United Community Banks' M&A Retreat, Aggressive Buybacks Signal Contradictions in 2025 Q4 Earnings Call

Date of Call: Jan 14, 2026

Financials Results

• Revenue: 11% year-over-year revenue growth in Q4; $1 billion+ for the year with 12% YOY growth
• EPS: $0.71 operating earnings per share in Q4, a 13% YOY improvement; $2.71 for the year, up 18% from $2.30

Guidance:

• Expect net interest margin up 2-4 basis points in Q1 2026.
• Deposit growth expected a couple hundred basis points below loan growth; loan-to-deposit ratio to continue rising.
• Expense growth targeted at 3-3.5%.
• Solid loan growth expected, with Q1 similar to Q4.
• Buybacks to be more assertive in 2026.
• Noninterest income to see nice growth in wealth, treasury management, and customer swaps.
• Mortgage and SBA fees optimistic; Navitas to sell more loans to keep portfolio under 10%.
• Credit loss rate expected in 20-25 bps range for 2026.
• Efficiency ratio improvement budgeted for 2026.

Business Commentary:

Revenue and Earnings Growth:

• United Community Banks reported an 11% year-over-year revenue growth in Q4 2025, with operating earnings per share increasing by 13% year-over-year to $0.71.
• This growth was driven by continued margin expansion and a 4.4% annualized loan growth, as well as effective cost management.

Loan and Deposit Dynamics:

• The company's loan growth maintained a 4.4% annualized pace, primarily in the C&I and HELOC categories, while deposits grew by 1% for the year.
• The increase in loan growth was supported by a focus on retail and small business lending, while deposit growth was influenced by positive seasonality in public funds and a strategic reduction in high-cost single-service customer rates.

Net Interest Margin Improvement:

• United Community Banks' net interest margin increased by 4 basis points to 3.62% in Q4 2025, with spread income growing by 7% annualized.
• The improvement was mainly due to a lower cost of funds and a beneficial shift in the loan-to-deposit ratio, which increased to 82%.

Capital Management and Share Repurchase:

• The company executed a share repurchase of 1 million shares at an average price below $30 per share in Q4 2025, and increased its dividend to an annualized rate of $1 per share.
• These actions were part of a broader capital management strategy to enhance returns to common shareholders, supported by strong earnings and a solid capital position.

Credit Quality and Risk Management:

• Net charge-offs were 34 basis points in Q4 2025, primarily due to charge-offs on two C&I loans, although credit quality remained strong with stable nonperforming assets.
• The bank's focus on risk management and the recognition of specific reserves contributed to maintaining strong credit quality, despite the charge-offs.

Sentiment Analysis:

Overall Tone: Positive

• CEO called Q4 'a solid end to a great year' and '2025 was a great year, but we want to be better.' Management expressed optimism for continued growth and improvement in 2026, citing 'strong' economy in markets, 'great performance,' and being 'very satisfied' with the foundation built.

Q&A:

• Question from Russell Elliott Gunther (Stephens Inc.): How should we think about overall balance sheet growth in '26? Should we expect the asset remix dynamic to continue?
  Response: Balance sheet growth will depend on deposit growth, modeled a couple hundred basis points below loan growth; expect continuation towards a higher loan-to-deposit ratio.

• Question from Russell Elliott Gunther (Stephens Inc.): What are anticipated asset class and geographic loan leaders for 2026, and how is Navitas viewed?
  Response: Focus remains on C&I, owner-occupied CRE, and HELOCs; Florida led production in 2025; Navitas had strong $1B+ originations and will continue to sell loans.

• Question from Stephen Scouten (Piper Sandler & Co.): Is there a mindset change around opportunistic share repurchases moving forward?
  Response: Intend to be more assertive on buybacks in 2026 due to strong capital build, great credit quality, and limited M&A opportunities.

• Question from Stephen Scouten (Piper Sandler & Co.): What are retention rates on CDs and fixed-rate loans, and how might rate cuts affect them?
  Response: CD retention around 90%; loan retention data not provided but new fixed loans originated at 6.45% in Q4. Expect more tailwind from lower deposit costs.

• Question from Michael Rose (Raymond James & Associates, Inc.): How is the competitive landscape, and what's the expense outlook given hiring?
  Response: Competitive but focused on client service and culture; expense growth targeted at 3-3.5% with minimal significant hires.

• Question from Michael Rose (Raymond James & Associates, Inc.): What is the M&A outlook for 2026?
  Response: Focus remains internal; less than 10 quality target banks in markets, but most are not for sale near-term; M&A is a long-term possibility.

• Question from Gary Tenner (D.A. Davidson & Co.): Can you provide thoughts on Q1 expense levels?
  Response: Q1 expenses expected flat; Q4 increase due to health insurance catch-up and high loan production incentives; seasonality includes FICA restart.

• Question from Gary Tenner (D.A. Davidson & Co.): Can you provide color on the 2 C&I charge-offs and outlook for 2026 credit?
  Response: Charge-offs on a $14M franchise loan (6M specific reserve) and a $4M SBA loan (no guarantee pursued). Expect 2026 loss rate in 20-25 bps range.

• Question from Catherine Mealor (Keefe, Bruyette, & Woods, Inc.): What is the break between the $1.4B in assets repricing between securities and loans?
  Response: $190M HTM book with ~$150M to cash flow in 2026; AFS repricing details pending offline discussion.

• Question from Catherine Mealor (Keefe, Bruyette, & Woods, Inc.): What is the fee outlook and seasonality for Q1?
  Response: Wealth and treasury management to see upper single-digit growth; mortgage seasonally weaker in Q1; SBA and Navitas build through year.

• Question from David Bishop (Hovde Group, LLC): Are tariffs impacting credit quality?
  Response: No impact from tariffs observed; customers are managing through tariff effects without significant asset quality issues.

• Question from David Bishop (Hovde Group, LLC): Can we expect further efficiency ratio improvement in 2026?
  Response: Yes, budgeting for operating leverage improvement with solid loan growth, margin expansion, and expense management.

• Question from Christopher Marinac (Janney Montgomery Scott LLC): Was higher Q4 charge-off related to year-end cleanup, and what's the outlook?
  Response: Overall annual charge-off mix stable; Q4 higher but Q3 lower; outlook for 2026 consistent with prior years at 20-25 bps bank level.

• Question from Christopher Marinac (Janney Montgomery Scott LLC): Is the focus on organic growth changing M&A strategy?
  Response: No change; focus remains on organic growth to achieve scale, attract talent, and compete; M&A limited to few high-quality targets in current markets.

• Question from Gary Tenner (D.A. Davidson & Co.): What is the loan growth expectation for 2026?
  Response: Expect solid loan growth; Q1 similar to Q4 seasonally; optimistic due to momentum but specific range not called.

Contradiction Point 1

M&A Strategy and Interest

Shift from actively pursuing acquisitions to dismissing them as a near-term focus, impacting growth strategy.

What is the 2026 M&A outlook? - Michael Rose (Raymond James & Associates, Inc.)

2025Q4: The strategy is not to expand the footprint... M&A is a 'popcorn' opportunity; the focus is currently on organic growth. - Herbert Harton(CEO)

Have you noticed an increase in M&A opportunities, and what's driving it? - Michael Rose (Raymond James)

2025Q3: More potential sellers have expressed interest in the last 2-3 quarters than before, providing optimism. - Herbert Harton(CEO)

Contradiction Point 2

Share Repurchase Strategy and Assertiveness

Shift from a cautious, opportunistic approach to planning more aggressive execution of buybacks.

Has the company's approach to opportunistic share repurchases shifted, and could strong capital position lead to more aggressive buybacks? - Stephen Scouten (Piper Sandler & Co.)

2025Q4: The intention is to be more assertive with buybacks in 2026. Capital build is strong... so more share repurchases are expected. - Herbert Harton(CEO)

Given the stock's improved price above the buyback range, will the bank continue share repurchases? - Catherine Mealor (Keefe, Bruyette, & Woods, Inc.)

2025Q2: The bank is not currently active in the buyback as the expected earn-back period exceeds their 7- to 8-year target... would be opportunistic at lower prices. - Jefferson Harralson(CFO)

Contradiction Point 3

Balance Sheet Growth Drivers

Shift from forecasting a securities-to-loans remix as a primary margin driver to identifying deposit acquisition as the primary balance sheet growth driver.

How should we think about balance sheet growth in 2026, the continuation of the favorable shift from securities to loans, and whether the investment portfolio will stabilize or expand? - Russell Elliott Gunther (Stephens Inc.)

2025Q4: Balance sheet growth will depend on deposit growth, which is expected to be a couple hundred basis points below loan growth. The trend toward a higher loan-to-deposit ratio is expected to continue throughout 2026. The remix from securities to loans provided a benefit, but the primary driver for future growth is deposit acquisition. - Jefferson Harralson(CFO)

What are your margin expectations moving forward, considering potential trade war impacts, and what are your expectations for Navitas' asset quality and growth? - Russell Gunther (Stephens)

2025Q1: Expected margin to be up 5-10 bps next quarter, driven by lower deposit costs and a favorable shift in earning assets from securities to loans. The securities book is expected to shrink slightly while the loan book grows. - Jefferson Harralson(CFO)

Contradiction Point 4

Capital Allocation Priority for Buybacks

Change in stated priority level for share buybacks relative to other initiatives.

Is there a shift in approach toward opportunistic share repurchases, and could buybacks become more aggressive with strong capital? - Stephen Scouten (Piper Sandler & Co.)

2025Q4: The intention is to be more assertive with buybacks in 2026... more share repurchases are expected. - Herbert Harton(CEO)

How will capital deployment be prioritized post-preferred redemption, particularly regarding buybacks and M&A? - Gary Tenner (D.A. Davidson)

2025Q3: Buybacks are possible in the future but are not the immediate focus. - Jefferson Harralson(CFO)

Contradiction Point 5

M&A Strategy and Focus

Shift from a strategy that included evaluating and preparing for M&A to a focus solely on organic growth.

What's the 2026 M&A outlook? - Michael Rose (Raymond James & Associates, Inc.)

2025Q4: The strategy is not to expand the footprint... fewer than 10 high-quality targets... M&A is a 'popcorn' opportunity; the focus is currently on organic growth. - Herbert Harton(CEO)

1) What's the breakdown of the 4.2% annualized loan growth this quarter, and were there paydowns? 2) What are the updates on hiring initiatives and M&A activity given recent resurgence? - Michael Rose (Raymond James)

2025Q2: The strategy remains to find small, high-performing institutions that are additive to the footprint... the outlook is better as industry stock prices improve, and more opportunities may arise. - Lynn Harton(CEO)