United Community Bank (UCBI) in Blairsville, Ga., expects a spike in second-quarter earnings after being cleared to reverse most of its deferred tax asset valuation allowance.

The $6.8 billion-asset company said Wednesday that it will be able to reverse roughly $266 million of the allowance during the quarter. It has $5 million remaining under the allowance, which it plans to use in future quarters to reduce income tax payments.

United Community also said gains from the DTA reversal will be partially offset by the sale of classified assets with a carrying amount of $171 million, including nonperforming loans and foreclosed properties. As a result, the company said it expects net chargeoffs to quadruple compared to a year earlier, to $71 million. The loan-loss provision will be nearly triple that of a year earlier, to $47 million.

The DTA reversal, minus the bulk sale, will add $220 million, or $3.78 a share, to the company's second-quarter earnings, Jimmy Tallent, United Community's president and chief executive, said in a press release.

"The sale accelerates the improvement in our credit quality and financial performance and improves our regulatory standing while lowering our classified assets ratio … to below 30%," Tallent said. "United's credit measures have steadily improved since the credit crisis and will advance even further, following the accelerated disposition of classified assets this quarter."

 

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