United Community Banks defers debt payment

United Community Banks, the third-largest bank based in Georgia, said Monday it will defer regularly scheduled interest payments on $54.6 million in outstanding debt.

The move is designed to preserve liquidity and comply with Federal Reserve rules, the Blairsville-based bank said in a news release, and is not an act of default.

United remains “well-capitalized” by regulatory standards, and Monday’s announcement has no effect on operations or customer accounts, said Rex S. Schuette, United chief financial officer.

The payments are related to trust preferred securities issued by the bank. They are a form of long-term debt that also acts like equity.

United, which has lost money for eight straight quarters, said the decision helps the bank holding company comply with Federal Reserve policies related to interest and dividend payments by banks in “stressed market conditions.” The payments would equal $4.7 million per year, and interest will continue to accrue during the deferral.

United said it consulted with the Federal Reserve Bank of Atlanta in taking the action and can defer the interest payments for up to five years.

United President and CEO Jimmy Tallent said the bank has the cash to pay preferred dividends and interest through November, and the decision boosts liquidity. Tallent said in the release the bank will “continue to evaluate and analyze various balance sheet and capital alternatives to further strengthen our overall capital position."

The bank lost $236.4 million in the third quarter of 2010, including a $210.6 million non-cash charge. The bank continues to be stung by soured residential development loans in North Georgia and metro Atlanta.

United has $7 billion in assets and about 100 branches in Georgia, North Carolina and Tennessee.

Chris Marinac, bank analyst with FIG Partners in Atlanta, said the Fed also could allow United to defer quarterly dividend payments on its $180 million in federal bailout funds.

Marinac said he expects United to outline a plan to boost capital, potentially through a stock or asset sale, later this month during its fourth quarter conference call.

Schuette said a decision on TARP dividend payments will be made with the Fed in February, and the bank continues to work to improve its balance sheet and capital.