KBRA Affirms Ratings for United Community Banks, Inc.

KBRA affirms the senior unsecured debt rating of BBB+, the subordinated debt rating of BBB, the preferred shares rating of BBB-, and the short-term debt rating of K2 for Greenville, South Carolina-based United Community Banks, Inc. (NYSE: UCB) ("the company"). In addition, KBRA affirms the deposit and senior unsecured debt ratings of A-, the subordinated debt rating of BBB+, and the short-term deposit and debt ratings of K2 for the bank subsidiary, United Community Bank ("the bank"). The Outlook for all long-term ratings is Stable.

Key Credit Considerations

UCB’s ratings are supported by its mostly favorable, sustained performance track record, its solid core deposit base, strong capital levels, and manageable credit costs over time. Following a period of subdued earnings in the 2023-2024 timeframe, driven by one-time items tied to UCB’s strategic initiatives and higher funding costs that were not too dissimilar to peers, UCB’s recent profitability has reverted towards its pre-March 2023 levels. Recent returns – ~1.2% core ROA generated in each of the past two quarters – have been supported by a demonstrably improved NIM - supported by a lower cost of deposits of 1.7% (down from a peak of 2.3% in 2024), repayment of higher cost funding, and a continued remixing of earning assets toward loans and away from securities. Earnings have also benefited from a relatively benign credit backdrop, while noninterest expense has been well-contained despite incremental costs tied to recently added revenue producers. Prospectively, as more asset repricing opportunities arise and loan growth accelerates, we expect NIM to benefit further, which, in turn, should drive earnings even closer to historical levels given a stable interest rate and economic backdrop.

UCB’s credit profile is also supported by a robust core capital position, including a recent CET1 ratio over 13%. While TCE was impacted by negative marks on UCB’s AFS securities portfolio during 2022-2024, the CET1 ratio remained strong, trending ahead of rating category peers in the 12%-13% range. Importantly, we believe it is unlikely that core capital metrics will increase materially from the currently high levels. Rather, we think it more likely that core capital ratios will be generally stable or trend modestly downward in the short-to-intermediate term. As an active acquirer, any prospective M&A deal executed by UCB could potentially drive core capital ratios lower given required interest rate marks on the seller’s loan and securities portfolios. That said, UCB's established acquisition track record and history of executing relatively digestible transactions temper potential capital concerns. Moreover, any capital distribution associated with M&A or other capital deployment actions would likely bring capital levels closer to rating category peers from their current above-peer position.

A solid asset quality track record is also supportive of the ratings. Following an uptick in losses tied to select portfolios, including those associated with the exit of the manufactured housing business in 2024 and long haul trucking losses in the equipment finance business, key credit metrics have improved and remain stable thanks to a variety of successful resolutions. Though UCB’s small-ticket commercial leasing portfolio, Navitas, remains an outsized contributor to NCOs (1Q26 NCO ratio of 22 bps vs. 10 bps excluding Navitas), credit quality performance in the bank’s “core” loan book has been comparatively stronger.

Rating Sensitivities

A sustained return to peer-like level of risk-adjusted earnings, if achieved in conjunction with its still strong core capital ratios and solid asset quality metrics, could result in positive rating momentum over the medium term. Conversely, above-peer deterioration in credit quality that materially impacts the earnings or capital profiles could pressure the ratings. Challenges related to the execution of the company's M&A strategy or failure to effectively integrate acquired banks and production talent would also be viewed negatively.

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