Atlantic Union Bankshares Corporation (NYSE: AUB) Q4 2025 Earnings Call dated Jan. 22, 2026
Corporate Participants:
Bill Cimino — Senior Vice President of Investor Relations
John Asbury — Chief Executive Officer
Rob Gorman — Chief Financial Officer
Shawn O’Brien — Consumer and Business Banking Group Executive
David Ring — Wholesale Banking Executive
Analysts:
Janet Lee — Analyst
David Bishop — Analyst
Stephen Moss — Analyst
Brian Wilczynski — Analyst
Hannah Wynn — Analyst
Stephen Scouten — Analyst
Presentation:
operator
Good day and thank you for standing by. Welcome to Atlantic Union Bancshare’s fourth quarter 2025 earnings conference call. At this time, all participants on a listen only mode. After the speaker’s presentation there will be a question and answer session. To ask a question during the session you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. Please note that today’s conference is being recorded. I will now hand the conference over to your speaker host Phil Cimillo, Senior Vice President of Investigations. Please go ahead.
Bill Cimino — Senior Vice President of Investor Relations
Thank you Livia and good morning everyone. I have Atlantic Union Bancshares 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 their 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 members measures including reconciliations to comparable GAAP measures is included in the appendix to our slide presentation and in our earnings release for the fourth quarter and full year 2025.
You’ll also make forward looking statements which were 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 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 a 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.
John Asbury — Chief Executive Officer
Thanks Bill. Good morning everyone and thank you for joining us today. Atlantic Union Bancshares reported strong fourth quarter financial results reflecting disciplined execution and successful integration of the Sandy Springs acquisition. We believe the adjusted operating financial results for the quarter showcase 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 QOR systems conversion completed in October and only modest residual merger related expenses anticipated in the first quarter, we expect the noise associated with our merger related expenses to decline.
This means that we will be positioned beginning with Q1 2026 to report unadjusted results that more clearly 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 in the still uncertain economic environment, we continue to expect 2020 six year end loan balances to range between 29 and $30 billion inclusive.
Of the negative impact from loan fair, 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. Loan yields 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 or reprice 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 nascent 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 one 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 non performing 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 remain low 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 4 percentage point increase since September. This change aligns with our expectations, particularly considering the November data now includes federal government workers who took buyout plans. 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, Maryland and North Carolina to stay manageable and below the national average, consistent with Moody’s current state level forecast, we remain competent 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 three 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 two years to complete the company we envisioned and worked so 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?
Rob Gorman — Chief Financial Officer
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 fourth quarter and full year 2025. My commentary today will primarily address Atlantic Union’s fourth quarter and 2025 financial results presenting on a non GAAP adjusted operating basis which for the fourth quarter excludes $38.6 million in pre tax merger related costs from the Sandy Spring acquisition and for the full year 2025 excludes the following pre tax merger related cost of $157.3 million, pretax gain on the sale of CRE loans of $10.9 million and the pre tax gain on the sale of our equity interest and Cary street partners of 14.8 million.
That said, in the fourth quarter reported net income available to common shareholders was of $109 million and earnings per common share were 77 cents. 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 97 cents per common share in the fourth quarter, resulting in an adjusted operating return on tangible common equity of 22.1%, an 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 20.3, 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 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 two 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 pre tax 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 and 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 in other earning asset yields partially offset by slightly higher loan yields.
As John mentioned, loan yields 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. Non interest 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 pre tax 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 CNE Spring acquisition Adjusted operating non interest income which excludes the pre tax loss on the CRE loan sale in the third quarter income tax.
The pretax gain on sale of our equity interest and Cary Street Partners in the fourth quarter and the pre tax 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, $400,000 of 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.
Any increases in fiduciary and asset management fees of $1.3 million primarily due to increases in estate fees, personal trust income and investment advisory fees. Reported non interest 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 Citiespring 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 non credit 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 in 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 CNE. Spring at December 31, loans held for investment netted of deferred fees and costs were $27.8 billion, which was an increase of $435 million or 6.3% annualized from the prior quarter. The 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 billion in broker deposits.
At the end of the fourth quarter, Atlantic Union bank shares 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 19.69 $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 and 30 billion dollars, while year end deposit balances are projected to be between $31.5 billion and 32. 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 a 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 $1,350,000,000 and $1,375,000,000 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 in September in 2026 and that term rates will remain stable at current levels on a full year basis.
Non interest income is expected to be between 220 and $230 million while adjusted not adjusted operating non interest expense is expected to fall in the range of $750 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 and tangible book value per share of between 12 and 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 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.
Bill Cimino — Senior Vice President of Investor Relations
Thanks Rob and Lithia. We’re ready for our first caller. Please.
Questions and Answers:
operator
Thank you. Ladies and gentlemen, just as a reminder, if you’d like to ask a question at this time, please press Star 11 on your telephone and wait for your name to be announced. To withdraw your question, simply press star 11 again. Please stand by while we compile the GNA raster. Now, first question coming from the line of Janet Lee with TD Cowan. Your line is now open.
John Asbury
Good morning, Janet.
Janet Lee
Good morning. 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 qnim? 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 were a little bit above what you guided. So I wanted to see what would put you at the higher end versus lower end and what your baseline expectation is.
Rob Gorman
Yeah. So as we said, Janet, you know, 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. 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 needs for funding 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 would 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’re guiding 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 coming in at the higher end as well.
Janet Lee
Got it. Thanks for the color. 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 what drove that remix in the quarter and whether that’s going to reverse in the quarters ahead. Thank you.
Rob Gorman
Yeah. So on that end, in terms of the betas, we’re still guiding to an interest bearing deposits guidance of mid-50s, 50 to 55% which was in line with when rates were going up. I think we ended up the prior through the cycle beta was around 55% for interest rate 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 to 13 billion dollars.
We’ve been able to reprice fairly quickly as the feds come down. That’s been a good thing to offset our variable rate loan loan book that reprices with fed funds. So that kind of is a balancing act there. So but in terms of what was the other other question you had?
Janet Lee
Deposit remix.
Rob Gorman
Yeah, 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 one category to another that’s primarily probably the main driver of that. So don’t expect that to shift too much going forward. Level set that now.
Janet Lee
Got it. Thank you.
Rob Gorman
Thanks Janet and Livia.
Bill Cimino
We’re ready for our next caller please.
operator
Our next question coming from the line of David Bishop with Humpty Group. The line is now open.
Rob Gorman
Hi Dave.
David Bishop
Hey John, how are you doing?
John Asbury
Good, thank you.
David Bishop
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. Are you starting to see some traction across the legacy Sandy Spring portfolio and is that some of the drivers we saw in the CNI growth this quarter?
John Asbury
Yeah, 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 phenomena is you would expect to see the pipeline somewhat cleaned 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 and what we see.
David Ring
Yeah, I guess I would. I’d only add that our folks are. Very optimistic going into the year with good pipelines across the footprint. Yeah, not in one place.
John Asbury
Yeah. Including the former Sandy Spring franchise, to be clear.
David Bishop
Great. And then, John, maybe, you know, a holistic question, you know, change in the governor’s mansion there. Just your view here from a, you know, a business friendly climate, do you think that’s going to have much of an impact in terms of the, the commonwealth’s growth capacity and business climate? Thanks.
John Asbury
Yeah, thank you. We feel good about the outlook here in our home state of Virginia. Virginia has a long tradition of business oriented moderates in these statewide offices. Governor, U.S. senate, and I feel quite confident that the new governor will continue that tradition.
David Bishop
Great. I’ll stop there and hop back in the queue.
Rob Gorman
Thank you. David and Libby.
Bill Cimino
We’re ready for our next caller. Please.
operator
Our next question coming from the line of Steve Moss with Raymond James. Your line is now open.
Rob Gorman
Hi, Steve.
Stephen Moss
Good morning, John. Rob, Bill, 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?
Rob Gorman
Yeah. So on the loan pricing side, we’re seeing about, you know, 6 to 620 loan pricing, you know, both on the variable and the fixed rate loans. So we expect that will continue. Really depends on, you know, where short term rates are, obviously on the variable rate side and, and where term rates are. But the spreads seem to be holding up pretty well on top of those indexes and in terms of the. Deposit. Costs at the end of December is what you’re asking, Steve? Yeah, we’re below 2% on that. It’s about 1, I think it was about 196 coming out of December.
Stephen Moss
Okay, appreciate that. And then in terms of just kind. Of, you know, thinking about the core. Margin here, I apologize if I missed it. But just curious, you know, do you continue to expect core margin expansion here throughout the year and kind of how you’re thinking about the cadence if that’s the case?
Rob Gorman
Yeah, we think core margin will expand a bit. Some of that’s coming off, you know, where we talked about the acquired loan book is repricing and coming 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 the Fed, you know, if the Fed cuts, you know, more than a couple 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 some of our deposit costs, which are indexed to fed funds fairly quickly, which will offset some of the variable rate loan impacts of further cuts. So in all, I think we’ll see some modest core margin expansion based on those factors.
Stephen Moss
Okay, appreciate that. And then just in terms of following. Up on the, you know, purchase account accretion, just curious, any updated thoughts around the full year number for that in.
Rob Gorman
Terms of 2026 date? Steve? Yeah, you know, we’re currently modeling between 150 and $160 million in 2026. As you know, that can fluctuate. We saw a bit higher than expected in the fourth quarter. So that can fluctuate. But give or take, you know, 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.
Stephen Moss
Okay, appreciate that. And John, maybe just one for you on, you know, North Carolina expansion. I know you talked about it a. Fair amount last month. Just kind of curious, you know, as. You continue to expand down there in the markets, you know, what, what are the good things you’re seeing, maybe what are some of the challenges, you know, as you’re building out down there?
John Asbury
Yes, Well, I think that we’re making good progress in troom in terms of the efforts to expand the commercial teams. And Sean o’ Brien is here, head of consumer and business banking. Sean, you can speak to just sort of the latest in terms of the branch build out.
Shawn O’Brien
Yeah, we continue to move quickly, have plans for our 10 branches to be open in, in Raleigh and Wilmington here in the next year and a half, two 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 has been very good there as far as finding good sites and finding teammates. So we think we’re on track. Steve.
Stephen Moss
Okay, great. I appreciate all the color here and I’ll step back.
John Asbury
Thank you.
Bill Cimino
And Livia, we’re ready for our next caller. Please.
operator
Our next question coming from the line of Brian Wojcinski with Morgan Stanley Yulen is now open.
John Asbury
Hey, good morning.
Brian Wilczynski
Hi. Good morning. 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. There’s the Sandy Spring footprint, North Carolina, and also the specialty banking businesses. I was wondering if you could talk a little bit where you’re seeing the most traction in the fourth quarter given how strong growth was. What you see is sort of the near term driver across those three buckets versus what may take some more time to materialize.
John Asbury
Dave Ring, do you want to give some color on that?
David Ring
Yeah, we could talk for hours on this one.
John Asbury
Let’s not do that.
David Ring
You know, 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 will see I think really nice results over the course of 26, but they also have turned 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 from
John Asbury
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 in with all the commercial market leaders and credit officers, is we’re seeing strength across the state. And so that’s actually really good to see. So we feel pretty good about the setup, Brian. It feels pretty well diversified.
Brian Wilczynski
That’s great to hear. And you highlighted the 6% annualized growth in the fourth quarter. Pipeline’s up, sounds like production is up. 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 the end of the government shutdown, material tailwind, or does it feel like you can sort of maintain this cadence over the course of the year?
John Asbury
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 it will 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.
Brian Wilczynski
Really appreciate the detail and thanks for taking my questions.
John Asbury
Thank you.
Rob Gorman
Thanks, Brian.
Bill Cimino
And we’re ready for our next caller. Please.
operator
Our next question coming from the line of Katherine Miller with KBW Yolan is now open.
John Asbury
Good morning.
Hannah Wynn
Good morning. This is Hanowin stepping in for Kathryn. Thank you for taking my question. 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.
John Asbury
Yeah, let me start by saying we saw the typical for us end of year decline that happens really in the last two weeks, if not last week of December. It’s not at all uncommon. And we saw it again where some of the larger commercial depositors will have various payments that they’re making. And so you see this downdraft in non interest 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 the 2026?
Rob Gorman
Yeah. 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. Really low single digits is what we’re calling for.
Hannah Wynn
Okay, thank you.
John Asbury
Thank you.
Rob Gorman
Thanks. Anna and Olivia.
Bill Cimino
We’re ready for our next caller, please.
operator
Our next question coming from the line of Steven Scott with 5% lay us now open.
Rob Gorman
Hi Steven, good morning.
Stephen Scouten
Yeah, good morning guys. Thanks. So one quick clarification, John, I think you said most of the cost saves. Related to the Sandy Spring deal are 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. You know what I think was around 204,205 million here this quarter on an adjusted basis.
Rob Gorman
Yeah. So Steven, the way I think about that is you’re going to see kind of a flattish quarter in the way we’re modeling it. Flash quarter, first quarter and it starts coming down a bit over the remaining years. You know, of course you understand the there are some seasonality in the first quarter. As you know, FICO resets, bonus payments are made, unemployment taxes go up and then we have some Merit increases going in. So that’ll be kind of the high water mark if you 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.
John Asbury
Rob, what can we say about what’s left of Sandy Spring related expenses?
Rob Gorman
Yeah, 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. You know 27.5% in the numbers. It’s probably about annualized about 60 some odd million there. Call it 60. We’re getting another five 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 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 in 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 in a reference.
John Asbury
There’s some residual remaining expenses in Q1.
Rob Gorman
Which is I think from a merger related.
John Asbury
Yeah, like merger ones.
Rob Gorman
Yeah, we have a couple of some IT decommissioning expenses and a few related to some leases that we’re getting out of. Maybe less than 5 million is our projection for the first quarter.
John Asbury
And then merger related. That’s it, it’s all over. That is done.
Stephen Scouten
That’s great. That’s extremely helpful detail. Appreciate it. And maybe I know you kind of. Noted the progression in North Carolina, that potential expansion still pretty much on path for you know, build out over the next year and a half to two 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 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 you know, given the integration with Legacy Sandy Springs into the AUB platform.
John Asbury
That would principally be I think a Commercial or wholesale banking Question. Do you want to answer that, Dave?
David Ring
Yes. I mean this is not the time. You necessarily want to hire a banker because you’re going to have to pay their bonus.
John Asbury
You mean this time of year?
David Ring
Yeah, 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.
John Asbury
In Carolina?
David Ring
In the Carolinas. And they’re very active. And so, you know, 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, you know, March, between March. And August during the year.
John Asbury
We do feel good about this team and our capacity. We’re sort of always in the market to some extent, but I wouldn’t expect to see like some big announcement that there’s some big expansion per se, but we’ll see how it goes.
Rob Gorman
But there’s no constraints on hiring. It’s just hire.
John Asbury
We have a long track record of, you know, as we can expand with the right talent, we tend to to do that and make it work out.
Rob Gorman
A little harder to accelerate on the consumer side because you got the branch build outs 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.
Stephen Scouten
I mean, you’ve got a lot on your plate clearly in terms of this 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 threshold you want to hit from a capital level first before you entertain that?
Rob Gorman
Yeah, I think we’ve been clear that we, we will entertain a share repurchase probably 2H20, 26 of this year. Really looking at excess capital. Anything beyond the 10.5% 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.
John Asbury
And I’m glad you asked that question, you saw that we grew tangible capital about 4%, approximately 4% in one 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 benefits of that. And we’ve been clear that we are guiding toward 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. Yeah.
Stephen Scouten
Fantastic. Feels like everything’s laid out before you. Appreciate the color guy.
Bill Cimino
Thank you Stephen and Livia. We’re ready for our last caller. Please.
operator
We have a follow up question from David Bishop. Elon is now open.
Rob Gorman
Hi Dave.
David Bishop
Hey John. Real quick. I guess a question for Rob. You noted the in other senses non credit related customer losses. Is that fraudulent type losses. Just curious what sort of drove those other expenses higher.
John Asbury
Yeah, that’s mostly what that is. Fraud is episodic and you know it can come and fit some spurts and that’s what you’re looking at.
Rob Gorman
Yeah, because was elevated just a couple of items issues that came up in the fourth quarter. Hopefully they don’t recur but you know they’re here.
John Asbury
It’s yeah. Do you get these scams that move around the industry and then there’ll be something else. But that’s episodic. But that’s what run rate issue.
David Bishop
Got it. So within your opex, you know guidance for the first quarter of the flattish would that be flattish off the reported sort of, you know, 204, you know, 0.6 on an adjusted basis or would it be, you know, sort of 202 adjusting for the fraud?
Rob Gorman
Yeah, it’s kind of around that range, you know, 203, 202, 203 including the amortization. Just because there’s you know, adds think about it is yeah, we may not see that level but there’s other things that will come in from a seasonal point of view.
David Bishop
Got it. Appreciate that color.
Bill Cimino
Thanks Dave and thanks everyone for calling. We look forward to speaking with you in three months. Have a good day.
operator
Ladies and gentlemen, this concludes today’s conference call. Thank you for your participation. You may now disconnect.
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