Atlantic Union's NII Guide Trimmed by Deposit Mix, But Core Momentum Holds
Q2 2026: Adjusted EPS of $0.94, ROATCE 20.1%, record loan production, but funding costs pressure net interest income outlook.
AUB · Earnings Call · 2026-07-21
Atlantic Union Bankshares (AUB) reported a strong second quarter. CFO Alexander Dodd noted that “adjusted operating earnings available to common shareholders were $134 million or $0.94 per common share” — Alexander D. Dodd, Executive Vice President and CFO · 2026-07-21, and John Asbury highlighted the record loan production. Yet management's revised NII outlook reflects a subtle but persistent shift in the deposit base.
Deposit Mix: The Guiding Hand
So we did update our guidance, for net interest income. And it is it is solely coming from the funding side of the balance sheet. What we saw in the quarter was customer migration to our higher yielding interest bearing deposit accounts, and that is informed our guidance.
The core net interest margin barely moved, but reported NIM expanded to 3.94% on higher accretion. The real story is the funding side. CFO Alexander Dodd was blunt: “It really is our deposit mix. it is informing the guide here. The deposit competition is elevated but stable.” — Alexander D. Dodd, Executive Vice President and CFO · 2026-07-21 This is a shift from the prior quarter's optimism; then, CFO Rob Gorman expected the core margin to “grind higher from here,” — Robert Gorman, Former CFO · 2026-04-21 but the deposit mix has forced a more cautious stance. This follows a similar adjustment in the first quarter, when Gorman noted that guidance was trimmed partly because “we've increased our deposit rate outlook” — Robert Gorman, Former CFO · 2026-04-21. Deposit mix is the buzzword. Noninterest-bearing deposits held at 22% of total, but new money is flowing into CDs and money markets at 3%–3.5% costs. This is a sector-wide challenge, but AUB's granular data shows it's not about aggressive competition—it's about where the growth lands. The shift toward interest-bearing deposits is a trend that has been building, and it's now a primary driver of the NII revision.
Loan Growth and Capital Machine
The balance sheet is humming. Loan production hit a record, with average loans up 6% annualized and period-end balances up 10.4%. As John Asbury noted, “We delivered record loan production during the quarter exceeding our 25 fourth quarter production level by roughly 8 percent.” — John C. Asbury, President and CEO · 2026-07-21 This growth is being funded partly by running down the securities book, now at 13% of assets. Dodd confirmed the priority: "We want to fund the loan growth from our core deposit growth going forward." Capital generation is accelerating: ROATCE hit 20.11%, ROA 1.47%, and tangible book value per share grew 13% year-over-year. The company restarted buybacks, repurchasing $10M in the quarter with $240M still authorized.
Credit Quality and Reserve Build
Credit remains pristine. Net charge-offs were just 3bps annualized, and management lowered the full-year guide to 5–10bps. Nonperforming assets are low at 39bps of loans. The allowance ratio held at 115bps, with a modest uptick in unemployment assumed. As Asbury said, "We have been impressed with the resilience of the not only our local economies, but client base." The bank is building reserves conservatively, but the provision expense has normalized after last year's spike.
Strategic Investments Pay Off
The Sandy Spring integration is complete, and revenue synergies are emerging. Former Sandy Spring teams contribute 27% of swap transactions and 32% of FX revenue. The North Carolina expansion is on track, with the first of 10 branches opening in Raleigh this month. These investments are funded by efficiency gains; the adjusted operating efficiency ratio improved to 47.47% in Q2. The efficiency ratio has fallen from over 60% a decade ago to 39.8% in Q1 2026, and the call's adjusted figure of 47.47% reflects the impact of strategic investments.The challenge is balancing these investments with margin pressure, but the bank's discipline suggests it will.
Outlook
The lowered NII guide is a yellow flag, but the underlying momentum is real. Loan growth is strong, credit is clean, and capital is building. The stock trades at 14.7x trailing earnings, a discount not fully justified by 13% TBV growth. As Asbury put it, "We believe Atlantic Union is well positioned to deliver sustainable growth, top-tier financial performance and long term value for our shareholders."