Good morning, and welcome to United Community Banks' 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 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 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 ucbi.com. 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 and its filings with the SEC and included on its website. At this time, I will turn the call over to 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 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 GAAP earnings by approximately $0.39 in the quarter. On an operating basis, earnings improved to $0.53 per share, with an operating return on assets of 92 basis points. We had strong deposit growth in the quarter, centered primarily in our public funds relationships. The rate of contraction in our margin slowed with our core margin dropping only 4 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. 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 borrowings. Credit quality in the core bank was very good with only 5 basis points of net losses. Non-performing assets were essentially flat at 51 basis points. Navitas continued to experience higher-than-normal losses as we continue to work out the sleeper truck portfolio. We expect losses to trend back towards 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. I am going to start my comments on Page 6 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 paid down, we grew total deposits by $504 million or 8.9%. The primary driver of the growth this quarter was public fund. We saw some seasonal inflow 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. 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. 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, where we highlight some of the strength of our balance sheet. As mentioned, our balance sheet is in 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 loss come back this quarter, and in both TCE and CET1, we are well above our peers. On Page 10, as I mentioned, our regulatory ratios also remain above peers and were mostly unchanged in the quarter. Our leverage ratio was down 24 basis points, driven by a larger balance sheet, being $400 million larger with strong deposit growth. 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 $0.78. 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 wanted 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. 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 5 basis points and down 4 basis points on a core basis. 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 9 basis point benefit to the margin in the third quarter to an 8 basis point benefit in the fourth. Moving to Page 12, noninterest income. Excluding the portfolio restructuring, noninterest income was down $3.4 million relative to last quarter. This was primarily due to a $3.5 million negative swing in the MSR valuation. 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. 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. 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 cost came in higher than expected and required us to build our reserves sum in the fourth quarter. Excluding this event, our expenses were essentially flat. 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 and our 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 FICO restart and other expense accruals. Net-net, on the expense side, I'm expecting them to be essentially flat for the first quarter. Of a net interest margin, the securities transaction is expected to take our yield up to the 3.10% range, which is a 4 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. 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. In combination, our margins should be relatively flat in Q1, somewhere between minus 2 and plus 2 basis points. 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 NPAs were essentially flat. Our special mention plus substandard improved slightly and down from a year ago. Our breakout on Navitas 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 as Lynn talked about in his opening. This quarter, the book shrunk from $57 million to $49 million, and of that shrinkage, we had $4.4 million of losses. We changed our practice at Navitas to markdown 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 this quarter. We continue to believe that 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 back on Page 15 with the allowance for credit losses. We set aside $14.6 million to cover $10.1 million in net charge-offs. This had the impact of building the ACL slightly in the quarter. With that, I will pass it back to Lynn.

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. In spite of industry-wide concerns over liquidity and deposit stability, we were able to grow customer deposits over 8% during the year, excluding mergers. We know from our internal surveys that our customer service scores grew significantly from already high levels. 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. We rebranded the company with our fourth refreshing 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. 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, in which we have since ceased originations. 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. Our relative credit results will improve in '24. We also see a great environment for taking market share. Merger disruptions continue, providing us opportunities to add talent. 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. I appreciate your support and interest. And now, we all look forward to your questions.

Ladies and gentlemen, we will now start the question-and-answer session. Our first question comes from Michael Rose at Raymond James. Please go ahead with your question.

Hey, good morning, everyone. Thanks for taking my questions. Bunch of calls this morning, but sorry if I missed this. But Jefferson, can you just give us your rate outlook that's embedded into your outlook? And then, can you describe, if it's not the forward curve, what the sensitivity would be if you assumed the forward curve, and then if we didn't get any cuts this year? Just trying to kind of math out the sensitivity from rates. I assume it's not linear. So, I just wanted to get some perspective. Thanks.

Great. Yeah, thanks. Michael, great question. So, on the margin, when we were giving the guidance of plus 2% to minus 2%, we were not having any rate cuts in there. And in that environment, we are expecting that the margin will increase throughout the year as we take near the top of our deposit beta. 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 would 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 if you follow exactly the forward curve, you might get 5 to 7 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, non-interest bearing mix kind of troughs in your modeling?

Yeah. So, that would shrink to 27% range. So, we're at the 28% range now. We're seeing that slowdown. So, right around 27%.

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'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. I'll start, and then Rich will follow. We closely evaluated our producers to identify who is performing and who isn't, which led to some tough decisions. On the technology front, we assessed which projects are essential and which can be eliminated. The decisions about branch operations are increasingly challenging since all our branches are profitable, but we need to determine which ones to consolidate or close. Those are some of the major considerations. Rich, do you want to add anything, or Jefferson?

We have been conducting an annual review of our branches. Strategically, we're assessing whether it makes sense to close branches that are located near others, as this allows us to retain about 90% of the deposits from the closed location. We have completed this evaluation, identified the branches to be closed, and notified the regulators about our decisions.

Yes. 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. In terms of investments, 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 the years beyond that, I think we picked up two great trust in 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.

Great. I appreciate the puts and the takes. And maybe just finally for me, can you just talk about kind of borrower demand in your markets? I think previously you've 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 borrower demand has probably come in a little bit. So, I just wanted to get a sense for 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 higher risk areas, but just some commentary there would be great. Thanks.

Good morning, Michael. This is Rich. I think you summarized it well. We are in strong markets and remain optimistic. We are looking forward to our new hires from late last year and our recent additions, which I'm excited about. We've made significant hires, including Evan Wyant, our new Central Florida President in Orlando, and Spencer Wiggins, our new Market President in Mobile, Alabama, who has opened an LPO there. Both of them come with valuable portfolios and will be bringing additional lenders as well. We're eager to see the impact of the lift-outs we did late last year in Tennessee, particularly in Knoxville, which is now generating closed loans, not just pipeline. We're also thrilled about our ongoing investment in Florida, which for the first time led the bank in production for Q4, and we're truly excited about that.

Okay. Thanks for taking all my questions. Appreciate it.

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

Hey, good morning, guys.

Good morning, 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 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 indexed deposits that are going to reprice down immediately?

Yeah. So, we have $3.6 billion of indexed deposits. So, some of that would be immediate. We're using for the non-maturity deposits. We're using high-30s%, 37%, 38%, 39% range. But I also believe that we can maybe get some back possibly before rates start going down. We've lowered rates in our promotional 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. Lynn mentioned the 8%, our loan-to-deposit ratio at 79%. So, we believe that we can maybe start getting some of this back before rates start going down. And Rich may have some...

Certainly. At the beginning of the year, we reduced our money market special by 35 basis points, which affected over $2 billion in that product. This translates to approximately $7 million in savings. Additionally, the ICS and treasury management are challenging to reduce by $1 million, but we are currently working on a pilot project in Atlanta to try and decrease that further.

Okay. That's really helpful. And then I guess turning to credit, Navitas obviously, there's still distress in the trucker segment. I mean, do you expect it to come down to, I guess, 85 to 95 basis points, 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. Perhaps the best information I can provide is that we conduct a refresh of public score absolute probability of default, which is somewhat comparable to a FICO score for small businesses, and that number is around 15%. This can help in identifying the higher-risk segment of that group. However, it's a very detailed portfolio. Beyond that, there isn't a specific risk rating applied. These are small business loans in the range of $100,000 to $200,000.

Okay. Is there anything I guess economically that could help that segment? I mean, with 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?

I believe the issue is more related to business conditions than interest rates. The value of tractors significantly decreased towards the end of last year, particularly in the latter half. This change primarily stems from the value of the tractors and the demand for trucking. Many retailers faced an excess of inventory, leading to decreased demand. Therefore, I think the main issue is the demand for transportation.

Okay. Understood. And I guess just lastly, is more on M&A. I mean, you guys obviously 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 even further?

Our strategy remains the same. We prefer smaller deals in areas where we can add more value. At the end of last year and as we enter the first quarter, mergers and acquisitions seem less likely due to the high valuations. With these high valuations, more capital is needed for an M&A transaction, and given the uncertainties in the economy, it raises the question of whether or not to proceed. Therefore, I believe that a transaction in 2024 is not as likely as it has been in the past. However, if interest rates decrease and valuations improve, and if there’s more certainty about the economy, we would be more comfortable using our capital. So, while a small deal in one of our markets could happen, I don't think it's very probable. I expect that 2025 will see more M&A activity.

Okay. That makes sense. Thanks, guys.

Thank you, Graham.

Our next question comes from Catherine Mealor from KBW. Please go ahead with your question.

Thanks. Good morning.

Good morning, Catherine.

Let me just start with just your growth outlook. I think this quarter was just a little bit slower and you talked about that in your prepared remarks. But just sort of 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 net loan growth maybe in the back half of the year?

Good morning, Catherine. This is Rich. For Q4, production was mostly on target. However, our actual pay-offs exceeded our forecasts. I examined that closely. Across our markets, a significant number of customers sold their businesses or engaged in sale leasebacks of their owner-occupied real estate, which we hadn't anticipated. This turned out to be higher than we expected. Looking at this quarter and the upcoming year, we see considerable opportunities arising from ongoing merger disruptions and the fact that some of our competitors have high loan-to-deposit ratios and are currently sidelined. Therefore, while we expect loan growth to be in the low-to-mid single-digit range, I am confident we will fare well. These merger disruptions are also likely to present us with talent acquisition opportunities. We remain committed to being opportunistic in this regard. Overall, I feel positive about our position going into Q1 and 2024.

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-8%s right now. It's just a lot of people don't want to do that or even if they think the rates are coming down. So, I think if you get lower rates and a more normal curve, I think you'd see some better demand. But at the same time, lower rates imply 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. Now, 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.

Okay. Regarding your comment about being liability-sensitive, I have two questions. I'm assuming much of this is due to your capacity to decrease deposit costs when rate cuts occur, especially since those costs were unexpectedly higher as the year progressed. I'm interested in your overall perspective on this. Additionally, what is your expectation for the number of fixed-rate loans that will mature and reprice in 2024?

Okay, could you remind me what the first question was? How do we...

How the liability has changed is interesting because you have been asset-sensitive for so long and now you're liability-sensitive. This quarter has been quite intriguing as different banks have approached this question in ways I wouldn't have anticipated over the past few weeks. I'm just curious about what is driving that change.

It's challenging to assess the assumptions, but I would say we are currently more liability-sensitive. We have more assets tied to Prime than liabilities, which you might consider as traditionally asset-sensitive. However, the figures are closer than they have ever been due to the $3.6 billion connected to our liabilities tied to SOFR and Prime. Previously, this figure would have been $600 million before Silicon Valley. Now, the numbers are much more aligned as our assets are more directly influenced by rates. In the near term, we don't anticipate seeing significant prepayments with the first 100 basis points move because these mortgages are quite far out of the money, making them behave similarly to fixed-rate loans temporarily, which is beneficial. As rates decrease, this might change. For now, we expect no increase in prepayments because of this situation. This is somewhat atypical as we expect to be asset-sensitive, but the prepayments are very much out of the money. Regarding fixed-rate loans, if we consider variable rate loans that are set to reprice within a year and add in fixed-rate loans maturing within the same timeframe, the percentage shifts from about 32-33% to 36%. Therefore, by including fixed-rate loans nearing maturity, we increase the floating rate category by 3%.

Okay. Got it. So, that $6.6 billion or 36% includes fixed rates that will mature this year?

That's correct.

Plus your variable rate loans? Got it.

Correct.

All right. Very helpful. Thank you, Jefferson.

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

Hey, good morning, guys. Just a few follow-ups. One, given the dynamics you 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 perspective?

We are aiming to outperform before interest rates decrease. Rich mentioned some of the rates we've reduced. While I've noticed some banks discussing potential rate cuts, I’m not sure if that trend is widespread yet. I believe we can start to outperform prior to any declines in rates. However, models embed many assumptions, and a major one is how our competitors will respond. A significant number of CDs will mature in the first half of this year. We might need to adjust our pricing in response to some banks facing liquidity issues in order to maintain our desired balance levels. It’s a challenging year to predict because if we enter deposit pricing meetings and hear about special offers, we may need to closely match them, similar to the special in Tennessee last year. Competition will play a crucial role, but we believe that with our robust balance sheet and deposit base, we can navigate this period before rates decline. Relying on our lower beta could be challenging since I'm uncertain about the actions of our competitors.

Jefferson, I would add, the feedback from the market or people out in the field is that the exception pricing request is way down.

Right.

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, but just contextually, is that an elevated result and a bit one-time 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 '24?

I believe the 3% range mentioned is a reasonable estimate. The fourth quarter was influenced by one-time factors, with some catch-up element included, leading to a higher run rate for that figure in 2024 due to increased expenses. However, it will not reach the levels seen in Q4. You can expect a $1.7 million improvement in that line item in the first quarter.

Okay. Got it. Appreciate the clarification, Jefferson. And then, just last one for me, guys. The low-to-mid single-digit loan growth for '24, what are you guys assuming out of Navitas?

Yes, that'll be mid-single-digit there too.

Our next question comes from David Bishop from Hovde Group. Please go ahead with your question.

Yeah. Good morning.

Good morning.

Hey, Jefferson, you spent some time doing a deeper dive into Navitas, but curious 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 getting your arms around potential loss content within that segment?

In terms of senior care, the environment appears stable. It doesn't seem likely to return to where it was before COVID. The costs of labor and goods are different now, making it more of an operating business. While we keep it in the CRE portfolio, it has many operational dynamics. Overall, it feels stable but not improving significantly. The improvements we've noticed are slow and gradual. Currently, we have three properties in non-accrual status, and we've adjusted their values to the appropriate appraised amounts. There might be more potential losses or recoveries, and we are closely monitoring and working to resolve these. Overall, the environment remains stable, and we have halted new originations in that portfolio as it is in wind-down mode, as shown in the slide.

Got it. Appreciate the color. And 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 the mortgage market recovers here. Any opportunities along those lines to augment fee income this year? Thanks.

Great question. We're all looking at each other.

We're all looking at each other.

I believe that Wealth Management will be the main focus. Regarding mortgages, considering the current interest rates, we are primarily concentrating on improving profitability rather than expecting an increase in revenue; it’s quite low at the moment. If rates decrease, we might see some positive outcomes. Our initiatives might not lead to significant changes. I'm particularly excited about Wealth Management because we have brought on a strong leader in that area. As for other segments, the sales of loans should remain fairly consistent, but what are your thoughts on the SBA?

The SBA is an excellent product in a market like this. We recently announced that we ranked 25th in the nation for dollars disbursed last year, and we expect that to grow even larger this year. As we continue discussions about hiring, I want to emphasize that there is a significant opportunity developing that I am also engaged in, and we are excited about that. As you know, we've consistently expanded our lines of business since my arrival, and we plan to keep that momentum going; we intend to be opportunistic. This year is quite interesting, and we are all waiting to see how the Fed responds, which makes me think that the current situation is somewhat reminiscent of M&A discussions. It seems more plausible that we might find opportunities to open new lines of business in 2025.

Great. Appreciate the color. Thank you.

Our next question comes from Christopher Marinac from Janney Montgomery Scott. Please go ahead with your question.

Thanks. Good morning. I wanted to ask about the positive retention at the acquired banks last year. So, is that kind of where you wanted it to be? And then, 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?

Sure. I'll begin, Christopher, this is Rich. Let's discuss Progress. We announced and completed the deal on January 1st, and it can be challenging to bring in new funds while transitioning until April. As a result, we experienced a decline in deposits initially, but we have been recovering since then and are optimistic about a positive outlook for 2024. Regarding the First National Bank of South Miami, whenever we acquire a bank, there tends to be a decrease in both deposits and loans. Some of this is anticipated, while other parts are unexpected, but we believe that situation will improve 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, Kelley Kee. He's been there for a while now. We've had great hires; we're seeing better trends there. Florida, you mentioned already.

Yeah. I would add, in Tennessee, 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 stabilize. 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. What are your thoughts about the criticized assets this year? We saw some improvement this quarter. Will that kind of bounce around the given range or do you have further backdrop on that?

Yeah. Christopher, that's a good question. If you look back to 2020, we were at 4.1%. The criticized was 2.6%. And 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 will obviously drive reserve behavior to some extent in provision; that we've certainly seen you be conservative for 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 feels like things are stable and everyone, including us, is expecting a soft landing. If everything goes as planned, we would anticipate those numbers to remain relatively stable. However, they are so low that I appreciate your phrase about them bouncing around a little bit.

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

Thanks, guys. Good morning.

Good morning, Gary.

Hey. I just wanted to ask you a couple of quick clarification points, Jefferson, on your guidance around the NIM. If I understood correctly, your guidance assumes no rate cuts, but if the forward curve played out, you'd see a benefit of 5 to 7 basis points, is that correct?

That's exactly right.

Okay. And then a follow-up to Catherine's question in terms of the fixed-rate repricing. If you kind of roll forward into 2025, what does the book look like? There is a larger slug of fixed-rate maturities in '25.

That's a great question. I wanted to get back to you on that one. I'd be 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.

And ladies and gentlemen, at this time, I'm 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.

Great. And again, thank you all for your time and interest, and we'd 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.