Atlantic Union Bankshares (US:AUB)2019-10-17 20:07Financial Data and Key Metrics Changes - Reported net income for Q3 2019 was $53.2 million, with earnings per share at $0.65, an increase of approximately $4.5 million or $0.06 from the previous quarter [31] - Non-GAAP operating net earnings for Q3 were $56.1 million or $0.69 per share, down from $57.1 million or $0.70 per share in the prior quarter [32] - Operating return on tangible common equity was 15.64%, a decrease of 94 basis points from the second quarter [9] - Operating return on assets was 1.29%, down six basis points from the last quarter [9] - Operating efficiency ratio was 55.12%, an increase of 266 basis points from the prior quarter [9] Business Line Data and Key Metrics Changes - Loan growth was 3% annualized for the quarter, while average loans grew 5% [11] - Deposit growth was strong at about 17% annualized, with year-to-date deposit growth of approximately 9% [13] - The loan-to-deposit ratio was around 94% at quarter-end, slightly below the 95% target [13] Market Data and Key Metrics Changes - Unemployment in Virginia ticked down to 2.8%, indicating a steady economic environment [13] - Non-performing assets totaled $36.4 million, an increase of $2.4 million from the second quarter [46] Company Strategy and Development Direction - The company rolled out a new three-year strategic plan focusing on meeting customer needs, optimizing processes, demonstrating organic growth, and continuous improvement [16][17] - The company aims to capitalize on opportunities arising from the BB&T and SunTrust merger, having already hired 29 people from these companies [25] - The focus remains on organic growth rather than M&A, with a commitment to enhancing internal capabilities [66] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the company's future despite challenges in the interest rate environment, expecting to achieve targeted ROTCE in Q4 2019 [10][33] - The current low rate environment is expected to compress net interest margins further, with projections for additional cuts from the Fed [52][34] - The company anticipates loan growth of approximately 6% for the full year 2019, with expectations for high single-digit growth in 2020 [12][57] Other Important Information - The company declared a quarterly cash dividend of $0.25 per common share, an increase of 8.7% compared to the prior quarter [49] - The company authorized a share repurchase program to buy up to $150 million of common stock through June 30, 2021 [49] Q&A Session Summary Question: Update on margin outlook - Management expects continued compression of 3 to 4 basis points in Q4 and 4 to 5 basis points per quarter through 2020, assuming further Fed cuts [52][54] Question: Growth expectations for next year - Management projects loan growth in the high single-digit range for 2020, potentially between 7% to 9% [57] Question: Core expenses outlook - Management anticipates core expenses to be in the $90 million to $91 million range for Q4, excluding rebranding and merger costs [60] Question: Update on third-party consumer loans - The third-party consumer loan book is over $200 million, with $140 million from Lending Club, which is in run-off mode [70] Question: Loan loss provisioning with CECL - Management expects charge-off ratios to increase to 25 to 30 basis points under CECL, depending on the economic environment [77]