For Immediate Release
For more information:
Rex S. Schuette
Chief Financial Officer
(706) 781-2266
Rex_Schuette@ucbi.com
UNITED COMMUNITY BANKS, INC. REPORTS
EARNINGS OF $10.6 MILLION FOR THIRD QUARTER 2012
| | ● | Net income of $10.6 million, or 13 cents per share |
| | ● | Loans up $18.6 million from second quarter, and $28 million from a year ago |
| | ● | Core transaction deposits up $72 million in third quarter, or 9 percent annualized |
| | ● | Nonperforming assets decline $3.8 million, or 3 percent, from second quarter |
BLAIRSVILLE, GA – October 25, 2012 – United Community Banks, Inc. (NASDAQ: UCBI) today reported net income of $10.6 million, or 13 cents per share, for the third quarter of 2012; and net income of $28.6 million, or 34 cents per share, year-to-date. The results for the third quarter and first nine months of 2012 reflect modest loan growth, strong core transaction deposit growth, increases in fee revenue and lower operating expenses compared with the same periods a year ago.
“United Community Banks is capitalizing on business opportunities, strengthening its financial foundation and building long-term value for customers, employees and shareholders,” said Jimmy Tallent, president and chief executive officer. “Our third quarter was successful by nearly every measure, and represents the fifth profitable quarter since our 2011 capital transaction and problem asset disposition plan execution.”
Tallent continued, “We achieved both positive linked-quarter and year-over-year loan growth. Our credit measures continue their positive trend, with nonperforming assets down $3.8 million, or 3 percent, from the second quarter. At the same time we reduced expenses and improved operating efficiency. We expect profitability to continue from improved efficiency and further expense reductions, as well as revenue enhancements from prudent growth of our business mix of loans and deposits. We are gaining momentum and achieving success.”
Tallent said, “Continued expansion of quality loan and deposit relationships remains a top priority. Total loans were $4.138 billion at quarter-end, up $18.6 million from the second quarter and up $28 million from a year earlier, reflecting the first annual loan growth in over four years. We are strategically growing the portfolio by focusing on full-service relationships with small-to-medium-sized businesses. During the third quarter we added $218 million in new loan commitments, of which $137 million were funded by quarter-end. We also grew core transaction deposits by $72 million, contributing to an especially strong $236 million total in the first nine months. Annualized, the linked-quarter growth rate is 9 percent and year-to-date is 11 percent.”
The third quarter provision for loan losses was $15.5 million, down from $36 million a year ago and $18 million in the second quarter. The third quarter 2011 provision for loan losses included $25 million specifically related to United’s largest lending relationship. Third quarter net charge-offs were $20.6 million, compared to $18.9 million in the second quarter of 2012 and $17.5 million in the third quarter of 2011. Tallent added, “Net charge-offs of $20.6 million this quarter included losses from the sale of $13 million in performing classified loans that had $3.6 million in specific reserves at the end of the second quarter. The losses on the sold loans account for most of the difference between our provision for loan losses and charge-offs this quarter.”
“Overall credit trends continued to improve this quarter with the exception of a slight increase in net charge-offs,” Tallent said. “Most notably our performing classified loans, which are defined as accruing substandard for regulatory purposes, decreased $41.1 million in the third quarter, or 13 percent, to $282.5 million at quarter-end. Nonperforming assets were $142 million in the third quarter, down $3.8 million from the second quarter. Nonperforming asset levels are impacted positively or negatively by the inflow of new nonperforming loans and our ability to liquidate foreclosed properties. In the third quarter, the inflow of new nonperforming loans was $30.5 million compared with $29.4 million in the second quarter and $103 million a year ago. Also, loans past due 30 to 89 days increased slightly from .65 percent of outstanding loans in the second quarter to .68 percent in the third quarter.”
Taxable equivalent net interest revenue totaled $57.4 million, up $535,000 from the second quarter of 2012 but down $1.91 million from the third quarter of 2011. “The decrease from last year primarily reflects lower yields on both our investment securities and loan portfolios,” stated Tallent. “Our investment securities interest decline was due to reinvestment at record low rates, combined with $179 million in lower average balances for the quarter. We continue to look for reinvestment opportunities with a focus on floating-rate securities to alleviate market and duration risk. Floating-rate securities now account for 39 percent of the total investment securities portfolio. The lower yield on our loan portfolio reflects ongoing pricing pressure on new and reviewed loans.”
Taxable equivalent net interest margin of 3.60 percent was up 17 basis points from last quarter and 5 basis points from a year ago. The increase in the third quarter was primarily due to our second quarter balance sheet restructuring and the resulting smaller balance sheet.
Fee revenue was $13.8 million for the third quarter, compared to $12.9 million for the second quarter and $11.5 million a year ago. The increase from prior quarters was primarily due to the higher level of mortgage loans closed and related mortgage fees. Mortgage refinancing activity continued to accelerate through the third quarter as mortgage rates fell to record low levels. Closed mortgage loans totaled $108 million in the third quarter of 2012 compared with $79.8 million in the second quarter and $57.4 million in the third quarter of 2011. Service charges and fees on deposit accounts were also up from a year ago due to new fees on low balance deposit accounts that became effective in the first quarter of 2012, more than offsetting lower overdraft fees.
Other fee revenue of $2.56 million was up $930,000 from the second quarter of 2012 and $579,000 from the third quarter of 2011, primarily related to fees on our new customer derivatives product and non-core items. In the third quarter of 2012, United earned $278,000 in net fees on customer derivative transactions through its recently initiated back-to-back swap program on fixed rate commercial loans. The non-core other fee revenue items in the third quarter included $608,000 in hedge ineffectiveness gains, compared with $180,000 in hedge ineffectiveness losses in the second quarter of 2012 and $575,000 in hedge ineffectiveness gains in the third quarter of 2011. Another non-core item relates to net gains or losses on United’s deferred compensation plan assets. In the third quarter of 2012, United had $153,000 in gains on deferred compensation plan assets compared with $386,000 in losses a year ago and $8,000 in losses in the second quarter of 2012. Gains and losses on deferred compensation plan assets included in fee revenue are directly offset by losses or gains on United’s deferred compensation plan liabilities that increase or decrease salaries and employee benefit costs each quarter.
Operating expenses, excluding foreclosed property costs, were $41.1 million for the third quarter of 2012 compared to $42.5 million for the second quarter and $43.7 million a year ago. Reduced staff levels and related costs were the primary drivers of the decrease from both periods, with 22 fewer staff positions compared to the second quarter and 170 fewer from a year ago. Most other expense categories were down as well, reflecting efforts to improve operating efficiency.
Foreclosed property costs for the third quarter of 2012 were $3.7 million, compared to $1.9 million in the second quarter and $2.8 million a year ago. Third quarter 2012 costs included $962,000 for maintenance and $2.7 million in net losses and write-downs. For the second quarter, foreclosed property costs included $1.1 million in maintenance and $739,000 in net losses and write-downs. Third quarter 2011 costs included $1.8 million in maintenance and $968,000 in net losses and write-downs. The rise this quarter in net losses and write-downs was due primarily to re-appraisals of properties held for sale.
As of September 30, 2012, capital ratios were as follows: Tier 1 Risk-Based of 14.3 percent; Tier 1 Leverage of 9.8 percent; and Total Risk-Based of 15.8 percent. The Tier 1 Common Risk-Based ratio was 8.8 percent and the tangible equity-to-assets ratio was 8.7 percent.
“We have made significant progress on all fronts to position us as the customer service leader in financial services,” Tallent said. “This progress includes successfully recapitalizing the company, aggressively addressing our credit challenges, and rebalancing our loan portfolio for a more favorable risk profile going forward. We have also made significant progress in building on our already strong deposit base and improving operating efficiency.”
Tallent noted the recent addition of Lynn Harton, who brings to United 29 years of executive banking experience, as chief operating officer. “Lynn has earned a high level of respect in our industry and we are delighted to have him on board,” Tallent said. “We also strengthened our board of directors earlier this year with the addition of two experienced business, risk management and capital markets professionals. With this added depth and expertise, coupled with our exceptional bankers and their documented outstanding level of customer service, we are well positioned with the right people, strategies, products, and business model to be the financial services leader in our markets.”
Conference Call
United will hold a conference call today, Thursday, October 25, 2012, 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 36390832. 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 $6.7 billion and operates 27 community banks with 104 banking offices throughout north Georgia, the Atlanta region, coastal Georgia, western North Carolina and east Tennessee. 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 2011 Annual Report on Form 10-K 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.
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