Atlantic Union Bankshares Balances Growth With Funding Pressure

Atlantic Union Bankshares Corporation ((AUB)) has held its Q2 earnings call. Read on for the main highlights of the call.

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Atlantic Union Bankshares’ latest earnings call struck a broadly optimistic tone, as management emphasized strong loan growth, wider margins, resilient profitability and pristine credit quality. While acknowledging rising deposit costs and funding pressure, executives argued that robust capital generation, growing tangible book value and disciplined expenses leave the bank well positioned despite a tougher deposit environment.

Loan Growth Remains a Core Engine

Loans held for investment ended the quarter around $28.7 billion, with average balances of $28.2 billion reflecting about 6% annualized growth in the second quarter. Period‑end loans climbed at a roughly 10.4% annualized pace from the first to the second quarter, and management now expects year‑end balances to land between $29 billion and $30 billion.

Margins and Net Interest Income Edge Higher

Reported fully tax‑equivalent net interest margin rose 9 basis points to 3.94%, while core net interest margin edged up 1 basis point to 3.46% as loan yields and volumes improved. Tax‑equivalent net interest income reached $329.7 million, up $12.8 million quarter over quarter, and the full‑year NII outlook was tightened to a range of $1.32 billion to $1.33 billion alongside a 3.90% to 3.95% NIM guide.

Profitability Metrics Stay Robust

Adjusted operating net income available to common shareholders came in at $134 million, translating to earnings per share of $0.94 and highlighting strong core performance. Returns remained attractive, with adjusted operating ROTCE at 20.11%, ROA at 1.47% and an adjusted operating efficiency ratio of 47.47%, while GAAP EPS reached $1.11 on net income of $158 million.

Credit Quality and Reserves Stay Strong

Annualized net charge‑offs were just 3 basis points in the quarter and year‑to‑date, underscoring a clean credit book despite isolated issues. The allowance for credit losses rose by $9.1 million to $331 million, holding steady at 115 basis points of loans, and management maintained its 115% to 120% ACL range while trimming 2026 net charge‑off guidance to 5 to 10 basis points.

Capital and Tangible Book Value Advance

Tangible book value per share increased $0.84 sequentially to $20.77, a 4.2% quarterly gain and 13% improvement year over year, reflecting notable capital accretion. The CET1 ratio stood at 10.41%, squarely within the preferred 10.0% to 10.5% band, and the bank repurchased about $10 million of stock in the quarter, leaving roughly $240 million of buyback capacity.

Noninterest Income and Revenue Diversification Improve

Reported noninterest income climbed to $90.2 million, up $35.5 million, aided by broader fee growth and mix benefits across businesses. On an adjusted basis, noninterest income increased $33.1 million to $57.9 million, driven largely by higher loan‑related swap fees and stronger fiduciary and asset management revenue.

Capital Markets and Fee Businesses Gain Traction

Capital markets teams hired from Sandy Spring continued to contribute meaningfully to the fee mix and diversify revenue streams away from spread income. These groups generated about 27% of loan‑related swap revenue and 32% of foreign exchange income in the quarter, highlighting the bank’s success in broadening its product set for commercial clients.

Expenses Reflect Ongoing Discipline

Total noninterest expense declined to $199.1 million, down $10.7 million, as merger‑related costs fell by $9 million and integration work slowed. Adjusted operating noninterest expense eased to $184 million, helped by lower marketing and seasonally softer payroll items, and management narrowed its 2026 expense outlook to a range of $742 million to $752 million.

Deposit Mix Shifts Toward Higher‑Cost Funding

Management highlighted a continued shift of balances into higher‑yielding interest‑bearing products such as money markets and interest checking, pushing funding costs higher. Spot deposit costs reached roughly 1.95% in June, and new interest‑bearing deposits are being raised at around 3.0% to 3.5%, prompting a more cautious stance on net interest income and margin.

Deposit Competition Remains Elevated but Stable

Executives described the deposit landscape as highly competitive, with customers showing a strong preference for certificates of deposit and other higher‑rate options. Total deposits of $30.5 billion grew at about a 1% annualized pace, but management acknowledged some volatility in average balances and mix as seasonal patterns and rate‑sensitive funds influenced flows.

Short‑Term Borrowings Bridge Late‑Quarter Loan Demand

The loan‑to‑deposit ratio finished the quarter at 94.1%, within the 90% to 95% target range but near the upper end as loan demand remained firm. Management leaned on short‑term borrowings to fund robust loan originations late in the period, characterizing these borrowings as a temporary bridge that underscores both strong loan pipelines and near‑term funding strain.

Nonperforming Assets Tick Up on Isolated Credits

Nonperforming assets moved modestly higher to 39 basis points of loans held for investment, still a low level by historical standards. The increase was mainly tied to two smaller commercial and industrial loans that migrated to nonaccrual status, which management framed as isolated events rather than signs of broader credit deterioration.

One‑Time Gain Inflates Reported Fee Income

Reported noninterest income benefited from a $32.3 million pretax gain on the sale of an equity position, providing a notable but nonrecurring boost to the quarter’s headline numbers. Management emphasized that this gain was excluded from adjusted operating results, which still showed solid underlying growth in fee‑based revenue.

Guidance Emphasizes Sustainable Growth and Capital Strength

For 2026, Atlantic Union is targeting year‑end loans of $29 billion to $30 billion and deposits of $31 billion to $32 billion, with the allowance for credit losses maintained at 115 to 120 basis points and net charge‑offs forecast at just 5 to 10 basis points. The bank expects fully tax‑equivalent NII of $1.32 billion to $1.33 billion, a 3.90% to 3.95% NIM, noninterest income of $22 million to $30 million, disciplined expenses, CET1 in the 10.0% to 10.5% range and roughly 12% tangible book growth.

Atlantic Union’s earnings call painted the picture of a bank balancing strong core momentum with a careful eye on funding headwinds. Loan growth, profitability and asset quality remain clear strengths, while deposit mix shifts and competitive pressures will require continued discipline on pricing and expenses, leaving investors to weigh the upside of capital returns and book value growth against the cost of supporting further expansion.