United Community Banks, Inc.

Good morning and welcome to United Community Bank's first quarter 2023 earnings call. Hosting the call today are Chairman and Chief Executive Officer Lynn Hartin, 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, free tax, free 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. at ucbi.com please be aware that during this call forward-looking statements may be made by representatives of united any forward-looking statement should be considered in light of risks and uncertainties described on pages five and six of the company's 2022 form 10k as well as other information provided by the company in its filings with the sec and included on its website at this time i will turn the call over to lynn harten good morning and thank you for joining our call today this has certainly been a busy and an interesting quarter

Despite the turmoil in the U.S. banking markets, we continued to perform well. While our reported operating earnings per share was 58 cents, if you exclude the progress double-dip credit provision, which I think is a better way of looking at it, our operating EPS was 65 cents for the quarter, and our operating return on assets was 119 basis points. Given the focus on liquidity and funding costs, we were pleased with our customer deposits growing at a 10% annualized rate in the quarter. The cost of deposits did increase, and our mix of deposits moved toward more interest-bearing, as would be expected in a higher-rate environment. Our bankers worked proactively with our customers after the news of Silicon Valley and Signature Bank, and we also saw mixed changes resulting in growth in our insured products. We ended the quarter with essentially no short-term borrowings or advances, However, we did incur extra costs during the quarter as we decided to hold higher levels of liquidity given the environment. We expect to be able to hold more normal levels of operating cash going forward. We've included additional information in our investor deck regarding our deposit composition, granularity, and insurance coverage and are glad to take additional questions on these topics on the call. Our deposit franchise continues to be a key strength for us. With mixed changes and increases in rates paid on interest-bearing deposits, our overall cost of deposits increased by 61 basis points. Our loan yields increased by 46 basis points for the quarter. Taking together, these changes combine to decrease our margin by 15 basis points from 3.76 to 3.61, while down, it's still significantly better, 64 basis points better, than the same period a year ago. Our loan growth for the quarter was 8% on an annualized basis. Credit quality continues to be strong, with net charge-offs of 17 basis points, flat with last quarter. We did have an increase in non-performing assets and past dues from 29 basis points to 43, but these numbers continue to be consistent with normal performance. Our senior care portfolio, which is 410 million, or 2.4% of total loans, continues to be our most stressed sub-portfolio, and was responsible for the increases in nonperforming assets and past dues. Our office portfolio, 710 million, or 4.2% of total loans, continues to perform well with very low levels of loans identified as high risk. This is a very granular portfolio. Our largest office loan is $23 million on a single property, and our 10 largest office loans combined total 132 million, or only 80 basis points of total loans. Rob will be glad to provide additional color on the portfolio during the question period. This was the first quarter we officially had Progress Bank as part of United. While the deposit and loan growth numbers I previously mentioned exclude Progress and Progress Activity, they of course did add to our balance sheet and income for the quarter. We are thrilled to have them as part of the team. I'm also pleased to report that we completed the conversion of Progress over this past weekend. And so now, not only are they part of United financially, they are also operating under the United brand and systems. David has built a great team and fantastic markets, and we're a better company together with them. During the quarter, we were also very pleased to announce a merger agreement with First National Bank of South Miami. This is a great bank, which has been in the market since 1952. We spent a lot of time with the management leadership team and are excited to bring their talent and energy to United in the latter part of this year. So, as I said, a busy and interesting quarter, and now I'd love for Jefferson to provide more detail on our performance.

Thank you, Len, and good morning to everyone. I am going to start my comments on page eight and go into some details on deposits. As Len mentioned, we had a strong customer deposit growth quarter. of $525 million, and we elected also to raise some brokered CDs in February, which gave us $790 million of new funding in Q1. The growth came in our CDs and our money market accounts as our DDA shrunk in the quarter. Our cost of total deposits moved to 1.1 percent in the first quarter from 49 basis points in the fourth, and we now have a beta of 23 percent through the cycle. We have added some more detail on page nine on our deposit base. We have a granular deposit base with $32,000 average account size. Also, our business deposits were up 6% not annualized this quarter with stable DDA and the growth coming on the interest-bearing side. In addition, our consumer deposits were up 1% not annualized with a more noticeable mixed change from DDA to interest-bearing. On page 10 is yet another look at our deposits, this time with regard to FDIC insurance. We estimate that 64% of our deposits have FDIC insurance, and we also calculate that another 12% are public funds that are collateralized with securities, making them somewhat stickier, we believe. So in total, we have 76% of our customer deposits that are either guaranteed or collateralized. We also have a note on this slide that we are seeing growth in our insured cash suite deposit, or ICS deposits, that was $319 million in the first quarter. Moving on to page 11 and the topic of loan growth, adjusting for the acquisition, our loans grew $335 million, or 8.2% annualized. Again, adjusting for the progress book, the biggest growth categories were residential mortgage, owner-occupied CRE, and Navitas. Our portfolio is very granular, with relatively small project limits, and is very diversified. On page 12, we look at some balance sheet highlights. Our loan-to-deposit ratio increased slightly, but remained low at 78%, with the strong deposit growth in the quarter offsetting the addition of progress. We also show that we had an increase in our TCE ratio to 8.2%, and our CET1 ratio remains above peers, but came down 20 basis points with the progress acquisition as we put some capital to work. On page 13, we take a deeper look at capital and show how we achieved the tangible book value growth in the quarter. Our regulatory ratios remain above peers, but did fall slightly and move towards peers a bit with the progress acquisition. Moving on to the margin on page 14. The margin increased 64 basis points year over year, but fell 15 basis points from last quarter. And excluding loan accretion came in 21 basis points lower on a core basis. Our loan yield increased 46 basis points in the higher rate environment, but our cost of total deposits was up 61 basis points to 1.10%. The main driver of the cost of total deposits increase was higher deposit rates, but a mixed change away from DDA towards money market and CDs also contributed another five basis points of margin pressure. Many of these trends are continuing. I mentioned that our average cost of total deposits was 1.10% in the first quarter, but on 331, on a spot basis, the cost of total deposits was 1.27%, and we have seen that move up five basis points as of Friday. So we have the benefits of loan yields moving higher, and a positive mixed change on the asset side being offset by higher deposit costs and a negative mixed change in deposits. On page 15, we look at fee income, which was down $3.2 million compared to last quarter. The decline is mainly due to the absence of $3.5 million in equity gains that came in Q4, along with $1.6 million of securities losses that occurred in Q1. Mortgage came in stronger, as a mixed change towards fixed product means that we've sold more loans and put less loans on the balance sheet. Moving to expenses on page 16, it came in at $131.2 million. Progress was the main driver of the increase. In particular, we added $2 million in higher core deposit and tangible amortization. We also had $900,000 in higher FDIC costs from the rate increase. the first quarter is seasonally higher with the restart of FICA taxes that came in $2.2 million ahead of the fourth quarter. On page 17, we talk about credit. Net charge-offs were flat at 17 basis points. Of the net charge-offs, Navitas losses came in at 93 basis points, which we believe is now back in the normal range. NPAs increased to 43 basis points of loans, and past dues also increased, while special mention loans improved. Rob is on the call and can discuss credit more in the Q&A. Our last page is page 18, where we talk about the reserve. We set aside $21.8 million in a loan loss provision, which more than covered our $7.1 million in net charge-offs. The $21.8 million provision also included a $10.4 million double-dip provision to set up a reserve for progress. And with that, I'll pass it back to Lynn.