Q4 2023 Atlantic Union Bankshares Corp Earnings Call

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Thank you for standing by. Welcome to the Atlantic Union Bank Share's fourth quarter 2023 earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will press 411 on your telephone. You will then hear an automated message advising your hand is

Hi, Good day. Thank you for spending by what can see Atlantic Union Bankshares fourth quarter 2023 earnings call.

This time, all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question there, especially in U S Press Star one on your telephone you didn't hear an automated message advising your hand is race to withdraw your question. Please press star. One again, please be advised that today's conference is being recorded I would now like to.

To withdraw your question, please press the call 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Bill Camino, Senior Vice President of Investor Relations. Please go ahead.

The conference over to your Speaker today does to me now senior Vice President of Investor Relations. Please go ahead.

Bill Camino: Thank you Victor and good morning everyone.

Thank you Victor and good morning, everyone.

Bill Camino: I have Atlanta Senior Venture President and CEO John Asbury and Executive Vice President and CFO Rob Gorman with me today. They also have other members of our executive management team with us for the question and answer period.

Atlantic Union, Bankshares, President and CEO, John Asbury, and executive Vice President and CFO, Rob Gorman with me today.

Speaker Change: Also have other members of our executive management team.

I shouldn't answer period.

Bill Camino: Please note that today's earnings release and the company's fly presentation we are going through on this webcast are available to download on our investor website, investors.manateebank.com.

Please note that today's earnings release and the accompanying slide presentation are conquer on this webcast are available to download on our investor website investors Dogmatic Union Bank Dot com.

Bill Camino: During today's call we will comment on our financial performance using both GAAP metrics and non-GAAP financial metrics.

Speaker Change: During today's call, we don't comment on our financial performance using both GAAP metrics and non-GAAP financial measures.

Bill Camino: Important information about these non-GAAP financial measures, including reconciliations to comparable GAAP measures, is included in the appendix for our slide presentation and in our earnings release for the fourth quarter of this year, 2023.

Important information about these non-GAAP financial measures, including reconciliations to comparable GAAP measures is included in the appendix to our slide presentation and in our earnings release for the fourth quarter and fiscal year 2023.

Bill Camino: We will make more looking statements on today's call, which are not statements of historical fact.

We won't make forward looking statements on today's call, which are not statements of historical facts.

Bill Camino: and are subject to risks in the service.

And are subject to risks and uncertainties there can be no assurance that actual performance will not differ materially from any future expectation results expressed or implied by these forward looking statements.

Bill Camino: There can be no assurance that actual performance will not differ materially from any future expectation or results expressed or implied by these four looking statements.

Bill Camino: We undertake no obligation to publicly revise or update any forward-looking statement. Please refer to our earnings release issue today and our other SEC filings.

We undertake no obligation to publicly revise or update any forward looking statements. Please refer to our earnings release issued today and our other SEC filings.

Bill Camino: For further discussion of the company's risk factors and other important information regarding our forward-looking statements, including factors that could cause action results to differ from those expressed or implied in a forward-looking statement.

Part of our discussion of the company's risk factors and other important information regarding our forward looking statements, including factors that could cause actual results to differ from those expressed or implied in our forward looking statements.

Bill Camino: All comments made during today's call are subject to the State Department statement.

All comments made during today's call are subject to that safe Harbor statement.

Bill Camino: and at the end of the prepared remarks, you will take questions from the research analyst community. And now I'll turn it over to John Asbury. Thank you, Bill. Good morning, everyone. Thank you for joining us today. Looking back at 2023, it was a wild ride across the industry. Right out of the gate, we reached a tipping point in depositor behavior set off by the Fed's aggressive series of rate increases in 2022. This resulted in a surge of deposit movement from non-interest-bearing deposits into interest-bearing alternatives and in turn, it guided a deposit rate rumpus that compressed net interest margins. As you know, four other 25 basis point rate increases eventually followed before the Fed paused.

At the end of the prepared remarks, we will take questions from the research analyst community and now I will turn the call over to John Asbury. Thank you Bill Good morning, everyone. Thank you for joining us today.

Looking back at 2023, it was a wild ride across the industry right out of the Gateway reached a tipping point in depositor behavior set off by the Fed's aggressive series of rate increases in 2022, which resulted in a surge of deposit movement from non interest bearing deposits into interest bearing alternatives and in turn got to date.

Is it rate rumpus that compressed net interest margins as you know 425 basis point rate increases eventually I liked before the fed paused the.

John C. Asbury: The high-profile, non-traditional bank failures in March initially shook depositor confidence in the American banking system and further intensified margin pressure. Thankfully, our deposit base remained sturdy, and we responded to the changing environment with actions that we believe will better position us to deliver long-term, sustainable shareholder value. Despite the year's disruptions, in the end, 2023 was a successful year for AUV, both financially and strategically, and we entered the new year with positive momentum.

The high profile non traditional bank failures in March initially shipped depositor confidence in the American banking system and further intensified margin pressure thankfully our deposit base remains sturdy and we responded to the changing environment with actions that we believe will better position us to deliver long term sustainable shareholder value. Despite.

Despite the ers disruptions and beyond 2023 was a successful year for ABB, both financially and strategically and we entered the new year with positive momentum.

John C. Asbury: As a reminder, during 2023, we took three significant and proactive actions to respond to the ever-changing environment.

As a reminder, during 2023, we took three significant and proactive actions to respond to the ever changing environment.

John C. Asbury: First, we quickly realized the need to adjust our structural expense base when deposit costs rose in Q1. Just nine months ago, during a Q1 23 earnings call, we said we would take meaningful expense actions and then did what we said we would do in the second quarter. We took out $17 million in structural expenses with nearly all expense savings complete by the end of Q2.

First we quickly realized the need to adjust our structural expense base when deposit costs rose in Q1, just nine months ago. During our Q1 'twenty three earnings call. We said, we would take meaningful expense actions and then did what we said we would do in the second quarter, we took out $17 million in the structural expenses with nearly all expense savings.

Speaker Change: Is complete by the end of Q2.

John C. Asbury: On July 25th, we announced our entry into a merger agreement with American National Bank Shares, Inc., which has been well received across our markets. We have been hard at work on integration planning, and we were incompetent that we could achieve our estimated expense savings following the closings.

Second on July 25th we announced our entry into a merger agreement with American National Bancshares, Inc, which has been well received across our markets. We have been hard at work on integration planning and we remain confident that we can achieve our estimated expense savings following the closing as.

John C. Asbury: As we have said before, the relationship between our two companies spans decades, and now more than ever, we believe that our mutual familiarity, complementary cultures, and the strategic rationale for the proposed transaction will position us well for success. Upon announcement, we stated that we expected to close sometime in the first quarter of 2024, and that remains our expectation.

As we have said before the relationship between our two companies span decades, and now more than ever we believe that our mutual familiarity complementary cultures and the strategic rationale for the proposed transaction will position us well for success. Upon announcement, we stated that we expected to close sometime in the first quarter of 2024 and that remains.

Our expectation we have received regulatory approval for the merger from our state regulator and are waiting on the federal reserve to conclude its review.

John C. Asbury: We have received regulatory approval for the merger from our state regulator and are waiting on the federal reserve to conclude its review.

John C. Asbury: Third, we repositioned our balance sheet in two separate transactions to seek to deliver better returns in the higher rate environment.

Third we repositioned our balance sheet in two separate transactions to seek to deliver better returns in the higher rate environment.

John C. Asbury: The first involved the sale of available for sale securities early in the year, prior to the bank's failures, and the second occurs in the third quarter, when we paired a sale leaseback of certain owned properties with the restructuring of a portion of our securities portfolio in a capital mutual transaction.

The first involved the sale of available for sale Securities early in the year prior to the bank failures and the second occurred in the third quarter. When we pair at a sale leaseback of certain owned properties with a restructuring of a portion of our securities portfolio and a capital neutral transaction.

John C. Asbury: As previously discussed, we estimate this will add $0.06 to annual after-tax earnings per share, and we have the full benefit of that in Q4-23.

As previously disclosed we estimate this will add <unk> to annual after tax earnings per share and we have the full benefit of that in Q4 dollars 23.

John C. Asbury: I won't list every accomplishment in 23, but despite the industry's turmoil, we made excellent progress against our three-year strategic plan that we updated in 2022.

List every accomplishment in 'twenty three but despite the industry turmoil, we made excellent progress against our three year strategic plan that we updated in 2022.

John C. Asbury: The highlights of the year was our technology modernization effort as we renegotiated our core operating system contracts, improved our technology stack, and are now in the late stages of implementing an upgraded online and mobile banking offering with a change in platforms. The new platform will be phased in over the course of 2024 and will deliver highly competitive capabilities and an improved client experience all at lower cost, and that is a great combination.

Highlights for the year was our technology modernization effort as we've renegotiated our core operating system contract improved our technology stack and are now in the late stages of implementing an upgraded online and mobile banking offering with a change in platforms and new platform will be phased out over the course of 2020.

Speaker Change: Four and will deliver highly competitive capabilities and an improved client experience all at lower cost and that is a great combination. We also continued to build depth throughout the organization as we matured our talent management process and enhanced our leadership team.

John C. Asbury: We also continued to build depth throughout the organization as we matured our talent management process and enhanced our leadership team.

John C. Asbury: All of these and more combine for a successful 2023 that will position us well for the future.

Speaker Change: All of these and more combined for a successful 2023 that will position us well for the future.

John C. Asbury: We see our financial results in 2023 as another confirmation of the merit and durability of our long-term strategy of being a diversified, traditional, full-service bank that makes a positive difference in our markets. With a strong brand and deep client relationships, we provide economically beneficial services and financing to help people and help businesses. It's a straightforward business model that works and has stood the test of time over our 124-year history.

Speaker Change: We see our financial results in 2023 is another confirmation of the merit and durability of our long term strategy of being a diversified traditional full service that it makes a positive difference in our markets with a strong brand and deep client relationships, we provide economically beneficial services and financing to help people.

And health businesses, it's a straightforward business model that works and has stood the test of time over a 124 year history.

John C. Asbury: That is why soundness, profitability, and growth in that order of priority remains our mantra. It informs how we run this company.

It's why soundness profitability and growth in that order of priority remains our mantra. It informs how we run this company.

John C. Asbury: We believe all that happened in 2023 is a proof point of why this philosophy is the right approach to running our bank.

Speaker Change: We believe all that happened in 2023 as a proof point why this philosophy is the right approach to running our bank.

John C. Asbury: I'm going to comment on macroeconomic conditions and their results.

I will now comment on macro economic conditions and our results for forecasting purposes, we remain cautious on the economic outlook. Although it does seem a soft landing as possible inflation continues its improving trend. Despite some month to month volatility and we believe we have seen the peak for short term rates.

John C. Asbury: For forecasting purposes, we remain cautious on the economic outlook, although it does seem a soft landing is possible. Inflation continues its improving trend despite some month-to-month volatility, and we believe we have seen the peak of short-term rates.

John C. Asbury: The macroeconomic environment remains favorable in our footprint, and we're not expecting that to change in the near term. As we've said for some time, our markets appear healthy. However, we have seen a slowdown in capital investment activity among certain parts of our client base in response to higher interest rates and economic uncertainty.

<unk> economic environment remains favorable and our footprint and were not expecting that to change in the near term as we've said for some time our markets appear healthy.

However, we have seen a slowdown in capital investment activity among certain parts of our client base in response to higher interest rates and economic uncertainty.

John C. Asbury: Our lending pipelines reflect that and are down modestly from last quarter and from a year ago. They imply we should expect a mid-single-digit loan growth in 2024 on a standalone basis.

Our lending pipelines reflect that and are down modestly from last quarter and from a year ago. They imply we should expect a mid single digit loan growth in 2024 on a standalone basis.

John C. Asbury: Virginia's last reported unemployment rate picked up slightly to a still very low 2.9% in November and, as usual, remains below the national average, which was 3.7% during the same period.

Virginia's last reported unemployment rate ticked up slightly to a still very low two 9% in November and as usual it remains below the national average, which was three 7% during the same period.

John C. Asbury: We do not anticipate any maturely negative near-term shift away from these low unemployment trends, and it generally is a non-credit environment, but as always, we continue to closely monitor the health of our markets.

Do not anticipate any materially negative near term shift away from these low unemployment trends and a generally benign credit environment, but as always we continue to closely monitor the health of our markets.

John C. Asbury: Given the ongoing investor focus on non-owner-occupied commercial real estate, and more specifically office exposure, I'll reiterate what I've said for the last three quarters. Commercial real estate finance is a historic strength of our company, and if an asset class has performed well in our markets over time, they have not traditionally been prone to boom and bust cycles. We stick to our knitting and generally deal with local and regional developers and operators that we know well and have track records with us.

Given the ongoing investor focus on non owner occupied commercial real estate and more specifically office exposure I'll reiterate what I've said for the last three quarters commercial real estate finance is a historic strength of our company and Thats an asset class that has performed well in our markets over time, they have not traditionally been prone to boom and bust cycles.

We stick to our knitting and generally deal with local and regional developers and operators that we know well and have track records with us we've.

John C. Asbury: We've included non-owner-occupied office exposure detail on the appendix for our earnings presentation. And as a reminder, we don't finance large, high-rise, or major metropolitan central business district office buildings, and we have no commercial real estate exposure in the District of Columbia.

We've included non owner occupied office exposure detail in the appendix to our earnings presentation and as a reminder, we don't finance large high rise or major metropolitan and Central business District office buildings, and we have no commercial real estate exposure in the district of Columbia.

John C. Asbury: The portfolio is performing well. It's geographically diverse, granular, and modest in size at about 5% of our total loan exposure at year-end. We proactively monitor this portfolio, and we don't see any systemic concerns in the office book currently.

Portfolio is performing well as geographically diverse granular and modest in size at about 5% of our total loan exposure at year end.

Proactively monitor this portfolio and we don't see any systemic concerns in the office book currently while we may see some degree of problems in the portfolio over time, we currently expect them to be readily manageable.

John C. Asbury: While we may see some degree of problems in the portfolio over time, we currently expect them to be readily manageable.

John C. Asbury: Turning now to quarterly results. We remain focused on generating positive operating leverage, that is, growing our revenue faster than our expenses.

Turning now to quarterly results, we remain focused on generating positive operating leverage that is growing our revenue faster than our expenses here are a few financial highlights for the fourth quarter and for the full year of 2023, which Rob will detail next.

John C. Asbury: Here are a few financial highlights for the fourth quarter and for the full year of 2023, which Rob will detail next.

John C. Asbury: On a year-over-year basis for 2023, we generated positive adjusted operating leverage of approximately 1%, as adjusted revenue growth was up approximately 2.8%, while adjusted operating non-interest expenses increased approximately 1.8%.

On a year over year basis for 2023, we generated positive adjusted operating leverage of approximately 1% as adjusted revenue growth was up approximately two 8% while adjusted operating noninterest expenses increased approximately one 8%.

John C. Asbury: I also would like to point out that pre-tax, pre-provision adjusted operating earnings increased 5% year-over-year.

I also would like to point out that pretax pre provision adjusted operating earnings increased 5% year over year.

John C. Asbury: Total deposits increased 5.6% year-over-year. Average deposit balances for Q4 increased $318 million, or approximately 7.5% from the prior quarter. As we've seen before, we did have a seasonal dip in deposits at year-end, but we're now seeing a normal rebuilding underway, and we're off to a very good start for Q1-24.

Total deposits increased five 6% year over year average deposit balances for Q4 increased $318 million or approximately seven 5% from the prior quarter.

We've seen before we did have a seasonal dip in deposits at year end, but we're now seeing a normal rebuilding underway and we're off to a very good start for Q1 'twenty four.

John C. Asbury: The remixing of non-interest-bearing deposits to interest-bearing deposits slowed during the fourth quarter, as expected, and we saw good growth in money markets and customer CDs. Quarter-end non-interest-bearing deposits were 24%, approximately, of total deposits, down from 25% on the prior quarter.

The remixing of noninterest bearing deposits to interest bearing deposits slowed during the fourth quarter as expected and we saw good growth in money markets and customers see this quarter and noninterest bearing deposits were 24% approximately a total deposits down from 25% on the prior quarter, we believe noninterest bearing deposit remix.

John C. Asbury: We believe not-existering deposit remixing is stabilizing, but it's not quite yet over. We posted annualized loan growth of 9.1% during the seasonally high fourth quarter compared to the prior quarter, which is better than expected and led by growth in commercial loans.

Stabilizing, but it's not quite yet over we posted annualized loan growth of nine 1% during the seasonally high fourth quarter compared to the prior quarter, which was better than expected and led by growth in commercial loans.

John C. Asbury: For the full year, loan growth was 8.2% point-to-point and averaged up 9.3%. Construction loan balances were down from the third quarter as projects completed and were recategorized as non-owner-occupied commercial real estate, but still ended up higher than the prior year. As I mentioned earlier, we expect to be in the mid-single-digit loan growth range for Loan Self-Investment in 2024 on a standalone basis. At this time, our confidence is high that we'll remain in a growth mood for 2024.

For the full year loan growth was eight 2% point to point and averaged up nine 3% construction loan balances were down from the third quarter as projects completed and we're re categorized as non owner occupied commercial real estate, but still ended up higher than the prior year as I mentioned earlier, we expect to be in the mid single digit growth lung.

Growth range for loans held for investment and 2024 on a standalone basis at this time, our confidence is high that will remain in a growth mode for 2024.

John C. Asbury: She and I line utilization this quarter was up modestly from the prior quarter as well as from the prior year's fourth quarter.

Line utilization this quarter was up modestly from the prior quarter as well as from the prior year's fourth quarter.

John C. Asbury: Loan production in the fourth quarter was relatively balanced between existing clients and new to bank clients. It was also relatively balanced between commercial and industrial and commercial real estate plus construction.

Loan production in the fourth quarter was relatively balanced between existing clients and new to bank clients. It was also relatively balanced between commercial and industrial and commercial real estate plus construction.

John C. Asbury: Commercial real estate payoffs declined year over year, but it increased slightly from the third quarter, which we interpret as a good sign that the theory market is still healthy in our foot.

Commercial real estate payoffs decline year over year, but increased slightly from the third quarter, which we interpret as a good sign that the CRE market is still healthy in our footprint.

John C. Asbury: Credit was again a good story, and we recorded annualized net charge-offs of three basis points for the fourth quarter, up from one basis point in the third quarter.

Credit was again, a good story and we recorded annualized net charge offs of three basis points for the fourth quarter up from one basis point in the third quarter for the full year. We finished at an impressive five basis points of net charge offs, we expected asset quality will eventually normalize following a very long run of minimal net charge offs there.

John C. Asbury: For the full year, we finished hitting the press at five basis points in their turnoffs.

John C. Asbury: We expect that asset quality will eventually normalize following a very long run of minimal net charge-offs, but we still see no evidence of an inflection point coming or having occurred. Having said that, runoff credit losses do happen from time to time, as we saw in the first quarter of last year.

We still see no evidence of an inflection point coming or having occurred having said that one off credit losses do happen from time to time as we saw in the first quarter of last year.

John C. Asbury: That's normal and to be expected. Regardless, we remain competent and are pleased with our assets.

Normal and to be expected, regardless, we remain confident and are pleased with our asset quality.

John C. Asbury: In sum, we thought this was a strong and fundamentally sound year for Attic Union against an industry backdrop that was dramatic this time.

We felt this was a strong and fundamentally sound year for Atlantic Union against an industry backdrop that was dramatic at times. We continued to demonstrate we will take the necessary strategic actions to successfully navigate the challenges we face in this uncertain economic environment and we do what we say we will do we expect on <unk>.

John C. Asbury: We continue to demonstrate we will take the necessary strategic actions to successfully navigate the challenges we face in this uncertain economic environment, and that we do what we say we will do.

John C. Asbury: We expect uncertainty to continue for some time, especially given geopolitical events, but for the time being, we remain cautiously optimistic in our outlook. As usual, with uncertainty comes opportunity, which we believe we are well positioned to capitalize on.

To continue for some time, especially given the geopolitical events, but for the time being we remain cautiously optimistic in our outlook as usual with uncertainty comes opportunity, which we believe we are well positioned to capitalize on.

John C. Asbury: The Latin Union is a uniquely valuable franchise that is a diversified, traditional, full-service bank with a strong brand and deep client relationships in stable and attractive markets. It should soon be even more so with the addition of American National Bank to the AUD family. We remain on a solid footing, resilient, and expect a good start to the year. I'll now turn the call over to Ron to cover the financial results for the quarter.

Atlantic Union is a uniquely valuable franchise that has a diversified traditional full service bank with a strong brand and deep client relationships and stable and attractive markets. It should soon be even more so with the addition of American National Bank to the ABB family, we remain on a solid footing resilient and expect a good start to the year.

Speaker Change: I'll now turn the call over to Rob to cover the financial results for the quarter.

Ron: Thank you, John, and good morning, everyone.

Thank you John and good morning, everyone.

Ron: Please note that for the most part, my commentary will focus on a managing the fourth quarter financial results on a non-GAAP, adjusted operating basis, which excludes the following pre-tax items.

Please note that for the most part my commentary will focus on Atlantic Union's fourth quarter financial results on a non-GAAP adjusted operating basis, which excludes the following pre tax items gains of $1 9 million in the fourth quarter and 27 7 million in the third quarter related to sale leaseback transactions.

Ron: Gaines of $1.9 million in the fourth quarter and $27.7 million in the third quarter related to sale-leaseback transactions.

Ron: The net loss on sales of securities of $27.6 million reported in the third quarter.

The net loss on sales of securities of $27 6 million.

Speaker Change: <unk> recorded in the third quarter of.

Ron: The $3.4 million FDIC special assessment expense recognized in the fourth quarter.

$3 4 million FDIC special assessment expense recognized in the fourth quarter.

Ron: The $3.3 million legal reserve related to our previously disclosed settlement with the CFPB in the fourth quarter.

$3 3 million legal reserve related to a previously disclosed settlement with the CFPB and the fourth quarter.

Ron: Mercurated costs of $1 million in the fourth quarter and $2 million in the third quarter associated with our pending merger with American National.

Mercury related cost of $1 million in the fourth quarter and $2 million in the third quarter associated with our pending merger with American National.

Ron: and expenses of $8.7 million associated with our strategic cost savings initiatives recorded in the third quarter.

<unk> expenses of $8 $7 million associated with our strategic cost savings initiatives recorded in the third quarter.

Ron: In the fourth quarter, reporting that income available to common shareholders was $53.9 million, and earnings per common share was $0.72.

In the fourth quarter reported net income available to common shareholders was $53 9 million and earnings per common share was <unk> 72.

Ron: For the full year 2023, reported net income available to common shareholders was $190 million, and earnings per common share was $2.53.

For the full year 2023 reported net income available to common shareholders was $190 million.

And earnings per common share was $2 53.

Ron: Adjusted operating earnings available to common shareholders were $58.9 million, or $0.78 per common share for the fourth quarter, and were $221 million, or $2.95 per common share for the full year 23.

Adjusted operating earnings available to common shareholders was $58 9 million.

Were <unk> 78 per common share for the fourth quarter and were $221 million or $2 95 per common share for the full year 'twenty three.

Ron: The adjusted operating return on tangible common equity was 18.2% in the fourth quarter and 17.2% for the full year.

Speaker Change: The adjusted operating return on tangible common equity was 18, 2% in the fourth quarter and 17, 2% for the full year.

Ron: The adjusted operating return on assets was 1.18% in the fourth quarter and 1.14% for the full year. And on an adjusted operating basis, the efficiency ratio was 52.9% in the fourth quarter and 54.2% for the full year of 23.

The adjusted operating return on assets was one 8% in the fourth quarter and one 4% for the full year and an adjusted operating basis. The efficiency ratio was 52, 9% in the fourth quarter at 54, 2% for the full year of 'twenty three.

2023.

Turning to credit loss reserves at the end of the fourth quarter. The total allowance for credit losses was $148 5 million.

Which is an increase of approximately $7 5 million from the third quarter, primarily due to loan growth in the fourth quarter and an increase in the allowance on to individually assessed loans due to changes in borrow or specific circumstances.

Ron: The total loss of credit losses, or the percentage of total loans held for investment, increased three basis points to 95 basis points at the end of the fourth quarter as compared to the third quarter.

The total allowance for credit losses, as a percentage of total loans held for investment increased three basis points to 95 basis 95 basis points at the end of the fourth quarter as compared to the third quarter.

Ron: The revenue for credit losses of $8.7 million in the fourth quarter was up from $5 million in the prior quarter. Net charge loss increased to $1.2 million with three basis points annualized in the fourth quarter, up from $294,000 with one basis point annualized in the third quarter. For the full year, the net charge loss ratio was five basis points annualized in the fourth quarter.

The provision for credit losses of $8 7 million in the fourth quarter was up from $5 million in the prior quarter net charge offs increased to $1 2 million or three basis points annualized in the fourth quarter up from $294000, a one basis point annualized in the third quarter for the full year the net.

Charge offs ratio was five basis points.

Ron: Now turning to the pre-tax, pre-provision components of the income statement for the fourth quarter, tax equivalent and editor's income was $157.3 million, which was an increase of $1.5 million from the third quarter, driven by higher yields on both available for sale securities and the loan portfolio, as well as growth in average loan health for investment, partially offset by the impact of higher deposit costs, driven by continued competition for deposits, while this changes in deposit myths as depositors continue to migrate to higher-costing interest-bearing deposit accounts and growth in average deposit balances during the quarter.

Now turning to pretax pre provision components of vehicles statement for the fourth quarter tax equivalent net interest income was $157 3 million, which was an increase of $1 6 million for the third quarter driven by higher yields on both available for sale securities in the loan portfolio as well as growth in average loans held for.

Partially offset by the impact of higher deposit costs, driven by continued competition for deposits changes in deposit mix as the positives continue to migrate to a higher cost.

Interest bearing deposit accounts and growth in average deposit balances during the quarter.

Ron: The fourth quarter tax equivalent net interest margin was 3.34%, which was a net decrease of one basic point from the previous quarter due to an increase of 20 basic points in the yield on earning assets, driven primarily by increases in loan and security investment yields, as well as favorable changes in earning asset mix and higher investment tax yields, which was more than offset by a 21 basic point increase in our cost of funds.

The fourth quarter's tax equivalent net interest margin was 334%, which was a net decrease of one basis point from the previous quarter due to an increase of 20 basis points in the yield on earning assets driven primarily by increases in loan and security yields security investment yields as well as favorable changes in earning asset mix and higher <unk>.

The cash yields which was more than offset by a 21 basis point increase in our cost of funds.

Ron: The loan four-quarter yield increased 13 basis points for 5.97% in the fourth quarter from 5.84% in the third quarter, which added approximately 11 basis points to the net interest margin.

The loan portfolio yield increased 13 basis points to 597% in the fourth quarter from 584% in the third quarter, which added approximately 11 basis points of net interest margin increase was primarily due to a full quarter's impact on variable rate loan yields from the federal Reserve's last rate increase in July as well as the <unk>.

Ron: The increase was primarily due to four quarters impact on variable rate loan yields from the Federal Reserve's last rate increase in July, as well as the impact of higher market interest rates on new loan production yields, as well as on renewing loans.

Pact of higher market interest rates on new loan production yields as well as on renewing loans.

Ron: period portfolio yield increased by 38 basis points to 3.80% in the fourth quarter from 3.42% in the third quarter, which added four basis points to the net interest margin.

Securities portfolio yield increased by 38 basis points to three 8%.

Fourth quarter from $3 four 2% in the third quarter, which added four basis points to the net interest margin.

Ron: The increase was primarily due to the impact of the securities portfolio repositioning done in September. In addition, the favorable OEF mixed shift towards higher yielding loans and higher yields on adjusted cash contributed an additional five days once the fourth quarter's net interest margin.

Increase was primarily due to the impact of the securities portfolio repositioning done in September in addition to favorable earning asset mix shift towards higher yielding loans and higher yields on adjusted cash contributed an additional five basis points to the fourth quarter's net interest margin.

Ron: The 21 basis point increase in the fourth quarter's cost of funds for 2.25% was primarily due to the 26 basis point increase in the cost of deposits for 2.23%. This had an approximately 25 basis point negative impact on the fourth quarter's net interest margin, partially outtapped by the four basis point margin positive impact of lower borrowing costs.

The 21 basis point increase in the fourth quarters cost of funds to two.

Two 5% was primarily due to the 26 basis point increase in the cost of deposits to cheat too.

Two 3%, which had an approximately 25 basis point negative impact on the fourth quarter's net interest margin.

Actually offset by the four basis point margin positive impact of lower borrowing cost.

Ron: The deposit cost increase is primarily driven by changes in deposit mix as deposit is migrated to higher costing interest-bearing deposit accounts during the quarter. Additionally, interest-bearing deposit rates increase as a result of higher overall market rates and a competitive deposit pricing environment.

Deposit cost increase was primarily driven by changes in deposit mix as deposit is positive. It has migrated to higher cost of interest bearing deposit accounts during the quarter. Additionally, interest bearing deposit rates increased as a result of higher overall market rates and the competitive deposit pricing environment.

Ron: Adjusted operating non-interest income, which exceeds gains and losses on sales of securities and gains on sale leaseback transactions recorded in the third and fourth quarters, increased $1.1 million to $28.1 million from the prior quarter.

Adjusted operating noninterest income, which excludes gains and losses on sales of securities engaged on.

Leaseback transactions recorded in the third and fourth quarters increased $1 1 million to $28 $1 million from the prior quarter.

Ron: Driven by an $893,000 increase in loan-related interest rate swap fees due to several new swap transactions, a $679,000 increase in loan syndication revenue, as well as quarterly increases across most other fee revenue categories, with the exception of an $843,000 decline in other service charges, commissions, and fees, primarily due to a merchant-vendor contract signing bonus reported in the prior quarter.

Driven by an eight 893000 decrease in loan related interest rate swap fees due to several new swap transactions of $679000 increase in LOE loans syndication revenue as well as quarterly increases across most other fee revenue categories with the exception of an $843000 decline in other service charge.

<unk> commissions and fees, primarily due to a merchant vendor contract signing bonus recorded in the prior quarter.

Ron: Report A-9 is this expense decrease to approximately $600,000 to $107.9 million for the fourth quarter.

Reported noninterest expense decreased approximately $600000 to $107 9 million for the fourth quarter.

Ron: Adjusted Operating Amounts of Expense, which excludes the amortization of intangible assets in the third and fourth quarters. The FDIC has special assessment in the fourth quarter. The Legal Reserve associated with our previously disclosed settlement with the CFPB in the fourth quarter. Merger-related costs associated with our pending merger with American National in the third and fourth quarters. And expenses associated with strategic cost-stated initiatives in the third quarter. Expenses increased $2.5 million to $98.2 million for the quarter. For the quarter from $95.7 million in the prior quarter. Primarily due to a $1.2 million increase in other expenses. Protecting the increase in memorial and credit-related expense. Higher teammate training and travel expenses. And annual debit card.

Adjusted operating noninterest expense, which excludes amortization of intangible assets in the third and fourth quarters. The FDIC a special assessment in the fourth quarter. The legal reserve associated with our previously disclosed settlement with the CFPB and the fourth quarter merger related costs associated with our pending merger with American national in the third and fourth.

<unk>.

And expenses associated with strategic cost savings initiatives in the third quarter expenses increased $2 5 million to $98 2 million for the quarter fourth quarter from $95 7 million in the prior quarter, primarily due to a $1 $2 million increase in other expenses.

The increase in Oreo and credit related expense higher teammate training and travel expenses and annual debit card.

Ron: Plastic inventory purchases

Classic inventory purchases.

Ron: In addition, a $1.1 million increase in professional services and expense, primarily for strategic initiatives in the fourth quarter and higher legal fees, were encouraged. A $799,000 increase in marketing and advertising expenses, primarily due to annual customer disclosure mailings during the quarter. And a $591,000 increase in occupancy expenses, which was driven by the increased lease payments related to the fair leaseback transactions executed in the third quarter.

In addition, a $1 1 million increase in professional services expense, primarily for strategic initiatives in the fourth quarter and higher legal fees were incurred a 799000 increase in marketing and advertising expenses, primarily due to annual customer disclosure mailings during the quarter and $591000 <unk>.

And occupancy expenses, which was driven by the increased lease payments related to the sale leaseback transactions executed in the third quarter.

Ron: These increases are partially outstripped by a $763,000 decrease in salaries and benefits, which reflects the impact of headcount reductions from our strategic cost-dating initiatives.

These increases were partially offset by a $763000 decrease in salaries and benefits, which reflects the impact of head count reductions from our strategic cost savings initiatives.

Ron: executed in the second and third quarters.

Executed in the second and third quarters.

Ron: At period end, loans held for investment netted deferred fees and costs were $15.6 billion, which was an increase of $351 million, with 9.1% annualized from the prior quarter.

At period end loans held for investment net of deferred fees and costs were $56 million, which was an increase of $351 million or nine 1% annualized from the prior quarter.

Ron: driven by increases in commercial loan balances of $363 million, or 11.1% in quarter annualized, partially offset by declines in consumer loan balances of $11.9 million, or 2% annualized.

Driven by increases in commercial loan balances of $363 million or 11, 1% linked quarter annualized partially.

Offset by declines in consumer loan balances of $11 $9 million or 2% annualized.

Speaker Change: Abby, loans increased 6.7% from the prior quarter, and for the full year, loans increased 8.2%.

Average loans increased six 7% from the prior quarter and for the full year loans increased eight 2%.

Speaker Change: At the end of December, total deposits stood at $16.8 billion, which was an increase of $32 million, or approximately 1% annualized from the prior quarter, while average deposits increased 7.5% annualized from the prior quarter.

At the end of December total deposits stood at $16 8 billion, which was an increase of $32 million or approximately 1% annualized from the prior quarter, while average deposits increased seven 5% annualized from the prior quarter.

Speaker Change: Their four-year total deposits increased 5.6%.

Full year total deposits increased five 6%.

Speaker Change: So the deposits increased from the prior quarter in the same period in the prior year, primarily due to increases in interest-bearing customer deposits and broker deposits, partially offset by declines in demand-deposit balance.

Total deposits increased from the prior quarter in the same period in the prior year, primarily due to increases in interest bearing customer deposits and brokered deposits, partially offset by declines in demand deposit balances.

Speaker Change: At the end of the fourth quarter, Atlantic Union Bank shares and Atlantic Union Bank's regulatory capital issues were well above well-capitalized levels. In addition, on an adjusted basis, we remain well-capitalized as of the end of the fourth quarter if you include the negative impact of AOCI and health maturity securities' unrealized losses in the cancellation of the regulatory capital ratio.

At the end of the fourth quarter Atlantic Union, Bankshares, and Atlantic Union Bank regulatory capital ratios were well above well capitalized levels. In addition on an adjusted basis, we remain well capitalized as at the end of the fourth quarter. If you include the negative impact of <unk> and held to maturity securities unrealized losses in the calc.

Duration of the regulatory capital ratios.

Speaker Change: During the fourth quarter, the company paid a common stock dividend of $0.30 per share, which was an increase of approximately 7% from the previous quarter.

During the fourth quarter the company paid common stock dividend of <unk> 32 per share, which was an increase of approximately 7% from the previous quarter.

Speaker Change: On a full year's 2024 financial outlook for AUD on a stand-alone basis, excluding any impact on the American national opposition, it is following.

On a full year 2024 financial outlook for ABB.

Speaker Change: Hand alone basis, excluding any impact from the American National acquisition is as follows we expect to generate full year loan growth in the mid single digit range and expect deposit balances to grow by low single digits during the year.

Speaker Change: They expect to generate full-year loan growth in the mid-single visit range and expect deposit balances to grow by low single visits during the year.

Speaker Change: They're also projecting that the full-year, fully taxed equivalent net interest margin will fall in the range of between 3.3%.

We're also projecting that the full year fully taxable.

Equivalent net interest margin will fall in the range of between three 3% and three 4% driven by our baseline assumption that the federal Reserve Bank will cut the fed funds rate by 25 basis points three times in 2024 beginning in June.

Speaker Change: And 3.4% driven by our baseline assumption that the Federal Reserve Bank will cut the Fed funds rate by 25 basis points three times in 2024 beginning in June.

Speaker Change: In addition, we project that our through-the-cycle total composite data will be approximately 45%, which would be more than offset by the projected through-the-cycle long yield data of approximately 50%.

In addition, we projected our through the cycle total deposit beta will be approximately 45%, which would be more than offset by the projected through the cycle loan yield beta of approximately 50%.

Speaker Change: The three disciples' interest-bearing deposit data is expected to be approximately $55,000.

Speaker Change: Through the cycle interest bearing deposit beta is expected to be approximately 55%.

Speaker Change: The current rate cycle is projected to end when the...

The current rate cycle is projected to end when they.

Speaker Change: FOMC pivots to reducing the Fed funds rate, which we now assume will begin in the second quarter.

Operator: Thank you for standing by. Welcome to the Atlantic Union Bank Share's fourth quarter 2023 earnings call.

Epilepsy pivots to reducing the fed funds rate, which we now assume will begin in the second quarter.

Speaker Change: As a result of loan growth and our tax equivalent net interest margin projection, we expect capital equivalent net interest income to increase by mid-single digits in 2024 from full-year 2023 levels. We also expect that the company will generate positive adjusted operating leverage in 2024 from full-year 2023 due to the expected mid-single digits adjusted operating revenue growth, up-casing expected low single-digit growth, and adjusted operating non-fiscal expense.

Operator: At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session.

As a result of loan growth in our tax equivalent net interest margin projection, we expect taxable equivalent net interest income to increase by mid single digits in 2024 from full year 2023 levels. We also expect that the company will generate positive adjusted operating leverage in 2024 for full year 2023 due to.

Operator: To ask a question during the session, you will press 411 on your telephone. You will then hear an automated message advising your question is on hold. To withdraw your question, please press the call 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Bill Camino, Senior Vice President of Investor Relations.

We expect a mid single digit adjusted operating revenue growth outpacing expected low single digit growth in adjusted operating non interest expense.

Please go ahead.

Thank you, Victor, and good morning everyone.

Speaker Change: On the credit front, while we don't see any systemic credit quality issues working at the moment, we're assuming a normalizing uptick in the net charge-up ratio between 10 and 15 basis points in 2024 and 5 basis points in 2023.

I have Atlanta Senior Venture President and CEO John Asbury and Executive Vice President and CFO Rob Gorman with me today.

On the credit front, while we don't see any systemic credit quality issues working at the moment, we are assuming a normalizing uptick in our net charge off ratio of between 10, and 15 basis points in 2024, and five basis points in 2023.

They will also have other members of our executive management team with us for the question and answer period.

Please note that today's earnings release and the company's fly presentation we are going through on this webcast are available to download on our investor website, investors.manateebank.com. During today's call, we will comment on our financial performance using both GAAP metrics and non-GAAP financial metrics. Important information about these non-GAAP financial measures, including reconciliations to comparable GAAP measures, is included in the appendix for our slide presentation and in our earnings release for the fourth quarter of this year, 2023. We will make more forward-looking statements on today's call, which are not statements of historical fact and are subject to risks in the service. There can be no assurance that actual performance will not differ materially from any future expectation or results expressed or implied by these four forward-looking statements. We undertake no obligation to publicly revise or update any forward-looking statement.

Speaker Change: but I would reiterate that we do not see evidence of a turn in the threat environment at this point so this may end up being as conservative a function as it was in 2023.

But I would reiterate that we do not see evidence of a turn in the credit environment. At this point. So this may end up being a conservative assumption as it was in 2023.

Speaker Change: The Office of the Federal Office for the Loan Vouchers suggested to remain within a range of 95 to 100 basis points in 2025.

The allowance for credit losses to loan balances.

Projected to remain within a range of <unk> 95 to 100 basis points in 2024.

Speaker Change: So in summary, Atlantic Union delivered strong financial results in the fourth quarter and the full year of 2023, despite the challenging banking and operating environment we effectively managed through 2023.

So in summary, Atlantic Union delivered strong financial results in the fourth quarter and the full year of 2023, despite the challenging banking operating environment, we effectively managed through in 2023.

Speaker Change: As a result, we believe we are well positioned to continue to generate sustainable, profitable growth and to build long-term value for our shareholders in 2024 and beyond.

As a result, we believe we are well positioned to continue to generate sustainable profitable growth and to build long term value for our shareholders in 2024 and beyond.

Speaker Change: With that, I'll now turn it over to Bill Camino, who will entertain and take a few questions.

With that I'll now turn it over to Bill Smith, who entertain can take a few questions.

Bill Camino: Thanks, Rob. And Victor, we're ready for our first caller, please. Thank you. At this time, we'll conduct a question and answer session. As a reminder, to have a question, you must press star 1-1 on your telephone and wait for a name to be announced. To withdraw a question, please press star 1 again.

Thanks, Rob and Victor we're ready for our first caller. Please.

Please refer to our earnings release issue today and our other SEC filings for further discussion of the company's risk factors and other important information regarding our forward-looking statements, including factors that could cause actual results to differ from those expressed or implied in a forward-looking statement. All comments made during today's call are subject to the State Department statement, and at the end of the prepared remarks, you will take questions from the research analyst community. Now I'll turn it over to John Asbury.

And at this time, we will conduct a question and answer session. As a reminder to ask a question you want to press star one on your telephone and wait for name to be announced to withdraw. Your question. Please press star one again.

Yes.

Victor: Please stand by, we will compile the Q&A roster. One moment for our first question.

Hey, Sam bio with some part of the Q&A roster one moment for our first question.

Speaker Change: Our first question comes from Casey Whitman from Piper Sandler.

Our first question comes from the line of Casey Whitman from Piper Sandler Your line is open.

Casey Whitman: Good morning. Good morning.

Thank you, Bill. Good morning, everyone.

Hey, good morning.

Thank you for joining us today.

Hi.

Casey Whitman: So appreciate the standalone margin guide for next year and the assumptions that go into it. Can you maybe walk us through sort of the trajectory more specifically quarterly and sort of around, you know, what each cut does to the margin? Do you think you can still hold it in that 330, 340 range even if we do get more than three cuts? Or how should we think about it?

Looking back at 2023, it was a wild ride across the industry. Right out of the gate, we reached a tipping point in depositor behavior set off by the Fed's aggressive series of rate increases in 2022.

So I appreciate the the Standalone margin guide for next year and the assumptions that go into it can you maybe walk us through sort of the trajectory more specifically quarterly and sort of around what each cut does to the margin do you think you can still holding in that 333 point range, even if we do get more than <unk>.

This resulted in a surge of deposit movement from non-interest-bearing deposits into interest-bearing alternatives, and in turn, it guided a deposit rate rumpus that compressed net interest margins. As you know, four other 25 basis point rate increases eventually followed before the Fed paused. The high-profile, non-traditional bank failures in March initially shook depositor confidence in the American banking system and further intensified margin pressure. Thankfully, our deposit base remained sturdy, and we responded to the changing environment with actions that we believe will better position us to deliver long-term, sustainable shareholder value. Despite the year's disruptions, in the end, 2023 was a successful year for AUV, both financially and strategically, and we entered the new year with positive momentum. As a reminder, during 2023, we took three significant and proactive actions to respond to the ever-changing environment.

<unk> cuts or how should we think about it.

Speaker Change: Yeah, Keith, that's a good question. As I mentioned, we are assuming three-plus. We're kind of

Yes, that's a good question as I mentioned is we are assuming three cuts where kind of.

Speaker Change: taking those bets that they were worth related to the dot-plot reductions that they noted in the last meeting. So with that, basically what we think we'll be doing, what we'll be seeing is kind of a first and second quarter kind of seeing the low point on the margin, maybe getting down to, you know, the 325 range, give or take, and then start to see that build up as

Taking into a bad word.

Related to the dot plot reduction.

Reductions.

Noted in the <unk>.

Last meeting.

So with that basically what we think it will be doing will be seen as kind of a.

Versus second quarter kind of see.

The low point on the margin maybe getting down to the.

325 range give or take.

Speaker Change: And then start to see that buildup.

Speaker Change: our fifth-rate local authority of special needs branch hire, which we're all set.

As.

Our fixed rate loan portfolio starts to reprice higher.

Which will offset.

Speaker Change: The variable rate note

The variable rate.

Speaker Change: potential compression due to the Fed funds moving down starting in the second quarter.

Potential compression due to the fed funds moving down starting in the second quarter.

First, we quickly realized the need to adjust our structural expense base when deposit costs rose in Q1. Second, just nine months ago, during a Q1 23 earnings call, we said we would take meaningful expense actions and then did what we said we would do in the second quarter. We took out $17 million in structural expenses with nearly all expense savings complete by the end of Q2. On July 25th, we announced our entry into a merger agreement with American National Bank Shares, Inc., which has been well received across our markets. We have been hard at work on integration planning, and we are confident that we could achieve our estimated expense savings following the closings. As we have said before, the relationship between our two companies spans decades, and now more than ever, we believe that our mutual familiarity, complementary cultures, and the strategic rationale for the proposed transaction will position us well for success. Upon announcement, we stated that we expected to close sometime in the first quarter of 2024, and that remains our expectation.

Speaker Change: So, additionally, we also see deposit rates kind of stabilizing as well, coming out of the first quarter, and we'll be fairly aggressive on taking deposit rates down over the balance of the year, assuming the Fed does cut.

So.

Additionally, we also see deposit rates kind of.

Stabilizing as well coming out of the first.

First quarter.

And what would be fairly aggressive on taking.

Taking deposit rates down over the balance of the year, assuming the fed does cut.

Speaker Change: We have about $2.2 billion of high-cost CDs that are coming off the books over the first seven months of the year. We also have about $1.8 billion of deposits that are indexed to the Fed funds rate, so that will come down quickly alongside our vertical loan portfolio.

Yes.

$2 2 billion of.

Speaker Change: Of high cost Cds are coming off the books over the first seven months of the year. We also have.

One $8 billion of deposits that are indexed to the fed funds rate so that will come down quickly alongside.

Vertical three.

<unk> portfolio.

Speaker Change: So that's how we see it happening. It's coming down and kind of gradually increasing through the balance of the year. And that's how we get to the new 30 to 340 range that we're suggesting for the full year of 2024.

So that's how we see it happening is coming coming down and kind of gradually increasing through the balance of the year.

And Thats, how we get to the 330 to $3 40 range that were suggesting for the full year of.

We have received regulatory approval for the merger from our state regulator and are waiting on the federal reserve to conclude its review. Third, we repositioned our balance sheet in two separate transactions to seek to deliver better returns in the higher rate environment. The first involved the sale of available for sale securities early in the year, prior to the bank's failures, and the second occurred in the third quarter, when we paired a sale leaseback of certain owned properties with the restructuring of a portion of our securities portfolio in a capital mutual transaction. As previously discussed, we estimate this will add $0.06 to annual after-tax earnings per share, and we will have the full benefit of that in Q4-23.

<unk> 2024, now if there is more than.

Speaker Change: Three cuts, that will be negative towards our expectations from the negligence margin perspective, but if you believe the futures, Fed Fund futures, which says there's six cuts starting in March, our estimates are that we would see, you know, six to eight basis points further compression from what I'm, from that 330 to 340 range. So, bigger and more in the 320 to 330 range would be our guidance, if that were to happen.

Three cuts that will be.

Negative towards our expectations from a net interest margin perspective.

If you believe the futures Fed fund futures, which says six cuts starting in March.

Our estimates are that we would see.

6% to eight basis points.

Further compression from what Im from that 330 to $3 40 range. So maybe we're more in the $3 20 to 330 range would be.

Our guidance if that were to happen, but again, our baseline assumptions fee cuts.

Speaker Change: But again, our baseline assumption is because.

Speaker Change: for the year.

For the year.

Speaker Change: Okay, sorry, I don't know if I misheard or not, but did you say, you said 325 or 335 for first quarter, all else equal?

Okay, Alright, and then I don't know if I misheard or not but did you say you said, 325% to $3 35 for first quarter all else equal here.

I won't list every accomplishment in 23, but despite the industry's turmoil, we made excellent progress against our three-year strategic plan that we updated in 2022. The highlight of the year was our technology modernization effort as we renegotiated our core operating system contracts, improved our technology stack, and are now in the late stages of implementing an upgraded online and mobile banking offering with a change in platforms. The new platform will be phased in over the course of 2024 and will deliver highly competitive capabilities and an improved client experience all at lower cost, and that is a great combination.

Speaker Change: You should see it drop down to, you know, between 325 and 330 is what I suggest.

So you should see it drop down to between.

Between $3 25, and $3 <unk> suggest.

Projections are.

Speaker Change: Okay, and the six to eight basis points potential further compression if there's cut steps per cut or if there's all three?

Okay in the six to eight basis point potential further compressing cut that's per cut or if theres all three.

Speaker Change: Say that again? Sorry, the six to eight basis points of potential further compression. Yeah, that's on a four-year basis, so instead of the three-thirty to three-forty range, you could think of six to eight basis points off seven.

Say that again.

The six to eight basis points of potential further compression.

Yes, that's on a full year basis so.

So instead of the $3 30 to 340 range do you think of 60 basis points off that range.

Speaker Change: Okay, and are we prepared to give an update as to what American National Light

Okay and are we prepared to give an update as to what American national late.

Speaker Change: sort of add to that margin or?

So to add to that margin or.

Speaker Change: Well, you know...

Doing well.

We also continued to build depth throughout the organization as we matured our talent management process and enhanced our leadership team. All of these and more combine for a successful 2023 that will position us well for the future. We see our financial results in 2023 as another confirmation of the merit and durability of our long-term strategy of being a diversified, traditional, full-service bank that makes a positive difference in our markets.

Speaker Change: You know, it's going to be

It's going to be.

Speaker Change: but obviously we don't know exactly because obviously the deal has been closed and we haven't finished our loan marks and other purchase accounting adjustments but it will be favorable to that just based on the

But obviously, we don't know exactly because obviously the deal hasn't closed we haven't finished our loan marks and other purchase accounting adjustments.

But it will be favorable to that just based on the.

Speaker Change: You know, with the higher loan marks and the accretion that comes off of that, which means

Higher loan marks and the accretion that comes off of that.

Speaker Change: Thank you.

You should see that.

Speaker Change: Um,

Speaker Change: out of combined basis including increasing income to be much higher than that range I

On a combined basis, including accretion income to be much higher than that range I just mentioned.

Yes.

Speaker Change: At this point we don't have, you know.

Alright.

At this point, we don't have.

Speaker Change: We have some projections there, but I think

We have some projections, there, but I'd hate to.

With a strong brand and deep client relationships, we provide economically beneficial services and financing to help people and businesses.

Speaker Change: Not knowing what their rates are going, I don't know.

Not knowing what your rates are going I don't want to do it.

Speaker Change: So thank you.

Sort of a fine point on that.

Speaker Change: Thanks for taking my question.

Makes sense, thanks for taking my questions.

Speaker Change: Thank you, David and Victor. We're ready for our next call.

And Victor we are ready for our next caller. Please.

Speaker Change: Thank you. One moment for an extra sheet.

It's a straightforward business model that works and has stood the test of time over our 124-year history. That is why soundness, profitability, and growth in that order of priority remain our mantra. It informs how we run this company. We believe all that happened in 2023 is a proof point of why this philosophy is the right approach to running our bank. I'm going to comment on macroeconomic conditions and their results. For forecasting purposes, we remain cautious on the economic outlook, although it does seem a soft landing is possible. Inflation continues its improving trend despite some month-to-month volatility, and we believe we have seen the peak of short-term rates. The macroeconomic environment remains favorable in our footprint, and we're not expecting that to change in the near term.

One moment for our next question.

Speaker Change: and our next question comes from Catherine Mealor from KBW.

And our next question comes from the line of Catherine Mealor from <unk>. Your line is open.

Speaker Change: Good morning, Catherine. Thanks. Good morning. Rob, you mentioned the back book of your sixth grade loan repricing. Can you just give us...

Good morning Catherine.

Good morning.

Rob Stevenson.

That book of your fixed rate loan repricing.

Just give us.

Speaker Change: A little bit of color, maybe do you know the number of loans or the amount of loans that you expect to replace over the next year? And then can you also, I know that's a big positive for American National too, is to layer that in, any kind of color you can live on that as well.

A little bit of color maybe.

<unk> learned that the amount of loans that you expect to reprice over the next year and then can you also.

That's a big positive for American axle therapy rare that that any kind of color you can give on that as well.

Speaker Change: Yeah, I don't have specific numbers of loans and how that's repricing, but our fixed-rate portfolio is about a three-year duration, so you're seeing that repriced every day with renewing loans, and of course, new loans coming on are being priced higher. But in terms of the, I think the fixed-rate portfolio, at least on the commercial side, is in the five, five and a quarter range from the portfolio perspective, and that's repricing higher in the six and a half to seven percent range at the moment, based on where home rates are currently.

Yes, I don't have a specific <unk>.

<unk> numbers of loans and how that's re pricing, but our fixed rate portfolio is about a three year give or take duration. So youre seeing that reprice every day.

With renewing loans and of course, new loans coming on.

<unk>.

<unk> higher.

But in terms of the I think the fixed rate portfolio leased on a commercial side is in the $5.

As we've said for some time, our markets appear healthy. However, we have seen a slowdown in capital investment activity among certain parts of our client base in response to higher interest rates and economic uncertainty. Our lending pipelines reflect that and are down modestly from last quarter and from a year ago. They nevertheless imply we should expect a mid-single-digit loan growth in 2024 on a standalone basis. Virginia's last reported unemployment rate picked up slightly to a still very low 2.9% in November and, as usual, remains below the national average, which was 3.7% during the same period. We do not anticipate any maturely negative near-term shift away from these low unemployment trends, and it generally is a non-credit environment, but as always, we continue to closely monitor the health of our markets.

At the moment.

Based on where rates.

Rates are.

Currently.

Speaker Change: in the market.

In the market.

Speaker Change: So that's part of our expectation is that even though that may reduce rates in the short term...

So.

So that's part of our expectation is that.

Even though that may reduce rates in the short.

Speaker Change: Short-term rates will come down, that will drive down the variable rate yields, but we'll be repricing these fixed rate loans and that shouldn't help us.

Thanks.

Short term rates will come down.

We will have some that will drive down the variable rate yields but.

B repricing these fixed rate loans and that should help offset.

Speaker Change: at least some of that drag on the shortage comes down.

At least some of that down that drag on it.

Short rates coming down.

Speaker Change: As for American National, yeah, he knows.

As for American Nashville, Yes, you know.

Speaker Change: about 80% of their loan book is fixed rate, has an average duration of about three years. So we're seeing, we fully expect to see that repricing happen fairly quickly.

About 80% of their loan book is fixed rate.

As an average duration of about three years, so we're seeing.

Given the ongoing investor focus on non-owner-occupied commercial real estate, and more specifically office exposure, I'll reiterate what I've said for the last three quarters. Commercial real estate finance is a historic strength of our company, and if an asset class has performed well in our markets over time, it has not traditionally been prone to boom and bust cycles. We stick to our knitting and generally deal with local and regional developers and operators that we know well and who have a track record with us. We've included non-owner-occupied office exposure detail in the appendix to our earnings presentation. And as a reminder, we don't finance large, high-rise, or major metropolitan central business district office buildings, and we have no commercial real estate exposure in the District of Columbia. The portfolio is performing well. It's geographically diverse, granular, and modest in size at about 5% of our total loan exposure at year-end.

We fully expect to see that repricing happened fairly quickly.

Speaker Change: We're going to have accretion income because we're marking that book, but that accretion income should flow back into core margin or core yields as repricing happens.

We're going to have accretion income because we're marking that book.

That accretion income should flow back into core margin or core yields as repricing happens.

Speaker Change: over that period.

Over that period of time.

Speaker Change: You mentioned the fixed rate loan book is going from $525,000.

And you mentioned the fixed rate loan book is going from 595.

Speaker Change: to, you know, six and a half to seven percent on new production. What does that look like for the whole portfolio, just including some of the, you know, C&I, higher rate variable loans?

It takes 5% to 7% on new production, what does that look like for the whole portfolio, including some of the C&I hiring variable loan.

Speaker Change: Yeah, so as you saw, our portfolio was reported as a 5.97%

Yes, so as you saw in our portfolios reporting is a $5 97.

Speaker Change: Moanier, Total Portfolio. We're seeing that, if you look at repricing, we're more in the 7.5, 7.5 range, 7.25, 7.5.

Loan yield total portfolio, we're seeing that.

Look at repricing were more in the 757.

Seven five range seven quarter, seven and a half range.

We proactively monitor this portfolio, and we don't see any systemic concerns in the office book currently. While we may see some degree of problems in the portfolio over time, we currently expect them to be readily manageable. Turning now to quarterly results, we remain focused on generating positive operating leverage, that is, growing our revenue faster than our expenses. Here are a few financial highlights for the fourth quarter and for the full year of 2023, which Rob will detail next. On a year-over-year basis for 2023, we generated positive adjusted operating leverage of approximately 1%, as adjusted revenue growth was up approximately 2.8%, while adjusted operating non-interest expenses increased approximately 1.8%.

Speaker Change: um, the, uh, the

B.

Speaker Change: The Variable Race Book is, you know,

The variable rate book as you know.

Speaker Change: will be placing in the high sevens and even the eights.

Repricing in the high Sevens and even the eights.

Speaker Change: That's it.

At this point.

Okay great.

Speaker Change: And then talking about your guide for loan growth is a little bit higher than your deposit growth. Can you just talk about the general strategies and deposit growth for this year?

And then talking.

Talking about your guide for loan growth is a little bit higher than your deposit growth can you talk about some general.

Is it kind of strategies and deposit Greg fragrance here.

Speaker Change: and what you envision in terms of mix change as we look to the year. It feels like that's getting better and kind of moderating, but I assume a lot of the growth still is going to come out of CDs and higher priced deposit books. I'm just kind of curious how you think about when that happens as we get to the end of the year.

And what you envision in terms of mix change as we work through the answer, but that's getting better and kind of moderating, but I assume lazar, Greg we're going to come in kind of an even higher priced deposits on could you just kind of curious how you think about remix happens.

Speaker Change: Yes, so Catherine, on that front, we're really not projecting a big, you know, we've seen pretty large change in the mission.

Yes, Kathryn on that front were really not projecting a big.

We've seen we've seen pretty large change in the mix this year.

I also would like to point out that pre-tax, pre-provision adjusted operating earnings increased 5% year-over-year. Total deposits increased 5.6% year-over-year. Average deposit balances for Q4 increased $318 million, or approximately 7.5% from the prior quarter.

Speaker Change: You know, primarily money's coming out of non-issue sparing, going into your money market.

Primarily what is coming out of noninterest bearing going into money market and Cds, we've seen a lot of growth in the CD book as well as the money market side, we're now projecting that theres going to be.

Speaker Change: and CDs. We've seen a lot of growth in the CD books as well.

Speaker Change: We're not projecting that there's going to be a major shift in the current mix we're seeing. We think not as a scary...

Major shifts in the current mix, we're seeing we think noninterest bearing which we.

Speaker Change: We're at 24% this quarter.

We're 24% this quarter, we're kind of projecting that's in the 22% to 24% range as we go forward this year.

Speaker Change: kind of projecting you know that's in the 22 or 24 percent range as we go forward this year. We also think

As we've seen before, we did have a seasonal dip in deposits at year-end, but we're now seeing a normal rebuilding underway, and we're off to a very good start for Q1-24.

We also think.

Speaker Change: Um

Speaker Change: from a deposit data perspective as rates come down we'll be re-pricing that money market book and CDs are maturing. As I mentioned

From a deposit beta perspective as rates come down.

We'll be repricing.

The remixing of non-interest-bearing deposits to interest-bearing deposits slowed during the fourth quarter, as expected, and we saw good growth in money markets and customer CDs. Quarter-end non-interest-bearing deposits were 24%, approximately, of total deposits, down from 25% in the prior quarter. We believe non-existing deposit remixing is stabilizing, but it's not quite yet over. We posted annualized loan growth of 9.1% during the seasonally high fourth quarter compared to the prior quarter, which was better than expected and led by growth in commercial loans. For the full year, loan growth was 8.2% point-to-point and averaged 9.3%.

That money market book and on Cds are maturing as I mentioned.

Speaker Change: Oh, really?

Speaker Change: Majority of our CD book is replacing or returning over the first seven months of this year, 2.2 billion. So, you know, we're...

The majority of our CD book is repricing or maturing over the first seven months of this year $2 2 billion, so depending on where.

Speaker Change: should be able to see some decline there.

Rates go.

Should be able to see some dip.

A decline there.

Speaker Change: Thank you for watching.

Speaker Change: So with that I think

So with that I think.

Speaker Change: Again, not looking for major shifts in deposit mix, but you're right, net growth will come into more of the interest-bearing deposits.

Again, not looking for major shifts in.

And deposit mix.

But you're right.

Net growth will come into more of the interest bearing deposits and I would add that.

Speaker Change: Yeah, and I would add that, you know, over the long haul, we do think of deposit growth as being a limiting factor for loan growth, but we're not contemplating excessive loan growth. One thing I'm proud of at Atlantic Union Bank is we pretty consistently grow net consumer households, which is not by very rapid amount, but we tend to end up every quarter with more consumer households than we did the month before. And we are focused on, you know, as always, expanding our business depository and treasury management offerings. We've seen good work there. Don't forget, American National Bank would have a lower loan deposit ratio than we do. We bring a lot of things to the table that are going to augment their efforts to go after commercial and industrial clients, including deposit and treasury management intensive clients, because we have some things that they don't currently offer. And I guess fundamentally, Kat, we are off to a good start. Remember, look at the difference between average deposit growth in Q4 and point-to-point. It's pretty notable because we have consistently seen this big drop at year-end. It wasn't as dramatic as we saw last year, but we're off to a very good start in Q1. So I think it's all pretty achievable. A point we've made before as well is we actually don't have to, while we would like to, we don't have to fund loan growth 100% out of pocket. We do have deposit growth because we do have cash being thrown off the securities portfolio. We're liquidating the indirect auto portfolios. But to be clear, we would like to match loan growth with deposit growth. So I think we'll be okay there.

Over the long haul, we do think of deposit growth as being eliminating factor for longer, but we're not contemplating access of longer.

One thing I am proud of Atlantic Union Bank is we pretty consistently grow net consumer households.

Which is not by very rapid amount, but we tend to end up every quarter with more consumer households, when we did the month before.

Construction loan balances were down from the third quarter as projects completed and were recategorized as non-owner-occupied commercial real estate, but they still ended up higher than the prior year.

And we're focused on yes.

As always expanding our business depository and Treasury management offerings. We've seen good growth there don't forget American National Bank would have a lower loan to deposit ratio that we do we bring a lot of things to the table that are going to augment their efforts to go after commercial and industrial clients, including deposit and Treasury management intensive.

As I mentioned earlier, we expect to be in the mid-single-digit loan growth range for Loan Self-Investment in 2024 on a standalone basis. At this time, our confidence is high that we'll remain in a growth mood for 2024.

She and I line utilization this quarter was up modestly from the prior quarter as well as from the prior year's fourth quarter. Loan production in the fourth quarter was relatively balanced between existing clients and new to bank clients. It was also relatively balanced between commercial and industrial and commercial real estate plus construction. Commercial real estate payoffs declined year over year, but they increased slightly from the third quarter, which we interpret as a good sign that the rental market is still healthy in our area. Credit was again a good story, and we recorded annualized net charge-offs of three basis points for the fourth quarter, up from one basis point in the third quarter. For the full year, we finished hitting the press at five basis points in their turnoffs.

Clients, because we have some things that they don't currently offer.

And I guess fundamentally Catherine we feel pretty good about it we are off to a good start remember look at the difference between average deposit growth in Q4 and point to point, it's pretty notable because we have consistently seen this big drop at year end. It wasn't as dramatic as we saw last year, but we're off to a very good start in Q1.

So I think it's all pretty achievable point, we've made before as well as you know we actually don't while we would like to we don't have to fund loan growth, 100% by deposit growth because we do have cash being thrown off the securities portfolio were liquidating the indirect auto portfolio, but to be clear, we would like to match.

<unk>.

Loan growth with deposit growth. So I think we'll be okay. There.

Okay, great very helpful. Thank you.

Speaker Change: How great, very helpful, thank you.

Speaker Change: Thanks, Debra. And Debra, we're ready for our next call, okay? Thank you. One moment for our next question.

Thanks, Catherine and Victor we're ready for our next caller. Please. Thank you one moment for our next question.

We expect that asset quality will eventually normalize following a very long run of minimal net charge-offs, but we still see no evidence of an inflection point coming or having occurred. Having said that, run-off credit losses do happen from time to time, as we saw in the first quarter of last year. That's normal and to be expected. Regardless, we remain competent and are pleased with our assets. In sum, we thought this was a strong and fundamentally sound year for Attic Union against an industry backdrop that was, this time, dramatic.

Speaker Change: Our next question comes from Steve Moss from Raymond James. Ryan is up.

Our next question comes from the line of Steve Moss from Raymond James Your line is open.

Stephen M. Moss: Thank you. Good morning.

Steve.

Good morning.

Stephen M. Moss: Just follow up on loan growth here. Just curious where you're seeing the drivers of underlying C&I growth here and the multifamily growth that we saw this quarter.

Just following up on loan growth here just curious.

Where youre seeing the drivers of underlying C&I growth here.

And the multifamily growth that we saw this quarter.

Stephen M. Moss: Where it's coming from?

Where it's coming from.

David: I'm going to ask David Green, who leads our commercial banking efforts, who's with us. So, David, what's your perspective on drivers of, I guess, theory and commercial loan growth?

I'm going to ask David Ring, who leads our commercial banking efforts is with us So Dave what's your perspective on drivers of I guess, CRE and commercial loan growth.

We continue to demonstrate we will take the necessary strategic actions to successfully navigate the challenges we face in this uncertain economic environment and that we do what we say we will do. We expect uncertainty to continue for some time, especially given geopolitical events, but for the time being, we remain cautiously optimistic in our outlook.

David Jason Bishop: Yes, so you asked specifically about multifamily. You know, that is one of the categories that we continue to grow. We've shrunk the number.

Yes so.

You asked specifically about multifamily.

That is one of the categories that we continue to grow we've shrunk.

David Jason Bishop: The categories, the asset classes we do want to grow in real estate, so it's kind of, as we grow, we're growing real estate, NC&I, at similar loan growth.

<unk>.

The categories the asset classes, we do want to grow and in real estate. So it's kind of as we grow we're growing real estate and C&I at similar.

Loan growth numbers so.

David Jason Bishop: There's so

As usual, with uncertainty comes opportunity, which we believe we are well positioned to capitalize on.

David Jason Bishop: on the C&I side.

On the C&I side.

David Jason Bishop: we're seeing growth in every region except we're slowing down in the western side of Virginia and that's why we're very excited about the additional

We're seeing growth in every region.

The Latin Union is a uniquely valuable franchise that is a diversified, traditional, full-service bank with a strong brand and deep client relationships in stable and attractive markets. It should soon be even more so with the addition of American National Bank to the AUD family. We remain on a solid footing, resilient, and expect a good start to the year.

Except where a slowing down in the western side of Virginia, and that's why we're very excited about the addition of the American National team there because we had a much smaller team on the west side, Yes, we are urging a source. So we're under resource there. So on the C&I side, we're seeing.

David Jason Bishop: We had a much smaller team on the west side, we were under resourced there, so on the C&I

Speaker Change: Thank you for joining us.

I'll now turn the call over to Ron to cover the financial results for the quarter. Thank you, John, and good morning, everyone.

C&I pipelines grow faster than the real estate pipelines, we're seeing it grow in every region and then when you look at our specialty businesses, they're really adding to the equation because government contractor asset based lending those are C&I growth.

Speaker Change: Contractor, S.S.

Speaker Change: Those are C&I.

Please note that for the most part, my commentary will focus on managing the fourth quarter financial results on a non-GAAP, adjusted operating basis, which excludes the following pre-tax items: gains of $1.9 million in the fourth quarter and $27.7 million in the third quarter related to sale-leaseback transactions. The net loss on sales of securities of $27.6 million reported in the third quarter, and the $3.4 million FDIC special assessment expense recognized in the fourth quarter. The $3.3 million legal reserve related to our previously disclosed settlement with the CFPB in the fourth quarter. Mercurial costs of $1 million in the fourth quarter and $2 million in the third quarter associated with our pending merger with American National, and expenses of $8.7 million associated with our strategic cost savings initiatives recorded in the third quarter.

Speaker Change: are growth engines for us, and they're doing quite well.

Growth engines for us and they're doing quite well.

Speaker Change: So it's pretty well diversified.

So, it's pretty well diversified with refineries.

Speaker Change: That's helpful.

Okay.

Helpful.

Speaker Change: And then just on the end sales that occurred this quarter, you know, two or more commercial real estate, just curious, you know, did they hit maturity walls? You know, what types of properties they are? And any incremental call you guys?

Okay, and then just on the <unk>.

Npls that occurred this quarter to a more commercial real estate just curious did they hit maturity wall what types of properties. They are.

Any incremental color you guys can give.

Speaker Change: Yeah, one was commercial real estate, one was commercial industrial. Doug Lilley is here. Doug, I know we had some unique circumstances. Do you want to speak to that? Yeah. Steve, thanks for the question. One of them was, I'll call it a fascinating situation. Partner dispute. It is non-owner-occupied, but it does have owner-occupied tenants owned by the partners.

Yes, one was commercial real estate, one was commercial and industrial that Willie is here, Doug I know, we had some unique circumstances do you want to speak to that.

Steve Thanks for the question.

One of them was.

I'll call it a fascinating situation partner dispute.

It is non owner occupied but it does have.

Owner occupied tenants.

And by the partners and they got into a dispute they put the borrower in bankruptcy and one of the two declared bankruptcy.

Doug Lilley: And they got into a dispute. They put the borrower in bankruptcy. One of the two declared bankruptcy. And we're just kind of working through that mess. So, you know, we took a specific reserve to buy time. The others, I'm afraid, were trying to assess the, you know, the actual value of it and whatnot. The other one was a distributor to retailers, seasonal. And I guess it's safe to say they had difficulty adjusting to the post-COVID world where their business accelerated because of everyone being at home. And now sales and whatnot have dropped, expenses up. So, anyway, we're working through that with them. I think that if you're looking to define what is an idiosyncratic credit. If you look like these are two good examples, they're not reflective of anything else.

And we're just kind of working through that mess.

So we took a specific reserve to buy time, we haven't been on the players that were trying to assess.

In the fourth quarter, it reported that income available to common shareholders was $53.9 million, and earnings per common share was $0.72.

The actual value of and whatnot. The other one was.

A distributor to retailers seasonal.

For the full year 2023, reported net income available to common shareholders was $190 million, and earnings per common share was $2.53. Adjusted operating earnings available to common shareholders were $58.9 million, or $0.78 per common share for the fourth quarter, and were $221 million, or $2.95 per common share for the full year 2024. The adjusted operating return on tangible common equity was 18.2% in the fourth quarter and 17.2% for the full year. The adjusted operating return on assets was 1.18% in the fourth quarter and 1.14% for the full year. And on an adjusted operating basis, the efficiency ratio was 52.9% in the fourth quarter and 54.2% for the full year of 23. The total loss of credit losses, or the percentage of total loans held for investment, increased three basis points to 95 basis points at the end of the fourth quarter as compared to the third quarter. The revenue for credit losses of $8.7 million in the fourth quarter was up from $5 million in the prior quarter. Net charge losses increased to $1.2 million with three basis points annualized in the fourth quarter, up from $294,000 with one basis point annualized in the third quarter.

Speaker Change: And I guess, it's safe to say they had difficulty adjusting to the post COVID-19 world, where their business accelerated because of everyone being at home and now.

Sales and whatnot, a drop expenses upset anyway, we're working through that with them I think that if youre looking to define what is an idiosyncratic credit issue look like these are two good examples they are not reflective of anything else that we're seeing.

Doug Lilley: Okay.

Okay.

Speaker Change: That's helpful.

Helpful and then.

Speaker Change: In terms of just American Nationals here, John, you know, you're waiting on the Fed. Just curious, you know,

In terms of just American national here.

John Youre right on the spend just curious.

Sure.

John C. Asbury: seems like with the state approval should be more of a formality but you know how do you think about a timeline to close here and you know are you having to have more active discussions with the Fed or just kind of any point you can give there?

It seems like what the state approval should be more of a formality, but how are you thinking about the timeline to close here.

And are you having to have more active discussions with a better just kind of any color you can give there.

Speaker Change: I would say, as I indicated in my comments, when we announced the merger on July 25th, we said we expected to close in Q124, that remains our expectation. Everything is proceeding normally, and I have no reason to think we will not hit the expected timeline. It just simply takes longer. We've been looking at lots of data, and it's frankly averaging five and sometimes six months. This is about as clean and straight-up a deal as you can imagine. So it's a straight-up combination. We respect that the Fed needs to do their work. They're going through their process. Everything is functioning normally. It just takes longer than it used to, and that's where we are.

Yes.

I would say is as I indicated in my comments, when we announced the merger on July 20, <unk>. We said we expected to close in Q1 24 that remains our expectation everything is proceeding normally.

And I have no reason to.

So I think we will not hit the expected timeline. It just simply takes longer and we've been looking at lots of data and it's frankly, averaging $5. Six months. This is about as clean and straight up a deal as you can imagine so it is a it's a straight up combination we respect.

With the fed needs to do their work, they're going through their process everything is functioning functioning normally.

For the full year, the net charge loss ratio was five basis points annualized in the fourth quarter. Now turning to the pre-tax, pre-provision components of the income statement for the fourth quarter, tax equivalent and editor's income was $157.3 million, which was an increase of $1.5 million from the third quarter, driven by higher yields on both available for sale securities and the loan portfolio, as well as growth in average loan health for investment, partially offset by the impact of higher deposit costs, driven by continued competition for deposits, while this changes deposit myths as depositor The fourth quarter tax equivalent net interest margin was 3.34%, which was a net decrease of one basic point from the previous quarter due to an increase of 20 basic points in the yield on earning assets, driven primarily by increases in loan and security investment yields, as well as favorable changes in earning asset mix and higher investment tax yields, which was more than offset by a 21 basic point increase in our cost of funds.

It just takes longer than it used to do in <unk>.

That's where we are.

Speaker Change: Okay, great. Appreciate all the callers. Thank you very much. Thank you, Steve. And Victor, we're ready for our next caller, please. Thank you. One moment for our next question.

Okay great.

Great all the color. Thank you very much. Thank you, Steve and Victor we're ready for our next caller fleet.

One moment for our next question.

Speaker Change: Our next question comes from Russell Gunther from Stevens. Your line is open. Hi, Russell.

Our next question comes from the line of Russell Gunther from Stephens. Your line is open Hi, Russell Good morning, Hey, John Good morning, everybody.

Russell Gunther: Hey John, good morning everybody. Just a couple of thoughts on the margins to start please. First being, you guys gave us the deposit data piece on the way up. I was just hoping to get some...

Just a couple of follow ups under margin discard premiums.

Being you guys gave us the deposit beta peaks on the way up.

Just hoping to get some.

Russell Gunther: Guidance around what you think the peak cumulative beta will be on the way down. What's embedded in those three cuts that you guys are guiding?

Guidance around what you think the peak cumulative beta will be on the way down what's embedded in those three cuts that you guys are guiding to.

Speaker Change: Yeah, Russell, on that front, you know, looking at the three cuts, we're looking at a...

Yes, Russell on upfront.

Looking at the three cuts we're looking at.

Speaker Change: Look, I hear and

By year end.

Speaker Change: with these cuts come in about a 20%.

With these cuts come in about a 20%.

Speaker Change: Ada on the downside for this year.

Data on the downside.

For this year.

Speaker Change: and so the next year assuming rates continue to go down.

Continue into the next year, assuming rates continue to go down but.

Speaker Change: That's our working assumption right now, 20%.

That's our that's our working assumption right now 20%.

Speaker Change: Okay, that's good. And then the range of $330 to $340, could you just talk through what would get you towards the high end?

Okay, that's great.

The range of $3 30 to $3 40, and could you just talk through what would get you towards the high end.

Speaker Change: Yeah, from that...

Yeah from that.

Speaker Change: To answer that question, it's basically going to be on how quickly can we bring down deposit rates. We think there'll be the Fed will cut, there'll be a bit of a lag in terms of the ability to reduce

So to answer that question is basically going to be on how quickly can we bring down the.

The loan four-quarter yield increased 13 basis points to 5.97% in the fourth quarter from 5.84% in the third quarter, which added approximately 11 basis points to the net interest margin. The increase was primarily due to the impact of four quarters' impact on variable rate loan yields from the Federal Reserve's last rate increase in July, as well as the impact of higher market interest rates on new loan production yields, as well as on renewing loans. Period portfolio yield increased by 38 basis points to 3.80% in the fourth quarter from 3.42% in the third quarter, which added four basis points to the net interest margin. The increase was primarily due to the impact of the securities portfolio repositioning done in September. In addition, the favorable OEF mixed shift towards higher yielding loans and higher yields on adjusted cash contributed an additional five days to the fourth quarter's net interest margin.

Deposit rates.

Think there'll be.

The fed will cut there'll be a bit of a lag.

In terms of the ability to reduce.

Speaker Change: The Deposit Rates um

The deposit rates.

Speaker Change: So more of, you know, let's see, the second cut and the third cut is primarily when we think we can really start reducing those towards the second half of the year.

So more of let's see the second.

And the third cut.

Primarily when we think we can really start reducing those towards the second half of the year.

Speaker Change: But it's all going to be dependent on, you know, the competition for deposits and clients.

But it's all going to be dependent on the competition for deposits and client.

Speaker Change: response if you will and we'll wrap it we'll wrap them down we won't you know

Response, if you will and we'll reach it.

Down we won't.

Speaker Change: go from here to the end point very quickly. So that's probably the biggest driver there.

You could go from here to the endpoint.

Very quickly so.

Probably the biggest driver there.

Speaker Change: Yeah, that makes sense. And then just switching gears for a second, on the expense side of things, so appreciate the four-year core guide, how does the fourth quarter shape up from a run rate perspective? Is there anything in there, you know, plus or minus, that stands out that normalizes, or is this a decent run rate?

Okay. It makes sense.

And then just switching gears for a second on the expense side of things. So I appreciate the full year core guide.

How does the fourth quarter shape up from a run rate perspective is there anything in there.

Plus or minus that stands out that normalizes or is this a decent run rate to think about.

The 21 basis point increase in the fourth quarter's cost of funds for 2.25% was primarily due to the 26 basis point increase in the cost of deposits for 2.23%. This had an approximately 25 basis point negative impact on the fourth quarter's net interest margin, partially offset by the four basis point positive impact of lower borrowing costs. The deposit cost increase is primarily driven by changes in deposit mix as deposits are migrated to higher costing interest-bearing deposit accounts during the quarter. Additionally, interest-bearing deposit rates increased as a result of higher overall market rates and a competitive deposit pricing environment. Adjusted operating non-interest income, which exceeds gains and losses on sales of securities and gains on sale leaseback transactions recorded in the third and fourth quarters, increased $1.1 million to $28.1 million from the prior quarter.

Speaker Change: Can you talk about this, the current fourth quarter, 23?

Hey, you're talking about this the current fourth quarter of 'twenty three.

Speaker Change: Yeah, there's a couple of items, but I, you know, I'll start with, uh,

Yes couple of items, but probably was.

Speaker Change: I was trying to say, you know, it might be in, call it the million dollar range.

So I would say it might be in call it the $1 million range.

Speaker Change: in the fourth quarter with how the state unlikely to particularly recur.

In the fourth quarter that would kind of let's say.

Likely to continue to recur.

Speaker Change: So, that's about the number that I said I found. That's how it does. You're referencing operating.

That's about the number of that.

That's out of the Youre referencing operating expenses, yes, yes, yes.

Speaker Change: We also, frankly, have a bit of a sprint underway in the company as we get ready. We're working on integration, clearly. If we approach conversion, there's only so much other things you can get done, so there's going to be a premium on getting other things done under the wire, if that makes sense.

Okay got you.

<unk> taken out at SCE and the other items.

Just kind of some things that came through and there is one way to address yeah. We also frankly have a bit of a sprint underway in the company as we get ready we're working on integration clearly.

We approach conversion there is only so much other things you can get done so theres been a premium on getting other things done under the wire if that makes sense.

Speaker Change: Yeah, I'd say it's, you know, a lot of depth in there.

Yes, so I would say, it's a lot of deaths in the strategic.

Speaker Change: Thank you.

Speaker Change: Achieving Investments, that's talked about from the professional piece.

Strategic investments that we're talking about from the professional fees line.

Speaker Change: and Dr. Robert.

The other things.

Robert: I appreciate it. Thank you guys. I mean, I guess with you guys still expecting to close this quarter, any change to timing of the conversion or that should be on track if the meal stays on track?

I appreciate it. Thank you guys and then I guess what are you guys still expecting deal closed this quarter any change to timing of the conversion or that should be on track assuming deal stays on track. We are on track for a conversion based on what we know right now and we are working through it every day.

It was driven by an $893,000 increase in loan-related interest rate swap fees due to several new swap transactions, a $679,000 increase in loan syndication revenue, as well as quarterly increases across most other fee revenue categories, with the exception of an $843,000 decline in other service charges, commissions, and fees, primarily due to a merchant-vendor contract signing bonus reported in the prior quarter. Report A-9 is this expense decrease to approximately $600,000 to $107.9 million for the fourth quarter. Adjusted Operating Amounts of Expense, which excludes the amortization of intangible assets in the third and fourth quarters. The FDIC has a special assessment in the fourth quarter. The Legal Reserve associated with our previously disclosed settlement with the CFPB in the fourth quarter. Merger-related costs associated with our pending merger with American National in the third and fourth quarters. And expenses associated with strategic cost-stated initiatives in the third quarter. Expenses increased $2.5 million to $98.2 million for the quarter. For the quarter, from $95.7 million in the prior quarter. Primarily due to a $1.2 million increase in other expenses. Protecting the increase in memorial and credit-related expenses. Higher teammate training and travel expenses. And annual debit card

Robert: We are on track for conversion based on what we know right now, and we are working to it every day.

Speaker Change: Got it. All right. And then just one last one, John, for you. You mentioned in prepared remarks willingness to take strategic actions to navigate the current environment. Certainly took a number of them in 2023. As you think about this year ahead, any big picture thoughts?

Got it alright.

And then just one last one John for you you mentioned in prepared remarks or willingness to take strategic actions to navigate the current environment certainly.

It took a number of them in 2023 as you as you're thinking about this year ahead.

Any big picture thoughts.

John C. Asbury: Well, I think that obviously we have to deliver the organic performance and potential of the franchise as always.

Well I think that.

Obviously, we have to deliver the organic performance and potential of the franchise as always.

John C. Asbury: I think the big thing is obviously ensuring that we have a successful integration of the American National Bank and that's kind of the big, you know, sort of overarching thing.

I think the big thing is obviously, ensuring that we have a successful integration of American National Bank, and that's kind of the big sort of overarching theme.

John C. Asbury: Those are the two big things that are on our mind.

So those are the those are the two big things that are on our mind.

John C. Asbury: which doesn't mean we don't take three steps ahead. We, in fact, do, but we'll talk about that later. Three big priorities, organic performance of the bank, transformation.

Which doesn't mean, we don't think three steps ahead, we in fact do but we'll talk about that later.

Three big priorities organic performance of the bank transformation.

John C. Asbury: activities and technology and then your strategic initiatives which by definition this year means American National Bank being successfully integrated so we can reach its focal point.

Activities in technology, and then strategic initiatives, which by definition. This year means that the national Bank and successfully integrated so we can reach its full potential.

Yeah.

Speaker Change: Understood. Okay, great. Thank you guys for taking my question.

Understood. Okay, great. Thank you guys for taking my question.

Speaker Change: Thank you very much.

Thanks, So thank you very much and Victor we have time for one last caller. Please.

Speaker Change: Thank you. One moment for our last question.

Thank you one moment for our last question.

Speaker Change: And our last question comes line up. David Bishop from Hope Group. Your line is open. Hi, David.

And our last question comes from the line of David Bishop from Hovde Group. Your line is open.

David David.

David Jason Bishop: Hey, quick question for you, Rob. I don't know if you have this handy, but do you have the end-of-period average interest-bearing deposit cost?

Alright.

Plastic inventory purchases. In addition, a $1.1 million increase in professional services and expenses, primarily for strategic initiatives in the fourth quarter and higher legal fees, were encouraged. Additionally, a $799,000 increase in marketing and advertising expenses, primarily due to annual customer disclosure mailings during the quarter. And a $591,000 increase in occupancy expenses, which was driven by the increased lease payments related to the fair leaseback transactions executed in the third quarter. These increases are partially outstripped by a $763,000 decrease in salaries and benefits, which reflects the impact of headcount reductions from our strategic cost-dating initiatives executed in the second and third quarters. At period end, loans held for investment netted deferred fees and costs were $15.6 billion, which was an increase of $351 million, with 9.1% annualized from the prior quarter, driven by increases in commercial loan balances of $363 million, or 11.1% in the quarter annualized, partially offset by declines in consumer loan balances of $11.9 million, or 2% annualized.

Hey quick question for you.

Rob I don't have haven't handy, but did.

Did you have.

End of period average interest bearing deposit costs versus the average for the period. Just curious if there was much difference there yeah, yeah on interest bearing deposits. If you look at the month of December is two.

Robert Michael Gorman: The average for the year, the period, I'm just curious if there's much difference there. Yeah, yeah, interest-bearing deposits, if you look at the month of December, it was $2.97, 2.97%. First of the fourth quarter average was $2.92. So, as I said, we continue to see some uptick in deposit costs, you know, driven by the...

$2, 97% to 97%.

Versus the fourth quarter average was 292, so as I said.

We need to see some uptick in deposit costs.

Youll driven by the.

Robert Michael Gorman: I think that we mentioned in the call in Amos

Items that we mentioned in the call in this in the script.

Robert Michael Gorman: Scripps

Script.

Speaker Change: Did you see much movement in market rates by competition inter-quarter? Just curious what you saw from some of your bigger peers out there within the market, if there was much movement up or down.

Did you see much movement in market rates by competition intra.

Intra quarter, just curious what you saw from some of your bigger peers out there within the market. If there was much movement up or down.

Speaker Change: Yeah, there really hasn't been a lot of movement.

Yes, there really hasnt been a lot of <unk>.

Movements.

Speaker Change: I'd say, you know, from mid-year to now, we are seeing the fact, you know,

Let's say.

From mid year or two.

So now.

We are seeing a bit.

Speaker Change: Folks going more towards a shorter, when you look at CD specials, more of a shorter duration, you know, six to seven weeks out of seven months.

Folks going more towards a shorter when you look at CD specials or have a shorter duration.

Seven seven months.

Speaker Change: So there's been a...

So theres been a.

Speaker Change: Reduction of kind of longer duration CDs and coming back with specials on a shorter end. We have seen a bit of movement in money market rates as well. Some of the larger players, like Truitt, have been...

Reduction of kind of longer duration Cds and coming back with specials on the shorter end.

We have seen a bit of movement in money market rates as well.

Some of the larger players like <unk>, who have increased.

Speaker Change: Their promotional morning market is a bit during the quarter, but not materially or anything to really concern ourselves with in terms of having to match that, although we keep a close eye on it. Again, the big guys are all making pretty clear commentary that as rates come down, they intend to bring down deposit rates. We'll see if that plays out.

Their promotional money markets a bit during the quarter, but not not materially free pizza.

Abby, loans increased 6.7% from the prior quarter, and for the full year, loans increased 8.2%. At the end of December, total deposits stood at $16.8 billion, which was an increase of $32 million, or approximately 1% annualized from the prior quarter, while average deposits increased 7.5% annualized from the prior quarter. Their four-year total deposits increased 5.6%. Therefore, deposits increased from the prior quarter to the same period in the prior year, primarily due to increases in interest-bearing customer deposits and broker deposits, partially offset by declines in demand-deposit balances. At the end of the fourth quarter, Atlantic Union Bank shares and its regulatory capital issues were well above well-capitalized levels. In addition, on an adjusted basis, we remain well-capitalized as of the end of the fourth quarter if you include the negative impact of AOCI and health maturity securities' unrealized losses in the cancellation of the regulatory capital ratio.

<unk> really concern ourselves with in terms of having to match that although we keep a close eye on the big guys are all making pretty clear commentary that as rates come down they intend to bring down deposit rates CFC if that plays out.

Speaker Change: Got it. That's one follow-up. I think, Rob, you mentioned, or John, some seasonality on the deposit side of this quarter. Any way the ring sends that from a dollar perspective?

Got it and then one follow up I think Rob you mentioned or Johnson seasonality.

On the deposit side this quarter any way to ring fence that from a dollar perspective.

Speaker Change: Thanks for watching!

Speaker Change: Yeah, I want to say, I would say, you know, call it two to three hundred million dollars is probably, when you look at it point to point, especially if you look at it from an average point of view, the average is probably a better, especially a pretty good way to think about it. I would agree with that, and you typically see it in the second half of December, and it comes out of, you know, government contractors, for example, professional practices, anyone on cash basis accounting, they tend to pay bonuses to get ahead of year end. And it's a very predictable pattern, and then just like we saw last year, you start to get a pretty quick reversal of that trend as you get into the new year. That's what we're seeing right now.

Yes, I want to say I would say call it $2 million to $300 million is probably when you look at point to point are especially if you look at it from an average point of view the average probably a better.

Actually a pretty good way to think about it I would agree with that and you typically see it in the second half of December and it comes out of.

Government contractors for example, professional practices anyone on cash basis accounting they tend to pay bonuses to get ahead of year end.

It's a very predictable pattern and then just like we saw last year you start to get a pretty quick reversal of that trend as you get into the new year, that's what we're seeing right now.

During the fourth quarter, the company paid a common stock dividend of $0.30 per share, which was an increase of approximately 7% from the previous quarter. On a full year's 2024 financial outlook for AUD on a stand-alone basis, excluding any impact on the American national opposition, it is following. They expect to generate full-year loan growth in the mid-single visit range and expect deposit balances to grow by low single visits during the year. They're also projecting that the full-year, fully taxed equivalent net interest margin will fall in the range of between 3.3%. And 3.4% driven by our baseline assumption that the Federal Reserve Bank will cut the Fed funds rate by 25 basis points three times in 2024, beginning in June.

Speaker Change: Great. Appreciate it. I'll tell her.

Great I appreciate all the color.

Speaker Change: Thank you, David. Thanks, David. And thanks, everyone, for your time today. We look forward to talking to you all in April. Have a good day.

Thank you David Thanks, David and thanks, everyone for your time today, we look forward to talking with you all in April have a good day.

Speaker Change: Thank you for your participation in today's conference. This is the end of the program. You may now disconnect, everyone. Have a good one.

Thank you for your participation in today's conference. This does conclude the program you may now disconnect everyone have a great day.

Speaker Change: Thank you for watching. Thank you for watching. Thank you for watching. Thank you for watching.

Okay.

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In addition, we project that our through-the-cycle total composite data will be approximately 45%, which would be more than offset by the projected through-the-cycle long yield data of approximately 50%. The three disciples' interest-bearing deposit data is expected to be approximately $55,000. The current rate cycle is projected to end when the... FOMC pivots to reducing the Fed funds rate, which we now assume will begin in the second quarter. As a result of loan growth and our tax equivalent net interest margin projection, we expect capital equivalent net interest income to increase by mid-single digits in 2024 from full-year 2023 levels. We also expect that the company will generate positive adjusted operating leverage in 2024 from full-year 2023 due to the expected mid-single digits adjusted operating revenue growth, up-casing expected low single-digit growth, and adjusted operating non-fiscal expense.

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Tim.

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On the credit front, while we don't see any systemic credit quality issues working at the moment, we're assuming a normalizing uptick in the net charge-up ratio between 10 and 15 basis points in 2024 and 5 basis points in 2023, but I would reiterate that we do not see evidence of a turn in the threat environment at this point so this may end up being as conservative a function as it was in 2023.

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Speaker Change: Music by Kevin MacLeod Music by Kevin MacLeod Music by Kevin MacLeod Music by Kevin MacLeod

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The Office of the Federal Office for the Loan Vouchers suggested it should remain within a range of 95 to 100 basis points in 2025. So, in summary, Atlantic Union delivered strong financial results in the fourth quarter and the full year of 2023, despite the challenging banking and operating environment we effectively managed through 2023. As a result, we believe we are well positioned to continue to generate sustainable, profitable growth and to build long-term value for our shareholders in 2024 and beyond.

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With that, I'll now turn it over to Bill Camino, who will entertain and take a few questions.

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Thanks, Rob.

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Operator: And Victor, we're ready for our first caller, please. Thank you. At this time, we'll conduct a question and answer session. As a reminder, to have a question, you must press star 1-1 on your telephone and wait for a name to be announced. To withdraw a question, please press star 1 again. Please stand by. We will compile the Q&A roster. One moment for our first question.

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Tim.

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Our first question comes from Casey Whitman on behalf of Piper Sandler. Good morning. Good morning.

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So I appreciate the standalone margin guide for next year and the assumptions that go into it.

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Can you maybe walk us through sort of the trajectory more specifically quarterly and sort of around, you know, what each cut does to the margin? Do you think you can still hold it in that 330, 340 range even if we do get more than three cuts? Or how should we think about it?

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Yeah, Keith, that's a good question. As I mentioned, we are assuming three-plus. We're kind of taking those bets that they were worth related to the dot-plot reductions that they noted in the last meeting. So with that, basically, what we think we'll be doing, what we'll be seeing is kind of a first and second quarter kind of seeing the low point on the margin, maybe getting down to, you know, the 325 range, give or take, and then start to see that build up as our fifth The variable rate note, potential compression due to Fed funds moving down starting in the second quarter. Additionally, we also see deposit rates kind of stabilizing as well coming out of the first quarter, and we'll be fairly aggressive on taking deposit rates down over the balance of the year, assuming the Fed does cut.

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We have about $2.2 billion of high-cost CDs that are coming off the books over the first seven months of the year. We also have about $1.8 billion of deposits that are indexed to the Fed funds rate, so that will come down quickly alongside our vertical loan portfolio. So that's how we see it happening. It's coming down and kind of gradually increasing through the balance of the year. And that's how we get to the new 30 to 340 range that we're suggesting for the full year of 2024. Three cuts, that would be negative from the negligence margin perspective, but if you believe the futures, Fed Fund futures, which say there are six cuts starting in March, our estimates are that we would see, you know, six to eight basis points further compression from what I'm suggesting from that 330 to 340 range. So, bigger and more in the 320 to 330 range would be our guidance if that were to happen. But again, our baseline assumption is because for the year.

Okay, sorry, I don't know if I misheard or not, but did you say you said 325 or 335 for the first quarter, all else equal?

You should see it drop down to, you know, between 325 and 330 is what I suggest.

Okay, and the six to eight basis points of potential further compression if there are cut steps per cut or if there are all three?

Say that again?

Sorry, the six to eight basis points of potential further compression.

Yeah, that's on a four-year basis, so instead of the three-thirty to three-forty range, you could think of six to eight basis points off seven. Okay, and are we prepared to give an update as to what American National Light will sort of add to that margin or not? Well, you know... You know, it's going to be, but obviously, we don't know exactly because, obviously, the deal has been closed, and we haven't finished our loan marks and other purchase accounting adjustments, but it will be favorable to that just based on the higher loan marks and the accretion that comes off of that, which means, Thank you. Um, out of a combined basis, including increasing income to be much higher than We have some projections there, but I think, not knowing what their rates are going to be, I don't know. So, thank you.

Thanks for taking my question.

Operator: Thank you, David and Victor. We're ready for our next call. Thank you.

Catherine Mealor: One moment for an extra sheet, and our next question comes from Catherine Mealor from KBW. Good morning, Catherine. Thanks. Good morning, Rob. Can you just give us... A little bit of color, maybe do you know the number of loans or the amount of loans that you expect to replace over the next year?

And then you can also, I know that's a big positive for American National too, layer that in; any kind of color you can live with that as well.

Catherine Mealor: Yeah, I don't have specific numbers of loans and how that's repricing, but our fixed-rate portfolio is about a three-year duration, so you're seeing that repriced every day with renewing loans, and of course, new loans coming on are being priced higher.

But in terms of the fixed-rate portfolio, at least on the commercial side, I think the fixed-rate portfolio is in the five, five and a quarter range from the portfolio perspective, and that's repricing higher in the six and a half to seven percent range at the moment, based on where home rates are currently in the market.

Catherine Mealor: So that's part of our expectation is that even though that may reduce rates in the short term...

Short-term rates will come down, that will drive down the variable rate yields, but we'll be repricing these fixed-rate loans, and that shouldn't help us, at least some of that drag on the shortage comes down.

Catherine Mealor: As for American National, yeah, he knows about 80% of their loan book is fixed rate and has an average duration of about three years.

So we're seeing, and we fully expect to see that repricing happen fairly quickly.

Catherine Mealor: We're going to have accretion income because we're marking that book, but that accretion income should flow back into core margin or core yields as repricing happens over that period.

You mentioned the fixed rate loan book is going from $525,000 to, you know, six and a half to seven percent on new production.

Catherine Mealor: What does that look like for the whole portfolio, just including some of the, you know, C&I, higher-rate variable loans?

Yeah, so as you saw, our portfolio was reported as a 5.97% Moanier Total Portfolio. We're seeing that, if you look at repricing, we're more in the 7.5, 7.5 range, 7.25, 7.5, uh, The Variable Race Book is, you know, will be placing in the high sevens and even the eights. That's it.

Catherine Mealor: And then talking about your guide for loan growth, which is a little bit higher than your deposit growth.

Can you just talk about the general strategies and deposit growth for this year?

Catherine Mealor: and what you envision in terms of mix change as we look to the year ahead.

It feels like that's getting better and kind of moderating, but I assume a lot of the growth is still going to come out of CDs and higher priced deposit books.

Catherine Mealor: I'm just kind of curious about when that happens as we get closer to the end of the year.

Yes, so Catherine, on that front, we're really not projecting a big change. We've seen a pretty large change in the mission. You know, primarily money's coming out of non-issue sparing, going into your money market, and CDs. We've seen a lot of growth in the CD books as well, but we're not projecting that there's going to be a major shift in the current mix.

Unnamed Speaker: We think not as a scary number... We're at 24% this quarter, kind of projecting that it's in the 22 or 24 percent range as we go forward this year. We also think, from a deposit data perspective, as rates come down, we'll be re-pricing that money market book, and CDs are maturing. As I mentioned, Oh, really? The majority of our CD book is replacing or returning over the first seven months of this year, 2.2 billion. So, you know, we're... should be able to see some decline there. Thank you for watching. So with that, Again, we're not looking for major shifts in the deposit mix, but you're right, net growth will come into more interest-bearing deposits. Yeah, and I would add that, you know, over the long haul, we do think of deposit growth as being a limiting factor for loan growth, but we're not contemplating excessive loan growth.

Unnamed Speaker: One thing I'm proud of at Atlantic Union Bank is that we pretty consistently grow net consumer households, which is not by a very rapid amount, but we tend to end up every quarter with more consumer households than we did the month before. And we are focused on, you know, as always, expanding our business depository and treasury management offerings. We've done good work there.

Unnamed Speaker: Don't forget, American National Bank would have a lower loan deposit ratio than we do. We bring a lot of things to the table that are going to bolster their efforts to go after commercial and industrial clients, including deposit and treasury management-intensive clients, because we have some things that they don't currently offer. And I guess fundamentally, Kat, we are off to a good start. Remember, look at the difference between average deposit growth in Q4 and point-to-point. It's pretty notable because we have consistently seen this big drop at year-end. It wasn't as dramatic as we saw last year, but we're off to a very good start in Q1. So I think it's all pretty achievable. A point we've made before as well is that we actually don't have to, while we would like to, fund loan growth 100% out of pocket. We do have deposit growth because we do have cash being thrown out of the securities portfolio. We're liquidating the indirect auto portfolios. But to be clear, we would like to match loan growth with deposit growth. So I think we'll be okay there. How great, very helpful, thank you.

Debra: Thanks, Debra.

Operator: And Debra, we're ready for our next call, okay?

Unnamed Speaker: Thank you.

Operator: One moment for our next question.

Stephen M. Moss: Our next question comes from Steve Moss from Raymond James.

Unnamed Speaker: Ryan is up.

Unnamed Speaker: Thank you.

Unnamed Speaker: Good morning.

Unnamed Speaker: Just follow up on loan growth here. Just curious where you're seeing the drivers of underlying C&I growth here and the multifamily growth that we saw this quarter. Where is it coming from?

I'm going to ask David Green, who leads our commercial banking efforts, who's with us.

Unnamed Speaker: So, David, what's your perspective on the drivers of, I guess, theory and commercial loan growth?

Yes, you asked specifically about multifamily. You know, that is one of the categories that we continue to grow. We've shrunk the number. The categories, the asset classes we do want to grow in real estate, so it's kind of, as we grow, we're growing real estate, NC&I, at similar loan growth. There's so, on the C&I side, we're seeing growth in every region except we're slowing down in the western side of Virginia, and that's why we're very excited about the additional We had a much smaller team on the west side; we were under resourced there, so on the C&I, Thank you for joining us. Contractor, S.S.

Unnamed Speaker: Those are C&I, are growth engines for us, and they're doing quite well. So it's pretty well diversified. That's helpful. And then just on the end sales that occurred this quarter, you know, two or more commercial real estate, just curious, you know, did they hit maturity walls? You know, what types of properties they are? And any incremental calls from you guys?

Unnamed Speaker: Yeah, one was commercial real estate, and one was commercial industrial.

Doug Lilley is here.

Unnamed Speaker: Doug, I know we had some unique circumstances.

Do you want to speak to him about that? Yeah. Steve, thanks for the question.

One of them was, I'll call it a fascinating situation. A partner dispute. It is non-owner-occupied, but it does have owner-occupied tenants owned by the partners. And they got into a dispute. They put the borrower in bankruptcy. Eventually, one of the two declared bankruptcy.

And we're just kind of working through that mess. So, you know, we took a specific reserve to buy time. The others, I'm afraid, were trying to assess the, you know, the actual value of it and whatnot. The other one was a distributor to retailers, seasonal. And I guess it's safe to say they had difficulty adjusting to the post-COVID world where their business accelerated because of everyone being at home.

And now sales and whatnot have dropped, and expenses are up. So, anyway, we're working through that with them. I think that if you're looking to define what is an idiosyncratic credit, if you think that these are two good examples, they're not reflective of anything else. Okay.

Unnamed Speaker: That's helpful. In terms of just American Nationals here, John, you know, you're waiting on the Fed. Just curious, you know, seems like with the state approval it should be more of a formality, but you know how you think about a timeline to close here, and you know are you having to have more active discussions with the Fed or just kind of any point you can give there?

I would say, as I indicated in my comments, when we announced the merger on July 25th, we said we expected to close in Q124. That remains our expectation.

Everything is proceeding normally, and I have no reason to think we will not hit the expected timeline.

It just simply takes longer. We've been looking at lots of data, and it's frankly averaging five and sometimes six months. This is about as clean and straight-up a deal as you can imagine. So it's a straight-up combination. We respect that the Fed needs to do its work. They're going through their process. Everything is functioning normally. It just takes longer than it used to, and that's where we are.

Unnamed Speaker: Okay, great. I appreciate all the callers. Thank you very much.

Unnamed Speaker: Thank you, Steve.

Victor: And Victor, we're ready for our next caller, please.

Operator: Thank you.

Unnamed Speaker: One moment for our next question.

Operator: Our next question comes from Russell Gunther from Stevens.

Russell Gunther: Your line is open.

Unnamed Speaker: Hi Russell.

Unnamed Speaker: Hey John, good morning everybody.

Unnamed Speaker: Just a couple of thoughts on the margins to start, please.

The first being, you guys gave us the deposit data piece on the way up.

Unnamed Speaker: I was just hoping to get some...

Unnamed Speaker: Guidance around what you think the peak cumulative beta will be on the way down.

What's embedded in those three cuts that you guys are guiding? Yeah, Russell, on that front, you know, looking at the three cuts, we're looking at a... Look, I hear, and these cuts come in about 20%. Ada on the downside for this year and so the next year assuming rates continue to go down. That's our working assumption right now, 20%. Okay, that's good. And then the range of $330 to $340, could you just talk through what would get you towards the high end? Yeah, from that... To answer that question, it's basically going to be on how quickly we bring down deposit rates. We think there'll be the Fed will cut, there'll be a bit of a lag in terms of the ability to reduce the deposit rates. So more of, you know, let's see, the second cut and the third cut are primarily when we think we can really start reducing those towards the second half of the year. But it's all going to be dependent on, you know, the competition for deposits and clients, response, if you will, and we'll wrap it, we'll wrap them up, we won't, you know, go from here to the end point very quickly. So that's probably the biggest driver there. Yeah, that makes sense.

And then just switching gears for a second, on the expense side of things, so appreciate the four-year core guide, how does the fourth quarter shape up from a run rate perspective? Is there anything in there, you know, plus or minus, that stands out that normalizes, or is this a decent run rate?

Can you talk about this, the current fourth quarter, 23? Yeah, there's a couple of items, but I, you know, I'll start with, uh, I was trying to say, you know, it might be in, call it the million dollar range in the fourth quarter with how the state is unlikely to particularly recur. So, that's about the number that I said I found. That's how it works. You're referencing an operating system.

Unnamed Speaker: and Steve Tibbets to reducing the fed funds rate, which we now assume will begin in the second quarter. As a result of loan growth and our tax equivalent, the antitrust margin projection, we expect absolute equivalent antitrust income to increase by mid-single-digits in 2024 from full-year 2023 levels. We also expect that the company will generate positive adjusted operating leverage in 2024 from full-year 2023 due to the expected mid-single-digit adjusted operating revenue growth outpacing expected low-single-digit growth in adjusted operating loans to such an extent. On the credit front, while we don't see any systemic credit quality issues working at the moment, we're assuming a normalizing uptick in the net charge-up ratio of between The Oshkosh Cradle Office for Wound Counselors suggested remaining within a range of 95 to 100 patient points in 2024.

We also, frankly, have a bit of a sprint underway in the company as we get ready. We're working on integration, obviously.

If we approach conversion, there's only so much other things you can get done, so there's going to be a premium on getting other things done under the wire, if that makes sense. Yeah, I'd say there's, you know, a lot of depth in there. Thank you. Achieving Investments, that's talked about in the professional piece and Dr. Robert. I appreciate it. Thank you, guys. I mean, I guess with you guys still expecting to close this quarter, any change to the timing of the conversion, or should that be on track if the meal stays on track?

Unnamed Speaker: We are on track for conversion based on what we know right now, and we are working towards it every day. Got it.

Unnamed Speaker: So, in summary, Atlantic Union delivered strong financial results in the fourth quarter and the full year of 2023, despite the challenging banking and operating environment we effectively managed through 2023. As a result, we believe we are well positioned to continue to generate sustainable, profitable growth and to build long-term value for our shareholders in 2024 and beyond. With that, I'm going to turn it over to Bill Camuto, who will entertain and take a few questions. Thanks, Rob. And Victor, we're ready for our first caller, please.

Unnamed Speaker: All right. And then just one last one, John, for you. You mentioned in your prepared remarks your willingness to take strategic actions to navigate the current environment. You certainly took a number of them in 2023. As you think about this year ahead, any big picture thoughts?

Well, I think that obviously we have to deliver the organic performance and potential of the franchise as always. I think the big thing is obviously ensuring that we have a successful integration of the American National Bank, and that's kind of the big, you know, sort of overarching thing. Those are the two big things that are on our mind, which doesn't mean we can't take three steps ahead.

Operator: Thank you. At this time, we'll conduct the question and answer session. As a reminder, to ask a question, you must press star 11 on your telephone and wait for a name to be announced.

Operator: To withdraw your question, please press star 1 again. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you.

We, in fact, do, but we'll talk about that later. Three big priorities: organic performance of the bank, transformation, activities, and technology, and then your strategic initiatives, which, by definition this year, mean American National Bank being successfully integrated so we can reach its focal point.

Operator: Please stand by; we'll compile the Q&A roster. One minute for our first question. Our first question comes from Casey Whitman from Piper Stanley. Join us. Good morning.

Keith: Hi, I appreciate the stand-alone margin guide for next year and the assumptions that go into it. Can you maybe walk us through sort of the trajectory more specifically quarterly and sort of around what each cut does to the margin? Do you think you can still hold it in that $3.30, $3.40 range even if we do get more than three cuts? Or how should we think about it? Yeah, Keith, that's a good question.

Unnamed Speaker: understood. Okay, great.

Unnamed Speaker: Thank you guys for taking my question.

Unnamed Speaker: Thank you very much.

Unnamed Speaker: Thank you. One moment for our last question.

Unnamed Speaker: And our last question comes in line up. David Bishop from Hope Group. Your line is open.

David Jason Bishop: Hi David.

Unnamed Speaker: Hey, I have a quick question for you, Rob.

Unnamed Speaker: As I mentioned, we are assuming three cups of some kind of taking the Fed to get their work related to the dot plot reductions that they noted in the last meeting. So basically, what we're thinking we'll be doing, what we'll be seeing is kind of a first and second quarter kind of seeing the low point on the margin, maybe getting down to, you know, the 325 range, give or take, and then start to see that build up as we go forward. Six to three, don't go forward, especially if you're on fire, which we'll all share, based on BLM So additionally, we also see deposit rates kind of stabilizing as well, coming out of the first quarter, and we'll be fairly aggressive on taking deposit rates down over the balance of the year, assuming the Fed does cut. We have about $2.2 billion of high-cost CDs that are coming off the books in the first seven months of the year.

I don't know if you have this handy, but do you have the end-of-period average interest-bearing deposit cost?

David Jason Bishop: The average for the year, the period; I'm just curious if there's much difference between them.

Yeah, yeah, interest-bearing deposits, if you look at the month of December, it was $2.97, 2.97%. The first of the fourth quarter average was $2.92. So, as I said, we continue to see some uptick in deposit costs, driven by the...

David Jason Bishop: I think that we mentioned on the call in Amos, Scripps: Did you see much movement in market rates by competition inter-quarter?

Just curious what you saw from some of your bigger peers out there within the market, if there was much movement up or down. Yeah, there really hasn't been a lot of movement. I'd say, you know, from mid-year to now, we are seeing the fact that folks are going more towards a shorter, when you look at CD specials, more of a shorter duration, you know, six to seven weeks out of seven months. So there's been a... Reduction of kind of longer duration CDs and coming back with specials on a shorter end. We have seen a bit of movement in money market rates as well. Some of the larger players, like Truitt, have been... Their promotional morning market is a bit during the quarter, but not materially or anything to really concern ourselves with in terms of having to match that, although we keep a close eye on it. Again, the big guys are all making pretty clear commentary that as rates come down, they intend to bring down deposit rates. We'll see if that plays out.

Unnamed Speaker: We also have about $1.8 billion of deposits that are indexed to the Fed Funds Rate, so that will come down quickly alongside a vertical growth rate loan portfolio. So that's how this year is going. It's coming down and kind of gradually increasing through the balance of the year. And that's how we get to a few 30 to 340 range that we're suggesting for the full year of 2024. Now, if there are more than three cuts, that will be negative for our expectations from the net interest margin perspective. But if you believe the futures, Fed Fund Futures, which say there are six cuts starting in March, our estimates are that we would see, you know, six to eight basis points of compression from what I'm seeing from that 330 to 340 range.

Unnamed Speaker: So, I think we're more in the 320 to 330 range would be our guidance if that were to happen. But again, our baseline assumption is the customer. Okay, sorry, I don't know if I misheard or not, but did you say 325 or 335 for the first quarter, all else equal? I think we should see it drop down to, you know, between 325 and 330 is what I suggest. Okay, and the six to eight basis points, potential further compression if there's cuts, that's per cut or if there are all three? Say that again.

David Jason Bishop: Got it. That's one follow-up question.

Unnamed Speaker: I think, Rob, you mentioned, or John, there is some seasonality on the deposit side of this quarter.

David Jason Bishop: Any way the ring sends that from a dollar perspective?

Unnamed Speaker: Thanks for watching!

Yeah, I want to say, I would say, you know, call it two to three hundred million dollars is probably, when you look at it point to point, especially if you look at it from an average point of view, the average is probably a better, especially a pretty good way to think about it. I would agree with that, and you typically see it in the second half of December, and it comes out of, you know, government contractors, for example, professional practices, anyone on a cash basis accounting, they tend to pay bonuses to get ahead of year end. And it's a very predictable pattern, and then, just like we saw last year, you start to get a pretty quick reversal of that trend as you get into the new year. That's what we're seeing right now.

Unnamed Speaker: Sorry, the 68 basis points of potential further compression. Yeah, that's on a four-year basis, so instead of the 340 or 340 range, you could pick 68 basis points off that one. Okay, and are we prepared to give an update as to what American National Light will do under the act without margin or not? Well, you know, um...

Unnamed Speaker: It's going to be We don't know exactly because the deal hasn't closed, and we haven't finished our loan marks and other purchase accounting adjustments, but it will be favorable to that just based on the higher loan marks and the accretion that comes off of that, and on a combined basis, including increasing income to be much higher than that age registry. At this point, we don't have, you know. We have some projections there, but that's it. You know, not knowing what their rates are going to be, I don't want to...

Unnamed Speaker: Great

David Jason Bishop: I appreciate it.

Unnamed Speaker: I'll tell her.

David Jason Bishop: Thank you, David.

Unnamed Speaker: Thanks, David.

Unnamed Speaker: And thanks, everyone, for your time today.

Unnamed Speaker: We look forward to talking to you all in April.

Unnamed Speaker: Have a good day!

Unnamed Speaker: Thank you for your participation in today's conference.

Unnamed Speaker: This is the end of the program. You may now disconnect, everyone. Have a good one.

Unnamed Speaker: Thank you for watching.

Unnamed Speaker: Thank you for watching.

Unnamed Speaker: So thanks. Thanks for taking my question. Thank you, and Victor, we're ready for our next caller. Thank you. One moment for our next question, and our next question comes from Catherine Mealor from KBW. Your line is open. Good morning, Catherine.

Unnamed Speaker: Thank you for watching.

Unnamed Speaker: Thank you for watching. Music by Kevin MacLeod. Music by Kevin MacLeod. Music by Kevin MacLeod.

Ross: Thanks, Good morning. Ross, you mentioned the back book of your 6th grade loan refinancing, can you just give us a little bit of color on maybe the number of loans or the amount of loans that you expect to replace over the next year? And then can you also, I know that's a big positive for American National to layer that in, any kind of color you can give on that as well? Yeah, I don't have a lot of specific numbers of loans and how that's repricing, but, you know, our fixed rate portfolio is about a three-year year-to-date duration, so you're seeing that repriced every day with renewing loans, and, of course, new loans coming on are being priced higher.

Ross: But in terms of the fixed rate portfolio, at least on the commercial side, I think the fixed rate portfolio is in the five, five-and-a-quarter range from the portfolio perspective, and that's repricing higher in the, you know, six-and-a-half to seven percent range at the moment, based on where home rates are currently at in the market. So part of our expectation is that even though that may reduce race in the short term, Austin Nicholas, David Bishop, Stephen Moss, Joseph Gladue, John Asbury, Robert Gorman, at least some of that drag on the shoulders comes down. As for American National, yeah, he knows about 80% of their loan book is fixed rate and has an average duration of about three years.

Unnamed Speaker: So we're seeing, we fully expect to see that repricing happen fairly quickly, you know, we're going to have increasing income because we're marking that book, but that increasing income should flow back into poor margin or poor yields as repricing happens over that period. And he mentions a fixed rate loan book that's going from 5.25 to six and a half to seven percent on new productions. What does that look like for the whole portfolio, just including some of the C&I, higher rate variable loans? Yeah, so as you saw, our portfolio is reporting as a 5.97 of the Monier Total Portfolio received at, but if you look at repricing, we're more in the 7.5 range, 7.25, 7.5 range. The Variable Rate of the Cure, for me personally, is in the high sevens and even the eights.

Unnamed Speaker: That's it. And then talking about your guide for loan growth being a little bit higher than your deposit growth. Can you just talk about just general strategies and deposit growth for this year? And what you anticipate in terms of mixed change as we look through the year? It feels like that's getting better and kind of moderating, but I assume a lot of the growth still is gonna come kind of as CDs and higher priced deposit books. I'm just kind of curious about where the mix happens as we get closer to Raise podria.

Unnamed Speaker: Just to cap in on that, we're really not projecting a big change in the mix this year, you know primarily money's coming out of non-interest pairing going into the money market and TV. We've seen a lot of growth in the TV book as well as the money market. So we're not projecting that there's going to be a major shift in the current mix we're seeing. We think Connors is bearing, you know; we're at 24% this quarter.

Unnamed Speaker: We're kind of projecting, you know, that's in the 22 or 24% range as we go forward this year, and from a deposit data perspective, as rates come down, we'll be re-pricing that money market book, and then CDs are maturing, as I mentioned. The majority of our C&E book has been closing or maturing over the first seven months of this year, 2.2 billion, so depending on where rates go, we should be able to see some decline there. So, with that, I think.

Unnamed Speaker: Again, not looking for major shifts in the deposit mix, but you're right, I think net growth will come into more interest-bearing deposits. Yeah, and I would add that, over the long haul, we do think of deposit growth as being a limiting factor for loan growth, but we're not contemplating excessive loan growth. One thing I'm proud of at Atlantic Union Bank is that we consistently grow net consumer households, which is not by a very rapid amount, but we tend to end up every quarter with more consumer households than we did the month before. And we are focused on, you know, as always, expanding our business depository and treasury management offerings. We've seen good growth there. Don't forget, American National Bank would have a lower loan deposit ratio than we do.

Unnamed Speaker: We bring a lot of things to the table that are going to augment their efforts to go after commercial and industrial clients, including deposit and treasury management-intensive clients, because we have some things that they don't currently offer, and I guess, Catherine, we feel pretty good about it. We are off to a good start. Remember, look at the difference between average deposit growth in Q4 and point to point. It's pretty notable because we have consistently seen this big drop at year end. It wasn't as dramatic as we saw last year, but we're off to a very good start in Q1, so I think it's all pretty achievable. A point we've made before as well is that we actually don't have what we would like to.

Stephen M. Moss: We don't have to fund loan growth 100% by deposit growth because we do have cash being thrown out of the securities portfolio. We're liquidating the indirect auto portfolio, but to be clear, you know, we would like to match loan growth with deposit growth, so I think we'll be okay there. Great, very helpful. Thank you, and Stephens. And Victor, we're ready for our next call, okay? Thank you. One moment for our next question. Our next question will come from Steve Moss from Raymond James, University of. Hi Steve. Hi, good morning.

Unnamed Speaker: You know, just follow up on loan growth here. Just curious where you're seeing the drivers of underlying C&I growth here and the multifamily growth that we saw this quarter, where it's coming from. I'm going to ask David Green, who leads our commercial banking efforts, to dig with your perspective on the drivers of, I guess, theory in commercial loan growth. Yes, so you asked specifically about multifamily.

Unnamed Speaker: You know, that is one of the categories that we continue to grow. We've shrunk the number of... The categories, the asset classes we do want to grow in, real estate, so it's kind of as we grow, we're growing real estate and C&I at similar loan growth, and others on the CNI side. We're seeing growth in every region, except we're slowing down in the western side of Virginia. And, you know, that's why we're very excited about the addition of the American National Team there because we had a much smaller team on the west side. Yeah, we were under-resourced there. We were under-resourced there.

Unnamed Speaker: So, on the C&I side, we're seeing... The C&I pipeline is a little faster than the real estate pipeline, so we're seeing it grow in every region. Then when we look at our specialty businesses, they're really adding to the equation because government contractor and asset-based lending are C&I growth engines for us, and they're doing quite well. So it's pretty well diversified. Okay, that's helpful. And then, just on the final sales that occurred this quarter, two of them were commercial real estate. Just curious, did they hit maturity walls, what types of properties they are, and any internal calls you guys would like to make. Yeah, one was commercial real estate, and one was commercial industrial.

Doug Willie is here. Doug, I know we had some unique circumstances. Do you want to speak to him about that? Yeah. Steve, thanks for the question. One of them was, I'll call it a fascinating situation, a partner dispute. It is non-owner-occupied, but it does have owner-occupied tenants owned by the partner, and they got in a dispute, they took a borrower into bankruptcy, one of the two declared bankruptcy, and we're just kind of working through that mess.

So, we took a specific reserve to buy time; we had them on the front of the line to assess the actual value of it and what not. The other one was a distributor to retailers, seasonal, and I guess it's safe to say they had difficulty adjusting to the post-COVID world where their business accelerated because of everyone being at home, but now sales and what not have dropped, and expenses are up. So, anyway, we're working through that with them. I think that if you're looking to define what an idiosyncratic credit issue looks like, these are two good examples.

Unnamed Speaker: They're not responsive to anything else that we're seeing. Okay, that's helpful, and then in terms of American Nationals here, John, you're waiting on the Fed, just curious. It seems like with the state approval, it should be more of a formality, but how are you thinking about a timeline to close here, and are you hoping to have more active discussions with the Fed, or just kind of any call you can give there? Yeah, I would say, as I indicated in my comments, when we announced the merger on July 25th, we said we expected it to close in Q1 2024. That remains our expectation. Everything is proceeding normally, and I have no reason to think we will not hit the expected timeline. It just simply takes longer.

John: We've been looking at lots of data, and it's, frankly, averaging five and sometimes six months. This is about as clean and straight-up a deal as you can imagine. So, it's a straight-up combination.

John: We respect that the Fed needs to do its work. They're going through their process. Everything is functioning normally. It just takes longer than it used to, and that's where we are.

Stephen M. Moss: Okay, great. We appreciate all the callers. Thank you very much. Thank you, Steve. And Victor, we're ready for our next caller, please.

Operator: Thank you. One moment for our next question. Our next question comes to us from Russell Gunther from Javens. Your line is open. Hi Russell.

Russell Gunther: Morning. Hey, John. Good morning, everybody.

Russell Gunther: Just a couple of follow-up questions on the margins to start, please. First, you guys gave us the deposit data piece on the way up. I was just hoping to get some guidance around what you think the peak cumulative beta will be on the way down, what's embedded in those three cuts that you guys are guiding. Yeah, Russell, on that front, looking at the three cuts, we're looking at a, will play year-end, with these cuts coming in about 20%, paid us on the downside for this year, and continue until the next year, assuming rates continue to go down. That's our working assumption right now, 20%. Okay, that's good. And then the range of 330 to 340; could you just talk through what would get you towards the high end?

Unnamed Speaker: Yeah, uh, from that... To answer that question, it's basically going to be how quickly we bring down deposit rates. We think there'll be, you know, the federal cuts. There'll be a bit of a lag in terms of the ability to reduce deposit rates.

Unnamed Speaker: So more of, you know, let's see, the second cut and the third cut, primarily when we think we can really start reducing those towards the second half of the year. But it's all going to be dependent on, you know, the competition for deposits and clients, we at the White House, go from here to the endpoint very quickly. So that's probably the biggest driver there. And then just switching gears for a second.

Unnamed Speaker: On the expense side of things, I appreciate the four-year core guide. How does the fourth quarter shape up from a run rate perspective? Is there anything in there, you know, plus or minus that stands out that normalizes or is this a decent run rate? Can you talk about this, the current fourth quarter, twenty-three? Yeah, there's a couple of items that I did, I'm sorry, it was...

Unnamed Speaker: I would say, you know, it might be in across the million dollar range in the fourth quarter. So that's about the number that I've said I could. That's how it's, uh, you're referencing, operating. Yeah, yeah, okay, yeah, no, you can take it out if you see any other items.

Unnamed Speaker: There's something to be said. There are kind of some things that came through. There's one way to look at it.

Unnamed Speaker: Yeah. We also, frankly, have a bit of a sprint underway in the company as we get ready. We're working on integration clearly as we approach conversion. There's only so much other things you can get done, so there's been a premium on getting other things done under the wire, if that makes sense.

Unnamed Speaker: Yeah, so I'd say there is, you know, a lot of depth in the... The Chief Investments Department of Professional Fees. Thank you all very much. I appreciate it. Thank you guys. I mean, I guess with the, you guys still expecting the deal to close this quarter, any change to the timing of the conversion, or should that be on track, assuming the deal stays on track? We are on track for a conversion based on what we know right now, and we are working towards it every day.

Russell Gunther: Got it. All right. And then just one last one, John, for you. You mentioned in your prepared remarks your willingness to take strategic actions to navigate the current environment, and certainly took a number of them in 2023.

John: As you think about the year ahead, any big picture thoughts? Well, I think that, obviously, we have to deliver the organic performance and potential of the franchise as always. I think the big thing is obviously ensuring that we have a successful integration of the American National Bank, and that's kind of the big sort of overarching thing. So those are the two big things that are on our minds, which doesn't mean we don't take three steps ahead; we, in fact, do. But we'll talk about that later. Improvement priorities, the organic performance of the bank, and transformation.

John: I'm going to talk about activities and technology, and then your strategic initiatives, which, by definition, this year means the American National Bank being successfully integrated so we can reach its focal point. Okay, great. Thank you guys for taking my question. Thank you very much. Thank you. One moment for any last questions. And our last question comes lined up. David Bishop from Hope Group, your line is open.

David Jason Bishop: Hi David. And a quick question for you, Rob. I don't know if you have this handy, but did you have the average interest-bearing deposit cost? The average for the peer interest period is something that is much different, correct? Yeah, the interest period deposits, if you look at the month of December, it was 297, 2.97 percent, versus the fourth quarter average, which was 292, so as I said, we continue to see some uptick in deposit costs, still driven by the... I think that we mentioned this in the call, in the script. Did you see much movement in market rates by competition inter-quarter? Just curious what you saw from some of your bigger peers out there within the market, if there was any movement up or down.

David Jason Bishop: Yeah, there really hasn't been a lot of movement. I'd say, you know, from mid-year to now, we are seeing the fifth, you know, folks going towards, So there's been a... demeanor. Their promotional morning market's a bit there in the quarter, but not mature or anything to really concern ourselves with in terms of things that match that, although we keep a close eye on it.

Unnamed Speaker: The Big Guys are all making pretty clear commentary that rates are ready to come down, and they intend to bring down deposit rates. We'll have to see if that plays out. Got it. That's one follow-up. I think, Rob, you mentioned, or John, some seasonality on the deposit side of this quarter. Any way to ring-fence that from a dollar perspective?

Unnamed Speaker: Thank you. Yeah, I want to say, I would say, you know, call it $300 million is probably, when you look at it point to point, especially if you look at it from an average point of view, the average is probably a better game. It's actually a pretty good way to think about it. I would agree with that. And you typically see it in the second half of December. Yeah And it comes out of, you know, government contractors, for example, professional practices, anyone on a cash basis accounting. They tend to pay bonuses to get ahead at year end.

Unnamed Speaker: It's a very predictable pattern, and then just like we saw last year, you start to get a pretty quick reversal of that trend as you get into the new year. That's what we're seeing right now.

David Jason Bishop: Great, appreciate all the power. Thank you, David. Thank you, David. And thanks, everyone, for your time today. We look forward to talking with you all in April. Have a good day. Thank you for your participation in today's conference. This will conclude the program. You may now disconnect. Everyone, have a great day. The End. For more information, head to nihilband.com.