SOURCE: United Community Banks, Inc.

April 19, 2005 08:00 ET

United Community Banks, Inc. Reports 13% Gain in Diluted Earnings per Share for First Quarter 2005

BLAIRSVILLE, GA -- (MARKET WIRE) -- April 19, 2005 --


HIGHLIGHTS:

--  Record First Quarter Earnings
       Diluted Earnings Per Share of 34 Cents - Up 13%
       Net Income of $13.4 Million - Up 23%
       Return on Tangible Equity of 19.86%

--  Strong Loan Demand and Rise in Net Interest Margin Provided
    Foundation for Performance
United Community Banks, Inc. (NASDAQ: UCBI), Georgia's third-largest bank holding company, today announced record first quarter 2005 results that included a 23% rise in net income, a 13% gain in diluted earnings per share and a 24% increase in total revenue from the first quarter of 2004.

For the quarter, net income rose to $13.4 million from $10.9 million a year earlier. Diluted earnings per share of $.34 increased $.04 from $.30 a year ago. Total revenue, on a taxable equivalent basis, was $56.1 million compared with $45.3 million for the first quarter of 2004. Return on tangible equity was 19.86% compared with 19.87% a year ago and return on assets was 1.06% compared with 1.08% a year ago.

"We began 2005 with a very solid first quarter financial performance," said Jimmy Tallent, United Community Banks' President and Chief Executive Officer. "During the quarter, we added $143 million in loans and $157 million in non-brokered deposits. The growth is on track with our performance goals of double-digit earnings per share growth and a return on tangible equity above 18%."

At March 31, 2005, total loans were $3.9 billion, up $730 million, or 23%, from a year ago and up $445 million, or 14%, on a core basis when loans added by acquisitions are excluded. "Loan demand has remained consistent across all our markets, providing significant growth opportunities," Tallent said. "Organic loan growth, accomplished through disciplined step-by-step execution and accompanied by an uncompromising focus on sound credit quality, is essential to our balanced growth strategy. This strategy also includes focused expansion with the right people in existing and new markets through de novo offices and selective acquisitions."

Taxable equivalent net interest revenue of $48.3 million for the first quarter rose $10.5 million, or 28%, from the same period a year ago. Recent acquisitions added approximately $3.9 million to net interest revenue, resulting in a core growth rate of 17%. Taxable equivalent net interest margin for the first quarter was 4.05% as compared with 3.99% a year ago and 4.05% last quarter. "We have maintained our net interest margin near the 4% level for the past 10 quarters and expect it to remain at or slightly above that level through 2005," Tallent said. "Our balance sheet is slightly asset sensitive, allowing us to benefit modestly from a rising interest rate environment."

The first quarter provision for loan losses was $2.4 million, up $600,000 from a year earlier and up $400,000 from the fourth quarter of 2004. Net charge-offs to average loans were 12 basis points for the first quarter, compared with 8 basis points for the first quarter of 2004 and 13 basis points for the fourth quarter of 2004. At quarter-end, non-performing assets totaled $13.7 million compared with $7.3 million a year ago and $8.7 million at the end of 2004. Non-performing assets as a percentage of total assets were 26 basis points at quarter end, compared with 18 basis points at March 31, 2004, and 17 basis points at December 31, 2004. "Although nonperforming assets increased this quarter, the 26 basis points still compares very favorably with our peer banks and is well within our acceptable range of non-performing assets. At this low-level, we expect volatility from quarter to quarter, even while our credit quality remains sound," Tallent explained. "Our excellent credit quality continues to be one of the key drivers of our high performance and growth," Tallent said. "United's credit quality success remains tied to our bedrock strategy of securing loans with hard assets."

Fee revenue of $10.2 million was up $922,000, or 10%, from $9.3 million a year ago, primarily due to growth in service charges and fees on deposit accounts and higher consulting fees. "We increased fee revenue by growing deposits through our core deposit program while cross-selling other products and services and expanding our consulting service practices," Tallent noted. Service charges and fees on deposit accounts increased $591,000 to $5.6 million, primarily due to growth in transactions and new accounts resulting from the core deposit program. Consulting fees of $1.5 million were up $355,000, or 32%, due to developing new business practices for risk management and financial services as well as strong growth in our existing consulting services.

"We remain sharply focused on growing core deposits and related fee revenue," Tallent added. "During the first quarter, we continued to promote our very successful 'Refer-a-Friend' core deposit program that rewards our many satisfied customers for referring their friends and family members to us. Our relentless focus on providing the highest level of customer service has generated customer satisfaction scores that continue to exceed 90% well above the industry average of 75%. Our high level of customer satisfaction not only helps us build our deposit base through customer referrals, but also allows us to maintain long-term relationships with existing customers. During the quarter, our core deposit program, along with other initiatives, added nearly 13,000 accounts and $100 million in balances."

Operating expenses were $34.8 million, up $6.6 million, or 23% from the first quarter of 2004. Nearly $2.8 million of this increase related to operating expenses of the three banks acquired in 2004 that were not included in last year's results. Salaries and employee benefit costs of $22.2 million increased $4.1 million, or 23%, with approximately $2.0 million of this increase resulting from acquisitions and de novo activities. The balance was due to an increase in staff to support business growth and merit increases. Communications and equipment expenses of $3.0 million increased $435,000, or 17%, due to the acquisitions and investments in technology equipment to support business growth and enhance operating efficiency. Advertising and marketing expense of $1.4 million rose $599,000, reflecting business growth and the higher program costs of our initiatives to raise core deposits. Occupancy expense of $2.7 million increased $386,000 reflecting the cost of operating additional banking offices added through our acquisitions. Professional fees of $1.0 million were up $201,000, approximately half of which was due to the acquisitions. The increase in all other operating expense categories was related to the recent acquisitions and business growth. "Our operating efficiency ratio was 59.47% for the quarter and within our long-term efficiency goal of 58% to 60%, based on our service-oriented community banking model," Tallent said.

"Looking forward, we believe United Community Banks is on target to achieve operating earnings per share growth during 2005 within our long-term goal of 12% to 15%," Tallent said. "We anticipate core loan growth will continue in the range of 10% to 14% and that our net interest margin will remain near the 4% level. Our outlook is based on a continued, stable economic environment in our markets combined with maintaining strong credit quality. We are well positioned for additional increases in short-term interest rates and should benefit modestly if, and when, they occur."

"We remain committed to excellent customer service, superior operating performance and solid credit quality as we continue to grow our franchise," Tallent added. "Pursuing a balanced-growth strategy focused on strong internal growth in existing markets, complemented by selective de novo offices and mergers in other attractive markets, will remain the foundation on which we continue to build superior performance and long-term shareholder value."

Conference Call

United Community Banks will hold a conference call on Tuesday, April 19, 2005, at 11:00 a.m. ET to discuss the contents of this news release, as well as business highlights for the quarter and the financial outlook for the remainder of the year. The telephone number for the conference call is (800) 798-2864 and the pass code is "UCBI." The conference call will also be available by webcast within the Investor Relations section of the company's web site.

About United Community Banks, Inc.

Headquartered in Blairsville, United Community Banks is the third-largest bank holding company in Georgia. United Community Banks has assets of $5.3 billion and operates 23 community banks with 83 banking offices located throughout north Georgia, metro Atlanta, coastal Georgia, western North Carolina and east Tennessee. The company specializes in providing personalized community banking services to individuals and small to mid-size businesses in its markets. United Community Banks also offers the convenience of 24-hour access to its services through a network of ATMs, telephone and on-line banking. United Community Banks common stock is listed on the Nasdaq National Market under the symbol UCBI. Additional information may be found at the company's web site, www.ucbi.com.

Safe Harbor

This news release 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 and such performance involves risks and uncertainties that may cause actual results to differ materially from those in such statements. Any such statements are based on current expectations and involve a number of risks and uncertainties. For a discussion of factors that may cause such forward-looking statements to differ materially from actual results, please refer to the section entitled "Forward-Looking Statements" on page 4 of United Community Banks, Inc.'s annual report filed on Form 10-K with the Securities and Exchange Commission.

UNITED COMMUNITY BANKS, INC.
Selected Financial Information
For the Three Months Ended March 31, 2005


                                        2005                2004
(in thousands, except per share         First        Fourth       Third
data; taxable equivalent)              Quarter       Quarter      Quarter
INCOME SUMMARY
Interest revenue                    $    73,649  $    66,761  $    61,358
Interest expense                         25,367       21,448       19,142
                                    -----------  -----------  -----------
  Net interest revenue                   48,282       45,313       42,216
Provision for loan losses                 2,400        2,000        2,000
Fee revenue                              10,200       10,757        9,857
                                    -----------  -----------  -----------
  Total revenue                          56,082       54,070       50,073
Operating expenses(1)                    34,779       33,733       31,296
                                    -----------  -----------  -----------
  Income before taxes                    21,303       20,337       18,777
Income taxes                              7,862        7,427        6,822
                                    -----------  -----------  -----------
  Net operating income                   13,441       12,910       11,955
Merger-related charges, net of tax            -          261            -
                                    -----------  -----------  -----------
  Net income                        $    13,441  $    12,649  $    11,955
                                    ===========  ===========  ===========

OPERATING PERFORMANCE(1)
 Earnings per common share:
  Basic                             $       .35  $       .35  $       .33
  Diluted                                   .34          .34          .32
 Return on tangible equity(2)(3)(4)       19.86%       19.96%       19.41%
 Return on assets(4)                       1.06         1.07         1.05
 Efficiency ratio                         59.47        60.20        60.11
 Dividend payout ratio                    20.00        17.14        18.18

GAAP PERFORMANCE
 Per common share:
  Basic earnings                    $       .35  $       .34  $       .33
  Diluted earnings                          .34          .33          .32
  Cash dividends declared                   .07          .06          .06
  Book value                              10.42        10.39         9.58
  Tangible book value(3)                   7.40         7.34         7.28

 Key performance ratios:
  Return on equity(2)(4)                  13.68%       14.15%       14.20%
  Return on assets(4)                      1.06         1.05         1.05
  Net interest margin(4)                   4.05         4.05         3.99
  Dividend payout ratio                   20.00        17.65        18.18
  Equity to assets                         7.71         7.54         7.50
  Tangible equity to assets(3)             5.58         5.75         5.76

ASSET QUALITY
 Allowance for loan losses          $    48,453  $    47,196  $    43,548
 Non-performing assets                   13,676        8,725       10,527
 Net charge-offs                          1,143        1,183        1,010
 Allowance for loan losses to
  loans                                    1.25%        1.26%        1.27%
 Non-performing assets to total
  assets                                    .26          .17          .23
 Net charge-offs to average
  loans(3)                                  .12          .13          .12

AVERAGE BALANCES
 Loans                              $ 3,797,479  $ 3,572,824  $ 3,384,281
 Investment securities                  946,194      805,766      762,994
 Earning assets                       4,819,961    4,456,403    4,215,472
 Total assets                         5,164,464    4,781,018    4,521,842
 Deposits                             3,717,916    3,500,842    3,351,188
 Stockholders' equity                   398,164      360,668      338,913
 Common shares outstanding:
  Basic                                  38,198       37,056       36,254
  Diluted                                39,388       38,329       37,432

AT PERIOD END
 Loans                              $ 3,877,575  $ 3,734,905  $ 3,438,417
 Investment securities                  928,328      879,978      726,734
 Earning assets                       4,907,743    4,738,389    4,280,643
 Total assets                         5,265,771    5,087,702    4,592,655
 Deposits                             3,780,521    3,680,516    3,341,525
 Stockholders' equity                   398,886      397,088      347,795
 Common shares outstanding               38,249       38,168       36,255


UNITED COMMUNITY BANKS, INC.
Selected Financial Information
For the Three Months Ended March 31, 2005

                                         2004                   First
(in thousands, except per                                      Quarter
 share data; taxable              Second        First         2005-2004
 equivalent)                      Quarter      Quarter          Change
                               -----------   -----------     -----------
INCOME SUMMARY
Interest revenue               $    56,680   $    54,587
Interest expense                    17,432        16,772
                               -----------   -----------
    Net interest revenue            39,248        37,815            28%
Provision for loan losses            1,800         1,800
Fee revenue                          9,647         9,278            10
                               -----------   -----------
   Total revenue                    47,095        45,293            24
Operating expenses (1)              29,363        28,176            23
                               -----------   -----------
    Income before taxes             17,732        17,117            24
Income taxes                         6,379         6,179
                               -----------   -----------
   Net operating income             11,353        10,938            23
Merger-related charges,
 net of tax                            304             -
                               -----------   -----------
   Net income                  $    11,049   $    10,938            23
                               ===========   ===========

OPERATING PERFORMANCE  (1)
  Earnings per common share:
    Basic                      $       .32   $       .31            13
    Diluted                            .31           .30            13
  Return on tangible
   equity (2)(3)(4)                  19.70%        19.87%
  Return on assets (4)                1.07          1.08
  Efficiency ratio                   60.05         59.83
  Dividend payout ratio              18.75         19.35

GAAP PERFORMANCE
  Per common share:
    Basic earnings             $       .31   $       .31            13
    Diluted earnings                   .30           .30            13
    Cash dividends declared            .06           .06            17
    Book value                        9.10          8.80            18
    Tangible book value (3)           6.77          6.86             8

  Key performance ratios:
    Return on equity (2)(4)          14.40%        14.87%
    Return on assets (4)              1.04          1.08
    Net interest margin (4)           3.95          3.99
    Dividend payout ratio            19.35         19.35
    Equity to assets                  7.30          7.46
    Tangible equity to
     assets (3)                       5.74          5.88

ASSET QUALITY
  Allowance for loan losses    $    42,558   $    39,820
  Non-performing assets              8,812         7,251
  Net charge-offs                      789           635
  Allowance for loan losses
   to loans                           1.27%         1.27%
  Non-performing assets to
   total assets                        .19           .18
  Net charge-offs to
   average loans (3)                   .10           .08

AVERAGE BALANCES
  Loans                        $ 3,235,262   $ 3,095,875            23
  Investment securities            715,586       652,867            45
  Earning assets                 3,991,797     3,808,877            27
  Total assets                   4,274,442     4,084,883            26
  Deposits                       3,178,776     2,955,726            26
  Stockholders' equity             311,942       304,926            31
  Common shares outstanding:
    Basic                           35,633        35,319
    Diluted                         36,827        36,482

AT PERIOD END
  Loans                        $ 3,338,309   $ 3,147,303            23
  Investment securities            739,667       617,787            50
  Earning assets                 4,172,049     3,851,968            27
  Total assets                   4,525,446     4,118,188            28
  Deposits                       3,339,848     3,074,193            23
  Stockholders' equity             330,458       311,247            28
  Common shares outstanding         36,246        35,331


(1)   Excludes pre-tax merger-related charges totaling $406,000 or $.01 per
      diluted common share and $464,000 or $.01 per diluted common share in
      the fourth and second quarters, respectively, of 2004.

(2)   Net income available to common stockholders, which excludes preferred
      stock dividends, divided by average realized common equity which
      excludes accumulated other comprehensive income.

(3)   Excludes effect of acquisition related intangibles and associated
      amortization.

(4)   Annualized.


UNITED COMMUNITY BANKS, INC.
Consolidated Statement of Income
For the Three Months Ended March 31,

                                                     Three Months Ended
                                                          March 31,
 (in thousands, except per share data)             2005              2004
                                                 --------         --------
 Interest revenue:
   Loans, including fees                         $ 63,467         $ 47,422
   Federal funds sold and deposits in banks           259              111
   Investment securities:
     Taxable                                        9,014            6,069
     Tax exempt                                       525              566
                                                 --------         --------
       Total interest revenue                      73,265           54,168
                                                 --------         --------

 Interest expense:
   Deposits:
     Demand                                         3,527            1,794
     Savings                                          168               83
     Time                                          13,008            9,297
   Federal funds purchased                            871              271
   Other borrowings                                 7,793            5,327
                                                 --------         --------
     Total interest expense                        25,367           16,772
                                                 --------         --------
     Net interest revenue                          47,898           37,396
 Provision for loan losses                          2,400            1,800
                                                 --------         --------
     Net interest revenue after
      provision for loan losses                    45,498           35,596
                                                 --------         --------

  Fee revenue:
    Service charges and fees                        5,614            5,023
    Mortgage loan and other related fees            1,483            1,280
    Consulting fees                                 1,482            1,127
    Brokerage fees                                    442              708
    Securities losses, net                              -               (4)
    Other                                           1,179            1,144
                                                 --------         --------
      Total fee revenue                            10,200            9,278
                                                 --------         --------
      Total revenue                                55,698           44,874
                                                 --------         --------

  Operating expenses:
    Salaries and employee benefits                 22,235           18,126
    Occupancy                                       2,668            2,282
    Communications and equipment                    2,982            2,547
    Postage, printing and supplies                  1,351            1,142
    Professional fees                               1,038              837
    Advertising and public relations                1,363              764
    Amortization of intangibles                       503              371
    Other                                           2,639            2,107
                                                 --------         --------
      Total operating expenses                     34,779           28,176
                                                 --------         --------
    Income before income taxes                     20,919           16,698
 Income taxes                                       7,478            5,760
                                                 --------         --------
      Net income                                 $ 13,441         $ 10,938
                                                 ========         ========
      Net income available to common
       stockholders                              $ 13,434         $ 10,922
                                                 ========         ========

 Earnings per common share:
   Basic                                         $    .35         $    .31
   Diluted                                            .34              .30
 Weighted average common shares
  outstanding (in thousands):
   Basic                                           38,198           35,319
   Diluted                                         39,388           36,482


UNITED COMMUNITY BANKS, INC.
Consolidated Balance Sheet
For the period ended
                                     March 31,    December 31,   March 31,
 ($ in thousands)                      2005          2004          2004
                                    ----------    ----------    ----------

 ASSETS

   Cash and due from banks          $   98,502    $   99,742    $   81,723
   Interest-bearing deposits
    in banks                            21,677        35,098        39,587
                                    ----------    ----------    ----------
      Cash and cash equivalents        120,179       134,840       121,310

   Securities available for sale       928,328       879,978       617,787
   Mortgage loans held for sale         34,628        37,094        14,508
   Loans, net of unearned income     3,877,575     3,734,905     3,147,303
     Less - allowance for loan
      losses                            48,453        47,196        39,820
                                    ----------    ----------    ----------
        Loans, net                   3,829,122     3,687,709     3,107,483

   Premises and equipment, net         105,188       103,679        89,625
   Accrued interest receivable          30,519        27,923        22,410
   Intangible assets                   120,119       121,207        71,811
   Other assets                         97,688        95,272        73,254
                                    ----------    ----------    ----------
     Total assets                   $5,265,771    $5,087,702    $4,118,188
                                    ==========    ==========    ==========

 LIABILITIES AND STOCKHOLDERS' EQUITY
 Liabilities:
   Deposits:
     Demand                         $  541,690    $  532,879    $  425,697
     Interest-bearing demand         1,120,284     1,055,192       863,975
     Savings                           177,051       171,898       148,260
     Time                            1,941,496     1,920,547     1,636,261
                                    ----------    ----------    ----------
       Total deposits                3,780,521     3,680,516     3,074,193

    Federal funds purchased and
     repurchase agreements             153,112       130,921       128,475
    Federal Home Loan Bank
     advances                          785,382       737,947       470,271
    Other borrowings                   113,390       113,879       108,751
    Accrued expenses and other
     liabilities                        34,480        27,351        25,251
                                    ----------    ----------    ----------
       Total liabilities             4,866,885     4,690,614     3,806,941
                                    ----------    ----------    ----------

 Stockholders' equity:
   Preferred stock, $1 par value;
    $10 stated value; 10,000,000
    shares authorized; 44,800,
    44,800 and 48,300 shares issued
    and outstanding                        448           448           483
   Common stock, $1 par value;
    100,000,000 shares authorized;
    38,407,874, 38,407,874 and
    35,706,573 shares issued            38,408        38,408        35,707
   Capital surplus                     154,535       155,076        95,532
   Retained earnings                   215,466       204,709       175,700
   Treasury stock; 158,467, 240,346
    and 375,563 shares, at cost         (3,074)       (4,413)       (6,414)
   Accumulated other comprehensive
    income                              (6,897)        2,860        10,239
                                    ----------    ----------    ----------
      Total stockholders' equity       398,886       397,088       311,247
                                    ----------    ----------    ----------
      Total liabilities and
       stockholders' equity         $5,265,771    $5,087,702    $4,118,188
                                    ==========    ==========    ==========

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