United Community Banks, the third-largest banking company based in Georgia, said Monday that it will defer quarterly dividend payments on its government aid.
The move follows a decision last month to suspend interest payments on other debts.
Monday's announcement, which was not unexpected, will help the company preserve liquidity and comply with Federal Reserve rules concerning dividend payments by banks operating in stressed markets.
United is the largest bank in Georgia to defer its Troubled Asset Relief Program payments. State laws have restricted some smaller institutions from paying TARP dividends.
The deferral will not affect customer accounts or bank operations, said Craig Metz, a United spokesman.
United, based in Blairsville and the No. 8 bank by market share in metro Atlanta, has struggled with a loan portfolio heavy on real estate. The bank hasn’t turned a profit in more than two years, though asset problems have improved.
The bank received $180 million in federal assistance under TARP. Until now, the bank has made scheduled quarterly payments totaling $17.5 million. Interest will continue to accrue during the deferral. The bank can delay payments without penalty for up to six consecutive quarters.
Last month, United announced it would defer interest payments, also at the prompting of the Fed, on $54.6 million in certain long-term debt. At the time, bank officials said a decision on TARP payments was pending.
Chris Marinac, a bank analyst with FIG Partners in Atlanta, credited United with doing “a yeoman’s job” shedding its balance sheet of soured loans.
The bank, he said, needs fresh investor cash to help repay the government. United is considering plans to strengthen its balance sheet, including selling more stock.
Marinac said United will be a survivor, and with more investor cash it could go on offense and gobble up weaker rivals.
“It’s a question of what’s the easiest path of success and independence. It's raising capital,” he said.
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