Q1 2024 Atlantic Union Bankshares Corp Earnings Call

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Operator: Good day, and thank you for standing by. Welcome to the Atlantic Union Bank Shares First Quarter 2024 Earnings Conference 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 need to press star 11 on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star 11 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 Cimino, Senior Vice President of Investor Relations. Please go ahead.

Speaker Change: Good day and thank you for standing by welcome to the Atlantic Union Bankshares first quarter 'twenty 'twenty four earnings conference 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 need to press star one one on your telephone.

Speaker Change: And you're an automated message advising your hand, just raised to withdraw your question. Please press star one again.

Speaker Change: Please be advised that today's conference is being recorded.

Speaker Change: I'd now like to hand, the conference over to your Speaker today, Bill assuming no senior Vice President of Investor Relations. Please go ahead.

William P. Cimino: Thank you, DeeDee, and good morning, everyone. I have Atlantic Union Bank Chairman, President, and CEO, John Asbury, and Executive Vice President and CFO, Rob Gorman, with me today. We also have other members of our executive management team with us for the question and answer period. Please note that today's earnings release and the accompanying slide presentation we are going through on the webcast are available to download on our investor website, investors.atlanticunionbank.com. During today's call, we will comment on our financial performance using both gap metrics and non-gap financial metrics.

Bill: Thank you Judy and good morning, everyone I have Atlantic Union, Bankshares, President and CEO, John Asbury and executive Vice President and CFO, Rob Gorman with me today.

Bill: We also have other members of our executive management team.

Speaker Change: And answer period.

Speaker Change: Please note that today's earnings release any accompanying slide presentation are going through.

Speaker Change: Webcast are available for download on our Investor website investors <unk> com.

Speaker Change: During today's call, we will comment on our financial performance using both GAAP metrics and non-GAAP financial measures.

William P. Cimino: Important information about these non-GAAP financial measures, including reconciliations to comparable GAAP measures, is included in the appendix or slide presentation and in our earnings release for the first quarter of 2024. Since our acquisition of American National Bank closed after quarter end, our discussion today will not include any American National results.

Speaker Change: Information about these non-GAAP financial measures, including reconciliations to comparable GAAP measures is included in the appendix for a slide presentation.

Speaker Change: Our earnings release for the first quarter of 2024.

Speaker Change: Our acquisition of American National Bank closed after quarter end our discussion today will not include any American national results.

William P. Cimino: We did provide a pro forma look at our assets, loans, and deposits for quarter end on slide four. We did provide financial outlook numbers for the full year that include the impact of American National. Speaking of which... We will make forward-looking statements on today's call, which are not statements of historical fact and are subject to risks and uncertainties. There can be no assurance that actual performance will not differ materially from any future expectations or results expressed or applied by these forward-looking statements.

Speaker Change: You did provide a pro forma look at our assets loans and deposits as of quarter end on slide four we.

Speaker Change: We did provide financial outlook numbers for the whole year that includes the impact of American nationals.

Speaking of which.

Speaker Change: We will make forward looking statements on today's call, which are not statements of historical fact and are subject to risks and uncertainties. There can be no assurance that actual performance will not differ material fleet from any future expectations, our results expressed or implied by these forward looking statements.

William P. Cimino: We undertake no obligation to publicly revise or update any forward-looking statement. Please refer to our earnings release issued today and our other SEC filings for further discussion of the company's risk factors and other important information regarding our forward-looking statements, including factors that could cause actual results to differ from those expressed or implied in a forward-looking statement. All comments made during today's call are subject to that Safe Harbor Statement. At the end of the call, we will take questions from the Research Analyst Community, and now I'll turn the call over to John Asbury.

Speaker Change: Brian takes no obligation to publicly revise or update any forward looking statements.

Speaker Change: Please refer to our earnings release issued today and our other SEC filings for further discussion of the Companys risk factors and other important information regarding our forward looking statements.

Speaker Change: Factors that could cause actual results to differ from those expressed or implied in our forward looking statements.

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

Speaker Change: At the end of the call, we'll take questions from the research analyst community and now I will turn the call over to John Asbury. Thank you Bill Good morning, everyone and thank you for joining us today I'd like to offer a special welcome to our new shareholders and teammates who joined US from American National Bank. Our merger closed on April 1st and we believe we're off to a great start I'll share more on that.

John C. Asbury: Thank you, Bill. Good morning, everyone, and thank you for joining us today.

John C. Asbury: I'd like to offer a special welcome to our new shareholders and teammates who've joined us now from American National Bank. Our merger closed on April 1st, and we believe we're off to a great start. I'll share more on that later in my comments.

John C. Asbury: For those new to our story, we operate our company under a mantra of soundness, profitability, and growth. There's nothing new about it, and it's a simple operating philosophy that's stood the test of time. The same is true for our traditional operating model. We make loans, we take deposits, and provide fee-based services to our customers under our brand. We're a traditional, diversified bank that provides financing and services that help people, help businesses, and help our communities.

Later in my comments.

John C. Asbury: New to our story, we operate our company under a mantra soundness profitability and growth in that order of priority. There is nothing new about it and it's a simple operating philosophy.

John C. Asbury: The same is true for our traditional operating model, we make once we take deposits and provide fee based services alter our customers under our brand where traditional diversified bank that provides financing and services to help people businesses and help our communities. We believe we are large enough and capable enough to be a challenger and an alternative.

John C. Asbury: We believe we're large enough and capable enough to be a challenger and an alternative to large banks, but we are still small enough and responsive enough to compete against the smaller banks that we often have more capabilities than them. The environment remains challenging for banks of all sizes, especially with persistent net interest margin pressures to which AUB is not immune. Thankfully, we expect the financial benefit of the American National Bank merger to be apparent during the second quarter and will provide a welcome boost to both net interest margin and bottom line profitability. Rob will comment on what to expect during his section of our remarks.

John C. Asbury: The large banks are still small enough and responsive enough to compete against the smaller banks too.

Often have more capabilities and make the environment remains challenging for banks of all sizes, especially with persistent net interest margin pressures to which AAV is not again thankfully, we expect the financial benefit of the American National Bank merger to be apparent during the second quarter and will provide a welcome boost to both net interest margin and bottom line profitability.

John C. Asbury: Rob will comment on what to expect during his section of our remarks I will now comment on the macro economic conditions. We are seeing and then move on to our first quarter results regarding the economic outlook for forecasting purposes, we do remain cautious although it appears a soft landing as possible.

John C. Asbury: I'll now comment on the microeconomic conditions we are seeing and then move on to our first quarter results. Regarding the economic outlook, for forecasting purposes, we do remain cautious, although it appears a soft landing is possible. Inflation is still a factor and does not seem to be progressing toward the Fed's target levels as quickly as it had been hoped, leading us to believe that we'll see fewer rate cuts this year or perhaps not at all.

John C. Asbury: Asia is still a factor and does not seem to be progressing towards the fed's target levels as quickly as we had hoped leading us to believe that we will see fewer rate cuts this year or perhaps not at all.

John C. Asbury: Nevertheless, the macroeconomic environment remains favorable in our footprint, and we do not expect that to change in the near term. Our markets continue to appear healthy, though 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. While our lending pipelines reflect that trend, they imply we should expect mid-single-digit loan growth in 2024, inclusive of American National Bank. Virginia's last reported unemployment rate was 2.9% in March and, as usual, remains below the national average, which was 3.8% during the same period.

John C. Asbury: Nevertheless, the macroeconomic environment remains favorable and our footprint and we do not expect that to change in the near term our markets continue to appear healthy that 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: Lending pipelines reflect that trend they imply we should expect mid single digit loan growth in 2024 inclusive of American National Bank.

John C. Asbury: Virginia as last reported unemployment rate was two 9% in March and as usual it remains below the national average, which was three 8% during the same period when.

John C. Asbury: When speaking to investors and analysts, among the more frequent questions we receive is the credit outlook for non-owner-occupied office exposure and, to a lesser extent, multifamily commercial real estate. We've added some additional disclosures on these loan categories in our supplemental slides as of quarter end, and here's our current perspective. Regarding non-under-occupied office, I'll start by saying that about 22% of the portfolio is medical, and it hasn't been impacted by concerns about work from home related office utilization trends. This is a granular portfolio that has an average loan size of 1.9 million and a median size of 664,000. We do not finance large central business district office buildings.

John C. Asbury: When speaking to investors and analysts among the more frequent questions. We receive is the credit outlook for non owner occupied office exposure and to a lesser extent multifamily commercial real estate. We've added some additional disclosures on this loan categories in our supplemental slides as of quarter end and here's our current perspective.

John C. Asbury: Regarding non owner occupied office I'll start by saying that about 22% of the portfolio is in medical and has not been impacted by concerns about work from home related office utilization trends. This is a granular portfolio with an average loan size of $1 9 million and a medium size at 664000, we.

John C. Asbury: We do not finance large central business District office buildings. Additionally, at four 9% of total loans outstanding. This was not an outsized exposure in the portfolio is well distributed geographically.

John C. Asbury: Additionally, at 4.9% of total loans outstanding, this is not an outsized exposure, and the portfolio is well distributed geographically. In our region, office exposure in greater Washington, D.C., receives attention. We have no exposure in the District of Columbia, no office exposure, and our total non-owner occupied office loans from Northern Virginia throughout the state of Maryland are a modest $65 million. Non-recourse commercial real estate lending is uncommon for us, and most office loans have some form of guarantee from the owner that seeks to ensure their ongoing commitment.

John C. Asbury: <unk> ox exposure in greater Washington D. C receives attention we have no exposure in the district of Columbia, The office exposure and our total non owner occupied office loans from Northern Virginia throughout the state of Maryland, as a modest $65 million non.

John C. Asbury: Non recourse commercial real estate lending is uncommon for us and most office loans have some form of guarantee from the honor that seeks to ensure the ongoing commitment.

John C. Asbury: Given their size and location, the suburban office buildings we finance are generally leased to local and regional businesses that, on average, have been less supportive of remote work and hybrid work arrangements than larger companies, meaning the buildings we finance have tended to be better utilized than larger companies.

John C. Asbury: Given their size and location the suburban office buildings, we financier generally leads to local and regional businesses that on average have been less supportive of remote work and hybrid work arrangements and larger companies meeting the building's refinance it tended to be better utilized the larger Alex overall this portfolio is performing well, while I expect will incur.

John C. Asbury: Overall, this portfolio is performing well, and while I expect we'll incur some problems in it over time, we currently expect any such problems to be readily manageable, regarding multifamily exposure. This is also a granular portfolio, and we believe it's reasonable in size at 6.8% of total assets. Our markets appear healthy and growing. They're not overbuilt, and nearly all report a scarcity of housing. We're generally still seeing stable rents, and there are currently no rent control laws in our markets. As is implied by our average loan size of $3.3 million and median size of $829,000, we do not finance high-rise luxury apartments.

John C. Asbury: There are some problems and over time, we currently expect any such problems to be readily manageable.

John C. Asbury: Regarding multifamily exposure. This is also a granular portfolio and we believe it's reasonable size at six 8% of total loans.

John C. Asbury: Our markets appear healthy umbrella theyre, not overbuilt and nearly all reports scarcity of housing we're generally still seeing stable ranch and there are currently no rent control laws in our markets.

John C. Asbury: As is implied by our average loan size of $3 3 million and medium size of $829000, we do not finance high rise luxury apartments.

John C. Asbury: While there is concern about the impact of higher interest rates on debt service coverage and property values, it's important to understand that multifamily revenues have also increased due to rising rents. Additionally, as with nearly all of our commercial real estate lending, we generally require some form of personal guarantee to seek to ensure the borrower is an ongoing debtor from the multifamily project. Normally, we finance multifamily construction with a mini-perm during the stabilization period, and we underwrite for institutional lender takeout. Typically, the developer refinances the property into the institutional market or sells it, and then reinvests the proceeds in new projects.

John C. Asbury: While the risks concerned about the impact of higher interest rates on debt service coverage and property values. It is important to understand multifamily revenues have also increased due to rising rents. Additionally, as with nearly all of our commercial real estate lending. We generally require some form of personal guarantee to seek to ensure the borrowers ongoing could have been from a multifamily project.

John C. Asbury: Normally we finance multifamily construction with a mini firm during the stabilization period, and we underwrite for institutional lender takeout typically the developer refinances the property into the institutional market ourselves. It and then reinvest the proceeds in new projects as demonstrated by the credit metrics on slide 18 of our supplemental presentation.

John C. Asbury: As demonstrated by the credit metrics on slide 18 of our supplemental presentation, asset quality for multifamily is among the best in the bank. We currently do not anticipate any material problems developing in this asset class, and we expect that should any arise, they would be readily manageable. We understand concerns about banks' office and multifamily exposure and hope this recap provides more clarity and context around what this looks like at AUB.

John C. Asbury: Asset quality for multifamily is among the best in the back.

John C. Asbury: We currently do not anticipate any material problems to develop in this asset class and we expect that should any arise it would be readily Nashville.

John C. Asbury: We understand concerns about banks office and multifamily exposure and hope this recap provides more clarity and context around what this looks like it will.

John C. Asbury: Behind our quarterly results here are a few financial highlights for the first quarter and Rob will provide more detail later total deposits increased 5% year over year, and 11% annualized quarter over quarter as we have seen before we did have a seasonal dip in deposits at the end of 2023, and then saw better than expected deposit inflows.

John C. Asbury: Moving on now to quarterly results, here are a few financial highlights for the first quarter, and Rob will provide more detail later. Total deposits increased 5% year-over-year and 11% annualized quarter-over-quarter. As we have seen before, we did have a seasonal dip in deposits at the end of 2023 and then saw better-than-expected deposit inflows in the first quarter. We had a modest increase in broker deposits, which are a relatively low 3.9% of total deposits. Importantly, we grew customer deposits 8.4% annualized, which allowed us to more than fund our quarterly loan growth. The loan deposit ratio declined to 91.7% at quarter end, down from 93% in the prior quarter.

First quarter, we had a modest increase in broker deposits, which are a relatively low three 9% of total deposits importantly, we grew customer deposits eight 4% annualized which allowed us to more than fund our quarterly loan growth the loan deposit ratio declined to 91, 7% at quarter end down from 93 <unk>.

John C. Asbury: <unk> in the prior quarter, our total range for the loan to deposit ratio remains pardon me our target range for the loan to deposit ratio remains 90% to 95%.

John C. Asbury: Deposit mix shifts continued and the higher rate environment with customer deposit growth coming from primarily money market and Cds. While we also saw some continuation of noninterest bearing deposit migration to interest bearing deposits, though at a declining pace noninterest bearing deposits or approximately 22% of total deposits.

John C. Asbury: Our total range for the loan to deposit ratio remains, pardon me, our target range for the loan to deposit ratio remains 90 to 95%. Deposit mix shift continued in the higher rate environment with customer deposit growth coming from primarily money market and CDs, while we also saw some continuation of non-interest bearing deposit migration to interest bearing deposits, though at a declining pace. Non-interest bearing deposits are approximately 22% of total deposits, and we believe that percentage is approaching its lowest.

John C. Asbury: We believe that percentage is approaching bottom.

John C. Asbury: We posted annualized loan growth of five 6% during the first quarter, which was led by growth in commercial loans. The increase in construction loan balances came from existing can Amazon projects underway funding up toward completion as I mentioned earlier, we expect to be in the mid single digit growth range for loans held for investment and 2024.

John C. Asbury: Inclusive of American National Bank.

John C. Asbury: We posted an annualized loan growth of 5.6% during the first quarter, which was led by growth in commercial loans. The increase in construction loan balances came from existing commitments on projects underway funding up toward completion. As I mentioned earlier, we expect to be in the mid-single-digit growth range for loans held for investment in 2024, inclusive of American National Bank. Commercial and industrial line utilization this quarter was consistent with the prior quarter but up from the prior year's first quarter.

John C. Asbury: Commercial and industrial line utilization this quarter was consistent with the prior quarter, but up from the prior year's first quarter.

John C. Asbury: Loan production in the first quarter was weighted more heavily to existing clients and new to bank clients with about 75% existing and also favorite C&I commercial real estate with about 63% of the production coming from commercial and industrial.

John C. Asbury: Commercial real estate payoffs decreased slightly from the fourth quarter and increased slightly from the same period in the prior year, which we interpret as a sign that commercial real estate markets, where we operate are still healthy.

John C. Asbury: Loan production in the first quarter was weighted more heavily to existing clients than new bank clients, with about 75% existing. It also favored CMI over commercial real estate, with about 63% of the production coming from commercial and industrial.

John C. Asbury: Credit remained stable net charge offs of 13 basis points annualized during Q1 were driven by two credits that we reserved for last quarter. As a reminder, we also reported 13 basis points of annualized net charge offs. During the first quarter of 2023 for the full year 2023, the net charge off ratio was only <unk>.

John C. Asbury: Commercial real estate payoffs decreased slightly from the fourth quarter and increased slightly from the same period in the prior year, which we interpret as a sign that the commercial real estate markets where we operate are still healthy. Credit remains stable. Net charge-offs of 13 basis points annualized during Q1 were driven by two loans that we reserved for last quarter.

John C. Asbury: Five basis points credit remains a good story at ABB and we do not consider the negligible losses, we have seen over the past few years to be sustainable.

John C. Asbury: We anticipate that asset quality should eventually normalize following the long run of minimal net charge offs that we still see no evidence of an inflection point coming or having occurred.

John C. Asbury: As a reminder, we also reported 13 basis points of annualized net charge-offs during the first quarter of 2023, yet for the full year 2023, the net charge-off ratio was only five basis points. Credit remains a good story at AUB, but we do not consider the negligible losses we have seen over the past few years to be sustainable. We anticipate that asset quality should eventually normalize following the long run of minimal net charge-offs, though we still see no evidence of an inflection point coming or having occurred.

John C. Asbury: For forecasting purposes, we continue to expect 10 to 15 basis points of net charge offs. During 2024. So we do not have visibility to enough potential charge offs that reached that level currently having said that idiosyncratic credit losses do happen as was the case with the two credits I mentioned earlier that's normal.

John C. Asbury: The expected, regardless, we remain confident and I'm pleased with our asset quality.

Turning now to our merger with American National as mentioned the transaction closed on April one and we're excited to have our new teammates and shareholders on board. After the deal was announced we spent a great deal of time with the American National team to get ready for legal day, one Anthony all important core systems conversion, which remains on track for late May we've already <unk>.

John C. Asbury: For forecasting purposes, we continue to expect 10 to 15 basis points of net charge-offs during 2024, though we do not have visibility to enough potential charge-offs to reach that level currently. Having said that, idiosyncratic credit losses do happen, as was the case with the two credits I mentioned earlier. That's normal and to be expected.

John C. Asbury: <unk> the first Mark system's conversion, which went well. This is our third acquisition of $3 billion asset bank. During my time here and we've refined our integration playbook. After each one based on lessons learned we're experienced at this and are expecting a smooth integration and conversions more so than anything else. It's the people of American national on our cultural.

John C. Asbury: Pat ability that excites us the more time, we spent with them at other markets. The more enthusiastic we become about the potential opportunities. We have together. Additionally, we continue to be bullish on the long term opportunity to leverage our new North Carolina markets as a growth platform and you can look for us to invest in them to drive organic growth over time, we've already.

John C. Asbury: Regardless, we remain confident in and pleased with our asset quality. Turning now to our merger with American National. As mentioned, the transaction closed on April 1, and we're excited to have our new teammates and shareholders on board. After the deal was announced, we spent a great deal of time with the American National team to get ready for legal day one and for the all-important core systems conversion, which remains on track for late May.

John C. Asbury: To add experienced bankers to the team there and intend to further build out our C&I capabilities in North Carolina, We believe American nationals markets and people coupled with our additional capabilities in the larger balance sheet safer a formidable combination.

John C. Asbury: In sum, we believe we are well positioned for 2024 and the strategic actions. We took last year to prepare for this challenging environment, coupled with financial benefits of the American National merger should differentiate <unk> performance going forward. We continue to believe we're on a reasonable growth footing and we won't hesitate to take the strategic actions, we deem necessary.

John C. Asbury: We've already completed the first mock systems conversion, which went well. This is our third acquisition of a $3 billion asset bank during my time here, and we've refined our integration playbook after each one based on lessons learned. We're experienced at this and are expecting a smooth integration and conversion.

John C. Asbury: More so than anything else, it's the people of American National and our cultural compatibility that excites me. The more time we spend with them and in their markets, the more enthusiastic we have become about the potential opportunities we have together. Additionally, we continue to be bullish on the long-term opportunity to leverage our new North Carolina markets as a grid platform, and you can look for us to invest in them to drive organic growth over time.

John C. Asbury: Gerry to strategically navigate the challenges we face in this uncertain economic environment.

John C. Asbury: As has been the case for some time, we expect uncertainty to continue, 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 last I'd like to thank our teammates at Atlantic Union Bank, because responses to the annual top work.

John C. Asbury: Places USA survey landed us a second consecutive national top workplace USA Award.

John C. Asbury: We've already begun to add experienced bankers to the team there and intend to further build out our C&I capabilities in North Carolina. We believe American nationals, markets, and people, coupled with our additional capabilities of a larger balance sheet, make for a formidable combination. In sum, we believe we're well positioned for 2024, and the strategic actions we took last year to prepare for this challenging environment, coupled with the financial benefits of the American national merger, should differentiate ABB's performance going forward.

John C. Asbury: This highly engaged team they are the ones who make it happen and then one other issue challenge or opportunity in the end the answer always lies with our people now.

John C. Asbury: Now more than ever Atlantic Union is uniquely valuable franchise that has diversified traditional full service bank with a strong brand and deep client relationships and stable and attractive markets I will now turn the call over to Rob to cover the financial results for the quarter Rob.

Robert Michael Gorman: Thank you John and good morning, everyone. Thanks for joining us today.

Robert Michael Gorman: I'd now like to take a few minutes to provide you with some details of Atlantic Union's financial results for the first quarter as Bill mentioned my comments today relate to Atlantic Union's financial results do not include financial results of American National since the transaction closed on April one.

John C. Asbury: We continue to believe we are on a reasonable growth footing, and we will not hesitate to take the strategic actions we deem necessary to strategically navigate the challenges we face in this uncertain economic environment. As has been the case for some time, we expect uncertainty to continue, 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.

Robert Michael Gorman: Also please note that for the most part my commentary will focus on Atlantic Union's first quarter financial results on a non-GAAP adjusted operating basis, which excludes the following pre tax items.

Robert Michael Gorman: <unk> of $1 9 million in the fourth quarter related to sale leaseback transactions.

Robert Michael Gorman: Yes, see special assistance of $3 4 million recognized in the fourth quarter and $840000 in the first quarter of three.

John C. Asbury: Last, I'd like to thank our teammates at Atlantic Union Bank whose responses to the annual Top Workplaces USA survey landed us a second consecutive National Top Workplace USA award: Highly Engaged Team. They are the ones who make it happen. And no matter the issue, challenge, or opportunity, in the end, the answer always lies with our people. Now more than ever, Atlantic Union is a uniquely valuable franchise that is diversified, traditional, full-service bank with a strong brand and deep client relationships in stable and attractive markets. I'll now turn the call over to Rob to discuss the financial results for the quarter.

Robert Michael Gorman: <unk> $3 3 million.

Robert Michael Gorman: Legal reserve related to a previously disclosed settlement with the CFPB and the fourth quarter.

Robert Michael Gorman: And merger related costs of $1 9 million in the first quarter and $1 million in the fourth quarter associated with our merger with American.

Robert Michael Gorman: In the first quarter reported net income available to common shareholders was $46 8 million and earnings per common share was <unk> 62.

Robert Michael Gorman: Adjusted operating earnings available to common shareholders was <unk> $49 million was <unk> 65 per common share for the first quarter.

Robert Michael Gorman: The first quarter's adjusted operating return on tangible common equity was 13, 9%. The adjusted operating return on assets was 99 basis points and on an adjusted operating basis. The efficiency ratio was 56, 8% in the first quarter.

Robert Michael Gorman: Thank you, John, and good morning, everyone. Thanks for joining us today.

Robert Michael Gorman: I'd now like to take a few minutes to provide you with some details of Atlantic Union's financial results for the first quarter. As Bill mentioned, my comments today relate to Atlantic Union's financial results and do not include financial results of American National since the transaction closed on April 1st. Also, please note that for the most part, my commentary will focus on Atlantic Union's first quarter financial results on a non-GAAP adjusted operating basis, which excludes the following pre-tax items.

Robert Michael Gorman: Turning to credit loss reserves as it is.

Robert Michael Gorman: As of the end of the first quarter. The total allowance for credit losses was $151 8 million.

Robert Michael Gorman: Which is an increase of approximately $3 3 million from the fourth quarter, primarily driven.

Robert Michael Gorman: By loan growth in the first quarter and the continued uncertainties in the economic outlook on certain loan portfolios.

Robert Michael Gorman: The total allowance for credit losses, as a percentage of total loans held for investment increased to 96 basis points at the end of the first quarter as compared to 95 basis points at the end of the fourth quarter.

Robert Michael Gorman: Gains of $1.9 million in the fourth quarter related to sale-leaseback transactions. FDIC special assessments of $3.4 million, recognized in the fourth quarter, and $840,000 in the first quarter. A $3.3 million legal reserve related to our previously disclosed settlement with the CFPB in the fourth quarter, and merger-related costs of $1.9 million in the first quarter and $1 million in the fourth quarter associated with our merger with American National. In the first quarter, reported net income available to common shareholders was $46.8 million, and earnings per common share was $0.62.

Robert Michael Gorman: Provision for credit losses of $8 $2 million in the first quarter was down from $8 $7 million in the prior quarter net charge offs increased to $4 9 million or 13 basis points annualized in the first quarter from $1 2 million or three basis points annualized in the fourth quarter Premier primarily related to two credit relationships, which were.

Robert Michael Gorman: Previously reserved for in the prior quarter's allowance for credit losses.

Robert Michael Gorman: Now turning to the pretax pre provision components of the income statement for the fourth first quarter tax equivalent net interest income was $151 $5 million and Thats, a decrease of $5 $8 million for the fourth quarter, primarily driven by higher deposit costs due to growth in average deposit balances and changes in the deposit mix.

Robert Michael Gorman: Adjusted operating earnings available to common shareholders were $49 million, or $0.65 per common share, for the first quarter. The first quarter's adjusted operating return on tangible common equity was 13.9%, the adjusted operating return on assets was 99 basis points, and on an adjusted operating basis, the efficiency ratio was 56.8%.

Robert Michael Gorman: In the lower day count in the quarter as well as higher short term borrowing costs due to an increase in average short term borrowings in the quarter.

Robert Michael Gorman: These decreases were partially offset by higher yields on our loan portfolio and higher average loan balances.

Robert Michael Gorman: Turning to credit loss reserves, as of the end of the first quarter, the total allowance for credit losses was $151.8 million, which is an increase of approximately $3.3 million from the fourth quarter, primarily driven by loan growth in the first quarter and the continued uncertainty in the economic outlook on certain loan portfolios. The total allowance for credit losses, a percentage of total loans held for investment, increased to 96 basis points at the end of the first quarter as compared to 95 basis points at the end of the fourth quarter. The provision for credit losses of $8.2 million in the first quarter was down from $8.7 million in the prior quarter.

Robert Michael Gorman: First quarter's tax equivalent net interest margin was 341, 9% and Thats a decrease of 15 basis points from the previous quarter due to an 80 basis point increase in the cost of funds, which was partially offset by a three basis point increase in the yield on earning assets due primarily to higher yields on loans.

Robert Michael Gorman: Loan portfolio yield increased six basis points to six 3% in the first quarter from $5, 97% in the fourth quarter, which added approximately five basis points to the net interest margin in the first quarter the.

Robert Michael Gorman: The increase was primarily due to the impact of higher market interest rates on new loan production yields as well as on renewing loan yields.

Robert Michael Gorman: The 80 basis point increase from the first quarter's cost of funds to 243% was due primarily to the 60 basis point increase in the cost of deposits for $2, three 9%, which had an approximate <unk> 11 basis points negative impact on the first quarter's net interest margin as well as a seven basis point margin.

Robert Michael Gorman: That charge loss increased to $4.9 million or 13 basis points annualized in the first quarter from 1.2 million or 3 basis points annualized in the fourth quarter, primarily related to two credit relationships which were previously reserved for in the prior quarter's allowance for credit. Now turning to the pre-tax, pre-provision components of the income statement for the fourth quarter, tax equivalent net interest income was $151.5 million, and that's a decrease of $5.8 million for the fourth quarter, primarily driven by higher deposit costs due to growth in average deposit balances and changes in the deposit mix and the lower day count in the quarter, as well as higher short-term borrowing costs due to an increase in average short-term borrowings in These decreases were partially offset by higher yields on the loan portfolio and a higher average loan balance.

Robert Michael Gorman: Impact negative impact of higher average short term borrowing balances in the quarter as funding mix.

Robert Michael Gorman: The deposit cost increase was primarily driven by changes in the deposit mix as the positives continue to migrate to higher cost of interest bearing deposit accounts during the quarter interest bearing deposit rates increase as a result of higher overall market rates and the continuing competitive deposit pricing environment.

Robert Michael Gorman: Adjusted non operating noninterest income, which excludes the $1 $9 million gain on a sale leaseback transaction, we recorded in the prior quarter decreased $2 5 million to $25 5 million for the fourth quarter, primarily due to a $2 $4 million decline in loan related interest rate swap fees as swap transactions.

Robert Michael Gorman: First quarter's tax equivalent net interest margin was 3.19 percent, and that was a decrease of 15 basis points from the previous quarter due to an 18 basis point increase in the cost of funds, which was partially offset by a three basis point increase in the yield on earning assets due primarily to higher yields on loans. The loan portfolio yield increased six basis points to 6.03% in the first quarter from 5.97% in the fourth quarter, which added approximately five basis points to the net interest margin in the first quarter.

Robert Michael Gorman: Increased from the seasonally high fourth quarter levels.

Reported noninterest expense decreased approximately $2 $6 million to a $105 3 million for the first quarter from $107 $9 million in the prior quarter.

Robert Michael Gorman: Adjusted operating noninterest expense, which excludes amortization of intangible assets.

Robert Michael Gorman: Excluding the FDIC special assessment in both the fourth quarter 23 in the first quarter of 'twenty for the legal reserve associated with our previously disclosed settlement with the CFPB in the fourth quarter and merger related costs associated with our merger with American National in the fourth and first quarters increased $2 5 million to 100.

Robert Michael Gorman: The increase was primarily due to the impact of higher market interest rates on new loan production yields, as well as on renewing loan prices. The 18 basis point increase in the first quarter's cost of funds to 2.43% was due primarily to the 16 basis point increase in the cost of deposits to 2.39%, which had an approximately 11 basis points negative impact on the first quarter's net interest margin, as well as a seven basis point margin impact due to the negative impact of higher average short-term borrowing balances on the Quarterly Funding Bill.

Robert Michael Gorman: $7 million from $98 2 million in the prior quarter.

Robert Michael Gorman: The increase in adjusted operating expenses was primarily driven by a $5 $2 million increase in salaries and benefits due to seasonal increases in payroll related taxes and 401Key contribution expenses in the first quarter, which were partially offset by a $1 $3 million decline in professional services expenses and.

Robert Michael Gorman: $700000 decline in marketing and advertising expenses.

Robert Michael Gorman: The deposit cost increase was primarily driven by changes in the deposit mix, as depositors continued to migrate to higher costing interest-bearing deposit accounts during the quarter. Interest-bearing deposit rates increased as a result of higher overall market rates and the continuing competitive deposit pricing environment. The adjusted operating non-interest income, which excludes the $1.9 million gain on a sale-leaseback transaction recorded in the prior quarter, decreased $2.5 million to $25.5 million from the fourth quarter, primarily due to a $2.4 million decline in loan-related interest rate swap fees as swap transactions decreased from the seasonally high fourth quarter level. Reported non-interest expense decreased approximately $2.6 million to $105.3 million for the first quarter from $107.9 million in the prior quarter.

Robert Michael Gorman: At the end of March loans held for investment net of deferred fees and costs was $50 9 billion, an increase of $216 million.

Robert Michael Gorman: Dollars or five 6% annualized from the prior quarter driven by increases in commercial loan balances of $271 million or 2% linked quarter annualized partially offset by declines in consumer loan balances of $54 million or nine 4% annualized primarily due to the runoff of auto loan balances.

Robert Michael Gorman: Related to the strategic decision made last year to exit the indirect auto loan business.

Robert Michael Gorman: At the end of March total deposits stood at 73 billion, an increase of $460 million of approximately 11% annualized from the prior quarter, primarily due to decreases in interest bearing customer deposits and broker deposits, partially offset by declines in demand deposits, which now stands at 22% of total.

Robert Michael Gorman: Adjusted Operating Expense, which excludes amortization of intangible assets, moved to the FDIC Special Assessment in both the fourth quarter, 23, and the first quarter of 24. The legal reserve associated with our previously disclosed settlement with the CFPB in the fourth quarter and merger-related costs associated with our merger with American National in the fourth and first quarters increased $2.5 million to $100.7 million from $98.2 million in the prior quarter. The increase in adjusted operating expenses was primarily driven by a $5.2 million increase in salaries and benefits due to seasonal increases in payroll related taxes and 401k contribution expenses in the first quarter, which were partially offset by a $1.3 million decline in professional service expenses and a $700,000 decline in marketing and advertising expenditure.

Robert Michael Gorman: Deposits.

Robert Michael Gorman: At the end of the first quarter Atlantic Union, Bankshares, and Atlantic Union Bank regulatory capital ratios were comfortably above well capitalized levels. In addition on an adjusted basis, we remain well capitalized as it would be under first quarter. If you include the negative impact of <unk>.

Robert Michael Gorman: And held to maturity securities unrealized losses in the calculation of the regulatory capital ratios.

Robert Michael Gorman: During the first quarter the company paid a common stock dividend of 32 per common share, which was an increase of six 7% from the previous year's quarterly dividend.

As noted on slide 14, we've now updated our full year 2024 financial outlook outlook for <unk> to include the estimated post closing impact of the American National acquisition, beginning in April and it will also provide comments related to our fourth quarter run rate revenue and expense targets to highlight the financial benefits of the acquisition.

Robert Michael Gorman: At the end of March, loans held for investment, net of deferred fees and costs, were $15.9 billion, an increase of $216 million. [inaudible] At the end of March, total deposits stood at $17.3 billion, an increase of $460 million or approximately 11% annualized from the prior quarter, primarily due to increases in interest-bearing customer deposits and broker deposits, partially offset by declines in demand deposits, which now stand at 22% of total deposits.

Robert Michael Gorman: Once we complete the systems conversion work and achieve our 40% cost savings goal.

Robert Michael Gorman: Please note that the 2024 financial outlook includes preliminary estimates of the purchase accounting adjustments that are subject to change.

Robert Michael Gorman: We now expect loan balances to end the year at or above $18 million, what year end deposit balances are projected to be at or above 19 8 billion.

Robert Michael Gorman: Fully tax equivalent net interest income for the full year is now projected to come in between $725 million and $740 million.

Robert Michael Gorman: At the end of the first quarter, Atlantic Union bank shares and Atlantic Union bank's regulatory capital ratios were comfortably above well capitalized levels. In addition, on an adjusted basis, we remain well capitalized as of the end of the first quarter, if you include the negative impact of AOCI and held to maturity security unrealized losses in the calculation of the regulatory capital ratio. During the first quarter, the company paid a common stock dividend of 32 cents per common share, which was an increase of 6.7% from the previous year's quarterly dividend.

Robert Michael Gorman: And we are targeting the fourth quarter fully tax equivalent net interest income run rate to fall.

Robert Michael Gorman: Between $195 million and $205 million.

Robert Michael Gorman: As a result, we are projecting that the full year fully tax equivalent net interest margin will fall on a range between three 4% and three 5% for the full year and we are targeting between 355% and 365% in the fourth quarter driven by our baseline assumption that the federal Reserve Bank will cut the fed fund.

Robert Michael Gorman: Rates by 25 basis points twice in 2024 beginning in September.

Robert Michael Gorman: As noted on slide 14, we've now updated our full year 2024 financial outlook for AUB to include the estimated post-closed impact of the American National Acquisition beginning in April, and have also provided comments related to our fourth quarter run rate revenue and expense targets to highlight the financial benefits of the acquisition once we complete the systems conversion work and achieve our 40% cost savings goal. Please note that the 2024 financial outlook includes preliminary estimates of purchase accounting adjustments that are subject to change.

Robert Michael Gorman: This is a fully tax equivalent net interest margin projection and target ranges include the impact of our preliminary estimate of net accretion income from the American National transaction, which is subject to change once purchase accounting adjustments are finalized and which can be volatile quarter to quarter.

Robert Michael Gorman: In addition, the net interest margin projection the target ranges assume that our through the cycle total deposit beta will be approximately 45%, which will be more than offset by the projected through the cycle loan yield data of approximately 50%.

Robert Michael Gorman: The through the cycle interest bearing deposit beta is expected to be approximately 58%.

Robert Michael Gorman: We now expect loan balances to end the year at or above $18 billion, while year-end deposit balances are projected to be at or above $19.8 billion. Fully tax-equivalent net interest income for the full year is now projected to come in between $725 million and $740 million, and we are targeting the fourth quarter fully tax-equivalent net interest income run rate to fall between $195 million and $205 million. As a result, we are projecting that the full year fully taxed equivalent net interest margin will fall in the range between 3.4% and 3.5% for the full year.

Robert Michael Gorman: The current rate cycle is projected to end when the <unk> pivots to reducing the fed funds rate, which as noted we now assume we will begin in September.

Robert Michael Gorman: On a full year basis, adjusted operating noninterest income as expected is expected to be between $105 million to $150 million and we are targeting the fourth quarter adjusted operating noninterest income run rate to fall between 30% and $35 million.

Robert Michael Gorman: Adjusted operating noninterest expenses for the full year are estimated to fall in the range of $445 million to $455 million, while the fourth quarter adjusted operating noninterest expense run rate. We are targeting here is expected to be between $110 million to $150 million, which assumes full achievement of our 40% merger.

Robert Michael Gorman: And we are targeting between 3.55% and 3.65% in the fourth quarter, driven by our baseline assumption that the Federal Reserve Bank will cut the Fed funds rate by 25 basis points twice in 2024, beginning in September. In addition, the 40-tax equivalent net interest margin projection and target ranges include the impact of our preliminary estimate of net accretion income from the American National Transaction, which is subject to change once purchase accounting adjustments are finalized and which can be volatile quarter to quarter.

Robert Michael Gorman: Related cost saves on a run rate basis, beginning in the fourth quarter.

Based on these projections in fourth quarter run rate targets, we expect to produce financial returns that will place us within the top quartile of our peer group and meet our objectives of delivering top tier financial performance for our shareholders.

Robert Michael Gorman: In summary, Atlantic Union delivered solid financial results in the first quarter. Despite the challenging banking environment we are.

Robert Michael Gorman: <unk> through <unk>.

Robert Michael Gorman: American National transaction closed April 1st as John said, the integration work is going very well and we remain confident that we will achieve the financial benefits of the combination once the cost saves.

Robert Michael Gorman: In addition, the net interest margin projection and target ranges assume that our through-the-cycle total deposit data will be approximately 45%, which will be more than offset by the projected through-the-cycle loan yield data of approximately 50%. The through-the-cycle interest-bearing debited beta is expected to be approximately 58%. The current rate cycle is projected to end when the FOMC pivots to reducing the Fed's funds rate, which, as noted, we now assume will begin in September.

Robert Michael Gorman: Savings are fully realized on a run rate basis, starting in the fourth quarter.

Robert Michael Gorman: 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.

Robert Michael Gorman: And with that let me turn it over to Bill <unk> for questions. Thank you, Rob and Didi, we're ready for our first of all our fleet.

Robert Michael Gorman: At a four-year basis, adjusting operating non-interest income is expected to be between $105 and $115 million. And we are targeting the fourth quarter adjusted operating non-interest income run rate to fall between $30 and $35 million. Adjusted operating non-interest expenses for the full year are estimated to fall in the range of $445 to $455 million, while the fourth quarter adjusted operating non-interest expense run rate we are targeting is expected to be between $110 and $150 million, which assumes full achievement of our 40% merger-related cost saves on a run rate basis beginning in the fourth

Bill: Thank you.

Bill: Okay.

Bill: One moment for our first question.

Bill: Okay.

Bill: And our first question comes from Catherine Mealor of K B W.

Catherine Fitzhugh Summerson Mealor: Good morning Catherine.

Catherine Fitzhugh Summerson Mealor: Good morning.

Speaker Change: Steve Rob if you could.

Catherine Fitzhugh Summerson Mealor: And the NIM guidance that you laid out is there any way just to put a range on where youre thinking the accretable yield will go and then maybe even outside of that where you think the core NIM will go within that guidance.

Catherine Fitzhugh Summerson Mealor: Yes.

Speaker Change: If you kind of.

Steve Rob: Our projection from a core perspective is for 2024 is to fall within a $3 20 to 330 range.

Robert Michael Gorman: Based on these projections and fourth quarter run rate targets, we expect to produce financial returns that will place us within the top quartile of our peer group and meet our objectives of delivering top-tier financial performance for our shareholders. In summary, Atlantic Union delivered solid financial results in the first quarter despite the challenging banking environment we are effectively managing through. The American National Transaction closed April 1st, and as John said, the integration work is going very well, and we remain confident that we will achieve the financial benefits of the combination once the cost savings are fully realized on a run rate basis starting in the fourth quarter.

Steve Rob: On top of that if you look at what we've projected for the for the reported numbers.

Steve Rob: Could add 20 to 25 basis points to that which would primarily be the American national.

Steve Rob: Including accretion income.

Speaker Change: Okay great.

Speaker Change: Great and so then you still then.

Speaker Change: And that core 320 to 330.

Speaker Change: Two rate cuts. So it seems like you still have two rate cuts do you feel like youre going to get some expansion from this quarter's level.

Speaker Change: Or does that look like if we don't get any rate cuts.

Speaker Change: Our sensitivity to that.

Speaker Change: If you don't get a rig rate cuts.

Robert Michael Gorman: As a result, we believe we're well positioned to continue to generate sustainable, profitable growth and to build long-term value for our shareholders in 2024 and beyond. And with that, I'll turn it over to Bill Cimino for questions.

Speaker Change: Catherine the impact is actually two or three basis points to the good.

Catherine Fitzhugh Summerson Mealor: Primarily because we won't see.

Catherine Fitzhugh Summerson Mealor: The rate cuts that they don't happen, we would see our variable rate loan yields declined by whatever the fed cuts.

William P. Cimino: Thank you, Rob. And Dede, we're ready for our first caller, please. Okay, thank you.

Catherine Fitzhugh Summerson Mealor: So it's actually a benefit.

Operator: Okay, thank you. One moment for our first question.

Catherine Fitzhugh Summerson Mealor: Two to three basis points.

Catherine Fitzhugh Summerson Mealor: For 2015.

Catherine Fitzhugh Summerson Mealor: Sure.

Speaker Change: Got it Okay, and then with that within that margin guide, if we look at deposit costs deposit cost.

Operator: And our first question comes from Catherine Mealor of KBW. Good morning, Catherine. Hey, good morning.

It creates a little bit more than I had expected. This quarter are you seeing stabilization towards the end of the quarter and just any kind of comments on maybe spot rates on deposit costs.

Catherine Fitzhugh Summerson Mealor: I want to see, Rob, if there is any way, in the NIM guidance that you lay out, to put a range on where you're thinking the credible yield will go, and then maybe even outside of that, where you think the core NIM will go within that guidance?

Speaker Change: March or April and then.

Speaker Change: Maybe even what that looks like with American national.

Robert Michael Gorman: Yeah, so if you kind of look at our projection from a core perspective for 2024, it is to fall within a 320 to 330 range. On top of that, if you look at what we've projected for the reported numbers, you can add 20 to 25 basis points to that, which would primarily be the American national impact, including accretion.

Speaker Change: Sure.

Speaker Change: Yes, so in terms of.

Speaker Change: We ended the quarter. If you look at March we were up a little bit.

Speaker Change: From the reported full quarter average.

Speaker Change: 243.

Speaker Change: Percent with total cost of deposits are up about three or four basis points from the average for the for the first quarter, we are projecting that those deposit costs.

Speaker Change: We'll be increase.

Robert Michael Gorman: Great. And so then you still assume that the core 320 to 330, that assumes two rate cuts. So it seems like you still know with two rate cuts, you feel like you're going to get some expansion from this quarter's level. But what does that look like if we don't get any rate cuts? How much sensitivity is there to that? Yeah, if we don't get any rate cuts, Catherine, the impact is actually two or three basis points to the good, primarily because we won't see the rate cuts. If they don't happen, we wouldn't see our variable rate loan yields decline by whatever. So it's actually a benefit.

Speaker Change: Through the second quarter.

Speaker Change: It kind of stabilize.

Speaker Change: The third quarter.

Speaker Change: Hopefully see a bit of a decline in the fourth quarter, if we see those rate cuts.

Speaker Change: We're calling for.

Speaker Change: I would say that yes.

Speaker Change: We think it will stabilize and call it.

Speaker Change: Give or take approximately two 5% range in terms of total deposit costs again, assuming that the fed cuts.

Speaker Change: Back half of the year.

Speaker Change: Okay, Great and then maybe one last margin related question.

Speaker Change: Yes.

Speaker Change: Does this forecast and the margin assume that.

Speaker Change: Got you liquidate American National's bond portfolio and reinvest that how do we think about that.

Speaker Change: Yes.

Speaker Change: That's true.

Speaker Change: We do expect that we've actually done some restructuring where we've.

Catherine Fitzhugh Summerson Mealor: You have two to three days. Okay, great. We're 24, got it. Okay. And then within that margin guide, if we look at deposit costs, deposit costs increased a little bit more than I had expected this quarter. Are you seeing stabilization towards the end of the quarter and just any kind of comments on maybe spot rates on deposit costs, you know, towards March or April and then maybe even what that looks like with American National?

Speaker Change: Right after close.

Speaker Change: About two thirds of the portfolio.

Speaker Change: Our restructured.

Speaker Change: And Youll see that coming out is obviously.

When we report our second quarter earnings but that.

Speaker Change: That is.

Speaker Change: Where we think we will end up as we've kind of completed that restructuring early in April and you'll see the benefits of that as we go forward.

Speaker Change: Sure.

Speaker Change: The accretion income.

Robert Michael Gorman: Yeah, so in terms of where we ended the quarter, if you look at March, you know, we were up a little bit from the reported full-quarter average, where 2.43% was the total cost of deposit, so up about three or four basis points from the average for the first quarter. We are projecting that those deposit costs will increase, you know, through the second quarter and kind of stabilize in the third quarter and hopefully see a bit of a decline in the fourth quarter if we see those rate cuts that we're calling for.

Speaker Change: Does it include the benefits of that.

Speaker Change: Because that will come through Gordon interest margin going forward.

Speaker Change: Okay perfect alright, thanks for all the clarity I appreciate it.

Speaker Change: Thanks, Catherine and Didi, we're ready for our next caller. Please thank you one moment.

Speaker Change: And our next question comes from Casey Whitman of Piper Sandler.

Casey Cassiday Orr Whitman: Hey, good morning.

Casey Cassiday Orr Whitman: Hi.

Casey Cassiday Orr Whitman: John I think you mentioned that you think we're nearing the bottom to the mix shift out of noninterest bearing can you just I mean, what gives you confidence there or what can you point to.

Robert Michael Gorman: I would say that, you know, we think we'll stabilize and call it. If you were to take the approximately 2.5% range in terms of total deposit costs, again assuming that the Fed cuts in the back half of the year.

Casey Cassiday Orr Whitman: For us thanks.

Casey Cassiday Orr Whitman: Sure well if you look at the pace of decline, it's becoming more shallow so its inflected. So we've seen it go down at a declining pace.

Catherine Fitzhugh Summerson Mealor: Okay, great. And maybe one last margin related question is, does this forecast in the margin assume that you liquidate American National's bond portfolio and then reinvest that? How do we think about that?

Casey Cassiday Orr Whitman: The other thing is historically speaking, we're starting to get closer to what we saw say pre pandemic now bear in mind, we have a larger base of commercial industrial clients.

Robert Michael Gorman: Yes, that's true. We do expect that. We've actually done some restructuring where, right after close, we're about two-thirds of the portfolio we restructured. You'll see that coming out, obviously, when we report second-quarter earnings, but that is where we think we'll end up. We've kind of completed that restructuring early in April, and you'll see the benefits of that as we go forward. Accretion income doesn't include the benefits of that because that will come through a coordinated margin going forward.

Operating accounts that are normally noninterest bearing.

Casey Cassiday Orr Whitman: And as we look at the.

Casey Cassiday Orr Whitman: Pace over the last couple of months up to now it's simply been on a declining trend Casey it's unlikely that businesses are suddenly waking up realizing they have large dollars sitting in their noninterest bearing account. They forgot about it is more likely than what's happening is that they are becoming more efficient in terms of our cash.

Catherine Fitzhugh Summerson Mealor: Perfect. All right. Thanks for all the clarity. I appreciate it. Indeed, we're ready for our next caller. Thank you.

Casey Cassiday Orr Whitman: <unk> activities, because its now to their advantage to do that and to some extent, we see companies using their cash as well because it's more expensive the borrower.

William P. Cimino: Thanks Catherine, and DeeDee. We're ready for our next caller, please.

Operator: And our next question comes from Casey Whitman of Piper Sandler.

Casey Cassiday Orr Whitman: They will pay cash for things they might have financed in the past, but what we see is a declining trend and it's impossible to predict with precision, but it certainly looks like it's on it.

Casey Cassiday Orr Whitman: Hi Casey. Hey, good morning.

Casey Cassiday Orr Whitman: Hi John, I think you mentioned that you think we're nearing the bottom for the makeshift out of Nondrews Bearing. Can you just, I mean, what gives you confidence there? Or what can you point to for us?

Casey Cassiday Orr Whitman: The slope of the line leads us to believe we are nearing the bottom.

Casey Cassiday Orr Whitman: I would also add that American national social from that point of view because they are about 31%.

John C. Asbury: Thanks.

John C. Asbury: I'm sure if you look at the pace of decline, it's becoming more shallow, so it's inflected, so we've seen it go down at a declining pace. The other thing is, you know, historically speaking, we're starting to get closer to what we saw, say, pre-pandemic. Now, bear in mind, we have a larger base of commercial industrial clients who have operating accounts that are normally non- And as we look at the pace over the last couple of months, you know, up to now, it's simply been on a declining trend, Casey.

Casey Cassiday Orr Whitman: Noninterest bearing to total deposits. So we'll be blend to together would probably give you back to about a 24% give or take but.

Casey Cassiday Orr Whitman: To John's point.

Casey Cassiday Orr Whitman: At the bottom here at around 22% on a <unk>.

Casey Cassiday Orr Whitman: Standalone basis.

Casey Cassiday Orr Whitman: We think yes, yes.

We'll see what happens with correct.

Speaker Change: Perfect. Thank you and then piggybacking on catherines questions.

Robert Michael Gorman: Rob can you.

Robert Michael Gorman: Walk us through what the size of the overall balance sheet than might be.

John C. Asbury: It's unlikely that businesses are suddenly waking up, realizing they have large amounts sitting in their non-interest-earning account that they forgot. It is more likely that what's happening is that they're becoming more efficient in terms of their cash management activities because it's now to their advantage to do that. And to some extent, we see companies using their cash as well because it's more expensive to borrow. So they will pay cash for things they might have financed in the past.

Robert Michael Gorman: With with American National.

Robert Michael Gorman: Yes, so its about three.

Robert Michael Gorman: $3 billion.

Robert Michael Gorman: In terms of.

Robert Michael Gorman: Yes.

Robert Michael Gorman: Total assets at closing so we expect we will continue to grow.

Robert Michael Gorman: I think we were at $24 5 billion build pro forma.

Robert Michael Gorman: <unk> numbers, so we expect to grow loan the loan book about 5% on a combined basis.

John C. Asbury: But what we see is a declining trend, and it's impossible to predict with precision. But it certainly looks like it's on a, The slope of the line leads us to believe we're nearing the bottom.

Robert Michael Gorman: A full year basis reported.

Robert Michael Gorman: Okay.

Robert Michael Gorman: So youll see those assets grew accordingly.

Robert Michael Gorman: Okay.

Robert Michael Gorman: Understood.

Speaker Change: And then maybe just a bigger picture question on M&A. Obviously, you just closed snack nationally you've got the systems conversion I think Gordon May John can you walk us through sort of your thoughts around future M&A and how we should think Atlanta's cninsure.

John C. Asbury: I'd also add that American National is helpful from that point of view because they're about 31% not interest bearing on total deposits. So when we blend them together, we're probably getting back to about a 24%, give or take, but to John's point, we think we're at the bottom here at around 22% on an AU based standalone basis.

Robert Michael Gorman: Sure.

Gordon May: It's hard to think about anything, but a successful conversion and integration of American National Bank right now, but I understand your question because we always do try to think a couple of steps ahead Casey.

Casey Cassiday Orr Whitman: Okay. Yeah, yeah. We'll see what happens. Right?

Casey Cassiday Orr Whitman: Perfect, thank you. And then piggybacking on some of Catherine's questions, just, I guess, Rob, can you walk us through what the size of the overall balance sheet then might be with American National?

Gordon May: Nothing has changed in terms of our declared priorities first organic performance of this bank that now includes American national make the most of what we have right here right now that is by far the most important thing we have to do second innovation and transformation activities. We have a lot of work underway. There we have a new.

Robert Michael Gorman: Yeah, so it's about, you know, about $3 billion in terms of their total assets at closing. So we expect that will continue to grow. I think we're at $24.5 billion bill, pro forma 331 number. So we expect to grow the loan book about 5% on a combined basis, on a full year basis reported. So you see those assets grow.

Gordon May: Mobile and online banking platform Thats coming online this year as well.

Gordon May: A lot went onto the technology space and we see continued opportunity for automation, which will pull expense out improved quality.

Casey Cassiday Orr Whitman: And then maybe just a bigger picture question on M&A, obviously, you just closed American National, and you've got the systems conversion, I think, going on in May. John, can you walk us through sort of your thoughts around future M&A? And what would you think about Atlantic Union?

Gordon May: <unk> and its a distant third would be strategic investment to include a whole bank acquisition. So.

John C. Asbury: Sure, it's hard to think about anything but a successful conversion and integration of American National Bank right now. But I understand your question, because we always try to think a couple of steps ahead. Casey, nothing has changed in terms of our declared priorities.

Gordon May: We have had other conversations that have gone on for years, just like American National Bank went on for years.

Gordon May: You never know what the timing would be if all goes well with American National Bank and everything is in good order, we consider something else consistent with what we described before we might if it made strategic and financial SaaS side I Hope, we're being clear that first things come first.

John C. Asbury: First, organic performance of this bank that now includes American National. Make the most of what we have right here, right now. That is by far the most important thing we have to do. Second, innovation and transformation activities. We have a lot of work underway there. We have a new mobile and online banking platform that's coming online this year as well. A lot has happened in the technology space, and we see continued opportunity for automation, which will pull expense out and improve quality.

Speaker Change: Great. Thank you for the call.

Speaker Change: And BD, we're ready for our next caller. Please thank you one moment.

Speaker Change: And our next question comes from Steve Moss of Raymond James.

Speaker Change: Steve.

John C. Asbury: Third, and it's a distant third, would be strategic investment to include the whole bank acquisition. So we have had other conversations that have gone on for years, just like American National Bank went on for years. You never know what the timing will be. If all goes well with American National Bank and everything is in good order, would we consider something else consistent with what we described before? We might, if it made strategic and financial sense. But I hope we're being clear that first things come first. Great

Stephen M. Moss: I see.

Stephen M. Moss: Okay.

Yes, Steve.

He removed from Q, let me promote the next person.

Stephen M. Moss: Yes.

Stephen M. Moss: Sure.

Stephen M. Moss: Our next question comes from David Bishop of Husky Group.

David Jason Bishop: Hey, David Good morning, David.

David Jason Bishop: Okay.

David Jason Bishop: Okay.

David Jason Bishop: David Your line is open.

David Jason Bishop: Hey, sorry about that can you hear me.

David Jason Bishop: You're making me nervous David.

David Jason Bishop: Alright.

Speaker Change: Patients are being promoted thank you yes.

John C. Asbury: Hey, John just curious.

William P. Cimino: Thank you, Casey. And DeeDee, we're ready for our next caller, please. Thank you. One moment.

John C. Asbury: Obviously, you mentioned at the beginning the resilience in the economy.

Operator: And our next question comes from Steve Moss of Raymond James.

Operator: Have we lost Steve? Key removed from CULA.

John C. Asbury: And the opportunities in the new markets in North Carolina.

Operator: He was removed from the queue. Let me promote the next person. Okay. Our next question comes from David Bishop of Hub-D Group. Hi, David. Good morning. David, your line is open.

John C. Asbury: Just curious how to reconcile that with what appears to be maybe conservative guidance in terms of loan growth or are there. Some portfolios, maybe youre going to run off post close but that sort of may.

David Jason Bishop: Hey, sorry about that. Can you hear me?

David Jason Bishop: You're making me nervous, David. Congratulations on being promoted.

Speaker Change: Maybe you can provide.

David Jason Bishop: Hey, John, just curious, you know, obviously you mentioned at the beginning the resilience and the economy and the opportunities in the new markets in North Carolina. Just curious how to reconcile that with what appears to be maybe conservative guidance in terms of loan growth, or are there some portfolios maybe you're going to run off post-close that sort of, you know, maybe provides the lower end of the loan growth guidance. Just curious maybe what, you know, just reconcile maybe some of the guidance versus the economic reality. Yes. There are no loans. There are no runoff portfolios associated with American National Bank.

Speaker Change: Lower end of the loan growth guidance, just curious maybe what.

Speaker Change: Reconciled maybe some of the guide here versus the.

Speaker Change: The reality, yes, there are no there are no runoff portfolios associated with American National Bank, the only runoff portfolio in our bank I suppose you would say would be the indirect auto finance.

We have things like office that we certainly don't have any appetite for taking on new exposure as well, but David I think perhaps David rang head of wholesale banking are commercial related businesses can comment here.

John C. Asbury: The only runoff portfolio in our bank, I suppose you would say, would be the indirect auto finance portfolio. We have things like offices that we certainly don't have any appetite for taking on new exposure as well. But, David, I think perhaps David Ring, Head of Wholesale Banking of Commercial-Related Businesses, can comment here. We do think that clients are being cautious. We feel good about these economies.

David Jason Bishop: We do think that clients are being cautious we feel good about these economies, we feel good about credit, but there is less investment going on right now so I think that the mid.

David Jason Bishop: Mid single digit loan growth guidance.

Speaker Change: Where we stand today is a good expectation could it be better than that I think it could.

Speaker Change: What is your view.

Speaker Change: While there are we've seen fewer opportunities opportunities.

John C. Asbury: We feel good about credit, but there is less investment going on right now. So I think that the mid-single-digit loan growth guidance where we stand today is a good expectation. Could it be better than that? I think it could.

Speaker Change: The shrink a little bit our pipelines are still good but there.

Rebuilding and Theyre more early stage in the pipeline. So we feel like down the road.

David V. Ring: Dave, what's your view? Well, there are, we've seen fewer opportunities, opportunities, a little bit. Our pipelines are still good, but they're rebuilding in their more early stages.

Speaker Change: No.

Speaker Change: And the new markets, where.

Speaker Change: We're exploring expansion opportunities to take advantage of those margins and we think they're going to provide more growth in the back half of the year as well. So we feel like we've never been one of the banks that we operate around the fringe of the credit.

David V. Ring: So, you know, we feel like, down the road, there's good growth in the new markets, you know, we're exploring expansion, feel like we've never been one of the banks that would offer... You know, we haven't changed our standards, and we're simply more. So I think that's a pretty conservative approach, David, and if things change as we gain more experience in the year, we'll obviously revisit our guidance.

Speaker Change: And so we haven't changed our standards and we're simply more cautious around some of the real estate asset class I would agree. So I think that's a pretty conservative approach David and.

Speaker Change: If things change as we gain more experience.

Speaker Change: In the year, we'll obviously revisit our guidance, but I think that's a good reasonable assumption.

David V. Ring: But I think that's a good reasonable assumption. Got it. And then, John, just in terms of, or Rob, you know, noted a little bit of growth in broker deposits. Just curious if there's any sort of cliff maturation or maturation and maybe what those average costs are.

Speaker Change: Got it and then John just in terms or for Rob.

Speaker Change: No to the.

Speaker Change: A little bit of growth in broker deposits just curious if there is.

John C. Asbury: Any sort of cliff maturation of maturation and maybe what those average costs are.

Robert Michael Gorman: Yeah, so the average cost is, it's a little over 5%, I think five and a quarter. We've got two tranches, two or three tranches, I guess three, about 150 million. We went a little extended the duration a bit to take advantage of the inverted curve.

Speaker Change: Yes, so the average cost is a little over 5% or 55% a quarter we've got.

Speaker Change: We've got two tranches two.

Speaker Change: Two or three tranches, I guess three about $150 million.

Speaker Change: We went a little extended duration a bit to take advantage of the inverted curve that those costs are about four.

Robert Michael Gorman: Those costs are about approximately $4.50 blended. And then we've got some one-month costs for the broker that's maturing, you know, over the next few months, here, and that's paying about a five and a quarter for those. So those numbers move up and down depending on what the funding requirements are at any particular point in time. So, as John said, we're just a bit under 4% of total deposits are brokered. And we've run anywhere from 2% to 4% in the past.

Speaker Change: Approximately $4 50 blended.

Speaker Change: And then we've got some.

Speaker Change: One months.

Speaker Change: Brokered.

Speaker Change: Maturity.

Speaker Change: In the next few months.

Speaker Change: Here.

Speaker Change: On the SP paying about five and a quarter for those.

Speaker Change: So.

Speaker Change: Those numbers move up and down depending on what the funding requirements are.

Speaker Change: At any particular point in time, so as John said, we're just a bit under 4% of total deposits and brokered we've run anywhere from 2% to 4% in the past.

Robert Michael Gorman: Do you think that it stays around that range? Yes, yeah. Got it. And then maybe on the loan side, just curious what six or eight loans might be repricing at an average rate versus what they reprice into. Thanks. Yeah, so...

Speaker Change: Do you think that stays around that range.

Speaker Change: Yes, yes, I do.

Got it and then maybe on the on the loan side just curious what.

Speaker Change: Fixed rate loans that might be repricing.

Speaker Change: Average rate versus what they re price sensitive.

Robert Michael Gorman: Yeah, so the repricing of the fixed rate loans, I think we're putting on about seven and a half percent, so up considerably from where the fixed rate Loan Yield is on the portfolio today. So it's been, it's been inching up over the last several quarters, and right, the most recent quarter was about seven and a half percent on the fixed. Great, thank you.

Speaker Change: Yes, so the repricing of the fixed rate loan category putting on about.

Speaker Change: Seven 5%.

Speaker Change: So up considerably from where the fixed rate.

Speaker Change: Sure.

Speaker Change: Loan yields on the portfolio today.

Speaker Change: So it's been it's been inching up.

Speaker Change: Last several quarters.

Speaker Change: Great.

Speaker Change: The most current quarter was about seven 5% on the fixed side.

Speaker Change: Sure.

Speaker Change: Great. Thank you.

Thanks, Dave gave you we are ready for our next caller. Please okay. Thank you one moment.

Operator: [inaudible]

Russell Elliott Teasdale Gunther: And our next question comes from Russell Gunther of Stevens.

Speaker Change: Okay.

Speaker Change: And our next question comes from Russell Gunther of Stephens.

Russell Elliott Teasdale Gunther: Good morning. I appreciate all the color on the margin. I just had a follow-up. So as we think about the roughly 20 to 25 basis points of Purchase Accounting Contribution, how does that cadence look for next year? Is that a decent kind of run rate into 25 or just trying to get a sense as to when veterans contribution could begin to taper?

Russell Elliott Teasdale Gunther: Hi, Good morning, good morning, good morning.

Russell Elliott Teasdale Gunther: I appreciate all the color on the margin I just had a follow up so as we think about the roughly 20 to 25 basis points of purchase accounting contribution.

Russell Elliott Teasdale Gunther: How does that cadence look for next year is that a decent kind of run rate in the 25 or just trying to get a sense as to when.

Russell Elliott Teasdale Gunther: Net earnings contribution could begin to taper.

Robert Michael Gorman: Yeah, so that's a blue 25. Yeah, that's a good estimate. We're talking about 25 base points in 2025. It starts to taper a bit as we get into 26 and 27. Of course, as you know, the [inaudible] Loan Interest Rate Mark is what we're talking about.

Russell Elliott Teasdale Gunther: Yes.

Russell Elliott Teasdale Gunther: So those are 225, yeah. That's a good estimate it we're talking about 25 basis points in 2025 starts to taper a bit.

Russell Elliott Teasdale Gunther: As we get into 2006 and 2007.

Russell Elliott Teasdale Gunther: Of course as you know.

Russell Elliott Teasdale Gunther: Depreciate income can be volatile, depending on prepays et cetera, but.

Russell Elliott Teasdale Gunther: That's our current estimate we're doing essentially four to five years some of the year digits honor.

Russell Elliott Teasdale Gunther: Loan interest rate Mark is where we go from there.

John C. Asbury: That's really helpful, thank you. And then just a quick one on the loan growth outlook. So could you give us a sense for how you're going about investing in the Carolina markets? I think you mentioned adding some bankers there? If there's, you know, a number you could share or general background, what's the opportunity set to continue to add commercial lenders to that footprint? And then, just lastly, is there a pickup in that market ultimately?

Russell Elliott Teasdale Gunther: Okay.

Speaker Change: That's really helpful. Thank you and then.

Speaker Change: Just a quick one on the loan growth outlook. So could you give us a sense for how youre going about investing in the Carolina markets. I think you mentioned, adding some bankers there there is.

Speaker Change: A number you can share a general background.

Speaker Change: What's the opportunity set to continue to add commercial lenders in that footprint is.

Speaker Change: And then just lastly, if the pickup in that market ultimately enough to move you back to your mid to high single digit pace.

John C. Asbury: How about I start, and I'll ask David Ring to follow. First of all, we're not talking about massive liftouts and that sort of thing. It'll be highly selective. I do think that the North Carolina market is going to be additive to our overall growth expectations. So in other words, I think that gives us confidence in our guidance and probably gives us more likelihood of upside. Dave, I know we are not quite yet ready to get into too much detail, but what are your thoughts on where we'd expect to expand?

Speaker Change: Or is that a general pickup in some of the macro economy that get you there.

Speaker Change: Okay.

Speaker Change: How about if I start and I'll ask David ring to to follow first of all we're not talking about massive lift outs and that sort of thing it will be highly selective.

David Jason Bishop: I do think that.

David Jason Bishop: The North Carolina market is going to be.

David Jason Bishop: Additive to our overall growth expectation so in other words I think that.

David V. Ring: It gives us confidence in our guidance and probably gives us more likelihood of upside.

David V. Ring: David I know, we are not quite yet ready to get into too much detail, but what are your thoughts on where you'd expect to expand that asset before I should comment we feel very very good about the American national team and the bankers that we have down there so.

John C. Asbury: Oh, and before I comment, we feel very, very good about the American national team and the bankers that we have down there. So, we think we're going to take that and build from it. Yeah, we have a very talented team that we inherited from American National, but we also have a very strong commercial real estate presence in North Carolina already because of our Charlotte group, which has been in business for about

David V. Ring: We think we're going to take that and build from it yes.

David V. Ring: We have a very talented team that we inherited from American national but we also have a very strong commercial real estate presence in North Carolina already because of our Charlotte group that's been in business for about eight years, there now and.

David V. Ring: So we're looking to do in North Carolina as move into the faster growing markets and where the capital is moving and so we have plans and we're executing them now we're just not ready to disclose what the.

David V. Ring: Well, guys, that's it for me. Thank you for taking my call. Okay. Thank you. Thank you, Russell. Thank you, Russell. And thanks, everybody, for joining us today. We look forward to talking with you in July, and everybody have a good quarter.

David V. Ring: The final result, Florida.

David V. Ring: Yes.

Speaker Change: Understood. Okay. That's it for me. Thank you for taking my call. Okay. Thank you. Thank you Russell Thanks Russell.

Speaker Change: Thanks, everybody for joining us today, we look forward to talking with you in July and everybody have a good quarter.

Operator: This concludes today's conference call. Thank you for participating, and you may now disconnect.

Speaker Change: This concludes today's conference call. Thank you for participating and you may now disconnect.

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