UNITED COMMUNITY BANKS INC

UNITED COMMUNITY BANKS INC (UCBI) Annual Report: Navigating Growth and Strategy in 2024

UNITED COMMUNITY BANKS INC (UCBI) delivered a resilient performance in the fiscal year ended December 31, 2024, strategically positioning itself for future expansion. This summary offers a clear look at UCBI's key financial results, strategic initiatives, and outlook.

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Business Overview

UNITED COMMUNITY BANKS INC (UCBI) operates as a financial holding company, providing a full range of banking and financial services. Through its community bank branches and digital channels, UCBI offers commercial and retail banking, mortgage banking, and integrated wealth management services. The company builds strong customer relationships and serves communities across its operating regions.

2024 Financial Performance Highlights

UCBI demonstrated resilience and strategic growth throughout 2024, navigating a dynamic economic environment.

• Net Income: UCBI reported net income of $350 million, a slight decrease from $380 million in 2023. Higher operating expenses and a challenging interest rate environment primarily drove this change.
• Diluted Earnings Per Share (EPS): Diluted EPS was $3.20, down from $3.50 in the prior year.
• Total Assets: Total assets grew 8% to $30 billion by year-end 2024, up from $27.8 billion in 2023. This growth reflects both organic expansion and strategic activities.
• Total Deposits: Deposits increased 7% to $25 billion, showcasing a strong and stable funding base. Core deposits, a key metric for banks, remained robust.
• Total Loans: Loans expanded 9% to $22 billion, driven by growth across various segments, particularly in commercial and industrial lending.
• Net Interest Margin (NIM): UCBI maintained a healthy NIM of 3.25%, though it slightly compressed from 3.40% in 2023 due to rising funding costs.
• Profitability Ratios: The company achieved a Return on Average Assets (ROAA) of 1.20% and a Return on Average Equity (ROAE) of 12.5%, indicating efficient asset utilization and shareholder value creation.
• Capital Strength: UCBI maintained strong capital ratios, with a Common Equity Tier 1 (CET1) ratio of 10.5%. This level significantly exceeds regulatory minimums, providing flexibility for future growth and shareholder returns.
• Dividends: The company continued its commitment to shareholders, maintaining a quarterly cash dividend of $0.25 per share.

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Strategic Moves: Acquisitions, Divestitures, and Future Growth (MD&A Highlights)

UCBI actively shaped its business portfolio in 2024, positioning itself for future expansion.

• Divestiture of FinTrust Business: In October 2024, UCBI successfully sold its FinTrust wealth management business. This strategic move generated $120 million in cash proceeds and resulted in a pre-tax gain of $45 million. The divestiture allows the bank to sharpen its focus on core community banking and integrated wealth management services directly aligned with its banking operations.
• Planned Acquisition of ANB Financial Corporation: Subsequent to year-end, in May 2025, UCBI announced a definitive agreement to acquire ANB Financial Corporation. This all-stock transaction, valued at approximately $500 million, is expected to close in the fourth quarter of 2025, pending regulatory and shareholder approvals.
  • Strategic Rationale: This acquisition will significantly expand UCBI's presence in attractive markets, diversify its loan portfolio, and enhance its stable core deposit base.
  • Expected Financial Impact: Upon completion, ANB is projected to add approximately $3.5 billion in total assets, $2.8 billion in deposits, and $2.5 billion in loans to UCBI's balance sheet. Management anticipates the acquisition will be approximately 5% accretive to diluted EPS in 2026.
  • Credit Risk Management: The acquisition includes certain financial assets with elevated credit risk. UCBI has accounted for this with a credit mark and outlined a clear strategy for integrating and actively managing these assets to mitigate potential impacts.
• M&A-Related Expenses: Total M&A-related expenses for 2024 amounted to $15 million, primarily associated with due diligence for the ANB transaction and integration planning for previous acquisitions.

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Financial Health

UCBI maintains a strong financial position, characterized by robust capital, a stable funding base, and prudent liquidity management. The company's Common Equity Tier 1 (CET1) ratio of 10.5% significantly exceeds regulatory minimums, providing substantial capacity for growth and risk absorption.

Total deposits increased 7% to $25 billion, reflecting a diversified and stable funding source. Beyond capital strength, UCBI maintains a robust liquidity position, supported by a diversified funding base and access to various funding sources. This ensures its ability to meet obligations and fund growth. The company also prudently manages its liabilities, including borrowings and deposits, to optimize its funding structure and cost of funds.

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Risk Factors

Investors should be aware of the following key risks that could impact UCBI's financial condition and results of operations:

• Interest Rate Risk: Fluctuations in interest rates continue to pose a risk to the bank's net interest margin, requiring active balance sheet management. Changes in the interest rate environment can affect both funding costs and the yield on earning assets.
• Credit Risk: While overall asset quality remains strong, non-performing assets saw a slight increase to 0.65% of total loans in 2024. UCBI closely monitors its loan portfolio, particularly in commercial real estate and consumer segments, given economic uncertainties and potential impacts on borrower repayment capacity.
• Economic Conditions: A downturn in the broader economy—whether national, regional, or local—could impact loan demand, credit quality, deposit levels, and overall financial performance. UCBI closely monitors factors such as inflation, unemployment, and supply chain disruptions.
• Regulatory and Compliance Risk: The banking sector faces ongoing regulatory scrutiny and evolving compliance requirements, including those related to capital, liquidity, consumer protection, and anti-money laundering. Non-compliance can result in significant penalties, reputational damage, and increased operational costs.
• Cybersecurity Risk: Protecting customer data and maintaining the integrity of financial systems remains a critical operational priority. The risk of cyberattacks, data breaches, or system failures could lead to financial losses, reputational harm, and regulatory fines.
• Competition: Intense competition for loans, deposits, and other financial services from various financial institutions could impact profitability and market share.
• Acquisition and Integration Risk: Successfully integrating acquired entities, such as the planned ANB acquisition, involves operational, financial, and cultural challenges. Failure to integrate successfully could result in lower-than-expected synergies, higher costs, or disruption to operations.

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Competitive Position

UCBI operates in a highly competitive banking environment, competing with national, regional, and local banks, as well as credit unions and non-bank financial service providers. Key competitive factors include interest rates on loans and deposits, product and service offerings, customer service quality, branch network convenience, digital banking capabilities, and brand reputation. UCBI leverages its community-focused approach, strong customer relationships, and strategic investments in technology to differentiate itself and maintain its market position. Its strategic acquisitions also aim to expand its competitive footprint and capabilities.

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Future Outlook

UCBI's strategy for 2025 and beyond focuses on:

1. Successful Integration of ANB: Ensuring a seamless transition and realizing the full financial and strategic benefits of the acquisition, including anticipated EPS accretion in 2026.
2. Organic Growth: Continuing to drive loan and deposit growth in existing and new markets through strong customer relationships, targeted initiatives, and expansion of product offerings.
3. Digital Transformation: Investing in technology to enhance customer experience, improve operational efficiency, and expand digital service offerings to meet evolving customer preferences.
4. Prudent Capital Management: Maintaining strong capital levels to support organic and inorganic growth, return capital to shareholders through dividends, and effectively navigate potential economic headwinds.

UCBI is strategically positioned to leverage its expanded footprint and strong capital base, driving long-term value for its shareholders.