United Community Banks, Inc. (UCB) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary indicates mixed signals. While there are strong points such as stable CET1 and TCE ratios, and a positive outlook for loan growth and share repurchases, there are concerns about increased operating expenses and net charge-offs. The Q&A reveals management's cautious stance on M&A and uncertainty in fixed-rate loan retention. The lack of clear guidance on asset repricing and M&A further tempers enthusiasm. Overall, the sentiment is balanced, leading to a neutral stock price prediction.
Key Financial Performance
Revenue Growth 11% year-over-year increase in Q4 2025, driven by margin expansion and 4.4% annualized loan growth.
Operating Earnings Per Share (EPS) $0.71 for Q4 2025, a 13% year-over-year improvement, attributed to overall strong performance.
Return on Assets (ROA) 1.22% for Q4 2025, reflecting stable asset performance.
Return on Tangible Common Equity (ROTCE) 13.3% for Q4 2025, indicating strong shareholder returns.
Annual Operating Earnings Per Share (EPS) $2.71 for 2025, an 18% increase from $2.30 in 2024, driven by improvements in key performance ratios.
Net Interest Margin (NIM) 3.62% in Q4 2025, up 4 basis points from the previous quarter, due to lower cost of funds and improved loan-to-deposit ratio.
Efficiency Ratio Improved by 264 basis points in 2025, reflecting better operational efficiency.
Credit Losses Declined in 2025, contributing to improved financial performance.
Annual Revenue Exceeded $1 billion in 2025, with 12% year-over-year growth, supported by retail and small business lending efforts.
Deposits Grew by 1% in 2025, with a cost of deposits improving by 21 basis points to 1.76% in Q4 2025.
Loan Growth 4.4% annualized growth in Q4 2025, primarily in C&I and HELOC categories.
Loan-to-Deposit Ratio Increased to 82% in Q4 2025, up from 80% in the previous quarter, indicating better utilization of deposits.
Common Equity Tier 1 (CET1) Ratio 13.4% in Q4 2025, remaining stable and strong.
Tangible Common Equity (TCE) Increased by 21 basis points to 9.92% in Q4 2025, reflecting improved capital strength.
Noninterest Income $40.5 million in Q4 2025, down $2.8 million from the previous quarter due to seasonality in mortgage business.
Operating Expenses $151.4 million in Q4 2025, up $4 million due to higher group health insurance costs.
Net Charge-Offs 34 basis points in Q4 2025, an increase due to charge-offs on 2 C&I loans, partially offset by specific reserves.
Allowance for Credit Losses 1.16% in Q4 2025, slightly down due to the release of a special reserve for Hurricane Helene.
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Operating Highlights
Retail and Small Business Lending: Both lines surpassed $1 billion in annual production for the first time.
Navitas Equipment Finance: Crossed $1 billion in originations for the first time.
Treasury Management: Expanded product set to grow the commercial line of business.
Geographic Expansion: Successful conversion of American National Bank in Fort Lauderdale to United Systems and brand, expanding presence in this market.
New Offices: Opened a new office in Cary, North Carolina, and began work on new offices in South Miami and Winston-Salem, North Carolina.
Florida Private Banking Model: Committed to expanding this model to the rest of the footprint.
Revenue Growth: Achieved 11% year-over-year revenue growth in Q4 and 12% for the year, surpassing $1 billion in revenue.
Efficiency Ratio: Improved by 264 basis points.
Credit Losses: Declined year-over-year.
Return on Tangible Common Equity: Increased to 13.3% for the year.
Tangible Book Value Per Share: Grew by 11% year-over-year.
Capital Plan Execution: Increased dividend to an annualized rate of $1 per share, repurchased 1 million shares at an average price below $30 per share, and redeemed preferred stock to enhance returns to common shareholders.
Interest Rate Risk Management: Reduced securities duration and upgraded talent and systems to manage interest rate risk and deposit pricing.
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Risk or Challenges
Deposit Balances: Average deposit balances were down slightly for the quarter, with a greater decline in end-of-period balances due to seasonality and strategic rate reductions on high-cost single-service customers.
Loan Charge-offs: Net charge-offs increased to 34 basis points in the quarter, driven by charge-offs on two C&I loans, including $5 million already reserved for.
Credit Loss Provision: Loan loss provision was $13.7 million, including a release of $1.9 million from a special reserve, indicating potential credit quality concerns.
Cost of Deposits: Cost of deposits improved to 1.76%, but the cumulative total deposit beta increased to 40%, reflecting potential pressure on deposit costs.
Noninterest Income: Noninterest income decreased by $2.8 million compared to the previous quarter, driven by seasonal mortgage softness and other factors.
Operating Expenses: Operating expenses increased by $4 million, primarily due to $1.5 million in higher group health insurance costs.
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Guidance & Outlook
Net Interest Margin (NIM): Expected to increase by 2 to 4 basis points in the first quarter of 2026, driven by repricing of back book and mix change towards loans and away from securities.
Loan Portfolio Growth: Focus on growth in C&I and HELOC categories, with continued annualized growth rate of 4.4%.
Deposit Strategy: Repricing $1.4 billion of CDs maturing in the first quarter of 2026 at 3.32%.
Economic Outlook: Optimistic for continued growth and improvement in 2026, supported by strong economic conditions in the company's markets.
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Shareholder Return Plan
Dividend Increase: Increased dividend in the third quarter to an annualized rate of $1 per share.
Share Repurchase: Repurchased 1 million shares of stock in the fourth quarter at an average price below $30 per share.
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Key Q&A
Q:How should we think about the overall balance sheet growth in '26? Should we expect the favorable average earning asset remix dynamic to continue?
A:Jefferson Harralson stated that balance sheet growth will depend on deposit growth, which is modeled to be a couple of hundred basis points below loan growth. He expects a continuation towards a higher loan-to-deposit ratio throughout 2026.
Q:What are the anticipated asset class and geographic loan leaders for the year ahead? How is Navitas expected to contribute to the overall loan mix?
A:Richard Bradshaw highlighted that Florida led in production, C&I grew by 12%, owner-occupied CRE performed well, and Navitas had a strong quarter. Retail crossed the $1 billion mark, and SBA had its largest quarter in commitments. The focus remains on C&I, owner-occupied CRE, and HELOCs.
Q:Is there a mindset change around the opportunistic nature of share repurchases moving forward?
A:Herbert Harton indicated that they intend to be more assertive on buybacks in 2026 due to strong capital build, great credit quality, and limited M&A opportunities. He believes buybacks offer good value and earnback.
Q:Can you provide insights into retention rates for CDs and fixed-rate loans as they reprice or mature?
A:Jefferson Harralson mentioned that CD retention rates are around 90%, higher than the industry average. For fixed-rate loans, he did not have specific retention data but noted that new fixed-rate loans are being issued at higher rates than the existing portfolio.
Q:Can you discuss the competitive landscape and expense outlook, particularly in light of hiring opportunities?
A:Herbert Harton and Richard Bradshaw noted that competition remains strong but manageable, with a focus on client service and culture. Expense growth is targeted at 3% to 3.5%, with no significant hires or lift-outs budgeted.
Q:What is the outlook for M&A opportunities in 2026?
A:Herbert Harton stated that they are not looking to expand their footprint and prefer smaller, high-quality deals. There are fewer than 10 potential targets in their markets, and most are not currently interested in selling.
Q:What are the expectations for expenses in the first quarter of 2026?
A:Jefferson Harralson expects expenses to be flat in Q1 2026, with some seasonality factors like FICA restart impacting costs. The Q4 2025 expenses included one-time items like group health catch-up and higher incentives.
Q:Can you provide details on the two specific C&I credits charged off during the quarter?
A:Robert Edwards explained that one was a $14 million franchise loan with a $6 million charge-off due to store closures, and the other was a $4 million SBA loan with a documentation error, leading to a decision not to pursue the guarantee.
Q:What is the fee income outlook for 2026, particularly for Navitas and SBA?
A:Jefferson Harralson and Richard Bradshaw expect strong growth in wealth management, treasury management, and customer swap businesses. SBA fees are expected to remain consistent or improve, while Navitas is likely to sell more loans to maintain its portfolio share under 10%.
Q:Are there any concerns about tariffs impacting credit quality?
A:Robert Edwards stated that there are no significant impacts from tariffs on asset quality, as customers are managing through the challenges effectively.
Q:What is the outlook for loan growth in 2026?
A:Richard Bradshaw expects Q1 2026 loan growth to be similar to Q4 2025, with less production but also fewer payoff headwinds. The overall outlook for 2026 is positive due to strong momentum.
Q:Review of Unclear Management Responses
A:Management avoided providing specific retention data for fixed-rate loans and did not detail the breakdown of the $1.4 billion in assets repricing at 4.90% between securities and loans. Additionally, they did not provide a clear outlook on M&A opportunities beyond general preferences and ongoing conversations.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
American Banker
American Bankers
Association Community
Award Financial
Bank Fort
Banker bank
Bankers Association
CDs Page
CI HELOC
CI loan
Carolina expansion
Carolina work
Financial Literacy
Literacy month
NIM
North Carolina
Page income
category
decline
due
end period
focus
interest rate
line
office
quality Page
reason increase
return asset
return equity
seasonality
share improvement
share stock
talent
treasury
UCB Transcript
United Community Banks, Inc. (UCB) Q4 2025 Earnings Call Transcript
Unknown1-14
The earnings call summary indicates mixed signals. While there are strong points such as stable CET1 and TCE ratios, and a positive outlook for loan growth and share repurchases, there are concerns about increased operating expenses and net charge-offs. The Q&A reveals management's cautious stance on M&A and uncertainty in fixed-rate loan retention. The lack of clear guidance on asset repricing and M&A further tempers enthusiasm. Overall, the sentiment is balanced, leading to a neutral stock price prediction.
United Community Banks, Inc. (UCB) Q3 2025 Earnings Call Transcript
Positive10-22
The earnings call reveals strong financial performance, with loan growth, improved net interest margin, and increased noninterest income. The company maintains a solid capital position and an optimistic market outlook. Despite some uncertainties in the investment portfolio, the positive guidance on profitability, operating leverage, and capital deployment priorities, including a recent dividend increase, support a positive sentiment. The Q&A section further reinforces confidence in loan growth and expense management. Overall, the positive elements outweigh any concerns, suggesting a likely stock price increase of 2% to 8% over the next two weeks.
United Community Banks, Inc. (UCB) Q2 2025 Earnings Call Transcript
Unknown7-23
The earnings call reflects a mixed sentiment. Financial performance shows positive growth in deposits and loans, and strong capital ratios. However, the lack of active stock buybacks and vague responses on M&A and securities restructuring create uncertainties. The Q&A indicates optimism in loan growth and recruitment but also highlights management's cautious stance on stock buybacks and M&A. Overall, the positive financial metrics are offset by uncertainties in strategic initiatives, leading to a neutral sentiment.
Earnings call transcript: United Community Banks Q1 2025 earnings beat forecast
Positive4-22
The earnings call highlights strong financial performance with increased operating earnings, deposit growth, and a solid CET1 ratio. The bank's share repurchase plan and positive fee income outlook further support a positive sentiment. Despite economic uncertainties and competitive pressures, management's optimistic guidance and proactive measures in handling risks suggest a positive outlook. The Q&A section reinforces this with expectations of margin improvement and stable loan pipelines. Overall, the strong financial metrics and strategic focus on shareholder returns indicate a likely positive stock price reaction.
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