United Community Banks, Inc. · NYSE:UCB
United Community Banks — Q2 2013 Earnings Presentation
39 slides from United Community Banks's earnings presentation, Jul 25, 2013
Slide 1: Second Quarter 2013 Investor Presentation
Second Quarter 2013 Investor Presentation Jimmy C. Tallent President & Chief Executive Officer H. Lynn Harton Chief Operating Officer Rex S. Schuette Executive Vice President & Chief Financial Officer rex_schuette@ucbi.com (706) 781-2266 David P. Shearrow Executive Vice President & Chief Risk Office
Slide 2: Cautionary Statement
Cautionary Statement This investor presentation may contain 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 understa
Slide 3: United at a Glance
United at a Glance Founded in 1950 Third-largest bank holding company in Georgia Headquartered in Blairsville, Georgia with 103 locations throughout north Georgia, metro Atlanta, coastal Georgia, western North Carolina, western South Carolina, and east Tennessee 1,500 employees (1) Deposit Market Sh
Slide 4: Business and Operating Model
Business and Operating Model Service is Point of Differentiation • #1 in Customer Satisfaction according to Customer Service Profiles • J.D. Power 2013 Retail Banking Satisfaction Study rates United among the top 2 banks in the southeast • Golden rule of banking – treating people the way we want to
Slide 5: Performance - Trends
United Community Banks, Inc. PERFORMANCE - TRENDS 5
Slide 6: Highlights First Quarter
Highlights First Quarter Improving Quarterly Results •Net income of $230 million, or $3.90 per share •Impacted by DTA recovery and accelerated classified asset sales •Core earnings (pre-tax, pre-credit) of $26.6 million Deferred Tax Asset Allowance Recovery • Reversal of $272 million of DTA allowanc
Slide 7: Key Drivers of Net Interest Revenue / Margin
Key Drivers of Net Interest Revenue / Margin $ in Net Interest Revenue & Margin millions Net Interest Revenue $61 • Offset margin compression by $57.4 4.0% growing loans $57 $56.8 $56.0 $54.7 $54.6 • 2Q13 growth impacted by: $53 3.60% 3.43% 3.5% Loan pricing competition 3.44% 3.38% 3.31% $49 Lower s
Slide 8: Non-Performing Loans (NPLs) Inflow Trends
Non-Performing Loans (NPLs) Inflow Trends $ in millions Quarterly NPL Inflows $30.5 $30 $29.4 $20.2 $20 $13.2 $10 $9.7 $0 Q212 Q312 Q412 Q113 Q113 Resi Constr Comm Constr Resi Mtg Comm RE Comm Consumer $ in millions Total NPLs $120 $115.4 $115.0 $109.9 $96.0 $90 $60 $27.9 $30 $0 Q212 Q312 Q412 Q113
Slide 9: Outlook
United Community Banks, Inc. OUTLOOK 9
Slide 10: Outlook
Outlook Our Goal: Leverage Our Strengths •Strong local leadership •Funding advantage in our legacy markets •Consistent and attractive culture • Class leading customer satisfaction • Low employee turnover To Grow Our Business The Right Way •Become better retail and small business bank • Grow sales: B
Slide 11: Outlook
Outlook $ in millions Grow Existing Fee Businesses at Faster Pace • Mortgage First Priority • Performing well, but at 50% of peers • Focus on home purchase product as well as refinancings • Focus on lower performing markets • Invest in management, people and new markets • Advisory Services • Custome
Slide 12: Outlook
Outlook Summary •Significant events to cleanse balance sheet, restore capital, and enhance profitability • Accelerated classified asset sales • DTA allowance recovery •Focus on core earnings growth – fee revenue, expenses, efficiencies • Offsetting margin headwinds through loan growth and improving
Slide 13: Financial Review
United Community Banks, Inc. FINANCIAL REVIEW 13
Slide 14: Core Earnings & Core Fee Revenue
Core Earnings & Core Fee Revenue $ in $60 millions Core Earnings $56.9 $57.4 $56.0 $26.6 Million $54.7 $54.6 $50 Up $181 thousand from 1Q13 and down $1.7 million $40 $41.3 $40.5 $41.6 $40.9 $42.1 from a year ago $30 $29.9 $29.1 $28.3 $26.4 $26.6 Net Interest Revenue $20 Core Operating Expenses $13.0
Slide 15: Core Operating Expenses
Core Operating Expenses $ in thousands Variance - Increase / (Decrease) 2Q13 1Q13 2Q12 Salaries & Employee Benefits $ 23,129 $ 74 $ (21) Communications & Equipment 3,468 422 257 Occupancy 3,449 82 (90) FDIC Assessment 2,505 - (40) (1) Includes foreclosed property costs, Advertising & Public Relation
Slide 16: Net Income
Net Income $ in thousands NET OPERATING INCOME Variance - Increase / (Decrease) 2Q13 1Q13 2Q12 Core Earnings (Pre-Tax, Pre-Credit) $ 26,558 $ 181 $ (1,730) Provision for Loan Loss (48,500) 37,500 30,500 NON-CORE FEE REVENUE: Hedge Ineffectiveness Gains (Losses) 369 454 549 $ in Securites Gains (Loss
Slide 17: Customer Deposit Mix & Core Growth
Customer Deposit Mix & Core Growth $ in millions Deposits by % / Customer Mix Total Deposit Mix 2Q13 1Q13 2Q12 4Q08 Demand / NOW $ 1,916 $ 1,894 $ 1,735 $ 1,457 2Q13 MMDA / Savings 1,406 1,401 1,330 630 $5.6B Core Transaction 3,322 3,295 3,065 2,087 59% Significant Demand & NOW Time < $100,000 977 1
Slide 18: Capital Ratios
Capital Ratios 16.00% 15.80% 15.70% 15.90% 15% 15.20% 14.30% 14.30% 14.20% 14.30% 13.70% 10% 9.80% 9.80% 9.60% 9.70% 9.20% 8.90% 8.80% 8.80% 8.80% 8.50% 8.80% at 6.30% period end 5.50% 5.70% 5.70% 5.70% 5% 2Q12 3Q12 4Q12 1Q13 2Q13 Total RBC Tier 1 RBC Leverage Tier 1 Common RBC Tangible Common to As
Slide 19: Loan Portfolio & Credit Quality
United Community Banks, Inc. LOAN PORTFOLIO & CREDIT QUALITY 19
Slide 20: Loan Portfolio (total $4.19 billion)
Loan Portfolio (total $4.19 billion) $ in billions By Loan Type Diversifying Portfolio Reduced 1Q11 concentrations 2Q13 Commercial $4.194 of A&D and $4.189 55% Investor RE $2.32 loans Retail Retail 37% C&I Install 6% $.26 $1.539 31% 34% $1.308 $1.424 C&I Residential 37% Mortgage $1.556 31% $1.28 Inv
Slide 21: New Loans Funded and Advances
New Loans Funded and Advances(1) $ in millions CATEGORY MARKET 2Q13 2Q12 2Q13 2Q12 Commercial C & I $ 58.3 $ 45.5 Atlanta $ 94.2 $ 78.0 Owner Occupied CRE 50.7 44.1 (1) Represents new Coastal Georgia 26.7 17.8 loans funded Income Producing CRE 30.4 14.8 N. Georgia 64.0 58.5 and net loan Commercial C
Slide 22: Commercial Loans (total $2.32 billion)
Commercial Loans (total $2.32 billion) $ in billions By Loan Type Geographic Diversity Atlanta MSA $.925 North Georgia 36% $ .577 Western North Carolina Coastal Georgia Other 40% 24% Gainesville MSA $ .284 East Tennessee $ .176 Carolina $ .177 $ .145 1% South$ .034 12% 40% 12% 25% 6% 7% 8% Owner 0%
Slide 23: Retail (total $1.54 billion)
Retail (total $1.54 billion) $ in millions By Loan Type Geographic Diversity(1) North Georgia Western North Carolina $ .538 Home Equity $ .323 LOC 26% $.40B 36% Atlanta MSA $ .237 East Tennessee Avg loan size $48,000 24% Coastal Georgia Gainesville MSA $ .127 $ .096 $ .070 12% 17% 23% 39% 5% 7% 9% M
Slide 24: Residential Construction (total $332 million)
Residential Construction (total $332 million) $ in millions By Loan Type Geographic Diversity North Georgia $ 153 Western North Carolina 48% $ 76 36% Atlanta MSA $ 66 Lot 24% East Tennessee Georgia MSA 52% $ 11 $173 3% Gainesville 5% Coastal$ 18 $8 12% 20% 23% 46% 3% 0% Raw 11% $36 2Q13 vs. 2Q13 1Q1
Slide 25: Credit Quality
Credit Quality $ in millions 2Q13 1Q13 4Q12 3Q12 2Q12 Net Charge-offs $ 72.4 $ 12.4 $ 14.5 $ 20.6 $ 18.9 as % of Average Loans 6.87 % 1.21 % 1.39 % 1.99 % 1.85 % Allowance for Loan Losses $ 81.8 $ 105.8 $ 107.1 $ 107.6 $ 112.7 as % of Total Loans 1.95 % 2.52 % 2.57 % 2.60 % 2.74 % as % of NPLs 294 1
Slide 26: Performing Classified Loans
Performing Classified Loans $ in millions $325 $323.6 $275 $282.5 $271.7 $261.9 $225 $175 $176.3 2Q12 3Q12 4Q12 1Q13 2Q13 BY CATEGORY 2Q12 3Q12 4Q12 1Q13 2Q13 Commercial: Commercial & Industrial $ 16 $ 19 $ 18 $ 20 $ 11 Owner Occupied 54 77 65 71 43 Total C & I 70 96 83 91 54 Income Producing CRE 94
Slide 27: TDRs
TDRs $ in millions LOAN TYPE Accruing(1) Non-Accruing Total TDRs 2Q13 vs. 2Q12 2Q13 vs. 2Q12 2Q13 vs. 2Q12 Commercial (Sec by RE) $ 40.4 $ 65.7 $ 2.0 $ 8.9 $ 42.5 $ 74.7 Commercial & Industrial 2.9 8.6 .1 .3 2.9 8.8 Commercial Construction 12.9 15.8 .1 16.8 13.0 32.6 Total Commercial 56.2 90.1 2.2 2
Slide 28: Net Charge-offs by Category & Market
Net Charge-offs by Category & Market $ in thousands NET CHARGE-OFFS BY CATEGORY 1Q13 % of Average Loans (Annualized) % of Avg Total Loans 1Q13 4Q12 3Q12 2Q12 Commercial (Sec. by RE): Ow ner Occupied $ 16,545 5.85 % .69 % 1.76 % 3.56 % .46 % Income Producing 8,921 5.45 1.99 .67 .70 1.75 Total Comm (S
Slide 29: NPAs by Loan Category & Market
NPAs by Loan Category & Market $ in thousands 2Q13 2Q12 NPLs OREO Total NPAs NPLs OREO Total NPAs LOAN CATEGORY LOAN CATEGORY Commercial (sec. by RE): Commercial (sec. by RE): Owner Occupied $ 5,283 $ 547 $ 5,830 Owner Occupied $ 9,399 $ 7,914 $ 17,313 Income Producing 1,954 - 1,954 Income Producing
Slide 30: Appendix
United Community Banks, Inc. APPENDIX 30
Slide 31: Experienced Proven Leadership
Experienced Proven Leadership • Over 39 years in banking • Over 30 years in banking • Over 35 years in banking • Led company from $42 • Responsible for overall • Responsible for million in assets in 1989 to operations accounting, finance and $7.2 billion today • Former Consultant and reporting activ
Slide 32: Market Share Opportunities & Demographics
Market Share Opportunities & Demographics EXCELLENT GROWTH OPPORTUNITIES FAST GROWING MARKETS Market Deposits Population Growth (%) Deposits (in Deposit Population Actual Projected Markets (in billions) (1) billions) (2,3) Banks Offices(3) Share (1) Rank(1) Markets1 (in thousands) 2010 - 2012 2012 -
Slide 33: Liquidity
Liquidity $ in millions Unused Variance Capacity 2Q13 1Q13 2Q12 vs 1Q13 vs 2Q12 Wholesale Borrowings (1) Brokered Deposits $ 1,416 $ 375 $ 332 $ 211 $ 43 $ 164 FHLB 1,160 70 - 125 70 (55) Fed Funds 130 - - - - - Other Wholesale - 54 52 54 2 - Total $ 2,706 $ 499 $ 384 $ 390 $ 115 $ 109 WHOLESALE BOR
Slide 34: Business Mix – Deposits at quarter-end
Business Mix – Deposits at quarter-end $ in millions 2Q13 vs. DEPOSITS BY CATEGORY 2Q13 1Q13 4Q12 3Q12 2Q12 2Q12 Demand & Now $ 1,916 $ 1,894 $ 1,841 $ 1,796 $ 1,735 $ 181 MMDA & Savings 1,406 1,401 1,372 1,342 1,330 76 Core Transaction Deposits 3,322 3,295 3,213 3,138 3,065 257 Time < $100,000 977
Slide 35: Core Transaction Deposits
Core Transaction Deposits $ in millions $176 East Tennessee Core Transactions / Total Deposits $175 1Q13 % 2Q13 1Q13 $212 Coastal Georgia Coastal GA 67.6 % 68.0 % $211 2Q13 Gainesville MSA 67.0 65.0 $205 North Carolina 62.6 60.1 Gainesville MSA $212 Atlanta MSA 62.1 61.9 East TN 61.5 60.2 $546 North
Slide 36: Lending & Credit Environment
Lending & Credit Environment $ in millions Regional Credit Review – Standard Underwriting •Legal Lending Limit $221 •House Lending Limit 132 •Project Lending Limit 12 •Top 25 Relationships 345 PROACTIVELY ADDRESSING CREDIT ENVIRONMENT • Centralized underwriting and approval process • Segregated work
Slide 37: Commercial Construction & Real Estate
Commercial Construction & Real Estate $ in millions COMMERCIAL REAL ESTATE COMMERCIAL CONSTRUCTION 30-Jun-13 30-Jun-13 Owner Income Amount Percent Occupied Producing Total Percent Land Develop - Vacant (Improved) $ 54.1 41 % Office Buildings $ 304.4 $ 175.1 $ 479.5 27 % Raw Land - Vacant (Unimproved
Slide 38: Loans by Business Mix and Region
Loans by Business Mix and Region $ in millions 2Q13 vs. 2Q13 1Q13 4Q12 3Q12 2Q12 2Q12 2012 2011 2010 2009 2008 QUARTERLY LOANS - BUSINESS MIX BY CATEGORY ANNUAL LOANS - BUSINESS MIX BY CATEGORY Commercial: Commercial: Comm & Indus $ 437 $ 454 $ 458 $ 460 $ 450 $ (13) Comm & Indus $ 458 $ 428 $ 441 $
Slide 39: Non GAAP Reconciliation Tables
Non GAAP Reconciliation Tables $ in thousands Operating Earnings to GAAP Earnings Reconciliation 2Q13 1Q13 4Q12 3Q12 2Q12 CORE FEE REVENUE Core fee revenue $ 14,063 $ 12,618 $ 14,551 $ 13,003 $ 12,764 Securities gains, net - 116 31 - 6,490 Loss on prepayment of borrowings - - - - (6,199) Gains from
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