United Community Banks Earnings Call Highlights Record Growth

United Community Banks ((UCB)) has held its Q4 earnings call. Read on for the main highlights of the call.

United Community Banks Delivers Record Revenue Amid Mixed Credit Signals in Earnings Call

United Community Banks’ latest earnings call struck an overall upbeat tone, underscoring record revenue, robust earnings growth and improving margins, while acknowledging some pressure points in credit costs, expenses and deposits. Management highlighted strong capital levels and increased capital returns to shareholders, framed operating hiccups—like higher charge-offs tied to just two commercial credits and seasonal deposit and fee softness—as contained rather than systemic. Overall, executives projected confidence in the bank’s earnings power and asset quality heading into 2026.

Record Revenue Growth Caps a Strong Year

Revenue momentum was a central theme. Fourth-quarter revenue rose 11% year over year, and full-year revenue surpassed $1 billion for the first time, up 12% from the prior year. Management emphasized that this represented record annual revenue for United Community Banks, reflecting both balance sheet growth and improved pricing. The revenue gains provided the foundation for better profitability metrics and supported the company’s decision to step up capital returns.

EPS and Profitability Metrics Move Higher

Profitability improved meaningfully across 2025. Operating earnings per share reached $0.71 in Q4, a 13% increase over the prior-year quarter, while full-year operating EPS climbed 18%, from $2.30 to $2.71. Return on assets in the fourth quarter came in at 1.22%, and return on tangible common equity reached a healthy 13.3%. Management linked these gains to both revenue growth and ongoing efficiency improvements, noting that the current profitability profile gives the bank more flexibility in how it allocates capital.

Margin Expansion and Better Efficiency

Net interest margin (NIM) continued to expand, signaling improved earnings power. Q4 NIM rose to 3.62%, up 4 basis points from the prior quarter, or 6 basis points excluding loan accretion. For the full year, margin improved by 23 basis points, aided by disciplined loan pricing and funding costs that are starting to peak. The efficiency ratio, a key measure of cost discipline, improved by 264 basis points year over year, indicating that revenue growth is outpacing expense growth over the longer horizon, even with some recent cost pressures.

Loan Growth and New Production Hit Milestones

Loan growth remained steady, with balances expanding at a 4.4% annualized pace in the quarter. More notable was the bank’s production performance: both retail and small business lending surpassed $1 billion in annual originations for the first time, underscoring broad-based demand and strong sales execution. Navitas, the bank’s equipment finance arm, also crossed $1 billion in annual originations for the first time, further diversifying loan growth across products and customer segments.

Capital Strength and Shareholder-Friendly Moves

The company highlighted a robust capital position alongside more aggressive capital return. In Q4, United repurchased 1 million shares at an average price below $30 and pointed to its earlier decision to raise the dividend to an annualized $1 per share. Management also redeemed preferred stock, simplifying the capital stack. Regulatory capital remains solid, with a CET1 ratio of 13.4%, while tangible common equity ticked up 21 basis points to 9.92%. These levels provide room for continued buybacks and organic growth without stretching the balance sheet.

Funding Mix, Deposit Costs and Balance Sheet Shifts

On the liability side, the loan-to-deposit ratio rose to 82%, marking the third consecutive quarterly increase as loan growth outpaced deposits. Deposits grew just 1% for the year, but the bank made progress on funding costs: the cost of deposits improved by 21 basis points to 1.76% as the rate cycle stabilized. Cumulative deposit beta moved up to 40% from 37%, reflecting competitive pricing in prior quarters. Management characterized deposit trends as manageable and indicated that they are comfortable allowing the loan-to-deposit ratio to drift higher from current levels.

Spread Income Expansion and NIM Tailwinds Ahead

Spread income, a core driver of earnings, grew at a 7% annualized rate in the fourth quarter. Management expects modest but continuing NIM improvement in early 2026, driven by repricing dynamics on both assets and liabilities. Back-book loans are rolling off at lower yields, and certain funding sources are maturing at relatively high rates, supporting NIM expansion even if the broader rate environment remains stable. This setup underpins the bank’s view that net interest income can continue to grow without outsized balance sheet expansion.

Market Recognition and Business Development Momentum

The bank paired its financial results with a narrative of franchise strength and customer satisfaction. United was recognized by J.D. Power as #1 in retail client satisfaction in the Southeast for the 11th time, reinforcing its brand in core markets. It was also named a top bank to work for by American Banker for the ninth time and received an ABA Community Commitment Award, underscoring its cultural and community focus. On the growth front, the company expanded its footprint by converting American National Bank in Fort Lauderdale and opening a new office in Cary, North Carolina, supporting future deposit and loan growth in attractive markets.

Risk Management and Portfolio Positioning Steps

Management devoted time to risk management initiatives, particularly around interest rate risk. The securities portfolio’s duration has been reduced, which is designed to make earnings more resilient across different rate scenarios and minimize unrealized losses if rates move higher. The bank also upgraded its interest rate risk and deposit pricing systems and added talent to its risk management team. These steps suggest a proactive approach to balance sheet management as the industry navigates rate uncertainty and evolving regulatory scrutiny.

Fee Income Drivers and Growth Opportunities

Beyond spread income, United is leaning on fee businesses to diversify revenue. Wealth management and treasury management delivered solid growth, and management expects customer swaps and treasury services to be important sources of noninterest income in 2026. These areas tend to be less balance sheet-intensive than traditional lending, potentially lifting returns on capital over time and providing some insulation if loan growth slows.

Elevated Charge-Offs Tied to Two Commercial Credits

Credit quality remains broadly sound, but Q4 saw a notable spike in net charge-offs to 34 basis points, up from the prior quarter. Management attributed the increase largely to two specific commercial and industrial loans, which together added about $9 million to charge-offs. One was a $14 million franchise loan that produced a $6 million loss; the other was a $4 million owner-occupied SBA loan where the bank did not pursue the government guarantee. Executives framed these as idiosyncratic events rather than indicative of broader credit deterioration, noting that overall loss expectations remain modest.

Seasonally Softer Noninterest Income

Noninterest income came in at $40.5 million in Q4, down $2.8 million from the prior quarter, which had been unusually strong. The decline was driven primarily by seasonally weaker mortgage income. Management did not flag structural concerns in fee businesses and suggested that underlying growth drivers in areas like wealth and treasury should offset seasonal swings going forward.

Operating Expense Headwinds from Benefits and Incentives

Operating expenses increased to $151.4 million on an operating basis in the fourth quarter, up $4 million sequentially. The rise was attributed largely to higher group health insurance costs, which added roughly $1.5 million, and higher incentive compensation tied to record loan production. While these costs pressured the quarter’s efficiency, management framed them as either variable or one-off in nature and reiterated longer-term goals for measured expense growth relative to revenue.

Modest Deposit Growth and Seasonal End-of-Period Outflows

While the funding profile remains stable, deposit growth was modest at just 1% for the year, and quarter-end balances showed more pronounced declines. Management explained that average non-public deposits were down slightly, with end-of-period balances pressured by typical seasonal factors and deliberate rate reductions for higher-cost, single-service customers. The decision to let some price-sensitive deposits run off reflects a focus on profitability over raw deposit volume, though it does contribute to the rising loan-to-deposit ratio.

Slight Easing of Reserve Coverage

The allowance for credit losses shifted modestly lower in Q4. The bank recorded a $13.7 million provision, which included the release of the final $1.9 million reserve associated with Hurricane Helene. As a result, reserve coverage dipped slightly to 1.16% of loans. Despite the lower ratio, management expressed confidence that reserves remain adequate in light of their forward view of credit losses, pointing to stable underlying credit metrics outside the few problem credits highlighted.

Managing Navitas Growth and Concentration

Navitas, the equipment finance division, continues to be a high-growth engine, expanding at an 18% annualized pace in the quarter before loan sales and now representing 9.5% of total loans. Management is keenly aware of concentration risk and signaled plans to sell a larger share of Navitas originations going forward. The goal is to keep the Navitas portfolio at or below 10% of total loans, balancing the attractive yields and growth with prudent balance sheet and risk management.

Guidance: Targeted Growth, Margin Tailwinds and Stable Credit

Looking ahead to 2026, United Community Banks guided to measured growth and stable asset quality rather than aggressive expansion. Net interest margin is expected to rise by roughly 2–4 basis points in Q1, helped by about $1.4 billion of assets paying down near 4.90% and a similar amount of CDs maturing at around 3.32%, with strong expected CD retention. The bank highlighted roughly $6.0 billion of fixed-rate loans at 5.19%, with new fixed originations coming on near 6.45%, supporting ongoing NIM tailwinds. Loan growth is expected to outpace deposits by a few hundred basis points, pushing the loan-to-deposit ratio above the current 82%, though management stressed that capital and liquidity remain strong. Expense growth is targeted at about 3.0%–3.5% for the year, with Q1 operating expenses roughly flat, and further efficiency-ratio improvement is anticipated. The bank plans to be more assertive with share buybacks, building on the 1 million shares repurchased just below $30, and is modeling credit losses in the 20–25 basis point range for 2026, in line with a full-year 2025 loss rate of about 22 basis points.

In closing, United Community Banks’ earnings call painted a picture of a franchise delivering record revenue, rising earnings and improving margins, backed by strong capital and a growing, diversified loan book. While investors must weigh the uptick in charge-offs, modest deposit growth and higher operating expenses, management framed these as manageable within the context of solid core trends and conservative credit expectations. With modest NIM tailwinds, controlled expense growth and a more active capital return strategy, the bank entered 2026 projecting steady, if not spectacular, earnings growth and a disciplined approach to risk and balance sheet management.