United Community Bank projects $42 million in 3rd quarter losses

BLAIRSVILLE - United Community Bank, which has a major presence in Gainesville and elsewhere in North Georgia, projects $42 million in 3rd quarter losses. The losses are blamed on bad housing loans and expectations that the situation will only continue.

The announcement was made Monday.

"Economic pressures on the housing market, particularly in Atlanta, continue to have an impact on our loan portfolio," said Jimmy Tallent, president and chief executive officer.

"In the third quarter, we saw some rise in the level of classified and non-performing assets and also a steepening of discounts. In light of this environment, with disappointing summer sales and increasing inventories in the marketplace, we have taken steps to dispose of some of our larger exposures before surplus real estate inventory valuations deteriorate further."

The third quarter provision for loan losses was $76 million. Net charge-offs for the third quarter were $56 million, of which 83 percent were residential construction loans in metro Atlanta. At quarter-end, the allowance to loans ratio was 1.91 percent, compared with 1.53 percent at June 30, 2008.

Non-performing assets at quarter-end totaled $178 million, compared with $152 million at June 30, 2008. Non-performing assets included $139 million in non-accrual loans, $39 million in other real estate owned and no loans accruing that were 90 days past due. The ratio of non-performing assets to total assets was 2.20 percent, compared with 1.84 percent at June 30, 2008.

In the third quarter, United sold $66 million of non-performing assets. Among these were sales at the very end of the quarter that resulted in the disposition of 13 of the company's largest non-performing loans and assets, totaling $42 million. Additionally, the company has verbal commitments to sell three non-performing assets totaling $18 million, which have been fully written down at quarter-end and should close in the next few weeks. The losses on these 16 sales represent a significant portion of the $56 million in charge-offs for the third quarter.

"While these actions resulted in sizable charge-offs for the quarter, our aggressive strategy cleared away loans and assets that represented our largest losses to date and those that we felt had the highest potential for continued decline in valuations," Tallent said.

"Selling these more illiquid properties was very positive for the company. Our goal is to get through this difficult credit cycle as quickly as possible, so we will continue our strategy of aggressively marketing properties rather than waiting for improved pricing for which the timing is difficult to predict.

"United continues to maintain a very strong capital position, well above the regulatory guidelines to be considered 'well-capitalized,'" Tallent said. "At quarter-end the Tier I Risk-Based Capital, Total Risk-Based Capital and Tangible Equity to Assets ratios are expected to be 8.7 percent, 11.4 percent and 6.6 percent, respectively. As announced in August, we increased our regulatory capital by adding $30 million of subordinated debt and we will close an internal trust preferred offering by the end of October. Our strong capital levels allowed us to absorb losses this quarter without impairing the company's financial soundness, so we plan to maintain our aggressive pursuit of problem asset disposition.

"We are disappointed with expected earnings for the third quarter, but we firmly believe that the actions taken strengthen our ability to manage through this cycle and support the long-term success of the company," Tallent said. "As we look to the quarters ahead, we see ongoing credit challenges. Charge-offs will continue to be elevated as we work through problem credits, but we certainly do not see a recurrence of the third quarter's level of charge-offs in the immediate future. Core earnings and our solid capital position will support the ongoing strategy of aggressively moving problem credits off our books and will enable us to actively pursue disposition options while remaining on solid financial footing."