United Community Q3 GAAP Loss Masks Operating EPS Growth

United Community Banks, Inc. (UCB) reported a third-quarter 2026 GAAP loss after a major securities portfolio repositioning, while underlying earnings increased and management projected further operating improvement in the fourth quarter. GAAP diluted loss per share was $1.16, reflecting a $366 million pre-tax loss on securities sales, partly offset by a $62 million pre-tax gain from the sale of Navitas. Operating diluted EPS, which excludes specified non-recurring items, rose to $0.77 from $0.71 in the second quarter and $0.75 a year earlier.

The bank expects fourth-quarter EPS of $0.80 to $0.83 and a net interest margin in the mid-3.70% range. That outlook incorporates full-quarter effects from the Peach State acquisition, the Navitas sale and the securities restructuring, and assumes a 25-basis-point interest-rate increase in December 2026.

Revenue and margin

Operating revenue reached $291.9 million, up from $279.3 million in the prior quarter and $276.8 million a year earlier. On a GAAP basis, total revenue was negative $12.0 million because of the securities repositioning.

Net interest revenue increased $10.3 million sequentially to $251.2 million, supported by Peach State, core growth, the net effect of the portfolio restructuring, higher interest rates and an additional calendar day. Those benefits were partly offset by the Navitas divestiture.

The fully taxable-equivalent net interest margin was 3.68%, unchanged from the second quarter and 10 basis points higher than a year earlier. Higher securities yields following the repositioning largely offset lower loan yields after the Navitas sale. The average securities yield increased 37 basis points sequentially to 3.34%, while the average loan yield rose three basis points to 6.06%. September’s loan yield was lower at 5.83%, reflecting the absence of Navitas.

Operating noninterest income increased $2.3 million from the second quarter to $40.7 million. Service charges rose $1.2 million, and other fee income benefited from $2.5 million of bank-owned life insurance death benefits. Compared with the prior year, operating noninterest income declined $2.5 million, including lower loan-sale gains and mortgage income.

Operating noninterest expense declined $3.3 million sequentially to $155.7 million, largely because the second quarter included costs related to the Navitas California license settlement. The third quarter included two months of Navitas operating expenses totaling $6 million and two months of Peach State expenses totaling $2 million. Operating expenses rose $8.3 million from a year earlier, including a $5.8 million increase in compensation tied to hiring, annual merit adjustments and group medical costs. The operating efficiency ratio was 53.1%, down from 56.7% in the second quarter and stable year over year.

Core loans and deposits expand

Total loans ended the quarter at $19.0 billion, down from $19.9 billion at June 30 as the sale of Navitas removed about $1.91 billion of loans. Excluding Navitas and Peach State, core loans increased $444 million, or 10% on an annualized basis. Third-quarter loan production exceeded $1 billion for the second consecutive quarter.

Core commercial and industrial loans grew at a 13% annualized rate, including $129 million of owner-occupied commercial real estate growth and $97 million of other C&I growth. Core home-equity lines increased $67 million. Revenue producers added since the third quarter of 2025 contributed about $170 million of funded loan growth, compared with approximately $30 million in the preceding quarter.

Deposits rose to $24.9 billion from $23.7 billion at the end of the second quarter, driven by Peach State and organic growth. Excluding Peach State, customer deposits increased $473 million, or 8% annualized. Noninterest-bearing deposits remained 27% of customer deposits. Average total deposit costs increased three basis points sequentially to 1.69%, and management anticipates a seasonal public-funds inflow of $325 million to $375 million in the fourth quarter.

Portfolio restructuring changes liquidity profile

United reclassified $2.2 billion of held-to-maturity securities as available for sale and then sold $2.5 billion of low-yielding, long-duration securities. Proceeds from that transaction and the Navitas sale were redeployed into approximately $3.1 billion of cash and securities yielding about 4.6%, while roughly $1 billion of borrowings carrying a rate of about 3.8% were repaid.

The securities portfolio’s duration fell to 2.0 years from 3.2 years in the second quarter, and its period-end yield reached 4.21%. Management expects the full quarterly benefit of the repositioning in the fourth quarter. Projected quarterly reinvestment cash flow for 2027 is about $340 million, compared with $240 million before the restructuring.

The Navitas sale also reduced the loan-to-core-deposit ratio to 77% from 85% in the prior quarter, giving the bank capacity to redeploy liquidity into organic lending over time, according to the presentation.

Credit metrics improve, while capital absorbs transaction effects

Net charge-offs were $4.0 million, or 0.09% of average loans, improving from 0.16% in the second quarter. Nonperforming assets declined nine basis points to 0.43% of total loans, while past-due loans fell four basis points to 0.07%. Higher-risk loans, defined as special-mention and substandard-accruing credits, represented 3.2% of loans, in line with recent trends.

The operating provision for credit losses was $10.0 million, up $1.3 million sequentially, and included provisions related to funded loan growth and Peach State’s unfunded commitments. Total allowance coverage was 1.05% of loans, little changed from the prior quarter.

The strategic transactions reduced tangible book value per share to $20.80 from $23.31 at the end of the second quarter. The tangible common equity ratio fell to 9.0% from 9.9%, while the preliminary Common Equity Tier 1 ratio declined to 13.0% from 13.5%. United repurchased $50 million of shares during the quarter and approved an additional $100 million authorization through the end of 2027, leaving $113 million authorized. It also declared a quarterly common dividend of $0.26 per share, 4% higher than a year earlier.

The fourth-quarter projections remain subject to the assumed interest-rate move and the expected effects of recently completed transactions. United also identified competitive, economic, political, regulatory and market conditions as factors that could cause actual results to differ materially from management’s forward-looking expectations.