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Form 8-K
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 22, 2010
United Community Banks, Inc.
(Exact name of registrant as specified in its charter)
         
Georgia   No. 0-21656   No. 58-180-7304
         
(State or other jurisdiction
of incorporation) 		  (Commission File Number)   (IRS Employer Identification No.)
     
63 Highway 515, P.O. Box 398
Blairsville, Georgia 		   
30512
     
(Address of principal executive offices)   (Zip Code)
Registrant’s telephone number, including area code: (706) 781-2265
Not applicable
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o   Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
o   Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
o   Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
o   Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 

 

Item 2.02 Results of Operation and Financial Condition
On April 22, 2010, United Community Banks, Inc. (the “Registrant”) issued a news release announcing its financial results for the quarter ended March 31, 2010 (the “News Release”). The News Release, including financial schedules, is attached as Exhibit 99.1 to this report. In connection with issuing the News Release, on April 22, 2010 at 11:00 a.m. EST, the Registrant intends to hold a conference call/webcast to discuss the News Release. In addition to the News Release, during the conference call the Registrant intends to discuss certain financial information contained in the March 31, 2010 Investor Presentation (the “Investor Presentation”) which will be posted to the Registrant’s website. The Investor Presentation is attached as Exhibit 99.2 to this report.
The presentation of the Registrant’s financial results included operating performance measures and core earnings measures, which are measures of performance determined by methods other than in accordance with generally accepted accounting principles, or GAAP. Management included non-GAAP operating performance and core earnings measures because it believes they are useful for evaluating the Registrant’s operations and performance over periods of time, and uses operating performance and core earnings measures in managing and evaluating the Registrant’s business and intends to refer to them in discussions about the Registrant’s operations and performance. Operating performance measures for 2009 exclude the effects of $25 million and $70 million, non-cash goodwill impairment charges in the third and first quarters, respectively, (bringing the total goodwill impairment charge for the year 2009 to $95 million), $2.9 million in non-recurring severance charges related to a reduction in workforce recorded in the first quarter and an $11.4 million gain in the second quarter from the acquisition of Southern Community Bank that resulted from a bargain purchase. These items have been excluded from operating performance measures because management believes that the two expense items and the bargain purchase gain are non-recurring in nature and do not reflect overall trends in the Registrant’s earnings. Additionally, core earnings measures exclude credit related costs such as the provision for loan losses and foreclosed property expense, securities gains and losses, income taxes and other items of a non-recurring nature. Core earnings are useful in evaluating the underlying earnings performance trends of the Registrant. Management believes these non-GAAP performance measures may provide users of the Registrant’s financial information with a meaningful measure for assessing the Registrant’s financial results and comparing those financial results to prior periods.
Operating performance and core earnings measures should be viewed in addition to, and not as an alternative or substitute for, the Registrant’s performance measures determined in accordance with GAAP, and is not necessarily comparable to non-GAAP performance measures that may be presented by other companies.
Item 9.01 Financial Statements and Exhibits
(a) Financial statements: None
(b) Pro forma financial information: None
(c) Exhibits:
99.1  Press Release, dated April 22, 2010
99.2  Investor Presentation, First Quarter 2010

 

 

 

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
         
April 22, 2010
  /s/ Rex S. Schuette
 
Rex S. Schuette 		   
 
  Executive Vice President and    
 
  Chief Financial Officer    

 

 

Exhibit 99.1

Exhibit 99.1

(UNITED COMMUNITY BANKS LOGO)

For Immediate Release

For more information:
Rex S. Schuette
Chief Financial Officer
(706) 781-2266
Rex_Schuette@ucbi.com

UNITED COMMUNITY BANKS, INC. REPORTS
NET OPERATING LOSS FOR FIRST QUARTER 2010

  •  
Non-performing assets of $417 million at quarter-end, but $317 million after transaction with private equity firm in April

  •  
Provision for loan losses of $75 million, charge-offs of $56.7 million

  •  
Allowance-to-loans ratio of 3.48 percent, up from 3.02 percent in previous quarter

  •  
Margin improves to 3.49 percent, up 41 basis points from one year ago

  •  
Sold consulting services business

  •  
Capital ratios remain strong

 

BLAIRSVILLE, GA –April 22, 2010 – United Community Banks, Inc. (NASDAQ: UCBI) today reported a net operating loss from continuing operations of $34.5 million, or 39 cents per diluted share, for the first quarter of 2010.

“The first quarter was difficult in terms of credit, as we had anticipated,” stated Jimmy Tallent, president and chief executive officer. “We were not able to dispose of foreclosed properties at the same pace as in previous quarters, in large part due to the harshest winter weather our markets have seen in many years. However, our sale of $100 million in illiquid non-performing assets by the end of April will prove to be beneficial. The sale, which includes approximately $72 million of non-performing loans and $28 million of foreclosed properties, shows our determination to find innovative ways to move through this credit cycle and into recovery more quickly.”

   

 

- 1 -

 

Total loans were $5.0 billion at quarter-end, down $159 million from the end of the fourth quarter and $641 million from a year earlier. As of March 31, 2010, residential construction loans were $960 million, or 19 percent of total loans, down $90 million for the quarter and down $470 million from a year ago. New lending during the quarter of $57 million, primarily commercial loans in metropolitan Atlanta, offset some of this decline. Annualized loan growth of 4 percent is consistent with that of 2009.

Taxable equivalent net interest revenue of $61.3 million for the first quarter reflected an increase of $3.9 million compared to the first quarter of 2009. The taxable equivalent net interest margin was 3.49 percent, up 41 basis points from a year ago and up 9 basis points from the fourth quarter of 2009. “Our ongoing strategies of building margin while maintaining liquidity are continuing to be effective,” Tallent said.

“We had our fifth consecutive quarter of core transaction deposit growth, with an increase of $53 million from the prior quarter or 9 percent on an annualized basis,” Tallent continued. “We believe much of this growth is related to disruption in the banking industry, and the favorable perception of United as a strong bank with strong service. We are emphasizing these positive attributes in our marketing programs.”

The first quarter 2010 provision for loan losses decreased to $75 million from $90 million in the fourth quarter of 2009. Net charge-offs also decreased, to $56.7 million, compared to $84.6 million in the fourth quarter. Non-performing assets increased to $417 million at quarter-end from $385 million at year-end. The ratio of non-performing assets to total assets at the end of the first quarter of 2010 and fourth quarter of 2009 was 5.32 percent and 4.81 percent, respectively. Including the planned sale of $100 million of non-performing assets, the pro forma quarter-end ratio of non-performing assets to total assets is 4.05 percent.

   

 

- 2 -

 

“The sale of these non-performing assets, which we announced on April 1, is a very unique and positive transaction for United and its shareholders,” stated Tallent. “It eliminates $100 million of our more illiquid non-performing assets while avoiding any additional charge-offs and credit costs associated with them. This is particularly attractive due to the lack of investor interest we have seen in larger tracts of land outside of our metro Atlanta markets. The transaction reduces non-performing assets by about 25 percent while attaining their highest current economic value and preserving our capital position. This transaction will help us move through the credit cycle and into recovery sooner.”

Operating fee revenue, all periods presented, excludes consulting services revenue because United’s consulting services subsidiary, Brintech, was sold on March 31. “Brintech has been part of United Community Banks for 10 years,” Tallent said. “At this time our focus is best placed on returning the company to profitability through our core businesses. Consulting requires scale to grow, and we found an acquirer that is a good fit and allows most of Brintech’s employees to continue in their roles.”

The results of United’s operations for all periods presented in the attached schedules have been restated to show earnings from continuing operations, which excludes Brintech’s fee revenue and operating expenses. Also, the net income or loss from the discontinued operations is reported as a separate line in the income statement.

Operating fee revenue for United was $11.7 million for the first quarter of 2010, compared to $11.8 million a year ago. Service charges and fees of $7.4 million were up $413,000, due primarily to new accounts and more ATM and debit card transactions. Mortgage loan fees were down $1.2 million, to $1.5 million, due to lower refinancing activity. Other fee revenue increased $1.0 million to $2.1 million, due primarily to the ineffectiveness of cash flow hedges on a certain portion of the company’s prime-based loans that resulted in an acceleration of $520,000 of deferred gains and higher earnings of $320,000 on bank-owned life insurance assets.

   

 

- 3 -

 

Due to higher foreclosed property costs, operating expenses increased by $3.0 million, from $51.8 million in the first quarter of 2009 to $54.8 million in the first quarter of 2010. Operating expenses for the first quarter of 2009, as noted in the financial highlights, exclude a $70 million non-cash goodwill impairment charge and $2.9 million in severance costs. Foreclosed property costs for the first quarter of 2010 were $10.8 million as compared to $4.3 million in the first quarter of 2009 and $14.4 million in the fourth quarter of 2009. Foreclosed property costs in the first quarter included $2.7 million for maintenance, property taxes and other related costs. In addition, write-downs relating to the sale of properties totaled $3.5 million and write-downs to help expedite future sales of other foreclosed properties totaled $4.6 million. Salary and benefit costs totaled $24.4 million, a decrease of $3.0 million from last year due primarily to the 10 percent reduction in workforce implemented at the end of the first quarter of 2009.

The effective tax rate for the first quarter of 2010 was 40 percent, compared to 45 percent in the fourth quarter of 2009 and 14 percent in the first quarter of 2009. The fourth quarter 2009 tax benefit included the favorable settlement of a several-year state tax audit dispute for which the company was fully reserved due to the uncertainty of the tax position. The first quarter 2009 effective rate was lower due to the goodwill impairment charge which was not a taxable event and therefore did not result in the recognition of a tax benefit. The effective tax rate for 2010 is expected to be 40 percent, slightly higher than the effective tax rate for the full year 2009.

As of March 31, 2010, United Community Banks’ regulatory capital ratios were as follows: Tier I Risk-Based Capital of 11.7 percent; Leverage of 8.1 percent; and Total Risk-Based Capital of 14.4 percent. The quarterly average Tangible Equity-to-Assets Ratio was 9.4 percent and the Tangible Common Equity-to-Assets Ratio was 7.1 percent.

“The quarter was eventful and productive, and one that I would like to think sets the tone for the balance of 2010,” concluded Tallent. “Moving $100 million of non-performing assets out of the bank doesn’t put all of our challenges behind us, but it is a significant milestone and a giant leap in the right direction. We have said for some time now that we would not rest until United returns to its accustomed profitability. That commitment continues and, while we aren’t there yet, we have made significant progress.”

   

 

- 4 -

 

Conference Call
United Community Banks will hold a conference call today, Thursday, April 22, 2010, 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 password ‘67352551.’ The conference call also will be webcast and can be accessed by selecting ‘Calendar of Events’ within the Investor Relations section of the company’s website at www.ucbi.com.

About United Community Banks, Inc.
Headquartered in Blairsville, United Community Banks is the third-largest bank holding company in Georgia. United Community Banks has assets of $7.8 billion and operates 27 community banks with 107 banking offices throughout north Georgia, the Atlanta region, coastal Georgia, western North Carolina and east Tennessee. The company specializes in providing personalized community banking services to individuals and small to mid-size businesses. United Community Banks also offers the convenience of 24-hour access through a network of ATMs, telephone and on-line banking. United Community Banks common stock is listed on the Nasdaq Global Select Market under the symbol UCBI. Additional information may be found at the company’s web site at www.ucbi.com.

Safe Harbor
This news release contains forward-looking statements, as defined by Federal Securities Laws, including statements about financial outlook and business environment. These statements are provided to assist in the understanding of future financial performance and such performance involves risks and uncertainties that may cause actual results to differ materially from those in such statements. Any such statements are based on current expectations and involve a number of risks and uncertainties. For a discussion of some factors that may cause such forward-looking statements to differ materially from actual results, please refer to the section entitled “Forward-Looking Statements” on page 3 of United Community Banks, Inc.’s annual report filed on Form 10-K with the Securities and Exchange Commission.

# # #

   

 

- 5 -

 

UNITED COMMUNITY BANKS, INC.
Financial Highlights
Selected Financial Information
                                                 
                                            First  
    2010     2009     Quarter  
(in thousands, except per share   First     Fourth     Third     Second     First     2010-2009  
data; taxable equivalent)   Quarter     Quarter     Quarter     Quarter     Quarter     Change  
INCOME SUMMARY
                                                
Interest revenue
   $ 89,849     $ 97,481     $ 101,181     $ 102,737     $ 103,562          
Interest expense
     28,570       33,552       38,177       41,855       46,150          
 
                                      
Net interest revenue
     61,279       63,929       63,004       60,882       57,412       7 %
Provision for loan losses
     75,000       90,000       95,000       60,000       65,000          
Operating fee revenue (1)
     11,666       14,447       13,389       11,305       11,823       (1 )
 
                                      
Total operating revenue (1)
     (2,055 )     (11,624 )     (18,607 )     12,187       4,235       (149 )
Operating expenses (2)
     54,820       60,126       51,426       53,710       51,788       6  
 
                                      
Operating loss from continuing operations before taxes
     (56,875 )     (71,750 )     (70,033 )     (41,523 )     (47,553 )     (20 )
Operating income tax benefit
     (22,417 )     (31,687 )     (26,252 )     (18,394 )     (15,421 )        
 
                                      
Net operating loss from continuing operations (1)(2)
     (34,458 )     (40,063 )     (43,781 )     (23,129 )     (32,132 )     (7 )
Gain from acquisition, net of tax expense
     —       —       —       7,062       —          
Noncash goodwill impairment charges
     —       —       (25,000 )     —       (70,000 )        
Severance costs, net of tax benefit
     —       —       —       —       (1,797 )        
(Loss) income from discontinued operations
     (101 )     228       63       66       156          
Gain from sale of subsidiary, net of income taxes and selling costs
     1,266       —       —       —       —          
 
                                      
Net loss
     (33,293 )     (39,835 )     (68,718 )     (16,001 )     (103,773 )     68  
Preferred dividends and discount accretion
     2,572       2,567       2,562       2,559       2,554          
 
                                      
Net loss available to common shareholders
   $ (35,865 )   $ (42,402 )   $ (71,280 )   $ (18,560 )   $ (106,327 )        
 
                                      
 
        
PERFORMANCE MEASURES
                                                
Per common share:
                                                
Diluted operating loss from continuing operations (1)(2)
   $ (.39 )   $ (.45 )   $ (.93 )   $ (.53 )   $ (.72 )     46  
Diluted loss from continuing operations
     (.39 )     (.45 )     (1.43 )     (.38 )     (2.20 )     82  
Diluted loss
     (.38 )     (.45 )     (1.43 )     (.38 )     (2.20 )     83  
Stock dividends declared (6)
     —       —     1 for 130     1 for 130     1 for 130          
Book value
     7.95       8.36       8.85       13.87       14.70       (46 )
Tangible book value (4)
     5.62       6.02       6.50       8.85       9.65       (42 )
 
                                                
Key performance ratios:
                                                
Return on equity (3)(5)
     (20.10 )%     (22.08 )%     (45.52 )%     (11.42 )%     (58.28 )%        
Return on assets (5)
     (1.70 )     (1.91 )     (3.32 )     (.78 )     (5.03 )        
Net interest margin (5)
     3.49       3.40       3.39       3.28       3.08          
Operating efficiency ratio from continuing operations (1)(2)
     75.22       78.74       68.35       73.68       75.13          
Equity to assets
     11.90       11.94       10.27       10.71       11.56          
Tangible equity to assets (4)
     9.39       9.53       7.55       7.96       8.24          
Tangible common equity to assets (4)
     7.13       7.37       5.36       5.77       6.09          
Tangible common equity to risk-weighted assets (4)
     10.03       10.39       10.67       7.49       8.03          
 
                                                
ASSET QUALITY *
                                                
Non-performing loans
   $ 280,802     $ 264,092     $ 304,381     $ 287,848     $ 259,155          
Foreclosed properties
     136,275       120,770       110,610       104,754       75,383          
 
                                      
Total non-performing assets (NPAs)
     417,077       384,862       414,991       392,602       334,538          
Allowance for loan losses
     173,934       155,602       150,187       145,678       143,990          
Net charge-offs
     56,668       84,585       90,491       58,312       43,281          
Allowance for loan losses to loans
     3.48 %     3.02 %     2.80 %     2.64 %     2.56 %        
Net charge-offs to average loans (5)
     4.51       6.37       6.57       4.18       3.09          
NPAs to loans and foreclosed properties
     8.13       7.30       7.58       6.99       5.86          
NPAs to total assets
     5.32       4.81       4.91       4.63       4.09          
 
                                                
AVERAGE BALANCES
                                                
Loans
   $ 5,172,847     $ 5,357,150     $ 5,565,498     $ 5,597,259     $ 5,675,054       (9 )
Investment securities
     1,517,696       1,528,805       1,615,499       1,771,482       1,712,654       (11 )
Earning assets
     7,084,891       7,486,790       7,400,539       7,442,178       7,530,230       (6 )
Total assets
     7,946,303       8,286,544       8,208,199       8,212,140       8,372,281       (5 )
Deposits
     6,570,016       6,835,052       6,689,948       6,544,537       6,780,531       (3 )
Shareholders’ equity
     945,426       989,279       843,130       879,210       967,505       (2 )
Common shares — basic
     94,390       94,219       49,771       48,794       48,324          
Common shares — diluted
     94,390       94,219       49,771       48,794       48,324          
 
                                                
AT PERIOD END
                                                
Loans *
   $ 4,992,045     $ 5,151,476     $ 5,362,689     $ 5,513,087     $ 5,632,705       (11 )
Investment securities
     1,526,589       1,530,047       1,532,514       1,816,787       1,719,033       (11 )
Total assets
     7,837,018       7,999,914       8,443,617       8,477,355       8,171,663       (4 )
Deposits
     6,487,588       6,627,834       6,821,306       6,848,760       6,616,488       (2 )
Shareholders’ equity
     925,895       962,321       1,006,638       855,272       888,853       4  
Common shares outstanding
     94,176       94,046       93,901       48,933       48,487          
     
(1)   Excludes the gain from acquisition of $11.4 million, net of income tax expense of $4.3 million in the second quarter of 2009 and revenue generated by discontinued operations in all periods presented.
 
(2)   Excludes the goodwill impairment charges of $25 million and $70 million in the third and first quarters of 2009, respectively, severance costs of $2.9 million, net of income tax benefit of $1.1 million in the first quarter of 2009 and expenses relating to discontinued operations for all periods presented.
 
(3)   Net loss available to common shareholders, which is net of preferred stock dividends, divided by average realized common equity, which excludes accumulated other comprehensive income (loss).
 
(4)   Excludes effect of acquisition related intangibles and associated amortization.
 
(5)   Annualized.
 
(6)   Number of new shares issued for shares currently held.
 
*   Excludes loans and foreclosed properties covered by loss sharing agreements with the FDIC.

 

 

 

UNITED COMMUNITY BANKS, INC.
Operating Earnings to GAAP Earnings Reconciliation
Selected Financial Information
                                         
    2010     2009  
(in thousands, except per share   First     Fourth     Third     Second     First  
data; taxable equivalent)   Quarter     Quarter     Quarter     Quarter     Quarter  
 
                                        
Interest revenue reconciliation
                                        
Interest revenue — taxable equivalent
   $ 89,849     $ 97,481     $ 101,181     $ 102,737     $ 103,562  
Taxable equivalent adjustment
     (493 )     (601 )     (580 )     (463 )     (488 )
 
                              
Interest revenue (GAAP)
   $ 89,356     $ 96,880     $ 100,601     $ 102,274     $ 103,074  
 
                              
 
                                        
Net interest revenue reconciliation
                                        
Net interest revenue — taxable equivalent
   $ 61,279     $ 63,929     $ 63,004     $ 60,882     $ 57,412  
Taxable equivalent adjustment
     (493 )     (601 )     (580 )     (463 )     (488 )
 
                              
Net interest revenue (GAAP)
   $ 60,786     $ 63,328     $ 62,424     $ 60,419     $ 56,924  
 
                              
 
                                        
Fee revenue reconciliation
                                        
Operating fee revenue
   $ 11,666     $ 14,447     $ 13,389     $ 11,305     $ 11,823  
Gain from acquisition
     —       —       —       11,390       —  
 
                              
Fee revenue (GAAP)
   $ 11,666     $ 14,447     $ 13,389     $ 22,695     $ 11,823  
 
                              
 
                                        
Total revenue reconciliation
                                        
Total operating revenue
   $ (2,055 )   $ (11,624 )   $ (18,607 )   $ 12,187     $ 4,235  
Taxable equivalent adjustment
     (493 )     (601 )     (580 )     (463 )     (488 )
Gain from acquisition
     —       —       —       11,390       —  
 
                              
Total revenue (GAAP)
   $ (2,548 )   $ (12,225 )   $ (19,187 )   $ 23,114     $ 3,747  
 
                              
 
                                        
Expense reconciliation
                                        
Operating expense
   $ 54,820     $ 60,126     $ 51,426     $ 53,710     $ 51,788  
Noncash goodwill impairment charge
     —       —       25,000       —       70,000  
Severance costs
     —       —       —       —       2,898  
 
                              
Operating expense (GAAP)
   $ 54,820     $ 60,126     $ 76,426     $ 53,710     $ 124,686  
 
                              
 
                                        
Loss from continuing operations before taxes reconciliation
                                        
Operating loss from continuing operations before taxes
   $ (56,875 )   $ (71,750 )   $ (70,033 )   $ (41,523 )   $ (47,553 )
Taxable equivalent adjustment
     (493 )     (601 )     (580 )     (463 )     (488 )
Gain from acquisition
     —       —       —       11,390       —  
Noncash goodwill impairment charge
     —       —       (25,000 )     —       (70,000 )
Severance costs
     —       —       —       —       (2,898 )
 
                              
Loss from continuing operations before taxes (GAAP)
   $ (57,368 )   $ (72,351 )   $ (95,613 )   $ (30,596 )   $ (120,939 )
 
                              
 
                                        
Income tax benefit reconciliation
                                        
Operating income tax benefit
   $ (22,417 )   $ (31,687 )   $ (26,252 )   $ (18,394 )   $ (15,421 )
Taxable equivalent adjustment
     (493 )     (601 )     (580 )     (463 )     (488 )
Gain from acquisition, tax expense
     —       —       —       4,328       —  
Severance costs, tax benefit
     —       —       —       —       (1,101 )
 
                              
Income tax benefit (GAAP)
   $ (22,910 )   $ (32,288 )   $ (26,832 )   $ (14,529 )   $ (17,010 )
 
                              
 
                                        
Diluted loss from continuing operations per common share reconciliation
                                        
Diluted operating loss from continuing operations per common share
   $ (.39 )   $ (.45 )   $ (.93 )   $ (.53 )   $ (.72 )
Gain from acquisition
     —       —       —       .15       —  
Noncash goodwill impairment charge
     —       —       (.50 )     —       (1.45 )
Severance costs
     —       —       —       —       (.03 )
 
                              
Diluted loss from continuing operations per common share (GAAP)
   $ (.39 )   $ (.45 )   $ (1.43 )   $ (.38 )   $ (2.20 )
 
                              
 
                                        
Book value per common share reconciliation
                                        
Tangible book value per common share
   $ 5.62     $ 6.02     $ 6.50     $ 8.85     $ 9.65  
Effect of goodwill and other intangibles
     2.33       2.34       2.35       5.02       5.05  
 
                              
Book value per common share (GAAP)
   $ 7.95     $ 8.36     $ 8.85     $ 13.87     $ 14.70  
 
                              
 
                                        
Efficiency ratio from continuing operations reconciliation
                                        
Operating efficiency ratio from continuing operations
     75.22 %     78.74 %     68.35 %     73.68 %     75.13 %
Gain from acquisition
     —       —       —       (9.96 )     —  
Noncash goodwill impairment charge
     —       —       33.22       —       101.55  
Severance costs
     —       —       —       —       4.20  
 
                              
Efficiency ratio from continuing operations (GAAP)
     75.22 %     78.74 %     101.57 %     63.72 %     180.88 %
 
                              
 
                                        
Average equity to assets reconciliation
                                        
Tangible common equity to assets
     7.13 %     7.37 %     5.36 %     5.77 %     6.09 %
 
                                        
Effect of preferred equity
     2.26       2.16       2.19       2.19       2.15  
 
                              
Tangible equity to assets
     9.39       9.53       7.55       7.96       8.24  
Effect of goodwill and other intangibles
     2.51       2.41       2.72       2.75       3.32  
 
                              
Equity to assets (GAAP)
     11.90 %     11.94 %     10.27 %     10.71 %     11.56 %
 
                              
 
                                        
Actual tangible common equity to risk-weighted assets reconciliation
                                        
Tangible common equity to risk-weighted assets
     10.03 %     10.39 %     10.67 %     7.49 %     8.03 %
Effect of other comprehensive income
     (.85 )     (.87 )     (.90 )     (.72 )     (1.00 )
Effect of deferred tax limitation
     (1.75 )     (1.27 )     (.58 )     (.22 )     —  
Effect of trust preferred
     1.00       .97       .92       .90       .89  
Effect of preferred equity
     3.29       3.19       3.04       2.99       2.96  
 
                              
Tier I capital ratio (Regulatory)
     11.72 %     12.41 %     13.15 %     10.44 %     10.88 %
 
                              

 

 

 

UNITED COMMUNITY BANKS, INC.
Financial Highlights
Loan Portfolio Composition at Period-End
                                                         
    2010     2009     Linked     Year over  
    First     Fourth     Third     Second     First     Quarter     Year  
(in millions)   Quarter(1)     Quarter(1)     Quarter(1)     Quarter(1)     Quarter     Change     Change  
LOANS BY CATEGORY
                                                        
Commercial (sec. by RE)
   $ 1,765     $ 1,779     $ 1,787     $ 1,797     $ 1,779     $ (14 )   $ (14 )
Commercial construction
     357       363       380       379       377       (6 )     (20 )
Commercial & industrial
     381       390       403       399       387       (9 )     (6 )
 
                                              
Total commercial
     2,503       2,532       2,570       2,575       2,543       (29 )     (40 )
Residential construction
     960       1,050       1,185       1,315       1,430       (90 )     (470 )
Residential mortgage
     1,390       1,427       1,461       1,470       1,504       (37 )     (114 )
Consumer / installment
     139       142       147       153       156       (3 )     (17 )
 
                                              
Total loans
   $ 4,992     $ 5,151     $ 5,363     $ 5,513     $ 5,633       (159 )     (641 )
 
                                              
 
                                                        
LOANS BY MARKET
                                                        
Atlanta MSA
   $ 1,404     $ 1,435     $ 1,526     $ 1,605     $ 1,660       (31 )     (256 )
Gainesville MSA
     372       390       402       413       422       (18 )     (50 )
North Georgia
     1,814       1,884       1,942       1,978       2,014       (70 )     (200 )
Western North Carolina
     756       772       786       794       808       (16 )     (52 )
Coastal Georgia
     388       405       440       455       460       (17 )     (72 )
East Tennessee
     258       265       267       268       269       (7 )     (11 )
 
                                              
Total loans
   $ 4,992     $ 5,151     $ 5,363     $ 5,513     $ 5,633       (159 )     (641 )
 
                                              
 
                                                        
RESIDENTIAL CONSTRUCTION
                                                        
Dirt loans
                                                        
Acquisition & development
   $ 290     $ 332     $ 380     $ 413     $ 445       (42 )     (155 )
Land loans
     124       127       159       159       155       (3 )     (31 )
Lot loans
     321       336       336       369       390       (15 )     (69 )
 
                                              
Total
     735       795       875       941       990       (60 )     (255 )
 
                                              
 
                                                        
House loans
                                                        
Spec
     153       178       218       268       317       (25 )     (164 )
Sold
     72       77       92       106       123       (5 )     (51 )
 
                                              
Total
     225       255       310       374       440       (30 )     (215 )
 
                                              
Total residential construction
   $ 960     $ 1,050     $ 1,185     $ 1,315     $ 1,430       (90 )     (470 )
 
                                              
 
                                                        
RESIDENTIAL CONSTRUCTION — ATLANTA MSA                
Dirt loans
                                                        
Acquisition & development
   $ 66     $ 76     $ 100     $ 124     $ 148       (10 )     (82 )
Land loans
     43       43       61       63       52       —       (9 )
Lot loans
     47       52       54       81       98       (5 )     (51 )
 
                                              
Total
     156       171       215       268       298       (15 )     (142 )
 
                                              
 
                                                        
House loans
                                                        
Spec
     58       68       91       127       164       (10 )     (106 )
Sold
     14       16       22       29       33       (2 )     (19 )
 
                                              
Total
     72       84       113       156       197       (12 )     (125 )
 
                                              
Total residential construction
   $ 228     $ 255     $ 328     $ 424     $ 495       (27 )     (267 )
 
                                              
     
(1)   Excludes total loans of $79.5 million, $85.1 million, $104.0 million and $109.9 million as of March 31, 2010, December 31, 2009, September 30, 2009 and June 30, 2009, respectively, that are covered by the loss-sharing agreement with the FDIC, related to the acquisition of Southern Community Bank.

 

 

 

UNITED COMMUNITY BANKS, INC.
Financial Highlights
Credit Quality (1)
                                                                         
    First Quarter 2010     Fourth Quarter 2009     Third Quarter 2009  
    Non-performing     Foreclosed     Total     Non-performing     Foreclosed     Total     Non-performing     Foreclosed     Total  
(in thousands)   Loans     Properties     NPAs     Loans     Properties     NPAs     Loans     Properties     NPAs  
NPAs BY CATEGORY
                                                                        
Commercial (sec. by RE)
   $ 45,918     $ 21,597     $ 67,515     $ 37,040     $ 15,842     $ 52,882     $ 38,379     $ 12,566     $ 50,945  
Commercial construction
     23,556       14,285       37,841       19,976       9,761       29,737       38,505       5,543       44,048  
Commercial & industrial
     3,610       —       3,610       3,946       —       3,946       3,794       —       3,794  
 
                                                      
Total commercial
     73,084       35,882       108,966       60,962       25,603       86,565       80,678       18,109       98,787  
Residential construction
     147,326       74,220       221,546       142,332       76,519       218,851       171,027       79,045       250,072  
Residential mortgage
     57,920       26,173       84,093       58,767       18,648       77,415       50,626       13,456       64,082  
Consumer / installment
     2,472       —       2,472       2,031       —       2,031       2,050       —       2,050  
 
                                                      
Total NPAs
   $ 280,802     $ 136,275     $ 417,077     $ 264,092     $ 120,770     $ 384,862     $ 304,381     $ 110,610     $ 414,991  
 
                                                      
 
                                                                        
NPAs BY MARKET
                                                                        
Atlanta MSA
   $ 81,914     $ 36,951     $ 118,865     $ 106,536     $ 41,125     $ 147,661     $ 120,599     $ 54,670     $ 175,269  
Gainesville MSA
     17,058       3,192       20,250       5,074       2,614       7,688       12,916       8,429       21,345  
North Georgia
     109,280       63,128       172,408       87,598       53,072       140,670       96,373       36,718       133,091  
Western North Carolina
     31,353       8,588       39,941       29,610       5,096       34,706       25,775       5,918       31,693  
Coastal Georgia
     33,438       21,871       55,309       26,871       17,150       44,021       38,414       3,045       41,459  
East Tennessee
     7,759       2,545       10,304       8,403       1,713       10,116       10,304       1,830       12,134  
 
                                                      
Total NPAs
   $ 280,802     $ 136,275     $ 417,077     $ 264,092     $ 120,770     $ 384,862     $ 304,381     $ 110,610     $ 414,991  
 
                                                      
 
                                                                        
NPA ACTIVITY
                                                                        
Beginning Balance
   $ 264,092     $ 120,770     $ 384,862     $ 304,381     $ 110,610     $ 414,991     $ 287,848     $ 104,754     $ 392,602  
Loans placed on non-accrual
     139,030       —       139,030       174,898       —       174,898       190,164       —       190,164  
Payments received
     (5,733 )     —       (5,733 )     (26,935 )     —       (26,935 )     (16,597 )     —       (16,597 )
Loan charge-offs
     (58,897 )     —       (58,897 )     (88,427 )     —       (88,427 )     (92,359 )     —       (92,359 )
Foreclosures
     (49,233 )     49,233       —       (79,983 )     79,983       —       (56,624 )     56,624       —  
Capitalized costs
     —       320       320       —       981       981       —       579       579  
Note / property sales
     (8,457 )     (25,951 )     (34,408 )     (19,842 )     (61,228 )     (81,070 )     (8,051 )     (47,240 )     (55,291 )
Write downs
     —       (4,579 )     (4,579 )     —       (2,209 )     (2,209 )     —       (1,906 )     (1,906 )
Net gains (losses) on sales
     —       (3,518 )     (3,518 )     —       (7,367 )     (7,367 )     —       (2,201 )     (2,201 )
 
                                                      
Ending Balance
   $ 280,802     $ 136,275     $ 417,077     $ 264,092     $ 120,770     $ 384,862     $ 304,381     $ 110,610     $ 414,991  
 
                                                      
                                                 
    First Quarter 2010     Fourth Quarter 2009     Third Quarter 2009  
            Net Charge-             Net Charge-             Net Charge-  
            Offs to             Offs to             Offs to  
    Net     Average     Net     Average     Net     Average  
(in thousands)   Charge-Offs     Loans (2)     Charge-Offs     Loans (2)     Charge-Offs     Loans (2)  
NET CHARGE-OFFS BY CATEGORY
                                                
Commercial (sec. by RE)
   $ 1,964       .45 %   $ 3,896       .86 %   $ 10,568       2.33 %
Commercial construction
     2,206       2.48       4,717       5.03       4,369       4.55  
Commercial & industrial
     4,110       4.31       153       .15       1,792       1.76  
 
                                          
Total commercial
     8,280       1.33       8,766       1.36       16,729       2.57  
Residential construction
     43,100       17.32       67,393       23.87       67,520       21.31  
Residential mortgage
     4,551       1.31       7,026       1.93       5,051       1.36  
Consumer / installment
     737       2.12       1,400       3.83       1,191       3.13  
 
                                          
Total
   $ 56,668       4.51     $ 84,585       6.37     $ 90,491       6.57  
 
                                          
 
                                                
NET CHARGE-OFFS BY MARKET
                                                
Atlanta MSA
   $ 15,545       4.32 %   $ 43,595       12.07 %   $ 50,129       12.61 %
Gainesville MSA
     1,675       1.92       2,273       2.49       1,473       1.60  
North Georgia
     29,747       6.51       18,057       3.57       24,017       4.74  
Western North Carolina
     3,695       1.96       10,091       5.11       3,949       1.98  
Coastal Georgia
     5,649       5.74       8,109       7.72       10,051       8.78  
East Tennessee
     357       .55       2,460       3.67       872       1.30  
 
                                          
Total
   $ 56,668       4.51     $ 84,585       6.37     $ 90,491       6.57  
 
                                          
     
(1)   Excludes non-performing loans and foreclosed properties covered by the loss-sharing agreement with the FDIC, related to the acquisition of Southern Community Bank. (2) Annualized.

 

 

 

UNITED COMMUNITY BANKS, INC.
Consolidated Statement of Income (Unaudited)
                 
    Three Months Ended  
    March 31,  
(in thousands, except per share data)   2010     2009  
Interest revenue:
                
Loans, including fees
   $ 72,215     $ 81,880  
Investment securities, including tax exempt of $311 and $319
     16,203       20,752  
Federal funds sold, commercial paper and deposits in banks
     938       442  
 
            
Total interest revenue
     89,356       103,074  
 
            
 
                
Interest expense:
                
Deposits:
                
NOW
     1,854       3,337  
Money market
     1,757       2,237  
Savings
     84       127  
Time
     20,198       36,053  
 
            
Total deposit interest expense
     23,893       41,754  
Federal funds purchased, repurchase agreements and other short-term borrowings
     1,038       553  
Federal Home Loan Bank advances
     977       1,074  
Long-term debt
     2,662       2,769  
 
            
Total interest expense
     28,570       46,150  
 
            
Net interest revenue
     60,786       56,924  
Provision for loan losses
     75,000       65,000  
 
            
Net interest revenue after provision for loan losses
     (14,214 )     (8,076 )
 
            
 
                
Fee revenue:
                
Service charges and fees
     7,447       7,034  
Mortgage loan and other related fees
     1,479       2,651  
Brokerage fees
     567       689  
Securities gains, net
     61       303  
Other
     2,112       1,146  
 
            
Total fee revenue
     11,666       11,823  
 
            
Total revenue
     (2,548 )     3,747  
 
            
 
                
Operating expenses:
                
Salaries and employee benefits
     24,360       27,313  
Communications and equipment
     3,273       3,646  
Occupancy
     3,814       3,769  
Advertising and public relations
     1,043       1,044  
Postage, printing and supplies
     1,225       1,175  
Professional fees
     1,943       3,281  
Foreclosed preoperty
     10,813       4,319  
FDIC assessments and other regulatory charges
     3,626       2,682  
Amortization of intangibles
     802       739  
Other
     3,921       3,820  
Goodwill impairment
     —       70,000  
Severance costs
     —       2,898  
 
            
Total operating expenses
     54,820       124,686  
 
            
Loss from continuing operations before income taxes
     (57,368 )     (120,939 )
Income tax benefit
     (22,910 )     (17,010 )
 
            
Net loss from continuing operations
     (34,458 )     (103,929 )
(Loss) income from discontinued operations, net of income taxes
     (101 )     156  
Gain from sale of subsidiary, net of income taxes and selling costs
     1,266       —  
 
            
Net loss
     (33,293 )     (103,773 )
Preferred stock dividends and discount accretion
     2,572       2,554  
 
            
Net loss available to common shareholders
   $ (35,865 )   $ (106,327 )
 
            
 
                
Loss from continuing operations per common share — Basic / Diluted
   $ (.39 )   $ (2.20 )
Loss per common share — Basic / Diluted
     (.38 )     (2.20 )
Weighted average common shares outstanding — Basic / Diluted
     94,390       48,324  

 

 

 

UNITED COMMUNITY BANKS, INC.
Consolidated Statement of Income (Unaudited)
                                         
    Revised for Discontinued Operations  
(in thousands, except per share data)   1Q10     4Q09     3Q09     2Q09     1Q09  
Interest revenue:
                                        
Loans, including fees
   $ 72,215     $ 78,064     $ 80,874     $ 81,691     $ 81,880  
Investment securities, including tax exempt
     16,203       17,313       18,820       20,485       20,752  
Federal funds sold, commercial paper and deposits in banks
     938       1,503       907       98       442  
 
                              
Total interest revenue
     89,356       96,880       100,601       102,274       103,074  
 
                              
 
                                        
Interest expense:
                                        
Deposits:
                                        
NOW
     1,854       2,315       2,528       2,843       3,337  
Money market
     1,757       2,328       2,711       2,269       2,237  
Savings
     84       105       130       121       127  
Time
     20,198       24,026       28,183       32,064       36,053  
 
                              
Total deposit interest expense
     23,893       28,774       33,552       37,297       41,754  
Federal funds purchased, repurchase agreements and other short-term borrowings
     1,038       1,081       613       595       553  
Federal Home Loan Bank advances
     977       1,045       1,300       1,203       1,074  
Long-term debt
     2,662       2,652       2,712       2,760       2,769  
 
                              
Total interest expense
     28,570       33,552       38,177       41,855       46,150  
 
                              
Net interest revenue
     60,786       63,328       62,424       60,419       56,924  
Provision for loan losses
     75,000       90,000       95,000       60,000       65,000  
 
                              
Net interest revenue after provision for loan losses
     (14,214 )     (26,672 )     (32,576 )     419       (8,076 )
 
                              
 
                                        
Fee revenue:
                                        
Service charges and fees
     7,447       8,257       8,138       7,557       7,034  
Mortgage loan and other related fees
     1,479       1,651       1,832       2,825       2,651  
Brokerage fees
     567       443       456       497       689  
Securities gains (losses), net
     61       2,015       1,149       (711 )     303  
Gain from acquisition
     —       —       —       11,390       —  
Other
     2,112       2,081       1,814       1,137       1,146  
 
                              
Total fee revenue
     11,666       14,447       13,389       22,695       11,823  
 
                              
Total revenue
     (2,548 )     (12,225 )     (19,187 )     23,114       3,747  
 
                              
 
                                        
Operating expenses:
                                        
Salaries and employee benefits
     24,360       24,061       23,889       26,305       27,313  
Communications and equipment
     3,273       3,819       3,640       3,571       3,646  
Occupancy
     3,814       4,003       4,063       3,818       3,769  
Advertising and public relations
     1,043       958       823       1,125       1,044  
Postage, printing and supplies
     1,225       1,307       1,270       1,288       1,175  
Professional fees
     1,943       2,646       2,358       3,195       3,281  
Foreclosed preoperty
     10,813       14,391       7,918       5,737       4,319  
FDIC assessments and other regulatory charges
     3,626       3,711       2,801       6,810       2,682  
Amortization of intangibles
     802       813       813       739       739  
Other
     3,921       4,417       3,851       1,122       3,820  
Goodwill impairment
     —       —       25,000       —       70,000  
Severance costs
     —       —       —       —       2,898  
 
                              
Total operating expenses
     54,820       60,126       76,426       53,710       124,686  
 
                              
Loss from continuing operations before income taxes
     (57,368 )     (72,351 )     (95,613 )     (30,596 )     (120,939 )
Income tax benefit
     (22,910 )     (32,288 )     (26,832 )     (14,529 )     (17,010 )
 
                              
Net loss from continuing operations
     (34,458 )     (40,063 )     (68,781 )     (16,067 )     (103,929 )
(Loss) income from discontinued operations, net of income taxes
     (101 )     228       63       66       156  
Gain from sale of subsidiary, net of income taxes and selling costs
     1,266       —       —       —       —  
 
                              
Net loss
     (33,293 )     (39,835 )     (68,718 )     (16,001 )     (103,773 )
Preferred stock dividends and discount accretion
     2,572       2,567       2,562       2,559       2,554  
 
                              
Net loss available to common shareholders
   $ (35,865 )   $ (42,402 )   $ (71,280 )   $ (18,560 )   $ (106,327 )
 
                              
 
                                        
Loss from continuing operations per common share — Basic / Diluted
   $ (.39 )   $ (.45 )   $ (1.43 )   $ (.38 )   $ (2.20 )
Loss per common share — Basic / Diluted
     (.38 )     (.45 )     (1.43 )     (.38 )     (2.20 )
Weighted average common shares outstanding — Basic / Diluted
     94,390       94,219       49,771       48,794       48,324  

 

 

 

UNITED COMMUNITY BANKS, INC.
Consolidated Balance Sheet
                         
    March 31,     December 31,     March 31,  
(in thousands, except share and per share data)   2010     2009     2009  
    (unaudited)     (audited)     (unaudited)  
ASSETS
                        
Cash and due from banks
   $ 105,613     $ 126,265     $ 103,707  
Interest-bearing deposits in banks
     99,893       120,382       5,792  
Federal funds sold, commercial paper and short-term investments
     183,049       129,720       24,983  
 
                  
Cash and cash equivalents
     388,555       376,367       134,482  
 
                        
Securities available for sale
     1,526,589       1,530,047       1,719,033  
Mortgage loans held for sale
     21,998       30,226       43,161  
Loans, net of unearned income (including $72,889 held for sale at March 31, 2010)
     4,992,045       5,151,476       5,632,705  
Less allowance for loan losses
     173,934       155,602       143,990  
 
                  
Loans, net
     4,818,111       4,995,874       5,488,715  
 
                        
Assets covered by loss sharing agreements with the FDIC
     169,287       185,938       —  
Premises and equipment, net
     181,217       182,038       178,980  
Accrued interest receivable
     30,492       33,867       45,514  
Goodwill and other intangible assets
     224,394       225,196       251,060  
Foreclosed property
     136,275       120,770       75,383  
Other assets
     340,100       319,591       235,335  
 
                  
Total assets
   $ 7,837,018     $ 7,999,914     $ 8,171,663  
 
                  
 
        
LIABILITIES AND SHAREHOLDERS’ EQUITY
                        
Liabilities:
                        
Deposits:
                        
Demand
   $ 740,727     $ 707,826     $ 665,447  
NOW
     1,344,973       1,335,790       1,284,791  
Money market
     729,283       713,901       500,261  
Savings
     186,699       177,427       177,001  
Time:
                        
Less than $100,000
     1,643,059       1,746,511       1,911,627  
Greater than $100,000
     1,132,034       1,187,499       1,350,190  
Brokered
     710,813       758,880       727,171  
 
                  
Total deposits
     6,487,588       6,627,834       6,616,488  
 
                        
Federal funds purchased, repurchase agreements, and other short-term borrowings
     102,480       101,389       158,690  
Federal Home Loan Bank advances
     114,303       114,501       260,125  
Long-term debt
     150,086       150,066       151,006  
Accrued expenses and other liabilities
     56,666       43,803       96,501  
 
                  
Total liabilities
     6,911,123       7,037,593       7,282,810  
 
                  
 
                        
Shareholders’ equity:
                        
Preferred stock, $1 par value; 10,000,000 shares authorized;
                        
Series A; $10 stated value; 21,700, 21,700 and 25,800 shares issued and outstanding
     217       217       258  
Series B; $1,000 stated value; 180,000 shares issued and outstanding
     174,727       174,408       173,480  
Common stock, $1 par value; 100,000,000 shares authorized; 94,175,857, 94,045,603 and 48,809,301 shares issued
     94,176       94,046       48,809  
Common stock issuable; 262,002, 221,906 and 161,807 shares
     4,127       3,597       3,270  
Capital surplus
     622,803       622,034       452,277  
Retained earnings (accumulated deficit)
     (15,481 )     20,384       158,201  
Treasury stock; 322,603 shares, at cost
     —       —       (5,992 )
Accumulated other comprehensive income
     45,326       47,635       58,550  
 
                  
Total shareholders’ equity
     925,895       962,321       888,853  
 
                  
 
                        
Total liabilities and shareholders’ equity
   $ 7,837,018     $ 7,999,914     $ 8,171,663  
 
                  

 

 

 

UNITED COMMUNITY BANKS, INC.
Average Consolidated Balance Sheets and Net Interest Analysis
For the Three Months Ended March 31,
                                                 
    2010     2009  
    Average             Avg.     Average             Avg.  
(dollars in thousands, taxable equivalent)   Balance     Interest     Rate     Balance     Interest     Rate  
Assets:
                                                
Interest-earning assets:
                                                
Loans, net of unearned income (1)(2)
   $ 5,172,847     $ 72,219       5.66 %   $ 5,675,054     $ 81,749       5.84 %
Taxable securities (3)
     1,487,646       15,892       4.27       1,682,603       20,433       4.86  
Tax-exempt securities (1)(3)
     30,050       509       6.78       30,051       522       6.95  
Federal funds sold and other interest-earning assets
     394,348       1,229       1.25       142,522       858       2.41  
 
                                        
 
                                                
Total interest-earning assets
     7,084,891       89,849       5.13       7,530,230       103,562       5.56  
 
                                        
Non-interest-earning assets:
                                                
Allowance for loan losses
     (187,288 )                     (128,798 )                
Cash and due from banks
     104,545                       104,411                  
Premises and equipment
     181,927                       179,495                  
Other assets (3)
     762,228                       686,943                  
 
                                            
Total assets
   $ 7,946,303                     $ 8,372,281                  
 
                                            
 
                                                
Liabilities and Shareholders’ Equity:
                                                
Interest-bearing liabilities:
                                                
Interest-bearing deposits:
                                                
NOW
   $ 1,361,696     $ 1,854       .55     $ 1,358,149     $ 3,337       1.00  
Money market
     723,470       1,757       .98       477,325       2,237       1.90  
Savings
     180,448       84       .19       172,708       127       .30  
Time less than $100,000
     1,692,652       8,891       2.13       1,942,897       17,217       3.59  
Time greater than $100,000
     1,155,776       6,770       2.38       1,393,188       12,825       3.73  
Brokered
     736,999       4,537       2.50       786,171       6,011       3.10  
 
                                        
Total interest-bearing deposits
     5,851,041       23,893       1.66       6,130,438       41,754       2.76  
 
                                        
 
                                                
Federal funds purchased and other borrowings
     102,058       1,038       4.12       150,517       553       1.49  
Federal Home Loan Bank advances
     114,388       977       3.46       204,941       1,074       2.13  
Long-term debt
     150,078       2,662       7.19       150,997       2,769       7.44  
 
                                        
Total borrowed funds
     366,524       4,677       5.18       506,455       4,396       3.52  
 
                                        
 
                                                
Total interest-bearing liabilities
     6,217,565       28,570       1.86       6,636,893       46,150       2.82  
 
                                            
Non-interest-bearing liabilities:
                                                
Non-interest-bearing deposits
     718,975                       650,093                  
Other liabilities
     64,337                       117,790                  
 
                                            
Total liabilities
     7,000,877                       7,404,776                  
Shareholders’ equity
     945,426                       967,505                  
 
                                            
Total liabilities and shareholders’ equity
   $ 7,946,303                     $ 8,372,281                  
 
                                            
 
                                                
Net interest revenue
           $ 61,279                     $ 57,412          
 
                                            
Net interest-rate spread
                     3.27 %                     2.74 %
 
                                            
 
                                                
Net interest margin (4)
                     3.49 %                     3.08 %
 
                                            
     
(1)   Interest revenue on tax-exempt securities and loans has been increased to reflect comparable interest on taxable securities and loans. The rate used was 39%, reflecting the statutory federal income tax rate and the federal tax adjusted state income tax rate.
 
(2)   Included in the average balance of loans outstanding are loans where the accrual of interest has been discontinued.
 
(3)   Securities available for sale are shown at amortized cost. Pretax unrealized gains of $43.2 million and $10.6 million in 2010 and 2009, respectively, are included in other assets for purposes of this presentation.
 
(4)   Net interest margin is taxable equivalent net-interest revenue divided by average interest-earning assets.

 

 

Exhibit 99.2

Exhibit 99.2

United Community Banks, Inc. Investor Presentation First Quarter 2010 Strong Bank. Strong Service. Strong Future. Jimmy C. Tallent President & CEO Rex S. Schuette EVP & CFO rex_schuette@ucbi.com (706) 781-2266 David P. Shearrow EVP & CRO

 

This presentation contains forward-looking statements, as defined by Federal Securities Laws, including statements about financial outlook and business environment. These statements 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 in such statements. Any such statements are based on current expectations and involve a number of risks and uncertainties. For a discussion of factors that may cause such forward-looking statements to differ materially from actual results, please refer to United Community Banks, Inc.'s Annual Report filed on Form 10-K with the Securities and Exchange Commission. Cautionary Statement 2

 

This presentation also contains non-GAAP financial measures determined by methods other than in accordance with generally accepted accounting principles ("GAAP"). Such non-GAAP financial measures include the following: net interest margin - pre credit, core fee revenue, core operating expense, core earnings, net operating (loss) income and net operating (loss) earnings per share, tangible common equity to tangible assets, tangible equity to tangible assets and tangible common equity to risk-weighted assets. The most comparable GAAP measures to these measures are: net interest margin, fee revenue, operating expense, net (loss) income, diluted (loss) earnings per share and equity to assets. Management uses these non-GAAP financial measures because we believe it is useful for evaluating our operations and performance over periods of time, as well as in managing and evaluating our business and in discussions about our operations and performance. Management believes these non-GAAP financial measures provide users of our financial information with a meaningful measure for assessing our financial results and credit trends, as well as comparison to financial results for prior periods. These non-GAAP financial measures should not be considered as a substitute for financial measures determined in accordance with GAAP and may not be comparable to other similarly titled financial measures used by other companies. For a reconciliation of the differences between our non-GAAP financial measures and the most comparable GAAP measures, please refer to the 'Non-GAAP Reconcilement Tables' at the end of the Appendix of this presentation. We have not reconciled tangible common equity to tangible assets and core earnings to the extent such numbers are presented on a forward-looking basis based on management's internal stress test or SCAP methodology. Estimates that would be required for such reconciliations cannot reliably be produced without unreasonable effort. 3 Non-GAAP Measures

 

Highlights First Quarter Credit Sale of $100 Million NPAs Sale of Consulting Services Business Core Earnings Capital 4

 

5 LOAN PORTFOLIO & CREDIT QUALITY

 

Structure Centralized underwriting and approval process Segregated work-out teams Highly skilled ORE disposition group Seasoned regional credit professionals Process Continuous external loan review Intensive executive management involvement: Weekly past due meetings Weekly NPA/ORE meetings Quarterly criticized watch loan review meetings Quarterly pass commercial and CRE portfolio review meetings Internal loan review of new credit relationships Ongoing stress testing... commenced in 2007 Policy Ongoing enhancements to credit policy Periodic updates to portfolio limits 6 Proactively Addressing Credit Environment

 

North Georgia Atlanta MSA Western North Carolina Coastal Georgia Gainesville MSA Eastern Tennessee East 0.36 0.28 0.15 0.08 0.07 0.05 Geographic Diversity 7 Loan Portfolio (total $5.0 billion)

 

Atlanta MSA North Georgia Western North Carolina Coastal Georgia Gainesville MSA Eastern Tennessee East 0.37 0.3 0.09 0.09 0.09 0.06 Commercial Construction Owner-Occupied Income Producing C & I East 15 38 32 15 Geographic Diversity Average Loan Size CRE: $444k C&I: $71k Comm. Constr. $684k 8 Commercial Loans (total $2.5 billion)

 

54% owner-occupied Typical owner-occupied: small business, doctors, dentists, attorneys, CPAs $12 million project limit 60% LTV (1) $444k average loan size Portfolio Characteristics (1) Loan balance as of Mar 31, 2010 / most recent appraisal (in millions) Mar 31, 2010 % of Loan Type Amount Total Office Buildings $ 399 22 % Small Businesses 388 22 Single-Unit Retail/Strip Centers 221 12 Small Warehouses/Storage 173 10 Churches 122 7 Hotels/Motels 118 7 Convenience Stores 83 5 Franchise / Restaurants 77 4 Multi-Residential Properties 65 4 Farmland 46 3 Multi-Unit Retail 40 2 Miscellaneous 33 2 Total Commercial Real Estate $ 1,765 9 Commercial Real Estate (by loan type)

 

$684k Average loan size Average LTVs (1) Land Dev-Improved: 45% Raw Land-Unimpr: 47% Comm Land Dev: 59% Total: 53% Portfolio Characteristics (1) Loan balance as of Mar 31, 2010 / most recent appraisal (in millions) Mar 31, 2010 % of Loan Type Amount Total Land Development - Vacant (Improved) $ 114 32 % Raw Land - Vacant (Unimproved) 99 28 Commercial Land Development 50 14 Office Buildings 31 9 Retail Buildings 13 3 Churches 3 1 Miscellaneous 47 13 Total Commercial Construction $ 357 10 Commercial Construction (by loan type)

 

North Georgia Western North Carolina Atlanta MSA Coastal Georgia Gainesville MSA Eastern Tennessee East 0.39 0.26 0.14 0.08 0.07 0.06 Mortgage Home Equity East 73 27 Geographic Diversity Avg loan size: $47k Avg loan size: $77k Origination Characteristics No broker loans No sub-prime / Alt-A 85% of HE > 680 FICO Policy Max LTV: 80-85% 11 Residential Mortgage (total $1.4 billion)

 

North Georgia Atlanta MSA Western North Carolina Coastal Georgia Gainesville MSA Eastern Tennessee East 0.48 0.24 0.16 0.06 0.04 0.02 Geographic Diversity Developing Spec: $243k Sold: $159k Develop.: $773k Raw: $316k Lot: $134k Average Loan Size Lot Spec Sold Developing Raw East 0.34 0.16 0.08 0.3 0.12 Construction Land 12 Residential Construction (total $960 million) $ in millions

 

13 Atlanta MSA (residential construction)

 

14 North Georgia MSA (residential construction)

 

(in millions) 1Q10 4Q 09 3Q 09 2Q 09 1Q 09 Net Charge-offs $ 56.7 $ 84.6 $ 90.5 $ 58.3 $ 43.3 as % of Average Loans 4.51 % 6.37 % 6.57 % 4.18 % 3.09 % Allowance for LL $ 173.9 $ 155.6 $ 150.2 $ 145.7 $ 144.0 as % of Total Loans 3.48 % 3.02 % 2.80 % 2.64 % 2.56 % as % of NPLs 62 59 49 51 56 as % of NPLs - Adjusted (1) 142 190 149 82 117 as % of NPLs - Adjusted Proforma(2) 233 Past Due Loans (30 - 89 Days) 2.17 % 1.44 % 2.02 % 1.61 % 1.67 % Non-Performing Loans $ 280.8 $ 264.1 $ 304.4 $ 287.8 $ 259.1 OREO 136.3 120.8 110.6 104.8 75.4 Total NPAs $ 417.1 $ 384.9 $ 415.0 $ 392.6 $ 334.5 as % of Total Assets 5.32 % 4.81 % 4.91 % 4.63 % 4.09 % as % of Loans & OREO 8.13 7.30 7.58 6.99 5.86 Excluding loans with no allocated reserve Excluding loans with no allocated reserve and loans sold to Fletcher 15 Credit Quality

 

(1) Based on simple average of the four quarters 16 Net Charge-offs by Loan Category

 

Note: Dollars in thousands (1) Based on simple average of the four quarters 17 Net Charge-offs by Market

 

18 NPAs by Loan Category and Market

 

Imputed Stress Test - Estimated Credit Losses Through December 2010 (1) Represents the SCAP - Selected Banks Scenario modified to reflect the characteristics of United Community Banks existing loan portfolio. (2) Based on average projected losses per loan category (More Adverse Scenario) for BB&T Corporation, Fifth Third Bancorp, Regions Financial Corporation and SunTrust Banks, Inc. as per the Board of Governors of the Federal Reserve System (2009) "The Supervisory Capital Assessment Program: Overview of Results" (3) Represents the mid-point of the indicative loss rates by loan category as per the Board of Governors of the Federal Reserve System (2009) "The Supervisory Capital Assessment Program: Overview of Results" 19 Credit Quality - SCAP Analysis

 

Imputed Stress Test - Projected Capital Ratios 20 Credit Quality - SCAP Analysis

 

21 FINANCIAL RESULTS

 

22 Core Earnings Summary - First Quarter 2010

 

4Q 08 1Q 09 2Q 09 3Q 09 4Q 09 1Q 10 Net Interest Margin 0.027 0.0308 0.0328 0.0339 0.034 0.0349 0.0043 0.0045 0.0052 0.0058 0.0064 0.0066 Net Interest Margin Margin improvement 9 bps vs. 4Q09 41 bps vs. 1Q09 Improved CD pricing Maintained loan pricing 1Q Excess liquidity - lowered Margin by 18 bps NIM Characteristics 3.53% 3.80% 3.97% 4.04% NIM NIM - Pre Credit (1) (1) Excluding impact of nonaccrual loans, OREO and interest reversals 3.13% 4.15% 23 Net Interest Margin

 

4Q08 1Q 09 2Q 09 3Q09 4Q09 1Q10 Lost Interest on C/Os 0.0007 0.0007 0.001 0.0015 0.0017 0.002 Nonaccrual/OREO 0.0016 0.0022 0.0023 0.0027 0.0027 0.0026 Interest Reversals 0.002 0.0016 0.0019 0.0016 0.002 0.002 Historically 8 to 12 bps Credit cycle - significant drag on margin and earnings Lost interest (avg. yield) on loans charged off - Replace with new loans after credit cycle Carry costs high with level of NPAs Cost 1Q10 vs. Historical - 54 bps (potential annual earnings impact of $38 million by lowering to historical levels) Credit Costs Impacting Margin ..58% ..64% ..66% ..52% Lost Interest on C/Os Interest Reversals Carry Cost of NPAs ..45% 24 ..43% Margin - Credit Costs

 

As of March 31, 2010 Demand & NOW MMDA & Sav. Time <$100k Time >$100k Public Funds Brokered East 1490 907 1636 1059 684 711 25 Deposit Mix (total $6.5 billion)

 

$ in millions 1Q 09 1Q 10 Geographic Diversity Atlanta MSA North Georgia Western North Carolina Gainesville MSA Coastal Georgia Eastern Tennessee 1Q10 892 650 445 150 140 120 1Q09 767 606 410 126 131 110 Atlanta MSA North Georgia Western North Carolina Gainesville MSA Coastal Georgia Eastern Tennessee 26 Core Transaction Deposits

 

27 Net Operating Loss - First Quarter 2010

 

28 Net Loss - First Quarter 2010

 

29 Capital Ratios (as percentages)

 

30 APPENDIX

 

Assets $7.8 Billion Deposits $6.5 Billion Banks 27 Offices 107 31 United at a Glance

 

32 Experienced Proven Leadership Joined Years in UCBI Banking Jimmy Tallent President & CEO 1984 37 Guy Freeman Chief Operating Officer 1994 50 Rex Schuette Chief Financial Officer 2001 33 David Shearrow Chief Risk Officer 2007 29 Glenn White President, Atlanta Region 2007 36 Craig Metz Marketing 2002 18 Bill Gilbert Retail Banking 2000 34

 

Business and operating model Twenty-seven "community banks" Local CEOs with deep roots in their communities Resources of $7.8 billion bank Service is point of differentiation Golden rule of banking "The Bank That SERVICE Built" Ongoing customer surveys 90+% satisfaction rate (Record 95% in March 2010) Strategic footprint with substantial banking opportunities Operates in a number of the more demographically attractive markets in the U.S. Disciplined growth strategy Organic supported by de novos and selective acquisitions 33 "Community bank service, large bank resources"

 

34 Robust Demographics (fast growing markets)

 

1 FDIC deposit market share and rank as of 6/09 for markets where United takes deposits. Source: SNL and FDIC 35 Market Share Opportunities (excellent growth prospects)

 

36 Leading Demographics

 

37 Small Business Market Growth Number of Businesses with 1 - 49 Employees

 

38 Business Mix Loans (at quarter-end)

 

39 Business Mix Loans (at year-end)

 

40 Residential Construction - Total Company

 

41 Residential Construction - Atlanta MSA

 

42 Residential Construction - North Georgia

 

43 Loans - Markets Served (at quarter-end)

 

44 Loans - Markets Served (at year-end)

 

Legal lending limit $199 House lending limit 20 Top 25 relationships 7.8% of total loans 387 Regional credit review Standard Underwriting (in millions) 45 Lending - Credit Summary (as of March 31, 2010)

 

46 NPAs by Loan Category, Market, and Activity

 

47 Net Charge-offs by Category and Market

 

48 Liquidity - Loans / Deposits

 

49 Liquidity - Wholesale Borrowings

 

50 Business Mix - Deposits (at quarter-end)

 

FBR Capital (Market Perform - Nov 19, 2009) Sandler O'Neill & Partners (Hold - Apr 5, 2010) FIG Partners (Market Perform - Jan 29, 2010) Soleil (Tenner Investment Research) (Hold - Apr 13, 2010) Keefe, Bruyette & Woods (Market Perform - Apr 5, 2010) Stephens, Inc. (Equal Weight - Feb 2, 2010) Macquarie Capital (USA) (Neutral - Jan 29, 2010) Sterne Agee & Leach, Inc. (Neutral - Apr 15, 2010) Raymond James & Associates (Outperform 2 - Apr 5, 2010) SunTrust Robinson Humphrey (Buy - Apr 5, 2010) 51 Analyst Coverage

 

Southern Community Bank ($ in millions) Purchased - June 19, 2009 Nine years old - Enhances presence in southside metro Atlanta markets Four banking offices in southside metro Atlanta MSA - Fayetteville, Coweta and Henry counties 54 employees (Reduced by 17 after conversion in September 2009) $208 in customer deposits, including $53 core deposits FDIC assisted transaction: 80% guarantee on $109 loss threshold, 95% above Fully discounted bid with no credit exposure Accounted for credit related items (at FMV) as "covered assets" on balance sheet 1Q10 4Q09 2Q09 Loans $ 79 $ 85 $ 110 OREO 32 34 25 FDIC receivable 58 67 95 Total Covered Assets $ 169 $ 186 $ 230 Pre-tax gain on acquisition of $11.4 Accretive to earnings per share in 2009 52

 

Discontinued Operations - Restated Income Statement 53 Page 1 of 2

 

54 Page 2 of 2 Discontinued Operations - Restated Income Statement

 

55 Non-GAAP Reconciliation Tables

 

56 Non-GAAP Reconciliation Tables

 

United Community Banks, Inc. Investor Presentation First Quarter 2010 Copyright 2010 United Community Banks, Inc. All rights reserved.