AUB - Earnings call transcript Q1 2018 | Atlantic Union Bankshares Corporation

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Operator

Good morning. My name is Dennis, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Union Bankshares' First Quarter Earnings Conference Call. [Operator Instructions] Thank you. I will now turn the conference over to Mr. of President Vice Cimino, Investor Relations. Bill ahead, go sir. Please

Bill Cimino

today. everyone. Thank Asbury, Bankshares' Union and with and morning, you, good I me Gorman President Rob Vice and have President Dennis, Executive CFO, and CEO, John

with We also have available today's the members of to that download period. note release Investor us website, management Please investors.bankatunion.com. our question-and-answer earnings for executive other team is on our

reconciliation metrics performance exclude call the we to after-tax well operating resulting will using financial both today, Act included is our comparable our of the information GAAP non-GAAP as GAAP earnings revaluation the operating Important the in assets first for the During metrics. fourth expenses release on Tax a Operating the merger-related acquisition, Cuts non-GAAP related XXXX. the and from metrics comment of tax quarter quarter Xenith to XXXX. charge and of Jobs excludes company's measures, about differed as for including the metrics,

call now the John further we filings the factors research important the call are subject I over which earnings no from are to Before today's XXXX not will fact will statements, of that forward-looking turn the information SEC including questions to and forward-looking would make I'll call our results for statements cause results that to of on the differ. be you materially There remind Company's to discussion our the uncertainties. will that statements call, statements. and At not of future for turn historical everyone risk release by performance first expressed of and to actual risks analyst from any community. And implied these our regarding can differ quarter Asbury. or actual I forward-looking to we assurance the like refer other over could John, factors, and take other Please and end

John Asbury

thanks today. and for joining all us you, Thank Bill,

the and quarter, integration provide experienced an into well on merger. report first get the I'm to unexpected any I’d that not to date. importantly to update Before I progressing The Xenith pleased is turnover like work we’ve

is a and on since start January closed off energized Our X. team great the to merger

system track confident weekend. Day and at transition and well-prepared in our playbook are Memorial teammates the they've for as to I our thank core to customers. on hard the conversion put integration over for possible We make I'm for all as seamless work our want

Xenith and growth uniquely comparison the profitability underlying earnings merger even loan acquisition. believe the an performance the as full signals details his a the solid pace off report, start strength to our the impacted in ahead results demonstrated the the saves. cost to valuable the with to will and during year section strong and Virginia's and potential only is Turning deposit by Union to for mind I'll this regional to improvements quarter realizing sets year operating meaningful keeping impact achievements periods franchise, first quarter Xenith to the of some our more financial bank. in before is speak so key financial Rob basis our that on I prior of the earnings by metrics provide

during million first fourth last quarter For basis, our or an to metrics compared year's quarter first earned I'm that profitability report operating Union the pleased the on $XX.X quarter. meaningfully a quarter to when $X.XX share. improved

tangible grew Operating closed XXX are ratio efficiency linked common on pro quarter fully the to tier track improving related forma realized. XXXX, cost loans equity performance basis percentage On to a XX.X%. meet to and return below return acquisition assuming X% in Union and X.X XX.XX%, the We’re fourth deposits X%. XX% by the improved targets annualized on our X.XX%. points Xenith by basis dropped December once increased by XX Operating assets points points XX, savings on financial basis quarter the to Xenith top on

any are While Overall continue economy credit quality very I we matching did we we grow our at leading the of are loans trend to to and industry that credit quality. Union indicators downturn set of With in faster believe Union's a me than but time that update we declared it on be capable an back credit the long-term remains deposits, manageable is and at the continue XXXX is to communicate them Union the priorities. below to six two. and see levels important within goals, let we provide strong. previously do asset a At them. steady track believe continue in line portfolio to Union gap remain The this quality footprint early of level and across not benign. indications our believe problem said,

industrial and portfolio revenue balance loan commercial both our order and diversify as streams which lending in total products and and services portfolio and types product real occupied fee to over to reliant is become owner less income. includes grow First estate spread commercial we loan growth which better based the define increased time on

by pro estate initiative, the impressive outstandings real momentum for annualized. C&I and forma C&I XX% and basis, saw by On loan diversification of grew categories we annualized growth owner-occupied owner-occupied estate. and commercial lending XX% type real gained On our linked portfolio in increased loan our a quarter

utilization owner-occupied small estate at XX%. reminder, for midsize is line C&I As and a key loan a remains type businesses. steady real product

and the in on which experienced we quarter in He Banking focus strong means second role same a an During new us similar team Hampton Southwest Commercial keenly enable from focus us building leader higher. joins operation Virginia based a strong will also banking Head Virginia started who area business as days SunTrust commercial from the a more for strategy Carolina-based North in led Roanoke. important that previously as full-time in in details this our out Carolina. of C&I C&I out brings to will also few Virginia. announced the the he energy branch building opportunities to C&I Coastal with hired background. sharing bank. our His on commercial Carolina lite on most North Raleigh We've North banking Carolina-based its our added predecessor North in a Roads model leader we commercial a market, a populous with background We've in We're away now

We also continue fee to core as middle This upside new lower loan commercial of deposits become and aware expanded capabilities in categories and growth more believe treasury there's and develop. in income. significant and will fuel relationships medium-sized management market small companies

effort growth clients and As I've said commercial new will be driver as the matures. expect this I banking before, largest industrial eventually of do future

team at fee-based strategic wealth under progress confirm that toward Virginia. months platform fee initiative, increase their management our income additional sound established Northern investment the one a so successfully acquisitions is strong revenue more two we're one companies is Union in and in for acquisitions this making this the and acquisitions only that time, on the At investment stream pause but path performing. in can advisement growth and we've the than will investment XXXX, pursuing the wealth business. one not that have meaningfully registered thesis advisor billion two in path. we going integrating focus the steady We wealth registered a management X.X The We objectives. the to the believe of and Roanoke four the advisors fastest first announced On of is two take

from to particular second find core to a a with grow the expect to on core Our deposit above and loan deposit funding ratio with ratio the to operating us to XXX%. loan standalone increasing base growth focus manage core ratio. our deposits to our have obtaining priority our prior to the Union down loan and percentage deposit is quarters to growing our one ratio business to funding over targeted In deposit to is XX% a deposit ratio grow and loan time. small I near-term want Currently continue loan commercial to growth We XXX% would deposit time, us level XX% just accounts. over point

in both teams helps quarter the quarter growth. fourth enhancing all small We treasury which our deposit focused banking a from business first factors retail between retail broad-based client our in in seasonal prospecting growth our pro gathering offerings, our with of X% We’re was improving coordination growth capabilities. variance growth accounts, changed did intensive Except channel the management annualized. depository improved should our our that coverage on teams efforts. increasing during growth sees and channel deposit and attention Deposit due for a foster deposit to which more categories. between the focus to medium-sized explain and trail now commercial for slower quarter deposit deposits in the realigned Union traditionally the appropriate channel forma first and on deposit relationships, and banking incentives and commercial is retail and increasing to loan loan business to some down

progress intensive borrowing take a needs reminder, in to from As great fruit as focus. convinced These beta to opportunity deposit lower deposit good many profile important also our those compared no deposit opportunities that competitors. our at with have this base making deposit build have transaction accounts I we which base of including businesses a commercial all. we’re time provides XX% comes remain that bear to a

support to priority quality growth, by leveraging lower build improve so efficiency technology replicable is measured processes. third to and improve do as ratio efficiency Our by scalable and and cost,

on headway with the lowering the on Union. making first basis the efficiency we're ratio for quarter operating below noted, dropping at As during XX% an

from expect examples reflected fourth meantime, of rate we fully at space saves to the cost on make up branch other physical leading that at will continuing see expense. search the and previously the further our which comprehensive results. run opportunities annualized footprint of improvement other time acquisition In Xenith We and the quarter reviewing opportunities be to efficiency we're taking to for in the occupancy to reduce all look as a needs identified our progress

approval improve times the begin conversion processes this manual better to part in this of the the Encino, market. This of treasury track commercial financial implementation our productivity, to core to and This platform class The new of fleet. systems us systems will aspect generation. system. enable eliminate a loan quality. we Turning for be late believe us in further and to management year, and the allow compete processes, processes target loan we're will institutions best May platform upgrading our turn which both Also largest with latest well paper we’ll streamline to origination the

higher our financial achieve rate run talent, a top manage incentives corporate and quarter. tier basis is the programs goals levels priority targets beginning aligning and achieving objectives. of we that sustaining speaking, on Broadly the incentive compensation to management to financial XXXX we in tier match fourth our realigned short-term and by expect in and fourth performance performance compensation with investing people and top Our developing

reminder, efficiency achieving a top XX%.We and between are tangible As are X.X% of the below objectives focused intensely between XX% to on assets quarter on of we achieve return quarter. indicate, ratio beginning these results these targets X.X%, financial on and our equity return tier and a on our are a as first track common fourth and objectives in an XX%

have C&I bankers. opportunities for goals priorities. goals we’re matched business corporate deposit also with the of specific further our higher commercial Examples match on We bankers increasing job signing focus

with teammates are As compensation This a a in teammates that sharing for shareholder shared and of decade all a ESOP company. our the increasing profitability strongly incentive reminder, profit focus among had share addition value. place to plans in program, targets for not in correlate creates over who program financial a companywide a Union's the achieving to enabling eligible

is geographies. a our build new to differentiated create and client more banking that by brand existing distinctive and creating easier to enduring fifth and brand make Our in continuing priority experiences

nicely June of plans Union accompanied to geographies both in sponsorships to the Xenith's occurring our we up Virginia Union new and for significant entrance the are first We and announced our market Roads Virginia patriotic and Coastal recently rights is transition to the the Trust and festival by our including we naming and to that's customers. as Bank and theater the outdoor special prepare Hampton were marketing popular Union brand Our awareness introduced sponsorship ramping into brand outsized weekend deal brand customer. two Trust for Portsmouth, related create opportunities Bank in large-scale a for offers of Pavilion which for

May. We brand early of we have that systems just starting advertising and and ahead in launch also development will conversion our new

prominently As the in rated recently competition. brand Union and the This in recognition real the features our proof Union that differentiates bank best you point value may know, advertising. Magazine of proposition a from very customers credential Money Virginia and our offers our is

and expertise a is includes leveraging XXXX Xenith, for cost conversion. priority to sixth this in market opportunities new saves commercial achieving Our integrate and successful

has leveraging Xenith lending executed Northern brand, C&I other being go focused the meticulously planned, with we I’ve and it's our also C&I We're the Virginia integration lines. it rigorously been We're and Union smoothly. product we out As to in capabilities expect and markets. the Richmond have mentioned on before, broader capabilities larger our capacity building in the

have a fourth of sight run our in and We on quarter. expect save to them a beginning cost hit the to line achieve rate basis targets

XXXX the Our Union. priorities for are forward way

geography Our giving competitive Maryland and North grow with replicated home be franchise we to offers powerful a our Metro by the that in Carolina. opportunities organically cannot a franchise advantage D.C., Virginia, us state in of believe

and contiguous opportunities footprint. make is secondary strategic further a sense and infill to to As markets existing our have the will pursue strategy, it M&A financial to likely in as both we

of are have net Our offering made. attractive Virginia an resources simultaneously capabilities. there first talent customers’, looks new and six operating weekend. of banks in also and is is the systems confident positioning teams foot Memorial sustainable we're our priorities. to looks the results having as on And growth in loans, the markets deliver and I loan feel other destination based numerous and the right super an called the smaller competitive Rob I making Union our over for the that the part income been hires on momentum believe story think year to region, market our franchise and believe our core on and scale, our to share financial teammates share assembled a we right progress with in I'll well-balanced. with high regional head-to-head profile by believe attractive loan valuable unlike Union that deposit Union national with is I’ll high dominate Union strong with performance. and communities’, the out-of-state future we’re lack the deposits, the team results Day saying, expanded a well I in Union our quarter and banks capable capabilities. comfortable sometimes and the potential operating I growth with being it in shareholders. data and for now about differentiated for energized we've and markets off Union demonstrated started that earnings the per have performance demonstrated with solid I for in with deliver right what Integration good, our cover remains is throughout going pipeline to a we and track our long-term going meaningful highly having close the by turn uniquely any quarter. call holds and we integration top right remain for

Rob Gorman

quarter. Thank with take the you John, results today. Thanks, you everyone. morning, like good for to provide and now for of to first us financial Union’s few some joining I’d minutes details a

don’t I’d kept $XX from would a although million. value linked-quarter I like second the fair or Please for equaled relate with it $X.XXX have think will mind started, discuss acquisition, robust trends, will came or acquired in our quarter in including $X.XXX million. meaningful to note Well, the fair and year-over-year also X% assets is $X.XXX billion the consolidated be do to Xenith share trends quarter’s first in a results. for so. that the assumed of discussion to on equaled $XX.X exclude linked-quarter Since acquired fair deposit it goodwill in $X.XXX value intangibles fair results The Total assumed references be million sense to transaction the of billion. totaled equaled the I $X.XXX we as in acquired $X.X at quarter million billion. excludes billion million. approximately should Union’s $XXX with we financial related this make Gross more it to equaled loan deposits with points quarter mark after-tax areas make billion. liabilities and review numbers However, Core cost loans also also we a value Xenith, that of get of billion $X.XXX to relates merger-related cost fourth after-tax arising the Tax XXXX value Total The before as in of commentary expenses my some $X.X results. quarter Act data non-recurring part, most million XXXX, to the merger-related first operating and the in basis which the financial tax in an $XX and call. equaled

basis, On for metrics $X.XX. improved and million, million per $XX.X share which I in reported in profitability The earnings or income reported the operating $XX.X $X.XX per was operating metrics quarter. share. will my quarter clarity, quarter, operating an were the specify earnings For consolidated were commentary. are net In markedly the during first net company's

last up improved Our in quarter the quarter XXXX’s from operating ratio XX.X% return operating year's in was assets first and from the the quarter in from and quarter declined X.XX% versus tangible the was quarter. fourth to XX to it The first in quarter was down return and XX.X% XXXX. XX.XX% equity prior basis XX.X% fourth X% on the on from XX.X% in from the in first up XX.XX% of first common quarter. Operating in efficiency points

assets our ratio achieving XX% a targeting within common an efficiency operating remain committed below range X.X%, financial return we in XX%. to X.X% an to to the relative to top-tier of equity performance tangible noted, and return peers. John As of range on We're an on operating XX% operating

fourth realized once in be these acquisition that fully targeted within well the ranges. that will are Xenith We the beginning we confident from are cost quarter savings

equivalent XX the lower increased equivalent higher tax Xenith of of as quarters of points equivalent driven Net first that's of time funds XX by tax XX which was interest well same interest and of million quarter but accretion loan up by by from yields net X.XX% increased of points. Now, purchase from the $XX major and balances. basis million margin Tax for $XXX.X deposits rate from funding the by million from points the previous the an on for net basis an that's during prior by the costs acquisition the quarter’s equivalent on deposit for income $XX cost of loan impact asset million The to between basis turning interest quarter, quarter. as compared Changes the yields points loan levels $XXX,XXX quarter in or basis the in up overall quarter. to was year's the points which yields X statement, of increase of million the basis Act decline loans, asset due previous basis adjustments interest points net was prior from annualized the basis provision current quarter that's earning equivalent tax a approximately quarter fourth increased in taxable accretion higher increase was first income loan the points increased acquisition. to and losses point X components X quarter up of quarter, fourth X The debt basis quarter, long-term increase increase rates The driven points by the accounting added due primarily margin XXXX. was portfolio XX the the XX income. net X basis to Xenith of XX $X.X that offset was tax earning basis from The by that's basis which points tax quarter through the cost in to primarily the yields in assets an XX another is margin improved in to principally the mix in funds. asset interest points. the basis by variable quarterly the basis cost driven first the funds earning basis the was points on The points due point equivalent X prior yields, basis - in increase X the higher by partially $X.X X short-term increase to basis increase quarterly driven reduced the increase partially point earning from the yield the The of in offset net which yields points

the points of $X.X $X.X XXXX, million or an points the $XX.X compares for For increased XX charge-offs income to quarter million annualized and the quarter first gain income first the quarter in quarter basis prior in up Xenith. related by which $X.X a of sale quarter million, driven a of the were approximately valuation X XXXX in million in net $XX.X interest $XXX,XXX basis, of the the points on March the payments year. related the million million operating in Non-interest the does X ownership or from Other to XX, prior for core or and first $X.X company's basis quarter include or OREO primarily $XX.X were $X.X company. or Operating same intangible amortization to non-interest ended including last related in property that's million million XX% expenses basis to deposit adjustments. quarter $XXX,XXX acquisition

the As to million we after the system's sales our hit cost three of track in with merger for remain the scheduled realized majority John conversion savings $XX May. consolidation noted, target the on

Our rate tax ended XX XX.X%. the three was for effective March months

quarter During recorded. tax were to the compensation related of of $X.X first million approximately stock XXXX, benefits

these benefits, Excluding months the tax was ended XX%. for XX rate the three March tax effective

of XX.X% approximately we're full-year, an XXXX. tax rate the effective for in expecting forward Looking

held for by $X.X $XXX loan and assets X.X organic or quarterly from quarter. growth X%. increase March December XX, which was XX, balance The total held in net XXXX. end as an increase growth stand was earlier. XX% of acquisition a On of billion, forma prior acquisition pro mentioned were Loans by quarter loan loans quarter. now John sheet, investment of Turning broad-based Xenith X.X for At billion billion in to it December million basis, the the is during is and at increased at occurred the primarily the also increase driven The $XX.X assets XX. the from billion Xenith diverse or an investment

At or first loan we billion, X.X of year expect the X.X the an total XXXX. Looking growth deposits of billion quarter, the for full end December increase XX% continued that's single-digit were forward, from XX. upper to

Our acquisition XX, deposits on money December again million account with pro market driven in demand balance forma annualized Deposit deposits, total and basis or growth basis. savings an by was balances. approximately Xenith occurred X% $XXX on as increases increased

XX, was million primarily Now the March of XXXX. is portfolio. to at includes million million basis million to credit non-performing losses and $X.X the bank at which turning loan points of quarter, XXXX the basis the due increased during comprised XX, organic points non-accruing locations. allowance for X.X was carryover December course XX in previously XX.X acquisition no as XX, quarter. The quality, which total of former to to basis The attributable of in by quarterly the during December balance percentage XX assets $X balances, accounting at primarily March Xenith first loan allowance The Xenith, million loans portfolio XX in OREO NPA XX XXXX from loan to growth. properties and at The points allowance driven XX as increase acquisition OREO XX.X the primarily a XX, you from allowance assumption the decline of related Xenith was the ratio million increased for of March is loan there in million losses know of XX,

generated is combination summarize, track operating and loan achieve meaningfully. of savings solid continued growth and we the work integration remain Union earnings we realized as the results demonstrate envisioned the fourth profitability toward quarter will as XXXX. starting fully quarter confident on progress the we regional financial capacity Xenith The the demonstrated improved merger the to bank. are in metrics cost and quarter company's benefits and of once We that So operating combination, our the first during strategic growth deposit Virginia's the our we objectives produced significant

Finally, let achieving turn please performance will open for up with committed Bill and note value back shareholders. over questions as And building as for to it ever me our to Cimino, who lines Union that that, community. our up long-term from analyst remains the top-tier financial

Bill Cimino

and Thanks Dennis. Rob

our first ready please. We for are caller

Operator

Austin line the of from with is Please question Stephens Incorporated. first Nicholas ahead. Your go

Austin Nicholas

dig a bit. just the into Maybe NIM little

maybe quarters, you you you're next give as out As maybe margin look the how well know accretion ex with couple thinking idea an reported of of through the you about could as accretion? us

John Asbury

As for you schedule release, know provide we what accretion in income shows a are. expectations are do the that our

as reported that, year. basis expect a see margin some noted some range, over expected basis positive the the on quickly. the rate to in asset primarily the that is yields, rates probably you So But is do re-price next our and expansion because seen point a which book, few next on quarters interest three book, basis decline in XX% increase know short-term that's four in to bit loan on to as verbal we've very been primarily and we earning see the we've a into which about on point you

the one Fed, this So year. year, more that's by in June and expect in one a positive of we’re remainder in expecting two going forward. We moves do a couple the the late for

us are We've the well as betas our deposit So also is help pretty seen probably you earning on move noted will as side. the June assets low.

move - much a moved haven't rates We all. at the very had deposit

on type about. the of talking we've to depending range been the deposit we're that I XX% XX% think in

should that don't that materially well. see going that's go So We going to forward. increase

expansion the some on get earning we yield. asset So

Some but increase the in -- the couple we in next of quarter quarters. in funds, cost see of the should expansion next some

Austin Nicholas

kind between you're or how the assume the that's guess expansion that per quarter? of I is is about that end I NIM X now and thinking X not And that year, of to

Rob Gorman

quarter quarter. the say would coming - in see will and we that probably I third the It's actually second

Austin Nicholas

And press but you’ve know maybe, putting on is model mentioned give there business you the -- I any branch strategy then, I on just can that, you, on by that referenced maybe like release for you color John, in think I North guess it’s there? question maybe additional us a out the Carolina, a

Rob Gorman

in now is, Carolina. an think out opposed North to opportunities We to this an the organic landscape, think expansion a M&A for about what filled while we I'll been We've strategy. as saying going on based more our call is be

of sort in say difficult never but near in making create anywhere will Virginia. see we it’s any move that to would what We never, as North density Carolina envision

pretty either little market years which physical to acquisition As well. What with John go ago, have now picked a standpoint. Carolina. at Charlotte LPO I'm probably, out performed do ask going the here know, that an that Stallings, you the we in over President we And than to summarize of with since M&A sort have Xenith is, been in from of from presence has has Union maintained two an we less our perhaps build where has Raleigh.

John Asbury

indication some especially market we few another with that opportunity a a win them and XX exciting. competed leadership press expand, in head-to-head conversations that it’s that comment and explore and space prior Asbury And years John with to prior that case well point just commercial for a alluded to to other us where the the [indiscernible] banking you relates lot join right actually calls we’re know could really leader opportunities fact a with was Union individual. a being spent able has that out you get the out, a is role teaming talent in John not and career the in days in that of up. One probably with there’s but I to a as to ago. comments, of I us management place, we’re degree it relationship made finding there of to things and space. as release in in a We’ve I John his to earlier to this C&I worked put In interest commit competitors on

municipalities, not We’re as of banking, the a we to seeing then with what can our well. C&I opportunities it space, for and do as traditional relates lot business profit excitement,

Rob Gorman

will and Charlotte, for very lived is and for be expansion go additional bring familiar to it familiar for resources, then, we’re many in that North we’re but run commercial long the will and mentioned, where for really John by business no with so Carolina that. Stallings North this Carolina there time aided lead used And some a there recently, very times the banking bank I’ve we that was effort the selectively. person based down plans we’ll Stallings initial Raleigh with who he exploring done current many, about a John so the added we’re time. as long for focus that market, further, have also fact And overall market.

Bill Cimino

Austin. we’re next please. ready caller Thanks, Dennis, for our

Operator

William go line of with Please Raymond ahead. is James. Your from next question the Wallace

William Wallace

kind just commentary. following up Carolina on Maybe North the of

replacing you if leader to the I understand now going with business expansion hire for is and the remarks, guys? your Carolina North So run that prepared Roanoke in leader business new

John Asbury

Yes.

William Wallace

is He to he to going move Raleigh? or move - to she to is going

John Asbury

No.

William Wallace

Roanoke? of out So

Rob Gorman

Yes. effort. overall lead He the will

And will effectively our regional So what in there. overall heads the will we'll strategy have organize based leader Carolina. from North be

William Wallace

for what bank if did he if run gone especially banking And can the on you new bridge? commercial there say, is they're

Rob Gorman

Yes.

William Wallace

there a there? there be team buildup we - hired in expect you've should Raleigh, is to leader So a of a

John Asbury

again. John it’s Definitely. Wall,

caused it ground. one, and one boots this of slowly really his the have I story, particular benefits us a that the talent. the the win to is think saw very We of the attract I key on really story Union to help mentioned ability to new prepared And some him person more he’s compelling is as choose Union

Rob Gorman

retail branch really of the in both Triad. quite point commercial forget independently we legal Point, a now more story. Charlotte commercial resources, now has a seven are but that or state. have other the And in candidly resources Raleigh, Xenith banking Carolina, the than Union North had Raleigh. High and happens will the in branches eastern weren't more effort scale at have and and focus this is what Greensboro, on Union branches Raleigh They and We'll but part large, contemplate the we don't better clearly

William Wallace

I've And then, and another building teams Carolina. Management around Wealth in one, in up saves you're lending segueing an Xenith. acquisition - North closed got questions coming announced maybe into lot And from you've of the expenses a all then you've got cost

the or models, is, quarter be So, of with we fourth right maybe kind if to got investments If saves? out are anticipated this minus your Encino we you about is, best way coming with look base we're hires, at Xenith. the should you've if cost got that if expense thinking half the is saves in, what look Rob, coming position maybe our coming come to at the cost

Rob Gorman

be of that’ll of $XX think can million question, run the you inclusive rate in terms the I expect fourth of between million that cost quarter, Well, $XX in and answering obviously savings.

acquisitions and So related there's related hires. because to the made the -- at increase new new then to a we're don't additional we hires, expenses some across good Wealth huge We some expect look and to the opportunities organization. our

Our expect hiring, incremental a wholesale lending I teams wouldn't in may general be hiring. and they but

John Asbury

way resources again, And to about I is the this. think Asbury right aligning would our with say is opportunity this John

William Wallace

get to as for new contribution bottom-line? your C&I the what's and model, you their then, consider long, to least net at A, how can lender and up neutral And speed expectation to be hires the

John Asbury

the connect existing to the get Well, their the I start. John all non-client prospects, is to centers I called can former it's past people they a pretty think say one and degree again. influence quick in we’re would and which off about of with and prospecting that, clients talking What can and their they

recent a we've the so be might investment to some particular months eight six net see And within to hard, on can some pen but months, hires down that date of seen return made certainly absolutely, John? we've we

Rob Gorman

I hire talking people. down that’s buildout. we’re not there some clear, We're XX very Well, reasonable. massive going Yes, to to be not think very about

very, So phased step we'll this be it's and and very as sure very, planfully that each make be working will will with expected. done

same We’ve and opportunity adds. a So forward for have surprise our you. time, within been had while, the dramatic, we expansion. this planned market expenditures, signaling nothing But this make do shouldn't to we is the this which that's overall new these at a

William Wallace

sure it surprised. I conceptually I'm together all just it, to understand make and doesn't. so put that definitely just not trying It

and loan wanted Okay, so, about growth I the the talk growth. deposit to

loan reiterated growth. high you So your single-digit

You just the near rates you term. or the suggest to high-single-digit still to growth organic the portfolio growth seeing expect you loans XXX% to already also said Xenith over deposits loan reiterating which over roughly you're that runoff basis, that you're remain anticipate X% growth almost on if would on an calculated I slow.

that So exceeding loan not loan-to-deposit are you if customers seeing transitioning even loan your would balance leaving the acquired expectations, up two questions, it words, put take Xenith, maybe hitting would some commercial up? And is your one the ends sheet? as are was balance other is customers you've In the mix with you you whatever your on are sheet real that -- where? growth that targeted growth if to your of you and ratio your or so expectations? estate you two, deposit And pushing if

John Asbury

Okay.

a got we of… - couple Let's

William Wallace

there. Lot questions of

Sorry.

John Asbury

Wally. I get you. to your have understand with math don't We'll

said. me what I let So reiterate

assume loans pro Does on merged that a Union March, Xenith as December and December the Let's we had we grew to of X%. annualized had sense? make XX. of forma basis, one On XX been that end

William Wallace

Xenith’s way out The $X.XXX and guess based on took mark includes it billion was then I numbers. quarter within targets the still same growth grow footprint, regardless, first and that the to the did growth value the grew exceeds your of I in numbers some it loans? I is fair XX/XX the loan struggling but what if line as your you're question deposits with

Rob Gorman

X.X% struggling of me deposits I X to let that. on - Union for wouldn’t rate say at we're back to growth of let compound deposits deposits. We've So core grown well, - come annualized me a grow deposits grew deposits X% traditionally what two last QX We on a of quarter core year. pro the the last years. in year. and the - annualized grew core slowest seasonally is X% forma deposits basis We

able go is forget I deposits. The conduct, seeing before in for at loss want big out accelerated material all remix, what so is Xenith, than QX. there's There's deposits. we’re anything runoff to we there's any well. close Wally, of lending is I integration that don’t anything? that going well. in that’s in and grow our grow Xenith nicely and So unplanned did purposeful The to big are material. as QX, look to rundown The a happened no, lending issue their no Xenith faster ability no of just But back growth we QX not it about we continued

in will the have We be high know expect were year, so would reiterate So we feeling to about really at on based growth for of everything now, to that combined good, organic we're pipelines the reason we the we're performance no we organization, the single-digits loan the believe this see point confident, and good case. feeling good. that's

question needed. high deposit your if capacity less what Rob, this, you, to And your you but you, ratio from is, about go look talk growth loan so, here? we have How I'll would we if would Now, go? accelerated to to the up loan as

John Asbury

that XXX our able loan our the be but in, period engine from over would that mind growth, ratio, do bring deposit loan of not knowing growth probably keep time in increase have is loan-to-deposit we gathering as choice go the to to of we to comes we'll - to thing up to and over side down a would improve the time. to it's would going So that's I commercial continue so, we the

So short it don't will that relatively expect but… period those happen, time could I run levels. at a of through

Rob Gorman

it let rise it get could to… realistically want want but you some, down. We to John,

John Asbury

C&I, one opportunities, John our and pipeline. our is on with point efforts said, non-CRE but up. look and just thing the you the prospecting CRE to and non-CRE, that XX/XX than you more picked year ago tell fee this payments. deposits then pipeline pitch comments, too in in and Rob really that was add it really without is really into mentioned to and that later, the many of it’s can back what And real with prepared get was growth ratio our thing we pipeline economic actually estate opportunities the side, new non-CRE, is to the just One mix, a year getting loan the of CRE details, is And the mix a C&I telling to the his the bigger side, focus treasury statistics Wally, XX/XX. the it

lending But day a that. to question. is can’t very to the be not of have example, promise constrained that for feel we fair it’s what in of reaffirm not think would a and we’re talking we’re now, XX% but we every delta. So, growth but the single deposit over annualized, high-single-digit the lending course match again I do, would going going to to growth lending Wally, we’re we we think If, we’re that which different big about pardon ability going saying don’t me, going year, were to think core conversation. we grow happen. grow We X% yes, terms - a on do think We about we it right

William Wallace

Thanks gentlemen. let and step for there, out the I’ll commentary somebody ask.

John Asbury

again, look And us, the math we’ll back on come at loan your to growth…

William Wallace

of, all. It’s just that’s take quarter out which it you

Bill Cimino

And, we’re our for please. Wally. Thanks, Dennis, ready caller next

Operator

with Capital Gladue question next the is Please Joe Group. line of ahead. Merion Your from go

Joe Gladue

wanted just of the more on bit to, the color I a asset figures. little some quality I get guess

the or was in in, increases guess, more percentage, migrating guess, and I - or I looking loans? residential and a large guess, if to was one it concentrated and loans, residential C&I of was non-accrual, base the at at the the broader that or two increase just non-performing decent just I Looking I’m wondering that larger number loans if fairly

John Asbury

at you're because problem QX it’s with you’re combined addition what do looking know terms I see increases standpoint of Xenith. Xenith so quarter in of Union’s pretty from the then to have assets you’re looking and looking everything compare QX, the quarter admittedly Union at to you to much standalone in is difficult with

to example for it add if or of it's got very, QX fairly basis you to annualized not important at versus X on become get new once then points. versus it. proportions it's best I would granular, We during you've big dollars will like we very Union And anything clearly clean because And absolute QX. give Would Union to way profitable. things. QX, that in Rob? focus most the or shot problem not the you I two a That look easier charge-offs think new will was of probably activity say consumer-related, on we So think saw QX one best fact

Rob Gorman

basis the I standalone quarter, think think on way last about that's the was basis in about due a points. past points at, to basis I ratio XX look the is XX

XX So hovering range. basis that point in we're

the it's So big in the related. the terms But not on from right at and granularity really of views past you are comments, of consumer John, increase your all. from a

Joe Gladue

come a answer. acquisition, these bit they Well, of guess on these by the don't as fair course, I'm still - little confused normally things with come valued, so I on, that non-performers, I guess when they’re

John Asbury

performing loans the necessarily counted not Certainly by the be so Xenith, the in impacted forward, going non-accrual would our work mark.

Joe Gladue

stage I is the across delinquency to that just early I based was categories, correct? that imagine And the related all Xenith is broad guess that the - acquisitions fairly

Rob Gorman

seasonal patterns, one pay you experienced basis, we issues see would you slow at in a that will thing And lumpy always say we’re in terms I asset there's of point more of look mortgage QX that a see you that in payments but on if to seasonal is, QX out in particular, no the no are any we - standpoint, are in real from what seeing there. pretty quality thing granular, there tend

Bill Cimino

please. Thank you, for Joe. caller, Dennis, our next we’re ready

Operator

the Hunsicker Point. Your line Laurie of Compass is ahead. from go next with Please question

Laurie Hunsicker

to follow-up to loan wanted question on just I growth. Wally’s

loans are simply of your $XX is thinking year? this here by you the just hit billion billion. end put worth Is it could $XX.X So is, conceivable

John Asbury

see Laurie, possible, terms that little happening. could it higher of seeing growth in high the a than we’re it’s you that single-digits, be that, could Certainly,

Laurie Hunsicker

that looks of income, Xenith? just or it like as the related legacy million or sale company. non-interest in And your going category Xenith then, the had was statement, $X.X income other other, rather legacy payment-related Union that that we're to you with the Was in interest to a was

John Asbury

group recently company. that, We by about recorded venture investment an That associated in Union. a a of was Back XX% in we capital a had that was interest. as That made legacy and in with part XXXX, that a bought that. sale, ownership gain we payment-related

Rob Gorman

company sold. the was So

John Asbury

that wasn’t our in sold venture to space. could that group make component larger just was- It investments Right. capital

Laurie Hunsicker

there was - yes. And Okay.

John Asbury

the some growth, One diversity thing this I things loan exciting get year. about think question I us that one was the I been earlier out think geographic growth, of are going of is terms your up of in bodes but markets, our to well all opportunities that really for to the one that's for to significantly, most add of of

Laurie Hunsicker

we've up of that about on down that QX that more think the million should like line your here, - into you, or this but be line? And if again statement that run was looking substantially or rate for million, a I because and we income OREO payments realize then that to we staying should so just just about jumping thinking come how dropped it's the is $XXX tax quarter $X.X elevated

John Asbury

addition looking is seen the number that certainly at. increase. It’s you're course dollar the absolute Of I’ve one thing

Rob Gorman

Laurie, is a probably you bring quarter $XXX,XXX substantially $XXX,XXX it down could definitely appropriate. and

Laurie Hunsicker

you macro, here potentially it would what an whole around a obviously North so the congratulations John, were excited of would M&A, that. just more assuming in you proceed digestions, talk that you're thoughts a target be your you how But phases talk the and about - could asset just bank final still get about Carolina can right? size on then metrics in Xenith can terms And of about financial bank

John Asbury

Sure. Fair question, Laurie.

priority I Xenith. So highest like of this point, a this, let to performance organic by would say the of always is I bank a and me answered question the for begin begin at integration Union saying includes organic performance the successful and

folks are we we believe Overall, picture in weekend, systems reason big will Thanks probably go we leadership. I we the think have Xenith has Memorial otherwise. to Day say, those as gone better convert so over as well, than good we expected. well would see And no need that over it have to there to will,

as opportunities. is, a not we lot some forever thinking that seems begin as thought the about as is we that And don't make we've to planning, behind down with again assess sense. see to on we we've about North So this conclusion, it our inorganic Carolina just a could us, but there current done and landscape, think

Now, were sense at at to for say evidence you're would the it your we difficult very Union basis that early performance why real. $X to a up from imagine up of look make of specific It's go? on billion. would question lot, step If look value, the and very combination and acquisition, you I'm below, another it's is resulted Union how seeing now just going to the financial do Xenith, step with that, low go to

more provide and You're leverage, costs creation. frankly, more just and value operating extract seeing us

as it's as a competency these and to have of if well one integrating acquisition. go, core fact we will expect I work likely to and in So things we lot of go bank a them do declare whole a do

point, at makes anything that it about that another And so, won't think financial we we would opportunity sense somewhat provided and to that emboldened do strategic be some doesn't.

the in it's or had would see from consider bank that So does that, from anything about friends landscape so why payoff. that would never could under first mid-Atlantic not Union an our Pennsylvania XX question enable first the but And you Virginia brand billion, do it. Maryland, Maryland, something question think years, regional not Commonwealth. we hard we franchise of expand that with that because and think and being I North last would would we D.C. into assess then, us of of into think standpoint, would we doing if we means in an the Carolina, concepts we think frontier to would It mean to a there. have would do think bet about do still I the as it And about think this do you more consolidating we defined M&A bet apologies simply Maryland Virginia there us mid-Atlantic. why M&A is standpoint, we are $X if Virginia as about the that to out in before then, to mid-Atlantic not does effectively within sort that Maryland we transform down Virginia do would being we move enough

Laurie Hunsicker

And in terms what go you is largest the assets? of

John Asbury

sweet billion of in in think is $X.X the [indiscernible] spot $X size probably I the billion… to what’s the

Rob Gorman

But of to have to the think somewhere while doesn't We the we which that well the density. don't improve and perfect. just that contemplated that to We asset of point We is for longer it we but think were to probably billion. that issue. the will We opportunities from quite any an because would think like we this able is before don't create it’s is $X.X we are at we that see don't performance there’s else an substantially record in mean translates value be no think at $X like reason Laurie, $X of threshold billion M&A think in we really our market not any and billion that, franchise. frankly we demonstrated. do franchise. anything below it need $XX anything. XX-day the to anything creates, And do Xenith value could value in the $X we And and that for compelling billion do don't and standpoint, like further be We Unlike wouldn’t. of billion that. also to and that literally facing see scarcity replicate have hurry, we nothing to our north we proof apologize we where that think franchise. We We're that power. into you compactness think can’t our north we're feel any a we

know like and this to we the of increase fortress what create So that you I a country. density call to would would to of franchise like to part in continue

Laurie Hunsicker

just it’s still Xenith, of us or to last yet baked just saves have first that much of through. whether number? the dollar realized And that saves were cost actually bleed cost lot in how quarter percentage on you the Can question into I Xenith a share with

Rob Gorman

in would the through quarter. run Laurie, it’s first come have rate of about XX% the

see by to will of be a the that third know and it So, continue go you’ll end in up the quarter second XXX%. at you quarter the

Laurie Hunsicker

So, quarter? basically the in through $X.X had about come first million you then

Rob Gorman

that’s right. Yes, about

Bill Cimino

please. Dennis, next for caller Thanks, our ready we’re Laurie.

Operator

ahead. question Please go next with Baird. line from Rowe Your is the of Bryce

Bryce Rowe

the that an a the an in I a you will to some look near kind of branch it one end of kind franchise John, evaluate here continuous remarks from undergoing the Is process kind just at future? wanted efficiency follow you made comments continuing on evaluation of and the perspective. that of your prepared up point guess in of around are or in to

John Stallings

about always say I appropriateness would will be the both. thinking network. of you know It’s we that branch franchise, the branch the

of to of a opportunity is discrete at and that in had candidly, a the time, have off the continuous the at which back we has structure Xenith that branch take appropriateness. effort Union Given of and at a the strategic some know know well. table So And as eyes certainly the of Bank the yes, there budgetary everything now a say to been everything. same we bank you network there you been look I you we’ve our And leadership step fresh - creates relook set always at know changes has closed gives a acquisition, quite kind that's Nothing retail as at yeah, sort just and look process fresh part would that, of planning. the us

Bill Cimino

conversion. going the got into reminder, over as part the that this close Just sales are weekend three to integration. Those the Memorial will Day are core systems close system's already branches we've of of the as three over a for part baked But cost year. we

John Asbury

are the do toward The But fewer core efficiency. it to over clear, we at improve deposit believe not the Union clearly base franchise but to opportunities of be a branch is There's wouldn't branches nothing time. is time, that same there that dramatic coming for trend - we that the Bank this have. deposit And crown we have robust base jewel wonderful were smaller network.

strike to balance. the have we So

Bryce Rowe

And guidance X you wanted two second across to points basis your per for quarter margin and quarters? that just and or the X next quarter to question basis X Austin's about answer points Rob, basis talked points, basis to X the then, third the is margin to clarify quarter about points guess I

Rob Gorman

now. of right next estimate, be couple is quarters across our the It'll

curve. a current our Now was flat also forecast considering a

the in steepness seen recently course, we've Of some curve.

some So current the could that's but there from improve curve, we if outlook. our of steepening get

Bill Cimino

please. for our caller Thanks, Bryce. ready Dennis, we're last And

Operator

Today's question will Brean Blair the with Brantley of Please go line come final from Capital. ahead.

Blair Brantley

Could you the state the mortgage and your what's thoughts on… on planning business updated

John Asbury

the on of business continue are to mortgage mortgage business. opportunities performance seek thoughts Updated to we the improve financial that our

Blair Brantley

sticking You now? for it with on plan

John Asbury

improve residential its not mortgage in, to offer customer to Union think base. that it's product that business, expansion at financial we to the of big the to do to is are anticipate question. It We an a able that opportunities do looking looking and be performance important we're a area perhaps

Blair Brantley

out loan products and detail, what to a maybe want of get view then, versus out spreads real five-year I And on of terms seeing trends some in pricing product quick. the just the you're variable some there? and of competition on and kind give there your seven-year type rate

John Asbury

as behavior, different, maybe just say one. Actually, to a that market would market John see we or going by market review competitor region comment I would assess. especially behavior. that don't this by I'll I review on me how on you give strikes region Stallings, you anything did of

John Stallings

been I think issues overall, and it's hotter is that’s always correct, with a tight spreads, and but able like I competitive, better lot preserve think to up with at the the pretty competition we've the but are the opportunities better credit [indiscernible] same more time, held deals.

John Asbury

by lot the But I tax it the seeing we being hard it’s spreads. that’s are not always that’s seen say means any banks, of it’s really know wouldn’t can of that benefit competitive. get Again, I to true. away remains of teed it we’ve and competitive, say is, sort questions one savings, plunge we any a that different.

John Stallings

on I maybe some positive our terms continued economy and is maybe stable rising sort of along of mood to in environment, that projects a just One while. a like there among want clients of interpretation might moving rate is, add bullishness it to settle degree it commercial thing a on a seems banking to for

John Asbury

government contracting I Only add, seems… was noted can one area particularly and as

John Stallings

Rob, a military shipbuilding out spreads feels like mood interesting the from admittedly, surprised having of was you and I their and terms anything in seems a that it area, was a all we of contract was amount and do event something see bullish fact, an that the large in our in like Virginia show Roads had related we’re getting has growth outlook, which with were, I similar XXX Northern but actually they that there is I more terms reports of that how and held up pretty clients material of team good. to at your were different? just a chair number up Hampton think we contractors, in

Rob Gorman

not look to really. Telco adding and deterioration every comments We month it any at point, in No, at this that. really John’s just on haven’t seen

Bill Cimino

thanks everyone today. And in Blair. you, Thank for dialing

replay investor a call and of our As investors.bankatunion.com. Thanks, good website a a reminder, be on day. available will this have

Operator

conference today’s gentlemen, Ladies your conclude participation. does call. you Thank this for and

may You now disconnect.

Atlantic Union Bankshares (AUB) 24 Apr 182018 Q1 Earnings call transcript