United Community Banks to sell up to $300M in stock

By Paul Donsky

The Atlanta Journal-Constitution

United Community Banks, which has been battered by the real estate downturn, notified regulators Tuesday that it intends to sell up to $300 million in stock to shore up its balance sheet.

Blairsville-based United, the state’s third-largest bank, said in a filing with the Securities and Exchange Commission that it had been “encouraged” by federal regulators to raise capital “in light of our continuing credit weakness.”

United also said regulators who are currently examining the bank indicated they expect to recommend that the company be placed under increased regulatory scrutiny. In the filing, the bank said it believes that raising funds will limit the scope of any enforcement action.

It’s not clear how much money United will ultimately try to raise. Analysts said recently that United may need $150 million to $175 million to bolster its reserves and ride out the downturn.

Any capital raised would come on top of $180 million the bank received last year from the U.S. Treasury as part of the government’s effort to stabilize the financial industry. The government purchased nonvoting preferred shares.

In a recent interview, United’s chief financial officer, Rex Schutte, said the bank was a bit wary about issuing stock to raise money because that would dilute existing shares. Schutte did say that raising money could help the company acquire failed banks.

United has lost about $200 million over the past year, according to data from the Federal Deposit Insurance Corp. At the end of the second quarter, the bank reported $439 million in problem loans, including loans that have been foreclosed on.