What happened

The share price of United Community Banks (UCBI 0.57%) 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 about $31.67 per share, down about 6.3% year to date as of Jan. 20.

It was a down week for the markets, too, as the S&P 500 fell 1.7%, the Dow Jones Industrial Average dropped 3.4%, and the Nasdaq Composite sank 0.6% this week during the same time frame.

So what

United Community Banks, based in Greenville, South Carolina, released its fourth-quarter and year-end earnings on Jan. 17, and that was one of the catalysts for the decline this week. 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 saw a 53% year-over-year jump in net interest revenue, 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. Also, noninterest income was down 10%, while noninterest expenses dropped 7% year over year.

The bank's stock price may have also taken a hit from some analyst downgrades. Truist analyst Jennifer Demba lowered the price target from $39 to $34 but maintained her hold rating. She cited rising credit costs, which she said may be normalizing faster than its peers, reported The Fly.

Also, Christopher Marinac, analyst at Janney Montgomery Scott, downgraded the stock from buy to neutral on the earnings miss and what he perceives as reduced upside, despite excellent operating fundamentals, according to The Fly.

Now what

The bank saw the net charge-off rate jump to 0.17% from 0.03% in the third quarter and 0.01% a year ago. Chairman and CEO Lynn Harton said it was primarily due to one commercial and industrial loan. The ratio of nonperforming assets was 0.18%, up 3 basis points from the previous quarter and 2 basis points from a year ago.

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

On Jan. 3, the bank closed on its acquisition of Progress Financial, which runs Progress Bank, expanding United Community Banks' presence into Alabama and the Florida Panhandle. Progress brings over $1.4 billion in total loans and $1.5 billion in deposits. This is a good community bank that is expanding -- and community banks in general might be a decent option for investors in 2023, as they should benefit more than large banks from rising rates due to their focus on lending.