United Community Banks defers interest on debt

BLAIRSVILLE - United Community Banks, Inc. plans to defer regularly scheduled interest payments on its $54.6 million of outstanding debt.

This decision was the result of Federal Reserve policies related to dividend and other interest payments in light of stressed market conditions. United says it took this action in consultation with the Federal Reserve Bank of Atlanta. United may defer interest payments for consecutive periods of up to five years without default or penalty under the terms of the trust preferred agreements.

The interest on these trust preferred securities will continue to accrue for payment in the future and will be reported as interest expense for financial statement purposes. The deferral of these cash payments would total $4.7 million on an annual basis.

"Although United's holding company has sufficient capital and liquidity to pay preferred dividends and trust preferred interest payments through most of 2011, without generating additional funds from the bank, the action taken today will improve the holding company's liquidity position," Jimmy Tallent, United's president and chief executive officer, said.

"Maintaining strong capital and liquidity are a top priority while managing through this difficult economic cycle," said Tallent. "Further, bank regulators are insisting that minimum capital levels required for "well-capitalized" status during periods of economic stability continue to be maintained at higher levels throughout the current economic cycle despite loan loss reserves at extraordinary levels. Although we plan to pay interest and dividends on our obligations in the future, at this time we believe deferral of these payments is in the best long-term interest of all our stakeholders."

Tallent continued, "Since the beginning of the credit crisis, we have successfully executed a number of initiatives which have reduced our credit exposures and enhanced the underlying strength of our balance sheet and capital position. As I commented last quarter, given the current operating and regulatory environment, we continue to evaluate and analyze various balance sheet and capital alternatives to further strengthen our overall capital position."

United has 106 banking offices throughout north Georgia, the Atlanta region, coastal Georgia, western North Carolina and east Tennessee, including six in Hall County - three in Gainesville and one each in Murrayville, Oakwood and Lula.