United Community Banks, Inc. · NYSE:UCB
United Community Banks — Q3 2009 Earnings Presentation
54 slides from United Community Banks's earnings presentation, Oct 23, 2009
Slide 1: Investor Presentation Third Quarter 2009
Investor Presentation Third Quarter 2009 United Community Banks, Inc. Jimmy C. Tallent President & CEO Rex S. Schuette David P. Shearrow Executive Vice President & CFO Executive Vice President & CRO rex_schuette@ucbi.com (706) 781-2266 The Bank That SERVICE Built. SM United Community Banks, Inc. | T
Slide 2: Cautionary statement
Cautionary statement This presentation 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. Such performance inv
Slide 3: Non-GAAP measures
Non-GAAP measures This presentation also contains non-GAAP financial measures determined by methods other than in accordance with generally accepted accounting principles (“GAAP”). Such non-GAAP financial measures include the following: net interest margin – pre credit, core fee revenue, core operat
Slide 4: United at a glance
United at a glance Assets $8.4 Billion Banks 27 Deposits $6.8 Billion Offices 109 The Bank That SERVICE Built. SM 4 United Community Banks, Inc. | Third Quarter 2009
Slide 5: Current environment
Current environment Working through credit challenges Strengthened capital Core earnings improvement The Bank That SERVICE Built. SM 5 United Community Banks, Inc. | Third Quarter 2009
Slide 6: Strengthened capital position
Strengthened capital position As of September 30, 2009 (1) (2) Reported Peers (3) Tangible Common Equity to Assets 7.44 % 5.72 % (3) Tangible Equity to Assets 9.56 7.48 Well-Capitalized Tier 1 Leverage 5.00 % 9.49 8.82 Tier 1 Risk Based Capital 6.00 12.73 12.13 Total Risk Based Capital 10.00 15.29 1
Slide 7: Deposit mix (total $6.8 billion)
Deposit mix (total $6.8 billion) Brokered Demand & NOW ($ in millions) 12% 22% Public Funds 3Q09 4Q08 9% Demand NOW $ 1,481 $ 1,457 MMDA & Savings 858 630 Core Transaction Deposits 2,339 2,087 MMDA & Sav. Time >$100k 13% 13% Annualized Growth 17% excl SCB acquisition Time < $100,000 1,848 1,945 Time
Slide 8: Core transaction deposits
Core Core transaction transaction deposits deposits Geographic Diversity Core Transactions / Total Deposits (%) 3Q09 4Q08 4Q 08 3Q 09 Atlanta MSA 40.2 % 34.6 % Eastern Tennessee North Georgia 24.7 22.4 $99 $117 Western NC 42.0 38.5 Coastal Georgia $120 Gainesville MSA 43.3 39.0 $136 Gainesville MSA
Slide 9: Net interest margin
Net interest margin Net Interest Margin NIM Characteristics 5.0% Margin improvement 11 bps QTD 3.97% 4.0% 3.80% 69 bps YTD 3.53% 3.53% 3.13% 3.39% 3.0% 3.17% 3.08% 3.28% Improved loan and 2.70% deposit pricing 2.0% Replaced higher priced 1.0% CDs and broker deposits .0% 3Q 08 4Q 08 1Q 09 2Q 09 3Q 09
Slide 10: Loan portfolio and credit quality
LOAN PORTFOLIO AND CREDIT QUALITY The Bank That SERVICE Built. SM 10 United Community Banks, Inc. | Third Quarter 2009
Slide 11: Proactively addressing credit environment
Proactively addressing credit environment Structure Centralized underwriting and approval process Segregated work-out teams Highly skilled ORE disposition group Seasoned regional credit professionals Process Continuous external loan review Intensive executive management involvement: ~ Weekly past du
Slide 12: Loan portfolio (total $5.4 billion)
Loan portfolio (total $5.4 billion) Geographic Diversity $1.2B Residential .1B Construction Installment Eastern 22% 3% Tennessee 5% $1.5B Residential Gainesville Mortgage MSA 27% 8% Coastal $2.6B Georgia Commercial 8% 48% Western North Carolina 15% Atlanta MSA 28% North Georgia 36% 0% 5% 10% 15% 20%
Slide 13: Commercial loans (total $2.6 billion)
Commercial loans (total $2.6 billion) $.4B Geographic Diversity Comm Const $.4B 15% Eastern C& I Tennessee 16% 6% $1.0B Gainesville Owner MSA Occupied 9% $.8B 38% Coastal Income Georgia Producing 9% 31% Western North Carolina 9% North Georgia 30 Average Loan Size Atlanta MSA CRE: $443k 37% C&I: $73k
Slide 14: Commercial real estate (by loan type)
Commercial real estate (by loan type) (in millions) Sept 30, 2009 % of Portfolio Characteristics Loan Type Amount Total Office Buildings $ 410 23% 55% owner-occupied Small Businesses 388 21 45% income producing(1) Single-Unit Retail/Strip Centers 231 13 Small Warehouses/Storage 167 9 Typical owner-o
Slide 15: Commercial construction (by loan type)
Commercial construction (by loan type) Portfolio Characteristics (in millions) Sept 30, 2009 % of $660k Average loan size Loan Type Amount Total Raw Land – Vacant (Unimproved) $ 154 40% Average LTVs (1) Land Development – Vacant (Improved) 145 38 Raw Land: 50% Land Dev.: 48% Office Buildings 32 9 To
Slide 16: Residential mortgage (total $1.5 billion)
Residential mortgage (total $1.5 billion) $.4 B Geographic Diversity Home Equity 26% Eastern Avg loan Tennessee size: $47k 6% Gainesville MSA 7% Coastal $1.1B Mortgage Avg loan Georgia size: $100k 8% 74% Atlanta MSA 15.5% Western North Carolina 25.5% North Georgia Origination Characteristics 39% No
Slide 17: Residential construction (total $1.2 billion)
Residential construction (total $1.2 billion) Geographic Diversity La $.2B nd Raw 14% $.4B Eastern Developing Tennessee 32% 2% Gainesville $.3B MSA DevelopingLot 5% 28% Coastal Georgia $.1B 7% Sold 8% Western North $.2B Carolina Co Spec 14% nst 18% ruc tion Atlanta MSA 27% North Georgia Average Loan
Slide 18: Atlanta MSA (residential construction)
Atlanta MSA (residential construction) (in millions) Variance 3Q 09 4Q 08 3Q 08 4Q 08 3Q 08 Acquisition & Development Developing Land $ 100 $ 167 $ 185 $ (67) $ (85) Raw Land 61 56 47 5 14 Lot Loans 54 86 103 (32) (49) Total 215 309 335 (94) (120) Construction Loans Spec 91 189 227 (98) (136) Sold 2
Slide 19: Credit quality
Credit quality (in millions) 3Q 09 2Q 09 1Q 09 4Q 08 3Q 08 Net Charge-offs $ 90.5 $ 58.3 $ 43.3 $ 74.0 $ 55.7 as % of Average Loans 6.57% 4.18% 3.09% 5.09% 3.77% Allowance for LL $ 150.2 $ 145.7 $ 144.0 $ 122.3 $ 111.3 as % of Total Loans 2.80% 2.64% 2.56% 2.14% 1.91% as % of NPLs 49 51 56 64 80 as
Slide 20: Net charge-offs by loan category
Net charge-offs by loan category (in thousands) 3Q09 % of Average Loans % of Avg NCOs Loans 2Q09 1Q09 4Q08 LTM(1) Commercial (sec. by RE) $ 10,568 2.33 % 1.34 % .20 % 1.10 % 1.24 % Commercial Construction 4,369 4.55 .80 .05 1.14 1.64 Commercial & Industrial 1,792 1.76 3.16 .89 3.24 2.26 Total Commer
Slide 21: Net charge-offs by market
Net charge-offs by market (in thousands) 3Q 09 % of Average Loans % of Avg (1) NCOs Loans 2Q09 1Q09 4Q08 LTM MARKETS Atlanta MSA $ 50,129 12.61 % 8.89 % 6.16 % 10.80 % 9.62 % Gainesville MSA 1,473 1.60 4.38 1.18 8.60 3.94 North Georgia 24,017 4.74 2.52 1.64 1.91 2.70 Western North Carolina 3,949 1.9
Slide 22: NPAs by loan category and market
NPAs by loan category and market (in thousands) 3Q 09 3Q 09 NPLs OREO Total NPAs NPLs OREO Total NPAs LOAN CATEGORY MARKETS Commercial (sec. by RE) $ 38,379 $ 12,566 $ 50,945 Atlanta MSA $ 120,599 $ 54,670 $ 175,269 Commercial Construction 38,505 5,543 44,048 Gainesville MSA 12,916 8,429 21,345 Comm
Slide 23: Key trends - loan portfolio and credit quality
Key trends - loan portfolio and credit quality Majority of credit challenges in 2009 centered in residential construction, primarily in Atlanta; this portfolio continues to decline rapidly which should lead to a reduction in credit losses going forward While some deterioration has occurred, the comm
Slide 24: Credit quality – SCAP analysis
Credit quality – SCAP analysis Imputed Stress Test – Estimated Credit Losses Through December 2010 (1) Represents the SCAP – Selected Banks Scenario modified to reflect the characteristics of United Community Banks, Inc. existing loan portfolio. (2) Based on average projected losses per loan categor
Slide 25: Credit quality – SCAP analysis
Credit quality – SCAP analysis Imputed Stress Test – Projected Capital Ratios Assumptions: Targeted LLR / Loans (12/31/10) (1) 2.00% Core Earnings (2) $132,857 Effective Tax Rate 35% Aggregate TARP Preferred Dividend (3) $12,867 Stress Test Analysis: Projected as of December 31, 2010 (4) Management
Slide 26: Financial results
FINANCIAL RESULTS The Bank That SERVICE Built. SM 26 United Community Banks, Inc. | Third Quarter 2009
Slide 27: Core earnings summary – Third Quarter 2009
Core earnings summary – Third Quarter 2009 (in millions) Variance 3Q09 2Q 09 1Q 09 4Q 08 3Q 08 3Q 08 4Q 08 Net Interest Revenue $ 63.0 $ 60.9 $ 57.4 $ 51.9 $ 58.8 $ 4.2 $ 11.1 Fee Revenue(1) 14.5 13.7 12.6 12.6 13.0 1.5 1.9 Gross Revenue 77.5 74.6 70.0 64.5 71.8 5.7 13.0 Operating Expense(2) 45.7 47
Slide 28: Net operating loss – Third Quarter 2009
Net operating loss – Third Quarter 2009 (in millions) Variance 3Q 09 2Q 09 1Q 09 4Q 08 3Q 08 3Q 08 4Q 08 Core Earnings $ 31.8 $ 26.8 $ 21.7 $ 17.3 $ 24.9 $ 6.9 $ 14.5 Provision for Loan Loss (95.0) (60.0) (65.0) (85.0) (76.0) (19.0) (10.0) Foreclosed Property Costs: - - Write-downs (4.1) (2.6) (1.8)
Slide 29: Net loss – Third Quarter 2009
Net loss – Third Quarter 2009 (in millions) Variance 3Q09 2Q09 1Q09 4Q08 3Q08 3Q 08 4Q 08 Net Operating Loss $ (43.7) $ (23.1) $ (32.0) $ (46.7) $ (39.9) $ (3.8) $ 3.0 Gain on Acquisition ($11.4 pre-tax) - 7.1 - - - - - Goodw ill Impairment Charge (25.0) - (70.0) - - (25.0) (25.0) Severance Costs ($
Slide 30: Capital ratios (as percentages)
Capital ratios (as percentages) Well- Capitalized 3Q 09 4Q 08 3Q 08 Regulatory Capital Tier 1 Risk-Based 6% 12.7% 11.2% 8.7 % Total Risk-Based 10 15.3 13.9 11.4 Leverage 5 9.5 8.3 6.7 Tangible Equity to Risk-Weighted Assets 13.3 11.2 8.3 Tangible Common Equity to Risk-Weighted Assets 10.3 8.3 8.3 Ta
Slide 31: Reasons to invest in United
REASONS TO INVEST IN UNITED The Bank That SERVICE Built. SM 31 United Community Banks, Inc. | Third Quarter 2009
Slide 32: Closing Comments
Closing Comments Capital strength Core earnings Business model – franchise Significant strategic opportunities The Bank That SERVICE Built. SM 32 United Community Banks, Inc. | Third Quarter 2009
Slide 33: Appendix
APPENDIX The Bank That SERVICE Built. SM 33 United Community Banks, Inc. | Third Quarter 2009
Slide 34: Experienced proven leadership
Experienced proven leadership Joined Years in UCBI Banking Jimmy Tallent President and CEO 1984 36 Guy Freeman Chief Operating Officer 1994 49 Rex Schuette Chief Financial Officer 2001 32 David Shearrow Chief Risk Officer 2007 28 Glenn White President, Atlanta Region 2007 35 Craig Metz Marketing 200
Slide 35: Business and operating model
Business and operating model Community bank service, large bank resources Twenty-seven “community banks” Local CEOs with deep roots in their communities Resources of $8.4 billion bank Service is point of differentiation Golden rule of banking ~ “The Bank That SERVICE Built” Ongoing customer surveys
Slide 36: Robust demographics (fast growing markets)
Robust demographics (fast growing markets) Population Growth (%) Population Actual Projected Markets1 (in thousands) 2000 – 2009 2009 – 2014 North Georgia 396 24 10 Atlanta MSA 5,544 31 13 Gainesville MSA 187 34 15 Coastal Georgia 370 10 5 Western North Carolina 425 11 5 East Tennessee 850 13 6 Tota
Slide 37: Market share opportunities (excellent growth prospects)
Market share opportunities (excellent growth prospects) Market Deposits United Deposit Markets (in billions) (1) Deposits Banks Offices Share (1) Rank(1) North Georgia $ 8.5 $ 2.6 11 23 31 % 1 Atlanta MSA 55.2 2.1 10 39 4 7 Gainesville MSA 2.6 .3 1 7 13 4 Coastal Georgia 7.5 .4 2 9 5 8 Western North
Slide 38: Leading demographics
Leading demographics 2009 - 2014 Total Assets Population (1) Rank Ticker Company State ($ B) Growth (2) 1 WAL Western Alliance Bancorporation NV $ 5.7 11.25 % 2 UCBI United Community Banks, Inc. GA 8.4 9.65 3 CFR Cullen/Frost Bankers, Inc. TX 15.7 9.20 4 PNFP Pinnacle Financial Partners, Inc. TN 5.0
Slide 39: Small business market growth
Small business market growth (# of business with 1 – 49 employees) Small Population Business Growth Markets1 2000 2006 Growth 2000-2009 North Georgia 6,453 7,693 19% 24% Atlanta MSA 70,893 126,200 78% 31% Gainesville MSA 3,158 3,824 21% 34% Coastal Georgia 9,441 10,210 8% 10% Western North Carolina
Slide 40: Business mix - loans (at quarter-end)
Business mix - loans (at quarter-end) Year over Year % (in millions) 3Q 09 2Q 09 1Q 09 4Q 08 3Q 08 Change LOANS BY CATEGORY Commercial (sec. by RE) $1,787 $1,797 $1,779 $1,627 $1,604 11 Commercial construction 380 379 377 500 509 (25) Commercial & Industrial 403 399 387 410 425 (5) Total commercial
Slide 41: Business mix - loans (at year-end)
Business mix - loans (at year-end) (in millions) 2008 2007 2006 2005 2004 LOANS BY CATEGORY Commercial (sec. by RE) $1,627 $1,476 $1,230 $1,055 $ 966 Commercial construction 500 527 470 359 250 Commercial & Industrial 410 418 296 237 212 Total commercial 2,537 2,421 1,996 1,651 1,428 Residential con
Slide 42: Residential construction – total company
Residential construction – total company (in millions) 3Q 09 2Q 09 1Q 09 4Q 08 3Q 08 Land Loans Developing Land $ 380 $ 413 $ 445 $ 484 $ 516 Raw Land 159 159 155 153 142 Lot Loans 336 369 390 358 385 Total 875 941 990 995 1,043 Construction Loans Spec 218 268 317 347 393 Sold 92 106 123 137 160 Tot
Slide 43: Residential construction – Atlanta MSA
Residential construction – Atlanta MSA (in millions) 3Q 09 2Q 09 1Q 09 4Q 08 3Q 08 Land Loans Developing Land $ 100 $ 124 $ 148 $ 167 $ 185 Raw Land 61 63 52 56 47 Lot Loans 54 81 98 86 103 Total 215 268 298 309 335 Construction Loans Spec 91 127 164 189 227 Sold 22 29 33 40 49 Total 113 156 197 229
Slide 44: Loans – markets served (at quarter-end)
Loans – markets served (at quarter-end) (in millions) 3Q 09 2Q 09 1Q 09 4Q 08 3Q 08 LOANS BY MARKET Atlanta MSA $1,526 $1,605 $1,660 $1,706 $1,800 Gainesville MSA 402 413 422 420 426 North Georgia 1,942 1,978 2,014 2,040 2,066 Western North Carolina 786 794 808 810 815 Coastal Georgia 440 455 460 46
Slide 45: Loans – markets served (at year-end)
Loans – markets served (at year-end) (in millions) 2008 2007 2006 2005 2004 LOANS BY MARKET Atlanta MSA $ 1,706 $ 2,002 $ 1,654 $ 1,207 $ 1,061 Gainesville MSA 420 400 354 249 -- North Georgia 2,040 2,060 2,034 1,790 1,627 Western North Carolina 810 806 773 668 633 Coastal Georgia 464 415 358 306 27
Slide 46: Lending – credit summary (as of September 30, 2009)
Lending – credit summary (as of September 30, 2009) (in millions) Legal lending limit $219 House lending limit 20 Top 25 relationships 423 7.9% of total loans Regional credit review Standard underwriting The Bank That SERVICE Built. SM 46 United Community Banks, Inc. | Third Quarter 2009
Slide 47: NPAs by loan category and market
NPAs by loan category and market (in thousands) 2Q 09 2Q 09 Loan Category Total Markets Total NPLs OREO NPAs NPLs OREO NPAs Commercial (sec. by RE) $ 37,755 $ 5,395 $ 43,150 Atlanta MSA $ 148,155 $ 50,450 $ 198,605 Commercial Construction 15,717 5,847 21,564 Gainesville MSA 9,745 3,511 13,256 Commer
Slide 48: Liquidity – loans / deposits
Liquidity – loans / deposits (in millions) Variance 3Q 09 4Q 08 3Q 08 vs 4Q 08 vs 3Q 08 Loans $ 5,363 $ 5,705 $ 5,830 $ (342) $ (467) Core (DDA, MMDA, Savings) $ 2,340 $ 2,087 $ 2,156 $ 253 $ 184 Public Funds 607 843 602 (236) 5 CD’s 3,035 3,281 3,186 (246) (151) Total Deposits (excl Brokered) $ 5,9
Slide 49: Liquidity – wholesale borrowings
Liquidity – wholesale borrowings (in millions) Unused Variance Capacity 3Q 09 4Q 08 3Q 08 vs 4Q 08 vs 3Q 08 Brokered Deposits $ 1,256 $ 839 $ 793 $ 745 $ 46 $ 94 FHLB 812 315 235 285 80 30 Fed Funds 150 - 8 16 (8) (16) Other Wholesale 490 102 100 104 2 (2) Total Wholesale $ 2,708 $ 1,256 $ 1,136 $ 1
Slide 50: Business mix – deposits (at quarter-end)
Business mix – deposits (at quarter-end) (in millions) DEPOSITS BY CATEGORY 3Q 09 2Q 09 1Q 09 4Q 08 3Q 08 Demand & NOW $ 1,481 $ 1,525 $ 1,485 $ 1,457 $ 1,591 MMDA & Savings 858 744 665 630 565 Core Transaction Deposits 2,339 2,269 2,150 2,087 2,156 Time < $100,000 1,848 1,985 1,904 1,945 1,807 Publ
Slide 51: Analyst coverage
Analyst coverage FIG Partners Soleil (Tenner Investment Research) (Market Perform – Sept 29, 2009) (Hold – Jul 8, 2009) Fox-Pitt Kelton Cochran Stephens, Inc. (In Line – Sept 25, 2009) (Equal-Weight – Sept 25, 2009) Keefe, Bruyette & Woods Sterne Agee & Leach, Inc. (Market Perform – Jul 27, 2009) (N
Slide 52: Southern Community Bank
Southern Community Bank Purchased – June 19, 2009 ($ in millions) Nine years old – Enhances presence in southside metro Atlanta markets Four banking offices in southside metro Atlanta MSA – Fayetteville, Coweta and Henry counties 54 employees $208 in customer deposits, including $53 core deposits FD
Slide 53: Non-GAAP reconciliation tables
Non-GAAP reconciliation tables (in millions, except EPS) Operating Earnings to GAAP Earnings Reconciliation 3Q 09 2Q09 1Q09 4Q08 3Q08 Core fee revenue reconciliation Core fee revenue $ 14.5 $ 13.7 $ 12.6 $ 12.6 $ 13.0 Securities gains (losses), net 1.2 (.7) .3 .8 .1 FHLB prepayment charge - - - (2.7
Slide 54: Non-GAAP reconciliation tables
Non-GAAP reconciliation tables Operating Earnings to GAAP Earnings Reconciliation 3Q09 2Q09 1Q09 4Q08 2Q08 Net interest margin - pre credit reconciliation Net interest margin - pre credit 3.97 % 3.80 % 3.53 % 3.13 % 3.53 % Effect of interest reversals, lost interest, and carry costs of NPAs (.58) (.
United Community Banks — Q3 2009 Earnings Presentation on 6ix