Atlantic Union Bankshares (US:AUB)2022-10-20 18:27Financial Data and Key Metrics Changes - Reported net income available to common shareholders was $55.1 million, with earnings per common share at $0.74, an increase of approximately $4.2 million or $0.05 per common share from the second quarter [24] - Adjusted operating return on tangible common equity was 17.2% in the third quarter, up from 16.5% in the second quarter [25] - Total allowance for credit losses was $190 million, an increase of approximately $6 million from the second quarter, primarily due to net loan growth and increased macroeconomic uncertainty [26] Business Line Data and Key Metrics Changes - Upper single digit loan growth of approximately 8% for the quarter, with a year-to-date loan growth of approximately 10% excluding PPP [8] - Non-interest income increased by $12.7 million to $25.6 million, primarily due to a pre-tax gain from the sale of the RIA business in the second quarter [29] - Non-interest expense increased by $1.1 million to $99.9 million, driven by a $1.3 million increase in salaries and benefits expense [30] Market Data and Key Metrics Changes - Virginia's unemployment rate has recovered to pre-pandemic levels at 2.26%, remaining below the national average of 3.5% [7] - Total assets increased to $20 billion at September 30, a 5.8% annualized increase from June 30 levels, primarily due to loan growth [31] - Total deposits stood at $16.5 billion, an increase of $418 million or approximately 10% annualized from the prior quarter [32] Company Strategy and Development Direction - The company is focused on soundness, profitability, and growth, navigating challenges in the operating environment [6] - Plans to continue expanding asset-based lending and enhancing capabilities in government contracts finance, equipment finance, and foreign exchange [13] - The company remains open to M&A opportunities under the right circumstances, focusing on smaller, lower-risk infill opportunities [18] Management's Comments on Operating Environment and Future Outlook - Management believes the effects of any recession will be somewhat tempered in Virginia due to its stable economic environment [7] - The company expects to generate upper single-digit loan growth for the year, with a strong loan pipeline entering the fourth quarter [9] - Management anticipates continued expansion of net interest margin due to asset sensitivity and expected Federal Reserve rate hikes [38] Other Important Information - The company did not repurchase any shares during the quarter to preserve capital for organic loan growth [35] - The effective tax rate for the third quarter increased to 17% from 16.7% in the second quarter [31] - The company expects to achieve top-tier financial targets in the fourth quarter of 2022 and throughout 2023 [36] Q&A Session Summary Question: Can you provide an update on deposit data this quarter? - Management indicated that deposit betas are around 12% to 80% for this cycle, expecting to see an increase in deposit rates as competition grows [42] Question: What is the outlook for deposit growth moving forward? - Management projects a normalization of deposit growth to 3% to 5% as they expect some runoff from commercial client operating accounts [44] Question: How is the company managing expenses in light of revenue projections? - Management stated they are focused on generating positive operating leverage and can adjust expenses if revenue growth does not materialize as expected [52] Question: What is the company's view on credit quality and potential risks? - Management noted that while they do not see systemic credit quality issues, they are preparing for a potential mild recession in 2023 [39]