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):
October 28, 2003

United Community Banks, Inc.
(Exact name of registrant as specified in its charter)

 

Registrant’s telephone number, including area code:  (706) 781-2265

 

 

Item 7.	Exhibits.
	99.1	News Release issued by United Community Banks, Inc. dated October 28, 2003.

 

Item 12.	Results of Operations and Financial Condition
	The information, including exhibits hereto, in this Current Report is being furnished and shall not be deemed "filed" for the purposes of Section 18 of the Securities and Exchange Act of 1934 or otherwise subject to the liabilities of that Section.  The information in this Current Report shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, except as otherwise expressly stated in such filing. On October 28, 2003, United Community Banks, Inc. (the “Registrant”) issued a news release announcing its financial results for the third quarter ended September 30, 2003 (the “News Release”). The News Release, including financial schedules, is attached as Exhibit 99.1 to this report and is incorporated into this Item 12 by reference. In connection with issuing the News Release, on October 28, 2003 at 11:00 a.m. EST, the Registrant intends to hold a conference call/webcast to discuss the News Release. The News Release contains a description of the Registrant’s earnings excluding merger-related expenses (referred to as “Operating Earnings”, “Net Operating Income”, “Diluted Operating Earnings Per Share”) related to the March 31, 2003 acquisition of First Central Bancshares, Inc., headquartered in Lenoir City, Tennessee, and the May 1, 2003 acquisition of First Georgia Holding, Inc., headquartered in Brunswick, Georgia. Management believes that a presentation of the Registrant’s earnings excluding merger-related expenses as a financial measure provides useful information to investors because it provides information about the Registrant’s financial performance from its ongoing business operations. The merger-related expenses are principally related to equipment lease termination, legal and other professional fees and systems conversion costs.

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.

 

Exhibit 99.1

For Immediate Release

October 28, 2003
 

For more information:

Rex S. Schuette Chief Financial Officer 706-781-2265 rex_schuette@ucbi.com

UNITED COMMUNITY BANKS, INC. REPORTS
RECORD THIRD QUARTER EARNINGS

Strong Loan and Fee Revenue Growth Drive Performance

BLAIRSVILLE, GA, October 28, 2003 – United Community Banks, Inc. (Nasdaq: UCBI), Georgia’s third largest bank holding company, today announced net income for the third quarter of 2003 rose 23% to a record $10.4 million from $8.4 million for the third quarter of 2002.  Diluted earnings per share of $.43 increased 13% from $.38 for the same period a year ago.  Total revenue, on a taxable equivalent basis, of $45.2 million increased 25% from the year-ago third quarter.  Return on tangible equity was 19.94% compared with 17.88% a year ago and return on assets was 1.06% compared with 1.12% a year ago.

For the nine months ended September 30, 2003, net operating income of $28.9 million rose $4.7 million, or 19%, from $24.2 million for the same period a year ago.  Diluted operating earnings per share totaled $1.24, an increase of $.15, or 14%, from $1.09 a year earlier.  Total revenue of $126.5 million increased $19.7 million, or 18%, from the same period a year ago.  Return on tangible equity was 19.12% compared with 17.96% a year ago.

Net operating income for the first nine months of 2003 excludes pre-tax merger-related charges of $1.5 million, or $1.0 million after tax, and $.04 per diluted share.  The merger-related charges were for legal, investment advisor and other professional fees, as well as the termination of equipment leases and conversion costs related to the acquisitions of First Georgia Holding, Inc. (“First Georgia Bank”) completed on May 1, 2003 and First Central Bancshares, Inc. (“First Central Bank”) completed on March 31, 2003.  Including those merger-related charges, net income, diluted earnings per share, return on equity and return on assets for the nine months ended September 30, 2003 were $27.9 million, $1.20, 15.02% and 1.02%, respectively.

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“Loan demand across all of our markets and higher fee revenue drove our third quarter performance, pushing earnings for the quarter above $10 million for the first time,” said Jimmy Tallent, President and Chief Executive Officer. “This record performance also marked a significant milestone for quarterly earnings, since only seven years ago we earned $10 million for the entire year.”

“Our ability to service customers, combined with the strength of our markets relative to the national economy, helped increase loans by $277 million, or 12%, from a year ago,” Tallent added.  “In addition, the acquisitions of First Central Bank and First Georgia Bank contributed $310 million in new loans, bringing our total loan growth to $587 million.  Mortgage refinancing together with new deposit products and services were key drivers for the rise in fee revenue.”

“Our long-term financial goals are sustained double-digit earnings per share growth and return on tangible equity above 16%,” Tallent said.  “Return on tangible equity, which excludes the effects of acquisition-related intangibles, was 19.94% for the third quarter compared with 17.88% for the same period a year ago. Excluding those intangibles, our return on equity for the quarter was 14.90% compared with 16.56% a year ago. As a result of the acquisitions, we expected our return on equity this quarter to decline by approximately 150 basis points to the 15% level,” Tallent added.

Taxable equivalent net interest revenue for the third quarter rose $6.2 million, or 20%, to $36.3 million from the same period a year ago.  Recent acquisitions contributed approximately $3.5 million, leaving the core growth rate at approximately 9%.  “Even without the acquisitions and despite the weak national economy, United Community Banks still experienced strong loan growth and new business,” Tallent said. 

Taxable equivalent net interest margin for the third quarter was 3.97% versus 4.31% a year ago, due to margin compression caused by lower interest rates. “Over the past four quarters, our net interest margin has stabilized around the 4% level and we expect to continue around that level in the fourth quarter,” Tallent said. “On a consecutive quarter basis, excluding acquisitions, our net interest revenue grew at an annualized rate of approximately 10%.  With a stable margin, we are prepared to maintain our earnings momentum by achieving a strong base of core business growth combined with continued focus on expense controls.”

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The third quarter provision for loan losses was $1.5 million, down $.3 million from a year earlier and unchanged from the second quarter of 2003.  Non-performing assets totaled $8.0 million and were down $1.6 million from a year ago while loans outstanding were up almost $600 million over the same period. Non-performing assets as a percentage of total assets were .20% at September 30, 2003, compared with .31% at September 30, 2002.  “Our high credit quality provides the foundation on which our financial performance is built,” Tallent said. “Credit quality remains excellent thanks to the tireless efforts of our exceptional team of bankers.  Our strategy of securing loans with hard assets is key to our credit quality success.” 

Fee revenue of $10.4 million for the third quarter increased $2.7 million, or 35%, from $7.7 million a year ago.  Excluding the contribution of recent mergers, fee revenue grew 15%, primarily driven by higher mortgage fees and service charges and fees on deposit accounts.   Low interest rates continued to help generate higher mortgage fees of $3.1 million for the quarter, up $1.3 million over 2002.  Service charges and fees on deposit accounts were $5.0 million, up $1.4 million due to the recent acquisitions, increasing popularity of new products and services introduced last year, and growth in transactions and new accounts.

Operating expenses were $28.7 million, up $6.2 million, or 27%, from the third quarter of 2002.  Included in this third quarter were operating expenses for the two banks acquired earlier this year, which totaled approximately $3.7 million, leaving the underlying core expense growth rate at 11%.  Salaries and employee benefits of $18.0 million increased $3.6 million, or 25%, with approximately $2.2 million of this increase resulting from the recent acquisitions.  The balance of the increase was due to normal merit increases for staff and higher incentive compensation associated with the growth in mortgage refinancing activities.  Staff levels at September 30, 2003, excluding acquisitions, were down slightly from a year ago.  Communications and equipment expenses increased $.6 million primarily resulting from the recent acquisitions. Excluding the acquisitions, communications and equipment expenses increased approximately 10% due to depreciation and amortization costs for software, telecommunications, and technology equipment added over the last twelve months.  Increases in all other expense categories can be attributed to the recent acquisitions and business growth. 

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“We continue to diligently monitor and control expenses while growing our customer base and revenue,” Tallent said.  “Excluding acquisitions, total revenue increased 12% while operating expenses rose 11%, providing for a positive operating leverage of 1%, which contributed to our 13% growth in diluted earnings per share this quarter.  Our efficiency ratio was 61.34% for the quarter compared with 59.66% a year ago and down slightly from the prior quarter.  Costs associated with recent acquisitions accounted for a significant portion of the increase over last year.  We are striving for an efficiency ratio in the range of 58% to 60%, which we believe is reasonable given our service-oriented community banking model.”

“Looking forward, we believe United Community Banks remains on target to achieve earnings per share growth within our long-term goal of 12% to 15% for the balance of 2003 and next year,” Tallent said.  “We anticipate loan growth in the range of 10% to 14% for the fourth quarter and through 2004, and our net interest margin will continue to be around the 4% level through 2004.  Our outlook is based on assumptions that include a continued, stable economic environment in our markets combined with strong credit quality.  We remain committed to providing superior customer service, growing our franchise -- both internally and through selective mergers, and improving our operating efficiency while maintaining solid credit quality.” 

On September 24, 2003, United Community Banks issued $35 million in subordinated step-up notes due September 30, 2015.  The subordinated notes qualify as Tier II capital under risk based capital guidelines.  The notes bear interest at a fixed rate of 6.25% through September 30, 2010, and a rate of 7.50% thereafter until maturity or earlier redemption.  The notes are callable at par on September 30, 2010, and September 30 of each year thereafter until maturity.  Proceeds from the offering will be used for general corporate purposes.

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Under the stock purchase program, a total of 1.5 million shares of common stock may be purchased through December 31, 2004.  As of September 30, 2003, a total of 874,000 shares have been purchased over the past two years with an average cost per share of $22.17.

On October 23, 2003, the Board of Directors declared a regular fourth quarter cash dividend of $.075 per common share payable January 2, 2004, to shareholders of record as of the close of business on December 15, 2003.  “Earlier this year, we increased our annual dividend rate for 2003 to $.30 per share, up $.05, or 20%, over the dividends paid for 2002,” Tallent said.  “This increase reflects our continued strong performance and commitment to deliver value to our shareholders.”

During the third quarter, United Community Banks announced an agreement to purchase three branches located in Avery, Mitchell, and Graham counties in western North Carolina from another financial institution.  In aggregate, the branches had deposits of  $74 million and loans of approximately $11 million as of September 30. The transaction has received all required regulatory approvals and will close in the fourth quarter of this year. "We are delighted to have this opportunity to expand our western North Carolina footprint in these excellent markets and to be able to serve our new customers with the same high level of customer service and community-focused banking style for which we are known," Tallent said.

United Community Banks completed the acquisitions of First Central Bank, headquartered in Lenoir City, Tennessee and First Georgia Bank, headquartered in Brunswick, Georgia during the first six months of 2003.  Combined, the acquisitions added 14 banking offices with approximately $310 million in loans, $410 million in deposits and $53 million in intangible assets.  “We successfully completed the last of the systems conversions during the third quarter and we are well on our way to meeting our strategic objectives with these mergers,” Tallent said.  “We are moving swiftly to take advantage of the outstanding growth opportunities available in these new markets.  Both acquisitions will be slightly accretive to earnings in 2003.”

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Conference Call

United Community Banks will hold a conference call to discuss the contents of this news release, as well as business highlights and financial outlook, on Tuesday, October 28, 2003 at 11:00 a.m. ET.  The telephone number for the conference call is (800) 915-4836.  The conference call will also be available by web-cast within the Investor Relations section of the company's web site, 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 $3.9 billion and operates 20 community banks with 70 banking offices located throughout north Georgia, metro Atlanta, 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 in its markets.  United Community Banks also offers the convenience of 24-hour access to its services through a network of ATMs, telephone and on-line banking.  United Community Banks common stock is listed on the Nasdaq National Market under the symbol UCBI.  Additional information may be found at the company’s web site, 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 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 4 of United Community Banks, Inc. annual report filed on Form 10-K with the Securities and Exchange Commission.

 

(Tables Follow)

 

 

 

 

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UNITED COMMUNITY BANKS, INC.
Consolidated Statement of Income
For the Three and Nine Months Ended September 30, 2003 and 2002
		Three Months Ended							Nine Months Ended
		September 30,							September 30,
(in thousands, except per share data)		2003			2002				2003			2002
Interest revenue:		(Unaudited)			(Unaudited)				(Unaudited)			(Audited)
Interest and fees on loans		$	46,623		$	42,533			$	133,461		$	126,167
Interest on federal funds sold and deposits in banks		140			76				307			427
Interest on investment securities:
Taxable		5,738			5,087				17,803			16,528
Tax-exempt		694			795				2,164			2,435
Total interest revenue		53,195			48,491				153,735			145,557
Interest expense:
Interest on deposits:
Demand		1,728			3,073				6,119			8,469
Savings		82			134				287			398
Time		9,784			11,303				30,673			34,355
Other borrowings		5,852			4,432				16,423			14,171
Total interest expense		17,446			18,942				53,502			57,393
Net interest revenue		35,749			29,549				100,233			88,164
Provision for loan losses		1,500			1,800				4,500			5,100
Net interest revenue after provision for loan losses		34,249			27,749				95,733			83,064
Fee revenue:
Service charges and fees		5,009			3,576				13,270			9,801
Mortgage loan and related fees		3,115			1,844				8,762			5,087
Consulting fees		1,092			1,216				3,366			3,381
Brokerage fees		447			467				1,315			1,456
Securities gains (losses), net		(122)			64				(125)			64
Other		860			560				2,506			2,161
Total fee revenue		10,401			7,727				29,094			21,950
Total revenue		44,650			35,476				124,827			105,014
Operating expenses:
Salaries and employee benefits		17,990			14,352				50,665			42,786
Occupancy		2,344			2,047				6,640			6,223
Communications and equipment		2,310			1,685				6,314			4,708
Postage, printing and supplies		1,237			870				3,354			2,836
Professional fees		1,036			881				3,007			2,621
Advertising and public relations		766			639				2,439			2,358
Amortization of intangibles		370			85				783			255
Merger-related charges		-			-				1,508			-
Other		2,659			1,992				7,126			6,332
Total operating expenses		28,712			22,551				81,836			68,119
Income before income taxes		15,938			12,925				42,991			36,895
Income taxes		5,574			4,524				15,094			12,675
Net income		$	10,364		$	8,401			$	27,897		$	24,220
Net income available to common stockholders		$	10,352		$	8,375			$	27,840		$	24,142
Earnings per common share:
Basic		$	.44		$	.39			$	1.24		$	1.13
Diluted		.43			.38				1.20			1.09
Average common shares outstanding:
Basic		23,408			21,392				22,501			21,402
Diluted		24,123			22,233				23,233			22,227

 

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UNITED COMMUNITY BANKS, INC.
Consolidated Balance Sheet
For the period ended
		September 30,			December 31,			September 30,
($ in thousands)		2003			2002			2002
ASSETS		(Unaudited)			(Audited)			(Unaudited)
Cash and due from banks		$	94,381		$	75,027		$	81,480
Interest-bearing deposits in banks		67,022			31,318			36,168
Federal funds sold		-			-			28,344
Cash and cash equivalents		161,403			106,345			145,992
Securities available for sale		634,421			559,390			460,673
Mortgage loans held for sale		14,348			24,080			24,766
Loans, net of unearned income		2,918,412			2,381,798			2,331,862
Less - allowance for loan losses		37,773			30,914			30,300
Loans, net		2,880,639			2,350,884			2,301,562
Premises and equipment, net		83,342			70,748			69,585
Accrued interest receivable		23,079			20,275			18,335
Intangible assets		65,674			12,767			12,853
Other assets		79,233			66,855			108,627
Total assets		$	3,942,139		$	3,211,344		$	3,142,393
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Demand		$	404,752		$	297,613		$	317,783
Interest-bearing demand		798,072			734,494			684,577
Savings		137,613			100,523			99,244
Time		1,449,894			1,252,609			1,285,358
Total deposits		2,790,331			2,385,239			2,386,962
Accrued expenses and other liabilities		24,752			17,222			71,473
Federal funds purchased and repurchase agreements		78,900			20,263			80,219
Federal Home Loan Bank advances		650,572			492,130			332,860
Long-term debt and other borrowings		107,871			74,911			55,449
Total liabilities		3,652,426			2,989,765			2,926,963
Stockholders' equity:
Preferred stock, $1 par value; $10 stated value; 10,000,000 shares authorized;
65,500, 172,600 and 172,600 shares issued and outstanding		655			1,726			1,726
Common stock, $1 par value; 50,000,000 shares authorized;
23,804,382, 21,805,924 and 21,805,924 shares issued		23,804			21,806			21,806
Capital surplus		106,925			62,495			62,419
Retained earnings		158,464			135,709			128,504
Treasury stock; 216,370, 542,652 and 461,385 shares, at cost		(8,015)			(11,432)			(9,401)
Accumulated other comprehensive income		7,880			11,275			10,376
Total stockholders' equity		289,713			221,579			215,430
Total liabilities and stockholders' equity		$	3,942,139		$	3,211,344		$	3,142,393