United Community Banks' Q1 2025: Contradictions in Loan Growth, Margins, and M&A Strategy

Loan growth expectations, margin expectations, and M&A strategy and opportunities are the key contradictions discussed in United Community Banks' latest 2025Q1 earnings call.



Strong Financial Performance:
- United Community Banks reported operating earnings of $0.59 per share, with an operating return on assets of 1.04%, both improvements from the previous year.
- Growth was driven by increased loans (5% annualized) and deposits (5% annualized), as well as a 10 basis point increase in net interest margin due to lower deposit costs.

Capital Management and Loan Growth:
- The company's TCE ratio increased by 21 basis points to over 9%, reflecting strong capital growth despite good loan growth in the quarter.
- Loan growth was particularly notable in areas like C&I (7% annualized) and Navitas (15% annualized), with HELOC loans also growing at a rate of 13% annualized.

Deposit and Cost Management:
- United achieved $309 million in deposit growth, or 5.3% annualized, even with seasonal public funds outflow of approximately $85 million.
- The company successfully reduced its cost of total deposits by 15 basis points in the quarter, emphasizing effective deposit repricing strategies.

Credit Quality and Risk Management:
- Net charge-offs remained stable at 21 basis points, with loan loss provisions covering net charge-offs and loan growth.
- United reduced its Hurricane Helene reserve by $2.6 million, demonstrating confidence in its current provisioning levels and credit quality.

Economic Uncertainty and Client Engagement:
- Despite uncertainties surrounding tariffs and international trade, United is closely monitoring the situation and engaging with clients to assess potential impacts.
- Companies are quickly adjusting with price increases, sharing tariffs, and finding alternative material sources, indicating a proactive approach to navigating economic challenges.