United Community Banks, Inc.(UCB) - 2024 Q3 - Quarterly Report

Financial Performance and Results - Total interest revenue for Q3 2024 increased to $349.086 million, up from$323.147 million in Q3 2023[14] - Net interest revenue after provision for credit losses for Q3 2024 was $194.758 million, compared to$172.288 million in Q3 2023[14] - Total noninterest income for Q3 2024 decreased to $8.091 million from$31.977 million in Q3 2023[14] - Net income for Q3 2024 was $47.347 million, slightly down from$47.866 million in Q3 2023[14] - Net income available to common shareholders for Q3 2024 was $45.502 million, compared to$46.775 million in Q3 2023[14] - Basic net income per common share for Q3 2024 was $0.38, down from$0.39 in Q3 2023[14] - Total other comprehensive income for Q3 2024 was $44.776 million, compared to a loss of$26.598 million in Q3 2023[16][17] - Comprehensive income for Q3 2024 was $92.123 million, up from$21.268 million in Q3 2023[16][17] - Net income for the nine months ended September 30, 2024, was $176.6 million, compared to$173.5 million for the same period in 2023[22] - Net income for the period was $23,031[19] - Net income for the nine months ended September 30, 2024 was$176.59 million, with basic and diluted earnings per share of $1.43[146] Risk Factors and Uncertainties - Forward-looking statements in the report include discussions of strategy, financial projections, and future performance, but are subject to risks and uncertainties[8] - Key risks include negative economic conditions, changes in loan underwriting policies, and potential effects of pandemics on business operations[9] - Interest rate changes by the Federal Reserve could reduce net interest margins and impact loan volumes and values[9] - The company faces risks related to mergers, acquisitions, and integration of new businesses[9] - Cybersecurity risks and reliance on third-party infrastructure could adversely affect business performance[9] - Legislative, regulatory, or accounting changes may negatively impact the company[9] - Volatility in the Allowance for Credit Losses (ACL) due to the CECL methodology could affect financial results[9] - The company may face limitations on dividend payments, impacting liquidity and shareholder returns[9] - Additional risks are disclosed in the company's 2023 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K[10] Balance Sheet and Equity - Total shareholders' equity increased to$3.41 billion as of September 30, 2024, up from $3.26 billion at the end of 2023[19] - Common stock dividends increased to$0.24 per share in 2024, up from $0.23 per share in 2023[19] - Accumulated other comprehensive income improved to a loss of$189.8 million in 2024, compared to a loss of $239.2 million at the end of 2023[19] - Total assets at the end of the period were$70,500[19] - Total liabilities for the period were $24,359[19] - Shareholder equity stood at$8,109[19] - Total assets increased from $3,475,971 in the previous period to$4,178,051 as of September 30, 2024, driven by growth in Level 1 and Level 2 assets[116][117] Cash Flow and Liquidity - Net cash provided by operating activities decreased to $201.6 million in 2024 from$272.2 million in 2023[22] - Net cash used in investing activities was $310.4 million in 2024, compared to$2.4 million in 2023[22] - Cash flow from operations was $763[19] - Total debt for the period was$2,333[19] Loans and Credit Losses - Total deposits decreased by $58.3 million in 2024, compared to an increase of$886.4 million in 2023[22] - Provision for credit losses decreased to $39.6 million in 2024 from$74.8 million in 2023[22] - The loan portfolio as of September 30, 2024, totaled $17,964.1 million, with a slight decrease from$18,318.8 million at the end of 2023[52] - The company recognized a loss of $27.2 million from the sale of its manufactured housing loans portfolio in Q3 2024[54] - The allowance for credit losses (ACL) on loans decreased to$205.3 million as of September 30, 2024, from $208.1 million at the end of 2023[52] - Nonaccrual loans increased to$112,380 thousand as of September 30, 2024, from $91,687 thousand as of December 31, 2023, reflecting a 22.6$205.29 million, with a release provision of $15.92 million during the nine months ended September 30, 2024[85] Mergers and Acquisitions - United acquired First Miami on July 1, 2023, adjusting provisional fair values: other assets decreased by$2.06 million to $18.8 million, other liabilities decreased by$726,000 to $16.9 million, and goodwill increased by$1.34 million to $24.5 million[31] - Merger-related costs for the First Miami acquisition were$6.53 million and $6.91 million for the three and nine months ended September 30, 2023, respectively[33] - Pro forma revenue and net income for Progress and First Miami acquisitions as if acquired on January 1, 2022, were$207.52 million and $55.54 million for the three months ended September 30, 2023, and$667.16 million and $197.93 million for the nine months ended September 30, 2023[34] Securities and Investments - The fair value of HTM debt securities as of September 30, 2024, was$2.06 billion, with gross unrealized gains of $116,000 and gross unrealized losses of$341.26 million[36] - The carrying value of pledged securities totaled $2.64 billion as of September 30, 2024, primarily to secure public deposits[37] - Total unrealized losses on AFS debt securities increased from$395.42 million as of December 31, 2023, to 341.26 million as of September 30, 2024, primarily due to changes in interest rates[40][42] - Residential MBS, Agency & GSEs accounted for the largest portion of unrealized losses at 175.51 million as of September 30, 2024, compared to $206.34 million as of December 31, 2023[40] - U.S. Treasuries unrealized losses decreased from$1.91 million as of December 31, 2023, to $1.41 million as of September 30, 2024[40] - State and political subdivisions unrealized losses decreased from$50.44 million as of December 31, 2023, to 45.43 million as of September 30, 2024[40] - Commercial MBS, Agency & GSEs unrealized losses decreased from 118.54 million as of December 31, 2023, to $103.95 million as of September 30, 2024[40] - Total fair value of AFS debt securities decreased from$2.07 billion as of December 31, 2023, to $2.04 billion as of September 30, 2024[40] - Accrued interest receivable on AFS debt securities increased from$12.57 million as of December 31, 2023, to $17.05 million as of September 30, 2024[45] - No ACL was recorded on the HTM portfolio at September 30, 2024, due to the high credit quality of the portfolio[43] - There were 594 AFS debt securities and 302 HTM debt securities in an unrealized loss position as of September 30, 2024[42] - Total debt securities as of September 30, 2024, amounted to$4,197.3 million in amortized cost and $4,023.5 million in fair value[46] - Proceeds from sales of AFS securities for the nine months ended September 30, 2024, were$647 thousand, compared to $595.2 million in 2023[48] Regulatory and Compliance - The company's 2023 10-K annual report was filed with the SEC on February 23, 2024[7] - The Bank changed its primary federal regulator from the FDIC to the Federal Reserve effective June 2024[25] - United transferred its securities listing from NASDAQ to the New York Stock Exchange under the trading symbols UCB and UCB PRI effective August 6, 2024[25] - United corrected an immaterial error in loan vintage disclosure for the 2023 10-K, reclassifying certain term loans and gross charge-offs to older vintage categories without affecting net income, cash flows, or equity[26][27] - United adopted FASB ASU No. 2023-02 using a modified retrospective transition method as of January 1, 2024, with no impact to shareholders' equity[28] - The company and its bank subsidiary were categorized as well-capitalized under regulatory requirements as of September 30, 2024[147] - Regulatory capital ratios as of September 30, 2024: CET1 capital at 13.07$19.45 billion as of September 30, 2024, compared to $20.01 billion as of December 31, 2023[149] Derivatives and Hedging - United expects to reclassify$4.64 million of gains from AOCI into earnings related to cash flow hedges over the next twelve months[88] - United entered into additional fair value hedges on stated amounts of closed portfolios of loans and investment securities during the first three quarters of 2024[89] - Net income recognized on AFS securities fair value hedges increased to $4.407 million for the three months ended September 30, 2024, compared to$3.768 million in the same period in 2023[90] - Net income recognized on loan fair value hedges was $4.612 million for the three months ended September 30, 2024, with no comparable figure in 2023[90] - Customer derivatives and dealer offsets resulted in a gain of$1.165 million for the three months ended September 30, 2024, up from $789 thousand in the same period in 2023[96] - Mortgage banking derivatives resulted in a loss of$1.947 million for the three months ended September 30, 2024, compared to a gain of $1.034 million in the same period in 2023[96] Goodwill and Intangible Assets - The carrying amount of goodwill decreased to$916.153 million as of September 30, 2024, from $919.914 million as of December 31, 2023, due to a$5.10 million write-down related to FinTrust[103] - The net core deposit intangible decreased to $52.915 million as of September 30, 2024, from$63.679 million as of December 31, 2023[100] - The total goodwill and other intangible assets decreased to $975.117 million as of September 30, 2024, from$990.087 million as of December 31, 2023[100] - The estimated aggregate amortization expense for finite-lived intangibles is projected to be $52.940 million over the next several years[104] - A$5.10 million write-down to the goodwill associated with FinTrust was recorded during the second quarter of 2024[127] Fair Value Measurements - AFS debt securities and equity securities with readily determinable fair values are recorded at fair value, with Level 1 securities including those traded on active exchanges like the NYSE, and Level 2 securities including MBS, municipal bonds, and corporate debt securities[107] - Deferred compensation plan assets and liabilities are classified as Level 1, with assets valued at $14,459 and liabilities at$14,454 as of September 30, 2024[108][116] - Mortgage loans held for sale are classified as Level 2, with a fair value of $49,800 as of September 30, 2024[109][116] - Derivative financial instruments are primarily classified as Level 2, with a total fair value of$64,594, including $54,037 in Level 2 and$10,557 in Level 3[115] - Servicing rights for residential and SBA/USDA loans are classified as Level 3, with residential mortgage servicing rights valued at $35,378 and SBA/USDA loan servicing rights at$4,937 as of September 30, 2024[114][116] - Total assets as of September 30, 2024, are $4,178,051, with Level 1 assets at$556,239, Level 2 at $3,569,116, and Level 3 at$52,696[116] - Total liabilities as of September 30, 2024, are $79,048, including$14,454 in deferred compensation plan liabilities and $64,594 in derivative financial instruments[115] - Corporate bonds classified as Level 3 have a fair value of$2,226 as of September 30, 2024, compared to $2,205 as of the previous period[116][117] - Derivative financial instruments classified as Level 3 have a fair value of$10,155 as of September 30, 2024, compared to $10,642 in the previous period[116][117] - SBA/USDA loan servicing rights fair value adjustments show a discount rate range of 4.8$48,228 thousand and a fair value of $49,800 thousand as of September 30, 2024[122] - Gain from change in fair value on mortgage loans held for sale was$180 thousand for the three months ended September 30, 2024[124] - Loans held for investment measured at fair value on a nonrecurring basis totaled $34,468 thousand as of September 30, 2024[126] - FinTrust net assets held for sale were carried at fair value, less cost to sell, totaling$15,586 thousand as of September 30, 2024[126] - Derivative assets - mortgage had a pull-through rate range of 73.0 - 100 with a weighted average of 91.1 as of September 30, 2024[120] - Fair value estimates for financial instruments as of September 30, 2024 include HTM debt securities at $2.06 billion, loans and leases at$17.26 billion, deposits at $23.25 billion, and long-term debt at$305.68 million[134] Compensation and Equity - The company's equity compensation plan covers 1.81 million shares as of September 30, 2024, with restricted stock unit and option activity showing 1.16 million shares outstanding and an aggregate intrinsic value of $33.67 million[136][138] - Compensation expense for restricted stock units and performance stock units was$7.18 million for the nine months ended September 30, 2024, with an additional $546,000 recognized for board members[140] - Unrecognized expense related to non-vested restricted stock unit and performance stock unit awards was$26.5 million as of September 30, 2024, expected to be recognized over 2.7 years[141] - The weighted average grant date fair value for restricted stock unit awards was $29.52 as of September 30, 2024[138] - The company recognized a deferred income tax benefit of$1.95 million related to stock-based compensation for the nine months ended September 30, 2024[141] Commitments and Credit Facilities - Commitments to extend credit decreased to $3.92 billion as of September 30, 2024, from$4.31 billion as of December 31, 2023[152] - Outstanding balance of purchase and credit card loans totaled $4.34 million as of September 30, 2024[152] Investments and Tax Credits - Investments in LIHTC partnerships: Carrying amount increased to$54.16 million as of September 30, 2024, from $48.87 million as of December 31, 2023[157] - Renewable energy investments: Carrying amount decreased to$3.37 million as of September 30, 2024, from $18.63 million as of December 31, 2023[157] - Fintech funds and equity method investments: Carrying amount increased to$35.96 million as of September 30, 2024, from $33.72 million as of December 31, 2023[157] - Income tax credits and benefits for LIHTC investments:$1.99 million for the three months ended September 30, 2024, and $5.99 million for the nine months ended September 30, 2024[158] Share Repurchase and Market Risk - Common stock repurchase program: Authorization increased to$100 million, extended through December 31, 2025[159] - No material changes in market risk as of September 30, 2024, compared to the 2023 10-K report[284]