Good day and welcome to Atlantic Union Bankshares Third Quarter 2024 Earnings Call and Sandy Spring Bank Acquisition Announcement. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. Instructions will be given at that time. As a reminder, this call may be recorded. I would now like to turn the call over to Bill Cimino, Senior Vice President, Investor Relations. Please go ahead.

Thank you, Michelle, and good morning, everyone. I have Atlantic Union Bancshares' President and CEO, John Asbury; and Executive Vice President and CFO, Rob Gorman with me today. We also have Sandy Spring Bancorp's Chairman, President and CEO, Dan Schrider on the call, who will join us in discussing our merger announced earlier today. Other members of our executive management team will be here for the question-and-answer period. Please note that today's releases and the accompanying slide presentations are available to download on our investor website, investors.atlanticunionbank.com. During today's call, 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 the appendix to our slide presentation and in our earnings release for the third quarter of 2024. We will make forward-looking statements on today's call, which are not statements of historical fact and are subject to risks and uncertainties. There can be no assurance that any actual performance will not differ materially from any future expectations or results expressed or implied by these forward-looking statements. We undertake no obligation to publicly revise or update any forward-looking statement. Please refer to our earnings release and our other SEC filings for 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 from those expressed or implied in the forward-looking statement. 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.

Thank you, Bill. Good morning, everyone. Today, we're excited to announce the merger of Atlantic Union Bancshares with Olney, Maryland-based Sandy Spring Bancorp. Sandy Spring is a $14.4 billion asset bank with an exceptional 156 year history and an impeccable asset quality track record in attractive contiguous markets. This is a highly respected Maryland Bank and in our view a historic franchise, among the oldest in America that has grown from a Maryland Community Bank to the largest Independent Bank in Maryland. This is exactly what Atlantic Union Bank has done in Virginia. We believe it's a hand in-glove fit for two great neighboring franchises that have been on similar paths with similar cultures and a similar customer and community focus. We are eager to share our thoughts on this announcement and why we believe it improves each company's shareholder value proposition and ability to serve our customers and communities. I will do so after Rob and I provide abbreviated comments on Q3 results for Atlantic Union. It was a good quarter for Atlantic Union with less noise in the prior quarter, which makes for an easier and shorter conversation about our results. So let's begin. As you will recall, during the second quarter, we closed our acquisition of Danville, Virginia based American National Bank and completed their systems conversion over Memorial Day weekend. We did not have the second quarter's merger related items impacting our results during the third quarter and we believe our post-merger core earnings power is now on full display. On a linked-quarter annualized basis, our deposit base grew 6.1% and averaged up 2.8%. Linked-quarter annualized loan growth in the seasonally slow third quarter was relatively flat, ending down 0.2%, though averaged up 3.6%. Loan growth was impacted by clients waiting for the well telegraphed Federal…

Well, thank you, John, and good morning, everyone. Please note that for the most part, my commentary will focus on Atlantic Union's third quarter financial results on a non-GAAP adjusted operating basis, which excludes $1.4 million in pretax merger-related costs recorded in the third quarter. In the third quarter reported net income available to common shareholders was $73.4 million and earnings per common share were $0.82 Adjusted operating earnings available to common shareholders was $74.5 million or $0.83 per common share for the third quarter, which was an increase of $18.2 million or 32.3% from the second quarter of 2024 and up $14.7 million or 24.7% from the third quarter of 2023. The adjusted operating return on tangible common equity was 19.2% in the third quarter. The adjusted operating return on assets was 1.25% in the third quarter. And on an adjusted operating basis, the efficiency ratio was relatively flat with the second quarter at 52.2%. As of the end of the third quarter, the total allowance for credit losses was $177.6 million which represented 97 basis points as a percentage of total loans. The provision for credit losses of $2.6 million in the third quarter was down from the prior quarter's $21.8 million provision for credit losses, primarily driven by the prior quarter's inclusion of the initial provision for credit losses and non-PCD loans and unfunded commitments acquired from American National of $14.6 million as well as by lower net charge-offs and lower loan growth in the third quarter. Net charge-offs decreased to approximately $700,000 or one basis point annualized in the third quarter from $1.7 million or four basis points annualized in the second quarter. The year-to-date net charge-off ratio was six basis points on an annualized basis. Now turning to pretax pre-provision components of the income statement…

Thank you, Rob. Now that we both hit the high points for the quarter, let's talk about the big news today and that's our exciting partnership with Sandy Spring. As noted on Slide 2, the forward-looking statements Bill covered at the beginning of this call still apply and we'd like to note additional risks listed on the slide. As you can see on Slides 3 and 4, the merger will be addressed in a joint proxy statement of Sandy Spring and Atlantic Union and the prospectus of Atlantic Union to be filed with the SEC. We urge you to read it when it becomes available because it will contain important information. Information regarding the persons who may, under the rules of the SEC, be considered participants in the solicitation of Sandy Spring and Atlantic Union shareholders in connection with the proposed merger will be set forth in the proxy statement prospectus when it is filed with the SEC. Now, let me begin by saying we are thrilled. We are thrilled to partner with Sandy Spring. We've long admired the company and its team and being neighbors, we know them well and have watched as Dan Schrider and his team have transformed a Maryland Community Bank into Maryland's Bank. This is a strategy we recognize as we've done exactly the same here in Virginia. We admire Sandy Spring's people, culture, customer focus, impeccable asset quality, track record and the important role they have played in their communities over their long 156-year history. We also respect their number one regional bank depository market share in Maryland and the density of their franchise, which in our view means they are highly relevant to their markets. We share our common legacy with our own 122-year history and our highly compatible people-oriented culture. They are…

Thank you, John. I really do appreciate being a part of this morning's call and would like to share a bit about Sandy Spring, talk about this partnership we've announced and what this will mean for our clients and our communities. For those who are unfamiliar with Sandy Spring Bank, we've served families and businesses in the Washington Metro area for over 156 years. With assets of $14.4 billion and over 50 locations in Maryland, D.C. and Virginia, we provide a wide range of products and services including consumer banking, commercial banking, treasury management and a robust wealth management and trust business. And as John noted, today's announcement brings together two very strong organizations and I'm really excited about what we're creating together. Atlantic Union Bank and Sandy Spring Bank share the same values and commitment. Both of us share a people first approach to doing business and serving our communities and together we'll add even greater value to those that we serve. This combination for us will deliver enhanced scale and capabilities and capacity for our clients and will provide greater opportunities for our employees to grow within a larger organization. And once this merger is complete, our collective footprint will include D.C., Maryland, Virginia and North Carolina. If there are any specific questions regarding Sandy Spring Bank, I'm happy to answer those during the Q&A session. And I'll turn it back to John.

Thank you so much, Dan. Slide 9 shows combined market share and some market highlights. We're excited to create the number one regional bank in the Mid-Atlantic region and separately the number one regional bank in Virginia, the number one regional bank in Maryland too. To my knowledge, this has never been done before and I do not believe it can be done again. This is an enormously powerful franchise. The pro forma entity will be situated in some of the wealthiest counties of the country. Our pro forma franchise will be in the 95th percentile of counties by median household income. In fact, six of those are in the top 12 in the United States. We're excited by the positioning in some of the largest population and wealth centers on the East Coast and with Washington D.C. and Maryland. This should allow us to have enhanced growth opportunities for our expanded wealth management capabilities, potential future loan and deposit growth and our ability to drive customer growth and gain market share. Before I turn it over to Rob, I wanted to offer perspective on why it should come as no surprise that we were interested in this combination. As mentioned earlier, I've been in Atlantic Union Bank now for eight years. During that time, we have worked hard to build a reputation for doing what we say we will do. And what we achieved with this partnership is one of those things. At our 2018 Investor Day, six years ago, I outlined what our future M&A strategies would look like and you can see that on Slide 10 of today's merger presentation. Since we outlined those options six years ago, with this announcement at different times, we've now done them all. We've had periods of organic only growth, particularly…

Thanks, John. Let me switch gears to outline the expected financial impact of the merger from the strategic aspects of the transaction, which as John just noted, we believe are very compelling. On Slide 11, we recap the transaction structure and key terms of the transaction. In terms of the transaction itself, it's a 100% stock deal with a fixed exchange ratio 0.90 shares of AUB common stock for each share of Sandy Spring's common stock. When factored in with the equity raise announced today, assuming full physical settlement of the common shares, this works out to approximately 29% pro forma ownership of the combined company by Sandy Springs shareholders. That translates into an aggregate transaction value of about $1.6 billion or $34.93 per Sandy Springs share based on the closing share price of Atlantic Union stock ending on Friday, October 18. This represents a per share market premium to Sandy Springs shareholders of approximately 7% over Friday's closing stock price. The implied transaction metrics represents a 1.28 priced to tangible book value multiple, a price to 2025 consensus earnings per share multiple of 13.5 times and a core deposit premium of 3.3%. Upon closing the transaction, three members of Sandy Spring's Board of Directors will join Atlantic Union's board, including CEO, Dan Schrider. The transaction is expected to close by the end of the third quarter of 2025, subject to customary closing conditions and the receipt of required regulatory approvals and shareholder approval from both companies. In addition, we are targeting the first quarter of 2026 to complete the core systems conversions. On Slide 12, we lay out the key transaction assumptions. From a cost savings and merger cost perspective, we are assuming we can achieve savings of approximately 27% of Sandy Spring's annual operating expenses and expect to…

Thank you, Rob. Atlantic Union and Sandy Spring are real banks for real people. As mentioned, our roots go back 122 years, while theirs go back 156 years. We wouldn't be here today without the support of our communities and we have supported them too through the years. As you can see, we both spend a lot of time and money investing in our communities. We believe that this transaction will enable us to deliver even greater benefits to our communities. And to that end, we have developed a $9.5 billion community benefits plan, whereby over the next five years, we will commit across our markets to provide approximately $8 billion in community benefit financing and approximately $1.5 billion in community investments and charitable contributions for the benefit of the communities we serve. We are also excited to announce that we will open three new branch locations in low to moderate income areas in Baltimore City, Maryland; Prince George's County, Maryland; and Prince William County, Virginia. We will provide residential mortgage assistance, additional support for small and medium-sized businesses and make additional donations to community organizations. We win lots of awards because we do the right things for our teammates and the communities we serve and the plan announced today reflects that long history and illustrates our continuing community support well into the future. As you can see, this transaction works on so many levels and positions us to deliver long-term shareholder value. It will solidify our status as the preeminent Lower Mid-Atlantic franchise that bridges into the Southeast. As Rob mentioned, the significant earnings accretion will earn back the tangible book value dilution quickly. With our history of successful integrations and having just completed an acquisition and systems conversion, we've exercised these muscles recently and we believe that this transaction has a lower execution risk as a result. Our customers will have greater convenience and will be able to offer greater capabilities in an expanded product set. And as previously mentioned, our teammates will benefit from expanded career and development opportunities in the soon to be larger organization. We have compatible cultures and great respect between our two companies and we plan to do great things together for our shareholders, our teammates, our customers and our communities. We are stronger together. And with that, I'll turn it back over to Bill Cimino to open it up for questions from our analysts. Bill?

Thank you, John. Michelle, we're ready for our first question, please.

Thank you. [Operator Instructions] Our first question comes from Catherine Mealor with KBW. Your line is open.

Good morning, Catherine.

Good morning. Good morning and congrats on this acquisition. I wanted to start maybe just with the CRE loan sale. Just curious if you can talk us through how you've prepared for that, the logistics of how that looks. And then I also saw in your presentation, you mentioned that the CRE sale takes about $0.29 out of book value. So just kind of curious what kind of discount you're assuming within that number? Thanks.

Sure. I'll start with the process. We were represented on this transaction by Morgan Stanley. Due diligence took the two phases. Phase 1, Dan, and we refer to as preliminary due diligence and we did several things at that period of time. We took the loan tape and we had it analyzed both one to calculate the actual credit marks or interest rate marks, I should say. And importantly, we also had Morgan Stanley who maintains an active commercial real estate capital markets group assessed the portfolio to identify the for sale portfolio, which we had estimated at $2 billion. Dan and I both referred to this phase of due diligence as the feasibility test. Does the merger make sense? Does the math work? And so it was important to not speculate, estimate or frankly guess it with the interest rate marks. We actually calculated the interest rate marks using our third-party. And at the same time, Morgan Stanley actually assessed the loan portfolio, identified the for sale notes and priced them. So we have a very, very good handle on what that will be. Catherine, I'll point out it's up to $2 billion. It's not necessarily $2 billion. We're solving for the known metrics of the targeted commercial real estate concentration ratio and the loan to deposit ratio. And so based on the modeling that we've done, it's up to $2 billion. We could find out that we do not need to sell all of that. But nevertheless, we were able to conclude with confidence that the potential transaction was feasible. We each agreed that if we're going to do this, we're going to position the company for growth and we're not going to have a CRE concentration ratio to hold us back and we're going to have ample liquidity in the loan to deposit ratio. So that's how that works in terms of the nature of it. By the way, we will be service retained. So the commercial real estate loans that are sold will be service retained, meaning it will be the same experience for the client. Rob, do you want to speak to how we calculated the remarks?

Yeah. So, Catherine, in terms of the impact on tangible book value, as you noted, we're selling about $2 billion of CRE loans. Obviously, those are being marked for sale. So included in that mark, we've got a 1.5 credit mark, we've got a 5% interest rate mark on that portfolio. And then on top of that, additional discount related to the sale in the market. We're assuming a low-90s total mark in terms of what we're able to sell to. So we'll receive those proceeds on a discounted basis from par. And then we're reinvesting those proceeds into paying down Federal Home Loan Bank advances. Actually, I should point out that the yield on the $2 billion we're talking about is about a 5.73% at the currently as we've modeled. And we're reinvesting that by paying down Federal Home Loan Bank and high cost broker deposits among other things. And those are rates paid on those are in the 4.54, 4.75 range. So we're taking a bit of a haircut on that from an earnings point of view. In addition, we also some of that some of those proceeds will be invested in both loans and securities portfolio. So there's a haircut that we're taking on a yield basis related to those. And then there's also the aspect of we're not getting the accretion income by selling these loans. We lose the ability on the accretion income aspect of that. So that's really how it's been calculated. We do know it's a headwind against the earnings as we go forward, but it's kind of a net not the full gross number of the 5.73 yield on the portfolio.

It's a headwind, but the transactions looks great despite the headwind.

Yeah, it's a headwind.

It's a headwind, but it allows you to grow as you move on to that?

Yes, that's exactly right, and I also want to point out that there's sort of an embedded option here. If you have the mindset as we are that we're going to see an elevation in commercial real estate payoffs. If we find that we are sort of running below the plan level of commercial real estate, then we're able to easily fix that. We'll simply sell fewer loans, which will pop off the targeted balances and that will actually be quite lucrative because they will have been marked. Again, all we're really doing is solving a math equation. How much do we have to sell in order to hit our targeted commercial real estate concentration ratio and loan to deposit ratio. It's really as simple as that.

And what are those targeted ratios? Is it -- I assume it's more than just below 300? Is it like 272 is the targeted CRE to capital that you're looking at?

Yes. If you look at the modeling, I think what we reported is about 272 at the holding company level. It's probably a little over that at the bank level 280. Yes, you can see that on the slide here 272 and 285. But, yes, below 300 for sure. That's the key in trying to bring that down even a bit lower than we're sitting right now. We're about 290 today.

And loan to deposit ratio will be in great shape. They'll actually be we're in good shape right now, but it will be lower still below 90%. I think the key message to the teams particularly who will join from Sandy Spring and to the markets in which the operators, we will be open for business, positioned to grow.

Great. That's really helpful. And then, just on a standalone basis for Atlantic Union, looks like the margin is coming down a little bit in the fourth quarter just as we added more rate cuts. Is there any way to kind of think about how that impacts the NIM at which we should start for 2025?

Yes, Catherine, I think we won't provide official guidance until our fourth quarter earnings call in January, but you can expect that we should see some expansion in the margin coming out of the fourth quarter. Really some of this is kind of temporary impacts in terms of we've lowered our accretion income estimates as payments prepayments are coming in lower than we had originally forecast. And then you can see lower fixed rates have impacted our lower market rates, term rates have impacted the yields that we're getting on new and renewing fixed rate loans. And then the other part of that is there's an extra 25 basis points of Fed Funds Rate Cut that we hadn't originally projected in the fourth quarter. That will catch up as we're expecting more to come into in 2025. So all that put together and being aggressive on deposit rate, bringing deposit rates down, we're assuming a mid-40s on the deposit beta down. That should allow us to spend the margin a bit in 2025 and we'll talk more about that in our next call.

Okay. Very helpful. Thank you and congrats.

Thank you, Catherine.

Thank you, Catherine. Michelle, we're ready for our next caller please.

Okay. Our next question comes from Russell Gunther with Stephens Inc. Your line is open.

Hi, Russell.

Hey, good morning, guys. Just to quickly follow-up on Catherine's line of question for the NIM. Could you give us a sense for where you'd expect the pro forma margin to shake out with deal close? And does the I think the $364 million you referred to on Slide 16, does that include marks taken on the $2 billion potential $2 billion of CRE sales or not? How should we be thinking about that number?

Yes, that should include, it should include the impact of the CRE sale, both from an earnings perspective as well as the marks not accreting as much income. And in terms of --

Okay. The 364 contemplates that you up to $2 billion of loans sold. Okay.

Yes, exactly. And then in terms of the margin impact, I think we're suggesting upon closing as we see accretion coming through probably in the, call it, the 3.75 to 3.85 range is what we'd be projecting with accretion income.

Okay. Got it. Thank you, Rob, for the clarity there. And then switching gears to loans and the loan growth outlook. I think Sandy Spring struggled a bit to grow C&I the way they would have liked. This is very much a core competency at Atlantic Union. So could you give us the playbook for overlay in the AUB model on Sandy Spring? And then how should we think about the overall pro forma loan growth rate going forward?

Dave Ring, who is our Head of All Commercial Businesses is here. Let me say that we have a playbook. We will continue to refine the playbook as we begin to spend more time with them. So, Dave, don't show your hand too much, but at least be directionally correct.

Yes. I think the advantage going into this transaction really is they've already segmented their business lines. So they already have a CRE segment like we do, C&I segment like we do. So now it's an opportunity to really grow the fee-based businesses along the new client acquisition. Our playbook will probably remain very similar to what you've seen over time where 30% to 40% of production comes from new client acquisition.

Yes. And I would say that the Maryland markets are similar to what we see. So we definitely will use what we'll call the Virginia, pardon me, the Virginia playbook. We are better able or I should let me rephrase, we are better positioned to serve middle market companies. So Sandy is perhaps a bit more limited there. So we'll continue to go after certainly smaller business, but we can move into the pure middle market. We bring new capabilities to the table be it equipment finance, asset based lending, foreign exchange, a robust interest rate hedging program, additional treasury management services. By the way, they have some treasury management offerings that we don't currently offer that we intend to keep. So all that will come in time. I do believe there are revenue synergies here, the single largest revenue synergy is they will not be constrained in any way shape or form in terms of the capacity to lend, but we bring new tools to the table. And I think that while we have modeled zero, they're going to be very real. So we're excited about it and what we can do together. As needed, I also think it will help us attract talent too, to the extent that the team finds that they have room to grow and add more talent.

All right, great. Thank you, guys. And then just last one for me would be a follow-up on the CRE loan sale. Understand solving for a math equation in terms of loan to deposit ratio and concentration. But is there anything you could share in terms of the profile of the loans sold, whether it's asset classes like office or geographies? Just how did you kind of ring fence the characteristics of the potential CRE to be sold?

Yes. Russell, we've actually identified the portfolio and priced it down to the individual note. Just to give you some context, it's about 200 notes. I don't want you to think it's 2,000. And the two largest categories will be retail and multifamily and then you get into some kind of miscellaneous other, which makes it up. Now we don't have to sell those 200 notes to be clear, but that is the identified portfolio. We can move some things around, so to speak. But there is a very liquid market for those. To be exceptionally clear, we're talking about very good high quality performing loans. I wish we didn't have to sell any, but it is the right thing to do. So we have a very good line of sight into exactly what we're selling.

Thanks, John, and thank you guys for taking my questions.

Thank you.

Thanks, Russell. Michelle, we're ready for our next caller please.

Okay. Our next question comes from Steve Moss with Raymond James. Your line is open.

Hi, Steve.

Hi. Good morning, guys. Just following up on the commercial real estate loans you plan to sell here. Just kind of curious kind of what's the average life of the type of loans you're looking to sell versus the average life of the CRE loans you're looking to retain?

I think the average life or duration of the portfolio is about four years on the commercial real estate portfolio. And these loans are pretty much in line. They may be a little shorter, but pretty much in line with that duration.

That's the total portfolio, Rob, or just the part you're selling? I'm sorry.

The total portfolio is about a four year duration and the part we're selling is approximately in that part.

Yes, it's largely reflective.

So it could be -- it's a little shorter than the four years, just from the market appetite for these sort of assets, but not significantly.

Okay. And then in terms of just the -- that mark that you guys are talking about and I think was in the low-90s you guys said, that is not included in the $575 million interest rate mark or is that included?

It is included in the total mark. And then we if you look at we have a reconciling settlement in the back, I think, page 28. And then we back that out as part of the real estate deal kind of have it in two places, a negative and a positive.

Okay. Got you. And then in terms of just kind of thinking about the market here today, it sounds like you guys saw loan yields came in during the quarter. Just kind of curious, I mean, what kind of rate you guys are seeing on new originations here and how you guys are thinking about the pro forma combined origination rate?

Yes. In terms of the Atlantic Union, new loans are coming on around the 7 to 705 range in the third quarter. Now that's down from, I think, about 725 in the prior quarter. Part of that is due to the significant decline in term rates that occurred in the second or third quarter. I think the five year fell about almost 100 basis points. Now that's climbed back a little since the end of the quarter. So that's what we're putting on new and renewed loans. In terms of the overall portfolio, I mean, you can think about it kind of if you combine the two with the marks, we're talking about pretty much in that ballpark, if you mark, Sandy's, which will, Sandy's loan yield or portfolio. So really those are being put on at market in terms of the loan mark, so you would expect to see those rates kind of play through.

Okay. And I'm going to ask before that question, just going back to the loans you're looking to sell, are you guys doing any hedging around the loans to lock in a price on loans you plan to sell? And also just curious, since the five year has moved up quite a bit here in the last couple of weeks, is that reflective of the rate mark you're taking on the $2 billion portfolio or is that kind of closer in the five year or three year?

Yes. It's reflective. I think the current market rates are reflective in the loan mark. But in terms of hedging, we've looked at various alternatives from a hedging point of view. And it's quite expensive. We'll continue to evaluate that. But at this point in time, we haven't locked into anything definitively on hedging that. We do have room that if rates were to go up a 100, call it 100 basis points, we'd still think we're in good shape from all of the metrics that we were talking about here.

Okay. Got you. And then just curious here on deposit cost side, it sounds like trends were a little bit ahead of what you guys were expecting for the quarter. Curious here with the 50 basis point Fed Cut, what you guys are seeing for deposit cost trends going forward?

Yes, we're certainly seeing them come down. We've been fairly aggressive in September post the Fed move in bringing down both our CD rates and money market rates. Actually consistent with what we're seeing from some of the large players in our market, the Truist, Wells and BofAs, they've been aggressive. So we are being aggressive as well. As I mentioned, we are modeling that we would probably be in the mid-40s through the down cycle from a deposit beta perspective and we'll be very aggressive on the downside here.

Okay, great. Appreciate all the color. Thank you very much.

Thanks, Steve.

Thanks, Steve, and Michelle, we're ready for our last caller please.

Thank you. Our last question comes from David Bishop with Hub Group. Your line is open.

Hey, David.

Good morning, David.

Hey, good morning, gentlemen. Hey, good morning. John, curious, obviously you get a lot bigger here following the transaction. Obviously, you guys are very strong community bank oriented franchises, both you and Dan. Do you see the nature of the types of loan relationships changing materially post-close here? Do you move up market in terms of that upper middle market? Just curious how you think the business model may change?

The way we would think about it is we'll keep doing everything we're doing today. There's nothing that's going on at Sandy Spring that's not going on here from our standpoint in terms of commercial banking. So we keep doing what we're doing, but we will have the capacity to deal with some larger clients as well into the middle market. We have some other capabilities that will be of interest. We have a public finance subsidiary, for example, which will actually make us more competitive up there in terms of tax exempt financing, for example. And you know the Baltimore area is an outstanding industrial market. I used to run asset based learning in the Southeast for Bank of America. We had a Baltimore office. We spent a lot of time up there. So as we bring things like equipment finance to the table and asset based lending and equipment finance we have marine finance capabilities tank, tugboats, barges et cetera, got the Port of Baltimore. We see a lot of opportunity not just in there, but I'm specifically calling out Baltimore in that area is an excellent sort of commercial and industrial market. But then just broadly Greater Washington region and Central Maryland, we will be able to bring some tools to the table and capital to be able to move a bit more upmarket. It's not an either or. It's everything they're doing and some additional capabilities.

Great. Thanks. And then maybe just curious, it's obviously getting maybe somewhat lost in the shuffle a little bit, but your experience thus far in terms of retention and maybe growth in the American National Deposit base, maybe some trends there post-close?

Yes, we feel good. Yes, we feel really good about it. It hasn't been really, yes, the retention has been really good, both the deposit side and I think from a commercial client perspective and a retail client perspective. So nothing material to report there. I actually feel like we're growing some of those accounts.

Dave, any comments on what you're seeing on the commercial side?

Yes. On the commercial side, the client attrition rate is actually lower than our average client attrition rate at legacy AUB and that's only slightly higher than the historical average for American National. So we're seeing pretty steady book of business.

Yes, that is a great team of bankers and we've clearly been able to demonstrate our enhanced ability to recruit, which we have mostly seen in North Carolina because we have a good, we have a great team right now in Central, Western and Southern Virginia, but we've been adding to the commercial team down in North Carolina. That's one benefit to the additional capabilities and some additional scale. There are going to be bankers who will perceive that as a good thing because it only further improves our ability to go head-to-head with the big guys into the middle market.

Got it. I appreciate the color. I guess one final question, John, it sounds like you had some line of sight maybe to additional commercial real estate pay downs coming up here, maybe talk about where you're seeing some of that pressure coming from?

Yes, it's interesting. So Maria Tedesco is here with me. We were just spending time recently with our commercial real estate team and it's very clear that what you have going on here is, if you look back, we've been through a period of suppressed or below normal commercial real estate payoffs, which in my mind think of it as like a backup or a bit of a backlog. So these are developers that in the normal course are going to refinance into the institutional non-recourse markets like insurance companies or if it's apartments, Fannie or Freddie's programs, possibly CMBS and they kind of been waiting because they've been making their expectation has been the term rates will come down or sell the properties. And so when term rates come down, cap rates go down. So when we saw the dip in treasury yields last quarter that felt like a little bit of a tipping point and I'm not saying there's a flood, but I'm just saying they were ready and they began to make this decision to do it. So we saw this pickup and we know from talking to them that they have more to go as they sort of feel their backlog because they want the capital back and they want their the ability to go do additional projects. This is actually a healthy thing. It should be viewed as a good thing in the markets. So I'm not saying there's a huge wave, but I'm saying it's beginning to think of it as normalized, but there probably will be some above average payoffs for a little bit while this backup clears. This is normal. This is what you want them to do. It's just kind of the normal process and it's been below average. So we've seen treasury yields pick up again now. So maybe that will change their expectations, not sure.

Putting that altogether maybe on an organic basis, does that sort of imply maybe a mid-single digit loan growth maybe as opposed to a high-single-digit growth rate, just curious maybe holistically?

Sure. Rob, do you want to speak to that?

Yes. So we're still calling for mid-single-digit loan growth, Dave, so even despite some of the headwinds we're seeing here.

Yes. We think the pipelines are supportive of that.

Great. Appreciate the color.

Thanks, Dave, and thanks everyone for joining us today on today's call. We look forward to talking with you next quarter. Thank you all.

Thank you for your participation. You may now disconnect. Everyone have a great day.