An official with United Community Bank, which has branches in Newton and Rockdale counties, says recently reported additional income tax expenses shouldn't have any bearing on day-to-day business.
Tim Heard, president of United Community Bank's three Forsyth branches, said a determination by the bank's corporate leaders to restate its financial results for the 2010 fiscal year and first three quarters of 2011 won't change business.
"We're very well capitalized and we have a lot of liquidity," he said. "We've won the JD Powers award for outstanding customer service for the past two years in a row, so this won't affect our banking operations in the least."
Craig Metz, executive vice president of marketing for United Community, reiterated, “This doesn’t affect customers at all. It’s a fairly arcane tax and accounting issue.” He added, “We’re happy to report we had a profit in the fourth quarter.”
According to reports from United Community Bank's corporate offices in Blairsville, the bank earlier this month "determined an additional income tax expense of $156.7 million."
As a result, the report goes on to state, "the revision for the fourth quarter of 2010 will increase the previously reported loss of $16.4 million to $173.1 million ... and will increase the previously reported net loss for the full year 2010 of $345.6 million to $502.3 million."
After the announcement, United Community’s share fell in value from $7.24 on Jan. 5 to $6.49 on Jan. 6. As a result of the drop in stock value, according to the bank's Web site, the law firm of Levi Korinsky in New York is investigating a potential suit against it on behalf of stockholders. The Shareholders Foundation also launched a probe into the matter, according to its Web site.
Metz said a large portion of the difference in the net losses stems from the bank's problem asset disposition plan.
"We set out in the first quarter [of 2011] to purposefully get some properties and foreclosures off our books," he said.
The other part of the difference comes from tax practices. Under IRS rules, Metz said, businesses that lose money can deduct taxes through a mechanism called deferred tax assets.
Alan Kumler, United Community’s chief accounting officer, said “As we make money, we have to pay taxes. When we lose money, we file a tax return. For the loss, we get a net operating loss carry forward. When we lose money, we hold that as an asset on our books and we use that as our tax payment, rather than paying in cash.
“We expect to use those tax carry forwards. We just can’t use them right now,” he said. “We don’t expect it to affect our company at all. In the future, we expect a big gain,” when those carry forwards are used.
In a statement, United Community Bank President and CEO Jimmy Tallant called the accounting treatment for deferred tax assets "complex and requires a great deal of judgment."
"While we continue to believe it is likely that we will realize all of our net deferred tax assets many years prior to their expiration, the [U.S. Securities and Exchange Commission] questioned the weighting of negative and positive factors affecting our ability to accurately project our long-term taxable earnings," he said. "By taking these actions, we have now resolved the SEC's concern."
Metz described the system as being similar to the bank having "a savings account" but with SEC control.
"It's like we've got a saving account, but the SEC says we can't use it until we reach a certain level of profitability, but they never tell us how much or how long," he said.
"They want exactly the same thing we want, for us to be making enough money ... the only thing is our tax assets will be held for a period of time."
Like Heard, Metz said the issue won't have any bearing on the average United Community customer.
"This doesn't have any impact on them," he said. "All of our funds are insured by the FDIC."
On Thursday, the bank announced its income earnings for fourth quarter 2011.
A release stated a net income of $9.9 million, or 12 cents per share, for that time period.
The report also showed a 2011 net loss of $227 million, but core transaction deposits up by $266 million.
"United is moving forward with a sound balance sheet and strong capital structure," said Tallant in a statement. "This is beginning to be demonstrated in our financial results including the fourth quarter profit.
"We believe the remaining credit challenges are manageable and while we are not invulnerable to the still-fragile economy, our expectation is continued profitability during 2012."
United Community Bank has 106 offices throughout Georgia, North Carolina and Tennesse. The Covington branch is located at 9100 Covington Bypass Road and the two Conyers branches are located at 1000 Ga. Highway 138 S.E. and 1600 Ga. Highway 20 North.