Q4 2023 United Community Banks Inc Earnings Call

January 24, 2024

Good morning and welcome.

Good morning, and welcome.

[music].

Good morning and welcome to United Community Bank's fourth quarter 2023 earnings call. Hosting our 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, pre-tax, pre-credit earnings, and other non-GAAP financial information.

Good morning, and welcome to United Community Bank's fourth quarter 2023 earnings call hosting our call today, our 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 <unk>.

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. Copies of the fourth quarter's earnings release and investor presentation were filed this morning on Form 8K with the SEC. And a replay of this call will be available in the Investor Relations section of the company's website at ucbi.com.

Investor presentation. Both are included on the website at U C. B I dot com copies of the fourth quarter's earnings release and Investor presentation were filed this morning on form 8-K, with the SEC and a replay of this call will be available in the Investor Relations section of the company's website at U C. B I dotcom.

Please be aware that during this call, forward-looking statements may be made by representatives of United. Any forward-looking statements should be considered in light of risks and uncertainties described on pages 5 and 6 of the company's 2022 Form 10-K, as well as other information provided by the company in its filings with the SEC and included on its website.

Please be aware that during this call forward looking statements may be made by representatives of United any forward looking statements should be considered in light of risks and uncertainties described on pages five and six of the company's 2022 Form 10-K as well as other information provided by the company in its filings with the SEC and didn't.

On its website.

Speaker Change: At this time, I'll turn the call over to Lynn Hart.

At this time I'll turn the call over to Lynn Harton.

Herbert Lynn Harton: Good morning and thank you for joining our call today.

Herbert Lynn Harton: Good morning, and thank you for joining our call today.

Herbert Lynn Harton: This quarter was a bit unusual with several non-recurring items.

Herbert Lynn Harton: This quarter was a bit unusual with several nonrecurring items.

Herbert Lynn Harton: First, the FDIC's special assessment to replenish the insurance fund was $10 million.

Herbert Lynn Harton: First the FDIC special assessment to replenish the insurance fund was $10 million.

Herbert Lynn Harton: Additionally, we took the opportunity as rates fell going into the end of the year to sell some of our longer duration bonds to shorten the average life of our balance sheet.

Herbert Lynn Harton: While not the driver of this decision, this will also increase our earnings for 2024.

Herbert Lynn Harton: While not the driver of this decision. This will also increase our earnings for 2024.

Herbert Lynn Harton: Together, these two items reduced our gap earnings by approximately 39 cents in the quarter.

Together these two items reduced our GAAP earnings by approximately 39 cents in the quarter.

Herbert Lynn Harton: On an operating basis, earnings improved to 53 cents per share, with an operating return on assets of 92 basis points.

Herbert Lynn Harton: On an operating basis earnings improved to 53 cents per share with an operating return on assets of 92 basis points. We.

Herbert Lynn Harton: We had strong deposit growth in the quarter, centered primarily in our public funds relationships.

Herbert Lynn Harton: We had strong deposit growth in the quarter centered primarily in our public funds relationships.

Herbert Lynn Harton: The rate of contraction in our margin slowed, with our core margin dropping only four basis points this quarter.

Herbert Lynn Harton: The rate of contraction in our margins slowed with our core margin dropping only four basis points this quarter.

Herbert Lynn Harton: By way of comparison, our core margin fell by an average of 19 basis points in each of the first three quarters of the year.

Herbert Lynn Harton: Loan growth was slower at 2.5% annualized versus 5.4% last quarter.

Herbert Lynn Harton: Loan growth was slower at 2.5% annualized versus five 4% last quarter.

Herbert Lynn Harton: Our liquidity position continues to be very strong.

Herbert Lynn Harton: We ended the year with over $1 billion in cash and cash equivalents and essentially no wholesale borrowing.

Herbert Lynn Harton: We ended the year with over 1 billion in cash and cash equivalents essentially no wholesale borrowings.

Herbert Lynn Harton: Credit quality in the core bank was very good with only five basis points of net losses.

Herbert Lynn Harton: Non-performing assets were essentially flat at 51 basis points.

Herbert Lynn Harton: Nonperforming assets were essentially flat at 51 basis points.

Herbert Lynn Harton: Navitas continue to experience higher than normal losses as we continue to work out of the sleeper truck portfolio.

Herbert Lynn Harton: The betas continued to experience higher than normal losses, as we continue to work out at the sleeper truck portfolio.

Herbert Lynn Harton: We expect losses to trend back toward normal levels at Navitas by the middle of next year.

Herbert Lynn Harton: We expect losses to trend back toward normal levels in the beat us by the middle of next year.

Speaker Change: I'm going to turn the call over to Jefferson now for more detail on the quarter and then I'll make a few comments on the full year.

Jefferson Lee Harralson: Thank you, Lynn, and good morning to everyone. I am going to start my comments on page six and go into some more details on deposits.

Jefferson Lee Harralson: Thank you Lynn and good morning to everyone I am going to start my comments on page six and go into some more details on deposits.

Jefferson Lee Harralson: As Lynn mentioned, our total deposit balances were up 7.9% annualized for the quarter.

Jefferson Lee Harralson: As Len mentioned, our total deposit balances were up 7.9% annualized for the quarter.

Jefferson Lee Harralson: and if you adjust for the broker deposits we pay down,

Jefferson Lee Harralson: And if you adjust for the broker deposits we paid down.

Jefferson Lee Harralson: We grew total deposits by $504 million, or 8.9%.

Jefferson Lee Harralson: We grew total deposits by $504 million or eight 9%.

Jefferson Lee Harralson: The primary driver of the growth this quarter was public funds. We saw some seasonal inflow and got a couple of new accounts that accounted for the growth in this line item.

Jefferson Lee Harralson: Primary driver of the growth this quarter was public funds, we saw some seasonal inflow and got a couple of new accounts that accounted for the growth in this line item.

Jefferson Lee Harralson: The deposit growth in the quarter more than funded our loan growth and our loan-to-deposit ratio moved to 79% from 80%.

Jefferson Lee Harralson: The deposit growth in the quarter more than funded our loan growth and our loan to deposit ratio to 79% from 80%.

Jefferson Lee Harralson: Our cost of deposits moved up 21 basis points in the quarter to 2.24%.

Jefferson Lee Harralson: Our cost of deposits moved up 21 basis points in the quarter to two point to 4% and.

Jefferson Lee Harralson: and we saw continued shrinkage in our DDA accounts

Jefferson Lee Harralson: And we saw continued shrinkage in our DDA accounts, but this is happening at a slower pace.

Jefferson Lee Harralson: but this is happening at a sore

Jefferson Lee Harralson: Our deposit betas for the cycle were below the median a year ago but are above the median now at 42% and we are hopeful to move closer to peers and get some of that back in 2024.

Jefferson Lee Harralson: Our deposit betas for the cycle, we're below the median a year ago, but are above the median now at 42% and we are hopeful to move closer to peers and get some of that back in 'twenty 'twenty four.

Jefferson Lee Harralson: We turn to our loan portfolio on page 8. We grew loans in the second quarter by $116 million, which is 2.5% annualized.

Jefferson Lee Harralson: We turned to our loan portfolio on page eight we grew well into the second quarter by $116 million, which is 2.5% annualized.

Jefferson Lee Harralson: This is a little lighter than we originally expected. We are seeing less demand from our customers who appear to be holding back on projects due to rates and uncertainty.

This is a little lighter than we originally expected we are seeing less demand from our customers who appear to be holding back on projects due to rates and uncertainty.

Jefferson Lee Harralson: We have seen our residential construction book shrink by about $97 million in Q4, and we also saw our construction commitments drop in Q4 in both commercial and residential.

Jefferson Lee Harralson: We saw Navitas loans grow at a 2% pace as we kept loan sales in this area high at $28 million.

Jefferson Lee Harralson: We saw davita as loans grow at a 2% pace as we kept loan sales in this area high at $28 million.

Jefferson Lee Harralson: On page 8, we also lay out that our loan portfolio is diversified and generally more granular and less commercial real estate heavy as compared to peers.

Jefferson Lee Harralson: On page eight we also lay out that our loan portfolio is diversified and generally more granular and less commercial real estate heavy as compare to peers.

Jefferson Lee Harralson: Turning to page 9 where we highlight some of the strengths of our balance sheet. As mentioned, our balance sheet is in good position with no FHLB borrowings and very limited brokered deposits.

Jefferson Lee Harralson: Turning to page nine where we highlight some of the strength of our balance sheet.

Jefferson Lee Harralson: As mentioned our balance sheet is in good position with no S. H L B borrowings and very limited broker deposits.

Jefferson Lee Harralson: On the bottom are charts of two of our capital ratios,

Jefferson Lee Harralson: On the bottom are charged up two of our capital ratios our.

Jefferson Lee Harralson: Our TCE ratio and CET1.

Jefferson Lee Harralson: Our TCE ratio and C. A T. One.

Jefferson Lee Harralson: The TCE was up because of less unrealized losses.

Jefferson Lee Harralson: The T C. He was up because of less unrealized losses.

Jefferson Lee Harralson: We had 28% of our AFS unrealized loss.

Jefferson Lee Harralson: We had 28% of our F. S unrealized loss come back this quarter and both T. C. E N C E. T. One we are well above our peers.

Jefferson Lee Harralson: come back this quarter, and both TCE and CET1, we are well above our peak.

Jefferson Lee Harralson: On page 10, as I mentioned, our regulatory ratios also remain above peers and were mostly unchanged in the quarter.

Jefferson Lee Harralson: On page 10, as I had mentioned a regulatory ratios also remain above peers and were mostly unchanged in the quarter.

Jefferson Lee Harralson: Our leverage ratio was down 24 basis points, driven by a larger balance sheet being $400 million larger with a strong deposit.

Jefferson Lee Harralson: Our leverage ratio was down 24 basis points, driven by a larger balance sheet being $400 million of larger with the strong deposit growth.

Jefferson Lee Harralson: At the bottom of the page, we show a tangible book value waterfall chart and note that the change in OCI was a benefit of 78 cents.

Jefferson Lee Harralson: At the bottom of the page we show a tangible book value waterfall chart and note that the change in OCI was a benefit of 78 cents.

Jefferson Lee Harralson: We put out a press release at the end of the year detailing our securities loss transaction in the fourth quarter.

Jefferson Lee Harralson: For risk purposes, we want it to be shorter in our securities book, and now our AFS book has a 2.4-year duration.

For risk purposes, we want it to be shorter in our securities book.

Jefferson Lee Harralson: And now our a M. Best book has a 2.4 year duration.

Jefferson Lee Harralson: which we believe is a better risk profile through cycles.

Jefferson Lee Harralson: Which we believe is a better risk profile through cycles.

Jefferson Lee Harralson: We have been continuing to be opportunistic in repurchasing our preferred shares at a discount of par. We bought back $1.8 million in Q4 and $7.1 million for the year, and we will continue to buy back small amounts depending on price.

Jefferson Lee Harralson: We have been continuing to be opportunistic in repurchasing our preferred shares at a discount to par.

Jefferson Lee Harralson: We bought back $1.8 million in Q4 and $7.1 million for the year.

Jefferson Lee Harralson: And we will continue to buyback small amounts depending on price.

Jefferson Lee Harralson: Moving on to the margin on page 11, the margin came in a little better than I was estimating and was down five basis points.

Jefferson Lee Harralson: Moving on to the margin on page 11.

Jefferson Lee Harralson: The margin came in a little better than I was estimating it was down five basis points.

Jefferson Lee Harralson: and down four basis points on a core basis.

Jefferson Lee Harralson: And down four basis points on a core basis we.

Jefferson Lee Harralson: We were pleased to see this translate into spread income growth this quarter.

We were pleased to see this translate into spread income growth this quarter.

Jefferson Lee Harralson: Our loan yield moved up 13 basis points to 6.15% with our new and renewed loan yield in the 8.5% range for the quarter.

Jefferson Lee Harralson: Our loan yield moved up 13 basis points to 6.15% with our new and renewed loan yield in the eight 5% range for the quarter.

Jefferson Lee Harralson: We had slightly less loan accretion in the quarter as compared to Q3. This went from a nine basis point benefit to the margin in the third quarter to an eight basis point benefit in the

Jefferson Lee Harralson: We had slightly less loan accretion in the quarter as compared to Q3.

Jefferson Lee Harralson: This went from a nine basis point benefit to the margin in the third quarter to an eight basis point benefit in the fourth.

Jefferson Lee Harralson: Moving to page 12, non-interest income, excluding the portfolio restructuring, non-interest income was down $3.4 million relative to last quarter.

Jefferson Lee Harralson: Moving to page 12, noninterest income excluding the portfolio restructuring noninterest income was down $3.4 million relative to last quarter.

Jefferson Lee Harralson: This was primarily due to a $3.5 million negative swing in the MSR evaluation.

Jefferson Lee Harralson: This was primarily due to a $3 $5 million negative swing in MSR valuation.

Jefferson Lee Harralson: Other income was up $2.5 million in the fourth quarter, due mainly to the absence of the $1 million loss on the sale of branches last quarter, and then a variety of small items made up the positives.

Jefferson Lee Harralson: Other income was up $2.5 million in the fourth quarter due mainly to the absence of the $1 million loss on the sale of branches last quarter and then a variety of small items made up the positive difference.

Jefferson Lee Harralson: Our gain on the sale of loans were basically flat in the quarter.

Jefferson Lee Harralson: Our gain on the sale of the loans were basically flat in the quarter.

Jefferson Lee Harralson: Another notable item was $2.5 million in unrealized losses on equity investments that we do not expect to repeat regularly.

Jefferson Lee Harralson: Operating expenses on page 14 came in at $138.8 million, which was up $3.5 million from last quarter.

Jefferson Lee Harralson: Operating expenses on page 14 came in at $138 $8 million, which was up $3 $5 million from last quarter.

Jefferson Lee Harralson: The primary reason for the increase is a $3.2 million negative swing in our group medical insurance costs.

Jefferson Lee Harralson: The primary reason for the increase of $3.2 million negative swing in our group medical insurance cost.

Jefferson Lee Harralson: We self-insure, and our medical costs came in higher than expected and required us to build our reserve sum in the fourth quarter.

Jefferson Lee Harralson: Self insure and our medical costs came in higher than expected and required us to build a reserve some in the fourth quarter.

Jefferson Lee Harralson: By excluding this event, our expenses were essentially flat.

Jefferson Lee Harralson: Excluding this event our expenses were essentially flat.

Jefferson Lee Harralson: Let's talk seasonality a little bit. The first quarter is our seasonally worst quarter.

Let's talk seasonality a little bit the first quarter is our seasonally worst quarter.

Jefferson Lee Harralson: Besides one less day this year in the first quarter,

Besides one less day this year in the first quarter.

Jefferson Lee Harralson: It's seasonally the slowest for SBA and Navitas in their corresponding loan sales.

Jefferson Lee Harralson: It's seasonally the slowest for S P, a and davita and our corresponding loan sales.

Jefferson Lee Harralson: Mortgage volumes are picking up a little bit with lower rates, but remain seasonally slow until spring.

Jefferson Lee Harralson: Mortgage volumes are picking up a little bit with lower rates, but remained seasonally slow until spring.

Jefferson Lee Harralson: We will have lower group medical costs by about $1.7 million, but we will also have a FICA restart and other expense accrual.

Jefferson Lee Harralson: We will have lower group medical costs by about $1.7 million, but we will also have a FICA restart and other expense accruals net net on the expense side I'm expecting them to be essentially flat for the first quarter.

Jefferson Lee Harralson: Net-net on the expense side, I'm expecting them to be essentially flat for the first

Jefferson Lee Harralson: On the net interest margin, the securities transaction is expected to take our yield up to the 310 range, which is a four basis point benefit to the net interest margin.

Jefferson Lee Harralson: Although net interest margin the securities transaction is expected to take our yield up to the 310 range, which is a four basis point benefit to the net interest margin.

Jefferson Lee Harralson: Our loan yields should continue to increase.

Jefferson Lee Harralson: Our loan yields should continue to increase and.

Jefferson Lee Harralson: and we are expecting our cost of funds increases to slow down.

Jefferson Lee Harralson: And we are expecting our cost of funds increases to slow down.

Jefferson Lee Harralson: We still have new CDs coming on at higher rates than maturing ones.

Jefferson Lee Harralson: We still have new Cds coming on at higher rates than maturing ones.

Jefferson Lee Harralson: and DDA could shrink a bit, but we are starting to push back and lower some of our promotional rates.

Jefferson Lee Harralson: And DDA could shrink a bit but we are starting to push back and lower some of our promotional rates in combination our margins should be relatively flat in Q1 somewhere between minus two and plus two basis points.

Jefferson Lee Harralson: Our margins should be relatively flat in Q1, somewhere between minus 2 and plus 2, basically. Thank you.

Jefferson Lee Harralson: Moving to credit quality, net charge-offs were 22 basis points in the quarter, with the bank being very low at just 5 basis points.

Jefferson Lee Harralson: Moving to credit quality net.

Jefferson Lee Harralson: Net charge offs were 22 basis points in the quarter with the bank being very low at just five basis points are.

Jefferson Lee Harralson: Our MPAs were essentially flat.

Jefferson Lee Harralson: Our M P as were essentially flat.

Jefferson Lee Harralson: Our special mention plus substandard were improved slightly and down from a year ago.

Our special mentioned plus sub standard where improved slightly and down from a year ago.

Jefferson Lee Harralson: Our breakout on the Navitas losses are on page 17. Last quarter, we broke out long-haul trucking for the first time. We are having higher losses in this small book, as Len talked about in his opening statement.

Jefferson Lee Harralson: Our breakout on the beautiful losses are on page 17 last quarter, we broke out long haul trucking for the first time, we were having higher losses in this small book ASLAN talked about in his opening.

Jefferson Lee Harralson: This quarter, the books shrunk from $57 million to $49 million, and of that shrinkage, we had $4.4 million of loss.

Jefferson Lee Harralson: This quarter the book shrunk from $57 million to $49 million of that shrinkage, we had $4.4 million up losses.

Jefferson Lee Harralson: We changed our practice at Navitas to mark down repossessed collateral at the repossession date.

Jefferson Lee Harralson: We changed our practice at Novartis to markdown repossessed collateral at the repossession date.

Jefferson Lee Harralson: This had the impact of recognizing losses sooner than we had been, and this added $1.8 million, or 47 basis points, to the Navitas loss rate discourse.

Jefferson Lee Harralson: This had the impact of recognizing losses sooner than we had been and this added $1.8 million or 47 basis points to the diabetes loss rate this quarter.

Jefferson Lee Harralson: We continue to believe the Navitas losses will stabilize in the 85 to 95 basis point range later this year.

Jefferson Lee Harralson: We continue to believe the Davita for losses will stabilize in the 85 to 95 basis point range later this year.

Jefferson Lee Harralson: Navitas losses, excluding long haul, were 96 basis points, and we are putting on new loans in the 10.5% range.

Jefferson Lee Harralson: Davita for losses, excluding long haul or.

Jefferson Lee Harralson: We're 96 basis points, and we are putting on new loans, and the 10 and a half per cent range.

Jefferson Lee Harralson: I will finish back on page 15 with the allowance for credit losses.

Jefferson Lee Harralson: I will finish back on page 15, with the allowance for credit losses, we set aside $14.6 million to cover 10.1 million and net charge offs.

Jefferson Lee Harralson: We set aside $14.6 million to cover $10.1 million in net charges.

Jefferson Lee Harralson: This had the impact of building the ACL slightly in the quarter.

Jefferson Lee Harralson: With that, I will pass it back to Len.

Jefferson Lee Harralson: With that I'll pass it back to Lynn.

Len: Thank you Jefferson. Great comments on the quarter. As we look back at 2023, I am proud of the way our teams responded to the many challenges the industry faced.

Herbert Lynn Harton: Thank you Jefferson Great comments on the quarter as we look back at 2023, I am proud of the way our teams responded to the many challenges the industry faced.

Len: In spite of industry-wide concerns over liquidity and deposit stability,

In spite of industry wide concerns over liquidity and deposit stability.

Len: We were able to grow customer deposits over 8% during the year, excluding mergers.

Herbert Lynn Harton: We were able to grow customer deposits over 8% during the year excluding mergers.

Len: We know from our internal surveys that our customer service scores grew significantly from already high levels.

Herbert Lynn Harton: We know from our internal surveys that our customer service scores grew significantly from already high levels.

Len: We added two very high quality banks to the franchise with Progress and First National Bank of South Miami.

Herbert Lynn Harton: We added two very high quality banks to the franchise with progress and first National Bank of South Miami.

Len: Both have been performing very well and ahead of my expectations.

Herbert Lynn Harton: Both have been performing very well and ahead of my expectations.

Len: We strengthen our customer-facing teams with new leadership at the state level in Tennessee and Florida, as well as significant market hires in Northwest Georgia, Atlanta, Orlando, Nashville, Knoxville, and middle market banking.

Herbert Lynn Harton: We strengthened our customer facing teams with new leadership at the state level in Tennessee, and Florida as well as significant market hires in northwest, Georgia, Atlanta, Orlando, Nashville, Knoxville, and middle market banking.

Len: We hired a new leader for wealth management to drive the expansion of that business.

Herbert Lynn Harton: We hired a new leader for wealth management to drive the expansion of that business.

Len: We strengthen our support and control teams as well with a new chief audit executive and several important additions in credit, risk, and technology.

Herbert Lynn Harton: We strengthened our support and control teams as well with our new Chief audit executive and several important additions in credit risk and technology.

Len: We were named the best bank to work for by American Banker for the seventh consecutive year.

Herbert Lynn Harton: We were named a best bank to work for by American banker for the seventh consecutive year.

Len: We rebranded the company with our fourth refreshing in our 70-year history.

Herbert Lynn Harton: We rebranded the company with our fourth refreshing and our 70 year history.

Len: We added another outstanding board member with highly relevant experience to help guide our continued growth.

Herbert Lynn Harton: We added another outstanding Board member with highly relevant experience to help guide our continued growth.

Len: All were outstanding accomplishments for the year.

All of our outstanding accomplishments for the year.

Len: However, our financial results for 23 did not meet our expectations.

Herbert Lynn Harton: However, our financial results for twenty-three did not meet our expectations.

Len: Much of the shortfall was driven by the margin contracting more rapidly than we expected.

Herbert Lynn Harton: Much of the shortfall was driven by the margin contracting more rapidly than we expected.

Len: Part of the reason for that is that we reacted appropriately, I believe, to the turmoil in the spring and increased deposit rates more rapidly than expected and perhaps more than required.

Herbert Lynn Harton: Part of the reason for that is that we reacted appropriately I believe to the turmoil in the spring and increased deposit rates more rapidly than expected and perhaps more than required.

Len: We also realized we had let our assets become less interest rate sensitive than we would have liked.

Herbert Lynn Harton: We also realize we had let our assets become less interest rate sensitive than we would've liked.

Len: We underperformed in credit due to a miss on a large shared national credit, as well as entering into a small high-risk segment within our Navitas book.

Herbert Lynn Harton: We underperformed in credit due to a miss on our large shared national credit as well as entering into a small high risk segment within our Nevada book.

Len: In which we have since ceased origination.

Herbert Lynn Harton: And which we have since ceased originations.

Len: Fortunately, our belief in managing concentrations, including fixed rates, and not betting the bank allowed us to maintain performance, which while okay from a peer perspective, is not at the level we strive to deliver.

Herbert Lynn Harton: Fortunately, our belief in managing concentrations, including fixed rates and not betting the bank allowed us to maintain performance, which while okay from a peer perspective is not at the level, we strive to deliver.

Len: 2024 will be an improvement.

Herbert Lynn Harton: 'twenty 'twenty four will be an improvement.

Len: We're focused on actively managing rate exposures and growing our net interest margin.

Herbert Lynn Harton: We're focused on actively managing rate exposures and growing our net interest margin IRA.

Len: Our relative credit results will improve in 24.

Herbert Lynn Harton: Our relative credit results will improve in 'twenty four.

Len: We also see a great environment for taking market share.

We also see a great environment for taking market share.

Len: Merger disruptions continue, providing us opportunities to add talent.

Herbert Lynn Harton: Merger disruptions continue providing us opportunities to add talent.

Len: Some of our competitors are liquidity challenged, also providing opportunities for us to grow.

Herbert Lynn Harton: Some of our competitors all liquidity challenged also providing opportunities for us to grow.

Len: While the overall demand for credit may be lower if the economy slows, we believe we are well positioned to grow our lending business regardless.

Herbert Lynn Harton: While the overall demand for credit may be lower if the economy slows. We believe we are well positioned to grow our lending business regardless.

Len: Our customer service scores and responsiveness to our customers puts us in a great place to be able to continue to grow low-cost deposits as well.

Herbert Lynn Harton: Our customer service scores and responsiveness to our customers puts us in a great place to be able to continue to grow low cost deposits as well.

Len: On the expense side, we have just completed some difficult decisions in putting together our budget, and we will continue to manage our costs actively as the year unfolds.

Herbert Lynn Harton: On the expense side, we have just completed some difficult decisions and putting together our budget and we will continue to manage our costs actively as the year unfolds.

Len: 24 will be a strong year for United and will set us up well to outperform in 25, which is our goal.

Herbert Lynn Harton: 24 will be a strong year for United and will set us up well to outperform in 25, which is our goal I.

Speaker Change: I appreciate your support and interest and now we all look forward to your questions.

Speaker Change: Ladies and gentlemen, at this time we'll begin the question and answer session.

Speaker Change: Ladies and gentlemen at this time, we'll begin the question and answer session to.

Speaker Change: To ask a question, you may press star and 1 using a touch-tone telephone. If you are using a speakerphone, we do ask that you please pick up your handset prior to pressing the button.

Speaker Change: To ask a question you May press star and one using a touchtone telephone you are using a speaker phone. We do ask that you. Please pick up your handset prior to pressing the keys.

Speaker Change: To withdraw your questions, you may press star and...

Host: Good morning and welcome. Good morning and welcome to United Community Bank's fourth quarter 2023 earnings call. Hosting our 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, 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.

Speaker Change: To withdraw your question you May press Star two.

Speaker Change: Once again, that is star and then one to ask a question.

Speaker Change: Once again that is star and then one to ask a question.

Speaker Change: We'll pause momentarily to assemble the roster.

Speaker Change: We will pause momentarily to assemble the roster.

Speaker Change: And our first question today comes from Michael Rose from Raymond James. Please go ahead with your question.

Michael Rose: Hey, good morning, everyone. Thanks for taking my questions.

Michael Rose: Hey, good morning, everyone. Thanks for thanks for taking my questions.

Michael Rose: A bunch of calls this morning, but sorry if I missed this, but Jefferson, can you just give us your

Michael Rose: <unk>.

Michael Rose: A bunch of calls this morning, but sorry, if I missed this but Jefferson can you just give us your you know what.

Jefferson Lee Harralson: you know what rate outlook you guys have embedded you know into your outlook and then you know can you describe if it's not the forward curve you know what the sensitivity would be if you were to assume the forward curve and then if we did say higher for longer and let's just say we didn't get any cuts this year just trying to kind of map out the sensitivity from rates I assume it's not linear so I just wanted to get some perspective thanks. Great yeah thanks Michael Michael great question so on on the margin when we are giving the guidance that plus two to minus two I'm not having any rate hikes in there or I'm sorry rate cuts in there?

Jefferson Lee Harralson: What rate outlook, you guys have embedded.

Jefferson Lee Harralson: And to your outlook and then.

Jefferson Lee Harralson: He can you describe if it's not the forward curve.

Speaker Change: What the sensitivity would be if you were to assume the forward curve and then if we did say higher for longer and let's just say we didn't get any cuts. This year, just trying to kind of map out the the sensitivity from rates I assume it's not linear so I just wanted to get some op perspective. Thanks, great. Yeah. Thanks, Michael Michael Great question. So on the margin when we are giving the guide.

Host: Copies of the fourth quarter's earnings release and investor presentation were filed this morning on Form 8K with the SEC, and a replay of this call will be available on the Investor Relations section of the company's website at ucbi.com. Please be aware that during this call, forward-looking statements may be made by representatives of United. However, any forward-looking statements should be considered in light of risks and uncertainties described on pages 5 and 6 of the company's 2022 Form 10-K, as well as other information provided by the company in its filings with the SEC and included on its website. At this time, I'll turn the call over to Lynn Hart.

That plus two to minus two not having any.

Speaker Change: Rate hikes and there or.

Speaker Change: Or I'm, sorry rate cuts in there.

Speaker Change: And in that environment, we are expecting that the margin will increase throughout the year as we're, I think, near the top of our deposit beta. We've had a 42% deposit beta cycle to date. We're projecting a peak at 45%.

Speaker Change: And on a in that environment, we are expecting that the margin will increase throughout the year is where take near the top of our deposit beta we have a we've had a 42% deposit beta.

Speaker Change: Cycle to date, we're projecting a peak at 45%.

Speaker Change: If rates were to follow the forward curve, I think we'd get a little bit of boost in there. If you look at our analysis, we're a little bit liability-sensitive right now. So I think that we'd get an extra. If you follow the exact forward curve, you might get five to seven basis points positive for the year if you follow the exact forward curve currently today.

Speaker Change: If rates were to follow the forward curve I think we get a little bit of a boost in there. If you look at our analysis, where a little bit.

Herbert Lynn Harton: Good morning, and thank you for joining our call today. This quarter was a bit unusual, with several non-recurring items. First, the FDIC's special assessment to replenish the insurance fund was $10 million. Additionally, we took the opportunity as rates fell going into the end of the year to sell some of our longer-duration bonds to shorten the average life of our balance sheet. While not the driver of this decision, this will also increase our earnings for 2024. Together, these two items reduced our gap earnings by approximately 39 cents in the quarter.

Speaker Change: Liability sensitive right now so I think that.

Speaker Change: We'd get an extra if you fall exactly forward curve, you might get five to seven basis points positive.

Speaker Change: If you followed the exact for the year. If you follow the exact a forward curve currently today.

Speaker Change: Okay, that's helpful. And where does that assume that the NIB mix, non-distributing mix, kind of troughs in your modeling? Yeah, so that would shrink to the 27% range. We're at the 28% range now. We're seeing that slow down.

Speaker Change: Okay, that's helpful and where does that assume that the niv mix non interest bearing mix kind of trough in your in your modeling yeah. So that would shrink to the 27% range. So we're at the 28% range now we're seeing that slow down so it's around right around 27.

Herbert Lynn Harton: On an operating basis, earnings improved to 53 cents per share, with an operating return on assets of 92 basis points. We had strong deposit growth in the quarter, centered primarily on our public funds relationships. The rate of contraction in our margin slowed, with our core margin dropping only four basis points this quarter. By way of comparison, our core margin fell by an average of 19 basis points in each of the first three quarters of the year. Loan growth was slower at 2.5% annualized versus 5.4% last quarter.

Speaker Change: So right around 27.

Speaker Change: Okay, perfect. And then, Lynn, I think you just made some comments around just some tough decisions around the budgeting process. I'm sorry if I missed it, but can you just talk about some areas where, you know, you're maybe scaling back a little bit and maybe some areas where you're investing and just how that translates. And again, sorry if I missed it, to the kind of expense outlook as we think about this year. I think previously you guys were talking about about a 3% year-on-year growth in 24 last quarter. Thanks. That's right. Yeah, so I'll start and then Rich will kick in. You know, we really took a hard look at our producers and kind of who's producing, who's not, made some difficult choices there. On the technology side, which projects do we really need to do, which projects can we cut out, made some, you know, the branch decisions get more and more difficult only because, you know, all of our branches are profitable, but which ones do we need to consolidate and shut down. Those are some of the bigger items. And, Rich, I don't know if you'd like to add anything to that or Jefferson. No, just, you know, as you go through and looking at, we've done this every year now in terms of the branches, so we're really looking also strategically and does it make sense in closing branches that's near another branch so they're enjoying the economics of moving because we know if we close a branch near another branch, then we're going to keep about 90% of the deposits. And so we've gone through that. Exercise and those have been identified and notifications have gone out to the regulators. So we're down the road on those. I'll just add some detail on that. So as we went into budget, we didn't have branch cuts in there. Now we're planning on cutting four branches in 2024.

Okay, perfect and then.

Speaker Change: I think you just made some comments around just some tough decisions around the budgeting process I'm, sorry, if I missed it but.

Speaker Change: He's talking about some areas, where you know you're maybe scaling back a little bit and maybe some areas, where you're investing in and just how that translates against sorry, if I missed it to the kind of expense outlook. As we think about this year. I think previously you guys were talking about about a 3% year on year growth of 24 last quarter. Thanks.

Herbert Lynn Harton: Our liquidity position continues to be very strong. We ended the year with over $1 billion in cash and cash equivalents and essentially no wholesale borrowing. Credit quality in the core bank was very good, with only five basis points of net losses. Non-performing assets were essentially flat at 51 basis points.

Speaker Change: That's right yeah. So I'll, just I'll start and enriches kick in you know, we really took a hard look at our our producers and kind of who's producing who's not made some difficult choices there on the technology side, which projects do we really need to do which projects can we cut out made some.

Herbert Lynn Harton: Navitas continues to experience higher than normal losses as we continue to work out the sleeper truck portfolio. We expect losses to trend back toward normal levels at Navitas by the middle of next year. I'm going to turn the call over to Jefferson now for more detail on the quarter, and then I'll make a few comments on the full year. Thank you, Lynn, and good morning to everyone.

Speaker Change: <unk> decisions get more and more difficult only because you know all of our branches are profitable, but which ones do we need to consolidate shut down but those are some of the bigger items and rich I don't know, what if you'd like to add anything to that or Jefferson No. Just a you know we as you go through and looking at how we've done.

Jefferson Lee Harralson: I am going to start my comments on page six and go into some more details on deposits. As Lynn mentioned, our total deposit balances were up 7.9% annualized for the quarter, and if you adjust for the broker deposits we pay down, we grew total deposits by $504 million, or 8.9%. The primary driver of the growth this quarter was public funds.

Speaker Change: This every year now in terms of the branches. So we're really looking also strategically and does it make sense and we're closing branches. That's near another branch so they're enjoying the economics of moving because we know if we close a branch near another branch then we're going to keep about 90% of the deposits and so we've gone through that exercise and that has been identified.

Speaker Change: And notifications have gone out to the regulators, though where we're down the road on those.

Speaker Change: I'll just add some detail on that so as we went into budget. We didn't have a branch cut down there now we're planning on cutting four branches in 2024.

Jefferson Lee Harralson: We saw some seasonal inflows and got a couple of new accounts that accounted for the growth in this line item. The deposit growth in the quarter more than funded our loan growth, and our loan-to-deposit ratio moved to 79% from 80%. Our cost of deposits moved up 21 basis points in the quarter to 2.24%, and we saw continued shrinkage in our DDA accounts, but this is happening at a slower pace. Our deposit betas for the cycle were below the median a year ago but are above the median now at 42%, and we are hopeful to move closer to peers and get some of that back in 2024. We turn to our loan portfolio on page 8. We grew loans in the second quarter by $116 million, which is 2.5% annualized. This is a little lighter than we originally expected.

Speaker Change: In terms of investments, we are excited about wealth management. I don't think you're going to see a huge change in 2024, but as we look in years beyond that, I think we picked up two great trust and wealth management businesses in both of our Florida acquisitions. And really, as we've come to understand that business, we know that our client base actually skews wealthier than average, probably wealthier than most people would think. We think it's a great opportunity to take that throughout the footprint, brought in a really strong leader for that. So that's one investment area that we're looking at.

Speaker Change: Auction staffing.

Speaker Change: In terms of investments you know, where we are excited about wealth management I don't think you're going to see a huge change in 'twenty four but as we look on the in in years beyond that I think it's a you know we picked up two great Trust and wealth management businesses in both of our Florida.

Speaker Change: <unk> and really as we've come to understand that business. You know, we know that our client base is actually skews wealthier than average probably wealthier than most people would think we think it's a great opportunity to take that throughout the footprint brought in a really strong leader for that so that's that's one investment area that where we're looking at.

Speaker Change: Great. I appreciate the puts and the takes. And maybe just finally for me, can you just talk about, you know, kind of borrower demand in your markets? I think previously you talked about kind of a mid-single digit growth expectation for this year. Certainly understand that you're in some really strong markets, but that, you know, borrower demand has probably come in a little bit. So just wanted to get a sense for, you know, where you see some opportunities. And then I assume that you're probably not looking to necessarily grow your office portfolio or some of those other, you know, quote, unquote, higher risk areas. But just some commentary there would be great. Thanks. Well, good morning, Michael. This is Rich. And I think you summarized it pretty well, I have to say. But we are, as you said, we're in the best markets. We remain optimistic.

Speaker Change: Great I appreciate the puts and takes and maybe just finally for me can you just talk about you know kind of borrower demand in your markets. I think previously you've talked about kind of a mid single digit grow.

Jefferson Lee Harralson: We are seeing less demand from our customers who appear to be holding back on projects due to rates and uncertainty. We have seen our residential construction book shrink by about $97 million in Q4, and we also saw our construction commitments drop in Q4 in both commercial and residential. We saw Navitas loans grow at a 2% pace as we kept loan sales in this area high at $28 million.

Speaker Change: With expectations for this year, certainly understand that you have some really strong markets, but that the borrower demand.

Speaker Change: Probably come in a little bit so I just wonder if you had a sense for where you see some some opportunities and then I assume that you're probably not looking to necessarily grow your office portfolio or some of those other quote unquote higher risk areas, but just some commentary there would be great. Thanks good.

Rich Bradshaw: Good morning, Michael This is rich and I think you summarized it pretty well I have to say, but we.

Jefferson Lee Harralson: On page 8, we also lay out that our loan portfolio is diversified and generally more granular and less commercial real estate heavy as compared to peers. Turning to page 9, we highlight some of the strengths of our balance sheet. As mentioned, our balance sheet is in a good position with no FHLB borrowings and very limited brokered deposits. On the bottom are charts of two of our capital ratios, our TCE ratio and CET1. The TCE was up because of less unrealized losses. We had 28% of our AFS unrealized losses come back this quarter, and both TCE and CET1, we are well above our peak. On page 10, as I mentioned, our regulatory ratios also remain above peers and were mostly unchanged in the quarter.

Rich Bradshaw: We are as you said, we're in the best markets, we remain optimistic.

Rich Bradshaw: Certainly looking for our new hires from late last year and our new hires that we just made. So I'm excited we've made some more recent big hires. And these are both people that we've been recruiting for over a year. And so we brought on Evan Ryan. Evan is our new Central Florida president in Orlando. And we brought in Spencer Wiggins, who's our new market president in Mobile, Alabama, and has opened up an LPO there. And there, both these gentlemen bring portfolio with them. I mean, they both carried a portfolio. And either they have or will bring some additional lenders. So we're excited about that to kick in with some of the lift outs that we did late last year. The Tennessee one, which was in Knoxville, is really kicking in. And by kicking in, I mean closed loans, not just pipeline. And so we're excited about that. And we're also excited about our continued investment in Florida. For the first time, Florida led the bank. Q4. Q4 in production. And we're really excited about that.

Rich Bradshaw: I'm certainly looking for our new hires from late last year and our new hires that we just made so I'm excited we've made some more recent big hires and these are both people that we've been recruiting for over a year and so we brought on Devin Ryan Evan is our new Central Florida, President and Orla.

Rich Bradshaw: Lando and we brought in Spencer Wiggans Who's our new market President in mobile, Alabama and will be has opened up an L. P. O. There. Both these gentlemen bring portfolio with them, but I mean, they both carried a portfolio and either they have or will bring some additional lenders. So we're excited about that to kick in.

Rich Bradshaw: With some of the lift outs that we did late last year, the Tennessee, one is and which was in Knoxville is really kicking in and then they kicking in I mean closed loans not just pipeline and so we're excited about that and we're also excited about our continued investment in Florida for the first time, Florida led the bank Q4 in production and we're really excited about that.

Jefferson Lee Harralson: Our leverage ratio was down 24 basis points, driven by a larger balance sheet being $400 million larger with a strong deposit. At the bottom of the page, we show a tangible book value waterfall chart and note that the change in OCI was a benefit of 78 cents. We put out a press release at the end of the year detailing our securities loss transaction in the fourth quarter. For risk purposes, we want it to be shorter in our securities book, and now our AFS book has a 2.4-year duration, which we believe is a better risk profile through cycles.

Rich Bradshaw: At.

Rich Bradshaw: Okay.

Speaker Change: Hey, thanks for taking all my questions. Appreciate it.

Speaker Change: Hey, Thanks for taking all my questions I appreciate it.

Speaker Change: Excellent.

Speaker Change: Our next question comes from Graham Dick from Piper Sandler. Please go ahead with your question.

Speaker Change: Our next question comes from Graham <expletive> problem Piper Sandler. Please go ahead with your question.

Speaker Change: Hey, good morning, guys. Morning, Graham.

Speaker Change: Hey, good morning, guys good morning Graham.

Graham Dick: Hey, I just wanted to circle back to the NIM quickly, specifically on the deposit betas. Jefferson, I think you said you're expecting to kind of catch back up the peers in terms of bringing your beta down if rates were to come lower. What are you expecting, I guess, in terms of deposit betas on some of the initial cuts if they were to occur in 2024? Do you think there'll be a lag or do you think it will sort of be linear where you have a set of index deposits they're going to reprice down immediately?

Graham: Hey, I just wanted to circle back to the NIM quickly specifically on the deposit betas Jefferson I think you said, you're expecting to kind of catch back up to peers in terms of bringing your beta down if rates were to come along or what are you expecting I guess in terms of deposit betas on on some of the initial cuts if they were to occur.

Jefferson Lee Harralson: We have been continuing to be opportunistic in repurchasing our preferred shares at a discount to par. We bought back $1.8 million in Q4 and $7.1 million for the year, and we will continue to buy back small amounts depending on price. Moving on to the margin on page 11, the margin came in a little better than I was estimating and was down five basis points and down four basis points on a core basis.

Graham: In 2024, do you think there'll be a lag or do you think it will sort of be linear where you have a set of index deposits theyre going to reprice down immediately.

Jefferson Lee Harralson: Yeah, so we have $3.6 billion of index deposits, so some of that would be immediate. We're using for the non-maturity deposits, we're using kind of high 30s, 37, 38, 39 percent range. But we also believe that we can maybe get some back possibly before rates start going down. We've lowered rates in our promotional money market CD or money market or ICF.

Speaker Change: Yeah. So we have a $3 $6 billion of index deposits. So some of that would.

It would be immediate we're using for the non maturity deposits were using a high 30, 37 38, 39%.

Speaker Change: Percent range.

Speaker Change: We also believe that we can maybe get some back possibly before rates started going down we've lowered rates and our promotional money market C D or money market or Ics.

Jefferson Lee Harralson: We were pleased to see this translate into spread income growth this quarter. Our loan yield moved up 13 basis points to 6.15%, with our new and renewed loan yield in the 8.5% range for the quarter. We had slightly less loan accretion in the quarter as compared to Q3. This went from a nine basis point benefit to the margin in the third quarter to an eight basis point benefit in the fourth. Moving to page 12, non-interest income, excluding the portfolio restructuring, was down $3.4 million relative to last quarter. This was primarily due to a $3.5 million negative swing in the MSR evaluation. Other income was up $2.5 million in the fourth quarter, due mainly to the absence of the $1 million loss on the sale of branches last quarter, and then a variety of small items made up the positives.

Speaker Change: So we think we can use the strength of our balance sheet, no wholesale funding, the good deposit growth of this year. Lynn mentioned the 8% or loan-to-deposit ratio. It's 79%. So we believe that we can maybe start getting some of this back before rates start going down and rich may have some money. Yeah, I'll add a little, Kyle. That start of the year here, we brought down our money market special 35 basis points. There was over $2 billion in that product. So that's, you know, just doing the math, that's about $7 million savings right there. And as you mentioned, Jefferson, the ICS, the treasury manager, really hard to bring that down a million. And I will tell you, we're working on a pilot in Atlanta to even bring it down further.

Speaker Change: So we are we.

Speaker Change: We think we can use the strength of our balance sheet no wholesale funding are the good deposit growth of this year when I mentioned in the 8% our loan to deposit ratio at 79%. So we believe that a we can maybe start getting some of this back before rates started going down and rich may have yeah, I'll add a little color. We brought that started the year here, we brought down our money.

Rich Bradshaw: Special 35 basis points, there was over 2 billion and that product. So that's you don't just doing the math, that's about $7 million savings right there and as you you mentioned Jefferson the Ics.

The treasury manager really hard to bring that down a million and I will tell you. We're working on a pilot in Atlanta to even bring it down further.

Speaker Change: Okay, that's really helpful. And then I guess turning to credit,

Speaker Change: Okay. That's really helpful and then I guess turning to credit Davita.

Speaker Change: Nevitas, obviously, there's still the stress in the trucker segment. I mean, you expect it to come down to, I guess, the 85 to 95 basis point, a total charge-off level at some point later this year. But I'm just wondering, on that long-haul trucking, the $49 million that's left, how much of that do you think is at risk, I guess, today of needing to be charged off?

Speaker Change: <unk>, obviously, they're still distress in the in the the truckers segment.

Jefferson Lee Harralson: Our gain on the sale of loans was basically flat in the quarter. Another notable item was $2.5 million in unrealized losses on equity investments that we do not expect to repeat regularly. Operating expenses on page 14 came in at $138.8 million, which was up $3.5 million from last quarter.

Speaker Change: You expect it to come down to you I guess, the 85 to 95 basis point of total charge off level at some point later this year, but I'm just wondering on that long haul trucking the $49 million. That's left how much of that do you think is at risk I guess today are of needing to be charged off.

Speaker Change: I'm not sure I have an answer for you on that. I think maybe the best thing I could give you is that we do a refresh of public score, absolute probability of default. It's kind of like a FICO for small business, and I think that number is like a 15%. So that would be one way to identify the higher risk population of that group. But it's a really granular portfolio, so short of that, there's no risk rating that goes on. This is small business, $100,000, $200,000 loans.

Speaker Change: Yeah, I'm not sure I have an answer for you on that I think maybe the best thing I could give you is that the way we do a refresh of you know public score absolute probability of default, it's kind of like a FICO for small business.

Jefferson Lee Harralson: The primary reason for the increase is a $3.2 million negative swing in our group medical insurance costs. We self-insure, and our medical costs came in higher than expected and required us to build our reserve sum in the fourth quarter. By excluding this event, our expenses were essentially flat.

Speaker Change: And.

Speaker Change: I think that number is like a 15%.

Speaker Change: So so that would be you know one way to identify the higher risk population of that group.

Jefferson Lee Harralson: Let's talk seasonality a little bit. The first quarter is our seasonally worst quarter. Besides one less day this year in the first quarter, it's seasonally the slowest for SBA and Navitas in their corresponding loan sales. Mortgage volumes are picking up a little bit with lower rates, but remain seasonally slow until spring. We will have lower group medical costs by about $1.7 million, but we will also have a FICA restart and other expense accruals. Net-net on the expense side, I'm expecting them to be essentially flat for the first. On the net interest margin, the securities transaction is expected to take our yield up to the 310 range, which is a four basis point benefit to the net interest margin. Our loan yields should continue to increase, and we are expecting our cost of funds increases to slow down.

Speaker Change: But it's a it's a you know really granular portfolio. So short of that I don't there's no risk rating that goes on at this is you know small business hundred thousand 200000 dollar loans.

Speaker Change: Okay. Is there anything, I guess, economically that could help that segment? I mean, would lower rates do anything to help? I mean, I guess it might all be dependent on invoice size, freight invoices, but anything out there that might be able to help this thing out externally?

Speaker Change: Okay is there anything I guess economically they could could help that segment I mean, but lower rates do anything to help I mean, I guess it might all be dependent on an invoice size.

Speaker Change: Freight invoices, but anything out there that might be able to help this thing out externally.

Speaker Change: Yeah, so I think it's more business related than it is interest rate related. So the value of the tractors went down pretty dramatically towards the end of last year, or really in the second half. And so I think it's more about the value of the tractors and the demand for trucking. You know, a bunch of retailers got overloaded with inventory and demand went down. So to me, the root cause is really demand of transportation.

Speaker Change: Yeah. So I think its more business related than it is interest rate related so the value of the tractors went down pretty dramatically towards the end of last year or really in the second half and so I think it's more about the value of the tractors and the demand.

Speaker Change: For tracking you know they are a bunch of our retailers got overloaded with inventory and demand went down so it's to me it's really.

Jefferson Lee Harralson: We still have new CDs coming on at higher rates than maturing ones, and DDA could shrink a bit, but we are starting to push back and lower some of our promotional rates. Our margins should be relatively flat in Q1, somewhere between minus 2 and plus 2, basically. Moving to credit quality, net charge-offs were 22 basis points in the quarter, with the bank being very low at just 5 basis points. Our MPAs were essentially flat.

Speaker Change: The root cause is really demand of transportation.

Speaker Change: Okay understood and then I guess, just lastly is more on M&A I mean, you guys. Obviously, you've been very active over the years, how do you feel about M&A conversations in 'twenty 'twenty four and the likelihood of maybe looking to bolster some of your markets, maybe like Florida like you mentioned in terms of adding scale there even further.

Speaker Change: Lastly, more on M&A. You guys have been very active over the years. How do you feel about M&A conversations in 2024 and the likelihood of looking to bolster some of your markets, maybe like Florida, like you mentioned, in terms of adding scale there even?

Speaker Change: Yeah, so, you know, our strategy remains consistent. We like smaller deals in markets where we are, where we can be more additive. And, you know, at the end of last year and as we come into the first quarter, you know, M&A, I think, is generally less likely because of the mark.

Speaker Change: Yeah. So you know our strategy is remains consistent we like a smaller deals in markets, where we are where we can be more additive and you know it at the end of last year and as we come into the first quarter. You know M&A I think is generally less likely because of the marks.

Jefferson Lee Harralson: Our special mention plus substandard was improved slightly and down from a year ago. Our breakout on the Navitas losses is on page 17. Last quarter, we broke out long-haul trucking for the first time.

Speaker Change: And, you know, with high marks, you have to allocate more capital to an M&A transaction with questions about the economy. Then you have to ask a question whether or not you want to do that or not. Now, so my view has been that an actual transaction in 24 is not as likely as it has been in the past for those reasons.

Jefferson Lee Harralson: We are having higher losses in this small book, as Len talked about in his opening statement. This quarter, the book shrunk from $57 million to $49 million, and of that shrinkage, we had $4.4 million in losses. We changed our practice at Navitas to mark down repossessed collateral at the repossession date. This had the impact of recognizing losses sooner than we had been, and this added $1.8 million, or 47 basis points, to the Navitas loss rate discussion. We continue to believe the Navitas losses will stabilize in the 85 to 95 basis point range later this year. Navitas losses, excluding long haul, were 96 basis points, and we are putting on new loans in the 10.5% range. I will finish on page 15 with the allowance for credit losses. We set aside $14.6 million to cover $10.1 million in net charges.

Speaker Change: And you know it with high marks you have to allocate more capital to an M&A transaction with questions about the economy, then you'll have to ask a question whether or not you want to do that or not now. So my view has been that an actual transaction in 'twenty for us.

Not as likely as it has been in the past for those reasons now.

Speaker Change: Now, you know, obviously, you know, as rates come down, then those marks get less. As you get clarity about the economy, your comfort in using your capital becomes greater. So, look, could you do a small deal in one of our markets, you know, happen? Yes. I don't think it's overly likely. I think 25 is kind of when you'll see more M&A activity come online.

Now you know obviously you know as rates come down then those marks get less as you get clarity about the economy your comfort in using your capital becomes greater.

Speaker Change: So look could you do a small because it's a small deal in one of our markets. You know happen, yes, I don't think it's overly likely I think 25 is kind of when you'll see more M&A activity come online.

Speaker Change: Okay, that makes sense. Thanks, guys.

Speaker Change: Okay that makes that makes sense. Thanks guys.

Speaker Change: Thank you, Chris.

Speaker Change: Thank you Graham.

Speaker Change: Our next question comes from Catherine Mueller from KBW. Please go ahead with your question.

Speaker Change: Our next question comes from Catherine Mealor from K B W. Please go ahead with your question.

Jefferson Lee Harralson: This had the impact of building the ACL slightly in the quarter. With that, I will pass it back to Len. Thank you, Jefferson.

Speaker Change: Thanks. Good morning. Good morning, Catherine.

Speaker Change: Thanks, Good morning, good morning Catherine.

Catherine Mueller: um let's just start with just your gross outlook i know this quarter was just a little bit slower and you talked about that and your prepared remarks but just we're thinking about how you think about loan growth maybe just

Speaker Change: Okay.

Catherine Mealor: Just start with just your growth outlook I know this quarter was just a little bit slower and he talked about that in your prepared remarks, but just thinking about how you think about loan growth maybe just.

Herbert Lynn Harton: Great comments on the quarter. As we look back at 2023, I am proud of the way our teams responded to the many challenges the industry faced. In spite of industry-wide concerns over liquidity and deposit stability, we were able to grow customer deposits by over 8% during the year, excluding mergers. We know from our internal surveys that our customer service scores grew significantly from already high levels.

Catherine Mueller: in the first part of the year, and then as we see rate cuts, what you think that will do to net loan growth maybe in the back half of the year.

And in the first part of the year and then as we see rate cut what do you think that will be a net loan growth maybe in the back half of the year.

Catherine Mueller: Good morning, Catherine. This is Rich. Good morning, Rich. For Q4, production actually came in pretty much on plan. It was the reality for us was that payoffs were greater than the forecast, and I really got into the weeds a little bit on that. And throughout our markets, we just had a fair amount of customers sold their business or they sold their owner-occupied real estate and did a sale lease back. So that was not in our projections. That was a little higher. The other thing, as we think about this quarter and next year or this year, is the thing that creates a lot of opportunity for us are the continued merger disruptions and the fact that some of our competition has fairly high loan-to-deposit ratios and just really aren't in the game right now. So I think we are going to see it's going to be a low to mid-single digit, but I think we're going to be just fine on loan growth. And I think we're actually in. That merger disruptions will also provide talent opportunities for us as well. So we continue to want to be opportunistic on that. But having said all that, that's why I'm feeling good about where we are in Q1 and 2024.

Speaker Change: Good morning, Catherine This is rich one enrich for a Q4 production actually came in pretty much on plan. It was the reality for US was that payoffs are greater than the forecast and I really got into the weeds, a little bit on that and throughout our markets. We just had a fair amount of customers sold their business.

Herbert Lynn Harton: We added two very high-quality banks to the franchise with Progress and First National Bank of South Miami. Both have been performing very well and ahead of my expectations. We strengthened our customer-facing teams with new leadership at the state level in Tennessee and Florida, as well as significant market hires in Northwest Georgia, Atlanta, Orlando, Nashville, Knoxville, and middle market banking. We hired a new leader for wealth management to drive the expansion of that business. We strengthened our support and control teams as well with a new chief audit executive and several important additions in credit, risk, and technology. We were named the best bank to work for by American Banker for the seventh consecutive year.

Speaker Change: Or are they sold their owner occupied real estate and did a sale lease back. So that was that was not in our projections that was a little higher and the other thing as we think about this quarter and next year or this year.

Speaker Change: As you know the thing that creates a lot of opportunity for US are the continued merger disruptions and the fact that some of our competition has fairly high loan to deposit ratios and just really aren't in the game right. Now. So I think we're gonna see it's gonna be a low to mid single digit, but I think we're gonna be just fine on loan growth.

Herbert Lynn Harton: We rebranded the company with our fourth refresh in our 70-year history. We added another outstanding board member with highly relevant experience to help guide our continued growth. All were outstanding accomplishments for the year.

Speaker Change: And I think we're actually in that merger and disruptions will also provide talent opportunities for us as well. So we continue to want to be opportunistic on that but having said all of that that's why I'm feeling good about where we are in Q1 and in 'twenty 'twenty four.

Herbert Lynn Harton: However, our financial results for 23 did not meet our expectations. Much of the shortfall was driven by the margin contracting more rapidly than we expected. Part of the reason for that is that we reacted appropriately, I believe, to the turmoil in the spring and increased deposit rates more rapidly than expected and perhaps more than required. We also realized we had let our assets become less interest rate sensitive than we would have liked. We underperformed in credit due to a miss on a large shared national credit, as well as entering into a small high-risk segment within our Navitas book, of which we have since ceased origination.

Speaker Change: But on the rates down translating to demand question, I think a normal shaped curve would really help. When you have a variable rate loan, we're trying to price it in the mid-eighths right now. It's just a lot of people don't want to do that loan, even if they think the rates are coming down. So I think if you've got lower rates and a more normal curve, I think you'd see some better demand, but then at the same time, lower rates is implying a slower economy at the same time. But I think a normal curve would be very helpful. And I'll throw one more thing on deposits. We do have deposit growth in our budget for next year. We have the seasonality outflows in Q1, I believe, so I wouldn't be surprised to see deposits down a little bit in Q1. But we're pretty optimistic. We've been growing deposits pretty well, and we think we'll have net growth in 2024.

Speaker Change: But on the rates down translate into two demand question I think a normal shaped curve would really help when you have a variable rate law and we're trying to price it in the mid eights right now.

Speaker Change: A lot of people don't want to do that won't even if they think the rates are coming down. So I think he got lower rates on a more normal curve I think you'd see a.

Speaker Change: Some better demand, but at the same time or rates is implying a solar economy at the same time, but I think a normal curve would be.

Speaker Change: Very helpful and I'll throw one more thing on deposits now we do have deposit growth N R.

Speaker Change: Our budget for next year, we will have the seasonality.

Herbert Lynn Harton: Fortunately, our belief in managing concentrations, including fixed rates, and not betting the bank allowed us to maintain performance, which while okay from a peer perspective, is not at the level we strive to deliver. 2024 will be an improvement. We're focused on actively managing rate exposures and growing our net interest margin. We expect our relative credit results to improve in 24. We also see a great environment for taking market share. Merger disruptions continue, providing us opportunities to add talent.

Outflows in Q1, I believe it's I wouldn't be surprised to see deposits down a little bit in Q1, but we're pretty optimistic we've been growing deposits pretty well and we think we will have a net growth in the 'twenty 'twenty four.

Speaker Change: And on your comment that you're now liability sensitive, Jefferson, I guess two questions within that. I'm assuming a lot of that is coming from your just ability to lower deposit costs when we start to see rate cuts, just given that that kind of was surprisingly more higher than expected as we move through the year. Just kind of curious on that just big picture. And then secondly, within that, what do you see amount of loans that you fixed rate loans that you expect to mature and reprice in 2024?

Speaker Change: Okay.

Speaker Change: Your comment that you're in a liability sensitive Jefferson.

Speaker Change: Just two questions within that I'm, assuming a lot of that is coming from here just to lower deposit costs, when we start to see rate cuts.

Herbert Lynn Harton: Some of our competitors are liquidity challenged, also providing opportunities for us to grow. While the overall demand for credit may be lower if the economy slows, we believe we are well positioned to grow our lending business regardless. Our customer service scores and responsiveness to our customers puts us in a great place to be able to continue to grow low-cost deposits as well. On the expense side, we have just completed some difficult decisions in putting together our budget, and we will continue to manage our costs actively as the year unfolds. 24 will be a strong year for United and will set us up well to outperform in 25, which is our goal.

Speaker Change: Just given that that kind of was surprisingly more higher than expected as we move through the year just kind of curious on that Big picture and then secondly within that what keep the amount of loans that you see.

Speaker Change: Fixed rate loans that you expect to mature.

Speaker Change: Reprice in 2024.

Speaker Change: Okay, so.

Speaker Change: Okay. So.

Speaker Change: Let me get – remind me of the first question. Oh, yeah. How do we – How the liability – because it's interesting. Like, you've been asset sensitive for so long, and now you're liability sensitive. And –

Speaker Change: Let me get remind me the first question.

Speaker Change: Uh huh.

Speaker Change: Oh yeah.

Speaker Change: Yeah, how do we how the liability it's.

Speaker Change: Interestingly he'd been asset sensitive for so long and now you're liability sensitive then.

Speaker Change: This quarter has been really interesting because different banks have answered that question differently than I would have expected all over the past few weeks. I'm just kind of curious what's driving that. Well, it's hard on the assumptions, but I would say we're temporarily liability sensitive because we do have more assets tied to SOFR and prime than we have liabilities. So you might think of that as traditionally asset sensitive, but I would say that those numbers are closer than they ever have been before because of this $3.6 billion that we have actually tied to on the liability side tied to SOFR and prime. So that number would have been $600 million pre-Silicon Valley.

Speaker Change: Okay.

Speaker Change: Or is it really interesting is different banks has answered that question differently than I would've expected.

Herbert Lynn Harton: I appreciate your support and interest, and now we all look forward to your questions. Ladies and gentlemen, at this time, we'll begin the question and answer session. To ask a question, you may press star and 1 on a touch-tone telephone. If you are using a speakerphone, we do ask that you please pick up your handset prior to pressing the button.

Speaker Change: Over the past few weeks, we've just kind of curious.

Speaker Change: What's driving that well, it's hard on the assumptions, but I would say we're temporarily liability sensitive because we do have more assets tied to so far in prime than we have liabilities.

Speaker Change: So that might you might think of that as traditionally asset sensitive, but I would say that those numbers are closer than they ever had been before because of this $3 $6 billion that we have actually tied to all on the liability side tied to sort of a friend prime so that number would have been $600 million pre.

Operator: To withdraw your questions, you may press star and... Once again, that is star and then one to ask a question. We'll pause momentarily to assemble the roster. And our first question today comes from Michael Rose from Raymond James. Please go ahead with your question. Hey, good morning, everyone.

Speaker Change: Silicon Valley so.

Speaker Change: The numbers are much closer on the assets that are going to move directly with rates. And then from there, you're not going to see a lot of prepayments on the first 100 basis points move because these mortgages are pretty far out of the money, so they're behaving more like fixed-rate loans temporarily. So you get that benefit. Now, that's not going to be as rates go way down, but in the near term, you're not going to see increases, we don't think, of prepayments because of that. So it's a little bit peculiar as I think we'll end up assets since the prepayments are just so far out of the money.

Speaker Change: The numbers are much closer on the assets aren't going to move directly with rates and then from there.

Michael Rose: Thanks for taking my questions. I had a bunch of calls this morning, but sorry if I missed this, but Jefferson, can you just give us your, you know, what rate outlook you guys have embedded you know into your outlook, and then you can describe if it's not the forward curve, what the sensitivity would be if you were to assume the forward curve, and then if we did say higher for longer, and let's just say we didn't get any cuts this Great, yeah, Michael Michael, great question. So on the margin when we are giving the guidance that plus two to minus two, I'm not having any rate hikes in there or, I'm sorry, rate cuts in there?

Speaker Change: Not going to see a lot of prepayments on the first 100 basis points move because these mortgages are pretty far out of the monies that are behaving more like fixed rate loans temporarily until you get that benefit now that's not going to be as rates go way down but in the near term you're not going to see increases we don't think of.

Speaker Change: Repayments because of that.

Speaker Change: So it's a little bit peculiar as I think we'll end up asset sensitive about the the prepayments are just so far out of the money.

Speaker Change: Now on the

Speaker Change: Now on the.

Speaker Change: Fixed rate loan question, if I answered that one, I hope I did, is that if you look at

Speaker Change: Fixed rate loan question, if I answered that one I hope I did is that if you look at variable rate loans that are.

Speaker Change: variable rate loan.

Speaker Change: that are

Michael Rose: And in that environment, we are expecting that the margin will increase throughout the year as we're, I think, near the top of our deposit beta cycle. We've had a 42% deposit beta cycle to date. We're projecting a peak at 45%. If rates were to follow the forward curve, I think we'd get a little bit of a boost in there. If you look at our analysis, we're a little bit liability-sensitive right now, so I think that we'd get an extra. If you follow the exact forward curve, you might get five to seven basis points positive for the year if you follow the exact forward curve currently today. Okay, that's helpful. And where does that assume that the NIB mix, the non-distributing mix, kind of troughs in your modeling?

Speaker Change: that are variable or scheduled to reprice within a year that you add to it.

Speaker Change: They are variable or are scheduled to reprice within a year.

Speaker Change: Add to it.

Speaker Change: Fixed rate loans that mature within a year, it moves from about 32, 33% to 36% with adding in the fixed maturity. So you have 3%, you're adding 3% to the floating rate category if you add in

Speaker Change: Fixed rate loans that mature within a year.

Speaker Change: It moved from about 30% to 33% to 36% with adding in the fixed maturity. So you have 3%, you're adding 3% to the floating rate category. If you add in.

Speaker Change: Fixed rate loans soon to mature.

Speaker Change: Fixed rate loans for them to mature.

Speaker Change: So 36 with that.

Speaker Change: The 36 with that.

Speaker Change: got it so that 36 that 6.6 billion or 30 for six of ones that includes six straight that will mature this year plus your variable reliance got it

Speaker Change: Scott that 30 set that $6 6 billion or 30% of the ones that include extra rate that will mature this year correct.

Speaker Change: Got it right.

Speaker Change: All right, very helpful. Thank you, Jefferson.

Speaker Change: All right very helpful. Thank you Jefferson.

Yeah.

Speaker Change: Our next question comes from Russell Gunther from Stevens. Please go ahead with your question.

Speaker Change: Our next question comes from Russell Gunther from Stephens. Please go ahead with your question.

Russell Gunther: Hey, good morning, guys. Just a few follow-ups. One on the deposit data on the way down. So Jefferson, here you are on the 45% peak on the way up. But given the dynamics we just talked about with the funding profile and rate sensitivity there, do you guys think that that can ultimately outperform on the way down? And how are you thinking about that from a timing?

Russell Gunther: Hey, good morning, guys I just had a few follow ups.

Jefferson Lee Harralson: Yeah, so that would shrink to the 27% range. We're at the 28% range now, and we're seeing that slow down. So right around 27.

Speaker Change: One on the deposit beta on the way down So Jackson hear you on the 45% peak on the way up.

Michael Rose: Okay, perfect. And then, Lynn, I think you just made some comments about just some tough decisions around the budgeting process. I'm sorry if I missed it, but can you just talk about some areas where, you know, you're maybe scaling back a little bit and maybe some areas where you're investing and just how that translates. And again, sorry if I missed it, to the kind of expense outlook as we think about this year. I think previously you guys were talking about about a 3% year-on-year growth in 24 last quarter. Thanks. That's right.

Speaker Change: But given the dynamics, we just talked about with the funding profile and rate sensitivity. There do you guys think that can ultimately.

Outperform on the way down and how are you thinking about that from a from a timing perspective.

Jefferson Lee Harralson: Yeah, so we are trying to, we're pushing for...

Speaker Change: Yeah. So we are trying to we're pushing for.

Jefferson Lee Harralson: Having it outperform before rates go down. Rich talked about some of the rates that we've lowered. I don't know. I've seen some of the calls where some banks are talking about lowering, but I don't know if that's going on across the industry right now. So I think we can begin to outperform before you start seeing rates come down.

Speaker Change: Having it outperform before rates go down and rich talked about some of the rates that we've lowered our I don't know I've seen some of the calls for some banks are talking about lowering but I don't know if that's going on across the industry right. Now. So I think we can began to outperform before you start seeing rates come down now.

Herbert Lynn Harton: Yeah, so I'll start and then Rich will kick in. You know, we really took a hard look at our producers and kind of who's producing, who's not, and made some difficult choices there. On the technology side, which projects do we really need to do, which projects can we cut out? Make some, you know, the branch decisions get more and more difficult only because, you know, all of our branches are profitable, but which ones do we need to consolidate and shut down? Those are some of the bigger items.

Jefferson Lee Harralson: As we all know, models have a lot of assumptions in them, and one of the biggest assumptions is going to be how competitors react. There are a lot of CDs maturing in the first half of this year. There might be some more liquidity-constrained banks that we're going to need to price against to hold our balances where we want them to be. So it's a really tricky year to forecast because, you know, if we come into some of our deposit pricing meetings and we're hearing about specials, last year, you'll remember, there was a special in Tennessee that we all had, a lot of us had to, I don't know about match, but get close to. Competition is going to be a big piece of it, but we think we can chip at it with our strong balance sheet and our strong deposit base before rates start going down because competition.

Speaker Change: As we all know models have a lot of assumptions in them and one of the biggest assumptions is gonna be how competitors react there are a lot of Cds maturing in the first half of this year.

Speaker Change: There's going to be there might be some more liquidity constrained banks that we're going to need to price against a hold our balances where we want them to be so it's a it's a really tricky year to forecast because you know if we come into some of our deposit pricing meetings and we're hearing about specials last year, you'll remember there was a special in Tennessee that we all had.

Herbert Lynn Harton: And, Rich, I don't know if you'd like to add anything to that or Jefferson's list. No, just, you know, as you go through and look at, we've done this every year now in terms of the branches, so we're really looking strategically and does it make sense to close branches that are near another branch so they're enjoying the economics of moving because we know if we close a branch near another branch, then we're going to keep about 90% of the deposits. And so we've gone through that. Exercise, and those have been identified, and notifications have gone out to the regulators.

Speaker Change: A lot of it had to I don't know about match, but get close to our competition is going to be a big piece of it but we think we can ship out it with our strong balance sheet and our strong deposit base before rates started going down because.

Jefferson Lee Harralson: You know, relying on our down betas being more than other banks could be tough because they just don't know what the competition is going to be doing.

Speaker Change: You know relying on our down betas being more than the other banks that could be tough because it just don't know what the competition is going to be doing.

Rich Bradshaw: So we're down the road on those. I'll just add some detail on that. So as we went into the budget, we didn't have branch cuts in there.

Jefferson Lee Harralson: The feedback from the market or people out in the field is that the exception pricing request is way down. So we're not seeing the same demand for pricing increases and matching that we've seen previously.

Speaker Change: 10%.

Speaker Change: The feedback from the market or people out in the field is that the exception pricing request is way down right. So we're not seeing the same demand for pricing increases and matching that we've seen previously.

Jefferson Lee Harralson: Now we're planning on closing four branches in 2024. In terms of investments, we are excited about wealth management. I don't think you're going to see a huge change in 2024, but as we look in years beyond that, I think we picked up two great trust and wealth management businesses in both of our Florida acquisitions. And really, as we've come to understand that business, we know that our client base actually skews wealthier than average, probably wealthier than most people would think. We think it's a great opportunity to take that throughout the footprint and bring in a really strong leader for that. So that's one investment area that we're looking at. Great

Speaker Change: Thanks, guys. And then just switching gears a bit to the expenses. So the $3 million swing this quarter on the self-insured, I would think that could be pretty volatile.

Speaker Change: Thanks, guys and then just switching gears a bit to the expenses. So the 3 million swing this quarter on the self insured.

Speaker Change: I would think that can be pretty volatile but.

Speaker Change: contextually. Is that an elevated result and a bit one-timey in nature? And then just bigger picture, I hear you guys actively trying to manage for the year. How are you thinking about just overall non-interest expense growth for 2021?

Speaker Change: Just contextually is that an elevated and result in a bit one timing in nature and then just bigger picture I hear you guys actively trying to manage for the year. How are you thinking about just overall.

Speaker Change: Noninterest expense growth for 'twenty four yes, I think yes, I think the.

Speaker Change: Yes, so I think the...

Speaker Change: 3% range, I think Rich may have mentioned, or maybe a questioner mentioned, I think that 3% range is a good range to think about. And where I'll say the fourth quarter was one time, it'll end up being, there was some catch-up element in there, it'll end up being a bit of a higher run rate for that number in 2024, as we have a higher expense run rate, but it won't be to the level of what it was in Q4, and I think you'll see it, again, a $1.7 million improvement.

Speaker Change: The 3% range that I think rich may have mentioned or maybe a question Ive mentioned I think that 3% range is a good range to to think about.

Speaker Change: Well I'll say the fourth quarter was one time it'll end up being suckered.

Michael Rose: I appreciate the puts and the takes. And maybe, just finally, for me, can you just talk about, you know, the kind of borrower demand in your markets? I think previously you talked about kind of a mid-single digit growth expectation for this year. I certainly understand that you're in some really strong markets but that, you know, borrower demand has probably come down a little bit. So just wanted to get a sense for where you see some opportunities. And then I assume that you're probably not necessarily looking to grow your office portfolio or some of those other, you know, quote, unquote, higher risk areas. But just some commentary there would be great.

There were some catch up element in there they'll end up being a bit of a higher run rate for that number in 'twenty. 'twenty. Four is we have a higher expense run rate, but it won't be to the level of what it was in Q4 and I think you'll see it.

Speaker Change: And at $1.7 million improvement.

Speaker Change: and Matt Weinheim in the first quarter.

Speaker Change: And that line item in the first quarter.

Matt Weinheim: Okay, got it. Appreciate the clarification, Jefferson. And then just last one from you guys. The low to mid-single digit loan growth for 24, what are you guys assuming out of Naveed?

Speaker Change: Okay got it I appreciate the clarification Jefferson and then just last one for me guys.

Speaker Change: The low to mid single digit loan growth for 'twenty four what are you guys assuming out a little bit.

Rich Bradshaw: Thanks. Well, good morning, Michael. This is Rich. And I think you summarized it pretty well, I have to say. But we are, as you said, in the best markets. We remain optimistic. Certainly looking for our new hires from late last year and our new hires that we just made. So I'm excited we've made some more recent big hires. And these are both people that we've been recruiting for over a year. And so we brought in Evan Ryan.

Speaker Change: I'll be mid-single digit there, too.

Speaker Change: Yes that would be mid single digit there too.

Speaker Change: Okay, great. That's it for me. Thanks for taking my question.

Speaker Change: Okay great.

Speaker Change: That's it for me thanks for taking my question.

Speaker Change: Yeah.

Speaker Change: Our next question comes from David Bishop from Hofty Group. Please go ahead with your question.

Speaker Change: Our next question comes from David Bishop from Hockey Group. Please go ahead with your question.

David Jason Bishop: Yeah, good morning.

David Jason Bishop: Yes, good morning.

David Jason Bishop: Jeff Jefferson, you spent some time, you know, doing a deeper dive into DaVita, but here's maybe an update on what you're seeing within the senior care portfolio, any update in terms of credit trends and how comfortable you are in terms of, you know, getting your arms around potential loss content within that segment.

David Jason Bishop: Hi, Dana.

David Jason Bishop: I understand that you spend some time doing a deeper dive into davita, but maybe an update on what youre seeing within the senior care portfolio any update in terms of credit trends and how comfortable you are in terms of getting our arms around potential lost contact with them in that segment.

Rich Bradshaw: Evan is our new Central Florida president in Orlando. And we brought in Spencer Wiggins, who's our new market president in Mobile, Alabama, and has opened up an LPO there. And there, both these gentlemen bring their portfolios with them. I mean, they both carry a portfolio.

David Jason Bishop: Yeah. So, David, it's Rob Edwards. In terms of senior care, it feels like the environment is stable. It doesn't really feel like it's going back to where it was pre-COVID. You know, just the cost of labor is different. And, of course, interest rates are different and the cost of goods. Really, it's an operating business.

David Jason Bishop: Yes, so David it's Rob Edwards in terms of senior care it feels like the environment is stable.

Rich Bradshaw: And either they have or will bring some additional lenders, so we're excited about that to kick in with some of the lift-outs that we did late last year. The Tennessee one, which was in Knoxville, is really kicking in.

David Jason Bishop: It doesn't really feel like it's it's going back to where it was pre COVID-19. You know just the cost of labor is different and of course interest rates are different and the cost of goods.

Rich Bradshaw: And by kicking in, I mean closed loans, not just pipeline. And so we're excited about that. And we're also excited about our continued investment in Florida. For the first time, Florida led the bank.

David Jason Bishop: Really it's an operating business, we keep it in the <unk> portfolio, but it's it's got many operating business dynamics to it.

Rob Edwards: We keep it in the Cree portfolio, but it's got many operating business dynamics to it. But it feels like it's stable. It's not going back. We haven't seen a ton of improvement. The improvement we see is kind of slow and steady is the way I would think of it. So we've got, in terms of lost content, we've got three properties in non-accrual right now. We've charged them down to the appropriate appraised value, we believe. You know, there may be additional lost content in there or there may be recovery content in there. And we continue to monitor those very closely and work to resolve them. So I would just say the environment is stable. We have ceased originations in that portfolio. And so it's in wind-down mode, and you see that on the slide. Thank you.

Rich Bradshaw: Q4. Q4 in production. And we're really excited about that. Hey, thanks for taking all my questions. I appreciate it. Our next question comes from Graham Dick from Piper Sandler.

David Jason Bishop: But it feels like it's stable, it's not going back we haven't seen a ton of improvement of the improvement. We see is kind of a slow and steady is the way I would think of it. So we've got in terms of our loss content. We've got three properties are in non accrual right now he's a charge.

Graham Dick: Please go ahead with your question. Hey, good morning, guys. Morning, Graham.

Graham Dick: Hey, I just wanted to circle back to the NIM quickly, specifically on the deposit betas. Jefferson, I think you said you're expecting to kind of catch up with the peers in terms of bringing your beta down if rates were to come lower. What are you expecting, I guess, in terms of deposit betas on some of the initial cuts if they were to occur in 2024? Do you think there'll be a lag, or do you think it will sort of be linear where you have a set of index deposits they're going to reprice down immediately? Yeah, so we have $3.6 billion of index deposits, so some of that would be immediate. We're using for the non-maturity deposits, we're using kind of a high 30s, 37, 38, 39 percent range.

David Jason Bishop: Them down to.

David Jason Bishop: The appropriate appraised value we believe.

David Jason Bishop: There may be a additional loss content in there are there may be recovery content in there.

David Jason Bishop: And we continue to monitor those very closely.

And work to resolve them so.

David Jason Bishop: I would just say the environment is stable, where we have ceased originations are in that portfolio.

David Jason Bishop: And <unk> and so it's it's in wind down mode, and you see that on the slide.

Speaker Change: God, I appreciate the color. Then one follow-up question, you spoke about the opportunities, I think, Lynn, in terms of wealth management. Any other opportunities to augment some of the other fee income lines? I know some of your peers are seeing the ability to add some pretty seasoned mortgage producer when

Speaker Change: Got it appreciate the color and then one follow up question you spoke about the opportunities I think land in terms of wealth management any other opportunities to augment some of the other fee income lines I know some of your peers are seeing and the ability to add.

Jefferson Lee Harralson: But we also believe that we can maybe get some back, possibly before rates start going down. We've lowered rates in our promotional money market CD or money market or ICF. So we think we can use the strength of our balance sheet, no wholesale funding, and the good deposit growth of this year. Lynn mentioned the 8% loan-to-deposit ratio. It's 79%. So we believe that we can maybe start getting some of this back before rates start going down, and the rich may have some money. Yeah, I'll add a little, Kyle.

Speaker Change: To add some pretty seasoned mortgage producer when when when the mortgage market recovers or any any opportunities along those lines.

Speaker Change: when the mortgage market recovers here. Any opportunities along those lines to augment fee income this year? Thanks.

Speaker Change: But our fee income this year.

Speaker Change: Great questions. I think the wealth is going to be the primary one. I think mortgage with where rates are, we've been mainly focusing on increasing the profitability there, not planning for an increase in revenue, but it's really on the very bottom. So if you get rates lower, you might see some. But our initiatives, maybe not. I was looking at Rich. And on the wealth management, it's where we're most excited about because of hiring.

Speaker Change: Great question, we're looking at.

Speaker Change: The.

Speaker Change: I think the wealth is going to be the primary one I think you know mortgage with where rates are been mainly focusing on increasing the profitability there and not planning for an increase in revenue, but it's really on the very bottom. So if you get rates lower you might you might see some but our initiatives maybe not maybe.

Jefferson Lee Harralson: At the start of the year here, we brought down our money market special by 35 basis points. There was over $2 billion in that product. So that's, you know, just doing the math, that's about $7 million savings right there. And as you mentioned, Jefferson, the ICS, the treasury manager, really hard to bring that down by a million. And I will tell you, we're working on a pilot in Atlanta to bring it down further. Okay, that's really helpful.

Speaker Change: I was looking at rich and.

Speaker Change: And and on the wealth manager is where we're most excited about because of our hiring.

Speaker Change: A strong leader in that area, but I'm thinking about other areas. The gain of loans sold, I think, should be relatively similar, but what do you think about the SBA? Yeah, the SBA is a great product in an environment like this, and so I think you saw the announcement. We came in 25th in the country in dollars out last year, and we think that's just going to get bigger this year. And as our hiring discussions continue, I will tell you there's a really material one going on there that I've been also involved in, so we look forward to that. But as you're aware, we've continually added lines of business here since I've been here, since Lynn brought me on, and we're just going to continue that. It's going to be opportunistic. This is kind of an interesting year, and we'll all wait to see what the Fed does and stuff. So I almost think that discussion is a little bit like MSNBC. I think there's probably a more realistic opportunity in 2025 if we're looking at opening any new lines of business.

Speaker Change: A strong leader in that area, but I'm thinking about other areas could you show the gain alone sold I think should be relatively similar but what do you think about the S. P. A M.

Graham Dick: And then, I guess, turning to credit, Nevitas, obviously, there's still the stress in the trucker segment. I mean, you expect it to come down to, I guess, the 85 to 95 basis point, a total charge-off level, at some point later this year. But I'm just wondering, on that long-haul trucking, the $49 million that's left, how much of that do you think is at risk, I guess, today, of needing to be charged off? I'm not sure I have an answer for you on that. I think maybe the best thing I could give you is that we do a refresh of the public score, the absolute probability of default. It's kind of like a FICO for small businesses, and I think that number is like 15%.

Speaker Change: The SBA is a great product in an environment like this and so I think you saw the announcement we came in 25th in the country and dollars out last year, and we think that's just going to get bigger this year and as our hiring discussions continue I will tell you, there's a really material one going on there.

Speaker Change: That had been are also involved in so we look forward to that but we've as you are aware that we've continually added lines of business here since I've been here since Lynn Lynn brought me on and or just going to continue that it's gonna be opportunistic you know this is kind of an interesting year and when we all wait to see what the fed does and stuff. So I almost think.

That discussion is a little bit like M&A, I think theres, probably more realistic opportunity in 2025, if we're looking at opening any new lines of business.

Jefferson Lee Harralson: So that would be one way to identify the higher-risk population of that group. But it's a really granular portfolio, so short of that, there's no risk rating that goes on. This is small business, $100,000, $200,000 loans.

Speaker Change: Great. Appreciate the call. Thank you.

Speaker Change: Great appreciate the color. Thank you.

Speaker Change: Our next question comes from Christopher Marinac from Janie Montgomery Scott. Please go ahead with your question.

Speaker Change: Our next question comes from Christopher Merrimack from Janney Montgomery Scott. Please go ahead with your question.

Christopher William Marinac: Thanks. Good morning. I wanted to ask about deposit retention at the acquired banks the last year or so. Is that kind of where you wanted it to be? And then, you know, how does it spill over into the deposit growth that you're looking for this year? Will you see deposit growth from those new markets or is it going to be more from the core UCBI franchise?

Thanks, Good morning, I wanted to ask about the positive retention at the acquired banks the last year or so.

Speaker Change: Is that kind of where you wanted it to be and then how does it spill over into the deposit growth that youre looking for this year will you see deposit growth from those new markets or is it going to be more from the core used to be a franchise.

Graham Dick: Okay. Is there anything, I guess, economically, that could help that segment? I mean, would lower rates do anything to help? I mean, I guess it might all be dependent on invoice size, freight invoices, but anything out there that might be able to help this thing out externally?

Christopher William Marinac: Sure. I'll start, Christopher. This is Rich. Let's start with progress. We announced that and closed January 1st. And then when you don't have your conversion until April, it's hard to get new money in a bank when you're converting. So since then, we've, you know, we lost some deposits at that point. But we've been building it up since. And we do see that being positive for 2024. And then, of course, the First National Bank of South Miami, whenever we do an acquisition, there's always some rundown both in deposits and loans. Some of that's planned. Some of it's not planned. But same thing. We expect that to be in good shape in 2024.

Rich Bradshaw: Sure and I'll I'll start Christopher this is rich.

Rich Bradshaw: Let's start with our progress are started.

Graham Dick: Yeah, so I think it's more business-related than it is interest rate-related. So the value of the tractors went down pretty dramatically towards the end of last year, or really in the second half. And so I think it's more about the value of the tractors and the demand for trucking. You know, a bunch of retailers got overloaded with inventory, and demand went down.

Rich Bradshaw: Ounce that and close January 1st and then when you don't have your conversion until April that's always a it's hard to get new money in a bank. When you are converting so since then that we've you know we lost some deposits at that point, but we've been building. It up since then we do see that being positive.

Rich Bradshaw: For 'twenty 'twenty four and then of course, the first National Bank of South Miami Whenever we do an acquisition there are some run down both in deposits and loans. Some of that is planned some of its not plan, but at the same thing we expect that to be in good shape in 'twenty 'twenty four.

Herbert Lynn Harton: So to me, the root cause is really demand for transportation. Lastly, more on M&A. You guys have been very active over the years. How do you feel about M&A conversations in 2024 and the likelihood of looking to bolster some of your markets, maybe like Florida, as you mentioned, in terms of adding scale there even? Yeah, so, you know, our strategy remains consistent.

Speaker Change: I might go back a couple deals and just talk about Tennessee. I think we had more runoff there than we would have liked, but we have a new leader there, Kelly Key. He's been there for a while now. We've had great hires. We're seeing better trends there. Florida, you mentioned already. Yeah, and I would add in Tennessee, yeah, that we did have some challenges there. I think we absolutely got the right person in place, and I think we'll see deposits in Q1 completely stabilized, and for the first time we'll see loan growth in Q1. That's the projection right now.

Rich Bradshaw: I might go back a couple of deals and just talk about.

Rich Bradshaw: Tennessee, I think we had more runoff there than we would have liked but we have we have a new leader there Kelly key he's been there for a while now we've had great hires.

Rich Bradshaw: We're seeing better trends there are Florida, you mentioned already yeah, and I would add in Tennessee, Yeah that we did have some challenges there I think we absolutely I got the right person in place and I think we will see deposits in Q1 completely stabilized and for the first time, we'll see loan growth in Q1, that's the projection right now.

Herbert Lynn Harton: We like smaller deals in markets where we are, where we can be more additive. And, you know, at the end of last year and as we come into the first quarter, M&A, I think, is generally less likely because of the mark. And, you know, with high marks, you have to allocate more capital to an M&A transaction with questions about the economy. Then you have to ask the question whether or not you want to do that or not.

Speaker Change: All right, great. Thank you both. That's really helpful. And then there's a quick one for Rob. You know, what are your thoughts about the criticized assets this year? We saw some improvement this quarter. Will that kind of bounce around a given range or do you have a further backdrop on that? Yeah, Chris, that's a good question. You know, if you look back to 2020, we were at 4.1 percent. The criticized was 2.6 percent. And, you know, today we're at 1.1. So I would expect it to kind of to go up, to be honest with you, just given where it is relative to where we've been historically and what would be a more normalized level.

Speaker Change: Alright, great. Thank you both that's really helpful. And then as a quick one for Rob you know what are your thoughts about the criticized assets. This year and we saw some improvement this quarter will that kind of bounce around a given range or do you have it further backdrop on that.

Yes, Chris that's a good question you know if you look back to 2020, we were at 4.1%. The criticized was 2.6% and you know today. We're at 1.1, so I would expect it to kind of the to go up to be honest with you.

Herbert Lynn Harton: Now, so my view has been that an actual transaction in 24 is not as likely as it has been in the past for those reasons. Now, you know, obviously, as rates come down, then those marks will get less. As you get clarity about the economy, your comfort in using your capital becomes greater. So, look, could you do a small deal in one of our markets, you know, happen? Yes, but I don't think it's overly likely.

Speaker Change: I'm, just just given where it is relative to where we've been historically and what would be a more normalized level.

Speaker Change: So, Rob, that'll obviously drive reserve behavior to some extent and provision that, you know, we've certainly seen you be conservative these last few quarters. So it just feels like more of the same, I guess, is my question.

Speaker Change: So Rob that will obviously drive reserve behavior to some extent in provision, but we've certainly seen you'd be conservative. So these last few quarters. So it just feels like more of the same I guess is my question.

Herbert Lynn Harton: I think 25 is kind of when you'll see more M&A activity come online. Okay, that makes sense. Thanks, guys. Thank you, Chris.

Rob Edwards: Yeah, it does. I mean, we're, you know, if you're asking about the future environment, you know, right now it sort of feels like things are stable and everybody's sort of expecting, as are we, a soft landing. And if all that works out, kind of would expect those numbers to be relatively stable. But they're so low that, you know, I like your phrase, bounce around a little bit.

Rob Edwards: Yeah. It does I mean, where you know if you're asking about the future environment. It you know right now it sort of feels like things are stable and everybody's sort of expecting as are we a soft landing. A then if if all of that works out kind of would expect those those numbers to be relatively stable.

Our next question comes from Catherine Mueller from KBW. Please go ahead with your question. Thanks. Good morning. Good morning, Catherine. Um, let's just start with just your gross outlook. I know this quarter was just a little bit slower, and you talked about that in your prepared remarks, but just we're thinking about how you think about loan growth maybe just in the first part of the year, and then as we see rate cuts, what you think that will do to net loan growth maybe in the back half of the year.

Rob Edwards: But there are so low that you know kind of I like your phrase bounce around a little bit.

Speaker Change: Great, thanks again.

Speaker Change: Great. Thanks again.

Speaker Change: Chris

Speaker Change: It's Chris.

Speaker Change: And once again, if you would like to ask a question, please press star and 1. To remove yourself from the question queue, you may press star and 1.

Chris: And once again, if you would like to ask a question. Please press star and one to remove yourself from the question queue, you May press star and two.

Speaker Change: Our next question comes from Gary Tenner from D.A. Davidson. Please go ahead with your question.

Chris: Our next question comes from Gary Tenner from D. A Davidson. Please go ahead with your question.

Rich Bradshaw: This is Rich. Good morning, Rich. For Q4, production actually came in pretty much on plan. But the reality for us was that payoffs were greater than the forecast, and I really got into the weeds a little bit on that. And throughout our markets, we just had a fair amount of customers sell their business, or they sold their owner-occupied real estate and did a sale lease back. So that was not in our projections. That was a little higher,

Gary Tenner: Thanks, guys. Good morning. Morning, Gary. Hey, just wanted to ask a couple of quick clarification points, Jefferson, on your kind of guidance around the NIM. If I understood correctly, your guidance assumed no rate cuts, but if the forward curve played out, you'd see a benefit of five to seven basis points. Is that correct? That's exactly right.

Gary Tenner: Thanks, guys. Good morning, good morning, Gary.

Gary Tenner: Hey, just wanted to ask a couple of quick clarification point structure on your kind of guidance or on the NIM if.

Gary Tenner: If I understood correctly your guidance assume no rate cuts, but if the forward curve played out.

Gary Tenner: She benefit of five to seven basis points is that correct that's exactly right.

Gary Tenner: Okay, and then...

Rich Bradshaw: The other thing, as we think about this quarter and next year or this year, is the thing that creates a lot of opportunity for us is the continued merger disruptions and the fact that some of our competition has fairly high loan-to-deposit ratios and just really aren't in the game right now. So I think we are going to see it's going to be a low to mid-single digit, but I think we're going to be just fine on loan growth. And I think we're actually in.

Speaker Change: Okay and then.

Gary Tenner: Follow-up to Catherine's question in terms of the fixed rate repricing. If you kind of rolled forward into 2025, what does the book look like there? Is there a larger slug of fixed rate maturities in 2025?

Speaker Change: Follow up to Catherines question in terms of the fixed rate re pricing if you kind of rolled forward into 2020 five what it what does the book look like there is there a larger slug of fixed rate maturities in 'twenty back. That's a great question I wanted to get back to you on that one I'd be guessing.

Speaker Change: Great question. I want to get back to you on that one.

Speaker Change: Guessing a little bit. So let me get back to you with the answer to that. That's a good question. I don't have it at my fingertips currently.

Speaker Change: I'm guessing a little bit so let me get back to you with the answer to that.

Speaker Change: A good question I don't have it at my Fingertips currently.

Speaker Change: Okay, that's all I have. Thank you.

Speaker Change: Okay.

Rich Bradshaw: That merger disruptions will also provide talent opportunities for us as well, so we continue to want to be opportunistic on that. But having said all that, that's why I'm feeling good about where we are in Q1 and 2024. But on the rates down translating to demand question, I think a normal-shaped curve would really help. When you have a variable rate loan, we're trying to price it in the mid-eighths right now. It's just that a lot of people don't want to do that loan, even if they think the rates are coming down. So I think if you've got lower rates and a more normal curve, I think you'd see some better demand, but then at the same time, lower rates are implying a slower economy at the same time. But I think a normal curve would be very helpful.

Speaker Change: That's all I had thank you.

Speaker Change: Okay.

Speaker Change: And ladies and gentlemen, at this time and showing no additional questions, I'll close today's question and answer session and turn the floor back over to Lynn Harton for any closing remarks.

Speaker Change: And ladies and gentlemen at this time in showing no additional questions I'll close today's question and answer session and turn the floor back over to Lynn Harton for any closing remarks.

Herbert Lynn Harton: Great. And again, thank you all for your time and interest and be glad to take any follow-up questions. Please reach out to Jefferson or me directly and we'll look forward to talking to you soon. Have a great day.

Okay, Great and again, thank you all for your time and interest and be glad to take any follow up questions. Please reach out to Jefferson or me directly and we'll look forward to talking to you soon have a great day.

Speaker Change: And ladies and gentlemen, with that we'll conclude today's conference call. We thank you for attending the presentation. You may now disconnect your lines.

Speaker Change: Okay.

And I'll throw one more thing on deposits. We do have deposit growth in our budget for next year. We have seasonality outflows in Q1, I believe, so I wouldn't be surprised to see deposits down a little bit in Q1. But we're pretty optimistic. We've been growing deposits pretty well, and we think we'll have net growth in 2024. And on your comment that you're now liability sensitive, Jefferson, I have two questions about that. I'm assuming a lot of that is coming from your ability to lower deposit costs when we start to see rate cuts, just given that that kind of was surprisingly higher than expected as we move through the year. Just kind of curious about that big picture.

Jefferson Lee Harralson: And then secondly, within that, what do you see as the amount of loans that you fixed rate loans that you expect to mature and reprice in 2024? Okay, so. Let me get – remind me of the first question. Oh, yeah. How do we – How do we handle the liability? Because it's interesting. Like, you've been asset sensitive for so long, and now you're liability sensitive.

And – This quarter has been really interesting because different banks have answered that question differently than I would have expected all over the past few weeks. I'm just kind of curious what's driving that. Well, it's hard to make assumptions on, but I would say we're temporarily liability sensitive because we do have more assets tied to SOFR and prime than we have liabilities. So you might think of that as traditionally asset sensitive, but I would say that those numbers are closer than they ever have been before because of this $3.6 billion that we are actually tied to on the liability side tied to SOFR and prime. So that number would have been $600 million pre-Silicon Valley. The numbers are much closer on the assets that are going to move directly with rates. And then from there, you're not going to see a lot of prepayments on the first 100 basis points move because these mortgages are pretty far out of the money, so they're behaving more like fixed-rate loans temporarily. So you get that benefit.

Operator: To fill out your questions, you may press star and then one to ask a question. We'll pause momentarily to assemble the roster, and our first question today comes from Michael Rose from Raymond James. Please go ahead with your question. Hey, good morning, everyone.

Michael Rose: Thanks for taking my questions, I had a bunch of calls this morning, but sorry if I missed this, but Jefferson, can you just give us your, you know, what rate outlook you guys have embedded into your outlook. And then, you know, can you describe, if it's not the forward curve, you know, what the sensitivity would be if you were to assume the forward curve? And then, if we did say higher for longer, and let's just say we didn't get any cuts this year, just trying to kind of map out the sensitivity of rates. I assume it's not linear, so I just wanted to get some perspective.

Jefferson Lee Harralson: Now, that's not going to be as rates go way down, but in the near term, you're not going to see increases, we don't think, of prepayments because of that. So it's a little bit peculiar as I think we'll end up with assets since the prepayments are just so far out of the money. Now on the Fixed rate loan question, if I answered that one, I hope I did, is that if you look at variable rate loans that are variable or scheduled to reprice within a year, that you add to it. Fixed rate loans that mature within a year move from about 32, 33% to 36% with adding in the fixed maturity.

Jefferson Lee Harralson: Thanks. Great. Yeah, thanks, Michael. Michael, great question.

Jefferson Lee Harralson: So, on the margin, when we are giving the guidance of plus 2 to minus 2, not having any rate hikes in there, or, I'm sorry, rate cuts in there. And in that environment, we are expecting that the margin will increase throughout the year as we're near the top of our deposit beta cycle. We've had a 42 percent deposit beta cycle to date. We're projecting a peak at 45 percent.

Jefferson Lee Harralson: So you have 3%, you're adding 3% to the floating rate category if you add in fixed rate loans soon to mature. So 36 with that, got it so that 36 that 6.6 billion or 30 for six of ones that includes six straight that will mature this year plus your variable reliance. Got it. All right, very helpful. Thank you, Jefferson. Our next question comes from Russell Gunther from Stevens. Please go ahead with your question. Hey, good morning, guys.

Jefferson Lee Harralson: If rates were to follow the forward curve, I think we'd get a little bit of a boost in there. If you look at our analysis, we're a little bit liability sensitive right now. So I think that we'd get an extra, if you follow the exact forward curve, you might get 5 to 7 basis points positive if you follow the exact curve for the year, if you follow the exact forward curve currently today. Okay, that's helpful. And where does that assume that the NIB mix, the non-discharge sparing mix, kind of troughs in your modeling?

Jefferson Lee Harralson: Yeah, so that would shrink to the 27% range. So we're at the 28% range now. We're seeing that slow down. So it's right around 27.

Russell Gunther: Just a few follow-ups. One on the deposit data on the way down. So Jefferson, here you are on the 45% peak on the way up. But given the dynamics we just talked about with the funding profile and rate sensitivity there, do you guys think that this can ultimately outperform on the way down? And how are you thinking about that from a timing perspective?

Jefferson Lee Harralson: Yeah, so we are trying to, we're pushing for... Having it outperform before rates go down. Rich talked about some of the rates that we've lowered. I don't know.

Jefferson Lee Harralson: I've seen some of the calls where some banks are talking about lowering rates, but I don't know if that's going on across the industry right now. So I think we can begin to outperform before you start seeing rates come down. As we all know, models have a lot of assumptions in them, and one of the biggest assumptions is going to be how competitors react.

Herbert Lynn Harton: Yeah, so I'll start and then Rich will kick in. You know, we really took a hard look at our producers and kind of who's producing, who's not, and made some difficult choices there. On the technology side, which projects do we really need to do? Which projects can we cut? I made some, you know, branch decisions that get more and more difficult only because, you know, all of our branches are profitable, but which ones do we need to consolidate, shut down? Those are some of the bigger items. And Rich, I don't know if you'd like to add anything to that or Jefferson's.

Jefferson Lee Harralson: There are a lot of CDs maturing in the first half of this year, so there might be some more liquidity-constrained banks that we're going to need to price against to hold our balances where we want them to be. So it's a really tricky year to forecast because, you know, if we come into some of our deposit pricing meetings and we're hearing about specials, last year, you'll remember, there was a special in Tennessee that we all had to, a lot of us had to, I don't know about match, but get close to. Competition is going to be a big piece of it, but we think we can chip at it with our You know, relying on our down betas being more than other banks could be tough because they just don't know what the competition is going to be doing. The feedback from the market or people out in the field is that the exception pricing request is way down.

Rich: No, just, you know, we, as you go through and look at, you know, we've done this every year now in terms of the branches. So we're really looking strategically, and does it make sense? And we're closing branches that are near another branch. So we're enjoying the economics of moving because we know if we close a branch near another branch, then we're going to keep about 90% of the deposits. And so we've gone through that exercise, and those have been identified, and notifications have gone out to the regulators. So we're down the road on those. I'll just add a detail on that. So as we went into the budget, we didn't have any branch cuts in there.

Herbert Lynn Harton: Now we're planning on closing four branches in 2024 and reducing production staff. In terms of investments, you know, we are excited about wealth management. I don't think you're going to see a huge change in 24, but as we look in years beyond that, I think it's, you know, we picked up two great trust and wealth management businesses in both of our Florida acquisitions. And really, as we've come to understand that business, we know that our client base actually skews wealthier than average, probably wealthier than most people would think. We think it's a great opportunity to take that throughout the footprint and bring in a really strong leader for that.

Rich Bradshaw: So we're not seeing the same demand for pricing increases and matching that we've seen previously. Thanks, guys. And then just switching gears a bit to the expenses. So the $3 million swing this quarter on the self-insured, I would think that could be pretty volatile, contextually. Is that an elevated result and a bit one-timey in nature?

Russell Gunther: And then just the bigger picture, I hear you guys actively trying to manage for the year. How are you thinking about just overall non-interest expense growth for 2021? Yes, so I think the... 3% range, I think Rich may have mentioned, or maybe a questioner mentioned, I think that 3% range is a good range to think about. And where I'll say the fourth quarter was one time, it'll end up being, there was some catch-up element in there, it'll end up being a bit of a higher run rate for that number in 2024, as we have a higher expense Okay, I got it. Appreciate the clarification, Jefferson. And then just last one from you guys. The low to mid-single digit loan growth for 24, what are you guys assuming out of Naveed? I'll be mid-single digit there, too.

Michael Rose: So that's one investment area that we're looking at. Great, I appreciate the puts and the takes. And maybe just finally for me, can you just talk about, you know, borrower demand in your markets? I think previously you talked about kind of a mid single-digit growth expectation for this year. Certainly understand that you're in some really strong markets but that, you know, borrower demand has probably come down a little bit. So just wanted to get a sense for where you see some opportunities. And then I assume that you're probably not necessarily looking to grow your office portfolio or some of those other, you know, quote unquote, higher risk areas, but just some commentary there would be great. Thanks. Well, good morning, Michael. This is Rich.

Rich: And I think you summarized it pretty well, I have to say, but we are, as you said, in the best markets. We remain optimistic, certainly looking for our new hires from late last year and our new hires that we just made. So I'm excited we've made some more recent big hires. And these are both people that we've been recruiting for over a year. And so we brought on Evan Ryan.

Rich Bradshaw: Okay, great. That's it for me. Thanks for taking my question. Our next question comes from David Bishop from Hofty Group. Please go ahead with your question. Yeah, good morning.

Rich: Evan is our new Central Florida president in Orlando. And we brought in Spencer Wiggins, who's our new market president in Mobile, Alabama, and has opened up an LPO there. Both these gentlemen bring portfolios with them. I mean, they both carry a portfolio, and either they have or will bring some additional lenders. So we're excited about that starting with some of the lift outs that we did late last year. The Tennessee one, which was in Knoxville, is really starting to pick up.

Rob Edwards: In terms of senior care, it feels like the environment is stable. It doesn't really feel like it's going back to where it was pre-COVID. You know, just the cost of labor is different.

Rob Edwards: And, of course, interest rates are different, and so is the cost of goods. Really, it's an operating business. We keep it in the Cree portfolio, but it's got many operating business dynamics to it. But it feels like it's stable.

Rich: And by kicking in, I mean closed loans, not just pipeline. And so we're excited about that. And we're also excited about our continued investment in Florida. For the first time, Florida led the bank in Q4 in production, and we're really excited about that. Hey, thanks for taking all my questions. I appreciate it.

Rob Edwards: It's not going back. We haven't seen a ton of improvement. The improvement we see is kind of slow and steady is the way I would think of it. So we've got, in terms of lost content, we've got three properties in non-accrual right now. We've charged them down to the appropriate appraised value, we believe. You know, there may be additional lost content in there, or there may be recovery content in there.

Graham Dick: Our next question comes from Graham Dick from Piper Sandler. Please go ahead with your question. Hey, good morning, guys. Good morning, Graham.

Jefferson Lee Harralson: Hey, I just wanted to circle back to the NIMM quickly, specifically on the deposit betas. Jefferson, I think you said you're expecting to kind of catch up to peers in terms of bringing your beta down if rates were to come lower. What are you expecting, I guess, in terms of deposit betas on some of the initial cuts if they were to occur in 2024? Do you think there'll be a lag, or do you think it will sort of be linear where you have, you know, a set of index deposits they're going to reprice down immediately? Yes, so we have $3.6 billion in index deposits. So some of that would be immediate. We're using for the non-maturity deposits; we're using the high 30s, 37, 38, and 39 percent range.

David Jason Bishop: And we continue to monitor those very closely and work to resolve them. So I would just say the environment is stable. We have ceased originations in that portfolio. And so it's in wind-down mode, and you see that on the slide. Thank you. God, I appreciate the color.

Herbert Lynn Harton: Then one follow-up question, you spoke about the opportunities, I think, Lynn, in terms of wealth management. Any other opportunities to augment some of the other fee income lines? I know some of your peers are seeing the ability to add some pretty seasoned mortgage producers when the mortgage market recovers here. Any opportunities along those lines to augment fee income this year?

Jefferson Lee Harralson: But we also believe that we can maybe get some back, possibly before rates are going down. We've lowered rates in our promotional money market CD or money market or ICS. So, we think we can use the strength of our balance sheet, no wholesale funding, the good deposit growth of this year, when I mentioned the 8% or loan to deposit ratio, it's 79%. So, we believe that we can maybe start getting some of this back before rates start going down, and Rich may have some problems. Yeah, I'll add a little color.

Herbert Lynn Harton: Thanks. Great questions. I think the wealth is going to be the primary one. I think mortgage with where rates are, we've been mainly focusing on increasing the profitability there, not planning for an increase in revenue, but it's really on the very bottom. So if you get rates lower, you might see some. But our initiatives, maybe not. I was looking at Rich.

Rich: We brought down, at the start of the year here, our money market special by 35 basis points. There was over $2 billion in that product. So, you know, just doing the math, that's about $7 million savings right there. And as you mentioned, Jefferson, the ICS, the treasury manager, really hard to bring that down by a million. And I will tell you, we're working on a pilot in Atlanta to bring it down further. Okay, that's really helpful.

Rich Bradshaw: And on wealth management, it's where we're most excited about hiring a strong leader in that area, but I'm thinking about other areas. The gain of loans sold, I think, should be relatively similar, but what do you think about the SBA?

Graham Dick: And then, I guess turning to credit, um... Nevitas, obviously, there's still the stress in the trucker segment. I mean, you expect it to come down to, I guess, the 85 to 95 basis point, a total charge-off level, at some point later this year. But I'm just wondering, on that long-haul trucking, the $49 million that's left, how much of that do you think is at risk, I guess, today, of needing to be charged off? Yeah, I'm not sure I have an answer for you on that. I think maybe the best thing I could give you is that we do a refresh of, you know, the public score, absolute probability default. It's kind of like a FICO for small business.

Rich Bradshaw: Yeah, the SBA is a great product in an environment like this, and so I think you saw the announcement. We came in 25th in the country in dollars out last year, and we think that's just going to get bigger this year. And as our hiring discussions continue, I will tell you there's a really material one going on there that I've also been involved in, so we look forward to that. But as you're aware, we've continually added lines of business here since I've been here, since Lynn brought me in, and we're just going to continue that. It's going to be opportunistic. This is kind of an interesting year, and we'll all wait to see what the Fed does and stuff. So I almost think that this discussion is a little bit like MSNBC.

Rich Bradshaw: I think there's probably a more realistic opportunity in 2025 if we're looking at opening any new lines of business. Great. Appreciate the call.

Jefferson Lee Harralson: And I think that number is like 15%. So that would be, you know, one way to identify the higher-risk population of that group. But it's a, you know, really granular portfolio. So short of that, I don't, there's no risk rating that goes on at this level. This is, you know, small business, $100,000, $200,000 loans. Okay.

Christopher William Marinac: Thank you. Our next question comes from Christopher Marinac on behalf of Janie Montgomery Scott. Please go ahead with your question. Thanks. Good morning.

Rob Edwards: I wanted to ask about deposit retention at the acquired banks over the last year or so. Is that kind of where you wanted it to be? And then, you know, how does that spill over into the deposit growth that you're looking for this year? Will you see deposit growth from those new markets, or is it going to be more from the core UCBI franchise? Sure. I'll start, Christopher. This is Rich.

Graham Dick: Is there anything, I guess, economically, that could help that segment? I mean, would lower rates do anything to help? I mean, I guess it might all be dependent on invoice size, freight invoices, but anything out there that might be able to help this thing out externally?

Christopher William Marinac: Let's start with progress. We announced that and closed on January 1st. And then when you don't have your conversion until April, it's hard to get new money in a bank when you're converting.

Jefferson Lee Harralson: Yeah, so I think it's more business-related than it is interest rate-related. So the value of the tractors went down pretty dramatically towards the end of last year, or really in the second half. And so I think it's more about the value of the tractors and the demand for trucking. A bunch of retailers got overloaded with inventory, and demand went down.

Rich Bradshaw: So since then, we've, you know, lost some deposits at that point, but we've been building it up since. And we do see that being positive for 2024. And then, of course, First National Bank of South Miami. Whenever we do an acquisition, there's always some rundown both in deposits and loans. Some of that's planned. Some of it's not planned. But same thing.

Jefferson Lee Harralson: So to me, it's really the root cause is really demand for transportation. Lastly, more on M&A. You guys have been very active over the years. How do you feel about M&A conversations in 2024 and the likelihood of maybe looking to bolster some of your markets, maybe like Florida, like you mentioned, in terms of adding scale there? Yeah, so, you know, our strategy remains consistent.

Rich Bradshaw: We expect that to be in good shape in 2024. I might go back and make some deals and just talk about Tennessee. I think we had more runoff there than we would have liked, but we have a new leader there, Kelly Key. He's been there for a while now.

Rich Bradshaw: We've had great hires. We're seeing better trends there. Florida, as you mentioned, is one example.

Rich Bradshaw: Yeah, and I would add in Tennessee, yeah, that we did have some challenges there. But I think we absolutely got the right person in place, and I think we'll see deposits in Q1 completely stabilized, and for the first time, we'll see loan growth in Q1. That's the projection right now. All right, great. Thank you both. That's really helpful. And then there's a quick one for Rob.

Jefferson Lee Harralson: We like smaller deals in markets where we are, where we can be more additive. And, you know, at the end of last year and as we come into the first quarter, M&A, I think, is generally less likely because of the mark. And with high marks, you have to allocate more capital to an M&A transaction with questions about the economy. Then you have to question whether or not you want to do that or not.

Christopher William Marinac: You know, what are your thoughts about the criticized assets this year? We saw some improvement this quarter. Will that kind of bounce around a given range, or do you have a further backdrop on that?

Rob Edwards: Yeah, Chris, that's a good question. You know, if you look back to 2020, we were at 4.1 percent. The criticized was 2.6 percent.

Jefferson Lee Harralson: So my view has been that an actual transaction in 24 is not as likely as it has been in the past for those reasons. Now, you know, obviously, as rates come down, then those marks get less, as you get clarity about the economy, your comfort in using your capital becomes greater. So look, could you do a small, could a small deal in one of our markets, you know, happen? Yes, but I don't think it's overly likely.

Graham Dick: I think 25 is kind of when you'll see more M&A activity come online. Okay, that makes sense. Thanks, guys. Thank you.

Rob Edwards: I mean, we're, you know, if you're asking about the future environment, right now, it sort of feels like things are stable, and everybody's sort of expecting, as are we, a soft landing. And if all that works out, you kind of would expect those numbers to be relatively stable. But they're so low that, you know, I like your phrase, bounce around a little bit.

Catherine Mueller: Our next question comes from Catherine Mueller from KBW. Please go ahead with your question. Thanks. Good morning. Good morning, Catherine.

Catherine Mueller: Let's just start with just your gross outlook. I know this quarter was just a little bit slower, and you talked about that in your prepared remarks, but just thinking about how you think about loan growth, maybe just, in the first part of the year. And then, as we see rate cuts, what you think that will do for that loan growth, maybe in the back half of the year. Good morning, Catherine.

Christopher William Marinac: Great, thanks again. Chris, and once again, if you would like to ask a question, please press star and 1. To remove yourself from the question queue, you can press star and 1.

Gary Tenner: Our next question comes from Gary Tenner from D.A. Davidson. Please go ahead with your question. Thanks, guys. Good morning. Morning, Gary. Hey, just wanted to ask a couple of quick clarification points, Jefferson, on your kind of guidance around the NIM. If I understood correctly, your guidance assumed no rate cuts, but if the forward curve played out, you'd see a benefit of five to seven basis points.

Rich: This is Rich. Good morning, Rich. For Q4, production actually came in pretty much on plan. But the reality for us was that payoffs were greater than the forecast, and I really got into the weeds a little bit on that. And throughout our markets, we just had a fair amount of customers sell their business, or they sold their owner-occupied real estate and did a sale leaseback. So that was not in our projections. That was a little higher,

Jefferson Lee Harralson: Is that correct? That's exactly right. Okay, and then... Follow-up to Catherine's question in terms of the fixed rate repricing. If you kind of rolled forward into 2025, what does the book look like there? Is there a larger slug of fixed rate maturities in 2025?

Rich: The other thing, as we think about this quarter and next year or this year, is the thing that creates a lot of opportunity for us is the continued merger disruptions and the fact that some of our competition has fairly high loan-to-deposit ratios and just really aren't in the game right now. So I think we are going to see it's going to be a low to mid-single digit, but I think we're going to be just fine on loan growth, and I think that merger disruptions will also provide talent opportunities for us as well. So we continue to want to be opportunistic on that. But having said all that, that's why I'm feeling good about where we are in Q1 and 2024.

Gary Tenner: Great question. I want to get back to you on that one, guessing a little bit. So, let me get back to you with the answer to that. That's a good question.

Jefferson Lee Harralson: I don't have it at my fingertips currently. Okay, that's all I have. Thank you. And ladies and gentlemen, at this time, and with no additional questions, I'll close today's question and answer session and turn the floor back over to Lynn Harton for any closing remarks. Great. And again, thank you all for your time and interest. I will be glad to take any follow-up questions. Please reach out to Jefferson or me directly, and we'll look forward to talking to you soon. Have a great day! And ladies and gentlemen, with that, we'll conclude today's conference call. We thank you for attending the presentation. You may now disconnect your lines. Transcript Emily Beynon

Rich: But on the rates down, translating into demand question, I think a normal-shaped curve would really help. When you have a variable rate loan, we're trying to price it in the mid-8s right now. It's just a lot of people don't want to do that loan, even if they think the rates are coming down. So I think if you got lower rates and a more normal curve, I think you'd see some better demand, but then at the same time, lower rates are implying a slower economy at the same time. But I think a normal curve would be very helpful.

Catherine Mueller: And I'll throw one more thing on deposits. Now we do have deposit growth in our budget for next year. We have seasonality outflows in Q1, I believe, so I wouldn't be surprised to see deposits down a little bit in Q1, but we're pretty optimistic. We've been growing deposits pretty well, and we think we'll have net growth in 2024. And on your comment that you're now liability sensitive, Jefferson, I guess two questions within that. I'm assuming a lot of that is coming from your ability to lower deposit costs when we start to see rate cuts, just given that that kind of was surprisingly higher than expected as we move through the year. So kind of curious about that, just the big picture.

Catherine Mueller: And then secondly, within that, what do you see the amount of loans that you, fixed rate loans that you expect to mature and reprice in 2024? Okay, so. Let me get – remind me of the first question. Oh, yeah. How do we – How do we handle the liability? Because it's interesting. Like, you've been asset sensitive for so long, and now you're liability sensitive.

Jefferson Lee Harralson: And – This quarter has been really interesting because different banks have answered that question differently than I would have expected all over the past few weeks. I'm just kind of curious what's driving that. Well, it's hard to make assumptions on, but I would say we're temporarily liability sensitive because we do have more assets tied to SOFR and PRIME than we have liabilities. So you might think of that as traditionally asset sensitive, but I would say that those numbers are closer than they ever have been before because of this $3.6 billion that we have actually tied to, on the liability side, tied to SOFR and PRIME. So that number would have been $600 million pre-Silicon Valley.

Jefferson Lee Harralson: The numbers are much closer on the assets that are going to move directly with rates. And then from there, you're not going to see a lot of prepayments on the first 100 basis points moved because these mortgages are pretty far out of the money, so they're behaving more like fixed-rate loans temporarily, so you get that benefit. Now, that's not going to be as rates go way down, but in the near term, you're not going to see increases, we don't think, of prepayments because of that. So it's a little bit peculiar, as I think we'll end up, since the prepayments are just so far out of the money. Now, on the... fixed rate loan question. If I answered that one, I hope I did, is that if you look at variable rate loans, that are. There are variables that are scheduled to be replaced within a year. You can add to this. Fixed rate loans that mature within a year, it moves from about 32, 33 percent to 36 percent with adding in the fixed maturity.

Jefferson Lee Harralson: So you have three percent; you're adding three percent to the floating rate category if you add in fixed-rate lawns soon to mature. So 36 with that, got it so that 36 that 6.6 billion or 36 of ones that includes six streets that will mature this year plus plus your variable rate ones got it. All right, very helpful. Thank you, Jefferson. Our next question comes from Russell Gunther from Stevens. Please go ahead with your question. Hey, good morning, guys.

Russell Gunther: Just a few follow-ups. One on the deposit beta on the way down. So, Jefferson, here you are at the 45 percent peak on the way up. But given the dynamics we just talked about with the funding profile and rate sensitivity there, do you guys think that this can ultimately outperform on the way down? And how are you thinking about that from a timing perspective?

Jefferson Lee Harralson: Yeah, so we are trying to, we're pushing for, having it outperform before rates go down. Rich talked about some of the rates that we've lowered. I don't know.

Russell Gunther: As we all know, models have a lot of assumptions in them, and one of the biggest assumptions is going to be how competitors react. There are a lot of CDs maturing in the first half of this year. There might be some more liquidity-constrained banks that we're going to need to price against to hold our balances where we want them to be. So it's a really tricky year to forecast because, you know, if we come into some of our deposit pricing meetings and we hear about specials last year, you'll remember there was a special in Tennessee that a lot of us had to, I don't know about match, but get close to Competition is going to be a big piece of it, but we think we can chip at it with our strong balance sheet and our strong deposit base before rates start going down. Uh... relying on our down beta being more than other banks could be tough because we just don't know what the competition is going to be doing. I would add, the feedback from the market, our people out in the field, is that the exception pricing request is way down. So we' Thanks, guys. And then I'm just switching gears a bit to the expenses. So the $3 million swing this quarter on the self-insured, I would think that can be pretty volatile, but contextually, is that an elevated result and a bit one-timey in nature?

Jefferson Lee Harralson: And then just the bigger picture, I hear you guys actively trying to manage for the year. How are you thinking about just overall non-interest expense growth for 2020? Yeah, so I think the 3% range that I think Rich may have mentioned, or maybe a questioner mentioned, I think that 3% range is a good range to think about. And where I'll say the fourth quarter was one-time, it'll end up being, there was some catch-up element in there, it'll end up being a bit of a higher run rate for that number in 2024, as we have a higher expense Okay, I got it. Appreciate the clarification, Jefferson. And then just last one for me, guys.

Russell Gunther: The low to mid single-digit loan growth for 24. What are you guys assuming out of the rest of it? I'll be mid-single digit there, too. Okay, great. That's it for me.

Russell Gunther: Thanks for taking my question. Our next question comes from David Bishop from Hofty Group. Please go ahead with your question. Yeah, good morning. Hey, David.

David Jason Bishop: Hey, Jefferson. You spent some time, you know, doing a deeper dive into DaVita's, but here's maybe an update on what you're seeing within the senior care portfolio, any update in terms of credit trends and how comfortable you are in terms of, you know, getting your officer out, and potential loss content within that segment. Yeah, so, David. It's Rob Edwards.

Rob Edwards: And of course, interest rates are different, and the cost of goods is different. Really, it's an operating business. We keep it in the Cree portfolio, but it's got many operating business dynamics to it. But it feels like it's stable.

Rob Edwards: It's not going back. We haven't seen a ton of improvement. The improvement we see is kind of slow and steady is the way I would think of it. So we've got, in terms of lost content, we've got three properties in non-accrual right now. We've charged them down to the appropriate appraised value, we believe. There may be additional lost content in there, or there may be recovery content in there.

Rob Edwards: And we continue to monitor those very closely and work to resolve them. So I would just say the environment is stable. We have ceased originations in that portfolio. And so it's in a wind-down mode, and you see that on the slide.

Herbert Lynn Harton: Scott Appreciate the color, then one follow-up question you spoke about the opportunities I think Lynn in terms of wealth management. Any other opportunity to augment some of the other fee income lines? I know some of your peers are seeing the ability to add some pretty seasoned mortgage producers when the mortgage market recovers here. Any opportunities along those lines to augment fee income this year? Thanks.

Herbert Lynn Harton: I think that wealth is going to be the primary one. I think, you know, mortgage rates. We've been mainly focusing on increasing the profitability there, not planning for an increase in revenue, but it's really on the very bottom. So if you get rates lower, you might see some. But our initiative, maybe not. I was looking at Rich.

Herbert Lynn Harton: And on wealth management is where we're most excited about because of hiring a strong leader in that area. But I'm thinking about other areas. The gain alone sold, I think, should be relatively similar.

Rich: But what do you think about the SBA? Yeah, the SBA is a great product in an environment like this. And so I think you saw the announcement. We came in 25th in the country in dollars out last year.

Rich: And we think that's just going to get bigger this year. And as our hiring discussions continue, I will tell you, there's a really material one going on there that I've also been involved in. So we look forward to that. But, as you're aware, we've continually added lines of business here since I've been here since Lynn brought me in. And we're just going to continue that. It's going to be opportunistic. This is kind of an interesting year, and we'll all wait to see what the Fed does and stuff. So I almost think that discussion is a little bit like M&A. I think there's probably a more realistic opportunity in 2025 if we're looking at opening any new lines of business. Great; I appreciate the color.

Christopher William Marinac: Thank you. Our next question comes from Christopher Marinac on behalf of Janie Montgomery Scott. Please go ahead with your question. Thanks. Good morning.

Christopher William Marinac: I wanted to ask about deposit retention at the acquired banks last year. So is that kind of where you wanted it to be? And then, you know, how does that spill over into the deposit growth that you're looking for this year? Will you see deposit growth from those new markets, or is it going to be more from the core UCBI franchise?

Rich: Sure. I'll start, Christopher. This is Rich.

Rich: Let's start with progress. We announced that and closed on January 1st, and then when you don't have your conversion until April, it's hard to get new money in a bank when you're converting. So since then, we lost some deposits at that point, but we've been building it up since, and we do see that being positive for 2024. And then, of course, First National Bank of South Miami, whenever we do an acquisition, there are some losses both in deposits and loans.

Rich: Some of that's planned, some of it's not planned, but same thing. We expect that to be in good shape in 2024. I might go back a couple of deals and just talk about Tennessee. I think we had more runoff there than we would have liked, but we have a new leader there, Kelly Key, he's been there for a while now. We've had great hires, we're seeing better trends there.

Rich: Yeah, and I would add in Tennessee, yeah, that we did have some challenges there. But I think we absolutely got the right person in place, and I think we'll see deposits in Q1 completely stabilized, and for the first time, we'll see loan growth in Q1. That's the projection right now. All right, great. Thank you both. That's really helpful. And then there's a quick one for Rob.

Rob Edwards: Yeah, Chris, that's a good question. You know, if you look back to 2020, we were at 4.1 percent. The criticized was 2.6 percent.

Rob Edwards: And, you know, today we're at 1.1. So I would expect it to kind of go up, to be honest with you, just given where it is relative to where we've been historically and what would be a more normalized level. So, Rob, that'll obviously drive reserve behavior to some extent and provision that, you know, we've certainly seen you be conservative these last few quarters. So it just feels like more of the same, I guess, is my question. Yeah, it does. If you're asking about the future environment, right now, it sort of feels like things are stable, and everybody's sort of expecting, as are we, a soft landing, and if all that works out, we would expect those numbers to be relatively stable. But they're so low that, you know, I like your phrase bounce around a little bit.

Rob Edwards: Great, thanks again. Chris. And once again, if you would like to ask a question, please press star and one to remove yourself from the question queue. You may press star and.

Operator: Our next question comes from Gary Tenor from D.A. Davidson. Please go ahead with your question. Thanks, guys. Good morning. Morning, Gary. Hey, just wanted to ask a couple of quick clarification points, Jefferson, on your kind of guidance around the NIM. If I understood correctly, your guidance assumed no rate cuts, but if the forward curve played out, you'd see a benefit of five to seven basis points.

Gary Tenor: Is that correct? That's exactly right. Okay, and then, to follow up on Catherine's question about the fixed rate repricing, if you kind of rolled forward into 2025, what does the book look like there? Is there a larger slug of fixed rate maturities in 2025?

Jefferson Lee Harralson: Great question. I want to get back to you on that one, guessing a little bit. So, let me get back to you with the answer to that. That's a good question.

Gary Tenor: I don't have it at my fingertips currently. Okay, that's all I have. Thank you. And ladies and gentlemen, at this time, if there are no additional questions, I'll close today's question and answer session and turn the floor back over to Lynn Harton for any closing remarks. Well, great. And again, thank you all for your time and interest, and I will be glad to take any follow-up questions. Please reach out to Jefferson or me directly, and we'll look forward to talking to you soon. Have a great day. And, ladies and gentlemen, with that, we'll conclude today's conference call. We thank you for attending the presentation. You may now disconnect your line.

Q4 2023 United Community Banks Inc Earnings Call

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