United Community Banks, Inc.(UCB) - 2025 Q2 - Quarterly Results

Company Overview United Community Banks, Inc. is a leading regional bank in the Southeast, expanding its asset base and market presence through strategic acquisitions and a focus on customer satisfaction Corporate Profile and Strategy UCBI is a premier regional bank in the Southeast, expanding its $28.1 billion asset base through strategic acquisitions and a strong focus on customer satisfaction Key Financial Metrics | Metric | Value | | :--- | :--- | | Total Assets | $28.1 Billion | | Total Deposits | $24.0 Billion | | Total Loans | $18.9 Billion | | Assets Under Management (AUM) | $3.3 Billion | | CET1 RBC (preliminary) | 13.3% | | Quarterly Common Dividend | $0.24 | | Banking Offices | 200 | - The acquisition of ANB Holdings, Inc. closed on May 1, 2025, adding a metro-focused branch network in fast-growing MSAs, a technology-enabled equipment financing subsidiary (Navitas), and a national SBA business[10] - UCBI has received multiple industry awards, including 1 in Customer Satisfaction in the Southeast by J.D. Power in 2025, 5 awards for small business and middle market banking by Coalition Greenwich in 2025, and being named a Best Bank to Work For by American Banker for the eighth consecutive year in 2024[9] Q2 2025 Performance Highlights The company achieved strong Q2 2025 results, demonstrating significant year-over-year improvements in profitability and shareholder value Key Financial Metrics Q2 2025 saw strong financial performance with GAAP diluted EPS up 17% to $0.63 and operating EPS up 14% to $0.66, alongside positive trends in key profitability indicators Key Performance Indicators | Metric | 2Q25 Value | YoY Improvement | | :--- | :--- | :--- | | Diluted EPS - GAAP | $0.63 | 17% | | Diluted EPS - Operating | $0.66 | 14% | | Return on Assets - GAAP | 1.11% | 14 bps | | Return on Assets - Operating | 1.16% | 12 bps | | Net Interest Margin | 3.50% | 13 bps | | Tangible Book Value (TBV) per Share | $21.00 | 10% | | Revenue | - | 6% | Profitability and Efficiency Ratios | Profitability & Efficiency | 2Q25 Value | | :--- | :--- | | Return on Common Equity - GAAP | 8.5% | | Return on Tangible Common Equity - Operating | 12.3% | | Efficiency Ratio - GAAP | 56.7% | | Efficiency Ratio - Operating | 54.8% | - Notable items in the second quarter included a $0.7 million loss on the extinguishment of senior debt and a $0.3 million gain on a securities sale[11] Detailed Financial Analysis This section provides an in-depth review of the bank's deposit franchise, loan portfolio, balance sheet strength, net interest income, and noninterest revenue and expense trends Deposit Franchise The deposit franchise demonstrated stability with 1.3% annualized core customer deposit growth and a 4 basis point quarter-over-quarter decrease in the cost of deposits to 2.01% - Excluding public funds and the ANB acquisition, customer deposits grew by $64 million (1.3% annualized) from Q1 2025. The ANB acquisition contributed $374 million in deposits[22] - The cost of deposits decreased by 4 bps QoQ to 2.01% in Q2 2025, driven by active management, product mix, and CD repricing. The monthly average cost for June was 1.99%[19][22] Customer Deposit Changes (QoQ) | Deposit Change from 1Q25 to 2Q25 | Amount (in millions) | | :--- | :--- | | 1Q25 Total Customer Deposits | $23,807 | | Change in Noninterest-bearing | +$125 | | Change in NOW | -$169 | | Change in Savings | +$124 | | Change in MMA | -$34 | | Change in Time Deposits | +$160 | | 2Q25 Total Customer Deposits | $24,013 (Implied) | Loan Portfolio Total loans reached $18.9 billion in Q2 2025, with 4.2% annualized organic growth, maintaining a diversified portfolio with C&I and CRE as primary segments - Total loans grew to $18.9 billion. Excluding the $301 million in loans from the ANB acquisition, organic loan growth was 4.2% annualized[27] Loan Portfolio Composition | Loan Portfolio Composition (2Q25) | % of Total Loans | | :--- | :--- | | C&I | 42% | | CRE | 24% | | Residential Mortgage | 17% | | Home Equity | 9% | | Commercial Construction | 6% | | Residential Construction | 1% | | Other Consumer | 1% | - Key portfolio metrics remain well-managed: Construction and CRE loans were 62% and 204% of total risk-based capital, respectively. Shared National Credits (SNCs) were low at 1.5% of total loans[27] Balance Sheet, Liquidity, and Capital UCBI maintains a strong balance sheet with robust capital ratios, including 9.45% Tangible Common Equity to Tangible Assets and 13.3% CET1, supported by strategic capital actions and increased tangible book value per share - Capital ratios remain strong and above the KRX Peer Median, with Tangible Common Equity / Tangible Assets at 9.45% and CET1 at 13.3%[29][30][37] - Key capital actions in Q2 2025 included: redeemed $100 million of senior debt; repurchased $14 million of common stock (507k shares) at an average price of $27.49; paid a quarterly common dividend of $0.24 per share, a 4% increase YoY[32][37] Tangible Book Value Per Share Reconciliation | Tangible Book Value Per Share Walk (Q1'25 to Q2'25) | Value per Share | | :--- | :--- | | 1Q25 TBV | $20.58 | | GAAP Earnings | +$0.63 | | Dividends | -$0.25 | | Change in AOCI | +$0.08 | | Other | -$0.04 | | 2Q25 TBV | $21.00 | Net Interest Income and Margin Net interest income rose to $225.5 million, with net interest margin expanding by 14 basis points to 3.50%, driven by improved funding costs and earning asset mix - Net interest margin (NIM) increased by 14 bps from 3.36% in 1Q25 to 3.50% in 2Q25. The increase was driven by rate (+4 bps), mix (+7 bps), and accretion (+2 bps)[39][40] - Net interest revenue grew to $225.5 million in Q2 2025, up from $212.0 million in 1Q25. The ANB acquisition contributed $2.2 million to this total[38][40] - Purchased loan accretion added $4.3 million to net interest income, contributing 7 basis points to the NIM, an increase of 2 bps from the prior quarter[40] Noninterest Income Operating noninterest income slightly decreased to $34.7 million, primarily due to a negative MSR valuation adjustment, despite $2.0 million in loan sale gains Operating Noninterest Income Breakdown | Operating Noninterest Income Breakdown | 2Q25 ($ millions) | 1Q25 ($ millions) | | :--- | :--- | :--- | | Service Charges | $10.1 | $9.5 | | Mortgage | $5.4 | $6.1 | | Brokerage / Wealth Mgmt | $4.4 | $4.5 | | Loan Sale Gains | $2.0 | $1.4 | | Other | $12.8 | $14.1 | | Total | $34.7 | $35.7 | - The quarter-over-quarter decrease was mainly driven by a $0.4 million negative MSR mark in 2Q25 compared to a $0.3 million positive mark in 1Q25. Other income also decreased, which included a $0.7 million loss on the extinguishment of senior debt[45] - The company sold $21.8 million of SBA loans and $16.9 million of Navitas loans, resulting in $2.0 million of loan sale gains[45] Noninterest Expense The operating efficiency ratio improved to 54.8%, a 138 basis point decrease from Q1, while operating noninterest expense increased to $143.1 million due to merit increases and acquisition costs - The operating efficiency ratio improved to 54.8% in 2Q25, down from 56.2% in 1Q25 and 57.1% in 2Q24. This ratio has been consistently below the KRX Peer Median[47][50] - Operating noninterest expense increased by $3.3 million from the prior quarter, driven by merit increases ($1.8 million) and the ANB acquisition ($1.2 million)[51] Noninterest Expense Trend | Noninterest Expense Trend ($ millions) | 2Q24 | 1Q25 | 2Q25 | | :--- | :--- | :--- | :--- | | GAAP | $147.0 | $141.1 | $147.9 | | Operating | $140.6 | $139.8 | $143.1 | Credit Quality Analysis This section examines the bank's strong credit quality, highlighting improvements in key metrics and the stability of its Allowance for Credit Losses Credit Metrics Credit quality improved in Q2 2025, with net charge-offs at 0.18% and nonperforming assets decreasing to 0.44% of total loans due to successful resolutions Key Credit Metrics | Credit Metric (% of Total Loans) | 2Q25 | 1Q25 | | :--- | :--- | :--- | | Net Charge-Offs (annualized) | 0.18% | 0.21% | | Nonperforming Assets (NPAs) | 0.44% | 0.51% | | Past Due Loans | 0.14% | 0.21% | - Nonperforming assets improved by $9.3 million during the quarter, a decrease of 6 bps, driven by the resolution of the largest Senior Care non-accrual credit and the exit of several C&I loans[55] - Higher risk loans, defined as special mention plus substandard accruing, were 3.1% of total loans, remaining steady compared to Q1 2025[55] Allowance for Credit Losses (ACL) The ACL to total loans ratio remained stable at 1.21%, with the provision for credit losses decreasing to $11.8 million due to lower net charge-offs - The ACL to total loans ratio was 1.21%, flat compared to the prior quarter[57][60] - The provision for credit losses was $11.8 million, down from $15.4 million in 1Q25, mainly due to lower charge-offs. The provision included a $2.5 million "double-dip" for the ANB non-PCD loan portfolio[60] Allowance for Credit Losses Reconciliation | ACL Walk-Forward (in thousands) | Amount | | :--- | :--- | | 1Q25 ACL | $223,201 | | Provision (Model Impact/NCO Refill) | +$11,493 | | Net Charge-Offs (NCOs) | -$8,226 | | ANB Double Dip | +$2,494 | | Hurricane Special Reserve Reduction | -$2,800 | | Other Changes | +$1,883 | | 2Q25 ACL | $228,045 | Appendix This section provides supplemental information on the company's culture, market position, detailed business segment performance, and comprehensive financial reconciliation tables Company Culture and Market Position United Community's 75-year culture, built on core values, drives consistent customer satisfaction and positions the bank strategically in high-growth Southeast MSAs - The company's vision is "To Be a Legendary Bank," guided by core values of Team, Truth, Trust, and Caring[63] - UCBI has a significant presence in many of the fastest-growing MSAs in the Southeast, with 22.3% of its deposits in the Atlanta MSA and 8.8% in the Greenville, SC MSA[78][79] Supplemental Business Details The Navitas equipment finance portfolio grew to $1.78 billion with a 9.71% yield, while mortgage rate locks increased to $359 million driven by seasonal strength and purchase volume - The Navitas loan portfolio reached $1.78 billion with a yield of 9.71%. The ACL for this portfolio is 2.59%[67][69] - Navitas's annualized net charge-offs were 1.14% in 2Q25. Excluding losses from the shrinking Long Haul Trucking segment, the NCO rate was 0.87%, an improvement of 8 bps from 1Q25[69] - Mortgage rate locks increased to $359 million in 2Q25 from $330 million in 1Q25, driven by seasonal momentum. Purchase volume accounted for 80% of originations[73][76] Financial Tables This section presents detailed financial data, including average deposit costs and comprehensive reconciliation tables for GAAP to non-GAAP operating measures Average Deposit Costs Trend | Average Deposit Costs (Annualized) | 2Q24 | 1Q25 | 2Q25 | | :--- | :--- | :--- | :--- | | DDA | N/A | N/A | N/A | | NOW | 3.01% | 2.47% | 2.45% | | MMDA | 3.55% | 3.05% | 2.99% | | Savings | 0.24% | 0.23% | 0.49% | | Time | 4.05% | 3.63% | 3.47% | | Total Deposits | 2.35% | 2.05% | 2.01% | - The presentation includes detailed tables reconciling GAAP to non-GAAP measures for key metrics including Noninterest Income, Expenses, Diluted EPS, Book Value Per Share, Return on Tangible Common Equity, Return on Assets, and the Efficiency Ratio[81][83]