United Community Misses

United Community Banks Inc. (UCBI - Snapshot Report) reported fourth quarter results on Friday. The company posted a net operating loss of $39.8 million, or 45 cents per share, compared to net operating loss of $46.7 million, or 99 cents per share in the year-ago quarter. The result came in worse than the Zacks Consensus Estimate for a loss of 43 cents.
 
The company said total loans at quarter-end fell to $5.2 billion from $5.7 billion in the year-ago period. The decline was caused by continued sluggishness in residential construction market. United Community’s residential construction loan book, which was 20% of total loans during the quarter, decreased 29% to $1.1 billion. In terms of loan markets, approximately 36.6% of total loans originated in North Georgia, while about 27.9% came from Atlanta.
 
Fully taxable equivalent net interest revenues rose by 23.2% year over year to $63.9 million, while net interest margin expanded 70 basis points (bps) to 3.40%. United Community’s provision for loan losses increased 5.9% to $90.0 million, while non-performing assets jumped to $384.9 million from $250.5 million a year-ago as the company faced continued headwinds in housing and construction markets.
 
United Community’s operating fee revenues recorded a growth of 60.7% to $17.2 million. The growth was mainly driven by higher consulting fees and robust gains in securities. Operating expenses increased 19.2% to $62.5 million primarily on account of higher foreclosed property costs as well as increased salary and benefit expenses.
 
At the end of the quarter, United Community’s tier I capital ratio, improved to 12.41% from 11.21% in the year-ago period, while tangible equity-to-assets ratio increased to 10.39% from 8.34% last year.
 
Looking ahead, United Community expects to benefit from reduced deposit costs in 2010 primarily on certificates of deposit (CDs) while maintaining loan pricing, which will lead to further improvement in margins. The Zacks Consensus Estimate, derived from 9 covering analysts, on the company’s earnings for 2010 is currently pegged at a loss of 64 cents per share, which has improved by 4 cents over the past month. The most accurate estimate is even bullish at a loss of 40 cents per share, indicating a potential upside of 37.5% over the Zacks Consensus Estimate.

Read the full analyst report on UCBI