United Community Banks, Inc.

Good morning and welcome to United Community Bank's first quarter 2021 earnings call. Hosting the call today are Chairman and Chief Executive Officer Lynn Harten, Chief Financial Officer Jefferson Harrelson, 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 has 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 first quarter's earnings release and investor presentation were filed last night on Form 8K 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 2020 Form 10-K, as well as other information provided by the company in its filings with the SEC and included on its website. At this time, I'll turn the call over to Len Hartin. Good morning, and thank you all for joining our call today.

Our first quarter results reflect the strength of both our markets and our teams. Economic conditions and forecasts also continue to improve. and our results include a $12 million release from our provision for credit losses. We also realized an additional $10 million in PPP fee income, as we have now had over 10,000 of our first-round PPP loans forgiven. Including these items, our EPS reached 82 cents per share, our return on assets was 1.62%, and our return on tangible common equity was 19.7%. Our PPP loan production and performance continues to be very strong, with funding of over $500 million in the most recent round. Outside of PPP, loan growth for the quarter was 3% annualized, lower than the previous two quarters, but we continue to be encouraged by our pipelines and activity. Deposits continue to grow rapidly due both to our service culture and ongoing stimulus funding. Our core transaction deposits increased in the quarter by $950 million or 33% on an annualized basis and our cost of deposits dropped three basis points and now stand at only 14 basis points. Mortgage continues to outperform with records set for both closings and locks in the quarter. Credit remains a source of strength. This quarter we had net recoveries of one basis point and non-performing assets declined from 55 basis points to 48 basis points of total loans. Overall, I continue to be proud of how our teams have adjusted to the environment and how they deliver both great service to our customers and great results for our owners. For more details on the quarter, I'm going to turn it over to the team here, and I'll start with Rob.

Thank you, Lynn. I will start my comments on page 7. We are pleased with our loan growth in the quarter. Overall loans increased by $308 million in the quarter, with $518 million of new round three PPP loans that were netted down by significant forgiveness of first and second round PPP loans. Excluding PPP activity, we had $71 million in loan growth, which translates into 3% annualized growth in the quarter. The primary drivers of loan growth for the quarter were mortgage loans and real estate categories. Some of the growth for the quarter was muted by a strategic direction on shared national credits. In the bullets on page seven, we highlight the granularity of our loan book, in which our top 25 relationships only comprise 5% of total loans, and we believe this is a demonstration of how we manage various levels of concentration. On page 8, we also feel encouraged about our credit quality, and in general, we are seeing stress decreasing in key areas. Our net charge-offs were essentially flat, with one basis point of net recoveries, as we had the benefit of strong recoveries again this quarter. The VDIS net charge-offs were also relatively low in the first quarter at just 70 basis points. which is the best number that unit has reported since the third quarter of 2019. We had a negative loan loss provision of $12.3 million for the quarter. The release came primarily due to our more optimistic economic forecast, which was consistent with the trend in recoveries and declining non-performing balances. You may recall that we had about $80 million in loan loss provisions for the year of 2020. which was about $60 million above net charge-offs. So our first quarter releases were about 20% of our 2020 reserve build. On page nine, there's additional detail on credit. In the upper left corner of the slide, our loan deferrals continue to improve and now stand at $48 million. In the lower left, we highlight our special mention loans and our accruing substandard loans. Special mention loans are grade seven for us, and substandard is grade eight. We did direct $90 million in downgrades, primarily from our senior care portfolio, which drove the increase you see in special mention. We are actually seeing some improvement in the occupancy and leasing characteristics of the senior care portfolio. But we do put loans into special mention if they are not cash flowing or not leasing up according to plan, regardless of their collateral value, the equity contribution, or the guarantor support that may exist in the project. I will remind you that both our hotel and senior care books have significant equity, and we do provide greater detail on both portfolios in the appendix. Our NPA is improved by $5.8 million and stand at 48 basis points of total loans as borrowers successfully liquidated real estate on two of our larger non-accruing relationships. All said, we are encouraged as to the direction of our portfolio and where our reserve is and the economic trends developing in our markets. Page 10 shows the details as to the change in reserve. As I mentioned, we released $12.3 million into the reserve in the first quarter, mainly due to the change in our forward forecast. Excluding PPP loans, our reserve percentage is 1.26%, which we believe is conservative given the credit environment as we see it. With that, I'll pass it to Jefferson.