United Community Banks, Inc. Q3 FY2025 earnings call

• The third quarter was strong with revenue growth, margin improvement, and loan growth. Provision for credit losses declined and expenses had controlled growth.
• All states had positive loan growth, treasury and bankers worked together to reduce deposit costs and grow deposits.
• Capital was managed with redemption of preferred stock, debt paydown, and share repurchases. Tangible book value grew 10%.
• High employee engagement as reflected in a 92nd percentile ranking in the employee survey.

Revenue grew over $16 million compared to the second quarter, driven by an 8 basis point margin improvement and 5.4% annualized loan growth. Provision for credit losses declined by ~$4 million, with $2.6 million released from the Hurricane Helene special reserve. Expenses grew $2.9 million over last quarter or $4.3 million on an operating basis. Earnings per share on an operating basis were $0.75 per share, a 32% year-over-year improvement, with ROA at 1.33% and ROE at 13.6%. Deposit growth: Excluding seasonal outflows, grew $137 million (2.6% annualized), DDA a key part, cost of deposits at 1.97% with expectation of deposit beta reaching 40% range. Loan portfolio: 5.4% annualized growth, C&I, Equipment Finance, and HELOC driving growth. Balance sheet: No wholesale borrowings, limited brokered deposits, loan-to-deposit ratio 80%, CET1 ratio 13.4%, redeemed $88 million preferred stock. Net interest margin: Increased 8 basis points to 3.58%, expected flat to down 2 basis points in Q4. Non-interest income: $43.2 million, up $8.5 million, with BOLI gain, MSR write-up, equity investment gains. Operating expenses: Up $4.3 million, mainly due to higher variable compensation. Credit quality: Net charge-offs 16 basis points, NPAs and past dues up but still strong, allowance for credit losses $7.9 million with $2.6 million release from Hurricane Helene reserve.

• Expect similar loan growth in Q4, possibly slightly better. - Deposit beta expected to reach 40% range. - Net interest margin expected to be flat to down 2 basis points in Q4. - Seeing more interest from sellers in M&A, more optimistic than previous quarters.

• Isolated cracks in the broader credit environment, especially in private credit, but limited impact on the bank due to cautious lending to non-depository financial institutions.

Q: Stephen Scouten asked about loan growth trends, senior care runoff, and HELOC growth.

A: Rich Bradshaw said loan growth was balanced across geographies, C&I a key driver, HELOC due to reorg and campaign.

Q: Gary Tanner asked about capital deployment and fee income.

A: Jefferson Harralson said capital priorities are organic growth, dividend, M&A, then buyback; fee income had better volume but nothing unusual.

Q: Michael Rose asked about expenses, hiring, and M&A.

A: Jefferson Harralson said expenses to be flat in Q4 with 3%-4% growth long term; Rich Bradshaw said hiring focused on culture. Lynn Harton said more sellers raising hands in M&A.

Q: Russell Gunther asked about balance sheet growth and securities portfolio.

A: Jefferson Harralson said securities portfolio likely flat to slightly down near term.

Q: Catherine Mealor asked about credit quality and NIM outlook.

A: Rob Edwards said NPA movement normal, Jefferson Harralson said NIM expected to have operating leverage in 2026.

Q: Kyle Guerman asked about core fee income.

A: Jefferson Harralson said fee income strong with some items non-recurring.