United munity Banks(US:UCBI)2023-10-18 18:57Financial Data and Key Metrics Changes - Customer deposits grew by $314 million or 5% annualized this quarter, excluding the acquisition of First National Bank of South Miami and the sale of two branches in Tennessee [17][28] - Operating earnings for the quarter were $0.45 per share, down $0.10 or 18% compared to the previous quarter [25] - The net interest margin decreased from 337 basis points to 324 basis points, a decline of 13 basis points [20][33] - The allowance for credit losses as a percentage of loans remained flat, while the coverage of non-performing assets (NPAs) improved [3] Business Line Data and Key Metrics Changes - The loan portfolio grew by $241 million, representing a 5.4% annualized growth [30] - Noninterest income decreased by $4.4 million compared to the previous quarter, primarily due to the absence of one-time items [35] - Expenses increased to $135.5 million, up $6.5 million from the previous quarter [36] Market Data and Key Metrics Changes - The cost of deposits rose by 39 basis points to 2.03%, with a cumulative total deposit beta of 38% since Q4 2021 [29] - The loan-to-deposit ratio remained at 80%, indicating strong liquidity to meet customer borrowing needs [19][31] Company Strategy and Development Direction - The company closed the acquisition of First National Bank of South Miami, with integration scheduled for the upcoming weekend [26] - The company is cautious in its lending and portfolio management strategies due to the combination of rapid interest rate increases and tightening credit conditions [24] Management's Comments on Operating Environment and Future Outlook - Management expects credit losses to struggle in the future due to credit tightening and rising interest rates, but currently, there are no significant issues [4] - The company anticipates a slight decline in margin for Q4 but expects stabilization and potential improvement in 2024 [50][62] Other Important Information - The company is actively cutting expenses in certain segments, particularly in mortgage [55] - The company has increased its reserve by $40 million this year, driven by asset quality and economic forecasts [70] Q&A Session Summary Question: Credit quality and charge-offs - Management noted that excluding Mountain Express Credit, charge-offs were down from 20 basis points last quarter to 17 basis points this quarter, with home equity performing well [41][43] Question: Margin expectations and headwinds - Management expects the margin to decline slightly in Q4 but not as much as in Q3, with existing customers moving to promotional rates [46][50] Question: Loan growth outlook - The company anticipates mid-single-digit loan growth but expects it to be slightly less than the pace in Q3 due to higher interest rates [57][80] Question: Navitas charge-off expectations - Management indicated that the trucking segment is a small portion of the overall portfolio, and consistent performance is expected from the remainder of the book [90] Question: Reserve levels and future projections - Management expects the reserve to grow based on economic forecasts and asset quality, with a potential increase in criticized numbers [70][72]