United Community Banks (UCBI) Q2 Earnings call transcript Jul 24, 2024
United Community Bank held its second quarter 2024 earnings call, where executives discussed the bank's performance and outlook for the future. The bank reported a strong quarter, with earnings per share of $0.58, up 5% from last year and 11.5% from the last quarter. This growth was driven by a focus on disciplined deposit pricing, ongoing loan repricing, and a net interest margin expansion of 17 basis points.
Financial Performance and Credit Trends
The bank's net interest margin expanded due to a disciplined approach to deposit pricing and loan repricing. This resulted in net interest revenue increasing by $9.6 million for the quarter. While noninterest income was down slightly from the last quarter, the bank's total deposit balances were down primarily due to a strategy of lowering public funds pricing and promotional deposit accounts. This led to some deposit shrinkage but also resulted in a higher margin.
Credit trends remained solid and stable, with net charge-offs at 26 basis points, down slightly from the last quarter. Equipment Finance charge-offs continued to normalize, and nonperforming assets were up slightly. The bank remains cautious on new credits and is actively managing existing relationships, resulting in a slight decline in loan outstandings. However, the bank is optimistic about growth improving for the balance of the year.
Strategic Priorities and Outlook
Executives provided insights into strategic priorities and future plans. The bank is focused on maintaining a strong balance sheet, with no FHLB borrowings and very limited broker deposits, providing flexibility in managing through a tough interest rate and competitive environment. Capital ratios have increased, and the leverage ratio was up 24 basis points in the quarter.
The bank's margin came in 17 basis points higher in the second quarter on a GAAP basis and 15 basis points on a core basis. The loan yield moved up 19 basis points to 6.43%, with new and renewed loan yields remaining in the 8.5% range. The bank expects loan yield to continue to increase and is currently at a point where the cost of funds is near a top.
In terms of growth, the bank sees opportunities in CRE and the secondary markets, particularly in owner-occupied CRE and specific specials on that product. Loan growth is expected to improve throughout the year, with a focus on CRE and the secondary markets. The bank is also looking to invest in growth, while maintaining a focus on expense management and cost reduction initiatives.
Investor Questions and Responses
During the question-and-answer session, investors and analysts asked about loan growth, loan yield, expense growth, and strategic priorities. Executives provided detailed responses, highlighting the bank's focus on maintaining a strong balance sheet, managing credit risk, and investing in growth opportunities. They also discussed the potential impact of regulatory changes and political developments on M&A activity.
In conclusion, United Community Bank's second quarter 2024 earnings call highlighted the bank's strong financial performance and strategic priorities for the future. The bank is well-positioned to navigate the current environment, with a focus on maintaining a strong balance sheet, managing credit risk, and investing in growth opportunities. The outlook for the remainder of the year is positive, with a focus on loan growth and managing expenses.