Main Street Journal
UNITED COMMUNITY BANK COMMERCIAL EDITION
Volume 12 | June 2023
A Note from Rich
Summer is here and so are some great opportunities for new relationships and hiring. In our last all-employee call, Lynn Harton spoke about the economic climate and our responsibility to lean into the relationships that we have carefully built over the years. United has been a trusted bank since 1950, and that’s because every one of you has worked to build relationships and continue to be honest and supportive of the customers you care about. If we continue doing this, we will keep our reputation as a trusted bank for another 70 years.
As you know, deposits are more important than ever. We have some tools that may help you as you continue to communicate with your customers. We have a page on our website that reinforces our commitment to our customers and United’s strong financial profile. We also created a webpage that highlights our FDIC coverage. Make it a goal to share this information with your customers to continue building that trust.
We’re looking forward to some great events this summer. We’ll officially welcome our new teammates at First National Bank of South Miami, with legal close anticipated for July 1. We’ll also begin transitioning the entire bank to the refreshed United Community logo. Our legacy Progress branches came through the conversion process seamlessly, and I think it looks fantastic. Thank you to all the teams who put in long hours and did the heavy lifting involved in that process!
A final note—we will take a ‘summer sabbatical’ from the newsletter and pick it back up in the fall. I expect lots of great deals in our next edition to highlight! Thank you, as always, for all you do for United. Have a fun and safe summer season.
1Q23 Move the Needle and Thread the Needle Awards
Like last quarter, we have two teams we’re recognizing for the Thread the Needle Award for their work in reducing risk at the bank. Congratulations to Matt Kibble and the Construction/Perm administration team and to Linda Durden and the Modification team. We had a bit of an issue with the pipelines of our construction/perm loan that were extending, and the size was creating a risk for us. The two teams moved and modified a huge number of loans and ultimately got us below our Tier One Capital target for C/P. Thank you to Matt, Linda, and the entire team for such a great accomplishment!
Benore Logistic Systems, Inc. was founded in 1994 in Erie, Michigan, and continues to be led by Jeffery Benore, CEO and President, and Joan Benore, Vice President.
Working alongside United Commercial Relationship Manager Laura Hodge, Rich Bradshaw and Jeffery Benore connected through a mutual friend, and a partnership was quickly formed. Rich toured the company’s facility in Greer, and United was able to secure a $23MM full-funder loan with Benore.
In addition to a wealth of services the company provides, they also receive recognition for their environmental practices. Benore is the first company in South Carolina to use a battery-electric Class 8 truck in its fleet. The Governor has even gotten in the cab for a test drive!
State President Update
Jim Rose, North Carolina State President
Greetings from the Old North State! North Carolina is the proud home of 36 United branches, from Murphy in the western mountains to Wilmington on the ocean. Another branch is to be constructed in Cary later this year. United competes with 52 other banks in North Carolina, and 24 of them are headquartered here.
We have a population of more than 10 million, which is almost identical to Georgia. You might’ve heard that the state is the home of some tremendous basketball rivalries—none better than Duke and UNC.
For United, North Carolina is a combination of several legacy branches in the west, the acquisition of Four Oaks in Central NC, the acquisition of Aquesta in Lake Norman, Charlotte, and Wilmington, and our newest market—the Triad (Greensboro and Winston-Salem). A lot of hard work by our bankers across these markets has paid off. North Carolina has grown to $2.2B in loans and over $3.3B in deposits.
Much like the other states within the United footprint, North Carolina has seen tremendous population growth, landing it 9th in the nation in 2023. More than 145 people move to Raleigh and Charlotte each day. Here’s a fun fact about North Carolina: clearly, we inspire some of the best bankers! Lynn Harton and Rob Edwards both started their banking career in NC, and we currently have four members of the United Board of Directors living in our state.
NC has an incredible team spirit and bankers who genuinely take care of our customers and teammates. One of our main goals is to lead the charge of reclaiming the JD Power award for United this year! Thank you for allowing me to share a little about our great state and the great work our bankers are doing here. As the Blue Angels say, “Glad to be here!”
Mike Buttner, Treasurer
Has anyone found the recession? It was supposed to hit by the 4th quarter of 2022 but missed. Then, it was to arrive in early 2023, but it is still missing. Now, the Fed is concerned that banks will tighten lending standards and that will start the recession.
Yet, the economy still seems to be muddling along. Yesterday, the Fed's beige book report—the regional Fed's report on their district's economic activity—had 4 districts with increased activity, 6 with no change, and 2 with modest contraction. Additionally, yesterday's initial jobless claims 4-week moving average was +230K. The employment picture is still strong. Consumer spending has come down but has not stopped.
I think the shape of the yield curve should get more attention than it has garnered. Because, over time, the negatively sloped curve will result in economic damage. I am not focused on the often quoted 2-year to 10-year treasury spread. The real focus should be on the 3-month bill to 5-year treasury spread. Since May 31, 2022, it has gone from +176 bps to -164 bps. That is a 340 bps difference! This will be the real catalyst for a continued slowdown in the economy.
All of this is related to banks. Banks fund themselves short—3-month bill—and lend intermediate—5-year treasury. This year's banking crisis, which was a liquidity scare, hid the curve's economic impact. Banks saw franchise value tied to the amount of deposit not caring as much about cost.
Well, things are calming in the bank world. So, banks are looking at the marginal cost of funding at 5.00%+, while new loans are coming on at 6.50% to 7.00%. This is not good for the net interest margin (NIM). If banks want to get back to a 250 bps NIM, they will have to raise their loan margins. This is not a tightening of credit standards but the reality of profitability. So, keep an eye on changes to bank lending margins. Comments/questions are always welcome.
- The 2022 Annual Report is available for order on the Supply Room. It can be an excellent tool for our commercial bankers to have in hand when meeting with clients.
- The 1Q23 At-A-Glance and Pitchbook are also available through the Marketing Page on UConnect.
- For additional marketing information, visit the Commercial Banking Marketing Resource page on UConnect.
- For updates regarding the logo refresh process, follow along on UConnect and visit the Logo Refresh UConnect page.
Retail Credit Updates: Credit Administration
A critical role in the proper management of a commercial portfolio is covenant management. There are several reports in CreditLens™ that evidence outstanding issues, such as covenants not yet activated and past due covenants.
Approving and Activating Covenants
A critical part of the post-closing process in CreditLens™ is to ensure covenants set forth in the approval document are approved and activated within CreditLens™. If the covenant has not been approved and activated, it will not show up on the covenant report. Step-by-step instructions on how to approve and activate can be found on page 150 of the CreditLens™ Best Practice Guide.
It is imperative that the financial information needed to calculate borrowing bases or covenants be collected within the prescribed time frame in the loan documentation. Once the appropriate information has been received and submitted to the testing personnel, the testing personnel must complete the calculations with supporting documentation. Most testing personnel utilize Microsoft Excel spreadsheets for the calculations to supplement the financial documentation provided by the borrower. After calculations are completed, it is imperative that the covenant is updated within CreditLens™. Step-by-step instructions for updating testing results within CreditLens™ can be found starting on page 154 of the CreditLens™ Best Practice Guide.
Once the covenant has been tested, all supporting documents (see list below) should be combined into one PDF and saved in the Documents tab.
- Borrowing Base/Covenant Calculation Sheet (if applicable)
- Borrowing Base Certificate (if applicable)
- All supporting financial documentation
- Any other information necessary for evidence to support any calculations
Outside of Alabama and the Florida Panhandle, all LOAs are currently using an LOA worksheet found in a Microsoft Access Workbook. If you have spent time in CreditLens™ over the past several months, you will see several new fields and tabs related to the LOA role. We are in the process of retiring the current LOA worksheet in Microsoft Access and rolling out the new LOA worksheet in CreditLens™. Over the next four months, we will deliver on-location CreditLens™ training to LOAs to ensure they are able to familiarize themselves with CreditLens™ and the worksheet within. Dates are still being finalized but will be sent out over the coming weeks.
Credit Team Process Updates
Receiving and evaluating current financial information on our borrowers is an important element of our risk rating framework. In order to ensure a standard process for Risk Rating borrowers which have not provided financial information in accordance with the requirements in their loan agreement, the following policy updates (Credit Policy #05-15-65 – Risk Ratings) were implemented in April 2023.
Franchise Middle Market Updates: Mike Orlov, Senior VP/Franchise Division Manager
The Franchise Middle Market team has found great success in its first year here at United. On May 1, 2022, the Franchise division officially launched, and we immediately hit the ground running. After implementing new policies, procedures, and processes to build a successful division, we funded our first deal on September 1, 2022. Between closing our first deal and my one-year anniversary at United, the Franchise division has neared $100 million in total funding.
While the first year has been amazing, we look to continue our success and grow with our bank partners. We have now funded deals with five out of our six market partners and hope to continue that great partnership well beyond 2023. It has been a pleasure working with all of our internal State Presidents and their teams. All parties involved have seen the benefit of working together to service our customers in the best way we can. With the Franchise division in place, our customers now have an experienced team to structure their deals, and this puts United in the best position to service them in the future. Additionally, we can move very quickly to get your prospect's information and offer very competitive terms and rates. Let’s also not forget that Franchise gets one of the highest spreads in the bank, and it always makes everyone happy to see those returns.
The Franchise group has hired dedicated resources, which has only increased the productivity of the team. We will be hiring additional resources as the year goes on, and we look forward to becoming a well-oiled machine. Please keep us in mind for any of your customers within our footprint who may have a franchise loan. We will happily look at opportunities starting at a $2MM relationship size, and up to $30MM+. The Franchise division has done deals in QSR, fast casual, automotive, fitness, and personal services, and we are always happy to give you a quick read on any potential deals you may have. Looking forward to a strong 2023 and continuing to help United be a LEGENDARY Bank!