United Community Banks (UCB)

Regional banking company United Community Banks (NYSE:UCB) reported Q3 CY2025 results exceeding the market’s revenue expectations, with sales up 27.4% year on year to $276.8 million. Its non-GAAP profit of $0.75 per share was 7.8% above analysts’ consensus estimates.

Company Overview

Starting as a small community bank in 1950 and expanding through strategic acquisitions across the Southeast, United Community Banks (NYSE:UCB) is a regional bank holding company that provides financial services including loans, deposits, wealth management, and merchant services across the southeastern United States.

Regional banks, financial institutions operating within specific geographic areas, serve as intermediaries between local depositors and borrowers. They benefit from rising interest rates that improve net interest margins (the difference between loan yields and deposit costs), digital transformation reducing operational expenses, and local economic growth driving loan demand. However, these banks face headwinds from fintech competition, deposit outflows to higher-yielding alternatives, credit deterioration (increasing loan defaults) during economic slowdowns, and regulatory compliance costs. Recent concerns about regional bank stability following high-profile failures and significant commercial real estate exposure present additional challenges.

United Community Banks competes with other regional banks operating in the southeastern United States, including Truist Financial (NYSE:TFC), Regions Financial (NYSE:RF), First Horizon (NYSE:FHN), and Synovus Financial (NYSE:SNV), as well as national banks with significant regional presence like Bank of America (NYSE:BAC) and Wells Fargo (NYSE:WFC).

From lending activities to service fees, most banks build their revenue model around two income sources. Interest rate spreads between loans and deposits create the first stream, with the second coming from charges on everything from basic bank accounts to complex investment banking transactions. Over the last five years, United Community Banks grew its revenue at an impressive 10.9% compounded annual growth rate. Its growth beat the average banking company and shows its offerings resonate with customers.

Long-term growth is the most important, but within financials, a half-decade historical view may miss recent interest rate changes and market returns. United Community Banks’s recent performance shows its demand has slowed significantly as its annualized revenue growth of 4.1% over the last two years was well below its five-year trend. Note: Quarters not shown were determined to be outliers, impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.

This quarter, United Community Banks reported robust year-on-year revenue growth of 27.4%, and its $276.8 million of revenue topped Wall Street estimates by 2.6%.

Net interest income made up 85.1% of the company’s total revenue during the last five years, meaning United Community Banks barely relies on non-interest income to drive its overall growth.

Markets consistently prioritize net interest income growth over fee-based revenue, recognizing its superior quality and recurring nature compared to the more unpredictable non-interest income streams.

Topline growth is certainly important, but the overall profitability of this growth matters for the bottom line. For banks, we look at efficiency ratio, which is non-interest expense (salaries, rent, IT, marketing, excluding interest paid out to depositors) as a percentage of total revenue.

Investors focus on efficiency ratio changes rather than absolute levels, understanding that expense structures vary by revenue mix. Counterintuitively, lower efficiency ratios indicate better performance since they represent lower costs relative to revenue.

Over the last five years, United Community Banks’s efficiency ratio couldn’t build momentum, hanging around 55.1%.

In Q3, United Community Banks’s efficiency ratio was 54.3%, falling short of analysts’ expectations by 50.6 basis points (100 basis points = 1 percentage point). This result was 3.1 percentage points better than the same quarter last year.

For the next 12 months, Wall Street expects United Community Banks to rein in some of its expenses as it anticipates an efficiency ratio of 54%.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

United Community Banks’s EPS grew at a solid 6.8% compounded annual growth rate over the last five years. However, this performance was lower than its 10.9% annualized revenue growth, telling us the company became less profitable on a per-share basis as it expanded.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For United Community Banks, its two-year annual EPS growth of 6.2% is similar to its five-year trend, implying strong and stable earnings power.

In Q3, United Community Banks reported adjusted EPS of $0.75, up from $0.57 in the same quarter last year. This print beat analysts’ estimates by 7.8%. Over the next 12 months, Wall Street expects United Community Banks’s full-year EPS of $2.63 to grow 7.3%.

Banks profit by intermediating between depositors and borrowers, making them fundamentally balance sheet-driven enterprises. Market participants emphasize balance sheet quality and sustained book value growth when evaluating these institutions.

This explains why tangible book value per share (TBVPS) stands as the premier banking metric. TBVPS strips away questionable intangible assets, revealing concrete per-share net worth that investors can trust. Traditional metrics like EPS are helpful but face distortion from M&A activity and loan loss accounting rules.

United Community Banks’s TBVPS grew at a mediocre 4.7% annual clip over the last five years. However, TBVPS growth has accelerated recently, growing by 10.6% annually over the last two years from $17.65 to $21.59 per share.

Over the next 12 months, Consensus estimates call for United Community Banks’s TBVPS to grow by 9% to $23.53, decent growth rate.

Leverage is core to a financial firm’s business model (loans funded by deposits). To ensure economic stability and avoid a repeat of the 2008 GFC, regulators require certain levels of capital and liquidity, focusing on the Tier 1 capital ratio.

Tier 1 capital is the highest-quality capital that a firm holds, consisting primarily of common stock and retained earnings, but also physical gold. It serves as the primary cushion against losses and is the first line of defense in times of financial distress.

This capital is divided by risk-weighted assets to derive the Tier 1 capital ratio. Risk-weighted means that cash and US treasury securities are assigned little risk while unsecured consumer loans and equity investments get much higher risk weights, for example.

New regulation after the 2008 financial crisis requires that all firms must maintain a Tier 1 capital ratio greater than 4.5%. On top of this, there are additional buffers based on scale, risk profile, and other regulatory classifications, so that at the end of the day, firms generally must maintain a 7-10% ratio at minimum.

Over the last two years, United Community Banks has averaged a Tier 1 capital ratio of 13%, which is considered safe and well capitalized in the event that macro or market conditions suddenly deteriorate.

Return on equity, or ROE, tells us how much profit a company generates for each dollar of shareholder equity, a key funding source for banks. Over a long period, banks with high ROE tend to compound shareholder wealth faster through retained earnings, buybacks, and dividends.

Over the last five years, United Community Banks has averaged an ROE of 9.4%, healthy for a company operating in a sector where the average shakes out around 7.5% and those putting up 15%+ are greatly admired. This is a bright spot for United Community Banks.

We enjoyed seeing United Community Banks beat analysts’ revenue expectations this quarter. We were also glad its EPS outperformed Wall Street’s estimates. On the other hand, its net interest income was in line. Overall, this print had some key positives. The stock traded up 8.4% to $32.75 immediately after reporting.

Updated: December 4, 2025 at 11:21 PM EST

When considering an investment in United Community Banks, investors should account for its valuation and business qualities as well as what’s happened in the latest quarter.

United Community Banks isn’t a terrible business, but it doesn’t pass our bar. Although its revenue growth was decent over the last five years, it’s expected to deteriorate over the next 12 months and its unimpressive EPS growth over the last five years shows it’s failed to produce meaningful profits for shareholders. And while the company’s net interest income growth was solid over the last five years, the downside is its estimated sales for the next 12 months are weak.

United Community Banks’s P/B ratio based on the next 12 months is 1.1x. While this valuation is reasonable, we don’t really see a big opportunity at the moment. We're fairly confident there are better investments elsewhere.

Wall Street analysts have a consensus one-year price target of $34.92 on the company (compared to the current share price of $31.36).