United Community Banks, Inc. announces Fourth Quarter Earnings

Diluted earnings per share up 52 percent, to 38 cents, from fourth quarter 2015 excluding merger-related and other non-operating charges, diluted operating EPS up 21 percent, to 40 cents

• Return on assets of 1.03 percent, or 1.10 percent excluding merger-related and other charges
• Loan growth of $196 million from the third quarter, or 12 percent annualized
• Core transaction deposits up $62.4 million from the third quarter, or 4 percent annualized
• Efficiency ratio of 57.7 percent, or 56.6 percent excluding merger-related and other charges

 

United Community Banks, Inc. (“United”) announced strong fourth quarter results with solid loan growth, effective expense management, sound credit quality and improvement in nearly every other performance measure.  Net income grew to $27.2 million, or 38 cents per diluted share, compared with $18.2 million, or 25 cents per diluted share, for the fourth quarter of 2015.  Net income for the full year of 2016 was $100.7 million, or $1.40 per diluted share.  This compares with $71.6 million, or $1.09 per diluted share, for 2015.

On an operating basis, net income rose to $28.9 million for the fourth quarter of 2016 compared with $23.8 million for the fourth quarter of 2015.  Fourth quarter 2016 operating net income excludes pre-tax merger-related charges of $1.14 million and the associated tax benefit of $432,000, as well as a tax charge of $976,000 related to the cancellation of nonqualified stock options.

Fourth quarter 2015 operating net income excludes $3.11 million in pre-tax merger-related charges and $5.97 million in pre-tax charges for impairment on properties acquired for future expansion.  The tax benefit on the fourth quarter 2015 charges was $3.49 million.  On a per diluted share basis, operating net income was 40 cents for the fourth quarter of 2016 compared with 33 cents for the fourth quarter of 2015.  For the full year of 2016, operating net income was $106.7 million, or $1.48 per diluted share, compared with $83.1 million, or $1.27 per diluted share, for 2015.

At December 31, 2016, preliminary regulatory capital ratios were as follows: Tier 1 Risk-Based of 11.3 percent; Total Risk-Based of 12.1 percent; Common Equity Tier 1 Risk-Based of 11.3 percent; and, Tier 1 Leverage of 8.5 percent.

“Our fourth quarter results mark a solid ending to an exceptional year for United Community Banks,” said Jimmy Tallent, chairman and chief executive officer.  “Our bankers continue to make progress in improving our financial performance.  A year ago we set a goal of achieving a 1.10 percent operating return on assets by the fourth quarter of 2016.  We knew that achieving this goal would not be easy, but we also knew our determined bankers and how they react to a challenge.  I am proud to say that in the fourth quarter, not only did they achieve that goal, but they also pushed our operating return on tangible common equity to 12.5 percent and improved our operating efficiency ratio to 56.6 percent.  I could not be more pleased.”  Operating performance measures exclude the charges mentioned above.  Including those charges, return on assets was 1.03 percent, return on common equity was 9.89 percent and the efficiency ratio was 57.7 percent.

“In the fourth quarter we completed all systems conversions for Tidelands Bank, and we have achieved all expected cost savings from that acquisition,” Tallent said.  “We are proud that Tidelands is now fully integrated with United Community Bank, operating under our brand in coastal South Carolina.

“Fourth quarter loan production was $747 million,” Tallent added.  “Linked-quarter loan growth of $196 million, or 12 percent annualized, was slightly above our 2016 loan growth target of mid-to-upper single-digit.  Our community banks originated $490 million in loans while specialized lending produced $216 million.  United’s specialized lending area encompasses commercial real estate, middle market, SBA, asset-based lending, senior living and builder finance.”

Fourth quarter net interest revenue totaled $80.9 million, up $1.9 million from the third quarter and up $7.2 million from the fourth quarter of 2015.  The increase from both periods reflects loan growth, and the increase from a year ago also includes net interest revenue from recent acquisitions.

The taxable-equivalent net interest margin of 3.34 percent remained the same as in the third quarter of 2016 and the fourth quarter of 2015.  The effect of rising short-term interest rates and lower wholesale borrowings offset the impact of competitive loan pricing.

No provision for credit losses was required for the fourth quarter.  This compares with a provision recovery of $300,000 in the third quarter, and a provision of $300,000 in the fourth quarter of 2015.  Fourth quarter net charge-offs totaled $1.5 million, compared with $1.4 million in the third quarter and $1.3 million in the fourth quarter of 2015. Contributing to the low level of net charge-offs were continued strong recoveries of previously charged-off loans. Nonperforming assets were .28 percent of total assets at December 31, 2016, compared with .30 percent at September 30, 2016 and .29 percent at December 31, 2015.

“Our lack of need for a provision for loan losses reflects continued strong credit quality and a low overall level of net charge-offs,” Tallent commented.  “Our credit quality indicators remain favorable and our outlook is for positive credit quality and low provision levels through 2017.  We expect to gradually increase provision levels with loan growth during the year, which is expected to slightly decrease our allowance and the related ratio to total loans.”

Fourth quarter fee revenue totaled $25.2 million, a decrease of $1.13 million from the third quarter and up $3.95 million from a year ago.  Mortgage fees were up $477,000 from the third quarter, and $3.23 million from a year ago.  Gains from sales of SBA loans were up $549,000 from the third quarter, and up $1.03 million from a year ago due to continued growth in SBA lending.  Offsetting the mortgage and SBA business growth from the third quarter of 2016 were decreases in merchant services and brokerage fees, and in deposit account fees and service charges.  Customer derivative fees were also down from the record level achieved in the third quarter.

“The rise in mortgage fees reflects our strategic investment in additional mortgage lenders where we see opportunities to gain market share and higher spreads on loan sales,” Tallent said.  “Also, our SBA lending business remains a top priority.  In the fourth quarter we sold $41 million in loans compared with $32 million in the third quarter and $25 million in the fourth quarter of 2015.”

Operating expenses were $61.3 million for the fourth quarter, compared with $64.0 million for the third quarter and $65.5 million for the fourth quarter of 2015.  Included in operating expenses are merger-related and impairment charges of $1.14 million in the fourth quarter, $3.15 million in the third quarter and $9.08 million in the fourth quarter of 2015.  Excluding these charges, fourth quarter operating expenses were $60.2 million compared with $60.9 million for the third quarter, and $56.4 million a year ago.

The decrease in operating expenses from the third quarter is mostly in salaries and employee benefits costs and a decrease in professional fees.  The increase from a year ago reflects the additional operating expenses of Tidelands Bank following its acquisition on July 1, 2016.  United’s financial results include operating expenses of acquired companies beginning on their respective acquisition dates.  The benefit of higher revenue and the lower level of fourth quarter expenses compared to the third quarter also improved the operating efficiency ratio to 56.6 percent, compared to 57.8 percent in the third quarter and 59.4 percent a year ago.

Tallent concluded, “I am very proud of our bankers and the exceptional results they achieved in 2016.  They steadily improved financial performance while providing the best in customer service, which is the foundation of our success and the core of everything we do. With our strong earnings momentum, a high-quality balance sheet and strategic investments in our franchise, I look forward with optimism going into 2017.”

 

About United Community Banks, Inc.

United Community Banks, Inc. (NASDAQ:UCBI) is a registered bank holding company based in Blairsville, Georgia with $10.7 billion in assets.  The company’s banking subsidiary, United Community Bank, is one of the southeast region’s largest full-service banks, operating 139 offices in Georgia, North Carolina, South Carolina and Tennessee.  The bank specializes in providing personalized community banking services to individuals, small businesses and corporations.  Services include a full range of consumer and commercial banking products including mortgage, advisory, and treasury management.  Respected national research firms consistently recognize United Community Bank for outstanding customer service: In 2014, 2015 and 2016, J.D. Power ranked United Community Bank first in customer satisfaction in the Southeast. In 2017, for the fourth consecutive year, Forbes included United among their list of the top 100  Best Banks in America.  Additional information about the company and the bank’s full range of products and services can be found at www.ucbi.com.