Ladies and gentlemen, thank you for standing by. And welcome to the Atlantic Union Bankshares Third Quarter 2019 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Bill Cimino. Thank you, please go ahead sir.

Thank you, Tiffany. 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. 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, investors.atlanticunionbank.com.During the call today, we will comment on our financial performance using both GAAP metrics and non-GAAP financial measures. Important information about these non-GAAP financial measures, including reconciliations to comparable GAAP measures is included in our earnings release for the third quarter of 2019.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.We undertake no obligation to publicly revise any forward-looking statements. Please refer to our earnings release for the third quarter of 2019 and our other SEC filings for a further discussion of the Company's risk factors and other important information regarding our forward-looking statements, including factors that could cause actual results to differ.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.

Thank you, Bill. Thanks to all for joining us today. And welcome to our second conference call as the newly rebranded Atlantic Union Bankshares Corporation. We remain pleased that our change in name, sign and trading symbol has been uneventful and in fact we have received a surprising number of compliments about it. I would like to express my gratitude to our marketing team for leading this very successful effort.I'd like to point out this month marks my three year anniversary of having joined the company. What a difference I see three years in and what an exciting transformation we had experienced and continue to experience. Our team checked off the boxes on the prior three years strategic plan and recently approved a new one that I'll comment on later in my remarks. The current challenges we face in the interest rate environment notwithstanding, I've never been more optimistic, confident and enthusiastic about the future of the company than now.Turning to current events. Atlantic Union followed it's good first half of the year with a solid third quarter. We will recall our stating in prior comments that results would be noisy for the first three quarters of the year as we wind up the Access National Bank integration, rebranding and a few other undertakings and that is certainly proven to be the case. As you can see in the earnings release, we did have a number of one-time items in the third quarter and a charge-off of a long-term land development workout, all of which impacted our operating profitability metrics from the prior quarter.For purposes of clarity, Rob Gorman will walk you through non-recurring items in detail during his portion of the comments. But for now, I'll hit the highlights of the quarter. To start, we delivered strong deposit growth…

Well, thank you, John. And good morning, everyone. Thanks for joining us today. And now I'd like to take a few minutes to provide you with some details of Atlantic Union's financial results for the third quarter. Please note that for the most part, my commentary will focus on Atlantic Union's third quarter financial results on a non-GAAP operating basis, which excludes $1.9 million in after-tax merger related costs and $895,000 in after-tax rebranding related costs. For clarity, I will specify which financial metrics were on the report versus non-GAAP operating basis.In addition, where applicable I will make reference to the company's financial results that are further adjusted for material strategic and atypical items which impacted the current quarter, including actions taken to reposition the balance sheet for declining interest rates. These items include the following, the company received approximately $9.3 million in life insurance proceeds during the quarter related to Xenith-acquired loan that had been charged-off prior to the company's acquisition of Xenith which was recorded in other non-interest income.The company sold approximately $75 million of securities and recorded a gain on the sale of investments of approximately $7.1 million during the quarter. The company also paid-off $140 million in long-term Federal Home Loan Bank advances and terminated related cash flow hedges which resulted in debt extinguishment losses of approximately $60.4 million recorded in non-interest expense. The effective cost of these advances, including the heads was 5.8%. So by repaying these high cost fixed rate advances, we were able to improve the go forward net interest margin by approximately four basis points and increase annual earnings by about $0.04 per share.In the third quarter, reported net income was $53.2 million and earnings per share was $0.65, up approximately $4.5 million or $0.06 from the second quarter. The reported return…

Thank you, Rob. And Tiffany, we're ready for our first caller please.

[Operator Instructions] Your first question comes from the line of Catherine Mealor. Your line is open.

Good morning, Catherine.

Thanks. Good morning. I wanted to start first with the margin. Rob, I wonder, if you could give us an update on where your outlook is for the margin. You've previously guided for about four to five bps per order compression. But you're not making changes to the balance sheet but just kind of updated thoughts there?

Yes, so just to give you some context of our projection going forward, we are currently assuming that will get another three cuts from the Fed in the Fed funds rate, one in October, another in December and then one in the third quarter of 2020. In terms of that modeling, what we are expecting to see is the core margin for the fourth quarter we're looking at continued compression of probably three to four basis points. And then quarterly through 2020, we’re looking at about four to five basis points consistent with what we said before on a quarterly basis. So that's our current outlook, really hasn't changed much. As you know, we did have a bit more compression this quarter, which was primarily driven by higher or actually lower levels of one month LIBOR, the drop was in terms of our projection.The drop was more than we had originally projected. So that added two basis points of compression versus our previous guidance.

Got it. So another three to four bps compression in the fourth quarter and then four to five bps per quarter through 2020 assuming three more cuts?

Yes, that's correct.

Okay.

So we were looking at kind of stabilizing the margin coming out of next year, probably in the 3.30, 3.35 range.

Got it, okay. And then under that scenario how in 2021, would we get to a 1.4% ROA? We’re kind of coming at 2020 with a even 3.35 margin?

Yes, so as we mentioned before, that 1.4% return on assets is probably the most difficult to achieve. We're going to continue to evaluate that based on our going through our budget process for 2020 right now and forecasting through 2021, we are going to reevaluate that guidance going forward and probably talk bit more about that in our fourth quarter call.

Okay, that makes sense. Okay, and so then on the growth, you're now forecasting for growth to be about 6% for this year, how should we think about growth for next year? Is it fair to assume that 2020 growth should be higher than that 6% is given some of the Truist opportunities that you have?

Yes, Catherine, this is John. We would say expect somewhere in the high single digit range, I wouldn't be projecting 9% but 7%, 8%, 9% somewhere within that band, should be doable based on the various initiatives that we have underway and based on market conditions based on what we know right now.

Okay, great. Thank you.

Thanks Catherine. And Tiffany, we're ready for our next caller please.

Your next question comes from the line of Casey Whitman. Your line is open.

Hi Casey, good morning.

Good morning. Just a question on expenses. So if I take out that FDIC assessment credit, core expenses this quarter maybe running around $94 million last quarter, I think you’re guiding to expenses coming down to like the $90 million, $91 million range. Do you think that's still achievable given all the investments and hires you’ve made? And is there anything other than I think you mentioned, like $1.2 million in branch closure savings to come out? Or do you think that's really just the run rate is little higher given, given the investments including the equipment finance division?

Yes, thanks Casey. This is Rob. I calculate that we had a $91.7 million for run rate, if you will versus the $94 million you mentioned as we said, we had some unusual items. They were offset by that credit. So I calculate $91.7 million. Going forward, we're looking at the $90 million to $91 million on a run rate basis in the fourth quarter. And that excludes the rebranding cost of a million potential conversion, merger costs of a million. And as we've said before, we're looking to accelerate some of our spending related to the opportunity from the Truist disruption. And that's about $1 million. So if you take all that together, we're looking at $90 million to $91 million for Q4 and then going forward we will be projecting is probably a 4% to 4.5% growth rate off of that run rate.

Got it, got it. So the recruiting costs in the OREO valuation adjustments and the community development issue those kind of items we would assume wouldn't necessarily, wouldn't come back is what you're saying?

Yes, exactly that’s the way I'm looking at as well.

And the FDIC assessment credit is that, is your expectation that you would get that for maybe one more quarter?

Yes. So the credit, the total credit we're getting related to that was $3.8 million. Our total premium assessment this quarter was $2.4 million. So basically it was zeroed out and we will apply the remainder, which is about $1.3 million to our assessment for the fourth quarter. So we're expecting $1.3 million of credit coming through in the fourth quarter.

Got it. All right, then I'll just ask that I guess a bigger picture. I mean, just on M&A it sounds like still very focused on the organic growth here but I guess any update to your general thoughts on holding M&A and the kind of a timeline that you might start re-engaging more in those conversations?

Casey, this is John, it's really, it's difficult to imagine that we would want to do anything next year that that doesn't mean that we like candidly, we are always having conversations. There are always conversations going on. There's literally a queue. We could do one tomorrow if we wanted to, but we don't we have more important things to do right now. So I think my big concern is that, if we take on another M&A deal, it will cause us to kick the can down the road, and what we believe are actually far more strategically important opportunities.So we really need time to knock some of these things out. You've heard me list out some of the initiatives that are on the table. Particularly with the new leadership, we have a consumer digital strategy recognizing that the largest opportunity we have is in fact this SunTrust BB&T combination. So if anything changes in terms of our intentionality, we're going to tell you, we would begin to signal it, it's just very difficult to imagine that we would want to try and get anything done next year again, which doesn't mean we couldn't be having conversations with someone over that period of time as we always do. So that's all I can say for now.

Very helpful. Thanks for all the color.

Thanks Casey.

Thanks Casey.

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

Your next question comes from the line of Laurie Hunsicker. Your line is open.

Hi Laurie.

Good morning, Laurie.

Hi, good morning. Just wondered if we could jump over to credit and certainly your credit is looking good. But can you just refresh us your third-party consumer? What is that book and then how much of that is lending club at this point?

Yes, so it's a bit over $200 million total third-party Laurie. About $140 million of that is the Lending Club book that's been coming down as you know, it's in run-off mode, it's been coming down by about $8 million to $9 million a month. The previous quarter it was about $166 million. So we’re now down to $140 million. We expect that will continue to run-off in the same fashion going forward.

Got it, okay. And then axing out the one credit you said the majority of your charge-offs came from that book. So I'm doing the math right. It was around, I don't know $4.7 million was then related to consumer?

Yes, that wasn’t the far amount wasn’t but there’s still some other relatively smaller commercial.

I think the total for this quarter would have been consumer 40% would have been our one land development loan. And if you rewind the last couple of quarters, third-party consumer charge-offs have been running about literally two-thirds of total, our charge-offs excluding third-party have been running about five to six bps annualized which is too low as we've said consistently.

Okay, and so I guess when should we expect to see this consumer book at zero? How are you thinking about that?

You mean in terms of the third-party, we're expecting the majority of that to run-off through the end of 2020. The Lending Club proceeds for the most part. So that should be running down through the next year or so.

Okay, great. And then just specifically around that or any guidance you can give us as we think about loan loss provisioning with CECL. Can you help us just think about this piece of it or more generally, and certainly appreciate the other color you gave, but if you can just help us think about what an ongoing loan loss provision would look like for you guys with this book?

Yes, so Laurie, as you know, we will be putting up an allowance for the acquired loan portfolio. And also the books credit impaired or books credit deteriorated in CECL terms. So we expected the charge-off ratio will increase because we will now be charging-off loans that are in those books will be charged-off against the allowance. So I'd expect that you will see 25 to 30 basis points of things being equal. That's assuming we don't necessarily have a lumpy commercial credit come through like we did this quarter.

Okay, great. And then just one last question on credit. I saw that you guys had an uptick in your CRE past due. Is there anything greater going on there? Is there any color you think you can give on that one?

The $8 million we made a reference in the release that $12 million of total past dues were actually current as of now, of that $12 million, $8 million were actually what we refer to as administrative past dues. So that would be the categories of commercial owner occupied, non-owner occupied. That simply means we had maturing credit facilities that were in process of renewal. And those were not indicative of credit problems. They were simply indicative of getting the renewals to the system on time.We mentioned before that we've implemented an end-to-end loan origination system. The downside of doing such a thing as you run a J-curve, it actually takes longer to load new credit facilities and renewals into such a system initially, and for the bankers to get up to speed. It's slower until they gain experience with it and then it becomes faster. And so we are on the upside of that J-curve. So we did have some slow down in terms of processing renewals. And that's what you're seeing those were not credit issues.

Okay. Okay, that's helpful. Okay. And then just over on expenses, I just want to make sure that I've got this right. You obviously had rebranding expenses here at 1.133. Did that include any of the branch closure expenses? Or if not, what were those and were they in the other, other line?

Yes, they did not include any branch closure costs in the third quarter. Actually, we had guided to perhaps expect another 200 to 300 in the third quarter from branch closures, but actually, we came in quite a bit lower that was about 50 ended up being about $55 million -- $55,000 of branch closure costs. So not material and that would have been any other line item.

Okay, great. And then just one last thing here on sort of this, we think about one-time within both merger costs and rebranding costs as we finish out this year 2019. Are we pretty much done with those as we head into 2020 or how should we be thinking about that?

Yes, that's exactly right, Laurie. This will be the final quarter of seeing both rebranding costs and merger costs.

Okay, great. Thank you.

Thank you.

Great, thank you, Laurie. And thank you everyone for calling today. As a reminder, a replay of the call will be available on our investor website investors.atlanticunionbank.com. Thank you and have a good day.

This concludes today’s conference call. Thank you for your participation. You may now disconnect.