UCB Q3 Deep Dive: Loan Growth and Margin Expansion Drive Results Amid Stable Credit Quality

Regional banking company United Community Banks (NYSE:UCB) reported Q3 CY2025 results beating Wall Street’s revenue expectations, with sales up 12.7% year on year to $276.8 million. Its non-GAAP profit of $0.75 per share was 7.8% above analysts’ consensus estimates.

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StockStory’s Take

United Community Banks posted a solid third quarter, with revenue growth supported by margin improvement and continued loan expansion across key geographies. Management attributed the positive performance to effective deposit cost management, balanced loan growth—particularly in commercial and equipment finance—and stable credit quality. CEO Lynn Harton highlighted that “all of our states delivered positive loan growth,” and emphasized the company’s cautious lending approach to non-depository financial institutions. The stability in credit metrics and growth in tangible book value were key themes driving operational results this quarter.

Looking ahead, management’s guidance centers on maintaining disciplined expense growth, capturing further loan growth opportunities, and leveraging repricing benefits on both loans and deposits. CFO Jefferson Harralson noted, “For the medium to longer-term expense run rate, think of us being in the 3% to 4% range,” while President Rich Bradshaw expressed confidence in sustained loan growth pipelines. Management also sees potential for further margin expansion as higher-yielding loans replace maturing assets, though there is caution around CD repricing and competitive pressures.

Key Insights from Management’s Remarks

Management pointed to several core business drivers behind the quarter’s performance, with particular focus on balanced lending strategies and prudent capital allocation.

• Loan growth across geographies: Management reported broad-based loan growth, with Florida, South Carolina, and North Carolina leading. Emphasis on commercial and industrial (C&I) lending was bolstered by targeted hiring and strategic pricing.
• Deposit cost discipline: The bank successfully reduced its cost of deposits, aided by coordinated efforts between treasury and frontline bankers, and expects further improvement as CD repricing continues into the next quarter.
• Limited exposure to private credit risks: CEO Lynn Harton stressed the company's conservative approach to lending in the private credit sector, maintaining very low exposure to non-depository financial institutions, which has insulated the bank from broader industry credit concerns.
• Active capital management: The quarter saw the redemption of preferred stock and continued repayment of senior debt, signaling a focus on strengthening capital ratios and flexibility for future growth or opportunistic buybacks.
• Expense management amid growth: Operating expenses increased primarily due to higher variable compensation tied to strong performance, but management anticipates expense growth to normalize, supporting improved efficiency ratios.

Drivers of Future Performance

United Community Banks’ outlook is shaped by ongoing loan and deposit growth, expense discipline, and margin management, with an eye on external risks.

• Sustained loan growth focus: Management anticipates continued strength in loan origination, especially in C&I and equipment finance, as hiring initiatives and expanded retail lending drive pipeline growth. President Rich Bradshaw stated the next quarter is expected to be “a very similar type quarter, maybe slightly better.”
• Margin and deposit repricing dynamics: The bank expects net interest margin to remain stable to slightly down, influenced by the repricing of maturing CDs and the gradual back book transition to higher-yielding assets. CFO Jefferson Harralson emphasized that success in lowering deposit costs will be key to maintaining margin levels.
• Expense and credit risk vigilance: Operating expenses are expected to grow at a moderate pace, with management monitoring variable compensation and hiring needs. Credit quality is projected to remain stable, though management remains attentive to broader economic volatility and sector-specific risks.

Catalysts in Upcoming Quarters

In the coming quarters, our analyst team will watch (1) the pace and quality of loan growth across states and business lines, (2) the impact of maturing CDs and shifting deposit costs on net interest margin, and (3) management’s discipline in expense growth and capital deployment. Monitoring developments in M&A activity and shifts in credit quality—especially in the Navitas and senior care portfolios—will also be crucial.

United Community Banks currently trades at $30.06, in line with $30.22 just before the earnings. Is there an opportunity in the stock?Find out in our full research report (it’s free for active Edge members).

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