United Community defers debenture payments tied to trust preferreds

By Caroline Salls

Pittsburgh, Jan. 3 - United Community Banks, Inc. will exercise its right to defer regularly scheduled interest payments on its $54.6 million of outstanding junior subordinated debentures related to its trust preferred securities, according to a company news release.

The company said the decision was the result of Federal Reserve policies related to dividend and other interest payments in light of stressed market conditions.

United said it took this action in consultation with the Federal Reserve Bank of Atlanta as required by the company's existing board resolution that was previously adopted at the request of the Federal Reserve.

United can defer interest payments for consecutive periods of up to five years without default or penalty under the terms of the trust preferred agreements.

The interest on these trust preferred securities will continue to accrue for payment in the future and will be reported as interest expense for financial statement purposes.

The deferral of these cash payments would total $4.7 million on an annual basis, according to the release.

The company said all of its capital ratios were above the well-capitalized minimum under regulatory guidelines as of Sept. 30, with United's total risk-based capital ratio at 12.99%, tier 1 risk-based capital at 10.42% and tier I leverage ratio at 7.32%.

"Although United's holding company has sufficient capital and liquidity to pay preferred dividends and trust preferred interest payments through most of 2011 without generating additional funds from the bank, the action taken today will improve the holding company's liquidity position," United president and chief executive officer Jimmy Tallent said in the release.

"Maintaining strong capital and liquidity are a top priority while managing through this difficult economic cycle.

"Further, bank regulators are insisting that minimum capital levels required for well-capitalized status during periods of economic stability continue to be maintained at higher levels throughout the current economic cycle despite loan loss reserves at extraordinary levels.

"Although we plan to pay interest and dividends on our obligations in the future, at this time we believe deferral of these payments is in the best long-term interest of all our stakeholders.

"Since the beginning of the credit crisis, we have successfully executed a number of initiatives which have reduced our credit exposures and enhanced the underlying strength of our balance sheet and capital position.

"Given the current operating and regulatory environment, we continue to evaluate and analyze various balance sheet and capital alternatives to further strengthen our overall capital position."

The bank holding company is based in Blairsville, Ga.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.