Q4 2024 Atlantic Union Bankshares Corp Earnings Call
Speaker Change: After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star 11 on your telephone. You will then hear an automated message advising you your hand is raised.
Speaker Change: Good day and thank you for standing by. Welcome to the Atlantic Union Bank Chair's 4th Quarter 2024 Earnings Call. At this time, I'll give your speaker today Melissa Cimino. After the speaker's presentation, there will be a question and answer session.
Melissa Cimino: Thank you, Michelle, and good morning, everyone. I have Atlantic Union Bank Shares President and CEO, John Asbury, and Executive Vice President and CEO, 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 released and your company's live presentation we are going to go on this webcast are available to download on our investor website, investors.atlanticunionbankshares.com.
Melissa Cimino: We also have other members of our executive management team about these non-GAAP financial measures, including reconciliations and global GAAP measures, which you can see in the slide presentation or slide pointer on this webcast, and in our earnings release on our fourth quarter of July, year of twenty-four. You will also make forward-looking statements on today's call, which are more comments on the strengthful performance of the GAAP measures and on the non-GAAP financial measures. There can be no assurance that our performance on the non-GAAP financially measures, including
Speaker Change: and the United States. We're going to take no obligation in our parting period. My vote is in April of the year, say 2024. Please refer to our Ernie Walker, and make four of the five statement in Asia call today, and we're not going to take under it as a sore by a lack of a characteristic as it was a kind of an interest factor.
Speaker Change: and other important information regarding our Board of Representatives, including factors that could cause distress from those expressed for implied inappropriate behavior. All comments made during today's call are subject to the Safe Harbor Statement. At the end of the call, we will be taking questions from the research and analysis community and I will turn the call over to John. Thank you, Bill. Good morning, everyone, and thank you for joining us today.
Speaker Change: and John Osborne. I'm going to be talking about the new and expanded markets and how well the two companies came together as one since closing. And on October 21st, we added to the excitement by announcing our proposed acquisition of Olney Maryland based Sandy Swarr was a good year and a consequential year for the Latin movement. We were excited to close our acquisition of American National Bank shares on April 1st.
Speaker Change: with the number one regional depository market share back in Virginia. In our view, I don't think there's ever been such a regional bank franchise headquartered in the lower mid-Atlantic.
Speaker Change: and we expect to close the transaction on April 1st. We are awaiting approval from the Virginia Bureau of Financial Institutions and we are with the Office of Financial Regulation. On the meetings I've attended, assuming receipt of remaining regulatory approval, each company's respective shareholder and stockholder owns potential. We've been delighted that the meeting to be held on February 5th with satisfaction of other closing conditions, we expect to close the transaction on April 1st. I'll now comment on the macroeconomic conditions and our market share and share planning process is well underway
Speaker Change: We are all in favor of it, we do not expect that to change in the near term.
Speaker Change: Our markets continue to appear healthy, and our lending pipelines are defied. We should expect a mid-to-single-digit annualized loan growth of 2,025 for our customers within the current AUB franchise. We believe that a good indicator of economic health is your employment. In all three states where we operate, we continue to have an employment rate that's better. We do not expect national changes in the employment rate of 4.4. Our markets continue to appear healthy, and our lending pipelines are defied.
Speaker Change: And that's the financial highlights for the 4th quarter of the school year 2044.
Speaker Change: and we agree. We continue to be on a moderate growth path with all our markets and with our increased presence in North Carolina and our plant expansion is nearly 3% annualized.
Speaker Change: We believe we do, and will, properly grow some of the most attractive and stable markets in the cutback half of the quarter and accelerate, following the elections and the Henry cut in December in the full year 2021. We continue to be on a moderate annualized path for back-to-positive loans. Point-to-point loan growth for the fourth quarter was approximately 3% annual. Average balances were about even quarter-to-quarter, and point-to-point growth to the average for the quarter, loan growth skewed to the back half of the quarter, and accelerated, following the elections.
in the fashion of Social Michael.
Speaker Change: And speaking of that, as we've been able to pay down, we're still mildly asset-struggling with surplus funds from some of our larger accounts that have significant fluctuations in the amount of time that the cash out runs for us.
Speaker Change: and should be a net positive for AUD's margins. Our loan growth was on top of the highest quarterly runoff we've seen since before the pandemic. We saw elevated payoffs and paydowns among both our CMI client base, especially in government contracting and larger businesses, and in commercial real estate. We viewed the elevated commercial real estate payoffs, which we predicted well for us, and should be a net positive for AUD's margins.
Speaker Change: Our loan growth was on top of the highest global runoff we've seen since before the pandemic. We saw an elevated payoff for paid hours among both our C&I client bases. The good news is that the total loan production increased 29% in the quarter of the past month. We now overcome the spike in payoffs and allow for a lot of loan growth. C&I utilization this quarter is demonstrating that the last quarter and the prior year's fourth quarter.
Speaker Change: and that there's ample opportunity and demand for commercial real estate sales from existing clients and about a third from new clients. The good news is that total loan production actually continues to favor C&I over commercial real estate with about 60% of production coming from C&I. We were pleased to see an increase in production and construction in the land last quarter and the third consecutive quarter which we view as another sign of growth for commercial real estate sales from existing clients and about a third from new clients.
Speaker Change: We will note that the fourth quarter earnings were negatively impacted by the higher permission delay loss that was driven by an in the 13.1 million dollar specific reserve. We were pleased to see an increasing production and construction of land development. CNI-1 recorded an apparent misrepresentation of its borrowing base, which was identified as the U.N. footprint.
Speaker Change: This individual credit primarily accounted for the increase in non-performing assets over the quarter quarter earnings with NPAs remaining low. The higher provision for loan losses driven by a $13.1 million specific reserve, but a $27.7 million return on free basis point to loan charges involving an apparent misrepresentation of the borrowing base, which is identified at the end. This individual credit primarily accounted for the increase in non-performing assets over the past few years, though NPAs remained low.
Speaker Change: and the General of the Type Procytics, and it's a typical event. We were making on this hour, asked for a call on all the bases. We were making them for a negotiation that were long-riding. The historical rule of yours is an ever mentioned, every quarter, in some handling of our 80 year franchise and we did not even have to be the fit of the full-awaiting American national evaluation years were unfortunately crowded this week. You expect to have a case when one off-loss has been in case not sometimes presiding. Exactly. We have to be sure that we will be able to be a public and we will be able to be a public.
and Vint Cerf.
Speaker Change: In sum, we're building out our unique franchise in the Virginia Community Bank, the largest regional bank headquartered in Virginia, which will be the largest regional bank headquartered in Florida, as has been the case for some time since Sandy Spring. Meanwhile, we've been more excited than ever about the growth opportunity in our north Carolina markets, and we're in a successful 2025 endeavor. And are continuing to build the franchise we have long sought using our largest regional
[inaudible]
Speaker Change: We also believe we are a matched security diagnosis. On alternative call over to Rob to cover the financial results for the phone number. Thank you John and good morning everyone. I'd now like to take a few minutes to provide you with additional details of the Atlantic Union's financial assessment of 840,000 dollars in the first quarter.
deluded potential market price to the Ford trailer.
Speaker Change: to be included in the diluted weighted average share, even though the underlying common stock has not been distributed. This diluted earnings per share is calculated by taking the difference between the average market price of AUB stock in the full year 2024 and the reported netting price of global defined shareholder shares under the 1997 sale. Dividing that result by AUB average market price was $2.24.
Speaker Change: That said, adjusted operating earnings and net income available to common shareholders were $61.4 million, or $64.8 million, and deluded earnings for common shareholders for the fourth quarter was $0.60. This resulted in an adjusted operating earnings and net income available to common shareholders was $197, an adjusted operating earnings on assets of $103 per common share and an adjusted operating efficiency ratio of 52.7% for the fourth quarter.
Speaker Change: was up from $2.6 million in the prior quarter, primarily driven by the Specific Reserve and Organic slightly higher net charge during the fourth quarter.
Speaker Change: The total loss in credit losses was 4 million or only 10 per investments annualized in the 4th quarter, but that was up from 666,000 in the 4th quarter. The provision for credit losses of 17.5 million dollars in the 4th quarter was up from 2.6 million dollars in the prior quarter primarily driven by the decision to insert slightly higher debt charges during the quarter. Which was an increase of 208,000 dollars in the 4th quarter. The increase in debt interest income in the prior quarter was less than any but that was up from 5.6 million dollars in the 6th quarter.
on behalf of Stroke Society.
Speaker Change: And in 5.4 million dollars decrease in interest income on earning assets Tax equivalent net interest income is $187 million dollars which was an increase of $208,000 from the third quarter Increase in net interest income from the prior quarter reflects the net effect of a $5.6 million dollar decline The decrease in interest income on earning assets due primarily to a $9.4 million dollar decrease in interest income on earning assets Driven by lower loan yields on our variable rate loans primarily due to the impact on the $7 million dollar deficit
Speaker Change: and was 3.3% in the third quarter, 3% in the fourth quarter.
Speaker Change: primarily due to lower quarter loan yields driven by a 4.6 million dollar increase in interest income partially offset by lowering assets and an increase in yield on a 2 million dollar increase in average cash Additionally, the reversal of earning assets on the specific reserve loan negatively fourth quarter tax closing in by a margin was 3.3 point in the quarter 3 percent at the decline of 5.3 point from the pre-fourth quarter decreased primarily due to lower 4.74 loan yields driven by a decrease in third quarter rate of loan yield
[inaudible]
Speaker Change: during the fourth quarter, during my lower years on our variable-rate loans, and a decrease in the security portfolio, to a 42-basis point decline in the cost of borrowings, to 3.87%.
Speaker Change: a nine basis point to partially offset by an increase in yield on cash and other earning assets for 8% and a favorable shift in the deposit to short-term borrowing or funding rates.
Speaker Change: 15 basis points of income increased by $941,000 to $35.2 million, primarily due to a $3.6 million increase in loan-related interest rate swaps, which was partially offset by a $1.5 million decrease in bank loan liabilities or positive income short-term borrowing benefits received in the prior quarter.
and the others.
September 30th, 2024.
Speaker Change: The Primary, driven by Hgrag's destruction, is a $7M commercial reduced franchise in the United States.
Speaker Change: Partially offset by the decline of the 2020 family real estate loan, the deferred fees and costs were increased on a pro forma basis. The American national balance was required on December 31, 2023.
Speaker Change: Loans held for investment are clearly at $661 million, were primarily driven by increases in construction and land development in full year, excluding the impact of the acquisition's fair value. Partially offset by declines in the multi-family real estate on December 31st, 2024, total out-of-profit formidation, and yet the American national balances were acquired on December 31st, 2023. Loans held for investment are clearly at $661 million, where projects partially offset by decreases in demand in the full year,
Speaker Change: a pro forma basis is that the American national balances were acquired on December 31st, 2024 toward a deposit increase of $970.4 million, which was an increase of $52 million or 1.8% annualized from the beginning of the fourth quarter through the increases in interest sharing. Bank shares in the Atlantic Union, customers' depository capital ratios were decreases in demand above well-capitalized levels.
[inaudible]
Speaker Change: between 775 million dollars and 800 million dollars. We are projecting that the full year fully taxed in the middle of May, which is March, will be in a range of between 3.4%, 5%, and 8.6%.
Speaker Change: We are set and driven by our baseline loans and deposit rates for the full year, fully taxable, equivalent net interest rate in 2025, projected to continue to grow as we steepen throughout 2025 and 800 million dollars. We are projecting that the current level of fully taxable net interest margin will be in a range between 3.4 percent and 3.6 percent.
Speaker Change: As the back book continues to increase higher, as well as by the impact of lower time deposit rates of approximately $3.3 billion, and a current average interest rate of approximately 4.4%. Projecting a change in the net interest margin from current levels, these favorable new impacts will be expected to be primarily driven by the impact of increasing yields on our fixed rate loan rate cuts anticipated. As the back book continues to increase higher, as well as by the impact of lower time deposit
Speaker Change: and a current average of $35 million, adjusted operating outage expenses, which excludes the amortization of infallible assets, partially offset by lower variable rate loan yields driven by the Fed's unestimated rate of range and interest.
Speaker Change: on a two-year basis, adjusted operating non-interest. In summary, Atlantic Union delivered a solid operating plan, which results in $145 million despite challenging spending. Adjusted operating non-interest expenses, which is true, we are effectively managing the annual assets expenses. As a result, we believe we are well-positioned to continue the two-year profitable growth and to build long-term value for shareholders to $420 million and beyond.
Speaker Change: In summary, we need to build a solid operating system built from the core support of the analyst community and the operating environment we are effectively managing through. 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 2025 and beyond. One moment for our first question. Our first question is going to come from the line of Russell Gunther in Carolina, Florida. Please go ahead.
Speaker Change: Good morning, Russell. Thank you. To ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. One moment for our first question. Our first question is going to come from the line of Russell Gunther with Stephen Zink. Your line is open. Please go ahead. Good morning, Russell. Hey, good morning, everyone. Can you guys provide any insight into how
Speaker Change: We don't know exactly what is going to happen up there as we come back to the office in Washington. It's been long requested by the mayor of Washington, D.C.
as well.
Speaker Change: So, the reality is that the current unemployment rate is 3.2% and it's one of the most affluent and highly educated regions of the country. And I think that's important. Also, the fact is that there are 373,000 federal workers in Washington, D.C., and we do question or mention exactly how many of those can actually go away as security agency, etc. So, the reality of the geopolitical situation in the incoming administration
Speaker Change: It is generally true that we've lost some of the markets in other regions... We've lost many of our similar markets and traditionally ne giving us that, And there's no question that this is traditionally a change in administration that is an economic stimulus to secure engagement in the regional markets We don't expect to see more taling in Washington DC right now
Speaker Change: And also, for anyone who is at all familiar, interestingly, the Washington Business Journal just reported that Webby spent time there, or lived in the area, in 2004, and observed it like we have.
Speaker Change: There's no question that traditionally a change in administration is an economic stimulus. And then I think the last point that I'll make, and I'll focus on Sandy Springs for a moment, is to remember, while there's any number of, interestingly, the Greater Washington Commercial Real Estate Oriented Banks, don't confuse that with Sandy Springs, which is a Maryland bank.
Speaker Change: They are a geographically compact franchise that exclusively operates in what's referred to as the Washington Delta. And then I think the last point that I'll make, and I'm going to focus on the Sandy Springs for a moment,
Speaker Change: and that's comparable to Chicago and Northern California and San Francisco's CSAs. The unemployment rate in that combined single area is 3.1%. It is probably one of the most highly educated and affluent markets in the country. So this is a big market. It has a population of 10 million people and it's comparable to Chicago and Northern California and San Francisco's CSAs. And so we see opportunity.
Speaker Change: and by time we'll tell exactly what's going to go on up there and clearly there's a lot of conversation and press around large office buildings, this is a big market, it is a diverse market which in terms of its industries, the federal government, we don't perceive that as impacting Sandy Springs because neither of us finance things so we see opportunities. So we'll see how it plays out over time and we'll tell exactly what's going to go on up
Speaker Change: Switching gears, I appreciate the organic NIM outlook for 2025, but it doesn't impact us. We don't see that as impacting Sandy Springs, helping out a robust finance bank, or anything like that. So we'll see how it plays out over time, but in this instance, Sandy Springs got it on 375 to 385 percent. Okay, got it. That's great color. Thank you. Now, just switching gears, I appreciate the organic NIM outlook for 2025, but it doesn't
Speaker Change: What we're looking at is that there will be two pledges to the Fed Fund, the Fed Fund's rates in 2025, stick that in the second half of the year.
Speaker Change: But in terms of between now and then, we are seeing that our back book expansion is a great loan portfolio. As we noted in my comments, what we're looking at is there'll be two cuts from the Fed Funds. It was a Fed Funds rate of $20 billion.
Speaker Change: expect that in the second half of the year, maybe $800 million, $900 million. But in terms of between now and then, we are seeing that our back 2025 fixed rate loan portfolio is repricing higher in one and a quarter, you know, by $1.25 or $1.50. We do see a bit of a lag on deposits, about a billion dollars coming down.
Speaker Change: from a rate paid perspective, lower cost associated with those maturing CD's. You know, there's other factors in that, but those are the big drivers there. Those expect to see maturing CD's pay 4.4% in 2025. Currently, as regards to Sandy Springs, we really don't see much change in that outlook in terms of the lower cost associated with those maturing CD's.
[inaudible]
Speaker Change: and the other one is the one that's been working on the first one. Thank you.
Speaker Change: If you look at November to December, where basically interest bearing liabilities came down 20 basis points, interest margin perspective, so we're seeing some lower levels of refunding in relation to DDA, which is going to start picking up, declining, and that should continue into 2025 as well. But in terms of what you just mentioned, John, yeah, so if you look at November to December, we also pointed out a couple of technical things, understanding that we had about a basis point.
Speaker Change: or a few technical people to comment on, which is to be able to take some larger, more engaging conflicts with larger clients in terms of payoffs and overnight borrowings, and have that be more typically reported. And so we were able to reduce what we paid on those accounts more than the wage cut.
Speaker Change: and that happened in December and that actually impacted NIMIC. Thank you. All right, one moment for our next question. And our next question is going to come from the line of Catherine Mueller with KPW. Your line is open. Please go ahead. Hi, Catherine. Hi, good morning. So it's a pretty good setup for NIMIC standards. Just one question back on the margins. I think Robbie touched on this a little bit, but I just wanted to dig into it. Can you talk about the impact of Sandy Springs?
Speaker Change: are all here to talk to you about the moving rates since that deal was announced to where we are today and that impact on kind of the core margin versus the credible yield and how that might impact the balance of the market. One question back on the margin, just I think some of this is a little bit of a question to dig into. Can you talk about the impact of standing spring, the acquisition, and how we should think about the moving rates since that deal was announced to where we are today and that
and others.
Speaker Change: Yes, so the net impact of that is, you know, you might see a bit, again, as you know, close the deal today and mark it today, since we're seeing a bit of a higher tangible market share.
of the Trump campaign.
Speaker Change: But in terms of, you know, the overall interest margin, I think, you know, as I just mentioned, you're going to see a bit of a lift in the combined margin. I would think there would be less ability to lower SAFSA deposit costs if you're going to move through next year. How do you think about that as an offset?
Speaker Change: Yeah, well one of the areas also on the AUG side, we don't see 50% of our home growth is variable rate, we don't see as much impact on that, so it's kind of washing how we can be able to keep up with those, you know, pre and pre-combined balance sheets.
think about that as an option.
Speaker Change: and Munra, scientists at the Kennedy School donated their discoveries to the Calgary Cangrean Aboriginal Literature Society. Many thanks again to Doug Scribner and his team.
Speaker Change: the overall organization's deposit rate is down, but the balance sheet is looking at Sandy Springs. But, you know, we'll continue to do this. Once we have the balance sheet up and running, there will be a bunch of transactions we'll be looking at.
Speaker Change: So, you know, part of the pressure that we always experience when rates go down, they will lead to some extent more clearly larger than they are. But at the same time, when rates don't go down or go up, that pressures them, because on the other side of the equation, since the points were sort of naturally hedged to each other, they're modest. And I will tell you that, selfishly, if you asked us to choose, you know, part of the pressure that we always experience when rates go down, they will lead to some extent more clearly larger than they are.
Today we're gonna interview the same Ryan
and the University of Michigan.
Speaker Change: At the end of this quarter, as you mentioned, we're at 1.05, and it looks like you're building in a little bit of a cushion for a modest reserve build on a four basis next year. Just kind of think about that conservatively, or anything that you're seeing that would drive that over. But it's basically a conservative assumption.
Speaker Change: We guided to 10 to 15 BIPs of non-charge-offs in 2010. We haven't seen, we don't really see any BIPs at this point. So, my view is we are contemplating an ultimate charge-off in whatever it may be. Again, assuming the specific reserve works its way, why is charge-off? There's not a lot, obviously that brings down loads for everything else.
Speaker Change: Yeah, that's right. That's a quality. That's right. And we can charge up to 10 to 15, 16, 12, 16,000, even more when we were at central charge.
Speaker Change: So my view is we are sort of contemplating an ultimate charge on whatever may be associated with that particular case.
Speaker Change: Pretty good for a 2021 outlook, as well as everything else.
All right, one moment.
Speaker Change: Our next question is going to come from the line of Stephen Skouten with Piper Sandler. Your line is open. Please go ahead. Stephen, good morning. Good morning, guys. Just a quick clarification on the expected closing of Taney Springs when you said April 1st. Shareholder vote, February 5th. Is it possible that, depending on what you hear in the timings from Virginia and Maryland, that could close earlier? Or is that going to affect the plan given conversion date?
Speaker Change: Good morning guys, just a quick clarification on the expected closing of the airport from 3rd of Maryland and Virginia, everything is operating as a normal course, is it possible that depending on what you hear from the timing from Virginia and...
Speaker Change: Marylin, is that going to close earlier, or is that going to stay the plan given conversion dates? But everyone is going through their process.
Speaker Change: walking away but everyone is not going to let the sooner we can get everything in the water I think for a special could he close
and what that could potentially do for the potential needed.
Speaker Change: I know you guys were commenting on higher payoffs than your stand-alone portfolio. If Sandy brings you to your knowledge experience on the same dynamics, and do you have any updated commentary on what that could potentially do for the potentially needed size of the CRE loan set?
Speaker Change: I think they've decided rates probably aren't going down in the next year, and they want to speak to exactly when that will be. But I will say across the industry, we've predicted our markets, and I think we're likely going to see that across the board. Most of what that is, the majority of it, is open answers into the term market in terms of our interest rates. That is our agreement, and that's what we will be doing.
Speaker Change: And then, as I mentioned, we're seeing a rise in construction financing, which is good. Three quarters in a row, we've kind of been waiting on that. Dave, do you want to comment? I think we'll likely get a commercial business award. Do you want to comment on payoffs? Our agreement is we will sell a million commercial and industrial payoffs. That is our agreement, and that's what we will do. And then, as I mentioned, we're seeing a rise in construction financing, which is good. Three quarters in a row, we've kind of been waiting on that.
Speaker Change: You want to comment on payoffs, which is probably the most unusual thing we saw versus sales. We're elevated commercial and industrial payoffs. We especially saw that for a short time in the financial business. Do you have any high-level perspective as to what's going on there?
Speaker Change: So, yeah, we're seeing like a nice mix of sales, refinance.
Speaker Change: and comment on what you just said about the portfolio, which I think is very helpful and loyal.
Speaker Change: in our mind it looks like pseudo-equity, I hope not very much, or I will until it looks like pseudo-equity.
Speaker Change: The rest of the portfolio, we see that as healthy, too. And then we're seeing payoffs from private enterprises that are coming in. Yeah, it's the first time we've really seen this in any meaningful way, and that's kind of the new dynamic. We're seeing larger middle-market types of clients. Frequently, the avenue that we get in is that there's private equity behind a number of these companies. So we see that, and we see that as healthy, too.
Speaker Change: It's the first time we've really seen this in any meaningful way, and they tend to deal with sort of the larger middle market types of clients. Frequently, the avenue they use to get in is... I want to elaborate on DEF CON for just a moment. There are going to be winners and losers, we think, based on what we're seeing. We saw more of that focus in the new administration. This administration is pro-defense.
Speaker Change: We are seeing a rich pipeline coming down to India, a really steady pipeline, and that's going to be a large global year.
Speaker Change: I want to elaborate on the types of metal market companies, they're going to be winners and losers. Cyber security, information security, in terms of these are all areas that are going to get more attention. This administration is pro-defense, so you have to pick and choose. We actually believe that the types of clients, and I think there's a reason why you see private equity and private credit coming into these companies, weapon systems, contractors, the types of metal market companies that deal with cyber security and information security.
Speaker Change: I mean, there's a lot of good work here for sure. Like you said, some new dynamics around payoffs. You've got Danny Springs' combination pending.
Speaker Change: You've got mid-single-digit growth as the guidance, which can be a fairly wide range. Can you give maybe some thoughts around what would cause you to be maybe at the lower end of that range and what could be delivered towards the higher end of that range? And maybe just the last thing for me, I mean, there's a lot of moving parts here for sure. I know some new dynamics are unveiled. You know, you guys are trying to grow 10% of Spring's companies. So just kind of how you think about those. You've got mid-single-digit growth as the guidance, which can be a fairly wide range.
Speaker Change: What could deliver 20 hours of energy, maybe. We go head to head just every single day with the big guys and we tend to deal with small factions.
Good to see you.
Speaker Change: If we had a wider risk growth, we would be doing not be a good scenario. That makes me wonder why. I guess I'll ask you my gut reaction. Remember, we deal with elevated payoffs, just like we saw. We would have had much better loan growth in Q2, particularly with the big guys. And we tend to deal with quality clients.
Speaker Change: It's hard to say if we had a wider risk box, we would be doing more, because we kind of stick to our same formula. My gut reaction would be elevated payoffs, just like we saw. We would have had much better, longer, sometimes more. If a competitor is structuring something a different way, we will let it go. And so that range that we give you really reflects how in the long run
Speaker Change: We kind of stick to our same formula. I would agree, and there's a reason why. I think we like the way we structure transactions, but sometimes if a competitor instructs you on something, we will let it go. And so that range that we give you really reflects how aggressive the competition is going to be.
Speaker Change: and I think for every year that I've been here, and I've been here eight years, I appreciate all the color and commentary. Very helpful, guys. Thank you. Okay. Thank you. Michelle, we're ready for our next call. And our next question is going to come from the line of...
Speaker Change: Dave Bishop with Hokey Pokey. Your line is open, please go ahead. Hi Dave, good morning gentlemen.
Speaker Change: I appreciate all the color and commentary, it's very helpful guys, thank you.
Speaker Change: I agree with you, John, but yeah, it's sort of a holistic question for you. You know, in terms of, you know, sort of moving funding closer, you still have the ability to lower the relationship price, as you noted, and bring down prices.
David Bishop: I would like for the Sanskrit to reflect that it was David Bishop and not John Asbury who referred to large banks as the closed, big, ugly, unclosed banks. To answer your question, our strategy is not to try to win anything based on the total relationship price that you noted and bring down. But we do believe that we don't have to match.
David Bishop: To answer your question, our strategy is not to try to win anything. I will say that across all of these markets, we really believe that we don't have to match. To me, it's kind of sad when we find ourselves having to share the regional dollars, which means under $100 billion in Virginia. Sandy has a position in Maryland.
Speaker Change: I will say that across all of these markets, it's really important to understand that there's no one quite like us. We are the big guys. We are number one in the pository market share. We do a regional band, which means under $100 million in Virginia. Sandy has that position in Maryland. The price is set for deposits by these larger players. Yes, there are smaller players that can influence. I think overall, it's a strategy that we tend to follow the big guys
Speaker Change: financially independent masters and you know inadvertently differentiation are blindspots at universal pricing everywhere. But I think yes, we have the ability to play very well. Um, I think that we not there are always more like the truth of the matter day and we are about to try to make sure it generally have the quarterly deliveries with large banks and I think that
That's fair. We may have higher pricing in some areas.
Speaker Change: We don't have universal pricing everywhere but I think we might have the ability to come very close to what those are. Michelle, we'll go to the next caller, please, and then we'll try to juggle back to Dave and try to get that on the line. All right. One moment, please.
Thank you.
Speaker Change: And our next question is going to come from the line of Steve Moss with Raymond James. Your line is open. Please go ahead.
I think we might have got to cut off.
Speaker Change: So we'll go to the next caller, please, and then we'll talk a little bit more. All right, one moment, please. Are you able, are you hearing anything? And our next question is going to come from the line of Steve Moss with Raymond James. Your line is open, please go ahead.
I stayed skiing.
Good morning.
Thank you.
Steve?
Steve Moss: Operator, we seem to have an issue that's odd that we have two in a row. Can you hear me? We can't hear you. Okay, sorry, I need to dial in. The call dropped off, so I missed the last couple minutes of commentary. Okay, so I guess, you know, maybe just...
Steve Moss: with regard to Purchase Accounting here, and do any of you guys hear me? What's the allocation you guys expect for 2025? Sorry, Anthony. Read dial in. The call dropped off. We need an increase in terms of...
Steve Moss: On the interest income side, yeah, so overall in the deal that we announced it was 22% accrued and it's going to go up a bit, assuming Greece is bigger than they are, maybe closer to that.
Steve Moss: They appreciate the income and 2020 to the impact that it makes.
Steve Moss: on the margin, Steve, just for absolute clarity. You're talking about... Perfect. Yeah. When you look at the guide... Yeah. Is that what your question was, Steve? In terms of... Yeah. Think about it. Yes. Okay. So A and B stand alone. Oh, stand alone guide. Yeah. In terms of increasing on the margin. Yeah. It's going to be stable from here. I'm not sure if this was actually answered, but you guys are talking about market dynamics and competition with private firms. Perfect. Yeah. When you look at the guide...
Speaker Change: Well, I was interpreting that question. Yeah, I think about it. About 20 to 25 could help, but definitely hearing tighter spreads from a number of people. Okay, appreciate that. And then would you like to speak to that? Not sure if this was...
Speaker Change: It's really on an individual basis, you know, tighter spreads happen sometimes, but most of the time we're going to get the spread that we require within our pricing model. A lot of banks don't even utilize tighter spreads for models, we do, and so we're really able to monitor and adjust on the fly when we're talking about how companies react.
Speaker Change: I would say it's a competitive environment for quality credit. I do read comments about surprisingly high yields on things in their traditional fixed rate, and so we're really able on real estate and on things that maybe we wouldn't be willing to do. So we're not going to have the highest yield on credit because of the cost. But I would say it's a competitive environment for quality credit.
There's nothing really fixed, Ray.
Speaker Change: on real estate and in terms of the non-performer, we're not going to be, we're not going to have the highest yield on credit because fraud and credit risk are at the top.
Speaker Change: Is that a, you know, what's the prospect for recovery there, is that a really punitive provision, can we, you know, kind of see a higher provision for that specific credit?
Speaker Change: I would say that the Pacific Reserve, by definition, reflects, to the best of our knowledge, what to expect. Doesn't he have federal loans to your chief federal officer? What's the prospect for recoveries there? Is that a preliminary provision? Kind of see a higher provision for that?
Speaker Change: I would say that the specific reserve, by definition, reflects... There's a methodology behind what we came up with, and we believe that will be a perfect reserve based on everything we've talked about. Yeah, exactly what you said.
Speaker Change: happened towards the end of the quarter, so laws unknown, we anticipate that this is the third week in a row that we're going to charge on, so workers are probably going to have to pay more, there's a methodology behind the number that we came up with, and we believe that this is an appropriate reserve based on everything we did at this time, and I'll let you keep to that. Okay, got it.
and others.
Speaker Change: Having backed up a bit, you know, I think, John, you alluded to, you fully expect us to sell the entire 2003 Commission default before, and therefore, I assume, just to give you a little recap, you guys are also likely to use the entire equity-raised demand as well, these days.
Speaker Change: Yeah, that's right, Steve. We fully expect to take the entire forward. I guess you all in the series will take that forward.
Speaker Change: We would do that, even though rates backed up a bit, we still feel, you know, we had estimated about a 90 cents a dollar, 100%.
Speaker Change: Okay, great. Thank you very much, guys. Thank you. Thank you, Steve. Operator, let's try to get Dave Bishop back, if we can. All right, one moment, please. Okay, after losing us means, you know, less uncertainty. That portfolio sale will happen faster than we would have thought. Dave Bishop, with the group, your line is open. Please proceed with your question.
Speaker Change: Welcome back, Dave. Right, 100%. Okay, great. Really appreciate all the callers. Thank you very much, guys. Thank you. Thank you, Steve. Operator, let's try to get Dave Bishop back in. Can you hear me? Yes, there you are. Thank you. We're glad you're back.
Speaker Change: I'm glad I'm back too. I don't know if you heard my question before I got called off. I'm not sure what happened out there. Please proceed with your question. Welcome back Dave.
Ova!
Speaker Change: and Mark Hill sort of retain that flexibility to put a one-off price.
and a large number of others.
Speaker Change: Having said that, our strategy, we don't do anything where we try to transcript. I guess the summary version is that there's no question that pricing is set by the larger players. So we always try to be able to market premiums. Individuals are sort of the general strategy, yes, we sort of model smaller banks, but we think of the pricing as being the larger players. Having said that, our strategy, we don't do anything
Speaker Change: to really try to be able to gain and bring them. So I will say that the General Assembly, yes, took all of the money out of it. And they kind of set the price that we try to do better. Your key point is it's relationships. Negotiated resettlement. So there's some of it. Mm-hmm. Okay, great. Yeah, I'll have to read the transcript to get to you. But you get the censorsaw a decent amount of capital from Congress.
Speaker Change: and others who have contributed to it, as it relates to the press headlines in terms of what Trump wants to do in D.C. with all the multi-family housing, house buildings, which I know you have to be happy about. With the right incentive, it will be interesting to hear, you can of course ask that of the Sandy leadership who will be joining us, who's going to have a very specific view, but I'm pretty familiar. I would tell you that you have to ask yourself, if it's true that the U.S. government wants
and Martin Johnstone.
Speaker Change: B. and our opinion, it's sort of irrelevant if you see more old, large office buildings going on the market. It doesn't impact us. But, again, incentives are provided to attract the capital to provide more housing, not much expand your ED. I don't know what that looks like exactly, not on your occupancy, but I think that, in terms of like the impact on us, I just hear on whether it's Sandy Spring, whoever the powers that be to look at this and ask, what would become old, large office buildings going on the market? It doesn't impact us.
Speaker Change: If anyone has additional comments, please let us know. Thank you.
Speaker Change: I think they'll have to be in some way, shape, or form and we'll see what happens.
Speaker Change: Dave, you live in the area, I know you sit right in the heart of Sandy Springs franchise, you know this market very well, how do you think about things?
Dave Bishop: I agree with the right basis, things can work and that may in and of itself be one of the
Dave Bishop: I think the government is willing to put it in the right hands at a price that makes it work. Perhaps that could help too. The administration has been clear, we are committed to a program that is vibrant and safe in Washington DC. I agree with the right answer. We will see what can work in that vein of it. Thank you.
Dave Bishop: Thank you, Kelly. Thanks, Dave. Thanks, everyone for calling today. We apologize for the technical difficulties. And we'll talk to you next quarter. Have a good day. Yes. We'll see what comes. Thanks for coming. This concludes today's conference call. I wish them much success. Thank you for participating. You may now disconnect.
Thank you.
Totally agree. Thanks for the color.