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UNITED COMMUNITY BANKS INC (UCB)·Q4 2024 Earnings Summary

Executive Summary

  • GAAP EPS was $0.61, up $0.23 QoQ and $0.50 YoY; operating EPS was $0.63, up 11% QoQ and 19% YoY, driven by higher net interest income, higher core fee income, and lower credit provision as manufactured housing (MH) losses rolled off .
  • Loans grew $212M (5% annualized) and customer deposits rose $213M (3.7% annualized); deposit costs fell 15 bps QoQ while net interest margin compressed 7 bps to 3.26% due to seasonal public funds mix and the full-quarter MH sale impact; core spread income still increased ~2% annualized .
  • Credit improved: net charge-offs dropped to 0.21% of average loans (lowest in two years), allowance coverage held at 1.20% of loans, and NPAs remained 0.42% of total assets; CET1 increased to 13.2% with TCE/TA at 8.97% .
  • Outlook: management guides Q1 2025 margin up 5–10 bps on loan repricing, CD repricing opportunity ($1.8B maturing at 4.14% likely to reset ~3.50%), and strong production in targeted categories (C&I, equipment finance, HELOC); expects SBA sale timing to push more activity into Q1–Q2, and lower Navitas loan sales as more loans are held on balance sheet .

What Went Well and What Went Wrong

What Went Well

  • Balanced growth with loans up $212M (5% annualized) and customer deposits up $213M (3.7% annualized), funding growth internally; “Loan growth returned to historical levels” and deposit growth supported NII expansion despite minor NIM compression .
  • Deposit cost management: total deposit costs fell 15 bps QoQ; CFO highlighted proactive repricing and near-term benefit from a steeper curve, with new loans priced ~7.25% in December .
  • Credit normalization: NCOs down to 0.21% of average loans and lowest in two years; reserve steady at 1.20% of loans; hurricane-related special reserve considered sufficient .

What Went Wrong

  • Net interest margin fell 7 bps to 3.26% due to seasonal public funds mix (~5 bps) and full-quarter impact from the MH portfolio sale (~2 bps) despite deposit cost declines; core NIM down 7 bps to 3.19% .
  • Fee headwinds and mix: wealth fees shrank with the sale of FinTrust; securities losses of $3.3M partially offset MSR mark-up and realized equity gains; reported noninterest income rose largely due to absence of Q3 MH sale loss .
  • Navitas losses ticked up slightly (13 bps of total losses vs. 12 bps in Q3) and SBA loan sale timing shifted later due to regulation changes, pushing some gains into Q1–Q2 2025 .

Financial Results

MetricQ4 2023Q3 2024Q4 2024
Total Revenue ($MM)$165.7 $202.8 $239.5
Net Interest Revenue ($MM)$203.5 $209.2 $210.3
Noninterest Income (GAAP, $MM)$(23.1) $8.1 $40.5
Provision for Credit Losses ($MM)$14.6 $14.4 $11.4
Noninterest Expenses (GAAP, $MM)$154.6 $143.1 $143.1
Net Income ($MM)$14.1 $47.3 $75.8
Diluted EPS (GAAP)$0.11 $0.38 $0.61
Diluted EPS (Operating)$0.53 $0.57 $0.63
Net Interest Margin (FTE)3.19% 3.33% 3.26%
ROA (GAAP, annualized)0.18% 0.67% 1.06%
Efficiency Ratio (Operating)57.15% 57.37% 55.18%
Net Charge-offs to Avg Loans (annualized)0.22% 0.52% 0.21%

Loan Portfolio Breakdown (Period-End)

Category ($MM)Q4 2023Q4 2024Linked QoQ Δ ($MM)YoY Δ ($MM)
Owner-Occupied Commercial RE$3,264 $3,398 +$75 +$134
Income-Producing Commercial RE$4,264 $4,361 +$102 +$97
Commercial & Industrial$2,411 $2,428 +$115 +$17
Commercial Construction$1,860 $1,656 −$129 −$204
Equipment Financing (Navitas)$1,541 $1,663 +$60 +$122
Residential Mortgage$3,199 $3,232 −$31 +$33
HELOC$959 $1,065 +$50 +$106
Manufactured Housing$336 $2 —−$334
Consumer$181 $186 −$2 +$5
Total Loans$18,319 $18,176 +$212 −$143

KPIs

KPIQ4 2023Q3 2024Q4 2024
CET1 Ratio12.2% 13.1% 13.2%
TCE / TA8.36% 8.93% 8.97%
NPAs / Total Assets0.34% 0.42% 0.42%
Dividend per Share (Quarter)$0.23 $0.24 $0.24
Deposits ($B)$23.31 $23.25 $23.46
Total Assets ($B)$27.30 $27.37 $27.72

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Interest Margin (core)Q1 2025Not specifiedUp ~5–10 bps QoQ expected on loan repricing, mix normalization, and deposit beta execution Raised
Deposit Beta (cumulative)Cycle~22% achieved so farTarget “high 30% range” through the cycle Raised target
CD RepricingQ1 2025Shortened book; elevated rates~$1.8B (51% of CDs) maturing at 4.14% expected to reprice ~3.50% Lower rate outlook
SBA Loan Sales Timing1H 2025Normal cadenceRegulation change pushes more sales/fees into Q1–Q2 vs. Q4; Q1 to be better YoY Timing shifted
Navitas Loan Sales2025 (per quarter)~$20–30M per quarter~$10–20M per quarter; more profitable to hold on balance sheet Lower sales (holding more)
Mortgage VolumesFY 2025Not specified~10% down for 2025 per MBA; UCB guides similar Lower
DividendQuarterly$0.24 in Q3$0.24 declared in Q4; +4% YoY Maintained QoQ

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2–Q3 2024)Current Period (Q4 2024)Trend
Net Interest Margin driversQ3 NIM impacted by MH sale and mix; deposit beta 22% achieved so far NIM −7 bps QoQ; MH sale (−2 bps) and public funds mix (−5 bps); core spread income +2% annualized; guide +5–10 bps in Q1 Improving into Q1
Deposit costs & CDsOngoing active management; CD book shortened Total deposit cost −15 bps QoQ; 51% of CD book ($1.8B) maturing to reprice ~3.50%; lengthen maturities back to ~11–13 months Cost down, duration normalizing
Loan growth focusTargeted categories (C&I, equipment, HELOC) C&I +13% annualized, Navitas +15%, HELOC +20%; late-quarter production boosts Q1 averages Strengthening
Credit normalizationQ3 NCOs elevated by MH sale; allowance ~1.23% NCOs 0.21%; allowance 1.20% of loans; hurricane reserve $9.9M; Navitas trucking losses to moderate in 2025 Improving
SBA & mortgage feesTiming affected by rule changes; MSR volatility SBA sales shift to Q1–Q2; mortgage MSR +$3.5M; brokerage fees down on FinTrust sale Mixed
M&A pipelineEvaluating small, tuck-in deals; ANB announced Dec.Environment more conducive post-election; capacity for one additional deal in 2025 beyond ANB Active

Management Commentary

  • “We are excited to report strong fourth quarter results…Loan growth returned to historical levels…customer deposits grew…This growth allowed us to increase net interest income while experiencing some minor expected net interest margin compression.” — Lynn Harton, CEO .
  • “Our cost of total deposits improved by 15 basis points in the quarter…we have over half of our CD book maturing, which is $1.8 billion at 4.14%. We should be able to reprice these in the 3.50 range.” — Jefferson Harralson, CFO .
  • “We are putting new loans on in the 7.25 range…combine all that together and…we’re 5 to 10 basis points up on the margin in the Q1.” — Jefferson Harralson, CFO .
  • “Florida led the bank in Q4 loan production followed by North Carolina and South Carolina…for 2 quarters back to back, the new markets have been leading the bank.” — Richard Bradshaw, President & CBO .
  • “There’s definitely been a pickup in conversations [on M&A] since the election…we have the capacity…to do one additional one this year in addition to American National.” — Lynn Harton, CEO .

Q&A Highlights

  • Loan growth drivers: utilization up and strong pipelines; new markets (Florida, Carolinas) leading production; targeted categories (C&I +20%, equipment +15%, income-producing CRE +9.5%, owner-occupied CRE +9%) .
  • Margin trajectory: asset-sensitive tilt; new loans ~7.25%; expect +5–10 bps NIM in Q1 absent additional rate cuts, with deposit betas trending to high-30% through the cycle .
  • Deposit repricing/duration: significant CD maturities in 1H25 with plan to lengthen terms back toward 11–13 months as rate environment evolves .
  • Navitas credit outlook: over-the-road trucking book shrank to $26M; losses expected to moderate to ~$4M in 2025 from $7–7.5M in 2024 .
  • SBA/mortgage fees: SBA rule changes push sale timing into Q1–Q2; mortgage volumes guided down ~10% for 2025, consistent with MBA .

Estimates Context

  • We attempted to retrieve S&P Global consensus estimates (EPS and revenue) for Q4 2024 and prior quarters, but the SPGI API daily request limit was exceeded, so estimates were unavailable for comparison at this time [functions.GetEstimates errors].
  • As a result, we cannot quantify beat/miss vs. Wall Street consensus for Q4 2024 in this recap. We default to S&P Global for estimates when accessible and will update when available.

Key Takeaways for Investors

  • Near-term margin uptick likely: management guides +5–10 bps NIM in Q1 on loan repricing, CD resets (~3.50% vs. 4.14%), and mix normalization; deposit beta execution toward high-30% should aid spreads .
  • Growth in targeted categories: strong production in C&I, equipment finance, and HELOC positions UCB to expand earning assets at attractive yields (~7.25% new loans) without reliance on wholesale funding .
  • Credit normalization supports lower provision: NCOs fell to 0.21% with MH sale behind and trucking losses expected to moderate; reserve steady at 1.20% with hurricane special reserve adequate .
  • Capital and liquidity remain strengths: CET1 at 13.2%, TCE/TA 8.97%, low brokered deposits (0.7% of total), enabling opportunistic balance sheet actions and flexibility in M&A .
  • Fee outlook mixed: MSR mark and card/treasury fees are positives; wealth fees lower post-FinTrust sale; SBA fee timing shifts into 1H25; Navitas loan sales reduced as more loans are retained .
  • Strategic catalysts: ANB tuck-in expected to close in 2Q25; improving M&A environment could add one more deal, with potential asset-side marks and liability repricing benefits .
  • Dividend stability: $0.24 quarterly dividend maintained; efficiency ratio improving (55.2% operating), supporting shareholder returns .