United Community Banks, Inc.

Good morning and welcome to United Community Bank's fourth 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 fourth 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 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. And now at this time, I'll turn the call over to Lynn Hartin.

Good morning, and thank you all for joining our call today. I'm very proud of what the United team has accomplished during the fourth quarter and really all of 2021. First, our financial performance continues to be strong, with a 110 basis point return on assets and a 13.9% return on tangible common equity, both on an operating basis for the quarter. During the fourth quarter, our teams delivered strong annualized organic loan growth of 7%, and 17 percent annualized organic deposit growth. Our cost of deposits dropped by one basis point during the quarter and now stands at only six basis points. Credit results continue to be excellent, with net charge also at only one basis point for the quarter, allowing for a small reserve release during the quarter. Our operating efficiency was 56.5 percent, even with a somewhat higher expense base, both from organic and acquired growth. And strategically, we completed the acquisition of Equesta in August, and we completed systems conversion in mid-November. Our wealth management line of business, strengthened by the addition of FinTrust this past summer, is performing well, and our assets under advisement now stand at $4.7 billion. And finally, our Reliant acquisition closed on January 1st, and we're now on track for systems conversion in April. I'd like to extend a special welcome to the Reliant team, Devan, John, Mark, all the leaders of Reliant have built a great team that will make United better, not just bigger. Reliant has been a multiple year winner of Best Places to Work and has been recognized as the best performing small bank in Tennessee for several consecutive years. We're very excited to have them join United. So once again, welcome to the entire Reliant team. I'm proud of what our people have been able to accomplish this year. And I'm also grateful for the quality of the teams that have joined us and the opportunities that our new markets and lines of business have brought this year. We're entering 2022 with great momentum, thanks to the hard work of the entire United family. And now I'd like to turn it over to Jefferson for more details on the quarter.

Thank you, Lynn. I am going to start my comments on page eight and discuss the loan portfolio. The loan portfolio was positively impacted by the addition of the Equesta loan book, as well as the ongoing forgiveness of PPP loans. Excluding these offsetting factors, we grew loans by $190 million in the fourth quarter, which was at a 7% annualized pace. This is our strongest growth of the year and encouraging for 2022. Our strategy for the portfolio is for it to be diversified, CNI heavy, and granular, and you can see the statistics on the bottom of the page. Moving to page nine, it shows our deposit growth, which was also impacted by Equesta. We've had strong growth all year with $2.4 billion of increases, which is 15% annual growth. That growth momentum continued in the fourth quarter with $718 million of organic deposit growth or 17% annualized. Moving to page 10, our strong deposit growth from both 2020 and 2021 creates a nice opportunity for us in the medium term. Our loan-to-deposit ratio has moved down to just 64% from 81% at the end of 2019, and our average cash balances and Q4 were $2.3 billion, up $557 million. We think we have a big opportunity to improve our margin and ROA as we grow back into our balance sheet in 2022 and beyond. Moving on to page 11, we talk about capital. We have been intentional in how we manage capital. In May of 2020, we raised $100 million of preferred equity to steepen our capital stack. And in 2021, as we understood COVID more, we started putting capital to work. In 2021, we paid down $66 million in debt and Tier 2 capital. We raised our dividend by 11% year over year. We repurchased $15 million of our own shares and included $40 million of cash in the EQUESA deal that closed this quarter. Also, with Reliant closing in Q1, we still believe we'll be in line with peers with our capital ratios. Page 12 highlights our net interest income and margin trends. Our net interest income is impacted by PPP fees and loan accretion. If you adjust for these and the requested deal, we were pleased that our core spread income grew at approximately 8% annualized in the fourth quarter. Our core margin compressed five basis points as our 17% annualized deposit growth pushed our average cash position up by $557 million in Q4. Excluding this cash build, our core margin was relatively flat. On page 13, we look at fee income, which was down $2.9 million from last quarter, mainly driven by normalizing mortgage income. Specifically, mortgage fees came in at $10.9 million, in line or a little above our expectations, as volume declined. Partially offsetting the margin decline was an increase in the gain on sale of other loans. Specifically, the fourth quarter is typically our strongest quarter for SBA sales, which came in at $3 million, and we had just under a million dollars in gain on sale of Navitas loans as well. I would like to talk about our service charge outlook in 2022 a little bit. UCB, like a lot of banks, made changes to our overdraft program to make it more customer friendly. Specifically, our customers now get their first overdraft of the year automatically forgiven And now we don't charge for overdrafts if the account stays within $20 underwater. This is compared to a $5 threshold before. And we have put limits in for the number of overdrafts that can occur in a single day at three and before this limit had been eight. All said, we think this could cost us $2.7 million in 2022. but there could be offset in the form of less waivers and hopefully higher customer satisfaction, but we think we are doing the right thing for our customers and our business. Page 14, we look at expenses that were higher in the quarter, primarily driven by the addition of AQUESTA. We completed the AQUESTA conversion in November and got some of our expected cost savings in Q4, and we believe that we will be on pace for the full cost savings run rate here in Q1. Moving to page 15, we are 95% complete on PPP forgiveness, and we have $1.8 million in fees left to recognize. We will hopefully be through the forgiveness in Q1, and perhaps this slide will even come out next quarter. Page 16, quickly, credit quality was stable and strong in the fourth quarter. as we had negligible net charge-offs in the fourth quarter. Moving on to page 17, I'll just make a comment that our special mention and substandard loans are stable to improving, and we are encouraged about 2022. Finally, on page 18, you can see our waterfall chart for the change in allowance for credit losses. We had a $647,000 release of provision in Q4. The release is driven by a $3.3 million AQUESTA double dip netted by a $3.9 million core reserve release. The chart shows the components of the change in our reserve, which includes a $3.6 million day one reserve increase from AQUESTA PCD loans that went straight into the reserve without going through the provision. And with that, I'll pass it back to Len.