United Community Banks, Inc.

United Community Bank's third quarter 2025 earnings call. Hosting our 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 highlight 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 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 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 5 and 6 of the company's 2024 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 Harten.

Good morning and thank you for joining our call today. The third quarter was a strong one for United. Revenue grew more than $16 million compared to the second quarter, driven by an eight basis point improvement in our margin and 5.4% annualized loan growth. Our provision for credit losses declined by approximately $4 million compared to last quarter, supported by continued strong credit results, and the release of $2.6 million from our Hurricane Helene Special Reserve. Expenses grew by only $2.9 million over last quarter, or $4.3 million on an operating basis, largely due to increased incentive accruals. Taken together for the quarter, we recorded earnings per share on an operating basis of $0.75 per share, a 32% year-over-year improvement, a return on assets of 1.33%, and a return on tangible common equity of 13.6%. I was pleased to see great balance, performance, and teamwork across the company this quarter. All of our states delivered positive loan growth this quarter. Our treasury team and our frontline bankers have worked together with better analytics and improved communication to reduce deposit costs while continuing to grow customer deposits. As our capital continues to grow, we have taken the opportunity to both increase our dividend and redeem our costly preferred stock. Our tangible book value reached $21.59, a 10% year-over-year growth. Credit losses were only 16 basis points for the quarter and only five basis points in the core bank, excluding Navitas. Other credit risk metrics, such as past dues, non-accruals, and special mention, all remained in very good ranges. Clearly, there have been announcements of a few cracks in the broader credit environment over the last several weeks. I believe these announcements are isolated events somewhat tied to private credit. Given the very rapid growth in private credit and the number of new entrants, it would not be surprising to see additional defaults in that sector, but that should have limited impact on most banks. Our own strategy has been to be very cautious and selective in considering lending to any non-depository financial institution. And accordingly, we have very little exposure there. Jefferson, why don't you cover the quarter in more detail?

Thank you, Lynn, and good morning to everyone. I will start on page five of the deck. We were very pleased with our deposit performance in the third quarter. Excluding the seasonal public outflows, we grew deposits by $137 million, or 2.6% annualized. with DDA comprising a good portion of the growth. Looking ahead to the fourth quarter, we expect about $400 million of public funds deposit inflow that will serve to make our balance sheet larger as we plan to hold the funds in cash and short-term investments. We were also able to push down our cost of deposits in the quarter to 1.97% to achieve a 37% total deposit beta so far. We have been saying we thought we could get to a high 30% range total deposit beta through the cycle, but on these first five cuts, I now believe we can get to the 40% range. In September, we averaged a 1.92% cost of deposits. So we are expecting more improvement in the fourth quarter. On page six, we turn to the loan portfolio where our growth continued at a 5.4% annualized pace. Excluding the impact of senior care runoff, we grew loans at a 6.2% annualized pace. Our growth came primarily in the C&I, equipment finance, and HGLAC categories. Turning to page 7, where we highlight some of the strengths of our balance sheet, we believe that our balance sheet is in good position from a liquidity and capital standpoint to be ready for any economic volatility. We have no wholesale borrowings and very limited brokered deposits. Our loan-to-deposit ratio remained low but increased for the second quarter in a row and is now at 80%. Our CET1 ratio was relatively flat at 13.4% and remains a source of strength for the bank. On page 8, we look at capital in more detail. As I mentioned, our CET1 ratio was 13.4%, but you'll notice the impact at the end of the quarter we redeemed the remaining $88 million of our preferred issue. All things equal, this lowered our Tier 1 total capital and leverage ratio towards peer levels. Our TCE ratio was up 26 basis points in the third quarter as the balance sheet stayed relatively flat. We have been fairly active in managing our capital. Since the beginning of 2024, we have now paid down $100 million of senior debt, $68 million in Tier 2 capital, We purchased $14 million of common shares. Now we have redeemed the $88 million of preferred. Moving on to spread income on page nine, we grew spread income 14% annualized in the quarter. Our net interest margin increased eight basis points to 3.58%, mainly driven by lower cost of funds and a mixed change towards loans. We remain slightly asset sensitive, And because of this, in the fourth quarter, I would expect our net interest margin to be flat to down two basis points. A key will be how we are able to reprice the $1.8 billion of CDs we have maturing in the fourth quarter at 3.60%. We also have the medium-term benefit of our back book of loans and securities that will mature at low rates. In the next year, using just maturities, we have about $1.4 billion of assets paying down in the 4.93% range. Moving to page 10, on an operating basis, non-interest income was $43.2 million, up $8.5 million from last quarter. Up to $43.2 million, we had a $1.5 million BOLI gain that we don't expect to repeat and an MSR write-up of $800,000. On the slide, we mentioned that unrealized gains on equity investments swung up $2.1 million. This moved from a half million dollar loss last quarter to a $1.6 million gain as this category will bounce up and down. Besides these items, we had strong across the board increases in most of our fee categories, and we feel good about our progress in the quarter. Operating expenses on page 11, were up $4.3 million in the quarter. This $4.3 million increase was primarily driven by higher variable compensation. With strong revenue growth in the quarter, our efficiency ratio improved to 53.1%. Moving to credit quality on page 12, net charge-offs were 16 basis points in the quarter, improved compared to last quarter and last year. NPAs and past dues moved a little higher off a low base as credit quality remained strong. We'll finish on page 13 with the allowance for credit losses. Our loan loss provision was $7.9 million in the quarter as compared to our $7.7 million in net charge-offs. The $7.9 million provision included a $2.6 million release of our Hurricane Helene Reserve, which now stands at just $1.9 million remaining. Net-net, our allowance coverage of credit losses moved down slightly to 1.19%. With that, I'll pass it back to Lynn.