- Earnings call transcript Q3 2022

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Operator

Good morning, and welcome to United Community Banks Third Quarter 2022 Earnings Call. Hosting the call today are Chairman and Chief Executive Officer, Lynn Harton; Chief Financial Officer, Jefferson Harralson; President and Chief Banking Officer, Rich Bradshaw; and Chief Risk Officer, Rob Edwards. United's presentation today includes references to operating earnings, pretax, 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. filings included on Any and forward-looking its SEC statements with the [Technical Difficulty] website. turn the call to time, this I will At Lynn over Harton.

Lynn Harton

today. you thank morning, call joining Good for our and

concerns pace are overshoot, a the Fed and momentum and have of key the I potential While in had a the about areas demonstrated our our tightening of very quarter we impact performing that business. of several strong economies southeastern well

of upper Difficulty] at basis First, loan growth of by end point XX% margin. [Technical and our revenue expansion annualized net interest a the driven target grew our range at our XX in rate an

and rate deposits the the see environment. did expect pace we we to continue will of deposit of advantage strength us give deposit in While an this accelerate, to our outflows, increases core

XX%, deposit at growth remains low at ample us loan to to Our reasonable liquidity ratio cost. providing fund

on return to X.XX%. assets improved operating Our

tangible to increased Our XX.X%. on return common

return ratio for in to both pre-provision reached pretax, and our increases nominal very assets offs all-time only XX%. perform us low Credit non-performing assets special with efficiency Our and well reached X.XX% at on credits. mention low an continues net and charge

stress. consumer of business signs significant seeing or not are We

shortages customers. Employment many be financial to to the for to enabling of strong continue inflationary activity in While them both impacting normal date. with common our our and markets be well groups pressures are shape, continues to business labor in perform pandemic both continuing consumers stronger than businesses, exited to

sales the higher business forecast Moody's mortgage market, giving We are slower weakened the would million of rates. finance their to commercial activity loan anticipation turnover growth by quarter closed loss $XXX we by hold of slow, finance well as in as and grew We economic home mortgage on at sale. of by more Loan home range loans residential than this with higher were led $XXX reserve our slowdowns be equipment million, million, future. our sales as and at was both increasing expected residential adjustable builder which rate, mortgage improvement $XX increased unemployment end our sheet in our in higher of as as reduced balance seeing due target rather our which

and great growth plan was outstanding Our impacted unexpected progress in we're believe runoff not implementing negatively commercial a in making This market. we by growth was Tennessee. that in

forward addition great We bankers share working of more with details our Progress continue to and outstanding with to has momentum one anticipate And we the Jefferson team early as them Bank. on becoming We've will look in XXX. strong closely our Progress acquisition be quarter. franchise. toward closing now, been a will

Jefferson Harralson

comments good Lynn, you, Thank on to my into and go details I'm some going page start on eight to deposits. everyone. and morning

move rates X% rate growth That acquisitions. year deposit half deposits excluding our was serve our the which baking we deposits, creating by public industry, deposit by as are shrunk funds customers year, that said, outside X.X% million a in deposits, also where attractive $XXX options are grew have for over of a weak our demand typically franchise, up quarter. which core environment headwinds in Still, our which $XXX and it and lot million think deposits higher us industries. are seasonally in transaction the is of were XX% or quarter. higher. proud the this will in are decrease third we or well quarter, total said, the of about million That We deposits $XX of

up XX. ten, XX we combination basis and On flexibility. I'll quarter we about our we up of of again, sheet page flexibility On his last was growth. very on nine, giving diversified loan and deposit page a expansion future helped took mentioned highlight are page. our about lot I we cost points deposit deposits from believe to loan good our balance strength move opening, pace. quarter annualized it comes Lynn a quarter, in and to portfolio. to growth loan a drivers margin this will that the position the loan when ratio later shrinkage a on page loan growth Our drive in talk at us grew loans X% talk that The in to to the XX% XX% of of We so fund

the to improved due smaller quarter on bond despite a profitability good More Our TCE on to sheet. X.X%, losses, capital XX. balance unrealized higher in ratio page and

improved above Our ratios and are peers.

quarter. by share quarter, bond in headwind the Our higher decreased $X.XX the losses tangible of book per in as drove $X.XX the unrealized

page our interest net discuss Moving we to margin. XX,

in last balance the seven XX about sheet I income. basis down of expansion was the we came quarter, of positive basis of to form and ratio XX, of we It impact earlier. had mentioned, mentioned lower points the from higher change higher Lynn mix As margin quarter. fee loan came deposit the rates XX which talk points in from and cash the Page from on the

volumes the line fourth in will in that of repeat rates Our a that to also the and most likely XX% decrease $XXX,XXX $X.X the declining had quarter. BOLI other MSR unlikely rising The a driver had rate repeat lock gain QX, and a response. not mortgage line was gain, in income million business mortgage is with

the fee some income Moving on categories. other to of

loans $X.X in gains sale Navitas had the just quarter. SBA million under loan in and gains on $XXX,XXX also We in

and commissions was the due final expenses expenses. savings acquisition. lion Operating cost improved Reliant from by to improvement page XX the share in lower million we Moving The $X.X of got mortgage and to the the were quarter.

came ratio improvement, efficiency in With and our just the XX%. the rates under higher help of expense

on built three quarter We loan continued remarks, reserve in into waterfall net our reserve of consecutive Part at jobs But year losses, pass and Moving the credit offs is we provided points I'll $X.X for was credit basis anticipated chart net it to Lynn have mentioned unemployment which with XX, back page growth. XX. With his reduced that on due for [Technical allowance On and loans. million to main reserve million, in end. Lynn. problem credit residential our that, levels had were $XX.X of X increase charge show the low to quarters. and in solid of we charge results strong the Difficulty] while higher future investment drivers our page

Jefferson Harralson

thanks team. United Jefferson. And many to you, the Thank

large to financial the institutions open He the improve increase to depth with an I'd George customer I an to to you of. a welcome products the for early technology information be met It’s welcome and experienced technology that an George the continued performance 'XXs. BV&T have our knowledge outstanding as XX executive United. now customer experience management. George, on than and leveraging specific we with team. of like very and you and the line organizational to I'd more all questions. to program information You brings like deliver of on years Board to in careers services, honor proud should And Directors. productivity. emphasis training incredible in both He's finally, began in to Bell our enhance

question-and-answer Kevin first with the [Operator will now go Davidson. ahead. up D.A. Fitzsimmons session. Please begin Instructions] is We And

Kevin Fitzsimmons

Hey, good morning, everyone.

margin impressive expansion. very Just

loan can Jefferson, of Fed. So cost you each the little with deeper be yield, handy the wondering month just a of dig for terms margin, that deposits might the -- to at guide if on hikes help trajectory the quarter September, if for have get the little us anticipated to just next trying those? Thanks. further what of of a from the -- out you in looking two or

Jefferson Harralson

start Yes. for the with Kevin. quarter, about the quarter. Thanks, of I margin appreciate was that, and X% I'm deposits want question. deposit I it the beta it. is cost the next last Thanks there How only thinking to

we've I for then to expect on quarter. the -- rate XX% it's the too. deposits us with hikes at think think raise that already you're I changes from that expected, are fourth made, And I that rate

using cost my beta of I'm So deposit or in were XX% deposits model. -- XX% cost deposits a and of

should I'm loan us. relatively are points next our betas as little but enhancement margin go continue rise. asset beta I to with that quarter. And about a expecting also think stay less sensitive we margin, together, entire our you expect -- stable forward, basis all expect I deposit seeing, with rates mix to some the On that I increased bring it as help of XX think to change

Kevin Fitzsimmons

one follow-up. Thank quick And Okay. you. just

Thanks. comments what [indiscernible] the uncertainty and should we quarters on you the reserve, building three given that of consecutive been there, headwinds on based out see the can the now? expect it's So that

Rob Edwards

Yes.

is There Rob. its into things play Kevin, three thanks that So really that.

role of certainly course economic This change the asset will in the play the but loan and growth was a future. in quality quarter, it forecast, also

So I think and seem are we've that economic Moody's the course, The as it likely forever play think anything is and that basis return would losses points -- been forecast and, else. in to as of to role would going normalized be the easily they much will loan predictable. don't forward levels more a I less X allowance provisioning going

Kevin Fitzsimmons

Thanks much. Okay. very

Operator

from come Milsaps Sandler. will with go Please question next Brad ahead. Our Piper

Brad Milsaps

Hey, good guys. morning,

Lynn Harton

Brad. morning, Good

Brad Milsaps

it move balance bond maybe talk mix and Hey, change out forward fourth than go higher you Can Jefferson, some about up what bond in it how bit XX% since you that about like portfolio almost cost maybe you book to the the continue deposits. aspect seem of sort on yield rate would move variable, the of the the of is quarter you and would going more rate beyond. to talked maybe it little would a

book wanted kind the thinking keeping kind maybe guidance? margin into your to and of shrinking balance versus your how on and Just sheet the hear of same that plays bond

Jefferson Harralson

per fourth most off little and Yes, great. the to shrinking our it year. you'll that to peak XXXX. its I'm the likely to see believe flow Thanks the fund I of next year. quarter is about, spits loan term into higher million for a use in the and a expecting call $XX It growth the hit near million on decreasing help bit portfolio cash for into quarter little securities in $XX next and And it, question. depending quarter,

modeling if model think portfolio, I smaller it you're I time securities as passes. So would the

tough -- environment. side, deposit funding expect the a is the On it I

it funds, are a but short lot I bond out money funds, deposits market bit, from of again is thing. there think quarter you next kind institutional money be down of term term as market, there seeing short a competition could stabilize that

So the funds is lot plan runoff term as the in fund of down, see should well. fourth medium a deposits with not change if be to much as seasonally But year. either short my a out help securities QX. kind to they for of which in QX, quarter, growth and were if were margin public but It's I portfolio down next increase surprised quarter loan wouldn't as a stronger and way, help that mix lot to our the that helps

Brad Milsaps

quick And one maybe follow-up that. just to

piece As fixed that variable expect you static use come out of most or of terms does to bond the flows, -- do of kind dollars stay you cash in in of of those its the piece book? the

Jefferson Harralson

-- mix would the I same. stay stay that think relatively will it

Brad Milsaps

Okay, okay. my second Jefferson. And then question,

I merit You great from did to some addition benefited quarter. managing mortgage new savings in in And deals, you from you earlier. done guys put mid-year know commissions have expenses, a cost what job this increases lower

pressure obviously, curious to ability your around Just inflationary just to how you're a your going kind next year, to about lot there, wanted of costs. control get of expenses into thoughts continue out thinking but

Lynn Harton

on there. start to in see and jump that I'll anybody else wants if

in QX midyear under this to So a employees rate we QX -- number. increase is That $XX,XXX. number do did run

So carryover you'll increase of the a done see maybe fourth was QX. in early because quarter that, that little kind for

budget tough that We're some we're all operating increase. year. going some pressure. budgeting budgets. is It to a our of So there'll total, be year be midyear with In our increase leverage next into doing from for inflationary

and invoices it's -- vendors others to it's battle. hand combat to with in as raise or come So pricing, want a hand

to have from savings expenses I Progress, bit the think of so cost We in $X XXXX. help a is little that on going million quarter there to higher. move a do that's pressure And

that's So helpful.

digit currently. budget mid-single we're think growth I a XXX, in in again, on we're but of that with the expense kind -- starting process I'm -- thought

Rich Bradshaw

Rich. is mortgage, to change headcount down we we've so to that our with the With me. accordingly. volumes, Excuse taken in rationalize continue This regards

Brad Milsaps

Appreciate queue. Thank Great. you. hop in back I'll the color.

Operator

next Raymond come from Please will Michael James. Our go ahead. question Rose with

Michael Rose

kind like have wanted you on morning. guys It SBA my I Can Navitas good for been Hey, then is forward? the to Thanks spreads we are know yields SBA just more into taking as the look outlook consistent questions. outlined, And businesses. of kind I to pressure. very but side, just are kind under looks here. those. you've and give obviously, maybe dig you portfolioing of on as Navitas looks beginning credit of us of like an normalize

you on a of versus If what you and kind underwriting in move that you've an the Thanks. losses [indiscernible] loss the maybe cycle cycle -- cumulative help of changed the how can on you through maybe would to just there for update kind give forward? other expect some maybe of business as last

Lynn Harton

Okay.

in I want think to Rich? three there's you there. And start questions do two, maybe that,

Rich Bradshaw

Yes. start on I'll the SBA side.

okay. it’s That's all good. -- So

down a side, SBA are bit. the On premiums little

we quarter. just And us, have expecting So out so left just that we we be are have of on quick this PPP fee XX,XXX up -- a we're quarter fourth XX stronger quarter [indiscernible] that administering. income then loans, to is traditionally for a

happy about that. pretty we're So

Jefferson Harralson

I of have the back of loans kept the SBA side, and over in last we quarters those some years, on strategically some would say portfolio. held couple

I what originate. we depending think our strategy to the is on most changing likely out to what there going we're pricing sell, is

fourth with and mentioning have attractive, the more be fourth sell quarter. loan gain a seasonally with expect being been in would $X.X over not don't with a we not holding back, loans be quarter not them little quarter loans. I there strategy call higher higher or the fixed remember I selling moving of strong million quarter. that rates on new in to sale may I see is last the could Navitas quarter maybe SBA consistently I we rate line on So Yes, quarter if that about being quarter's every could business. that here loans we and the each gain sale was that where sell a a there

again, small don't say like a likely would here be sales. where expectation SBA is, in sell quarter So is loans most there loan higher we I these loan and what But pricing. normal another sale if Navitas the more don't we could

Lynn Harton

And hold sell There's be. when we -- would dollar an it's sale based on SBA. what over of the same on and of the kind amount under thing

let Now me normalized over Navitas credit part loss Rob. question, it of pass that to

Rob Edwards

So points this in we basis losses. year had the first quarter of X

our points as back go They quarter. I have think Prior increased we've been if losses to going to were saying high. XX basis -- they increase. are we this in time,

at XX basis I points. think were in XXXX, we

direction have, I think sort basis will I'm normalize. the it's the see was through we're with that some it to So XXXX. do we today We've upscale with that that of is, a in not like of We I points. customers sure going of approval than think book would sort you XX we get pointed back dealing feel we're the better I process. agree in to

I do that So we'll points, I increase. but basis know to don't think get back XX it'll

XX basis I points. difference Although it XX basis the seeing and points say wouldn't we're yet, between that

So were that at not X%, they early number I'm in we're watching point. anywhere the early near running stage stage delinquencies, this delinquencies, pre-pandemic

So not yet a there either. much seeing change really of

Michael Rose

Okay. Very helpful.

Rob Edwards

the has changes, portfolio Credit been upscaled. but

we things all a So it it's when bought lower portfolio XXXX. in equal, believe risk we

Michael Rose

of Makes sense. deals, a you remind follow-up. I but on And you've the Maybe approval kind pending if us had and then deal sorry there? couple just any just if recently. obviously getting missed I'm one a Jefferson, this, here progress can of update this

expectation is accretable an year, year for you'll for yield next we scheduled have years? next to realize accretion? As do over Thanks. of you have go that And next of what couple into the the pool initial

Lynn Harton

Yes.

toward and but we getting work in that close And just FDIC approval with could Lynn. toward on done with are the year, that part we Progress is process next so and to the the this Fed of deal, continue on early optimistic So, continuing we're them.

Jefferson Harralson

exact the Yes. have I don't accretion me. of with number

afterwards, of talk the numbers I'll Let's numbers. give accretion pool The through. you accretion coming

Michael Rose

Perfect. taking for Thanks questions. my

Operator

ahead. with Our Please next KBW. Catherine will Mealor from go come question

Catherine Mealor

morning. Good Thanks.

Just We and higher then changes. wanted quarter, largely obviously, from the this to better saw ask on a credit. a growth the macro provision question

outlook So factors likelihood your how reserve we'll the think just reserve how as the the you builds macro of quarters, your next today, over couple do and have where change the potential you given see of you that today? sit kind of to for sits what's -- here more kind

Rob Edwards

It's an interesting question.

both of mentioned think their I two models. comments the all Jefferson in in Lynn and a one being role change drivers, in Unemployment our plays basically unemployment. of

is portfolio particularly will So the models the the models sales. variable. drive improvement then And residential how that were The our monies other think future quarter, that home you -- and driven of home one unemployment driven new and this about sales new home by factor.

So we're specifically home the sales September. in declines in new year-over-year market in seeing already and

I think So it's happening already.

you But could extent be it unemployment, negative that tightening less then predicting would further to than reserve the see the you to So likely. more see further it be you build. begin it on if won't think I happens, of and views

Jefferson Harralson

I'll worse. model just It's is sensitive getting weather if better or this add. Moody's to really

it's give make looking you you that the to outside model is just to be this -- that the Because of consensus. it might subject change so for. -- sometimes Moody's think can just it's So be so hard and that to to I answer sensitive

So to a very difficult it's answer. question

Catherine Mealor

the today But because see stronger loan as the the strong so market. loan was we've also did first little you the weaker you bit you been growth mean, than the of growth, is a that on economy has the [indiscernible] deal. Reliant, had and growth I incorporate -- then of the And after when Reliant just it view you'll national

year? next big as maybe growth move potentially loan could on comments picture what So into we just like look

Rich Bradshaw

is question. Thanks this for Rich. Catherine, Yeah. the

has with year. certainly next a yes, bit little So it changed

We're market, we're of that still the you've labor year. we're strong, be still all, that interest best but got an not rates impact to positive. seeing that's with chains very thinking -- we're pipelines that think -- so So supply and first about next has

this and digit. were a we're little bit digit that year kind next we single year high expecting mid-single So of be down to

Catherine Mealor

Great. much. Everything answered. so has Thanks been else

Lynn Harton

you. Thank

Operator

go Group. come Our question Bishop Hovde will Please ahead. next with from David

David Bishop

Yes, good morning, and thanks my for taking question.

preamble, Lynn maybe [indiscernible] headwinds think some in on market I low the the the or like there noted you front. Jefferson in Nashville were

Thanks. loan seeing growth of when and on the you're how maybe the deposit to and that you side curious, market resume any Just rationality in market? sort to expect in

Rich Bradshaw

Tennessee appetite. a loans our is this obviously had not gotten -- credit that and subprime, primarily Yes, we haven't part Hi, We up what meet land -- through tell didn't large made of credit I’m most of of and [indiscernible] of Rich. loan. you, will down. paper was We've auto of I two gotten appetite. it. all kind through a

a QX the to lot our and of team. about moving maybe little good where discussions. will we're So in Also, a Nashville. feel more bit I you in emphasis really we some and tell just of There's hiring then

have We and hiring positive about some front feel that very the on there well. momentum good as

market that about is positive forward. going such strong very So it market. feel a We

Jefferson Harralson

overlay or good buy vary quarter about we strength we conversion, loan there's of within just It's expectations some or market and we're really distraction what two this feel we to for might really way, our sometimes. a feel I the about But team, and a seeing. when -- feel our either the box, good sometimes see a typical there's And bank that. we're three as pretty we maybe even overlaying

David Bishop

it XXXX? Then again? have source volatile over follow-up normalize were don't banking it. you Got It -- there. could if noise of that that Thanks. sounds the one you Can where could know And know revenue. a of some on in front. like I Jefferson I there that be color. go some you into mentioned Appreciate sense mortgage

Jefferson Harralson

about business noise Yes, I'll talk can Rich bit. and the the a start little with

MSR in the So quarter gain, $X.X to which the don't noise I was million. accounting expect that was the repeat.

the expectations QX that Rich in -- can So I'd the out start take for talk locks and volumes and and about and QX? such pipelines for

Rich Bradshaw

bit be well. little as a to and about the just arms XX% down QX little we're down move QX probably margins to to expect a well. do expecting from as bit we And mix be more Yes,

David Bishop

it. color. the Got Appreciate

Operator

Marinac next Janney. with Our go ahead. come question Christopher Please will from

Christopher Marinac

I held the of deposits the and thanks. funding And ask Jefferson, Hey, wanted excess that morning. the use that quarters? already securities. you does think increased to have the taps that Good balance some on factor about to of about become sheet maturity next if I'm and how a several the you wondering

Jefferson Harralson

great next the a question out thinking about and It’s we're year Chris. balance Thanks, planning sheet. as

the So I AFS of mentioned or not can But I'm if to -- securities. the selling we're Obviously, $X maturity HTM come on that I'm from but XX% selling of about expecting either, itself lot flow the both both cash to billion sorry, and AFS four planning that we're of the and -- on billion fund planning held flow securities the HTM we AFS not If securities. will cash against loans. a borrow portfolio.

during I our from about went if cycle. the think that billion to $X.X So portfolio billion $X

could more down billion think that to a think or be I be or $X to ratio will I billion, for $X us. $X deposit normal even billion loan

in line So portfolio, the think going I of to securities fits we're have. the HCM of with the always amount size

the our that of believe not I of the HCM, not shrink size really borrow the and those it's the and for letting ability AFS strategy or against having is the HCM liquidity both affecting portfolio. securities portfolio So combination to

Christopher Marinac

just And deposits if you the on incentives pools whoever, can tap there necessary tapping are that very Thanks. curious past than or can perhaps a of deposits be what that you there's focus of perhaps helpful. a was it. greater people Rich you That's teams Got any year? for generation. question more or just I'm or that for are could that new

Rich Bradshaw

to wants I'll around is great anybody else question. join. start it it That and with a I'll to maybe pass who

if about that's most us We're changing I new -- energy more. pools I but say imagine would there's rate it. coming don't I growth deposit is with that, and associated are necessarily what think mind, banks to wouldn't say we their using with how I I So know would and

out there that You'll as well. see

defensively. if before, -- bankers use I talked rate you envision I would think to We they are our --

happening the to deposit in I they campaigns the growth keep future I the changing to now where to base. in deposit grow before deposits envision can imagine compensation had rate customers. can and energy we we increasing I want use future. for But just our excess think and

And deposit. an organizational going so the you're think I energy grow change see to to around need

Lynn Harton

on emphasis we customers. energy funds. focus more and than of want really real That's a customers in core state the It's are and the where presidents our And teams. core our so where public protecting that's putting lot our really

Christopher Marinac

Great. background. Thanks again It's super the for helpful. I appreciate it.

Lynn Harton

Thank you, Chris.

Operator

And turn question-and-answer like Lynn session. this back closing over any our concludes I'd for to Harton the to conference remarks.

Lynn Harton

you once the that going joining the we're Great. of a know Regardless, I of -- it's is be Fed and anything. strength consumer hard liquidity mild focus and When has customer amount in absorber got economic what if the market we the little seems call. -- really absorbers Well and bit built pretax, recession, to the tightening the again, pre-provision for think that to you thank employment think about shock the going you have, in. company shock would as of to XXXX. on into. strength like that and have about the strength where ROA what's would and to seem we I'm excited to capital The be there'll credit that core into business go seem the it today, and culture, deposits happen to really we make all a We though argue talked go environment about

with supporting the us and to everybody have. I any anyway, and so being feel on questions And reach line other appreciate that you you. free Thank out

Operator

Thank you today's conference for attending now The has concluded. presentation.

may now disconnect You your lines.

United Community Banks (UCB) 19 Oct 222022 Q3 Earnings call transcript