United Community Banks Reports Q3 Operating EPS of $0.77

United Community Banks (NYSE: UCB ) reported third-quarter financial results on Tuesday. The transcript from the company's third-quarter earnings call has been provided below. This transcript is brought to you APIs. For real-time access to our entire catalog, please visit for a consultation.

View the webcast at Summary United Community Banks reported third-quarter operating earnings of $0.77 per share, up from $0.71 in the previous quarter, supported by strong core loan growth of 10% annualized. The company executed strategic initiatives, including the sale of Navitas, to de-risk the balance sheet and enhance profitability, with a stable net interest margin of 3.68% and increased net interest revenue. Looking forward, the company anticipates earnings per share of $0.80 to $0.83 in the fourth quarter, driven by sustained growth in loans and deposits, and plans to expand its net interest margin to the mid-370s.

Operationally, the loan-to-deposit ratio of 77% provides liquidity for growth, while capital ratios remain strong, allowing for potential future acquisitions and share repurchases. Management highlighted the impact of new hires on loan production, robust deposit growth, and the strategic repositioning of the securities portfolio to enhance yields in a higher rate environment. Full Transcript OPERATOR Good morning and welcome to United Community Banks' third quarter 2026 earnings call. Hosting our call today are Chairman and Chief Executive Officer Lynn Harton, Chief Financial Officer Tom Speer, Chief Banking Officer Rich Bradshaw, and Chief Risk Officer Rob Edwards.

United's presentation today includes references to operating earnings, pre-tax, pre-credit earnings, and other non-GAAP financial information. For these non-GAAP financial measures, United has provided a reconciliation to the corresponding GAAP financial measure in the Financial Highlights section of the earnings release, as well as at the end of the investor presentation. Both are included on the website at ucbi.com. Copies of the third quarter's earnings release and investor presentation were filed this morning on Form 8-K with the SEC, and a replay of this call will be available in the Investor Relations section of the company's website at ucbi.com.

Please be aware that during this call forward-looking statements may be made by representatives of United. Any forward-looking statements should be considered in light of risks and uncertainties described on pages 5 and 6 of the company's 2019—2025 Form 10-K, as well as other information provided by the company in its filings with the SEC and included on its website. At this time, I'll turn the call over to Lynn. Lynn Harton (Chairman and Chief Executive Officer) Good morning and thank you for joining us today.

Many of you joined our call on September 8th where we discussed the completion of several important initiatives that put United in a stronger financial position and made the franchise more resilient. Our goals were to de-risk the balance sheet, to enhance our profitability, and to position the company for future growth. We're glad to be able to give you details today on the preliminary results of those actions and let you see more clearly the improvements we anticipate as we head into the fourth quarter in 2027. For the quarter, our operating earnings reached $0.77 a share, a significant improvement from the $0.71 recorded in the quarter.

One of the drivers included strong core loan growth of 10% annualized, of which nearly 40% was driven by our new hires discussed on September 8th. For comparison, our core loan growth ex Navitas was 6% in the second quarter and 4% for the year of 2025. We also had solid core deposit growth of 8% annualized. Non-interest-bearing deposits were stable as a percentage of the total, and deposit costs increased very modestly despite the upward rate environment.

Even without Navitas and their higher-yielding loan portfolio for the last month of the quarter, our margin was stable at 3.68%, and net interest revenue increased by $10 million over the second quarter. Credit continues to be very strong, and net charge-offs were only 9 basis points, consistent with the 9 basis points in the core bank last quarter. The sale of Navitas significantly de-risked the company from a credit perspective. Looking forward, we're well positioned to grow our earnings and returns.

Our loan-to-deposit ratio is 77%, providing liquidity to deploy into customer relationship lending opportunities. Our capital ratios remain strong, giving us flexibility to support growth from new hires as well as optionality to return capital to shareholders and welcome additional quality in-footprint banks into the company when appropriate and available. I'd like to now turn it over to Tom Speer, our new CFO, for more detail on the quarter. Tom Speer (Chief Financial Officer) Thank you, Lynn.

I'm honored to have the opportunity to join this outstanding team at an important point in United Community Banks' evolution. The third quarter was an important one for United Community Banks as the strategic actions that were executed over the past few months position us very well to generate sustained and profitable growth moving forward. Starting with loan growth on page six, we were pleased this quarter with the strong core loan growth delivered by the bank. Excluding the sale of Navitas and the addition of Peach State, core loan growth was 10% annualized, the strongest we've seen since 2022.

Production was robust, exceeding $1 billion for the second quarter, reflecting the continued benefits from our investments in hiring revenue producers. Production from new hires within the last year increased to approximately $170 million in the third quarter, contributing 40% of United Community Banks' funded loan growth for the quarter. Following the Peach State acquisition, which was effective August 1, and the Navitas sale effective September 1, we wanted to provide an update on the go-forward loan portfolio. The quarterly reported loan yield was 6.06%.

That compares to a loan yield of 5.83% in September, which provides a good baseline heading into the fourth quarter. Approximately half of the loan portfolio is floating-rate, including the impact of swaps; higher short-term rates and the continued benefit from fixed asset repricing will serve to support loan yields. Turning to deposits, we generated deposit growth of $1.2 billion in the quarter, which includes the acquisition of Peach State. Excluding the impact of Peach State, deposit growth was solid at $473 million, or 8% annualized.

Growth was particularly strong in money market, which was up $366 million excluding acquired balances. Core DDA growth was solid as well at $111 million, or 6.9% annualized. Time deposits remained relatively flat with an increase of $13 million, or 1.4% annualized. Public funds ended the quarter at $2.8 billion, stable versus the second quarter.

Public funds typically have seasonal inflows in the fourth quarter of approximately $325 to $375 million, with meaningful outflows beginning late in the first quarter and returning to normalized levels by the end of the second quarter. For the quarter, average total deposit costs were 1.69% and interest-bearing costs were 2.31%, up 3 and 4 basis points respectively. As of the end of September, total deposit costs were 1.71%. Approximately 15% of total deposits are indexed and have already realized the impact of the Fed rate hike in September.

United Community Banks' quarter-end loan to core deposit ratio was 77%, which gives us strategic flexibility as we grow both sides of the balance sheet and allows us to be more deliberate with respect to deposit pricing in the current environment. Moving to the investment portfolio, following the restructuring executed in the third quarter, we have added information related to our securities portfolio on slide 8. More details related to the Navitas sale and restructuring are available in the presentations published on June 12 and September 8. As a reminder, last month we reclassified $2.2 billion in held-to-maturity securities to available-for-sale designation.

We then sold $2.5 billion of long-dated securities that were yielding approximately 2.2%. At that time we were expecting to redeploy over $3 billion into securities yielding approximately 4.5% with a duration of around two years. With the increase in rates in September, our average reinvestment rate was over 4.6% with the same expected duration of approximately two years. The securities yield for the quarter was 3.34%, up 37 basis points from the prior quarter.

At the end of the quarter the portfolio was yielding approximately 4.2%, which represents a good launch point for forward projections. Our portfolio is highly liquid and well positioned for a higher-for-longer rate environment. Quarterly cash flows are expected to average around $340 million in 2027, up more than 40% from pre-restructuring levels, and floating-rate securities account for approximately 45% of the total portfolio.

Moving to slide 9, net interest revenue increased $10.3 million from the second quarter, primarily driven by the Peach State acquisition and core growth, the net effect of the portfolio restructuring, higher interest rates, and day count, partially offset by the impact of the Navitas sale. Our net interest margin of 3.68% was stable in the third quarter as higher securities yields following the repositioning largely offset lower loan yields following the Navitas sale. Following the securities repositioning and Navitas sale, United Community Banks' asset sensitivity has meaningfully increased.

We are well positioned for a higher-for-longer rate environment as approximately half of our loans and securities are floating-rate. Additionally, repricing of our back book of fixed-rate assets will continue to be a tailwind over time. Moving to page 10, GAAP noninterest income decreased by $302 million from the second quarter, reflecting the impact of both the gain on the sale of Navitas and the loss on the investment portfolio repositioning. On an operating basis, noninterest income was $40.7 million for the quarter, up slightly from prior quarters, primarily driven by higher BOLI gains and service charges.

Mortgage fees increased largely driven by an increase in MSR valuation, which was mostly offset in the hedge included in the other noninterest income line item. On page 11 we highlight noninterest expense for the quarter. The quarter included two months of expense related to Peach State and two months of expense related to Navitas. Expenses in the fourth quarter will include a full quarter with Peach State and without Navitas.

We were pleased that the bank's operating efficiency ratio improved to 53.1% in the quarter and was stable year over year. Moving to page 12, credit quality for the quarter was very strong. Net charge-offs benefited from the sale of Navitas, which has historically contributed approximately half of the bank's net charge-offs. Net charge-offs for the quarter were $4 million, or 9 basis points of average loans, improved from $7.9 million in the second quarter.

Nonperforming assets and past dues were both down quarter over quarter and remained at benign levels. On slide 13, the allowance for credit losses increased to $200 million, up from $188 million in the prior quarter, primarily driven by robust loan growth in the third quarter. The provision also included approximately $800,000 to establish the Peach State initial unfunded reserve. The ACL coverage ratio, inclusive of unfunded commitments, was 1.05%.

Moving to page 14, United Community Banks' liquidity and capital positions remain robust following the strategic actions taken in the third quarter. Our solid CET1 and TCE ratios provide us with strategic flexibility moving forward. Our TCE ratio is 9% and our CET1 ratio is 13%, both down from the second quarter primarily due to recent strategic actions, but remain strong relative to peers. Our relatively low loan-to-deposit ratio is also a continued source of strength allowing capacity for future organic growth.

On slide 15 we note the previously announced repurchase of approximately $50 million of common shares in the third quarter, which effectively converted the Peach State deal into an all-cash transaction. Additionally, in the third quarter, United Community Banks' board authorized a $100 million increase to our existing share repurchase authorization through year-end 2027, bringing the total outstanding authorization to $113 million. Also in the third quarter, we increased our common dividend to $0.26 per share, a 4% increase year over year.

Tangible book value came in largely as expected, reflecting the impacts of the various strategic actions taken in the quarter as well as higher interest rates. Moving to the outlook for the fourth quarter on page 16, while United Community Banks does not typically provide detailed forward guidance, we felt that it was important to help provide some clarity metrics given all the movement in the third quarter. The completion of the strategic actions executed in the third quarter will improve profitability and earnings, in addition to de-risking the balance sheet.

Earnings per share in the fourth quarter are expected to increase to a range of $0.80 to $0.83 per share, driven by solid growth in pre-provision net revenue. Net interest revenue growth will be driven by continued growth in loans and deposits along with a full quarter's benefit of the securities portfolio restructuring, Peach State Bank, and the benefits from higher interest rates on our asset-sensitive position. We expect net interest margin to expand to the mid-370s.

Our effective tax rate is expected to normalize to the high 22% area in the fourth quarter following an increase in the third quarter due to the specific tax rates applicable to the Navitas sale and the investment securities losses, as well as a higher core effective tax rate resulting from higher estimated pre-tax income and certain discrete items recognized in the quarter. We are entering the fourth quarter with strong fundamentals and momentum as we continue executing on our strategy as a simpler bank positioned for growth in some of the nation's best markets. Our asset sensitivity and strong capital and liquidity position us well for the current environment.

I'm very proud to have joined this outstanding team at an important inflection point for the company. I'll now turn the call back over to Lynn. Lynn Harton (Chairman and Chief Executive Officer) Thank you, Tom. I'll end by repeating the core goals of the actions we completed last quarter.

We've simplified the business and reduced credit risk by exiting Navitas. We're investing in the core franchise, strengthening organic growth, and remaining disciplined around tuck-in acquisitions and capital deployment. And we've repositioned the balance sheet, reducing interest rate risk and creating a more resilient capital and earnings profile. We're excited about our momentum and outlook as we head into the end of the year.

I'll now open the floor for questions. OPERATOR And at this time we'll begin the question-and-answer session. To ask a question, you may press star and then one using a touch-tone telephone. To withdraw your question, you may press star and then two.

If you are using a speakerphone, we do ask that you please pick up the handset before pressing the keys to ensure the best sound quality. Again, that is star and then one to ask a question. Our first question today comes from Russell Guenther from Stephens. Please go ahead with your question.

Russell Guenther (Analyst) Hey, good morning, guys. I wanted to start on the strong organic growth results this quarter. It would be helpful to get a sense for what type of contribution the new commercial lenders are putting up so far. And then with the recent backup in rates and likelihood we get some additional Fed hikes, is there an absolute level in rates where you would expect to see some pipeline fallout that puts your kind of high-single-digit organic growth rate at risk?

Rich Bradshaw (President and Chief Banking Officer) Russell, good morning. This is Rich Bradshaw. I'll tackle that one. So our new hires represented 38% of the production in Q3.

Also wanted to point out because I'm very proud, that was our second quarter in a row of a billion dollars of production. So I feel like the machine is working. In terms of interest rate hikes and where you see that kind of over/under, I'd say it's probably about 100 basis points, and the first place you're going to see that is CRE. So you would expect that construction loans will slow down.

Yesterday I happened to meet with Lisa Shelnutt, who's our player-coach in charge of CRE, and she said they were as busy as they've ever been. So I was actually a tiny bit surprised by that, so I found that encouraging. But again, if there's 100 basis points, the math starts not working as well in terms of the deals penciling out. But we do have a lot of construction loans that we did, so we'd have the continuing draws from that.

And then, because of a possible raising rate environment, our customers are starting to ask about our Mini-Perm program because capital markets slow down. So I do expect that we will see some pickup in the Mini-Perm, and those will be two- or three-year loans as the owners are waiting for the capital markets to get a little bit better for their end. Russell Guenther (Analyst) Got it. Okay, very helpful, thank you.

And then my second question is on the margin. So appreciate all the color in terms of where we are going to jump off next quarter. As you fleshed out the increased asset sensitivity here, it would be helpful to get a sense for how you think about incremental rate hikes and what that means to the NIM, and particularly what deposit beta assumptions underpin that.