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July 22 – United Community Bans reports Net Operating Income of $20 for 2nd Qtr, up 22 percent over prior year

Category: Banking & Finance

Coastal Empire News Staff Report

July 22, 2015 - United Community Banks, Inc. (NASDAQ: UCBI) today reported net operating income of $20.0 million for the second quarter of 2015, up 22 percent from a year ago. 

Operating earnings per diluted share was 32 cents, up 19 percent from a year ago.  The increase reflects strong loan and core deposit growth, a stable net interest margin, growth in fee revenue and a lower provision for credit losses, according to the bank’s holding company.

UCB has completed its merger with MoneyTree Corporation and its wholly owned subsidiary, First National Bank as of May 1.

Loans are up $142 million from the first quarter, or 12 percent annualized, excluding loans acquired in the merger.

Core transaction deposits are up $109 million, or 11 percent annualized, excluding deposits acquired in the merger. And, net interest margin held steady at 3.30 percent.

The banking company has also received regulatory approvals for acquisition of Palmetto Bancshares.

For the first six months, United reported net income of $35.5 million, or 57 cents per diluted share. 

“Our second quarter financial performance was outstanding by every measure,” said Jimmy Tallent, chairman and chief executive officer.  “I’m especially proud to report that we achieved our goal for a one percent return on assets, excluding merger-related charges. 

“We had solid loan growth combined with a steady net interest margin,” Tallent continued.  “Strong recoveries of previously charged-off loans drove our provision for credit losses down to half the first quarter level.  Fee revenue was up significantly, with strong growth in our mortgage business and gains from our SBA lending business.   “Second quarter net loan growth of $142 million, excluding the merger with MoneyTree Corporation and its wholly owned subsidiary, First National Bank (“FNB”), was driven by strong loan production of $526 million across all United markets.  Our community banks originated $296 million of loan production while our specialized lending area, which includes health care, corporate, SBA, asset-based, middle market and commercial real estate lending, produced $152 million.  Core deposit growth was another contributing factor with a linkedquarter increase of $109 million, or 11 percent annualized, excluding deposits acquired in the merger. Increased demand deposits in our Atlanta and western North Carolina markets drove over half of this growth.” 

Second quarter taxable equivalent net interest revenue totaled $61.3 million, up $3.70 million from the first quarter and up $6.37 million from the second quarter of 2014.  The acquisition of FNB added just over $2.0 million to second quarter net interest revenue.  The taxable equivalent net interest margin of 3.30 percent held steady with the first quarter and was up 9 basis points from a year ago.  Along with loan growth, this drove the remainder of the increase in net interest revenue. 

At $900,000, the second quarter provision for credit losses was half of the amount from the first quarter and down $1.3 million from the second quarter of 2014.  Second quarter net charge-offs were $978 thousand compared with $2.56 million in the first quarter and $4.18 million a year ago.  Strong recoveries of previously charged-off loans drove net charge-offs down in the second quarter.  Nonperforming assets to total assets were .26 percent, equal to last quarter, and down from .32 percent a year ago. 

Second quarter fee revenue totaled $17.3 million, up $1.58 million from the first quarter and $3.12 million from the second quarter of 2014.  Higher mortgage fees and an increase in gains from SBA loan sales account for most of the increase from both prior periods.  Mortgage fees of $3.71 million were up $952 thousand from the first quarter and up $1.83 million from a year ago, reflecting strong growth in home purchases and an increase in refinancing activity.  Closed mortgage loans totaled $128 million in the second quarter of 2015, compared with $87.9 million in the first quarter and $68.5 million in the second quarter of 2014.  SBA loan sale gains totaled $1.49 million in the second quarter of 2015 compared with $1.14 million in the first quarter of 2015 and $744 thousand in the second quarter of 2014. 

Second quarter brokerage fees of $1.23 million from United’s advisory services business were down $319 thousand from the first quarter and were level with the second quarter of 2014.  Service charges and fees of $8.38 million were up $760 thousand from the first quarter, reflecting growth in interchange fees, while down $152 thousand from a year ago, primarily reflecting the declining trend in overdraft fees. 

“Our growth in fee revenue reflects our commitment to diversifying the revenue stream by focusing on fee generating products and services,” stated Tallent. 

Second quarter salaries and employee benefits expense of $28.0 million was up $1.52 million from the first quarter and $3.67 million from a year ago.  The increases reflect the addition of FNB’s compensation expenses for two months, investment in new producers and support staff for the specialized lending area, and higher commissions and incentives associated with growth in the mortgage business and in commercial loans and core deposits. 

Tallent noted, “The previously announced merger with FNB closed on May 1, and their results of operations are included in United’s results from that date forward.  Conversion of the operating systems was successfully completed last weekend. 

“We also announced our planned merger with Palmetto Bancshares, Inc. and its banking subsidiary, The Palmetto Bank, which is headquartered in Greenville, South Carolina,” Tallent explained.   “The Palmetto Bank is a high-quality franchise with $1.2 billion in assets and 25 banking offices in the Upstate South Carolina markets.  The merger creates significant benefits for United, including meaningful earnings per share accretion, improved growth profile and profitability, attractive rates of return, and higher franchise value.  We have received all regulatory approvals and the transaction is scheduled to close on September 1.  I am very pleased to welcome both First National Bank and The Palmetto Bank to the United family.” 

At June 30, 2015, capital ratios were as follows: Tier 1 Risk-Based of 11.9 percent; Total RiskBased of 13.1 percent; Tier 1 Common Risk-Based of 11.9 percent; and, Tier 1 Leverage of 9.1 percent. 

“Our second quarter results continue the positive momentum from the first quarter, with strong growth in loans, core deposits, and fee revenue,” Tallent said. “We are excited about executing our growth strategies to expand the franchise and add value for shareholders.”

United Community Banks, Inc. (UCBI) is a bank holding company based in Blairsville, Georgia, with $8.2 billion in assets.  The company’s banking subsidiary, United Community Bank, is one of the Southeast’s largest full-service banks, operating 114 offices in Georgia, North Carolina, South Carolina and Tennessee.

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