UNITED COMMUNITY BANKS INC

Previous wording

The following is a discussion of our financial condition at June 30, 2024 and December 31, 2023 and our results of operations for the three and six months ended June 30, 2024 and 2023. The purpose of this discussion is to focus on information about our financial condition and results of operations which is not otherwise apparent from our consolidated financial statements and is intended to provide insight into our results of operations and financial condition. The following discussion and analysis should be read along with our consolidated financial statements and related notes included in Part I - Item 1 of this Report, “Cautionary Note Regarding Forward-Looking Statements” and the risk factors discussed in our 2023 10-K and the other reports we have filed with the SEC after we filed the 2023 10-K.

Current wording

The following is a discussion of our financial condition at September 30, 2024 and December 31, 2023 and our results of operations for the three and nine months ended September 30, 2024 and 2023. The purpose of this discussion is to focus on information about our financial condition and results of operations which is not otherwise apparent from our consolidated financial statements and is intended to provide insight into our results of operations and financial condition. The following discussion and analysis should be read along with our consolidated financial statements and related notes included in Part I - Item 1 of this Report, “Cautionary Note Regarding Forward-Looking Statements” and the risk factors discussed in our 2023 10-K and the other reports we have filed with the SEC after we filed the 2023 10-K.

Previous wording

We offer a wide array of commercial and consumer banking services and investment advisory services primarily through a 203 branch network throughout Georgia, South Carolina, North Carolina, Tennessee, Florida and Alabama. We have grown organically as well as through strategic acquisitions. At June 30, 2024, we had consolidated total assets of $27.1 billion and 3,070 full-time equivalent employees.

Current wording

We offer a wide array of commercial and consumer banking services and investment advisory services primarily through the operation of 202 banking offices throughout Georgia, South Carolina, North Carolina, Tennessee, Florida and Alabama. We have grown organically as well as through strategic acquisitions. At September 30, 2024, we had consolidated total assets of $27.4 billion and 3,010 full-time equivalent employees.

Previous wording

•During the second quarter of 2024, we entered into an agreement to sell FinTrust, which we expect to close in the third quarter of 2024.

Current wording

•During the second quarter of 2024, we entered into an agreement to sell FinTrust, which closed subsequent to the end of the third quarter on October 1, 2024.

Previous wording

We reported net income and diluted earnings per common share of $66.6 million and $0.54, respectively, for the second quarter of 2024, compared to $63.3 million and $0.53, respectively, for the same period in 2023. The increase in net income resulted primarily from higher net interest revenue and a decrease in provision for credit losses, which were partly offset by higher noninterest expense.

Current wording

We reported net income and diluted earnings per common share of $47.3 million and $0.38, respectively, for the third quarter of 2024, compared to $47.9 million and $0.39, respectively, for the same period in 2023. The third quarter of 2024 included a $27.2 million loss on the manufactured housing loan sale, which was partially offset by a decrease in provision for credit losses of $15.8 million and an increase in net interest revenue of $6.63 million.

Previous wording

Net interest revenue increased to $209 million for the second quarter of 2024, compared to $200 million for the second quarter of 2023. The increase in interest revenue was provided by loan growth, including loans acquired from First Miami, higher interest rates earned on our average loan and securities portfolios, partly resulting from the replacement of lower-yielding fixed rate asset runoff with higher-yielding market rate instruments, and earnings from fair value hedges on certain AFS investment securities and loans. The increase in interest revenue was partially offset by increases in interest expense resulting from higher rates paid on deposits, including deposits received through the First Miami acquisition. Our net interest spread decreased 15 basis points to 2.32%, reflecting a steeper increase in rates paid on deposits compared to that of loans since the second quarter of 2023. Our net interest margin, which was 3.37% for the second quarters of 2024 and 2023, was also impacted by rising deposit rates, but was partially mitigated by the benefit of noninterest-bearing funding sources which, aside from some balance attrition, were unaffected by rising interest rates, thereby keeping our net interest margin level with the second quarter of 2023.

Current wording

Net interest revenue increased to $209 million for the third quarter of 2024, compared to $203 million for the third quarter of 2023. Taxable equivalent interest revenue increased $26.0 million mostly resulting from higher interest rates earned on our average loan and securities portfolios. The increase resulted from the replacement of lower-yielding fixed-rate asset runoff with higher-yielding market rate instruments and earnings from fair value hedges on certain AFS investment securities and loans. The increase in interest revenue was partially offset by an increase in interest expense of $19.3 million mostly resulting from interest-bearing deposit growth in combination with higher rates paid on those deposits. For the third quarter of 2024, our net interest spread increased seven basis points to 2.30% and our net interest margin increased nine basis points to 3.33% compared to the same period of 2023. The increases in net interest spread and net interest margin reflect the increase in yield on interest-earning assets, as discussed, in combination with less steep increases in deposit rates compared to the third quarter of 2023.

Previous wording

We recorded a provision for credit losses of $12.2 million for the second quarter of 2024, compared to a provision of $22.8 million for the second quarter of 2023. The provision for credit losses for the second quarter of 2024 reflects slower loan growth and current period net charge offs of $11.6 million. The provision for unfunded commitments for the quarter was a negative $1.47 million due to a decrease in the amount of unfunded commitments.

Current wording

We recorded a provision for credit losses of $14.4 million for the third quarter of 2024, compared to a provision of $30.3 million for the third quarter of 2023. The provision for the third quarter of 2023 was elevated due to a $19.0 million charge off taken during this quarter and a $4.01 million provision for the establishment of the initial ACL for First Miami non-PCD loans and unfunded commitments. The provision for credit losses for the third quarter of 2024 is indicative of the impact of an improving economic forecast and slower loan growth, partly offset by a special provision of $9.89 million related to expected losses in nine counties in western North Carolina severely affected by Hurricane Helene. The provision for unfunded commitments for the quarter was a negative $1.49 million due to a decrease in the amount of unfunded commitments, particularly commercial construction commitments.

Previous wording

For the second quarter of 2024, noninterest expenses of $147 million increased $14.6 million, or 11%, compared to the same period of 2023. The increase was primarily attributable to a $9.57 million increase in salaries and employee benefits, a $5.10 million goodwill write-down associated with the pending sale of FinTrust, an $1.24 million increase in communications and equipment expense and a $862,000 increase in occupancy expense. The increase in salaries and benefits and occupancy expense was partially attributable to the addition of First Miami employees and branches on July 1, 2023. These increases were partially offset by a $1.49 million decrease in merger-related and other charges.

Current wording

For the third quarter of 2024, noninterest expenses of $143 million decreased $1.41 million, or 1%, compared to the same period of 2023. The decrease was primarily attributable to a decrease in merger-related and other charges of $6.99 million due to the lack of merger activity in 2024, which was partially offset by a $2.36 million increase in salaries and employee benefits and a $1.72 million increase in communications and equipment expense.

Previous wording

For the six months ended June 30, 2024 and 2023, we reported net income of $129 million and $126 million, respectively, and diluted earnings per common share of $1.05 for both periods. Net interest revenue and net interest margin for the six months ended June 30, 2024 were $408 million and 3.28%, respectively, compared to $412 million and 3.49%, respectively, for the same period in 2023. In addition to the factors affecting the second quarter of 2024, results of operations for the six months ended June 30, 2024 include a $1.51 million increase in BOLI income related to death benefits recognized in the first quarter of 2024 and higher FDIC assessment expense of $3.89 million, which is mostly attributable to the FDIC special assessment.

Current wording

For the nine months ended September 30, 2024 and 2023, we reported net income of $177 million and $173 million, respectively, and diluted earnings per common share of $1.43 and $1.44, respectively. Net interest revenue and net interest margin for the nine months ended September 30, 2024 were $617 million and 3.30%, respectively, compared to $614 million and 3.41%, respectively, for the same period in 2023. In addition to the factors affecting the third quarter of 2024, results of operations for the nine months ended September 30, 2024 include a $5.10 million goodwill write-down associated with the transfer of FinTrust to held-for-sale, a $1.37 million increase in BOLI income related to death benefits recognized in the first and third quarters of 2024 and higher FDIC assessment expense of $4.58 million, which is attributable to the FDIC special assessment and an increase in our assessment base. The nine months ended September 30, 2024 also reflects an additional six months of salaries and benefits and occupancy expense attributable to the addition of First Miami employees and branches on July 1, 2023.

Previous wording

Results for the second quarter and first six months of 2024 are discussed in further detail throughout the following sections of MD&A.

Current wording

Results for the third quarter and first nine months of 2024 are discussed in further detail throughout the following sections of MD&A.

Previous wording

This Report contains financial information determined by methods other than in accordance with GAAP. Such non-GAAP financial information includes the following measures: “tangible book value per common share,” and “tangible common equity to tangible assets.” In addition, management presents non-GAAP operating performance measures, which exclude merger-related and other items that are not part of our ongoing business operations. Operating performance measures include “net income – operating,” “diluted income per common share – operating,” “return on common equity – operating,” “return on tangible common equity – operating,” “return on assets – operating” and “efficiency ratio – operating.” We have developed internal policies and procedures to accurately capture and account for merger-related and other charges and those charges are reviewed with the Audit Committee of our Board each quarter. We use these non-GAAP measures because we believe they provide useful supplemental information for evaluating our operations and performance over periods of time, as well as in managing and evaluating our business and in discussions about our operations and performance. We believe these non-GAAP measures may also provide users of our financial information with a meaningful measure for assessing our financial results and credit trends, as well as a comparison to financial results for prior periods. Nevertheless, non-GAAP measures have inherent limitations, are not required to be uniformly applied and are not audited. These non-GAAP measures should be viewed in addition to, and not as an alternative to or substitute for, measures determined in accordance with GAAP. In addition, because non-GAAP measures are not standardized, it may not be possible to compare our non-GAAP measures to similarly titled measures used by other companies. To the extent applicable, reconciliations of these non-GAAP measures to the most directly comparable measures as reported in accordance with GAAP are included in Table 1 of MD&A.

Current wording

This Report contains financial information determined by methods other than in accordance with GAAP. Such non-GAAP financial information includes the following measures: “tangible book value per common share,” and “tangible common equity to tangible assets.” In addition, management presents non-GAAP operating performance measures, which exclude merger-related and other items that are not part of our ongoing business operations. Operating performance measures include “noninterest income - operating,” “noninterest expense - operating,” “net income – operating,” “diluted income per common share – operating,” “return on common equity – operating,” “return on tangible common equity – operating,” “return on assets – operating” and “efficiency ratio – operating.” We have developed internal policies and procedures to accurately capture and account for merger-related and other charges and those charges are reviewed with the Audit Committee of our Board each quarter. We use these non-GAAP measures because we believe they provide useful supplemental information for evaluating our operations and performance over periods of time, as well as in managing and evaluating our business and in discussions about our operations and performance. We believe these non-GAAP measures may also provide users of our financial information with a meaningful measure for assessing our financial results and credit trends, as well as a comparison to financial results for prior periods. Nevertheless, non-GAAP measures have inherent limitations, are not required to be uniformly applied and are not audited. These non-GAAP measures should be viewed in addition to, and not as an alternative to or substitute for, measures determined in accordance with GAAP. In addition, because non-GAAP measures are not standardized, it may not be possible to compare our non-GAAP measures to similarly titled measures used by other companies. To the extent applicable, reconciliations of these non-GAAP measures to the most directly comparable measures as reported in accordance with GAAP are included in Table 1 of MD&A.

Previous wording

FTE net interest revenue for the second quarter of 2024 was $210 million, an increase of $8.47 million from the same period in 2023. The increase was primarily driven by the $1.05 billion increase in average loans and a 58 basis point increase in the average rate earned on loans. As a result, loan interest revenue increased $40.9 million compared to the second quarter of 2023. The increase in average loans was provided by the addition of the First Miami loan portfolio on July 1, 2023, which as of the acquisition date had $577 million in loans, while the remaining increase represented organic growth. The increase in yield on average loans was attributable to rising rates, including the impact of the replacement of lower-yielding fixed rate asset runoff with higher-yielding market rate instruments, and $3.78 million in earnings from recent fair value hedges of loans, which were entered into during the fourth quarter of 2023 and the first quarter of 2024. Loan interest revenue for the second quarters of 2024 and 2023 also included $5.34 million and $4.06 million, respectively, of purchased loan discount accretion.

Current wording

Loan interest revenue increased $17.4 million compared to the third quarter of 2023. The increase in yield on average loans was attributable to rising rates, including the impact of the replacement of lower-yielding fixed rate asset runoff with higher-yielding market rate instruments, and $4.61 million in earnings from recent fair value hedges of loans, which were entered into during the fourth quarter of 2023 and the first quarter of 2024. These increases were partially offset by a decrease in the average daily balance of loans, primarily due to slow loan growth and the sale of substantially all of our manufactured housing loans at the end of August 2024, and a decrease in purchased loan discount accretion of $1.22 million compared to the third quarter of 2023. Purchased loan discount accretion for the third quarters of 2024 and 2023 totaled $4.39 million and $5.61 million, respectively.

Previous wording

Additionally, FTE interest revenue on securities increased $8.99 million compared to the same period of last year, driven by an increase in the average interest rate earned on taxable securities of 61 basis points. The increase in yield is mostly attributable to rising interest rates, the bond portfolio restructuring we completed in the fourth quarter of 2023 and the earnings from the fair value hedges of certain AFS securities, which we entered into during the second quarters of 2023 and 2024. In the second quarters of 2024 and 2023, we recognized $3.82 million and $910,000, respectively, in earnings related to the securities fair value hedges.

Current wording

FTE interest revenue on securities increased $8.26 million compared to the same period of last year, driven by the increase in the average interest rate earned on taxable securities which is mostly attributable to rising interest rates, the bond portfolio restructuring we completed in the fourth quarter of 2023 and the earnings from the fair value hedges of certain AFS securities. The hedges contributed $4.41 million and $3.77 million, respectively, in earnings in third quarter 2024 and 2023.

Previous wording

Interest expense for the second quarter of 2024 increased $42.8 million compared to the same quarter of 2023. The average daily balance of interest-bearing deposits increased $1.91 billion compared to the second quarter of 2023 and the average rate paid on those deposits increased 82 basis points, resulting in a $45.2 million increase in deposit interest expense. The growth in interest-bearing deposits is attributable to the addition of deposits acquired in the First Miami transaction, organic growth and deposit migration from noninterest-bearing deposit accounts. We have continued to attract and retain deposits by remaining competitive with our interest rate offerings, which has increased our average rate paid on deposits. The growth in our deposit base has allowed us to reduce our utilization of more costly short-term borrowings and FHLB advances, as the average balances of these combined decreased $192 million compared to the second quarter of 2023, resulting in a reduction in interest expense on these types of borrowings of $2.44 million.

Current wording

Interest expense for the third quarter of 2024 increased $19.3 million compared to the same quarter of 2023. The average daily balance of interest-bearing deposits increased $892 million compared to the third quarter of 2023 and the average rate paid on those deposits increased 32 basis points, resulting in a $19.4 million increase in deposit interest expense. The growth in interest-bearing deposits is attributable to organic growth and deposit migration from noninterest-bearing deposit accounts. We have continued to attract and retain deposits by remaining competitive with our interest rate offerings, which has increased our average rate paid on deposits. As a result, we have been able to reduce our utilization of higher interest rate brokered deposits, the interest expense for which decreased $1.65 million compared to the third quarter of 2023, partially offsetting the increased interest expense on customer deposits. The growth in our deposit base has also allowed us to reduce our utilization of more costly short-term borrowings and FHLB advances, as the average balances of these combined decreased $42.3 million compared to the third quarter of 2023, resulting in a reduction in interest expense on these types of borrowings.

Previous wording

FTE net interest revenue for the first six months of 2024 was $410 million, a 1% decrease compared to the first six months of 2023. During the first six months of 2024, our net interest spread decreased 42 basis points and our net interest margin decreased by 21 basis points compared to the same period of 2023. The net interest margin for the six months ended June 30, 2024 benefited from higher purchased loan accretion of $1.18 million, $5.43 million in higher earnings from the AFS securities fair value hedges and $4.94 million earnings from the loan fair value hedges. The compression in net interest rate spread and net interest margin for the six months ended 2024 compared to that of 2023 resulted primarily from the steep increase in rates paid on deposits over the last several quarters combined with interest-bearing deposit growth.

Current wording

During the first nine months of 2024, our net interest spread decreased 24 basis points and our net interest margin decreased by 11 basis points compared to the same period of 2023. The compression in net interest rate spread and net interest margin for the nine months ended September 30, 2024 compared to that of 2023 resulted primarily from the cumulative effect of rising interest rates paid on deposits over the last several quarters as compared to that of last year, combined with the increases in interest-bearing deposits from organic growth, interest-bearing deposits received from First Miami and migration from our non-interest bearing deposits. For the nine months ended September 30, 2024 and 2023, the average daily balance of noninterest bearing deposits comprised 27% and 33%, respectively, of total deposits.

Previous wording

(1)Interest revenue on tax-exempt securities and loans includes a taxable-equivalent adjustment to reflect comparable interest on taxable securities and loans. The FTE adjustment totaled $1.06 million and $1.01 million, respectively, for the three months ended June 30, 2024 and 2023. The tax rate used to calculate the adjustment was 25% in 2024 and 26% in 2023, reflecting the statutory federal income tax rate and the federal tax adjusted state income tax rate.

Current wording

(1)Interest revenue on tax-exempt securities and loans includes a taxable-equivalent adjustment to reflect comparable interest on taxable securities and loans. The FTE adjustment totaled $1.09 million and $1.07 million, respectively, for the three months ended September 30, 2024 and 2023. The tax rate used to calculate the adjustment was 25% in 2024 and 26% in 2023, reflecting the statutory federal income tax rate and the federal tax adjusted state income tax rate.

Previous wording

(3)Unrealized losses on AFS securities, including those related to the transfer from AFS to HTM, have been reclassified to other assets. Pretax unrealized losses of $344 million in 2024 and $389 million in 2023 are included in other assets for purposes of this presentation.

Current wording

(3)Unrealized losses on AFS securities, including those related to the transfer from AFS to HTM, have been reclassified to other assets. Pretax unrealized losses of $295 million in 2024 and $430 million in 2023 are included in other assets for purposes of this presentation.

Previous wording

(1)Interest revenue on tax-exempt securities and loans includes a taxable-equivalent adjustment to reflect comparable interest on taxable securities and loans. The FTE adjustment totaled $2.12 million and $2.11 million, respectively, for the six months ended June 30, 2024 and 2023. The tax rate used to calculate the adjustment was 25% in 2024 and 26% in 2023, reflecting the statutory federal income tax rate and the federal tax adjusted state income tax rate.

Current wording

(1)Interest revenue on tax-exempt securities and loans includes a taxable-equivalent adjustment to reflect comparable interest on taxable securities and loans. The FTE adjustment totaled $3.22 million and $3.18 million, respectively, for the nine months ended September 30, 2024 and 2023. The tax rate used to calculate the adjustment was 25% in 2024 and 26% in 2023, reflecting the statutory federal income tax rate and the federal tax adjusted state income tax rate.

Previous wording

(3)Unrealized gains and losses on AFS securities, including those related to the transfer from AFS to HTM, have been reclassified to other assets. Pretax unrealized losses of $333 million and $404 million in 2024 and 2023, respectively, are included in other assets for purposes of this presentation.

Current wording

(3)Unrealized gains and losses on AFS securities, including those related to the transfer from AFS to HTM, have been reclassified to other assets. Pretax unrealized losses of $320 million and $413 million in 2024 and 2023, respectively, are included in other assets for purposes of this presentation.

Previous wording

The ACL represents management’s estimate of life of loan credit losses in the loan portfolio and unfunded loan commitments. Management’s estimate of credit losses under CECL is determined using a model that relies on reasonable and supportable forecasts and historical loss information to determine the balance of the ACL and resulting provision for credit losses. The provision for credit losses recorded in each period was the amount determined by management such that the total ACL reflected the appropriate balance of expected life of loan losses.

Current wording

The ACL represents management’s estimate of life of loan credit losses in the loan portfolio and unfunded loan commitments. Management’s estimate of credit losses is determined using our CECL model that relies on reasonable and supportable forecasts and historical loss information to determine the balance of the ACL and resulting provision for credit losses. The provision for credit losses recorded in each period was the amount determined by management such that the total ACL reflected the appropriate balance of expected life of loan losses.

Previous wording

We recorded a provision for credit losses of $12.2 million and $25.1 million, respectively, for the three and six months ended June 30, 2024, compared to $22.8 million and $44.5 million, respectively, for the same periods of 2023. The provision recorded for the first six months of 2023 included the initial provision for credit losses on Progress non-PCD loans and unfunded commitments of $10.4 million. Excluding the provision for credit losses for the initial non-PCD ACL for Progress recorded in the first six months of 2023, provision expense for the first six months of 2024 decreased $8.95 million compared to the same period of 2023. The decrease was mostly driven by slower loan growth and a decline in unfunded commitments, partially offset by an increase in net charge-offs of $9.04 million. See Table 12 in MD&A for further detail on net charge-offs.

Current wording

$4.01 million. Additionally, the provision recorded for the first nine months of 2023 also included the initial provision for credit losses on Progress non-PCD loans and unfunded commitments of $10.4 million.

Previous wording

Overdraft fees for the second quarter and first half of 2024 increased compared to the same periods of 2023, driven by higher transaction volume.

Current wording

Overdraft fees for the third quarter and first nine months of 2024 increased compared to the same periods of 2023, driven by higher overdraft transaction volume.

Previous wording

The increase in mortgage loan gains and related fees for the six months ended June 30, 2024 was primarily a result of positive fair value adjustments to our mortgage servicing asset and higher gains on mortgage sales. During the first half of 2024, we recorded a positive fair value adjustment, including decay, to the mortgage servicing rights asset of $1.59 million, compared to an $836,000 negative fair value adjustment, including decay, during the first half of 2023.

Current wording

The decrease in mortgage loan gains and related fees for the three months ended September 30, 2024 was primarily a result of negative fair value adjustments to our mortgage servicing asset partially offset by higher gains on mortgage sales. During the third quarter of 2024, we recorded a negative fair value adjustment, including decay, to the mortgage servicing rights asset of $3.07 million, compared to an $214,000 positive fair value adjustment, including decay, during the third quarter of 2023. During the nine months ended September 30, 2024, mortgage loan gains and related fees increased 3% compared to the same period of 2023 as higher gains on sales more than offset higher negative fair value adjustments recorded on our mortgage servicing asset.

Previous wording

The increase in wealth management fees is mostly attributable to the addition of First Miami’s assets under management. Our total assets under management and advisement as of June 30, 2024 totaled $5.33 billion, of which $2.35 billion were attributable to FinTrust.

Current wording

The increase in wealth management fees for the nine months ended September 30, 2024 is mostly attributable to the addition of First Miami’s assets under management starting July 1, 2023. Our total assets under management and advisement as of September 30, 2024 totaled $5.59 billion, $2.46 billion of which were attributable to FinTrust. Subsequent to the end of the third quarter of 2024, on October 1, 2024, we completed the sale of FinTrust.

Previous wording

Our SBA/USDA lending strategy includes selling a portion of the loan production each quarter. The amount of loans sold depends on several variables including the current lending environment, balance sheet management activities and market pricing. From time to time, we also sell certain equipment financing receivables. The following table presents loans sold and the corresponding gains recognized on the sales for the periods indicated. The decrease in gains on other loan sales is mostly a result of our decision to hold more of our SBA/USDA and equipment financing loan production during 2024 compared to 2023.

Current wording

Our SBA/USDA lending strategy includes selling a portion of the loan production each quarter. The amount of loans sold depends on several variables including the current lending environment, balance sheet management activities and market pricing. From time to time, we also sell certain equipment financing receivables. In addition, during the third quarter of 2024, we sold the substantially all of our manufactured housing loan portfolio, the details of which are included in the table below. This portfolio was part of the Reliant Bancorp, Inc. acquisition, which closed in January 2022. The portfolio had been in runoff mode following our decision to cease originations in 2023. The sale reduced risk and allowed us to redirect resources to activities that better align with our strategic objectives.

Previous wording

•The decrease in customer derivative fees was mostly attributable to slower loan growth and low demand for the product in the current high interest rate environment.

Current wording

•For the nine months ended September 30, 2024, customer derivative fee income was down compared to the same period of last year mostly due to slower loan growth and low demand for the product due to the high interest rate environment. However, during the third quarter of 2024, fees increased compared to the same period of 2023, which was mostly driven by the Federal Reserve’s 50 basis point rate cut in September 2024, which increased demand for customer derivatives.

Previous wording

•The increase in BOLI income for the six months ended 2024 compared to 2023 is primarily a result of death benefits realized during the first quarter of 2024.

Current wording

•The increase in BOLI income for the nine months ended September 30, 2024 compared to the corresponding period of 2023 is primarily a result of death benefits realized during the first and third quarters of 2024.

Previous wording

•The increase in treasury management income is a result of growth in customer base enrolled in this product. This is reflective of our continued investment in this area, as we have increased our Treasury Management headcount throughout our geographic footprint.

Current wording

•The increase in treasury management income is a result of growth in customer base enrolled in this product, which is reflective of our continued investment in this area.

Previous wording

•Other noninterest income for the second quarter of 2024 decreased compared to 2023 as 2023 included the gain on sale of a commercial insurance book of business of $1.59 million. The six months ended June 30, 2024 includes a lease termination gain of $2.40 million as a result of exiting one of our corporate offices.

Current wording

•Other noninterest income for the third quarter of 2024 increased compared to the same period of 2023, primarily due to the change in collateral charges related to our derivative positions of $912,000 and due to the third quarter of 2023 including a $1.00 million loss on the disposal of two of our Tennessee branches. For the nine months ended September 30, 2024, the increase in other noninterest income was mostly driven by a lease termination gain of $2.40 million, which resulted from exiting one of our corporate offices. The nine months ended September 30, 2023 includes the gain on sale of a commercial insurance book of business of $1.59 million and a $1.00 million loss on the Tennessee branch sale.

Previous wording

The increase in salaries and employee benefits for the second quarter and first half of 2024 compared to the same periods of 2023 was driven by several factors, including the addition of First Miami employees starting in the third quarter of 2023, higher group insurance costs, increases in salaries, lower deferred direct loan origination costs and an increase in bonus expense. The increase in salaries is primarily driven by annual merit increases that went into effect for all employees on April 1, 2024. The decrease in deferred direct loan origination costs is attributable to slower loan growth. These increases were offset by decreases in commissions and incentive pay. In addition, for the six months ended June 30, 2024, we recorded higher deferred compensation plan expense resulting from first quarter gains on deferred compensation plan investments, which are included in other noninterest income. Full time equivalent headcount totaled 3,070 at June 30, 2024, compared to 3,064 at June 30, 2023.

Current wording

The increase in salaries and benefits expense for the nine months ended September 30, 2024 compared to the same period of 2023 was driven by several factors, including increases in salaries, bonus expense, temporary personnel expense, group insurance costs, deferred compensation expense and a decrease in deferred direct loan origination costs. These increases were partly offset by a decrease in incentive expense. The increase in salaries was driven both by the addition of First Miami employees starting in third quarter of 2023 and annual merit increases that went into effect on April 1, 2024.

Previous wording

Communications and equipment expense increased primarily due to incremental software contract costs and the growth in our network. We also recorded higher depreciation expense related to software and equipment placed into service since the second quarter of 2023, which includes technology equipment for our new Greenville headquarters building, the implementation of a new syndicated loan platform, and new signage associated with our rebranding.

Current wording

Communications and equipment expense increased primarily due to incremental software contract costs and the growth in our network. We also recorded higher depreciation expense related to software and equipment placed into service since the third quarter of 2023, which includes technology equipment for our new Greenville headquarters building, the implementation of a new syndicated loan platform, and new signage associated with our rebranding.

Previous wording

Over half of the increase in occupancy costs for the second quarter and first six months of 2024 compared to the same periods of 2023 was attributable to the additional branches acquired in the First Miami transaction. The remaining increase was attributable to higher repairs and maintenance costs and depreciation expense, partially offset by a reduction in rent expense.

Current wording

The occupancy expense increase for the third quarter and first nine months of 2024 was attributable to higher repairs and maintenance costs and depreciation expense, partially offset by a reduction in rent expense. The first nine months of 2024 also included an additional six months of expense related to branches acquired in the First Miami transaction compared to the same period of 2023.

Previous wording

The increase in FDIC assessments and other regulatory charges for the first half of 2024 compared to that of 2023 was driven by growth in our FDIC assessment base and $1.74 million in additional expense related to the FDIC special assessment. The special assessment was formally announced in the fourth quarter of 2023 as part of the FDIC’s efforts to recover losses resulting from the bank failures that occurred in early 2023. Related to the special assessment, we accrued $10.0 million of expense in the fourth quarter of 2023, an additional $2.50 million in the first quarter of 2024 based on a revised estimate of the special assessment and a reduction in accrual of $764,000 in the second quarter of 2024 based on the actual assessment notice we received.

Current wording

The increase in FDIC assessments and other regulatory charges for the first nine months of 2024 compared to that of 2023 was driven by growth in our FDIC assessment base and $1.74 million in additional expense related to the FDIC special assessment. The special assessment was formally announced in the fourth quarter of 2023 as part of the FDIC’s efforts to recover losses resulting from the bank failures that occurred in early 2023. We accrued $10.0 million of expense related to the special assessment in the fourth quarter of 2023 based on the estimate at that time and then recorded additional expense in 2024 when the actual assessment notice was received.

Previous wording

Merger-related and other charges for the second quarter and first half of 2024 primarily consisted of costs associated with our rebranding, branch closure costs, and expenses related to the First Miami acquisition. Merger-related and other charges for the same periods of 2023 were primarily related to the acquisition of Progress.

Current wording

Merger-related and other charges for the third quarter and first nine months of 2024 primarily consisted of costs associated with our rebranding, branch closure costs and expenses related to the pending sale of FinTrust. Merger-related and other charges for the same periods of 2023 were primarily related to the acquisitions of Progress and First Miami, branch closure costs and our rebranding.

Previous wording

The increase in other noninterest expense for the three and six months ended June 30, 2024 was primarily driven by the goodwill write-down of $5.10 million recorded in the second quarter related to the pending sale of FinTrust. The write-down reflects the reduction in book value of FinTrust to the estimated fair value of the sales proceeds, of which a portion is contingent upon achieving certain revenue growth targets. We expect the sale to close in the third quarter of 2024.

Current wording

The increase in other noninterest expense for the nine months ended September 30, 2024 was primarily driven by the goodwill write-down of $5.10 million recorded in the second quarter related to the pending sale of FinTrust. The write-down reflects the reduction in book value of FinTrust to the estimated fair value of the sales proceeds, of which a portion is contingent upon achieving certain revenue growth targets. The sale of FinTrust was completed subsequent to the end of the third quarter on October 1, 2024.

Previous wording

Total assets at June 30, 2024 and December 31, 2023 were $27.1 billion and $27.3 billion, respectively. Total liabilities at June 30, 2024 and December 31, 2023 were $23.7 billion and $24.0 billion, respectively. Shareholders’ equity totaled $3.34 billion and $3.26 billion at June 30, 2024 and December 31, 2023, respectively.

Current wording

Total assets at September 30, 2024 and December 31, 2023 were $27.4 billion and $27.3 billion, respectively. Total liabilities at September 30, 2024 and December 31, 2023 were $24.0 billion and $24.0 billion, respectively. Shareholders’ equity totaled $3.41 billion and $3.26 billion at September 30, 2024 and December 31, 2023, respectively.

Previous wording

Our loan portfolio, which as of June 30, 2024 totaled $18.2 billion, is our largest category of interest-earning assets. The following table presents a summary of the loan portfolio by loan type as of June 30, 2024.

Current wording

Our loan portfolio, which as of September 30, 2024 totaled $17.9 billion, is our largest category of interest-earning assets. The following table presents a summary of the loan portfolio by loan type as of September 30, 2024.

Previous wording

The following table provides a disaggregation of our Income Producing CRE portfolio as of June 30, 2024. Total loans within this category totaled $4.06 billion at June 30, 2024. Our office income producing CRE portfolio totaled $733 million as of June 30, 2024. The average loan within this category was $1.31 million and the largest loan was $12.2 million. Senior care loans, which we no longer originate, totaled $311 million at June 30, 2024.

Current wording

The following table provides a disaggregation of our Income Producing CRE portfolio as of September 30, 2024. Total loans within this category totaled $4.26 billion at September 30, 2024. Our office income producing CRE portfolio totaled $762 million as of September 30, 2024. The average loan within this category was $1.37 million and the largest loan was $15.9 million. Senior care loans, which we no longer originate, totaled $268 million at September 30, 2024.

Previous wording

The total ACL for loans at June 30, 2024 increased by $4.95 million, or 2%, compared to December 31, 2023 and the ACL for loans as a percentage of total loans remained relatively consistent. Slower loan growth in the second quarter and first half of 2024 resulted in a relatively stable ACL for loans as of June 30, 2024. Within the loan portfolio, there were increases in the ACL for equipment financing and manufactured housing loans, partially offset by a decrease in the ACL for income producing CRE loans. The increase in the ACL for manufactured housing resulted from an increase in the loss-given-default model assumption for this portfolio driven by recent history, while the increase in the ACL for equipment finance loans was driven mostly by loan growth and recent charge-off history. The decrease in ACL for income producing CRE loans was driven by a net decrease in balances in this loan category since December 31, 2023. Our ACL for unfunded commitments decreased mostly due to a decrease in our construction commitments.

Current wording

The total ACL for loans at September 30, 2024 decreased by $2.78 million, or 1%, compared to December 31, 2023 and the ACL for loans as a percentage of total loans remained constant. During the third quarter of 2024, we established an additional allowance of $9.89 million related to expected loan losses in nine counties in western North Carolina severely affected by Hurricane Helene, of which over half was related to the residential mortgage portfolio. Additionally, there was an increase in the ACL for equipment financing loans driven mostly by loan growth and recent charge-off history. These increases were mostly offset by the decrease in ACL for manufactured housing loans as we sold substantially all of that portfolio during the third quarter of 2024. Additionally, the ACL for income producing CRE loans decreased due to slow loan growth combined with an improved outlook for these loans after the recent federal funds interest rate cut in September of 2024, which positively affected the CRE Price Index. Our ACL for unfunded commitments decreased mostly due to a decrease in our construction commitments.

Previous wording

The increase in net charge-offs for the second quarter and first half of 2024 compared to the same periods of 2023 was primarily driven by increases in charge-offs in the equipment finance and manufactured housing portfolios. The increase in equipment finance charge-offs is partly attributable to charge-offs related to loans to borrowers in the long-haul trucking industry. The long-haul trucking equipment segment, comprising a small portion of the portfolio, is deemed not representative of the entire equipment financing portfolio. Manufactured housing loans tend to be more sensitive to economic conditions such as inflation and rising interest rates, which contributed to the increase in charge-offs compared to the same periods of 2023. In addition, in the second quarter of 2024, net charge-offs for income producing CRE loans increased compared to the same period of 2023 due to a partial charge-off of one senior care loan. During 2023, we stopped originating new manufactured housing loans, long-haul trucking equipment finance loans and senior care loans.

Current wording

The increase in net charge-offs of $6.05 million for the nine months ended September 30, 2024 compared to the same period of 2023 was primarily related to increased charge-offs in the equipment finance portfolio and the charge offs in the third quarter of 2024 related to the sale of the manufactured housing loans. The increase in equipment finance charge-offs is partly attributable to charge-offs related to loans to borrowers in the long-haul trucking industry. The long-haul trucking equipment segment, comprising a small portion of the portfolio, is deemed not representative of the entire equipment financing portfolio. The increase in manufactured housing loan charge offs is due to recognition of the portion of the loss from the sale of that portfolio that results from estimated credit losses. Commercial & industrial charge offs are down due to the large charge off taken in the third quarter of 2023 mentioned above.

Previous wording

The table below summarizes NPAs for the periods indicated. NPAs include nonaccrual loans, OREO and repossessed assets. The increase since December 31, 2023 was primarily driven by net increases in commercial construction, residential mortgage, manufactured housing and income producing CRE nonaccrual loans. Notably, one commercial construction borrower with loans of $4.03 million moved to nonaccrual status during the second quarter of 2024. Also, there was one $6.00 million senior care loan in income producing CRE that moved to nonaccrual status during the second quarter of 2024, which also had a partial charge-off during the period.

Current wording

The table below summarizes NPAs for the periods indicated. NPAs include nonaccrual loans, OREO and repossessed assets. The increase since December 31, 2023 was primarily driven by net increases in commercial construction, commercial and industrial, and residential mortgage nonaccrual loans. Notably, one commercial and industrial borrower and one commercial construction borrower with loans of $4.95 million and $4.03 million, respectively, moved to nonaccrual status during 2024. Partially offsetting these increases, manufactured housing nonaccrual loans decreased $14.1 million compared to December 31, 2023 as a result of the sale of substantially all of this portfolio during the third quarter of 2024.