UNITED COMMUNITY BANKS INCUCB
UNITED COMMUNITY BANKS INC Income Taxes Disclosure
Income Taxes
Income tax expense is as follows for the years indicated:
| Year Ended December 31, | |||||||||||||||||
| (in thousands) | 2025 | 2024 | 2023 | ||||||||||||||
| Federal | |||||||||||||||||
| Current | $ | 74,001 | $ | 58,041 | $ | 36,982 | |||||||||||
| Deferred | 11,309 | 4,546 | 4,013 | ||||||||||||||
| Total federal | 85,310 | 62,587 | 40,995 | ||||||||||||||
| State | |||||||||||||||||
| Current | 10,171 | 5,372 | 1,630 | ||||||||||||||
| Deferred | (1,080) | 2,517 | 2,259 | ||||||||||||||
| Total state | 9,091 | $ | 7,889 | $ | 3,889 | ||||||||||||
| (Decrease) increase in valuation allowance | (84) | 133 | 117 | ||||||||||||||
| Total income tax expense | $ | 94,317 | $ | 70,609 | $ | 45,001 | |||||||||||
The differences between the provision for income taxes and the amount computed by applying the statutory federal income tax rate of 21% in 2025, 2024 and 2023 to income before income taxes are as follows for the years indicated:
| Year Ended December 31, | |||||||||||||||||||||||||||||||||||
| (in thousands) | 2025 | 2024 | 2023 | ||||||||||||||||||||||||||||||||
Amount | % | Amount | % | Amount | % | ||||||||||||||||||||||||||||||
| Pretax income at statutory rates | $ | 88,707 | 21.00 | % | $ | 67,831 | 21.00 | % | $ | 48,834 | 21.00 | % | |||||||||||||||||||||||
| State taxes, net of federal benefit | 7,116 | 1.68 | 6,337 | 1.96 | 3,164 | 1.36 | |||||||||||||||||||||||||||||
| Tax credits | |||||||||||||||||||||||||||||||||||
| Rehabilitation | (116) | (0.03) | (170) | (0.05) | (181) | (0.08) | |||||||||||||||||||||||||||||
| Renewable energy | (9,161) | (2.17) | (596) | (0.18) | (3,820) | (1.64) | |||||||||||||||||||||||||||||
| Low income housing | (7,876) | (1.86) | (7,067) | (2.19) | (6,280) | (2.70) | |||||||||||||||||||||||||||||
| Nontaxable or nondeductible items | |||||||||||||||||||||||||||||||||||
| BOLI earnings | (2,027) | (0.48) | (1,896) | (0.59) | (1,685) | (0.72) | |||||||||||||||||||||||||||||
| Tax-exempt interest revenue | (2,704) | (0.64) | (2,902) | (0.90) | (2,781) | (1.20) | |||||||||||||||||||||||||||||
FDIC premium expense | 1,739 | 0.41 | 1,734 | 0.54 | 1,539 | 0.66 | |||||||||||||||||||||||||||||
| Tax losses from partnership investments | (2,107) | (0.50) | (929) | (0.29) | (1,129) | (0.49) | |||||||||||||||||||||||||||||
| Share-based payment awards | (628) | (0.15) | (696) | (0.21) | (781) | (0.34) | |||||||||||||||||||||||||||||
| Other | 2,514 | 0.60 | 1,065 | 0.33 | 2,109 | 0.91 | |||||||||||||||||||||||||||||
| Other adjustments | |||||||||||||||||||||||||||||||||||
| Proportional amortization | 17,286 | 4.09 | 7,046 | 2.18 | 6,680 | 2.87 | |||||||||||||||||||||||||||||
| Other, net | 1,115 | 0.27 | 325 | 0.10 | (778) | (0.33) | |||||||||||||||||||||||||||||
| Changes in unrecognized tax benefits | 459 | 0.11 | 527 | 0.16 | 110 | 0.05 | |||||||||||||||||||||||||||||
| Total income tax expense | $ | 94,317 | 22.33 | % | $ | 70,609 | 21.86 | % | $ | 45,001 | 19.35 | % | |||||||||||||||||||||||
The states that make up the majority (greater than 50%) of the state taxes reconciling item for the periods reported are as follows:
•2025: Alabama, Florida, North Carolina and Georgia;
•2024: Florida, South Carolina, Tennessee and Georgia;
•2023: Georgia, Florida and North Carolina.
The following summarizes the sources and expected tax consequences of future taxable deductions (revenue) which comprise the net DTA as of the dates indicated:
| December 31, | |||||||||||
(in thousands) | 2025 | 2024 | |||||||||
| DTAs: | |||||||||||
| ACL | $ | 50,444 | $ | 49,542 | |||||||
| Net operating loss carryforwards | 15,154 | 14,137 | |||||||||
| Deferred compensation | 12,688 | 12,697 | |||||||||
| Loan purchase accounting adjustments | 11,391 | 12,527 | |||||||||
| Nonqualified share based compensation | 2,648 | 2,527 | |||||||||
| Accrued expenses | 11,977 | 10,452 | |||||||||
| Unrealized losses on AFS securities | 45,043 | 67,357 | |||||||||
| Deferred gains on SBA/USDA loan sales | 1,560 | 1,483 | |||||||||
| Lease liability | 9,294 | 10,843 | |||||||||
| Other | 5,652 | 3,173 | |||||||||
| Total DTAs | 165,851 | 184,738 | |||||||||
| DTLs: | |||||||||||
| Unrealized gains on cash flow hedges | 949 | 5,534 | |||||||||
| Acquired intangible assets | 10,362 | 11,669 | |||||||||
| Premises and equipment | 16,004 | 14,408 | |||||||||
| Loan origination costs | 13,930 | 11,893 | |||||||||
| True tax leases | 19,600 | 13,362 | |||||||||
| Servicing assets | 9,998 | 9,453 | |||||||||
| Derivatives | 884 | 899 | |||||||||
| ROU asset | 8,975 | 10,317 | |||||||||
| Securities purchase accounting adjustments | 942 | 1,977 | |||||||||
| BOLI | 1,566 | 1,734 | |||||||||
| Trust preferred securities debt issuance | 1,398 | 1,453 | |||||||||
| Uncertain tax positions | 2,542 | 2,158 | |||||||||
| Other | 1,752 | 1,727 | |||||||||
| Total DTLs | 88,902 | 86,584 | |||||||||
| Less valuation allowance | 1,088 | 1,172 | |||||||||
| Net DTA | $ | 75,861 | $ | 96,982 | |||||||
At December 31, 2025, United had:
•$35.4 million of state net operating loss carryforwards subject to annual limitation under Internal Revenue Code Section 382 that begin to expire in 2026, if not previously utilized.
•$27.5 million of state net operating loss carryforwards that begin to expire in 2026, if not previously utilized.
•$41.7 million in federal net operating loss carryforwards subject to annual limitation under IRC Section 382 that begin to expire in 2027, if not previously utilized.
•$5.50 million of state tax credits that begin to expire in 2027, if not previously utilized.
Management assesses the valuation allowance recorded against DTAs at each reporting period. The determination of whether a valuation allowance for DTAs is appropriate is subject to considerable judgment and requires an evaluation of all the positive and negative evidence. ASC 740 requires that companies assess whether a valuation allowance should be established against their DTAs based on the consideration of all available evidence using a “more likely than not” standard.
At December 31, 2025 and 2024, based on the assessment of all the positive and negative evidence, management concluded that it is more likely than not that nearly all of the net DTA will be realized based upon future taxable income. The valuation allowance of $1.09 million and $1.17 million, respectively, was related to acquired state net operating losses, which are subject to limitations and are therefore expected to expire unused.
The valuation allowance could fluctuate in future periods based on the assessment of the positive and negative evidence. Management’s conclusion at December 31, 2025 that it was more likely than not that the net DTA of $75.9 million will be realized is based on management’s estimate of future taxable income. Management’s estimate of future taxable income is based on internal forecasts which consider historical performance, various internal estimates and assumptions, as well as certain external data all of which management believes to be reasonable although inherently subject to significant judgment. If actual results differ significantly from the current estimates of future taxable income, even if caused by adverse macro-economic conditions, the valuation allowance may need to be increased for some or all of the net DTA.
A reconciliation of the beginning and ending unrecognized tax benefit related to uncertain tax positions is as follows for the years indicated:
(in thousands) | 2025 | 2024 | 2023 | ||||||||||||||
| Balance at beginning of year | $ | 3,535 | $ | 2,956 | $ | 2,848 | |||||||||||
| Additions based on tax positions related to the current year | 1,272 | 999 | 939 | ||||||||||||||
| Decreases resulting from a lapse in the applicable statute of limitations | (582) | (420) | (831) | ||||||||||||||
| Balance at end of year | $ | 4,225 | $ | 3,535 | $ | 2,956 | |||||||||||
Approximately $3.34 million of the unrecognized tax benefit at December 31, 2025 would increase income from continuing operations, and thus affect United’s effective tax rate, if ultimately recognized into income.
United recognizes interest and penalties relative to unrecognized tax benefits in income tax expense. No amounts related to unrecognized tax benefits were accrued or expensed at December 31, 2025 or 2024.
United and its subsidiaries file a consolidated U.S. federal income tax return, as well as various state returns in the states where it operates. United’s federal and state income tax returns are generally no longer subject to examination by taxing authorities for years before 2022.
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.