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, 2003

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

63 Highway 515, P.O. Box 398
Blairsville, Georgia 30512
(Address of principal executive offices)

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

Not applicable
(Former name or former address, if changed since last report)

 

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

April 22, 2003

 

For more information:

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

UNITED COMMUNITY BANKS, INC. REPORTS
12% GAIN IN OPERATING EARNINGS FOR FIRST QUARTER 2003

Strong Loan and Fee Revenue Growth

BLAIRSVILLE, GA, April 22, 2003 - United Community Banks, Inc. (Nasdaq: UCBI), Georgia’s third largest bank holding company, today announced net operating income of $8.6 million for the first quarter of 2003, up 12% as compared to $7.7 million for 2002. The increase was driven by strong loan and fee revenue growth. Diluted operating earnings per share of $.39 increased 11% from $.35 in the first quarter of 2002. Total revenue, on a taxable equivalent basis, of $37.7 million increased 9% from the year-ago first quarter. On an operating basis, return on common equity was 16.55%, compared with 16.52% a year ago and return on average assets was 1.07%, compared with 1.12% a year ago.

Operating earnings for the first quarter of 2003 exclude pre-tax merger-related charges of $840 thousand, or $.02 per share, for the termination of equipment leases and legal, professional and conversion costs related to the acquisition of First Central Bancshares which was completed on March 31, 2003. Including those charges, United’s first quarter net income, diluted earnings per share, return on common equity and return on average assets were $8.1 million, $.37, 15.50% and 1.00%, respectively. First Central, which was acquired for approximately $9 million in cash and 821,000 shares of United’s common stock, added at quarter-end approximately $90 million in loans, $160 million in deposits and $20 million in intangible assets. First Central’s earnings will be included in United’s consolidated results beginning April 1, 2003.

 

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“Our first quarter performance was marked by strong growth in both loans and deposits, coupled with a rise in fee revenue,” said Jimmy Tallent, President and Chief Executive Officer. “Our north Georgia and metro Atlanta markets continue to outpace the sluggish national economy leading to an increase in average loans of 16% in the first quarter as compared to a year ago, while core deposits rose 8%. New deposit products and services introduced in the first half of 2002, and strong demand for mortgage refinancing were responsible for the rise in fee revenue.”

“Our stated long-term financial goals are to achieve sustained double-digit earnings per share growth and return on equity in the range of 16% to 18%,” Tallent said. “By combining revenue growth with disciplined expense controls, we continue to achieve these goals.”

Taxable equivalent net interest revenue for the first quarter was $30.8 million, up $1.6 million, or 5%, over the first quarter of 2002, due primarily to strong growth in loans and new business, and was offset in part by margin compression. United’s taxable equivalent net interest margin for the first quarter was 4.05% versus 4.51% for 2002. “This decline in net interest margin was attributed to strong growth in floating rate loans and a continued flat yield curve with which to reinvest maturing investment securities and fixed rate loans,” stated Tallent. “We expect our net

interest margin to remain in the low 4.00% range for the remainder of the year based on our outlook for a continuation of this low interest rate environment through year-end. We are prepared to sustain our earnings momentum in 2003 by maintaining a strong base of business growth and tight expense controls.”

For the first quarter, the provision for loan losses was $1.5 million, equal to the provision a year earlier. “Our loan growth is being achieved on a foundation of solid credit quality, despite the current economic challenges. Non-performing assets decreased $1.4 million from the past year, and our ratio of non-performing assets to total assets continued to decline,” Tallent said. Non-performing assets totaled $7.7 million compared with $9.1 million a year ago. As a percentage of total assets, non-performing assets were .22% at March 31, 2003, compared to .25% at December 31, 2002 and .32% at March 31, 2002. “We continue to maintain our high level of credit quality thanks to our seasoned lenders and conservative lending strategy of targeting loans secured by hard assets,” Tallent added.

 

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Fee revenue of $8.4 million for the first quarter increased $1.5 million, or 21%, from $6.9 million a year ago. Service charges and fees on deposit accounts were $3.6 million, up $.8 million as a result of new products and services introduced in the first half of 2002 and continued growth in transaction volumes and new accounts. Mortgage loan and related fees totaled $2.3 million, up $.5 million from a year ago as continued low long-term rates spurred mortgage refinancings.

Excluding merger-related charges, operating expenses were $23.9 million, up $1.5 million, or 7%, from the first quarter of 2002. Salaries and employee benefits of $15.1 million increased $1.3 million, or 10%, due primarily to an increase in growth-related expenses for staff added during the first half of 2002 and new banking offices. Communications and equipment expenses increased $.4 million due to an increase in depreciation and amortization charges for investments in software, telecommunications and technology equipment over the last twelve months. Combined, all other expenses were down slightly due to tighter controls over discretionary expenses. “We held the rise in operating expenses this quarter to 7% while gaining a 9% increase in total revenue. Our efficiency ratio was 61.03% for the quarter compared with 61.83% a year ago. We are striving for an efficiency ratio in the range of 58% to 60% over the next two years, which we believe is reasonable given our service-oriented community banking platform,” stated Tallent.

“For the balance of 2003, we believe United remains on target to achieve earnings per share growth in the lower-end of our long-term goal of 12% to 15%,” Tallent said. “Our expectation is based on a continued, stable economic environment in our markets combined with strong credit quality. We anticipate loan growth to continue in the range of 10% to 14% for the year. We stand by our commitment to superior customer service, growing both internally and through selective mergers, and improving our operating efficiency while maintaining solid credit quality.”

 

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On April 17, 2003, United’s Board of Directors declared a regular cash dividend of $.075 per common share payable July 1, 2003, to shareholders of record as of the close of business on June 16, 2003. “We increased the annual dividend rate for 2003 to $.30 per share, up $.05, or 20%, over the dividends paid for 2002,” commented Tallent. “This increase reflects our continued strong performance and our commitment to deliver value to our shareholders.”

The Board has authorized the purchase of up to 1.5 million shares of United’s common stock through December 31, 2003. As of March 31, 2003, United had purchased a total of 763,000 shares with an average cost per share of $21.52.

On March 31, 2003, United completed the acquisition of First Central Bancshares, Inc., headquartered in Lenoir City, with assets of $160 million and eight locations in the Knoxville area. “We are excited about the loan and deposit growth opportunities in the eastern Tennessee market and we are already off to a great start with the integration process. We are truly thankful for the trust and confidence placed in us by First Central’s staff and shareholders and we look forward to a long and prosperous relationship,” said Tallent.

“We are equally excited and optimistic about our upcoming merger with First Georgia Holding, Inc., headquartered in Brunswick, with assets of $260 million and six locations,” said Tallent. “First Georgia’s markets are located along the major I-95 corridor between Savannah and Jacksonville. This is an excellent market and First Georgia provides a strong base to grow our franchise in the coastal and southeastern Georgia region. Both of these acquisitions will be slightly accretive to earnings in 2003,” Tallent added.

Upon completion of the First Georgia merger, United will have $3.8 billion in assets and will operate 19 community banks with 67 banking offices in north Georgia, metropolitan Atlanta, coastal Georgia, western North Carolina, and eastern Tennessee. The transaction has received shareholder and regulatory approval and is expected to close May 1, 2003.

 

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Conference Call
United Community Banks’ executive management will hold a conference call to discuss the contents of this news release, as well as business highlights and financial outlook, on Tuesday, April 22, 2003 at 11:00 a.m. EST. 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. After the completion of the First Georgia merger noted above, United will have assets of $3.8 billion and operate 19 community banks with 67 banking offices located throughout north Georgia, metro Atlanta, Georgia coast, western North Carolina, and eastern Tennessee. The company specializes in providing personalized community banking services to individuals and small to mid-size businesses in its markets. United also offers the convenience of 24-hour access to its services through a network of ATMs, telephone and on-line banking. United Community Banks, Inc. 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.
For the Three Months Ended March 31, 2003
											First
	2003		2002								Quarter
(in thousands, except per share	First		Fourth		Third		Second		First		2003-2002
data; taxable equivalent)	Quarter		Quarter		Quarter		Quarter		Quarter		Change
INCOME SUMMARY (1)	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Interest revenue	$ 48,403		$ 48,579		$ 49,076		$ 49,326		$ 48,951
Interest expense	17,589		18,964		18,942		18,761		19,690
Net interest revenue	30,814		29,615		30,134		30,565		29,261		5	%
Provision for loan losses	1,500		1,800		1,800		1,800		1,500
Total fee revenue	8,377		8,784		7,727		7,302		6,921		21
Total revenue	37,691		36,599		36,061		36,067		34,682		9
Operating expenses	23,917		23,005		22,551		23,195		22,373		7
Income before taxes	13,774		13,594		13,510		12,872		12,309		12
Income taxes	5,164		5,034		5,109		4,773		4,589
Net operating income	8,610		8,560		8,401		8,099		7,720		12
Merger-related charges, net of tax	546		-		-		-		-
Net income	$ 8,064		$ 8,560		$ 8,401		$ 8,099		$ 7,720		4
OPERATING PERFORMANCE (1)
Earnings per common share:
Basic	$ .40		$ .40		$ .39		$ .38		$ .36		11
Diluted	.39		.39		.38		.36		.35		11
Return on average common equity (3)	16.55	%	16.42	%	16.56	%	16.67	%	16.52	%
Return on average assets	1.07		1.08		1.12		1.12		1.12
Efficiency ratio	61.03		59.94		59.66		61.25		61.83
Dividend payout ratio	18.75		15.63		16.03		16.45		17.36
GAAP PERFORMANCE
PER COMMON SHARE
Basic	$ .38		$ .40		$ .39		$ .38		$ .36		6
Diluted	.37		.39		.38		.36		.35		6
Cash dividends declared	.075		.0625		.0625		.0625		.0625		20
Book value	11.09		10.34		10.01		9.71		9.11		22
KEY PERFORMANCE RATIOS
Return on average common equity (3)	15.50	%	16.42	%	16.56	%	16.67	%	16.52	%
Return on average assets	1.00		1.08		1.12		1.12		1.12
Efficency ratio	63.17		59.94		59.66		61.25		61.83
Net interest margin	4.05		4.03		4.31		4.51		4.51
Dividend payout ratio	19.74		15.63		16.03		16.45		17.36
Average equity to average assets	6.84		6.92		7.15		6.95		7.02
ASSET QUALITY
Allowance for loan losses (4)	$ 33,022		$ 30,914		$ 30,300		$ 29,190		$ 28,134
Non-performing assets	7,745		8,019		9,591		9,221		9,130
Net charge-offs	1,030		1,186		690		745		490
Allowance for loan losses to loans	1.30	%	1.30	%	1.30	%	1.29	%	1.31	%
Non-performing assets to total assets	.22		.25		.31		.31		.32
Net charge-offs to average loans	.17		.20		.12		.14		.10
AVERAGE BALANCES
Loans	$ 2,422,542		$ 2,358,021		$ 2,300,681		$ 2,211,980		$ 2,085,153		16
Earning assets (2)	3,072,719		2,919,613		2,780,276		2,717,074		2,624,650		17
Total assets	3,269,481		3,138,747		2,976,509		2,911,514		2,806,575		16
Deposits	2,466,801		2,408,773		2,378,656		2,286,231		2,169,845		14
Stockholders’ equity	223,599		217,051		212,703		202,319		196,895		14
Common shares outstanding:
Basic	21,218		21,293		21,392		21,407		21,407
Diluted	21,957		22,078		22,233		22,383		22,063
AT PERIOD END (4)
Loans	$ 2,546,001		$ 2,381,798		$ 2,331,862		$ 2,269,973		$ 2,153,743		18
Earning assets	3,304,232		3,029,409		2,908,577		2,823,262		2,680,066		23
Total assets	3,579,004		3,211,344		3,142,393		3,014,608		2,871,843		25
Deposits	2,723,574		2,385,239		2,386,962		2,340,376		2,256,236		21
Stockholders’ equity	245,699		221,579		215,430		209,587		196,703		25
Common shares outstanding	22,037		21,263		21,345		21,414		21,400		3

 

(1)	Excludes pre-tax merger-related charges totaling $840,000 or $.02 per diluted common share recorded in the first quarter of 2003.
(2)	Excludes unrealized gains and losses on securities available for sale.
(3)	Return on common equity is calculated by dividing net income available to common stockholders by average realized common equity which excludes accumulated other comprehensive income.
(4)	United completed its acquisition of First Central Bancshares on March 31, 2003. Included in amounts presented above are the following assets and deposits of First Central : $87.8 million in loans; $1.6 million in allowance for loan losses; $31.2 million in investment securities; $20.3 million in intangibles; and $163.2 million in deposits.

 

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