Good morning. My name is Denise, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Union Bankshares Trust third quarter earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. [Operator instructions] Bill Cimino, Director of Corporate Communications. You may begin you conference.

Thank you, Denise, and good morning, everyone. I have Union Bankshares' President and CEO, John Asbury and Executive Vice President and CFO, Rob Gorman with me today. We also have other members of our executive management team with us for the question-and-answer period. Please note that today's earnings release is available to download on our Investor website at investors.bankatunion.com. During the call today, we will comment on our financial performance using both GAAP metrics and non-GAAP operating metrics. Operating metrics exclude the after-tax merger-related expenses for the pending Xenith acquisition. Important information about these non-GAAP operating metrics, including a reconciliation to comparable GAAP measures, is included in our earnings release for the third quarter of 2017. Before I turn the call over to John, I would like to remind everyone that on today's call we will make forward-looking statements, 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 results expressed or implied by these forward-looking statements. Please refer to our earnings release for the third quarter of 2017 and our other SEC filings for a further discussion of the Company's risk factors, important information regarding our forward-looking statements including factors that could cause actual results to differ and the pending Xenith acquisition. At the end of the call, we will take questions from the research analyst community. I'll now turn the call over to John Asbury.

Thank you, Bill and thanks to everyone for joining us today. Union delivered another solid quarter of loan and deposit growth on an annualized basis and improvements to our profitability metrics on an operating basis, particularly the efficiency ratio. Before I dig into the quarter, I'd like to provide an update on the Xenith acquisition. As a reminder, we announced the acquisition on May 22 and noted how it checked off every one of our four strategic priorities of diversification, core deposit funding, efficiency and crossing the $10 billion asset threshold. The planning work to ensure successful merger integration is on track. The teams continue to work well together and the process is moving along smoothly. Union and Xenith are holding our respective Shareholder Meetings next week to approve the transaction. We have filed all the required applications with the regulators and we've received all the required regulatory approvals. We expect to complete the transaction in very early January 2018. I continue to meet with commercial clients, perspective commercial clients, state and local government officials and centers of influence to tell our story and I'm delighted with the support that we're receiving. The most enthusiastic commentary relates to Virginia, once again, having a statewide regional bank, something we've not had on the Commonwealth in nearly 20 years. We're not alerted believing that the combined franchise is uniquely valuable to our teammates, customers, shareholders and the communities that we serve. With our differentiated competitive positioning and expanded capabilities, we are intensifying our efforts to go head-to-head with the out-of-state-based super regional and national banks that dominate banking market share in Virginia. As I love to tell our clients and prospective clients, at Union no one calls us from Charlotte, Atlanta, Winston-Salem and San Francisco or anywhere else for that matter to…

Well, thank you John and good morning, everyone. Thanks for joining us today. I'd now like to take a few minutes to provide you with some details of our financial results for the quarter. On an operating basis, which excludes $661,000 in after-tax expenses related to the pending Xenith acquisition, consolidated earnings for the third quarter were $21.3 million or $0.49 per share, that's up 6.5% versus the second quarter on an earnings per share basis. For the segment perspective, third quarter operating net income for the community bank segment was $21 million or $0.48 per share, while the mortgage segment added $347,000 to earnings or $0.01 per share in the quarter. Now turning to the major components of the income statement; tax-equivalent net interest income was $73.8 million, that's up $2.2 million from the second quarter and up $4.4 million from the prior year's third quarter and that primarily was driven by increased levels of earning asset balances. The current quarter's tax-equivalent net interest margin was 3.59%. That's a decline of three basis points from the previous quarter and down 17 basis points from the prior year. As a reminder, the year-over-year decline in net interest margin relates the 10-basis point margin impact of our $150 million subordinated debt that was issued last December. Accretion of purchase accounting adjustments for loans and borrowings added nine basis points to the net interest margin in the third quarter. That's up a basis point from the second quarter. The net interest margin decline was due to the four-basis point increase in our cost of funds, which was partially offset by a one basis point increase in earning asset yields. The quarterly four basis point increase in the cost of funds to 66 basis points was driven by higher deposit costs, which increased…

Thank you, Rob and Denise, we're ready to start taking the calls now.

[Operator instructions] Your first question comes from Catherine Mealor with KBW. Your line is open.

Good morning.

Hi Catherine.

Hi Catherine.

I wanted to start with the margin. Rob, can you just give us an outlook in where you see the margin going for the back half of the year and particularly in a quarter where we're not going to have the full impact of a recent rate hike presumably, how do you expect deposit cost to trend?

Yeah. So, I would expect that we will see deposit costs stabilizing in the fourth quarter. We had as I mentioned, we had some improvement in the deposit rates during the third quarter, primarily in our business checking account and also the impact of relationship money market rates and CD promotions that we had. We expect those will stabilize in the fourth quarter. So, I wouldn't expect to see a material increase in our total deposit cost for the quarter. And overall margin basis, we are looking at -- we expect that there will be continued flat curve environment. So, it will probably be flattish, maybe down to what differ or so in the fourth quarter. As we go into 2018, of course Xenith will have clearly strong impact on us. We expect from a core margin basis, that's the combination with Xenith will add a couple of basis points to our legacy Union also on a core basis call it 350 to 350 couple of basis points on that. And then accretion, we would expect that including our accretion income and accretion, that we expect from Xenith will probably in the 365, 366 range, not to put a fine point on that, but in the 360 range, 360's range.

And is that 350 or 352 range on a core basis include the assumption for rate hikes next year?

Yeah. So, on that point, we do expect that the fed move in December, really won't help us too much in -- it won't have much of an effect obviously in the fourth quarter, but -- in the first quarter. And then we are projecting another fed move late in 2018. So, we're not expecting a lot of help during the year, although it would be helpful if they didn't move more aggressively during 2018.

But you do still are seeing a flattish yield curve that if the curve steepens more on your side…

Yeah. We don't see any -- we don't see really much steepening or this reflects through next year is the way we're looking at it.

Okay. That's very helpful.

Yeah, we think it would be helpful. Sorry…

And then one more on the margin, your loan yields ex accretion was fairly flat this quarter. Can you give any incremental commentary on pricing you're seeing on your production?

Yeah, if you look at our loan portfolio yields, we're at about 444, we've been putting on new loans on average about in the 435 range over the last several months. So, we hope to not seeing much pressure on compressing on the loan yields going forward, but not quite there yet. I will say that loan yields were up if you subtract out the impacts of the hedge ineffectiveness and we do have some volatility related to loan fees quarter-to-quarter. You saw a five-plus increase in the loan yields during the quarter.

Okay.

Catherine, I think that's an important point. If you look -- if you deconstruct what happened in the margin, you'll see that lower quarter-over-quarter loan had a material impact. Q3 is traditionally a seasonally lower origination period and there are certain fees that we take at the income during the periods. So, we have to see that and then actually this was a basis point. So, it's fair to say that we were largely matching increase in rate paid on deposits with increase in money yields.

Yeah, I think that's right. We had about a five-basis point increase in cost deposits and ex those factors. We were about five basis points on a loan yield increase.

All right. Okay. That's helpful. I'll jump back in queue. Thank you.

Thanks Catherine and Denise, we're ready for our next caller please.

Your next question comes from Austin Nicholas with Stephens. Your line is open.

Hey Austin.

Hey guys. Good morning. Thanks for taking my call. It was good to see the core expenses come down quarter-over-quarter, any color on where we should expect those to go over the next couple quarter maybe on a legacy Union basis? Anything left to build on the $10 billion mark? I know there is around $5 million I think in the run rate already for some of the ERM systems. But any color just on the operating expenses would be helpful?

Yeah, in terms of looking forward to the fourth quarter, I think you can see just on an operating basis, excluding any merger-related costs, would probably be flattish to the current quarter. And then going into the new year on a legacy basis, pretty much in line with where we are in the fourth quarter adding any inflation adjustments near to and that sort of thing in the 2.5% to 3% range is probably what is a good outlook for us? Of course, that's on a legacy basis, with the Xenith acquisition as you know, we are projecting to take up 40% of their run rate expenses basically in 2018. We expect that the full run rate should -- we're seeing that in late third quarter, probably fourth quarter of 2018. And if we look forward from an efficiency point of view, we expect to be in the mid-50s range once we can extract those cost savings with the Xenith acquisition.

And Austin, we would reaffirm based on everything we know so far, we have high confidence in our ability to achieve the cost saving project that we publicly indicated.

Got it. That's very helpful, thanks guys. And then, may be just on the loan growth any trends there you're seeing in any of your markets, were there any pay downs this quarter that slowed loan growth at all or any expectations that you have for those over the next couple quarters?

Yeah, I'll start with the paydowns, we did see some paydowns on the C&I revolving credit side. That's why we had this contrast of commitments growing quarter-over-quarter annualized 22%, yet actual C&I balances declined slightly. Now remember, by definition, C&I means a commercial loan, not secured by real estate and so whenever you hear me talk about the commercial banking effort from a lending perspective, that includes two pieces. That includes C&I loans, commercial loans not secured by real estate plus owner-occupied real estate. Owner-occupied real estate is not constrained by concentration limits and that is simply a commercial loans secured by real property source of repayment as cash flow for the business and that actually grew 7%. So, the declines that we saw in the C&I outstandings are entirely accounted for based on just paydowns and that's something as we continue to grow as we continue to mature and become more of a commercial bank, you're going to see this. You're going to see more volatility in terms of C&I outstandings because those are mostly revolving credit and so they go up and down, but they should go up over time. We're up 9% year-over-year for example in terms of C&I balances. It didn't have any I would say sort of significant out of the normal course paydowns elsewhere in terms of the commercial non-owner-occupied real estate portfolio. By its normal course, you'll always have situations where properties mature, stabilize and are either sold by a merchant developer or are refinanced into the institutional nonrecourse long-term markets. So, we always have an element that that's healthy, you want that and then you overcome that of course with new originations. But I would say that the summer months traditionally are slower months for the commercial banking effort, for the obvious…

Got it. Understood. Well, thanks for the time guys and I appreciate the color, that's all I have for now.

Thanks Austin.

Thanks Austin. Denise, we're ready for our next caller please.

Your next question comes from William Wallace with Raymond James. Your line is open.

Thank you. Good morning. How are you?

Hey. We're doing well.

Maybe a little bit of clarity on the fourth quarter margin guidance Rob. If deposit costs are stabilizing and third Q loan -- 3Q loan yields were negatively impacted by seasonality, I would expect them to bounce back in loan yields in the fourth quarter, which would suggest that we should see margin up two to three basis points. Why would it be flat to down a basis point?

Well, we call it flat, call it up a bit, we talk a basis points here and bit up a bit down. It really depends on how our loan growth comes in and where we can match our deposit growth at the same pace. If now we have to go and borrow with the federal home loan bank and that is obviously a higher cost source of funding with a relatively short term perhaps if we can get that deposit engine to match the loan growth. So, it's kind of a bit of a hedge on how the funding is going to come in, in the cost of the borrowing cost, wholesale borrowing cost versus the deposit cost.

Okay. So, you anticipate in your budget that you might have to fund wholesale and hope that you can have upside if you're able to drive deposits to fund the loans?

Exactly right. Yeah.

Okay. On the deposit side, I am curious, maybe if you could give us an update on what percent of your deposits are retail versus -- are consumer versus commercial and how that will change with Xenith?

Overall, looking for a chart -- overall, we're 60% consumer and 40% commercial and if you look at on various products on the deposit side, it's mostly -- it's more commercial than consumer. And then the other products are kind of 50-50 on interest checking and money markets. So, it's kind of consumer -- there they have the area to clarify noninterest checking skewed to commercial. So overall, we love with the focus on C&I. We love to see that continue or change over a period of time to be a bit heavier on the commercial side C&I especially on noninterest-bearing deposits we love to see that happen and John you probably can talk a bit more about that.

So, if you look at Xenith, while you're well aware of the two legacy components of what I'll call it the Xenith, legacy Xenith was a great business. So that was clearly a commercial deposit intensive operation. Legacy Hampton Roads was kind of the opposite being a relatively large retail intensive bank of the Hampton Roads. They had a meaningful super franchise. So, I think as they proportionally they're going to add more of a business flavor due to Legacy Xenith, but Xenith was smaller than Hampton Roads. So, the way I think about it is we have an enormous effort underway now to focus on deposit-intensive commercial business that's underway now at Union. Candidly that's just never been our focus area. It's not that we don't do it. Clearly, we do it, but it just happens and it's not been as sharply focused an effort as what I wanted to see and what's underway now. At the same time, we pick up learnings from legacy Xenith where they have things like deposit-only relationship managers, strategies around non-profit deposit-intensive businesses that may not borrow at all and these were areas that we just didn't have a lot of focus or accountability for. So, I feel like we are opening up opportunity. I feel like from a small business or business banking standpoint, we've looked at that too much through the lens of lending and not enough through the lens of asset-rich environment. Those small businesses in this country don't have depositors and so I think that's the right way to think about it. So, we are very enthused about the opportunity we have to continue to expanded it. I know there is a lot of talk about how commercial businesses are more rate sensitive and that's true when you're talking about money market accounts, but I'm talking about operating accounts, which is non-interest-bearing checking. The core operating accounts of the businesses are remarkably stable and those are pretty low cost and as we continue to expand our treasury management offerings, we become more and more of an attractive destination for businesses, noninterest-bearing operating accounts. And meanwhile just on retail, so we continue to expand the retail offerings that focus.

If you're successful in your push to drive meaningful growth in the commercial operating accounts, wouldn't you anticipate that those accounts would also come with relatively sizable dollars that would be money market or no?

It depends on the nature of the business, that would say yes, but candidly it depends on the business thus far and the profile. The truth is those businesses that have lots and lots of excess liquidity, they're net borrowers. If they have an operating line of credit and they're borrowing on a line of credit I would expect they have more much of money market. At the same time, we love deposit-intensive businesses. So, to be clear, we are all in for commercial money market accounts, but I want to make certain that we've captured the operating account, not really the bank unless here the one who holds the operating account with the transacting loan. So, it's hard to know right now candidly while in terms of what exact mix to expect, but I would say we have opportunity to grow consumer deposits. We have opportunity to grow noninterest-bearing checking or commercial business and we have opportunity to grow your business money market as well.

Okay. Maybe it's better to wait until Xenith closes to talk about the successes that you're seeing given that it seems like -- it seems like right now you're driving deposit growth through promotions and its negatively impacting deposit costs, but it sounds like if and correct me if I'm wrong, but it sounds like you're core existing deposit customer base you're not expecting too much pressure on the betas there?

Yeah, that's right. I'll agree with that statement.

Yeah, we haven’t really, I think an important thing to watch is watch the mix of our deposit base. We're still half on our transaction accounts, which is really important as some of those are interesting checking as in our quarter the round numbers and that's going to be more rate sensitive. But I think that one of our strategy is that we are doing things we've not done before because we are chasing low double-digit loan growth, trying to create low double-digit deposit growth and we're seeing high single-digit deposit growth, which is actually a very good outcome and meanwhile you have to step back and just think about how many households are we doing business with particularly on the retail bank, is that growing or is that shrinking or is that flat. It's growing about 3%, which is growing about -- see it grow faster and there are strategies underway in retail banking. We'll make that happen faster and of course we're very excited about the additional value proposition that we will bring to the table with our growth resources and product set as we get into the greater half of the roads where Xenith I think has done a nice job there, but they’ve done it on a shoestring.

We like the loan growth. We want to fund that. We think there is really strong upside in the growth of the balance sheet and that's going to drive up some of it.

And remember Xenith is more liquid than we. So, our loan to deposit ratio will drop below 100% when we cover Xenith and 2.5…

Great. And so that's a good segue to my last question, which is you gave some margin color for '18 and some expense color for '18, do you think once Xenith closes, that you can drive low double-digit growth in 2018 on the loan side?

What we would like to say, I don't think we're prepared to move off of what we've said before, which is we're expecting high single-digit growth. We would like to stand by that based on what we know right now and hopefully have the opportunity to exceed that we'll know more as we're done.

Great. Thank you, guys. Appreciate the color.

Thank you, Wally.

Thank you, Wally and Denise, we're ready for our next caller please.

Your next question comes from Laurie Hunsicker from Compass Point. Your line is open.

Good morning.

Hi Laurie.

Just under -- if we could start on credit and certainly your credit is looking pristine. But if you could just help us with obviously we saw the drop in commercial real estate nonperforming loans in that non-owner-occupied category. Is that the credit relationship that came in last quarter, the $2.6 million?

In terms of the non-accrual.

Correct. In terms of the non-accrual.

Yeah, that would be part of the it just based on the loans we've discussed in the prior quarters. The non-accrual last quarter that ties back to the original relationship that we've been talking about all year.

Okay. And then the total in in that relationship, if I remember was $6 million, do you have the total on that relationship?

No actually it was more like 9-ish current, the current exposure and I'll use that word in terms of what would be on the books is more like 6.

Is more 6. Okay. And then same question on OREO and I guess maybe and Rob you were running through December pretty quickly. The OREO expenses of 1.139 was obviously huge especially because of tax payments in this quarter. So, two questions, if we're looking at that on a go-forward basis all else being equal and for kind of thinking about that for the December quarter when you do have a tax payment, $200,000 is may be a good run rate, a $300,000 something like that versus the 1.1?

Yeah, I would say about $350,000 to $400,000 is probably a good run rate as I mentioned and maybe approximately what I noted there, but we had about $760,000 related to -- we had some sales and we took a loss of about $140,000 and then we've got -- took some valuation adjustments of about $560,000 or so related to properties, some of which are now under contract. And so, we have about $3.4 million under contract at quarter end, $900,000 of that actually closed last week. So, some of the evaluation adjustments related to those properties going under sale.

Okay. And then of the…

So, from that point of view, I would not expect to see those levels going forward.

Okay. Okay. Great. And then of the $3.4 million, obviously $900,000 closed, but is all of the $3.4 million expected to close in the fourth quarter?

No, it looks like about $1 million relates to some properties that have some work that has to happen on some of the properties probably won't be until 2018 and then -- but it is under contract. It's about $1 million of that I think. The others are going through a due diligence process. Hopefully those would close during fourth.

Okay. And then where does King Carter stand currently?

No changes to King Carter. That's about $2 million, we evaluate options there, but we have not made any changes there.

Okay. And then what about your shutter branches, obviously, that came down a little bit?

Actually yes. So, we did have some of the OREO sales in the quarter related to that. That $900,000 that I mentioned has already closed in the fourth quarter that was related to that and another $1 million is under contracts. So, you're going to see that number come down pretty substantially in the fourth quarter.

Okay. Great. Okay. And then just last question here as we think about credit, your reserves to loans, obviously you posted nice loan growth in the quarter, but your reserves to loans is now sitting at 54 basis points. How do you think about a floor on that?

Obviously, you have to think about the market portfolio.

If you consider the market portfolio, it's probably about 75 basis points. Yeah, we're looking at that very closely as we speak especially as we're going through the Xenith transaction. We follow out process, the way we calculate that and we continue to evaluate qualitative adjustments that would be additive to whatever the historical loss rate calculations would indicated and the benign credit quality items would indicate in the near-term. We don't have much fresh issues from a credit point of view, but we continue to evaluate that. I would not expect to see that, I'll put a number on it, it's below 50 basis points probably would be a good number.

We only have so much discretion in terms of the way you would like qualitatively dial it up. We can only defend so much of that.

Right. No, I am just thinking from the standpoint that your charge-off exceeded your provisions and how we think about that.

Yeah, that's right. It's interesting to watch what it looks like in the quarters to come because that was a couple of things, that's basically half of those charge-offs were related to two credits that we've been working since Q1, one of which is now gone by the way. That one is completely resolved leaving us one.

Okay. That makes sense. Okay. And then on loan growth, double-digit loan growth guide, that's great. Can you help us think about the C&I as we look going forward, obviously that was down 10% annually at linked quarter? How do we think about that within the framework?

Yeah, well remember as I said before, when you say C&I, they're talking about not the totality of commercial banking dealing with operating companies and employ people. You're talking specifically about commercial loans that are not secured by real estate.

Correct. Just that $550 million.

Yeah, so I wouldn't read too much into the seasonal decline because that was utilization. We saw utilization drop about five basis points during the quarter, utilization meaning what percentage of the commitments are actually borrowed. The commitments themselves that are outstanding grew 22% linked quarter. So that's going to find the path for future growth because the pipeline is strong Laurie and again we'll have to get comfortable, I am used to this having been in very large superregional commercial banks, you have to get comfortable that you're going to have more seasonal movement on the C&I. You won't see much on the owner-occupied real estate side, which grew 7% annualized. So, I think we have upside and the truth is that we're just building our data points here at Union as we continue to expand this effort. So, I am -- I feel like of all categories, this is an opportunity that is opening to us like never before and it's also an area that we've always been interested in, but we've not had as much dedicated focus and then of course everything gets accelerated as we bring in Xenith, which has matured dedicated C&I teams that have backgrounds in larger bank environment, specialized lending units like government contracting. They get a balance sheet four times but they're accustomed to having to have more treasury management, more resources, a larger franchise. So, there is a lot of good stuff going on there and then out two new leaders, we have John Stallings is extremely familiar with that market across Virginia. Dave Ring brings a ton of expertise to the table and he's been in environments just like Union that are and in a build mode building the commercial bank effort. It's my background too that at Union Bank, the CEO, the President, the Head of Commercial, we are all large bank C&I bankers by background. We're very focused on this. We are very serious upon executing on this opportunity and this is a differentiated story. I don't know of anyone in our market area that has the focus, the story and frankly I think the credibility that Union Bank does in terms of the smaller institutions to be able to take market share and here's a point I would love to make. Don't forget who dominates market share in Virginia. It's Bank of America, Wells Fargo, SunTrust, BB&T. We're not talking C&I. This is not coming from the little bitty banks. They can't do it. This is -- we're going head-to-head with the big guys and we think that we can be successful there.

Okay. That's helpful. And I guess to that point as you continue to grow your platform just really high quality leadership, how do we think about your next acquisition? How do you think about where you want to take yourself with size and I realize Xenith hasn’t closed? But as you look going forward over the next year two, three, four years, how big do you see yourself growling organically and then possibly through acquisition?

Yeah, I think let me answer the way I always answer it. The most important thing obviously above and beyond executing successfully Xenith and integrating it, the most important objective of this company is the organic performance at the Union Bank. Growing the bank, not where we see this as an acquisition machine, but I do believe that if we continue to do what we say we're going to do and that's what we intend that we're going to have opportunities. It is an attractive story. We are getting some degree of inbound interest that I don't want to talk about of people who would like you better get to know us and understand what we're doing here. So that bodes well. We don't have any particular size objective. So, I think it's dangerous for us to sit here and say we want to be an X billion-dollar bank. Now that we're above and beyond the $10 billion asset threshold post Xenith, we really need to be thinking about what really matters, which is what are we going to do for our shareholders. We know as a company we're going to evaluate it, we're not going to evaluate it. It's based on how big. We're going to evaluate it based on how we perform and what we do for our shareholders. Now those things are going to be correlated as we think that we'll be able to continue to extract value open that new markets through acquisition. So, we still think about contiguous states. I believe that we will have opportunity to do infill within Virginia. I think that's -- that is very real and I think that few people would be in a better position in Union to have an accretive transaction in end market, where we can extract a lot of cost, consolidate our closed branches, that sort of thing and we're keenly interested in opening up new growth markets. We're keenly interested in North Carolina. Our new President, John Stallings used to run SunTrust and the Raleigh in Eastern North Carolina area still in those line of people down there. I've spent time in Charlotte and Winston and Nashville for that matter. My career I've spent more time in North Carolina ahead of Virginia. So, in any way and we're looking at Maryland, so what's how we think about it.

Great. And sorry Laurie. We probably got time for one more caller. So, I am going to have to…

Can I just ask you one super quick question? Your branch closers and I missed this because you spoke too fast, your one-time costs were how much.

$65,000 for the quarter;

$65,000. Okay. Perfect. Thank you.

All right. Thanks. And Denise, I think we got time for maybe one more caller please.

And your last question comes from Blair Brantley with Brean Capital. Your line is open.

Hey guys. Good morning.

Hi Blair. How are you?

Most of my questions have been answered, just coming back to the benchmarking effort you guys finished. How do we think about those efforts there and how that translates towards the bottom line or does that just key operating expense growth in a more measured pace?

Well, I do think if there are real opportunities to take cost out as a result of benchmarking study Blair. So, what was happening is we have a large number of recommendations. We had a prioritized list of these recommendations. Something candidly have to be pushed post integration of Xenith. There are some that are running on an independent track aren’t really competing for the same resources as Xenith but many are and in that case Xenith has to win. We have to prioritize the Xenith integration at the top of the few. So, there are things, I think it's giving us sort of a kind of a latter approach to opportunities to extract cost and maybe I'll answer your question this way. Were it not for the Xenith acquisition, you would expect to have seen the operating efficiency ratio go down as a result of various initiatives that are related to the benchmarking study that we did and the study is helpful to us in so many respects that we are not get into in the interest of time. But I'm awfully glad that we had the foresight only engaged to have them benchmark us not just against banks say 5 to 10, but also those that are still 10 to 15, because that will be the new peer group. So, we don't want to get into too many specifics, but we do think we have the ability to continue to extract cost organically out of the Union franchise and a lot of this I should point out is better leveraging technology. I am critical of Union Bank in terms of the number of manual processes that we have and we had a bad habit of having to have thrown more FTE against our growth. We're a growth company. As we grow, we keep putting more FTE against processes. We shouldn't have to do that. We should be more reliant on technology having more scalable platform and you should see more operating leverage coming out of our growth and I think we'll be able to do that.

Got it. Great. And then just one other quick follow-up, in terms of the Xenith integration and that process and any big surprises there in terms of keeping talent and any type of move on that end?

So far so good. No material issues to report. I would like to think that the news over there is pretty good. That's certainly what I see as I spend time with them, John, Dave Ring and I, we've all been there. We make the round. We stayed visible. That is a good team and we're so excited about the story. So, I think that again the additional capabilities we bring to the table are helpful. They know we're serious about the commercial effort, which is very, very important to the legacy Xenith folks because that was built via the C&I platform and they know how fond we are of the Hampton Roads market. So, so far so good and we love that team.

Great. Thank you.

Thanks Blair and Denise, I think if we've got one more caller, I think we can try to squeeze one more in.

Your last question comes from David West with Davenport & Company. Your line is open.

Hi David.

Good morning. In fact, the only question I have left was maybe specific on the Xenith deal. You've talked in the past about their Marine portfolio having a little more time with that, do you still anticipating retaining that portfolio?

Yeah, I would see at this point, we continue to learn about it. I think they’ve got a good track record with it. We are comfortable with the people that we have met and their processes for sure and honest answer David is that we want more about it on the other side of the merger. So there -- and I'll just leave it at that.

Very good. Thanks very much.

Thanks Dave.

Thank you, Dave and thanks everyone for dialing in today. As a reminder, a replay will be available at our website investors.bankatunion.com. Thank you and we'll talk to you next quarter.

This concludes today's conference call. You may now disconnect.