United Community Banks has acquired five banks since 2018, the year Lynn Harton took over as CEO. In recent months, though, the Greenville, South Carolina-based company has made more news selling assets. Harton characterized the trend as fine-tuning in a recent interview, but was quick to add the $27.1 billion-asset United Community remains wedded to a growth-by-acquisition strategy.
"We've been very acquisitive over the last several years. We intend to continue to be acquisitive as we go forward," Harton said. "We've taken this kind of lull in the market to ... tune up our strategy, clarify what we're good at and what we're not, and clarify where we want to invest going forward. ... That's really what we've been doing the past 12 months."
The latest example of fine-tuning came earlier this month. United Community
Looking Inward
For United Community, manufactured housing was never an obvious fit. Most customers lived out of footprint, in Mississippi, Texas and Louisiana, while the business's subprime nature required the employment of a dedicated servicing team. United Community stopped originations toward the end of 2023 and marketed the manufactured housing unit for sale. It received offers, but none it considered adequate. "It made more sense for us to collect [the loans] out, so that's what we decided to do," Harton said.
One potential buyer, 21st Century Mortgage, proved persistent and ultimately was able to strike a deal. "As the rate environment started to change and move more favorably, they came up with a bid that did make economic sense," Harton said.
Prior to the 21st Century Mortgage deal, United Community sold an insurance agency in the second quarter of 2023. A year later, United Community agreed to sell its registered investment advisory subsidiary, FinTrust Capital Advisors, following a deep dive into its wealth management operation which resulted in a decision to focus on the trust business.
"While FinTrust is a great company and has great people, it really wasn't something that was going to move the needle," Harton said. "The trust aspect of wealth management that [acquired banks] Seaside National Bank & Trust and First National Bank of South Miami brought was really the more core piece for us. … It was a great model, so we said, 'Let's put our effort into integrating those two groups and then expanding that product and that philosophy throughout the rest of the footprint.'"
In similar fashion, the $21.2 billion-asset Atlantic Union Bankshares in Richmond, Virginia,
"[FinTrust] employees are probably better suited in a company that is really focused on what they are doing and can give them a better opportunity to grow," Harton said.
United Community has also made strides improving its online account-opening capacities in recent months. That project, not to mention the detailed strategic reviews that preceded the manufactured housing and FinTrust sales, would have been difficult to undertake if deals were coming fast and furious, according to Harton. "When you're heavily invested in acquisitions, that has to be one of your top priorities" for all your teams," Harton said.
United Community reported net income of $129.2 million for the first six months of 2024, up about 3% from the same period in 2023. Though the company's shares have declined about 2.5% since the start of 2024, they're up 15% since early June. In a research note published last week, analyst Chris Marinac, who covers United Community for Janney Montgomery Scott, suggested investors may welcome its strategy, "to limit balance sheet growth and enhance capital ratios while benefiting return on assets."
"We think investors could warm up further to United Community shares — especially if the price pulls back below the $28 level," Marinac added.
Still a buyer
United Community announced its most recent acquisition, of the $1 billion-asset, Miami, Florida-based First Miami Bancorp, in February 2023. Harton is satisfied with the progress United Community has made during the M&A slowdown. There are signs of a pickup in loan demand. At the same time, credit quality, which has remained solid, should benefit from the sale of the subprime manufactured housing portfolio, which generated an outsize portion of both charge-offs and nonperforming assets.
"We still see very stable credit," Harton said. "We don't see anything systemic. Where a problem crops up, it's typically more of a management problem in that particular company versus some kind of broad systemic issue we should be worried about."
Loan demand, meanwhile, appears to have benefited from the
The benefits of looking inward notwithstanding, United Community's overarching blueprint remains unchanged. It still considers itself a buyer. "We continue to be heavily interested in acquiring, bringing great banks into our family," Harton said.
United Community is actively pursuing deal opportunities — inside its six-state Southeastern footprint, which includes the Carolinas, Georgia, Florida, Alabama and Tennessee. "I would say we're probably not as interested in expanding our footprint," Harton said. "We've got the footprint we set out to build."
