Atlantic Union Bankshares Corporation (AUB 13.95%)
Q3 2020 Earnings Call
Oct 22, 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 Corporation third quarter earnings conference call. [ Operator Instructions]
I would now like to hand the conference over to your speaker today, Bill Cimino, Investor Relations. Please go ahead, sir.
Bill Cimino -- Vice President and Director of Investor Relations
Thank you, Josh, and good morning, everyone. I have Atlantic Union Bankshares' President and CEO, John Asbury; and Executive Vice President and CFO, Rob Gorman, with me today. We also have other members of our executive management team with us virtually for the question-and-answer period. Please note that today's earnings release and accompanying slide presentation we are going through on this webcast are available to download on our investor website at investors.atlanticunionbank.com. There's also a download link on the website that we're on today. During the 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 our earnings release for the third quarter of 2020.
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 of these results expressed or implied by these forward-looking statements. We undertake no obligation to publicly revise any forward-looking statements, and please refer to our earnings release for the third quarter of 2020 or our other SEC filings for a further discussion of the company's risk factors and other informed 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 Asbury -- President and Chief Executive Officer, Atlantic Union Bankshares
Thank you, Bill. Thanks to all for joining us today, and I hope everyone listening is safe and well. As I've stated before, since early March, we've been consistent in our commentary that we're managing through two significant and distinct challenges. First, the COVID-19 pandemic and everything associated with it; and second, a much-lower-than-expected interest rate environment for years to come, with all of its implications for the company's profitability. This quarter's results evidence the actions we've taken so far to address those two distinct challenges and are having a positive impact in positioning Atlantic Union for future success. We continue to believe that our strategic plan is the right one and that we have a great opportunity before us to create something uniquely valuable for our shareholders and the communities we serve, and we remain keenly focused on reaching the full potential of this powerful franchise despite the present challenges. We continue to operate under the mantra of "Soundness, Profitability & Growth-in that order of priority." A sound bank is and will remain our highest priority. A prudent and conservative credit culture served the company well during the Great Recession, and it will serve us well during the economic challenges brought about by the pandemic. Our loan modifications have helped our clients weather the storm, and we fortified capital with a preferred equity issuance in the second quarter.
Our second priority is profitability, and you can see the initial impact of our actions to align our expense run rate to the new revenue reality of the lower rate environment. As for growth, on the other side of the current economic challenges, we believe we have a long runway ahead of us to grow organically and through market share takeaway from our larger competitors that dominate market share in our home state of Virginia, supplemented by our operations in Maryland and North Carolina. We also expect there will be potential future opportunities to continue to be a consolidator within our footprint. Let me first update you on our pandemic response. Our March 16 pivot to a new operating model, with 90% of nonbranch personnel working from home and having branch lobbies closed except for appointments, has been effective. During September, we piloted reopening branch lobbies to customer walk-in traffic, and on October 14, we fully reopened all branch lobbies. Corporate offices will remain closed to all but essential personnel for an indefinite period. Work from home is going fine. We're not going to rush bringing people back in, given the safety and social distance challenges. I won't take you through the details of the Paycheck Protection Program again, but we do continue to think PPP has been a brand builder for Atlantic Union, and the numbers in our share of loans processed, particularly in Virginia, support that statement. We have an organized process under way to convert to more than 3,000 new-to-bank PPP clients to full relationships as we think there's a great opportunity from the negative experiences many of them had with larger banks that caused them to come up to us seeking help.
We started to submit applications for PPP loan forgiveness on behalf of our clients to the SBA. We did not receive any approvals during the third quarter, but we did obtain the first approval from the FDA last week, so it's good to finally see the forgiveness process begin. We remain hopeful that Congress will eventually pass the bipartisan proposal to automatically forgive PPP loans under $150,000. They represent 85% of all of our PPP loans by count. We are happy to see the streamlined forgiveness for PPP loans of $50,000 and below, which represent 58% of our PPP loans by count that we think Congress can and should do more to help these businesses. Our customers have learned to bank differently. While branch lobbies are now reopened, we rolled out a digital appointment scheduling option to customers and have had more than 18,000 appointments set since June 1. We added mortgage options to the appointment scheduler during the quarter as well. We've seen usage of our digital channels increase substantially from the prior year. For example, digital logins are up 21% since the start of the year, mobile check deposit utilization is up 18% this year, Zelle utilization is up 290% year-over-year and Card Control users are up about 100% since we've launched that in April. Our call center volume has decreased from its peak, and it's now about 10% higher than February. The average call time -- wait time is now lower than before the crisis. All the while, 90% of the call center personnel work from home. We updated our digital channel navigation to make self-service updates easier to find and added e-statement opt-in to online banking enrollment. We continue to work on new projects and improve the omnichannel customer experience with quarterly releases and upgrades to our product offerings.
During the fourth quarter of the year, we expect to roll out a Zoom video chat option to our current branch appointment options, which are currently empowered in 44 branches. We'll expand the pilot of having branch teammates take call center overflow calls during busy parts of the day that improves both our productivity and customer experience. We'll allow customers to select e-statements at the account level rather than at a customer level, and that should improve e-statement penetration and reduce expenses. We'll also be able to notify customers when a new e-statement is ready. We continue the pilot of our enhanced wealth CRM platform using Black Diamond technology and continue to -- our efforts to rightsize small business clients with the consumer online platform in order to ensure that they're not unnecessarily using a more complex commercial banking solution. All the while, we continue to enhance our treasury management offerings and experience for our commercial client base. Turning to credit. As COVID-19 began, we prepared, expecting to be hit by the economic equivalent of a Category five hurricane. While we still think there's a storm swirling on the horizon, we don't expect it will be as severe as we initially feared, but anything could still happen. The resiliency and diverse nature of our markets, coupled with government stimulus and an accommodative federal reserve, is helping as we've seen the unemployment rate in our markets improve faster than expected. Here in our home state of Virginia, September unemployment came in at 6.2%. Our loan book also helps as we don't have any outsized exposure to the industries most directly impacted by the social distancing measures put in place, such as hotels, restaurants and retail. By all indications and metrics, credit remains solid, and we continue to try to help as many of our clients through this as possible, while, at the same time, mitigating their risk of loss.
As for payment deferrals, we had a number of loans roll off of modifications during the quarter and into the first part of October. The total modification balances as of Friday, October 16 were approximately 830 loans under modification with a balance of $523 million or 3.6% of our total portfolio. If you exclude the PPP loans, then it would be approximately 4.1% of the total portfolio. This is down from $1.9 billion and 4,000 loans as of April 24, which was then approximately 15% of the portfolio. Our modifications peaked in May around 17%. Nearly all of the initial rounds of loan modifications will have matured in November. So far, of all the loans with an expired initial modification, only 40 commercial loans, 4-0, with an aggregate balance of approximately $90 million or 8% of the dollars have gone under a second modification. Of these, half the dollars were for nine hotel properties that were initially on a 90-day modification before we decided to make hotel modifications a standard 180 days. We noted in the middle of the third quarter that we had $302 million in modifications that we approved but subsequently deemed unnecessary as the clients informed us they no longer needed them, so we removed those from our report. That was reflected in the mid-quarter deferral update we provided in September. The modifications run a range of options and are tailored for each borrower. The majority of our commercial mods, about 70%, are principal and interest deferrals, mostly for 90 days, with a balance of about $340 million as of last Friday, and that's about 2.7% of the loan portfolio after adjusting out the PPP loans.
Our exposures to the most in-focus industries are limited and are outlined on slides numbered 7, eight and nine of our accompanying presentation. The amount of loans under a modification in these segments decreased from 224 loans for $324 million on August 28 to 111 loans for $199 million as of October 16. As a reminder, our hotel portfolio is entirely within our footprint. It comprises $676 million or 5.3% of our total loan portfolio, excluding PPP loans, as of September 30 and consists primarily of limited-service nonresort hotels flagged by main brands that don't rely on conventions and conferences. The hotel portfolio's debt service coverage ratio and the loan-to-value going into the crisis was the best among all of our commercial real estate property types. We saw that occupancy generally improved in August from July. Looking at September data, Northern Virginia, Charlottesville and Staunton and Harrisonburg saw occupancy rates remain steady or improve from August, whereas the rest of the footprint saw some degree of decline. Whether that decline was seasonal in nature from the end of the summer or a reflection of a new trend remains to be seen. Our restaurant balance is $223 million or 1.7% of total loans, excluding PPP, as of September 30. It's granular, and it's 85% secured by real estate collateral. Restaurants in Virginia have been open for indoor and outdoor dining since early June at 50% of occupancy. And since July 1, we're capped at a 250 patron limit.
About 10% of the segment was under modification as of October 16. Our retail trade exposure, which means loans to retail operators and single-credit tenant leases, is 4.3% of total loan exposure, excluding PPP, as of quarter end, but only about 2% of the segment under a modification as of October 16. A significant portion of this segment is local convenience stores with gas and auto dealers. About 80% of the retail trade exposure is secured by real estate collateral, with 21% in PPP. Our healthcare segment is also granular. It's heavily secured by real estate, and they've been open with social distancing and PPP rules since May. We only have about 3.6% of this segment still on a modification as of October 16. We have no meaningful exposure to passenger airlines, cruise lines or energy. As you may recall, our third-party consumer portfolio has been winding down for some time. The quarter end balance for our lending club exposure was $66 million and continues to run off. Payment deferrals in the lending club portfolio declined by 71% to less than $1.7 million during the quarter as those accounts went off of modification and became current. With the unemployment rate in Virginia better than the June 30 Moody's forecast, which informed our Q2 CECL reserve, and with no negative changes in the outlook since then, we have had a more normalized provision expense for the quarter, and Rob will walk you through all of those details. Overall, we continue to proactively work through this event with our clients while mitigating credit risk wherever we can. Moving on to our expense reduction actions. We developed our initiatives to reduce the company's expense run rate to match the lower revenue expectations due to COVID-19 and the lower for longer interest rate environment back in March, and we started to take action on them in the second quarter into the third quarter. These expense reduction efforts include the consolidation of 14 branches or about 10% of our branch network, which closed in mid-September.
In addition to moving some projects to next year and eliminating others, we put a hiring freeze in place in March, except for critical positions. We eliminated a number of positions in June, and including branch consolidation personnel, we reduced total headcount by 6.4% by the end of the third quarter as compared to FTE levels at the end of March. In addition to these actions, we're executing on several other cost reduction initiatives, such as tighter management to reduce overtime; contract labor and outside consultant spending; extracting price concessions from third-party vendors and renegotiating contracts, including leases; improving teammate productivity through process reengineering and robotic process automation. Our goal remains to achieve and maintain top-tier financial performance regardless of the operating environment. Our financial outlook will ultimately depend on the continued success against additional flare-ups of COVID-19 in our main operating areas, which will be one of the primary factors that determine the length and depth of the disruption in our markets. We continue to face great uncertainty at this point, mostly the duration of COVID-19, but as I mentioned before, we are in a better macroeconomic environment today than we thought we would be six months ago. There will probably be some dips along the way to a full recovery, but we believe the overall trend should be upward. At this time, we simply don't know when we may return to prepandemic macroeconomic levels, but the evidence supports that we're seeing better economic performance in our footprint than what is seen overall in the national economic model projections.
As we've said in the past, the Virginia economy is fairly unique with a broadly diverse set of regional economies, with about 20% of it anchored in some fashion by the federal government. Federal government spending in Virginia is mainly for government agencies and Department of Defense, with only a small fraction going to income assistance programs, education and transportation. We expect to have a full year loan growth in the low single digits, excluding PPP loans. Commercial loan categories of all types, on a combined basis, grew about 4% annualized during the quarter, substantially offset by declines in consumer categories of HELOC, third-party lending and residential mortgages held on balance sheet. We continue to see the trend of increased line of credit pay downs, with utilization down to about 24%, well below our normal utilization of around 40%. Clearly, we've had a sea change in the economy, brought on by the pandemic, resulting in a systemic downturn that we're climbing out of now. Credit losses were minimal during Q2 and Q3, but of course, the real impact is yet to be seen. We continue to expect an eventual rise in credit losses, and we thought Q3 would have begun a transition toward that, but obviously, it didn't happen. Although we cannot predict with certainty, our current best estimate is that credit losses may materialize in the first half of 2021. We expect normalized levels of credit losses after the impact of the pandemic works its way through the economy. Having said all of the above, we see nothing at this time that causes us to think we're anything that well positioned and readily able to absorb the delayed impact of COVID-19 on credit losses at Atlantic Union.
Moving beyond credit, our goal remains creating a company with differentiated performance. We'll continue to work on ways to make the company more efficient and scalable while improving the customer experience and could see further improvements to our expense base as a result. As I said last quarter, we're not standing by waiting for things to happen, we're pushing the organization forward. While we always think a few steps ahead toward strategic opportunities and how the industry is evolving, at this time, we remain sharply focused on credit risk mitigation, positioning for success and slowly returning to a more normalized operating environment. I'm convinced we will emerge from this crisis stronger, better and more efficient than before, which will give us opportunities, both organic and otherwise, within our operating footprint. We're leveraging our learnings and ingraining our newfound capabilities, agility and innovation into the company's culture so that we have the flexibility to adapt to the lower for longer rate environment and the coming next normal, whatever that may be. We still believe in chaos lies opportunity. We're weathering the storm, taking care of our teammates and customers and protecting this bank. We took decisive actions to reduce the expense structure to match the lower for longer rate environment in an effort to maintain top-tier financial performance. We'll continue to work our strategic plan, but we will shift our time lines as needed to adjust to the new reality. I'm so very proud of our teammates, all they've done and their demonstrated ability to adjust to a new way of working in the midst of all of this uncertainty. I remain confident in 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. All that has happened this year only convinces me more. Atlantic Union Bankshares is a uniquely valuable franchise. It's dense, it's compact, in great markets, with a story unlike any other in our region. We've assembled the right scale, the right markets and the right team to deliver high performance even in the most trying of times.
I'll now turn the call over to Rob to cover the financial results for the quarter. Rob?
Rob Gorman -- Chief Financial Officer
Well, thank you, John, and good morning, everyone. Thanks for joining us today. I hope you, your families and friends are all safe and staying healthy. Before I get into the details of Atlantic Union's financial results for the third quarter, I think it's important to once again reinforce John's comments on Atlantic Union's governing philosophy of "Soundness, Profitability & Growth-in that order of priority." This core philosophy is serving us well as we manage the company through the current COVID-19 pandemic crisis and preparing us for what comes next. Atlantic Union continues to be in a strong financial position with a well-fortified balance sheet, ample liquidity and a strong capital base, which will allow us to weather the current storm and come out stronger once this crisis has passed. As a matter of sound enterprise risk management practice, we periodically conduct capital, credit and liquidity stress test for scenarios such as the operating environment we now find ourselves in. Results from these stress tests help inform our decision-making as we manage through the current crisis and gives us confidence the company will remain well capitalized and has the necessary liquidity and access to multiple funding sources to meet the challenges of the current economic environment. Now let's turn to the company's financial results for the third quarter of 2020. GAAP net income available to common shareholders was $58.3 million or $0.74 per share, which is up significantly from $30.7 million or $0.39 per share in the second quarter. Non-GAAP pre-tax, preprovision earnings increased $8.1 to $78.6 million from $70.4 million in the second quarter.
Please note that the third quarter reported GAAP and non-GAAP financial results include expenses of approximately $2.6 million related to strategic actions taken to reduce the company's expense run rate in light of the current and expected operating and interest rate environment, including the consolidation of 14 branches in September. These actions are expected to reduce the company's quarterly expense rate by approximately $1.1 million beginning in the fourth quarter. Turning to credit loss reserves. As of the end of the third quarter, the total allowance for credit losses was $186.1 million, which was comprised of the allowance for loan and lease losses of $174.1 million and a reserve for unfunded commitments of $12 million. In the third quarter, the total allowance for credit losses increased $5.1 million primarily due to the continued economic uncertainty related to COVID-19. The allowance for loan and lease losses as a percentage of the total loan portfolio was 1.21% at September 30, which was up two basis points from 1.19% at the end of the second quarter, and the total allowance for credit losses as a percentage of total loans was 1.29% at the end of September, up from 1.26% in the prior quarter. If you exclude SBA-guaranteed PPP loans, the allowance for loan and lease losses as a percentage of adjusted loans increased two basis points to 1.36% from the second quarter, and the total allowance for credit losses as a percentage of adjusted loans increased four basis points to 1.46% from the prior quarter. The coverage ratio of the allowance for loan and lease losses to nonaccrual loans was about 4.5 times at September 30 compared to 4.3 times at June 30.
The $5.1 million increase to the company's total allowance for credit losses took into consideration the COVID-19 pandemic impact on credit losses, both through the two-year reasonable and supportable macroeconomic forecast utilized in the company's quantitative CECL model and through management's qualitative adjustments. Beyond a two-year reasonable and supportable forecast period, the CECL quantitative model estimates expected credit losses using a reversion to the mean of the company's historical loss rates on a straight line basis over two years. In estimating expected credit losses within the loan portfolio at quarter end, the company utilized Moody's September baseline macroeconomic forecast for the 2-year reasonable and supportable forecast period. Moody's September economic forecast improved since June, and it has now assumed that on a national level GDP spikes up approximately 27% in Q3 and then averages between 3% and 4% over the forecast period. Moody's September forecast for Virginia, which covers the majority of our footprint, had previously assumed that the unemployment rate in the state would remain at about 7% through the forecast period, but that has been revised to trim down to 5% in the third quarter of 2022. In addition to the quantitative modeling, the company also made qualitative adjustments for certain industries viewed as being highly impacted by COVID-19, as discussed by John earlier. Additional qualitative factors were added this quarter to take into consideration the uncertainties pertaining to the future path of the virus and additional government stimulus. The provision for total credit losses for the third quarter was $6.6 million, a decline of $27.6 million compared to the prior quarter.
The provision for total credit losses in the third quarter consisted of $5.6 million in the provision for loan losses, which was 17 basis points of average loans, excluding PPP loans on an annualized basis, down from 102 basis points in the second quarter. And also, we add $1 million in provision for unfunded commitments during the quarter. Net charge-offs during the third quarter came in at $1.4 million or four basis points of total average loans on an annualized basis, which compares to $3.3 million or nine basis points for the prior quarter and $7.7 million or 25 basis points for the third quarter of last year, as in previous quarters, the majority of net charge-offs, approximately 80% in Q3, came from nonrelationship third-party consumer loans, which are in runoff mode. Now turning to the pre-tax, preprovision components of the income statement for the third quarter. Tax-equivalent net interest income was $140.3 million, which was up slightly from the second quarter. Net accretion of purchase accounting adjustments added eight basis points to the net interest margin in the second -- in the third quarter, down six basis points from 14 basis points impact in the second quarter, primarily due to lower levels of loan-related accretion income of $2.6 million. The third quarter's tax-equivalent net interest margin was 3.14%, which was a decline of 15 basis points from the previous quarter. This 15 basis point decline in the tax-equivalent net interest margin in the third quarter was principally due to a 31 basis point decline in the yield on earning assets, which was partially offset by a 16 basis point decline in the cost of funds. The quarter-to-quarter earning asset yield decline was driven by the 29 basis point decline in the loan portfolio yield as well as the impact of lower yields on securities of 38 basis points.
The loan portfolio yield decline to 3.84% from 4.13% in the second quarter was primarily driven by lower average core loan yields of 21 basis points resulting from declines in market interest rates during the quarter, most notably the decline in the average 1-month LIBOR rate, which was lower by 19 basis points from the second quarter average of 35 basis points. In addition, lower loan accretion income reduced loan yields by approximately eight basis points from the prior quarter. Reduction in the securities portfolio yield to 2.19% from 3.29% and was a result of the deployment of excess liquidity during the quarter into new investments at yields lower than the existing portfolio yield. Additionally, higher-yielding securities are paying down, and the proceeds are being reinvested at today's local market interest rates. The quarterly 16 basis point decline in the cost of funds to 45 basis points was primarily driven by a 14 basis point decline in the cost of deposits to 39 basis points. Interest-bearing deposit costs declined by 18 basis points from the second quarter to 55 basis points in the third quarter due to the aggressive repricing of deposits as market interest rates declined. Also contributing to the second quarter's lower cost of funds was a 20 basis point decline in wholesale borrowing cost and a positive impact from changes in the overall funding mix between quarters. Noninterest income declined $1.5 million to $34.4 million from the prior quarter. Adjusted for the securities gain of $10.3 million recorded in the second quarter, noninterest income increased $8.8 million driven by an increase in mortgage banking income of $3.1 million due to higher mortgage loan origination volumes resulting from the current low interest rate environment. In addition, customer-related fee income increased by $2.2 million due to higher overdraft fees, higher interchange income and fiduciary and asset management fees in the third quarter.
During the quarter, the company also recaptured approximately $1.7 million of the $2.5 million in COVID-19-driven unrealized SBIC fund investment losses recorded in the second quarter. And bank-owned life insurance income increased $1.4 million primarily due to death benefit proceeds received in the quarter. Partially offsetting these increases was a decline of $2.3 million in loan-related interest rate swap income, which was due to lower transaction volumes in the quarter. Noninterest expense decreased $9.6 million to $93.2 million in the prior quarter primarily driven by the $10.3 million loss on debt extinguishment resulting from the prepayment of long-term Federal Home Loan Bank advances recorded in the second quarter. Total noninterest expense in the third quarter included $2.6 million in costs related to the company's expense reduction actions, including the closure of 14 branches in September, also included approximately $639,000 in costs related to the company's COVID-19 response and an increase in marketing expenses related to donations that the company made in support of organizations that fight for racial equality and contribute to change in our communities. In addition, FAS 91 deferred loan origination costs declined by approximately $2.9 million from the second quarter, and that was due to the nonrecurring impact of PPP loans originated during the second quarter. Partially offsetting these expense items was the decline in the FDIC assessment of approximately $1.1 million due to the positive impact of PPP loans on the company's assessment rate. The effective tax rate for the third quarter increased slightly to 15.3% from 15.2% in the second quarter. And for the full year, we still expect the effective tax rate to be in the 15.5% to 16% range.
Now turning to the balance sheet. Period end total assets stood at $19.9 billion at September 30, which was an increase of $178 million from June 30 levels primarily due to an increase in the company's securities portfolio partially offset by a reduction in cash balances. At quarter end, loans held for investment were $14.4 billion, an increase of $75 million or approximately 2% annualized from the prior quarter. The overall loan growth in the third quarter was driven by increases in commercial loans of $123 million or 4% on an annualized basis. This was partially offset by reductions in consumer loan balances of $48 million or 9% on an annualized basis. The commercial loan growth was primarily driven by growth in equipment finance loan and lease balances during the quarter, while the decline in consumer loan balances was driven by continued pay downs in mortgage and HELOC balances and third-party consumer loan balance one-off, which was partially offset by annualized growth in indirect auto balances of 7.8%. As noted earlier, the average loan portfolio yields were up 29 basis points to 3.84% during the quarter. At the end of September, total deposits stood at $15.6 billion, a slight decline of $29 million or less than 1% from the prior quarter. The decline in deposits in the third quarter was primarily due to lower NOW and CD balances, mostly offset by growth in demand deposits, money market and savings account balances. Low-cost transaction accounts comprised 51% of total deposit balances at the end of the third quarter, which is in line with the 51% at the end of the second quarter. The average cost of deposits declined by 14 basis points to 39 basis points in the third quarter. The company's liquidity position remains strong at both the bank and holding company levels, with multiple sources that can be tapped, if needed. To date, we have borrowed $189 million from the Federal Reserve's Paycheck Protection Program liquidity facility as PPP loan-related deposits remained at elevated levels at the end of the third quarter.
From a shareholder stewardship and capital management perspective, we remain committed to managing our capital resources prudently as deployment of capital for the enhancement of long-term shareholder value remains one of our highest priorities. From a capital perspective, the company continues to be well positioned to manage through the pandemic and its impact on the company's financial results. At the end of the third quarter, Atlantic Union Bankshares and Atlantic Union Bank's capital ratios were well above regulatory well-capitalized levels. During the third quarter of 2020, the company paid a common stock dividend of $0.25 per share and also paid a quarterly dividend of $156.60 on each outstanding share of preferred stock. Now to summarize, Atlantic Union delivered solid financial results in the third quarter despite the continuing business disruption associated with COVID-19 and the headwinds of the lower interest rate environment. Our financial performance has benefited from the decisive actions the company has taken to reduce its expense run rate to more closely align with revenue growth pressures driven by the lower for longer interest rate environment as we strive to maintain top-tier financial performance regardless of the operating environment. Finally, please note that while we are proactively managing through this unique and unpredictable pandemic and are taking the proper steps to weather the economic downturn to ensure the safety, soundness and profitability of the company, we also 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 to open it up for questions.
Bill Cimino -- Vice President and Director of Investor Relations
Thanks, Rob. And Josh, we're ready for our first caller, please.
Questions and Answers:
Operator
[ Operator Instructions] Our first question comes from Eugene Koysman with Barclays. You may proceed with your question.
Rob Gorman -- Chief Financial Officer
Good morning, Eugene.
Eugene Koysman -- Barclays -- Analyst
Good morning, thanks for taking my question. So last quarter, you said that you're expecting your core net interest margin's accretion was stabilized in the 3.15%, 3.20% range. In this quarter, the core NIM was closer to 3.06%, excluding the accretion, right? How do we think about the net interest margin and the net interest income trajectory into the fourth quarter, especially as we start seeing PPP forgiveness coming in? Thank you.
Rob Gorman -- Chief Financial Officer
Yes. Thank you, Eugene. This is Rob. I'll take that one. Yes, so we did -- we were guiding toward kind of 3.15% range for core. And that's -- you're correct, it came in at about 3.06%, 3.07%, depending on how you count the PPP in that calculation. Basically, what's occurred is we've seen a lot more excess liquidity, and we decided in the quarter to put that liquidity -- excess liquidity to work as opposed to leave it in cash balances, which were earning 10 to 12 basis points. So we leveraged up the securities portfolio, making a trade-off between the core margin and the net interest income that we could derive from that excess liquidity. So if you look at Page 13 of our presentation, you can see in the drivers of change graph that we have, we had previously suggested that we expected earning asset yield compression would be offset by cost of funds, cost of deposit declines. And that pretty much played out except related to the securities yield, which, as you see, was about negative six basis points on the overall margin, including the core margin. Going forward, we do expect to pretty much stabilize in this lower level.
Again, we haven't -- you haven't seen the full impact of the securities portfolio leveraging strategy. The average for the quarter for securities was about $2.8 billion. At quarter end, we've got about $3.1 billion. We added about $400 million. So there was that component, and then there was higher pay downs, prepayments on higher-yielding securities than we had projected, and those were redeployed back into the securities portfolio at lower yields than the existing portfolio. So that's pretty much where we stand at the moment. We do expect that there will continue to be some earning asset yield on going forward on a core basis, but we feel good about the ability to, at least mostly, cover that with cost of funds, especially cost of deposit declines. So we've got opportunities there. In particular, we've got a CD portfolio that has about $1.6 billion of maturing CDs over the next 12 months. About $130 million or $140 million a month average cost of those CDs or 1.5%, and those are being repriced monthly to 20 to 25 basis points. So we have opportunity there. Hopefully, that helps.
Eugene Koysman -- Barclays -- Analyst
Yes. That's very helpful. Now just to jump on expenses, also on just the color on your prior guidance as well. Do you still expect to get to the $88 million quarterly core expense run rate by the end of the year? And how do we get there from here? And should we expect the NPAC expenses to stay low? And what happens to the COVID expenses as well?
Rob Gorman -- Chief Financial Officer
Yes. We're pretty much in line with what we have projected. If you back out the onetime costs related to the branch closures and other actions we took this year and you adjust for COVID and additional marketing expenses that we talked about from a charitable donation perspective, so we get to about an $89 million or so. The branch closures' impact, which is about $1.1 million on a quarterly basis, doesn't really -- hasn't really occurred prior to the fourth quarter. That will take -- we'll see that full impact decline this quarter. So we're still feeling good about the $88 million on a core run rate basis.
Eugene Koysman -- Barclays -- Analyst
Got it. Appreciate that. And just a little follow up. Of the $2.6 million onetime charges related to branch closures, how much was in compensation versus other expenses?
Rob Gorman -- Chief Financial Officer
Yes. Actually, in the salaries line, we had accrued about $1.8 million of severance. In fact, we were able to -- many of the positions coming out of the branches and other areas were redeployed into open positions. So severance declined about $400,000 this quarter, so that was a positive in the salary and benefits line. The remainder is in other expenses related to lease terminations and other write-offs. So think about it as about three plus million was in other, offset by about $400,000 in salaries and benefits.
Eugene Koysman -- Barclays -- Analyst
Thank you. Appreciate that color. Thank you.
Rob Gorman -- Chief Financial Officer
We're ready for our next caller, please.
Operator
Thank you. Our next question comes from Casey Whitman with Piper Sandler. You may proceed with your question.
Rob Gorman -- Chief Financial Officer
Hi Casey. Hey, good morning.
Casey Whitman -- Piper Sandler -- Analyst
Good morning. Just a quick follow-up on Eugene's question about maybe just the FDIC assessment charge, just to make sure we're understanding it correctly. I mean should that go back up when the PPP is forgiven? Or am I thinking about that wrong?
Rob Gorman -- Chief Financial Officer
It should not -- yes, it should not go up. Actually, so related to that, when we were doing our projection for the FDIC assessment, we included PPP as loans from a liquidity -- a component of liquidity perspective. FDIC came out with guidance and said we should treat those as cash, which reduced the assessment. So we -- part of that $1.1 million adjustment was reducing the previous accrual in the second quarter and then picking up about $400,000 or $500,000 with the new assessment. That should continue to be lower in terms of it wasn't an increase. We should see about half of that be added back in the fourth quarter. So it's a benefit, but not the $1.1 million benefit. But as that comes down, our assessment will kind of recalculate at the prior to PPP level, which was lower.
Casey Whitman -- Piper Sandler -- Analyst
Okay. And then maybe another question on PPP. Can you give us what the margin impact was this quarter from it, and then maybe the dollar amount you guys reported?
Rob Gorman -- Chief Financial Officer
For PPP, yes, it was actually a one bp net benefit to us this quarter. It was about -- in total, it was about $14 million of PPP-related income. About $9.8 million was related to the amortization of deferred fees that came in, and then there was about $4 million related to the 1% coupon rate that we are earning on that. So total about $14 million.
Casey Whitman -- Piper Sandler -- Analyst
Okay. Perfect. Just one last one for me, and sorry if you gave this in the release. But can you give us an update on where criticized and classifieds were this quarter versus last quarter? And maybe just help us out if you saw any negative migration there, in particular within some of the adverse segments?
Rob Gorman -- Chief Financial Officer
Yes. So if you look at the classifieds and look at how we account for that, it basically didn't move much at all. We did have some migration into what we call watch category this quarter related to hotels, as we evaluate the credit component of our portfolio there. That's being reevaluated. We expect that some of that, that migrated, what we call, a five rating, watch rating, from four is going to actually migrate back once we take a really close look this quarter at each and every one of those obligors and properties. So from a real classified perspective, not much has changed. But if you consider watch in there, it went up due to hotels being put in that category. And Doug, I don't know, if you're on the line, you might want to add something.
John Asbury -- President and Chief Executive Officer, Atlantic Union Bankshares
Doug Woolley, do you have anything to say in terms of trends we're seeing on asset quality?
Bill Cimino -- Vice President and Director of Investor Relations
Maybe having some connectivity issues.
Rob Gorman -- Chief Financial Officer
Yes. Some technical problem there. Sorry, Casey.
John Asbury -- President and Chief Executive Officer, Atlantic Union Bankshares
Yes. So...
Douglas F. Woolley -- Executive Vice President and Chief Credit Officer
Okay. We're on. Rob, was that for Doug?
Rob Gorman -- Chief Financial Officer
Yes.
Douglas F. Woolley -- Executive Vice President and Chief Credit Officer
Okay. There was some garble there, sorry. Well, Rob explained it spot on. With some categories of watch that we're looking at, our reserve reflects the potential for loss coming up. We don't have any even meaningful incidence of known problems. We have downgraded loans to watch so that we pay more attention to it according to our credit risk management protocols. So we're comfortable with where we are, but we certainly expect deterioration at some point in some categories or some borrowers.
Casey Whitman -- Piper Sandler -- Analyst
Understood. Thank you, guys and good quarter.
Rob Gorman -- Chief Financial Officer
Thanks, Casey. Our next caller, please.
Operator
Thank you. Our next question comes from Catherine Mealor with KBW. You may proceed with your question.
Rob Gorman -- Chief Financial Officer
Good morning. Catherine.
Catherine Mealor -- KBW -- Analyst
Yeah, thanks, good morning. Just a follow-up on the margin. Can you give us some color around core loan yields and where new and renewed loan yields are coming on right now? And how much downside you see to similar yields as we move through next year?
Rob Gorman -- Chief Financial Officer
Yes. Yes. As you can imagine, core loan yields are coming down in the commercial book. I think we were down -- let me see, I had that somewhere here. I think we're down at about the 3.50% range, looking at total commercial book of business, which was down, if you look at from an average to average, about, I think, between a few basis points on average quarter-to-quarter. That primarily is being driven by LIBOR coming down and repricing at that level. And based on where we -- look, you may see a bit more pressure on that as fixed-rate loans reprice or renew or we have new loans coming on at some of the lower levels. We feel that most of the LIBOR-based or the variable rate component of that will stabilize from this level, at least from a -- not as -- should not compress as much, obviously, because we feel like LIBOR is now, knock on wood, at its bottom, which is about 16 -- 15, 16 basis points. So we did have to incur some compression related to that 19 basis point decline on average from quarter-to-quarter.
John Asbury -- President and Chief Executive Officer, Atlantic Union Bankshares
If you look at slide 13 of the presentation, over on the right, you can see that LIBOR -- 30-day LIBOR averaged 35 basis points in Q2. It averaged 16 basis points in Q3. And by the end of Q2, it was down to 17 basis points. Currently 15%. So to Rob's point, LIBOR should have bottomed, we think, we hope. We should have already felt the impact of that in the portfolio, at least in terms of the down pricing of the existing LIBOR of leased credits.
Catherine Mealor -- KBW -- Analyst
Great. Okay. And so then on the fixed-rate side, that's where the pressure is coming moving forward. But you would say -- would you say even on -- I guess, is there a way to think about, just in totality, where kind of new and renewed loan yields are coming on relative to where the current yield is today, maybe more on the fixed rate side?
Rob Gorman -- Chief Financial Officer
Yes. Catherine, it is coming out a bit lower. I'm just trying to put my hands on the particular detail that I have around that. I don't seem to have it in front of me, but yes, you're right. There is some pressure. I think if you look at it in total, on the commercial book of business, fixed-rate loans are coming in lower versus what the portfolio average was as of the end of September. Probably -- if you look at the mix in the total, it's probably, call it, about 10 basis points or so of potential...
Catherine Mealor -- KBW -- Analyst
Great. Okay. And then on the securities book, what's your best guess as to where this bottoms, just assuming rates kind of stay as is today as you think about that churn?
Rob Gorman -- Chief Financial Officer
Yes. So we'll be about 2 91 on the securities portfolio. We think it's going to probably drop into the 2 60 range over time.
Catherine Mealor -- KBW -- Analyst
Great. And then one last one on PPP. Just your -- as you're looking at PPP applications for forgiveness, what's your best guess as to how much you think you'll see this quarter and then into next year?
Rob Gorman -- Chief Financial Officer
Yes. So at the end of this quarter, we've got deferred fees of about $32 million remaining. We think the bulk of those see -- we'll start to see some of those forgiveness fees coming through versus amortized coming in this quarter, although not materially. It's really -- we expect really first quarter to be the biggest component of that, but remains to be seen. So there may be some that we get this quarter, depending on how quickly these less-than-$50,000 loans can be forgiven through the process, which is obviously an easy reform to get through. We'll see what happens this quarter, but our expectation is it's more first quarter.
John Asbury -- President and Chief Executive Officer, Atlantic Union Bankshares
Yes. Catherine, we have begun to invite under $50,000 -- or we're about to begin to invite under $50,000 borrowers. And I can tell you right now, we have 577 loans for $378 million that have been approved by us and submitted to the SBA. We're waiting to hear from the SBA. I think we had two approved as of yesterday. And we've got about 1,638 invitations that have gone out, and it's -- we'll kind of work our way through it. So we have continued to suggest or to say to our under $150,000 borrowers we believe it's to your advantage to wait and see if Congress will do something to give you effectively auto forgiveness. Obviously, if someone needs to go ahead and apply, we'll take it. But I think this is mostly an early next year event more so than Q4.
Catherine Mealor -- KBW -- Analyst
Great, very helpful. Thank you. Thanks Robert and John.
Rob Gorman -- Chief Financial Officer
We're ready for our next caller, please.
Operator
Thank you. Our next question comes from William Wallace with Raymond James. You may proceed with your question.
Rob Gorman -- Chief Financial Officer
Hi Wallace.
William Wallace -- Raymond James -- Analyst
Hi, good morning guys. Thanks for taking my call. On the expense, John, in your prepared remarks, you made some comments about some ongoing initiatives outside of branch consolidation. It sounds like a lot of technology, kind of streamlining of processes, etc. If I look at this $88 million run rate after the branch consolidation and I think about additional initiatives, and also as I think about just seasonal increases going into next year, how should I be thinking about the cadence of the expense line with initiatives versus kind of natural pressures that we typically see to expenses?
John Asbury -- President and Chief Executive Officer, Atlantic Union Bankshares
Sure. I can -- let me start, and I'll ask Rob to chime in here. We're not done with expense reduction initiatives, and we believe there are other opportunities to continue to rationalize the branch network. I wouldn't expect it to be of the same magnitude of what we just saw. But we've been emboldened by our experience with the branch network reduction. We're down about 10%. I can tell you, we had almost no complaints. And based on the changes in consumer behavior, our own experiences, the uptick that we're seeing in use of technology, things like the ability to do Zoom meetings with branch personnel, all of this further emboldens us to continue to look hard at the branch network. So don't be surprised if you see us do a little more pairing. Again, not the same magnitude. We also do have some technology initiatives under way that will effectively reduce cost through process improvement. And up and down the line, we're looking pretty hard at everything. And yes, on the other hand, there are investments that need to be made as well, so it's a balancing act. So Rob, how would you answer his question specifically?
Rob Gorman -- Chief Financial Officer
Yes. So John is correct. We continue to evaluate opportunities to reduce our run rate and become more efficient, and we will continue to do that. Our view is that the $88 million run rate, we expect, should be able to be improved on going into next year, although that will -- the magnitude of that absolute reduction needs consider things like merit increases and other inflationary type things. So at this point in time, we are driving to at least be flat to that $88 million, inclusive of those inflationary adjustments on the expense line by getting other expense savings. We hope that maybe we can improve that even further, but we're evaluating all opportunities to do that. Yes, we'll have more to say on that as we get through our planning process in the January earnings call.
William Wallace -- Raymond James -- Analyst
Okay. All right. And then as a follow-up on the NIM question from earlier, Rob, you were suggesting flattish from the kind of core, ex PPP noise and accretion noise. Do you think that flat next year is actually achievable? You talked about some pretty significant pressures on the securities portfolio, and obviously, we know loans are repricing lower. Do you think you have enough on the deposit and funding side to offset those? Or should we think about maybe there's more downside pressure than flat after fourth quarter?
Rob Gorman -- Chief Financial Officer
Yes. Thanks, Wally. Good question. Yes, I would suggest there's more downward pressure than opportunity to expand the margin. At this point in time, we feel like there's opportunities on the cost of fund side to offset the majority of any earning asset yield compression from the securities book or the loan portfolio. However, I would suggest that there could be, around the edges, some further compression. If you are 3.06%, we could be between 3% and 3.06% going forward. A big lever we have is on deposit costs. We're 39 basis points during the third quarter. If you look at September levels, we're actually down to 36 basis points. So we've taken actions and continue to do that. We think we can land in the low 20s through various actions, both through the runoff on the CD book repricing and then other tightening on the -- or reducing rates on other related deposit categories, like money market, NOW accounts, etc..
John Asbury -- President and Chief Executive Officer, Atlantic Union Bankshares
Wally, some of the surge that we've seen in deposit growth we had assumed was a temporary phenomenon, we're beginning to rethink that. Here's an interesting stat: we still think about 42% of the PPP fundings are on deposit at the bank. That surprises us because should be that these PPP borrowers are through their eligibility period for expenses, yet we can look at the growth that remains. And so I'm not sure that's going to drain out as fast as we thought. We continue to see deleveraging, deposits building. If we get economic stimulus, that will probably further contribute to deposits. So we can think a little bit differently about the duration, I guess you would say, of this surprising rise that we've had in deposits and what we can do with that. So all of this makes us inclined to be more versus less aggressive with deposit pricing. We'll certainly be testing price elasticity of the deposit base. We have been, and we'll do it more.
William Wallace -- Raymond James -- Analyst
Okay. And John, just one last question, you can direct this to someone else, if it's not you. But if you look across your footprint in the western part of the state versus Northern Virginia, Richmond and Hampton Roads, are you seeing any difference in activity among your borrowing base, whether it's existing customers or a difference in demand within the regions that you operate in, in Virginia?
John Asbury -- President and Chief Executive Officer, Atlantic Union Bankshares
Let me ask Dave Ring to comment. Dave, do you have -- Dave Ring his Head of Commercial. Do you have any perspective you'd like to share about kind of the relative strength of the different regions of Virginia, particularly smaller markets like Southwest Virginia?
David Ring -- Commercial Banking Group Executive
Sure, John. Can you hear me, OK?
John Asbury -- President and Chief Executive Officer, Atlantic Union Bankshares
Yes.
David Ring -- Commercial Banking Group Executive
Great. Yes. As you go across the regions, whether it's Western, Northern, Eastern or Central, demand is still pretty stable. However, in Western Virginia, it's more real estate related, so we're obviously a little more particular right now. In the Northern region, we still have strong demand, but the utilization of the lines of credit have decreased quite a bit. So overall, demand is still stable, but we're being more particular across the board on the types of assets we're willing to finance and the structures we're willing to approve.
John Asbury -- President and Chief Executive Officer, Atlantic Union Bankshares
Dave, what does one market pricing looking like? Is pricing -- what are the trends? Because this will get into some of the margin questions we've been receiving going on spreads.
David Ring -- Commercial Banking Group Executive
Sure. The newer, better credit, so new and strong asset quality type credits are still commanding pretty tight spreads. On renewals, we've seen renewal spreads stabilize or even tick up a little bit. So overall, spreads have started to stabilize instead of going down. So we feel pretty good about where we are in spreads going forward, at least for the next quarter.
William Wallace -- Raymond James -- Analyst
Thank you. Thank you all thanks.
Rob Gorman -- Chief Financial Officer
We're ready for our next caller, please.
Operator
Thank you. Our next question comes from Laurie Hunsicker with Compass Point. You may proceed with your question.
Rob Gorman -- Chief Financial Officer
Good morning. Laurie.
Laurie Hunsicker -- Compass Point -- Analyst
Great. Hi, good morning and thanks for taking my questions.I just wanted to go back. When you were chatting with Catherine about PPP loans, I thought I heard you say there were $32 million in potential fees, and I thought that number was closer to $50 million. So just looking for clarification on that.
Rob Gorman -- Chief Financial Officer
Yes. So Laurie, that's the current balance. We've amortized into income the difference there. We had about $9.8 million amortized this quarter, and it was about $7.5 million or so last quarter. So $50 million against -- if you take out the amortized -- the recognition of those fees over the last two quarters gets you to the $32 million.
Laurie Hunsicker -- Compass Point -- Analyst
Okay. Got it. So then just to clarify, in essence, if all $1.6 billion were forgiven right this second, the net gain that would pop into net interest income is only a net $32 million remaining. Is that correct?
Rob Gorman -- Chief Financial Officer
That's correct, yes. If everything got forgiven, yes.
Laurie Hunsicker -- Compass Point -- Analyst
Perfect. Okay. I just wanted to just jump over to credit, and I appreciate slide nine. I'm just looking at the $676 million of hotels, and maybe this is a question for you, Dave, what is the breakdown between what's C&I and what's CRE? And then can you just remind us on what LTV was for the hotels? I thought it was running around approximately 60%, just didn't know if you had a tighter number on that.
John Asbury -- President and Chief Executive Officer, Atlantic Union Bankshares
Yes. That's correct. The overall portfolio loan-to-value going in was about 60%, the portfolio value. Doug Woolley, Chief Credit Officer, I'm going to ask to comment on hotels. I think you -- I think what's implied into your question was are you financing hotel operators that are C&I loans not secured by real estate. I think the answer to that is going to be no. Doug, of the hotel exposure, $676 million, that's going to be all secured by the hotels themselves, correct? And do you have any comments to make?
Douglas F. Woolley -- Executive Vice President and Chief Credit Officer
Yes, that's correct. Was that your question, Laurie?
Laurie Hunsicker -- Compass Point -- Analyst
Okay. So wait, then maybe I'm not thinking about some things the right way because you've got about 100 -- I'm sorry, about $237 million or so of PPP loans. So you've got at least $237 million of C&I hotel loans, right?
Douglas F. Woolley -- Executive Vice President and Chief Credit Officer
Yes. The...
Laurie Hunsicker -- Compass Point -- Analyst
Right. So I guess, what is the breakdown of the $676 million that's CRE versus C&I? Or I can follow-up with you offline. I'm just looking for that differential and just trying to understand that better.
Douglas F. Woolley -- Executive Vice President and Chief Credit Officer
Yes. All the -- well, all the PPP loans are to the hotel operators themselves, and they are almost all single-asset entities, right, even if they're controlled by an investor hotel group. So we don't use the term C&I when we refer to hotels, it's all in the same bucket. So maybe we do talk about it offline just to make sure we've got your question accurate.
Laurie Hunsicker -- Compass Point -- Analyst
Perfect. We'll -- yes, we'll chat offline. Also, on the restaurant CRE piece, so you've got $190 million of the $223 million that's CRE. What is the LTV running on that?
Douglas F. Woolley -- Executive Vice President and Chief Credit Officer
That's going to be, I'd say, all over the board. Some of -- most of it is the location itself. Sometimes, it's not -- sometimes, it's additional collateral, second-owner home, things like that. So because we underwrite cash flow first, we can assume -- because we don't do this analysis across the board because it does vary on the individual credit decision, so you can assume it's anywhere between 70% and 80% at time of approval.
Laurie Hunsicker -- Compass Point -- Analyst
Okay. That's helpful. And then how much of your CRE is in office? And do you have an LTV on that?
Douglas F. Woolley -- Executive Vice President and Chief Credit Officer
Yes. Let me pull that up. The LTVs are, going in, no worse than 75%. Obviously, it's a seasoned portfolio, so it's between 60% and 65%. We're not doing an awful lot of new office, not because of COVID, just pre-COVID, too. Let me get a number for you.
Laurie Hunsicker -- Compass Point -- Analyst
Okay. And then maybe when you're looking for that, too, leveraged loans, I think those are running around $300 million, give or take. I don't know if you have a more accurate number. And then of that book, do you know how much is modified?
Douglas F. Woolley -- Executive Vice President and Chief Credit Officer
Yes. Define modified, so we're talking the same language.
John Asbury -- President and Chief Executive Officer, Atlantic Union Bankshares
Loan deferral, you mean, Laurie?
Laurie Hunsicker -- Compass Point -- Analyst
Deferral, correct. Yes, how much of that -- I don't know if it's $300 million or $325 million. How much of that is actually in some form of deferment?
Douglas F. Woolley -- Executive Vice President and Chief Credit Officer
Yes. That is a -- well, going in, it was in a low -- it was a low number, and it's really almost nonexistent right now. We don't have any meaningful or, let's say, reported stress in that portfolio. Outstandings on office, $840 million, give or take. That was as of the end of the quarter.
Laurie Hunsicker -- Compass Point -- Analyst
Okay. And then did you have a leveraged loan balance? Or should I follow up with you offline on that?
Douglas F. Woolley -- Executive Vice President and Chief Credit Officer
Yes. We have a balance of about $350 million.
Laurie Hunsicker -- Compass Point -- Analyst
About $350 million. Okay, that's helpful. And then just any comments in terms of your retail? Do you have any movie theater anchored strips? In other words, if we're looking at that $546 million, and to your point, most of it is service retail...
Douglas F. Woolley -- Executive Vice President and Chief Credit Officer
No.
Laurie Hunsicker -- Compass Point -- Analyst
You don't. Okay.
Douglas F. Woolley -- Executive Vice President and Chief Credit Officer
Yes. No.
Laurie Hunsicker -- Compass Point -- Analyst
Okay. Great. And then just, John, last question. You started off by saying potentially consolidation within your footprint would be something you would consider. Can you help us think about, a, how you're approaching a size deal? What would be your ideal target? And then, b, what you're thinking on timing? Would you do it potentially now or in the near-term while we're potentially still in the COVID crisis? Are you waiting to get on the flip side? Or just any thoughts around that?
John Asbury -- President and Chief Executive Officer, Atlantic Union Bankshares
Yes. I actually think big picture, we are in or approaching what I think is going to be the perfect setup for additional bank M&A for all the obvious reasons, Laurie. It's -- we're absolutely not thinking about anything right now. I think this is going to be a next year thing for the -- I'm well aware of the fact that we've seen recent deals, but as best I can tell, those deals were all already baking ahead of COVID, at least the more sizable ones. So from our standpoint, we really do need to have some clarity. And I would think that this is probably a second half of next year opportunity for most across the industry and that we're going to have to have some confidence in terms of what asset quality looks like. We need to prove to the world that everything is fine here. We need to have confidence in asset quality for any potential partner. And so that fuels like quarters from now. So that's one point. I would say nothing has changed in terms of how we think about what we might be interested in. Geographically, the same strategic business case. The financial case would have to make perfect sense. I actually think the ship has sailed on large premium types of combinations.
What is interesting to us is that as we look at -- we think about things, we talk to people, we model it, the relative growth and the size Atlantic Union over the last few years does render deals even of the size or the types that we've been doing less impactful incrementally. So yes, it's very difficult to contemplate when you do anything smaller than what you've seen us do before. Would we consider something larger? We would, but it would have to make certainly strategic and financial sense, and you get into all kinds of cultural issues, strategy issues, etc. So I think it's going to be an important tool in the toolkit. And -- but I think that you would not be surprised by anything we might be contemplating just in the context of what we've always said, we view this as a mid-Atlantic franchise. We like it contiguous, we like it dense, we like it compact. Nothing may happen, something may happen. But I do think that the reality of the lower for longer rate environment, more so than anything else, is going to put a lot of pressure. Every move, everything we do in this company, we do with an eye toward scalability. And I think that, that's been important, and it continues to be important as we move forward. So it's not top of mind right now, but we always think a few steps ahead, and we certainly have ideas about things. So we'll see what the future holds.
Laurie Hunsicker -- Compass Point -- Analyst
Thanks, John.
Bill Cimino -- Vice President and Director of Investor Relations
And thanks, Laurie. And we -- we're going to try to squeeze in one last caller here.
Operator
Thank you. And last question comes from Brody Preston with Stephens. You may proceed with your question.
Brody Preston -- Stephens -- Analyst
Thanks guys. More than generous with your time. So I'll try to keep this brief, Rob, I just wanted to clarify, on the onetime expenses, it just seemed a little, I guess, muddled between the severance and whatnot. So I guess, I just wanted to get the all-in full dollar amount, the $2.6 million, the $0.6 million you had from COVID. And then was there any additional severance that was in the expense number?
Rob Gorman -- Chief Financial Officer
Yes. No other severance in those numbers really. Those are really the ones.
Brody Preston -- Stephens -- Analyst
Okay. All right. And then you had strong growth in other commercial. I'm assuming that's coming from equipment finance. So I just wanted to see -- get a sense for what you're seeing for opportunities there. And is there any specific industries that you're having greater success in?
John Asbury -- President and Chief Executive Officer, Atlantic Union Bankshares
Dave Ring, do you want to speak to that, please?
David Ring -- Commercial Banking Group Executive
Sure. If you recall, we started the equipment finance business last December. We have a full team that we brought over for another bank and have added employees to it. And we have built a referral program internally to help drive referrals from -- in footprint straight to the equipment finance company. So you see in that business, we might have done a term loan for equipment instead and be on our books. Now it gets booked in equipment finance, but they are also self-sourcing as well. The business is throwing off about $100 million a quarter right now in outstandings, and it's doing very well for us. And we're very fortunate that we put this company in place, I think, prior to COVID and prior to the beginning of this year because it gives us the opportunity to finance the existing asset classes with more expertise and a few additional asset classes related to transportation and shipping that we couldn't do before but are prevalent in our market. So it's the same types of companies we've always been banking, Brody, but we do have a couple of extra asset classes that I just named that help us penetrate this market within our footprint better.
John Asbury -- President and Chief Executive Officer, Atlantic Union Bankshares
And it filled an important gap, as we knew it would, where we weren't competitive because, typically, we're going up against superregional banks, some of the large nationals, and we just weren't competitive, what we were doing with fleet financing of trucks or whatever it was. Even I'm thinking of a deal that came out of one of our regions where it was a ready-mixed concrete operation, and they were buying a fleet of cement mixers that we just wouldn't have been competitive. So the whole point here was to fill a gap as a part of our C&I strategy, our diversification strategy. It's pretty basic stuff. This is not small-ticket leasing, but it's kind of standard stuff as Dave Ring was saying. So we're very happy with the timing. We are very fortunate. And they have been exceeding our expectations. It's a good team.
Brody Preston -- Stephens -- Analyst
That's really great color. And then maybe just one more, if I could. John, I appreciate your comments around wanting to get greater clarity before you jump back into M&A. But just as I think about the overall situation, reserves are kind of peaking here and deferrals are heading lower. And so maybe just organically, at what point do you consider sort of putting the pedal back down on growth and then maybe trying to accelerate some of those tourist-related hires that maybe you had paused on here for a couple of quarters? And then, I guess, on a related note, longer term, what do you see sort of the organic growth rate of the bank looking like?
John Asbury -- President and Chief Executive Officer, Atlantic Union Bankshares
I think that the business model fundamentally should be able to generate sustainable growth of the high single digits in a more normalized environment. And one of the things I always love to point to is look at depository market share. Let's take Virginia, which is, of course, the home state. Truist is 25% depository market share, the way we count it, where we cap branches at $5 billion. In comes Wells Fargo at 16%; Bank of America, 11%; we're 7%. And so there's a lot of runway there. And then, of course, we have our other expansion markets in Maryland, North Carolina. The equipment finance division is an incremental add as well. So we feel like the brand is only getting stronger. We've only become more capable. And so we're pretty well positioned for what should be a nice, decent organic run rate. The business model, we're not really built for double-digit growth in a normalized environment, nor do we need it? But the other point I would make is that we fish where the fish are. Yes, we compete against a smaller bank. But most of those fish are in these larger institutions. Nothing has changed in terms of the opportunity we see at Truist. And Dave Ring, I'll ask you to comment on any hiring. New hiring hasn't been 0. And the other thing that we are very excited about, you haven't heard us talk too much about it, but I'll bring it up again because in the last quarter, lots Wells Fargo, lots of what's going on there. With their $10 billion multiyear expense reduction initiative, with their strategy to more centrally manage clients that are right in our wheelhouse that look small to them, there's going to be an opportunity here. And so I think that what we've done with PPP, most of those 3,000 new-to-bank clients would have come out of these large institutions that we picked up through PPP. So the stage is set. Dave, can you comment on what hiring we may have seen. But I don't want to give the impression that we somehow stopped it or aren't focused on Truist or Wells Fargo, nothing could be further from the truth.
David Ring -- Commercial Banking Group Executive
Sure, John. We are hiring all year long, although the fourth quarter is less attractive to hire because you're compensating folks for bonuses they've earned elsewhere and potentially upfront. However, all during the course of COVID and pre-COVID this year, we have acquired talent from mostly the banks that are currently experiencing disruption, and they're the large banks that you all know. So as -- we have offers out today. We've just added to our government contractor banking team as well recently through these external hires. And we're also focusing on hiring strong credit-oriented folks for our portfolio manager positions. So overall, we've done quite a bit of hiring. We've hired in the double digits during the course of the year from those large institutions. And one of the things that makes us very attractive is we are very easy to understand. They know what their targets are. We make it clear what their goals are. And it's back to what they really like to do, which is take care of commercial customers, meet business owners and focus in footprint.
Brody Preston -- Stephens -- Analyst
That's great color. I really appreciate the time.
Bill Cimino -- Vice President and Director of Investor Relations
Thanks, everyone, for joining us today. We appreciate your interest. And as a reminder, a replay of the webcast will be available on our website, investors.atlanticunionbank.com. Thanks so much, and we'll talk to you next quarter. Goodbye.
Duration: 78 minutes
Call participants:
Bill Cimino -- Vice President and Director of Investor Relations
John Asbury -- President and Chief Executive Officer, Atlantic Union Bankshares
Rob Gorman -- Chief Financial Officer
Douglas F. Woolley -- Executive Vice President and Chief Credit Officer
David Ring -- Commercial Banking Group Executive
Eugene Koysman -- Barclays -- Analyst
Casey Whitman -- Piper Sandler -- Analyst
Catherine Mealor -- KBW -- Analyst
William Wallace -- Raymond James -- Analyst
Laurie Hunsicker -- Compass Point -- Analyst
Brody Preston -- Stephens -- Analyst