SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported):
October 25, 2005

United Community Banks, Inc.

(Exact name of registrant as specified in its charter)

Georgia		No. 0-21656		No. 58-180-7304
(State or other jurisdiction of incorporation)		(Commission File Number)		(IRS Employer Identification No.)

63 Highway 515, P.O. Box 398
Blairsville, Georgia 30512
(Address of principal executive offices)

Registrant’s telephone number, including area code:
(706) 781-2265

Not applicable
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o		Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o		Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o		Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o		Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240-13e-4(c))

 

 

Item 2.02 Results of Operation and Financial Condition

		On October 25, 2005, United Community Banks, Inc. (the “Registrant”) issued a news release announcing its financial results for the third quarter ended September 30, 2005 (the “News Release”). The News Release, including financial schedules, is attached as Exhibit 99.1 to this report. In connection with issuing the News Release, on October 25, 2005 at 11:00 a.m. EST, the Registrant intends to hold a conference call/webcast to discuss the News Release.
		The News Release contains a description of the Registrant’s earnings excluding merger-related expenses (referred to as “Operating Earnings”, “Net Operating Income”, “Diluted Operating Earnings Per Share”) related to the June 1, 2004 acquisition of Fairbanco Holding Company, Inc., headquartered in Fairburn, Georgia; the November 1, 2004 acquisition of Eagle National Bank, headquartered in Stockbridge, Georgia; and the December 1, 2004 acquisition of Liberty National Bancshares, Inc., headquartered in Conyers, Georgia. Management believes that a presentation of the Registrant’s earnings excluding merger-related expenses as a financial measure provides useful information to investors because it provides information about the Registrant’s financial performance from its ongoing business operations. The merger-related expenses are principally related to equipment lease termination, legal and other professional fees and systems conversion costs.

Item 9.01 Financial Statements and Exhibits

     (a)    Financial statements: None

     (b)    Pro forma financial information: None

     (c)    Exhibits:

               99.1    Press Release, dated October 25, 2005

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

EXHIBIT 99.1

For Immediate Release

For more information:
Rex S. Schuette
Chief Financial Officer
(706) 781-2265
Rex_Schuette@ucbi.com

UNITED COMMUNITY BANKS, INC.
REPORTS 13% GAIN IN DILUTED EARNINGS PER SHARE
FOR THIRD QUARTER 2005

HIGHLIGHTS:

•		Record Third Quarter Earnings
		Diluted Operating Earnings Per Share of $.36 — Up 13%
		Net Operating Income of $14.3 Million — Up 20%
		Return on Tangible Equity of 18.90%
•		Strong Loan Demand and Rise in Net Interest Margin and Fee Revenue Drove Performance

BLAIRSVILLE, GA, October 25, 2005 — United Community Banks, Inc. (Nasdaq: UCBI), Georgia’s third largest bank holding company, today announced record financial results for the third quarter of 2005. Compared with the third quarter of 2004, the company achieved a 28% increase in total revenue, a 20% rise in net operating income and a 13% gain in diluted operating earnings per share.

For the third quarter of 2005, net operating income rose to $14.3 million compared with $12.0 million a year earlier. Diluted operating earnings per share increased to $.36 from $.32 a year ago. Total revenue, on a taxable equivalent basis, was $64.0 million compared with $50.1 million for the third quarter of 2004. Return on tangible equity was 18.90% and return on assets was 1.01%, compared with 19.41% and 1.05%, respectively, a year ago.

“We continued to experience solid growth across all of our markets,” said Jimmy Tallent, United Community Banks President and Chief Executive Officer. “Total assets at quarter-end surpassed $5.7 billion, a 24% increase from a year ago. Loans increased $181 million during the third quarter, or 18% on an annualized basis, which helped drive the increase in net interest revenue. Our net interest margin rose to 4.17%, up 18 basis points from a year ago, as increasing short-term interest rates continued to positively affect our slightly asset-sensitive balance sheet. Fee revenue was up 24%, reflecting increases in every category.”

“With the business growth achieved through the third quarter, United Community Banks remains well on track to meet our performance goals of double-digit earnings per share growth and a return on tangible equity above 18% for the year,” Tallent said.

For the first nine months of 2005, net operating income totaled $41.5 million, a 21% increase compared with $34.2 million for the same period of 2004. Diluted operating earnings per share of $1.05 increased 13% from $.93 for the first nine months of 2004. Total revenue, on a taxable equivalent basis, totaled $180.7 million, up 27% from $142.5 million a year ago. Return on tangible equity was 19.30% and return on assets was 1.03%, compared with 19.67% and 1.07% a year ago, respectively.

Net operating income for the first nine months of 2004 excludes $464,000 in pre-tax merger charges from the acquisition of 1^st Community Bank, which was completed on June 1, 2004. Including these merger-related charges, reported net income was $33.9 million; reported diluted earnings per share was $.92; and, reported return on equity 14.48%.

At September 30, 2005, total loans were $4.3 billion, up $816 million, or 24%, from a year ago. Organic growth, which excludes acquisitions, was $610 million, or 18%. “Loan demand remains strong across all our markets, leading to excellent growth opportunities,” Tallent said. Organic growth, with an uncompromising focus on sound credit quality, is at the core of our balanced growth strategy.”

“Organic growth is further supported by focused geographic expansion,” Tallent added. “We find the right people and build around them — usually adding two to four de novo offices a year,” Tallent explained.

“Last quarter, we announced our entry into the Gainesville market through a partnership with three experienced local banking executives who brought with them over 50 experienced bankers to form United Community Bank — Hall County. In just five months, this team has added more than $205 million in loans and $105 million in deposits. We now have three additional banking offices, including our main office which is located in downtown Gainesville, and we plan to open an additional banking office by mid-2006,” Tallent added. “In addition, we continued to execute our expansion plans for metro Atlanta. We opened two de novo banking offices in Tyrone and Newnan Lakes. These offices are located in Fayette and Coweta counties on the south side of metro Atlanta, which further strengthens our presence in these fast growing markets.”

“I want to emphasize that it is a testimony to the success and strength of our existing franchise that we were able to absorb such a significant de novo undertaking and still deliver on our primary financial goals,” Tallent added.

“During the third quarter, our deposit growth exceeded our strong loan growth due to our sharp focus on growing core deposits,” Tallent said. “We continued to promote our very successful ‘Refer-a-Friend’ core deposit program that rewards our many satisfied customers for referring their friends and family members to us. Our relentless focus on providing the highest level of customer service has generated customer satisfaction scores that continue to exceed 90%, well above the comparable industry average of 75%. This is invaluable in building our deposit base through customer referrals while also maintaining and growing long-term relationships with existing customers. During the quarter, our core deposit program and other initiatives have added 11,700 accounts and $108 million in balances. Year-to-date, it has added 36,000 new accounts and $218 million in deposits.”

Taxable equivalent net interest revenue of $55.0 million for the third quarter rose $12.8 million, or 30%, from the same period a year ago. Acquisitions completed in late 2004 added approximately $2.9 million to net interest revenue. Excluding acquisitions, the core growth rate was 23%. Taxable equivalent net interest margin for the third quarter was 4.17% as compared with 3.99% a year ago and 4.12% last quarter.

“Rising interest rates have resulted in a slight margin expansion over the past two quarters,” Tallent said. “Our balance sheet remains slightly asset sensitive, which should allow us to benefit modestly from further increases in interest rates. However, as we continue efforts to fund our loan growth with new deposits, we expect competitive pricing pressures will offset any gains and could have a slight compression in our margin,” added Tallent.

The third quarter provision for loan losses was $3.4 million, up $1.4 million from a year earlier and up $600,000 from the second quarter of 2005. Annualized net charge-offs to average loans were 13 basis points for the third quarter, compared with 14 basis points for the second quarter of 2005 and 12 basis points for the third quarter of 2004. At quarter-end, non-performing assets totaled $13.6 million compared with $13.5 million at the end of the second quarter of 2005 and $10.5 million a year ago. Non-performing assets as a percentage of total assets were 24 basis points at quarter-end, compared with 24 basis points at June 30, 2005 and 23 basis points at September 30, 2004.

“Our asset quality continues to compare favorably with our peer banks and remains well within our tolerance levels,” Tallent said. “Strong credit quality is essential to our balanced growth strategy and overall success. United Community Banks’ credit quality is rooted in our guiding principle of securing loans with hard assets.”

Fee revenue of $12.4 million rose $2.5 million, or 26%, from $9.9 million a year ago with steady growth achieved in every category. “Service charges and fees on deposit accounts increased $1.1 million to $6.6 million, primarily due to growth in transactions and new accounts resulting from the core deposit program and cross-selling other products and services,” Tallent said. “We also experienced healthy increases in consulting, mortgage and brokerage fees.”

Consulting fees rose 25% to $1.8 million, due to growth in the risk management and financial-service practices as well as strong growth across other consulting services. Brokerage fees increased 51% to $571,000 due to strong market activity. Other fee revenue increased by $466,000 to $1.2 million due primarily to a $160,000 gain on the sale of a former banking office location and $118,000 in gains on the sale of SBA loans.

Operating expenses increased $10.0 million, or 32%, to $41.3 million from the third quarter of 2004. Nearly $1.8 million of this increase related to operating expenses of the two banks acquired in the fourth quarter of 2004 that were not included in last year’s results. Salaries and employee benefit costs of $26.3 million increased $6.7 million, or 34%, with approximately $2.7 million resulting from acquisitions and recent de novo expansion. The balance was due to an increase in staff to support business growth and related hiring costs and higher commissions related to the increase in mortgage and brokerage revenue.

Communications and equipment expenses increased $656,000 to $3.5 million due to the 2004 acquisitions and investments in technology equipment to support business growth. Advertising and marketing expense rose $560,000 to $1.7 million reflecting initiatives to raise core deposits and generate brand recognition in new markets. Occupancy expense increased $391,000 to $2.7 million reflecting the increase in cost to operate additional banking offices added through acquisitions and de novo expansion. Professional fees were up $139,000 to $1.2 million due to higher costs related to the volume of new loans generated and overall business growth. The increase in other operating expense was due to recent acquisitions and business growth.

“Our operating efficiency ratio of 61.16% for the quarter was slightly above our long-term efficiency goal of 58% to 60%, reflecting the higher operating costs of our recent de novo expansion into Gainesville,” Tallent said.

“Looking forward, we believe United Community Banks is on target to complete the year with operating earnings per share growth within our long-term goal of 12% to 15%, but at the lower end of the range this year due to our significant strategic expansion in the Gainesville market,” Tallent said. “We anticipate core loan growth will continue at the high end of our targeted range of 10% to 14% and net interest margin could come down slightly from our current level due to expected pricing competition for deposits. For 2006, we look forward to an operating earnings per share growth rate within our long-term goal of 12% to 15%, core loan growth within our targeted range of 10% to 14%, and our net interest margin could trend down slightly to the 4% range as we continue to fund loan growth with deposits. Our outlook is based on a continued, stable economic environment in our markets combined with maintaining strong credit quality.

“We remain committed to excellent customer service, superior operating performance and solid credit quality as we continue to grow our franchise,” Tallent added. “Our balanced growth strategy — delivering strong internal growth in our markets complemented by selective de novo offices and merger expansion — will continue as the foundation for superior performance and building long-term shareholder value.”

Conference Call
United Community Banks will hold a conference call on Tuesday, October 25, 2005, at 11:00 a.m. ET to discuss the contents of this news release, as well as business highlights for the quarter and the financial outlook for the remainder of the year. The telephone number for the conference call is (800) 798-2801 and the pass code is “UCBI.” The conference call will also be available by web cast within the Investor Relations section of the company’s web site.

About United Community Banks, Inc.
Headquartered in Blairsville, United Community Banks is the third-largest bank holding company in Georgia. As of September 30, 2005, United Community Banks had assets of $5.7 billion and operated 24 community banks with 88 banking offices located throughout north Georgia, metro Atlanta, coastal Georgia, western North Carolina and east Tennessee. The company specializes in providing personalized community banking services to

individuals and small to mid-size businesses in its markets. United Community Banks also offers the convenience of 24-hour access to its services through a network of ATMs, telephone and on-line banking. United Community Banks common stock is listed on the Nasdaq National Market under the symbol UCBI. Additional information may be found at the company’s web site, ucbi.com.

Safe Harbor
This news release contains forward-looking statements, as defined by Federal Securities Laws, including statements about financial outlook and business environment. These statements are provided to assist in the understanding of future financial performance and such performance involves risks and uncertainties that may cause actual results to differ materially from those in such statements. Any such statements are based on current expectations and involve a number of risks and uncertainties. For a discussion of factors that may cause such forward-looking statements to differ materially from actual results, please refer to the section entitled “Forward Looking Statements” on page 4 of United Community Banks, Inc. annual report filed on Form 10-K with the Securities and Exchange Commission.

(Tables Follow)

UNITED COMMUNITY BANKS, INC.
Selected Financial Information
For the Three and Nine Months Ended September 30, 2005

																						Third
		2005												2004								Quarter				For the Nine								YTD
(in thousands, except per share		Third				Second				First				Fourth				Third				2005-2004				Months Ended								2005-2004
data; taxable equivalent)		Quarter				Quarter				Quarter				Quarter				Quarter				Change				2005				2004				Change
INCOME SUMMARY		(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)								(Unaudited)				(Unaudited)
Interest revenue		$	89,003			$	80,701			$	73,649			$	66,761			$	61,358							$	243,353			$	172,625
Interest expense			34,033				29,450				25,367				21,448				19,142								88,850				53,346
Net interest revenue			54,970				51,251				48,282				45,313				42,216			30	%				154,503				119,279			30	%
Provision for loan losses			3,400				2,800				2,400				2,000				2,000								8,600				5,600
Fee revenue			12,396				12,179				10,200				10,757				9,857			26					34,775				28,782			21
Total revenue			63,966				60,630				56,082				54,070				50,073			28					180,678				142,461			27
Operating expenses (1)			41,294				38,808				34,779				33,733				31,296			32					114,881				88,835			29
Income before taxes			22,672				21,822				21,303				20,337				18,777			21					65,797				53,626			23
Income taxes			8,374				8,049				7,862				7,427				6,822								24,285				19,380
Net operating income			14,298				13,773				13,441				12,910				11,955			20					41,512				34,246			21
Merger-related charges, net of tax			—				—				—				261				—								—				304
Net income		$	14,298			$	13,773			$	13,441			$	12,649			$	11,955			20				$	41,512			$	33,942			22
OPERATING PERFORMANCE (1)
Earnings per common share:
Basic		$	.37			$	.36			$	.35			$	.35			$	.33			12				$	1.08			$	.96			13
Diluted			.36				.35				.34				.34				.32			13					1.05				.93			13
Return on tangible equity (3)			18.90	%			19.21	%			19.86	%			19.96	%			19.41	%							19.30	%			19.67	%
Return on assets			1.01				1.03				1.06				1.07				1.05								1.03				1.07
Efficiency ratio			61.16				61.18				59.47				60.20				60.11								60.64				60.00
Dividend payout ratio			18.92				19.44				20.00				17.14				18.18								19.44				18.75
GAAP PERFORMANCE
Per common share:
Basic earnings		$	.37			$	.36			$	.35			$	.34			$	.33			12				$	1.08			$	.95			14
Diluted earnings			.36				.35				.34				.33				.32			13					1.05				.92			14
Cash dividends declared			.07				.07				.07				.06				.06			17					.21				.18			17
Book value			11.04				10.86				10.42				10.39				9.58			15					11.04				9.58			15
Tangible book value (3)			8.05				7.85				7.40				7.34				7.28			11					8.05				7.28			11
Key performance ratios:
Return on equity (2)			13.42	%			13.46	%			13.68	%			14.15	%			14.20	%							13.51	%			14.48	%
Return on assets			1.01				1.03				1.06				1.05				1.05								1.03				1.06
Net interest margin			4.17				4.12				4.05				4.05				3.99								4.12				3.98
Dividend payout ratio			18.92				19.44				20.00				17.65				18.18								19.44				18.95
Equity to assets			7.46				7.65				7.71				7.54				7.50								7.60				7.42
Tangible equity to assets (3)			5.53				5.62				5.58				5.75				5.76								5.57				5.79
ASSET QUALITY
Allowance for loan losses		$	51,888			$	49,873			$	48,453			$	47,196			$	43,548							$	51,888			$	43,548
Non-performing assets			13,565				13,495				13,676				8,725				10,527								13,565				10,527
Net charge-offs			1,385				1,380				1,143				1,183				1,010								3,908				2,434
Allowance for loan losses to loans			1.22	%			1.22	%			1.25	%			1.26	%			1.27	%							1.22	%			1.27	%
Non-performing assets to total assets			.24				.24				.26				.17				.23								.24				.23
Net charge-offs to average loans			.13				.14				.12				.13				.12								.13				.10
AVERAGE BALANCES
Loans		$	4,169,170			$	3,942,077			$	3,797,479			$	3,572,824			$	3,384,281			23				$	3,970,937			$	3,239,005			23
Investment securities			1,008,687				996,096				946,194				805,766				762,994			32					983,889				710,674			38
Earning assets			5,239,195				4,986,339				4,819,961				4,456,403				4,215,472			24					5,016,702				4,006,149			25
Total assets			5,608,158				5,338,398				5,164,464				4,781,018				4,521,842			24					5,371,966				4,294,555			25
Deposits			4,078,437				3,853,884				3,717,916				3,500,842				3,351,188			22					3,884,733				3,162,588			23
Stockholders’ equity			418,459				408,352				398,164				360,668				338,913			23					408,399				318,668			28
Common shares outstanding:
Basic			38,345				38,270				38,198				37,056				36,254								38,272				35,738
Diluted			39,670				39,436				39,388				38,329				37,432								39,499				36,917
AT PERIOD END
Loans		$	4,254,051			$	4,072,811			$	3,877,575			$	3,734,905			$	3,438,417			24				$	4,254,051			$	3,438,417			24
Investment securities			945,922				990,500				928,328				879,978				726,734			30					945,922				726,734			30
Earning assets			5,302,532				5,161,067				4,907,743				4,738,389				4,280,643			24					5,302,532				4,280,643			24
Total assets			5,709,666				5,540,242				5,265,771				5,087,702				4,592,655			24					5,709,666				4,592,655			24
Deposits			4,196,369				3,959,226				3,780,521				3,680,516				3,341,525			26					4,196,369				3,341,525			26
Stockholders’ equity			424,000				415,994				398,886				397,088				347,795			22					424,000				347,795			22
Common shares outstanding			38,383				38,283				38,249				38,168				36,255								38,383				36,255

UNITED COMMUNITY BANKS, INC.
Consolidated Statement of Income
For the Three and Nine Months Ended September 30, 2005 and 2004

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
(in thousands, except per share data)		2005				2004				2005				2004
Interest revenue:		(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)
Loans, including fees		$	77,470			$	53,023			$	210,383			$	149,771
Federal funds sold and deposits in banks			253				181				662				358
Investment securities:
Taxable			10,340				7,254				29,544				19,662
Tax exempt			520				514				1,573				1,625
Total interest revenue			88,583				60,972				242,162				171,416
Interest expense:
Deposits:
Demand			5,187				2,151				13,093				5,865
Savings			223				98				565				274
Time			17,653				10,608				45,680				29,678
Federal funds purchased			1,407				573				3,384				1,343
Other borrowings			9,563				5,712				26,128				16,186
Total interest expense			34,033				19,142				88,850				53,346
Net interest revenue			54,550				41,830				153,312				118,070
Provision for loan losses			3,400				2,000				8,600				5,600
Net interest revenue after provision for loan losses			51,150				39,830				144,712				112,470
Fee revenue:
Service charges and fees			6,627				5,559				18,521				15,894
Mortgage loan and other related fees			2,367				1,747				5,592				4,612
Consulting fees			1,777				1,426				4,944				3,955
Brokerage fees			571				377				1,781				1,600
Securities (losses) gains, net			(153	)			398				(155	)			394
Loss on prepayments of borrowings			—				(391	)			—				(391	)
Other			1,207				741				4,092				2,718
Total fee revenue			12,396				9,857				34,775				28,782
Total revenue			63,546				49,687				179,487				141,252
Operating expenses:
Salaries and employee benefits			26,334				19,636				73,843				56,424
Occupancy			2,743				2,352				8,129				6,907
Communications and equipment			3,484				2,828				9,581				8,052
Postage, printing and supplies			1,426				1,214				4,146				3,424
Professional fees			1,174				1,035				3,283				2,667
Advertising and public relations			1,683				1,123				4,745				2,878
Amortization of intangibles			503				442				1,509				1,208
Merger-related charges			—				—				—				464
Other			3,947				2,666				9,645				7,275
Total operating expenses			41,294				31,296				114,881				89,299
Income before income taxes			22,252				18,391				64,606				51,953
Income taxes			7,954				6,436				23,094				18,011
Net income		$	14,298			$	11,955			$	41,512			$	33,942
Net income available to common stockholders		$	14,293			$	11,955			$	41,494			$	33,925
Earnings per common share:
Basic		$	.37			$	.33			$	1.08			$	.95
Diluted			.36				.32				1.05				.92
Weighted average common shares outstanding (in thousands):
Basic			38,345				36,254				38,272				35,738
Diluted			39,670				37,432				39,499				36,917

UNITED COMMUNITY BANKS, INC.
Consolidated Balance Sheet
For the period ended

		September 30,				December 31,				September 30,
($ in thousands)		2005				2004				2004
ASSETS		(Unaudited)				(Audited)				(Unaudited)
Cash and due from banks		$	139,147			$	99,742			$	102,457
Interest-bearing deposits in banks			28,935				35,098				57,465
Cash and cash equivalents			168,082				134,840				159,922
Securities available for sale			945,922				879,978				726,734
Mortgage loans held for sale			28,539				37,094				19,189
Loans, net of unearned income			4,254,051				3,734,905				3,438,417
Less — allowance for loan losses			51,888				47,196				43,548
Loans, net			4,202,163				3,687,709				3,394,869
Premises and equipment, net			109,468				103,679				92,918
Interest receivable			36,108				27,923				28,108
Intangible assets			119,154				121,207				87,381
Other assets			100,230				95,272				83,534
Total assets		$	5,709,666			$	5,087,702			$	4,592,655
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Deposits:
Demand		$	637,296			$	532,879			$	491,123
Interest-bearing demand			1,180,125				1,055,192				910,699
Savings			175,864				171,898				166,184
Time			2,203,084				1,920,547				1,773,519
Total deposits			4,196,369				3,680,516				3,341,525
Federal funds purchased and repurchase agreements			157,347				130,921				178,335
Federal Home Loan Bank advances			775,251				737,947				585,513
Other borrowings			118,168				113,879				113,878
Accrued expenses and other liabilities			38,531				27,351				25,609
Total liabilities			5,285,666				4,690,614				4,244,860
Stockholders’ equity:
Preferred stock, $1 par value; $10 stated value; 10,000,000 shares authorized; 37,200, 44,800 and 44,800 shares issued and outstanding			372				448				448
Common stock, $1 par value; 100,000,000 shares authorized; 38,407,874, 38,407,874 and 36,620,754 shares issued			38,408				38,408				36,621
Capital surplus			153,712				155,076				116,075
Retained earnings			238,144				204,709				194,350
Treasury stock; 24,449, 240,346 and 366,112 shares, at cost			(671	)			(4,413	)			(6,251	)
Accumulated other comprehensive (loss) income			(5,965	)			2,860				6,552
Total stockholders’ equity			424,000				397,088				347,795
Total liabilities and stockholders’ equity		$	5,709,666			$	5,087,702			$	4,592,655