United Community Banks, Inc. Q2 FY2025 earnings call

• Earnings growth: Operating earnings per share up 14% y-o-y, net interest margin expanded. - Deposit performance: Deposits grew with American National deal, cost of deposits lowered. - Loan performance: Loan growth 4.2% annualized, pipelines strong. - Credit quality: Net charge-offs 18 basis points, ex Navitas 8 basis points, nonaccruals and past dues improved. - Acquisition: Successful closing of American National Bank acquisition, integrated systems and branding. - Expense control: Efficiency ratio improved to 54.8%.

Operating earnings per share for the quarter was $0.66, an increase of 14% year-over-year. Net interest margin expanded to 350 basis points, an improvement of 14 basis points over last quarter. Deposits saw a $205 million increase, with $64 million growth annualized excluding the American National deal and public fund seasonality. Loan growth was 4.2% annualized. Expense growth was well controlled, resulting in an efficiency ratio of 54.8%, an improvement of 222 basis points compared to last year. Deposit cost was 2.01%, with deposit beta in the high 30% range. Loan-to-deposit ratio increased slightly to 79% with acquisition and loan growth.

• Expect Q3 loan growth around 6%. - Targeting 5 basis points margin expansion in Q3, focusing on deposit costs and loan mix. - Continued optimism about organic growth, M&A, dividends, and buybacks within excess capital.

• Uncertainties in tariff effects and yield curve direction. - Potential impact of interest rate changes on Navitas loan margins and CECL modeling.

Q: Just wanted to delve into the loan growth, 4.2% annualized this quarter. Was there any sort of pay downs? And then just more broadly, can you talk about some of your hiring initiatives?

A: Yes, there were some pay downs. Expect Q3 to be around 6% growth. Focus on top talent, David Nast retired, Jason Phillippe hired with 2 additional CRMs in Northern Alabama.

Q: It looks like the core margin was up about 12 basis points Q-on-Q. Just heard Rich talk about a little bit better loan growth in the third quarter. I think you mentioned beta is kind of in the high 30% range. If I caught that, I think that's a little bit higher than what you'd expected previously. So as we put all that together, it seems like there should be continued core margin expansion as we think about the next quarter or 2. Can you just walk us through some of the puts and takes?

A: Do think there's opportunity for more margin expansion in Q3, targeting ~5 basis points. Focus on deposit costs and loan mix change towards loans.

Q: We're active in the buyback this quarter. Just curious, your openness to continue even though the stock has kind of hold -- has improved from levels where you were buying back.

A: At this price range, earn-back is longer than target. Not active currently but have $86 million authorization left.

Q: I wanted to follow up on the loan growth conversation quickly. Just if we could put a finer point on sort of where commercial pipeline stand today versus linked quarter and bigger picture, any sentiment shift you're getting from your commercial borrowing?

A: Pipeline bigger than last quarter, similar to Q1. Customers feel optimistic, mood positive with clients due to tariff comfort and tax bill.

Q: I just wanted to circle back on Navitas from the standpoint of kind of the gain on sale there. Is there a scenario that margin would get better or worse as interest rates play out?

A: Margin mostly dependent on treasury yield in 3-4 year range. Rates up could tighten margin, rates down could widen it.

Q: I just wanted to follow back around on kind of some of the thoughts around hiring. You put that slide, Slide 19, I think it is where you show kind of your deposit market share and some of the fastest-growing MSAs in the Southeast. So is it fair to think about the names -- those cities that are higher ranked on that list and maybe where you guys have a lower deposit share currently as being areas of greater focus for you guys? Or is it more about, hey, continuing to get density where we already are to leverage the franchise you have in those markets?

A: Focus on top talent, looking at markets with lower deposit share and major metros, but talent must be present.