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United Community Banks posted stronger second-quarter results, with operating EPS up 8% to $0.71 and revenue up 7% year over year. Net interest margin also improved to 3.68%, and management said loan growth is accelerating as the company refocuses on its core banking franchise.
The pending Navitas sale drove a large reserve release and boosted GAAP earnings, while also setting up some near-term margin pressure. United released a $38.5 million Navitas reserve, and management said selling the portfolio could reduce net interest margin by about 30 basis points on a static basis.
Organic loan growth improved to a 6.4% annualized pace, supported by hiring 37 net new producers since September and adding more experienced lenders. Management expects upper-single-digit loan growth next year, while deposits, credit quality, and capital levels remain stable.
United Community Banks (NYSE:UCB) reported higher second-quarter operating earnings and revenue, while executives said loan growth is accelerating as the company shifts focus back to its core banking franchise following the pending sale of Navitas.
Chairman and Chief Executive Officer Lynn Harton called the quarter "great," citing progress on strategic goals and stronger organic loan production. Harton said operating earnings per share were $0.71, up 8% from a year earlier, while total revenue increased 7% year over year. The company's net interest margin rose to 3.68%, up 18 basis points from the prior year and three basis points from the first quarter.
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Chief Financial Officer Jefferson Harralson said GAAP earnings were $0.95 per share, helped by a large non-operating item tied to Navitas. United released its Navitas loan loss reserve after reclassifying those loans as held for sale, which added $0.25 to GAAP earnings in the quarter.
Harralson said the company recorded a $29.8 million net reserve release in the quarter, including a $38.5 million reserve release related to Navitas. On a bank-only basis, United recorded an $8.7 million provision, more than covering $4.2 million in bank net charge-offs. The allowance for credit losses declined to 1.04% of loans, reflecting what Harralson described as the lower loss content and variability associated with the sale of the Navitas portfolio.
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