history of disciplined growth. While the journey post-merger may have hiccups, the long-term value creation potential is substantial.