United Community Banks, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; balance-sheet comparisons are with December 31, 2023 unless otherwise noted. Financial statements are unaudited. United provides commercial and consumer banking and investment advisory services through 205 branches in six southeastern states.
Financial performance
| Metric | Q1 2024 | Comparable period / change |
|---|---|---|
| Total revenue | $225.8 million | $219.9 million in Q1 2023, up 3% |
| Net interest revenue | $199.1 million | $211.5 million in Q1 2023, down 6% |
| Net interest margin (FTE) | 3.20% | 3.61% in Q1 2023 |
| Provision for credit losses | $12.9 million | $21.8 million in Q1 2023 |
| Net income | $62.6 million | $62.3 million in Q1 2023, up 1% |
| Diluted EPS | $0.51 | $0.52 in Q1 2023 |
| GAAP efficiency ratio | 60.47% | 57.20% in Q1 2023 |
Net interest pressure reflected a $75.9 million increase in deposit interest expense, exceeding the $57.2 million increase in interest revenue on earning assets. The average rate paid on interest-bearing deposits rose 150 basis points year over year. Noninterest income increased 31%, with higher mortgage-related income, BOLI death benefits, and a $2.4 million lease termination gain contributing. Noninterest expense rose 4%, including a $2.5 million increase in the estimated FDIC special assessment.
Financial position, cash flow and credit
- Balance sheet: Total assets were $27.36 billion; loans held for investment were $18.37 billion, up modestly from year-end; deposits were $23.33 billion, also broadly stable. Shareholders’ equity was $3.30 billion.
- Funding and liquidity: Long-term debt was $324.9 million; no short-term borrowings or FHLB advances were outstanding at quarter-end. Cash and cash equivalents totaled $961.9 million. Management reported $4.46 billion of additional borrowing capacity and $2.96 billion of unpledged securities available as collateral. Uninsured deposits were approximately $9.0 billion, of which $2.88 billion was collateralized by securities.
- Cash flows: Operating activities provided $88.8 million; investing activities used $122.5 million; financing activities used $8.2 million. Cash and cash equivalents decreased $41.9 million during the quarter.
- Credit quality: Net charge-offs were $12.9 million, compared with $7.1 million in Q1 2023; the annualized ratio to average loans was 0.28%, versus 0.17%. Nonperforming assets were $107.2 million, or 0.39% of assets, compared with $73.4 million, or 0.28%, a year earlier. The loan allowance was $210.9 million, equal to 1.15% of loans.
- Capital and shareholder returns: Consolidated CET1 was 12.39%; the Bank’s CET1 was 12.60%. Both were categorized as well-capitalized. The quarterly common dividend was $0.23 per share.
Material changes and unusual items
- Net interest margin declined year over year as deposit costs rose faster than yields on loans and securities. United attributed part of loan and deposit growth to the 2023 First Miami acquisition.
- Credit costs and nonperforming assets increased. Management cited elevated charge-offs in equipment finance, commercial and industrial, and manufactured housing; long-haul trucking exposure was identified as a contributor to equipment-finance charge-offs.
- At March 31, HTM securities had a fair value of $2.04 billion against $2.47 billion of carrying value, an unrealized loss of approximately $422 million. AFS securities had $259 million of gross unrealized losses. Management attributed losses primarily to interest rates and said it did not intend, nor believe it would be required, to sell securities in unrealized-loss positions before recovery.
- First-quarter non-GAAP operating results exclude specified items, including the $2.4 million lease termination gain, $2.5 million FDIC special assessment, and $2.1 million of merger-related and other charges. Management reported operating diluted EPS of $0.52; this measure is non-GAAP.
- The filing provides no specific numerical earnings or margin guidance. Management said liquidity was sufficient for expected cash-flow needs; results remain sensitive to deposit pricing, interest rates, economic conditions, and credit performance.
Outlook, risks and contingencies
Key disclosed risks include continued deposit competition and repricing, interest-rate changes affecting margin and securities values, economic weakness and real-estate or industry-specific credit deterioration, liquidity and funding risks, regulatory costs, cybersecurity and third-party service risks, and acquisition integration. Commercial real estate and other loan concentrations warrant monitoring; the income-producing office CRE portfolio was $757 million, and senior-care loans totaled $335 million. United reported $4.08 billion of commitments to extend credit and $66.6 million of letters of credit. Management did not expect pending or threatened litigation to have a material adverse effect. No material changes to previously reported risk factors or market risk were disclosed.
Important facts for investors to verify
- Whether deposit pricing and deposit mix stabilize enough to halt further net interest margin compression.
- Trends in nonaccrual loans, net charge-offs, and the allowance—particularly in equipment finance, C&I, manufactured housing, and CRE.
- Uninsured deposit levels, collateral coverage, and the availability of stated contingent borrowing capacity.
- How interest rates affect the securities portfolio’s unrealized losses and tangible capital over time.
- The recurring earnings contribution of mortgage activity, BOLI, and other items, versus the quarter’s unusual gains and charges.