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 decidedly positive tone, with management emphasizing strong loan growth, improving margins, disciplined costs and exceptional credit quality. While funding pressures from a shift toward higher-cost deposits tempered the outlook for net interest income and margin, executives argued that core profitability and capital generation remain more than sufficient to absorb these headwinds.

Strong Loan Growth

Loans held for investment finished the quarter at about $28.7 billion, with average loans of $28.2 billion and annualized growth near 6% in Q2. Period-end balances rose at a faster 10.4% annualized pace from Q1 to Q2, and year-to-date loan growth is tracking 6.4%, putting the company on course for year-end loans between $29 billion and $30 billion.

Margin and NII Improvement

Reported fully tax-equivalent net interest margin widened by 9 basis points to 3.94%, while core margin edged up 1 basis point to 3.46%. Tax-equivalent net interest income reached $329.7 million, up $12.8 million quarter over quarter on stronger loan volumes and yields, supporting a full-year NII outlook of $1.32 billion to $1.33 billion and a tightened NIM range of 3.90% to 3.95%.

Strong Operating Profitability

Adjusted operating net income available to common shareholders came in at $134 million, translating to earnings per share of $0.94. Returns were notably robust, with adjusted operating ROTCE at 20.11%, ROA at 1.47%, and an efficiency ratio of 47.47%, while GAAP net income to common shareholders totaled $158 million, or $1.11 per share.

Solid Credit Performance and Reserves

Credit metrics remained pristine, with annualized net charge-offs just 3 basis points in both the quarter and year to date. The allowance for credit losses increased modestly to $331 million, or 115 basis points of loans, and management kept its ACL target at 115 to 120 basis points while lowering 2026 net charge-off expectations to a very low 5 to 10 basis points.

Capital Generation and Book Value Growth

Tangible book value per share rose $0.84 from the prior quarter to $20.77, a 4.2% sequential and 13% year-over-year increase. The CET1 ratio stood at 10.41%, comfortably within the 10.0% to 10.5% preference range, and the company repurchased about $10 million of stock with roughly $240 million of buyback capacity remaining, supporting an expected 12% TBV growth in 2026.

Revenue Diversification and Noninterest Income

Reported noninterest income climbed $35.5 million to $90.2 million, boosted by a sizable gain on the sale of an equity interest. On an adjusted basis, noninterest income increased $33.1 million to $57.9 million, helped by stronger loan-related swap fees and fiduciary and asset management revenue, with former Sandy Spring capital markets teams generating meaningful contributions in swaps and FX.

Expense Discipline

Total noninterest expense fell $10.7 million to $199.1 million, largely reflecting a $9 million drop in merger-related costs as integration spending rolled off. Adjusted operating noninterest expense slipped to $184 million, aided by lower marketing and seasonally softer payroll items, and the bank tightened its 2026 adjusted expense guidance to a range of $742 million to $752 million.

Deposit Mix Shift and Funding Pressure

Management highlighted a shift in customer behavior toward higher-yielding interest-bearing products, which is pushing up funding costs. The spot cost of deposits reached about 1.95% in June, with new interest-bearing deposits coming on between 3.0% and 3.5%, prompting a downward tweak to net interest income expectations and a tighter outlook for net interest margin.

Elevated Competitive Environment for Deposits

Competitive intensity for deposits remained elevated but stable, driving customers toward CDs, money market accounts and interest checking that carry higher rates. Total deposits were $30.5 billion, growing roughly 1% annualized from Q1 to Q2, yet management noted some volatility in average balances tied to seasonality and mix, underscoring ongoing deposit pricing risk.

Short-Term Borrowings Increased at Quarter-End

The loan-to-deposit ratio ended the quarter at 94.1%, squarely inside the bank’s 90% to 95% target range but still reflecting a tight funding posture. To support strong late-quarter loan growth, management leaned on incremental short-term borrowings as a bridge, signaling near-term funding strain even as core deposit relationships remain solid.

Minor Uptick in Nonperforming Assets and Small C&I Nonaccruals

Nonperforming assets rose slightly to 39 basis points of loans held for investment, a level the bank still views as benign. Two smaller commercial and industrial credits were moved to nonaccrual status during the quarter, but executives characterized these as isolated issues that do not indicate broader stress in the loan portfolio.

One-Time Gain Supporting Reported Noninterest Income

Reported noninterest income was notably affected by a one-time pretax gain of $32.3 million from the sale of an equity interest. While adjusted noninterest income saw genuine underlying strength, management was careful to separate the recurring improvement from this nonrecurring gain when framing profitability trends.

Updated Guidance and Outlook

Looking ahead, Atlantic Union now projects year-end 2026 loans of $29 billion to $30 billion and deposits of $31 billion to $32 billion, with credit costs staying very low as ACL holds at 115 to 120 basis points and net charge-offs at 5 to 10 basis points. The bank guides full-year tax-equivalent NII to $1.32 billion to $1.33 billion, NIM to 3.90% to 3.95%, noninterest income to $22 million to $30 million, and adjusted operating expenses to $742 million to $752 million, while managing CET1 around 10% to 10.5% and aiming to complete the remaining share repurchases and grow tangible book value roughly 12% in 2026.

Atlantic Union’s earnings call painted the picture of a bank balancing strong growth and profitability against rising funding costs in a competitive deposit market. For investors, the key takeaway is that asset quality, capital levels and return metrics remain impressive, and management appears confident that disciplined expense control and capital deployment can sustain attractive shareholder value despite the funding mix challenges ahead.