Atlantic Union Bankshares: A Resilient Play in Regional Banking Ahead of Q2 Earnings

Atlantic Union Bankshares (AUB) is poised to deliver its Q2 2025 earnings on July 24, offering investors a critical update on its strategic transformation. The bank's recent moves—culminating in its merger with Sandy Spring Bancorp and the $2 billion commercial real estate (CRE) loan sale to Blackstone—position it as a defensively positioned regional player. Here's why AUB deserves a closer look.

CRE Loan Sale to Blackstone: De-Risking the Balance Sheet

AUB's June 2025 sale of $2 billion in performing CRE loans to Blackstone Real Estate Debt Strategies marked a strategic pivot. Sold at a 7–10% discount to par, the transaction reduced CRE concentration from 18% to 14% of total assets, easing regulatory and investor concerns over exposure to volatile sectors like office and retail properties. Proceeds were redirected toward paying down high-cost deposits and expanding the securities portfolio, improving net interest margins in a high-rate environment.

The sale also reflects AUB's focus on resilient CRE segments: the portfolio was concentrated in multifamily and neighborhood retail, which have shown greater stability amid economic shifts. This move aligns with Blackstone's broader strategy to capitalize on discounted pricing in a market where over $600 billion in CRE loans face refinancing challenges by 2026.

Sandy Spring Integration: Unlocking Cost Synergies

The April 2025 merger with Sandy Spring Bancorp created a regional banking powerhouse with $38.7 billion in pro forma assets and 183 branches. By October 2025, AUB expects to realize 27% in cost savings post-integration, with full synergies contributing to a 28% accretive impact on 2026 earnings.

Key progress includes:
- Deposit Cost Reduction: A 18-basis-point decline in Q1 2025, driven by a $194 million increase in noninterest-bearing deposits.
- Net Interest Margin Expansion: Rose to 3.45% in Q1, up 12 basis points year-over-year.
- System Conversion: The core system transition for Sandy Spring is on track for October 2025, a milestone for operational cohesion.

These metrics suggest the merger is on track to deliver efficiency gains faster than initially projected.

Dividend Sustainability: A Steady Hand Amid Volatility

With a CET1 ratio of 10.1% as of March 2025—well above regulatory minimums—AUB maintains ample capital to support its 2.5% dividend yield. The bank's focus on accretive growth, such as doubling its wealth management AUM to over $13 billion, reinforces its ability to sustain payouts.

While Q1 2025 earnings dipped to $0.52 per share (vs. $0.60 in Q4 2024), this reflects merger-related costs and the timing of the CRE sale. The 2026 EPS accretion target of 28% suggests the dividend is safe, even in a rising-rate environment.

Investment Thesis: AUB as a Defensive Regional Play

AUB's moves—de-risking its balance sheet, accelerating synergies, and prioritizing capital-efficient growth—make it a standout regional bank. Key catalysts ahead of the Q2 earnings include:
1. Balance Sheet Strengthening: Confirmation of reduced CRE exposure and improved liquidity post-loan sale.
2. Synergy Progress: Early signs of cost savings and core system integration milestones.
3. Earnings Resilience: Whether Q2 results align with the 28% 2026 accretion target.

Risk Factors:
- CRE sector weakness could pressure loan performance.
- Delays in system integration could delay synergy realization.

Verdict

Atlantic Union Bankshares is executing a disciplined strategy to capitalize on its Mid-Atlantic footprint while de-risking its balance sheet. With a robust capital base, accretive merger synergies, and a dividend that offers stability, AUB presents a compelling case for investors seeking regional bank exposure. The July 24 earnings release will test whether these strategic moves are translating into tangible financial gains. For now, AUB remains a resilient play in an uncertain banking landscape.

Consider holding or accumulating AUB if valuation multiples compress below its peer median. Monitor the Q2 results closely for clues on its path to 2026 accretion targets.