United munity Banks(US:UCBI)2025-04-22 13:00Financial Data and Key Metrics Changes - Operating earnings were reported at 59 cents per share, with an operating return on assets of 1.04%, both showing solid improvements from the previous year [5] - Loans grew at an annualized pace of just over 5%, while deposits also grew at an annualized rate of 5% [6] - The net interest margin increased by 10 basis points over the fourth quarter, driven by lower deposit costs [6][19] Business Line Data and Key Metrics Changes - The loan portfolio saw a 7% annualized growth in Commercial and Industrial (CNI) loans, including owner-occupied Commercial Real Estate (CRE), and a 15% annualized growth in the Navitas book [15] - Home Equity Line of Credit (HELOC) loans experienced a 13% annualized growth [15] - Non-interest income on an operating basis decreased by $4.8 million from the previous quarter, but the run rate of fee income remained essentially flat [20] Market Data and Key Metrics Changes - Deposit growth was strong, with $309 million in deposit growth or 5.3% annualized, despite approximately $85 million in seasonal public funds outflow [12] - The cost of total deposits improved by 15 basis points during the quarter [13] - The loan-to-deposit ratio remained low at 78%, indicating balanced loan and deposit growth [16] Company Strategy and Development Direction - The company is focused on organic growth as a priority for capital deployment, with share buybacks being considered more attractive than M&A at current stock prices [51][80] - The acquisition of American National Bank is set to close on May 1st, marking a significant step in the company's growth strategy [24] - The company aims to maintain a low single-digit growth in operating expenses, with expectations of modest growth in the second quarter [47] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating economic uncertainties, noting that consumer spending and employment in their markets remain strong [10] - There are no elevated concerns regarding the impact of tariffs at this time, as clients are adjusting quickly to maintain margins [10][34] - The company is cautious about potential risks in the small commercial segment, particularly with the Navitas portfolio [35] Other Important Information - The Common Equity Tier 1 (CET1) ratio increased to 13.3%, indicating a strong capital position [17] - The Total Capital Ratio (TCE) was up 21 basis points, remaining above peers [18] - The allowance for credit losses slightly increased to 1.21% of loans, with a loan loss provision of $15.4 million covering net charge-offs [22] Q&A Session Summary Question: Margin expectations going forward - Management expects margins to increase by 5 to 10 basis points next quarter, driven by lower deposit costs and a shift in the mix between loans and securities [27] Question: Concerns regarding tariffs and borrower behavior - Management noted that impacts are client-specific and that borrowers are reacting quickly to adjust to tariff-related challenges [30][34] Question: Changes in borrower behavior and pipelines - Current pipelines for Q2 are similar to Q1, with no significant negative impacts observed [43] Question: SBA and fee income challenges - The company, as a preferred lender, has not faced significant challenges in getting SBA deals approved, and the first quarter was the largest for SBA in history [45] Question: Operating expenses outlook - Operating expenses are expected to remain in the low single-digit growth range, with some seasonal increases anticipated [47] Question: Capital deployment priorities - Organic growth remains the top priority, with share buybacks being more attractive than M&A at current valuations [51][80] Question: Credit quality and loan loss reserves - The company uses Moody's scenarios for credit loss reserves and balances economic forecasts with portfolio performance [60][66]