SECURITIES AND EXCHANGE COMMISSION
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 20, 2004
United Community Banks, Inc.
| Georgia | No. 0-21656 | No. 58-180-7304 | ||
| (State or other jurisdiction of incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
63 Highway 515, P.O. Box 398
Blairsville, Georgia 30512
Registrant’s telephone number, including area code:
Not applicable
Item 7. Exhibits.
| 99.1 | News Release issued by United Community Banks, Inc. dated April 20, 2004. |
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 April 20, 2004, United Community Banks, Inc. (the “Registrant”) issued a news release announcing its financial results for the first quarter ended March 31, 2004 (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 April 20, 2004 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, the May 1, 2003 acquisition of First Georgia Holding, Inc., headquartered in Brunswick, Georgia, and the October 24, 2003 and November 14, 2003 acquisitions of three branches in western North Carolina. 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.
| /s/ Rex S. Schuette | ||
April 20, 2004
|
Rex S. Schuette Executive Vice President and Chief Financial Officer |
EXHIBIT 99.1 [UNITED COMMUNITY BANKS LOGO] For Immediate Release April 20, 2004 For more information: Rex S. Schuette Chief Financial Officer (706) 781-2265 Rex_Schuette@ucbi.com UNITED COMMUNITY BANKS, INC. REPORTS 15% GAIN IN OPERATING EARNINGS PER SHARE FOR FIRST QUARTER 2004 HIGHLIGHTS: - - Record First Quarter Earnings of $.30 Per Share (post split), Up 15% From a Year Ago - - Strong Loan Demand Drove Growth for Quarter - - Stable Net Interest Margin, Strong Credit Quality Provided Foundation for Performance - - Return on Tangible Equity Above 19% BLAIRSVILLE, GA, April 20, 2004 - United Community Banks, Inc. (Nasdaq: UCBI), Georgia's third largest bank holding company, today announced first quarter results that included a 27% rise in net operating income, a 15% gain in net operating earnings per share, and a 20% increase in total revenue from the same period last year. For the first quarter of 2004, net operating income rose to a record $10.9 million from $8.6 million a year earlier. Diluted operating earnings per share of $.30 increased 15% from $.26 for the first quarter a year ago. Total revenue, on a taxable equivalent basis, was $45.3 million compared with $37.7 million for the first quarter of 2003. Also, return on tangible equity was 19.87% compared with 17.79% a year ago and return on assets was 1.08% compared with 1.07% a year ago. On March 15, 2004, United Community Banks announced a three-for-two split of its common stock effective April 28, 2004, for shareholders of record April 14, 2004. All per share amounts
presented in this press release and accompanying schedules have been adjusted to reflect the split as if it had occurred prior to the earliest period presented. "United Community Banks achieved outstanding results during the first quarter of 2004," said Jimmy Tallent, president and chief executive officer. "Loan demand for the quarter remained strong across all our markets, providing an opportunity for our employees to deliver the highest level of customer service. This, in turn, provided us with a solid foundation to continue to build our business and expand our franchise." At March 31, 2004, total loans were $3.1 billion and excluding acquisitions loans were up 14% from last year. "This core growth was achieved in a disciplined, step-by-step process throughout the year, without compromising credit quality in a challenging economic environment," Tallent added. "For the first quarter, we again achieved our stated goals of sustained double-digit growth in operating earnings-per-share and a return on tangible equity, which excludes the effects of acquisition-related intangibles, above 18%," Tallent said. Net operating income for the first quarter of last year excludes pre-tax merger-related charges of $840 thousand related to the acquisition of First Central Bancshares, Inc. ("First Central Bank") which was completed on March 31, 2003. The merger-related charges were for legal, investment advisor and other professional fees, as well as the termination of equipment leases and conversion costs. Including those merger-related charges, net income and diluted earnings per share were $8.1 million and $.25, respectively, for the quarter ended March 31, 2003. "Our ability to serve the needs of our customers, combined with the strength of our markets helped increase core loans by $369 million, or 14%, from a year ago," Tallent said. "In addition, the acquisitions of First Central Bank, First Georgia Bank, and the three banking offices in western North Carolina contributed $232 million in new loans, bringing our total loan growth to $601 million, or 24%, from a year ago." Taxable equivalent net interest revenue for the first quarter rose $7.0 million, or 23%, to $37.8 million from the same period a year ago. Acquisitions during 2003, contributed approximately
$3.5 million of this increase, leaving the core growth rate at approximately 12%. "Even without the acquisitions, we achieved solid growth in loans and new business," Tallent added. Taxable equivalent net interest margin for the first quarter was 3.99% versus 4.05% a year ago. "Despite this environment of historically low interest rates, United Community Banks has maintained a net interest margin near the 4% level for the past six quarters and we expect our margin to remain near this level through 2004," Tallent said. "With a stable margin at the 4% level, we are prepared to maintain our earnings momentum by achieving a strong base of core business growth combined with our continued focus on credit quality and expense controls." The first quarter provision for loan losses was $1.8 million, up $300 thousand from a year earlier and unchanged from the fourth quarter of 2003. Net charge-offs to average loans were .08% for the first quarter, compared with .17% for the first quarter of 2003 and .12% for the fourth quarter. Non-performing assets totaled $7.3 million, down $.5 million from a year ago, while loans outstanding increased $601 million. Non-performing assets as a percentage of total assets were .18% at March 31, 2004, compared with .19% at December 31, 2003 and .22% at March 31, 2003. "Our excellent credit quality continues to be the foundation for high performance and growth," Tallent said. "Credit quality remains sound thanks to the tireless efforts of our exceptional team of bankers. Our strategy of securing loans with hard assets remains the key to our credit quality success." Fee revenue of $9.3 million for the first quarter increased $.9 million, or 11%, from $8.4 million a year ago. "Service charges and fees on deposit accounts were $5.0 million, up $1.4 million due to acquisitions, increasing popularity of new products and services, and growth in transactions and new accounts," Tallent commented. This was offset partially by mortgage loan and related fees which were $1.3 million and down $1.0 million from a year ago due to the lower level of mortgage refinancing activity caused by the rise in long-term interest rates. "We are focused on growing core deposits and related fee revenue," Tallent added. "Early in the first quarter of 2004, we began a company-wide initiative to increase our deposit base by engaging our many satisfied customers in the process. The initial results of this program have been encouraging with a significant increase in new account openings in the first quarter as compared to last year."
Operating expenses were $28.2 million, up $4.3 million, or 18%, from the first quarter of 2003. Included in the first quarter of 2004 were operating expenses for the two merged banks and the three acquired banking offices completed in 2003, which added approximately $3.3 million of expenses, leaving the underlying core expense growth rate of 4%. Salaries and employee benefits of $18.1 million increased $3.0 million, or 20%, with approximately $2.0 million of this increase resulting from the 2003 acquisitions. The balance of the increase was due to normal merit increases for staff that was partially offset by lower incentive compensation associated with the slowdown in mortgage refinancing activities. Communications and equipment expenses of $2.5 million increased $.6 million, or 34%, due to the acquisitions and investments in technology equipment to support business growth and enhance operating efficiency. Increases in all other operating expense categories were primarily due to the acquisitions and business growth. "We continue to diligently monitor and control operating expenses while growing our customer base and revenue," Tallent said. "Excluding acquisitions, total revenue for the quarter increased approximately 8% while operating expenses rose 4%. This positive operating leverage contributed to our 15% growth in diluted operating earnings per share for the first quarter. Our operating efficiency ratio was 59.83% compared with 61.03% a year ago. We are striving for a long-term efficiency ratio in the range of 58% to 60%, which we believe is reasonable given our service-oriented community banking model," Tallent added. "United Community Banks' growth strategy is focused primarily on internal growth within our markets. Additionally, if we have the right people, we will expand through de novo offices and selective acquisitions of banks and branch offices," Tallent said. "As part of this growth strategy, we announced earlier this quarter a merger with Fairbanco Holding Company, Inc., the parent company of 1st Community Bank headquartered in Fairburn, Georgia. 1st Community Bank has assets of $190 million with five full-service banking offices in Peachtree City in Fayette County, Newnan in Coweta County, and Fairburn, Union City and Palmetto in south Fulton County. The transaction, which is subject to regulatory and shareholder approval, is expected to close in the second quarter and will be slightly accretive to earnings during 2004."
"Looking forward for the remainder of 2004, we feel United Community Banks is on target to achieve operating earnings per share growth within our long-term goal of 12% to 15%," Tallent said. "For 2004, we anticipate core loan growth will continue in the range of 10% to 14% and our net interest margin will remain near the 4% level. Our outlook is based on flat short-term rates through 2004 and other assumptions that include a continued, stable economic environment in our markets combined with strong credit quality. We remain committed to providing superior customer service and operating performance while maintaining solid credit quality and growing our franchise - both internally and through selective de novo offices and mergers." Other Items Under the company's stock purchase program, a total of 2.25 million shares on a post-split basis may be purchased through December 31, 2004. No shares were purchased during the first quarter. As of March 31, 2004, a total of 1.3 million shares had been purchased over the past three years with an average cost per share of $14.78. 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 for the remainder of 2004, on Tuesday, April 20, 2004 at 11:00 a.m. ET. The telephone number for the conference call is (888) 266-1047. The conference call will also be available by web-cast within the Investor Relations section of the company's web site. 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 $4.1 billion and operates 20 community banks with 74 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, 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)
UNITED COMMUNITY BANKS, INC. SELECTED FINANCIAL INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 2004 - ------------------------------------------------------------------------------------------------------------------------------- 2004 2003 FIRST ----------- -------------------------------------------------------- QUARTER (in thousands, except per share FIRST FOURTH THIRD SECOND FIRST 2004-2003 data; taxable equivalent) QUARTER QUARTER QUARTER QUARTER QUARTER CHANGE ----------- ----------- ---------- ---------- ---------- ---------- INCOME SUMMARY (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) Interest revenue $ 54,587 $ 53,943 $ 53,731 $ 53,261 $ 48,403 Interest expense 16,772 17,098 17,446 18,467 17,589 ---------- ---------- ---------- ---------- ---------- Net interest revenue 37,815 36,845 36,285 34,794 30,814 23% Provision for loan losses 1,800 1,800 1,500 1,500 1,500 Fee revenue 9,278 9,090 10,401 10,316 8,377 11 ---------- ---------- ---------- ---------- ---------- TOTAL REVENUE 45,293 44,135 45,186 43,610 37,691 20 Operating expenses (1) 28,176 27,572 28,712 27,699 23,917 18 ---------- ---------- ---------- ---------- ---------- Income before taxes 17,117 16,563 16,474 15,911 13,774 24 Income taxes 6,179 5,959 6,110 6,014 5,164 ---------- ---------- ---------- ---------- ---------- NET OPERATING INCOME 10,938 10,604 10,364 9,897 8,610 27 Merger-related charges, net of tax -- 383 -- 428 546 ---------- ---------- ---------- ---------- ---------- NET INCOME $ 10,938 $ 10,221 $ 10,364 $ 9,469 $ 8,064 36 ========== ========== ========== ========== ========== OPERATING PERFORMANCE (1) Earnings per common share: Basic $ .31 $ .30 $ .29 $ .29 $ .27 15 Diluted .30 .29 .29 .28 .26 15 Return on tangible equity (3) 19.87% 19.72% 19.94% 19.54% 17.79% Return on assets 1.08 1.06 1.06 1.06 1.07 Efficiency ratio 59.83 59.81 61.34 61.40 61.03 Dividend payout ratio 19.35 16.67 17.24 17.24 18.52 GAAP PERFORMANCE Per common share: Basic earnings $ .31 $ .29 $ .29 $ .28 $ .25 24 Diluted earnings .30 .28 .29 .27 .25 20 Cash dividends declared .06 .05 .05 .05 .05 20 Book value 8.80 8.47 8.20 8.15 7.39 19 Tangible book value (3) 6.86 6.52 6.44 6.37 6.40 7 Key performance ratios: Return on equity (2) 14.87% 14.19% 14.90% 14.76% 15.50% Return on assets 1.08 1.02 1.06 1.01 1.00 Net interest margin 3.99 3.96 3.97 3.99 4.05 Dividend payout ratio 19.35 17.24 17.24 17.86 20.00 Equity to assets 7.46 7.41 7.35 7.19 6.84 Tangible equity to assets (3) 5.88 5.82 5.85 6.03 6.47 ASSET QUALITY Allowance for loan losses $ 39,820 $ 38,655 $ 37,773 $ 37,353 $ 33,022 Non-performing assets 7,251 7,589 7,998 8,232 7,745 Net charge-offs 635 918 1,080 1,069 1,030 Allowance for loan losses to loans 1.27% 1.28% 1.29% 1.31% 1.30% Non-performing assets to total assets .18 .19 .20 .21 .22 Net charge-offs to average loans .08 .12 .15 .16 .17 AVERAGE BALANCES Loans $3,095,875 $2,959,626 $2,881,375 $2,742,952 $2,422,542 28 Investment securities 652,867 699,059 664,523 689,384 614,981 6 Earning assets 3,808,877 3,695,197 3,629,819 3,497,851 3,072,719 24 Total assets 4,084,883 3,961,384 3,888,141 3,756,689 3,269,481 25 Deposits 2,955,726 2,843,600 2,826,900 2,829,986 2,466,801 20 Stockholders' equity 304,926 293,464 285,790 269,972 223,599 36 Common shares outstanding: Basic 35,319 35,260 35,112 34,280 31,827 Diluted 36,482 36,391 36,185 35,387 32,936 AT PERIOD END Loans $3,147,303 $3,015,997 $2,918,412 $2,861,481 $2,546,001 24 Investment securities 617,787 659,891 634,421 660,625 658,546 (6) Earning assets 3,851,968 3,796,332 3,676,018 3,642,545 3,304,232 17 Total assets 4,118,188 4,068,834 3,942,139 3,905,929 3,579,004 15 Deposits 3,074,193 2,857,449 2,790,331 2,870,926 2,723,574 13 Stockholders' equity 311,247 299,373 289,713 285,500 245,699 27 Common shares outstanding 35,331 35,289 35,232 34,967 33,055 (1) Excludes pre-tax merger-related charges totaling $580,000 or $.01 per diluted common share, $668,000 or $.01 per diluted common share and $840,000 or $.01 per diluted common share recorded in the fourth, second and first quarters, respectively, of 2003. (2) Net income available to common stockholders divided by average realized common equity which excludes accumulated other comprehensive income. (3) Excludes effect of acquisition related intangibles and associated amortization.
UNITED COMMUNITY BANKS, INC. CONSOLIDATED STATEMENT OF INCOME FOR THE THREE MONTHS ENDED MARCH 31, 2004 AND 2003 - -------------------------------------------------------------------------------------------------------------------------------- THREE MONTHS ENDED MARCH 31, ---------------------------------- (in thousands, except per share data) 2004 2003 - -------------------------------------------------------------------------------------------------------------------------------- INTEREST REVENUE: (Unaudited) (Unaudited) Loans, including fees $ 47,422 $ 41,106 Federal funds sold and deposits in banks 111 68 Investment securities: Taxable 6,069 5,966 Tax exempt 566 731 -------- -------- Total interest revenue 54,168 47,871 -------- -------- INTEREST EXPENSE: Deposits: Demand 1,794 2,228 Savings 83 90 Time 9,297 10,108 Other borrowings 5,598 5,163 -------- -------- Total interest expense 16,772 17,589 -------- -------- Net interest revenue 37,396 30,282 Provision for loan losses 1,800 1,500 -------- -------- Net interest revenue after provision for loan losses 35,596 28,782 -------- -------- FEE REVENUE: Service charges and fees 5,023 3,574 Mortgage loan and other related fees 1,280 2,312 Consulting fees 1,127 1,120 Brokerage fees 708 420 Securities losses, net (4) - Other 1,144 951 -------- -------- Total fee revenue 9,278 8,377 -------- -------- TOTAL REVENUE 44,874 37,159 -------- -------- OPERATING EXPENSES: Salaries and employee benefits 18,126 15,104 Occupancy 2,282 2,102 Communications and equipment 2,547 1,900 Postage, printing and supplies 1,142 945 Professional fees 837 895 Advertising and public relations 764 706 Amortization of intangibles 371 85 Merger-related charges - 840 Other 2,107 2,180 -------- -------- Total operating expenses 28,176 24,757 -------- -------- Income before income taxes 16,698 12,402 Income taxes 5,760 4,338 -------- -------- NET INCOME $ 10,938 $ 8,064 ======== ======== Net income available to common stockholders $ 10,922 $ 8,047 ======== ======== Earnings per common share: Basic $ .31 $ .25 Diluted .30 .25 Weighted average common shares outstanding (in thousands): Basic 35,319 31,827 Diluted 36,482 32,936
UNITED COMMUNITY BANKS, INC. CONSOLIDATED BALANCE SHEET FOR THE PERIOD ENDED - ---------------------------------------------------------------------------------------------------------------------------------- MARCH 31, DECEMBER 31, MARCH 31, ($ in thousands) 2004 2003 2003 - ---------------------------------------------------------------------------------------------------------------------------------- ASSETS (Unaudited) (Audited) (Unaudited) Cash and due from banks $ 81,723 $ 91,819 $ 138,939 Interest-bearing deposits in banks 39,587 68,374 18,262 Federal funds sold -- -- 19,220 ----------- ----------- ----------- Cash and cash equivalents 121,310 160,193 176,421 Securities available for sale 617,787 659,891 658,546 Mortgage loans held for sale 14,508 10,756 30,607 Loans, net of unearned income 3,147,303 3,015,997 2,546,001 Less - allowance for loan losses 39,820 38,655 33,022 ----------- ----------- ----------- Loans, net 3,107,483 2,977,342 2,512,979 Premises and equipment, net 89,625 87,439 76,612 Interest receivable 22,410 20,962 23,436 Intangible assets 71,811 72,182 33,022 Other assets 73,254 80,069 67,381 ----------- ----------- ----------- TOTAL ASSETS $ 4,118,188 $ 4,068,834 $ 3,579,004 =========== =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Deposits: Demand $ 425,697 $ 412,309 $ 344,912 Interest-bearing demand 863,975 846,022 761,278 Savings 148,260 140,619 117,079 Time 1,636,261 1,458,499 1,500,305 ----------- ----------- ----------- Total deposits 3,074,193 2,857,449 2,723,574 Federal funds purchased and repurchase agreements 128,475 102,849 40,781 Federal Home Loan Bank advances 470,271 635,420 457,001 Other borrowings 108,751 152,596 75,052 Accrued expenses and other liabilities 25,251 21,147 36,897 ----------- ----------- ----------- TOTAL LIABILITIES 3,806,941 3,769,461 3,333,305 ----------- ----------- ----------- Stockholders' equity: Preferred stock, $1 par value; $10 stated value; 10,000,000 shares authorized; 48,300, 55,900 and 127,100 shares issued and outstanding 483 559 1,271 Common stock, $1 par value; 50,000,000 shares authorized; 35,706,573, 35,706,573 and 33,940,626 shares issued 35,707 35,707 33,941 Capital surplus 95,532 95,951 70,308 Retained earnings 175,700 166,887 142,178 Treasury stock; 375,563, 417,525 and 885,707 shares, at cost (6,414) (7,120) (13,054) Accumulated other comprehensive income 10,239 7,389 11,055 ----------- ----------- ----------- TOTAL STOCKHOLDERS' EQUITY 311,247 299,373 245,699 ----------- ----------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 4,118,188 $ 4,068,834 $ 3,579,004 =========== =========== ===========