United Community Banks, Inc.(UCB) - 2025 Q2 - Quarterly Report

Part I - Financial Information Financial Statements This section presents the unaudited consolidated financial statements for United Community Banks, Inc. as of June 30, 2025, and for the three and six-month periods then ended, including balance sheets, statements of income, comprehensive income, changes in shareholders' equity, and cash flows, along with detailed notes explaining the basis of presentation and significant accounting policies Consolidated Balance Sheets As of June 30, 2025, total assets grew to $28.09 billion from $27.72 billion at year-end 2024, driven by an increase in net loans and leases, while total liabilities increased to $24.47 billion, primarily due to a rise in deposits, and shareholders' equity strengthened to $3.61 billion Consolidated Balance Sheet Highlights (Unaudited) | (in thousands) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Assets | $28,085,521 | $27,720,258 | | Cash and cash equivalents | $574,956 | $519,873 | | Loans and leases, net | $18,704,375 | $17,968,982 | | Total deposits | $23,963,012 | $23,460,975 | | Total Liabilities | $24,472,597 | $24,288,131 | | Total Shareholders' Equity | $3,612,924 | $3,432,127 | Consolidated Statements of Income For Q2 2025, net income increased to $78.7 million from $66.6 million in Q2 2024, with diluted EPS rising to $0.63 from $0.54, driven by higher net interest revenue, while H1 2025 net income was $150.1 million, up from $129.2 million in the prior year period Q2 2025 vs Q2 2024 Performance (Unaudited) | (in thousands, except per share data) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net interest revenue | $225,531 | $208,700 | | Provision for credit losses | $11,818 | $12,235 | | Total noninterest income | $34,708 | $36,556 | | Total noninterest expense | $147,919 | $147,044 | | Net income | $78,733 | $66,615 | | Diluted EPS | $0.63 | $0.54 | H1 2025 vs H1 2024 Performance (Unaudited) | (in thousands, except per share data) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net interest revenue | $437,552 | $407,849 | | Provision for credit losses | $27,237 | $25,134 | | Total noninterest income | $70,364 | $76,143 | | Total noninterest expense | $289,018 | $292,046 | | Net income | $150,146 | $129,246 | | Diluted EPS | $1.21 | $1.05 | Consolidated Statements of Comprehensive Income Comprehensive income for Q2 2025 was $88.1 million, a significant increase from $68.7 million in Q2 2024, driven by higher net income and a larger other comprehensive income from net unrealized gains on available-for-sale securities - For the six months ended June 30, 2025, comprehensive income was $185.9 million, compared to $133.9 million for the same period in 2024[14] - Other comprehensive income for the six months ended June 30, 2025 was $35.7 million, mainly due to $35.5 million in net unrealized gains on available-for-sale securities[14] Consolidated Statement of Changes in Shareholders' Equity Shareholders' equity increased from $3.43 billion at year-end 2024 to $3.61 billion by June 30, 2025, primarily due to net income, other comprehensive income, and stock issued for an acquisition, partially offset by dividends and repurchases - Key drivers of the $180.8 million increase in shareholders' equity during the first six months of 2025 were net income, other comprehensive income, and stock issued for an acquisition[16] - The company repurchased $13.9 million of common stock and paid $58.5 million in common stock dividends ($0.48 per share) during the first half of 2025[16] Consolidated Statements of Cash Flows For the six months ended June 30, 2025, cash and cash equivalents increased by $55.1 million, with net cash provided by operating activities at $195.5 million and investing activities at $103.1 million, while financing activities used $243.5 million Six Months Ended June 30 Cash Flow Summary (Unaudited) | (in thousands) | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $195,468 | $193,901 | | Net cash provided by (used in) investing activities | $103,137 | $(247,269) | | Net cash used in financing activities | $(243,522) | $(387,644) | | Net change in cash and cash equivalents | $55,083 | $(441,012) | Notes to Consolidated Financial Statements The notes provide detailed explanations of the company's accounting policies and financial results, including the ANB acquisition, investment securities, loan portfolios, credit quality, and regulatory capital information Note 3 – Acquisitions On May 1, 2025, United acquired ANB Holdings, Inc. in a stock transaction, adding one banking location in Florida, with acquired assets of $428.5 million and assumed liabilities of $380.8 million, resulting in $18.0 million of goodwill - United acquired ANB on May 1, 2025, issuing 2,380,952 shares of common stock as consideration, valued at $65.7 million[26][27] ANB Acquisition Summary (in thousands) | Item | Fair Value Recorded | | :--- | :--- | | Total assets acquired | $428,475 | | Total liabilities assumed | $380,766 | | Total identifiable net assets | $47,709 | | Goodwill | $18,029 | Note 4 – Investment Securities As of June 30, 2025, the investment securities portfolio comprised $4.08 billion in AFS and $2.31 billion in HTM securities, with HTM having gross unrealized losses of $371.0 million and AFS having net unrealized losses of $168.3 million, primarily due to interest rate changes Investment Securities Portfolio (June 30, 2025, in thousands) | Category | Amortized Cost | Fair Value | | :--- | :--- | :--- | | Available-for-Sale (AFS) | $4,243,667 | $4,075,323 | | Held-to-Maturity (HTM) | $2,306,730 | $1,935,748 | - At June 30, 2025, there were 519 AFS and 300 HTM debt securities in an unrealized loss position, with the company not intending or being required to sell them before recovery of their cost basis[42] Note 5 – Loans and Leases and Allowance for Credit Losses Total loans and leases held for investment grew to $18.92 billion at June 30, 2025, from $18.18 billion at year-end 2024, with the ACL on loans increasing to $216.5 million, representing 1.14% of total loans, and nonaccrual loans decreasing significantly to $80.5 million Loan Portfolio Composition (in thousands) | Loan Type | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Total commercial | $14,156,507 | $13,505,724 | | Residential mortgage | $3,210,430 | $3,231,479 | | Home equity | $1,180,455 | $1,064,874 | | Total loans | $18,920,875 | $18,175,980 | - Nonaccrual loans decreased to $80.5 million (0.43% of total loans) at June 30, 2025, from $113.6 million (0.62% of total loans) at December 31, 2024[61][62] Allowance for Credit Losses (ACL) - Loans (in thousands) | Period | Beginning Balance | Provision | Net Charge-offs | Ending Balance | | :--- | :--- | :--- | :--- | :--- | | Six Months 2025 | $206,998 | $26,083 | $(17,832) | $216,500 | | Six Months 2024 | $208,071 | $29,473 | $(24,522) | $213,022 | Note 11 – Regulatory Matters As of June 30, 2025, United Community Banks, Inc. and its subsidiary bank were categorized as well-capitalized, with consolidated CET1, Tier 1, and Total capital ratios of 13.34%, 13.77%, and 15.14% respectively, all comfortably above regulatory thresholds United Community Banks, Inc. Capital Ratios (Consolidated) | Ratio | June 30, 2025 | Well-Capitalized Minimum | | :--- | :--- | :--- | | CET1 capital | 13.34% | 6.5% | | Tier 1 capital | 13.77% | 8.0% | | Total capital | 15.14% | 10.0% | | Leverage ratio | 10.37% | 5.0% | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's Q2 and H1 2025 financial performance, highlighting the successful ANB acquisition, strong net interest revenue growth driven by lower deposit costs, improved asset quality, and a solid financial position regarding balance sheet composition, liquidity, and capital resources Overview and Results of Operations The company reported strong Q2 2025 results with net income of $78.7 million ($0.63 diluted EPS), up from $66.6 million ($0.54 diluted EPS) in Q2 2024, driven by a $17.3 million increase in quarterly net interest revenue and the ANB acquisition - Completed the acquisition of ANB on May 1, 2025, acquiring $447 million in assets and assuming $381 million in liabilities[146] - Net interest margin for Q2 2025 increased to 3.50% from 3.37% in Q2 2024, primarily due to a larger decrease in interest rates paid on deposits compared to the decrease in rates earned on loans[150] - Noninterest income decreased by $1.85 million in Q2 2025 compared to Q2 2024, mainly due to negative fair value adjustments on the mortgage servicing asset and lower wealth management fees following the sale of FinTrust in late 2024[152] Balance Sheet Review Total assets grew to $28.1 billion at June 30, 2025, supported by loan growth and the ANB acquisition, with the loan portfolio reaching $18.9 billion, asset quality improving significantly with NPAs decreasing by $31.7 million, and deposits growing by $502 million to $24.0 billion - The Allowance for Credit Losses (ACL) for loans increased to $217 million at June 30, 2025, from $207 million at year-end, primarily due to loan growth and an initial allowance for ANB loans[186] - Nonperforming assets (NPAs) decreased to $84.0 million at June 30, 2025, from $115.6 million at December 31, 2024, driven by $49.6 million in payoffs and paydowns of nonaccrual loans[191][195] - Customer deposits increased by $514 million since December 31, 2024, which includes $374 million from the ANB acquisition[199] Liquidity and Capital Resources The company maintained a strong liquidity and capital position at June 30, 2025, with substantial available liquid funds and unused borrowing capacity, including over $1.9 billion in FHLB availability and $2.4 billion at the Federal Reserve Discount Window, while shareholders' equity increased to $3.61 billion, and all capital ratios remained well above regulatory minimums - The company's interest rate sensitivity modeling shows it is slightly more asset sensitive at June 30, 2025, compared to year-end 2024, with a 100 basis point rate increase projected to boost net interest revenue by 1.97%[206] Unused Borrowing Capacity (in thousands) | Source | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | FHLB | $1,921,234 | $1,917,905 | | Federal Reserve - Discount Window | $2,395,442 | $2,267,139 | - Shareholders' equity increased to $3.61 billion, driven by earnings and the ANB acquisition, while capital levels remained well-capitalized[210][211] Quantitative and Qualitative Disclosures About Market Risk The company reported no material changes in its market risk profile as of June 30, 2025, from what was disclosed in its 2024 Form 10-K, with interest rate sensitivity detailed in the MD&A section - No material changes in market risk were reported since the 2024 10-K filing[216] Controls and Procedures Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting occurring during the quarter - The principal executive officer and chief financial officer concluded that disclosure controls and procedures were effective as of June 30, 2025[217] - There were no changes in internal control over financial reporting during the quarter that materially affected, or are reasonably likely to materially affect, internal controls[218] Part II - Other Information Unregistered Sales of Equity Securities and Use of Proceeds During Q2 2025, the company repurchased 506,600 shares of common stock at an average price of $27.52 per share, with approximately $86.1 million remaining available for future repurchases under the program as of June 30, 2025 Q2 2025 Common Stock Repurchases | Month | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | April 2025 | 343,338 | $27.31 | | May 2025 | 163,262 | $27.96 | | June 2025 | — | — | | Total | 506,600 | $27.52 | Other Information On June 10, 2025, President and CEO Lynn Harton entered into a Rule 10b5-1 trading plan for the sale of 25,000 shares of company common stock, scheduled to begin on February 15, 2026, with no other directors or officers adopting, modifying, or terminating such arrangements during the quarter - CEO Lynn Harton established a Rule 10b5-1 trading plan on June 10, 2025, for the future sale of 25,000 shares[222] Exhibits This section lists the exhibits filed with the Form 10-Q, including corporate governance documents, CEO/CFO certifications, and interactive data files formatted in Inline XBRL - The exhibits include certifications by the CEO and CFO pursuant to Exchange Act rules and Section 1350, as well as Inline XBRL data files[227]