United Community Banks Inc. (UCBI) reported third-quarter results on Friday. The company posted its fifth-straight quarterly net operating loss of $43.7 million, or 93 cents per share, compared to net operating loss of $39.9 million, or 84 cents per share in the year-ago quarter. The result also missed the Zacks Consensus Estimate for a 91-cents loss.

The company said total loans at quarter-end fell to $5.4 billion from $5.8 billion in the year-ago period. The decline was primarily driven by management’s efforts to reduce exposure to the residential construction market. The company’s residential construction loan book, which was 22% of total loans during the quarter, shrunk 25.8% to $1.2 billion. In terms of loan markets, approximately 36.2% of total loans originated in North Georgia, while about 28.5% came in from Atlanta .

Net interest revenue grew 7.2% year over year to $63.0 million, while net interest margin expanded 22 basis points (bps) to 3.39%. The growth in margin was primarily the result of United Community’s loan strategy, which was skewed towards higher spreads coupled with efforts to raise low cost deposits by reducing rates on new and renewed time deposits. Provision for loan losses increased 25% year over year to $95.0 million, while non-performing assets almost doubled to $415.0 million from $177.7 million a year-ago as the company faced continued headwinds in housing and construction markets.

The company’s operating fee revenue recorded a growth of 19.4% year over year to $15.7 million. The expansion was driven by higher consulting fees due to increased demand for assistance with regulatory compliance matters and growth in mortgage fees due to higher refinancing. Operating expenses reduced nearly 6% year over year to $53.6 million on account of reduced foreclosed property costs and lower salary and benefit expenses as the company slashed workforce by 174 since the beginning of the year.

In an effort to strengthen the balance sheet and boost capital adequacy ratios, United Community raised $222.5 million through a public offering of 44.5 million shares. As a result of the stock offer, United Community’s tier I capital ratio, at quarter-end, improved to 12.73% from 8.66% in the year-ago period, while tangible equity-to-assets ratio increased to 7.55% from 6.64% last year.

Moving forward, United Community, which acquired Southern Community Bank during June in a Federal Deposit Insurance Corp. (FDIC) assisted deal, anticipates a return to profitability in the next year as management moves aggressively to shed problem credits. Meanwhile, the Zacks Consensus Estimate on the company’s full-year earnings is currently pegged at a loss of $2.34 per share, which has worsened by 24 cents over the past month as all 5 covering analysts lowered expectations.
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