Financial Data and Key Metrics Changes - Revenue increased by over $16 million compared to the second quarter, driven by an 8 basis point improvement in margin and 5.4% annualized loan growth [4] - Provision for credit losses declined by approximately $4 million compared to the last quarter, supported by strong credit results and a release of $2.6 million from the Hurricane Helene Special Reserve [4] - Earnings per share on an operating basis reached $0.75, a 32% year-over-year improvement, with a return on assets of 1.33% and a return on tangible common equity of 13.6% [4] Business Line Data and Key Metrics Changes - All estates delivered positive loan growth, with significant contributions from C&I, Equipment Finance, and HELAC categories [5][8] - Deposits grew by $137 million, or 2.6% annualized, excluding seasonal public outflows, with DDA comprising a good portion of the growth [7] - Spread income grew by 14% annualized in the quarter, with net interest margin increasing by 8 basis points to 3.58% [10] Market Data and Key Metrics Changes - The loan-to-deposit ratio increased to 80%, while the CET1 ratio remained flat at 13.4% [8][9] - The cost of deposits was pushed down to 1.97%, achieving a total deposit beta of 37% so far [7] - Non-interest income was $43.2 million, up $8.5 million from the previous quarter, with strong increases across most fee categories [10] Company Strategy and Development Direction - The company aims to be cautious and selective in lending to non-depository financial institutions, maintaining limited exposure [6] - Capital priorities include organic growth, dividend increases, and potential M&A opportunities, with buybacks being considered opportunistically [28] - The company is focusing on improving employee engagement and culture, ranking in the 92nd percentile for employee engagement compared to over 2,000 companies [13] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism for the remainder of the year, supported by strong loan growth and credit quality metrics [13] - The company anticipates continued operating leverage and profitability improvement in 2026, driven by margin expansion [55] - Management noted an increase in interest from sellers in the M&A space compared to previous quarters, indicating a more favorable environment for potential acquisitions [36] Other Important Information - The company redeemed $88 million of preferred stock, which lowered Tier 1 total capital and leverage ratio towards peer levels [9] - The allowance for credit losses moved down slightly to 1.19%, with a loan loss provision of $7.9 million for the quarter [12] Q&A Session Summary Question: Loan growth trends and pipelines - Management indicated strong loan growth, particularly in Florida, South Carolina, and North Carolina, with expectations for similar performance in Q4 [19][21] Question: Deposit beta guidance - Management expressed confidence in achieving a total deposit beta in the 40% range due to successful rate cuts and CD growth [22][23] Question: Capital deployment priorities - Capital priorities include organic growth, dividend increases, M&A opportunities, and buybacks being considered opportunistically [28] Question: Fee income and service charge income - Management noted that the increase in service charge income was due to better volume, with no unusual changes in fee structure [29] Question: Expenses and hiring efforts - Management expects a flat expense run rate for Q4, with a medium to long-term growth rate of 3% to 4% [33] Question: Credit quality and Navitas book - Management reported stable performance in the Navitas book, with expectations of losses normalizing around 1% in a typical environment [53] Question: Future profitability and operating leverage - Management anticipates continued operating leverage and profitability improvement in 2026, driven by margin expansion [55]
United Community Banks, Inc.(UCB) - 2025 Q3 - Earnings Call Transcript