Atlantic Union's Net Interest Margin Reverses After a Second-Quarter Lift

The Tip Desk · October 27, 2026 · 4 min read

Net interest income rose only $3.3 million to $328.4 million in the third quarter of 2026, and the net interest margin compressed 7 basis points to 3.82%.

Atlantic Union Bankshares Corporation (AUB), the largest regional bank headquartered in the lower Mid-Atlantic, reported net interest income of $328.4 million for the third quarter of 2026, up $3.3 million from $325.1 million in the second quarter. That sequential gain was a sharp slowdown from the $12.7 million increase recorded in the second quarter.

The company said higher interest income on loans held for investment, reflecting loan growth and increased accretion, was partly offset by higher deposit interest expense, higher brokered-deposit costs and higher short- and long-term borrowing costs. Long-term borrowing costs rose as both the 2029 and 2036 subordinated notes were outstanding and the 2036 notes carried a larger principal.

Net interest margin compressed 7 basis points to 3.82%, reversing a 9-basis-point expansion to 3.89% in the second quarter. Fully taxable-equivalent margin was 3.88%. Cost of funds rose 7 basis points to 2.01%, which the company attributed primarily to higher costs on interest-bearing customer deposits and higher brokered-deposit costs. The yield on total earning assets (FTE) was 5.89%. Net accretion income was $40.9 million.

Quarterly average loans held for investment increased 9.61% on an annualized quarter-over-quarter basis to $28.93 billion, with period-end LHFI up 8.63% on the same basis to $29.30 billion, led by commercial and industrial, other commercial, and construction and land development. Quarterly average deposits rose only 1.53% on an annualized quarter-over-quarter basis to $30.51 billion; period-end deposits were $30.97 billion. Brokered and demand deposits increased, while interest-bearing customer deposits declined.

The company issued $250.0 million of 6.25% fixed-to-floating subordinated notes due 2036 and used net proceeds of about $246.8 million to redeem $168.0 million of 4.25% notes due 2029, which had a floating rate of 6.53% at redemption. It recognized a $2.7 million pre-tax loss on debt extinguishment in noninterest expense.

Net income available to common shareholders was $133.7 million, or $0.94 a share diluted. Adjusted operating earnings available to common shareholders were $135.6 million, or $0.96 a share diluted.

Noninterest income fell $35.4 million to $54.8 million from $90.2 million, primarily because the second quarter included a $32.3 million pre-tax gain on the sale of the company’s equity interest in Bearing Insurance Group. Adjusted operating noninterest income, which excludes that gain and small securities-sale gains, declined $3.1 million to $54.8 million. The company cited a $2.0 million drop in loan-related interest-rate swap fees on lower volumes, $1.1 million less mortgage banking income on lower origination volumes and gain-on-sale margins, and $1.0 million less fiduciary and asset-management fees.

Noninterest expense increased $5.2 million to $204.3 million, primarily on the $2.7 million debt-extinguishment loss. Adjusted operating noninterest expense rose $2.7 million to $186.7 million, with $2.6 million higher marketing, $1.7 million higher salaries tied to variable incentive compensation and North Carolina expansion, and $1.5 million higher technology costs, partly offset by $3.4 million lower other expenses from gains on sales of other real estate owned.

The provision for credit losses fell to $5.7 million from $11.7 million, which the company said reflected lower reserve requirements and slower loan growth relative to the second quarter. Net charge-offs were $2.3 million, or 0.03% of average LHFI annualized, unchanged from the prior quarter. Nonperforming assets were 0.37% of total LHFI, down 2 basis points on lower new nonaccruals. Accruing past-due loans rose 6 basis points to 0.34% of LHFI, concentrated in CRE non-owner occupied, C&I and CRE owner occupied. The allowance for credit losses was $334.2 million.

The company repurchased about 1.5 million shares for $62.5 million in the third quarter, versus 265 thousand shares for $10.0 million in the second quarter, leaving $177.5 million remaining on the $250 million program. The common equity Tier 1 ratio was estimated at 10.39% at September 30, 2026. Common equity to total assets and tangible common equity to tangible assets fell from the prior quarter to 12.74% and 7.87%, respectively, as AOCI losses on available-for-sale securities more than offset earnings.