United Community Banks Aktie

Good morning, and welcome to United Community Banks' conference call discussing today's announcement of a definitive agreement to sell its equipment finance business, Navitas, to funds managed by Wafra, Inc. Hosting the call today are Chairman and Chief Executive Officer, Lynn Harton; and Chief Financial Officer, Jefferson Harralson. United's presentation today includes references to non-GAAP financial information. For these non-GAAP financial measures, United has provided a reconciliation to the corresponding GAAP financial measure at the end of the investor presentation.

Copies of the press release and investor presentation discussing the transaction were filed this morning on Form 8-K with the SEC, and a replay of this call will be available in the Investor Relations section of the company's website at ucbi.com. Please be aware that during this call, forward-looking statements may be made by representative of United. Any forward-looking statements should be considered in the light of risks and uncertainties described on Pages 5 and 6 of the company's 2025 Form 10-K as well as other information provided by the company in its filings with the SEC and included on its website.

At this time, I will turn the call over to Lynn Harton.

Good morning, and welcome to our call. We're excited to announce today that we have entered into a definitive agreement to sell our equipment finance company, Navitas. For me, this is a story about the continuing build-out of our Southeastern footprint. When we purchased Navitas in early 2018, we were about 40% of our current size at $11.9 billion in total assets. We have not yet entered Florida, Alabama or Nashville. We had a loan-to-deposit ratio of 79% and far fewer commercial bankers than we would have liked. We needed a growth engine to support us as we continue to build out the footprint.

Navitas delivered on that objective, growing from $350 million in outstandings at the time of acquisition to $1.9 billion today and delivering strong risk-adjusted returns as they grew. But our focus was always the core bank. Accordingly, we placed an internal limit on Navitas' size at 10% of total UCB loans. And as many of you know, we've been near that limit for some time. And to execute against that limit, we began selling Navitas loans and slowed internal hiring at the company.

During the same time, we were building out our banking footprint with acquisitions in Florida, Alabama, Tennessee and North Carolina and developing our capabilities, particularly in commercial banking and wealth. And so now with our relationship banking momentum building and the outlines of our footprint established, the time is right to sell Navitas and refocus our management time and attention fully on the core bank.

As you look to Slide 2, we believe this sale provides an attractive return on a solid but noncore asset. It meaningfully reduces the risk in our loan portfolio as Navitas is naturally a higher loss content business. Post sale, we'll have even more flexibility from both a liquidity and a capital perspective to invest in our core strengths, relationship-based community and commercial banking in our footprint. And Navitas will be with an owner that can support and accelerate their growth.

So Jefferson, let me turn it to you for additional details on the transaction.

Thank you, Lynn. Navitas has been a very successful investment for us over these past 8 years, and I'm excited now about the ability to get a good price for the business and then to invest and focus on our core banking businesses. I'll start with the financial aspects of the transaction on Page 4. We are selling the origination business and the loan book of Navitas for approximately $1.9 billion in cash. This represents a 7.1% premium over the receivables that we are selling. These numbers will change slightly based on the loan growth between March 31 and close, which is expected in about 60 days.

We are keeping about 2% of the loans on our balance sheet that do not meet the financing requirements of the buyer. The net gain to UCB has been reduced by the capitalized origination costs that were being amortized over the life of the loans and by transaction expenses. The overall earnings impact also benefits from the release of $42 million of Navitas' loan loss reserves.

From a timing perspective, the $42 million reserve release will occur in the second quarter as we move the loans to held for sale and the roughly $77 million gain from the sale should occur when the transaction closes. We expect the combined impact to be additive to tangible book value by $0.67 per share or about -- by about 3%. I will discuss impact to capital ratios on the next page.

Moving to Page 5. I will first talk about the capital impact of the transaction. At the bottom left of the slide, we show our 13.4% CET1 ratio that we had at March 31, and we adjust this down for the pro forma impact of the Peach State deal that will close either mid-Q3 or early Q4, bringing us to a 13% CET1 ratio, again pro forma for Peach State. In this transaction, our CET1 ratio will move up by 145 basis points, driven by the gain on sale from the transaction and with the reduction in risk-weighted assets, taking our CET1 ratio to 14.5% by our calculations.

From a near-term earnings perspective, we estimate that selling the Navitas loans and reinvesting the $1.9 billion in cash in the securities portfolio in the 4% to 4.5% range will initially reduce earnings by about 9% before taking into account any benefits from redeploying the proceeds back into loans or doing other capital use activities.

Specifically, we believe that we will replace this earnings gap in the relatively near term by reinvesting the proceeds into loans via the organic growth of our franchise and by various capital deployment alternatives. On the loan growth front, with this potential transaction in mind, beginning in the fourth quarter of 2025, we have been materially increasing our revenue producer hiring efforts as such, we have increased our revenue producers by 38 people or 18% since September 30, which we believe puts us in a good spot for increasing our loan growth in the second half of 2026 and beyond and will be useful in using the liquidity and capital created by the transaction.

With our significant hiring that has continued into the second quarter, we are planning on upper single-digit loan growth in 2027 if the economy remains constructive into next year. In addition to the elevated hiring that we have done in anticipation of the potential of the Navitas sale, I will also note that the recently completed Peach State or recently announced Peach State transaction was also contemplated with Navitas in mind and replaces about 25% of the loans being sold with Navitas.

Going further, in addition to the increased organic activity and with our projected CET1 ratio in the 14.5% range, we will also explore our various other capital deployment opportunities that are available to us, such as buybacks, balance sheet optimization and perhaps M&A should the opportunity present itself. Please note, though, that our M&A strategy is unchanged and would focus on relatively small, in-market transactions with minimal integration risk where we can be most additive.

With that said, I will direct you to the upper chart on Page 5 and walk through the earnings progression a little bit. Starting from our $0.70 operating earnings base that we reported in the first quarter. We adjust this to include the expected EPS accretion once the cost savings are in that we talked about in the Peach State transaction, which brings us to $0.72 in base earnings.

Then adjusting for the Navitas' sale and the 9% impact that I mentioned before, this takes us to the $0.65 range of adjusted Q1 EPS. Finally, then we do the math on reinvesting the excess capital created either fully into buybacks with a $300 million buyback or at reinvestment ranges of 10% to 12% return on invested capital and these calculations get us back to $0.69 if we were to simply buy back the $300 million in shares at current prices and to the upper end of the $0.69 to $0.73 range if we were to invest at a 10% to 12% return, which is together neutral to slightly accretive compared to our current earnings profile.

All said, once closed, we will be a company with a lower risk profile with a more attractive business mix with roughly half the net charge-offs and one that will get back to earnings accretion or at least neutral in the relatively near term.

With that, I'll pass it back to Lynn and open it up to questions.

Thank you, Jefferson. And I'd like to thank the Navitas' team for being a part of United these past 8 years. You've been a great cultural fit as well as a strong performer and I'm grateful for the time we have had together and the relationship that we have built. And to Wafra, congratulations on a great purchase. I've also been impressed with your culture and approach to the business as we have gone through this process together and I wish you both tremendous success in the future. And now I'd like to open the floor for questions.

[Operator Instructions]

The first question will come from Russell Gunther with Stephens.

I thought the deck was super helpful in terms of the moving pieces. I did want to follow up, though, in terms of your sense of the pro forma margin going forward, both near term, but then as you think about putting this excess liquidity to work on the asset side, maybe help us with how you're thinking about deposit cost expectations going forward and how that has changed with this excess liquidity given an increasingly competitive environment for growth?

All right. So I'll start with that one. Initially, if you just do the pro forma based on Q3, it takes the margin down by about 30 basis points. But I say initially because we believe we're going to be relatively quickly moving these securities back into loans and growing the bank and getting that margin back over time. And the second part of the question was about cost of deposits. We had guided to relatively flat for this quarter. We're still on pace with that. I do think you're going to see the loan growth pick up a little bit. You're seeing the competition pick up a little bit.

We do have the benefit of CDs costs coming down. But I think you could see it be within our expectations this quarter and maybe slightly higher in the second half of the year. But the -- having all this excess liquidity will help us relative to peers, I think, be able to manage our deposit expectations.

Okay. Great. And then you guys mentioned one of the avenues for excess capital deployment being in footprint M&A and kind of small in nature. Maybe just remind us kind of priority markets within footprint, what small in asset size means to you? And then as we think about CET1 levels, just level set us where you measure that and what we can think about as excess from here?

Yes, sure. Russell, I'll take that. So in terms of target areas, our footprint, as I mentioned, the outlines of our footprint are pretty well settled. And so we'd just be looking at tuck-in fill-ins in what we think are attractive markets. I think the Peach State transaction is a great example of that. In terms of what small looks like, our average deal is about between $1 billion and $1.5 billion. We've done smaller like Peach State, but -- so that's those are the kinds of deals we're looking at, small, well-run in-market deals where it's just easier from an integration perspective. It's more -- we can be more additive from a product and balance sheet perspective, and it doesn't distract us from the real work we're doing on hiring and growing our organic business.

Okay. Great. And then I guess just a follow-up to that, guys, would be as you think about where you want to run CET1 relative to the pro forma 14.5%?

Yes, that's a great question. So if you think about it philosophically to start with, I've always held felt like we should hold a little more capital than peers for 2 reasons. One is, historically, as a percentage of assets, as we were building out the franchise, we were -- just for acquisition purposes alone and integration risk and all that, well, let's -- while we're in that fast build-out pace, let's hold a little more capital for that reason.

And then I always felt like the market viewed Navitas as a higher risk asset, frankly, than I did. I think they're -- yes, they have a higher loss content, but their volatility is not that significant. They're really well run. So we held a little more capital from the market's perspective for Navitas. So as you think about now, as a percentage of assets, our acquisition activity will be less. We won't have Navitas on the books. So at a minimum, I would target more core peer levels versus being above peer levels. We haven't set on a specific number. But philosophically, there's certainly no reason for us to be above peer.

The next question will come from Michael Rose with Raymond James.

Obviously, a very good return from when you bought this in 2018. So congrats to you guys. But obviously, these are higher-yielding loans. Lynn, as you just mentioned, the perception around credit quality may have been an issue. I know you've had some long-haul trucking type of issues, but certainly very manageable given the portfolio size. I guess the question is, I guess, why now exactly, particularly given the spread pressure that we're seeing and given that these loan yields have been very consistent for a very long period of time.

Clearly, the business is growing. I know you've limited to 10%. That's -- you've been operating at that level for a period of time, but why not wait for sometime in the future once we get through maybe some of the spread compression issues?

Yes, sure. Great question, Michael. So we started looking at this really 12 to 18 months ago. Part -- one issue is, as you think about a company like Navitas, you can only hold back or I won't use -- maybe I'll use the word strangle. You can't hold back a growth company too much or you just start losing momentum, start losing people and those kinds of things. So one reason -- one thing is we were at kind of our limit. We needed to figure out some way to continue to invest in the business and grow the business without it overwhelming us.

So we looked at various alternatives, whether selling more loans, securitizing whatever. But we felt like given the attractiveness of the company, the rise of private credit, all those things together said, "Hey, let's explore a sale. Yes, it's going to have the short-term impacts that you mentioned. But long term, we get them in a better home, and we're better able to focus on our core bank. It just felt like the right time for those reasons.

Appreciate the color. Maybe just as a follow-up, I know you guys had planned to offset some of the dilution from the acquisition, the Peach State acquisition with buybacks. That was one thing that I don't think was listed in the slide deck from this morning. But could increased buybacks be part of the equation for some of this liquidity and capital?

Yes, absolutely. And if we didn't have that in the deck, we should have -- I think it's in there. But absolutely, that is part of it. So again, going back 18 months ago, we -- 12 -- 18 months ago, we said, look, all right, if we're going to do this, we need to -- a couple of things we thought about. Number one, we need to accelerate hiring. So we actually put together a project just as we do with acquisitions, we have a very detailed process of how do we bring people in, how do we integrate them into the culture, how do we get them to understand the credit world that United operates in. But we have not done that for organic hires. It had been more one-offs. So we said, let's -- all right, if we're going to take Navitas out, get them to a better home, we're going to have this capital and liquidity, let's accelerate hiring.

So Rich and his team put that together. They've been very successful. We haven't talked a lot about it, but the pace of new hires is coming on very well. So we feel really good about the organic growth coming on. And at the same time, you've got this excess capital, and we knew we would have even more excess capital than you thought we had. So let's look at buybacks. So you saw us lean into buybacks the last 6 months far more than we have been doing. And as I look at small tuck-in acquisitions, we had actually initially proposed the Peach State deal to Peach State as an all-cash transaction, looking at that as the deployment of capital in anticipation of this.

But some of them wanted to hold the stock, and so we did a 50-50 deal. So I would say, absolutely, buybacks are on that menu. And we've done a lot of work looking at different alternatives, and we're going to take the next 60 days between now and close to kind of refine those things, think about what's in the best long-term shareholder interest and then begin executing on that after close.

Very, very fair. And sorry, I missed the repurchase thing. It was in there, so that's my fault. Maybe just one final question for me. I know you guys have talked about kind of mid-single-digit growth this year. It sounds like you're going to see or expecting some acceleration as we think about next year. Maybe it's a little bit early to discuss it, but I know you have been hiring folks. I guess what gives you the confidence that you can see accelerating loan growth as we move into next year?

This is Rich Bradshaw, the President and Chief Banking Officer. I think I'm a special guest on today's call. But -- so yes, the hiring has gone ahead of plan. It's gone very well. We're -- our average lender producer experience is in the 20-year range in the people we're hiring. They're from traditionally larger banks than us. So they're in our growth markets. So we're very excited about this. So we do anticipate, obviously, core loan growth increasing in 2027.

The next question will come from Catherine Mealor with KBW.

A couple of just small follow-ups. First on -- as we play with the margin impact, what cost of funds should we be using to offset their kind of? What do you all typically use as a funding cost for this portfolio?

So their funding cost is kind of baked into the whole bank. So as a modeler of the company, I don't think I would change the funding cost. When we were funding it internally, we had an FTP and a spread and all that kind of thing. But our funding really is unchanged, except for that we have a significant amount of liquidity now to fund future loan growth and to help us kind of potentially widen this margin, the new margin in an environment where deposit funding is a little tougher. So I don't think the funding cost in the near-term modeling changes a lot.

Okay. Cool. So just use like a 170 cost of deposits.

That's right because they...

Compete kind of against it.

Right. They're just going to be funding securities for a while, and that's going to translate into loans over time.

Okay. Cool. Great. And then any timing on the investment of the proceeds for the bond purchases? I mean, do you plan to do just kind of one big transaction all at once? Or is there any kind of layering in that we should consider for those investments?

It's under -- I would say it's just -- it's under review. We're going to let this deal close. We're examining all options, and we'll make decisions later in the year.

Okay. And then lastly, at what point you had considered an HTM restructure. Is that at all back on the table just in light of this transaction and with higher for longer rate environment potentially on the horizon? Or just kind of curious your updated thoughts on that?

Yes. I would say that's one of the menu items that we're evaluating. We haven't made any decisions on any of these things. And so because what we want to do now that we've got this piece of the transaction announced, we want to just really sit back and say, all right, what's in the best long-term interest of the company in terms of risk, return, all those things. So no decisions, but it is one of the menu items we've looked at.

The next question will come from Stephen Scouten with Piper Sandler.

I guess I'm curious how you think about the time line of the deployment of the incremental liquidity. I mean you already had a relative strength from a liquidity standpoint, I guess, from a low loan-to-deposit ratio. So do you think about the risk profile of your kind of core loan book any differently or any new market expansions to kind of allow for maybe more rapid deployment of this liquidity? Because I think you probably already had like 2 or 3 years of ability to grow loans in excess of deposits. So I just want to think about that time line and that risk profile from here?

Yes. So in terms of the loan book, expanding the risk profile is not something we would do only because my background grew up in credit. It kind of goes exponential. You have a good loan and a bad loan, and it's really hard to make just something in the middle. So we don't plan on expanding the box. What we're really trying to do is expand our product set.

So Rich talked about commercial bankers coming from larger banks. So our middle market area, for example, which will be larger kind of end market commercial deals, we've not been as active in that market as we'd like to be. I don't view that as expanding the risk box because the underwriting of those are very consistent, very good, but it's a product we haven't done as much of as an example. And then just volume, if you look at -- this makes sense, but if you look at historically, loan growth is really pretty closely tied to the net loan growth of your producers. I mean that's a logical thing you don't really think about or talk about too much. And so we've expanded the net growth of our producers pretty substantially.

Rich may have the exact numbers. This won't be for the full year, but I think we're up about 18% over year -- over the last few months. If you annualize it, now it won't annualize at that level. It's probably more like the 12% to 15% range, but that's significantly higher than what we've been doing. And so just from a pure volume perspective of doing the kind of deals we want to do, we would look for that to happen. But that takes a while to come in. So you bring a new banker in 6 to 9 months before they start really producing at full level. So this is a longer-term play.

So the immediate deployment will be in the securities book. It will be short, simple, safe. We are not looking to take any risk there because we're not -- we're funding with core deposits. We're not funding out in the wholesale market. We don't have to reach for yield or anything else. So you'll see a short simple safe bond transactions in the near term. And then Rich has got kind of carte blanche to go get great bankers and bring them in the market and deliver on that.

And I agree with the numbers and comments, particularly about middle market that Lynn said. And I will tell you, it's very encouraging because it does take a while for a lender to get on board in terms of bringing on new business and closing new business. But what's been exciting is some of these new hires within 60 days, 90 days, we're already seeing deals at senior credit committee, and those are all deals for us over $20 million. So it is happening, and we are excited.

Yes, that's great color. And I guess kind of tying on to that, you have been extremely successful with this kind of new hire progression over the last couple of quarters. Does this accelerate that even further? Like do you get a little bit more aggressive, whether that be from a market perspective or just in terms of a willingness to spend near term to hire more people, maybe even, I don't know, LPOs. I know, Lynn, you said it's going to be a long time horizon to deploy this, but I'm just kind of wondering if it changes the thought process around what's already been a positive trend to maybe magnify that further.

No, it doesn't accelerate only because, as I mentioned, we've been executing on this for the last 12 months. We just -- I don't like to tell people what we're going to do. I'd like to tell people what we are doing. And so we are already, in our mind, at that accelerated pace in anticipation of this. But it's -- if you're a banker considering coming over to us, I will say that this is an attractive thing to help Rich bring people on because now his pitch has already been great. You've got a bank with a great culture and a great footprint.

And by the way, now we've got a mid-70s loan-to-deposit ratio, all core funded. So yes, we want you to go get deposits, bring deposits in, but you don't have to be -- you're not going to be super focused on that. Let's go bring in the loan transactions. We've got tons of capital. It's -- so it's a really good story that we think continues the momentum that Rich has already built.

And I would add, we're not trying to -- we do have some goals that we're trying to hit, but we're past this year. We're really being opportunistic. If it's the right people, we will bring them on. And we'd rather have the right people than a specific number. And all of a sudden, when I came here 12 years ago, we never talked about culture and the hiring. Now it's always the first question that they bring up. So that's playing a really important role. And so we're going to continue trying to do what we're doing, and we think we're doing it well.

Yes. Fantastic. No, it is a differentiated recruiting position to have all that liquidity. So congrats on the transaction and all the progress.

[Operator Instructions]

The next question will come from Christopher Marinac with Brean Capital LLC.

Just a quick question on the interest rate environment. The fact that rates have moved since the end of March, does this make this decision easier for you to execute?

Good question. I'll start with that. The rate changes aren't super meaningful in some ways. They are creating more unrealized losses and a higher reinvestment rate if we were to go down that path. So I don't think the rate changes are affecting our menu of things to do. Now if you're talking about -- maybe have a slightly different question, Chris, which was the executing of the Navitas transaction, higher rates probably -- all things equal, it maybe hurts the transaction or makes it a little more -- makes the loans on the balance sheet a little less valuable, which maybe feel like we had a good valuation for what we sold. So rate volatility does play in the valuation, obviously, but that 10-year stayed in a range where it made the transaction doable.

Great. And then just for Rich, real quick. I mean, since rates are up a little bit, does that give you any more room to perhaps price just a little bit better? I know it's competitive, and I know it's not an easy time, but just curious if you can get more yield from customers?

Yes, it's a great question. I will say over the last 12 months, we've seen pricing compress, particularly in CRE. And I'll say today is the first time I've seen that really stabilize and actually maybe increase a little bit, particularly on the investment CRE construction, which we do a lot of. So the answer is yes. We've seen a little impact on the positive side.

The next question will come from David Bishop with Hovde Group.

A quick question circling back to the share buyback. I appreciate the footnote, I think it shows about $300 million potentially contemplated. Remind us how much is remaining under I think there's a current $100 million authorization. I guess, does that imply you'll have to go back and seek Board approval to increase it?

That's right. So our current remaining authorization is $63 million. Keep in mind that with the Peach State deal, we talked about buying the $50 million back already, so that's contemplated. I will say that we are between the S-4 and the shareholder vote at Peach State. So we're currently blacked out. But I think a strong buyback is definitely a stronger buyback than what the $63 million authorization would put out there is definitely on the table as an option for us as we go through the year.

Got it. And then in terms of the hiring you guys have made have been aggressive over the past year and into this year, curious, Jefferson if that has any impact in terms of your maybe organic stand-alone expense growth expectations this year into next?

So most of the hiring that we've done so far incorporated into our expense guidance for the rest of the year when I mentioned it would be up $1 million in the second and third, fourth quarter, not cumulatively, but $1 million to the run rate. I can see that moving a little higher, but I think that we've incorporated that into our prior guidance mostly.

Got it. And one final housekeeping question. I appreciate the -- I think it's about $9 million that comes out of the expense run rate from Navitas. Can we assume from a breakdown in terms of comp, salaries versus occupancy, maybe 2/3, 1/3, just sort of any guidance you can give there in terms of [indiscernible]?

We have -- let me get back to you on that. Half and half is the number coming to me, but it could be -- let me get back to you on the specifics of that, but half and half is the number I'm remembering.

This will conclude our question-and-answer session. I would like to turn the conference back over to Mr. Lynn Harton for any closing remarks.

Great. Well, once again, thank you all for joining the call for great questions. And any further follow-up, feel free to reach out to any of us here, and I hope you have a great rest of your day. Thank you.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Good morning, and welcome to United Community Bank's First Quarter 2026 Earnings Call. Hosting the call today are Chairman and Chief Executive Officer, Lynn Harton; Chief Financial Officer, Jefferson Harralson; President and Chief Banking Officer, Rich Bradshaw; and Chief Risk Officer, Rob Edwards.

United's presentation today includes references to operating earnings; pretax, pre-credit earnings; and other non-GAAP financial information. For these non-GAAP financial measures, United has provided a reconciliation to the corresponding GAAP financial measure in the Financial Highlights section of the earnings release as well as at the end of the investor presentation. Both are included on the website at ucbi.com. Copies of the first quarter's earnings release and investor presentation were filed this morning on Form 8-K with the SEC, and a replay of this call will be available in the Investor Relations section of the company's website at ucbi.com.

Please be aware that during this call, forward-looking statements may be made by representatives of United. Any forward-looking statements should be considered in light of risks and uncertainties described on Page 5 and 6 of the company's 2025 Form 10-K as well as other information provided by the company in its filings with the SEC and included on its website.

At this time, I will turn the call over to Lynn Harton.

Good morning, and thank you for joining our call today. We've got a lot to cover. I'm going to start with our quarterly earnings update, and then we will close with the details of our acquisition of Peach State Bank headquartered in Gainesville, Georgia.

We had a great start to 2026. For the first quarter, we realized net income of a little over $84 million, translating into EPS of $0.69. On an operating basis, our EPS was $0.70, representing a 19% increase from the first quarter of 2025. Annualized loan growth of 4.5% for the quarter and an expansion of our net interest margin of 3 basis points helped to drive these results. Credit also performed very well this quarter with total charge-offs of 22 basis points, only 10 basis points, excluding Navitas.

Nonperforming assets as a percentage of loans were 50 basis points, down 1 basis point from Q1 2025, and special mention in substandard loans totaled only 2.9% of total loans, down 2 basis points from Q1 of 2025. Our operating return on assets was 122 basis points, an 18 basis point improvement year-over-year, and our operating return on tangible common equity was 13.1%.

Given our high capital levels, we continued to return capital to shareholders, both via a $0.25 quarterly dividend and the repurchase of $37 million of our common stock. We also announced the intention to redeem our remaining $100 million in sub debt in the second quarter, only 20% of which qualified as Tier 2 capital. Even with the dilution from our repurchase activity, tangible book value per share grew at an annualized rate of nearly 6% for the quarter and by 10% year-over-year. We were also excited to have been recognized by J.D. Power as the top-ranked bank for retail client satisfaction in the Southeast during the quarter. This is the 12th time the United team has received this recognition. I'm very proud of the dedication and genuine care that our teams across the footprint demonstrate every day. It's because of them that we are the most recognized bank for customer satisfaction in the Southeast.

I'll now turn it over to Jefferson to cover our first quarter's performance in more detail.

Thank you, Lynn, and good morning to everyone. I will start on Page 5 and talk about our deposit results. On an end-of-period basis, our customer deposits grew by $237 million or 4% annualized, mostly driven by DDA growth in the quarter. We were also very pleased that our cost of deposits moved down 9 basis points to 1.67% and that our cumulative total deposit beta stands at 39% in this down cycle, which exceeded our goal.

On Page 6, we turn to the loan portfolio, where our growth continued at a 4.5% annualized pace. Our growth came primarily in the HELOC and C&I categories, which are 2 of our current areas of focus for growth.

Turning to Page 7, where we highlight some of the strengths of our balance sheet. We believe that our balance sheet is in good position from a liquidity and capital standpoint to be ready for any economic volatility. We have very limited broker deposits and very limited wholesale borrowings of any kind. Our loan-to-deposit ratio remained low and was unchanged at 82% this quarter with a solid end-of-period deposit growth. Our CET1 ratio was flat at 13.4% and remains a source of strength for the bank.

On Page 8, we look at capital in more detail. As I mentioned, our CET1 ratio was 13.4% and our TCE was also flat at 9.92%. We were active in our buyback again in the first quarter, buying back $37 million in shares, which equated to 1.1 million shares in the quarter or just under 1% of our shares outstanding.

Moving on to spread income on Page 9. Spread income was down in Q1, mainly due to having 2 less days in the quarter. On a year-over-year basis, our spread income was up 10%. Our net interest margin increased 3 basis points in the quarter to 3.65% and up 29 basis points compared to last year, and the first quarter is the fifth quarter in a row of margin expansion. We continue to experience a margin tailwind from our back book repricing and from the mix change towards loans away from securities. In the next year, using just maturities, we have about $1.4 billion of assets, paying down in the 4.63% range. And because of this continued impact, I would expect the margin to be up between 3 and 5 basis points in the second quarter.

Moving to Page 10. Noninterest income was $43.7 million in the quarter. This included a $5.2 million gain on an interest rate cap that was hedging a sub debt issuance that we intend to redeem on April 30. Excluding the cap gain, noninterest income benefited from a strong mortgage quarter and was offset by seasonally lower service charges. And we opted to sell less Navitas loans than usual. Last quarter, we sold $41.6 million in Navitas loans compared to $8.3 million this quarter.

Our GAAP expenses were $157.3 million in the first quarter, and our operating expenses were $151.6 million. We had a small amount of our normal merger charges, but we had 2 more unusual and offsetting nonoperating expenses. First, we had fully accrued for the FDIC special assessment that came after the Silicon Valley failures. That said, the FDIC refilled this bond faster than expected and is not asking for the full assessment. We had taken the original assessment as a nonoperating loss, and so the release of the assessment of $1.9 million comes through nonoperating as well.

We also had another nonoperating charge in the first quarter related to a change in our payroll process necessitated by changes in legislation. We had paid our employees on a current basis, and we changed this to paying our employees in arrears. As a result of the transition in payroll timing, some of our employees would have gone nearly a month without a paycheck, so we paid an additional check to bridge the gap. Aside the one-timers, expenses were $151.6 million, relatively flat compared to the fourth quarter.

Moving to credit quality on Page 12. Net charge-offs were 22 basis points in the quarter, improved from last quarter and flat to last year. We also saw relatively flat NPAs and a nice improvement in past dues as credit quality remains strong.

I will finish on the quarterly results on Page 13 with the allowance for credit losses. Our loan loss provision was $10.9 million in the quarter, which was in line with our net charge-offs. With the loan growth, our allowance coverage of credit losses moved down slightly to 1.15%.

With that, I'll pass it back to Lynn.

Thank you, Jefferson. Now let's move into a discussion of our Peach State Bank announcement, and I'll start with a bit of history. United began de novo in Gainesville, part of Hall County in 2005. Over the past 20 years, we've enjoyed strong organic growth there with now $827 million of deposits in the county. Peach State was founded that same year, 2005, and has also enjoyed strong organic growth. Total assets for the company are $788 million as of the end of the first quarter with $713 million in deposits. Hall County is a rapidly growing part of the overall Atlanta MSA. And after this transaction, the combined bank will have the #1 deposit share in the county.

Culturally, we fit well together. We know each other personally. We work in the community together. We go to school together. We go to church together. Peach State shares the same passion for customer service as United. There's a tremendous amount of mutual respect between the 2 teams, and I'm very excited to see them come together and continue to win in this market.

Jefferson, let me turn it back over to you now to cover the financial aspects of the transaction.

Okay. Well, first, Peach State has approximately $800 million in assets or about 3% of our assets. The deal value is about $100 million and will be a 50-50 cash stock mix. We are paying 1.9x tangible book value and 6x cost saved earnings. Given our overlap, we are estimating 40% cost savings. While the deal is 50-50 stock and cash, we plan on repurchasing the $50 million in shares issued by year-end. As structured, we estimate the deal to be $0.09 accretive in 2027. And with the planned buybacks, we estimate the deal to be $0.12 accretive.

With that, I'll pass it back to Lynn to conclude.

Thank you, Jefferson. This is a great example of what we want to do in the M&A space. It is in market, manageable size, a history of strong performance, great upside potential and an attractive way to leverage capital and continue to grow our business and our brand. I'd like to now open the call to questions.

[Operator Instructions] Our first question today comes from Russell Gunther from Stephens.

This is Jake Morton on for Russell Gunther. My first question is on deposit costs. How would you expect them to trend from here in an interest rate scenario where the Fed remains on pause on a stand-alone basis and including Peach State? Is there room for you to bring these down further? Or should we expect some pressure going forward?

I'll take that one. Thanks for the question. I would expect our deposit cost to be relatively flat. We have some tailwind from CD maturities, but we are seeing competition out there, and we do want to grow our deposits this year. So I think if you layer in relatively flat deposit costs, that's a good place to start. And the deal being only 3% of our assets, doesn't change those numbers meaningfully.

Got it. I appreciate the color there. And my second question is for -- so do you have the spot cost of deposits at the end of the quarter? And also, can you talk to the competition that you were seeing in your market? And like where is it most aggressive, which specific product and also competitor-wise, if you could talk to that.

Yes. Thanks. Great question. The spot cost is relatively close to the quarterly average, so not a major difference in spot versus quarterly average. I may pass to Rich to talk about deposit competition of what we're seeing.

In terms of competition, in terms of past quarters, I would say, it's slowed down a little bit. We're not getting a lot of special request on pricing from the market. So I'd say it's kind of normalized. And we really don't have it. We're in 6 states. So we have a lot of different competitors, no single one.

Our next question comes from Michael Rose from Raymond James.

Just wanted to start on loan growth. Obviously, really strong results in both C&I and commercial real estate. You did have some continued paydown on the construction side. I guess my question is, are we getting towards the end of the kind of more accelerated paydowns here? Because it seems to me, just given the growth that you've had and the momentum you've had in both C&I and CRE, that loan growth could actually accelerate from here. So I just wanted to just better understand that? And then if you can talk to some of the competition just given all the dislocation in and around your markets from the deal activity that we're seeing.

Sure. I'm writing these down. Let's start with -- yes, so we are pleased with Q1 loan growth. It's usually a seasonally low quarter for us. So we're very pleased. And in terms of the geography, South Florida led with Matt Bruno and South Carolina and Coastal Georgia were second with North Florida in third. And in terms of the commercial lines of business that led the way, it was middle market, ABL and Navitas. And then lastly, on the retail side was HELOCs.

In terms of paydowns, we actually saw the biggest amount of paydowns in hospitality, which we think is a good thing. So don't see a big pickup. Normally, we do a lot of construction CRE lending. So it's just kind of the normal flow. So I don't see a material change there. And in terms of loan growth going forward, we remain optimistic. We think it will be in the 5% to 6% range, providing nothing else goes on unusual in Iran.

And then lastly, on hiring, we've talked about that because that's influencing things. In Q1, we saw a net increase of 10 revenue producers, and we're aiming for 10% annual growth on that in 2026. And we have 9 more to hit the goal, and we think we'll get there or get close by the end of Q2.

All right. Really, really helpful. Maybe just as a follow-up, just on expenses. If I exclude kind of all the moving parts, it looks like you guys had really good kind of expense control. Maybe you can just talk about some of the hiring efforts that you guys might have in place as we contemplate the next couple of quarters. And then if you could just touch on maybe some early investments on AI and what you guys are doing and what we could expect there from an expense build.

All right. All right. Great. Rich just spoke about the kind of the numbers of the new hires that we're very excited about. I think if you think about our expense growth, we're targeting this 3.5% range, but now we have these hires that you might add on to that. I think the hires could add about $1 million to $1.2 million a quarter. We're not factoring in the better growth that could happen later in the year, but that should happen sometime late '26 or early '27. So we're excited about our ability to grow our producers and it could have some effect on expenses in the near term.

Yes, I would agree with that in terms of -- you got to -- you see a little bit of a lag with the new hires. You kind of expect it to start kicking in, in 5 months to 6 months reasonably when you hire them. And so we're expecting to see late in Q2, some help from Q4, which is also a good hiring quarter.

And Michael, you mentioned AI. So far, I would say our AI investments have been very good and have a strong payback. For example, most of our AI at this time is coming in through vendors. We've -- on the fraud side, all of our vendors are heavy users of AI and our fraud losses have actually dropped by 50% over the last 2 years partially because of that. And that's not even counting the benefits to our clients, which would be on top of that.

Our contact center, where we have chatbots and other AI-enabled tools, we're seeing the ability to take more calls with the same number of agents. The same in our programming. We're doing more programming work today without adding programmers as they're using AI. So as we think about the next steps, an Agentic AI -- I think there are clearly possibilities for some of our kind of more mundane processes, for example, flood and other things where we could get some benefit from AI. That's at just the conversational stage now. But so far, I would say I wouldn't -- any expense build -- our history is any expense build we come out of that, we more than have realized savings on.

Our next question comes from Gary Tenner from D.A. Davidson.

I just wanted to touch on M&A for a second. You guys have talked about being pretty focused in-market, small banks. Obviously, Peach State fits the bill there. Given the environment we're in, do you see a pipeline of activity where you could potentially sort of announce another deal in lockstep with this one? Any reason to think that this would take you out of the market for any period of time?

Great. Thank you. Great question. No, I mean, if -- we would not have any issue. I don't believe in doing another deal while Peach State is active. Certainly, given the size, given the regulatory environment, given our history, if we saw the right deal, which would have similar metrics and conditions to Peach State, I'd be more than happy to move forward with that.

And then just the comment around the accretion in 2027 kind of adjusted for share repurchase. I guess it's sort of semantics, but I mean, the repurchase shares, presumably, that would be over and above what you would plan to do anyway, right? So how do you kind of balance that if that question is fine.

Well, and I guess I'll start with that. And the reason we presented it that way with showing the effect of the repurchase. Our original intent was to do the entire deal all cash. In our view, and I understand it's different than a share repurchase. But at the same time, if I'm evaluating a share repurchase at 11, 12x earnings versus buying a bank at 6, hey, why not buy the bank at 6x earnings. So I guess that was in our mind, and that's kind of the way we presented it.

I think that's well said. I don't have a lot to add to that, but I will say we have $63 million left on our authorization. We have been active in the buyback already with $67 million over the last 2 quarters. So it's a great question. But I think Lynn hit it on how we're thinking about the deal as a use of capital.

And our next question comes from Catherine Mealor from KBW.

This is [indiscernible] stepping in for Catherine Mealor. And congratulations on the acquisition. So my first question is kind of a follow-up on the buyback activity. You bought back around 30 million shares in the past 2 quarters. And with the merger announcement, you mentioned that repurchasing shares could offset the dilution. I was just wondering if you could talk a little bit about the timing and the amount of buybacks we can expect moving forward from here.

That's a great question. And I do think we will buy back the $50 million by year-end. We are somewhat price sensitive. So I cannot -- I don't want to guarantee that we're buying back shares in any given quarter. So I don't know if I would put that in the model for Q2. But I do think we are creating about $30 million of excess capital every quarter. That is the amount that we will be contemplating purchasing on a given quarter. But it depends on the price and some other things we might have going on, it might not be an every quarter thing. So I can't help you so much on the modeling there. But I think by year-end, we will get the $50 million in.

That's great. And then my other question is about your fee outlook. Your fees came in strong this quarter, and I was kind of wondering where you expect fees to go from here.

Right. I expect a modest growth rate in our fee income. We have some nice growth businesses within here. Our treasury services has been growing well. We've made relatively significant investments in our wealth area that we're very excited about. Our mortgage business has been going really strongly. We also have seasonal strength coming in mortgage and Navitas as we go into the second quarter and SBA. So I think you will see a nice growth rate off of this seasonally low first quarter.

Our next question comes from Stephen Scouten from Piper Sandler.

A couple of follow-ups maybe to some conversations that have already been covered to some degree. But Lynn, you said this was kind of like the exact type of deal you guys would look for given culture and deposits and so forth. How about like from a size perspective, I mean, would you guys lean towards these smaller types of deals moving forward still? Or would you like to do something a little more sizable if that were available? What would be your preference there?

Yes. We have typically done deals 10%, probably at the most, 15% or less of our size. We just find that the institutions of that size, they tend to align with us better on employee experience, client experience, community involvement, and we can be more additive. So yes, if Peach State had been twice as large, would we be excited about it? Absolutely. There's just a limited number of those larger, call them, $2.5 billion to $3.5 billion banks. But certainly, we would be interested in those as well.

This one is, I think, really unique, again, given the history of the 2 companies together, the growth in Hall County and this really rapidly growing county, #1 job-creating county, I believe, in Georgia. And so to be able to have that kind of team together and to share together made it really attractive.

Makes sense. I appreciate that. And then on the hiring target, I think if I heard Rich correctly, you guys might actually kind of hit your stated target for the year by the end of 2Q. So would you anticipate ramping up that plan further? Or would it more be, hey, let's let these people ramp up over that 5- to 6-month time line before we add incremental expenses on continual hiring?

Steve, that's a great question. I mean, certainly, we want to hit goal, but we would be opportunistic. If we saw the right people out there with the right experience and the right sized portfolio, we would certainly look to do that.

Yes. And I would just say, too, the seasonality as you get in the year, just with bonuses, those kinds of things, first quarter, second quarter are strong, starts to slow down in the third and fourth quarter, it's more difficult. So I think Rich getting out to an early start has been a great thing.

Yes. That cadence makes a lot of sense. Okay. And then maybe just last thing for me would be kind of overall NIM trajectory from here, maybe for Jefferson. I know you said spot cost deposits were kind of the same as the quarterly average and maybe expect them to stay flat from here. So would you expect a little bit of incremental upside on the loan repricing? I think you called out $1.4 billion in fixed rate assets.

Yes, I do. I think we'll -- I had mentioned that I think we'll get 3 to 5 basis points of margin expansion in the second quarter. I think that we are slightly asset sensitive and the outlook for no rate cuts doesn't really hurt us. We're relatively flat, but slightly asset sensitive. But I think this back book repricing story continues. I think this mix change towards loans away from securities continues. So we do have a wider margin in our model throughout the year, but we do have a nice 3 to 5 expectation in the second quarter.

And our next question comes from Christopher Marinac from Brean Capital.

I want to go back to Peach State Bank for a second. Would you only buy banks that have excess deposits, and that seems like an attractive feature of this transaction? And is that something that will guide your M&A interest going forward?

I would say no to that question. We like to have a low loan-to-deposit ratio. We think we can put those deposits to work. But that's the -- one good thing of many of having an 82% loan-to-deposit ratio is that we can also buy banks, small banks that are loaned up as well and give them some more capacity for growth. So that was a nice to have in this acquisition. We also think we can help out high loan-to-deposit ratio banks as well if that type of bank came about.

Got it. And then for the new hires, is there a deposit mandate with these folks? And how will that play out as '27 comes into focus?

Certainly, on the loan side, we are requiring a depository relationship whenever we do a loan, so we'll start there. But these people all have existing clients. And so we're hoping that the first thing they can bring over is the deposits. It's easier than the loans. So we see that pretty fast, and that's all part of the package.

Our next question comes from Kyle Gierman from Hovde Group.

This is Kyle on for Dave Bishop. Just wanted to follow up back on fee income. I wanted to go into mortgage banking, saw some nice trends there. I was wondering how sustainable that might be going forward? And any initiatives in place to enhance that line item?

So I'll start maybe and then pass it to Rich on the initiatives. We have one thing working for us and one thing working against us as we go into the second quarter for mortgage. First, rates you had rates dipped to -- mortgage rates dipped to the 6% range at the end of February, which helped promote a little mini refi boom that helped out this quarter. But also, we're going into the second and third quarters, which are the strongest seasonal quarters for mortgage. So you get a little bit of an offset as you go into Q2. I'll pass it to Rich for initiatives.

I'd say the -- on the mortgage side, obviously, we're expecting, as Jefferson said, a stronger Q2. The challenge in mortgage is interest rates drive so much of it. And so that's a little bit -- it's a little bit hard to say. We do have a few more shorter on-balance sheet products that have driven some interest. So we'll continue looking at that.

And maybe a final question. Saw a slight uptick in NPAs this quarter. I was wondering if you could provide some color on what drove that? And then maybe just a broad view of the credit quality trends.

Yes. This is Rob. Thanks, Kyle, for the question. So I sort of anticipate asset quality to be stable. And I would expect NPAs to kind of fluctuate up and down. If you look back, maybe 10 basis points up or down over time. There wasn't any one credit that moved into NPA this quarter that's a highlight or anything. It's just a standard movement in and out of nonaccrual.

And ladies and gentlemen, with that, we'll be concluding our question-and-answer session. I would like to turn the floor back over to Lynn Harton for any closing remarks.

Great. Thank you, and I appreciate everybody joining the call. And again, any further questions, reach out to Jefferson or myself, and we look forward to talking to you again soon. Have a great day.

The conference has now concluded. We do thank you for attending today's presentation. You may now disconnect your lines.

Good morning, and welcome to United Community Bank's Fourth Quarter 2025 Earnings Call. Hosting our call today are Chairman and Chief Executive Officer, Lynn Harton; Chief Financial Officer, Jefferson Harralson; President and Chief Banking Officer, Rich Bradshaw; and Chief Risk Officer, Rob Edwards.

United's presentation today includes references to operating earnings, pretax, precredit earnings and other non-GAAP financial information. For these non-GAAP financial measures, United has provided a reconciliation to the corresponding GAAP financial measure in the financial highlights section of the earnings release as well as at the end of the investor presentation. Both are included on the website at ucbi.com. Copies of the fourth quarter's earnings release and investor presentation were filed this morning on Form 8-K with the SEC and a replay of this call will be available in the Investor Relations section of the company's website at ucbi.com.

Please be aware that during this call, forward-looking statements may be made by representatives of United. Any forward-looking statements should be considered in light of risks and uncertainties described on Pages 5 and 6 of the company's 2024 Form 10-K as well as other information provided by the company in its filings with the SEC and included on its website.

At this time, I'll turn the call over to Lynn Harton.

Good morning, and thank you for joining our call today. The fourth quarter was a solid end to a great year. During the quarter, we had 11% year-over-year revenue growth, led by continued margin expansion and 4.4% annualized loan growth. Nonperforming assets, past dues and substandard loans remained stable at low levels. Our operating earnings per share for the quarter was $0.71, a 13% year-over-year improvement. Our fourth quarter return on assets was 1.22%, and our return on tangible common equity was 13.3%.

For the year, our operating earnings per share grew by 18% from $2.30 to $2.71. 2025 saw solid improvements in all of our key performance ratios. Margin was up 23 basis points. Efficiency ratio improved by 264 basis points. Credit losses declined and our return on assets improved by 18 basis points. We topped $1 billion in revenue for the year with 12% year-over-year growth. We put extra focus on our retail and small business lending efforts in both of those lines passed $1 billion in annual production for the first time. Our Navitas equipment finance team also crossed $1 billion in originations for the first time.

Executing on our capital plan, we increased our dividend in the third quarter to an annualized rate of $1 per share. We took advantage of the opportunity to repurchase 1 million shares of our stock in the fourth quarter at an average price below $30 per share. During the year, we also redeemed our preferred stock, further increasing our returns to common shareholders. Our return on tangible common equity reached 13.3% for the year, and our tangible book value per share grew by 11% year-over-year.

Culture remained a focus during the year as well. As a result, we were recognized for being #1 in retail client satisfaction in the Southeast for the 11th time by J.D. Power. American Banker recognized us for the ninth time as being one of the top banks to work for in the country. And the American Bankers Association awarded us with a Community Commitment Award for our Financial Literacy month program. For Financial Literacy month in 2025, our team led 154 workshops reaching more than 13,400 students. That's just a small example of the tremendous energy the United team personally invest in our communities.

2025 was a great year, but we want to be better. To improve the durability of our earnings and multiple interest rate scenarios, we reduced our securities duration. We upgraded both our talent and our systems that manage interest rate risk and deposit pricing. We continue to invest in growth. 2025 saw the successful conversion of American National Bank in Fort Lauderdale to the United Systems and brand expanding our presence in this dynamic market.

We opened a new office in Cary, North Carolina and began work on new offices in South Miami and Winston-Salem, North Carolina. We committed to the expansion of our Florida private banking model to the rest of our footprint. We expanded our product set and treasury management to help us continue to grow our commercial line of business and we added talent and risk management to prepare us for continued success. It's been a great year.

Jefferson, why don't you cover our performance in more detail.

Thank you, Lynn, and good morning to everyone. I will start on Page 6 and talk about our deposit results. We experienced a positive seasonality we expected with regard to public funds in the fourth quarter with an increase of $293 million. We were also very pleased that our cost of deposits improved 21 basis points to 1.76% and that our cumulative total deposit beta moved to 40% from 37% as we discussed last quarter.

Excluding public funds, our average balances were down slightly for the quarter, but similar to last year, we did see a greater decline in end-of-period balances. This end-of-period decline was partially due to seasonality with customers moving cash in and out during the last 2 weeks of the year. And it was also the result of our strategy where we lowered rates on some of our highest cost single-service customers. For the year, our deposits grew by 1%, and we continue to grow customers and accounts.

On Page 7, we turn to the loan portfolio, where our growth continued at a 4.4% annualized pace. Our growth came primarily in the C&I and HELOC categories, which are 2 of our current areas of focus for growth.

Turning to Page 8, where we highlight some of the strengths of our balance sheet. We believe that our balance sheet is in good position from a liquidity and capital standpoint to be ready for any economic volatility. We have very limited broker deposits and very limited wholesale borrowings of any time. Our loan-to-deposit ratio remained low but increased for the third quarter in a row and is now at 82%. Our CET1 ratio was relatively flat at 13.4% and remains a source of strength for the bank.

On Page 9, we look at capital in more detail. As I mentioned, our CET1 ratio was 13.4% and our TCE increased by 21 basis points to 9.92%. As Lynn mentioned we were active in our buyback in the fourth quarter, buying back 1 million shares at just under $30 per share.

Moving on to spread income on Page 10. We grew spread income 7% annualized in the quarter. Our net interest margin increased 4 basis points to 3.62%. Excluding loan accretion, our net interest margin increased by 6 basis points as compared to the third quarter. The driver was mainly a lower cost of funds, but we also benefited from the loan-to-deposit ratio moving to 82% from 80% last quarter.

We continue to experience a NIM tailwind from our back book repricing and from the mix change towards loans and away from securities. In 2026, using just maturities, we have about $1.4 billion of assets paying down in the 4.90% range. And because of this continued impact, I would expect the NIM to be up between 2 and 4 basis points in the first quarter. A key will be how we are able to reprice the $1.4 billion of CDs we have maturing in the first quarter at 3.32%.

Moving to Page 11. In noninterest income was $40.5 million, down $2.8 million from the elevated result of the last quarter. We had good growth in our wealth business and continued strong growth in our treasury management and customer swaps businesses within the other category, while mortgage softened as expected due to seasonality.

Operating expenses on Page 12 were $151.4 million, an increase of $4 million on an operating basis. The main reason for the increase is $1.5 million in higher group health insurance cost.

Moving to credit quality on Page 13. Net charge-offs were 34 basis points in the quarter. an increase compared to last quarter. The primary reason for the $9 million increase was charge-offs on 2 C&I loans, of which $5 million was already specifically reserved for. NPAs improved and past dues were flat as credit quality remains strong.

I will finish on Page 14 with the allowance for credit losses. Our loan loss provision was $13.7 million in the quarter and included the release of the final $1.9 million of Hurricane Helene special reserve. Net-net, ROL coverage of credit losses moved down slightly to 1.16%.

With that, I will pass it back to Lynn.

Thank you, Jefferson. As we move into 2026, we're optimistic for continued growth and improvement. The economy in our markets remain strong and will support continued growth in our business.

Before we turn to questions, I'd like to recognize and congratulate our teams for a great performance this past year. I'm looking forward to another great year with them in '26. And with that, let's open the floor for questions.

[Operator Instructions] The first question today comes from Russell Gunther with Stephens.

Starting on the balance sheet, if I could. We got a favorable average earning asset remix this quarter out of securities and into loans. How should we think about the overall balance sheet growth in '26? Should we expect this dynamic to continue? Or just on the investment portfolio front, could that flatten out or grow going forward?

All right. Thanks, Russell. I'll take that one. The -- I would expect our balance sheet growth to be really dependent upon our deposit growth. Generally, we're modeling that it would be a couple of hundred basis points below our loan growth for both deposit growth and the balance sheet growth. So yes, I would expect this continuation towards a higher loan-to-deposit ratio throughout 2026.

Okay. Excellent. And then just maybe isolating for the loan growth piece, Jefferson, you guys talked about C&I and HELOC remaining a focus. But if you could just touch on sort of anticipated asset class and geographic loan leaders for the year ahead. And then lastly, just Navitas as well, strong production in '25. How are you thinking about that and as a contributor to the overall loan mix?

Russell, this is Rich. I'll take that one. So first of all, to address the production, this was the largest bank production quarter ever. So we felt great about that, did have some senior care headwinds and a couple of large loans that we chose not to defend. To your point, very pleased that Florida, which had our 2 newest acquisitions led in production for the bank. As you said, C&I grew. We grew that 12%. Owner-occupied CRE did well. Navitas had a strong quarter.

As I said earlier, retail crossed the $1 billion mark and had a great quarter. And SBA, even with the government shutdown had the largest quarter in commitments that they've ever had. So we feel very good about that. And we look forward to 2026. We've got a lot of good conversations going on the hiring side throughout the footprint. We continue to focus, as you said, an asset class, we continue to want to do more in C&I and owner-occupied CRE as well as the HELOCs have done well for us as well.

The next question comes from Stephen Scouten with Piper Sandler.

Yes. Obviously, really nice opportunistic trade on the share repurchase in the quarter. I'm wondering if there's any kind of mindset change at all around that opportunistic nature of the repurchase moving forward? Or if you could be a little more aggressive given capital looks like it will continue to build pretty aggressively based on the strong earnings.

Yes. I would say we would intend to be more assertive on buybacks as we look into '26. As you mentioned, capital build is there. Credit quality is great. So no really reason to hold anything there. M&A opportunities are light. We've kind of built the foundations of the footprint that we want. And so we're very satisfied with what we've got. So that really puts buybacks in the crosshairs. And frankly, we think there continue to be at a good value and a good earnback as we sit. So yes, I would expect to see more.

That's great. Okay. And then if I'm thinking about -- I think, Jefferson, you had said last quarter, I believe, like in the medium term, felt like you saw some upside to the NIM. And obviously, we saw that this quarter on that remix and it sounds like next quarter as well. Can you -- I don't know if you have any data like this, but give us a feel for as these loans reprice and mature and maybe as the CDs, in particular, renew, like what sort of retention rates you tend to get on those pools of assets and deposits just as we think about the upside potential there?

That's great. So I'll start on the CD side. I mentioned the amount of CDs that were repricing in Q1 at 3.32% maturing. They've been coming on around 3.13%. We've been seeing that trend continues. So we are still seeing more tailwind from the cost of funds or cost of deposits angle. We were at 1.69% at quarter end there. So we are set for some nice improvement if the current trends stay in place in the first quarter.

On the loan side, excluding Navitas, we have $6 billion of fixed rate loans at 5.19%. That fixed book was up 9 basis points in Q4, and it's been increasing about 6 to 8 basis points a quarter. In the fourth quarter, we were putting on new fixed rate loans at 6.45%, excluding Navitas. And with the long end of the curve staying relatively high that may be able to stay in that 6.45% range, but we're also seeing spread compression there. But either way, we're putting them on at a much higher rate than 5.19%. So we have this longer-term trend on the asset side. That's a tail end, and we have a shorter-term trend on the liability side that should help our margin too in the near term.

Got it. That's helpful. And kind of specifically around those fixed rate loans, like as they reprice, do you -- or mature, I mean, can you give us a feel for how much of that you retain? I mean is it -- I'd assume just given the continued loan growth, it's a pretty high percentage. But just kind of curious if you have a metric there and if there's any change in competitive factors with rate cuts that you think that 6.45% could get pushed lower. I know you spoke to the curve staying where it is, but just curious there.

So I'll go back and answer your question, too, because you had asked me about the retention of the CDs. That's been in the 90% range. We understand that's much generally higher than where the industry is. I don't have the data in front of me on the loan side. I can come back to you on that. I don't know if retention of loans is a number you guys have, but I'll come back with you on -- I don't have that at the table. So we'll come back to you on that one, Stephen.

The next question comes from Michael Rose with Raymond James.

Just wanted to get a sense from you guys. I think Rich mentioned just some of the efforts on the hiring front. Can you just talk about the competitive landscape? We've had some deals in and around your markets closed here recently. It feels like it's more competitive, both on the loan and deposit side. Can you just kind of walk us through that?

And I think last quarter, maybe you talked about kind of a 3% to 4% expense growth rate, but I've heard some other banks talk about maybe accelerating that just given some of the hiring opportunities. Can you just kind of walk us through the puts and takes to the hiring and the expense outlook and then just the competitive aspect, as I mentioned earlier.

Yes. Sure, Michael. This is Lynn. I'll start on the competitive side and then turn it over to Rich for further details. But I mean, look, we're in fantastic markets, as you know. And so it is a very competitive environment, and there's always deals going on. So I don't view the current deals as being anything unusual or change in the competitive dynamic. I just think we're in a great place to be. And so what matters is how our brand plays in the market. And that's why we're really focus on client service. We really focus on J.D. Power. We got an extra focus on Greenwich this year. We won 5 awards last year for commercial service. We'd like to win 10 this year and the employee culture.

So we're having opportunities to hire not from the deals that are coming up, but just from people who want to be with a bank that's focused on the community where they feel like they can make a difference and be in this environment with a balance sheet that's big enough to take care of their clients. So competition is going to always be there. We don't overly focus on it. We just focus on what we can do to be the kind of bank that attracts the right people here. And Rich, what would you add to that?

So yes, on the competitive front, I would say that in the last 2 quarters, it probably has gotten a little more competitive. The good news only on interest rate, not on structure. So that feels pretty good. And then along the lines of Lynn's comments on the industry and hiring, what I would say is more than ever, as I've been here almost 12 years, it's never -- culture has never mattered more. It comes up in every discussion. I'm talking with when you're hiring a senior lender. And so that's -- I think that plays in our favor, and that's what we're working towards.

Really helpful. Any commentary on kind of the expense outlook for the year, just maybe given some of those opportunities?

Yes. We don't budget significant hires or lift outs. We're really trying to stick to this 3% and 3.5% growth rate. It's a very difficult environment to maintain that, but that is what we are targeting and what we think we'll get in 2026.

Okay. Great. And then maybe just finally for me. Last quarter, you did talk about maybe some more opportunities here for M&A potential as we move forward. Has any of that changed? We've obviously seen some pretty quick deal approvals here. And it seems like if you want to do a deal, there's -- you can get it done. Can you just talk about the opportunity set? I know over the past year or 2, you've talked about maybe a relative dearth of opportunities. But last quarter, you talked about maybe seeing more banks raising their hands versus the prior couple of quarters. Just would love to, Lynn, just to hear your outlook and view on how the M&A landscape plays out this year?

Yes, sure, glad to, Michael. So I mean I would start with kind of what's our overall strategy, what has been -- like I said, we like our footprint. We're not looking to expand that. We like smaller deals where we can be more additive and the cultures are better fit. And really, the honest truth is, and we want quality organizations. We're not interested typically in fixers. And so there's literally -- I was counting them up yesterday when we were talking about this call, and there's literally less than 2 handfuls. I mean, less than 10 in our markets that we would be interested in.

So we have ongoing conversations with those. Right now, I would say most of them, like I said, they're quality banks, the whole industry, we believe, is set up for great performance in '26. And so most of them are saying, "You know what, I think I'm going to perform in '26, and I'll think about selling it sometime down the road." So it's really, at this point, our focus is more -- much more internal and building it out.

And these other -- these 8 companies that we really like, we just kind of wait for the popcorn to pop and grab them that because it is hard to predict. So that's probably why my conversation -- my comments, maybe the last 2 quarters haven't been as consistent as they should have been because it's just really hard to predict. It's just based on those -- that small number of quality companies and what they want to do.

Next question comes from Gary Tenner with D.A. Davidson.

I just wanted to ask a follow-up on the expense question. I know you mentioned Jefferson targeting 3% to 3.5% growth. Obviously, expenses were a bit higher this quarter, and I think with the kind of the bigger delta between expectations and where you came in. Can you give us some thoughts on the first quarter kind of as a jumping off point from the expense levels you might expect?

Yes. Great. Thanks for the question. Gary, number one, we put in the deck that the main driver was the -- a bit of a catch-up on the group health of $1.5 million. I don't expect that to be at that level next quarter. The other delta there was the impact of what Rich was talking about, the biggest record loan production in our history that moves our incentives up by about $1 million versus last quarter. We also had some assorted year-end things. In some cases, it was a little bit unusual with some small write-ups.

And I would say that our run rate of expenses is a little less than we printed in the fourth quarter. That said, Q1 has some seasonality in there, things hitting like the FICA restart at $1.5 million. And if you put all that together, I think that our expenses should be flat in Q1.

Okay. And then a quick question on credit. Excluding Navitas, your charge-offs were about 26 basis points, highest they've been in a couple of years, really, excluding the manufactured housing loss recognition in 2024. Could you provide any color just on those 2 specific C&I credits charged off during the quarter? I know there was some specific reserve associated with them already, but just curious about any thoughts around those 2 credits, particularly and kind of bank level charge-offs as you're looking into 2026?

Gary, this is Rob. I'd be glad to share with you about the credits. The first one was a $14 million franchise loan for one of the largest franchisees in a national well-known franchise system. Some of the units were struggling. And while normal resolution would be the sale of the stores, the franchisee and the franchisor could not find an agreeable path forward.

So the loss is really greater than what we think should have been appropriate because the stores ended up being closed, but that was a $6 million charge-off we took on a $14 million franchise loan. The second one was a $4 million owner-occupied SBA loan where we had a documentation error in the underwriting and decided to not pursue the guarantee.

In the last 12 years, that's really the first time we've originated a credit that we decided to not pursue the guarantee. We have done an after-action review and feel confident in some of the tweaks that we made to the program and confident in the ongoing performance of the SBA portfolio.

In terms of looking forward to 2026, when I look back, I think you mentioned sort of taking out the manufactured housing. So if I do that in 2024, the loss rate was 24 basis points. If I look at 2025, the loss rate was 22 basis points for the full year. And I expect 2026 to fall in that 20 to 25 basis point range again.

The next question comes from Catherine Mealor with KBW.

One follow-up just on the margin. Jefferson, you mentioned, I think you said $1.4 billion in assets are at 4.90% and so that's going to be repricing this year. Do you have the break between that 1.4 million in securities and loans?

Yes, I can get that for you. I could have a guess now, but let me get that -- let's talk offline and I'll get you the details on that. But it's a little bit of a guess to break that down with the information I have right now.

Cool. Okay. I think I was just trying to get a sense as to the upside, maybe in just the bond book repricing that we might see this year. So that's maybe another way to ask it.

So if you ask it like that, I can come back -- I can do it better. So if you look at just the HTM book, it's at $190 million, and I would expect about $150 million of that to cash flow in 2026. And on the AFS portfolio, that is going to be -- I want to come back to you on the repricing of what's coming -- what's maturing out of the AFS. So let's -- I can talk about that one offline too.

Okay. Cool. Yes, that's great. And then maybe just another question on fees, just the fee outlook, the back end of the year run rate on fees for third and fourth quarter were higher than the first 2. And so can you just kind of remind us of the seasonality to be aware of as we go into the first quarter of the year? And then maybe just your outlook, particularly for kind of Navitas and SBA fee growth into '26?

All right. So I think about the fee income items, the biggest items would be wealth where we expect nice growth in 2026. Within other, we also have our treasury management, which is growing well. So I think those are the 2 items where you're going to see nice kind of upper single-digit growth.

We also have, I think, with the volumes that we're expecting next year, you're going to see strong growth in our customer swap businesses. Service charges aren't really a growth business for us or banks these days. For mortgage, we're pretty optimistic, and I'll pass it over to Rich here. The Mortgage Bankers Association is expecting 6% to 6.5% growth. We're seeing a lot of optimism from our mortgage team. And I'll pass it over to Rich to talk about the seasonality and our outlook for mortgage.

Yes. And I'd just -- I'd echo what Jefferson said on the mortgage side, I feel good about where we're going on that. And with interest rates going down just a little bit, and we've seen a pickup in applications. So we hope that will continue. With regards to SBA, the one thing you didn't discuss pricing remains consistent on that. I do feel that we have some momentum going in SBA just with the large Q4 and some hiring going on there. So I think we'll do the same or better on the SBA fees for 2026?

On the seasonality, you get one more weak seasonal quarter from mortgage before they're stronger second and third quarters and SBA tends to build up throughout the year.

Great. And then on Navitas?

Navitas tends to also build up throughout the year. Now they've had a it had good momentum all year, but typically, their seasonality is a little bit weaker first and then stronger throughout the year.

I would say that they had a great Q4, and they're going to have a good Q1, but there is seasonality associated with it.

Yes. And then I mean typically, I mean, do you feel like you'll still be portfolioing as much on Navitas? Or just given that your balance sheet growth feels like it's getting things really strong, maybe you sell a little bit more of that? How do you think about the balance between those 2 things?

Yes. So as 2025 unfolded, we ended up selling more and more Navitas loans. I would expect that to continue. They're at 9.5% of our total loans. We want to keep that at 10% or under. They're going at a faster rate. They were 18% annualized growth this quarter before sale. So that translated into us selling more. So I think Navitas selling more loans is the most likely outcome for 2026.

The next question comes from David Bishop with Hovde Group.

Just curious, we got some calls inbound lately about catching up in terms of the impact of tariffs on credit quality. Are you starting to see any of that bleed into the borrower financial statements sort of impacting them negatively in terms of debt service coverage, et cetera? Any sort of problems you're seeing starting to emanate around the edges there on credit quality from tariffs?

Yes. David, this is Rob. Really, the short answer is that we're not seeing any impact from tariffs in terms of asset quality. We continue to have discussions with customers around the impact of tariffs and people seem to be finding a way to work through that, whether it's passing it on, reducing margins. But we're not -- there isn't anything we're looking at in the problem loan workout area or -- and through the annual review process that would indicate that there's something that's pushing back to singly this tariff concern.

The next question, I want to follow up on Catherine's, which was of the $1.4 billion fixed securities. Now this would be an AFS and HTM would be $285 million at [indiscernible].

Got it. I guess 1 follow-up question, Jefferson. I think you noted in the preamble, another, call it, 200 basis point improvement in the efficiency ratio this year. Do you think you can continue to lean on sort of that ratio as you look out and budget through 2026? Can we expect additional efficiency improvements?

Yes. Thanks, David. The -- I do think that we are budgeting for operating leverage improvement in 2026. We see that with our -- on the revenue side, with our expectation for solid loan growth, a little bit of margin expansion in combination with expenses being managed, I think that we should have some efficiency ratio improvement next year -- this year.

The next question comes from Christopher Marinac with Janney Montgomery Scott.

I wanted to ask Rob a few points on just charge-offs in general. We saw higher charge-offs in Q4, particularly on the commercial side. Is any of that just related to year-end cleanup? And does the outlook change at all for what you see in the next few quarters?

Yes. So the outlook really, I would just go back to the previous comment. The outlook for 2026 is stable and consistent with what we saw on the bank side for 2024 and 2025. So not really seeing any change there. We did have higher charge-offs in the fourth quarter and lower charge-offs in the third quarter. I think you got to look at the overall mix as sort of an annual thing versus a quarter-to-quarter thing. We did see nonaccruals come down $4.5 million in the quarter. We were able to exit 2 substandard credits during the quarter that were really we thought problematic, and so we were pleased with that. So overall, we continue to feel good about the shape of the portfolio and performance going forward.

That makes sense on looking broader on losses. So I appreciate that. It seems that the back and forth on the criticized ratio is more of a good thing for you than not. That, if you will, volatility is normal. And it doesn't seem like the overall level is changing a whole lot. Is that a correct read to kind of what to expect and just the criticized combat combined on the graphic we see every quarter?

Yes. Two points you made that I would just agree with. One is the overall levels aren't really changing. And the second point you made was we would prefer special mention to substandard. So yes to both.

Okay. And then a last question for Lynn, just on the big picture. I mean, it seems that UCB is really focused on the organic growth and much less on M&A. Does anything out there possibly change that for you? Or is simply the kind of buying business less attractive for you in general?

Yes, I don't think there's anything that changes that. We are -- it changes the fact that we are focused more on organic now. If you look back in history, to me, the only thing that scale really gets you, it's not technology. We can fund whatever technology we need. In fact, at our size, it's probably easier to implement than it is if you're larger. But what scale does get you is a bigger balance sheet, product set, particularly for your commercial clients and then the ability to attract better talent and better talent throughout the company.

So whether it's in risk, whether it's in treasury, whether it's on the lending side. So our focus going back 10 years, was let's build out, let's get the scale needed to be able to compete for these small business, small commercial, middle market clients in our markets. And look, would I like to be bigger? Absolutely, but are we big enough? Absolutely.

And combined with that, then is both fewer targets out there and honestly, fewer quality targets. And whereas in the past, we took a couple of fixers on. It's really hard with all the momentum we've got now, the number of technology projects we're able to do without having to worry about integrations and conversions. The bar on what kind of bank I would want to bring into this franchise has honestly gone up.

So that, to me, is more of a natural move, as we've built out and executed our strategy than any kind of change in the market or change in anything else. So as I've mentioned earlier, there's a very limited number of high-quality franchises in our current market that we'd be interested in. And as you would expect, those are the ones that are less needful or less interested in selling near term. And so it's more of a long-term calling game. And as they get ready, we'll do our best to be their preferred acquirer. But in the meantime, we've got great momentum and really focused on just executing what's in front of us.

The next question comes from Gary Tenner with D.A. Davidson.

I just had a quick follow-up. Just as it relates to loan growth, Jefferson, you kind of mentioned expecting solid loan growth in your answer to the question about the efficiency ratio and operating leverage. So you were right at 5% this year, excluding the Florida deal. Does that kind of translate to more -- kind of more of a 5% plus or 5% to 7% number, do you think in 2026? Or would you anchor expectations closer to that 5% mid-single-digit type of number?

Gary, this is Rich. I'll take that one. For Q1, we kind of expect similar result as to Q4, probably because of seasonality, there'll be a little less production, but there'll also be less payoff headwinds. So we figure that's about the same. And then I covered a lot of areas in terms of momentum going into 2026. I think it's still too early to call, but we feel very positive, very optimistic because of all the momentum we have rolling into 2026.

This concludes our question-and-answer session. I would like to turn the conference back over for any closing remarks.

Great. Well, once again, thank you all for joining the call. I appreciate the comments, the conversation. I thought they were great today and look forward to any follow-up you might have, just reach out directly, and we look forward to talking again soon. Have a great day.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Good morning and welcome to United Community Bank's Third Quarter 2025 Earnings Call. Hosting our call today are Chairman and Chief Executive Officer, Lynn Harton; Chief Financial Officer, Jefferson Harralson; President and Chief Banking Officer, Rich Bradshaw; and Chief Risk Officer, Rob Edwards.

United's presentation today includes references to operating earnings, pretax, precredit earnings and other non-GAAP financial information. For these non-GAAP financial measures, United has provided a reconciliation to the corresponding GAAP financial measure in the financial highlights section of the earnings release as well as at the end of the investor presentation. Both are included on the website at ucbi.com. Copies of the first quarter's earnings release and investor presentation were filed this morning on Form 8-K with the SEC and a replay of this call will be available in the Investor Relations section of the company's website at ucbi.com. Please be aware that during this call, forward-looking statements may be made by representatives of United. Any forward-looking statements should be considered in light of risks and uncertainties described on Pages 5 and 6 of the company's 2024 Form 10-K as well as other information provided by the company in its filings with the SEC and included on its website.

At this time, I will turn the call over to Lynn Harton.

Good morning, and thank you for joining our call today. The third quarter was a strong one for United. Revenue grew more than $16 million compared to the second quarter, driven by an 8 basis point improvement in margin and 5.4% annualized loan growth. Our provision for credit losses declined by approximately $4 million compared to last quarter, supported by continued strong credit results and the release of $2.6 million from our Hurricane Helene special reserve. Expenses grew by only $2.9 million over last quarter or $4.3 million on an operating basis, largely due to increased incentive accruals. Taken together for the quarter, we recorded earnings per share on an operating basis of $0.75 per share, a 32% year-over-year improvement, a return on assets of 1.33% and and a return on tangible common equity of 13.6%. I was pleased to see great balance performance and teamwork across the company this quarter. All of our states delivered positive loan growth this quarter. .

Our treasury team and our frontline bankers have worked together with better analytics and improved communication to reduce deposit costs while continuing to grow customer deposits. As our capital continues to grow, we have taken the opportunity to both increase our dividend and redeem our costly preferred stock. Our tangible book value reached $21.59, a 10% year-over-year growth. Credit losses were only 16 basis points for the quarter and only 5 basis points in the core bank, excluding Navitas. Other credit risk metrics such as past dues, nonaccruals and special mention, all remained in very good ranges. Clearly, there have been announcements of a few cracks in the broader credit environment over the last several weeks. I believe these announcements are isolated events somewhat tied to private credit.

Given the very rapid growth in private credit and the number of new entrants, it would not be surprising to see additional defaults in that sector, but that should have limited impact on most banks. Our own strategy has been to be very cautious and selective in considering lending to any nondepository financial institution. And accordingly, we have very little exposure there. Jefferson, why don't you cover the quarter in more detail.

Thank you, Lynn and good morning to everyone. I will start on Page 5 of the deck. We were very pleased with our deposit performance in the third quarter. Excluding the seasonal public outflows, we grew deposits by $137 million or 2.6% annualized with DDA comprising a good portion of the growth. Looking ahead to the fourth quarter, we expect about $400 million of public funds deposit inflow that will serve to make our balance sheet larger as we plan to hold the funds in cash and short-term investments. We were also able to push down our cost of deposits in the quarter to 1.97%, to achieve a 37% total deposit beta so far. We have been saying we thought we could get to a high 30% range total deposit beta through the cycle. But on these first 5 cuts, I now believe we can get to the 40% range. In September, we averaged a 1.92% cost of deposits. So we are expecting more improvement in the fourth quarter.

On Page 6, returned to the loan portfolio, where our growth continued at a 5.4% annualized pace. Excluding the impact of senior care runoff, we grew loans at a 6.2% annualized pace. Our growth came primarily in the C&I, Equipment Finance and eblock categories. Turning to Page 7, where we highlight some of the strengths of our balance sheet. We believe that our balance sheet is in good position from a liquidity and capital standpoint to be ready for any economic volatility. We have no wholesale borrowings and very limited brokered deposits. Our loan-to-deposit ratio remained low but increased for the second quarter in a row and is now at 80%. Our CET1 ratio was relatively flat at 13.4% and remains a source of strength for the bank. On Page 8, we look at capital in more detail. As I mentioned, our CET1 ratio was 13.4%, but you'll notice the impact at the end of the quarter we redeemed the remaining $88 million of our preferred issue, all things equal, dislowered our Tier 1 total capital and leverage ratio towards peer levels.

Our TCE ratio was up 26 basis points in the third quarter as the balance sheet stayed relatively flat. We have been fairly active in managing our capital since the beginning of 2024 we have now paid down $100 million of senior debt, $68 million in Tier 2 capital, repurchased $14 million of common shares. Now we have redeemed the $88 million of preferred. Moving on to spread income on Page 9. We grew spread income 14% annualized in the quarter. Our net interest margin increased 8 basis points to 3.58% mainly driven by lower cost of funds and a mix change towards loans. We remain slightly asset sensitive. And because of this, in the fourth quarter, I would expect our net interest margin to be flat to down 2 basis points. A key will be how we are able to reprice the $1.8 billion of CDs we have maturing in the fourth quarter at 3.60%. We also have the medium-term benefit of our back book of loans and securities that will mature at low. In the next year, using just maturities we have about $1.4 billion of assets paying down in the 4.93% range.

Moving to Page 10. On an operating basis, noninterest income was $43.2 million, up $8.5 million from last quarter, Of the $43.2 million, we had a $1.5 million gain that we don't expect to repeat and an MSR write-up of $800,000. On the slide, we mentioned that unrealized gains on equity investments swung up $2.1 million. This moved from a $0.5 million loss last quarter to a $1.6 million gain as this category will bounce up and down. Besides these items, we had strong across-the-board increases in most of our fee categories, and we feel good about our progress in the quarter. Operating expenses on Page 11 were up $4.3 million in the quarter. This $4.3 million increase was primarily driven by higher variable compensation. With strong revenue growth in the quarter, our efficiency ratio improved to 53.1%. Moving to credit quality on Page 12. Net charge-offs were 16 basis points in the quarter, improved compared to last quarter and last year. NPAs and past dues, moved a little higher off a low base as credit quality remains strong. I will finish on Page 13 with the allowance for credit losses. Our loan loss provision was $7.9 million in the quarter as compared to our $7.7 million in net charge-offs. The $7.9 million provision included a $2.6 million release of our Hurricane Helene reserve, which now stands at just $1.9 million remaining. Net-net, our allowance coverage of credit losses moved down slightly to 1.19%.

With that, I'll pass it back to Lynn.

Thank you, Jefferson. As we move into Q4, the optimism we mentioned last quarter for the remainder of the year seems well founded. And as we close, I'd like to recognize our leaders throughout the footprint. We recently completed our regular employee survey and the overall results reflected very well on your care for your teams, your communication of our strategies and the exhibition of our values. We ranked in the 92nd percentile for employee engagement compared to over 2,000 companies that did the same survey. Becoming a legendary bank begins with being a great place to work for great people. I want to thank you for what you're doing to make that a reality. And now I'd like to open the floor to questions. .

[Operator Instructions]

And today's first question comes from Stephen Scouten with Piper Sandler.

I guess maybe if we could start on loan growth trends. seemed like a really nice quarter here from a loan growth perspective. I'm wondering kind of what you're seeing within your pipelines? And then also, if you could talk about maybe what kind of inning we're in, in terms of the senior care runoff? And lastly, that HELOC product in growth, if there's anything unique to that product or just something you guys have been marketing a little bit more or customers unlocking existing equity, that sort of thing. Appreciate it.

Steve, this is Rich. I'll address the loan growth. We feel -- we do feel very good about the loan growth. Florida led with South Carolina, North Carolina, as the geographies right behind that. As Lynn mentioned earlier, this is our most balanced quarter since I've been here with all the geographies contributing. So that felt really good. I also like the heavy emphasis on C&I. We worked really hard on hiring people, strategy, pricing to really drive C&I. So that feels key. So we're very -- in terms of the pipelines and how that looks for Q4, we feel very -- it would be a very similar type quarter, maybe slightly better. The activity is strong, the pipelines are strong, and that's all been confirmed with my credit partners. So the credit teams are validating that they're seeing a lot of activity. In terms of the HELOC, we -- that's not by accident. We've spent a lot of time and effort. We did a reorg in January with the -- one of the purposes of that reorg was a bigger emphasis on retail. And we're proud to tell you that 100% of our branch managers are now lending. That wasn't the case before and we're really good about that. And we also ran a campaign throughout the year on HELOC. I'm trying to think that I answered all the questions.

Senior care. Yes. Senior Care. Great point. We have about $230 million left. We had $35 million runoff roughly this quarter, expect something similar feel next quarter. And then next year, we do not plan on running off the whole portfolio because some of that are long-term customers that we've been in business with a long time, but the non part of that, we do. Expect most of that to go away next year.

Perfect. And then Jefferson, on the deposit beta guide, I think you said you think that could get into the 40% range now. what leads you to believe that could get better? I tend to think about deposit betas waning as we get incremental cuts and rates get lower. So is it just the cliff of the short duration CDs that you have that gives you more confidence there? Or any color there would be great.

Yes. A lot of it has, Steve. A lot of it is really already been done some rate cuts that we've made later in the quarter. We were unsure what we're going to see with competition, and we've been able to cut rates by a little more than we thought. We've seen CD growth even though we've customer rates. So it's not really so much. I think this will come to an end if we don't get any more rate cuts, but I just believe that the success that we've had through the last 2 quarters you'll see that kind of flow through in the full quarter and the fourth. .

Okay. Perfect. And then just lastly for me. I think you said, let's see fixed rate loans 4.93 repricing over 12 months and the CD book, I think was [ 360 ]. Can you give me a feel for where you think, at least as of today, new CD yields and loan yields would be coming on that relative to those numbers?

Yes. So new loan yields would be in the 7% range, new CDs, 3%. That's a little -- some variable to it, so maybe [ 320, 330 ]. .

And the next question comes from Gary Tenner with D.A. Davidson.

I wanted just to ask about capital. Jefferson, you kind of how active you all have been since early 2024. And with some of the stuff behind you, including the preferred redemption, how are you thinking about capital deployment a buyback here? Or are you wanting to push Tier 1 a little higher just through earnings for a quarter before you consider that?

Thanks, Gary. So just to list out our capital priorities. Number 1 is organic growth. We are, as Rich mentioned, feeling better about where our loan growth is going. Number two, in priority is the dividend, which raised that by 4%. M&A, there are some possible opportunities out there and maybe even 1 you could put some cash into and use capital that way. Buyback is on the list. We have authorization. We'll be opportunistic, but we have the other 3 priorities or above it. We have used buybacks in the past. We may do it in the future. but I'd put it in the order of organic growth, dividend, M&A and then buyback.

Got it. And then just on the fee side, 1 of the line items that I think, had a notable jump with service charge income this quarter went from 10.1 to 11.4%, if I recall correctly. Anything unusual there? Any change in the fee structure or anything you could point out to?

Nothing unusual, just some better volume there. So I can't point to anything specifically there.

And the next question comes from Michael Rose with Raymond James.

Just wanted to ask on expenses. I know you guys have talked about some hiring efforts in the back half of the year. I know some of it was incentive comp related, but just wanted to see how much of the sequential increase was related to those efforts and then what that could look like, particularly in light of some of the M&A discretion that we have going on, how opportunistic you plan to be as we move forward.

Yes. I'll start maybe with the expense piece and maybe talk to Rich on the hiring for the kind of medium to longer-term expense run rate, think of us being in the 3% to 4% range. We did mention the higher variable comp this quarter. So I think that that would not necessarily repeat next quarter. So I think flat is a good guide for the fourth quarter. And then in general, 3% to 4% growth is how you should think about where we are. Now I pass to Rich on how we think about hiring or...

Sure. We continue to be opportunistic about hiring throughout the footprint. So we're always after top talent that's going on. I'd say the other just kind of an interesting note is in the recruiting compensation incentive program usually is first on the conversations. And now it's kind of turned to culture, Culture times to be first and I truthfully think that gives us an advantage.

Perfect. Maybe just a follow-up Gary's question. Just as it relates to M&A, I think you guys have been pretty sour on M&A prospects, just given, I think, some pricing concerns. I don't want to put words in your mouth, but it does seem like you're a little bit more open than you've been kind of in the past 2 or 3 quarters at least. I assume some of that has to do with the regulatory backdrop. But are you seeing more opportunities, meaning are more people raising their hands at this point? And is there a better opportunity set than, say, 2 or 3 years ago? Just want to make sure I understand what you guys are trying to communicate.

Yes. Thank you, Michael. This is Lynn. So yes, from a regulatory perspective, we've always been really confident with the size deals that we do. So I haven't really -- wouldn't put the change into that category. But I would say that we are seeing more people raise their hands today than 2 to 3 quarters ago. So that gives us a little more optimism. I mean still early. You still got to see what develops out of that. But I think there is -- we are seeing more interest on the part of sellers than we have seen. .

And the next question comes from Russell Gunther of Stephens.

From a balance sheet growth perspective, how should we think about average earning assets going forward? Would you guys expect securities, the investment portfolio to continue to decline from here or kind of trend water as a percentage of average earning assets?

That's a great question. I mentioned we have a seasonal piece to our balance sheet, which in the fourth quarter will be seasonally strong. I mentioned $400 million likely of public funds coming in on an average basis, that's probably $300 million for the fourth quarter. I would expect to see the securities portfolio is going to be more of a derivative of how strong the deposit growth. But I could see it being flat to slightly down in the near term. But over -- if you think about 2026, I would expect deposit growth there and then the securities book to flatten out. .

Okay. Excellent. And then just last 1 for me with regard to your capital deployment priority list and sort of adjacent to the securities portfolio, how are you guys thinking, if at all, in terms of any action from a restructuring perspective with regard to the investment portfolio?

It's a great question, and that is something that we have talked about at the Board level. I don't see anything imminent there, but it is a conversation that we've had over the last 6 months and probably continue to.

And the next question comes from Catherine Mealor with KBW.

Question on credit. Maybe first, kind of your level of NPEs are still low. But just any kind of color on to the increase in C&I NPLs. And then secondly, just any kind of update or color you can give us on the Navitas book. It feels like the losses have normalized from the long-haul trucking piece and how the exposure is really low. But just curious, any trends that you're seeing within that book as well.

Yes. Thanks, Catherine. This is Rob. So on the NPA side, on the commercial side, we exited 3 of our top nonperforming C&I credits One was in the service business. One was in the light manufacturing business. One was in the distribution business. So we added 1 that was in the service business and added 1 -- 2 in the service business, I guess, and 1 in the light manufacturing business. So kind of just feels like the normal cycle of movement of in and out, we are able to exit credits successfully, and we'll continue to do that. So we had some come in and some go out. during the quarter, not feeling like there's any trend to be noticed there. And like you said, still from year-end, we've come down from 64 basis points to 51 basis points if you look at year-end till now. So we feel like it's just kind of the normal ebb and flow on the commercial NPA side.

On Navitas, they've been pretty stable. I've been impressed from -- we acquired them 7 years ago, and I've been impressed at their forecasting the complexity of how they forecast losses. And they're really right on track for how their forecast looked at the beginning of the year and expect it -- we've always said we expect losses in a normal environment to be around 1%. Of course, the long haul has taken them over that a little bit. But if you take that out, you can see that it's it really is just staying pretty close. We're at 92 basis points this quarter and feel like that's kind of a normal range for them longer term.

Great. Very helpful. And then maybe just a bigger picture question. It feels like the NIM has seen some nice recovery over the past year and growth is improving. As we look to '26, is this a year that you think will still have perhaps profitability improvement and positive operating leverage, are there any kind of investments within expenses or your staff that you think that we should expect to see before we get to that really big ramp of profitability.

I would think, yes, for 2026 and operating leverage, we're in the budget season now. I can't imagine coming out of a budget season without strategizing operating leverage in there. And the powerful driver is going to be the margin. If you think about our loan yield at [ 621 ], if you think about putting on new loans at 7 and back book coming off, you can see nice medium-term opportunity in the margin. So I think the combination of those things is, yes, we think we will continue to have operating leverage in 2026. .

And the next question comes from [ Kyle German ] with Group.

Shifting to the revenue side. I was wondering if I can get a bit more color on the core fee income and what are your expectations for the next quarter?

Yes. I'll give that a shot. And I would say we laid a lot of that out on that fee page. If you look at the $43 million we laid out the MSR, we don't think the BOLI that we don't think will repeat. We also have the unrealized equity gains that, again, bounces around. It's been a little bit negative, a little bit positive, so hard to know. I think if you take those 3 items out, you're at a pretty good fee income run rate.

And that concludes our question-and-answer session. So I'd like to turn the floor to Lynn Harton for any closing comments.

Well, great. Well, once again, thank you all for joining the call. And as always, if you have any additional questions, please feel free to reach out to Jefferson or myself. And we look forward to seeing you soon and talking to you soon. Thank you so much.

Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.

Good morning and welcome to United Community Bank's Second Quarter 2025 Earnings Call. Hosting our call today are Chairman and Chief Executive Officer, Lynn Harton; Chief Financial Officer, Jefferson Harralson; President and Chief Banking Officer, Rich Bradshaw; and Chief Risk Officer, Rob Edwards.

United's presentation today includes references to operating earnings, pretax, precredit earnings and other non-GAAP financial information. For these non-GAAP financial measures, United has provided a reconciliation to the corresponding GAAP financial measure in the financial highlights section of the earnings release as well as at the end of the investor presentation. Both are included on the website at ucbi.com.

Copies of the first quarter's earnings release and investor presentation were filed this morning on Form 8-K with the SEC and a replay of this call will be available in the Investor Relations section of the company's website at ucbi.com.

Please be aware that during this call, forward-looking statements may be made by representatives of United. Any forward-looking statements should be considered in light of risks and uncertainties described on Pages 5 and 6 of the company's 2024 Form 10-K as well as other information provided by the company in its filings with the SEC and included on its website.

At this time, I'll turn the call over to Lynn Harton.

Good morning, and thank you all for joining our call today.

We continue to enjoy solid growth in earnings. Operating earnings per share for the quarter was $0.66, an increase of 14% year-over-year. One cause of that growth was an expansion of our net interest margin to 350 basis points, an improvement of 14 basis points over last quarter.

Jefferson will give more details, but the quarter saw continued stabilization of our noninterest-bearing balances as well as success in lowering interest-bearing deposit rates.

Seasonal outflows of public funds were within our expected ranges and our customer deposits, excluding merger activity, grew 1.3% annualized.

Loan growth was 4.2% annualized and pipelines remain strong as we head into the third quarter. Credit continues to perform well. Net charge-offs were 18 basis points for the quarter, including Navitas. Ex Navitas net charge-offs were 8 basis points annualized. Both nonaccruals and past dues already at low levels, improved during the quarter.

Expense growth was well controlled and helped us reach an efficiency ratio of 54.8%, an improvement of 222 basis points compared to last year.

I'd like to congratulate and thank our teams throughout the bank for these great results. I'm also grateful for all the work that our existing teams and our new teammates from American National Bank did this quarter to close the acquisition and convert systems and branding. American National is a 40-year-old institution in Fort Lauderdale that fits perfectly with our South Florida footprint. I'm very excited to welcome their talented and passionate team to United.

Jefferson, why don't you cover the quarter in more detail now?

Thank you, Lynn, and good morning to everyone. I'll start on Page 5. We were very pleased with our deposit performance this quarter. Our $205 million increase in deposits had the benefit of the American National deal that closed on May 1.

In the second quarter, we also saw our usual public funds deposits outflows of $233 million. Excluding the deal and the public fund seasonality, our deposits grew by $64 million or by 1.2% annualized. We were also able to push down the cost of our deposits in the quarter to 2.01% to achieve a 34% total deposit beta so far. We continue to believe that we are on pace for a high 30% deposit beta range through the cycle.

We also continue to have some opportunity to reprice our CD book lower. In the third quarter, we have about $1.4 billion of CDs or 38% of our CD book, maturing at 3.72%, that should be able to move down by 10 to 20 basis points.

On Page 6, we turn to the loan portfolio, where our growth continued at a 4.2% annualized pace, excluding American National.

Turning to Page 7. where we highlight some of the strengths of our balance sheet. We have no wholesale borrowings and very limited brokered deposits. Using some of our balance sheet flexibility, we redeemed $100 million in senior notes in June, where the cost was about to adjust to the 9% range from its existing 5% rate.

Our loan-to-deposit ratio remained low but increased slightly to 79% with the acquisition and solid loan growth. In addition, our CET1 ratio remained at 13.3% and remains a source of strength for the bank.

On Page 8, we look at capital in more detail. Our TCE ratio was up 27 basis points and our regulatory capital ratios were stable at high levels. Our TCE and all of our capital ratios remain above peers, which we believe will allow us to continue to be opportunistic. We were able to be opportunistic this quarter and repurchased 507,000 shares or about $14 million of UCB stock. We have been fairly active in managing our capital. Since the beginning of 2024, we have now paid down $100 million in senior debt, $68 million in Tier 2 capital and now have repurchased $14 million of common shares.

Moving on to spread income on Page 9. We grew spread income at a 21% annualized pace excluding American National compared to last quarter. Our net interest margin increased 14 basis points to 3.50%, mainly driven by lower cost of funds and a mix change towards loans.

Moving to Page 10. On an operating basis, noninterest income was down $1 million from last quarter. This was mostly driven by a negative swing in the MSR mark which was at a $300,000 gain in Q1 and a $400,000 loss in Q2. In addition, we had $700,000 in negative fees due to a write-down of our remaining deferred costs that came when we redeemed the senior debt I mentioned earlier.

Excluding the MSR swing and the cost to extinguish the senior debt, fee income was slightly higher than Q1. We resumed selling Navitas loans in the quarter, which drove the increase in loan sale gains as compared to last quarter.

Operating expenses on Page 11 and were only up $2.1 million in the quarter, excluding American National. This $2.1 million increase was primarily driven by $1.8 million in merit increases. The expense base was relatively flat, excluding American National and the merit increase.

Moving to credit quality on Page 12. Net charge-offs were 18 basis points in the quarter, improved compared to last quarter and last year. We also saw nice improvements in NPAs and past dues as credit quality remained strong.

I will finish on Page 14 with the allowance for credit losses. Our loan loss provision was $11.8 million in the quarter and more than covered our $8.2 million in net charge-offs. The $11.8 million provision also included a $2.5 million provision or double dip to set aside a reserve for the American National non-PCD book. This double dip was more than offset by a $2.8 million release of our hurricane-related special reserve.

Specifically, we reduced our hurricane Helene reserve by $2.8 million and it now stands at $4.4 million as we are feeling more comfortable with the potential loss content. Net-net, our allowance coverage remained flat in the quarter at 1.21%.

With that, I'll pass it back to Lynn.

Thank you, Jefferson. While we acknowledge that there are uncertainties in the environment, particularly relative to the tariff effects and the direction of the yield curve, we feel very optimistic about our outlook for the rest of the year.

With that, I'd like to open the floor for questions.

[Operator Instructions] And today's first question comes from Michael Rose with Raymond James.

Just wanted to delve into the loan growth, 4.2% annualized this quarter. Was there any sort of pay downs? And then just more broadly, can you talk about some of your hiring initiatives? I know M&A is kind of off the table right now would love some updates there just given the resurgence we've seen in some activity here recently.

But I know you previously talked about not a ton of acquisition candidates at this point that would fit your thresholds and what you're looking for. But just on the loan growth front, just some of the hiring efforts and then if there were any impact of paydowns ex the A&B deal this quarter.

Michael, this is Rich. Yes, there were some pay downs. So we feel good about the growth in Q2. We expect Q3 to be more similar to Q1, which is around the 6% mark. Q2 did have some slippage in closing. So that's helping the pipeline going into Q3. So we feel really good about the activity. In terms of recruiting, we continue to focus on top talent and have conversations going on throughout the footprint. So we expect that we will be adding additional lenders during the year.

I do want to announce that David Nast, our Alabama, Florida, State President has announced his retirement. We thank him for all his leadership pre and post-acquisition on Progress Bank, which was about 2.5 years ago. We have hired Jason Phillippe. Jason joins us from 25 years of C&I experience, both as a lender and a leader in the Huntsville and Alabama market. So we're very excited about that. And since we have hired him, we have brought on 2 additional CRMs in the Northern Alabama market. So we feel good about the trajectory there and feel really good about the second half of the year.

Michael, on the M&A side, our strategy remains the same. We continue to look for small, high-performing institutions that would be additive to our footprint and continue to have conversations. Certainly, I think the outlook is better now. If you look 3, 4 months ago where prices were in the industry, it just wasn't attractive for those banks to have conversations with anyone is still, frankly, kind of difficult to make the numbers work, but I'm optimistic that as the rest of the industry and particularly us, continue to perform well, get the stock prices where they ought to be and then there will be some more opportunities for us.

Perfect. I appreciate the color. And maybe one for Jefferson. It looks like the core margin was up about 12 basis points Q-on-Q. I think it was a little bit better than the 5 to 10 basis points you talked about last quarter. Just heard Rich talk about a little bit better loan growth in the third quarter. I think you mentioned beta is kind of in the high 30% range. If I caught that, I think that's a little bit higher than what you'd expected previously. So as we put all that together, it seems like there should be continued core margin expansion as we think about the next quarter or 2. Can you just walk us through some of the puts and takes, Jefferson?

Yes. Thanks for the question, Michael. So we do think there is an opportunity for some more margin expansion for us. In the third quarter, specifically, targeting about 5 basis points of margin expansion. A big piece of it and the most important piece of it for us to execute on would be the cost of deposits. We were just under 2% in the -- for an average in the month of June.

That high 30% range, deposit beta would take us relatively close to [1.95%]. We think we can make some progress towards that in the third quarter. You're also going to see a continuation of one of the drivers of this quarter, which would be a mix change towards loans. We're not buying a lot of securities right now. You're going to see this loan-to-deposit ratio and this kind of loan to average earning asset ratio. -- move higher. And so that should help as well in addition to the strong loan growth that we're expecting that Rich talked about. So even if we get a rate cut in September, we're a little bit asset-sensitive. I do think we'll have about 5 basis points of margin expansion.

All right. And just remind us, Jefferson, is there any other debt maturities we should be considering in coming quarters?

No significant ones that I'm thinking about.

Our next question comes from Catherine Mealor with KBW.

We're active in the buyback this quarter. Just curious, your openness to continue even though the stock has kind of hold -- has improved from levels where you were buying back.

Yes, it's a great question. We -- at this price range, the earn-back is longer than what we are targeting in that 7- to 8-year range. So we're not buying back shares currently, but we still have the authorization. We have $86 million left. And at lower prices, we would be opportunistic and step in. But at this point, we are not active in the buyback.

And then I look on to Navitas growth and how you were kind of keeping that on balance sheet versus selling in the secondary market?

I'll talk about the growth part, and then you can talk about the balance sheet, Jefferson. But expect -- they had a great quarter, and we expect a similar Q3 out of Navitas.

Yes, So we're seeing some really strong activity out of Navitas. We did start selling loans again this quarter, $14 million. We're right at 9.4% of Navitas loans to total loans. We had talked about a limit of 10%. So we're getting relatively close to this 10% limit. We like the asset class, but we also like diversification. So I think you should expect us to keep the sales at this level or higher for the rest of the year?

And the next question comes from Russell Gunther with Stephens.

Lynn and Jefferson, I wanted to follow up on the loan growth conversation quickly. Just if we could put a finer point on sort of where commercial pipeline stand today versus linked quarter and bigger picture, any sentiment shift you're getting from your commercial borrowing?

Russell, this is Rich. I'd say, as I mentioned earlier that the pipeline is bigger than last quarter. It's similar to Q1, maybe even perhaps a little bit better. So I'd say our customers feel optimistic, and we feel optimistic with them. And again, we'll continue those hiring discussions throughout the footprint, and we feel good about those as well. So when you put all that together, we're pretty optimistic.

Yes. I would agree they had several meetings with clients over the last weeks and months. And while they were originally -- everybody was worried about tariffs, everybody has gotten more comfortable with that and comfortable with the negotiating strategy that appears to be developing. So that has fallen off. And frankly, they're all very excited about things like bonus depreciation, extension of current tax rates, et cetera, in the bill that was just passed. So I would say the mood is pretty positive with all the clients I'm talking to.

Great. And then maybe just -- you touched on it broadly, but in terms of where the recruitment pipeline stands and then within your footprint, are there any markets in particular you'd like to get a little denser?

The hiring pipeline, I would say, looks good. It differs a little bit by markets and states and what our needs are. And we're continually analyzing where our next needs are and where the talent is. So it's kind of those 2 things got to come together for it to work, and we're continually doing that and putting through continued analysis of that. So again, we feel good about where we're at. The staying within the footprint is a priority for us.

Very helpful. And then just switching gears for me on the capital discussion. Obviously, well above peers. We touched on buyback appetite, M&A appetite. But where does your appetite stands for securities restructurings? In particular, we saw in HTM trade this week. Is that kind of on your guy's radar in terms of use of excess capital?

So I would say and Lynn hop in here, but we have significant excess capital. We do have an HTM book that is under earning that is coming back to us over time as we have created a little tailwind sort of margin, but it also generates a current ROA that's lower than we know that it's possible. So it's something that we look at. We did see the transaction, but we're -- we like running with these high capital ratios. We haven't made a decision on this, but it is something that we look at from time to time.

Yes. I would just say our priorities continue to be organic growth, M&A, dividends, buybacks. But we do look at all options, and we are aware that, particularly with the environment, I think, getting more stable, we've got more capital than we need to have. And so we're evaluating all those options.

Next question comes from Christopher Marinac with Janney Montgomery Scott.

Jefferson, I just wanted to circle back on Navitas from the standpoint of kind of the gain on sale there. Is there a scenario that margin would get better or worse as interest rates play out?

Yes. So great question, Chris. Thank you. So the margin is mostly dependent upon the treasury yield in that 3-, 4-year range. So if -- generally, if rates go up, you see that margin tighten a little bit. And if rates go down, you'll see it widen out. And we have had some time since rates have risen to increase rates at Navitas, and we're seeing that translate into higher gain on sale margins. But from here, you will see that same thing play out. If you get a little higher, it really depends on that treasury yield. But lower treasuries would definitely translate into higher yields for -- higher gain on sale for Navitas loans.

Got it. Great. And a follow-up question just for Rob. Just curious on how you look at the CECL modeling and how things may shape up in the future. Is there any possibility for the model to give you some relief incrementally?

So a lot of things go into that, but it is possible that the model gives relief and that the required allowance comes down. That is certainly a possibility. But loan growth plays a role in that, obviously, as well as economic predictions and forecasts and some of the indexes that are part of that modeling also play a role.

Got it. And Rob, just a quick one on just sort of the puts and takes on the criticized moves this quarter. I know either were substantial. Just curious kind of what you're seeing in the pipeline there?

The pipeline for you're saying special mention and classified assets. Is that the question?

Correct. Yes, correct.

Things feel stable. We continue to run stress test exercises around changing interest rates. And certainly, as it relates to the CRE book, we continue to run stress tests and get results from that and close to our customers. But I don't see anything on the horizon that would be different than where we've been recently.

And the next question is from Stephen Scouten with Piper Sandler.

I just wanted to follow back around on kind of some of the thoughts around hiring. You put that slide, Slide 19, I think it is where you show kind of your deposit market share and some of the fastest-growing MSAs in the Southeast.

So is it fair to think about the names -- those cities that are higher ranked on that list and maybe where you guys have a lower deposit share currently as being areas of greater focus for you guys? Or is it more about, hey, continuing to get density where we already are to leverage the franchise you have in those markets?

I would say the answer is yes and yes because we're looking -- there are markets that we don't have as many commercial lenders in that we see that we have further opportunity to grow. And then we're really looking at the major metro markets in the area that we're not in that have the greatest opportunity for us for growth. And also -- but part of that has to be the talent has to be there. And so to be clear, we're really hiring -- really wanting to hire top talent. And so that's really the focus.

That's helpful. I appreciate that, Rich. And then maybe just kind of a follow-up to that would be, there's a lot more M&A chatter in and around the market. And to the degree dislocation provides maybe a greater opportunity set than perceived? How aggressive would you guys think about being in terms of the balance of near-term expense build and recruiting that high-end talent?

Yes. I think we would have room to be very assertive. If -- who knows what happens. There's always disruption. And to Rich's point, we really want to just take advantage of what's there in the market relationships we have with lenders. So we don't ever target any specific bank. We really go to our bankers in the market, the relationships they have. And if those people get unhappy for whatever reason, then that's the opportunity to bring them over. But we're constantly running numbers and Rich has got a free hand to spend as much as he wants to, bringing in the right kind of talent.

And this concludes today's question-and-answer session. At this time, I would like to turn the conference back over to Lynn Harton for any closing remarks.

Well, great. Once again, thank you all for joining. It's great speaking with you once again. Look forward to seeing you soon, hopefully, at a conference. In the meantime, if you have any follow-up questions, don't hesitate to reach out. And I hope you have a great day. Thank you.

The conference has now concluded. Thank you for attending today's presentation, and you may now disconnect.