SOURCE: United Community Banks, Inc.

United Community Banks, Inc.

January 25, 2012 19:00 ET

United Community Banks, Inc. Reports Earnings of $9.9 Million for Fourth Quarter 2011

BLAIRSVILLE, GA--(Marketwire - Jan 25, 2012) - United Community Banks, Inc. (NASDAQ: UCBI)

  • Net income of $9.9 million, or 12 cents per share
  • Loans stable with prior quarter, first time since March 2008
  • Core transaction deposits up $266 million, or 10 percent, for the year
  • Nonperforming assets decline to $160 million, or 2.3 percent of assets
  • New director appointed

United Community Banks, Inc. (NASDAQ: UCBI) today reported net income of $9.9 million, or 12 cents per share, for the fourth quarter of 2011. The fourth quarter results included, among other items, a higher level of foreclosure costs reflecting an increase in sales activities, as well as the positive impact of a $3.5 million reversal of a previously established reserve related to the settlement of a state tax dispute.

The 2011 net loss of $227 million primarily reflects significant credit costs in the first quarter incurred in connection with United's problem asset disposition plan. The plan was executed in connection with raising $380 million of new capital in March 2011.

"United is moving forward with a sound balance sheet and strong capital structure. This is beginning to be demonstrated in our financial results including the fourth quarter profit," stated Jimmy Tallent, United's president and chief executive officer. "Our core pre-tax, pre-credit earnings, excluding one-time items, were above the third quarter. We continued to dispose of problem assets aggressively. We believe the remaining credit challenges are manageable and while we are not invulnerable to the still-fragile economy, our expectation is continued profitability during 2012."

Total loans were $4.1 billion at quarter-end, equal to third quarter and down $494 million from a year earlier. "We have worked diligently to reverse the trend of declining loan balances, and achieved great progress toward that goal during 2011," stated Tallent. "The $494 million decline included $410 million in the first quarter, primarily from the bulk loan sale and de-risking of our balance sheet, which were strategic components of our problem asset disposition plan. We are now in a position to prudently rebuild our loan portfolio and grow net interest revenue and earnings. We are encouraged to have $182 million of new loan commitments with $147 million funded in the fourth quarter and $542 million of new loan commitments with $392 million funded in the full year. The majority were commercial loans."

The fourth quarter provision for loan losses was $14 million, down from an operating provision of $47.7 million a year ago which excluded a recovery of $11.7 million related to a 2007 fraud-related loan charge-off. The third quarter 2011 provision for loan losses was $36 million, including $25 million specifically related to United's largest loan relationship.

Net charge-offs for the fourth quarter were $45.6 million, compared to $17.5 million for the third quarter and down from $47.7 million in operating net charge-offs a year ago. Fourth quarter 2011 net charge-offs included the $25 million charge-off related to a large loan relationship that was reserved for in the third quarter of 2011. Nonperforming assets decreased $28 million during the fourth quarter to $160 million at December 31, 2011, primarily related to this $25 million partial charge-off.

"Nonperforming assets have been written down to levels that should allow for continued liquidation without significant losses," Tallent said. "Total nonperforming assets will continue to be impacted by our ability to liquidate foreclosed properties, and also could be affected by uneven levels of nonperforming loan inflows and charge-offs. Looking ahead, we expect our overall credit trends to improve during 2012, although not necessarily on a straight line."

Taxable equivalent net interest revenue of $59.1 million declined slightly from the third quarter. Compared with the fourth quarter of 2010, net interest revenue declined $1.1 million, primarily due to a decrease in interest revenue resulting from a $593 million reduction in average loan balances. The effect of this reduction was significantly offset by lower interest expense due to reductions in deposit rates. Net interest margin was 3.51 percent for the fourth quarter of 2011, down seven basis points from a year ago and four basis points from the third quarter.

"Loan and deposit growth are key for increasing core earnings," Tallent commented. "The weak economy has created a highly competitive environment for good, quality loans and recognizing this, we are gaining traction with the addition of seasoned lenders in key markets. We have had tremendous success attracting core transaction deposits -- increasing the balance by $266 million in 2011, or 10 percent, from a year ago and we remain sharply focused on growing core deposits. This focus continues is 2012."

Fee revenue was $12.7 million in the fourth quarter of 2011, compared to $11.5 million in the third quarter and $12.4 million a year ago. Service charges and fees were $7.2 million, up $209,000 from a year ago, due primarily to a $434,000 increase in ATM and debit card revenue, which totaled $3.0 million. However, these fees were partially offset by a $295,000 decline in overdraft fees resulting from lower volumes. Mortgage fees of $1.8 million were up $677,000 from the third quarter and down $43,000 from a year ago. The comparisons to prior periods are significantly influenced by the interest rate environment and refinancing activities.

Other fee revenue of $2.8 million reflected an increase of $828,000 from the third quarter of 2011, and an increase of $51,000 from the fourth quarter of 2010. The increase from the third quarter was primarily due to the recognition of a $728,000 gain from the sale of low-income housing tax credits, while the fourth quarter of 2010 included a similar gain. Also included in each period was the recognition of deferred gains relating to the ineffectiveness of terminated cash flow hedges on certain prime-based loans. Hedge ineffectiveness gains recognized in the fourth quarter were $313,000, compared with $575,000 in the third quarter and $400,000 a year ago.

Excluding foreclosed property costs, fourth quarter 2011 operating expenses were $41.8 million, down from the third quarter of 2011 and fourth quarter of 2010 by $1.9 million and $2.5 million, respectively. The decrease from the third quarter was mostly in salaries and employee benefits. The decrease from a year ago was mostly due to lower professional fees, a lower FDIC assessment and lower salaries and employee benefits.

Foreclosed property costs for the fourth quarter of 2011 were $9.3 million as compared to $2.8 million last quarter and $20.6 million a year ago. The fourth quarter of 2011 included $2.4 million for maintenance of foreclosed properties and $6.9 million in net losses and write-downs on properties. For the third quarter of 2011, foreclosed property costs included $1.8 million in maintenance and $968,000 in net losses and write-downs. Fourth quarter 2010 costs included $4.8 million in maintenance and $15.8 million in net write-downs and losses.

The income tax benefit for the fourth quarter included the release of $3.5 million from a previously established reserve for uncertain tax positions upon the settlement of a state tax dispute. United's third quarter tax benefit also included the release of approximately $1.1 million in reserves for uncertain tax positions relating to state tax returns that have expired. Excluding these items, the tax provision for both periods was minimal due to the full deferred tax asset valuation allowance.

"Earlier this month we announced we would record a full valuation allowance for our net deferred tax asset, and that we would restate our previously filed financial reports going back to the fourth quarter of 2010," Tallent said. "This restatement results from an ongoing comment process with the SEC which we believe has now been resolved. While the comment process outcome was disappointing, it had no effect on our positive momentum and outlook."

Tallent continued, "The full valuation allowance results from a difference in judgment regarding the weighting of evidence supporting our deferred tax asset. We are now placing more weight on the objective negative evidence represented by our recent cumulative losses rather than the more subjective positive evidence represented by our future earnings forecasts. Once we have achieved sustained profitability and improved credit performance such that the weighting of the evidence shifts, we would expect to be able to reverse the valuation allowance. At December 31, 2011, the $268 million valuation allowance reduced Tangible Book Value per share by $4.65 and Tangible Common Equity-to-Assets ratio by approximately 2.83 percent.

As of December 31, 2011, capital ratios for United were as follows: Tier 1 Risk-Based of 13.6 percent; Tier 1 Leverage of 8.8 percent; and Total Risk-Based of 15.4 percent. The Tier 1 Common Risk-Based ratio was 8.2 and the Tangible Common Equity-to-Assets ratio was 5.4 percent.

United also reported today that Clifford V. Brokaw, a managing director of Corsair Capital LLC, United's largest shareholder, has been named to its board of directors, subject to regulatory approval, and to its wholly owned subsidiary, United Community Bank. Brokaw succeeds Corsair Capital's previous board appointee, Peter Raskind, who is expected to be named a director of one of the nation's largest banks. Under regulatory requirements he is unable to serve as a board member simultaneously on more than one large bank holding company or bank board. In addition to Corsair, Brokaw has been a managing director of the financial institutions group at Goldman Sachs & Co, worked in the mergers and acquisitions group of J.P. Morgan, and is a director of Torus Insurance Holdings.

"We are delighted to have Cliff join our board," Tallent said. "He has already been a valuable source for guidance and direction as a board observer over the past nine months, and we look forward to his counsel in an official capacity going forward."

Conference Call

United will hold a conference call tomorrow, January 26, 2012, at 11 a.m. ET to discuss the contents of this news release and to share business highlights for the quarter. To access the call, dial (877) 380-5665 and use the conference number 41622107. The conference call also will be webcast and can be accessed by selecting 'Calendar of Events' within the Investor Relations section of the United's website at www.ucbi.com.

About United Community Banks, Inc.

Headquartered in Blairsville, United Community Banks, Inc. is the third-largest bank holding company in Georgia. United has assets of $7.0 billion and operates 27 community banks with 106 banking offices throughout north Georgia, the Atlanta region, coastal Georgia, western North Carolina and east Tennessee. United specializes in providing personalized community banking services to individuals and small to mid-size businesses and also offers the convenience of 24-hour access through a network of ATMs, telephone and on-line banking. United's common stock is listed on the Nasdaq Global Select Market under the symbol UCBI. Additional information may be found at United's web site at www.ucbi.com.

Safe Harbor

This news release contains forward-looking statements, as defined by federal securities laws, including statements about United's financial outlook and business environment. These statements are based on current expectations and are provided to assist in the understanding of future financial performance. Such performance involves risks and uncertainties that may cause actual results to differ materially from those expressed or implied in any such statements. For a discussion of some of the risks and other factors that may cause such forward-looking statements to differ materially from actual results, please refer to United's filings with the Securities and Exchange Commission including its 2010 Annual Report on Form 10-Kand Quarterly Reports on Form 10-Q for the periods ended June 30, 2011 and September 30, 2011 under the sections entitled "Forward-Looking Statements" and "Risk Factors" and in United's Current Reports on Form 8-K. Forward-looking statements speak only as of the date they are made, and we undertake no obligation to update or revise forward-looking statements.

UNITED COMMUNITY BANKS, INC.
Financial Highlights
Selected Financial Information
2011 2010
Fourth
Quarter
Third
Quarter
Second
Quarter
First
Quarter
Fourth
Quarter
(in thousands, except per share data; taxable equivalent)
INCOME SUMMARY
Interest revenue $ 71,905 $ 74,543 $ 76,931 $ 75,965 $ 81,215
Interest expense 12,855 15,262 17,985 19,573 21,083
Net interest revenue 59,050 59,281 58,946 56,392 60,132
Operating provision for loan losses (1) 14,000 36,000 11,000 190,000 47,750
Fee revenue (2) 12,667 11,498 13,905 11,838 12,442
Total operating revenue (1)(2) 57,717 34,779 61,851 (121,770 ) 24,824
Operating expenses (3) 51,080 46,520 48,728 115,271 64,918
Loss on sale of nonperforming assets - - - - -
Operating income (loss) from continuing operations before income taxes 6,637 (11,741 ) 13,123 (237,041 ) (40,094 )
Operating income tax expense (benefit) (3,264 ) (402 ) 1,095 295 144,760
Net operating income (loss) from continuing operations (1)(2)(3) 9,901 (11,339 ) 12,028 (237,336 ) (184,854 )
Noncash goodwill impairment charges - - - - -
Partial reversal of fraud loss provision - - - - 11,750
Loss from discontinued operations - - - - -
Gain from sale of subsidiary - - - - -
Net income (loss) 9,901 (11,339 ) 12,028 (237,336 ) (173,104 )
Preferred dividends and discount accretion 3,025 3,019 3,016 2,778 2,586
Net income (loss) available to common shareholders $ 6,876 $ (14,358 ) $ 9,012 $ (240,114 ) $ (175,690 )
PERFORMANCE MEASURES
Per common share:
Diluted operating income (loss) from continuing operations (1)(2)(3) $ .12 $ (.25 ) $ .16 $ (13.00 ) $ (9.87 )
Diluted income (loss) from continuing operations .12 (.25 ) .16 (13.00 ) (9.25 )
Diluted income (loss) .12 (.25 ) .16 (13.00 ) (9.25 )
Book value 6.62 6.77 7.11 2.20 15.40
Tangible book value (5) 6.47 6.61 6.94 1.69 14.80
Key performance ratios:
Return on equity (4)(6) 7.40 % (15.06 )% 42.60 % (526.54 )% (196.10 )%
Return on assets (6) .56 (.64 ) .66 (13.04 ) (9.47 )
Net interest margin (6) 3.51 3.55 3.41 3.30 3.58
Operating efficiency ratio from continuing operations (2)(3) 71.23 65.73 66.88 169.08 89.45
Equity to assets 8.28 8.55 8.06 6.15 7.80
Tangible equity to assets (5) 8.16 8.42 7.93 6.01 7.64
Tangible common equity to assets (5) 5.38 5.65 1.37 2.70 5.22
Tangible common equity to risk-weighted assets (5) 8.22 8.52 8.69 .75 5.64
ASSET QUALITY *
Non-performing loans $ 127,479 $ 144,484 $ 71,065 $ 83,769 $ 179,094
Foreclosed properties 32,859 44,263 47,584 54,378 142,208
Total non-performing assets (NPAs) 160,338 188,747 118,649 138,147 321,302
Allowance for loan losses 114,468 146,092 127,638 133,121 174,695
Operating net charge-offs (1) 45,624 17,546 16,483 231,574 47,668
Allowance for loan losses to loans 2.79 % 3.55 % 3.07 % 3.17 % 3.79 %
Operating net charge-offs to average loans (1)(6) 4.39 1.68 1.58 20.71 4.03
NPAs to loans and foreclosed properties 3.87 4.54 2.82 3.25 6.77
NPAs to total assets 2.30 2.74 1.66 1.79 4.42
AVERAGE BALANCES ($ in millions)
Loans $ 4,175 $ 4,194 $ 4,266 $ 4,599 $ 4,768
Investment securities 2,141 2,150 2,074 1,625 1,354
Earning assets 6,688 6,630 6,924 6,902 6,680
Total assets 7,019 7,000 7,363 7,379 7,254
Deposits 6,115 6,061 6,372 6,560 6,294
Shareholders' equity 581 598 594 454 566
Common shares - basic (thousands) 57,646 57,599 25,427 18,466 18,984
Common shares - diluted (thousands) 57,646 57,599 57,543 18,466 18,984
AT PERIOD END ($ in millions)
Loans * $ 4,110 $ 4,110 $ 4,163 $ 4,194 $ 4,604
Investment securities 2,120 2,123 2,188 1,884 1,490
Total assets 6,983 6,894 7,152 7,709 7,276
Deposits 6,098 6,005 6,183 6,598 6,469
Shareholders' equity 575 583 603 586 469
Common shares outstanding (thousands) 57,561 57,510 57,469 20,903 18,937
(1) Excludes the partial reversal of a previously established provision for fraud-related loan losses of $11.8 million in the fourth quarter of 2010. Operating charge-offs also exclude the $11.8 million related partial recovery of the previously charged off amount. (2) Excludes revenue generated by discontinued operations in the first quarter of 2010. (3) Excludes the goodwill impairment charge of $211 million in the third quarter of 2010 and expenses relating to discontinued operations in the first quarter of 2010. (4) Net loss available to common shareholders, which is net of preferred stock dividends, divided by average realized common equity, which excludes accumulated other comprehensive income (loss). (5) Excludes effect of acquisition related intangibles and associated amortization. (6) Annualized.
* Excludes loans and foreclosed properties covered by loss sharing agreements with the FDIC.

UNITED COMMUNITY BANKS, INC.
Financial Highlights
Selected Financial Information
Fourth
2011 2010 Quarter
Fourth
Quarter
Fourth
Quarter
2011-2010
(in thousands, except per share data; taxable equivalent) Change
INCOME SUMMARY
Interest revenue $ 71,905 $ 81,215
Interest expense 12,855 21,083
Net interest revenue 59,050 60,132 (2 )%
Operating provision for loan losses (1) 14,000 47,750
Fee revenue (2) 12,667 12,442 2
Total operating revenue (1)(2) 57,717 24,824
Operating expenses (3) 51,080 64,918 (21 )
Loss on sale of nonperforming assets - -
Operating income (loss) from continuing operations before income taxes 6,637 (40,094 )
Operating income tax expense (benefit) (3,264 ) 144,760
Net operating income (loss) from continuing operations(1)(2)(3) 9,901 (184,854 )
Noncash goodwill impairment charges - -
Partial reversal of fraud loss provision - 11,750
Loss from discontinued operations - -
Gain from sale of subsidiary - -
Net income (loss) 9,901 (173,104 )
Preferred dividends and discount accretion 3,025 2,586
Net income (loss) available to common shareholders $ 6,876 $ (175,690 )
PERFORMANCE MEASURES
Per common share:
Diluted operating income (loss) from continuing operations (1)(2)(3) $ .12 $ (9.87 )
Diluted income (loss) from continuing operations .12 (9.25 )
Diluted income (loss) .12 (9.25 )
Book value 6.62 15.40 (57 )
Tangible book value (5) 6.47 14.80 (56 )
Key performance ratios:
Return on equity (4)(6) 7.40 % (196.10 )%
Return on assets (6) .56 (9.47 )
Net interest margin (6) 3.51 3.58
Operating efficiency ratio from continuing operations (2)(3) 71.23 89.45
Equity to assets 8.28 7.80
Tangible equity to assets (5) 8.16 7.64
Tangible common equity to assets (5) 5.38 5.22
Tangible common equity to risk-weighted assets (5) 8.22 5.64
ASSET QUALITY *
Non-performing loans $ 127,479 $ 179,094
Foreclosed properties 32,859 142,208
Total non-performing assets (NPAs) 160,338 321,302
Allowance for loan losses 114,468 174,695
Operating net charge-offs (1) 45,624 47,668
Allowance for loan losses to loans 2.79 % 3.79 %
Operating net charge-offs to average loans (1)(6) 4.39 4.03
NPAs to loans and foreclosed properties 3.87 6.77
NPAs to total assets 2.30 4.42
AVERAGE BALANCES ($ in millions)
Loans $ 4,175 $ 4,768 (12 )
Investment securities 2,141 1,354 58
Earning assets 6,688 6,680 -
Total assets 7,019 7,254 (3 )
Deposits 6,115 6,294 (3 )
Shareholders' equity 581 566 3
Common shares - basic (thousands) 57,646 18,984
Common shares - diluted (thousands) 57,646 18,984
AT PERIOD END ($ in millions)
Loans * $ 4,110 $ 4,604 (11 )
Investment securities 2,120 1,490 42
Total assets 6,983 7,276 (4 )
Deposits 6,098 6,469 (6 )
Shareholders' equity 575 469 23
Common shares outstanding (thousands) 57,561 18,937
(1) Excludes the partial reversal of a previously established provision for fraud-related loan losses of $11.8 million in the fourth quarter of 2010. Operating charge-offs also exclude the $11.8 million related partial recovery of the previously charged off amount. (2) Excludes revenue generated by discontinued operations in the first quarter of 2010. (3) Excludes the goodwill impairment charge of $211 million in the third quarter of 2010 and expenses relating to discontinued operations in the first quarter of 2010. (4) Net loss available to common shareholders, which is net of preferred stock dividends, divided by average realized common equity, which excludes accumulated other comprehensive income (loss). (5) Excludes effect of acquisition related intangibles and associated amortization. (6) Annualized.
* Excludes loans and foreclosed properties covered by loss sharing agreements with the FDIC.

UNITED COMMUNITY BANKS, INC.
Financial Highlights
Selected Financial Information
For the Twelve
Months Ended
YTD
2011-2010
Change
(in thousands, except per share data; taxable equivalent) 2011 2010
INCOME SUMMARY
Interest revenue $ 299,344 $ 343,123
Interest expense 65,675 100,071
Net interest revenue 233,669 243,052 (4 )%
Operating provision for loan losses (1) 251,000 234,750
Fee revenue (2) 49,908 48,548 3
Total operating revenue (1)(2) 32,577 56,850
Operating expenses (3) 261,599 242,952 8
Loss on sale of nonperforming assets - 45,349
Operating income (loss) from continuing operations before income taxes (229,022 ) (231,451 )
Operating income tax expense (benefit) (2,276 ) 73,218
Net operating income (loss) from continuing operations (1)(2)(3) (226,746 ) (304,669 )
Noncash goodwill impairment charges - (210,590 )
Partial reversal of fraud loss provision - 11,750
Loss from discontinued operations - (101 )
Gain from sale of subsidiary - 1,266
Net income (loss) (226,746 ) (502,344 )
Preferred dividends and discount accretion 11,838 10,316
Net income (loss) available to common shareholders $ (238,584 ) $ (512,660 )
PERFORMANCE MEASURES
Per common share:
Diluted operating income (loss) from continuing operations (1)(2)(3) $ (5.97 ) $ (16.64 )
Diluted income (loss) from continuing operations (5.97 ) (27.15 )
Diluted income (loss) (5.97 ) (27.09 )
Book value 6.62 15.40 (57 )
Tangible book value (5) 6.47 14.80 (56 )
Key performance ratios:
Return on equity (4)(6) (93.57 )% (85.08 )%
Return on assets (6) (3.15 ) (6.61 )
Net interest margin (6) 3.44 3.56
Operating efficiency ratio from continuing operations (2)(3) 92.27 98.98
Equity to assets 7.75 10.77
Tangible equity to assets (5) 7.62 8.88
Tangible common equity to assets (5) 3.74 6.52
Tangible common equity to risk-weighted assets (5) 8.22 5.64
ASSET QUALITY *
Non-performing loans $ 127,479 $ 179,094
Foreclosed properties 32,859 142,208
Total non-performing assets (NPAs) 160,338 321,302
Allowance for loan losses 114,468 174,695
Operating net charge-offs (1) 311,227 215,657
Allowance for loan losses to loans 2.79 % 3.79 %
Operating net charge-offs to average loans (1)(6) 7.33 4.42
NPAs to loans and foreclosed properties 3.87 6.77
NPAs to total assets 2.30 4.42
AVERAGE BALANCES ($ in millions)
Loans $ 4,307 $ 4,961 (13 )
Investment securities 1,999 1,453 38
Earning assets 6,785 6,822 (1 )
Total assets 7,189 7,605 (5 )
Deposits 6,275 6,373 (2 )
Shareholders' equity 557 819 (32 )
Common shares - basic (thousands) 39,943 18,925
Common shares - diluted (thousands) 39,943 18,925
AT PERIOD END ($ in millions)
Loans * $ 4,110 $ 4,604 (11 )
Investment securities 2,120 1,490 42
Total assets 6,983 7,276 (4 )
Deposits 6,098 6,469 (6 )
Shareholders' equity 575 469 23
Common shares outstanding (thousands) 57,561 18,937
(1) Excludes the partial reversal of a previously established provision for fraud-related loan losses of $11.8 million in the fourth quarter of 2010. Operating charge-offs also exclude the $11.8 million related partial recovery of the previously charged off amount. (2) Excludes revenue generated by discontinued operations in the first quarter of 2010. (3) Excludes the goodwill impairment charge of $211 million in the third quarter of 2010 and expenses relating to discontinued operations in the first quarter of 2010. (4) Net loss available to common shareholders, which is net of preferred stock dividends, divided by average realized common equity, which excludes accumulated other comprehensive income (loss). (5) Excludes effect of acquisition related intangibles and associated amortization. (6) Annualized.
* Excludes loans and foreclosed properties covered by loss sharing agreements with the FDIC.

UNITED COMMUNITY BANKS, INC.
Selected Financial Information
For the Years Ended December 31,
(in thousands, except per share data; taxable equivalent) 2011 2010 2009 2008 2007
INCOME SUMMARY
Net interest revenue $ 233,669 $ 243,052 $ 245,227 $ 238,704 $ 274,483
Operating provision for loan losses (1) 251,000 234,750 310,000 184,000 37,600
Operating fee revenue (2) 49,908 48,548 50,964 46,081 53,701
Total operating revenue (1)(2) 32,577 56,850 (13,809 ) 100,785 290,584
Operating expenses (3) 261,599 242,952 217,050 200,335 181,730
Loss on sale of nonperforming assets - 45,349 - - -
Operating (loss) income from continuing operations before taxes (229,022 ) (231,451 ) (230,859 ) (99,550 ) 108,854
Operating income taxes (2,276 ) 73,218 (91,754 ) (35,651 ) 40,266
Net operating (loss) income from continuing operations (226,746 ) (304,669 ) (139,105 ) (63,899 ) 68,588
Gain from acquisition, net of tax - - 7,062 - -
Noncash goodwill impairment charges - (210,590 ) (95,000 ) - -
Severance cost, net of tax benefit - - (1,797 ) - -
Fraud loss provision and subsequent recovery, net of tax benefit - 11,750 - - (10,998 )
Net (loss) income from discontinued operations - (101 ) 513 449 403
Gain from sale of subsidiary, net of income taxes and selling costs - 1,266 - - -
Net (loss) income (226,746 ) (502,344 ) (228,327 ) (63,450 ) 57,993
Preferred dividends and discount accretion 11,838 10,316 10,242 724 18
Net (loss) income available to common shareholders $ (238,584 ) $ (512,660 ) $ (238,569 ) $ (64,174 ) $ 57,975
PERFORMANCE MEASURES
Per common share:
Diluted operating (loss) earnings from continuing operations (1)(2)(3) $ (5.97 ) $ (16.64 ) $ (12.37 ) $ (6.82 ) $ 7.36
Diluted (loss) earnings from continuing operations (5.97 ) (27.15 ) (19.80 ) (6.82 ) 6.18
Diluted (loss) earnings (5.97 ) (27.09 ) (19.76 ) (6.77 ) 6.22
Cash dividends declared (rounded) - - - .87 1.73
Stock dividends declared (6) - - 3 for 130 2 for 130 -
Book value 6.62 15.40 41.78 84.75 88.52
Tangible book value (5) 6.47 14.80 30.09 51.93 54.62
Key performance ratios:
Return on equity (4) (93.57 )% (85.08 )% (34.40 )% (7.82 )% 7.79 %
Return on assets (3.15 ) (6.61 ) (2.76 ) (.76 ) .75
Net interest margin 3.44 3.56 3.29 3.18 3.88
Operating efficiency ratio from continuing operations (2)(3) 92.27 98.98 73.97 70.00 55.53
Equity to assets 7.75 10.77 11.12 10.22 9.61
Tangible equity to assets (5) 7.62 8.88 8.33 6.67 6.63
Tangible common equity to assets (5) 3.74 6.52 6.15 6.57 6.63
Tangible common equity to risk-weighted assets (5) 8.22 5.64 10.39 8.34 8.21
ASSET QUALITY *
Non-performing loans $ 127,479 $ 179,094 $ 264,092 $ 190,723 $ 28,219
Foreclosed properties 32,859 142,208 120,770 59,768 18,039
Total non-performing assets (NPAs) 160,338 321,302 384,862 250,491 46,258
Allowance for loan losses 114,468 174,695 155,602 122,271 89,423
Operating net charge-offs (1) 311,227 215,657 276,669 151,152 21,834
Allowance for loan losses to loans 2.79 % 3.79 % 3.02 % 2.14 % 1.51 %
Operating net charge-offs to average loans (1) 7.33 4.42 5.03 2.57 .38
NPAs to loans and foreclosed properties 3.87 6.77 7.30 4.35 .78
NPAs to total assets 2.30 4.42 4.81 2.92 .56
AVERAGE BALANCES ($ in millions)
Loans $ 4,307 $ 4,961 $ 5,548 $ 5,891 $ 5,735
Investment securities 1,999 1,453 1,656 1,489 1,278
Earning assets 6,785 6,822 7,465 7,504 7,071
Total assets 7,189 7,605 8,269 8,319 7,731
Deposits 6,275 6,373 6,713 6,524 6,029
Shareholders' equity 557 819 920 850 743
Common shares - Basic (thousands) 39,943 18,925 12,075 9,474 9,190
Common shares - Diluted (thousands) 39,943 18,925 12,075 9,474 9,319
AT YEAR END ($ in millions)
Loans * $ 4,110 $ 4,604 $ 5,151 $ 5,705 $ 5,929
Investment securities 2,120 1,490 1,530 1,617 1,357
Total assets 6,983 7,276 8,000 8,592 8,207
Deposits 6,098 6,469 6,628 7,004 6,076
Shareholders' equity 575 469 962 989 832
Common shares outstanding (thousands) 57,561 18,937 18,809 9,602 9,381
(1) Excludes pre-tax provision for fraud-related loan losses and related charge-offs of $18 million, net of income tax benefit of $7 million in 2007 and subsequent recovery of $11.8 million in 2010. (2) Excludes the gain from acquisition of $11.4 million, net of income tax expense of $4.3 million in 2009. (3) Excludes the goodwill impairment charges of $211 million and $95 million in 2010 and 2009, respectively, and severance costs of $2.9 million, net of income tax benefit of $1.1 million in 2009. (4) Net (loss) income available to common shareholders, which is net of preferred stock dividends, divided by average realized common equity, which excludes accumulated other comprehensive income (loss). (5) Excludes effect of acquisition related intangibles and associated amortization. (6) Number of new shares issued for shares currently held.
* Excludes loans and foreclosed properties covered by loss sharing agreements with the FDIC.

UNITED COMMUNITY BANKS, INC.
Operating Earnings to GAAP Earnings Reconciliation
Selected Financial Information
2011 2010
Fourth
Quarter
Third
Quarter
Second
Quarter
First
Quarter
Fourth
Quarter
(in thousands, except per share data; taxable equivalent)
Interest revenue reconciliation
Interest revenue - taxable equivalent $ 71,905 $ 74,543 $ 76,931 $ 75,965 $ 81,215
Taxable equivalent adjustment (423 ) (420 ) (429 ) (435 ) (497 )
Interest revenue (GAAP) $ 71,482 $ 74,123 $ 76,502 $ 75,530 $ 80,718
Net interest revenue reconciliation
Net interest revenue - taxable equivalent $ 59,050 $ 59,281 $ 58,946 $ 56,392 $ 60,132
Taxable equivalent adjustment (423 ) (420 ) (429 ) (435 ) (497 )
Net interest revenue (GAAP) $ 58,627 $ 58,861 $ 58,517 $ 55,957 $ 59,635
Provision for loan losses reconciliation
Operating provision for loan losses $ 14,000 $ 36,000 $ 11,000 $ 190,000 $ 47,750
Provision for special fraud-related loan loss and partial recovery - - - - (11,750 )
Provision for loan losses (GAAP) $ 14,000 $ 36,000 $ 11,000 $ 190,000 $ 36,000
Fee revenue reconciliation
Operating fee revenue $ 12,667 $ 11,498 $ 13,905 $ 11,838 $ 12,442
Gain from acquisition - - - - -
Fee revenue (GAAP) $ 12,667 $ 11,498 $ 13,905 $ 11,838 $ 12,442
Total revenue reconciliation
Total operating revenue $ 57,717 $ 34,779 $ 61,851 $ (121,770 ) $ 24,824
Taxable equivalent adjustment (423 ) (420 ) (429 ) (435 ) (497 )
Gain from acquisition - - - - -
Provision for special fraud-related loan loss and partial recovery - - - - 11,750
Total revenue (GAAP) $ 57,294 $ 34,359 $ 61,422 $ (122,205 ) $ 36,077
Expense reconciliation
Operating expense $ 51,080 $ 46,520 $ 48,728 $ 115,271 $ 64,918
Noncash goodwill impairment charge - - - - -
Severance costs - - - - -
Operating expense (GAAP) $ 51,080 $ 46,520 $ 48,728 $ 115,271 $ 64,918
Income (loss) from continuing operations before taxes reconciliation
Operating income (loss) from continuing operations before taxes $ 6,637 $ (11,741 ) $ 13,123 $ (237,041 ) $ (40,094 )
Taxable equivalent adjustment (423 ) (420 ) (429 ) (435 ) (497 )
Gain from acquisition - - - - -
Noncash goodwill impairment charge - - - - -
Severance costs - - - - -
Provision for special fraud-related loan loss and partial recovery - - - - 11,750
Income (loss) from continuing operations before taxes (GAAP) $ 6,214 $ (12,161 ) $ 12,694 $ (237,476 ) $ (28,841 )
Income tax (benefit) expense reconciliation
Operating income tax (benefit) expense $ (3,264 ) $ (402 ) $ 1,095 $ 295 $ 144,760
Taxable equivalent adjustment (423 ) (420 ) (429 ) (435 ) (497 )
Gain from acquisition, tax expense - - - - -
Severance costs, tax benefit - - - - -
Provision for special fraud-related loan loss tax benefit - - - - -
Income tax (benefit) expense (GAAP) $ (3,687 ) $ (822 ) $ 666 $ (140 ) $ 144,263
Diluted earnings (loss) from continuing operations per common share reconciliation
Diluted operating earnings (loss) from continuing operations per common share $ .12 $ (.25 ) $ .16 $ (13.00 ) $ (9.87 )
Gain from acquisition - - - - -
Noncash goodwill impairment charge - - - - -
Severance costs - - - - -
Provision for special fraud-related loan loss and partial recovery - - - - .62
Diluted earnings (loss) from continuing operations per common share (GAAP) $ .12 $ (.25 ) $ .16 $ (13.00 ) $ (9.25 )
Book value per common share reconciliation
Tangible book value per common share $ 6.47 $ 6.61 $ 6.94 $ 1.69 $ 14.80
Effect of goodwill and other intangibles .15 .16 .17 .51 .60
Book value per common share (GAAP) $ 6.62 $ 6.77 $ 7.11 $ 2.20 $ 15.40
Efficiency ratio from continuing operations reconciliation
Operating efficiency ratio from continuing operations 71.23 % 65.73 % 66.88 % 169.08 % 89.45 %
Gain from acquisition - - - - -
Noncash goodwill impairment charge - - - - -
Severance costs - - - - -
Efficiency ratio from continuing operations (GAAP) 71.23 % 65.73 % 66.88 % 169.08 % 89.45 %
Average equity to assets reconciliation
Tangible common equity to assets 5.38 % 5.65 % 1.37 % 2.70 % 5.22 %
Effect of preferred equity 2.78 2.77 6.56 3.31 2.42
Tangible equity to assets 8.16 8.42 7.93 6.01 7.64
Effect of goodwill and other intangibles .12 .13 .13 .14 .16
Equity to assets (GAAP) 8.28 % 8.55 % 8.06 % 6.15 % 7.80 %
Actual tangible common equity to risk-weighted assets reconciliation
Tangible common equity to risk-weighted assets 8.22 % 8.52 % 8.69 % .75 % 5.64 %
Effect of other comprehensive income (.03 ) (.29 ) (.42 ) (.32 ) (.42 )
Effect of deferred tax limitation - - - - -
Effect of trust preferred 1.18 1.19 1.15 1.13 1.06
Effect of preferred equity 4.27 4.33 4.20 5.87 3.53
Tier I capital ratio (Regulatory) 13.64 % 13.75 % 13.62 % 7.43 % 9.81 %
Net charge-offs reconciliation
Operating net charge-offs $ 45,624 $ 17,546 $ 16,483 $ 231,574 $ 47,668
Subsequent partial recovery of fraud-related charge-off - - - - (11,750 )
Net charge-offs (GAAP) $ 45,624 $ 17,546 $ 16,483 $ 231,574 $ 35,918
Net charge-offs to average loans reconciliation
Operating net charge-offs to average loans 4.39 % 1.68 % 1.58 % 20.71 % 4.03 %
Subsequent partial recovery of fraud-related charge-off - - - - (1.00 )
Net charge-offs to average loans (GAAP) 4.39 % 1.68 % 1.58 % 20.71 % 3.03 %

UNITED COMMUNITY BANKS, INC.
Operating Earnings to GAAP Earnings Reconciliation
Selected Financial Information
For the Twelve Months Ended
(in thousands, except per share data; taxable equivalent) 2011 2010 2009 2008 2007
Interest revenue reconciliation
Interest revenue - taxable equivalent $ 299,344 $ 343,123 $ 404,961 $ 466,969 $ 550,917
Taxable equivalent adjustment (1,707 ) (2,001 ) (2,132 ) (2,261 ) (1,881 )
Interest revenue (GAAP) $ 297,637 $ 341,122 $ 402,829 $ 464,708 $ 549,036
Net interest revenue reconciliation
Net interest revenue - taxable equivalent $ 233,669 $ 243,052 $ 245,227 $ 238,704 $ 274,483
Taxable equivalent adjustment (1,707 ) (2,001 ) (2,132 ) (2,261 ) (1,881 )
Net interest revenue (GAAP) $ 231,962 $ 241,051 $ 243,095 $ 236,443 $ 272,602
Provision for loan losses reconciliation
Operating provision for loan losses $ 251,000 $ 234,750 $ 310,000 $ 184,000 $ 37,600
Provision for special fraud-related loan loss and partial recovery - (11,750 ) - - 18,000
Provision for loan losses (GAAP) $ 251,000 $ 223,000 $ 310,000 $ 184,000 $ 55,600
Fee revenue reconciliation
Operating fee revenue $ 49,908 $ 48,548 $ 50,964 $ 46,081 $ 53,701
Gain from acquisition - - 11,390 - -
Fee revenue (GAAP) $ 49,908 $ 48,548 $ 62,354 $ 46,081 $ 53,701
Total revenue reconciliation
Total operating revenue $ 32,577 $ 56,850 $ (13,809 ) $ 100,785 $ 290,584
Taxable equivalent adjustment (1,707 ) (2,001 ) (2,132 ) (2,261 ) (1,881 )
Gain from acquisition - - 11,390 - -
Provision for special fraud-related loan loss and partial recovery - 11,750 - - (18,000 )
Total revenue (GAAP) $ 30,870 $ 66,599 $ (4,551 ) $ 98,524 $ 270,703
Expense reconciliation
Operating expense $ 261,599 $ 288,301 $ 217,050 $ 200,335 $ 181,730
Noncash goodwill impairment charge - 210,590 95,000 - -
Severance costs - - 2,898 - -
Operating expense (GAAP) $ 261,599 $ 498,891 $ 314,948 $ 200,335 $ 181,730
Income (loss) from continuing operations before taxes reconciliation
Operating income (loss) from continuing operations before taxes $ (229,022 ) $ (231,451 ) $ (230,859 ) $ (99,550 ) $ 108,854
Taxable equivalent adjustment (1,707 ) (2,001 ) (2,132 ) (2,261 ) (1,881 )
Gain from acquisition - - 11,390 - -
Noncash goodwill impairment charge - (210,590 ) (95,000 ) - -
Severance costs - - (2,898 ) - -
Provision for special fraud-related loan loss and partial recovery - 11,750 - - (18,000 )
Income (loss) from continuing operations before taxes (GAAP) $ (230,729 ) $ (432,292 ) $ (319,499 ) $ (101,811 ) $ 88,973
Income tax (benefit) expense reconciliation
Operating income tax (benefit) expense $ (2,276 ) $ 73,218 $ (91,754 ) $ (35,651 ) $ 40,266
Taxable equivalent adjustment (1,707 ) (2,001 ) (2,132 ) (2,261 ) (1,881 )
Gain from acquisition, tax expense - - 4,328 - -
Severance costs, tax benefit - - (1,101 ) - -
Provision for special fraud-related loan loss tax benefit - - - - (7,002 )
Income tax (benefit) expense (GAAP) $ (3,983 ) $ 71,217 $ (90,659 ) $ (37,912 ) $ 31,383
Diluted earnings (loss) from continuing operations per common share reconciliation
Diluted operating earnings (loss) from continuing operations per common share $ (5.97 ) $ (16.64 ) $ (12.37 ) $ (6.82 ) $ 7.36
Gain from acquisition - - .58 - -
Noncash goodwill impairment charge - (11.13 ) (7.86 ) - -
Severance costs - - (.15 ) - -
Provision for special fraud-related loan loss and partial recovery - .62 - - (1.18 )
Diluted earnings (loss) from continuing operations per common share (GAAP) $ (5.97 ) $ (27.15 ) $ (19.80 ) $ (6.82 ) $ 6.18
Book value per common share reconciliation
Tangible book value per common share $ 6.47 $ 14.80 $ 30.09 $ 51.93 $ 54.62
Effect of goodwill and other intangibles .15 .60 11.69 32.82 33.90
Book value per common share (GAAP) $ 6.62 $ 15.40 $ 41.78 $ 84.75 $ 88.52
Efficiency ratio from continuing operations reconciliation
Operating efficiency ratio from continuing operations 97.27 % 98.98 % 73.97 % 70.00 % 55.53 %
Gain from acquisition - - (2.77 ) - -
Noncash goodwill impairment charge - 72.29 31.17 - -
Severance costs - - .95 - -
Efficiency ratio from continuing operations (GAAP) 97.27 % 171.27 % 103.32 % 70.00 % 55.53 %
Average equity to assets reconciliation
Tangible common equity to assets 3.74 % 6.52 % 6.15 % 6.57 % 6.63 %
Effect of preferred equity 3.88 2.36 2.18 .10 -
Tangible equity to assets 7.62 8.88 8.33 6.67 6.63
Effect of goodwill and other intangibles .13 1.89 2.79 3.55 2.98
Equity to assets (GAAP) 7.75 % 10.77 % 11.12 % 10.22 % 9.61 %
Actual tangible common equity to risk-weighted assets reconciliation
Tangible common equity to risk-weighted assets 8.22 % 5.64 % 10.39 % 8.34 % 8.21 %
Effect of other comprehensive income (.03 ) (.42 ) (.87 ) (.91 ) (.23 )
Effect of deferred tax limitation - - (1.27 ) - -
Effect of trust preferred 1.18 1.06 .97 .88 .65
Effect of preferred equity 4.27 3.53 3.19 2.90 -
Tier I capital ratio (Regulatory) 13.64 % 9.81 % 12.41 % 11.21 % 8.63 %
Net charge-offs reconciliation
Operating net charge-offs $ 311,227 $ 215,657 $ 276,669 $ 151,152 $ 21,834
Subsequent partial recovery of fraud-related charge-off - (11,750 ) - - 18,000
Net charge-offs (GAAP) $ 311,227 $ 203,907 $ 276,669 $ 151,152 $ 39,834
Net charge-offs to average loans reconciliation
Operating net charge-offs to average loans 4.39 % 4.42 % 5.03 % 2.57 % .38 %
Subsequent partial recovery of fraud-related charge-off - (.25 ) - - .31
Net charge-offs to average loans (GAAP) 4.39 % 4.17 % 5.03 % 2.57 % .69 %

UNITED COMMUNITY BANKS, INC.
Financial Highlights
Loan Portfolio Composition at Period-End (1)
2011 2010
Fourth Third Second First Fourth
(in millions) Quarter Quarter Quarter Quarter Quarter
LOANS BY CATEGORY
Commercial (sec. by RE) $ 1,822 $ 1,771 $ 1,742 $ 1,692 $ 1,761
Commercial construction 164 169 195 213 297
Commercial & industrial 428 429 428 431 441
Total commercial 2,414 2,369 2,365 2,336 2,499
Residential construction 448 474 502 550 695
Residential mortgage 1,135 1,150 1,177 1,187 1,279
Consumer / installment 113 117 119 121 131
Total loans $ 4,110 $ 4,110 $ 4,163 $ 4,194 $ 4,604
LOANS BY MARKET
Atlanta MSA $ 1,220 $ 1,192 $ 1,188 $ 1,179 $ 1,310
Gainesville MSA 265 272 275 282 312
North Georgia 1,426 1,478 1,500 1,531 1,689
Western North Carolina 597 607 626 640 702
Coastal Georgia 346 316 325 312 335
East Tennessee 256 245 249 250 256
Total loans $ 4,110 $ 4,110 $ 4,163 $ 4,194 $ 4,604
RESIDENTIAL CONSTRUCTION
Dirt loans
Acquisition & development $ 88 $ 97 $ 105 $ 116 $ 174
Land loans 61 60 62 69 99
Lot loans 207 216 218 228 275
Total 356 373 385 413 548
House loans
Spec 59 64 74 88 97
Sold 33 37 43 49 50
Total 92 101 117 137 147
Total residential construction $ 448 $ 474 $ 502 $ 550 $ 695
RESIDENTIAL CONSTRUCTION - ATLANTA MSA
Dirt loans
Acquisition & development $ 17 $ 19 $ 20 $ 22 $ 30
Land loans 14 15 16 19 23
Lot loans 22 22 22 24 32
Total 53 56 58 65 85
House loans
Spec 27 28 30 34 38
Sold 6 8 9 11 10
Total 33 36 39 45 48
Total residential construction $ 86 $ 92 $ 97 $ 110 $ 133
(1) Excludes total loans of $54.5 million, $57.8 million, $70.8 million, $63.3 million and $68.2 million as of December 31, 2011, September 30, 2011, June 30, 2011, March 31, 2011 and December 31, 2010, respectively, that are covered by the loss-sharing agreement with the FDIC, related to the acquisition of Southern Community Bank.

UNITED COMMUNITY BANKS, INC.
Financial Highlights
Loan Portfolio Composition at Period-End (1)
2011 2010 Linked Year over
Fourth Third Fourth Quarter Year
(in millions) Quarter Quarter Quarter Change Change
LOANS BY CATEGORY
Commercial (sec.by RE) $ 1,822 $ 1,771 $ 1,761 $ 51 $ 61
Commercial construction 164 169 297 (5 ) (133 )
Commercial & industrial 428 429 441 (1 ) (13 )
Total commercial 2,414 2,369 2,499 45 (85 )
Residential construction 448 474 695 (26 ) (247 )
Residential mortgage 1,135 1,150 1,279 (15 ) (144 )
Consumer / installment 113 117 131 (4 ) (18 )
Total loans $ 4,110 $ 4,110 $ 4,604 - (494 )
LOANS BY MARKET
Atlanta MSA $ 1,220 $ 1,192 $ 1,310 28 (90 )
Gainesville MSA 265 272 312 (7 ) (47 )
North Georgia 1,426 1,478 1,689 (52 ) (263 )
Western North Carolina 597 607 702 (10 ) (105 )
Coastal Georgia 346 316 335 30 11
East Tennessee 256 245 256 11 -
Total loans $ 4,110 $ 4,110 $ 4,604 - (494 )
RESIDENTIAL CONSTRUCTION
Dirt loans
Acquisition & development $ 88 $ 97 $ 174 (9 ) (86 )
Land loans 61 60 99 1 (38 )
Lot loans 207 216 275 (9 ) (68 )
Total 356 373 548 (17 ) (192 )
House loans
Spec 59 64 97 (5 ) (38 )
Sold 33 37 50 (4 ) (17 )
Total 92 101 147 (9 ) (55 )
Total residential construction $ 448 $ 474 $ 695 (26 ) (247 )
RESIDENTIAL CONSTRUCTION - ATLANTA MSA
Dirt loans
Acquisition & development $ 17 $ 19 $ 30 (2 ) (13 )
Land loans 14 15 23 (1 ) (9 )
Lot loans 22 22 32 - (10 )
Total 53 56 85 (3 ) (32 )
House loans
Spec 27 28 38 (1 ) (11 )
Sold 6 8 10 (2 ) (4 )
Total 33 36 48 (3 ) (15 )
Total residential construction $ 86 $ 92 $ 133 (6 ) (47 )
(1) Excludes total loans of $54.5 million, $57.8 million, $70.8 million, $63.3 million and $68.2 million as of December 31, 2011, September 30, 2011, June 30, 2011, March 31, 2011 and December 31, 2010, respectively, that are covered by the loss-sharing agreement with the FDIC, related to the acquisition of Southern Community Bank.

UNITED COMMUNITY BANKS, INC.
Financial Highlights
Loan Portfolio Composition at Year-End (1)
(in millions) 2011 2010 2009 2008 2007
LOANS BY CATEGORY
Commercial (sec. by RE) $ 1,822 $ 1,761 $ 1,779 $ 1,627 $ 1,476
Commercial construction 164 297 363 500 527
Commercial & industrial 428 441 390 410 418
Total commercial 2,414 2,499 2,532 2,537 2,421
Residential construction 448 695 1,050 1,479 1,829
Residential mortgage 1,135 1,279 1,427 1,526 1,502
Consumer / installment 113 131 142 163 177
Total loans $ 4,110 $ 4,604 $ 5,151 $ 5,705 $ 5,929
LOANS BY MARKET
Atlanta MSA $ 1,220 $ 1,310 $ 1,435 $ 1,706 $ 2,002
Gainesville MSA 265 312 390 420 399
North Georgia 1,426 1,689 1,884 2,040 2,060
Western North Carolina 597 702 772 810 806
Coastal Georgia 346 335 405 464 416
East Tennessee 256 256 265 265 246
Total loans $ 4,110 $ 4,604 $ 5,151 $ 5,705 $ 5,929
(1) Excludes total loans of $54.5 million, $68.2 million and $85.1 million as of December 31, 2011, 2010 and 2009, respectively, that are covered by the loss-sharing agreement with the FDIC, related to the acquisition of Southern Community Bank.

UNITED COMMUNITY BANKS, INC.
Financial Highlights
Credit Quality (1)
Fourth Quarter 2011
Non-performing Foreclosed Total
(in thousands) Loans Properties NPAs
NPAs BY CATEGORY
Commercial (sec.by RE) $ 27,322 $ 9,745 $ 37,067
Commercial construction 16,655 3,336 19,991
Comm