Atlantic Union has 114 branches in Virginia, Maryland and North Carolina.
Richmond’s biggest bank is trimming its employee count and eliminating some of its downtown office space as it looks to keep expenses in check in the face of rising interest rates and tightening margins.
Atlantic Union Bank on Thursday announced the specifics of a multi-pronged plan to slash $17 million in costs annually.
The biggest piece of that effort calls for layoffs of 4 percent of the company’s staff by the end of July.
CEO John Asbury said in an interview with BizSense Thursday afternoon that approximately 74 employees will be affected by the job cuts. Those include positions across the organization and mostly in the bank’s various back-end support divisions, rather than client-facing workers, he said.
The layoffs also are spread out geographically and not concentrated in its hometown of Richmond, Asbury said.
The division hit the hardest from the layoffs is the bank’s 15-person indirect automobile financing unit, which is being eliminated entirely.
“Indirect auto is a pretty thin-margin business. While it’s been a good business, in this environment it was simply too thin a margin,” Asbury said.
John Asbury
Asbury said the capital typically devoted to the auto business would be reallocated to other areas of the bank in a more fruitful way.
“We are aligning resources with opportunity,” he said.
Additional expenses will be shaved by renegotiating contracts with the bank’s third-party technology vendors and reducing the bank’s amount of leased corporate office space.
The bank leases three office buildings in the Richmond region: on three floors in James Center and two entire buildings in Innsbrook.
While Asbury said the bank is still negotiating with its landlords on that front, he confirmed the company will be vacating nearly two entire floors in Three James Center, which houses its corporate headquarters in downtown Richmond. It will continue to occupy one floor in the building.
“We’re not exiting any building entirely,” Asbury said.
Some of the operations in the excess James Center space will be consolidated to the bank’s building on Cox Road in Innsbrook, which Asbury said is recently renovated and underutilized.
The office space shuffle is also due to AUB’s continued policy of letting some corporate employees work from home two days a week and the resulting unused square footage.
“We are a hybrid shop,” Asbury said. “We don’t need to pay rents for space we’re not using.”
Atlantic Union is headquartered in Three James Center.
Thinking longer-term about office space, Asbury said the bank has other plans in mind, though nothing concrete.
“We envision one consolidated headquarters facility in the greater Richmond area somewhere,” he said. “We really don’t like having people spread in three buildings.”
There are no branch closures planned as part of this round of cost cutting, Asbury said. The bank had 109 branches as of the end of the first quarter.
Asbury emphasized that the bank’s overall revenue continues to rise and that the cost cutting is aimed at reducing its rate of expense growth, which has been accelerated by the rapid increase in interest rates and compressed the bank’s net interest margin.
“We have completed our review, doing what we said we would do, reducing expense growth to low single digits, 1 or 2 percent,” he said.
Discussing the banking market more broadly, Asbury said things are holding up well for the time being.
“We are still seeing solid loan growth. Overall, I think the economy is performing better than one might expect,” he said.
Deposits are stable, he said, but are more costly for the bank because of rising interest rates.
If there has been a slowdown in lending, it’s in the commercial real estate sector, he said.
“I think we have seen lenders grow more cautious, particularly for commercial real estate loans,” he said.
But he said the cautiousness goes both ways.
“It’s not so much that we’re tightening, it’s that our borrowers are tightening,” he said, adding that many developers are putting projects on hold due to lenders requiring more equity up front on deals.
“From Atlantic Union Bank’s standpoint, we are absolutely open for business,” he said.
Atlantic Union has 114 branches in Virginia, Maryland and North Carolina.
Richmond’s biggest bank is trimming its employee count and eliminating some of its downtown office space as it looks to keep expenses in check in the face of rising interest rates and tightening margins.
Atlantic Union Bank on Thursday announced the specifics of a multi-pronged plan to slash $17 million in costs annually.
The biggest piece of that effort calls for layoffs of 4 percent of the company’s staff by the end of July.
CEO John Asbury said in an interview with BizSense Thursday afternoon that approximately 74 employees will be affected by the job cuts. Those include positions across the organization and mostly in the bank’s various back-end support divisions, rather than client-facing workers, he said.
The layoffs also are spread out geographically and not concentrated in its hometown of Richmond, Asbury said.
The division hit the hardest from the layoffs is the bank’s 15-person indirect automobile financing unit, which is being eliminated entirely.
“Indirect auto is a pretty thin-margin business. While it’s been a good business, in this environment it was simply too thin a margin,” Asbury said.
John Asbury
Asbury said the capital typically devoted to the auto business would be reallocated to other areas of the bank in a more fruitful way.
“We are aligning resources with opportunity,” he said.
Additional expenses will be shaved by renegotiating contracts with the bank’s third-party technology vendors and reducing the bank’s amount of leased corporate office space.
The bank leases three office buildings in the Richmond region: on three floors in James Center and two entire buildings in Innsbrook.
While Asbury said the bank is still negotiating with its landlords on that front, he confirmed the company will be vacating nearly two entire floors in Three James Center, which houses its corporate headquarters in downtown Richmond. It will continue to occupy one floor in the building.
“We’re not exiting any building entirely,” Asbury said.
Some of the operations in the excess James Center space will be consolidated to the bank’s building on Cox Road in Innsbrook, which Asbury said is recently renovated and underutilized.
The office space shuffle is also due to AUB’s continued policy of letting some corporate employees work from home two days a week and the resulting unused square footage.
“We are a hybrid shop,” Asbury said. “We don’t need to pay rents for space we’re not using.”
Atlantic Union is headquartered in Three James Center.
Thinking longer-term about office space, Asbury said the bank has other plans in mind, though nothing concrete.
“We envision one consolidated headquarters facility in the greater Richmond area somewhere,” he said. “We really don’t like having people spread in three buildings.”
There are no branch closures planned as part of this round of cost cutting, Asbury said. The bank had 109 branches as of the end of the first quarter.
Asbury emphasized that the bank’s overall revenue continues to rise and that the cost cutting is aimed at reducing its rate of expense growth, which has been accelerated by the rapid increase in interest rates and compressed the bank’s net interest margin.
“We have completed our review, doing what we said we would do, reducing expense growth to low single digits, 1 or 2 percent,” he said.
Discussing the banking market more broadly, Asbury said things are holding up well for the time being.
“We are still seeing solid loan growth. Overall, I think the economy is performing better than one might expect,” he said.
Deposits are stable, he said, but are more costly for the bank because of rising interest rates.
If there has been a slowdown in lending, it’s in the commercial real estate sector, he said.
“I think we have seen lenders grow more cautious, particularly for commercial real estate loans,” he said.
But he said the cautiousness goes both ways.
“It’s not so much that we’re tightening, it’s that our borrowers are tightening,” he said, adding that many developers are putting projects on hold due to lenders requiring more equity up front on deals.
“From Atlantic Union Bank’s standpoint, we are absolutely open for business,” he said.
Although not specifically mentioned, it sort of sounded like downtown Richmond May eventually lose AUB to a Richmond area suburban HQ office where the whole HQ staff can be consolidated into one location cheaper than being downtown. That’s unfortunate. I had hopes that one day AUB would build a new HQ tower downtown. Maybe I’m reading the tea leaves incorrectly here, but this article seemed to indicate that an eventual larger HQ tower downtown is probably off the table. 🙁
Not surprising that another regional bank is under pressure. Sad, because I hate to see the big boys get bigger.
The AUB decision to shrink office space is ongoing nationally as a hybrid system of going to the office or working from home takes hold.
This isn’t a good sign for the commercial office segment of the real estate industry.
Long gone are the days of Ukrop’s First Market. I don’t understand how or why anyone would bank with them anymore. Cutting staff from a profit-making arm simply because you want to shore up margins for shareholders is such a nasty thing to do — even better reason to support your local Credit Union or other small financial institution.
I agree that a local Credit Union is almost always better than a bank. By the way, the regional banks are just want-to-be big banks.
Also, many bankers must use this site. I say this because when anyone says anything positive about a Credit Union, it gets a net thumbs down, really quick.
As a former bank customer I will tell you their ‘client facing’ approach in the commercial banking world is horrible. They have lost talent over and over and fail to replace them. My banker who was great resigned and no one contacted me for almost a year. Then at the 11th hour they wanted to save the relationship. The ‘savior’ quit two months later and went to another local bank. I am also curious in this cost saving measure how much of the 3+ million dollar salary the CEO is giving up? I bet its nothing and the savings is… Read more »
Worth noting, the bank reported first quarter net income available to common shareholders (meaning net income minus preferred stock dividends) of $32.7 million.
I think when reporting on companies’ cost-cutting measures, especially when it involves layoffs, it should be common practice to at least include their recent bottom line.