United Community Banks, Inc.

Good morning, and welcome to United Community Bank's fourth quarter 2024 earnings call. Hosting our 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, 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 this morning 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 2023 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 will turn the call over to Lynn Hartin.

Good morning and thank you for joining our call today. We were pleased to report earnings of 61 cents this quarter and $2.04 for the full year. On an operating basis, we recorded earnings of 63 cents for the quarter and $2.30 for the year. This represented an annualized growth in operating earnings of 11% from last quarter and an increase of 9% for the full year of 24 compared to 23. Our tangible book value increased 9% year-over-year and at a 7% annualized rate during the fourth quarter. Our operating return on assets reached 1.08% in the quarter, and we finished the full year at 1.02%. Our operating return on tangible common equity increased to 12.1% for the quarter and 11.4% for the full year. There was no single driver of performance this quarter. Rather, we recorded strong, balanced performance across all of our businesses. Loan growth accelerated at the end of the quarter, reaching a 5% annualized growth rate, with several different product types contributing. Deposit growth totaled almost 4% annualized during the quarter, with seasonal growth in public funds driving those results. As the Fed lowered short-term rates this quarter, we were able to decrease deposit costs by 15 basis points nearly offsetting the 21 basis point decline in loan yields. Our overall margin was down 7 basis points, but net interest revenue increased by $1.1 million over the previous quarter. Credit continues to reflect solid economic conditions in our footprint. Total net charge-offs were 21 basis points, our lowest rate since Q2 of 23. Other credit metrics were also stable at low levels. Expenses were well managed, essentially flat with the third quarter. Our operating efficiency improved to 55%. We continue to have ample liquidity to fund growth and are looking forward to our opportunities in 2025, including the expansion of our South Florida footprint with American National Bank. Jefferson, why don't you cover the quarter in more detail now?

Will do. Thank you, Ann, and good morning to everyone. I'm going to start on page five and lead off by talking about deposits. We enjoyed $213 million of deposit growth, or 3.7% annualized. We had stable DDA, and we had the benefit of seasonally strong public funds. The strong deposit growth funded substantially all of our loan growth in the quarter. We were proactive in lowering our deposit cost. Our cost of total deposits improved by 15 basis points in the quarter. We have a total deposit beta of 22% so far, but we believe we are still on pace for a high 30% range total deposit beta through the cycle. On page six, we go into some more detail on deposits. In particular, we show our opportunity to reprice CDs here in the first quarter. We have been shortening our CD book over the past year, and we have a significant amount of dollars maturing in the first quarter, specifically We have over half of our CD book maturing, which is $1.8 billion at 4.14%. We should be able to reprice these in the 350 range given the current environment. On page seven, we turn to the loan portfolio where growth picked up nicely, specifically in areas that we are targeting. We had 13% annualized growth in CNI, which includes owner-occupied CRE. and 15% annualized growth in the Navitas book. We have also been targeting our HELOC product for growth, and we were pleased with 20% annualized growth in that area. Turning to page 8, where we highlight some of the strengths of our balance sheet, we believe that our balance sheet is in good position with just a small amount of wholesale borrowings and very limited broker deposits. Our loan to deposit ratio stayed at 78% in Q4, after moving down from the 80% level with the sale of our manufactured housing portfolio in Q3. Our CET1 ratio remained over 13% in the quarter. On page 9, we look at capital in more detail. We had increases in most of our regulatory capital ratios and our TCE, and all of our capital ratios remained above peers. If you recall last quarter, we took the opportunity to call a small amount, or $8 million, of trust preferreds that saved some money and helped the margin. We took a similar action in the fourth quarter, redeeming $60 million of subordinated debt. This debt was about to slip from the low 5% range to the low 8% range. So it saves us about $1.8 million in 2025. It was also just beginning to lose Tier 2 capital treatment. The redemption moved our capital ratio down by about 30 basis points, and the total capital ratio ended up down 20 basis points in the quarter. The redemption also generated a $2.2 million gain as the debt came to us in an acquisition and was marked on the books at a premium. This gain is called out on page 4 as a notable item. Moving on to spread income and the margin on page 10, We achieved 2% annualized growth in spread income. We were pleased with this outcome given the sale of the manufactured housing portfolio that negatively affected the average loan balances. Excluding the MH impact, we estimate that our spread income growth was in the 4% to 5% annualized range this quarter. The margin came in seven basis points lower in the fourth quarter. The decrease was in line with our expectations and was explainable by the manufactured housing impact of two basis points and the mixed change due to public fund seasonality of five basis points. Excluding these two items, our margin was flat, which we view as a good outcome while we work on executing to achieve the high 30% total deposit beta as compared to the 22% achieved so far. Moving to page 11, on an operating basis, non-interest income was up $5.2 million from last quarter. the growth came despite a $1.6 million shrinkage in wealth income fees with the sale of our FinTrust sub on October 1st. The total fee income increase was benefited by a $3.5 million MSR write-up and a $1.4 million realized gain on the sale of equity securities and was offset by $3.3 million in securities losses. Including the debt redemption gain I mentioned before, our run rate of non-interest income is closer to the $36 million range. Besides the highlighted items, we had strong results in debit card income, customer swap income, and treasury management fees that drove quarter-to-quarter growth on a core basis. Our gain on sale of SBA and Navitas loans was similar to last quarter, adjusting for the manufactured housing sale. Operating expenses on page 12 came in flat at $140.9 million. We had about $1.2 million of tail expenses from FinTrust that we expect not to repeat next quarter. Moving to credit quality, net charge-offs were improved to 21 basis points in the quarter. Recall that our net charge-offs excluding the MH sale was 28 basis points last quarter. While overall losses were lower, Navitas losses were a little bit higher and contributed 13 basis points of total losses, up from 12 basis points last quarter. Excluding MH and Navitas' losses, the bank's losses were low and stable at just 8 basis points, down from 15 basis points last quarter. In other credit statistics, NPAs and past dues were improved, while special mention in substandard loans moved slightly higher. We'll finish on page 14 with the allowance for credit losses. Our loan loss provision was $11.4 million in the quarter and more than covered our $9.5 million in net charge-offs. We also covered loan growth with the provision and the reserve stayed stable at 1.2% of loans. We still have $9.9 million of reserves set aside as a special provision for loans in a nine-county area in North Carolina for Hurricane Helene. We already had $3.1 million in reserve on these loans before, so the total reserve is $13 million on these loans in the nine counties, or 3.5% of total loans there. Our update is that we have $27 million in storm-related deferrals, 18 million of which occurred in the nine-county area where we have the special reserve. We believe that our current provision is sufficient to cover any potential losses. With that, I'll pass it back to Lynn. Thank you, Jefferson.