United Community Banks, Inc. · NYSE:UCB

United Community Banks — Q2 2010 Earnings Presentation

57 slides from United Community Banks's earnings presentation, Jul 23, 2010

  1. Slide 1: United Community Banks, Inc. Investor Presentation Second Quarter 2010

    United Community Banks, Inc. Investor Presentation Second Quarter 2010 Jimmy C. Tallent President & CEO Rex S. Schuette Strong Bank. Strong Service. Strong Future. EVP & CFO rex_schuette@ucbi.com (706) 781-2266 David P. Shearrow EVP & CRO

  2. 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

  3. 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

  4. Slide 4: Highlights Second Quarter

    Highlights Second Quarter Credit Loan and Deposit Growth Core Earnings Strong Bank. Strong Service. Strong Future. 4

  5. Slide 5: Loan Portfolio & Credit Quality

    LOAN PORTFOLIO & CREDIT QUALITY Strong Bank. Strong Service. Strong Future. 5

  6. Slide 6: Proactively Addressing Credit Environment

    Proactively Addressing Credit Environment Structure ƒ Centralized underwriting and approval process ƒ Segregated work‐out teams ƒ Highly skilled ORE disposition group ƒ Seasoned regional credit professionals Process ƒ Continuous external loan review ƒ Intensive executive management involvement: o We

  7. Slide 7: Loan Portfolio (total $4.9 billion)

    Loan Portfolio (total $4.9 billion) Geographic Diversity $.8B Residential .1B $ in millions ConstructionInstallment Eastern 17% 3% $1.4B Tennessee Residential 5% $255 Mortgage Gainesville 28% MSA 7% $343 Coastal $2.6B Georgia Commercial 7% $356 52% Western North Carolina 15% $738 Atlanta MSA 29% $1,

  8. Slide 8: Commercial Loans (total $2.6 billion)

    Commercial Loans (total $2.6 billion) $.4B Geographic Diversity Comm Const $ in millions $.4B 13% Eastern C& I Tennessee 17% $1.0B 5% $140 Owner Gainesville Occupied MSA 38% 8% $202 $.8B Coastal Income Georgia Producing 8% $210 32% Western North Carolina 8% $215 North Georgia 32% $807 Atlanta MSA Av

  9. Slide 9: Commercial Real Estate (by loan type)

    Commercial Real Estate (by loan type) (in millions) June 30, 2010 % of Portfolio Characteristics Loan Type Amount Total Office Buildings $ 402 23% 54% owner-occupied Small Businesses 397 22 Typical owner-occupied: Single-Unit Retail/Strip Centers 221 12 small business, doctors, Small Warehouses/Stor

  10. Slide 10: Commercial Construction (by loan type)

    Commercial Construction (by loan type) Portfolio Characteristics (in millions) Jun 30, 2010 % of $710k Average loan size Loan Type Amount Total Land Development – Vacant (Improved) $ 129 38% Average LTVs (1) Raw Land – Vacant (Unimproved) 66 19 ƒ Land Dev-Improved: 63% Commercial Land Development 56

  11. Slide 11: Residential Mortgage (total $1.4 billion)

    Residential Mortgage (total $1.4 billion) Geographic Diversity $.4 B $ in millions Home Equity 27% Eastern Avg loan Tennessee size: $47k 6% $85 Gainesville MSA 7% $92 Coastal $1.0B Georgia Avg loan Mortgage 8% $103 size: $97k 73% Atlanta MSA 14% $190 Western North Carolina 26% $349 North Georgia 39%

  12. Slide 12: Residential Construction (total $.8 billion)

    Residential Construction (total $.8 billion) Geographic Diversity La $.1B nd $ in millions $.2B Raw Developing 13% Eastern 26% Tennessee 2% $19 Gainesville MSA $.1B 3% $25 Sold Developing 7% $.3B Coastal Lot Georgia 38% 5% $37 $.1B Western North Co Spec Carolina ns 16% tru 18% $148 c tio n Atlanta M

  13. Slide 13: Atlanta MSA (residential construction)

    Atlanta MSA (residential construction) (in millions) Variance 2Q10 1Q10 2Q09 1Q10 2Q09 Acquisition & Development Developing Land $ 52 $ 66 $ 124 $ (14) $ (72) Raw Land 32 43 63 (11) (31) Lot Loans 39 47 81 (8) (42) Total 123 156 268 (33) (145) Construction Loans Spec 50 58 127 (8) (77) Sold 10 14 29

  14. Slide 14: North Georgia MSA (residential construction)

    North Georgia MSA (residential construction) (in millions) Variance 2Q10 1Q10 2Q09 1Q10 2Q09 Acquisition & Development Developing Land $ 113 $ 148 $ 180 $ (35) $ (67) Raw Land 45 43 54 2 (9) Lot Loans 181 189 204 (8) (23) Total 339 380 438 (41) (99) Construction Loans Spec 44 54 81 (10) (37) Sold 24

  15. Slide 15: Credit Quality

    Credit Quality (in millions) 2Q10 1Q10 4Q 09 3Q 09 2Q 09 Net Charge-offs $ 61.3 $ 56.7 $ 84.6 $ 90.5 $ 58.3 as % of Average Loans 4.98% 4.51% 6.37% 6.57% 4.18% Allowance for Loan Losses $ 174.1 $ 173.9 $ 155.6 $ 150.2 $ 145.7 as % of Total Loans 3.57% 3.48% 3.02% 2.80% 2.64% as % of NPLs 78 62 59 49

  16. Slide 16: Net Charge-offs by Loan Category

    Net Charge‐offs by Loan Category (in thousands) 2Q10 % of Average Loans % of Avg NCOs Loans 1Q10 4Q09 3Q09 LTM(1) Commercial (sec. by RE) $ 9,757 2.21 % .45 % .86 % 2.33 % 1.46 % Commercial Construction 1,460 1.67 2.48 5.03 4.55 3.43 Commercial & Industrial 867 .85 4.31 .15 1.76 1.77 Total Commercia

  17. Slide 17: Net Charge-offs by Market

    Net Charge‐offs by Market (in thousands) 2Q10 % of Average Loans % of Avg (1) NCOs Loans 1Q10 4Q09 3Q09 LTM MARKETS Atlanta MSA $ 16,926 4.85 % 4.32 % 12.07 % 12.61 % 8.46 % Gainesville MSA 2,547 3.01 1.92 2.49 1.60 2.26 North Georgia 28,100 6.19 6.51 3.57 4.74 5.25 Western North Carolina 7,194 3.86

  18. Slide 18: NPAs by Loan Category and Market

    NPAs by Loan Category and Market (in thousands) 2Q10 2Q10 NPLs OREO Total NPAs NPLs OREO Total NPAs LOAN CATEGORY MARKETS Commercial (sec. by RE) $ 56,013 $ 13,297 $ 69,310 Atlanta MSA $ 74,031 $ 30,605 $ 104,636 Commercial Construction 17,872 11,339 29,211 Gainesville MSA 10,730 2,750 13,480 Commer

  19. Slide 19: Financial Results

    FINANCIAL RESULTS Strong Bank. Strong Service. Strong Future. 19

  20. Slide 20: Core Earnings

    Core Earnings In millions $35.0 $31.7 $29.9 $29.4 $30.0 $28.9 $26.7 $25.0 $21.5 $20.0 $16.5 $15.0 4Q 08 1Q 09 2Q 09 3Q 09 4Q 09 1Q 10 2Q 10 Strong Bank. Strong Service. Strong Future. 20

  21. Slide 21: NPA Sale in 2Q

    NPA Sale in 2Q Sold $103 Million NPA’s – With a $65 Million Capital Option and Warrant ƒ Completed sale on April 30, 2010 ƒ Accelerates disposition of the more illiquid assets CATEGORY (in millions) MARKETS (in millions) Commercial $ 29.4 Atlanta $ 10.7 Commercial Construction 11.3 Gainesville 13.5

  22. Slide 22: NPA Sale – Fair Value Accounting

    NPA Sale – Fair Value Accounting Fair Value Accounting – Warrant / Option to Purchase Equity ƒ Increase to Capital Surplus ‐ $39.8 million ƒ Pre‐tax expense charge ‐ $45.3 million; after‐tax cost ‐ $30.0 million ƒ GAAP Capital +$9.8million – Slight Negative to “Reg. Capital” (DTA) (in millions) Inco

  23. Slide 23: Core Earnings Summary

    Core Earnings Summary (In Thousands) Variance 2Q10 1Q10 2Q09 Net Interest Revenue $ 61,627 $ 348 $ 745 Core Fee Revenue 11,579 74 (437) Gross Revenue 73,206 422 308 Core Operating Expense (Excl OREO) 43,768 (139) (2,405) Pre-Tax, Pre-Credit (Core) $ 29,438 $ 561 $ 2,713 Net Interest Margin 3.60 % .1

  24. Slide 24: Net Interest Margin

    Net Interest Margin NIM Characteristics 5.0% 4.04% 4.15% 4.24% Margin improvement 3.97% 4.0% 3.80% 11 bps vs. 1Q10 32 bps vs. 2Q09 3.0% 3.60% 3.40% 3.49% Improved CD pricing 3.28% 3.39% 2.0% Maintained loan pricing 1.0% Excess liquidity – lowered margin .0% by 13 bps in 2Q 2Q09 3Q09 4Q09 1Q10 2Q10 N

  25. Slide 25: Deposit Mix (total $6.3 billion)

    Deposit Mix (total $6.3 billion) ($ in millions) 2Q10 1Q10 2Q09 Brokered Demand & NOW Demand / NOW $ 1,561 $ 1,489 $ 1,523 10% 25% MMDA / Savings 930 908 744 Public Funds Core Transaction 2,491 2,397 2,267 9% 10% Annualized Growth Time >$100k 16% Time < $100,000 1,569 1,636 1,985 MMDA & Sav. Public

  26. Slide 26: Net Operating Loss – From Continuing Operations

    Net Operating Loss – From Continuing Operations Second Quarter 2010 (In Thousands) 2Q10 1Q10 2Q09 Pre-Tax, Pre-Credit (Core) $ 29,438 $ 28,877 $ 26,725 Provision for Loan Loss (61,500) (75,000) (60,000) Loss on Sale of NPA's (45,349) - - Foreclosed Property Costs: Write-downs (11,192) (8,097) (2,618

  27. Slide 27: Net Loss

    Net Loss Second Quarter 2010 (In Thousands) 2Q10 1Q10 2Q09 Net Operating Loss $ (59,532) $ (34,458) $ (23,129) Earnings /(Loss) from Discounted Operations - (101) 66 Gain from Sale of Subsidiary, Net - 1,266 - Gain on SCB (pre-tax $11.4m) - - 7,062 Net Loss (59,532) (33,293) (16,001) Preferred Stock

  28. Slide 28: Capital Ratios

    Capital Ratios Well- Capitalized JUN '10 MAR '10 JUN '09 Tier 1 RBC 6% 11.1 % 11.7 % 10.4 % Total RBC 10% 13.8 14.4 13.1 Leverage 5% 7.7 8.1 7.7 Tangible Equity to Assets 9.3 9.4 8.0 Tangible Common to Assets 6.9 7.1 5.8 Strong Bank. Strong Service. Strong Future. 28

  29. Slide 29: Appendix

    APPENDIX Strong Bank. Strong Service. Strong Future. 29

  30. Slide 30: United at a Glance

    United at a Glance Assets $7.7 Billion Banks 27 Deposits $6.3 Billion Offices 106 Strong Bank. Strong Service. Strong Future. 30

  31. Slide 31: Experienced Proven Leadership

    Experienced Proven Leadership Joined Years in UCBI Banking Jimmy Tallent President & CEO 1984 37 Guy Freeman Chief Operating Officer 1994 50 Rex Schuette Chief Financial Officer 2001 33 David Shearrow Chief Risk Officer 2007 29 Glenn White President, Atlanta Region 2007 36 Craig Metz Marketing 2002

  32. Slide 32: Business and operating model

    Business and operating model “Community bank service, large bank resources” Twenty-seven “community banks” ƒ Local CEOs with deep roots in their communities ƒ Resources of $7.7 billion bank Service is point of differentiation ƒ Golden rule of banking 9 “The Bank That SERVICE Built” ƒ Ongoing custome

  33. Slide 33: 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

  34. Slide 34: Margin – Credit Costs

    Margin – Credit Costs Credit Costs Impacting Margin .70% .66% Historically 8 to 12 bps .64% .64% .60% .58% .20% Credit cycle – significant drag on .20% .19% .50% .52% .16% margin and earnings .40% .19% Lost interest (avg. yield) on loans charged off .26% .25% .30% .27% .27% Carry costs high with lev

  35. Slide 35: Market Share Opportunities

    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 $ 2.4 11 23 31 % 1 Atlanta MSA 55.2 1.9 10 38 4 7 Gainesville MSA 2.6 .3 1 6 13 4 Coastal Georgia 7.5 .4 2 9 5 8 Western North

  36. Slide 36: Leading Demographics

    Leading Demographics 2009 - 2014 Total Population (1) Rank Ticker Company State Assets ($ B) Growth (2) 1 WAL Western Alliance Bancorporation NV $ 6.1 11.25 % 2 WTNY Whitney Holding Corporation LA 11.6 9.75 3 UCBI United Community Banks, Inc. GA 7.7 9.65 4 CFR Cullen/Frost Bankers, Inc. TX 16.8 9.20

  37. Slide 37: Small Business Market Growth

    Small Business Market Growth Number of Businesses with 1 – 49 Employees Small Population Business Growth Growth 2000 - 2009 Markets 1 2000 2006 (%) (%) 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 C

  38. Slide 38: Performing Classified Loans

    Performing Classified Loans (in millions) 2Q10 1Q10 4Q09 3Q09 2Q09 LOANS BY CATEGORY Commercial (Sec. by RE) $ 141 $ 152 $ 124 $ 93 $ 70 Commercial Construction 78 75 51 51 36 Commercial & Industrial 22 35 34 35 12 TOTAL COMMERCIAL $ 241 $ 262 $ 209 $ 179 $ 118 Consumer / Installment 4 4 4 3 3 Resid

  39. Slide 39: Business Mix Loans (at quarter-end)

    Business Mix Loans (at quarter‐end) 2Q10 Year Over (in millions) 2Q10 1Q10 4Q09 3Q09 2Q09 Year LOANS BY CATEGORY Commercial (sec. by R/E) $ 1,780 $ 1,765 $ 1,779 $ 1,787 $ 1,797 $ (17) Commercial Construction 342 357 363 380 379 (37) Commercial & Industrial 441 381 390 403 399 42 Total Commercial 2,

  40. Slide 40: Business Mix Loans (at year-end)

    Business Mix Loans (at year‐end) (in millions) 2009 2008 2007 2006 2005 LOANS BY CATEGORY Commercial (sec. by R/E) $ 1,779 $ 1,627 $ 1,476 $ 1,230 $ 1,055 Commercial Construction 363 500 527 469 359 Commercial & Industrial 390 410 418 296 237 Total Commercial 2,532 2,537 2,421 1,995 1,651 Residentia

  41. Slide 41: Residential Construction – Total Company

    Residential Construction – Total Company (in millions) 2Q10 1Q10 4Q09 3Q09 2Q09 Land Loans Developing Land $ 214 $ 290 $ 332 $ 380 $ 413 Raw Land 110 124 127 159 159 Lot Loans 311 321 336 336 369 Total 635 735 795 875 941 Construction Loans Spec 125 153 178 218 268 Sold 60 72 77 92 106 Total 185 225

  42. Slide 42: Residential Construction – Atlanta MSA

    Residential Construction – Atlanta MSA (in millions) 2Q10 1Q10 4Q09 3Q09 2Q09 Land Loans Developing Land $ 52 $ 66 $ 76 $ 100 $ 124 Raw Land 32 43 43 61 63 Lot Loans 39 47 52 54 81 Total 123 156 171 215 268 Construction Loans Spec 50 58 68 91 127 Sold 10 14 16 22 29 Total 60 72 84 113 156 Total Res

  43. Slide 43: Residential Construction – North Georgia

    Residential Construction – North Georgia (in millions) 2Q10 1Q10 4Q09 3Q09 2Q09 Land Loans Developing Land $ 113 $ 148 $ 172 $ 179 $ 180 Raw Land 45 43 45 56 54 Lot Loans 181 189 197 198 204 Total 339 380 414 433 438 Construction Loans Spec 44 54 61 71 81 Sold 24 26 27 30 36 Total 68 80 88 101 117 T

  44. Slide 44: Loans – Markets Served (at quarter-end)

    Loans – Markets Served (at quarter‐end) (in millions) 2Q10 1Q10 4Q09 3Q09 2Q09 LOANS BY MARKET Atlanta MSA $ 1,373 $ 1,404 $ 1,435 $ 1,526 $ 1,605 Gainesville MSA 343 372 390 402 413 North Georgia 1,808 1,814 1,884 1,942 1,978 Western North Carolina 738 756 772 786 794 Coastal Georgia 356 388 405 44

  45. Slide 45: Loans – Markets Served (at year-end)

    Loans – Markets Served (at year‐end) (in millions) 2009 2008 2007 2006 2005 LOANS BY MARKET Atlanta MSA $ 1,435 $ 1,706 $ 2,002 $ 1,651 $ 1,207 Gainesville MSA 390 420 400 354 249 North Georgia 1,884 2,040 2,060 2,034 1,790 Western North Carolina 772 810 806 773 668 Coastal Georgia 405 464 415 358 3

  46. Slide 46: Lending – Credit Summary (as of June 30, 2010)

    Lending – Credit Summary (as of June 30, 2010) (in millions) Legal lending limit $196 House lending limit 20 Top 25 relationships 425 ƒ 8.7% of total loans Regional credit review ƒ Standard Underwriting Strong Bank. Strong Service. Strong Future. 46

  47. Slide 47: NPAs by Loan Category, Market, and Activity

    NPAs by Loan Category, Market, and Activity UNITED COMMUNITY BANKS, INC. Financial Highlights Credit Quality (1) Second Quarter 2010 First Quarter 2010 Fourth Quarter 2009 Non-performing Foreclosed Total Non-performing Foreclosed Total Non-performing Foreclosed Total (in thousands) Loans Properties

  48. Slide 48: Net Charge-offs by Category and Market

    Net Charge‐offs by Category and Market Second Quarter 2010 First Quarter 2010 Fourth Quarter 2009 Net Charge- Net Charge- Net Charge- Offs to Offs to Offs to Net Average Net Average Net Average (in thousands) Charge-Offs Loans (2) Charge-Offs Loans (2) Charge-Offs Loans (2) NET CHARGE-OFFS BY CATEGO

  49. Slide 49: Liquidity – Loans / Deposits

    Liquidity – Loans / Deposits (in millions) Variance 2Q 10 1Q 09 2Q 09 vs 1Q 10 vs 2Q 09 Loans $ 4,873 $ 4,992 $ 5,513 $ (119) $ (640) Core (DDA, MMDA, Savings) 2,491 2,397 2,267 94 224 Public Funds 630 685 541 (55) 89 CD's 2,597 2,695 3278 (98) (681) Total Deposits (excl Brokered) $ 5,718 $ 5,777 $

  50. Slide 50: Liquidity – Wholesale Borrowings

    Liquidity – Wholesale Borrowings Unused Variance (in millions) Capacity 2Q10 1Q10 2Q09 vs 1Q 10 vs 2Q 09 Brokered Deposits $ 1,301 $ 612 $ 711 $ 763 $ (99) $ (151) FHLB 867 104 114 283 (10) (179) Fed Funds 100 - - - - - Other Wholesale 290 104 102 252 2 (148) Total $ 2,558 $ 820 $ 927 $ 1,298 $ (107

  51. Slide 51: Business Mix – Deposits (at quarter-end)

    Business Mix – Deposits (at quarter‐end) (in millions) DEPOSITS BY CATEGORY 2Q10 1Q10 4Q09 3Q09 2Q09 Demand & Now $ 1,561 $ 1,489 $ 1,465 $ 1,481 $ 1,523 MMDA & Savings 930 908 879 858 744 Core Transaction Deposits 2,491 2,397 2,344 2,339 2,267 Time < $100,000 1,569 1,636 1,740 1,848 1,985 Public De

  52. Slide 52: Core Transaction Deposits

    Core Transaction Deposits Geographic Diversity Core Transactions / Total Deposits (%) 2Q 09 2Q 10 2Q10 2Q09 $ in millions Atlanta MSA 48.0 % 38.5 % Eastern Tennessee $118 North Georgia 28.3 24.7 $124 Coastal Georgia Western NC 46.2 40.9 $130 $144 Gainesville MSA 49.0 39.8 Gainesville MSA $131 Coasta

  53. Slide 53: Analyst Coverage

    Analyst Coverage FBR Capital Sandler O'Neill & Partners (Market Perform ‐ Apr 22, 2010) (Hold ‐ Jun 28, 2010) FIG Partners Soleil (Tenner Investment Research) (Outperform ‐ Apr 26, 2010) (Hold ‐ Apr 26, 2010) Guggenheim Securities, LLC Stephens, Inc. (Neutral ‐ Jun 10, 2010) (Equal Weight ‐ May 10,

  54. Slide 54: Southern Community Bank

    Southern Community Bank ($ in millions) Purchased – June 19, 2009 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 (Reduced by 17 after conversion in September 2009) $208 i

  55. Slide 55: Non-GAAP Reconciliation Tables

    Non‐GAAP Reconciliation Tables (in thousands except EPS) Operating Earnings to GAAP Earnings Reconciliation 2Q 10 1Q 10 2Q09 Core fee revenue reconciliation (1) Core fee revenue $ 11,579 $ 11,605 $ 12,016 Securities gains (losses), net - 61 (711) SCB Acquisition Gain - - 11,390 Fee Revenue (GAAP) $

  56. Slide 56: Non-GAAP Reconciliation Tables

    Non‐GAAP Reconciliation Tables Operating Earnings to GAAP Earnings Reconciliation 2Q 10 1Q 10 2Q 09 Net interest margin - pre credit reconciliation Net interest margin - pre credit 4.24 % 4.15 % 3.80 % Effect of interest reversals, lost interest, and carry costs of NPAs (.64) (.66) (.52) Net interes

  57. Slide 57: United Community Banks, Inc.

    United Community Banks, Inc. Investor Presentation Second Quarter 2010 Copyright 2010 United Community Banks, Inc. All rights reserved.

United Community Banks — Q2 2010 Earnings Presentation on 6ix