United Community Banks (NYSE:UCB) reported higher second-quarter operating earnings and revenue, while executives said loan growth is accelerating as the company shifts focus back to its core banking franchise following the pending sale of Navitas.
Chairman and Chief Executive Officer Lynn Harton called the quarter “great,” citing progress on strategic goals and stronger organic loan production. Harton said operating earnings per share were $0.71, up 8% from a year earlier, while total revenue increased 7% year over year. The company’s net interest margin rose to 3.68%, up 18 basis points from the prior year and three basis points from the first quarter.
Navitas Sale Drives Reserve Release, Margin Outlook
Harralson said the company recorded a $29.8 million net reserve release in the quarter, including a $38.5 million reserve release related to Navitas. On a bank-only basis, United recorded an $8.7 million provision, more than covering $4.2 million in bank net charge-offs. The allowance for credit losses declined to 1.04% of loans, reflecting what Harralson described as the lower loss content and variability associated with the sale of the Navitas portfolio.
The Navitas transaction is also expected to affect United’s margin. In response to a question from Piper Sandler analyst Stephen Scouten, Harralson said that on a static basis, selling Navitas and reinvesting the proceeds at 4.25% would reduce the margin by about 30 basis points. However, he said the underlying margin should continue widening as the bank adds loans at an increasing pace and benefits from back-book loan and securities repricing.
Harralson said the third quarter margin will depend on the timing of the Navitas sale. He said the fourth quarter, assuming a third-quarter sale, could be down about 20 to 25 basis points, with underlying margin expansion expected to offset that impact over two quarters.
Harton thanked the Navitas team, noting that the unit had been part of United for eight years. “It has been a pleasure working with all of you and you have made a great contribution to our growth and success,” he said.
Loan Growth Accelerates as Hiring Adds Producers
United reported total loan growth of 6.8% annualized in the second quarter. Excluding Navitas, organic loan growth was 6.4% annualized, up from 3.9% annualized in the first quarter and 4.3% for full-year 2025. Harton attributed the improvement to the company’s effort to hire new revenue producers after deciding last year to sell Navitas and refocus on the core franchise.
Harralson said United has added 37 net new producers since Sept. 30, 2025, about half of them commercial lenders. That increased the company’s overall sales force by about 17%.
Chief Banking Officer Rich Bradshaw said United is targeting experienced bankers, generally with about 20 years of experience and a history of producing portfolios greater than $100 million. He said the company is using no recruiters and is relying on culture in its hiring efforts.
Bradshaw said a fully ramped-up experienced banker could contribute about $30 million in funded loans. He said United is looking for ex-Navitas loan growth in the 7% range for the third quarter and expressed confidence in achieving upper-single-digit loan growth next year. He said growth is expected across both commercial and industrial lending and commercial real estate, with production spread across United’s geographies.
Bradshaw also said pricing and structure in the market have stabilized after pressure in commercial real estate over the past year. Harralson added that loan yields will decline by about 30 basis points when Navitas is removed, but new loans are being added at higher yields than that lower base.
Deposits, Expenses and Credit Quality
Customer deposits declined by $295 million on an end-of-period basis, with two-thirds of the decline coming from expected seasonal public funds outflows, Harralson said. On an average basis, excluding public funds, customer deposits grew $169 million, or 3.3% annualized. Deposit costs improved by one basis point during the quarter, though Harralson said he expects the cost of deposits to drift slightly higher in the second half due to stronger loan growth and deposit competition.
Operating expenses were $159.9 million in the quarter. Harralson said the total included a $4.5 million notable operating expense related to a settlement with the California Department of Financial Protection and Innovation over a Navitas lender license. Excluding that item, expenses rose $2.9 million from the first quarter, including $1.8 million from annual merit increases and about $1 million from new revenue producer hiring. Excluding the license issue, the efficiency ratio improved slightly to around 55%.
Harralson said the current expense base is about $154.5 million on a run-rate basis. The pending Peach State acquisition is expected to add about $4 million quarterly, with roughly $2 million in quarterly cost savings next year. Navitas has a $9 million quarterly expense run rate that will go away when that deal closes. Harralson said the fourth-quarter expense base could be roughly $150 million, depending on additional lender hiring.
Credit metrics remained stable. Harton said bank-only net charge-offs were nine basis points, while total net charge-offs were 16 basis points. Past dues were 11 basis points, and special mention and substandard accruing loans were 2.5%, which he said was the lowest level in several quarters. Chief Risk Officer Rob Edwards said bank-only net charge-offs, excluding Navitas, have ranged between eight and 13 basis points over the past 10 years and were 12 basis points in each of the past two years.
Capital, Buybacks and M&A
United reported a common equity Tier 1 ratio of 13.5% and tangible common equity just under 10%. Harralson said the sale of Navitas would leave the company with a CET1 ratio of roughly 14.5%. He said the company has not provided capital targets, but noted that returning to the 13% range would imply about $300 million of excess capital, a subject he said management expects to discuss with the board over the next year.
Harton said the company continues to expect the Peach State deal to close early in the third quarter and intends to repurchase the shares issued for that acquisition. Harralson said United has $63 million remaining under its repurchase authorization and still expects to buy back the remaining $50 million of the $100 million in total consideration for Peach State.
On bank acquisitions, Harton said conversations are active among smaller institutions, particularly banks of about $1.5 billion in assets or less. He said he expects more activity after Peach State is completed. Harralson said United is not looking at large or out-of-market deals, but remains interested in high-quality smaller banks. Harton said pricing varies by transaction, with United targeting a three-year earn-back on an all-stock basis.
Harralson also said the company is actively recruiting for his successor as CFO and expects an announcement possibly in the September-to-October timeframe.
About United Community Banks (NYSE:UCB)
United Community Banks, Inc (NYSE: UCB) is a bank holding company headquartered in Blairsville, Georgia. It operates primarily through its subsidiary, United Community Bank, providing a broad range of banking and financial services to individual, business and governmental customers. The company’s core offerings include deposit accounts, commercial and consumer lending, mortgage origination, treasury and cash management services, and wealth management.
In addition to traditional banking products such as checking, savings and money market accounts, United Community Bank specializes in commercial real estate financing, small business administration (SBA) loans, equipment financing and agricultural lending.
