Why United Community Banks shares fell 10.1% this week

What happened

The share price of United Community Banks (UCBI 2.94%) it fell 10.1% this week as of 1 p.m. ET from last Friday’s close, according to S&P Global Market Intelligence. The stock is trading at around $31.67 per share, down about 6.3% year-to-date through January 20.

It was also a low week for the markets, as the S&P 500 fell 1.7%, the Dow Jones Industrial Average fell 3.4%, and the Nasdaq Composite it sank 0.6% this week over the same time period.


Greenville, South Carolina-based United Community Banks posted its fourth-quarter and year-end earnings on Jan. 17, and that was one of the catalysts for this week’s decline. The bank posted diluted adjusted earnings per share of $0.75, which was up from $0.64 a year ago but below the consensus estimate of $0.83 per share.

United Community Banks experienced a 53% year-over-year increase in net interest income, due to a 30% increase in loans and higher interest rates. However, interest expense more than doubled from the third quarter to about $31 million. Additionally, non-interest income fell 10%, while non-interest expenses fell 7% year-over-year.

The bank’s share price may also have been affected by downgrades by some analysts. truist analyst Jennifer Demba lowered the price target from $39 to $34, but maintained her hold recommendation. She cited rising credit costs, which she said may be normalizing faster than peers, The Fly reported.

In addition, Christopher Marinac, an analyst at Janney Montgomery Scott, downgraded the stock from buy to neutral due to lost earnings and what he perceives as an upside downgrade, despite excellent operating fundamentals, according to The Fly.

Now what

The bank saw the net cancellation rate rise to 0.17% from 0.03% in the third quarter and 0.01% a year ago. President and CEO Lynn Harton said it was mainly due to a commercial and industrial loan. The non-performing assets ratio was 0.18%, 3 basis points more than the previous quarter and 2 basis points more than a year ago.

The bank continues to expand its net interest margin, which was 3.76% in the fourth quarter, compared to 3.57% in the previous quarter and 2.81% a year earlier. Its efficiency ratio remains at a low 48%, down from 62% a year ago.

On January 3, the bank closed on the acquisition of Progress Financial, which manages Progress Bank, expanding United Community Banks’ presence in the Alabama and Florida Panhandle. Progress brings in more than $1.4 billion in total loans and $1.5 billion in deposits. This is a good expanding community bank, and community banks in general could be a decent option for investors in 2023, as they should benefit more than the big banks from increased rates due to their focus on lending.

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