Q3 2020 Atlantic Union Bankshares Corp Earnings Call
Is being recorded if you require any further assistance. Please press star zero I would now like to hand, the conference over to your Speaker today Bill. Some you know Investor Relations. Please go ahead Sir.
Thank you, Josh and good morning, everyone.
Atlantic Bankshares, President and CEO, John Asbury, and executive Vice President and CFO, Rob Gorman with me today.
We also have other members of our executive management team virtually for the question and answer period.
Please note that today's earnings release and accompanying slide presentation, you're going to run. This webcast are available for download on our Investor website at Investor started Atlantic Union Bank Dot Com is also a download link on the website that fuel today.
During the call we will comment on our financial performance using both GAAP metrics non-GAAP financial measures important information about these non-GAAP financial member measures, including reconciliations to comparable GAAP measures is included in our earnings release for the third quarter 2020.
Before I turn the call over to John I'd like to remind everyone that on todays call. We will make forward looking statements, which are not statements of historical facts and are subject to risks and uncertainties. There can be no assurance that actual performance will not differ materially. Please.
Results expressed or implied by these statements.
Well take no obligation to publicly to revise any forward looking.
Please refer to our earnings release for the third or fourth.
[noise] other assay.
Other SEC filings for a 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.
Comments made during today's call are subject to that Safe Harbor statement.
At the end of the call we will take questions from the research analyst community and now I'll turn the call over to John effort.
Thank you bill thanks to all for joining us today, and I hope everyone listening as safe as well as I've stated before since early March we've been consistent in our commentary that we're managing through two significant interest given challenges first the COVID-19, pandemic and everything associated with it and shock at a much lower than expected interest rate environment for years to come without.
All of its implications for the company's profitability. This quarter's results evidence the actions we've taken so far to address those two distinct challenges and are having a positive impact in positioning you're asking for future success.
I continue to believe that our strategic plan is the right one and we have a great opportunity before us to create something uniquely valuable for shareholders and the communities. We serve and we remain keenly focused on reaching the full potential of this powerful franchise. Despite the present challenges we.
We continue to operate or do a mantra soundness profitability and growth in that order of priority. That's how back is and will remain our highest priority a prudent and conservative credit culture served the company well during the great recession, and it will serve us well during the economic challenges brought about by the pandemic Hello.
Our loan modifications have helped our clients weathered the storm and we fortified capital with a preferred equity issuance in the second quarter.
Our second priority is profitability and you can see the initial impact of our actions to align our expense run rate to the new revenue reality, but the lower rate environment.
That's real growth on the other side of the current economic challenges. We believe we have a long runway ahead of us to grow organically and through market share take away from our larger competitors that dominate market share in our home state of Virginia supplemented by our operations in Maryland in North Carolina.
I also expect will be potential future opportunities to continue to be a consolidator within our footprint.
Let me first update you on our pandemic response on March 16th pivot to a new operating model with 90% of non branch personnel working from home and haven't branch lobbies closed except for appointments how can affect it.
During September we piloted reopening branch lobbies to customer walk in traffic and on October 14th we fully reopened all branch lobbies corporate offices will remain closed to all but a central personnel for an indefinite period, what's the homes going fine, we're not going to rush, bringing people back and get on the safety and social distance challenges.
I won't take you through the details of the Paycheck protection program again that we do continue to think P.P., it's been a brand builder for Atlantic Union and the numbers and our share of loans process, particularly in Virginia that support that statement.
I haven't organized process under way to convert the more than 3000 need a bank's PBT clients to full relationships, which we think there's a great opportunity from a negative experiences many of them had with larger banks that caused them to come up to us she can help.
We started to submit applications for PDP loan forgiveness on behalf of our clients to the U.S.P.A., we did not receive any approvals during the third quarter. We did obtain the first approval from the FDIC last week. So its good to finally see the forgiveness process began.
We remain hopeful that Congress will eventually passed the bipartisan proposal to automatically forget PPP blondes under $150000. They represent 85% of all of our PTP loans by County, we are happy to see the streamline forgiveness for PDP lunge at 50000 below which represent 58% of our PPD.
Lines back how do we think Congress can and should do more to help these businesses.
Our customers have learned to bank differently, while branch lobbies are now we open we rolled out a digital appointment scheduling option to customers and have had more than 18000 appointments sat since June one.
He added mortgage options to the appointment scheduled during the quarter as well we've seen usage of our digital channels increased substantially from the prior year for example, digital log onto your up 21% since the start of the year mobile.
Mobile check deposit utilization is up 18% this year.
Well utilization is up 290% year over year and called control users are up about a 100% since we watched that in April.
Call Center volume has decreased from its peak in its now about 10% higher than February the average call time wait time is now lower than before the crisis all the while 90% of the call Center personnel work from home.
We updated our digital channel navigation to make self service updates easier to find and added he statement often to online banking walnut he could take.
We continue to work on new projects and improved the omni channel customer experience with quarterly releases and upgrades to our product offerings. During the fourth quarter revenue, we expect to rollout as Jim video chat option to our current branch appointment options, which are currently in pilot and 44 branches will expand the pilot of having branch teammates take call Center Eva.
Calls during the busy part of the day that improves both our productivity and customer experience.
Well allow customers to select you statements at the account level, rather than a customer level and that should improve your statement penetration and reduce expenses.
Well also be able to notify customers when I mean, you statement is ready.
Continue to pilot of our enhanced well CRM platform using black Diamond technology.
I continue to our efforts to rightsize small business clients, if the consumer online platform in order to ensure that they're not necessarily using a more complex commercial banking solution. All the while we continue to enhance our treasury management offerings and experience for our commercial client base.
Turning to credit the scope and my teams again, we prepared expecting to be hit by the economic equivalent of a category five hurricane.
While we still think there is a storm swirling on the horizon, we don't expect it will be as severe as we initially feared that anything could still happen. There was the audience you can't diverse nature of our markets coupled with government stimulus and an accommodative Federal reserve is helping as we've seen the unemployment rate in our markets improved faster than expected here.
Here in our home state of Virginia September unemployment came in at 6.2% or one book also helps US we don't have any outsized exposure to the industry's most directly impacted by the social distancing measures put in place such as hotels restaurants and retail.
But all indications in metrics credit remained solid and we continue to try to help as many of our clients through this as possible while at the same time mitigating our risk of loss.
As for payment deferrals, you had a number of loans roll off of modifications during the quarter and into the first part of October the total modification balances as of Friday October 16 were approximately 830 loans under modification with a balance of 523 million or 3.6% of our total portfolio if.
You exclude the PPP ones, then it would be approximately 4.1% of the total portfolio.
It was down from 1.9 billion and 4000 lines as of April 24th which was down approximately 15% of the portfolio modifications peaked in may around 17% nearly all of the initial rounds of loan modifications will have matured in November.
So far of all the loans with an expired initial modification only 40 40 commercial loans 40, well with an aggregate balance of approximately $90 million or 8% of the dollars have gone under a second modification hobbies half. The dollars were for nine hotel properties that were initially on a 90 day.
And before we decided to make hotel modifications a standard 180 days.
Yeah. It was in the middle of the third quarter that we had $302 million in modifications that we accrued but subsequently deemed necessary as the clients informed us they no longer needed them. So we removed those from our report that was reflected in the mid quarter deferral update we provided in September.
The modifications run a range of options that are tailored for each borrower. The majority of our commercial much about 70% of principal and interest deferrals, mostly for 90 days with a balance of about 340 million as of last Friday, and that's about 2.7% for the loan portfolio after adjusting out the PPP loans okay.
Our exposures to the most in focus industries are limited and they are outlined on slide number seven eight and nine of our accompanying presentation. The amount of loans under a modification in these segments decreased from 224 loans for $324 million on August 28.
At 111 loans for 199 million as of October 16th has there.
As a reminder, our hotel portfolio was entirely within our footprint. The comprises 676 million or 5.3% of our total loan portfolio. Excluding PPP loans as of September 30. They consist primarily of limited service numbers with hotels flagged by name brand.
Don't rely on conventions in conferences, that's helped portfolios debt service coverage ratio and the loan to value going into the crisis was the best among all of our commercial real estate property types.
We saw that occupancy generally improved in August from July.
Looking at September data, Northern Virginia, Charlottesville, and Stanton Harrison burn so occupancy rates remain steady or improved from August yes. The rest of the foot print saw some degree of decline whether that declined was seasonal in nature from the end of the summer or a reflection of a new trend remains to be seen.
Our restaurant balance is 223 million or 1.7% of total loans, excluding PPP as of September 30, its granular and its 85% secured by real estate collateral.
Restaurant in Virginia have been opened for indoor and outdoor dining since early June and 50% of occupancy and since July one was capped at a 250 patron limit about 10% of the segment was under modification as of October 16.
Our retail trade exposure, which means ones to retail operators in single credit tenant leases is 4.3% of total loan exposure, excluding PPP as of quarter end with only about 2% of the segment under a modification as of October 16.
A significant portion of this segment is local convenience stores with gas and the auto dealers.
About 80% of the retail trade exposure is secured by real estate collateral with 21% in PDP.
I don't care segment is also granular it's heavily secured by real estate and they've been open with social distancing and PPP rules since may.
We only have about 3.6% of the segments Donna modification as of October 16.
We have no meaningful exposure to passenger airlines cruise lines your energy.
As you May recall, the third party consumer portfolio, it's been winding down for some time the quarter end balance for lending club exposure was 66 million and continues to run off payment deferrals in the lending club portfolio declined by 71% to less than 1.7 million during the quarter as those accounts one off of modification.
And then became current.
With the unemployment rate in Virginia, better than the June Thirtyth, more Moody's forecast, which informed our Q2 seasonal reserve and with no negative changes in the outlook. Since then we have had a more normalized provision expense for the quarter and Rob will walk you through all of those details.
Overall, we continue to proactively work through this event with our clients, while mitigating credit risk wherever we can lose.
Moving on to our expense reduction actions, we developed our initiatives to reduce the company's expense run rate to match the lower revenue expectations due to cope with 19 and the lower for longer interest rate environment back in March and we started to take action on them in the second quarter into the third quarter.
These expense reduction efforts include the consolidation of 14 branches for about 10% of our branch network, which closed in mid September.
Addition to moving some projects the next year and eliminating others, we put a hiring freeze in place in March except for critical positions.
Eliminated a number of positions in June and including branch consolidation personnel, we reduced total headcount by 6.4% probably into the third quarter EPS compared to EPS keay levels at the end of March.
Addition to these actions were executing on several other cost reduction initiatives, such as tighter management to reduce overtime contract labor and outside consulting spending extracting price concessions from third party vendors and renegotiating contracts, including leases and improving teammate productivity through process reengineering and robotic process automation.
Our goal remains to achieve and maintain top tier financial performance, regardless of the operating environment.
Our financial outlook will ultimately depend on the continued success against additional flare ups, it's clear that my team and our main operating areas, which will be one of the primary factors that determine the length and depth of the disruption in our markets. We continue to face greater uncertainty at this point, mostly the duration of COVID-19, but as I mentioned before we are in a better.
Macroeconomic environment today than we thought we would be six months ago.
It will probably be some steps along the way to a full recovery, but we believe the overall trend should be upward at this.
At this time, we simply don't know when we may return to pre pandemic macroeconomic levels, but the evidence supports that we're seeing better economic performance in our footprint and what is seeing overall in the national economic model projections.
As we've said in the past in Virginia economy is fairly unique with broadly diverse set of regional economies with about 20% of its anchored in some fashion by the federal government.
Federal government spending in Virginia is mainly for government agencies and department of defense with only a small fraction going to income assistance programs education and transportation.
We expect to have a full year loan growth in the low single digits, excluding PPP loans commercial loan categories of all types on a combined basis grew about 4% annualized during the quarter substantially offset by declines in consumer categories. If you lock third party lending and residential mortgages held on balance sheet, we continue to see it.
A trend of increased line of credit pay downs with utilization down to about 24% well below a normal utilization of around 40%.
Clearly weve had a sea change in the economy brought on by the pandemic, resulting in a systemic downturn there were climbing out of no credit losses were minimal during Q2 and Q3, but of course, the real impact is yet to be seen.
We continue to expect an eventual rise in credit losses, and we thought Q3 would have begun a transition toward that that obviously you didnt happen although.
Although we cannot predict with certainty our current best estimate is that credit losses may materialize in the first half of 2021, we expect.
We expect normalized levels credit losses after the impact of the pandemic works its way through the economy.
Having said all you bought we see nothing at this time that causes us to think anything, but well positioned and readily able to absorb delayed impact it could have been 19 on credit losses at Atlantic Union.
Moving beyond credit our goal remains creating a company with differentiated performance will continue to work on ways to make the company more efficient and scalable while improving the customer experience and could see further improvements to our expense base as a result.
As I said last quarter were not standing by waiting for things to happen pushing the organization forward.
Well, we always think a few steps ahead towards strategic opportunities and how the industry is evolving at this time, we remain sharply focused on credit risk mitigation positioning for success in slowly returning to a more normalized operating environment.
I'm convinced we will emerge from this crisis stronger better and more efficient than before which will give us opportunities both organic and otherwise within our operating footprint. The leveraging our learnings and then graining, our new found capabilities agility and innovation into the company's culture. So that we have the flexibility to adapt to the lower for longer rate and.
Firemen and the coming next normal whatever that may be.
We still believe in chaos lives opportunity.
Weathering the storm, taking care of the teammates and customers and protecting the spec.
Took decisive actions to reduce the expense structure to match lower for longer rate environment in an effort to maintain top tier financial performance will continue to work our strategic plan, we will shift our timelines as needed to adjust to the new reality.
So very proud of our teammates all they've done and our demonstrated ability to adjust to a new way of working in the midst of all of this uncertainty I remain confident in what the future holds for us and the potential we have to deliver long term sustainable financial performance for our customers communities teammates and shareholders.
All that has happened this year only convinces me more blocking the bancshares is a uniquely valuable franchise, it's dense compact great markets with the story. Unlike any other in our region. We've assembled the right scale, the right markets and the right team to deliver high performance even in the most trying at times.
I will turn the call over to Rob to cover the financial results for the quarter up.
Well, thank you John and good morning, everyone. Thanks for joining US today I Hope you your families and friends all see in staying healthy.
Before I get into the details of Atlantic Union front here to results for the third quarter I think it's important to once again reinforce Johns comments on Atlantic unions governing governing philosophy of soundness profitability and growth in that order of priority is.
This core philosophy is serving us well as we manage the company through the current COVID-19 pandemic crisis and preparing us for what comes next.
Atlantic unit continues to be in a strong financial position with a well fortified balance sheet ample liquidity and a strong capital base, which will allow us to weather the current storm and come out stronger once this crisis has passed as.
As a matter of sound enterprise risk management practices, we periodically conduct capital credit and liquidity stress test for scenarios such as the operating environment, We now find ourselves in.
Results from these stress tests help inform our decision, making as we manage through the current crisis and gives us confidence the company will remain well capitalized and has the necessary liquidity and access to multiple funding sources to meet the challenges of the current economic environment.
Now, let's turn to the company's financial results for the third quarter of 2020.
GAAP net income available to common shareholders was $58.3 million or 74 cents per share, which is up significantly from $30.7 million were 39 cents per share in the second quarter.
Non-GAAP pre tax pre provision earnings increased $8.1 million to $78.6 million from $70.4 million in the second quarter.
Please note that the third quarter reported GAAP and non-GAAP financial results include expenses of approximately $2.6 million related to strategic actions taken to reduce the company's expense run rate in light of the current and expected operating and interest rate environment, including the consolidation of 40 branches in September.
These actions are expected to reduce the company's quarterly expense rate by approximately $1.1 million or beginning in the fourth quarter.
Turning to credit loss reserves as of as of the end of third quarter results total allowance for credit losses was $186.1 million, which was comprised of the allowance for loan and lease losses of $174.1 million and a reserve for unfunded commitments of $12 million.
Third quarter, the total allowance for credit losses increased $5.1 million, primarily due to the continued economic uncertainty related the COVID-19.
The allowance for loan and lease losses as a percentage of the total loan portfolio was 1.21% at September Thirtyth, which was up two basis points from 1.19% at the end of the second quarter and the total allowance for credit losses as a percentage of total loans was 1.29% at the end of September up from 1.26 in the prior quarter.
If you exclude SBC guaranteed pp key loans, the allowance for loan and lease losses as a percentage of adjusted loans increased two basis points to 1.36% from the second quarter and the total allowance for credit losses as a percentage of adjusted loans increased four basis points to 1.46% from.
The prior quarter.
The coverage ratio of the allowance for loan and lease losses to non accrual loans was above four and a half times at September thirtyth compared to 4.3 times at June Thirtyth.
The $5.1 billion increase to the company's total sales for credit losses took into consideration the cove in 19 pandemic impact on credit losses, both through the two year reasonable unsupportable macroeconomic forecast utilizing the company's quantitative Cecil model and through management's qualitative adjustments.
Beyond the two year reasonable supported the forecast period to see so quantitative model estimates expected credit losses, using a reversion to the mean of the company's historical loss rates on a straight line basis over two years.
It estimating expected credit losses within the loan portfolio at quarter end. The company you utilize movie September baseline macroeconomic forecasts for two year reasonable insupportable forecast period Moody.
Moody September economic forecast improved since June and it is now assumed on a national revenue GBP spikes.
Approximately 27% in Q3, and then averages between three and 4% over the forecast period.
Moody's September forecast for Virginia, which covers the majority of our footprint at.
Had previously assumed that the unemployment rate in the state would remain at about 7% through forecast period, but that has been revised to trend down to 5% in the third quarter 2022.
In addition to the quantitative modeling the company also made qualitative adjustments for certain industry is viewed as being highly impacted by COVID-19 as discussed by John earlier.
Additional qualitative factors were added this quarter to take into consideration the uncertainties pertaining to the future path of the virus and additional government stimulus.
Our vision for total credit losses for the third quarter was $6.6 million, a decline of $27.6 million compared to the prior quarter the provision.
The provision for credit losses in the third quarter consisted of $5.6 million in the provision for loan losses was.
17 basis points of average loans, excluding PPP loans on an annualized basis down from 102 basis points in the second quarter.
And also what we added $1 billion in provision for unfunded commitments during the quarter.
Net charge offs during the third quarter came in at $1.4 million were four basis points of total average loans on an annualized basis, which compares to $3.3 million or nine basis points for the prior quarter and $7.7 million or 25 basis points for the third quarter of last year as it.
As in previous quarters, the majority of net charge offs approximately 80% in Q3 came from non relationship third party consumer loans, which are in run off mode.
Now turning to the pre tax pre provision components of the income statement for the third quarter tax equivalent net interest income was $140.3 million, which was up slightly from the second quarter net occur.
Net accretion of purchase accounting adjustments added eight basis points to the net interest margin in the second quarter and in the third quarter down six basis points from 40 basis points impact in the second quarter, primarily due to lower levels of loan related accretion income of $2.6 million.
The third quarter's tax equivalent net interest margin was 3.14%, which was a decline of 15 basis points from the previous quarter.
This 50 basis point decline in the tax equivalent net interest margin in third quarter was principally due to a 31 basis point decline in the yield on earning assets, which was partially offset by a 60 basis point decline in cost of funds.
The quarter to quarter, earning asset yield decline was driven by the 29 basis point decline in the loan portfolio yield as well as the impact of lower yields on securities of 38 basis points.
The loan portfolio yield declined to 3.84% from 4.13% in the second quarter was primarily driven by lower average core loan yields of 21 basis points, resulting from declines in market interest rates during the quarter, most notably the decline in the average one month LIBOR rate, which was lower by 19.
Basis points from the second quarter average of 35 basis points.
In addition, lower loan accretion income reduced loan yields by approximately eight basis points from the prior quarter.
Reduction in the securities portfolio yield to 2.19% from 3.29% was the result of the deployment of excess liquidity during the quarter inch of new investments at yields lower than the existing portfolio yield.
Additionally, higher yielding securities or paying down and a person proceeds are being reinvested at today's low interest rates.
The quarterly 16 basis point decline in the cost of funds to 45 basis points was primarily driven by a 40 basis point decline in the cost of deposits to 39 basis points interest bearing deposit costs declined by 80 basis points from the second quarter to 55 basis points in the third quarter due to the aggressive repo.
Pricing of deposits as market interest rates decline.
Also contributing to the second quarter is lower cost of funds were 20 basis point decline in wholesale borrowing costs and a possible positive impact from changes in the overall funding mix between quarters.
Noninterest income declined $1.5 million to $34.4 million from the prior quarter.
Adjusted for the Securities gain of $10.3 million recorded in the second quarter.
Noninterest income increased $8.8 million driven by an increase in mortgage banking income was $3.1 million.
Due to higher mortgage loan origination volumes, resulting from the current low interest rate environment. In addition customer related fee income increased by $2.2 million due to higher overdraft fees higher interchange income in fiduciary in asset management fees in the third quarter.
During the quarter. The company also recaptured approximately $1.7 million of the two and a half million dollars encoded 19, driven unrealized SP I see fund investment losses recorded in the second quarter and bank owned life insurance income increased 1.4 million, primarily due to a death benefit proceeds received in the quarter.
Partially offsetting these increases was a decline of $2.3 million in loan related interest rate swap income, which was due to lower transaction volumes in the quarter.
Noninterest expense decreased $9.6 million to $93.2 million in the prior quarter, primarily driven by the $10.3 million loss on debt extinguishment, resulting from the prepayment of long term federal home loan bank advances recorded in the second quarter.
Total noninterest expense in the third quarter included $2.6 million and costs related to the company's expense reduction actions in.
During the closure 40 branches in September also included approximately 639000 in costs related to the company's coded.
In response and.
And an increase in marketing expenses related to donations that the company made in support of organizations that fight for racial equality and contribute to change in our communities in it.
In addition, Fas 91 deferred loan origination costs declined by approximately 2.9 million from the second quarter and that was due to the nonrecurring impact of PPP loans originated during the second quarter, partially offsetting these expense items with the decline in the FDIC assessments of approximately $1.1 million due to the positive impact of.
PPP loans on the Companys assessment rate.
The effective tax rate from third quarter increased slightly to 50.3% from 50.2% in the second quarter.
For the full year, we still expect the effective tax rate to be in the 15.5% to 60% range.
Now turning to the balance sheet period end total assets stood at 90.9 billion at September Thirtyth, which was an increase of $178 million from June thirtyth levels, primarily due to an increase in the company's securities portfolio, partially offset by a reduction in cash balances.
At quarter end loans held for investment were $40.4 billion, an increase of $35 million.
We're approximately 2% annualized from the prior quarter. The overall loan growth in the third quarter was driven by increases in commercial loans of $123 million were 4% on an annualized basis.
Partially offset by reductions in consumer loan balances of $48 million.
Or 9% on an annualized basis.
The commercial loan growth was primarily primarily driven by growth in equipment finance loan and lease balances during the quarter, while the decline in consumer loan balances was driven by continued paydowns in mortgage and he lost balances and third party third party consumer loan balances run off which was partially offset by annualized growth in indirect auto balance.
Sales of 7.8%.
As noted earlier the average loan portfolio yields were up 29 basis points to 3.84% during the quarter.
At the end of September total deposits stood at $15.6 billion, a slight decline of $29 million or less than 1% from the prior quarter.
The decline in deposits in the third quarter was primarily due to lower now in CD balances, mostly offset by growth in demand deposits money market and savings account balances.
Mostly go cost transaction accounts comprised 51% of total deposit balances at the end of the third quarter.
Which is in line with the 51% at the end of the second quarter the average.
The average cost of deposits declined by 40 basis points to 39 basis points in the third quarter.
The company's liquidity position remains strong at both the bank and holding company levels with multiple sources, there can be tapped if needed.
Today, we borrowed $189 million from the federal Reserve's Paycheck protection program liquidity facility as PPP loan related deposits remain remained at elevated levels at the end of the third quarter.
From a shareholder shareholder stewardship and capital management perspective, we remain committed to managing our capital resources prudently as deployment of capital for the enhancement of long term shareholder value remains one of our highest priorities from a.
From a capital perspective, the company continues to be well positioned to manage through the pandemic and its impact on the company's financial results at the end of third quarter Atlantic Union Bankshares in Atlanta can you bank capital ratios were well above regular tori well capitalized levels.
During the third quarter of 2020, the company paid a common stock dividend of 25 cents per share.
It also paid a quarterly dividend of $156.60 on each outstanding share preferred stock.
Now to summarize it we had a union delivered solid financial results in the third quarter. Despite the continuing business disruptions associated with COVID-19, and the headwinds of the lower interest rate environment.
Financial performance has benefited from the decisive actions. The company has taken to reduce expense run rate to more closely aligned with revenue growth pressures driven by the lower for longer interest rate environment as we strive to maintain top tier financial performance, regardless of the operating environment.
Finally, please note that while we are Pratt proactively managing through this unique and unpredictable pandemic and are taking the proper steps to weather the economic downturn to ensure the safety soundness and profitability of the company. We also remain focused on leveraging the Atlantic Union franchise to generate sustainable profitable growth and remain committed.
To building long term value for our shareholders.
And with that I will turn it back over to Bill to open it up for questions. Thanks, Rob Gosh, we're ready for our first caller. Please.
Thank you as a reminder to ask a question you'll need to press star one on your telephone to withdraw your question press the pound key please stand by we compile the Q and a roster.
Our first question comes from Eugene placement with Barclays. You May proceed with your question wondering Jim.
Good morning.
Thanks for taking my question.
Of course, so last quarter, you said that you expect that your core net interest margin accretion stabilized only three fifteenthree pointing rich and this quarter is important that was closer to three or six excluding the accretion right. How do we think about the net interest margin.
Net interest income trajectory into the fourth quarter, especially as we started seeing pvp forgiveness coming.
Yes. Thank you Eugene this rather have picked that one yes. So we did we were guiding towards.
Kind of 350 range for core and Thats you are correct that came in about three or six the real seven but depending on how you count the PPP and the calculation.
Basically what what's occurred is we've seen a lot more excess liquidity and we decided in the quarter to put debt liquidity excess liquidity to work as opposed to leave it in cash balances, which were up 10 to 12 basis points. So we leveraged off the securities portfolio.
Making a trade off between.
The core margin and the net interest income that we could derive from that exelis excess liquidity. So if you look at that pace.
Page 13 of our presentation you can see in the in the drivers are chains graph that we have.
He had previously suggested that.
We we expect an earning asset yield compression would be offset by cost of funds cost of deposit declines.
That pretty much keep played out except.
Related to the securities yield, which as you see was about a negative six basis points on the overall margins, including the core margin.
Going forward.
We do expect to pretty much stabilized in this lower level again.
You haven't seen the full impact of the of the.
The securities portfolio leveraging strategy.
The average for the quarter for Securities was about 2.8 billion at quarter.
At quarter end, we've got about 3.1 billion, we added about 400 million. So there was that component and then there was.
It was higher.
Paydowns prepayments higher yielding securities than than we had projected in those were redeployed back into the securities portfolio, where we're yields than than the existing portfolio. So thats.
So thats.
Pretty much where we stand at the moment, we do expect it to continue to be some earning asset yield compression going forward on a core basis, but we.
But we feel good about the ability to.
At least the ghosts.
Cover that with cost of funds specialty cost deposit.
Decline so we've got opportunities there.
In particular, we've got a CD portfolio debt has about 1.6 billion.
Maturing Cds over the next 12 months about 130 or $40 million a month average cost of those Cds or 1.5% and those are being re priced monthly too.
The 20 to 25 basis points, so we have opportunities there.
[music].
Hopefully that helps.
Yes, Thats very helpful. Thank you.
Now just to jump on expenses.
Also.
Just a color in your prior guidance as well do you still expect to get to the $80 million quarterly core expense run rate by the end of the year and how do we get there from here.
So should we expect the FDIC expenses to stay low and what happens with Goldman Sachs.
Yes.
Yes, we're pretty much in line with what we had projected if you if you back out the onetime costs related to the branch closures and other actions we took this.
This year and you adjust for coated and Chris.
Traditional marketing expenses that we've talked about from a charitable donation perspective.
So we get to about an $89 million or so the bridge.
The branch closures impact, which is about 1.8 million on a quarterly basis Doesnt really hasn't really occurred prior to the to the fourth quarter that will take we'll see that full impact.
Decline. This this quarter. So we're still feeling good about the $88 million on a on a core run rate basis.
Got it.
Thank you appreciate that just a little follow up of the 2.6 million one time charges related to branch closures, how much was the in the compensation versus other expenses.
Yes.
Actually it.
In the in the salaries line, we had accrued about $1.8 million of severance in fact, we were able to.
Many of the positions coming out of the branches and other areas were redeployed into open positions. So seven.
Severance.
Declined about 400000 this quarter, so that was a positive.
And salary benefits line the remainder is seen other expenses.
Related to lease terminations and other write offs.
Think about it is about three plus million.
Million was in other offset by about 400000 in Cellengine benefits.
Thank you and I appreciate that color.
Thank you gene and Josh ready for our next caller. Please.
Thank you. Our next question comes from Casey Whitman with Piper Salmon you May proceed with your question.
Hi, Casey Hi, good morning.
Morning.
Just a quick follow up on new genes question about meat, maybe just the FDIC assessment charge it.
Just to make sure I understand it correctly I mean should those should that go back up when the.
When the PDP is forgiven or am I thinking about that wrong.
It should not EPS should not go up actually so related to that when we.
When we were doing our projection for the.
See assessment, we included Pp PD.
Loans from a liquidity the component of liquidity perspective.
If you actually came out with guidance and so we should treat those as cash which reduced the assessment. So part of that $1.1 million adjustment was.
Reducing the previous crew in the second quarter.
Then picking up about four or 500000 with the.
With the new assessment that should continue.
To be lower.
So in terms of wasn't an increase we should see about half of that.
Be added back in the in the fourth quarter. So.
That's a benefit.
But not.
Not the 1.1 benefit.
But as that comes down our assessment will kind of.
Recalculated at the prior to PPP level, which was lower.
Okay. Thank you and then.
Maybe another question on PPP can you give us.
Let the margin impact was this quarter from it and then maybe the dollar amounts as reported.
For Pvp.
It was actually up one VF net benefit to us this quarter.
It was about in total was about $14 million of PPP related income above.
About 9.8 was related to the amortization of deferred fees that came in and then.
It was about $4 million related to the 1% coupon rate than we are.
So total about 14.
Okay perfect. Thank you just one last one from me insight you gave us earlier, but can you give us an update on where criticized and classified were this quarter versus last quarter and maybe just help us out you saw any negative migration there particular within some of the at risk segments.
Yes. So if you look at if you look at the classified Cindy.
Look at how we account for that basically didnt move much at all.
We do have some migration.
Into what we call.
Watch category.
This quarter related to the two hotels as we evaluate.
The credit.
Component of our portfolio, there thats being reevaluated, we expect that some of that Mike.
Migrated what we call five rating watch rating from force is going to actually migrate back once we take a really close this quarter.
And each and every one of those outdoors and properties so from a.
From a real class my perspective, not much has changed but if you consider watching there if you went up.
Due to the total sales being put in that category.
As Doug I don't know if you're on the line you might want to add something.
Hi, Doug really.
Do you have anything to say in terms of trends, we're seeing on asset quality.
Yes.
May be having some.
The issues with much of the technical problem, there so sorry Casey.
So.
Although.
Was that for Doug Yes.
Yep.
Okay. There was some garbled there sorry.
Well Rob explained it.
Spot on.
With some categories of watch that we're looking at.
Our our reserve reflects the potential for a loss coming up we don't.
We don't we don't have any.
Even meaningful incidents known problems.
We have.
We have downgraded loans to watch so that we pay more attention to it according to our credit risk management protocols.
Protocols.
We're we're.
We're comfortable with where we are but we certainly expect deterioration at some point in some categories or some borrowers.
Understood. Thank you guys and good quarter.
Thanks, Casey Josh ready for our next caller please.
Thank you. Our next question comes from Catherine Mealor with KBW. You May proceed with your question wanting Catherine.
Thanks, Good morning, just a follow up on the margin.
Some color around core loan yields and we are doing.
And on right now and how much downside you see.
The significant next year. Thanks.
Yes, yes. It is it's can managing core loan yields are coming down in the to the commercial book.
I think we were down.
So you said that.
Similar here I think we're down it's about the 350 range looking at total commercial book of business, which was.
You know down.
If you look at from an average average tsubo to.
The revenue basis points on average quarter to quarter.
Rob.
That primarily is being driven by.
LIBOR are coming down and repricing.
At that level in these.
Based on where we look you may see us a bit more pressure on that.
As a fixed rate loans.
Reprice or renew or we have new loans coming on some of the lower levels.
We feel.
That most of the.
Linerboard based or variable rate component of that.
We will stabilize from from this level east from.
Not this should not compressed as much obviously because.
Because we feel like LIBOR is now.
Knock on wood that is bottom, which was about 16 50 60 basis points. So we.
We did have to incur some compression related to that 90 basis point decline on average from quarter to quarter. If you look at slide 13 of the presentation over on the right. You can see that LIBOR 30 day LIBOR averaged 35 basis points in Q2, it averaged 16 basis points in Q3 and by the end of Q2, it was down to 17 basis.
Points currently 15, so to Rob's point LIBOR should have bottomed, we think we hope.
You should have already felt the impact of that in the portfolio at least in terms of the down pricing of the existing LIBOR based.
Credits.
Great. Okay. So then.
Thanks, and then on the fixed rate side of it that's what the pressure is coming.
Moving forward that you would say, but would you say even on.
If I just think is are we think about just into talenti, where kind of era, where yields are coming on relative to where the current yield is today.
Maybe more on the fixed rate side.
Yes, Kathryn is it is coming out a bit lower us trying to put my hands on that particular.
Detail than that of round.
We seem to have it in front of me, but yes, you're right. There is some pressure I think.
You look at it in total on a commercial book of business.
Fixed rate loans, a covenant in in lower versus what the portfolio average was as of the end of September.
Probably if you look at the mix in the total probably call about 10 basis points. So.
Great.
Okay, and then on the Securities book, What's your best guess as to where the bottom is just assuming rates kind of stay as Greg today, and as you think about that churn.
Yes, what about will be booked to 91 on the securities portfolio, We think it's going to probably drop into the yield.
260 range over overtime.
Great.
Great. Thanks, and then one last one on PPD, just curious as you're looking at.
PPP applications for forgiveness, what's your best guess as to how much you pick your fee this quarter and going into next year.
Yes, so beyond that.
At the end of this quarter, we've got deferred fees of about $32 million remaining.
We think the bulk of those feet, we'll start to see the hub.
Some of those forgiveness fees coming through versus amortized coming in.
This quarter, although not materially it's really we expect really first quarter to be.
The biggest component of that.
But remains to be seen so there may be some.
We get this quarter, depending on how quickly these less than $50000.
Loans can be forgiven through the process, which is.
Easy easier for us to get through.
We'll see what happens this quarter, but our expectation is were first quarter capped.
Catherine we have begun to end fight under 50000 bar, we're about to begin to invite under $50000 borrowers and I can tell you right. Now we have 577 loans for $378 million that have been approved by us and submitted to the FDA waiting to hear from the FDA I think we had two approved as of yesterday.
Okay.
And we've got about a 1638.
Indications that have gone out.
It's what kind of work our way through it so.
We have continued to suggest or to say to our under $150000 borrowers. We believe its to your advantage to wait and see if Congress will do something to give you effectively auto forgiveness, obviously, if someone needs to go ahead and apply we'll take it.
But I think this is mostly a.
Early next year event more so than in Q4.
Great very helpful. Thank you.
Thanks, Catherine Josh ready for our next caller please.
Thank you. Our next question comes from William Wallace of Raymond James You May proceed with your question Hi, Wally.
Hi, Good morning, guys. Thanks for taking my call.
My question rather.
On the expense John in your prepared remarks, you made some comments about some ongoing initiatives outside of branch consolidations.
A lot of technology kind of streamlining processes et cetera, if I look at this 88 million dollar run rate after the branch.
The branch consolidation and I think about additional initiatives and also as I think about just seasonal increases going into next year, how should I be thinking about.
The cadence of of the expense line with no.
Initiatives versus.
Kind of natural pressures that we that we typically see to expenses.
Sure I can let me start and I'll ask Rob to to chime in here.
We're not done with expense reduction initiatives and we believe there are other opportunities to continue to rationalize the branch network I wouldn't expect it to be of the same magnitude of what you just saw but we've been emboldened buyer experience with the branch network reduction were down about 10% I can tell you we had.
No complaints and based on the changes in consumer consumer behavior, our own experience is the uptick that we're seeing and use of technology things like the ability to do so.
Meetings with branch personnel all of this further emboldens us to continue to look hard at the branch network. So don't be surprised if you see us do a little more pairing again not the same magnitude.
Also do have some technology initiatives underway that will effectively reduced reduce cost through process improvement.
Up and down the line, what we're looking pretty hard at every thing and yes on the other hand, there are investments that need to be made as well. So it's a balancing act so Rob how would you answer his question specifically.
Yes so.
Just quickly we continue to evaluate opportunities to reduce our run rate and become more efficient and we will continue to do that.
Our view is that.
The $88 million run rate, we expect should be able to be improved on going into next year.
Although that will.
The magnitude of that.
Absolute reduction.
These to consider things like merit increases and other inflationary type things so.
At this point in time.
We are driving to at least be flat to that 88 inclusive of those.
Inflationary adjustments on the expense line by getting other expense savings, we hope that maybe we can improve that even further but we are evaluating all opportunities to do that.
Well have more to say on it.
Well have more to say on that as we get through our planning process in the in the in the January earnings call.
Okay. All right. Thank you and then.
And then as a follow up on the NIM question from earlier.
Rob you are suggesting flattish from the kind of core X X PPP noise and accretion noise do you think that that flat next year is actually achievable you talked about some pretty significant pressures on the securities portfolio, and obviously, we know well.
Roger Repricing lower do you think you have enough on the deposit funding side too to offset those or should we think about maybe there.
There's more.
More.
More downside pressure, then and flat yes, yes.
Yes. Thanks good question.
Yes, I would suggest there's more downward pressure than you opportunity to expand the margin.
At this point in time, we feel like there's opportunities on the cost of fund side.
To offset the majority of any earning asset yield compression from the securities book or the loan portfolio.
However, I would suggest that there could be around.
Around the edges some further compression.
Pierre Threeo six we could be between three and three six going forward.
Big lever, we have is on deposit costs were 39 basis points.
During the during the third quarter. If you look at September levels were actually down to 36 basis points. So weve taken actions and continue to do that we think we can land in the low twentys.
Food through various actions both to the run off on the CD book Repricing and then other tightening on the order book.
Reducing rates on other.
Related category.
Sales of categories like money market now accounts et cetera in Bali some of the surge that we've seen a deposit growth. We had assumed was a temporary phenomenon, we're beginning to rethink that well here's an interesting stat, we still think about 42% of the PPP fundings around deposit at the bank that surprises us because.
Should be that these PPP borrowers.
Our through their eligibility period for expenses, yes, we can look at the growth that remains in so I'm not sure that's going to drain out as fast as we thought we continued to see deleveraging deposits building, if we get economic stimulus.
That will probably further contribute to deposit so we can think a little bit differently about.
Duration I guess, you would say of this surprising lies that we've had in deposits and what we can do with that so all of this makes us inclined to be more versus less aggressive with deposit pricing.
Certainly be testing price elasticity of the deposit base, we have been and will do it more.
Okay, Thanks, and John just one last question.
You can direct us to someone else if it's not you, but if you look across your footprint in the west.
In the western part of the state versus Northern Virginia, Richmond, enhancing drugs are you seeing any difference in activity among your borrowing base, whether its existing customers or.
Demands.
Within the regions that you operate in Virginia.
Stay bring to comment Dave do you have data sharing this head of commercial do you have any perspective, you'd like to share about kind of the relative strength of the different regions of of Virginia, particularly smaller markets like South West Virginia.
Sure John Guinee here.
Can you hear me, Okay, Yes, yes, great yes.
As you go across the regions was western.
Northern Eastern North Central demand is still pretty stable. However.
However.
In Western Virginia, It's more real estate related so were obviously, a little more particular right now.
In the northern region, we still have strong demand, but the utilization of the lines of credit has decreased quite a bit so.
Overall.
Demand is still stable.
But we are being more particular across the board on the types of assets were willing to finance and the structures were willing to approve it.
What is the one market pricing looking like as pricing what are the trends this will get into some of the margin questions weve been receiving going on spreads.
Sure the newer better credits of new and strong asset quality type credits are still commanding pretty tight spreads on renewals, we've seen renewal spreads stabilize or even tick up a little bit. So overall spreads have started to stabilize.
Hi, guys instead of going down so we feel pretty good about where we are in spreads going forward at least for the next quarter.
Thank you.
Thank you Alex Mail system.
Thanks, Paul falling and Josh ready for our next caller. Please.
Thank you. Our next question comes from Laurie Hunsicker with Compass point you May proceed with your question all morning light Gray.
Great Hi, good morning, Thanks for taking my questions I just wanted to go back when you were chatting with Catherine about TPP down I thought I heard you say there were $32 million.
The Thames fill season, I thought that number was closer to $50 million.
Just looking for clarification on that.
Yes, so laurie.
That's a current balance we've we've been amortized into income.
The difference there would have been $9.8 million the amortize this quarter and is about seven and a half or so last quarter. So 50 in gifts to pick up the numbers caused the recognition of those fees over the last two quarters gets you to 32.
Okay got it. So then just to clarify in essence, if all billion square for given right. This second.
The net gain of a pop into net interest income is only a net 32 million remaining if that cracks that that's correct, yes, if everything copper given yes.
Okay.
Just wanted to jump over to credit.
And I appreciate slide nine I'm, just looking at the $676 million of hotels and maybe this is a question for you Dave what is the breakdown between whats the Eni and whats Cree and then can you just remind us on what LTV was for the hotels I thought it was running around approximately 60% just didn't know if you had to attack.
Number on that yes, thats correct. The overall portfolio loan to value going then was about 60% the portfolio value.
Doug Willie Chief Credit Officer, I'm going to ask to comment on hotels I think it was I think what's implied in your question was are you financing.
Hotel operators that are seeing islands, not secured by real estate I think the answer to that is going to be no.
Of the hotel exposure 676 million, that's going to be all secured by the hotels themselves correct. Tim do you have any comments to make.
Yes, Thats correct was that your question Laurie.
Then maybe im not thinking about things the right way because you've got about 100 and I'm sorry that soon.
Im sorry about $237 million or sell a PPP round.
And you've got at least $237 million of Cnine Hotel line.
Right.
Yes.
Right. Okay. So I guess what is what is the breakdown of the 676 sets Cree versus the Eni.
Or I can tell you might recall that line item.
Looking for that differential and.
Trying to understand that better.
Yes, all the all the PPP loans or to the hope hotel operators themselves.
And there are other almost all single asset entities right, even if they are controlled by an investor.
So group.
So we don't we don't use the term cnine when we refer to hotels.
It's all in the same bucket so.
So so maybe maybe we do talk about it offline just to make sure. We've got your question accurate.
Perfect well, well, yes, what's kind of like on oxo on on the restaurant creepy. So you've got $190 million of the 223, that's that's great what did the LTV running on that.
That's a that's going to be let's say all over the board.
Some of the most of it is the is the location itself.
Sometimes its not sometimes its additional collateral second auto and things like that.
So we because we.
We underwrite cash flow first.
We can we can assume because we don't do this analysis.
Across the board because it does vary on the individual credit decision. So you can assume its anywhere between 70 and 80% at time of approval.
Okay.
It's helpful and then.
Much of your Cree is in office and do you have an LTV on that.
Yes, let me pull that up to the Ltvs or.
Going in worst than 75%, obviously, its a season portfolio. So it's between 60 and 65% were not.
We're not doing an awful lot of new office not because it opened just a precursor to.
You get a number for you.
Okay, and then maybe when you're looking for that to leverage loans. I think those are running around 300 million give or take I don't know if you have a more accurate number and then of that book do you know how much it modified.
Yet defined modified so we're talking the same language.
Lung deferral, you mean, Laurie Defra correct, yes, how much how much of that I don't know, if it's 300 million or 325, how much of that is actually in some form of department and that that is a well going in it was at a low on it was a low number.
And it's really almost nonexistent right now we don't have any.
Meaningful or or let's say reported stress in that portfolio.
That's great Outstandings on office $840 million give or take.
Okay.
As of the end of the quarter.
Okay, and then did you have a leverage loan balance or should I follow up with you offline.
And that.
Yes, we have.
The balance of about 350.
Okay. That's helpful and then.
Any comments in terms of your retail do you have any movie theater anchored strip and now we're looking at that 546 million.
And to your point most of its service retail you down Okay, Yes no.
Okay, great and.
Great and then just Jon last question, you started off by saying potentially consolidation within your footprint would be something you would consider can you help us think about.
Hey, how you are approaching aside what would be your ideal target and then b.
What you're thinking on timing would you do it potentially now or in the near term, while where potentially selling the club. The crisis are you waiting to get on the flip side or just any thoughts around that thanks, Yeah, I actually think big picture we are in.
And we're approaching what I think is going to be the perfect setup for additional bank M&A for all the obvious reasons Laurie.
It's absolutely not thinking about anything right now I think this is going to be a next year thing for them.
Im well aware of the fact that we've seen recent deals, but as best I can tell those sales will all all already baking ahead of Covance at least.
At least a more sizable ones. So from our standpoint, we really do need to have some clarity and I would think that this is probably a second half of next year opportunity for most across the industry.
And that we're going to have to have some confidence in terms of what asset quality looks like we need to prove to the world that everything is fine here, we need to have confidence.
In asset quality for any potential partner and so that feels like quarters from now so thats one point I would say nothing has changed in terms of how we think about what we might be interested and geographically the same such as strategic business case.
Financial case would have to make perfect sense actually think the ship the sales on large premium types of combinations.
What is interesting to us is that yes, we look at we think about things we talked to people. We model led the wealth of growth and the size of Atlantic handing over the last few years does render fuel even as the size of the types that we've been doing less impactful incrementally.
So yes.
Very difficult to contemplate you do anything smaller than what you've seen us do before.
What do we consider something larger we would.
But it would have to make certainly strategic and financial sense and you get into all kinds of cultural issues strategy issues et cetera. So I think it's it's going to be an important tool in the tool kit.
And but I think that you would not be surprised by anything we might be contemplating just in the context of what we've always said we view this as a mid Atlantic franchise, we like it contiguous we like dance, we like it compact.
Nothing may happen something may happen, but I do think that the reality of the lower for longer rate environment more so than anything else is going to put a lot of pressure every move.
Every move everything we do in this company, we deal with an eye towards scalability.
And I think that that's been important and it continues to be important as we move forward. So it's not top of mind right now, but we always think a few steps ahead and we certainly have ideas about things. So we'll see what the future holds.
Thanks, John and thanks, Laurie and we were going to try to squeeze in one last caller here.
So Josh we're ready for the last caller.
Thank you and last question comes from Brody Preston with Stephens You May proceed with your question.
I've already noted.
Hi, Thanks, guys gentlemen, more than generous with your time, so I'll try to keep this brief Rob I just wanted to clarify on the onetime expenses that just seem to.
A little I guess model between the severance and whatnot. So I guess I just wanted to get the all in full dollar amount to 2.6 to 0.6 year term co bid and then was there any additional severance that was in the expense number.
Yes, no no other no other.
No other severance in those numbers, but those are really the ones.
Okay, but no.
Yes.
All right and then you had strong growth in other commercial I am assuming thats coming from equipment finance. So I just wanted to see will get us.
Get a sense for what you are seeing for opportunities there and is there any specific industries that you're having greater success and.
They bring do you want to speak to that please.
Sure. If you recall, we started the equipment finance business last December.
We have a full team that we brought over for another bank and have added employees to it and.
We have built a referral program internally to.
To help drive referrals from in footprint straight to the equipment Finance company. So you see in that business. So we might have done a term loan for equipment instead.
And be on our books now it gets booked in equipment finance, but they are also self sourcing as well but.
The business is throwing off about 100 million.
Corridor right now.
In Outstandings and it's doing very well for us and we're very fortunate that we put this company in place I think prior to co bid in prior to the beginning of this year because.
It gives us the opportunity to finance the existing asset classes with more expertise.
And that a few additional asset classes related to transportation and.
And shipping that we couldn't do before but are prevalent in our market. So it's the same types of companies. We've always been banking Brody, but we do have a couple of extra asset classes that I just named that help us.
Penetrate this this market within our footprint better it fills an important GAAP EPS, we knew it would where we weren't compatible because typically we're going up against Super Regional bank. Some of the large nationals. We just werent competitive hopefully, we'll do a complete financing of trucks or whatever it was even though I'm thinking of it.
The old that came out of one of our regions, where I was ready mix concrete operation and they were buying a fleet of cement mixers that.
We just wouldnt have been competitive so the whole point here was to fill a gap as a part of our Cnine strategy our diversification strategy.
It's pretty basic stuff. This is not small ticket leasing.
But it's kind of standard stuff and so.
Its neighboring is saying so we're very happy with the timing we are very fortunate and they have been exceeding our expectations. The good thing.
That's that's really great color and then maybe just one more if I could you know John I appreciate your comments around.
Wanting to get greater clarity before you jump back in the M&A.
But just as I think about no for the overall situation and reserves that are kind of peaking here and deferrals are heading lower and so maybe just organically at what point do you consider sort of putting the pedal back down on growth and maybe trying to accelerate some of those tourist related hires.
That maybe had paused on here for a couple of quarters sure then I guess on a related note.
Longer term, what do you see sort of the organic growth rate of the bank looking like.
I think that the business model fundamentally should be able to generate sustainable growth of the high single digits in a more normalized environment, yes.
And one of the things always love to point to look at depository market share or lets take Virginia, which is of course the home state.
Truest is 25% postpaid market share the way, we count it where we cap branches at 5 billion becomes wells Fargo 16, falling off a lot of them were solve them.
And so there's a lot of runway there and then of course, we have our other expansion markets in Maryland, North Carolina equipment Finance Division is incremental add as well so we feel like the.
The brand is only getting stronger we've only become more capable and so we're pretty well positioned for what should be a nice.
Decent organic revenue the business model, we're not we're not really built for double digit growth in a normalized environment, what do we need it up while the other point I would make is that we fish, where the fish are yes, we compete against the smaller banks, but most of those fish are on these larger institutions nothing has changed in terms of the opportunity we see it.
Tools can delivering I'll ask you to comment on any hiring hiring new hiring hasn't been zero.
And the other thing that we are very excited about you haven't heard us talk too much about that but I'll bring it up again because in last quarter Watch Wells Fargo watch, what's going on there with a $10 billion multiyear expense reduction initiative with their strategy to more centrally knowledge.
Clients that are right in our wheelhouse that look small to Dom there.
There's going to be an opportunity here and so I think that what we've done with PDP.
Most of those 3000 liter bank clients would have come out of these large institutions that we picked up through PPP. So that the stage is set.
Dave can you comment on what hiring we may have seen that I don't want to give the impression that we somehow stop there are focused on through EPS or wells Fargo nothing could be further from the truth.
Sure John we are hiring all year long, although the fourth quarter is less attractive to higher because your.
Compensating folks for bonuses theyve earned elsewhere and potentially upfront.
However, all during the course of co bid.
And pre co bid this year, we have acquired talent from mostly the banks that are currently experiencing disruption and.
And there are the large banks that you you all now so as as.
We we have offers out today.
We've just added to our government contractor banking team as well recently.
Through these.
External hires and we're also focusing on hiring a strong credit oriented folks for a portfolio manager positions. So overall, we've done quite a dump quite a bit of hiring we've hired in the double digits. During the course of the year.
From those large institutions and.
One of the things that makes us very attractive is we are very easy to understand they know.
They know what their targets are we make it clear what their goals are and it's back to what they really like to do which is take share of commercial customers meet business owners and focus in footprint.
That's great color I really appreciate the time this morning, everyone. Thanks.
Expertise there thanks, and thanks, everyone for joining us today, we appreciate your interest and as a reminder, a replay of the webcast will be available on our website investors about bank at Union Atlantic Union Bank backup. Thanks, so much.
Thanks, So much and we'll talk to you next quarter Goodbye.
Okay.
Yes.
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