United Community Banks, Inc.

Good morning and welcome to United Community Bank's second 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 second 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 everyone for joining our call today. This has been a great quarter for United, and I want to start by congratulating our teams for what they are doing to build the company. We've had several strategic accomplishments this quarter. We doubled the size of our investment advisory business and added offices in South Carolina and Georgia with the acquisition of FinTrust Capital Advisors. We're excited to welcome that team to United and look forward to the opportunities that our combination will bring. We also announced a bank expansion in the Charlotte MSA with the acquisition of Equesta. Jim Engle has built a great team that will be additive to our franchise with approximately $750 million in assets and nine offices. We've had several lending divisions in Charlotte for some time and have been looking for a way to grow our presence there, and we're very excited that Equesta chose to partner with us. We anticipate closing the acquisition in the fourth quarter of this year. And finally, last week we were glad to announce our entry into the Nashville, Tennessee market with the acquisition of Reliant Bank. Reliant is a high-performance community bank that will be a great fit with our culture and strategy. Reliant's team, led by Devan Ard, founder, chairman, and CEO, will lead our continued growth in the Tennessee market, where we now will have a top 10 deposit market share. From an operating perspective for the quarter, EPS was 78 cents per share, equating to a 146 basis point ROA and a 17.8% return on tangible EPS. on an operating basis. Loan growth ex-PPP was 5% annualized and we had strong overall average balance sheet growth resulting in strong growth in our spread income. Deposits continued to grow strongly while our cost of deposits dropped five basis points and now stands at only nine basis points. Credit continues to be a strength with net recoveries of two basis points and a reserve release of $13.6 million. Overall a great quarter one we're very proud of, and I'll turn it over to Jefferson for more details.

Thank you, Len. I'm going to start my comments on page nine. The chart highlights our consistent loan growth, excluding PPP loans, over the last year. It also shows our strong deposit growth over the same timeframe. And in combination, we have become a lot more liquid, and our loan-to-deposit ratio has moved to 70% from 80% a year ago. On page 10, we take a closer look at our loan book and the mix of our loans. We had $123 million of loan growth, which is a 5% annualized loan growth rate, which is net of the sale of a number of SBA and Navitas loans that totaled just over $45 million in the quarter. Moving to page 11, which details our deposit growth, while we had $123 million of loan growth, we also had $335 million of deposit growth, which annualizes at an 8% growth rate. We did have a lot of success this quarter in continuing to lower our cost of deposits, which moved to nine basis points this quarter, down from five basis points last quarter. On page 12, I will touch briefly on capital. Our capital ratios grew in the quarter and are above peer levels, partly because of a $100 million preferred raise we did last year. With our pending transactions, we are putting that race to work, and we expect that our capital ratios will be at peer levels on a pro forma basis. We did buy back a modest amount of shares in Q2, which totaled just over $5 million. On page 13, we talk about spread income and the margin. Excluding PPP fees and loan accretion, our spread income grew at a 17% annualized pace in Q2. Our core margin was down four basis points, mainly due to continued increased liquidity driven by strong deposit growth in combination with a significant cash flow coming in with PPP forgiveness. Page 14 details our fee income, which was significantly down from last quarter, primarily because of mortgage. Our rate lock volume was down in Q2. and this combined with our gain on sale percentage also being down from Q1. While down, our gain on sale percentage does still remain above pre-pandemic levels. Then, given the lower rates in the quarter, we also had a $3 million MSR rate down this quarter, which compared to a $1.3 million gain last quarter and created a $4.3 million negative swing in total from Q1. We did resume the VDIS loan sales this quarter, and had $803,000 of gains on $18.9 million of loans sold. We would expect to continue Navitas loan sales for the rest of the year, in addition to our normal SBA loan sales. Page 15 shows our expenses, up $800,000 from last quarter, excluding merger-related charges. I expect relatively flat to possibly down expenses in Q3, excluding the impact of FinTrust that adds about $1.5 million of quarterly expenses. I will finish up on page 16 and talk about PPP loans. We had $411 million of PPP loans forgiven in Q2, and we have $472 million remaining to be forgiven. We recognize $11 million of PPP fees in Q2 and have $19 million of fees yet to be recognized. of which we would expect to get the lion's share later in 2021. And with that, I'll pass it to Rob to discuss credit.