United Community Banks, Inc. · NYSE:UCB
United Community Banks — Q3 2010 Earnings Presentation
57 slides from United Community Banks's earnings presentation, Oct 28, 2010
Slide 1: United Community Banks, Inc. Investor Presentation Third Quarter 2010
United Community Banks, Inc. Investor Presentation Third 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
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: Highlights Third Quarter
Highlights Third Quarter Credit Loan and Deposit Growth Core Earnings Capital Strong Bank. Strong Service. Strong Future. 4
Slide 5: Loan Portfolio & Credit Quality
LOAN PORTFOLIO & CREDIT QUALITY Strong Bank. Strong Service. Strong Future. 5
Slide 6: 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: o We
Slide 7: Loan Portfolio (total $4.76 billion)
Loan Portfolio (total $4.76 billion) Geographic Diversity $.76B .13B Residential $ in millions Construction Installment 16% 3% Eastern $1.32B Tennessee Residential 5% $260 Mortgage 28% Gainesville MSA 7% $316 Coastal $2.55B Georgia Commercial 7% $345 53% Western North Carolina 15% $719 Atlanta MSA 2
Slide 8: Commercial Loans (total $2.55 billion)
Commercial Loans (total $2.55 billion) $.31B Geographic Diversity Comm Const $ in millions $.46B 12% Eastern C& I Tennessee 18% $.99B 6% $148 Owner Gainesville Occupied MSA 39% 8% $195 $.79B Coastal Income Georgia Producing 8% $213 31% Western North Carolina 8% $209 North Georgia 31% $799 Atlanta MS
Slide 9: Commercial Real Estate (by loan type)
Commercial Real Estate (by loan type) (in millions) September 30, 2010 Portfolio Characteristics Loan Type Amount Percent Office Buildings $ 397 22% 56% owner-occupied Other Small Business 305 17 Retail 261 15 Typical owner-occupied: Small Warehouses/Storage 174 10 small business, doctors, Churches
Slide 10: Commercial Construction (by loan type)
Commercial Construction (by loan type) (in millions) Sep 30, 2010 Portfolio Characteristics Loan Type Amount Percent Land Development – Vacant (Improved) $ 114 37% $650k Average loan size Raw Land – Vacant (Unimproved) 67 22 Commercial Land Development 57 18 Office Buildings 34 11 Miscellaneous Cons
Slide 11: Residential Mortgage (total $1.32 billion)
Residential Mortgage (total $1.32 billion) Geographic Diversity $.34B $ in millions Home Equity 26% Eastern Avg loan Tennessee size: $45k 6% $84 Gainesville MSA 7% $87 Coastal $.98B Georgia Mortgage Avg loan 7% $90 size: $96k 74% Atlanta MSA 14% $185 Western North Carolina 26% $336 North Georgia 40%
Slide 12: Residential Construction (total $.76 billion)
Residential Construction (total $.76 billion) Geographic Diversity La $.10B nd $ in millions $.19B Raw Developing 14% Eastern 25% Tennessee 2% $18 Gainesville MSA $.06B $.30B Developing 5% $35 Sold Lot Coastal 8% 40% Georgia 5% $35 $.11B Western North Co Spec Carolina ns 14% tru 19% $149 c tio n Atl
Slide 13: Atlanta MSA (residential construction)
Atlanta MSA (residential construction) (in millions) Variance 3Q10 2Q10 3Q09 2Q10 3Q09 Acquisition & Development Developing Land $ 34 $ 40 $ 100 $ (6) $ (66) Raw Land 27 32 61 (5) (34) Lot Loans 45 39 54 6 (9) Total 106 111 215 (5) (109) Construction Loans Spec 42 48 91 (6) (49) Sold 11 10 22 1 (11)
Slide 14: North Georgia MSA (residential construction)
North Georgia MSA (residential construction) (in millions) Variance 3Q10 2Q10 3Q09 2Q10 3Q09 Acquisition & Development Developing Land $ 98 $ 113 $ 180 $ (15) $ (82) Raw Land 43 45 56 (2) (13) Lot Loans 168 181 198 (13) (30) Total 309 339 434 (30) (125) Construction Loans Spec 38 44 71 (6) (33) Sold
Slide 15: Credit Quality
Credit Quality (in millions) 3Q10 2Q10 1Q10 4Q 09 3Q 09 2Q 09 Net Charge-offs $ 50.0 $ 61.3 $ 56.7 $ 84.6 $ 90.5 $ 58.3 as % of Average Loans 4.12% 4.98% 4.51% 6.37% 6.57% 4.18% Allowance for Loan Losses $ 174.6 $ 174.1 $ 173.9 $ 155.6 $ 150.2 $ 145.7 as % of Total Loans 3.67% 3.57% 3.48% 3.02% 2.80
Slide 16: Net Charge-offs by Loan Category
Net Charge‐offs by Loan Category (in thousands) 3Q10 % of Average Loans (Annualized) % of Avg NCOs Loans 2Q10 1Q10 4Q09 LTM(1) Commercial (sec. by RE) $ 14,212 3.16 % 2.21 % .45 % .86 % 1.67 % Commercial Construction 1,972 2.40 1.67 2.48 5.03 2.90 Commercial & Industrial 1,207 1.07 .85 4.31 .15 1.60
Slide 17: Net Charge-offs by Market
Net Charge‐offs by Market (in thousands) 3Q10 % of Average Loans (Annualized) % of Avg (1) NCOs Loans 2Q10 1Q10 4Q09 LTM MARKETS Atlanta MSA $ 13,753 3.97 % 4.85 % 4.32 % 12.07 % 6.30 % Gainesville MSA 1,143 1.40 3.01 1.92 2.49 2.21 North Georgia 26,554 5.92 6.19 6.51 3.57 5.55 Western North Carolin
Slide 18: NPAs by Loan Category and Market
NPAs by Loan Category and Market (in thousands) 3Q10 3Q10 NPLs OREO Total NPAs NPLs OREO Total NPAs LOAN CATEGORY MARKETS Commercial (sec. by RE) $ 53,646 $ 14,838 $ 68,484 Atlanta MSA $ 65,304 $ 32,785 $ 98,089 Commercial Construction 17,279 15,125 32,404 Gainesville MSA 11,905 5,685 17,590 Commerc
Slide 19: Financial Results
FINANCIAL RESULTS Strong Bank. Strong Service. Strong Future. 19
Slide 20: Core Earnings
Core Earnings In millions $35.0 $31.7 $29.9 $29.4 $30.0 $28.9 $27.5 $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 3Q 10 Strong Bank. Strong Service. Strong Future. 20
Slide 21: Core Earnings Summary
Core Earnings Summary (In Thousands) Variance 3Q10 2Q10 3Q09 Net Interest Revenue $ 60,014 $ (1,613) $ (2,990) Core Fee Revenue 12,603 1,024 363 Gross Revenue 72,617 (589) (2,627) Core Operating Expense (Excl OREO) 45,154 1,386 1,646 Pre-Tax, Pre-Credit (Core) $ 27,463 $ (1,975) $ (4,273) Net Intere
Slide 22: Net Interest Margin
Net Interest Margin Net Interest Margin NIM Characteristics 5.0% Margin changes 4.15% 4.24% 4.13% ‐3 bps vs. 2Q10 3.97% 4.04% 4.0% +18 bps vs. 3Q09 3.0% Maintained loan & CD pricing 3.60% 3.57% 3.39% 3.40% 3.49% 2.0% 3Q Excess liquidity – lowered Margin by 19 bps 1.0% Impact of credit costs – 56 bps
Slide 23: Margin – Credit Costs
Margin – Credit Costs Credit Costs .70% Impacting Margin .66% .64% .64% .60% .58% .20% .56% Historically 8 to 12 bps .20% .19% .50% .16% .14% Credit cycle – significant drag on .40% margin but improving .26% .25% .30% .27% .22% Cost 3Q10 vs. Historical – 44 bps .27% (annual earnings impact of $29 .2
Slide 24: Deposit Mix (total $6.0 billion)
Deposit Mix (total $6.0 billion) ($ in millions) 3Q10 2Q10 3Q09 Brokered Demand & NOW Demand / NOW $ 1,582 $ 1,561 $ 1,481 Public Funds 6% 27% MMDA / Savings 977 930 859 10% Core Transaction 2,559 2,491 2,340 Time >$100k 11% Annualized Growth 16% Time < $100,000 1,492 1,569 1,848 Public Deposits 561
Slide 25: Net Operating Loss – From Continuing Operations
Net Operating Loss – From Continuing Operations Third Quarter 2010 (In Thousands) 3Q10 2Q10 3Q09 Pre-Tax, Pre-Credit (Core) $ 27,463 $ 29,438 $ 31,736 Provision for Loan Loss (50,500) (61,500) (95,000) Loss on Sale of NPA's - (45,349) - Foreclosed Property Costs: Write-downs (14,187) (11,192) (4,107
Slide 26: Net Loss
Net Loss Third Quarter 2010 (In Thousands) 3Q10 2Q10 3Q09 Net Operating Loss $ (25,825) $ (59,532) $ (43,781) Earnings /(Loss) from Discounted Operations - - 63 Goodwill Impairment Charge (210,590) - (25,000) Net Loss (236,415) (59,532) (68,718) Preferred Stock Dividend (TARP) $ 2,581 $ 2,577 $ 2,56
Slide 27: Capital Ratios
Capital Ratios Well- Capitalized 3Q10 2Q10 3Q09 Bank Leverage 5% 7.9% 8.3% 9.8% Tier 1 RBC 6 11.4 11.9 13.3 Total RBC 10 13.2 13.8 15.1 Holding Company Leverage 5% 7.3% 7.7% 9.5% Tier 1 RBC 6 10.4 11.1 13.2 Total RBC 10 13.0 13.8 15.8 Tangible Common Equity to: Assets 6.8% 6.9% 5.4% Risk Weighted As
Slide 28: Appendix
APPENDIX Strong Bank. Strong Service. Strong Future. 28
Slide 29: United at a Glance
United at a Glance Assets $7.0 Billion Banks 27 Deposits $6.0 Billion Offices 106 Strong Bank. Strong Service. Strong Future. 29
Slide 30: Experienced Proven Leadership
Experienced Proven Leadership Joined Years in UCBI Banking Jimmy Tallent President & CEO 1984 36 Guy Freeman Chief Operating Officer 1992 52 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
Slide 31: 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 $7.0 billion bank Service is point of differentiation Golden rule of banking 9 “The Bank That SERVICE Built” Ongoing custome
Slide 32: Robust Demographics (fast growing markets)
Robust Demographics (fast growing markets) Population Growth (%) Population Actual Projected Markets1 (in thousands) 2000 - 2010 2010 - 2015 North Georgia 394 23% 7% Atlanta MSA 5,611 32 10 Gainesville MSA 191 37 13 Coastal Georgia 373 11 5 Western North Carolina 429 12 4 East Tennessee 860 14 6 Tot
Slide 33: Market Share Opportunities
Market Share Opportunities (excellent growth prospects) Market Deposits United Deposit Markets (in billions) (1) Deposits (2) Banks Offices Share (1) Rank(1) North Georgia $ 7.7 $ 2.1 11 23 31 % 1 Atlanta MSA 50.0 1.9 10 38 4 7 Gainesville MSA 2.5 .3 1 6 13 3 Coastal Georgia 7.3 .4 2 9 5 8 Western N
Slide 34: Leading Demographics
Leading Demographics 2010 - 2015 Total Population (1) Rank Ticker Company State Assets ($ B) Growth (2) 1 CFR Cullen/Frost Bankers, Inc. TX $ 17.1 9.10 % 2 SBIB Sterling Bancshares, Inc. TX 5.1 8.30 3 WTNY Whitney Holding Corporation LA 11.4 8.20 4 WAL Western Alliance Bancorporation NV 6.0 7.75 5 P
Slide 35: Small Business Market Growth
Small Business Market Growth Number of Businesses with 1 – 49 Employees Small Population Business Growth Growth 2000 - 2010 Markets 1 2000 2006 (%) (%) North Georgia 6,453 7,693 19 23 Atlanta MSA 70,893 126,200 78 32 Gainesville MSA 3,158 3,824 21 37 Coastal Georgia 9,441 10,210 8 11 Western North C
Slide 36: Performing Classified Loans
Performing Classified Loans (in millions) 3Q10 2Q10 1Q10 4Q09 3Q09 LOANS BY CATEGORY Commercial (Sec. by RE) $ 158 $ 141 $ 152 $ 124 $ 93 Commercial Construction 103 78 75 51 51 Commercial & Industrial 22 22 35 34 35 TOTAL COMMERCIAL $ 283 $ 241 $ 262 $ 209 $ 179 Consumer / Installment 3 4 4 4 3 Res
Slide 37: Business Mix Loans (at quarter-end)
Business Mix Loans (at quarter‐end) 3Q10 (in millions) 3Q10 2Q10 1Q10 4Q09 3Q09 vs. 3Q09 LOANS BY CATEGORY Commercial (sec. by R/E) $ 1,781 $ 1,780 $ 1,765 $ 1,779 $ 1,787 $ (6) Commercial Construction 310 342 357 363 380 (70) Commercial & Industrial 456 441 381 390 403 53 Total Commercial 2,547 2,5
Slide 38: Loans – Markets Served (at quarter-end)
Loans – Markets Served (at quarter‐end) (in millions) 3Q10 2Q10 1Q10 4Q09 3Q09 LOANS BY MARKET Atlanta MSA $ 1,365 $ 1,373 $ 1,404 $ 1,435 $ 1,526 Gainesville MSA 316 343 372 390 402 North Georgia 1,755 1,808 1,814 1,884 1,942 Western North Carolina 719 738 756 772 786 Coastal Georgia 345 356 388 40
Slide 39: Residential Construction – Total Company
Residential Construction – Total Company (in millions) 3Q10 2Q10 1Q10 4Q09 3Q09 Land Loans Developing Land $ 190 $ 214 $ 290 $ 332 $ 380 Raw Land 104 110 124 127 159 Lot Loans 303 311 321 336 336 Total 597 635 735 795 875 Construction Loans Spec 109 125 153 178 218 Sold 58 60 72 77 92 Total 167 185
Slide 40: Residential Construction – Atlanta MSA
Residential Construction – Atlanta MSA (in millions) 3Q10 2Q10 1Q10 4Q09 3Q09 Land Loans Developing Land $ 34 $ 40 $ 66 $ 76 $ 100 Raw Land 27 32 43 43 61 Lot Loans 45 39 47 52 54 Total 106 111 156 171 215 Construction Loans Spec 42 48 58 68 91 Sold 11 10 14 16 22 Total 53 58 72 84 113 Total Res Con
Slide 41: Residential Construction – North Georgia
Residential Construction – North Georgia (in millions) 3Q10 2Q10 1Q10 4Q09 3Q09 Land Loans Developing Land $ 98 $ 113 $ 148 $ 172 $ 179 Raw Land 42 45 43 45 56 Lot Loans 168 182 189 197 198 Total 308 340 380 414 433 Construction Loans Spec 38 44 54 61 71 Sold 22 24 26 27 30 Total 60 68 80 88 101 Tot
Slide 42: 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
Slide 43: 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
Slide 44: Lending – Credit Summary
Lending – Credit Summary (as of September 30, 2010) (in millions) Legal lending limit $188 House lending limit 20 Project lending limit 12 Top 25 relationships 447 9.4% of total loans Regional credit review – Standard underwriting Strong Bank. Strong Service. Strong Future. 44
Slide 45: NPAs by Loan Category, Market, and Activity
NPAs by Loan Category, Market, and Activity UNITED COMMUNITY BANKS, INC. Financial Highlights Credit Quality (1) Third Quarter 2010 Second Quarter 2010 First Quarter 2010 Non-performing Foreclosed Total Non-performing Foreclosed Total Non-performing Foreclosed Total (in thousands) Loans Properties N
Slide 46: Net Charge-offs by Category and Market
Net Charge‐offs by Category and Market UNITED COMMUNITY BANKS, INC. Financial Highlights Credit Quality (1) Third Quarter 2010 Second Quarter 2010 First Quarter 2010 Net Charge- Net Charge- Net Charge- Offs to Offs to Offs to Net Average Net Average Net Average (in thousands) Charge-Offs Loans (2) C
Slide 47: Loans / Deposits – Liquidity
Loans / Deposits – Liquidity (in millions) Variance 3Q 10 2Q 10 3Q 09 vs 2Q 10 vs 3Q 09 Loans $ 4,760 $ 4,873 $ 5,363 $ (113) $ (603) Core (DDA, MMDA, Savings) $ 2,559 $ 2,491 $ 2,340 $ 68 $ 219 Public Funds 623 630 607 (7) 16 CD's 2,463 2,597 3035 (134) (572) Total Deposits (excl Brokered) $ 5,645
Slide 48: Wholesale Borrowings - Liquidity
Wholesale Borrowings ‐ Liquidity (in millions) Unused Variance Capacity 3Q10 2Q10 3Q09 vs 2Q 10 vs 3Q 09 Wholesale Borrowings Brokered Deposits $ 1,399 $ 354 $ 612 $ 839 $ (258) $ (485) FHLB 631 55 104 315 (49) (260) Fed Funds 30 - - - - - Other Wholesale 180 104 104 102 - 2 Total $ 2,240 $ 513 $ 82
Slide 49: Business Mix – Deposits (at quarter-end)
Business Mix – Deposits (at quarter‐end) (in millions) DEPOSITS BY CATEGORY 3Q10 2Q10 1Q10 4Q09 3Q09 Demand & Now $ 1,582 $ 1,561 $ 1,489 $ 1,465 $ 1,481 MMDA & Savings 977 930 908 879 858 Core Transaction Deposits 2,559 2,491 2,397 2,344 2,339 Time < $100,000 1,492 1,569 1,636 1,740 1,848 Public De
Slide 50: Core Transaction Deposits
Core Transaction Deposits Geographic Diversity Core Transactions / Total Deposits (%) 3Q 09 3Q 10 3Q10 3Q09 $ in millions Atlanta MSA 49.4 % 40.2 % Eastern Tennessee $117 North Georgia 32.6 24.4 $131 Coastal Georgia Western NC 49.9 43.3 $136 $147 Gainesville MSA 48.8 43.3 Gainesville MSA $142 Coasta
Slide 51: NPA Sale in 2Q
NPA Sale in 2Q Sold $103 Million NPA’s – With a $65 Million Capital Option and Warrant Completed sale on April 30, 2010 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
Slide 52: NPA Sale – Fair Value Accounting
NPA Sale – Fair Value Accounting Fair Value Accounting – Warrant / Option to Purchase Equity Increase to Capital Surplus ‐ $39.8 million Pre‐tax expense charge ‐ $45.3 million; after‐tax cost ‐ $30.0 million GAAP Capital +$9.8million – Slight Negative to “Regulatory Capital” (DTA) (in millions
Slide 53: Southern Community Bank
Southern Community Bank ($ 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
Slide 54: Non-GAAP Reconciliation Tables
Non‐GAAP Reconciliation Tables (in thousands except EPS) Operating Earnings to GAAP Earnings Reconciliation 3Q 10 2Q 10 3Q09 Core fee revenue reconciliation (1) Core fee revenue $ 12,861 $ 11,579 $ 13,389 Securities gains (losses), net - - - SCB Acquisition Gain - - - Fee Revenue (GAAP) $ 12,861 $ 1
Slide 55: Non-GAAP Reconciliation Tables
Non‐GAAP Reconciliation Tables Operating Earnings to GAAP Earnings Reconciliation 2Q 10 2Q 10 3Q 09 Net interest margin - pre credit reconciliation Net interest margin - pre credit 4.13 % 4.25 % 3.97 % Effect of interest reversals, lost interest, and carry costs of NPAs (.56) (.64) (.58) Net interes
Slide 56: Analyst Coverage
Analyst Coverage FBR Capital Sandler O'Neill & Partners (Market Perform ‐ Aug 19, 2010) (Hold ‐ Sep 29, 2010) FIG Partners Soleil (Tenner Investment Research) (Outperform ‐ Jul 28, 2010) (Hold ‐ Jul 26, 2010) Guggenheim Securities, LLC Stephens, Inc. (Neutral ‐ Sep 10, 2010) (Equal Weight ‐ Jul 28,
Slide 57: United Community Banks, Inc.
United Community Banks, Inc. Investor Presentation Third Quarter 2010 Copyright 2010 United Community Banks, Inc. All rights reserved.
United Community Banks — Q3 2010 Earnings Presentation on 6ix