Atlantic Union Turns a Page: A Clean Quarter, but Deposit Mix Weighs on Outlook
First quarter in two years without merger costs; strong loan growth and margin improvement offset by funding mix pressure.
AUBAP · Earnings Call · 2026-07-21
The Long-Awaited Clean Quarter
For the first time in two years, Atlantic Union Bankshares reported results with no merger-related costs—a subtle but meaningful milestone. As President and CEO John Asbury noted, “For the first time in 2 years, we did not incur any merger-related costs.” — John Asbury, President and CEO · 2026-07-21 This is the clearest signal yet that the integration of Sandy Spring Bank is fully behind the company and that the franchise is now entering a period of pure organic execution. The quarter also included a $32.3 million pre-tax gain from the sale of its equity interest in Bearing Insurance, which, as CFO Alex Dodd explained, helped push reported EPS to $1.11. Excluding that gain, adjusted operating earnings were $0.94 per share, driving an adjusted operating return on tangible common equity of 20.11%—a level that has already hit the company's medium-term target.
Loan Growth Momentum
The core story this quarter is loan growth. Average loans grew approximately 6% annualized, while period-end loans jumped 10.4% annualized to $28.7 billion. This was broad-based, with particular strength in commercial lending, construction lending, and multifamily. The pipeline remains healthy, and management expects full-year loan growth to land at the higher end of its mid-single-digit range. Notably, the former Sandy Spring teams are now contributing meaningfully—they generated 27% of interest rate swap transactions and 32% of foreign exchange revenue. The company's interest bearing deposits strategy is shifting toward higher-yielding products, but loan growth is being funded increasingly by core deposits, a trend the company expects to continue.
Deposit Mix and NIM Guidance
Despite the strong loan performance, the liability side is proving more challenging. Core net interest margin improved by only 1 basis point quarter-over-quarter to 3.46%, as deposit growth was concentrated in deposit mix—specifically, customers moving into higher-yielding interest-bearing accounts. Alex Dodd provided clarity on the deposit dynamics: “We're actually forecasting some of the interest-bearing -- I'm sorry, noninterest-bearing growth in the second half of the year and maintaining that same percentage of our total deposits around 22%.” — Alexander Dodd, Executive Vice President and CFO · 2026-07-21 The company now expects a 25 basis point Fed hike in September, but the benefit will be partially offset by rising deposit costs. As a result, the full-year NIM guidance was tightened to 3.90%–3.95%, with NII guided down to $1.32–$1.33 billion.
Geopolitical Backdrop and Execution
Management was candid about the macro environment. Asbury mentioned that the quarter was marked by Iran conflict uncertainty, but noted that customer confidence and economic activity in its footprint held up well. The company's strategic priorities remain unchanged: disciplined execution, organic growth, and soundness. As Asbury said, “We remain focused on building on this progress through disciplined execution, organic growth and continued attention to soundness, profitability and growth in that order.” — John Asbury, President and CEO · 2026-07-21 This consistency, combined with the absence of merger costs and the successful integration, suggests Atlantic Union is now positioned to generate sustained top-quartile returns.