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United Community posts loss, cuts jobs

Atlanta Business Chronicle – by Joe Rauch Staff Writer


United Community Banks Inc. reported a $103 million loss after $70 million in goodwill impairment charges in first quarter 2009 and is cutting 9 percent of its workforce as credit issues persist at the bank, according to its first quarter earnings announcement early Thursday.

The job cuts, totaling 191 of the bank’s roughly 1,900 employees, are the first major cutbacks for Georgia’s third largest bank, based in Blairsville.

United Community (NASDAQ: UCBI) expects to save $10 million annually from the cuts, according to its earnings release.

Chief Financial Officer Rex Schuette, in a separate interview, said most of the employees were let go by March 31, with additional rounds of cuts scheduled for the rest of the year.

“We were staffed to be a $9 billion or $10 billion bank,” said Schuette, who added the cuts come from the over-arching holding company, and the 27 subsidiary banks across its operating footprint.

David Shearrow, United Community’s chief risk officer, said it was “a very, very difficult” thing to do, “but we felt it is the right thing to do for United long-term.”

The news of the cuts comes as the bank reported a $32 million operating loss during the quarter, and a $70 million goodwill impairment charge that created the total loss during the first three months of 2009.

Credit problems continue to dominate the bank’s balance sheet, even as some operating metrics are improving.

The primary driver behind the operating loss was a $65 million provision for loan losses, as both revenue and expenses remained relatively stable at the bank.

The loan loss provision was the third consecutive loan loss expense taken the bank, dating back to third quarter last year. But the figure was a slight decline from the charges in both third and fourth quarter 2008.

United Community also reported loan charge-offs dipped from $74 million at the end of 2008 to $46 million in the first three months of the year, a 38 percent drop.

Other credit metrics worsened, however.

Nonperforming loans climbed from $190 million at year-end 2008 to $259 million in first quarter 2009, a 36 percent increase, and the amount of foreclosed property owned by the bank spiked 26 percent to $79 million.

Some of the increase was due to the bank’s hesitancy to sell some foreclosed homes and repossessed lots as prices for both softened during the quarter to levels below what the bank felt were acceptable, Shearrow said.

But the vast majority of those loan issues remain around metro Atlanta.

United Community reported $179 million in assets around the city during first quarter, roughly double the next largest geographic problem loan area, which was North Georgia at $87 million.

Shearrow said that while the bank isn’t issuing long-term guidance on 2009, he sees the mixed credit news with some optimism.

“The Atlanta market’s been in this turnaround for two years now,” he said. “My personal sense is we’re getting through some of these challenges, and we have more of this behind us than we do in front of us.”