大西洋聯合銀行股份 (AUB) 2026 年第 3 季財報電話會議：放款成長與淨息差展望

重點摘要

• Atlantic Union Bankshares 公布 2026 年第三季普通股股東淨利為 1.337 億美元，或稀釋後每股盈餘 0.94 美元。調整後營運盈餘為 1.356 億美元，或稀釋後每股盈餘 0.96 美元。
• 期末放款總額較 6 月 30 日年化成長 8.6% 至 293 億美元，而平均放款年化成長 9.6%。管理層目前預期全年放款成長將趨向高個位數區間的低端。
• 由於資金成本上升，完全稅額對等淨利息收益率 (NIM) 下降 6 個基點至 3.88%，但受惠於放款成長與折溢價攤銷收入，完全稅額對等淨利息收入增加 340 萬美元。
• 信貸品質維持強勁。淨呆帳沖銷額為 230 萬美元，或年化 3 個基點，而不良資產佔投資用放款比率下降至 0.37%。
• 期末存款年化成長 6.5% 至 310 億美元。季末存放比為 94.6%，隨著客戶資金回流，截至 10 月 19 日已改善至 93.7%。
• 管理層預計第四季淨利息收益率將有所改善，主因是以 SOFR 為基準的放款反映了 9 月升息，但較高的存款成本以及資金轉向計息產品仍是抵銷因素。

關鍵財務數據

業務與營運表現

工商放款 (C&I) 與營建放款帶動放款成長，額度動用率略有上升。工商放款約佔新增放款的 59%，管理層指出幾乎所有區域的案源管道都在擴展。

營建放款餘額繼續受益於現有專案的撥款。然而，管理層預期較高的融資、營建和利息負擔成本將減少新營建承諾，對資產負債表的影響可能會遞延 6 至 12 個月。

Atlantic Union Bankshares 正擴展北卡羅來納州業務。該公司計劃將羅利 (Raleigh) 地區的分行從 1 家擴增至 8 家，其中 1 家新分行已開業，另有 2 家預計於 11 月初開幕。公司還預計從明年開始新增 3 家威爾明頓 (Wilmington) 地區分行。卡羅來納商業團隊目前包含 29 名業務開發人員，包括 23 名專注於工商放款及 6 名專注於商業不動產的銀行業務人員。

管理層指出，其跨區域市場受惠於資料中心開發、製藥業生產及國防科技活動帶來的間接好處。該銀行不直接融資大型資料中心，但為承包商、工業企業及其他相關周邊公司提供服務。

該公司在本季買回了 6,250 萬美元的普通股，同時將普通股核心第一類資本比率 (CET1) 維持在 10% 至 10.5% 的目標營運區間內。在考量資本水準及 AOCI 敏感度前提下，管理層打算將獲授權的庫藏股計畫持續執行至 2027 年 5 月。

管理層展望

NIM 展望假設聯準會將於 12 月再次升息 25 個基點，且定期利率維持在當前水準。管理層表示，每升息 25 個基點應可為單季 NIM 增加約 3 個基點，因為浮動利率放款的重新定價預期將足以抵銷存款 Beta 的增加。

公司未提供 2027 年的財務展望。由於 AOCI 對長期利率具敏感性，公司亦撤回了具體的 2026 年每股有形帳面價值成長展望。

風險與關注領域

資金成本仍是短期內淨利息收益率的主要壓力來源。客戶轉向高殖利率存款產品以及借款比重提高，導致第三季 NIM 下降。整體累積存款 Beta 為 40%，計息存款則上升至 50%。

較高利率可能會抑制抵押貸款銀行業務收入以及放款相關的利率交換手續費，亦可能推遲商業營建專案並加劇存款競爭。

長期利率上升導致 AOCI 出現較大的未實現損失，並降低了每股有形帳面價值。管理層表示，若利率進一步大幅上升，可能會促使其重新審視股票回購的步調。

儘管管理層報告稱未出現廣泛的信貸惡化，但浮動利率營建借款人正面臨較高的融資成本。公司還警告，地緣政治緊張局勢、能源價格波動、持續通膨以及變動中的利率展望將繼續帶來不確定性。

分析師問答重點

• 淨利息收益率走勢：在多數以 SOFR 為基準的放款反映 9 月升息前，9 月核心 NIM 從整季的 3.40% 上升至 3.42%。隨著浮動利率放款重新定價，管理層預期第四季 NIM 將改善。
• 放款定價：第三季新增放款中約有三分之二是浮動利率。浮動利率放款收益率收在 6.2% 附近，利差約 220 個基點。固定利率收益率約為 6.45%，但在競爭定價環境下，利差收窄至約 170 個基點。
• 資金組合：該銀行在本季增加了約 5 億美元的借款。管理層預計在這些借款到期時將以客戶存款取代，其中約半數在 6 個月內到期，其餘的平均存續期間約為 12 個月。
• 信貸狀況：管理層表示尚未發現工商放款 (C&I) 借款人有顯著壓力，並指出機構商業不動產開發商能夠承受較高的浮動利率成本。
• 收購會計折溢價攤銷：第三季基準放款折溢價攤銷約為 2,700 萬美元（每月 900 萬美元），加速折溢價攤銷約為 1,300 萬至 1,400 萬美元。管理層預計第四季基準水準相近，而較高的利率可能會放緩提前還款速度與加速折溢價攤銷。

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完整財報電話會議逐字稿

管理層陳述

Operator

Hello, and welcome to Atlantic Union Bankshares Third Quarter 2026 Earnings Call. [Operator Instructions] I would now like to turn the call over to Bill Cimino, Head of Investor Relations. You may begin.

William Cimino

Thank you, Tawanda, and good morning, everyone. I have Atlantic Union Bankshares President and CEO, John Asbury; and Executive Vice President and CFO, Alex Dodd, with me today. We also have other members of our executive management team with us for the question-and-answer period. Please note that today's earnings release and the accompanying slide presentation we are going through on this webcast are available to download on our investor website, investors.atlanticunionbank.com.

During today's call, we will make -- we will comment on our financial performance using both GAAP metrics and non-GAAP financial measures. Important information about these non-GAAP financial measures, including reconciliation to comparable GAAP measures, are in the appendix to our slide presentation and in our earnings release for the third quarter of 2026.

We will also make forward-looking statements, which are not statements of historical fact and are subject to risks and uncertainties. There can be no assurance that actual performance will not differ materially from any future expectation or results expressed or implied by these forward-looking statements.

We undertake no obligation to publicly revise or update any forward-looking statement, except as required by law. And please refer to our earnings release and slide presentation issued today and our other SEC filings for further discussion of the company's risk factors and other important information regarding our forward-looking statements, including factors that could cause actual results to differ from those expressed or implied. All comments made during today's call are subject to that safe harbor statement. And at the end of the call, we will take questions from the research analyst community. And now I'll turn the call over to John.

John Asbury

Thank you, Bill. Good morning, everyone. This was a solid quarter with healthy loan growth, strong credit quality and a modest increase in adjusted operating earnings. Higher net interest income and lower credit costs supported the result, while funding costs increased and fee income moderated.

I'll briefly cover the quarter's highlights and share some market perspective before Alex reviews the financial results. Our third quarter results reflect disciplined execution and sound underlying performance despite a more challenging funding environment. With merger-related items behind us, the only significant adjustment this quarter was a loss on debt extinguishment related to our subordinated debt refinancing. Over the past several years, we have deployed capital deliberately to strengthen the franchise and support long-term growth. This quarter provides further evidence that our investments in supporting earnings capacity and organic growth while our earnings and capital generation continue to provide flexibility to invest in the franchise and return capital to shareholders.

As always, we remain focused on soundness, profitability and growth, in that order. Our North Carolina expansion is underway. We began with 1 branch in the Raleigh region and plan to add 7 new branches there, bringing us to 8 across the region when complete. One new location is already opened and 2 more are scheduled to open by early November.

Beginning next year, we also expect to add 3 branches in the Wilmington area. In parallel, we are expanding our commercial banking teams in North Carolina. Together, these investments are designed to build full-service relationships, support long-term deposit gathering and commercial banking growth and generate attractive risk-adjusted returns over time.

We believe our model translates well to these markets. We combine local market knowledge, local decision-making and responsiveness with the capabilities and balance sheet strength of a larger regional bank. That is the value proposition we're bringing to North Carolina, and it's the value proposition that we have executed well across the rest of the franchise.

I'll briefly cover our third quarter highlights and share some market perspective before Alex reviews the financial results. The operating environment does remain uncertain, shaped by geopolitical tensions, energy price volatility, persistent inflation and an evolving interest rate outlook. Within our customer base, activity remains constructive, though, and loan pipelines are healthy.

Customers are becoming more selective as financing and project costs remain elevated, but overall activity level remains supportive of profitable growth. Against that backdrop, client activity and disciplined execution produced healthy loan growth during a traditionally seasonally slower quarter. We remain focused on profitable growth supported by relationship-based funding, appropriate pricing and attractive risk-adjusted returns. With that context, here are the key highlights from the third quarter.

Average loans were $28.9 billion, increasing approximately 9.6% annualized during the quarter. Period-end loans reached $29.3 billion, up approximately 8.6% annualized from June 30. Growth was well distributed across the franchise, led by commercial and industrial lending and construction lending, and line utilization increased modestly.

Year-to-date annualized loan growth was 7.2%. Based on current pipelines and expected fourth quarter activity, we now expect full year loan growth toward the lower end of the high single-digit range. Average deposits increased 1.5% annualized during the quarter, while period-end deposits increased 6.5% annualized to $31.0 billion.

Year-to-date deposit growth was approximately 2.2%, consistent with our low single-digit outlook. Several larger customer outflows reduced quarter end deposit balances and period-end deposit growth reflected increased brokered funding, which represented 3.5% of total deposits at quarter end.

Importantly, most of those funds returned early in the fourth quarter. And as of October 19, our loan-to-deposit ratio had improved to 93.7% compared with 94.6% at September 30. Brokered deposits were relatively flat year-over-year. Our focus remains on growing relationship-based deposits, expanding share of wallet and maintaining disciplined funding.

Reported FTE net interest margin declined 6 basis points to 3.88% as funding costs increased, but FTE net interest income rose $3.4 million as loan growth and accretion income more than offset those pressures. Q3 received no material benefit from the September rate increase because most SOFR-based loans reset in early October.

Q4 should reflect a full quarter of that benefit on the variable rate loan portfolio. Alex will provide additional details in his comments. Overall, asset quality remained strong and trends were favorable across most key metrics. Quarter-over-quarter, nonperforming assets declined to 37 basis points of loans held for investment from 39 basis points.

Classified assets decreased to 4.0% from 4.4% and net charge-offs remained at 3 basis points annualized. Accruing past dues increased 6 basis points to 34 basis points, but remained low in absolute terms. Given favorable credit trends and our current loss expectations, we are lowering our full year net charge-off guidance, which Alex will discuss later in the call.

The most recent state unemployment data available for this presentation are for August, showing unemployment rates in Virginia and North Carolina remain below the national average, while Maryland was in line with it. Labor market conditions across our footprint continue to compare favorably with the national picture, supporting our confidence in the resilience and long-term attractiveness of our markets.

This quarter's results reflect continued progress in our organic growth initiatives. We are operating as one team across the combined franchise. We also continue to build our North Carolina commercial banking teams where we see meaningful opportunities to deepen relationships and contribute incremental growth over time.

Conditions across our markets remain resilient, although we expect certain aspects of the operating environment to become more challenging over time. Higher rates may weigh on mortgage banking activity and interest rate swap income, while competition for deposits may increase pressure on funding costs.

In commercial real estate, higher financing and project costs are likely to slow new construction and delay some projects. Even so, at this time, we believe that healthy pipelines and continued customer activity support our expectations for profitable growth despite the uncertain environment.

Additionally, we have not observed any broad-based deterioration in our loan portfolios. We have a long track record of adapting to changing conditions, and we will continue to respond as the environment evolves. While we remain mindful of the headwinds I just discussed, we believe that our focus on soundness, profitability and growth in that order positions us well to continue creating long-term value.

Our priorities remain clear: to protect balance sheet strength, generate profitable growth and allocate capital where we see attractive risk-adjusted returns. Healthy loan demand, strong credit performance and continued earnings and capital generation provide the flexibility to invest in the franchise, return capital to shareholders and create long-term shareholder value.

With that, I'll turn the call over to our Chief Financial Officer, Alex Dodd, for a detailed review of our quarterly financial results. Alex?

Alexander Dodd

Thank you, John, and good morning, everyone. The third quarter reported net income available to common shareholders was $133.7 million and fully diluted earnings per common share of $0.94, resulting in a return on tangible common equity of 19.59%, a return on assets of 1.43% and an efficiency ratio of 52.7%.

Our third quarter adjusted operating earnings available to common shareholders, which principally excludes the $2.7 million pre-tax loss on debt extinguishment, was $135.6 million or $0.96 per diluted common share, resulting in an adjusted operating return on tangible common equity of 19.85%, adjusted operating return on assets of 1.45% and an adjusted operating efficiency ratio of 48.1%.

Slide 11 shows the year-to-date metrics on a GAAP basis and the corresponding trend over the past 5 years. As we move to Slide 12, this shows the same metrics as Slide 11, but on an operating basis. For the year-to-date performance, we have reached our medium-term financial targets of 1.4% to 1.5% for return on assets, and 19% to 20% for return on tangible common equity. While there will always be quarter-to-quarter variability, we remain confident in our ability to sustain performance within these target ranges over the medium term, which we define as this year and next.

Turning to credit loss reserves. The total allowance for credit losses was $334.2 million, an increase of $3.3 million for the quarter, primarily driven by loan growth. The total allowance for credit losses as a percentage of total loans held for investment decreased 1 basis point to 114 basis points at the end of the quarter. Net charge-offs were $2.3 million or 3 basis points annualized in the quarter.

Turning to net interest margin. The fully tax equivalent net interest margin declined 6 basis points to 3.88% as higher funding costs more than offset a modest improvement in earning asset yields. Despite the decline in margin, tax equivalent net interest income increased $3.4 million during the quarter, driven by strong loan growth.

Earning asset yields increased 1 basis point from the prior quarter to 5.89%. Loan yields declined modestly during the quarter and did not yet reflect the impact of the Federal Reserve's 25 basis point September rate increase on the variable rate portfolio.

Cost of funds increased 7 basis points to 2.01% from continued customer migration into higher-yielding deposit products and a higher funding mix of borrowings during the quarter.

Noninterest income decreased $35.4 million to $54.8 million for the third quarter, primarily driven by the $32.3 million pre-tax gain on the sale of our equity interest in Bearing Insurance recognized during the second quarter. Adjusted operating noninterest income decreased $3.1 million, driven primarily by lower loan-related interest rate swap fees and reduced mortgage banking revenue as higher interest rates tempered customer activity.

Fiduciary and asset management fees were also lower when compared to the prior quarter. Noninterest expense increased $5.2 million to $204.3 million for the third quarter, primarily driven by the $2.7 million pre-tax loss on debt extinguishment recognized in the third quarter of 2026.

Excluding the one-time expense and amortization of intangibles, the adjusted operating noninterest expense increased $2.7 million, primarily from the continued investment in the North Carolina expansion, strategic technology initiatives and seasonal marketing costs.

At September 30, loans held for investment, net of unearned income, were $29.3 billion, an increase of $623 million (sic) [$623.3 million] or 8.6% annualized from the prior quarter. Our average loan growth for the quarter was approximately 9.6%. At September 30, total deposits were $31 billion, an increase of $497 million (sic) [$497.3 million] or approximately 6.5% annualized from the prior quarter, while average deposits increased 1.5% for the quarter.

Our loan-to-deposit ratio ended the quarter at 94.6%, within our preferred range of 90% to 95%. As John mentioned, those balances have largely returned and our loan-to-deposit ratio as of yesterday was 93.7%. At the end of the third quarter, Atlantic Union Bankshares and Atlantic Union Bank's regulatory capital ratios were comfortably above well-capitalized levels.

In addition, we remain well capitalized on an adjusted basis if you include the negative impact of AOCI and unrealized losses for held-to-maturity securities in the calculation of the regulatory capital ratios.

During the quarter, we repurchased $62.5 million of common stock while maintaining a CET1 ratio within our targeted operating range of 10% to 10.5%. Tangible book value per share was $20.36 at quarter end compared with $20.77 at June 30. The decline primarily reflects higher unrealized losses recorded in AOCI as long-term rates increased.

Before reviewing our full year outlook, I want to highlight the strength of the franchise's earnings and capital generation capabilities, providing the flexibility to execute buybacks while continuing to support strategic growth and investment opportunities. Our prior guidance called for term rates to remain stable and at the same levels, neither of which occurred in the third quarter. We continue to expect loan balances to end the year between $29 billion and $30 billion, while year-end deposit balances continue to be projected between $31 billion and $32 billion.

We expect full year loan growth towards the lower end of the high single-digit range and expect year-end deposits to end up in the lower single-digit range. On the credit front, the allowance for credit losses is projected to remain at the lower end of the 115 basis point to 120 basis point range, and we are reducing the projected net charge-off ratio to be less than 5 basis points in 2026.

Fully tax equivalent net interest income for the full year is projected to come in at the lower end of the $1.32 billion to $1.33 billion range, inclusive of accretion income. We expect higher interest-bearing deposit mix as well as greater loan and deposit competition to partially offset increasing loan yields. We believe we will be at the low end of the 3.90% to 3.95% range for our 2026 fully tax equivalent net interest margin. This outlook is supported by our baseline assumption that the Federal Reserve increases rates by 25 basis points in December and that term rates remain stable at current levels.

Our focus remains on generating profitable net interest income growth rather than managing to a specific margin target. On a full year basis, adjusted operating noninterest income is expected to be at the lower end of the $220 million to $230 million range, including the impact of higher rates on mortgage income and loan-related interest rate swap activity.

Adjusted operating noninterest expense is expected to fall in the lower end of the range of $742 million to $752 million, including the expense impact of our North Carolina investment. The impact on AOCI on tangible book value growth was significant during the quarter as long-term interest rates moved higher.

Given the sensitivity of AOCI to future rate movements, we are not providing a specific tangible book value growth outlook for full year 2026 at this time. Importantly, our commitment to building tangible book value remains unchanged. Excluding the impact of AOCI volatility, tangible book value would have increased by $2.24 or approximately 11% compared to the third quarter of last year, reflecting the underlying earnings power and capital generation of the franchise.

Looking ahead, we are currently in the midst of our 2027 planning process and are not prepared to provide an outlook at this time. As John mentioned, we remain focused on generating sustainable, profitable growth, delivering positive operating leverage and continuing to build tangible book value, which we believe will drive long-term shareholder value. I'll now turn the call over to Bill.

William Cimino

Thank you, Alex. And Tawanda, we're ready for our first caller, please.

Operator

[Operator Instructions] Our first question comes from the line of Brian Wilczynski with Morgan Stanley.

分析師問答

Brian Wilczynski

I wanted to start off with the updated net interest margin outlook for 2026. I think it implies some modest NIM expansion in the fourth quarter. Can you just talk more about the puts and takes around NIM, including both the borrowings that you highlighted as well as the impact from higher rates?

Alexander Dodd

Yes. Thanks, Brian. I'll start on the Q3 margin. We did see a 6 basis point decline in the quarter, and that was solely due to funding due to higher mix of customer deposits going into interest -- higher interest-bearing products as well as higher mix of borrowings for the quarter.

And as we move into the fourth quarter, and you heard from our prepared remarks, we are sticking with the range of 3.90% to 3.95% for our net interest margin, which means essentially our margin will improve as we go into the fourth quarter. And that's coming from a couple of factors.

One of them is that the Fed rate increase happened late in the quarter and half of our loan book is variable. So we will see a full quarter's benefit of the 25 basis point increase in the fourth quarter. Also beyond that, our investment portfolio has a variable component and our new purchases in that portfolio are coming on about 140 basis points over the portfolio yield.

This will be offset by the full beta impact on the deposit portfolio, and further customer mix.

So we remain positive about NIM and expect it to grind higher in the fourth quarter to get to the full range of 3.90% to 3.95% for the full year.

John Asbury

Alex, can you speak to what we saw in September?

Alexander Dodd

Thanks, John. Yes. And as we're leaving the quarter, we did see our core margin increase by 2 basis points. So this is just the month of September, started to see the benefit of the factors I mentioned on the variable rate loans and higher coupon yields, offset by -- we have some -- about $3 billion of Fed linked deposits that reprice immediately. So we're encouraged by the core NIM increase in the month of September, which was at 3.42% compared to our full quarter of 3.40%.

John Asbury

Yes. And I would reiterate that nearly all SOFR-based loans are repricing early in the month, which means we did not see any benefit any material benefit on SOFR-based loans from the Fed rate increase in the month of September that has now occurred. But that's encouraging. Even without that, we were beginning to see NIM trend up in September core NIM.

Brian Wilczynski

That's great. Really appreciate all of the detail. And then as a follow-up on loan growth, you mentioned the potential impact that higher rates could have on construction activity. I was wondering, are you seeing that slowdown today either in construction or in any particular parts of the portfolio? And how meaningful of an impact do you think higher rates could have on loan growth as we look ahead to the fourth quarter?

John Asbury

Yes, Brian, the growth that you're seeing in construction lending, which will continue, are fundings on existing construction loans, projects that are already underway. So there's no change there. What will happen is we anticipate that we will see fewer new construction projects. That will have a delayed impact.

That could take minimum 6 months to a year before we really feel that. But in talking to our developer clients, there is no question that we're hearing commentary that they may begin to delay certain projects, not all, but certain projects. And it's the classic issue where they're already dealing with inflation and higher subcontractor bids.

And when you add on additional interest carry, certain things are just harder to pencil out and effectively require more cash equity. And so it's a bit difficult to quantify right now, but we expect that new construction commitment production will slow. It's difficult to say just how much. But that will effectively be a bit of a delayed impact before we really feel it.

As for C&I and other forms of financing, it will not be as significant. Our client base is doing very well. Demand overall is actually quite strong. We are seeing some evidence of companies paying cash on the C&I side, whether it's for equipment finance more so than we have seen. And of course, that puts pressure on operating account balances, particularly noninterest-bearing, if they decide that they have surplus liquidity and they would rather pay cash for some or all.

But having said that, I would say we are on a strong run in terms of what's going on in commercial and industrial. So I think that we'll still see good growth. Overall, I would expect that total loan growth will moderate a bit from what we've been seeing certainly in Q3, but we'll still be on a growth footing based on everything that we're seeing.

William Cimino

Tawanda, we're ready for our next caller, please.

Operator

Our next question comes from the line of Janet Lee with TD Cowen.

Sun Young Lee

I understand that you're not commenting on 2027. If we just look at the core NIM trajectory or just the benefits of a rate hike, is this still a benefit to your NIM if we get a rate hike given the -- still the fixed rate asset repricing benefits and the floating rate impact? I understand that the funding pressure will be higher, but I just want to see if -- to the extent you can comment, is it a net benefit to your incremental NIM?

Alexander Dodd

It is a net benefit. When we see a Fed rate increase, we'll see the repricing of all of our variable rate loans, and that will be -- that will more than offset the deposit beta. So we will see a short-term increase, and we're modestly asset sensitive on the short end of the curve. So there will be a modest benefit going forward as well.

Sun Young Lee

Got it. So core NIM could still expand in a rising rate scenario.

Alexander Dodd

That's correct.

Sun Young Lee

Okay. And on betas, could you comment on your cumulative cycle beta expectations as we stand? What do you think is reasonable? And for the broker deposits, you had mentioned that some of these client outflows have come back to the balance sheet. So should we -- like is there a way -- any way to quantify how much brokered deposits could come down in the fourth quarter?

Alexander Dodd

Sure. Yes. Our overall beta is 40%. And on the interest-bearing portion of the portfolio, it's 50%. And we did take on borrowings for the quarter about $500 million. Most of this was short term or under 6 months. And so we expect to replace those with customer deposits when they mature. And so it's probably half under 6 months. The remaining half is 12 months in duration overall.

William Cimino

Tawanda, we're ready for our next caller, please.

Operator

Our next question comes from the line of David Chiaverini with Jefferies.

David Chiaverini

So I wanted to ask on the deposit side. I think I heard you mention about expecting a higher interest-bearing deposit mix. I guess, as it relates to that, can you comment on maybe magnitude and then overall kind of deposit pricing and competitiveness in your markets? Are you seeing a change in recent months relative to, say, 3 or 6 months ago?

Alexander Dodd

Sure. Our margin did decline 6 basis points, and the sole driver was going to be on the funding side coming from our deposit mix and deposit pricing and also the mix of borrowings. To your question about the deposit portfolio, the 2 drivers of the cost of deposits increasing by 7 points are really coming from mix and higher average pricing on interest checking and savings.

As we move forward, we'd expect the full beta to come on the deposit portfolio and continued customer mix of movement into the higher rate products.

John Asbury

David, I'd also add for context, as you know, our markets are dominated by the very largest institutions, which historically have been very disciplined in terms of depository pricing. They effectively set the market. We have seen upward movement from them, and that does move the market.

They seem to have somewhat front-run the recent Fed rate increase. We saw them begin to move up in a few cases, even a bit ahead of that. And of course, we have to respond to that. There are always smaller banks somewhere that will do unexpected things, and we'll deal with that one by one, but they most certainly don't set the market. We view deposit pricing on the whole as rational.

There's strong loan growth across the industry. Therefore, there are more bids for deposits, and that's what's going on. So we don't see anything all that unexpected going on out there.

David Chiaverini

Great. And then shifting to the loan side. It sounds like the pipelines are healthy and that it's being driven from C&I. Any particular categories or sectors that are driving that growth? And I guess related to that, with the AI kind of data center build-out, I know that you guys aren't necessarily participating directly, but your markets are kind of sourcing or housing some of these data centers. Can you talk about to what extent that's supporting your pipelines?

John Asbury

Sure. Let me lead off, and then I'm going to ask David Ring, who leads our wholesale businesses, which is what we refer to the collection of commercial businesses, to provide commentary. I'll start with the data center issue.

You are right, we do not directly finance data centers. They're far too large and expensive. We do have adjacent businesses. It could be contractors. You could see it in industrial warehousing, even landscaping, believe it or not. So we have clients who are benefiting from the data center expansion that is going on, and that is continuing. One of the more interesting things that we noticed, the comment that I took note of, we're seeing a lot of very large contractors being pulled into these really hyperscaler data center build-outs, which is creating space for kind of midsized or smaller contractors that would more likely be our client base.

And so that's actually supportive of them. So pricing is improving. There's more work, et cetera. So there are tangential benefits, and it also creates a lot of tax revenue, frankly. Here's another thing that it's difficult to quantify, but the demand for power generation is very high. And so we're seeing a lot of power infrastructure development going on.

We have a client who is a manufacturer that is a supplier to the electrical utility industry, building components for transformers and that sort of thing, and they are very busy, and we just don't see any end in sight. So it would be a tangential benefit.

Dave Ring, can you comment more broadly? I think it's fair to say that we're seeing very good diversified loan growth. Anything that's particularly strong from your perspective?

David Ring

Thanks, John. Thanks, David. I think you covered the question on data center. But on the pipeline piece, first, we look at production related to the pipeline. C&I production is roughly 59% of our production, and our pipelines look very similar to this. So when you look across our pipeline, C&I tends to dominate now and almost every region has a growing pipeline.

So we don't have it in any specific area or any specific region. We're seeing growth in the pipelines in all our regions right now.

John Asbury

Other things to watch over time will be pharma manufacturing, which we are in one of the best positioned markets in the country, we believe, where we sit right in the middle of a lot of investment that's going on to manufacture pharmaceuticals here in the U.S., and that would run from -- in the North Maryland, certainly here through Central Virginia into the Research Triangle that has benefits.

We're seeing multibillion-dollar plants and several of them underway right now, which has spillover benefits to contractors and labor, that's good. And also, we are firmly believe that we are the defense technology capital of the country. You see that in the Greater Washington region, especially Northern Virginia.

They're very active. So there's some secular trend here, certain clusterings that are going to be long term positives for the markets. But beyond that, it's a pretty diversified economy. And on the whole, it's doing well.

William Cimino

Tawanda, we're ready for our next caller, please.

Operator

Our next question comes from the line of Russell Gunther with Stephens.

Russell Elliott Gunther

John, a follow-up on the loan growth discussion, maybe more intermediate term, we'll see. But I guess with the recent backup in rates, likelihood of some additional Fed hikes, is there an absolute level in rates where you guys would expect to see some pipeline fall out?

You mentioned new construction, but maybe beyond that asset class and in a way that would put that sort of mid- to high single-digit growth profile, we tend to think of AUB at risk.

John Asbury

That's a difficult question to answer. I think that the increase that we've seen, as I mentioned before, is going to have a noticeable impact on new construction financing. That's the area that I would expect to see the most. It won't stop it, but it's going to knock out some projects that the developers are just going to wait on.

Typically, what I'm hearing from them, and I've spent a lot of time with a number of them recently, is they're kind of waiting to see what's going to happen. Is this temporary or is this not? But on the commercial and industrial side and certain real estate projects such as health care or certain industrial properties, I really don't see it putting much of a dent in that.

And then again, commercial and industrial, the demand is there and they need to respond to it, and they're doing okay. So 100 basis point increase in term rates or 100 basis point increase in short-term rates, I don't see changing much there. So it's hard to say. It would presumably need to be quite a bit.

Sometimes you'll hear me talk about construction lending is like a bathtub. And what I mean by that is new construction commitments, that's sort of the spigot or the faucet that's filling up the bathtub. And as projects complete, they drain out of that construction lending balance and they move into permanent mortgage.

So I think what you're going to see is the bathtub will keep draining as projects complete and move out of the construction lending category and the faucet is going to be slowed, but it's not going to be shut off. So it's really hard to say. But the punchline, I think, could it be the difference between mid-single-digit growth and high single-digit growth? It could. Always think about our default position as being mid-single-digit growth.

And you've seen us a couple of times pull out slide we used in Investor Day that states that over the last, I think it was a 9-year period, the organic-only growth rate for us has been about 7% over time. Technically, that would be a high single-digit number. But I think we're on a reasonable growth footing, and we'll say more about what to expect next year.

Russell Elliott Gunther

Understood. And helpful color, John. And then to follow up on the margin discussion, I appreciate the commentary around the asset-sensitive position today. Could you guys put a finer point on what each 25 basis point rate hike might mean to the NIM? Can you kind of size the benefit there?

Alexander Dodd

Yes. Each 25 basis point increase, Russell, should be about 3 basis points of margin in a quarter.

Russell Elliott Gunther

Okay. Great. And then just my last follow-up, if I could. Do you have where the spot deposit rate ended the quarter?

Alexander Dodd

Yes. In September, it was at 2.03%. So we were at 2% for the full quarter, and it ticked up 3 basis points in September. So you're getting a mix of the rate increase in there as well.

William Cimino

Tawanda, ready for our next caller, please.

Operator

Our next question comes from the line of Will Jones with KBW.

William Jones

I wanted to ask maybe just sticking with the margin discussion on loan yields, maybe what you saw in the quarter on loan pricing. I was maybe a bit surprised if you kind of wipe away the fair value accretion that loan yields were really more stable-ish this quarter. I felt like there was some fixed repricing momentum that we would see. I know the quarter doesn't reflect much of the September hike that we saw, but maybe just kind of the outlook you see for loan yields moving forward?

Alexander Dodd

Sure. Yes. For loan yields, what we saw in the quarter was on the variable side, we ended the quarter around 6.2% with spreads at about 220 basis points. And keep in mind, about 2/3 of our production in the third quarter was coming from variable rate loans.

On the fixed side, we ended the quarter with yields around 6.45%, and we did see spreads tighten in the third quarter down to about 170 basis points from competitive pricing. But what happened in the third quarter of loans going down by basis points, I look basis point, I feel like that's more of a function of the mix of originations as we're more on the variable side, which comes with a lower yield. And going forward, coming into the fourth quarter and the run-up in rates, we do expect yields to increase. When I quoted the September yield, that's more of a blended average for that month. But I don't have the number for our exact spot at the end of the quarter, but we expect them to increase as rates increased in the last 45 days.

John Asbury

Yes. There's no question we're seeing more variable rate lending right now. And of course, we now have the benefit of the Fed rate increase as we go into the new month. We did see an odd dynamic, something that's a bit uncommon. From a competitive and market condition standpoint, we were seeing more spread compression on fixed rate lending than variable, which is a little odd based on what we've seen traditionally.

And it appears that at least certain banks are more focused on yield than spread. And some of that, we're going to need to sit out because if we don't see what we believe to be a reasonable risk-adjusted return, we're not going to do it.

William Jones

Yes. Okay. That's helpful color, John. And then Alex, thanks for pointing out the mix there on new loans in the quarter. Maybe turn the conversation over to capital. Buybacks were meaningful this quarter. Just talk about your propensity to continue. Should we expect maybe this pace of buyback to continue going forward?

And I know AOCI, what was a negative optic impact to tangible book and TCE. Does that impact your train of thought or strategic thinking at all as it comes to buyback or deploying capital just when we see some of these more meaningful moves in AOCI?

John Asbury

Yes. Our capital management priority is to support organic growth. And then beyond that, we want to return capital to our shareholders through the dividend and share repurchases. And in the quarter, we did buy back $62.5 million worth of our -- within our approved buyback program. We do intend on continuing the buyback through May of 2027. With that being said, we are mindful to the impact of rates on AOCI and we're monitoring our tangible common equity ratio.

And if rates were to move sharply higher, we would revisit. And that's the good thing about the buyback program is that it's flexible. We are generating a lot of capital. And so if we were to decide, and I'm not saying we have, but if we were to reduce or stop share buybacks, you would see capital run up very quickly. So I agree with Alex that we have flexibility there.

William Cimino

Tawanda, we're ready for our next caller, please.

Operator

Our next question comes from the line of David Bishop with Hovde Group.

David Bishop

John, I saw the takedown of the net charge-off expectations there. Just curious, as you look at your borrower financial statements and talk to your clients out there, are you seeing any indications of credit stress from higher rates sort of permeating the commercial or even consumer segment at this time?

John Asbury

Let's ask Chief Credit Officer Doug Woolley, who's famous for being succinct. Doug?

Douglas Woolley

All right. David, I'll give you a more extended answer. On commercial real estate, we do have some floating rate construction projects. So that will have some impact. The bulk of our portfolio is institutional developers. They take those things in stride, and we don't have any concern about that. On the C&I side, even though rates have gone up, the interest rate cost expense to a C&I borrower is a small percent of their overall operating cost.

It really would have to move significantly. And we had absolutely no stress that we could discern back when rates skyrocketed from nothing post-COVID. The C&I borrowers simply absorbed that. I'll take that as a not really.

David Bishop

Yes. Well said, well said. And then, John, I think you mentioned earlier some of the benefits from the defense segment, GovCon. Just curious what you're seeing within that segment within the Greater D.C. region.

John Asbury

Yes, they're doing well. I would say that there's no question that they're active. This focus on national security, defense and intelligence is receiving a lot of funding. Credit's holding up very well. And we just don't -- we feel quite good about that portfolio. We do see a lot of M&A in that space. We've had clients sold. Sometimes we have clients buying companies as well.

But it's very supportive, and it's showing up if you go up into the region, you'll see improving dynamics on office, a lot of which is being taken up by defense contractors who are expanding or moving into the area and then firms that are adjacent to defense contractors, and they could be everything from attorneys, private equity firms setting up shop in the region because a lot of capital is flowing into it.

And so we don't finance like giant defense contractors, but it's overall supportive. And the unfortunate aspect of the geopolitical situation is that this is going to play out for a long time because of the changing nature of warfare, drone warfare, drone defenses, cybersecurity, autonomous aerial vehicles, autonomous ships, you name it. There's a multibillion-dollar expansion underway in Baltimore for shipbuilding, specifically submarines. The Newport News shipyard has over a 10-year backlog. And so this is a very durable trend, David. And so it's going to have spillover benefits over time into the region.

William Cimino

Tawanda, we are ready for our last caller, please.

Operator

Our next question comes from the line of Steve Moss with Raymond James.

Stephen Moss

Sorry, I was popped on late here, but -- so I apologize if I missed anything, but I did want to ask what growth are you seeing out of the North Carolina markets these days? And maybe just how much that drove your loan growth for the quarter?

John Asbury

Yes. We view ourselves as a $3 billion asset bank in North Carolina in terms of where we are. Now remember, we are not new to North Carolina. The Charlotte LPO, which is the biggest component, which deals with commercial -- regional commercial real estate developers in North and South Carolina, and we do, do business in South Carolina.

We just don't have a material physical presence there. That's been around for a long time and has done well. Then American National Bank had been in the Piedmont Triad area for about 10 years. So that's the base that we're building from. Dave Ring, do you want to comment on some of the expansion activity and what we're seeing? It is unarguably the best growth market in which we operate.

David Ring

Sure, John. Let me just start with, we've continued to add new people, new relationship managers in the Carolinas. We have a total of 29 producers now in the Carolinas, 23 of them are C&I focused, 6 of them are commercial real estate focused, and they're spread across Wilmington, Greensboro, Burlington, Raleigh, Winston-Salem and Southern Charlotte.

And so we have good coverage across the entire state now. We're very comfortable with where we are, and we've started to build a stronger middle market team in North Carolina. This past quarter was the best quarter that we've had since the American National acquisition, and we continue to see growth in the Carolinas. That's a nice contributor to our overall growth.

Stephen Moss

Okay. Great. And then the other question I want to ask and just ask about the accretion here. For 2027, just kind of curious, what are your updated thoughts on purchase accounting accretion for '27?

John Asbury

Yes. We're not ready, Steve, to give any 2027 guidance at this time. I'll say for the third quarter, we look at accretion on the lending side between baseline and accelerated accretion. And the baseline accretion was about $9 million per month or $27 million for the quarter. And the accelerated accretion was about $13 million.

A little bit above that, maybe $13 million to $14 million for the quarter. We should expect that in the fourth quarter as well from the baseline side. For accelerated accretion, though, we have to be mindful the higher rate environment may slow down prepayments, and that's what's driven by -- that's what drives the accelerated accretion, but not yet ready to give guidance yet on 2027.

David Ring

Yes. And we firmly believe that the accretion is reinvested as the cash comes back in and the rising rate environment actually supports our argument that, that will convert over time into core net interest income.

William Cimino

Thanks, everyone, for joining us today. We look forward to updating you in January. Have a good day.

Operator

Ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now disconnect.