United Community Banks, Inc. Reports Earnings of $15.5 Million for Third Quarter 2013

October 24, 2013

BLAIRSVILLE, GA--(Marketwired - Oct 24, 2013) - United Community Banks, Inc. ( NASDAQ : UCBI )

  • Net income of $15.5 million, or 21 cents per share
  • Operating efficiency ratio improves to 58.6 percent reflecting lower expenses
  • Loans up $78 million, or 7 percent annualized
  • Core transaction deposits up $94 million, or 11 percent annualized
  • All capital ratios strengthened

United Community Banks, Inc. ( NASDAQ : UCBI ) today reported it continued to achieve substantial momentum in positioning itself to build the long-term value of its franchise. For the third quarter and nine months ended September 30, 2013 net income was $15.5 million, or 21 cents per share, and $257.2 million, or $4.24 per share, respectively. The year-to-date results include the impact of two significant events during the second quarter -- the reversal of the valuation allowance on United's net deferred tax asset and the higher provision for loan losses and foreclosed property costs from the accelerated sales of classified assets.

"I am very pleased with the important progress we are making in growing our business and improving operating efficiency," said Jimmy Tallent, president and chief executive officer. "We achieved good loan and deposit growth while at the same time lowering operating expenses. This is particularly demonstrated by the improvement in our efficiency ratio to 58.6 percent, the lowest level since 2007. This is a tribute to the great effort of our dedicated team of bankers."

The third quarter provision for loan losses was $3.0 million compared with $48.5 million in the second quarter and $15.5 million in the third quarter of 2012. The second quarter provision was elevated by higher charge-offs associated with the accelerated classified loan sales. The resulting reduction in classified loans led to lower net charge-offs in the third quarter and a lower provision. Third quarter net charge-offs were $4.47 million compared with $72.4 million in the second quarter and $20.6 million a year ago.

Nonperforming assets at quarter-end were $30.6 million, representing .42 percent of total assets, down from $31.8 million or .44 percent of assets at June 30, 2013, and from $142 million or 2.12 percent of assets a year ago. The classified asset ratio, which is the ratio of classified assets to Tier 1 regulatory capital plus the allowance for loan losses, declined to 26 percent from 27 percent at the end of second quarter and 55 percent a year ago.

Third quarter taxable equivalent net interest revenue totaled $54.3 million, down $224,000 from the second quarter and down $3.03 million from the third quarter of 2012. "The decrease generally reflects the ongoing lower yields on our loan and investment securities portfolios," said Tallent. "The lower loan portfolio yield reflects competitive pricing pressure on new and renewed commercial loans and on new retail loan offerings with low introductory rates. Introductory rates on $45 million of these retail loans rolled over to a market rate of prime-plus in the third quarter with another $40 million due to reset to market rates in the fourth quarter. The lower investment securities yield compared to a year ago is due to reinvestment of cash flows at record low rates. We continue to look for reinvestment opportunities to alleviate market and duration risk. Our focus has been on floating-rate securities, which at quarter-end accounted for 39 percent of the total investment securities portfolio, up one percent from last quarter."

The third quarter taxable equivalent net interest margin was 3.26 percent, down five basis points from the second quarter and 34 basis points from a year ago. "Our margin continues to reflect the unprecedented low interest rate environment," stated Tallent. "We could see further compression in the near term, though we believe at a slower pace. To offset the impact of a lower margin on net interest revenue, we are concentrating on growing the loan portfolio in the mid-single digit range by focusing on retail loans and continuing to add commercial lenders in key markets."

"Third quarter fee revenue of $14.1 million was down slightly compared to second quarter and up approximately $1.0 million from a year ago when certain non-core items are excluded," commented Tallent. Second quarter fee revenue of $16.3 million was elevated due to non-core items, which included a $1.37 million recovery on a bank-owned life insurance policy, a $468,000 gain from the sale of low-income housing tax credits, and $369,000 in hedge ineffectiveness gains. Similarly, year ago fee revenue of $13.8 million included hedge ineffectiveness gains of $608,000.

Service charges and fees on deposit accounts were up $484,000 from the second quarter and up $760,000 from a year ago reflecting strong growth in debit card interchange fees. Brokerage fees were up $211,000 from the second quarter and up $565,000 from a year ago, which shows a renewed focus on this line of business. Mortgage fees were down $449,000 from the second quarter and down $246,000 from a year ago reflecting slower mortgage refinancing activity resulting from rising long-term interest rates. Closed mortgage loans totaled $76.6 million in the third quarter compared with $95.2 million in the second quarter and $107.9 million in the third quarter of 2012.

Operating expenses, excluding foreclosed property costs, were $39.9 million for the third quarter compared to $43.7 million in the second quarter of 2013 and $41.1 million a year ago. The decrease from both periods reflects a reduction in loan workouts and collections costs as well as lower severance costs. Third quarter severance costs were $405,000 compared with $1.56 million and $401,000 for the second quarter of 2013 and the third quarter of 2012, respectively.

Foreclosed property costs were $194,000 in the third quarter compared to $5.15 million in the second quarter and $3.71 million a year ago. The higher second quarter costs reflect $4.31 million in net losses and write-downs related to the accelerated foreclosed property sales and $837,000 for maintenance. The third quarter 2012 foreclosed property costs included $2.74 million in net losses and write-downs and $962,000 for maintenance.

"The effective tax rate for the third quarter was elevated from 35 percent to 38 percent by a $.6 million net charge to tax expense," stated Tallent. "The net charge reflects a state income tax rate reduction in North Carolina that lowered the rate at which a portion of our net deferred tax asset will be recovered. The resulting charge was partially offset by the release of tax reserves for tax returns that had expired."

As of September 30, 2013, capital ratios were as follows: Tier 1 Risk-Based of 14.2 percent; Total Risk-Based of 15.5 percent; Tier 1 Common Risk-Based of 9.1 percent; and Tangible Equity-to-Assets of 9.0 percent. The Tier 1 Leverage ratio was 10.0 percent.

Tallent concluded, "Going forward, we are focused strategically on loan and fee-based service growth in existing and newer markets to provide United with further momentum in building its value to our shareholders. We are looking ahead with confidence driven by our progress, our business opportunities and the best customer satisfaction in our industry."

Conference Call

United will hold a conference call today, Thursday, October 24, 2013, at 11 a.m. ET to discuss the contents of this news release and to share business highlights for the quarter. To access the call, dial (877) 380-5665 and use the conference number 76304427. The conference call also will be webcast and can be accessed by selecting 'Calendar of Events' within the Investor Relations section of United's website at www.ucbi.com.

About United Community Banks, Inc.
Headquartered in Blairsville, United Community Banks, Inc. is the third-largest bank holding company in Georgia. United has assets of $7.2 billion and operates 103 banking offices throughout north Georgia, the Atlanta region, coastal Georgia, western North Carolina, east Tennessee and western South Carolina. United specializes in providing personalized community banking services to individuals and small to mid-size businesses and also offers the convenience of 24-hour access through a network of ATMs, telephone and on-line banking. United's common stock is listed on the Nasdaq Global Select Market under the symbol UCBI. Additional information may be found at United's website at www.ucbi.com.

Safe Harbor
This news release contains forward-looking statements, as defined by federal securities laws, including statements about United's financial outlook and business environment. These statements are based on current expectations and are provided to assist in the understanding of future financial performance. Such performance involves risks and uncertainties that may cause actual results to differ materially from those expressed or implied in any such statements. For a discussion of some of the risks and other factors that may cause such forward-looking statements to differ materially from actual results, please refer to United's filings with the Securities and Exchange Commission including its 2012 Annual Report on Form 10-K and Quarterly Report on Form 10-Q for the second quarter of 2013 under the sections entitled "Forward-Looking Statements" and "Risk Factors." Forward-looking statements speak only as of the date they are made, and we undertake no obligation to update or revise forward-looking statements.

 
 
UNITED COMMUNITY BANKS, INC.
Financial Highlights
Selected Financial Information
                                     
                                     
    2013   2012        
(in thousands, except per share data; taxable equivalent)  
 
Third Quarter  
 
 
 
Second Quarter  
 
 
 
 
 
First Quarter  
 
Fourth
Quarter
 
 
 
 
Third
Quarter
 
 
 
 
Third
Quarter
2013-2012
Change
 
 
 
INCOME SUMMARY                                              
Interest revenue   $ 61,363     $ 61,693       $ 62,134   $ 64,450     $ 65,978        
Interest expense     7,025       7,131         7,475     8,422       8,607        
    Net interest revenue     54,338       54,562         54,659     56,028       57,371     (5 )%
Provision for loan losses     3,000       48,500         11,000     14,000       15,500        
Fee revenue     14,144       16,312         12,826     14,761       13,764     3  
  Total revenue     65,482       22,374         56,485     56,789       55,635        
Operating expenses     40,097       48,823         43,770     50,726       44,783     (10 )
    Income (loss) before income taxes     25,385       (26,449 )       12,715     6,063       10,852     134  
Income tax expense (benefit)     9,885       (256,413 )       950     802       284        
    Net income     15,500       229,964         11,765     5,261       10,568     47  
Preferred dividends and discount accretion     3,059       3,055         3,052     3,045       3,041        
Net income available to common shareholders   $ 12,441     $ 226,909       $ 8,713   $ 2,216     $ 7,527     65  
                                               
PERFORMANCE MEASURES                                              
  Per common share:                                              
    Diluted income   $ .21     $ 3.90       $ .15   $ .04     $ .13     62  
    Book value     10.99       10.90         6.85     6.67       6.75     63  
    Tangible book value (2)     10.95       10.82         6.76     6.57       6.64     65  
                                               
  Key performance ratios:                                              
    Return on equity (1)(3)     7.38 %     197.22 %       8.51 %   2.15 %     7.43 %      
    Return on assets (3)     .86       13.34         .70     .31       .63        
    Net interest margin (3)     3.26       3.31         3.38     3.44       3.60        
    Efficiency ratio     58.55       68.89         64.97     71.69       62.95        
    Equity to assets     11.80       11.57 (4)       8.60     8.63       8.75        
    Tangible equity to assets (2)     11.76       11.53 (4)       8.53     8.55       8.66        
    Tangible common equity to assets (2)     9.02       8.79 (4)       5.66     5.67       5.73        
    Tangible common equity to risk- weighted assets (2)     13.34       13.16         8.45     8.26       8.44        
                                               
ASSET QUALITY *                                              
  Non-performing loans   $ 26,088     $ 27,864       $ 96,006   $ 109,894     $ 115,001        
  Foreclosed properties     4,467       3,936         16,734     18,264       26,958        
    Total non-performing assets (NPAs)     30,555       31,800         112,740     128,158       141,959        
  Allowance for loan losses     80,372       81,845         105,753     107,137       107,642        
  Net charge-offs     4,473       72,408         12,384     14,505       20,563        
  Allowance for loan losses to loans     1.88 %     1.95 %       2.52 %   2.57 %     2.60 %      
  Net charge-offs to average loans (3)     .42       6.87         1.21     1.39       1.99        
  NPAs to loans and foreclosed properties     .72       .76         2.68     3.06       3.41        
  NPAs to total assets     .42       .44         1.65     1.88       2.12        
                                               
AVERAGE BALANCES ($ in millions)                                              
  Loans   $ 4,250     $ 4,253       $ 4,197   $ 4,191     $ 4,147     2  
  Investment securities     2,178       2,161         2,141     2,088       1,971     11  
  Earning assets     6,615       6,608         6,547     6,482       6,346     4  
  Total assets     7,170       6,915         6,834     6,778       6,648     8  
  Deposits     5,987       5,983         5,946     5,873       5,789     3  
  Shareholders' equity     846       636         588     585       582     45  
  Common shares - basic (thousands)     59,100       58,141         58,081     57,971       57,880        
  Common shares - diluted (thousands)     59,202       58,141         58,081     57,971       57,880        
                                               
AT PERIOD END ($ in millions)                                              
  Loans *   $ 4,267     $ 4,189       $ 4,194   $ 4,175     $ 4,138     3  
  Investment securities     2,169       2,152         2,141     2,079       2,025     7  
  Total assets     7,243       7,163         6,849     6,802       6,699     8  
  Deposits     6,113       6,012         6,026     5,952       5,823     5  
  Shareholders' equity     852       829         592     581       585     46  
  Common shares outstanding (thousands)     59,412       57,831         57,767     57,741       57,710        
 
(1) Net income available to common shareholders, which is net of preferred stock dividends, divided by average realized common equity, which excludes accumulated other comprehensive income (loss).  (2) Excludes effect of acquisition related intangibles and associated amortization.  (3) Annualized.  (4) Calculated as of period-end.
 
* Excludes loans and foreclosed properties covered by loss sharing agreements with the FDIC.
   
   
   
UNITED COMMUNITY BANKS, INC.  
Financial Highlights  
Selected Financial Information  
                   
    For the Nine
Months Ended
September 30,
       
(in thousands, except per share data; taxable equivalent) 2013     2012     YTD
2013-2012
Change
 
INCOME SUMMARY                      
Interest revenue   $ 185,190     $ 202,979        
Interest expense     21,631       29,908        
    Net interest revenue     163,559       173,071     (5 )%
Provision for loan losses     62,500       48,500        
Fee revenue     43,282       42,010     3  
  Total revenue     144,341       166,581        
Operating expenses     132,690       136,048     (2 )
    Income (loss) before income taxes     11,651       30,533     (62 )
Income tax expense (benefit)     (245,578 )     1,938        
    Net income     257,229       28,595     800  
Preferred dividends and discount accretion     9,166       9,103        
Net income available to commonshareholders   $ 248,063     $ 19,492     1,173  
                       
PERFORMANCE MEASURES                      
  Per common share:                      
    Diluted income   $ 4.24     $ .34     1,147  
    Book value     10.99       6.75     63  
    Tangible book value (2)     10.95       6.64     65  
                       
  Key performance ratios:                      
    Return on equity (1)(3)     64.29 %     6.57 %      
    Return on assets (3)     4.93       .53        
    Net interest margin (3)     3.32       3.52        
    Efficiency ratio     64.19       63.36        
    Equity to assets     9.91       8.42        
    Tangible equity to assets (2)     9.85       8.32        
    Tangible common equity to assets (2)     7.04       5.50        
    Tangible common equity to risk-weighted assets (2)     13.34       8.44        
                       
ASSET QUALITY *                      
  Non-performing loans   $ 26,088     $ 115,001        
  Foreclosed properties     4,467       26,958        
    Total non-performing assets (NPAs)     30,555       141,959        
  Allowance for loan losses     80,372       107,642        
  Net charge-offs     89,265       55,326        
  Allowance for loan losses to loans     1.88 %     2.60 %      
  Net charge-offs to average loans (3)     2.84       1.80        
  NPAs to loans and foreclosed properties     .72       3.41        
  NPAs to total assets     .42       2.12        
                       
AVERAGE BALANCES ($ in millions)                      
  Loans   $ 4,234     $ 4,157     2  
  Investment securities     2,160       2,089     3  
  Earning assets     6,590       6,569     -  
  Total assets     6,974       6,894     1  
  Deposits     5,972       5,890     1  
  Shareholders' equity     691       580     19  
  Common shares - basic (thousands)     58,443       57,826        
  Common shares - diluted (thousands)     58,444       57,826        
                       
AT PERIOD END ($ in millions)                      
  Loans *   $ 4,267     $ 4,138     3  
  Investment securities     2,169       2,025     7  
  Total assets     7,243       6,699     8  
  Deposits     6,113       5,823     5  
  Shareholders' equity     852       585     46  
  Common shares outstanding (thousands)     59,412       57,710        
 
(1) Net income available to common shareholders, which is net of preferred stock dividends, divided by average realized common equity, which excludes accumulated other comprehensive income (loss).  (2) Excludes effect of acquisition related intangibles and associated amortization.  (3) Annualized.
 
* Excludes loans and foreclosed properties covered by loss sharing agreements with the FDIC.
 
...
   
UNITED COMMUNITY BANKS, INC.  
Non-GAAP Performance Measures Reconciliation  
Selected Financial Information  
                               
                               
    2013     2012  
(in thousands, except per share data; taxable equivalent)  
 
Third
Quarter
 
 
 
 
Second
Quarter
 
 
 
 
First
Quarter
 
 
 
 
Fourth
Quarter
 
 
 
 
Third
Quarter
 
 
                                         
Interest revenue reconciliation                                        
Interest revenue - taxable equivalent   $ 61,363     $ 61,693     $ 62,134     $ 64,450     $ 65,978  
Taxable equivalent adjustment     (370 )     (368 )     (365 )     (381 )     (419 )
Interest revenue (GAAP)   $ 60,993     $ 61,325     $ 61,769     $ 64,069     $ 65,559  
                                         
Net interest revenue reconciliation                                        
Net interest revenue - taxable equivalent   $ 54,338     $ 54,562     $ 54,659     $ 56,028     $ 57,371  
Taxable equivalent adjustment     (370 )     (368 )     (365 )     (381 )     (419 )
Net interest revenue (GAAP)   $ 53,968     $ 54,194     $ 54,294     $ 55,647     $ 56,952  
                                         
Total revenue reconciliation                                        
Total operating revenue   $ 65,482     $ 22,374     $ 56,485     $ 56,789     $ 55,635  
Taxable equivalent adjustment     (370 )     (368 )     (365 )     (381 )     (419 )
Total revenue (GAAP)   $ 65,112     $ 22,006     $ 56,120     $ 56,408     $ 55,216  
                                         
Income (loss) before taxes reconciliation                                        
Income (loss) before taxes   $ 25,385     $ (26,449 )   $ 12,715     $ 6,063     $ 10,852  
Taxable equivalent adjustment     (370 )     (368 )     (365 )     (381 )     (419 )
Income (loss) before taxes (GAAP)   $ 25,015     $ (26,817 )   $ 12,350     $ 5,682     $ 10,433