United Community Banks Inc (UCB) September 2026 Conference Transcript

Thank you for joining us today that put United in a strong franchise, more resilient balance sheet than we would have liked. And as a result, our returns moved from tolerance is not where we intend to stay. Over the past several quarters, we've been taking action to close out a few key milestones. Novitas has been a solid success growth as we integrated multiple banks. Over time, though, Novitas became more complex with multiple product lines across all 50 states, growth that reached our concentration limit. As previously announced, we also have a release, making this move with Novitas processes and culture. That effort has produced 42 net new additions to contribute to growth density in our existing footprint through small, tuck-in acquisitional $100 million authorization through changes to how we manage the balance sheet. We strengthened our balance sheet management team in our rate environment. But we also concluded that getting the balance sheet where we wanted it, last week we moved all securities to a valid list of the embedded HTM losses through AOCI. A portion of those losses by selling use these proceeds to re-ratios post-restructure remain strong to continue to support grading Navitas. We positioned the balance sheet to create a more resilient capital. With these actions, we believe United is positioned for strong and sustainable earnings and liquidity. With that, I'll turn it over to Jefferson to walk through the details.

Flynn mentioned our strategy to reduce risk and volatility and then reinvest the funds in the form of balance sheet capacity for profitability improvement. On page four in the first year de-risking actions, the sale of the Navitas portfolio heavily generated about $4.2 billion and hauling this capital and liquidity primarily into securities with shorter duration and higher yields. continuing to repurchase our own shares. Most importantly, in column three, we highlight that these actions in total, including the significant hiring of producers, translate into digit loan growth in 2027. These strategies in total, on a sheet that has great CET1 ratio, and essentially no short term. Into page five, I will talk on some of the specifics of the Navitas Transat our balance sheet and providing $2 billion of cash and 145 basis points of CET1. Selling the Vitas is one part of our strategy core banking franchise. Selling the Vitas creates capacity in our funding and liquidity, which can then be invested in people and a more valuable bank. Next on page six, I will go into some of the details of the bond transaction. The bond transaction is designed primarily by movements and interest rates to reclassify our health and maturity portfolio to the available for sale designation. These losses and moving them to AFS in the event of higher rates, as I mentioned earlier, had longer durations than we would like. Because of this, next we decided to further reduce our risk by selling $2.6 billion in both value of security. $300 million of the Navitas gain that is also half. Security sold had a yield of 2.2% and a weighted average life of reinvestment. We had $2 billion of cash that came in from the Navitas sale and another $2.2 billion of cash sale I just described. Cash coming in, we already have or expect to shortly put about $3 billion of that cash to work in the securities portfolio. We'll Invested in the 4.5% range, ended up in the $7 billion yield, will increase around 90 basis points to approximately 4%, and the duration will move from 3.2 years in Q2 to about 2 at the end of Q3, with the remaining $1 billion of 3.8%. While done mostly for risk reduction purposes, an annualized pre-securities fund a portion of our expected loan growth in the future. strategy together and give you a picture off the page, we also give you some thoughts on the puts and takes of our earnings run rate. We are using a Q2 74 cent number as a run rate proxy. Our Q2 operating EPS adjusted for notable items that we identified last quarter related to regulatory remediation. Selling Navitas and reinvesting the proceeds we previously mentioned takes about Offsetting the impact of Novitas of $2.6 billion of book value of bonds at 2.2% and reinvesting around 4-night peach date, we do think we will get $0.02 of the total expected $0.03 of quarterly accretion in the near term. Finally, the healthy rate in $150 million of loans through the end of August is optimism for strong loan growth, given that most of our loan growth generally comes in at, quote, 20% is in the form of DDA. This also gives us optimism on the core growth combination of a robust economic environment and our significant investment talent. It comes together as we replace the Navitas earnings. The profitability increases with a low loan-to-deposit ratio. Next, at the bottom, in our tangible book value per share, $23.31 as our starting point, We made a gain of $0.42 in the third quarter coming from the Vetus that could change slightly as we go through the full accounting quarter, and reserve release in the 23-31 sub-maturity reclassification and portfolio restructure we announced today. It was $0.39 out of the TBV number. Again, these losses were already existing on an economic basis, and the reclassification now aligns the accounting with the economic reality. finally as i mentioned earlier we also closed peach date on august 1st with 50 cash as we have repurchased 1.3 million shares we issued in the transaction in combination this investment takes from tangible book value in the quarter and finally we overlay the expected profitability range of the quarter from a tvv to help in the understanding of the puts and takes of the quarter but i will also note that we haven't finalized our peach date marks that avita's gain could change slightly, and there could be some changes in unrealized losses with interest rate movements from June 30th. Other comments I will add in speaking about this slide, we expect the net interest margin to be in the low 360s, as the benefit of the bond trade offsets a lot of the margin impact of losing Navitas. We also guide that we are expecting to be in the 125 to 130 range, the margin and the ROA to increase as we reinvest the cash. Finally, again, pro forma for everything, we will have very strong capital ratios as our CET1 will be above 13% and our TCE ratio will be greater than 9%. Pages 8, 9, and 10 tell the story of how we are deploying capital. On page 8, we talk about share repurchases we have been utilizing in 2026. We came into 2026 with a $100 million authorization. As an update so far this quarter, we have repurchased $50 million in shares in addition to the $37 million in shares we repurchased in the first quarter. $37 million for the year to date, 2% of the shares outstanding year to date. With the elevated repurchases in the quarter, we had just $13 million left in our authorization to increase the repurchase authorization by $100 million through the end of 2027. Page 9, we are also making a significant investment in people that we believe will meaningfully increase our loan growth rate for nearly a year and is starting to show meaningful benefit. 42 producers to the bank since 930 of 2025, an 18% increase in revenue producers. And with the momentum we are seeing, we believe we will be growing loans at an upper single-digit pace. On page 10, bank M&A being at the 10th this quarter of the kind of M&A we target. We generally target banks with less than $2 billion in assets. Peach State was less than $1 billion. We target banks and growth markets within our existing footprint. In Peach State's case, the transaction brought us to number one deposit share in the fast-growing Gainesville, Georgia MSA. We find these types of acquisitions to be low.

Before we open it up for questions, let me cover three or nine years on this great team. We appreciate your contributions greatly and wish you the very best in your next chapter. On this first step and deep expertise in balance sheet management, planning, and amplifying United returns and deserve.

We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. The first question today comes from Michael Rose with Raymond James. Please go ahead.

Hey, good morning, everyone. Thanks for taking my questions, and congratulations, Jefferson, and welcome, Tom. Just wanted to maybe start on the NIM. You know, I think when you guys announced this, you know, back in June, you were talking about kind of a 30-basis point headwind, and we're going to get that back to kind of 20 to 25 basis points, I think, by the fourth quarter. What are some of the updates there? And, you know, just with the paydown of debt, you know, how should we kind of think about the margin trajectory over the next two quarters?

Yeah, thanks, Michael. The bond transaction replaces the solution that we talked about that's coming from Navitas. And what we have underlying is an increasing margin. We've seen a little bit of margin increase. fashion coming in, Navitas going out, we end up with a margin that's maybe down five basis points for 360s. And then I would expect it to stay in that range in the fourth quarter, the remixing.

Very helpful. And then, you know, I guess what drove the decision to do, you know, I think a little bit more, you know, on the restructuring side than maybe what was implied back in June, is it just the, you know, kind of obviously continued upward moving rates that we've seen at the time, so maybe it was a better opportunity, you know, was obviously happy to see it, just wanted to get a better understanding of kind of what drove the decision to do more. Thanks.

Yeah, sure. Thanks, Michael. This is Lynn. I'll take that. So, you know, we've been thinking about this for about, honestly, 18 months. I've done dozens of simulations looking at share repurchases, loan sales, different security sales buckets, all those things of, number one, risk reduction. So I think I'm not trying to bet anything, but I think if anything we're in a drift upward in rates. And so how do we protect the flexibility and liquidity? We need to be able to fund this loan growth. We had a great deposit base, but also in terms of the securities roll off and how do we fund that out of the securities book. Of course, we looked at book dilution and we looked at earnings impact. And so as we have gone through that past 18 months, it got rid of most of the risk, the most flexibility, the most liquidity. The dilution, yes, in economic terms, it was there anyway. From an earnings perspective, it's got a good earnings pickup, but literally the risk and flexibility were the big drug.

Perfect. I appreciate you answering the dilution. That was going to be my final question, but maybe just one more, just as it relates to the buyback, you know, obviously good to see. I think when you announced the transaction, you kind of illustrated a $300 million buyback increase in the authorization today. I guess the question is now that you guys have a lower risk balance sheet, meaningful liquidity, you know, what should we think about in terms of a CET01 level for you guys, potentially in the face of some tailoring by regulators? Thanks.

Yeah, that's a great question. We're debating that at the board level now, so I'm not ready to give a specific target, but it would be lower than the target than what we have held in the past. There have been two reasons in my mind that we've held higher capital levels maybe than peer averages. One is Navitas. I think the market viewed Navitas as being higher risk and maybe more volatile than I personally viewed it. But regardless, we felt like we needed to carry a buffer because of Navitas. That's obviously gone. So we don't need that Navitas buffer. The other reason is we've held a little extra so that we could do a peach state-size acquisition. So the bias is down on capital. The board's got to make that decision, and we are actively debating it. I will say that the board is very adamant that our return on tangible needs to be 15% at a minimum consistently. And so we want to be on that path and above. And so that's more the target we're focused on right now.

Very helpful. I appreciate it on the call, everyone.

Michael?

The next question comes from Russell Gunther with Stevens. Please go ahead.

Hey, good morning, guys. Good morning. Hey, morning, Jefferson. I wanted to follow up on the margin discussion, if I could. Maybe just as we think about the magnitude of expansion kind of from the back half of this year into next, could you help us think about some of the drivers around overall balance sheet size, where that trend and kind of timing of securities to average earning assets could go, where you might flex a 75% loan to deposit ratio, just some of the bigger moving pieces to that kind of expansion. into 27?

Well, it's a great question. I'm not prepared to give guidance into 2027 internally, is that one, we want to be a strong, going to determine the size of the balance sheet, ability to not have to enter the market. So we think versus competition, it gives us a lot of flexibility to be able to, again, not pay the top rates. I also think we traditionally have been a strong deposit goer at the same time for next year on this, I do think you should see that loan-to-deposit ratio drift higher over time, depending on deposit growth.

Okay, got it. Thank you. And then maybe just a bigger picture question.

Anything to read into the decision to pull the trigger here on the balance sheet restructuring and accelerate some buyback relative to your overall M&A appetite in the near term or to the likelihood that a related actionable opportunity would be able to present itself in the near term? yeah so i mean we we sized and scoped all this to be able to continue to do the kind of m&a that we have done in the event that it presents itself and you know there's nothing i would say imminent but there's you know conversations going on all the time so us seeing another you know slightly plus in market deal we've got in our mind plenty of capital to be able to do got it okay thanks Thanks, Lynn.

Thanks, Jefferson. Good for me.

The next question comes from David Bishop with HVD Group. Please go ahead.

Hey, good morning, gentlemen. Hey, quick question, Lynn Jefferson, on the repositioning of the portfolio. Just curious, you mentioned the flexibility and liquidity it gives you. Any sense of the securities cash flow per quarter you're projecting now versus coming into the transaction?

Yep, great question. It's up about 50%, so it goes from about $240 a quarter to $360 a quarter, and that was one of the main reasons that we made the portfolio the higher loan growth that we are.

Got it. And then, Jefferson, real quick, I think you went over some of the quarter-to-date trends in terms of loan and deposit growth. Do you mind just hitting on those again real quick?

Yep, great. Quarter-to-date, we're at about $150 million of loan growth. So that averages out to kind of a mid-single-digit or lower loan growth. But what makes that remarkable is that generally all of our loan growth comes at the end of the quarter. So having 150 two months in kind of gives us some confidence that the loan growth this quarter could be in the 7% annualized range. Growth this quarter, I mentioned $500 million. A lot of that is average balance growth that was a little bit of a rebound from some shrinking that we had last quarter. We are growing deposit accounts, and we're feeling good about that, but we've also had a very strong average feeling good about where we are in deposit growth this quarter as well with the $500 million.

Appreciate that, Collar.

The next question comes from Christopher Maranak with Breen Capital, LLC. Please go ahead.

Thanks. Good morning, Jefferson. You just talked about low growth, and so just to finalize that point, you know, would low growth necessarily accelerate into Q4 and Q1 as a result of both the timing as well as kind of the cumulative momentum of the new hires?

Yeah, and this is Lynn. I'm on a vacation and health and marketing area. And so, Abraham, why don't you kind of bring us up on a little bit of the momentum we're seeing in the new hires, et cetera?

All right. I will do that. Thank you, Lynn. Good morning, everybody. It's great to be here with you. I would say overall we're really pleased. Internally, we're optimistic because we're seeing a lot of momentum. I think three kind of key areas, 42 revenue producers, and we're starting to see the impact of those. We do anticipate kind of here at the end of the year to see that slow naturally through the end of year. We're really good about the project. A lot of momentum from a lending perspective. We've seen year to date as we sit here in September. I'd mentioned it's the largest I've seen in my almost four years, And if Rich was here, he would say it's the largest it's been in his time with United. Kind of lastly, from a production in the second, you mentioned $50 million of growth, about 50% of that growth, a significant ramp-up into the year in 2020.

Okay, great. Thank you for sharing all that. That's very helpful. And then just a quick credit check, the kind of adjusted charge-off outlook, is it still kind of roughly that mid-teens level now that Navitas is out?

I mean, charge-offs, you know, in the bank, Ex-Novitas have been running about 10 basis points, and we don't see anything that would move that any higher at this point. So I think 10 bips in charge off about kind of what we see.

Great. Thank you, Lynn. Thank you, Jefferson, and good to meet you, Abraham, as well.

Thanks, Chris. The next question comes from Stephen Scouten with Piper Sandler. Please go ahead.

Hey, good morning, everyone. I just wanted to confirm a couple things. One, Jefferson, on that securities yield that you gave, that's the 4Q26 securities yield, effectively, once it's all kind of worked into the average?

That's correct.

And then can you talk about the $4.2 billion in cash to the bank? I think you said about $3 billion in the securities book, so $1.2 billion, presumably, into cash here in your term, plus $360 million a quarter from cash flow. So I guess I'm curious why it feels like a lot to leave maybe undeployed, even with accelerating loan growth. So any kind of commentary there about the strategy or mindset?

A piece I want to make sure you heard on that is of the 4.2 cash that came in, we're reinvesting, call it 3, 3.1 of that, and then $1.1 billion of debt pay down. So there's not significant undeployed cash sitting around by the time we get to quarter in.

Ah, got it. Thank you for the clarification there. All right. I think that's all I had. Everything else was kind of asked and answered. Appreciate the time.

This concludes our question and answer session. I would like to turn the conference back over to Lynn Harton for any closing remarks.

Well, great. Well, once again, thank you all for joining our call. Great questions. And we're very open to any additional questions. Just reach out. And we look forward to seeing you all again soon. Thank you.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.