Regional Banks Shed Risk as Hospitality Recovers
United Community Banks is offloading its equipment finance arm to slash charge-offs and boost capital.
Coverage: 10 of 18 companies in this theme (UCB, CAC, ISBA, KW, JHG, GNL, APLE, AGNT, IIPR, KRC) — a sample, not the full set.
United Community Banks (UCB) is aggressively pruning its risk profile by selling its Navitas equipment finance business for $1.9 billion in cash. The move targets a specific pocket of volatility; while Navitas represented only 10% of the bank's total loan portfolio, it accounted for roughly 50% of net charge-offs over the twelve months ended March 31, 2026. By exiting this segment, UCB expects a one-time pre-tax earnings benefit of $109 million and 145 basis points of CET1 capital accretion.
The divestiture fundamentally resets the bank's credit quality and liquidity posture. Pro forma net charge-offs for the last twelve months drop to 0.12% from 0.22% once Navitas is excluded. UCB expects its pro forma loan-to-deposit ratio to land at 74%, with the resulting excess liquidity slated for reinvestment into lower-risk securities yielding 4.0% to 4.5%.
Other regional players are finding margin relief through deposit discipline. Camden National Corporation (CAC) saw its net interest margin (FTE) rise 20 basis points year-over-year to 3.24% in the first quarter. This expansion was supported by a 16 basis point decline in deposit costs to 1.54% and a 45% plunge in brokered deposits. While non-interest checking deposits fell 5%, the bank saw an 8% increase in savings and money market accounts.
Camden National is also pivoting toward fee-based growth and consumer credit. Assets under administration grew 11% organically, pushing non-interest income to 19% of total revenue. On the lending side, the bank's HELOC portfolio surged 21% year-over-year. Its credit quality remains tight, with non-performing loans representing just 0.22% of total loans.
In the real estate sector, hospitality is showing renewed momentum. Apple Hospitality REIT (APLE) reported a 2.2% increase in comparable hotels RevPAR for the first quarter, driven by a 2.1% rise in occupancy. Momentum is accelerating, with preliminary April data showing RevPAR growth exceeding 4%. The REIT is operating in a favorable supply environment, as 57% of its hotels have no new supply under construction within five miles.
Commercial real estate remains a mixed bag of refinancing and occupancy struggles. Kilroy Realty (KRC) recently expanded its revolving credit facility to $1.25 billion and its term loan to $250 million, while successfully narrowing its SOFR borrowing spreads. However, its stabilized portfolio occupancy sat at 77.6% as of March 31. Meanwhile, Innovative Industrial Properties (IIPR) is leveraging the debt markets, pricing an upsized $350 million offering of 6.0% exchangeable senior notes, with plans to use $70 million of the proceeds for share repurchases.
Asset management is seeing a wave of consolidation. Janus Henderson Group (JHG) has secured all regulatory and client approvals for its take-private transaction with Trian and General Catalyst, which is expected to close on June 30 at $52.00 per share. Similarly, Kennedy-Wilson Holdings (KW) has completed its take-private acquisition by Fairfax at $10.90 per share, removing its common stock from the NYSE.