425: United Community Banks Reports Strong 2024 Earnings and Outlines Growth Strategy

United Community Banks reported solid fourth-quarter and full-year 2024 earnings, highlighted by strong loan and deposit growth, and anticipates further expansion in 2025.

Summary

• United Community Banks reported fourth-quarter earnings of $0.61 per share and full-year earnings of $2.04 per share.
• On an operating basis, the bank recorded earnings of $0.63 per share for the quarter and $2.30 for the year.
• Operating earnings grew by 11% annualized from the previous quarter and 9% for the full year compared to 2023.
• The tangible book value increased by 9% year-over-year and at a 7% annualized rate during the fourth quarter.
• The operating return on assets reached 1.08% in the quarter and 1.02% for the full year.
• The operating return on tangible common equity increased to 12.1% for the quarter and 11.4% for the full year.
• Loan growth accelerated to a 5% annualized rate, with contributions from various product types.
• Deposit growth totaled almost 4% annualized during the quarter, driven by seasonal growth in public funds.
• Deposit costs decreased by 15 basis points, nearly offsetting a 21 basis point decline in loan yields.
• The overall margin decreased by 7 basis points, but net interest revenue increased by $1.1 million over the previous quarter.
• Net charge-offs were 21 basis points, the lowest rate since Q2 of 2023.
• Operating efficiency improved to 55%.
• The bank is looking forward to opportunities in 2025, including the expansion of its South Florida footprint with American National Bank.

Sentiment

Score: 8

Explanation: The document conveys a positive sentiment due to strong financial results, strategic growth initiatives, and optimistic outlook. The bank's performance metrics are generally strong, and management expresses confidence in future prospects. There are some minor negatives, but the overall tone is positive.

Positives

• The bank experienced strong loan growth, particularly in C&I, owner-occupied CRE, and HELOC products.
• Deposit growth was robust, driven by seasonal increases in public funds.
• The bank proactively lowered deposit costs by 15 basis points.
• Credit quality remains solid, with net charge-offs at their lowest rate since Q2 2023.
• Operating efficiency improved to 55%.
• The bank redeemed $60 million of subordinated debt, saving approximately $1.8 million in 2025.
• Noninterest income increased by $5.2 million from the previous quarter.
• The bank has a significant amount of CDs maturing in the first quarter, providing an opportunity to reprice at lower rates.
• The bank's capital ratios remain above peers.

Negatives

• The overall margin decreased by 7 basis points, although net interest revenue increased.
• Navitas losses were slightly higher, contributing 13 basis points of total losses.
• There was a $1.6 million shrinkage in wealth income fees due to the sale of FinTrust.
• The bank experienced $3.3 million in securities losses.
• Special mention and substandard loans moved slightly higher.

Risks

• The bank's margin is still slightly asset sensitive, and there may be timing elements until deposit costs are fully repriced.
• There is a potential for continued pressure on loan yields.
• The bank is exposed to potential losses from loans in a 9-county area in North Carolina affected by Hurricane Helene.
• The bank's mortgage volume is expected to be down 10% in 2025.
• Navitas loan sales are expected to be lower in 2025.

Future Outlook

The bank anticipates continued growth in 2025, including expansion in South Florida and potential M&A opportunities. They expect a slight improvement in the margin in the first quarter and continued improvement throughout the year, barring any rate cuts. They also expect good loan growth in the first quarter.

Management Comments

• Lynn Harton stated that the bank was pleased to report earnings of $0.61 this quarter and $2.04 for the full year.
• Lynn Harton mentioned that there was no single driver of performance this quarter, rather, they recorded strong balanced performance across all of their businesses.
• Lynn Harton welcomed Ginger Martin and her team at American National Bank, expressing confidence in their addition to the South Florida team.
• Lynn Harton also welcomed Matthew Bruno as the new leader for the Miami operation.
• Lynn Harton noted that 2025 is United's 75th anniversary and they plan on making it a great year.
• Rich Bradshaw mentioned that business owner confidence is up and pipelines are very strong.
• Rich Bradshaw stated that Florida led the bank in Q4 loan production followed by North Carolina and South Carolina.
• Jefferson Harralson stated that they are still on pace for a high 30% range of total deposit beta through the cycle.
• Jefferson Harralson mentioned that they are putting new loans on in the 7.25% range.
• Jefferson Harralson stated that they expect a 5 to 10 basis point improvement in the margin in the first quarter.
• Lynn Harton stated that there has been a pickup in conversations since the election and that there is a better environment overall for M&A.
• Rob Edwards stated that he is thinking about $44 million as a good number for the outlook for net charge-offs in 2025.
• Jefferson Harralson mentioned that they expect Navitas loan sales to be a little down in 2025.
• Rob Edwards stated that they expect losses on the over-the-road trucking portfolio to moderate in 2025.

Industry Context

The announcement reflects a positive trend in the banking sector, with increased loan growth and improved credit quality. The bank's focus on M&A and expansion in key markets aligns with industry trends of consolidation and strategic growth. The discussion of interest rate sensitivity and deposit betas is relevant given the current economic environment and potential for rate cuts.

Comparison to Industry Standards

• United Community Banks' operating return on assets of 1.08% for the quarter and 1.02% for the full year is generally in line with or slightly above the average for regional banks.
• The bank's operating return on tangible common equity of 12.1% for the quarter and 11.4% for the full year is competitive with other well-performing regional banks.
• The loan growth of 5% annualized is a positive sign, indicating strong demand for their lending products, which is a key metric for banks.
• The deposit growth of almost 4% annualized is also a positive indicator, showing the bank's ability to attract and retain deposits.
• The net charge-offs of 21 basis points are low, indicating good credit quality and risk management, which is better than many peers.
• The operating efficiency ratio of 55% is a good result, indicating that the bank is managing its expenses effectively.
• The bank's CET1 ratio remaining over 13% is a strong indicator of capital strength, which is above the regulatory requirements and many peers.
• The bank's proactive management of deposit costs, reducing them by 15 basis points, is a positive sign of their ability to manage interest rate risk.
• The bank's strategy of shortening the duration of their CD book to take advantage of potential rate cuts is a smart move, similar to what other banks are doing.
• The bank's focus on M&A, particularly the acquisition of American National Bank, is a common strategy for regional banks to expand their market presence and improve profitability.

Management Changes

Stakeholder Impact

• Shareholders will benefit from the strong financial performance and growth prospects.
• Employees will have opportunities for growth and development as the bank expands.
• Customers will benefit from the bank's expanded services and locations.
• Suppliers and creditors will benefit from the bank's financial stability and growth.

Next Steps

• The bank plans to continue its expansion in South Florida with the integration of American National Bank.
• The bank will focus on repricing maturing CDs in the first quarter.
• The bank will continue to manage its loan portfolio and credit quality.
• The bank will explore potential M&A opportunities in 2025.
• The bank will celebrate its 75th anniversary in 2025.

Key Dates

Keywords

earnings, loan growth, deposit growth, net interest margin, credit quality, M&A, capital ratios, operating efficiency, Navitas, CDs