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Atlantic Union Bankshares Corporation (NASDAQ:AUB)
Q4 2019 Earnings Call
Jan 21, 2020, 9:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by and welcome to the Atlantic Union Bankshares Fourth Quarter and Full Year 2019 Earnings Call. [Operator Instructions]

I would now like to hand the conference over to your speaker today, Mr. Bill Cimino. You may begin.

William P. Cimino -- Senior Vice President and Director of Investor Relations

Thank you. Carl, and good morning everyone. While I hope you enjoyed the brief bit of news with this program, I do want to say that we'll probably next time go with music instead of the news on the hold. I have Atlantic Union Bankshares' President and CEO, John Asbury with me today; and Executive Vice President and CFO, Rob Gorman. 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 fourth quarter and full-year 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 fourth quarter and full year 2019 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. 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.

John C. Asbury -- President and Chief Executive Officer

Thank you, Bill. Thanks to all for joining us today and happy new year from Atlantic Union Bankshares Corporation. I do want to point out I'm fighting a cold, so I apologize in advance for the rough voice and occasional cough.

We closed out an eventful 2018 with a solid fourth quarter by continuing to execute on our strategic plan and hitting the loan and deposit growth targets we revised last quarter. As we begin 2020, we continue to believe we have a great opportunity before us to create something uniquely valuable for our shareholders and the communities we serve and remain keenly focused on reaching the full potential of this powerful franchise.

Atlantic Union accomplished much in 2019. To start, we closed the Access National Bank acquisition on February 1st and converted their core systems in May; successfully and uneventful rebranded the Company to Atlantic Union and changed the stock trading symbol to AUB; delivered 8% deposit growth while loan growth was 6% for the year.

The year-end loan to deposit ratio was in line 95% target right where it should be; we completed the transformation of the Executive Leadership team, with the hiring of David Zimmerman in the fourth quarter to head up our Wealth Management Group Middleburg Financial; approved and rolled out our new three-year strategic plan to our teammates; added an established equipment financing team to close the commercial banking product gap; launched Zelle and added nCino to address digital product gaps; won a number of a customer experience awards, including the much coveted number one ranking for the J.D. Power Retail Banking Satisfaction Survey for the Mid-Atlantic region in 2019, with the Mid-Atlantic region defined by J.D. Power as Virginia to New York State, there was none better; last a focused initiative to take advantage of the coming market disruption from the Truist merger.

Rob will provide more details on the financial performance in his section, but for operating metrics for the fourth quarter, our operating return on tangible equity was 16.01%, which is a 37 basis point increase from the third quarter. For the full-year, our operating ROTCE was 16.14%.

Operating return on assets was 1.30%, up 1 basis points from the prior quarter. For the full-year operating ROA was 1.31%. Operating efficiency ratio was 52.65%, which is a 247 basis point decrease from the prior quarter. In late 2018, we communicated that we had updated our top-tier financial targets to the following; operating ROTCE between 16% and 18%; operating ROA between 1.4% and 1.6%; and an operating efficiency ratio of 50% or below. We made those updates then expecting to operate in a rising rate environment and stepped up our top-tier financial metrics accordingly.

As the economic and geopolitical environment materially changed over the course of 2019, we shifted expectations for the Federal Reserve to cut rates. Even then the rate environment was below our expectations, and there was a sustained inversion of the yield curve that negatively impacted our net interest margin and revenue growth throughout the year. Despite the adverse changes in the rate environment, we did perform well against our original 2018 targets.

Given the challenging current and expected operating environment for banks Rob will comment on our revised financial targets for 2020 and 2021 in his remarks to focus on maintaining top tier financial performance regardless of the operating environment.

Loan growth was 10% annualized for the quarter point-to-point, while average loans grew 3%. Q4 is predictably a stronger seasonally in loan growth, and we saw significant growth materialize late in the quarter. Headwinds to growth in Q4 were a persistent trend of commercial real estate pay downs remaining at elevated levels, and our decision to run-off the third-party consumer loan portfolio, C&I line utilization at approximately 40% and total commitments both picked up from the third quarter.

As a reminder, the Access acquisition closed on February 1st, 2019. On a pro forma basis, as if the Access balances were included for the full-year, our year-end loan growth was approximately 6%, which is consistent with the expectations we communicated during our third quarter earnings call. Our loan pipelines are well balanced and slightly ahead of where we were this time last year, giving us confidence in our 2020 forecast. Based on everything we know at this time we expect full-year 2020 loan growth to be in the 6% to 8% range, including the impact of further run-off of our third-party consumer loan portfolio.

We expect to take advantage of the disruption caused by the Truist merger, but we do expect headwinds from the continuation of elevated pay downs in the CRE portfolio as rate expectations for the year suggest the institutional non-recourse long-term fixed rate market will remain an attractive substitute product for CRE clients.

Our deposit growth was about 8% annualized for the quarter point-to-point and average growth was approximately 15%. For the full-year 2019 deposit growth was approximately 9% point-to-point, which was at the higher end of our upper single-digit growth guidance. Given the current strength we believe we'll be able to match deposit growth with loan growth for 2020 in the 6% to 8% range and maintain our loan to deposit ratio at our target of 95%.

Turning to credit, credit quality remained solid in the fourth quarter. The economy in our footprint is steady, unemployment in Virginia ticked down to 2.6%, among the lowest in the nation, and we still do not see any evidence of systemic credit deterioration in our loan portfolio. Quarterly charge-offs were 15 basis points annualized down 10 basis points in the prior quarter. The full-year net charge-off ratio was 17 basis points. As we've seen in prior quarters, a big part of charge-offs at Atlantic Union Bank, about 60% for the quarter came from our third-party consumer loan portfolio, which as mentioned continues to run-off.

Barring some unexpected change in the macroeconomic environment we aren't expecting a change in credit quality in 2020. As I have consistently said over the past three years, I do believe problem asset levels at Atlantic Union, and across the industry remain below the long-term trend line, and I still believe that to be true. Eventually we will see a return to more normalized credit losses, but we can't tell you went to expect that, as we're not yet seeing any evidence of a systemic downturn.

Moving away from the quarter's financial highlights, and looking ahead we rolled out our new three-year strategic plan to our teammates in the second half of the year. Our plan stays true to how we like to operate Atlantic Union Bank, which is maintained forward progress, press our advantage, where we can and do what we say we're going to do. But as you know us and our story, the strategic plan continues a logical progression of what we've been working on for some time. Our roadmap to achieving the objectives of the strategic plan are our strategic priorities, which I have outlined before. I'll provide an update to those priorities.

Diversify loan portfolio and revenue streams; we made solid progress on our commercial banking effort and the commercial loan categories of C&I and owner-occupied real estate now make up one-third of our total loan portfolio. We stood up an equipment finance team in the fourth quarter to close a competitive gap in our commercial offerings and the team hit the ground running, closing about $12 million in loans during the month of December. The new capability has been very well received by our commercial banking teams and we're excited about the potential for this group over time.

Complementing our C&I strategy is a growing treasury management services annuity fees income stream. Treasury management transformed beginning of 2018 with the hiring of a new product development team of segmentation of TM support by line of business and an ambitious undertaking to enhance our service offerings. We now have a robust TM platform comprised of inside and external sales teams, a product management team and a sales and implementation team. New TM revenue in various stages of implementation totals $1.9 million in annual run rate plus a record $1.3 million in the pipeline.

Next grow core funding; as I mentioned earlier, our loan to deposit ratio is currently at our target of about 95%. We continue to believe we have opportunities to grow our deposit base and deepen our market share. For example we piloted a bank at work program in our coastal region in the fourth quarter, which targets the consumer banking needs of our commercial client employees. We've taken the learnings from that pilot and are now in the process of launching this effort across our footprint. The bank at work program is an important product to grow consumer accounts and low-cost deposits and helps to strengthen our commercial client relationships.

Next, manage the higher levels of performance; as we mentioned earlier, we aim to stay in the top quartile of our peers as measured by ROTCE, ROA and efficiency ratio metrics. We believe we have a number of opportunities to improve the efficiency of the bank by reengineering our end-to-end processes. For example, we are focused on taking out laborious manual processes and reducing rework wherever we can with a companywide robotic process automation initiative. Improving efficiency and scalability is an important focus for us in 2020.

Next, strengthen our digital capabilities; as I mentioned before, during 2019 we implemented table stakes technology improvements like Zelle in the consumer bank and nCino in the commercial bank. Middleburg Financial will have a comprehensive new wealth management platform in the first half of 2020, that will improve the client and teammate experience and close an important competitive gap. We're piloting a new digital account opening solution that simplifies the enrollment process, and that should launch in February.

We're adding debit card controls and enhanced notifications and alerts for real-time updates to customers in the first quarter. We have installed or upgraded Wi-Fi in all branches, so customers can more easily receive assistance to setup online and mobile banking, which is important for new and existing customers. Some of the new digital capabilities address gaps with our larger competitors, bringing us closer to parity with the most frequently used functionality. While we don't intend to lead the market in digital innovation we must be competitive and current with our digital offerings to remain in the consideration set for new customers, especially those considering leaving a larger bank.

Next is make banking easier; we launched a product called transition checking, that enables customers who might not otherwise qualify for traditional checking product to establish, or reestablish themselves in the banking system by offering a fee-based account that has no overdraft privileges. We successfully piloted a project to issue temporary instant debit cards at our branches and will roll that out across the system, starting this month. Debit card issuance time has been a pain point for our customers and this will resolve the issue.

We're also rolling out contactless debit cards to customers in the first quarter. We installed electronic signature capture pads at all branches to eliminate paper, streamline process, improve quality and create a more consistent experience for applications and forms. We've revamped the consumer lending team and their approval processes to speed up home equity line of credit approvals and have already seen a 25% reduction in average cycle time. We streamlined our treasury management services on-boarding process and simplified documentation by developing a master services agreement that allows clients to easily add new services. We further expanded our TM product set with a number of new offerings such as integrated payables on a better purchasing card product and finally capitalize on strategic opportunities.

Since we don't know what the future holds, we must be nimble, and able to react to a changing marketplace. The greatest market opportunity we're likely to see over the next few years is the Truist merger, and during 2019 we hired 39 people from the Truist companies in a variety of roles. We are expecting considerable Truist branch closures in our Virginia trading areas, which we expect to begin in late 2021 and we'll be ready for the coming disruption. As for other strategic opportunities, it should be clear from my comments we're busy and focused on internal improvements at the moment and still have a number of projects to finish in the near-term.

Having said that, we still believe Atlantic Union Bank is in the best position to further consolidate Virginia and look to fill in our Mid-Atlantic trade area. Our choice of Atlantic in the Atlantic Union Bank name was intentional, as we think we have the potential to become the premier Mid-Atlantic regional bank. It's my preference to focus internally for as long as possible in 2020 to gain efficiencies inside the bank to become more scalable, and to improve our competitive positioning. However, we have demonstrated, we're able to leverage M&A as a shareholder value creating secondary strategy and that remains at our playbook.

In summary, Atlantic Union had another solid quarter and a good 2019. We continue to make steady progress against our strategic priorities and delivered good financial performance despite headwinds from the adverse interest rate environment. I remain highly confident what the future holds for us, and the potential we have to deliver long-term sustainable financial performance for our customers, communities, teammates and shareholders.

I can think of no better way to finish my comments in the New Year, than by reiterating Atlantic Union Bankshares is a uniquely valuable franchise. It's dense and compact in great markets with a story unlike any other in our region. We have assembled the right scale, the right markets and the right team to deliver high performance in a franchise that can no longer be replicated in Virginia. We have growth opportunities in our North Carolina and Maryland operations in what we believe will be a multi-year disruption, with one of our largest competitors.

I'll now turn the call over to Rob to cover the financial results for the quarter and for 2019. Rob?

Robert Michael Gorman -- Executive Vice President and Chief Financial Officer

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 Atlantic Union's financial results for the fourth quarter and for 2019.

Please note that for the most part, my commentary will focus on Atlantic Union's fourth quarter and full-year financial results on a non-GAAP operating basis, which exclude $709,000 in after-tax merger-related costs, and $713,000 in after-tax rebranding related costs in the fourth quarter. It also excludes $22.3 million in after-tax merger-related costs and $5.1 million in after-tax rebranding costs for the full-year of 2019.

For clarity, I will specify which financial metrics are on a reported versus non-GAAP operating basis. In the fourth quarter, reported net income was $55.8 million and earnings per share were $0.69. That's up approximately $2.6 million or $0.04 from the third quarter. For the year ended 2019, reported net income was $193.5 million and earnings per share were $2.41, up $47 million or $0.19 per share from 2018 levels.

Reported return on equity for the fourth quarter was 8.81% and 7.89% for the full-year. Reported return on assets was 1.27% for the fourth quarter, and was 1.15% for 2019. Reported efficiency ratio was 57.4% for the quarter and 62.37% for the full-year.

On a non-GAAP operating basis, which as noted, excludes $1.4 million in after-tax merger-related costs and rebranding-related costs for the quarter and $27.4 million for the year. Consolidated net earnings for the fourth quarter were $57.3 million or $0.71 per share, which is up from $56.1 million or $0.69 per share in the third quarter. For the full year 2019 operating net earnings were $221 million or $2.75 per share, which is up $43 million or $0.04 per share from 2018 levels.

The non-GAAP operating return on tangible common equity was 16.01% in the fourth quarter and was 16.14% for the full-year. The non-GAAP operating return on assets was 1.3% in the fourth quarter and was 1.31% for 2019. Non-GAAP operating efficiency ratio was 52.65% in the fourth quarter, and was 53.6% for the full-year of 2019.

As a reminder, we remain committed to achieving top tier financial performance relative to our peers. Since the fall of 2018, we have been targeting the following operating financial metrics. An operating return on tangible common equity within a range of 16% to 18% and operating return on assets in the range of 1.4% to 1.6% and an operating efficiency ratio of 50% or lower. When we set these targets at the end of 2018, we expected to operate in a rising rate environment, which will result in net interest margin expansion and solid revenue growth. However this did not materialize as market interest rates declined materially since the beginning of 2019.

Given this challenging current and expected operating environment for banks and its impact on revenue growth caused by the intractable lower for longer interest rate environment, which we now expect will persist in 2021, we are revising our operating financial metric targets accordingly to the following. Return on tangible common equity within a range of 15% to 17%; return on assets in the range of 1.2% to 1.4% and an efficiency ratio of 53% or lower.

Our financial performance targets are set consistently in the top quartile among our peer group, regardless of the operating environment and we believe these new targets are reflective of the financial metrics required to achieve top tier financial performance in the current economic environment.

Now turning to the major components of the income statement for the fourth quarter, tax equivalent net interest income was $137.8 million, down $1.6 million from the third quarter, primarily due to lower earning asset yields, during the quarter, driven by lower average market rates and changes in the average earning asset mix from the third quarter.

Net accretion of purchase accounting adjustments for loans, time deposits and long-term debt, added 18 basis points to the net interest margin in the fourth quarter, which is up from the third quarter 13 basis point impact primarily due to increased levels of loan related-accretion income.

The fourth quarter's tax equivalent net interest margin was 3.55%. That's a decline of 9 basis points from the previous quarter. For the full-year tax interest margin was 3.69%, which is down 5 basis points from 2018's net interest margin of 3.74%. The 9 basis point decline in the tax equivalent net interest margin for the fourth quarter was principally due to an 18 basis point decrease in the yield on earning assets, partially offset by a 9 basis point decline in the cost of funds. The 18 basis point decrease in the quarter-to-quarter earning asset yield was primarily driven by 17 basis point decline in the loan portfolio yield and a 3 basis point negative impact related to changes in earning asset mix in the quarter.

Decline in the loan portfolio yield of 17 basis points was driven by lower average loan yields of 22 basis points, partially offset by the 5 basis point benefit from higher loan accretion income. Average loan yields were lower, primarily due to the impact of declines in market interest rates during the quarter. Notably the significant declines in the one month LIBOR and prime rates.

The 3 basis point earning asset yield decline resulting from changes in the earning asset mix from the prior quarter was due to the buildup of liquidity during the quarter resulting from the timing of deposit inflows early in the quarter and the funding of loan growth late in the quarter, which shouldn't carry over into future quarters. The quarterly 9 basis point decline in the cost of funds to 1% was primarily driven by a 28 basis point decline in wholesale borrowing cost, favorable changes in the overall funding mix between quarters and by lower interest-bearing deposit costs, which declined 6 basis points from the third quarter's 125 basis points.

The provision for loan losses for the fourth quarter was $3.1 million or 10 basis points on an annualized basis, which is a decrease of $6 million or 19 basis points from the third quarter. The decrease in the loan loss provision from the previous quarter was primarily driven by lower levels of net charge-offs. For the quarter of 2019, net charge-offs were $4.6 million or 15 basis points on an annualized basis, compared to $7.7 million or 25 basis points for the prior quarter.

As in previous quarters, a significant amount of the net charge-offs came from non-relationship third-party consumer loans, which are in run-off mode. For the year, net charge-offs were $20.9 million or 17 basis points. Non-interest income declined to $29.2 million for the fourth quarter from $48.1 million in the prior quarter. The decrease in non-interest income was primarily driven by life insurance proceeds of approximately $9.3 million related to the acquisition of Xenith and a gain of approximately $7.1 million due to the sale of investment securities recorded in the third quarter.

Excluding these third quarter items, non-interest income declined by $2.5 million, driven by lower loan related interest rate swap income of $2 million due to lower transaction volumes and seasonally lower mortgage banking revenue of $685,000. Excluding merger-related costs and rebranding-related costs in both the third and fourth quarters of 2019, operating non-interest expense decreased by $15.6 million or 15% to $92.5 million when compared to the prior quarter.

The decrease in operating, non-interest expense was primarily due to the recognition of approximately $16.4 million loss on debt extinguishment in the third quarter, resulting from the repayment of approximately $140 million in Federal Home Loan Bank advances and the termination of related cash flow hedges.

Salaries and benefits declined by $2.5 million, primarily due to lower incentive compensation expense, and higher deferred costs related to new loan originations. This decreases were partially offset by increases in marketing expense of approximately $1.1 million due to increases in direct mail and sponsorships, professional fees of $955,000 related to higher consulting costs for strategic initiatives, FDIC expenses of $873,000 primarily due to a lower FDIC small bank assessment credit earned in the fourth quarter and OREO and credit-related expense of approximately $542,000 due to OREO valuation adjustments driven by updated appraisals received during the quarter.

As a reminder, we achieved our $25 million access-related merger cost saves target on a run rate basis at the end of the third quarter. Also please note that we do not expect to incur any additional merger cost or rebranding expenses in 2020. The effective tax rate for the fourth quarter was 16.7%, compared to 16.8% in the third quarter. For the full-year the effective tax rate was 16.2%. In 2020, we expect the full year effective tax rate to be in the 16.5% to 17% range.

Turning to the balance sheet, period end total assets stood at $17.6 billion at December 31st, which is an increase of $122 million from September 30 levels and an increase of $3.8 billion from December 31st, 2018 levels primarily as a result of Access acquisition and loan growth during the year. At quarter end loans held for investment were $12.6 billion, an increase of $304 million or approximately 10% annualized, while average loans increased $87.4 million or 2.9% annualized from the prior quarter.

On a pro forma basis, as if the Access acquisition had closed on January 1st instead of February 1st, year-to-date loan balances grew approximately 6% on an annualized basis through December 31st of 2019. Looking forward, as John mentioned, we project loan growth of approximately 6% to 8% for the full-year of 2020 inclusive of the expected run off of third-party consumer loan balances.

At December 31st total deposits stood at $13.3 billion, an increase of $260.3 million or approximately 8% from September 30th, while average deposits increased $491 million or 15.3% annualized from the prior quarter. Deposit balance growth during the fourth quarter was driven by increases in money market and interest checking balances, partially offset by seasonal declines in demand deposits and lower time deposit account balances.

On a pro forma basis, as if the Access acquisition had closed on January 1st deposit balances increased approximately 9% for the full-year. Loan to deposit ratio was 94.8% at year-end, which is in line with our 95% target. For 2020 as John noted, we expect to achieve deposit growth of 6% to 8%, which will be in line with our loan growth expectations.

Now turning to credit quality, non-performing assets totaled $32.9 million or 26 basis points, as a percentage of total loans, a decline of $3.5 million or 4 basis points from third quarter levels. The allowance for loan losses decreased $1.5 million from September 30th to $42.3 million, primarily due to lower incurred losses embedded in the consumer loan portfolio as it continues to pay down and an improved economic environment, which was partially offset by loan growth during the quarter.

And now I would like to provide further thoughts on how the adoption of the current expected credit-loss model or CECL will impact Atlantic Union. As you know, under the new CECL accounting standard that went into effect on January 1st lifetime expected credit losses will now be determined using macroeconomic forecast assumptions and management judgments applicable to, and through the expected life of the loan portfolios.

Since our last seasonal update in October the economic outlook and portfolio characteristics have been consistent to slightly improved and the company now estimates that the allowance for credit losses will increase to approximately $95 million or more than double the allowance reserve level as of December 31st under the former incurred loss methodology.

As previously noted, the allowance increase under CECL is primarily driven by the company's acquired loan portfolio and the consumer loan portfolio. We have completed an independent validation of our CECL model and we plan to disclose the final allowance impact in our 10-K, once we have worked through the full governance process for the day one recognition.

From a shareholder stewardship and capital management perspective, we are committed to managing our capital resources prudently as the deployment of capital for the enhance -- the enhancement of long-term shareholder value remains one of our highest priorities.

As such during the fourth quarter of 2019, the company declared and paid a quarterly cash dividend of $0.25 per common share, an increase of $0.02 per share or approximately 9%, compared to the prior year's quarterly dividend level. The Board of Directors had previously authorized a share repurchase program to purchase up to $150 million of the company's common stock through June 30th, 2021 in open market transactions or privately negotiated transactions. As of January 17th, we have repurchased 2.4 million shares at an average price of $36.91 or $89.6 million in total. The total remaining authorized shares to repurchase is approximately $60 million.

So to summarize, Atlantic Union delivered solid financial results in the fourth quarter and in 2019, despite the headwinds of the lower interest rate environment and the company continued to make progress toward its strategic growth priorities. We are revising our operating financial metric targets to reflect the challenging interest rate environment, which we expect will persist in 2021, but we remain committed to achieving top tier financial performance relative to our peers.

Finally, please note that we remain focused on leveraging the Atlantic Union franchise to generate sustainable profitable growth and remain committed to building long-term value for our shareholders.

And with that, I'll turn it back over to Bill Cimino to open it up for questions from our analyst community.

William P. Cimino -- Senior Vice President and Director of Investor Relations

Thanks, Rob and Carl, we're ready for our first caller.

Questions and Answers:

Operator

[Operator Instructions] Your first question comes from the line of Casey Whitman from Piper Sandler. The line is now open.

John C. Asbury -- President and Chief Executive Officer

Hi, Casey, good morning.

Casey Orr Whitman -- Piper Sandler -- Analyst

Good morning. Hi, Good morning. Rob, just to be clear on the updated financial targets you just outlined, what are you assuming for further rate cuts, if any?

Robert Michael Gorman -- Executive Vice President and Chief Financial Officer

Yes, on that front, Casey what we're assuming is that there is no further rate cuts by the Fed in 2020 and 2021 where -- but the curve remains in line with where it is today, a flat curve. In terms of the NIM forecast that we're looking at, in terms of those targets that we set, we are thinking we will be stabilizing at the levels you see in the fourth quarter on a core basis, expect to be in about 3.35% to 3.40% range on a core basis. Now if the Fed were to cut which the implied curves indicate maybe in the second half of this year, you could see that range could drop to the 3.30% to 3.35% range going forward.

Casey Orr Whitman -- Piper Sandler -- Analyst

Okay. Understood. Let me ask a question about expenses. So your core expense run rate is now at around $92.5 million and you've got at least the FDIC expense is likely normalizing back up in the first half of the year. So where do you think expenses shake out until the '20? Or I think last call you had guided to like a 4% to 5% increase in expenses for in '20, is that -- does that still apply here or sort of what are your general thoughts about expenses in '20?

Robert Michael Gorman -- Executive Vice President and Chief Financial Officer

Yes, that's exactly right, Casey. So we coming out of the fourth quarter, we think we're at a run rate of about $92 million. That includes some of the impacts of the investments we made this year. We are expecting to increase that run rate approximately 4% next year as we continue to invest in the various technologies, digital product and people etc, including a wage inflation factor of about 3%. So we're looking at about a 4% increase in that run rate on a full-year basis next year. Obviously the quarters will be a little different as there is some seasonality in the first quarter, which will be a little higher than an average for each of the quarters.

John C. Asbury -- President and Chief Executive Officer

And Casey, this is John. I would add that to some extent you can expect to see this front-end load a bit. Yes, there is the seasonal aspect, Rob points to, but there is a surge of activity going on in the company and we are making hay while the sun shines in terms of, we are not working on a merger right now and we are very focused on completing a number of important initiatives to position the company for the future and there are some things that will begin to drop off the schedule as we get into the second half of the year.

So I'll kind of leave it at that. But I would reiterate what Rob said, don't look for it to be evenly distributed, look for it to be a little more loaded toward the front end and then an improving trend at the back end.

Casey Orr Whitman -- Piper Sandler -- Analyst

Very helpful. Thanks guys. I'll let someone else jump on.

John C. Asbury -- President and Chief Executive Officer

Thank you, Casey.

William P. Cimino -- Senior Vice President and Director of Investor Relations

And Carl, we are ready for our next caller, please.

Operator

Your next question comes from the line of Catherine Mealor from KBW. The line is now open.

Catherine Mealor -- Keefe Bruyette & Woods -- Analyst

Thanks, good morning.

Robert Michael Gorman -- Executive Vice President and Chief Financial Officer

Hey, Catherine.

John C. Asbury -- President and Chief Executive Officer

Hi, Catherine.

Catherine Mealor -- Keefe Bruyette & Woods -- Analyst

Just wanted to follow up on the margin guidance that you gave, Rob. As we think about loan yields, it seemed like the legacy loan yields had a pretty big decline this quarter. How are you thinking about loan yields going into next year and maybe where new production is coming on right now versus where the legacy loan yield is currently sitting? And then on the other side of the balance sheet, maybe on deposit cost, how much further reduction do you think you can get in deposit cost if we don't see any further rate cuts?

Robert Michael Gorman -- Executive Vice President and Chief Financial Officer

Yes, so in terms of the guidance on margin as mentioned, we feel like we're going to be stabilizing in the range you see in the fourth quarter. Some of that is when you look at the detail of that, we're going to see additional loan yield earning asset yield compression. Not material, but we think we can offset that with additional reductions in our cost, cost of funds, primarily and the cost deposits. We do have some opportunities in lowering various deposit rates. It is a bit of a tail on some of our promotional money markets that we have a six-month promotional money market promotions out there, some of which we'll reprice as we continue into this year.

So we think there's opportunity there. Actually money markets came down about 30 basis points quarter-to-quarter. So we're expecting that would come down a little further. We are seeing a little more pressure on the loan yields as well, but when you match up the compression on that versus lower deposit costs we should be able to stabilize in this 3.35% to 3.40% range again assuming no rate cuts coming down the pike.

Catherine Mealor -- Keefe Bruyette & Woods -- Analyst

Got it. And then in that does that also assume a level of deployment of the excess liquidity that we saw in this quarter as well?

Robert Michael Gorman -- Executive Vice President and Chief Financial Officer

Yes, that's right, yes. So as I mentioned, there was about 3 basis points of lower margin due to that liquidity. So that also comes into play as well in that guidance.

Catherine Mealor -- Keefe Bruyette & Woods -- Analyst

Got it, OK. And then I noticed also the fair value accretion guidance came down, I think it was about -- I think it was about $60 million last quarter for 2020 and now its $13.7 million. Is this just from kind of -- is this from CECL or can you give any color on why the decline?

Robert Michael Gorman -- Executive Vice President and Chief Financial Officer

Yes, in terms of what you see in the earnings release, we have not updated that projection, or what we think CECL is we're still working through the potential for CECL. The decline there is primarily because we accelerated. You saw a little bit of acceleration in the fourth quarter which kind of reduced the go-forward number. Our feeling is that when we recalculate under CECL that we will see a bit of a pick-up for an acceleration, if you will, that accretion more in 2020 then what's currently showing up on that chart. So we will continue to work through that. We will give better guidance probably in the next quarter on that, but that's probably a conservative estimate at this point.

Catherine Mealor -- Keefe Bruyette & Woods -- Analyst

Okay, that makes sense. Great, thank you very much.

John C. Asbury -- President and Chief Executive Officer

Thanks, Catherine.

William P. Cimino -- Senior Vice President and Director of Investor Relations

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

Operator

Your next question comes from the line of William Wallace from Raymond James. The line is now open.

John C. Asbury -- President and Chief Executive Officer

Good morning, Wally. How are you?

William Wallace -- Raymond James -- Analyst

Thank you. Good morning. Very good, thank you. Maybe just following up on the last line of questioning on -- so how would you anticipate your reserve to trend in 2020 once you implement CECL? Should they be flat on our reserve to loan basis or up or continue to be down, like we saw in '19?

Robert Michael Gorman -- Executive Vice President and Chief Financial Officer

Yes, well interestingly on that front, Wally, as you know we book day one impact. We -- as we've estimated would be about $95 million. You will see that coming down primarily, because of the run-off in our consumer third-party consumer book where presumably that we've got the lifetime losses embedded in that day one projection. So we won't be replenishing that reserve for at least our book of business for any charge-offs that come through assuming that we've estimated properly.

So you can expect that would come down over time, just all things being equal and the portfolio mix remaining the same. The drivers of increasing that of course will be loan growth in the other book of business. The other loan portfolios that we have on the books. But -- and of course, if there is major changes in the economic outlook, more risk, more tendency toward a recession that could drive the reserve up as well. But as we look forward now, I think you could expect to see the day one reserve level come down a bit over the year.

William Wallace -- Raymond James -- Analyst

Okay, thank you. And then the $95 million impact, does that include the purchased loans, is that the full impact?

Robert Michael Gorman -- Executive Vice President and Chief Financial Officer

Yes, that's right, Wally. That's correct, yes.

William Wallace -- Raymond James -- Analyst

So what's the capital impact then?

Robert Michael Gorman -- Executive Vice President and Chief Financial Officer

Yes, the capital impact is about -- we calculate about 20 basis points to 25 basis points in terms of regulatory capital will be phased in over three years.

William Wallace -- Raymond James -- Analyst

Okay. And so -- but the TCE impact will be immediate in that...

Robert Michael Gorman -- Executive Vice President and Chief Financial Officer

Call it -- on TCE probably call it about 20 bps to 25 bps.

William Wallace -- Raymond James -- Analyst

Okay.

Robert Michael Gorman -- Executive Vice President and Chief Financial Officer

Yes.

William Wallace -- Raymond James -- Analyst

And then -- so looking at your financial, your revised financial targets that 15% to 17% return on tangible common, what TCE base, do you assume for those targets?

Robert Michael Gorman -- Executive Vice President and Chief Financial Officer

We expect it -- as we've mentioned, I think we -- our goal is to be at about 8.5% TCE. And I think our projections call for that to be about 8.5% to 8.75% for this year, including the impact of the CECL.

William Wallace -- Raymond James -- Analyst

Okay, right. Okay. John, I believe in your prepared remarks, you mentioned the continued opportunity around Truist branch closures, did you say that you anticipate those closures in late 2021?

John C. Asbury -- President and Chief Executive Officer

Yes, what you're saying Wally is that because Virginia has the most overlap, including the Greater Washington area of any of their markets in the system they intend to go last year, presumably to get it right. And so we do not expect those closures to occur until the latter part of or least the second half of next year, as you may have read they are saying that there will be no branch closures anywhere for a year, which doesn't surprise me just given the scale of this combination.

We've seen leadership announcements of course have come through. They are consolidating their commercial banking teams for the time being, SunTrust branches and BB&T branches continue to run effectively independently. And so we have -- we are adjusting a few of our plans accordingly. Yes, surprisingly, we do market research. You'd be surprised at how many consumers have no earthly idea these two companies are merging at this point, not a clue. The commercial customer certainly did. So we don't want -- we need to make sure that we synchronize some of our initiatives with the maximum disruption opportunity on the consumer side.

William Wallace -- Raymond James -- Analyst

Okay. So you were through the award and there were no announcements on any new M&A in 2019. You have continued opportunity around Truist disruption through 2021 or even in to 2022 it sounds like. How does the M&A discussion change, or does it change in 2020?

John C. Asbury -- President and Chief Executive Officer

Not really, if you listened, my comments were carefully made. So what we're saying is that we have a number of initiatives and I listed off quite a few that have been completed and there are more under way. So our heart is probably right now is to really get ahead of this Truist. As I said, I feel like we've got the opportunity while we're not engaged and a merger transaction conversion integration effort. We need to make a run for it. We need to knock out and get us close to competitive parity as we can during this window of opportunity.

Having said that, the level of discussion that's going on out there, the level of inbound inquiries that we are receiving does lead us to believe that there will be opportunities when we decide that it's time. It is -- we are not of the mindset that we would want to do anything this year, but we have conversations continuously. We'll continue to evaluate this in real time. We look at the full spectrum of opportunities on the M&A front, and I would say that there is a very real opportunity as we get into 2021, you could see us active again.

But for now, what we do not want to do is to put off or delay strategically important initiatives internally. And they are all just products, by the way, I hinted at this. We'll talk later on about -- we have a stem to stern review of processes inside this organization we will be implementing -- we are implementing. It's happening now, robotic process automation. There are a number of things that do cost us some money, frankly on the front end that will make the company, more efficient, more scalable more productive and offer higher quality. And so this is the window to do it. So that is our view.

William Wallace -- Raymond James -- Analyst

Okay, thanks. And this is just a ticky-tack question, Rob. But are we done with merger costs, and as a quick follow-up, when should we see the discontinued operations go ahead?

Robert Michael Gorman -- Executive Vice President and Chief Financial Officer

Yes. So as I mentioned in my prepared remarks, yes, merger costs are done and rebranding costs, you've done. So we're basically running at an operating go forward here -- operating expense base.

William Wallace -- Raymond James -- Analyst

And on discontinued, same thing?

Robert Michael Gorman -- Executive Vice President and Chief Financial Officer

Yeah. Yes.

William Wallace -- Raymond James -- Analyst

Okay, great. Thanks. I'll let somebody else ask a question now.

John C. Asbury -- President and Chief Executive Officer

Thanks Wally.

William P. Cimino -- Senior Vice President and Director of Investor Relations

Thanks, Wally, and Carl we are ready for our next caller, please.

Operator

Your next question comes from the line of Brody Preston from Stephens, Inc. The line is now open.

John C. Asbury -- President and Chief Executive Officer

Hi Brody.

Brody Preston -- Stephens Inc -- Analyst

Hi, good morning everyone. How are you?

John C. Asbury -- President and Chief Executive Officer

Good morning.

Brody Preston -- Stephens Inc -- Analyst

I just had a couple, just clean-up questions, before I get into some of my other questions. So I guess just following up on the CECL commentary, so I guess just the 20 basis points to 25 basis points, that would be about a $35 million capital impact, somewhere in that range, is that fair, Rob?

Robert Michael Gorman -- Executive Vice President and Chief Financial Officer

Yes, yes, that's about right Brody.

Brody Preston -- Stephens Inc -- Analyst

Okay. And then I guess, as I think about -- as I think about the reserve ratio moving forward, I understand that the consumer book is running off, but as the acquired book also runs off, I'm assuming that that's carried at a -- if we segment the buckets for the loan loss reserve between origination and acquire -- originated and acquired, I'm assuming that that acquired bucket is -- the reserve ratio on that is a little bit higher and so as that runs off. Does that also I guess, add to the loan loss reserve ratio moving lower over time?

Robert Michael Gorman -- Executive Vice President and Chief Financial Officer

Yes, I don't think that's going to impact it that much in terms of the acquired -- the acquired book, let's say the good acquired book, which is what we're putting the reserve at, which is pretty much in line with legacy Union's reserving. So I wouldn't expect that that's going to be a driver. There is of course the PCB, the purchased credit deteriorated. But that's not a big number for us here.

Brody Preston -- Stephens Inc -- Analyst

Okay. And then on the share repurchases just comparing the press releases, it looks like you bought back about $45 million worth of stock this quarter, just wondering if you had the shares repurchased or the average price that you repurchased, that just for the fourth quarter?

Robert Michael Gorman -- Executive Vice President and Chief Financial Officer

Yes, I think in total it's like $36.91 since we started and the fourth quarter was -- I think was about $37.30 or so $37.40.

Brody Preston -- Stephens Inc -- Analyst

Okay. Great, thank you. And I guess just going back to the NIM guidance, you said you sort of expect that to stabilize. In this 3.35% to 3.40% on a core basis is that, is that GAAP core NIM that you're guiding to?

Robert Michael Gorman -- Executive Vice President and Chief Financial Officer

When you say GAAP?

Brody Preston -- Stephens Inc -- Analyst

Yes, I mean you provide -- yes you provide an FTE and a GAAP margin in your press release. And so just think out that the core margin on a GAAP and an FTE basis just...

Robert Michael Gorman -- Executive Vice President and Chief Financial Officer

Yes, that's FTE basis that we're talking about here.

Brody Preston -- Stephens Inc -- Analyst

Okay. So it sounds like maybe just a little bit more compression in the first quarter and then sort of stable to up from there?

Robert Michael Gorman -- Executive Vice President and Chief Financial Officer

Yes. That's perfect.

Brody Preston -- Stephens Inc -- Analyst

Okay. All right. I just wanted to touch on what percent of loans, the loan portfolio is tied to LIBOR and how much of that is one month LIBOR?

Robert Michael Gorman -- Executive Vice President and Chief Financial Officer

Yes the total book about 24% is tied to one month LIBOR. So it's pretty sensitive to that LIBOR rate. And as you know, it declined quite a bit in the fourth quarter, about 30 basis points. I think so that was a big driver of the loan yield compression you saw -- we saw.

Brody Preston -- Stephens Inc -- Analyst

Okay and what percent of the portfolio is tied to prime?

Robert Michael Gorman -- Executive Vice President and Chief Financial Officer

About 12% to 13%.

Brody Preston -- Stephens Inc -- Analyst

Okay. And I'm assuming these loans sort of reprice throughout the quarter on a monthly basis?

Robert Michael Gorman -- Executive Vice President and Chief Financial Officer

Yes, that's right.

Brody Preston -- Stephens Inc -- Analyst

Okay.

Robert Michael Gorman -- Executive Vice President and Chief Financial Officer

Somewhat relates to back swaps which we price a little more. I guess about -- monthly basis I think they typically reprice.

Brody Preston -- Stephens Inc -- Analyst

Okay. And then on the CD book. I guess, I was a little bit surprised to see the cost of CDs flat to up a basis point just given some of what I saw you were doing on the CD pricing front in the quarter. And so I guess what was the driver of that and what could we expect for time deposit costs moving forward?

Robert Michael Gorman -- Executive Vice President and Chief Financial Officer

Yes, I think what you should be seeing those coming down. I think that's a reflection of some of the higher rate CDs that we were running us promotions during the second and third quarter that, that are playing out, but you can expect to see those rates coming down as we've this we've lowered the rates over the last two quarters. So going into next year, you will see those declining as you'll see money market rates start to come down as well.

Brody Preston -- Stephens Inc -- Analyst

All right. And then just a couple of -- a couple of quick ones left. The mortgage was a little bit weaker than I was looking for. And it looks like refi volumes aren't quite as strong as I would have thought, I just wanted to better understand what drove that?

Robert Michael Gorman -- Executive Vice President and Chief Financial Officer

Yes, actually I think in terms of what our expectations were. It came in pretty well when you consider that fourth quarter is typically a lower seasonal quarter for mortgages. So we felt pretty good about that. So we were expecting that to tick down for the quarter.

Brody Preston -- Stephens Inc -- Analyst

Okay. And then, wealth management, you had a pretty good a pretty strong quarter in terms of AUM. Wanted to get a sense for how much of that was market related versus new inflows and what's your outlook for 2020 for that business might be just given some of the leadership changes?

Robert Michael Gorman -- Executive Vice President and Chief Financial Officer

Yes, I would say a lot of what you saw there was driven by the market in terms of the driving AUM up less so of new business coming in. Although we did have some coming in remains to be seen in terms of expectations in 2020. Our new leadership there is undergoing a review of the entire business unit and we do expect to see an uptick there. But some of that is dependent on where -- some of it's market-driven, as well in terms of AUM. So we'll see where we go from there. But taking that out of the equation, we do expect to see it some positive momentum in that business but pretty, it's too early to tell at this point.

Brody Preston -- Stephens Inc -- Analyst

All right, great. Thank you very much everyone.

John C. Asbury -- President and Chief Executive Officer

Thanks, Brody.

Robert Michael Gorman -- Executive Vice President and Chief Financial Officer

Thanks, Brody.

William P. Cimino -- Senior Vice President and Director of Investor Relations

And Karl, we are ready for our next caller, please.

Operator

Your next question comes from the line of Laurie Hunsicker from Compass Point. The line is now open.

Laurie Hunsicker -- Compass Point -- Analyst

Hello, thanks.

John C. Asbury -- President and Chief Executive Officer

Hi, Laurie. Good morning.

Laurie Hunsicker -- Compass Point -- Analyst

Hi, good morning, Rob. I just wanted to go back to margin. Again, I know you've talked a lot about it, but directionally, as we look at just the accretion income piece and I'm thinking about reported margin. I just want to make sure that I have this right apples-to-apples, because accretion income was so big this quarter. So if we're looking at it going forward. Your reported margin just keeping in line with your comments on your core margin, you reported margin probably is going to track in that the 3.45%. So like high 3.40%s, 3.48%, 3.49% range, am I doing that the right way?

Robert Michael Gorman -- Executive Vice President and Chief Financial Officer

Yes, I've got it 3.45% to 3.50% depending on core, that's right.

Laurie Hunsicker -- Compass Point -- Analyst

Okay, perfect. I just want to make sure I got that right. Okay and then just a few things on expenses here, just specifically three line items looked outsized, and I wondered if you could help us think about that around your comments, the technology, the professional and the marketing. Was there any one-time items that drove those higher?

Robert Michael Gorman -- Executive Vice President and Chief Financial Officer

Not really, other than -- and the marketing uptick, we had some credits in the third quarter, which did not recur in the fourth quarter. So the fourth quarter was a bit more of a run rate basis for marketing. In terms of technology and processing, we're starting to see the impact of some of the initiatives that we put in place during the year. For instance Zelle adds to processing costs, etc. So there is an uptick related to some of those items that started to come through in the fourth quarter. And the other item, which one was that? That was -- professional fees.

Laurie Hunsicker -- Compass Point -- Analyst

So just the technology, yes and the professional fees for...

Robert Michael Gorman -- Executive Vice President and Chief Financial Officer

Yes, professional fees we do have some consulting expenses we're incurring related to some of the initiatives that we're putting in place. We're putting in a new deposit pricing platform that we've spent some consulting dollars on, got some other projects, robotic automation as John alluded to. So there's some up -- consulting related to strategic initiatives that's embedded in those numbers.

Laurie Hunsicker -- Compass Point -- Analyst

Okay. And so I guess -- and one more question here. As we think about the branches that you closed. Obviously no more -- or at least in the near-term, no more rebranding or branch closure expenses, but are the cost saves from those branch closures now fully phased, or are we going to see?

Robert Michael Gorman -- Executive Vice President and Chief Financial Officer

Yes, yes, so we -- that's right on spot. I think we said about $400,000, $500,000 a quarter that we did see in the fourth quarter.

Laurie Hunsicker -- Compass Point -- Analyst

Okay, and then where do you guys stand in terms of thinking about branch closures for this year, are you feeling good about the numbers?

John C. Asbury -- President and Chief Executive Officer

We feel pretty good about where we are in terms of the culling that we've done, something that we are exploring we're about to do one, as we have an opportunity enrichment where we're going to go, essentially close two branches and move them into one new better location. And as we assess the franchise, and I'll ask Shawn O'Brien, Head of Consumer Banking, to comment. We think we could replicate that model, end up with better located fewer branches in metropolitan markets and lower our expense run rate. Shawn, we don't want to get into too much detail but any perspective you can share on that?

Shawn E. O'Brien -- Executive Vice President and Consumer Banking Group Executive

Yes, all I'd add is that through acquisition, we have some branches that aren't super consistent with our brand and not necessarily in the best shape. And so we'd like to get a little bit less of a dense franchise footprint. And I think we can do that probably by taking 14 -- 12, 14 branches over time and consolidating them into seven newer branches. So that's kind of what we're looking to do, but that's a bit of a long-term play as we build out those new branches.

Laurie Hunsicker -- Compass Point -- Analyst

Okay. Okay, great. And then, John, you mentioned through 2019 you had hired 39 people from BB&T SunTrust. How are you still actively looking to hire. And then just of those 39, how many people are part of your C&I team? Thanks.

John C. Asbury -- President and Chief Executive Officer

I guess the answer is we're always in the market for talent and we are not going to have a big net add. A lot of those were not all net adds to be very clear. And so we had, I would say, a good half of that number would be in various roles in retail bank, especially branch managers with outstanding alternative who are really bankers coming out of these larger organizations and I'm looking to Dave Ring on here maybe best guess maybe 40% or so of those would be commercial banking related. And we think the relationship manager...

David V. Ring -- Executive Vice President and Commercial Banking Group Executive

Yes about 15 between commercial originators and credit oriented folks. And for this year, you know, probably adds in the single digits in total, but it's like John said, it's more of a net number, because we know we have retirements and other things that we will replace this year.

Laurie Hunsicker -- Compass Point -- Analyst

Great, great. Okay, one last quick question here. Question for you. Rob, your third-party consumer what is the balance. And then of that what's lending club? Thanks.

Robert Michael Gorman -- Executive Vice President and Chief Financial Officer

Yes, in terms of the lending club we're about $118 million at the end of the quarter. So that was down about $22 million or $23 million. And on that front, Laurie by the end of this year we expect to be less than probably $15 million or less as it continues to run off.

Laurie Hunsicker -- Compass Point -- Analyst

Great. And then do you have the number for what your third-party consumer originatives [Phonetic], I know most of its lending club, with the total.

Robert Michael Gorman -- Executive Vice President and Chief Financial Officer

Yes, we had about another, in terms of service, finance, we have about $100 million some odd in that third party program, which we will also be running down this year as well.

Laurie Hunsicker -- Compass Point -- Analyst

Okay, so you're still -- you're right around $200 million, $220 million...

Robert Michael Gorman -- Executive Vice President and Chief Financial Officer

Yes, a little over. Yes, probably more like in the $225 million, $230 million range.

Laurie Hunsicker -- Compass Point -- Analyst

Okay, great, thanks. I'll leave it there.

Robert Michael Gorman -- Executive Vice President and Chief Financial Officer

Thank you, Laurie.

William P. Cimino -- Senior Vice President and Director of Investor Relations

And Carl, we have time for one last caller, please.

Operator

Your next question comes from the line of Eugene Koysman from Barclays. The line is now open.

John C. Asbury -- President and Chief Executive Officer

Good morning, Eugene.

Eugene Koysman -- Barclays -- Analyst

Good morning. Thank you. I wanted to follow up on your loan growth target for 2020. Can you share how much of that 6% to 8% loan growth are you expecting to come from the legacy Truist customers?

John C. Asbury -- President and Chief Executive Officer

No, we cannot do that.

Eugene Koysman -- Barclays -- Analyst

That's fair. And can you help us maybe you give us some color on how your initiatives to go after the Truist customers are progressing?

John C. Asbury -- President and Chief Executive Officer

Very well, I'll ask Maria Tedesco, President of Atlantic Union Bank to provide some commentary. We have a comprehensive set of initiatives. Now the timing of some of these has changed a bit. Certain guerrilla marketing tactics for branches that are going to be consolidated doesn't really make a lot of sense at this point in time. Maria, do you want to speak just in terms of high level project, forgive me, I just said it, Project Sundown for those of you who don't know it, is our formally secret code name. So we're taking advantage of the SunTrust BB&T disruption. I hope you see the humor in Sundown.

Maria P. Tedesco -- President of Atlantic Union Bank

Well, again, we see this as a multi-year opportunity. This is -- we are planning on a marathon event with initiatives to go over the next couple of years. But much of what you see us doing is now closing the gap of who our sort of competitive set is exactly what we're doing. So those are the short-term plans, but we see this as an offensive plan. We know this disruption, we're ground zero for this event. And we have a sense of what will happen that will be disruptive to customers, that will make it opportunistic for us. So those initiatives without getting into much detail is really set against what we believe to be the timeline of disruption. And literally every business has their plan in which to be offensive and be opportunistic.

John C. Asbury -- President and Chief Executive Officer

And recognizing that this is a public forum, we don't want to show our hand too much, but rest assured, there is a very robust action plan, to Maria's point, each line of business has a very targeted set of initiatives, and I would reiterate this is a multi-year disruption. It has begun. This will play out for years.

Maria P. Tedesco -- President of Atlantic Union Bank

Yes. And I think you'll see a lot of the initiatives that we've even talked about today on this call help us be a stronger competitive positioning in the market, but certainly those with specific product gap.

John C. Asbury -- President and Chief Executive Officer

And on the commercial side, we do discreetly track clients that we have won coming out of BB&T or SunTrust, and trust me, there is a list, and it's growing. We're not going to get into details, but we're having pretty good success chipping away at that.

Eugene Koysman -- Barclays -- Analyst

That sounds pretty good. Given the number of technology initiatives you've talked about, can you share with us what is your technology budget for the last year and for 2020 and maybe help us understand how much of it, you're spending to run the bank versus innovate the bank?

John C. Asbury -- President and Chief Executive Officer

Yes, I don't want to answer the former question, Eugene, in terms of too much specificity on exactly what we're using for digital strategy. In some respects. There is certainly a dollar cost issue here. But one of the bigger constraints for a mid-size bank like us candidly is not so much the dollars, although that's important. It's having the subject matter experts available to work the project and that is the single biggest reason why we don't want to do a very near-term acquisition, because we will take this very same people offline to work on a merger conversion integration, and we need them focused on laying this out. Rob, can you -- what if anything would you share in terms of how much do you think we're spending on new -- will be a relatively small portion.

Robert Michael Gorman -- Executive Vice President and Chief Financial Officer

Yes, I think incrementally you're probably talking about maybe a 10% increase year-over-year from what we've normally spent on that. So incrementally, including all digital investments in ranking [Phonetic], all the automation, the Zelles of the world, the nCinos of the world. So I would say probably good 10% increase in our budget related to technology.

John C. Asbury -- President and Chief Executive Officer

And then beyond technology budget per se you have to think holistically. I'm looking at Kelly Dakin now who's Head of Digital Strategy and Customer Experience. Kelly, how many people on your team now today?

Kelly Dakin -- Chief Digital and Chief Customer Experience Officer

There is 17 people that support digital strategy and another three that support customer experience.

John C. Asbury -- President and Chief Executive Officer

And when I got here it was probably 1.5 you've been here just under a year, and how much you walked into?

Kelly Dakin -- Chief Digital and Chief Customer Experience Officer

I walked in, there was about four people.

John C. Asbury -- President and Chief Executive Officer

About four. So there you go. So it's people as well who are working on these initiatives. And you can expect to see on the digital strategy side, that the idea is to have essentially a quarterly release schedule. And so there is a plan that goes out for a long, long time, in terms of the timeline of things you want to do, everything from continuous upgrades to the mobile banking suite of offerings, new product initiatives, some of this needs to be modulated. If we were in a higher rate environment, frankly we'd be doing more than we're going to do right now. But we're going to see the things that need to done. I'm sorry, Eugene there's probably that's much clarity as we're willing to share publicly.

Eugene Koysman -- Barclays -- Analyst

This is actually very helpful, thank you very much.

William P. Cimino -- Senior Vice President and Director of Investor Relations

Thank you, Gene and thanks everyone for calling in today. As a reminder, we'll have a replay available on our Investor website investors.atlanticunionbank.com. We look forward to talking with you next month. Have a good day.

Operator

[Operator Closing Remarks]

Duration: 67 minutes

Call participants:

William P. Cimino -- Senior Vice President and Director of Investor Relations

John C. Asbury -- President and Chief Executive Officer

Robert Michael Gorman -- Executive Vice President and Chief Financial Officer

Shawn E. O'Brien -- Executive Vice President and Consumer Banking Group Executive

David V. Ring -- Executive Vice President and Commercial Banking Group Executive

Maria P. Tedesco -- President of Atlantic Union Bank

Kelly Dakin -- Chief Digital and Chief Customer Experience Officer

Casey Orr Whitman -- Piper Sandler -- Analyst

Catherine Mealor -- Keefe Bruyette & Woods -- Analyst

William Wallace -- Raymond James -- Analyst

Brody Preston -- Stephens Inc -- Analyst

Laurie Hunsicker -- Compass Point -- Analyst

Eugene Koysman -- Barclays -- Analyst

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