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    AUB
    Earnings call· Mar 2026(Q1 FY26)

    Atlantic Union Bankshares Q1 FY26 earnings call AUB

    Apr 21, 2026 Source

    Executive summary

    Atlantic Union Bankshares Q1 FY26 — Solid Operating Results, Integration Concluded, and Positive Outlook

    Atlantic Union Bankshares reported solid Q1 FY26 results, marking the successful conclusion of the Sandy Spring Bank integration. The underlying operating performance supports confidence in achieving full-year financial outlooks, with a focus now on demonstrating earnings power and capital generation. Despite some NIM pressure from lower accretion income and geopolitical uncertainties, the bank is well-positioned for sustainable growth in its attractive markets, driven by strong loan pipelines and customer deposit growth.

    Highlights

    5

    • Adjusted operating return on tangible common equity was 19.6% in Q1 FY26.

    • Adjusted operating return on assets was 1.41% in Q1 FY26.

    • Adjusted operating efficiency ratio was 49.9% in Q1 FY26.

    • Annualized loan growth was approximately 2.2% in Q1 FY26, with total loans ending at $27.9 billion.

    • Annualized net charge-off ratio was just 2 basis points in Q1 FY26, with nonperforming assets declining 6 bps to 0.36%.

    Concerns

    4

    • Reported FTE net interest margin declined 11 basis points to 3.85% in Q1 FY26, mainly due to lower accretion income.

    • Full-year 2026 FTE net interest income guidance was lowered to $1.34 billion-$1.35 billion.

    • Full-year 2026 accretion income guidance was lowered to $140 million-$150 million.

    • Geopolitical developments, specifically the Iran conflict and sharp increase in petroleum prices, pose a risk of declining consumer and business confidence.

    Guidance & targets

    11
    CategoryTargetConfidence
    Full-year 2026 loan balances
    $29 billion-$30 billion
    high materiality
    High
    Full-year 2026 deposit balances
    $31 billion-$32 billion
    high materiality
    High
    Full-year 2026 allowance for credit losses to loan balances
    115-120 basis points
    medium materiality
    High
    Full-year 2026 net charge-off ratio
    10-15 basis points
    medium materiality
    Medium
    Full-year 2026 FTE net interest income
    $1.34 billion-$1.35 billion
    high materiality
    High
    Full-year 2026 accretion income
    $140 million-$150 million
    medium materiality
    Medium
    Full-year 2026 FTE net interest margin
    3.90%-4.00%
    high materiality
    High
    Full-year 2026 noninterest income
    $220 million-$230 million
    medium materiality
    High
    Full-year 2026 adjusted operating noninterest expense
    $742 million-$752 million
    high materiality
    High
    Annual growth in tangible book value per share
    12%-15%
    high materiality
    High
    Customer deposit growth
    3%-4%
    medium materiality
    High

    Operational metrics

    35
    Adjusted operating return on assets
    1.41%
    Q1 FY26

    Reported on a non-GAAP adjusted operating basis.

    Loan accretion income decrease
    $13 millionQoQ decrease
    Q1 FY26

    Primary driver of lower earning asset yields and reported NIM decline.

    Earning asset yields
    5.79%down 20 bps QoQ
    Q1 FY26

    Primarily due to lower loan accretion income and lower yields on variable-rate loans.

    Cost of funds
    1.94%down 9 bps QoQ
    Q1 FY26

    Due primarily to lower deposit costs.

    Deposit costs decrease
    13 basis pointsQoQ decrease
    Q1 FY26

    Reflected impact of Fed funds rate reductions on customer deposit rates and decline in higher cost broker deposit balances.

    Adjusted operating noninterest expense decrease
    $1.6 millionQoQ decrease
    Q1 FY26

    Excludes merger-related costs and amortization of intangible assets. Driven by reductions in other expenses, professional services, and technology costs, partially offset by salaries and benefits increase.

    Salaries and benefits expense increase
    $5 millionQoQ increase
    Q1 FY26

    Primarily due to seasonal increases in payroll taxes and 401(k) contribution expenses.

    Broker deposits as percentage of total deposits
    2%
    Q1 FY26

    Reflects planned reduction in high-cost broker deposits.

    Broker deposits decrease
    $517.9 millionQoQ decrease
    Q1 FY26

    Primary driver of total deposit decrease.

    Interest-bearing customer deposits increase
    $438.5 millionQoQ increase
    Q1 FY26

    Partially offset the decrease in broker deposits.

    Common stock dividend
    $0.37up 8.8% YoY
    Q1 FY26

    In line with prior quarter's dividend amount.

    Tangible book value per common share
    $19.93up $0.24 or 1% QoQ
    Q1 FY26

    Increased despite headwinds from AOCI unrealized losses.

    AOCI negative impact to tangible book value
    $0.16
    Q1 FY26

    Due to increase in AOCI unrealized losses during the first quarter as term interest rates increased.

    Basel III Endgame impact on RWA
    6%-6.5%reduction
    Future

    Estimated impact based on current proposal, would reduce risk-weighted assets.

    Basel III Endgame impact on CET1 ratio
    65-75 basis pointsincrease
    Future

    Estimated impact based on current proposal, would increase CET1 regulatory capital ratio.

    Securities portfolio as percentage of total assets
    13.5%
    Q1 FY26

    Being reduced to help fund any gaps between deposit growth and loan growth.

    Securities portfolio cash flows
    $75 million
    monthly

    Provides funding opportunity for loan growth.

    Fixed rate loan maturities (legacy AUB)
    $850 million-$900 million
    quarterly

    Repricing from 5%-5.10% to 6%-6.10% yields.

    Fixed rate loan maturities (total)
    $1.2 billion-$1.3 billion
    quarterly

    Repricing from 5%-5.10% to 6%-6.10% yields.

    New fixed rate loan yields
    6%-6.10%
    current

    Compared to legacy portfolio yields of 5%-5.10%.

    Broker deposits maturing (Q2 FY26)
    $200 million
    Q2 FY26

    High-cost broker deposits maturing, offering potential for cost reduction.

    Broker deposits maturing (Q3 FY26)
    $80 million
    Q3 FY26

    High-cost broker deposits maturing, offering potential for cost reduction.

    CD special rates
    4%
    current

    Reflects increased deposit competition in certain markets.

    Advantaged money market rate
    3.80%
    current

    Reflects increased deposit competition in certain markets.

    Nonperforming assets as percentage of loans held for investment
    0.36%down 6 bps QoQ
    Q1 FY26

    Bringing the bank closer to historical operating levels.

    Criticized and classified assets as percentage of total loans
    4.5%down from 4.7% QoQ
    Q1 FY26

    Indicates improving asset quality.

    Virginia unemployment rate
    3.7%stable
    January

    At or below national average, consistent with Moody's forecast.

    Maryland unemployment rate
    4.3%
    January

    At or below national average, consistent with Moody's forecast.

    North Carolina unemployment rate
    3.8%
    January

    At or below national average, consistent with Moody's forecast.

    National unemployment rate
    4.3%
    January

    Used for comparison with state-level unemployment rates.

    Loan pipeline increase
    26%QoQ increase
    Q1 FY26

    Indicates strong future loan production.

    Construction and development pipeline
    record high
    Q1 FY26

    Positions the bank for continued growth in construction lending balances.

    Atlantic Union Equipment Finance fundings
    record level
    Q1 FY26

    Contributed to strong loan production.

    North Carolina commercial real estate team production
    record level
    Q1 FY26

    Contributed to strong loan production, operating throughout the Carolinas.

    Allowance for credit losses methodology change
    —
    Q1 FY26

    Enhances credit modeling practices, enabling more dynamic and precise modeling with greater granularity. Did not materially impact ACL levels.

    Industry KPIs

    13
    MetricValueDetails
    Loans$27.9 billionUSD
    Deposits$30.4 billionUSD
    Rotce ROE19.6%%
    Cet1 ratio—
    Capital returns$0.37USD per share
    Fee income lines$54.8 millionUSD
    Allowance reserves$321.9 millionUSD
    Net interest income$316.9 millionUSD
    Net interest margin3.85%%
    Net charge offs npls2 basis pointsbps
    Total operating expenses$209.8 millionUSD
    Provision for credit losses—
    Efficiency ratio operating leverage49.9%%

    Deals & partnerships

    1
    Sandy Spring BankIntegration of acquired bank

    The integration of Sandy Spring Bank was successfully concluded, with final merger-related charges impacting this quarter's results. The 1-year measurement period related to the acquisition concluded, and related goodwill was finalized at $541 million as of March 31.

    Risks & headwinds

    6
    Uncertain macroeconomic environment

    Not quantified

    Mitigation: Disciplined execution, strong foundation, focus on attractive markets.

    Geopolitical developments and energy price shocksOngoing

    Sharp increase in petroleum prices

    Mitigation: Closely monitoring developments; portfolio has limited sensitivity to energy prices. Potential for increased defense spending in markets.

    Potential decline in consumer and business confidence

    Not quantified

    Mitigation: Strong loan pipelines and positive business sentiment currently observed in footprint.

    Elevated payoffs in commercial real estate portfolioQ1 FY26

    Not quantified, occurred late in Q1 FY26

    Mitigation: Highlights strength of CRE markets, robust investor demand, and ample liquidity.

    Deposit cost competitionCurrent

    Increased rates in Metro D.C. area and North Carolina, CD specials in 4% range, money market rate at 3.80%

    Mitigation: Regional pricing strategy, focus on core customer deposits, and benefit from maturing high-cost broker deposits.

    Loan competitionOngoing

    Not quantified

    Mitigation: Focus on higher quality credit, strong methodology for swap sales, and ability to compete effectively against larger banks.

    What to watch in Q2 FY26

    5

    Core Net Interest Margin trend

    next quarter
    Current3.45% (up 4 bps QoQ, excluding accretion)
    TargetGrind higher

    Why it matters

    Core NIM expansion is a key driver of profitability, especially with stable Fed rates. Verification will confirm management's expectation of continued improvement.

    In terms of the core margin, Russell, we do expect it can grind higher from here and we do expect that.

    Q&A highlights

    6

    How do you expect the core NIM to trend, and what is the outlook for deposit costs given the Fed's stance?

    Management expects core NIM to grind higher, driven by fixed-rate loan repricing and maturing high-cost broker deposits. Deposit costs are expected to stabilize, with limited ability for further significant reductions if Fed rates remain high, but some competition is noted in certain markets.

    “In terms of the core margin, Russell, we do expect it can grind higher from here and we do expect that. As I mentioned in my comments, we don't expect the Fed to cut this year. So there shouldn't be an impact on our variable-rate loan yields on a negative -- from a negative perspective.”

    asked by Russell Elliott Gunther · answered by Robert Gorman

    2 min read6 chapters

    Detailed Narrative

    01

    CFO Transition and Integration Completion

    Atlantic Union Bankshares announced Alex Dodd as the new CFO, succeeding Rob Gorman who will remain as a senior financial adviser until September. The company also confirmed the successful conclusion of the Sandy Spring Bank acquisition integration, with final merger-related charges incurred this quarter. This transition marks a shift in focus towards demonstrating the franchise's earnings power and capital generation ability without merger-related noise.

    02

    Loan Growth Dynamics and Pipeline Strength

    The bank reported 2.2% annualized loan growth in Q1 FY26, reaching $27.9 billion, despite elevated payoffs in the commercial real estate portfolio late in the quarter. Loan production remained strong, with record fundings from Atlantic Union Equipment Finance and record production from the North Carolina-based commercial real estate team. Loan pipelines are noticeably higher than at the beginning of the quarter, with construction and development pipelines at a record high, positioning the bank to meet its full-year loan growth targets of $29 billion-$30 billion.

    03

    Deposit Strategy and Net Interest Margin

    Customer deposit growth nearly offset a planned $517.9 million reduction in high-cost broker deposits, which now represent only 2% of total deposits. The core net interest margin, excluding volatile accretion income, improved by 4 basis points quarter-over-quarter to 3.45%, driven by lower deposit costs. However, the reported FTE net interest margin declined 11 basis points to 3.85% due to lower accretion income and lower earning asset yields, partially offset by reduced cost of funds.

    04

    Credit Quality and Economic Outlook

    Credit quality remains strong, with an annualized net charge-off ratio of just 2 basis points and nonperforming assets declining to 0.36% of loans. Criticized and classified assets also improved to 4.5% of total loans. Management expects unemployment levels in its key markets (Virginia, Maryland, North Carolina) to remain manageable and comparable to or below the national average, supporting confidence in the attractive regional markets.

    05

    Capital Management and Regulatory Impact

    The bank's regulatory capital ratios are comfortably above well-capitalized levels. Management estimates the Basel III Endgame proposal could reduce risk-weighted assets by 6%-6.5%, translating to a 65-75 basis point increase in the CET1 ratio. The company plans to manage its CET1 ratio between 10% and 10.5% and expects to reach the 10.5% mark by Q2 FY26, enabling potential share buybacks in the near future, subject to Board approval.

    06

    Strategic Focus and Diversified Franchise

    With the Sandy Spring integration complete and no further acquisitions planned, Atlantic Union is focused on leveraging its expanded markets and driving organic growth in Virginia, North Carolina, and specialty lines. The company emphasizes its diversified franchise across three strong states and specialty lines like equipment finance, aiming to deliver top-tier financial performance and long-term shareholder value.

    AI-generated summary of the company’s earnings call. Not investment advice.