📰 What This Document Is

This transcript is from United Community Banks, Inc.'s Quarterly Earnings Call, held on April 21, 2026. 🗓️ It serves as a deep dive into the bank’s financial performance for the first quarter of 2026, while also providing extensive discussion around the proposed merger with Peach State Bancshares, Inc.

👉 Think of this call as management walking you through their entire report card for the quarter, explaining why they got the grades they did, and discussing their plan for how the company will look after a potential big merger.

🏦 United Community Banks' Background and Scale

United Community Banks is a regional financial institution that has been growing organically in Gainesville, Hall County since 2005. 🏘️ The bank provides a range of services, from lending (like mortgages and C&I loans) to managing customer deposits.

👉 As of the end of Q1, the company has total assets of $788 million, with $713 million in deposits. The merger with Peach State Bancshares, Inc. (founded the same year, 2005) aims to create a larger, combined entity that will hold the #1 deposit share in Hall County.

📈 Financial Highlights and Deposit Strength

The call highlighted several key financial performance metrics, focusing on strong deposit growth and healthy balance sheet ratios. 💰 Management reported that customer deposits grew by $237 million, or a 4% annualized rate, driven largely by Demand Deposit Account (DDA) growth.

• Deposit Costs: The cost of deposits decreased by 9 basis points, landing at 1.67%. This is a positive sign because lower costs mean more profit margins.
• Deposit Beta: The cumulative total deposit beta stands at 39%, which the bank stated exceeded their internal goal. This metric measures how stable and reliable the bank's deposits are.
• Loan-to-Deposit Ratio: This ratio remained low and unchanged at 82%. A low ratio signals that the bank has a healthy cushion of stable deposits compared to its loans.
• Capital Strength: The bank's regulatory capital ratios remain strong: the CET1 ratio was flat at 13.4%, and the Total Capital (TCE) was also flat at 9.92%.

💲 Profitability and Interest Margins

The discussion focused heavily on how the bank generates profit, specifically through interest income and lending fees. 💸 Management noted that the net interest margin (NIM) increased 3 basis points in the quarter to 3.65%.

👉 The increase in NIM was driven by a combination of factors: the back book repricing (loans are adjusting rates) and a favorable mix shift towards loans away from fixed-income securities.

• Multi-Year Trend: The NIM also rose 29 basis points compared to the same period last year, marking the fifth consecutive quarter of margin expansion.
• Future Outlook: Considering maturity assets alone, the bank expects about $1.4 billion in assets to mature in the 4.63% range next year. Due to this, management expects the NIM to increase by 3 to 5 basis points in the second quarter.

💼 Operational Performance and Lending Focus

The bank reported continued growth in its loan portfolio and highlighted key areas where its lending efforts are concentrated. 🚀 Loan growth continued at a 4.5% annualized pace, with primary growth coming in the Home Equity Line of Credit (HELOC) and Commercial & Industrial (C&I) categories.

• Operational Expenses: GAAP expenses for the first quarter were $157.3 million, with operating expenses of $151.6 million. These numbers were relatively flat compared to the fourth quarter.
• Navitas Loans: The bank reduced its sale of Navitas loans significantly in Q1, selling only $8.3 million compared to $41.6 million the previous quarter.
• Noninterest Income: This segment generated $43.7 million, which included a $5.2 million gain on an interest rate cap hedging a sub debt issuance scheduled for redemption on April 30.

🏛️ The Merger Details and Deal Structure

The primary focus of the call was the proposed merger of Peach State Bancshares, Inc. with and into United Community Banks, Inc. This discussion covered the financial mechanics and strategic rationale for combining the banks. 🤝

• Transaction Scale: Peach State has approximately $800 million in assets, representing about 3% of the combined company’s assets.
• Valuation: The deal value is estimated to be $100 million and will be structured as a 50-50 mix of cash and stock. Management is paying 1.9x tangible book value and 6x cost-saved earnings.
• Accretion Estimates: The bank estimates the deal to be $0.09 accretive in 2027, and after planning for share repurchases, they estimate it to be $0.12 accretive.
• Strategic Fit: The CEO emphasized that the deal is attractive because the target is "in market, manageable size, [and] has a history of strong performance... and an attractive way to leverage capital and continue to grow our business and our brand."

✨ Management Commentary on Capital Strategy

Executives provided detailed commentary on the bank's use of excess capital, particularly concerning share buybacks. 💵 The company was active in buybacks in Q1, repurchasing $37 million in shares.

👉 Management confirmed plans to repurchase the $50 million in shares issued by year-end. CFO Jefferson Harralson also stated that the bank is creating about $30 million of excess capital every quarter, which is the amount they are contemplating purchasing, though this depends on the stock price.

🧬 Focus on Technology and Growth

The bank discussed future growth vectors, including specialized lending and the integration of advanced technology. 🤖

• AI Investment: Chairman Lynn Harton noted that the bank's AI investments have been highly effective, citing that all vendor fraud losses dropped by 50% over the last two years. They are also using AI in their contact center to handle more calls with the same number of agents.
• Growth Areas: The bank is focused on specific high-growth areas, including middle market, Additional Bank Loans (ABL), Navitas, and HELOCs.
• Hiring: To support growth, the bank saw a net increase of 10 revenue producers in Q1 and aims for 10% annual growth on that in 2026.

⚠️ Credit Quality and Risk Factors

Management addressed the health of the bank’s assets, focusing on loan performance and potential risks. 📉 Net charge-offs for the quarter were 22 basis points, which improved from the previous quarter and was flat compared to last year.

• Asset Health: The institution saw relatively flat Non-Performing Assets (NPAs) and a nice improvement in past-due accounts, indicating strong credit quality.
• Loan Loss Provision: The loan loss provision was $10.9 million for the quarter, matching the net charge-offs.
• Risk Posture: The CRO, Rob Edwards, anticipates asset quality will remain stable and expects NPAs to fluctuate slightly (perhaps 10 basis points up or down) over time, which is standard movement.

📞 Key Investor Questions and Outlook

The Q&A session provided valuable, forward-looking context from investors and management. 🧐

• Deposit Cost Trends: When asked by Stephens regarding deposit costs in an interest rate pause scenario, CFO Jefferson Harralson stated the deposit cost is expected to be "relatively flat," though he acknowledged that competition is present.
• Loan Growth Outlook: When asked about future loan growth, President Rich Bradshaw stated the bank remains optimistic, projecting a 5% to 6% range, assuming "nothing else goes on unusual in Iran."
• Future Deal Size: When discussing future M&A, Lynn Harton clarified their preference for deals that are typically 10%, or at most 15% or less, of the current bank's size, as these smaller institutions tend to align better with their culture and community involvement.

📞 Where to Find More Information

For follow-up information, investors and analysts were directed to specific contacts and resources:

• Website: The full earnings release and investor presentation were filed on the company's website at ucbi.com.
• Call Replay: A replay of the call will be available in the Investor Relations section of ucbi.com.
• Key Contacts: For any further questions, investors were advised to reach out to Jefferson Harralson (CFO) or Lynn Harton (CEO).

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🧠 The Analogy

Think of the bank merger as two excellent, local neighborhood coffee shops (United and Peach State) that are right next to each other and share the same customer base. Instead of having two separate signs, they decide to open a new, bigger, and more successful flagship store together. They are doing this not just to look bigger, but to combine their best qualities—like knowing the local community and keeping costs low—so they can serve more people and offer a wider selection of goods (services).

🧩 Final Takeaway

United Community Banks is aggressively positioning itself for growth through a strategically planned merger with Peach State, aiming to dominate its local market share. Management is confident in its current stability and future earnings, driven by solid loan growth, managed capital expenditures, and the combined strength of two established community brands.