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

Oct 24, 2013

BLAIRSVILLE, GA -- (Marketwired) -- 10/24/13 -- United Community Banks, Inc. (NASDAQ: UCBI)

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Conference Call

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

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

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

UNITED COMMUNITY BANKS, INC.
Financial Highlights
Selected Financial Information
2013 2012
(in thousands, except per share data; taxable equivalent)
Third Quarter

Second Quarter


First Quarter
Fourth
Quarter

Third
Quarter

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

Second
Quarter

First
Quarter

Fourth
Quarter

Third
Quarter
Interest revenue reconciliation
Interest revenue - taxable equivalent $ 61,363 $ 61,693 $ 62,134 $ 64,450 $ 65,978
Taxable equivalent adjustment (370 ) (368 ) (365 ) (381 ) (419 )
Interest revenue (GAAP) $ 60,993 $ 61,325 $ 61,769 $ 64,069 $ 65,559
Net interest revenue reconciliation
Net interest revenue - taxable equivalent $ 54,338 $ 54,562 $ 54,659 $ 56,028 $ 57,371
Taxable equivalent adjustment (370 ) (368 ) (365 ) (381 ) (419 )
Net interest revenue (GAAP) $ 53,968 $ 54,194 $ 54,294 $ 55,647 $ 56,952
Total revenue reconciliation
Total operating revenue $ 65,482 $ 22,374 $ 56,485 $ 56,789 $ 55,635
Taxable equivalent adjustment (370 ) (368 ) (365 ) (381 ) (419 )
Total revenue (GAAP) $ 65,112 $ 22,006 $ 56,120 $ 56,408 $ 55,216
Income (loss) before taxes reconciliation
Income (loss) before taxes $ 25,385 $ (26,449 ) $ 12,715 $ 6,063 $ 10,852
Taxable equivalent adjustment (370 ) (368 ) (365 ) (381 ) (419 )
Income (loss) before taxes (GAAP) $ 25,015 $ (26,817 ) $ 12,350 $ 5,682 $ 10,433
Income tax expense (benefit) reconciliation
Income tax expense (benefit) $ 9,885 $ (256,413 ) $ 950 $ 802 $ 284
Taxable equivalent adjustment (370 ) (368 ) (365 ) (381 ) (419 )
Income tax expense (benefit) (GAAP) $ 9,515 $ (256,781 ) $ 585 $ 421 $ (135 )
Book value per common share reconciliation
Tangible book value per common share $ 10.95 $ 10.82 $ 6.76 $ 6.57 $ 6.64
Effect of goodwill and other intangibles .04 .08 .09 .10 .11
Book value per common share (GAAP) $ 10.99 $ 10.90 $ 6.85 $ 6.67 $ 6.75
Average equity to assets reconciliation
Tangible common equity to assets 9.02 % 8.79 % 5.66 % 5.67 % 5.73 %
Effect of preferred equity 2.74 2.74 2.87 2.88 2.93
Tangible equity to assets 11.76 11.53 8.53 8.55 8.66
Effect of goodwill and other intangibles .04 .04 .07 .08 .09
Equity to assets (GAAP) 11.80 % 11.57 % 8.60 % 8.63 % 8.75 %
Tangible common equity to risk-weighted assets reconciliation
Tangible common equity to risk-weighted assets 13.34 % 13.16 % 8.45 % 8.26 % 8.44 %
Effect of other comprehensive income .49 .29 .49 .51 .36
Effect of deferred tax limitation (4.72 ) (4.99 ) - - -
Effect of trust preferred 1.09 1.11 1.15 1.15 1.17
Effect of preferred equity 4.01 4.11 4.22 4.24 4.29
Tier I capital ratio (Regulatory) 14.21 % 13.68 % 14.31 % 14.16 % 14.26 %
UNITED COMMUNITY BANKS, INC.
Non-GAAP Performance Measures Reconciliation
Selected Financial Information
For the Nine Months
Ended September 30,
(in thousands, except per share data; taxable equivalent) 2013 2012
Interest revenue reconciliation
Interest revenue - taxable equivalent $ 185,190 $ 202,979
Taxable equivalent adjustment (1,103 ) (1,309 )
Interest revenue (GAAP) $ 184,087 $ 201,670
Net interest revenue reconciliation
Net interest revenue - taxable equivalent $ 163,559 $ 173,071
Taxable equivalent adjustment (1,103 ) (1,309 )
Net interest revenue (GAAP) $ 162,456 $ 171,762
Total revenue reconciliation
Total operating revenue $ 144,341 $ 166,581
Taxable equivalent adjustment (1,103 ) (1,309 )
Total revenue (GAAP) $ 143,238 $ 165,272
Income (loss) before taxes reconciliation
Income (loss) before taxes $ 11,651 $ 30,533
Taxable equivalent adjustment (1,103 ) (1,309 )
Income (loss) before taxes (GAAP) $ 10,548 $ 29,224
Income tax expense (benefit) reconciliation
Income tax expense (benefit) $ (245,578 ) $ 1,938
Taxable equivalent adjustment (1,103 ) (1,309 )
Income tax expense (benefit) (GAAP) $ (246,681 ) $ 629
Book value per common share reconciliation
Tangible book value per common share $ 10.95 $ 6.64
Effect of goodwill and other intangibles .04 .11
Book value per common share (GAAP) $ 10.99 $ 6.75
Average equity to assets reconciliation
Tangible common equity to assets 7.04 % 5.50 %
Effect of preferred equity 2.81 2.82
Tangible equity to assets 9.85 8.32
Effect of goodwill and other intangibles .06 .10
Equity to assets (GAAP) 9.91 % 8.42 %
Tangible common equity to risk-weighted assets reconciliation
Tangible common equity to risk-weighted assets 13.34 % 8.44 %
Effect of other comprehensive income .49 .36
Effect of deferred tax limitation (4.72 ) -
Effect of trust preferred 1.09 1.17
Effect of preferred equity 4.01 4.29
Tier I capital ratio (Regulatory) 14.21 % 14.26 %
UNITED COMMUNITY BANKS, INC.
Financial Highlights
Loan Portfolio Composition at Period-End (1)
2013 2012
(in millions) Third Quarter Second Quarter First Quarter Fourth Quarter Third Quarter
LOANS BY CATEGORY
Owner occupied commercial RE $ 1,129 $ 1,119 $ 1,130 $ 1,131 $ 1,126
Income producing commercial RE 614 629 674 682 693
Commercial & industrial 457 437 454 458 460
Commercial construction 137 133 152 155 161
Total commercial 2,337 2,318 2,410 2,426 2,440
Residential mortgage 888 876 850 829 833
Home equity lines of credit 421 402 396 385 341
Residential construction 318 332 372 382 389
Consumer installment 303 261 166 153 135
Total loans $ 4,267 $ 4,189 $ 4,194 $ 4,175 $ 4,138
LOANS BY MARKET
North Georgia $ 1,262 $ 1,265 $ 1,363 $ 1,364 $ 1,383
Atlanta MSA 1,246 1,227 1,262 1,250 1,238
North Carolina 575 576 575 579 579
Coastal Georgia 421 397 398 400 380
Gainesville MSA 253 256 259 261 256
East Tennessee 277 282 282 283 283
South Carolina 47 34 - - -
Other (2) 186 152 55 38 19
Total loans $ 4,267 $ 4,189 $ 4,194 $ 4,175 $ 4,138
RESIDENTIAL CONSTRUCTION
Dirt loans
Acquisition & development $ 40 $ 42 $ 57 $ 62 $ 71
Land loans 35 36 42 46 41
Lot loans 167 173 188 193 196
Total 242 251 287 301 308
House loans
Spec 30 34 40 41 44
Sold 46 47 45 40 37
Total 76 81 85 81 81
Total residential construction $ 318 $ 332 $ 372 $ 382 $ 389
(1) Excludes total loans of $23.3 million, $25.7 million, $28.3 million, $33.4 million and $37.0 million as of September 30, 2013, June 30, 2013, March 31, 2013, December 31, 2012 and September 30, 2012, respectively, that are covered by the loss-sharing agreement with the FDIC, related to the acquisition of Southern Community Bank. (2) Includes purchased indirect auto loans that are not assigned to a geographic region.
UNITED COMMUNITY BANKS, INC.
Financial Highlights
Loan Portfolio Composition at Period-End (1)
2013 2012

(in millions)		 Third
Quarter		 Second
Quarter		 Third
Quarter		 Linked Quarter Change Year over Year Change
LOANS BY CATEGORY
Owner occupied commercial RE $ 1,129 $ 1,119 $ 1,126 $ 10 $ 3
Income producing commercial RE 614 629 693 (15 ) (79 )
Commercial & industrial 457 437 460 20 (3 )
Commercial construction 137 133 161 4 (24 )
Total commercial 2,337 2,318 2,440 19 (103 )
Residential mortgage 888 876 833 12 55
Home equity lines of credit 421 402 341 19 80
Residential construction 318 332 389 (14 ) (71 )
Consumer installment 303 261 135 42 168
Total loans $ 4,267 $ 4,189 $ 4,138 78 129
LOANS BY MARKET
North Georgia $ 1,262 $ 1,265 $ 1,383 (3 ) (121 )
Atlanta MSA 1,246 1,227 1,238 19 8
North Carolina 575 576 579 (1 ) (4 )
Coastal Georgia 421 397 380 24 41
Gainesville MSA 253 256 256 (3 ) (3 )
East Tennessee 277 282 283 (5 ) (6 )
South Carolina 47 34 - 13 47
Other (2) 186 152 19 34 167
Total loans $ 4,267 $ 4,189 $ 4,138 78 129
RESIDENTIAL CONSTRUCTION
Dirt loans
Acquisition & development $ 40 $ 42 $ 71 (2 ) (31 )
Land loans 35 36 41 (1 ) (6 )
Lot loans 167 173 196 (6 ) (29 )
Total 242 251 308 (9 ) (66 )
House loans
Spec 30 34 44 (4 ) (14 )
Sold 46 47 37 (1 ) 9
Total 76 81 81 (5 ) (5 )
Total residential construction $ 318 $ 332 $ 389 (14 ) (71 )
(1) Excludes total loans of $23.3 million, $25.7 million, $28.3 million, $33.4 million and $37.0 million as of September 30, 2013, June 30, 2013, March 31, 2013, December 31, 2012 and September 30, 2012, respectively, that are covered by the loss-sharing agreement with the FDIC, related to the acquisition of Southern Community Bank. (2) Includes purchased indirect auto loans that are not assigned to a geographic region.
UNITED COMMUNITY BANKS, INC.
Financial Highlights
Credit Quality(1)
Third Quarter 2013
Non-performing Foreclosed Total
(in thousands) Loans Properties NPAs
NONPERFORMING ASSETS BY CATEGORY
Owner occupied CRE $ 6,358 $ 591 $ 6,949
Income producing CRE 1,657 139 1,796
Commercial & industrial 609 - 609
Commercial construction 343 376 719
Total commercial 8,967 1,106 10,073
Residential mortgage 11,335 1,679 13,014
Home equity lines of credit 1,169 475 1,644
Residential construction 4,097 1,207 5,304
Consumer installment 520 - 520
Total NPAs $ 26,088 $ 4,467 $ 30,555
Balance as a % of Unpaid Principal 61.6 % 41.5 % 57.6 %
NONPERFORMING ASSETS BY MARKET
North Georgia $ 13,652 $ 1,726 $ 15,378
Atlanta MSA 3,096 1,026 4,122
North Carolina 5,680 762 6,442
Coastal Georgia 995 928 1,923
Gainesville MSA 1,036 - 1,036
East Tennessee 1,629 25 1,654
South Carolina - - -
Other (3) - - -
Total NPAs $ 26,088 $ 4,467 $ 30,555
NONPERFORMING ASSETS ACTIVITY
Beginning Balance $ 27,864 $ 3,936 $ 31,800
Loans placed on non-accrual 9,959 - 9,959
Payments received (3,601 ) - (3,601 )
Loan charge-offs (5,395 ) - (5,395 )
Foreclosures (2,739 ) 2,739 -
Capitalized costs - 7 7
Property sales - (2,534 ) (2,534 )
Write downs - (329 ) (329 )
Net gains (losses) on sales - 648 648
Ending Balance $ 26,088 $ 4,467 $ 30,555
(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.
(3) Includes purchased indirect auto loans that are not assigned to a geographic region.
UNITED COMMUNITY BANKS, INC.
Financial Highlights
Credit Quality(1)
Second Quarter 2013
Non-performing Foreclosed Total
(in thousands) Loans Properties NPAs
NONPERFORMING ASSETS BY CATEGORY
Owner occupied CRE $ 5,283 $ 547 $ 5,830
Income producing CRE 1,954 - 1,954
Commercial & industrial 548 - 548
Commercial construction 504 376 880
Total commercial 8,289 923 9,212
Residential mortgage 12,847 1,303 14,150
Home equity lines of credit 1,491 140 1,631
Residential construction 4,838 1,570 6,408
Consumer installment 399 - 399
Total NPAs $ 27,864 $ 3,936 $ 31,800
Balance as a % of Unpaid Principal 62.6 % 31.6 % 55.8 %
NONPERFORMING ASSETS BY MARKET
North Georgia $ 12,830 $ 1,617 $ 14,447
Atlanta MSA 3,803 1,197 5,000
North Carolina 6,512 295 6,807
Coastal Georgia 2,588 627 3,215
Gainesville MSA 1,008 - 1,008
East Tennessee 1,123 200 1,323
South Carolina - - -
Other (3) - - -
Total NPAs $ 27,864 $ 3,936 $ 31,800
NONPERFORMING ASSETS ACTIVITY
Beginning Balance $ 96,006 $ 16,734 $ 112,740
Loans placed on non-accrual 13,200 - 13,200
Payments received (47,937 ) - (47,937 )
Loan charge-offs (23,972 ) - (23,972 )
Foreclosures (9,433 ) 9,433 -
Capitalized costs - 55 55
Property sales - (17,972 ) (17,972 )
Write downs - (1,369 ) (1,369 )
Net gains (losses) on sales - (2,945 ) (2,945 )
Ending Balance $ 27,864 $ 3,936 $ 31,800
(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.
(3) Includes purchased indirect auto loans that are not assigned to a geographic region.
UNITED COMMUNITY BANKS, INC.
Financial Highlights
Credit Quality(1)
First Quarter 2013
Non-performing Foreclosed Total
(in thousands) Loans Properties NPAs
NONPERFORMING ASSETS BY CATEGORY
Owner occupied CRE $ 8,142 $ 4,750 $ 12,892
Income producing CRE 9,162 834 9,996
Commercial & industrial 29,545 - 29,545
Commercial construction 22,359 3,027 25,386
Total commercial 69,208 8,611 77,819
Residential mortgage 10,901 3,463 14,364
Home equity lines of credit 916 - 916
Residential construction 14,592 4,660 19,252
Consumer installment 389 - 389
Total NPAs $ 96,006 $ 16,734 $ 112,740
Balance as a % of Unpaid Principal 66.3 % 45.0 % 62.0 %
NONPERFORMING ASSETS BY MARKET
North Georgia $ 63,210 $ 6,616 $ 69,826
Atlanta MSA 17,380 3,524 20,904
North Carolina 8,519 2,533 11,052
Coastal Georgia 3,523 1,449 4,972
Gainesville MSA 911 370 1,281
East Tennessee 2,463 2,242 4,705
South Carolina - - -
Other (3) - - -
Total NPAs $ 96,006 $ 16,734 $ 112,740
NONPERFORMING ASSETS ACTIVITY
Beginning Balance $ 109,894 $ 18,264 $ 128,158
Loans placed on non-accrual 9,665 - 9,665
Payments received (6,809 ) - (6,809 )
Loan charge-offs (10,456 ) - (10,456 )
Foreclosures (6,288 ) 6,288 -
Capitalized costs - 54 54
Property sales - (6,726 ) (6,726 )
Write downs - (1,041 ) (1,041 )
Net gains (losses) on sales - (105 ) (105 )
Ending Balance $ 96,006 $ 16,734 $ 112,740
(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.
(3) Includes purchased indirect auto loans that are not assigned to a geographic region.
UNITED COMMUNITY BANKS, INC.
Financial Highlights
Credit Quality(1)
Third Quarter 2013 Second Quarter 2013 First Quarter 2013



(in thousands)

Net
Charge-Offs		 Net Charge-
Offs to
Average
Loans(2)

Net
Charge-Offs		 Net Charge-
Offs to
Average
Loans(2)

Net
Charge-Offs		 Net Charge-
Offs to
Average
Loans(2)
NET CHARGE-OFFS BY CATEGORY
Owner occupied CRE $ 1,641 .58 % $ 16,545 5.85 % $ 1,922 .69 %
Income producing CRE 216 .14 8,921 5.45 3,321 1.99
Commercial & industrial 136 .12 15,576 13.91 1,501 1.34
Commercial construction 133 .39 6,295 17.53 (4 ) (.01 )
Total commercial 2,126 .36 47,337 7.96 6,740 1.14
Residential mortgage 693 .31 5,469 2.52 1,635 .79
Home equity lines of credit 382 .37 1,040 1.04 512 .53
Residential construction 1,072 1.31 18,506 20.91 2,973 3.22
Consumer installment 200 .28 56 .10 524 1.35
Total $ 4,473 .42 $ 72,408 6.87 $ 12,384 1.21
NET CHARGE-OFFS BY MARKET
North Georgia $ 2,090 .66 % $ 59,102 17.20 % $ 4,868 1.45 %
Atlanta MSA 1,013 .33 9,986 3.21 3,295 1.07
North Carolina 704 .49 1,952 1.36 2,249 1.59
Coastal Georgia 139 .14 480 .49 821 .85
Gainesville MSA 97 .15 123 .19 430 .67
East Tennessee 359 .51 711 1.01 679 .98
South Carolina - - - - - -
Other (3) 71 .17 54 .24 42 .39
Total $ 4,473 .42 $ 72,408 6.87 $ 12,384 1.21
(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.
(3) Includes purchased indirect auto loans that are not assigned to a geographic region.
UNITED COMMUNITY BANKS, INC.
Consolidated Statement of Income (Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
(in thousands, except per share data) 2013 2012 2013 2012
Interest revenue:
Loans, including fees $ 50,114 $ 53,868 $ 151,776 $ 163,805
Investment securities, including tax exempt of $202, $225, $624 and $737 9,872 10,706 29,518 34,772
Deposits in banks and short-term investments 1,007 985 2,793 3,093
Total interest revenue 60,993 65,559 184,087 201,670
Interest expense:
Deposits:
NOW 413 447 1,286 1,587
Money market 545 599 1,641 1,901
Savings 37 37 109 112
Time 2,486 4,612 8,636 15,844
Total deposit interest expense 3,481 5,695 11,672 19,444
Short-term borrowings 525 514 1,563 2,463
Federal Home Loan Bank advances 16 26 65 882
Long-term debt 3,003 2,372 8,331 7,119
Total interest expense 7,025 8,607 21,631 29,908
Net interest revenue 53,968 56,952 162,456 171,762
Provision for loan losses 3,000 15,500 62,500 48,500
Net interest revenue after provision for loan losses 50,968 41,452 99,956 123,262
Fee revenue:
Service charges and fees 8,456 7,696 23,831 23,295
Mortgage loan and other related fees 2,554 2,800 8,212 7,221
Brokerage fees 1,274 709 3,104 2,331
Securities gains, net - - 116 7,047
Loss from prepayment of debt - - - (6,681 )
Other 1,860 2,559 8,019 8,797
Total fee revenue 14,144 13,764 43,282 42,010
Total revenue 65,112 55,216 143,238 165,272
Operating expenses:
Salaries and employee benefits 23,090 22,918 71,416 72,440
Communications and equipment 3,305 3,254 9,819 9,620
Occupancy 3,379 3,539 10,195 10,849
Advertising and public relations 962 934 2,937 2,868
Postage, printing and supplies 644 954 2,401 2,849
Professional fees 2,650 2,180 7,515 6,107
Foreclosed property 194 3,706 7,678 9,382
FDIC assessments and other regulatory charges 2,405 2,537 7,415 7,592
Amortization of intangibles 427 728 1,623 2,190
Other 3,041 4,033 11,691 12,151
Total operating expenses 40,097 44,783 132,690 136,048
Net income before income taxes 25,015 10,433 10,548 29,224
Income tax expense (benefit) 9,515 (135 ) (246,681 ) 629
Net income 15,500 10,568 257,229 28,595
Preferred stock dividends and discount accretion 3,059 3,041 9,166 9,103
Net income available to common shareholders $ 12,441 $ 7,527 $ 248,063 $ 19,492
Earnings per common share
Basic $ .21 $ .13 $ 4.24 $ .34
Diluted .21 .13 4.24 .34
Weighted average common shares outstanding
Basic 59,100 57,880 58,443 57,826
Diluted 59,202 57,880 58,444 57,826
UNITED COMMUNITY BANKS, INC.
Consolidated Balance Sheet

(in thousands, except share and per share data)
September 30,
2013

December 31,
2012

September 30,
2012
(unaudited) (audited) (audited)
ASSETS
Cash and due from banks $ 70,986 $ 66,536 $ 57,270
Interest-bearing deposits in banks 131,147 124,613 119,355
Short-term investments 62,000 60,000 45,000
Cash and cash equivalents 264,133 251,149 221,625
Securities available for sale 1,963,424 1,834,593 1,761,994
Securities held to maturity (fair value $214,651, $261,131 and $281,336) 205,613 244,184 262,648
Mortgage loans held for sale 11,987 28,821 30,571
Loans, net of unearned income 4,267,067 4,175,008 4,137,845
Less allowance for loan losses (80,372 ) (107,137 ) (107,642 )
Loans, net 4,186,695 4,067,871 4,030,203
Assets covered by loss sharing agreements with the FDIC 31,207 47,467 53,070
Premises and equipment, net 165,993 168,920 170,532
Bank owned life insurance 80,537 81,867 81,574
Accrued interest receivable 18,199 18,659 19,133
Goodwill and other intangible assets 3,888 5,510 6,237
Foreclosed property 4,467 18,264 26,958
Net deferred tax asset 269,784 - -
Other assets 37,366 34,954 34,690
Total assets $ 7,243,293 $ 6,802,259 $ 6,699,235
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits:
Demand $ 1,418,782 $ 1,252,605 $ 1,210,703
NOW 1,279,134 1,316,453 1,184,341
Money market 1,197,495 1,149,912 1,126,312
Savings 249,044 227,308 222,431
Time:
Less than $100,000 925,089 1,055,271 1,123,672
Greater than $100,000 624,019 705,558 731,766
Brokered 419,344 245,033 223,474
Total deposits 6,112,907 5,952,140 5,822,699
Short-term borrowings 53,769 52,574 53,243
Federal Home Loan Bank advances 125 40,125 50,125
Long-term debt 129,865 124,805 120,285
Unsettled securities purchases 11,610 - 24,319
Accrued expenses and other liabilities 82,800 51,210 43,309
Total liabilities 6,391,076 6,220,854 6,113,980
Shareholders' equity:
Preferred stock, $1 par value; 10,000,000 shares authorized;
Series A; $10 stated value; 21,700 shares issued and outstanding 217 217 217
Series B; $1,000 stated value; 180,000 shares issued and outstanding 179,714 178,557 178,183
Series D; $1,000 stated value; 16,613 shares issued and outstanding 16,613 16,613 16,613
Common stock, $1 par value; 100,000,000 shares authorized; 45,222,839, 42,423,870 and 42,393,319 shares issued and outstanding 45,223 42,424 42,393
Common stock, non-voting, $1 par value; 30,000,000 shares authorized; 14,189,006, 15,316,794 and 15,316,794 shares issued and outstanding 14,189 15,317 15,317
Common stock issuable; 242,262, 133,238 and 129,270 shares 3,979 3,119 3,247
Capital surplus 1,077,536 1,057,951 1,056,998
Accumulated deficit (461,090 ) (709,153 ) (711,369 )
Accumulated other comprehensive loss (24,164 ) (23,640 ) (16,344 )
Total shareholders' equity 852,217 581,405 585,255
Total liabilities and shareholders' equity $ 7,243,293 $ 6,802,259 $ 6,699,235
UNITED COMMUNITY BANKS, INC.
Average Consolidated Balance Sheets and Net Interest Analysis
For the Three Months Ended September 30,
2013 2012

(dollars in thousands, taxable equivalent)
Average
Balance


Interest

Avg.
Rate

Average
Balance


Interest
Avg.
Rate
Assets:
Interest-earning assets:
Loans, net of unearned income (1)(2) $ 4,249,892 $ 50,217 4.69 % $ 4,147,220 $ 53,963 5.18 %
Taxable securities (3) 2,157,448 9,670 1.79 1,947,780 10,481 2.15
Tax-exempt securities (1)(3) 20,913 331 6.32 22,895 368 6.43
Federal funds sold and other interest-earning assets 186,544 1,145 2.46 227,950 1,166 2.05
Total interest-earning assets 6,614,797 61,363 3.69 6,345,845 65,978 4.14
Non-interest-earning assets:
Allowance for loan losses (83,408 ) (112,034 )
Cash and due from banks 63,890 51,705
Premises and equipment 166,906 171,608
Other assets (3) 407,912 190,439
Total assets $ 7,170,097 $ 6,647,563
Liabilities and Shareholders' Equity:
Interest-bearing liabilities:
Interest-bearing deposits:
NOW $ 1,222,334 413 .13 $ 1,176,087 447 .15
Money market 1,328,661 545 .16 1,157,655 599 .21
Savings 248,937 37 .06 221,186 37 .07
Time less than $100,000 952,320 1,369 .57 1,144,103 2,260 .79
Time greater than $100,000 644,264 1,229 .76 750,828 1,876 .99
Brokered time deposits 233,842 (112 ) (.19 ) 176,114 476 1.08
Total interest-bearing deposits 4,630,358 3,481 .30 4,625,973 5,695 .49
Federal funds purchased and other borrowings 67,292 525 3.10 55,994 514 3.65
Federal Home Loan Bank advances 32,082 16 .20 44,473 26 .23
Long-term debt 144,601 3,003 8.24 120,276 2,372 7.85
Total borrowed funds 243,975 3,544 5.76 220,743 2,912 5.25
Total interest-bearing liabilities 4,874,333 7,025 .57 4,846,716 8,607 .71
Non-interest-bearing liabilities:
Non-interest-bearing deposits 1,356,792 1,163,471
Other liabilities 93,247 55,607
Total liabilities 6,324,372 6,065,794
Shareholders' equity 845,725 581,769
Total liabilities and shareholders' equity $ 7,170,097 $ 6,647,563
Net interest revenue $ 54,338 $ 57,371
Net interest-rate spread 3.12 % 3.43 %
Net interest margin (4) 3.26 % 3.60 %
(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 and loans that are held for sale.
(3) Securities available for sale are shown at amortized cost. Pretax unrealized losses of $10.6 million in 2013 and pretax unrealized gains of $22.9 million in 2012 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.
UNITED COMMUNITY BANKS, INC.
Average Consolidated Balance Sheets and Net Interest Analysis
For the Nine Months Ended September 30,
2013 2012

(dollars in thousands, taxable equivalent)
Average
Balance


Interest

Avg.
Rate

Average
Balance


Interest
Avg.
Rate
Assets:
Interest-earning assets:
Loans, net of unearned income (1)(2) $ 4,233,531 $ 152,022 4.80 % $ 4,157,057 $ 164,101 5.27 %
Taxable securities (3) 2,138,725 28,894 1.80 2,065,112 34,035 2.20
Tax-exempt securities (1)(3) 21,411 1,022 6.36 24,187 1,207 6.65
Federal funds sold and other interest-earning assets 196,445 3,252 2.21 322,998 3,636 1.50
Total interest-earning assets 6,590,112 185,190 3.76 6,569,354 202,979 4.13
Non-interest-earning assets:
Allowance for loan losses (100,154 ) (115,252 )
Cash and due from banks 63,879 52,755
Premises and equipment 168,144 173,410
Other assets (3) 252,275 214,068
Total assets $ 6,974,256 $ 6,894,335
Liabilities and Shareholders' Equity:
Interest-bearing liabilities:
Interest-bearing deposits:
NOW $ 1,256,684 1,286 .14 $ 1,304,159 1,587 .16
Money market 1,297,792 1,641 .17 1,120,091 1,901 .23
Savings 242,807 109 .06 214,280 112 .07
Time less than $100,000 997,193 4,686 .63 1,199,563 7,806 .87
Time greater than $100,000 670,821 4,086 .81 783,370 6,354 1.08
Brokered time deposits 201,599 (136 ) (.09 ) 162,682 1,684 1.38
Total interest-bearing deposits 4,666,896 11,672 .33 4,784,145 19,444 .54
Federal funds purchased and other borrowings 70,512 1,563 2.96 85,022 2,463 3.87
Federal Home Loan Bank advances 41,352 65 .21 153,539 882 .77
Long-term debt 131,491 8,331 8.47 120,256 7,119 7.91
Total borrowed funds 243,355 9,959 5.47 358,817 10,464 3.90
Total interest-bearing liabilities 4,910,251 21,631 .59 5,142,962 29,908 .78
Non-interest-bearing liabilities:
Non-interest-bearing deposits 1,305,133 1,105,607
Other liabilities 68,312 65,390
Total liabilities 6,283,696 6,313,959
Shareholders' equity 690,560 580,376
Total liabilities and shareholders' equity $ 6,974,256 $ 6,894,335
Net interest revenue $ 163,559 $ 173,071
Net interest-rate spread 3.17 % 3.35 %
Net interest margin (4) 3.32 % 3.52 %
(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 and loans that are held for sale.
(3) Securities available for sale are shown at amortized cost. Pretax unrealized gains of $7.96 million in 2013 and pretax unrealized gains of $24.1 million in 2012 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.

For more information:
Rex S. Schuette
Chief Financial Officer
(706) 781-2266
Email Contact

Source: United Community Banks, Inc.

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