Atlantic Union Bankshares Charts Confident Post-Merger Path

Atlantic Union Bankshares Corporation ((AUB)) has held its Q1 earnings call. Read on for the main highlights of the call.

Atlantic Union Bankshares’ latest earnings call struck a confident tone, with management stressing disciplined execution, the completed Sandy Spring integration, and strong adjusted profitability. While reported net interest margin was hit by volatile accretion income and competitive deposit markets, underlying trends in core margin, credit quality, and capital left management upbeat about meeting ambitious 2026 targets.

Integration of Sandy Spring Removes Merger Overhang

The bank confirmed that the Sandy Spring Bank integration is complete, with final goodwill set at $541 million and the one‑year acquisition measurement period closed as of March 31. With this milestone reached, management does not expect further merger‑related costs, clearing a major integration overhang and simplifying reported results going forward.

Adjusted Profitability Metrics Signal Strong Core Performance

Atlantic Union reported adjusted operating earnings available to common shareholders of $126.2 million, or $0.89 per share, in the first quarter. That translated into a robust 19.6% adjusted operating return on tangible common equity and 1.41% adjusted operating ROA, alongside an efficiency ratio just under 50%, underscoring solid core profitability despite headline noise.

Loan Growth Modest but Pipelines Reach Record Levels

Loans held for investment stood at $27.9 billion, with quarterly loan growth running at about 2.2% annualized, or roughly 5.9% on an average basis through the quarter. Management highlighted materially higher pipelines, including a record construction and development pipeline and record fundings in equipment finance and North Carolina commercial real estate, pointing to stronger growth ahead.

Core Net Interest Margin Improves Despite Headwinds

Excluding accretion, core net interest margin ticked up 4 basis points quarter‑over‑quarter to 3.45%, driven mainly by easing deposit costs and continued repricing of legacy assets. This underlying improvement contrasts with the decline in reported margin and suggests the earning asset base is quietly becoming more profitable as older loans reset.

Credit Quality Remains a Standout Strength

Credit metrics held firm, with first‑quarter annualized net charge‑offs at just 2 basis points and nonperforming assets down 6 basis points to 0.36% of loans. Criticized and classified assets improved to 4.5% of total loans, while the allowance for credit losses of $321.9 million represents roughly 115 basis points of loans, giving the bank a sizable cushion against potential future losses.

Deposit Mix Shifts Toward Core Customers

Customer interest‑bearing deposits increased by $438.5 million while brokered deposits fell by $517.9 million, leaving broker funding at only about 2% of total deposits. The shift illustrates a deliberate effort to rely less on high‑cost wholesale funding and to preserve flexibility in managing the balance sheet as rate and competitive dynamics evolve.

Capital, Dividend and Tangible Book Value Progress

Regulatory capital ratios remain comfortably above well‑capitalized thresholds, giving management room to pursue growth and shareholder returns. Tangible book value per share rose $0.24, or 1%, to $19.93 even after absorbing AOCI pressure, and the quarterly common dividend was maintained at $0.37 per share, up 8.8% from a year earlier.

Updated 2026 Outlook and Potential Capital Returns

Management reaffirmed an ambitious 2026 roadmap, calling for year‑end loans of $29–$30 billion, deposits of $31–$32 billion, FTE net interest income of $1.34–$1.35 billion, and a NIM of 3.90%–4.00%. Noninterest income is projected at $220–$230 million, with adjusted operating expenses of $742–$752 million and CET1 expected to exceed 10.5%, positioning the bank to consider share buybacks later in the year, subject to board approval.

Reported NIM Pressured by Lower Accretion Income

The fully taxable‑equivalent net interest margin declined 11 basis points quarter‑over‑quarter to 3.85%, primarily due to a $13 million drop in loan accretion income, including a one‑time $3.5 million adjustment tied to the acquisition measurement period. This dynamic introduced volatility into reported NII, obscuring the improvement in the core margin that excludes purchase accounting effects.

Lower Accretion Outlook Adds Earnings Volatility

Purchase accounting accretion guidance was revised lower, with expectations for roughly $140–$150 million of accretion in 2026, reflecting uncertainty around prepayments and timing. The reduced contribution from accretion diminishes near‑term NII visibility and reinforces the importance of organic margin expansion and balance sheet growth to sustain earnings.

Competitive Deposit Markets Drive Higher Funding Costs

Management flagged intense competition for deposits in key markets, including Metro D.C. and parts of North Carolina, which has required targeted CD specials in the roughly 4% range and attractive money market offerings near 3.8%. These actions help defend relationships but push marginal deposit costs higher, creating ongoing pressure on funding expenses and pricing discipline.

Noninterest Income Dips on Lower Swap Fees

Noninterest income fell $2.2 million sequentially to $54.8 million, largely due to seasonally softer loan‑related interest rate swap fees as transaction volumes slowed. This decline was partially offset by higher capital markets revenue, highlighting the inherent variability in fee‑based income streams tied to client activity and market conditions.

Final Merger Costs and Adjustments Weigh on Q1

First‑quarter results included $9 million of pretax merger‑related expenses, which management labeled as the final set tied to the Sandy Spring deal. A nonrecurring $3.5 million loan fair value adjustment also weighed on earnings, but with these items behind them, investors should see cleaner comparisons and a clearer view of the core run‑rate.

CRE Payoffs Introduce Near‑Term Balance Sheet Noise

The bank experienced elevated commercial real estate payoffs late in the quarter, mostly linked to property sales, which temporarily pulled down loan balances. While management described CRE markets and investor demand as solid, they also acknowledged that such paydowns can create quarter‑to‑quarter volatility in CRE outstandings and associated interest income.

Net Charge‑Off Target Achievable but Visibility Limited

Management reiterated its 2026 net charge‑off target of 10–15 basis points, but admitted they currently lack clear line of sight to that range given the potential for idiosyncratic losses. This honest assessment underscores some lingering uncertainty around future provisioning needs, despite today’s excellent credit performance and solid reserve coverage.

AOCI and HTM Losses Weigh on Tangible Book Value

Rising term rates drove higher unrealized losses in accumulated other comprehensive income, which management estimates reduced tangible book value by about $0.16 per share in the first quarter. These mark‑to‑market impacts also created some headline pressure on reported capital, even though underlying regulatory ratios remain comfortably above minimums.

Guidance Points to Growth, Margin Stability and Capital Build

Looking ahead, the bank’s 2026 guidance calls for loan balances to climb to $29–$30 billion and deposits to reach $31–$32 billion, with the allowance for credit losses staying around 115–120 basis points of loans and net charge‑offs within 10–15 basis points. Management is targeting FTE NII of $1.34–$1.35 billion, NIM between 3.90% and 4.00%, noninterest income of $220–$230 million, and adjusted expenses of $742–$752 million, supporting expectations of double‑digit annual tangible book growth and top‑quartile returns.

Atlantic Union’s earnings call left the impression of a bank that has largely digested a major acquisition and is now focused on organic growth, margin discipline, and capital deployment. While accretion volatility, deposit competition, and rate‑driven AOCI swings create noise, strong core profitability, pristine credit, and clear long‑term targets make the story compelling for investors watching regional bank fundamentals.