On Tuesday, Atlantic Union Bankshares (NYSE:AUB) discussed second-quarter financial results during its earnings call. The full transcript is provided below.
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Summary
Atlantic Union Bankshares reported strong financial performance in Q2 2026, with a notable $32.3 million pre-tax gain from the sale of its equity interest in Berrings Insurance.
The company saw solid loan growth, with average loans increasing by 6% annualized and period-end loans up 10.4% annualized, ending the quarter at $28.7 billion.
Net interest margin improved, driven by higher loan yields and increased loan accretion income, while credit quality remained strong with low net charge-offs.
Strategic initiatives include expanding capital markets capabilities and a focus on organic growth, with significant investments in North Carolina to enhance retail and commercial banking presence.
The company expects full-year loan growth toward the higher end of its mid-single-digit range and plans to repurchase $240 million of its common shares under existing authorization.
Full Transcript
OPERATOR
Thank you for standing by. Welcome to Atlantic Union Bankshares Second Quarter 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. Please be advised that today's conference is being recorded.
I will now hand the conference over to your host, Bill Cimino, Senior Vice President, Investor Relations. Please go ahead.
Bill Cimino, Senior Vice President, Investor Relations
Thank you, Livia, 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 comment on our financial performance using both GAAP metrics and non-GAAP financial measures. Important information about these non-GAAP financial measures, including reconciliations to comparable GAAP measures, is included in the appendix to our slide presentation and in our earnings release for the second 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 result 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. 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 in a forward-looking statement.
All comments made during today's call are subject to that safe harbor statement. At the end of the call we'll take questions from the research analyst community. I'll now turn the call over to John.
John Asbury, President and CEO
Thank you, Bill. Good morning, everyone. Thank you so much for joining us today. Atlantic Union Bankshares reported strong second quarter financial results, reflecting disciplined execution and providing an encouraging indication of the earnings power of the franchise we have been building. For the first time in two years we did not incur any merger-related costs. We were also pleased to realize a $32.3 million pre-tax gain from the sale of our equity interest in Berrings Insurance.
Adjusted operating performance, excluding the gain from the equity interest sale, was notable for solid loan growth, margin improvement on both a core and reported basis, disciplined expense management and solid credit performance along with continued capital generation. Over the past two years, we have deployed capital intentionally to strengthen and expand our franchise. We believe our second quarter results are an encouraging early indication that those investments are beginning to translate into stronger earnings capacity, capital generation and long-term shareholder value.
We remain focused on building on this progress through disciplined execution, organic growth and continued attention to soundness, profitability and growth, in that order. Our commitment to creating shareholder value remains unwavering. We believe Atlantic Union is well positioned to deliver sustainable growth, top-tier financial performance and long-term value for our shareholders. We believe that our continued organic growth opportunities due to our robust presence in attractive markets reinforce our status as the premier regional bank headquartered in the lower Mid-Atlantic.
I'll briefly cover our Q2 '26 highlights and share market insights before Alex presents the financial review. Before reviewing this quarter's results, I would note that the second quarter was marked by continued uncertainty, particularly around geopolitical developments and the conflict involving Iran. Despite that backdrop, customer confidence remained resilient and economic activity across our footprint held up well. We delivered record loan production during the quarter, exceeding our 2025 fourth quarter production level, which is traditionally our strongest quarter, by roughly 8%.
While the second quarter is typically one of our seasonally stronger periods and we expect some moderation in the third quarter due to the normal summer slowdown, our pipelines remain healthy. Overall, we believe that our underlying credit activity and pipeline depth support our full-year outlook and we currently expect loan growth to finish toward the higher end of our mid-single-digit range. Importantly, this growth reflects strong client activity across our markets, the value of the customer relationships we have built, and disciplined execution by our team.
With that context, here are the key highlights from the second quarter. Average loans were $28.2 billion and grew approximately 6% annualized during the second quarter, while period-end loans increased approximately 10.4% annualized from Q1 to Q2, ending the quarter at approximately $28.7 billion. Growth was well distributed across the franchise, led by strong client activity in commercial lending, construction lending, multifamily and select consumer categories.
Line of credit utilization decreased slightly from the first quarter but was up slightly year over year. Year-to-date annualized loan growth was 6.4%. As I mentioned, loan pipelines are healthy and support our expectation that full-year loan growth is tracking toward the higher end of our mid-single-digit outlook. Average deposits increased 2.4% annualized during the quarter, and total deposits increased approximately 1% annualized from the end of Q1 to the end of Q2, all consistent with our low single-digit 2026 outlook.
Growth was concentrated in interest-bearing deposits. We also reduced brokered deposits by approximately $53 million during the quarter and roughly $571 million year to date. Brokered deposits represented only 2% of total deposits at quarter end, giving us flexibility to use them selectively going forward if needed. Our core customer deposit base remains a defining strength of the franchise, and our focus remains on relationship-based deposit growth, expanding share of wallet and maintaining funding discipline.
Core net interest margin, which excludes the purchase accounting adjustments, improved by 1 basis point quarter over quarter. Reported FTE net interest margin increased 9 basis points to 3.94%, driven primarily by higher accretion income compared with first quarter. Alex will provide more detail on the factors influencing NIM performance in his section. Before turning to credit, I do want to highlight the progress we are making in bringing our capital markets capabilities to our expanded footprint.
In the second quarter, former Sandy Spring Bank teams generated approximately 27% of our interest rate swap transactions and 32% of our foreign exchange revenue. We believe these fee products should continue to provide opportunities for additional revenue synergies over time. Credit quality remained strong in the quarter, with annualized net charge-offs of just 3 basis points for both the second quarter and year to date. Based on our first half performance, current loss expectations and favorable asset quality trends, we are lowering our full-year net charge-off guidance, which Alex will discuss later in the call.
Key asset quality indicators remained encouraging. Nonperforming assets increased modestly from the prior quarter but remain low at 39 basis points of loans held for investment, while past dues declined considerably and criticized and classified assets improved to 4.4% of total loans, down from 4.5% in the prior quarter. With Bureau of Labor Statistics scheduled to release June unemployment data shortly, this chart will soon be updated. For now, I'll simply note that Virginia and North Carolina's May unemployment rates remain below the national average, while Maryland's was just slightly above it.
We continue to expect unemployment levels in Virginia, Maryland and North Carolina to remain manageable and generally comparable to or below the national average, consistent with Moody's current state-level forecast. We remain confident in the resilience and long-term attractiveness of our markets. As I approach my 10th anniversary with Atlantic Union at the end of this quarter, what is clear to me is how far we've come as an organization. We've stayed focused, adapted as conditions changed, and consistently executed the strategy we set out and clearly communicated, while remaining grounded in the community bank values and local relationships that have always defined Atlantic Union. This quarter's results reflect that continued momentum and, most importantly, the dedication of our teammates whose hard work makes it all possible. With that foundation in place, and no additional acquisitions currently planned during this phase of our strategic plan, our focus is squarely on continuing to demonstrate the sustained performance and capital generation capability of the company. We have built performance that enables us to better serve our customers and communities, invest in our teammates and create long-term value for our shareholders.
With that, I'll turn the call over to our CFO, Alex Dodd, for a detailed review of our quarterly financial results. Before I do, I'd like to note that Alex has now been with the company for nearly four months following a deliberate and smooth transition with former CFO Rob Gorman, who will retire at the end of September. Since this is our last earnings call before Rob's retirement, I want to again thank him for all he's contributed over his 14 years with Atlantic Union.
Rob leaves behind a strong legacy and will be missed, but he is ably succeeded by Alex. With that, I'll turn the call over to Alex for his inaugural quarterly earnings
Alex Dodd, Chief Financial Officer
Comments. Alex, thank you. John, and good morning, everyone. Before I begin, I want to thank Rob as well for making this a smooth transition for me. I'll now take a few minutes to provide you with some details on the results. My commentary today will primarily address Atlantic Union Bankshares' second quarter financial results presented on a non-GAAP adjusted operating basis, which for the second quarter principally excludes the $32.3 million pre-tax gain associated with the sale of our equity interest in bearing insurance.
In the second quarter, reported net income available to common shareholders was $158 million and earnings per common share of $1.11. The adjusted operating earnings available to common shareholders were $134 million or $0.94 per common share for the second quarter, resulting in an adjusted operating return on tangible common equity of 20.11%, an adjusted operating return on assets of 1.47% and an adjusted operating efficiency ratio of 47.47%. Here's a look at the GAAP year-to-date metrics and trends over the last few years.
Looking at the year-to-date adjusted operating numbers, at the end of the second quarter we have already reached the target for ROA and ROTCE medium-term financial targets. We remain confident that we will achieve all three of these targets over the medium term, which we define as this year and next. Turning to the credit loss reserves, at the end of the second quarter the total allowance for credit losses was $331 million, an increase of $9.1 million primarily driven by loan growth during the quarter.
The total allowance for credit losses as a percentage of total loans held for investment remained flat at 115 basis points at the end of the second quarter. As John mentioned, net charge-offs were $2 million, or 3 basis points annualized, in the quarter. Now turning to the pre-tax, pre-provision components of the income statement for the second quarter, tax-equivalent net interest income was $329.7 million, an increase of $12.8 million from the first quarter, primarily driven by an increase in loan volumes, higher loan yields and increased loan accretion income.
The increase in loan-related interest income was partially offset by an increase in deposit interest expense primarily from growth in interest-bearing deposit balances and modestly higher deposit costs. As John noted, the second quarter's tax-equivalent net interest margin increased nine basis points from the prior quarter to 3.94%, primarily due to higher earning asset yields, partially offset by modestly higher cost of deposits. Earning asset yields increased 9 basis points from the prior quarter to 5.88%, primarily due to higher loan accretion income of $5 million and higher loan yields.
Cost of funds was flat from the prior quarter as a 3 basis point increase in the cost of deposits was offset by lower borrowing amortization costs related to past acquisitions. Of note, excluding the impact of accretion income, our core net interest margin increased by 1 basis point to 3.46%. Noninterest income increased $35.5 million to $90.2 million for the second quarter, primarily driven by the gain on sale of our equity interest in bearing insurance.
Excluding the one-time gain, adjusted operating noninterest income increased $3.1 million to $57.9 million, driven by higher loan-related interest rate swap fees associated with higher loan originations and increased fiduciary and asset management fees, which were partially offset by lower other income. Noninterest expense decreased $10.7 million to $199.1 million for the second quarter, driven by a $9 million decline in merger-related costs. Adjusted operating noninterest expense, which excludes merger-related costs in the first quarter and amortization of intangible assets in both quarters, decreased $1.3 million to $184 million for the second quarter, primarily due to lower marketing costs along with a decrease in salaries and benefits primarily related to seasonally higher payroll taxes and 401(k) contribution expenses in the prior quarter. At June 30, loans held for investment, net of unearned income, were $28.7 billion, an increase of $727 million, or 10.4% annualized, from the prior quarter. Our average loan growth for the quarter was approximately 6%. At June 30, total deposits were $30.5 billion, an increase of $77 million, or approximately 1% annualized, from the prior quarter, while average deposits decreased 2.4% for the quarter.
Our loan-to-deposit ratio ended the quarter at 94.1%, within our preferred range of 90% to 95%. At the end of the second 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.
On a linked-quarter basis, tangible book value per common share increased $0.84, or 4.2%, to $20.77 per share at the end of the second quarter. Since Q2 2025, tangible book value per share has grown $2.39, or 13%, year over year. The CET1 ratio was 10.41% for the second quarter and within our preferred range of 10% to 10.5%. During the second quarter, the company repurchased approximately $10 million of its common shares at an average price of $37.76, leaving approximately $240 million remaining under our share repurchase authorization.
Before turning to the financial outlook, I would emphasize that our second quarter results represented strong operating performance and an encouraging indication of the earnings capacity and capital generation capability of the franchise. At the same time, we believe our updated outlook reflects a disciplined and prudent view of second half funding competition and deposit mix. We continue to expect loan balances to end the year between $29 and $30 billion, while year-end deposit balances continue to be projected between $31 and $32 billion.
On the credit front, the allowance for credit losses is projected to remain in the 115 to 120 basis point range, and we are reducing the range for our projected net charge-off ratio to be between 5 and 10 basis points in 2026. Fully tax-equivalent net interest income for the full year is now projected to come in between $1.32 billion and $1.33 billion inclusive of accretion income. The updated range reflects our expectation of higher interest-bearing deposit mix as well as greater loan and deposit competition in the second half of the year.
We are tightening the range for our 2026 fully tax-equivalent net interest margin to between 3.90% and 3.95%. This outlook is supported by our baseline assumption that the Federal Reserve increases rates by 25 basis points in September and that term rates remain stable at current levels. On a full-year basis, noninterest income is expected to be between $220 million and $230 million, while adjusted operating noninterest expense is estimated to fall in between the range of $742 to $752 million, including the expense impact of our North Carolina investment and our other 2026 strategic initiatives.
Based on these projections, including our expected stock repurchase activity, we expect to generate annual growth in tangible book value per share of approximately 12% in 2026 and produce financial returns that will place us within the top quartile of our proxy peer group. In summary, Atlantic Union delivered strong operating financial results in the second quarter and had a solid first half. We remain focused on generating sustainable profitable growth and to build long-term value for our shareholders in 2026 and beyond.
I'll now turn the call over to Bill.
Bill Cimino, Senior Vice President, Investor Relations
Thank you, Alex, and Livia. We're ready for our first caller. Please.
OPERATOR
Ladies and gentlemen, to ask a question at this time you will need to press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, simply press star 1 1 again. Please stand by. We'll be compiling the queue now. First question coming from the line of Russell Gunter.
John Asbury, President and CEO
Good morning, Russell.
Russell Gunter
Hey, good morning. Hey, morning John. Good morning Alex. First question for me, I wanted to kind of start on the margin and really trying to get a sense directionally for loan yields, where they're headed. So if you could level set us for where new production came on in 2Q, kind of perhaps where that pipeline yield sits today. And then just remind us of what the fixed-rate repricing opportunity is for you guys kind of relative to what you are putting on new commercial at today.
Alex Dodd, Chief Financial Officer
Sure. And good morning, Russell. So for the second quarter, our fixed-rate loans are coming on. New loan spreads are around 200 basis points, and our variable-rate loans are also around 200 basis points. We saw a little bit of lower spreads in the quarter due to larger loans that we completed, and that was more just a function of the size of the loan, but around 200 basis points for both variable and fixed. In terms of the fixed-rate opportunity, we have about $800 to $900 million per quarter of variable-rate loans that are maturing with rates around 5%, and we expect to put those back on around 610 basis points.
So it's about a 100 to 110 basis point benefit for the loan maturities each quarter. Yeah. So we do have in our guidance a 25 basis point increase in September. We will see a small benefit in the fourth quarter for the deposit pricing lag. It's under 1 basis point for the full year, and it's about 3 basis points in the fourth quarter. In terms of core margin, we do expect that to grind higher over time from the benefit of the fixed-rate loan repricing.
But because of higher funding costs and deposit mix, it's not going to be as high as expected. As we look forward to the next few quarters, we'll see core margin increase modestly because of those dynamics.
Russell Gunter
Got it. Okay, great. Super helpful. I'll step back. Thanks for taking my question.
Bill Cimino, Senior Vice President, Investor Relations
Thank you. Russell and Olivia, we're ready for our next caller. Please.
OPERATOR
Thank you. Our next question coming from the line of Janet Lee.
John Asbury, President and CEO
Hi, Janet. Good morning.
Janet Lee
Good morning. Could you give us a little more color around the deposit competition and the mix shift, what you're expecting in deposits in your NII guide, and maybe what pace of deposit cost increase is assumed in your 3.90% to 3.95% NIM guide?
Alex Dodd, Chief Financial Officer
Sure. And good morning, Janet. So we did update our guidance for net interest income, and it's solely coming from the funding side of the balance sheet. What we saw in the quarter was customer migration to our higher-yielding interest-bearing deposit accounts, and that's informed our guidance. So we're encouraged by the loan growth that we saw in the quarter, but the cost of funding that is going up higher than we expected. What we saw through the quarter—to give you perspective on just the month of June—we saw a 2 basis point increase in our cost of deposits.
So it was 3 basis points for the full quarter and 2 basis points in the month of June, and that really informed the outlook for the rest of the year. So I guess I'll stop there, Jen, and see if you have further questions.
Janet Lee
Got it. So 2 basis point increase in the month of June. So that is sort of, at this point, the pace at which you would expect for the rest of the year, ballpark.
Alex Dodd, Chief Financial Officer
Not necessarily. We're going to be a little bit under that if you just play that out for the rest of the year. And that's going to come from the mix that we'll see in CD growth and money market growth as well as some DDA growth that we have in our outlook. So it's underneath that pace, but that's what informed our outlook for the rest of the year.
Judd, Analyst
Alex, is it fair to say what we're seeing is relatively stable deposit rates from a competitive standpoint? Is this more of a mix issue in terms of where is the growth coming? Got it. Thanks for the color. And just a quick follow up, PAA for the second quarter came in maybe just slightly above. What you guided before is 145. PAA for 2026 is still good assumption.
Alex Dodd, Chief Financial Officer
Yeah, we had said on the last call the range is 140 to 150 and we're still tracking to that. So 145 being in the midpoint is fine.
Judd, Analyst
Got it. Thank you.
John Asbury, President and CEO
Thanks, Janet.
Janet Lee
Thank you.
John Asbury, President and CEO
Janet and Livia, we're ready for the next caller please.
OPERATOR
Thank you. Our next question coming from the line of the ... with Hovde Group, Yolanda Melvin.
Yolanda Melvin, Analyst at Hovde Group
Hey, good morning, gentlemen. Hey, curious John, Alex, it sounds like the loan pipeline continues to be pretty robust. Just curious what you're seeing on the commercial pipeline out of sort of the legacy Sandy Spring Maryland markets. How much that's contributing to the pipeline and maybe the growth you saw this quarter?
John Asbury, President and CEO
Yeah, we are growing the former Sandy Spring portfolio and we're happy to see that. Dave Ring, do you want to just sort of speak directionally?
Dave Ring
Sure. I mean we're seeing double digit growth in the pipeline within the greater Washington market. Washington, Maryland production is up double digits as well. And all the markets, all the teams in those markets are also growing. So we're seeing very balanced, stable growth and we're not seeing any hangover from the acquisition.
John Asbury, President and CEO
The way I think about this, Dave, is that the former Sandy is, in round numbers, maybe a third of the overall portfolio. And so you would expect, all things being equal, for them to be about a third of the pipeline and they've come a long way closer to that. So we've been very pleased with it and the teams, to be clear.
Yolanda Melvin, Analyst at Hovde Group
Got it. Appreciate that color. And then John, just maybe an update in progress in terms of the Carolina build out, what you're seeing on those fronts. Thanks.
John Asbury, President and CEO
Yes, there's really two, I think of this. It's a holistic strategy comprised of both the retail banking effort as well as the investments that we're making in expanding our commercial banking teams along with some additional investment for mortgage and wealth management, et cetera. Something I've been saying recently, I want to be clear in terms of the investment, while we do refer to it as the North Carolina strategy, you could more specifically refer to it as our densification strategy in Raleigh and Wilmington because that's where the thrust of the investment and certainly the physical branch network build out is going on.
So I'll ask Sean O'Brien, who's head of Consumer Business Banking, can you update us on where are we in terms of the branch effort? And then I'll ask Dave Ring to chime in with some perspective on the commercial side. Yeah, Sean.
Sean O'Brien, Head of Consumer Business Banking
Thanks, John. So we announced that we were going to open 10 branches, 10 new branches in North Carolina, to John's point in Raleigh and Wilmington, and the first of those branches opens here this month. So we are very excited. That's Raleigh. We have a branch opening and then we have two more opening in Raleigh in October, November of this year. So we'll have three new Raleigh branches this year and then we will start to open branches in Wilmington as well.
If you remember, 7 in Raleigh, 3 in Wilmington, and we hope to get all 10 done in 2027. A couple may get into 2028, but we are very happy with our site selection. We've hired the first three teams. They're completely staffed for Raleigh. So we have all of those teams hired. We're very happy with the talent we found, so we're very excited about it. We have a lot of plans underway for how to grow new customers in those two primary markets.
John Asbury, President and CEO
And then Dave, your perspective on what we call wholesale banking, which are the various commercial businesses.
Dave Ring
We're working really closely with consumer and so we're seeing double digit growth again in loan balances in North Carolina. Plus we're waiting on announcements of some new hires that have started or recently started that we're very excited about. So overall we're meeting our talent acquisition plan and we're meeting our loan growth expectations.
John Asbury, President and CEO
So, Dave, more to come on that.
Yolanda Melvin, Analyst at Hovde Group
Great. Thank you for the color.
John Asbury, President and CEO
Thanks, Dave and Livia. We're ready for our next caller. Please.
OPERATOR
Our next question coming from the line of Katherine Miller with KBW. Your line is now open.
John Asbury, President and CEO
Hi, Kathryn.
Katherine Miller, Analyst at KBW
Hi, good morning. Just one more on the NII. Circling back on the size of the bond book, how should we think about the securities portfolio growth in the back half of the year or is it fair to keep that fairly stable?
Alex Dodd, Chief Financial Officer
Yeah, I guess I'll start with in the second quarter, we did bring it down over 200 million to fund lending growth and we're now at about 13% of total assets and we plan on keeping it stable in the rest of the year.
Katherine Miller, Analyst at KBW
Okay, so that's shrunk the past two quarters. So maybe we can expect as deposit growth improves in the back half of the year, your loan growth is funded by deposit growth, not the securities book. So that just is flat.
Alex Dodd, Chief Financial Officer
Yeah, you're correct. We want to fund the loan growth from our core deposit growth going forward.
Katherine Miller, Analyst at KBW
Perfect. Okay, great. And then on buybacks, it was great to see that started. How should we think about how much of that 240 million you expect to repurchase over the next, through the period that you have that authorization,
Alex Dodd, Chief Financial Officer
We plan to complete the whole program. Our forecasting assumption right now is spread out by quarter, but it's obviously going to be dictated by the share price and when we're in the market.
Katherine Miller, Analyst at KBW
Perfect. Okay, thank you.
John Asbury, President and CEO
Thank you, Katherine. One quick note, Katherine, if you recall, you know, the securities book was elevated after the CRE loan sale, so it coming down is sort of part of our plan is to reinvest those into core earnings. So you'll go back, you can see how it rose temporarily. And that was the plan. And then we intended to draw it down, which was what we've done. And as Alex said, roughly 13% is a pretty good, pretty good proportion of assets to have in the securities portfolio from our perspective.
Katherine Miller, Analyst at KBW
Got it. Okay, thanks for the clarification.
John Asbury, President and CEO
Thanks, Katherine. And Livia, we're ready for the next caller. Please.
OPERATOR
Our next question coming from the line of Steve Moss with Raymond James. Your line is now open.
John Asbury, President and CEO
Hi, Steve.
Steve Moss, Analyst at Raymond James
Hey, John. Good morning everyone. Maybe just following up on deposit competition. You're just kind of curious in terms of what's your appetite to maybe increase borrowings over higher cost CDs and money market. Is the market that competitive that borrowing is cheaper? I know you put on some towards the end of the quarter here.
John Asbury, President and CEO
Yeah. What you saw go on at the end of the quarter was essentially a bridge. As we indicated, we had 6% annualized loan growth during the quarter. So we were productive all quarter long, which was great. It was not all back-end loaded. Having said that, it certainly picked up at the end of the quarter, you know, and hence that bridge. So Alex, do you want to share any perspective?
Alex Dodd, Chief Financial Officer
Sure. And we ended the quarter with a loan to deposit ratio of over 94% and had to increase borrowings, as you're calling out. But we would prefer to fund our lending growth through our core deposit growth, including CDs. And then after that we may support it with brokered deposits as well. The borrowings is going to be more of a short-term measure to really balance the overall balance sheet.
John Asbury, President and CEO
And as you know from past history with us, not unlike many others, we do see some seasonality in deposit balances in Q2 due to tax payments. And we also have certain larger commercial depositors that seem to commonly have some sort of downdraft in balances just at quarter end through the natural cycle and flow of their businesses. And you can see that evident in the difference between the spot growth rate for deposits and the average quarter over quarter.
Steve Moss, Analyst at Raymond James
Right, okay, just wanted to check on that. Appreciate that color there. And then the second thing here, just in terms of, you know, on credit, I guess, you know, two things. One, if you give color around the C&I loans that were placed in nonaccrual this quarter and then with regard to the allowance for credit losses, you guys state in your guidance that you assume an uptick in unemployment. Just kind of wondering how much that uptick matters to the total ACL for the current year or by year end.
John Asbury, President and CEO
Doug Woolley, Chief Credit Officer is here. Do you want to speak to that?
Doug Woolley, Chief Credit Officer
Doug. On the C&I uptick, it's two smaller credits that have gone a little bit sideways. So we're working through that. But obviously not a pool. So we think it's a little bit of loss there. Doesn't indicate anything not tied to anything else in the portfolio. It's interesting. We have been impressed with the resilience of not only our local economies but the client base. You would expect to see some stress and this isn't much. So non-performers are low from our perspective at 39 bps of loans held for investment.
And it's fair to assume that you could see it go plus or minus a bit in any given quarter. We're actually below where we finished the end of last year. No common thread in terms of. It happens, losses are very, very low. I've said for 10 years that losses across the industry and in the bank are below what I would have expected to be a normalized rate. And that was beginning 10 years ago. So we feel pretty good about losses.
Steve Moss, Analyst at Raymond James
Right. And appreciate that color there. And just the ACL guide, is it just like maybe one to two bps in terms of the assumption on the unemployment rate to rise, it's a minor impact. Maybe on your guidance for 2016.
Alex Dodd, Chief Financial Officer
That's right, it is a minor impact. We're certainly still within our 115, 120 basis points as you look out to 2020.
Steve Moss, Analyst at Raymond James
Okay, thanks. I'll step back in the queue here. Thank you.
John Asbury, President and CEO
Steve and Livia, we're ready for the next caller, please.
OPERATOR
Our next question coming from the line of Brian Wilcinski with Morgan Stanley. Your line is now open.
Brian Wilcinski, Analyst at Morgan Stanley
Hi, good morning. Thanks for taking my question. You mentioned earlier on the call that most of the pressure that you're seeing on deposit cost is coming from the mix of deposits. Can you give any color on what the cost of new interest-bearing deposits that are coming into the bank today are?
Alex Dodd, Chief Financial Officer
Yeah, the new deposits on a combined basis is going to be over 3%, somewhere between 3 and 3.5% depending on that mix. But it's mostly going to be in CDs and money markets and interest checking.
Brian Wilcinski, Analyst at Morgan Stanley
Got it. That's very helpful, thank you. And then when we look at the non-interest-bearing deposits as a percentage of total, it sounds like there will be some more migration in the second half of the year. Do you think that you'll see a similar amount of migration in the second half as you saw in the second quarter?
Alex Dodd, Chief Financial Officer
We're actually forecasting some of the interest-bearing—I'm sorry, non-interest-bearing growth in the second half of the year and maintaining that same percentage of our total deposits, around 22%. But obviously we saw migration happen in the second quarter. So that's our assumption right now based on working with the business leaders. But it could change.
John Asbury, President and CEO
Yeah, the data that we're looking at is suggesting it's not about smaller deposit, non-interest-bearing accounts. It's some of the larger ones, commercial businesses that are making more active use of sweep accounts. I mean, the reality is that we do offer quite sophisticated treasury management services, and part of our job is to help them optimize working capital. So we saw some of that movement as they were able to deploy some surplus funds. But in Alex's camp, we would expect to see some improvement there over time.
It's very difficult to forecast in this environment. No question about it.
Brian Wilcinski, Analyst at Morgan Stanley
Got it. And if I could just squeeze in one more, Alex, do you happen to have the spot deposit costs at quarter end?
Alex Dodd, Chief Financial Officer
It was 195 for the month of June.
Brian Wilcinski, Analyst at Morgan Stanley
Got it. I really appreciate all the detail and thank you for taking my questions.
Alex Dodd, Chief Financial Officer
Certainly.
Bill Cimino, Senior Vice President, Investor Relations
Thanks, Brian and Livia. We're ready for our next caller, please.
OPERATOR
Our next question coming from the line of David Schefferini with Jeffrey Sealon is now open.
Bill Cimino, Senior Vice President, Investor Relations
Hi, David.
Frank, Analyst
Hi everyone. This is Frank on for Dave. Just one for me. On the balance sheet sensitivity, I know you guys mentioned that the NII guide down was coming mostly from the deposit side, but I just kind of want to touch on how your modeled NII sensitivity has changed relative to last quarter and just what deposit beta you're now embedding in your guidance. Thank you, guys.
Alex Dodd, Chief Financial Officer
Yeah, the sensitivity changed because of our mix, and that's what you can expect is the mix change versus the prior quarter into higher rate-sensitive deposit products. To the second part of your question around the beta, the beta we're pricing in for the 25 basis point increase is about 50% for interest-bearing products and 40% overall. We have, as I mentioned earlier in the call, there will be a lag, so we'll reprice immediately for some contractual deposits, and then there'll be a 90-day lag for our savings portfolio where we'll see a bit of a benefit that's short lived, but a benefit in the fourth quarter.
Frank, Analyst
Awesome. Cool. Thank you, guys.
Bill Cimino, Senior Vice President, Investor Relations
Thanks, Frank. And Libby, we're ready for our next caller, please.
OPERATOR
Our next question in queue coming from the line of Steven Skun with Cypress handler Alanis Malpin.
Steven Skun, Analyst
Yeah, thanks. Good morning, guys. Curious if we could go back to the conversation here around the repurchase briefly. I know you said you plan to utilize the entirety of that. Can you talk a little bit about, at a high level, how you think about the math there, whether it's an earn-back perspective, alternate uses of that capital, and just kind of potentially how sensitive to price you could be if the stock continues to move higher?
Alex Dodd, Chief Financial Officer
Sure. So in terms of the buyback, there's a couple things we want to manage at the same time. We want to operate our CET1 ratio between 10 and 10.5%, and our capital management priority, excuse me, is supporting loan growth. So if we see loan growth outperform our guidance, we will slow down the buyback. But in terms of buyback specifically, we have an intrinsic value model on our share price, and we want to get a certain return out of when we'll be in the market.
So, you know, if it does trade above—our shares trade above where we want to actually be in the market—there'll be maybe a pause for a little while in terms of when we're repurchasing shares overall. The earn-back, though, is about four years on the share buyback. So, you know, we want to make a good economic decision of when we're in the market and when we're actually doing our repurchase activity. We've modeled, as I said, over the next 12 months to be split by month or evenly distributed, but that's going to depend on where the shares are pricing.
Steven Skun, Analyst
Got it. Very helpful. Appreciate that clarity. And then just maybe one last one. Going back to kind of the balance sheet momentum and loan growth and deposit growth, it sounds like overall balance sheet growth should maybe more closely match loan growth moving forward. If I'm hearing what you're saying—less potential drawdown in securities, maybe less remix and more just matched growth. From that perspective, is that the right viewpoint in the hope of what you'd be able to deliver?
Alex Dodd, Chief Financial Officer
Well, over time, the guidance that we provided for 26 is mid-single-digit loan growth and low-single-digit deposit growth. But certainly over time we would expect to fund loans with deposits—customer deposits ideally.
Steven Skun, Analyst
Got it. Okay. Appreciate it. Everything else has been kind of asked and answered. Thanks for the time.
John Asbury, President and CEO
Thanks, Stephen. And thanks everyone for joining us today. We appreciate your time and look forward to talking with you next quarter.
Bill Cimino, Senior Vice President, Investor Relations
Thank you, everyone.
OPERATOR
Ladies and gentlemen, that concludes the conference for today. Thank you for your participation, and you may now disconnect.
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