UCBI - Earnings call transcript Q2 2018 | United Community Banks, Inc.

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Operator

Good morning, and welcome to United Community Banks Second Quarter 2018 Earnings Call. Hosting our call today are; President and Chief Executive Officer, Lynn Harton; Chief Financial Officer, Jefferson Harralson; and Chief Credit Officer, Rob Edwards. United’s presentation today includes references to operating earnings, pre-tax, pre-credit earnings and other non-GAAP financial information.

For these non-GAAP financial measures, United has provided a reconciliation to the corresponding GAAP financial measure in the Financial Highlights section of the earnings release as well as at the end of the investor presentation. Both are included on the website at UCBI.com. will quarter’s on and SEC, the Form replay this second filed presentation and company’s the the of night in last X-K call website of at earnings section investor release were a Investor UCBI.com. Copies Relations available of be with the may be Please statements that representatives by this during made aware of forward-looking call, be United. other considered of information and uncertainties as Page X the Any in XXXX with risks well by its forward-looking website. described the included provided of as statements the company SEC in light should on XX-K company’s be Form filings on its and And turn now the I’ll Harton. Lynn to at time, call this over

Lynn Harton

second thank again, reached a quarter. I you and joining for new am, record. morning, very our our once with call. the Loan Good pleased production all for results

interest margin and maintained remains our we quality asset improved, expense our Our discipline sound. net

in execute to continue teams very Our competitive well environment. a

quarter, X% XX% Our year-ago for $X.XX of the earnings up and increase quarter or share per over last an $X.XX quarter. reached the from

We’re assets. to of return announced points our XXX basis progress XXXX on make also toward continue goal proud reaching to

This quarter’s XXX results significant our goal. points, progress demonstrating toward reached basis

to the per This of a last Given and our with them. payable declared during able of support and a positive XX% share quarterly be and pleased quarter is to year. XX. share, $X.XX appreciate cash our last the our board June We a XX% dividend over our quarter, increasing outlook, profitability strong increase very over returns increase shareholders

his I’d with was Loan of continuing performance. from quarter our $XX for partnership. more to we Navitas on Gary above for I’d details of like to quarter included to now turn performance. for having the in million the invest and in business. growth over it this strong and you at Jefferson, in to numbers, As Navitas additional growth continue expectations like pleased our our the first our recognize I’m very success full is team

Jefferson Harralson

Lynn. you, Thank

and enjoy units pleased over by and Oaks momentum continue and that to our are business Horry past the the We Four have us with County, we partners Bank the of encouraged and Navitas. across strategic growth year, the several joined

to proud profitability on year. out of beginning laid that the at key reaching goals the we our of also We’re verge be the

yield you follow rates with growth XX quarter premium. Page margin from our X interest the X% I’m linked-quarter ago. to just in If accretable see the Further starting XX quarter had Page interest in of from me, $XXX.X would in up continued on versus on deck. we quarter, is basis to spread accretable about interest increases margin points at the the year decrease million X, contributed were marked net first Even net mainly X a like margin, a boost points more, basis along On short-term linked was second are the primary due prepayments quarter. that our in on up quarter the points increase. second basis we interest a of the investor X second yield you’ll the driver net The rising points in in higher The from loans and got in the last Navitas generated margin. quarter. basis to income The

margin company stability a the our Moving to driver to deposit a strength Slide and expansion. X, of core base our remains key our of

increase. the basis This points. XX of XX quarter second You from representing is X basis basis that point was our deposits linked-quarter can last up quarter, in see points cost

growth. fully to deposit base funded grow, increasing the primarily by during transaction continues our deposit increases. $XX quarter, loan this And million core driven DDA growth Our by

quarter, our versus by but sub-debt X primarily full full the impact the to to and cost funds last Finally, of quarter, of of deposit first cost. Navitas due increased our due basis impact overall points raise rising partly in

Turning our very the record X% to quarter runoff. is fact, it indirect last in was up was quarter. the million $XXX Even annualized same XX% portfolio loan a This strong excluding on year. at in figure the Page production period loans strategic was in and X, core more, growth our of our loan over

down quarter Moving to X, revenue Durbin amendment. year from in the fee quarter. forward to Page is Fees due $XX.X $XXX,XXX with last loss the income up interchange second million, which was by last were from

$XX for highest in level Moving result and further our business quarter our a into income, commitments commitments June had it’s fee SBA our million second record of history.

the quarter from year due a from $XXX,XXX actually loans of This first This quarter’s year-over-year and ago year to quarter. a as commitment than mainly SBA higher XXX% said, from revenue and have was construction first SBA toward The result ago an for seasonality. of to to the mix being fewer backlog a completed. year. was $XX That rest loan decrease million higher of until was fee that sold. is being the $XXX,XXX result XX% down change tailwind cannot attributable our sold these recent construction will we loans, believe our the guarantee backlog gains projects are SBA SBA in the created loans, now a be We and provide which up

a originations, locks million mortgage is Our had In through versus in mortgage the share. our first balance last versus strong the linked-quarter last we non-interest in in other quarter we last QX market quarter. mentioned to but of and fee securities the grow year-over-year right-down offset that item. there quarter, $XXX,XXX to million These income QX more Lynn part record losses losses prepayment a of totaling came had closed. $XXX,XXX revenue continues asset and $XXX fees a to quarter, a record business in also mortgage in also was larger that slight loans right-up securities by had in the on in This applications are well. $XXX,XXX second volumes due that mortgage XX% Despite servicing take at essentially as prepayment compared the we is primarily management year. comment are of quarter a increase One second QX decrease The line sheet continues of a number the with advances losses. the strategy mortgage included $XXX we business closed and that in the gains FHLB perform gain. $XXX loans in million

Moving that results Net XX quarter basis which the With improvement back Slide this $X.X Lynn, closed non-operating in to to X.XX%; increase forward deferred in impact corporate the to end due right-down About QX. X a including XX, were effect compared points again point basis required in it basis from expense versus points tax turn last On X rate will quarter. points of quarter up State to take February in not last million acquisition basis like a a QX. this is X in operating item mentioning our basis with other XXXX, and full is that $XXX,XXX charges, report the of Slide of XX, Navitas there that this over. came we expenses, outstanding XX quarter. points, last the from able a be half to NPAs was but of Georgia asset. of decrease At X. on is charge-offs tax to State the credit One at bears are quarter. X% pleased Georgia line were right-down that, merger-related I’d quarter,

Lynn Harton

performance the credit in we and measures multiple operating increase This which a able across were in report solid and was to quarter company Jefferson. efficiency, in a quality, our dividend. Thanks, margin significant strong including

in top our Our honors consecutive evidenced as teams the J.D. award deliver Satisfaction Southeast. Banking by best-in-class to year fifth for also continue receiving customer Power Retail service the

doing are the year well. South. build performers and to of markets I’m and ability of new investments the the our our optimistic remainder to in about very one into Our franchise top our continue the

be answer any we’ll to Now, glad questions.

Operator

comes [Operator first from Demba Instructions] from SunTrust. Our Jennifer

Your line open. is

Jennifer Demba

the And How you? still closed Navitas Hi. you kind is you’re transaction? to-date? them you performing from about of did curious production when how are if the loan expecting Just

Lynn Harton

Jennifer, accelerate opportunities couple well Yes, pick projections. than actually teams up will this to we better of is think we’ve a that Lynn. growth the that they’re as some. had And doing

this probably pickup. was So the quarter future. investing the because higher it’s in little of a expense the side But

exceeding acquired when So yes, of our they’re that on put and we slightly together projections right them. top we

Jennifer Demba

just M&A deals in point? most have last three been not obviously the two months received some not Street. or this could well at seen Okay. and you the We’ve by in And interest your all, of clarify them, if

that So sways or I to you to know are much what way right investors’ following want on And now. just what thinking one is your you How announcement? immediately other? the deals guys reaction stance

Lynn Harton

Sure, Jenny.

that I’ll a with, got pretty we’ve had changes So we’ve disciplined start in. strategy no

But we those or Primary the So in we four markets. we want be we focus want also have Alabama, interested are where states. given current in I institutions smaller in primary Rob Florida our enter right where or experience to have our and opportunities overlap. is markets we – significant in would markets

You’ve metrics that – ones have so say seen would fit to safe model seen we’re purchased would on right haven’t anything fully be gone deals we opportunities, or I accretion. you come pretty because description. deals the know put and they’re that that And several good Jefferson, business several priced, don’t on do several before, EPS financial them got same the primarily assume companies or… in it’d we’ve conversations reactions to cases, really sticking that to in But larger think, think earnbacks The kind on have I three – kind doing. We I’m looked we larger along. that been up to-date, we’ve either add at one we’ve opposed would with to going The of pricing. but deals we’ve some years, if not lately of culture. philosophically

Jefferson Harralson

that’s said. think well I

I to – think deals we of the strategy banks, is buy strategy really of it reactions, have. reduces smaller primary but risk and Seeing Our unchanged. transaction some the the stock and price other – is is our that

Jennifer Demba

much. so Thanks

Operator

from KBW. Next from question Catherine comes Mealor

open. Your line is

Catherine Mealor

Good morning. Thanks.

Lynn Harton

Good morning.

Catherine Mealor

strong, growth relatively linked mentioned auto by you outside of record saw both quarter. really the a offset but the indirect your Navitas was sure given that we I’m volume and as quarter, was pay-downs – So origination was flat the

And kind see think of this into in growth the we growth just year activity the paydown the does fourth activity? you paydown quarters? of you the third the that and outlook outlook we’ll Or your changed the talk saw that then about year? quarter can net in better Thanks. rest rest for for the of So your do dig that

Lynn Harton

do we’ll see Catherine. third quarters. the fourth and Rob. I’ll then start to in growth and Sure, think I’ll turn better I

This amount estate We’ve quarter an fair commercial for that coming book. out the of paydowns, some did time. have been that of book real elevated of on cautious amount

energy renewable of kind got feel think our we and coming well. And will couple that of sell actually living offset a we to group But area and do those harvesting large our in focusing started like well quarter. new – number growth that this on group of as so we’ve deals great a and – senior non-profits

of, over that’s unusual. But million, the to up some to go really go Oaks The is differences mean, the always great third acquisition. Four we have away, And other anything quarter that of, the et side, targets into taper also. been large which cetera. Rob, team. in in deposits actually our going been as is we kind team on in $XXX as it’s of fourth has piece Raleigh merger, and credits you culture, go – degree, I’m in market. or a other there’s by that into kind grown repositioning offset, have should And do some add? our that and that’s repositioning I on loan thrilled, of off while in new

Rob Edwards

No.

So we’ve we’re said there. I and historically on we multifamily line selective – to that continue that hold being would

been multifamily we the certainly TDRs X.X continue for essentially in past, and to down on and categories primarily we’ve well. – And strategically reduce about unchanged to the as commitments continue Our that have come years. talked land land those our last

paydowns anticipating. on should So stuff side. paydowns the some bit we it of the the – But little that kind repositioning of of then be is a also

Catherine Mealor

Okay.

we – so, then see your year the big then? outlook we if is would – half rest the see mean and year? the would growth So kind pretty of back a would of that – if Because the of some for improvement then in unchanged

Rob Edwards

Yes, we there will be… do think

Catherine Mealor

repositioning still little growth even the to like feel the through of is maybe softer? you do the year and going go still rest so, a net is bit Or

Rob Edwards

to of pickup is would kind so significantly. wildcard that and the the think, we growth – which repositioning, continue a third The side. fourth I always we’re taper rate, Yes, on in is payoff the that off quarter. would But think mean mid-single-digit

Catherine Mealor

mentioned that, of back timing year. helpful. loan sales, Jefferson, Okay. tailwind the going to on Thank the of And a that’s then Great, for the that’s you. you SBA the half create

pushed likely XXXX Or – million saying do back work. in of about – so the the some how next those of may be construction you will of be year? $XX this half a think backlog, think those to trying timing that into you’re that So event? can Just that loans

Jefferson Harralson

for question. thanks right, the All

I believe sold $XX So that million $XX currently of would that second in half. million about the be

Now, to multiply that the first the if that XX% million, well. you selling about are piece you we think got $XX as times

So of adjust million not most that those I back of sold loans, but make sure $XX XX% XXX%. $XX think in likely the million the we’re to gets selling half,

Catherine Mealor

Got it, okay. All right, helpful. thank That’s you.

Operator

Sandler Brad from Our next from O’Neill. question comes Milsaps

open. Your line is

Peter Ruiz

actually everyone. morning, good Hey, Brad. This is Ruiz on for Peter

Lynn Harton

Peter. Good morning,

Jefferson Harralson

Peter. Hey,

Peter Ruiz

the up first just following here. guess, on – fees on I

dynamics this were industry you guys area you you of the like new going of for applications, quarter forward? Just here? of lot expectations Or originators adding expanding Just still bit, an a given are quarter. saying, a little were Can a and at all about the locks maybe record it here? talk the kind is expansion and headwinds, mortgage maybe you

Jefferson Harralson

talk Yes, Lynn as well. I’ll wants I’ll start see and if to

up significantly over originators are year. So last

over probably of area is major last we’re a XX%. for business up So us. Originators year

balance We perm. are of originations include expanded to product our a have set to product. sheet XX% construction our

adding been markets. our MSA originators have We major in

originators, been banks, adding originators. been products, we’ve covering markets. we as So buy new in been the we’ve adding footprint our adding originators adding We’ve

coming expected as fruition time. significant share the that is we So that to And of relatively combination is had over to all takeaway planned. have we market

Peter Ruiz

maybe this there, SBA sort great. was later to a there? accruing sort of the here, kind the expenses to some timing expenses year? prior of of, Okay, And possibly the sales on here related impact recognized, there of originations Is maybe, being

Jefferson Harralson

We question. talk great can here. expenses a It’s

to lot deferred I had lot are those do a origination over A of don’t time. So that. SBA with expenses think

costs some there be life lot of yes, those, So expensed loans. to be direct would but increase a the of expenses over again, the that of with SBA, going are of

quarter-to-quarter. major wasn’t growth the that So piece expense the of

mentioned, before, the about Navitas I BNN. was of As just half expense growth

The it the increases little quarter. match the bit that in of salary increases we growth, We too. of also, came – And some had merit other tax lot increases we after second given come piece a from increased after had a – reform. XXX(k) some our

not were. the was a of So driver that, the SBA but items primary other

Peter Ruiz

kind term, this I maybe then so Okay, be solid then? a run second near rate quarter here guess, could of

Jefferson Harralson

see think QX. bit an I you’ll of a in increase

and I our think you’ll see efficiency ratio improve QX QX. in

investing are core in growth. We several businesses and

point flat I’d growth I QX think and relatively an towards annualized then rate QX. mid-single-digit you in

Peter Ruiz

Great, thanks for now. I’ll step much. so back

Jefferson Harralson

catch I question quite there. your didn’t

Operator

Our Raymond next question from Rose Michael from James. comes

open. Your line is

Michael Rose

are Hey, good you? guys. How morning,

Jefferson Harralson

morning. Good

Lynn Harton

Good morning.

Michael Rose

business to are of your kind Where are some greatest like geography areas by to mentioned had efforts. some lines? you’d seeing, looking rather, And step up You you guys What or in? hire additional continually by Thanks. to, are you of hiring the whether areas what that opportunities? the

Lynn Harton

mentioned, that, on partnership Sure. in well. so that added sure Navitas, focused We making have – we we’re as very goes I

so that’s quarter. focus past the been this And primary

have add We on quarter. line of business small focused new nonprofits, this an added which a was

just Beyond regular our that, markets. it’s

So focus. Atlanta. we have add more to don’t love We’d any in particular

We continue particular this et Raleigh, in time. at but so to areas look cetera no – additional

Michael Rose

June how And have the from Okay. restructuring. as about the next Maybe impact hike, from margin? securities one follow-up, portfolio impacts done think should How here? that does rate about think guys quarter’s sensitivity some you we we the

Lynn Harton

Sure.

kept that right Duration So our around the portfolio X.X-year range. of – relatively duration we’ve our securities short. stays

I are we basically in we our – asset wouldn��t asset-sensitive kept it sensitivity are do restructuring. have is. believe still where We that the

at we to tailwind from believe a funding. the a on same to going sheet a do getting to hike more you the the we competitive ratio. But grow indirect. We have in. continues remix from come see expectations away are remix time, some from have to – deposit and XX% loan do a some margin more the And rate benefit do increase. towards from with I have have grow beta funding. should balance margin we want loan-to-deposit our So loan-heavy do It’s standpoint, Navitas’ tailwind the that do in We to

were the slightly QX, thinking flat the in down. I rate if would higher. no for hike there you believe a hike slightly margin I you with If And be – would that a then rate to margin be think be was to QX, to assumption, going with think there’s the in in chance

Michael Rose

guys. for That’s taking Thanks questions, my a color. great

Operator

comes from Stafford question Tyler next Stephens. Our from

Your open. line is

Tyler Stafford

Hey, good morning, guys.

Jefferson Harralson

Good morning.

Lynn Harton

Good morning.

Tyler Stafford

and about just talk the of last to the can comment in of It expect second growth to there an up were is pretty you’d the Jefferson, start you Maybe brokered to the opportunity stronger? if deposit those quarter. growth just see reduce year? over made, advances end like deposit the on near-term the that you half FHLB substantially looks the at the Is

Jefferson Harralson

look point we grow. if you shrink growth, public deposits fund and so slides there, and have Yes, the Appendix you of our one – the our the in to at I’ll deposit core

look So until quarter. fourth we then for the public continue a to get year, deposits to shrink the to stronger throughout we quarter you’ll our seasonal have and

in and QX kind down our up of And seasonality, at about down down X.X%. our public quarter. X%, are QX, by if usually So it’s the X.X% look you second funds seasonally

than So our what public funds more are seasonality you. would down little tell

quarter the $XX brokered are found We those core we and little CD are combination change to two. of will a the out and FHLB. had the down be be growth. FHLB growth. time, were like we’re add versus brokered you down. of you two curve given and have to going happy given we of over in Right And mix little further more attractive. we and an a million bit on might CDs CD or if will we a year, Later do – between piece FHLB our attractive deposit it, deposit very From and growth and those we think found more have pricing now up see a we brokered that the with brokered core nice with But FHLB brokered in deposit quarter the together a in

first have and like cases. – money do board and our banks, rates some the that are in in growth. even were funding. most quarter, to We And core core very expect we and we – And very in of happy in we were second we CDs grow funding are markets second to in continue our want happy quarter we the We rates the raised half.

Tyler Stafford

very Thanks. yields you Do for this what Navitas helpful. Okay, have quarter? the – average loan

Jefferson Harralson

you on that. lot Let let that. you me get to There’s in on get back adjustments of there. to accounting But back a me

Tyler Stafford

That’s fine.

Jefferson Harralson

We think XX%, is coming out around have the but premium rate a their you also ongoing acquired of mark loans.

So to get and answer want the I you. back official you get with I’ll

Tyler Stafford

maybe then And fine. just Catherine. to the question up follow prior from that’s Yes, on SBA

the the mentioned higher Jefferson, would the would half of so you that of the portion alone. in first So plus $XX production, year I million the the $XX think first of sales you sold half year? selling the actually in of second also the You sell year be the half But expect XX% half than to the of million. rather back

Jefferson Harralson

half. I the happens sales correct. second expect That’s with seasonality That’s anyway. what usually would in higher

help number, the expect and backlog good and is have origination We to And have in we going we that well. volume strong – quarters QX. as origination QX

Tyler Stafford

there? lastly from then think just that. – for update me, And I so outlook clarify the updated just you provision earnings just removed release, may any wanted have thoughts the guys Okay, to

Rob Edwards

go provision We expect in half I is the year. the the of would would This expect second Rob. – to up

Navitas short So loans mark have is that credit a fairly lifespan. a the there on

to climb losses maybe so for QX. in would runs to in as later were provisioning year, QX those really begin in not you out so that and lot a the And that provision for begin QX, flat then in

Tyler Stafford

then you build reserve expect would GAAP So also to slightly? the

Rob Edwards

from maybe occurs. dollar perspective a so growth – Maybe as necessarily. Not

Tyler Stafford

Thank got Okay, it. right, all you.

Operator

Our next Marinac Partners. question from FIG comes Christopher from

open. is Your line

Christopher Marinac

Is build sheer I’m it here talent Wanted morning. have it size Atlanta, in do acquisitions the Good a success. production continue to you that curious ongoing partly quarters? on without success about also to Thanks. expand we to have continue information just you see that in to to big that the in having from due Atlanta, of many talking Or you of the disclosed. is to you’ve due been Atlanta? lot

Lynn Harton

great know, presence a really significant We’ve you $X.X more than in XX it’s is a market. there, billion Atlanta deposits. So both. offices, got as

got We with office on opportunities have the doing looking – been well. today. be disruption Midtown we’re in there at, is think up going adding We’ve to we will that’s new very and that some And group. that the market our

potentially able market And add so there, some additional we’re to like it’s real talent and focus us. excited about being for

Christopher Marinac

Got a of, it. you color where Jefferson, And of out? the may loan-to-deposit guess, I think sort any, just quarters go ratio is couple there additional on,

Jefferson Harralson

great a That’s question.

Our grow a grow number been plan to loans over take a as over time. Haven’t ratio think in this and that target can the do we term, XX% and for time. well deposits at we loan-to-deposit towards near is pace given higher to increase

think do want I over I target year till be it but right up move But you I from we have here now. don’t XX% So this end, for time. towards think to do a will

Christopher Marinac

have the fair ROA as at that it’s a And to engage you operating will that do that, and you. level. leverage Got say higher

Jefferson Harralson

Yes.

Christopher Marinac

time. Great. your Appreciate Thank guys. you,

Jefferson Harralson

Thanks Chris.

Operator

Research. Bush comes from next Our question from NAB Nancy

Your line is open.

Nancy Bush

gentlemen. Good morning,

Jefferson Harralson

morning. Good

Nancy Bush

what Jefferson, – saw expectations talk and the if deposit sorry, first beta I are? missed but did your in in you you quarter what about it, I versus quarter

Jefferson Harralson

Yes.

quarter Our deposit That this quarter. do was increase beta the second first quarter. XX%. to the beta I in deposit was than higher expect third

beta long-term around is historical XX%. deposit Our

that over the beta third frame. XXXX only deposit since is XX has deposit of basis quarter up very time low, been Our points costs

grow think most a we’re going We we to our It versus expensive funding. So spot to – better relatively is be banks. grow do in to want our but funding.

funded million of The is $XX that growth have first the indirect we loan by runoff.

the to that margin. other the a of as rate do for had competition talked such think be But deposit dollar So I banks beta higher that a I the down cost. the have flat about increase fund we get rate And with growth. – quite QX, if expect we don’t deposit said, is marginal to slightly in in will even with margin of needs us. loan don’t rising margin hike If each the

Nancy Bush

several you as your And that and the to are felt in calls far, very be yes. I’m just mean, CDs. have to add-on thinking, to to, and reports specials, an competitive earnings that I know, – to of I’ve the they’ve And you Okay, just specials markets that do to some tend need running given that, listened those thus guys the have funding going But of position? yet in markets? your any you referenced

Jefferson Harralson

at watching been with have have been our competitors the pricing midpoint competitors. specials we our are. We our where of And

we our real been have pricing. checking not account out in at the some – and aggressive commercial we products, have gone of a checking curve new account. But looked So commercial

at aggressive We certain in where markets have some various more introduced we time. have pricing introduced markets pricing in

can to as to in we do trying thoughtful to possible. way the and money a everything need raise – raise We’re we as

markets. just So a our to not we’re blanket big throw there and out rate going

use have are we be bit We each little thoughtful precision and try to to raise to quarter. funds need try raise of to going – the to the

So but to it’s I think is it answer working. the yes that,

Nancy Bush

All right, thanks very much.

Operator

the call now further like I no to time. would to Harton questions remarks. for showing I’m closing turn over Lynn this at

Lynn Harton

for great company what hope And you continue on And thank team for to I’d you you the day. congratulate of customers. to being call, Thank also a every on in I for and for your and rest you. for that all, have you this all you accomplish interest the day thank Community call like Bank on United Well, listening the is United. and your your

Operator

in the today’s concludes and gentlemen, for program. This Ladies you participating thank conference.

disconnect, have day. a and may wonderful You

United Community Banks (UCB) 25 Jul 182018 Q2 Earnings call transcript