* Posts Q1 loss $0.39/shr vs est loss $0.32/shr
* Provision for loan losses rises 15 pct
* Sees provisions to decline quarter on quarter
* Says interested in FDIC transactions in its footprint
* Shares recover from early losses, up 4 pct (Recasts; adds CEO and analyst comments, stock movement)
By Archana Shankar and Supantha Mukherjee
BANGALORE, April 22 United Community Banks Inc (UCBI.O) said it expects credit metrics to improve steadily and provisions for loan losses to go down quarter over quarter.
The bank holding company posted seventh straight quarterly loss that was wider than expected, hurt mainly by a higher provision for loan losses.
Shares of the company recovered from their early fall of 7 percent and rose 4 percent to $6.00 in afternoon trade Thursday on Nasdaq.
"There are a lot of positive things that set the stage for a quicker return to profitability," Raymond James analyst Michael Rose said.
United Community, which expects residential construction loans to be at the center of challenges, however, said non-performing assets (NPAs) may show a declining trend, given the portfolio run-off in Atlanta and decline in past dues.
Georgian banks have been facing credit issues after the state's real estate market, especially in Atlanta, collapsed under the weight of falling home prices.
"With the rapid decline in the Atlanta residential construction book and the related problems largely behind us our charge-offs have declined and should decline in 2010," Chief Executive Jimmy Tallent said in a conference call.
United Community Banks Inc (UCBI.O) said in April it would sell $100 million worth of bad loans and other real estate-owned assets, representing a quarter of its total non-performing assets. [ID:nSGE6300H7]
While the NPAs are still too high, this transaction removes a large block and allows the company to redirect the time and attention to other NPAs, CEO Tallent said.
"Since quarter end additional $25 million of NPAs went under contract," he said.
With the stabilization of credit issues, the company is now focusing its attention to acquire failed banks through FDIC-assisted transactions.
"We are absolutely interested in FDIC transactions within our footprints that has real customers and real franchise that would add to our franchise," the CEO said. The company may look at acquiring some banks in and around the Atlanta area, analyst Rose said. "They may do a deal later this year."
United Community posted a net operating loss from continuing operations of $34.5 million, or 39 cents a share, compared with a loss of $32.1 million, or 72 cents a share, a year ago.
Provision for loan losses rose 15 percent to $75 million.
Analysts on average expected the company to post a loss of 32 cents per share, according to Thomson Reuters I/B/E/S. (Reporting by Supantha Mukherjee; Editing by Gopakumar Warrier)