United Community Banks NYSE: UCB reported first-quarter 2026 net income of a little over $84 million, or $0.69 per share, as modest loan growth and another quarter of net interest margin expansion helped lift results, executives said during the company’s earnings call.
Chairman and CEO Lynn Harton said operating earnings were $0.70 per share, a 19% increase from the first quarter of 2025. He also highlighted credit performance and shareholder returns, while management detailed balance sheet trends and discussed the company’s planned acquisition of Peach State Bank in Gainesville, Georgia.
Quarterly results and balance sheet trends
Harton attributed the quarter’s performance to “annualized loan growth of 4.5% for the quarter and an expansion of our net interest margin of three basis points.” He said operating return on assets was 1.22% and operating return on tangible common equity was 13.1%.
Chief Financial Officer Jefferson Harralson said customer deposits grew $237 million on an end-of-period basis, representing 4% annualized growth, “mostly driven by DDA growth in the quarter.” Harralson added that the cost of deposits decreased nine basis points to 1.67% and that the bank’s cumulative total deposit beta stands at 39% in the current down-rate cycle, which he said exceeded the company’s goal.
On liquidity and funding, Harralson said the bank has “very limited broker deposits and very limited wholesale borrowings of any kind,” and noted the loan-to-deposit ratio remained unchanged at 82%. Capital levels were also steady, with a CET1 ratio of 13.4% and tangible common equity at 9.92%.
United continued to return capital to shareholders, Harton said, through a $0.25 quarterly dividend and $37 million of common stock repurchases during the quarter. Harralson said the repurchase activity totaled 1.1 million shares, “just under 1% of our shares outstanding.” Harton also said the company intends to redeem its remaining $100 million in subordinated debt in the second quarter, noting that only 20% of that debt qualified as Tier 2 capital.
Net interest margin and fee income drivers
Harralson said net interest margin rose three basis points sequentially to 3.65% and was up 29 basis points from the prior year. “The first quarter is the fifth quarter in a row of margin expansion,” he said, citing back-book repricing and a balance sheet mix shift “towards loans away from securities.” Looking ahead, Harralson said that based on maturities alone, the company has about $1.4 billion of assets paying down at roughly 4.63% over the next year, and he expects the margin to increase another 3 to 5 basis points in the second quarter.
Non-interest income totaled $43.7 million and included a $5.2 million gain on an interest rate cap tied to a sub-debt issuance that the company plans to redeem April 30, Harralson said. Excluding the cap gain, he said fee income benefited from a “strong mortgage quarter” but was offset by seasonally lower service charges. He also noted that the company sold fewer Navitas loans than in the prior quarter, selling $8.3 million in Q1 compared to $41.6 million in the fourth quarter.
During the Q&A, Harralson said he expects “a modest growth rate” in fee income, pointing to growth in treasury services, investments in wealth management, and strength in mortgage. He also said mortgage, Navitas, and SBA typically show seasonal strength heading into the second quarter.
Expense items, hiring, and AI investments
GAAP expenses were $157.3 million, while operating expenses were $151.6 million, Harralson said. He described two “unusual and offsetting” non-operating items: a $1.9 million release related to the FDIC special assessment following the Silicon Valley Bank failures, and a non-operating charge related to a payroll timing change that required an additional check to bridge the transition to paying employees in arrears.
On staffing, President and Chief Banking Officer Rich Bradshaw said the company had a net increase of 10 revenue producers in the first quarter and is targeting 10% annual growth in revenue producers in 2026, with “nine more to hit the goal.” Harralson said the hires could add about $1 million to $1.2 million per quarter to expenses in the near term, while Bradshaw said production typically takes “five months-six months” to begin showing up after hiring.
Harton said the company’s AI initiatives have, so far, shown a “strong payback,” largely through vendor-enabled tools. He said fraud losses have dropped by 50% over the last two years, “partially because of” AI use by vendors. He also said AI tools in the contact center have allowed the bank “to take more calls with the same number of agents,” and that programming productivity has increased without adding programmers.
Credit quality and provisioning
Harton said credit “performed very well,” with total charge-offs of 22 basis points, or 10 basis points excluding Navitas. He said non-performing assets as a percentage of loans were 50 basis points, down one basis point from the first quarter of 2025, and special mention and substandard loans were 2.9% of total loans.
Harralson said the company’s provision for credit losses was $10.9 million, in line with net charge-offs. With loan growth, allowance coverage moved slightly lower to 1.15%.
Chief Risk Officer Rob Edwards addressed a question on NPAs, saying he expects asset quality to remain stable, with NPAs fluctuating modestly. “There wasn’t any one credit that moved into NPA this quarter that’s a highlight or anything,” he said, describing it as “standard movement in and out of non-accrual.”
Peach State Bank acquisition details and strategy
Management also focused on United’s planned acquisition of Peach State Bank, which is headquartered in Gainesville, Georgia. Harton said both banks were founded in 2005 and described Hall County as a rapidly growing part of the Atlanta metropolitan area. He said United currently has $827 million of deposits in Hall County, while Peach State reported $788 million in assets and $713 million in deposits as of the end of the first quarter.
Harralson said Peach State is approximately $800 million in assets, about 3% of United’s asset base. The deal value is about $100 million, structured as a 50/50 cash and stock mix. Harralson said the company is paying 1.9 times tangible book value and “6x cost savings earnings,” with estimated cost savings of 40% due to overlap.
While the transaction includes stock issuance, Harralson said the company plans to repurchase the $50 million in issued shares by year-end. As structured, management expects the deal to be $0.09 accretive to earnings in 2027, and $0.12 accretive with the planned buybacks.
In response to analyst questions, Harton said the bank would not be constrained from pursuing additional acquisitions during the Peach State integration given the transaction’s size and United’s regulatory and M&A track record. He also said United typically targets deals in the 10% to 15% size range, though the company would also be interested in larger targets if available.
On funding and deposit strategy, Harralson said the company does not require acquisitions to have “excess deposits,” though he noted Peach State’s low loan-to-deposit ratio was attractive because United can “put those deposits to work.” Harton added that on the lending side, the bank is requiring a depository relationship with loans and expects new hires’ clients to bring over deposits early in the relationship.
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.
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