United Bancorporation of Alabama, Inc.

Good morning and welcome to our fourth quarter 2024 United Bank Corporation's earnings call. I'm Brian Bruley. I'll be stepping off for a moment and turning it over to Mike Benson, our Chief Executive Officer and President, David Stewart, our Chief Credit Officer, and Leanne Jones, our Chief Financial Officer. We will be taking questions through the Q&A function on your Zoom app this morning, maybe at the top of your screen or at the bottoms, but you can find it there. So we'll be monitoring those questions as they come in. So with that, Mike, I'll turn it over to you.

Brian, thank you very much. And thank you for all of you for joining us again. We appreciate your support and your interest in the bank. Wanted to spend a little bit of time, as we always do, share a little bit of insight and performance metrics from 2024. So with that, we'll just jump on in. We felt like 2024 was a good solid year for the bank. Obviously, like many banks, there were some headwinds in the credit side of the house that David will speak about. But again, very successful in a lot of the initiatives that we've had. uh, CDFI programs and the like. So I'll give you some, uh, some high level numbers and then we'll kind of walk through, uh, time permitting. Then we will have a little bit of time typically for some questions and answers as we can, uh, at the end of the session. So for the, uh, year, uh, year to date, net income totals were $26.9 million at the holding company level or an EPS of 765. Um, That is compared to $31.5 million and $8.81 for 2023. On the quarter, net income was $6.9 million, earnings per share of $2 a share, and that is compared to $10.4 million and $2.95 respectively for the prior year. Just a couple of things to note. This was our first full quarter with legacy Town Country United Bank and United Bank operating under the same umbrella, so to speak, as one institution. So we're excited to get that final piece of the puzzle post-merger done and look forward to 2024 or 2025 as we go forward. I had mentioned a few of the CDFI awards. I will kind of give you a rundown real quick on what we received. A lot of year-end numbers here. you know, kind of back end heavy on the award announcements and recognition this past year. BEA, or the Bank Enterprise Award, $64,000 was received and recognized in the fourth quarter. FA, or the Financial Assistance Award, of $1.3 million has not yet been received, but was announced and recognized in the fourth quarter. A $65 million new market tax credit allocation was announced this Now, as you recall, that is not really monetized until those credits are sold and put into transactions. But that was another successful round, another successful application for our team, and we're very proud of that. And last and certainly not least in the fourth quarter, the latest Capital Magnet Fund announcement. was $9 million, one of the largest awards to any individual institution in the country. So we recognized and received that as well in the fourth quarter. So strong results from the CDFI team. Year to date, net interest margin has remained strong, stable, 4.57% versus 2023 of 4.6, right at it where we have been operating albeit with an uptick in cost of funds. We've continued to hold that line, and we're very pleased with that. A couple of highlights for the quarter was the termination of the KSOP plan that we've had in place for a number of years. There was an announcement, obviously, that had been sent out about that, but the numbers of that are this. We repurchased 197,700, and 1,700 1,000 shares, 197,000 shares bought at $54.25 a share, total transaction cost of $10.7 million. So we were glad to get that wrapped up prior to year end. And then Leanne may get into this in a little more detail, but we also sold approximately $52 million in bonds. recognizing a $3 million loss in the fourth quarter as well, as we've continued to try to sell some of the low performers and reinvest at better rates. So I'll let Leanne speak to that in a little more detail in just a minute. So those are some of the highlights. You know, again, a good solid year. We look forward to 2025. But with that, I'll turn it over to David. Maybe speak about the credit side.

Sure. So good to be with everybody again. So we'd like to run through some of the highlights associated with the loan book for the bank. So year in performance, year over year growth was at 7.3%. Came out to $59.5 million, so we were pleased. That was right on top of our budgeted number. So strong year in terms of loan production and growth, right where we had anticipated we would be at year end. Q4 was strong as well. In our opinion, 1.7% growth for the quarter of $14.7 million. We've continued to see strong production out of our affordable housing group. Our multifamily construction book has continued to grow. That's been a strong performer for us. Also, year-end, we saw some increases in the municipal book, as well as our farmland. If you guys will remember, we've talked a lot about some of the ESUB funding and using those for special tranches of loans. Part of our strategy was to put that to work in multifamily, in some municipal credits, and also farmland as well. So ag and timberland continues to be part of our DNA, if you will. So our first loan here at the bank in 1904 was an ag loan, so we continue to embrace that. Continue to track pretty well on our loan to deposit. We've stayed right around just under 80% at year end. So that's been our target and seem to be managing that well while continuing to manage that debt NIM and cost of funds. Kind of the things could jump off your page, non-performing assets. So wanted to take a few minutes to talk about that. So we did publish an updated earnings release. There was a small mistake on the total non-performings. So we had stated 16 is actually 17.2. That should be outpublished on our investors' website at this point. Thank you, Brian, for having that out. That's really inclusive of three credits that make up a lot of that non-agreable balance that you're seeing in those non-performing assets. One is a large credit that we're a participant in. We're working through a Chapter 11 plan right now for those folks. We've properly reserved for what we have on the books and are optimistic we can resolve that soon. Don't have a time frame, but we are working through that credit. That's Goodness, almost 60% of that number. The other portion is two credits. One is another credit that is actually in a bankruptcy plan right now. We think that we'll exit that here soon. Goodness, probably in the next few weeks. Have that one resolved with a very small loss. And then there is the one other credit. participation credit that we're working through a restructure, trying to get some resolution. So if you net those three out, now your past use plus non-accruals goes down from 2.09% down to 0.67%. So that's under our target for non-performing assets plus past use at the bank. So we are spending an inordinate amount of time, as you can imagine, working through those relationships. Really don't see any other correlation of issues systemically at the bank. We did work through a lot of ag-related problems in 2024 related to the 2023 crop cycle. If you guys will remember, we had a basically a once-in-a-generation drought that some of our better farmers work through some carryover. So we've shored up our position. We've been very aggressive with using FSA guarantees. Those are loan guarantees for anything that we would need to renew for those farmers to help keep them farming and limit our risk. So we... First indications that year-end 2020 forest crop cycles is better than 2023. We did have quite the weather issues. We had some pockets of drought, which is understandable. Then also any of you that might follow commodity prices. Commodity prices have slid a small amount. Input prices have stayed up, so just margins for a lot of our farming community are not what they have been in the past. So we're kind of separating the men from the boys. The guys are all trying to learn how to be a little smarter and more diversified. So all in all, I think 2024 will be a pretty good year for our farmers. Not as good as in the past, but not as bad as 2023. Moving on down, you guys will have seen some charge-offs. We had a couple of charge-offs over the last six months of the year that we went ahead and elected to take those write-downs. And then we've been a little more aggressive with the allowance for credit loss, so just in terms of what we had seen in the credit book. Okay. associated some of those non-accruals that I discussed and making sure we're in good shape, uh, moving forward into the next fiscal year. So we ended the year with a consolidated CECL at 1.42% for an allowance of 12.3. So, uh, all in all good growth had some headwinds has been a while. So, um, but we feel that we have, uh, isolated those challenges and are ready to move forward into 2025. That's all I've got. So I'll pass it over at this point to Leanne.