KBRA Comments on United Community Banks, Inc.’s Proposed Subordinated Note Issuance
Kroll Bond Rating Agency (KBRA) currently maintains BBB+ senior unsecured and BBB subordinated debt ratings for United Community
Banks, Inc. (NASDAQ: UCBI) (“the Company”); the holding company for Blairsville, Georgia based, United Community Bank, which is
rated A- at the senior unsecured level. The Outlook for all long-term ratings is Stable. Having announced the acquisition of
Navitas Credit Corp (“Navitas”), an equipment finance company, on January 8, UCBI’s proposed public offering of subordinated notes
is projected to be utilized primarily to fund the cash portion (65%) of the estimated $130 million purchase price. In addition to
supplementing UCBI’s suite of commercial product offerings, the proposed Navitas merger complements its other nationwide product in
the form of its SBA business. However, with approximately $350 million in loans, as compared to UCBI’s $7.2 billion loan portfolio,
the Navitas merger is projected to have only a modest impact on UCBI’s bottom line and strategic direction.
With the Navitas transaction expected to close during the first quarter of 2018, UCBI’s capital ratios are expected to decline
by approximately 50 bps in the first quarter of 2018. This follows a smaller anticipated fourth quarter 2017 slippage resulting
principally from the reduction of the company’s deferred tax asset that is estimated to be in the $37 - $41 million range. UCBI
management currently anticipates rebuilding capital during the balance of 2018 to levels similar to those exhibited in recent
periods, which include a tangible common equity ratio in the 9% range.
As a reminder, in February 2017, KBRA upgraded UCBI’s senior unsecured and subordinated debt ratings, as well as its short-term
debt rating, owing principally to improved operating performance, which among other drivers, has benefitted from favorable asset
quality, as well as the company’s low-cost core deposit base. Ratings are also reflective of KBRA’s positive perspective
surrounding UCBI’s experienced management team and risk management infrastructure.
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About KBRA and KBRA Europe
KBRA is a full service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. In
addition, KBRA is recognized by the National Association of Insurance Commissioners as a Credit Rating Provider and a certified
Credit Rating Agency (CRA) by the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe Limited is
registered with ESMA as a CRA.
Analytical:
Kroll Bond Rating Agency
Ben Stewart, 301-969-3186
Associate Director
bstewart@kbra.com
or
Ian Jaffe, 646-731-3302
Senior Director
ijaffe@kbra.com
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