United Community Banks, Inc. Announces Third Quarter Results

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United Community Banks, Inc. Announces Third Quarter Results

Oct 23, 2018

Continued Strong Profitability, EPS up 42% year over year

GREENVILLE, S.C., Oct. 23, 2018 (GLOBE NEWSWIRE) -- United Community Banks, Inc. (NASDAQ: UCBI) (“United”) realized strong third quarter results, with solid year-over-year loan and deposit growth, favorable efficiency levels and outstanding asset quality trends. Reported earnings per share were $0.54, an increase of 42 percent from a year ago. Excluding merger-related and other charges, earnings per share were $0.55, up 34 percent compared to last year. United also reported higher profitability ratios with increases in both return on assets and return on tangible equity.

During the quarter, United benefitted from strong core deposit growth, net interest margin expansion as well as strong mortgage and SBA production. Core transaction deposits were up $70 million and total customer deposits increased by $156 million during the quarter. Compared to last year, mortgage and SBA production increased 23 percent and 10 percent, respectively. Additionally, year-to-date SBA production is 39 percent higher than 2017. Navitas Credit Corporation, United’s equipment finance arm, continued to perform well and was a key growth driver for the quarter.

“I am pleased with our third quarter performance and continue to be optimistic about the balance of 2018,” said Lynn Harton, President and Chief Executive Officer of United. “Our new markets and investments continue to perform well and we have high expectations for the remainder of the year and beyond. We are pleased that we were able to exceed our return on assets target and are proud to have attained a 1.42 percent return on assets this quarter on an operating basis. I credit our outstanding team for this performance and am proud they were recognized for creating one of the “Best Banks to Work For” by American Banker for the second year in a row.”

Third Quarter 2018 Financial Highlights:

Return on assets of 1.41 percent, or 1.42 percent, excluding merger-related and other charges
Return on common equity of 12.0 percent
Return on tangible equity of 15.8 percent, excluding merger-related and other charges
Loan growth, excluding planned runoff of the indirect portfolio, of 2 percent on an annualized basis
Loan production of $778 million, as compared to $617 million in Q3 2017
Expansion of the net interest margin to 3.95 percent, up 5 basis points from the second quarter of 2018 and up 41 basis points from a year ago
Efficiency ratio of 56.8 percent, or 56.4 percent, excluding merger-related and other charges
Net charge offs of seven basis points, consistent with last quarter
Nonperforming assets of 0.19 percent of total assets, compared with 0.20 percent at June 30, 2018 and 0.23 percent at September 30, 2017

Conference Call

United will hold a conference call, Wednesday, October 24, 2018, at 11 a.m. ET to discuss the contents of this press release and to share business highlights for the quarter. To access the call, dial (877) 380-5665 and use the conference number 1270387. The conference call also will be webcast and available for replay for 30 days by selecting “Events & Presentations” within the Investor Relations section of United’s website at www.ucbi.com.



UNITED COMMUNITY BANKS, INC.
Financial Highlights
Selected Financial Information


		2018												2017							Third Quarter 2018-2017 Change				For the Nine Months Ended September 30,							YTD 2018-2017 Change
(in thousands, except per share data)		Third Quarter				Second Quarter				First Quarter				Fourth Quarter				Third Quarter			Third Quarter 2018-2017 Change				2018				2017			YTD 2018-2017 Change
INCOME SUMMARY
Interest revenue	$	128,721			$	122,215			$	115,290			$	106,757			$	98,839						$	366,226			$	282,963
Interest expense		16,611				13,739				12,005				9,249				9,064							42,355				24,486
Net interest revenue		112,110				108,476				103,285				97,508				89,775			25		%		323,871				258,477			25		%
Provision for credit losses		1,800				1,800				3,800				1,200				1,000							7,400				2,600
Noninterest income		24,180				23,340				22,396				21,928				20,573			18				69,916				66,332			5
Total revenue		134,490				130,016				121,881				118,236				109,348			23				386,387				322,209			20
Expenses		77,718				76,850				73,475				75,882				65,674			18				228,043				191,729			19
Income before income tax expense		56,772				53,166				48,406				42,354				43,674			30				158,344				130,480			21
Income tax expense		13,090				13,532				10,748				54,270				15,728			(17	)			37,370				50,743			(26	)
Net income (loss)		43,682				39,634				37,658				(11,916	)			27,946			56				120,974				79,737			52
Merger-related and other charges		592				2,873				2,646				7,358				3,420							6,111				7,304
Income tax benefit of merger-related and other charges		(141	)			(121	)			(628	)			(1,165	)			(1,147	)						(890	)			(2,580	)
Impact of remeasurement of deferred tax asset resulting from 2017 Tax Cuts and Jobs Act		-				-				-				38,199				-							-				-
Release of disproportionate tax effects lodged in OCI		-				-				-				-				-							-				3,400
Net income - operating ⁽¹⁾	$	44,133			$	42,386			$	39,676			$	32,476			$	30,219			46			$	126,195			$	87,861			44

PERFORMANCE MEASURES
Per common share:
Diluted net income (loss) - GAAP	$	0.54			$	0.49			$	0.47			$	(0.16	)		$	0.38			42			$	1.51			$	1.10			37
Diluted net income - operating ⁽¹⁾		0.55				0.53				0.50				0.42				0.41			34				1.57				1.21			30
Cash dividends declared		0.15				0.15				0.12				0.10				0.10			50				0.42				0.28			50
Book value		17.56				17.29				17.02				16.67				16.50			6				17.56				16.50			6
Tangible book value⁽³⁾		13.54				13.25				12.96				13.65				14.11			(4	)			13.54				14.11			(4	)

Key performance ratios:
Return on common equity - GAAP⁽²⁾⁽⁴⁾		11.96		%		11.20		%		11.11		%		(3.57	)	%		9.22		%					11.43		%		9.26		%
Return on common equity - operating^(1)(2)(4)		12.09				11.97				11.71				9.73				9.97							11.93				10.20
Return on tangible common equity - operating^(1)(2)(3)(4)		15.81				15.79				15.26				11.93				11.93							15.62				12.07
Return on assets - GAAP⁽⁴⁾		1.41				1.30				1.26				(0.40	)			1.01							1.32				0.99
Return on assets - operating⁽¹⁾⁽⁴⁾		1.42				1.39				1.33				1.10				1.09							1.38				1.09
Dividend payout ratio - GAAP		27.78				30.61				25.53				(62.50	)			26.32							27.81				25.45
Dividend payout ratio - operating ⁽¹⁾		27.27				28.30				24.00				23.81				24.39							26.75				23.14
Net interest margin (fully taxable equivalent)⁽⁴⁾		3.95				3.90				3.80				3.63				3.54							3.88				3.49
Efficiency ratio - GAAP		56.82				57.94				57.83				63.03				59.27							57.52				58.81
Efficiency ratio - operating ⁽¹⁾		56.39				55.77				55.75				56.92				56.18							55.98				56.57
Average equity to average assets		11.33				11.21				11.03				11.21				10.86							11.19				10.54
Average tangible equity to average assets⁽³⁾		8.97				8.83				8.82				9.52				9.45							8.88				9.21
Average tangible common equity to average assets⁽³⁾		8.97				8.83				8.82				9.52				9.45							8.88				9.21
Tangible common equity to risk-weighted assets⁽³⁾⁽⁵⁾		11.62				11.36				11.19				12.05				12.80							11.62				12.80
																									-
ASSET QUALITY
Nonperforming loans	$	22,530			$	21,817			$	26,240			$	23,658			$	22,921			(2	)		$	22,530			$	22,921			(2	)
Foreclosed properties		1,336				2,597				2,714				3,234				2,736			(51	)			1,336				2,736			(51	)
Total nonperforming assets (NPAs)		23,866				24,414				28,954				26,892				25,657			(7	)			23,866				25,657			(7	)
Allowance for loan losses		60,940				61,071				61,085				58,914				58,605			4				60,940				58,605			4
Net charge-offs		1,466				1,359				1,501				1,061				1,635			(10	)			4,326				4,937			(12	)
Allowance for loan losses to loans		0.74		%		0.74		%		0.75		%		0.76		%		0.81		%					0.74		%		0.81		%
Net charge-offs to average loans⁽⁴⁾		0.07				0.07				0.08				0.06				0.09							0.07				0.09
NPAs to loans and foreclosed properties		0.29				0.30				0.35				0.35				0.36							0.29				0.36
NPAs to total assets		0.19				0.20				0.24				0.23				0.23							0.19				0.23

AVERAGE BALANCES ($ in millions)
Loans	$	8,200			$	8,177			$	7,993			$	7,560			$	7,149			15			$	8,124			$	7,012			16
Investment securities		2,916				2,802				2,870				2,991				2,800			4				2,863				2,799			2
Earning assets		11,320				11,193				11,076				10,735				10,133			12				11,197				9,969			12
Total assets		12,302				12,213				12,111				11,687				10,980			12				12,209				10,788			13
Deposits		9,950				9,978				9,759				9,624				8,913			12				9,896				8,723			13
Shareholders’ equity		1,394				1,370				1,336				1,310				1,193			17				1,367				1,137			20
Common shares - basic (thousands)		79,806				79,753				79,205				76,768				73,151			9				79,588				72,060			10
Common shares - diluted (thousands)		79,818				79,755				79,215				76,768				73,162			9				79,598				72,071			10

AT PERIOD END ($ in millions)
Loans	$	8,226			$	8,220			$	8,184			$	7,736			$	7,203			14			$	8,226			$	7,203			14
Investment securities		2,873				2,834				2,731				2,937				2,847			1				2,873				2,847			1
Total assets		12,405				12,386				12,264				11,915				11,129			11				12,405				11,129			11
Deposits		10,229				9,966				9,993				9,808				9,127			12				10,229				9,127			12
Shareholders’ equity		1,402				1,379				1,357				1,303				1,221			15				1,402				1,221			15
Common shares outstanding (thousands)		79,202				79,138				79,123				77,580				73,403			8				79,202				73,403			8

⁽¹⁾ Excludes merger-related and other charges which includes amortization of certain executive change of control benefits, the fourth quarter 2017 impact of remeasurement of United's deferred tax assets following the passage of tax reform legislation and a first quarter 2017 release of disproportionate tax effects lodged in OCI. ⁽²⁾ Net income less preferred stock dividends, divided by average realized common equity, which excludes accumulated other comprehensive income (loss). ⁽³⁾ Excludes effect of acquisition related intangibles and associated amortization. ⁽⁴⁾ Annualized. ⁽⁵⁾ Third quarter 2018 ratio is preliminary.

UNITED COMMUNITY BANKS, INC.
Non-GAAP Performance Measures Reconciliation
Selected Financial Information

		2018												2017							For the Nine Months Ended
	Third				Second				First				Fourth				Third				For the Nine Months Ended
(in thousands, except per share data)	Quarter				Quarter				Quarter				Quarter				Quarter					2018				2017

Expense reconciliation
Expenses (GAAP)	$	77,718			$	76,850			$	73,475			$	75,882			$	65,674			$	228,043			$	191,729
Merger-related and other charges		(592	)			(2,873	)			(2,646	)			(7,358	)			(3,420	)			(6,111	)			(7,304	)
Expenses - operating	$	77,126			$	73,977			$	70,829			$	68,524			$	62,254			$	221,932			$	184,425

Net income reconciliation
Net income (loss) (GAAP)	$	43,682			$	39,634			$	37,658			$	(11,916	)		$	27,946			$	120,974			$	79,737
Merger-related and other charges		592				2,873				2,646				7,358				3,420				6,111				7,304
Income tax benefit of merger-related and other charges		(141	)			(121	)			(628	)			(1,165	)			(1,147	)			(890	)			(2,580	)
Impact of tax reform on remeasurement of deferred tax asset		-				-				-				38,199				-				-				-
Release of disproportionate tax effects lodged in OCI		-				-				-				-				-				-				3,400
Net income - operating	$	44,133			$	42,386			$	39,676			$	32,476			$	30,219			$	126,195			$	87,861
Diluted income per common share reconciliation
Diluted income (loss) per common share (GAAP)	$	0.54			$	0.49			$	0.47			$	(0.16	)		$	0.38			$	1.51			$	1.10
Merger-related and other charges		0.01				0.04				0.03				0.08				0.03				0.06				0.06
Impact of tax reform on remeasurement of deferred tax asset		-				-				-				0.50				-				-				-
Release of disproportionate tax effects lodged in OCI		-				-				-				-				-				-				0.05
Diluted income per common share - operating	$	0.55			$	0.53			$	0.50			$	0.42			$	0.41			$	1.57			$	1.21

Book value per common share reconciliation
Book value per common share (GAAP)	$	17.56			$	17.29			$	17.02			$	16.67			$	16.50			$	17.56			$	16.50
Effect of goodwill and other intangibles		(4.02	)			(4.04	)			(4.06	)			(3.02	)			(2.39	)			(4.02	)			(2.39	)
Tangible book value per common share	$	13.54			$	13.25			$	12.96			$	13.65			$	14.11			$	13.54			$	14.11

Return on tangible common equity reconciliation
Return on common equity (GAAP)		11.96		%		11.20		%		11.11		%		(3.57	)	%		9.22		%		11.43		%		9.26		%
Merger-related and other charges		0.13				0.77				0.60				1.86				0.75				0.50				0.55
Impact of tax reform on remeasurement of deferred tax asset		-				-				-				11.44				-				-				-
Release of disproportionate tax effects lodged in OCI		-				-				-				-				-				-				0.39
Return on common equity - operating		12.09				11.97				11.71				9.73				9.97				11.93				10.20
Effect of goodwill and other intangibles		3.72				3.82				3.55				2.20				1.96				3.69				1.87
Return on tangible common equity - operating		15.81		%		15.79		%		15.26		%		11.93		%		11.93		%		15.62		%		12.07		%

Return on assets reconciliation
Return on assets (GAAP)		1.41		%		1.30		%		1.26		%		(0.40	)	%		1.01		%		1.32		%		0.99		%
Merger-related and other charges		0.01				0.09				0.07				0.20				0.08				0.06				0.06
Impact of tax reform on remeasurement of deferred tax asset		-				-				-				1.30				-				-				-
Release of disproportionate tax effects lodged in OCI		-				-				-				-				-				-				0.04
Return on assets - operating		1.42		%		1.39		%		1.33		%		1.10		%		1.09		%		1.38		%		1.09		%

Dividend payout ratio reconciliation
Dividend payout ratio (GAAP)		27.78		%		30.61		%		25.53		%		(62.50	)	%		26.32		%		27.81		%		25.45		%
Merger-related and other charges		(0.51	)			(2.31	)			(1.53	)			12.04				(1.93	)			(1.06	)			(1.31	)
Impact of tax reform on remeasurement of deferred tax asset		-				-				-				74.27				-				-				-
Release of disproportionate tax effects lodged in OCI		-				-				-				-				-				-				(1.00	)
Dividend payout ratio - operating		27.27		%		28.30		%		24.00		%		23.81		%		24.39		%		26.75		%		23.14		%

Efficiency ratio reconciliation
Efficiency ratio (GAAP)		56.82		%		57.94		%		57.83		%		63.03		%		59.27		%		57.52		%		58.81		%
Merger-related and other charges		(0.43	)			(2.17	)			(2.08	)			(6.11	)			(3.09	)			(1.54	)			(2.24	)
Efficiency ratio - operating		56.39		%		55.77		%		55.75		%		56.92		%		56.18		%		55.98		%		56.57		%

Average equity to assets reconciliation
Equity to assets (GAAP)		11.33		%		11.21		%		11.03		%		11.21		%		10.86		%		11.19		%		10.54		%
Effect of goodwill and other intangibles		(2.36	)			(2.38	)			(2.21	)			(1.69	)			(1.41	)			(2.31	)			(1.33	)
Tangible common equity to assets		8.97		%		8.83		%		8.82		%		9.52		%		9.45		%		8.88		%		9.21		%

Tangible common equity to risk-weighted assets reconciliation ⁽¹⁾
Tier 1 capital ratio (Regulatory)		12.34		%		11.94		%		11.61		%		12.24		%		12.27		%		12.34		%		12.27		%
Effect of other comprehensive income		(0.68	)			(0.57	)			(0.50	)			(0.29	)			(0.13	)			(0.68	)			(0.13	)
Effect of deferred tax limitation		0.30				0.33				0.42				0.51				0.94				0.30				0.94
Effect of trust preferred		(0.34	)			(0.34	)			(0.34	)			(0.36	)			(0.24	)			(0.34	)			(0.24	)
Basel III intangibles transition adjustment		-				-				-				(0.05	)			(0.04	)			-				(0.03	)
Tangible common equity to risk-weighted assets		11.62		%		11.36		%		11.19		%		12.05		%		12.80		%		11.62		%		12.81		%

⁽¹⁾ Third quarter 2018 ratios are preliminary.

UNITED COMMUNITY BANKS, INC.
Financial Highlights
Loan Portfolio Composition at Period-End


		2018						2017			Linked Quarter Change			Year over Year Change
	Third		Second		First		Fourth		Third
(in millions)	Quarter		Quarter		Quarter		Quarter		Quarter
LOANS BY CATEGORY
Owner occupied commercial RE	$	1,673	$	1,682	$	1,898	$	1,924	$	1,792	$	(9	)	$	(119	)
Income producing commercial RE		1,788		1,821		1,677		1,595		1,413		(33	)		375
Commercial & industrial		1,194		1,193		1,142		1,131		1,084		1			110
Commercial construction		761		735		691		712		583		26			178
Equipment financing		509		465		423		-		-		44			509
Total commercial		5,925		5,896		5,831		5,362		4,872		29			1,053
Residential mortgage		1,035		1,021		992		974		933		14			102
Home equity lines of credit		702		708		712		731		689		(6	)		13
Residential construction		198		195		190		183		190		3			8
Consumer		366		400		459		486		519		(34	)		(153	)
Total loans	$	8,226	$	8,220	$	8,184	$	7,736	$	7,203		6			1,023

LOANS BY MARKET
North Georgia	$	992	$	1,001	$	1,004	$	1,019	$	1,047		(9	)		(55	)
Atlanta MSA		1,493		1,533		1,513		1,510		1,477		(40	)		16
North Carolina		1,078		1,067		1,037		1,049		542		11			536
Coastal Georgia		610		623		635		630		634		(13	)		(24	)
Gainesville MSA		235		230		231		248		242		5			(7	)
East Tennessee		460		474		473		475		471		(14	)		(11	)
South Carolina		1,586		1,571		1,537		1,486		1,470		15			116
Commercial Banking Solutions		1,530		1,444		1,438		961		920		86			610
Indirect auto		242		277		316		358		400		(35	)		(158	)
Total loans	$	8,226	$	8,220	$	8,184	$	7,736	$	7,203		6			1,023

UNITED COMMUNITY BANKS, INC.
Financial Highlights
Credit Quality


	Third Quarter 2018										Second Quarter 2018											First Quarter 2018
	Nonperforming			Foreclosed				Total			Nonperforming				Foreclosed			Total				Nonperforming			Foreclosed			Total
(in thousands)	Loans			Properties				NPAs			Loans				Properties			NPAs				Loans			Properties			NPAs
NONPERFORMING ASSETS BY CATEGORY
Owner occupied CRE	$	4,884		$	183			$	5,067		$	5,772			$	812		$	6,584			$	6,757		$	1,121		$	7,878
Income producing CRE		1,194			156				1,350			991				455			1,446				3,942			368			4,310
Commercial & industrial		1,516			-				1,516			2,180				-			2,180				1,917			-			1,917
Commercial construction		825			522				1,347			613				576			1,189				574			658			1,232
Equipment financing		1,181			-				1,181			1,075				-			1,075				428			-			428
Total commercial		9,600			861				0,461			10,631				1,843			12,474				13,618			2,147			15,765
Residential mortgage		8,928			424				9,352			7,918				184			8,102				8,724			232			8,956
Home equity lines of credit		2,814			-				2,814			1,812				550			2,362				2,149			335			2,484
Residential construction		455			51				506			637				20			657				378			-			378
Consumer		733			-				733			819				-			819				1,371			-			1,371
Total NPAs	$	22,530		$	1,336			$	23,866		$	21,817			$	2,597		$	24,414			$	26,240		$	2,714		$	28,954

NONPERFORMING ASSETS BY MARKET
North Georgia	$	7,170		$	361			$	7,531		$	7,583			$	640		$	8,223			$	8,519		$	85		$	8,604
Atlanta MSA		1,778			132				1,910			1,928				132			2,060				1,138			132			1,270
North Carolina		3,690			480				4,170			3,029				750			3,779				5,006			1,271			6,277
Coastal Georgia		1,498			-				1,498			943				-			943				1,887			-			1,887
Gainesville MSA		212			-				212			186				-			186				574			163			737
East Tennessee		1,403			128				1,531			1,473				143			1,616				1,511			10			1,521
South Carolina		3,280			235				3,515			3,093				362			3,455				3,443			483			3,926
Commercial Banking Solutions		2,871			-				2,871			2,831				570			3,401				2,937			570			3,507
Indirect auto		628			-				628			751				-			751				1,225			-			1,225
Total NPAs	$	22,530		$	1,336			$	23,866		$	21,817			$	2,597		$	24,414			$	26,240		$	2,714		$	28,954

NONPERFORMING ASSETS ACTIVITY
Beginning Balance	$	21,817		$	2,597			$	24,414		$	26,240			$	2,714		$	28,954			$	23,658		$	3,234		$	26,892
Acquisitions		-			-				-			-				-			-				428			-			428
Loans placed on non-accrual		5,759			-				5,759			3,612				-			3,612				7,463			-			7,463
Payments received		(3,095	)		-				(3,095	)		(5,314		)		-			(5,314		)		(3,534	)		-			(3,534	)
Loan charge-offs		(1,588	)		-				(1,588	)		(2,065		)		-			(2,065		)		(1,150	)		-			(1,150	)
Foreclosures		(363	)		454				91			(656		)		984			328				(625	)		625			-
Property sales		-			(1,659		)		(1,659	)		-				(1,029	)		(1,029		)		-			(957	)		(957	)
Write downs		-			(166		)		(166	)		-				(106	)		(106		)		-			(72	)		(72	)
Net gains (losses) on sales		-			110				110			-				34			34				-			(116	)		(116	)
Ending Balance	$	22,530		$	1,336			$	23,866		$	21,817			$	2,597		$	24,414			$	26,240		$	2,714		$	28,954

	Third Quarter 2018							Second Quarter 2018							First Quarter 2018
				Net Charge-							Net Charge-							Net Charge-
				Offs to							Offs to							Offs to
	Net			Average				Net			Average				Net			Average
(in thousands)	Charge-Offs			Loans⁽¹⁾				Charge-Offs			Loans⁽¹⁾				Charge-Offs			Loans⁽¹⁾
NET CHARGE-OFFS BY CATEGORY
Owner occupied CRE	$	(251	)	(.06)		%		$	(578	)	(.13)		%		$	(43	)	(.01)		%
Income producing CRE		1			-				1,421		.33					422		.10
Commercial & industrial		418		.14					16		.01					(3	)		-
Commercial construction		(43	)	(.02)					(107	)	(.06)					266		.15
Equipment financing		482		.39					(49	)	(.04)					40		.08
Total commercial		607		.04					703		.05					682		.05
Residential mortgage		171		.07					11			-				(52	)	(.02)
Home equity lines of credit		279		.16					21		.01					89		.05
Residential construction		(164	)	(.33)					(58	)	(.12)					(64	)	(.14)
Consumer		573		.60					682		.64					846		.72
Total	$	1,466		.07				$	1,359		.07				$	1,501		.08

NET CHARGE-OFFS BY MARKET
North Georgia	$	483		.19		%		$	246		.10		%		$	772		.31		%
Atlanta MSA		99		.03					103		.03					(109	)	(.03)
North Carolina		(87	)	(.03)					1,268		.48					144		.06
Coastal Georgia		24		.02					19		.01					137		.09
Gainesville MSA		(48	)	(.08)					(2	)		-				(18	)	(.03)
East Tennessee		(1	)		-				76		.06					31		.03
South Carolina		418		.11					(1,057	)	(.27)					12			-
Commercial Banking Solutions		403		.11					381		.11					176		.06
Indirect auto		175		.27					325		.44					356		.41
Total	$	1,466		.07				$	1,359		.07				$	1,501		.08

⁽¹⁾ Annualized.


UNITED COMMUNITY BANKS, INC.
Consolidated Statements of Income (Unaudited)

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in thousands, except per share data)		2018		2017		2018		2017

Interest revenue:
Loans, including fees	$	108,335	$	80,264	$	308,296	$	227,816
Investment securities, including tax exempt of $1,052, $671, $3,049, and $1,307		19,899		17,875		56,448		53,365
Deposits in banks and short-term investments		487		700

Press Release Details

United Community Banks, Inc. Announces Third Quarter Results