UNITED COMMUNITY BANKS INC

Previous 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.

Current wording

The following is a discussion of our financial condition at March 31, 2025 and December 31, 2024 and our results of operations for the three months ended March 31, 2025 and 2024. 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 2024 10-K and the other reports we have filed with the SEC after we filed the 2024 10-K.

Previous 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.

Current wording

We offer a wide array of commercial and consumer banking services and investment advisory solutions through a 200 branch network throughout Georgia, South Carolina, North Carolina, Tennessee, Florida and Alabama. Our equipment finance and SBA/USDA lending businesses operate throughout the United States. At March 31, 2025, we had consolidated total assets of $27.9 billion and 2,982 full-time equivalent employees.

Previous wording

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

Current wording

Results for the first quarter of 2025 are discussed in further detail throughout the following sections of MD&A.

Previous wording

In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and revenues and expenses for the period. Our accounting and reporting estimates are in accordance with GAAP and conform to general practices within the banking industry. Estimates that are susceptible to significant changes include accounting for the ACL and fair value measurements, both of which require significant judgments by management. Actual results could differ significantly from those estimates. Also, different assumptions in the application of these accounting estimates could result in material changes in our consolidated financial position or consolidated results of operations. Our critical accounting estimates are discussed in MD&A in our 2023 10-K.

Current wording

In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and revenues and expenses for the period. Our accounting and reporting estimates are in accordance with GAAP and conform to customary practices within the banking industry. Estimates that are susceptible to significant changes include accounting for the ACL and fair value measurements, both of which require significant judgments by management. Actual results could differ significantly from those estimates. Also, different assumptions in the application of these accounting estimates could result in material changes in our consolidated financial position or consolidated results of operations. Our critical accounting estimates are discussed in MD&A in our 2024 10-K.

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 “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.

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,” “tangible book value per common share,” “return on common equity – operating,” “return on tangible common equity – operating,” “return on assets – operating,” “efficiency ratio – operating” and “tangible common equity to tangible assets” 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

(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.

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 $991,000 and $1.06 million, respectively, for the three months ended March 31, 2025 and 2024. The tax rate used to calculate the adjustment was 26%, 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 $295 million in 2024 and $430 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 $269 million in 2025 and $322 million in 2024 are included in other assets for purposes of this presentation.

Previous 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.

Current wording

The decrease in mortgage loan gains and related fees for the three months ended March 31, 2025 compared to the same period of 2024 was primarily a result of a $1.58 million less favorable fair value adjustment to our mortgage servicing asset partially offset by higher gains on mortgage sales and rate lock volume. The following table provides additional mortgage metrics for the periods indicated.

Previous wording

We recorded a provision for credit losses of $14.4 million and $39.6 million, respectively, for the three and nine months ended September 30, 2024, compared to $30.3 million and $74.8 million, respectively, for the same periods of 2023.

Current wording

We recorded a provision for credit losses of $15.4 million for the three months ended March 31, 2025, compared to $12.9 million for the same period of 2024. The increase in provision was mostly driven by a less favorable economic forecast and net loan growth.

Previous wording

Additional discussion on credit quality and the ACL is included in the “Asset Quality and Risk Elements” section of MD&A in this Report.

Current wording

These increases were partially offset by a decrease in net charge-offs and a release of a portion of the Hurricane Helene additional allowance established in 2024. Additional discussion on credit quality and the ACL is included in the “Asset Quality and Risk Elements” section of MD&A in this Report.

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 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.

Current wording

Communications and equipment expense increased primarily due to incremental software contract costs. We also recorded increased depreciation related to equipment placed into service since March 31, 2024, which included technology equipment for our new Greenville headquarters building and new signage associated with our rebranding.

Previous 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.

Current wording

Merger-related and other charges for the first quarter of 2025 decreased compared to the same period in 2024 primarily due to a decrease in costs associated with our rebranding.

Previous 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.

Current wording

Total assets at March 31, 2025 and December 31, 2024 were $27.9 billion and $27.7 billion, respectively. Total liabilities at March 31, 2025 and December 31, 2024 were $24.4 billion and $24.3 billion, respectively. Shareholders’ equity totaled $3.50 billion and $3.43 billion at March 31, 2025 and December 31, 2024, respectively.

Previous 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.

Current wording

Our loan portfolio is our largest category of interest-earning assets. The following table presents the loan portfolio and the allocation of the ACL by loan type for the periods indicated.

Previous wording

Table 10 - Loan Portfolio Composition

Current wording

Table 7 - Loan Portfolio Composition and ACL Allocation

Previous 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.

Current wording

The following table provides a disaggregation of our income producing CRE portfolio as of March 31, 2025 and December 31, 2024. Office is the largest subcategory within the income producing CRE portfolio. At March 31, 2025, the average loan within the office category was $1.45 million and the largest loan was $16.4 million.

Previous wording

The ACL reflects our assessment of the life of loan expected credit losses in the loan portfolio and unfunded loan commitments. This assessment involves uncertainty and judgment and is subject to change in future periods. The amount of any changes could be significant if our assessment of loan quality or collateral values changes substantially with respect to one or more loan relationships or portfolios. The allocation of the ACL is based on reasonable and supportable forecasts, historical data, subjective judgment and estimates and therefore, is not necessarily indicative of the specific amounts or loan categories in which charge-offs may ultimately occur. See the Critical Accounting Estimates section of MD&A in our 2023 10-K for additional information on the ACL.

Current wording

The ACL reflects our assessment of the life of loan expected credit losses in the loan portfolio and unfunded loan commitments. This assessment involves uncertainty and judgment and is subject to change in future periods. See the Critical Accounting Estimates section of MD&A in our 2024 10-K for additional information on the ACL.

Previous wording

The following table presents a summary of net charge-offs to average loans for the periods indicated.

Current wording

The following table provides a summary of net charge-offs to average loans for the periods indicated.

Previous wording

In 2023 and 2024, we entered into fair value hedges on a portion of our AFS securities portfolio in order to mitigate the impact of any potential future unrealized losses on our tangible common equity. Gains and losses related to the hedge and hedged item are reflected in investment securities interest income. The changes in the fair value of the hedge and the hedged item substantially offset each other. See Note 7 to the financial statements for further detail.

Current wording

We utilize fair value hedges on a portion of our AFS securities portfolio in order to mitigate the impact of potential future unrealized losses on our tangible common equity. Gains and losses related to the hedge and hedged item are reflected in investment securities interest income. The changes in the fair value of the hedge and the hedged item substantially offset each other. See Note 4 to the financial statements for further detail.

Previous wording

At September 30, 2024, HTM debt securities had a fair value of $2.06 billion, indicating net unrealized losses of $341 million. Additional unrealized losses on HTM debt securities of $61.4 million (pre-tax) were included in AOCI as a result of the transfer of AFS debt securities to HTM in 2022. Unrealized losses were primarily attributable to changes in interest rates.

Current wording

At March 31, 2025, HTM debt securities had a fair value of $1.95 billion, indicating net unrealized losses of $386 million. Additional unrealized losses on HTM debt securities of $57.5 million (pre-tax) were included in AOCI as a result of the transfer of AFS debt securities to HTM in 2022. Unrealized losses were primarily attributable to changes in interest rates.

Previous wording

Customer deposits are the primary source of funds for the continued growth of our earning assets. We believe our high level of service, as evidenced by our strong customer satisfaction scores, is instrumental in attracting and retaining customer deposit accounts. Since December 31, 2023, customer deposits decreased $67.5 million, which was mostly driven by a decrease in NOW and interest-bearing demand deposits due to seasonal outflow of public funds combined with more conservative public funds deposit pricing. In addition, our customer deposit composition changed since the end of 2023 as money market deposit balances increased with offsetting decreases in other customer deposit types. This was driven by higher demand for money market accounts, which are more liquid than time deposits and offer a higher interest rate than demand and savings accounts. As of September 30, 2024, we had approximately $9.23 billion of uninsured deposits, of which $2.71 billion was collateralized by investment securities.

Current wording

Customer deposits are the primary source of funds for the continued growth of our earning assets. We believe our high level of service, as evidenced by our strong customer satisfaction scores, is instrumental in attracting and retaining customer deposit accounts. Since December 31, 2024, customer deposits increased $309 million, mostly driven by an increase in money market deposit balances. As of March 31, 2025, we had approximately $9.78 billion of uninsured deposits, of which $3.04 billion was collateralized by investment securities.

Previous wording

At September 30, 2024 and December 31, 2023, we had long-term debt outstanding of $316 million and $325 million, respectively, which includes senior debentures, subordinated debentures, and trust preferred securities. At September 30, 2024 and December 31, 2023 there were no short-term borrowings or FHLB advances outstanding. The need to utilize wholesale funding sources has decreased as our deposit and cash balances have substantially provided for our liquidity needs. During the third quarter of 2024, we called two of our trust preferred securities, reducing our outstanding long-term debt by $8.56 million.

Current wording

At March 31, 2025 and December 31, 2024, we had long-term debt outstanding of $254 million, which includes senior debentures, subordinated debentures, and trust preferred securities. At March 31, 2025 there were no short-term borrowings outstanding. At December 31, 2024 there were $195 million in short-term borrowings outstanding. The need to utilize wholesale funding sources has decreased as our deposit and cash balances have substantially provided for our liquidity needs.

Previous wording

There have not been any material changes to our contractual obligations since December 31, 2023.

Current wording

There have not been any material changes to our contractual obligations and off-balance sheet arrangements since December 31, 2024.

Previous wording

Our policy is based on the 12-month impact on net interest revenue simulations with various interest rate shocks and ramps compared to the base scenario. In the shock scenarios, rates immediately change the full amount at the scenario onset. In the ramp scenarios, rates change by 25 basis points per month until they reach the predetermined levels. Our policy limits the projected change in net interest revenue from the base scenario to 8% for each 100 basis point change in simulations with rate shock and ramp scenarios. The following table presents our interest sensitivity position at the dates indicated.

Current wording

Management uses an asset/liability simulation model to measure the potential change in net interest revenue over time using multiple interest rate scenarios. Our modeling is based on the 12-month impact on net interest revenue simulations with various interest rate shocks and ramps, which are compared to a base scenario that assumes rates remain flat. In the shock scenarios, rates immediately change the full amount at the scenario onset. In the ramp scenarios, rates change by 25 basis points per month until they reach the predetermined levels.

Previous wording

Our interest sensitivity model includes significant key assumptions which may change over time. The scenario results presented in the table above assume parallel movements in the yield curve, which may differ from actual future curve behavior. Although our model generally assumes no change in deposit portfolio size or composition, we have included an assumption for the runoff of surge deposits since 2021. In the second quarter of 2023, in response to the rapid rate increases mentioned above, we increased the beta assumption in our model. As of September 30, 2024, our modeled total deposit beta, which is measured as the change in our overall deposit rate as a percentage of the change in the targeted federal funds rate, was 43% in an up scenario and 38% in a down scenario.

Current wording

The following table presents our interest sensitivity position at the dates indicated. The scenario results presented assume parallel movements in the yield curve, which may differ from actual future curve behavior. Other than an assumption for the runoff of estimated surge deposits, our model generally assumes no change in deposit portfolio size or composition.

Previous wording

The Bank’s main source of liquidity is customer interest-bearing and noninterest-bearing deposit accounts. Liquidity is also available from wholesale funding sources consisting primarily of repurchase agreements, Federal funds purchased, FHLB advances, and brokered deposits. These sources of liquidity are generally short-term in nature and are used as necessary to fund asset growth and meet other short-term liquidity needs. As part of our liquidity management, we focus on maximizing the amount of securities and loans available as collateral for contingent liquidity sources and calibrating our assumptions in our liquidity stress test on an ongoing basis, particularly as it relates to deposit duration. At September 30, 2024, we had sufficient qualifying collateral to support additional borrowings, which is detailed in the table below.

Current wording

The Bank’s main source of liquidity is customer interest-bearing and noninterest-bearing deposit accounts. Liquidity is also available from wholesale funding sources consisting primarily of repurchase agreements, Federal funds purchased, FHLB advances, and brokered deposits. These sources of liquidity are generally short-term in nature and are used as necessary to fund asset growth and meet other short-term liquidity needs. As part of our liquidity management, we focus on maximizing the amount of securities and loans available as collateral for contingent liquidity sources and calibrating our assumptions in our liquidity stress test on an ongoing basis, particularly as it relates to deposit duration. At March 31, 2025 and December 31, 2024, we had sufficient liquid funds and qualifying collateral to support additional borrowings, which are detailed in the table below.

Previous wording

In addition, because the Holding Company is a separate entity and apart from the Bank, it must provide for its own liquidity. The Holding Company is responsible for the payment of dividends declared for its common and preferred shareholders, and interest and principal on any outstanding debt or trust preferred securities. The Holding Company currently has sufficient liquid assets to meet these obligations. While the Holding Company has access to the capital markets, the ultimate sources of its liquidity are subsidiary service fees and dividends from the Bank, which are limited by applicable law and regulations. A South Carolina state-chartered bank is permitted to pay a dividend of up to 100% of its current year earnings without requesting approval of the South Carolina Board of Financial Institutions, provided certain conditions are met. Holding Company liquidity is managed to a minimum of 15-months of anticipated cash expenditures after considering all of its liquidity needs over this period.

Current wording

In addition, because the Holding Company is a separate entity and apart from the Bank, it must provide for its own liquidity. The Holding Company is responsible for the payment of dividends declared for its common and preferred shareholders, and interest and principal on any outstanding debt or trust preferred securities. The Holding Company currently has sufficient liquid assets to meet these obligations. Holding Company liquidity is maintained at a level of at least 15 months of forecasted cash obligations.

Previous wording

In the opinion of management, our liquidity position at September 30, 2024 was sufficient to meet our expected cash flow requirements for the foreseeable future.

Current wording

In the opinion of management, our liquidity position at March 31, 2025 was sufficient to meet our expected cash flow requirements for the foreseeable future. See the consolidated statement of cash flows for further detail.

Previous wording

Shareholders’ equity at September 30, 2024 was $3.41 billion, an increase of $145 million from December 31, 2023 primarily due to year-to-date earnings and other comprehensive income, partially offset by dividends declared on common and preferred stock.

Current wording

Shareholders’ equity at March 31, 2025 was $3.50 billion, an increase of $68.8 million from December 31, 2024 primarily due to year-to-date earnings and other comprehensive income, partially offset by dividends declared on common and preferred stock.

Previous wording

Management believes the effect of inflation on financial results depends on our ability to react to changes in interest rates, and by such reaction, reduce the inflationary effect on performance. We have an asset/liability management program to manage interest rate sensitivity. In addition, periodic reviews of banking services and products are conducted to adjust pricing in view of current and expected costs.

Current wording

A bank’s asset and liability structure is substantially different from that of an industrial firm in that primarily all assets and liabilities of a bank are monetary in nature with relatively little investment in fixed assets or inventories. Management believes the effect of inflation on financial results depends on our ability to react to changes in interest rates, and by such reaction, reduce the inflationary effect on performance. We have an asset/liability management program to manage interest rate sensitivity. In addition, periodic reviews of banking services and products are conducted to adjust pricing in view of current and expected costs.