Document


 
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
 
 
 
 
 
 
 
FORM 10-Q
 
 
 
 
 
 
 
 
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
 
 
 
 
 
 
 
For the Quarterly Period Ended March 31, 2019
 
 
 
 
OR
 
 
 
 
 
 
 
 
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
 
 
For the Transition Period from ___________ to ___________
 
 
 
 
 
 
 
 
 
Commission file number 001-35095
 
 
 
 
 
 
 
 
 UNITED COMMUNITY BANKS, INC. 
 
 
 
(Exact name of registrant as specified in its charter)
 
 
Georgia
 
58-1807304
(State of Incorporation)
 
(I.R.S. Employer Identification No.)
125 Highway 515 East
 
 
Blairsville, Georgia
 
30512
Address of Principal Executive Offices
 
(Zip Code)
 
(706) 781-2265
 
 
(Telephone Number)
 
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. 
YES ý NO ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Date File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
YES ý NO ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer ý
Accelerated filer ¨
Non-accelerated filer ¨ 
Smaller reporting company ¨
Emerging growth company ¨
 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). 
YES ¨ NO ý

Common stock, par value $1 per share 79,039,390 shares outstanding as of April 30, 2019.
Securities registered pursuant to Section 12(b) of the Act:
 
 
 
Title of Each Class
Trading Symbol(s)
Name of Each Exchange on Which Registered
Common stock, par value $1 per share
UCBI
Nasdaq Global Select Market
 




INDEX
 
 
 
 
 
 
Item 1.  
Financial Statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


2



Part I – Financial Information
UNITED COMMUNITY BANKS, INC.
Consolidated Statements of Income (Unaudited)
 
 
Three Months Ended March 31,
(in thousands, except per share data)
 
2019
 
2018
 
 
 
 
 
Interest revenue:
 
 

 
 

Loans, including fees
 
$
115,259

 
$
96,469

Investment securities, including tax exempt of $1,169 and $972
 
20,818

 
18,295

Deposits in banks and short-term investments
 
439

 
526

Total interest revenue
 
136,516

 
115,290

 
 
 
 
 
Interest expense:
 
 
 
 
Deposits:
 
 
 
 
NOW and interest-bearing demand
 
3,536

 
1,113

Money market
 
4,205

 
2,175

Savings
 
32

 
49

Time
 
8,184

 
2,956

Total deposit interest expense
 
15,957

 
6,293

Short-term borrowings
 
161

 
300

Federal Home Loan Bank advances
 
1,422

 
2,124

Long-term debt
 
3,342

 
3,288

Total interest expense
 
20,882

 
12,005

Net interest revenue
 
115,634

 
103,285

Provision for credit losses
 
3,300

 
3,800

Net interest revenue after provision for credit losses
 
112,334

 
99,485

 
 
 
 
 
Noninterest income:
 
 
 
 
Service charges and fees
 
8,453

 
8,925

Mortgage loan and other related fees
 
3,748

 
5,359

Brokerage fees
 
1,337

 
872

Gains from sales of SBA/USDA loans
 
1,303

 
1,778

Securities losses, net
 
(267
)
 
(940
)
Other
 
6,394

 
6,402

Total noninterest income
 
20,968

 
22,396

Total revenue
 
133,302

 
121,881

 
 
 
 
 
Noninterest expenses:
 
 
 
 
Salaries and employee benefits
 
47,503

 
42,875

Communications and equipment
 
5,788

 
4,632

Occupancy
 
5,584

 
5,613

Advertising and public relations
 
1,286

 
1,515

Postage, printing and supplies
 
1,586

 
1,637

Professional fees
 
3,161

 
4,044

FDIC assessments and other regulatory charges
 
1,710

 
2,476

Amortization of intangibles
 
1,293

 
1,898

Merger-related and other charges
 
546

 
2,054

Other
 
7,627

 
6,731

Total noninterest expenses
 
76,084

 
73,475

Net income before income taxes
 
57,218

 
48,406

Income tax expense
 
12,956

 
10,748

Net income
 
$
44,262

 
$
37,658

 
 
 
 
 
Net income available to common shareholders
 
$
43,947

 
$
37,381

 
 
 
 
 
Earnings per common share:
 
 
 
 
Basic
 
$
0.55

 
$
0.47

Diluted
 
0.55

 
0.47

Weighted average common shares outstanding:
 
 
 
 
Basic
 
79,807

 
79,205

Diluted
 
79,813

 
79,215

See accompanying notes to consolidated financial statements. 

3



UNITED COMMUNITY BANKS, INC.
Consolidated Statements of Comprehensive Income (Unaudited)
(in thousands)
 
Three Months Ended March 31,
 
 
Before-tax
Amount
 
Tax 
(Expense)
Benefit
 
Net of Tax
Amount
2019
 
 
 
 
 
 
Net income
 
$
57,218

 
$
(12,956
)
 
$
44,262

Other comprehensive income:
 
 
 
 
 
 
Unrealized gains on available-for-sale securities:
 
 
 
 
 
 
Unrealized holding gains arising during period
 
33,174

 
(8,049
)
 
25,125

Reclassification adjustment for losses included in net income
 
267

 
(68
)
 
199

Net unrealized gains
 
33,441

 
(8,117
)
 
25,324

Amortization of losses included in net income on available-for-sale securities transferred to held-to-maturity
 
84

 
(20
)
 
64

Amortization of losses included in net income on terminated derivative financial instruments that were previously accounted for as cash flow hedges
 
102

 
(26
)
 
76

Amortization of prior service cost and actuarial losses included in net periodic pension cost for defined benefit pension plan
 
174

 
(44
)
 
130

 
 
 
 
 
 
 
Total other comprehensive income
 
33,801

 
(8,207
)
 
25,594

 
 
 
 
 
 
 
Comprehensive income
 
$
91,019

 
$
(21,163
)
 
$
69,856

 
 
 
 
 
 
 
2018
 
 
 
 
 
 
Net income
 
$
48,406

 
$
(10,748
)
 
$
37,658

Other comprehensive loss:
 
 
 
 
 
 
Unrealized losses on available-for-sale securities:
 
 
 
 
 
 
Unrealized holding losses arising during period
 
(29,265
)
 
7,155

 
(22,110
)
Reclassification adjustment for losses included in net income
 
940

 
(221
)
 
719

Net unrealized losses
 
(28,325
)
 
6,934

 
(21,391
)
Amortization of losses included in net income on available-for-sale securities transferred to held-to-maturity
 
222

 
(54
)
 
168

Amortization of losses included in net income on terminated derivative financial instruments that were previously accounted for as cash flow hedges
 
147

 
(38
)
 
109

Defined benefit pension plan activity:
 
 
 
 
 
 
Net actuarial loss on defined benefit pension plan
 
(5
)
 
1

 
(4
)
Amortization of prior service cost and actuarial losses included in net periodic pension cost for defined benefit pension plan
 
227

 
(58
)
 
169

Net defined benefit pension plan activity
 
222

 
(57
)
 
165

 
 
 
 
 
 
 
Total other comprehensive loss
 
(27,734
)
 
6,785

 
(20,949
)
 
 
 
 
 
 
 
Comprehensive income
 
$
20,672

 
$
(3,963
)
 
$
16,709


See accompanying notes to consolidated financial statements.

4



UNITED COMMUNITY BANKS, INC.
Consolidated Balance Sheets (Unaudited)
 
 
March 31, 2019
 
December 31, 2018
(in thousands, except share data)
 
 
 
 
 
 
 
ASSETS
 
 

 
 

Cash and due from banks
 
$
118,659

 
$
126,083

Interest-bearing deposits in banks (includes restricted cash of $6.43 million and $6.70 million)
 
206,836

 
201,182

Cash and cash equivalents
 
325,495

 
327,265

Debt securities available for sale
 
2,454,625

 
2,628,467

Debt securities held to maturity (fair value $265,117 and $268,803)
 
265,329

 
274,407

Loans held for sale at fair value
 
26,341

 
18,935

Loans and leases, net of unearned income
 
8,493,254

 
8,383,401

Less allowance for loan and lease losses
 
(61,642
)
 
(61,203
)
Loans and leases, net
 
8,431,612

 
8,322,198

Premises and equipment, net
 
214,022

 
206,140

Bank owned life insurance
 
193,489

 
192,616

Accrued interest receivable
 
35,126

 
35,413

Net deferred tax asset
 
51,055

 
64,224

Derivative financial instruments
 
25,924

 
24,705

Goodwill and other intangible assets
 
322,779

 
324,072

Other assets
 
160,030

 
154,750

Total assets
 
$
12,505,827

 
$
12,573,192

LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
 
Liabilities:
 
 
 
 
Deposits:
 
 
 
 
Noninterest-bearing demand
 
$
3,313,861

 
$
3,210,220

NOW and interest-bearing demand
 
2,205,117

 
2,274,775

Money market
 
2,106,045

 
2,097,526

Savings
 
681,739

 
669,886

Time
 
1,668,563

 
1,598,391

Brokered
 
558,981

 
683,715

Total deposits
 
10,534,306

 
10,534,513

Federal Home Loan Bank advances
 
40,000

 
160,000

Long-term debt
 
257,259

 
267,189

Derivative financial instruments
 
18,789

 
26,433

Accrued expenses and other liabilities
 
147,315

 
127,503

Total liabilities
 
10,997,669

 
11,115,638

Shareholders' equity:
 
 
 
 
Common stock, $1 par value; 150,000,000 shares authorized;
    79,035,459 and 79,234,077 shares issued and outstanding
 
79,035

 
79,234

Common stock issuable; 621,491 and 674,499 shares
 
10,291

 
10,744

Capital surplus
 
1,494,400

 
1,499,584

Accumulated deficit
 
(59,573
)
 
(90,419
)
Accumulated other comprehensive loss
 
(15,995
)
 
(41,589
)
Total shareholders' equity
 
1,508,158

 
1,457,554

Total liabilities and shareholders' equity
 
$
12,505,827

 
$
12,573,192

 
See accompanying notes to consolidated financial statements.

5



UNITED COMMUNITY BANKS, INC.
Consolidated Statement of Changes in Shareholders’ Equity (Unaudited)
For the Three Months Ended March 31,
(in thousands, except share and per share data)
 
Common Stock
 
Common Stock Issuable
 
Capital Surplus
 
Accumulated Deficit
 
Accumulated Other Comprehensive Income (Loss)
 
Total
Balance, December 31, 2017
 
$
77,580

 
$
9,083

 
$
1,451,814

 
$
(209,902
)
 
$
(25,241
)
 
$
1,303,334

Net income
 
 
 
 
 
 
 
37,658

 
 
 
37,658

Other comprehensive loss
 
 
 
 
 
 
 
 
 
(20,949
)
 
(20,949
)
Common stock issued to dividend
   reinvestment plan and employee benefit
   plans (5,204 shares)
 
5

 
 
 
139

 
 
 
 
 
144

Common stock issued for acquisition
   (1,443,987 shares)
 
1,444

 
 
 
44,302

 
 
 
 
 
45,746

Amortization of stock option and restricted
   stock awards
 
 
 
 
 
1,148

 
 
 
 
 
1,148

Vesting of restricted stock and exercise
   of stock options, net of shares surrendered to
   cover payroll taxes (48,310 shares issued,
   46,074 shares deferred)
 
48

 
850

 
(1,725
)
 
 
 
 
 
(827
)
Deferred compensation plan, net, including
  dividend equivalents
 
 
 
143

 
 
 
 
 
 
 
143

Shares issued from deferred compensation
   plan, net of shares surrendered to cover
   payroll taxes (45,558 shares)
 
46

 
(684
)
 
629

 
 
 
 
 
(9
)
Common stock dividends ($0.12 per share)
 
 
 
 
 
 
 
(9,633
)
 
 
 
(9,633
)
Balance, March 31, 2018
 
$
79,123

 
$
9,392

 
$
1,496,307

 
$
(181,877
)
 
$
(46,190
)
 
$
1,356,755

 
 
 
 
 
 
 
 
 
 
 
 
 
Balance, December 31, 2018
 
$
79,234

 
$
10,744

 
$
1,499,584

 
$
(90,419
)
 
$
(41,589
)
 
$
1,457,554

Net income
 
 
 
 
 
 
 
44,262

 
 
 
44,262

Other comprehensive income
 
 
 
 
 
 
 
 
 
25,594

 
25,594

Exercise of stock options (12,000 shares)
 
12

 
 
 
185

 
 
 
 
 
197

Common stock issued to dividend
   reinvestment plan and employee benefit
   plans (8,445 shares)
 
8

 
 
 
178

 
 
 
 
 
186

Amortization of restricted stock awards
 
 
 
 
 
1,985

 
 
 
 
 
1,985

Vesting of restricted stock, net of shares
   surrendered to cover payroll taxes (15,945
   shares issued, 19,450 shares deferred)
 
16

 
532

 
(865
)
 
 
 
 
 
(317
)
Purchases of common stock (305,052 shares)
 
(305
)
 
 
 
(7,535
)
 
 
 
 
 
(7,840
)
Deferred compensation plan, net, including
   dividend equivalents
 
 
 
185

 
 
 
 
 
 
 
185

Shares issued from deferred compensation
   plan, net of shares surrendered to cover
   payroll taxes (70,044 shares)
 
70

 
(1,170
)
 
868

 
 
 
 
 
(232
)
Common stock dividends ($0.16 per share)
 
 
 
 
 
 
 
(12,867
)
 
 
 
(12,867
)
Adoption of new accounting standard
 
 
 
 
 
 
 
(549
)
 
 
 
(549
)
Balance, March 31, 2019
 
$
79,035

 
$
10,291

 
$
1,494,400

 
$
(59,573
)
 
$
(15,995
)
 
$
1,508,158


See accompanying notes to consolidated financial statements.

6



UNITED COMMUNITY BANKS, INC.
Consolidated Statements of Cash Flows (Unaudited)
 
 
Three Months Ended March 31,
(in thousands)
 
2019
 
2018
Operating activities:
 
 

 
 

Net income
 
$
44,262

 
$
37,658

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Depreciation, amortization and accretion
 
6,373

 
10,487

Provision for credit losses
 
3,300

 
3,800

Stock based compensation
 
1,985

 
1,148

Deferred income tax expense
 
658

 
10,225

Securities losses, net
 
267

 
940

Gains from sales of SBA/USDA loans
 
(1,303
)
 
(1,778
)
Net (gains) losses and write downs on sales of other real estate owned
 
(45
)
 
188

Changes in assets and liabilities:
 
 
 
 
Other assets and accrued interest receivable
 
(6,206
)
 
(385
)
Accrued expenses and other liabilities
 
(5,994
)
 
1,371

Loans held for sale
 
(7,406
)
 
8,833

Net cash provided by operating activities
 
35,891

 
72,487

 
 
 
 
 
Investing activities:
 
 
 
 
Debt securities held to maturity:
 
 
 
 
Proceeds from maturities and calls of securities held to maturity
 
9,049

 
13,832

Purchases of securities held to maturity
 

 
(4,781
)
Debt securities available for sale and equity securities:
 
 
 
 
Proceeds from sales of securities available for sale
 
178,604

 
113,961

Proceeds from maturities and calls of securities available for sale
 
60,779

 
85,331

Purchases of securities available for sale
 
(34,729
)
 
(30,161
)
Net increase in loans
 
(90,380
)
 
(79,404
)
Proceeds from sales of premises and equipment
 
105

 
195

Purchases of premises and equipment
 
(11,686
)
 
(6,107
)
Net cash paid for acquisition
 

 
(56,800
)
Proceeds from sale of other real estate
 
974

 
957

Net cash provided by investing activities
 
112,716

 
37,023

 
 
 
 
 
Financing activities:
 
 
 
 
Net change in deposits
 
117

 
186,089

Net change in short-term borrowings
 

 
(264,923
)
Repayment of long-term debt
 
(10,110
)
 
(12,309
)
Proceeds from FHLB advances
 
780,000

 
760,000

Repayment of FHLB advances
 
(900,000
)
 
(830,000
)
Proceeds from issuance of subordinated debt, net of issuance costs
 

 
98,188

Proceeds from issuance of common stock for dividend reinvestment and employee benefit plans
 
186

 
144

Proceeds from exercise of stock options
 
197

 

Cash paid for shares withheld to cover payroll taxes upon vesting of restricted stock
 
(549
)
 
(836
)
Repurchase of common stock
 
(7,342
)
 

Cash dividends on common stock
 
(12,876
)
 
(7,885
)
Net cash used in financing activities
 
(150,377
)
 
(71,532
)
 
 
 
 
 
Net change in cash and cash equivalents, including restricted cash
 
(1,770
)
 
37,978

 
 
 
 
 
Cash and cash equivalents, including restricted cash, at beginning of period
 
327,265

 
314,275

 
 
 
 
 
Cash and cash equivalents, including restricted cash, at end of period
 
$
325,495

 
$
352,253

 
 
 
 
 
Supplemental disclosures of cash flow information:
 
 
 
 
Interest paid
 
$
22,963

 
$
13,069

Income taxes paid
 
939

 
811

Significant non-cash investing and financing transactions:
 
 
 
 
Unsettled securities purchases
 

 
4,790

Unsettled government guaranteed loan sales
 
13,934

 
14,240

Transfers of loans to foreclosed properties
 
751

 
625

Unsettled repurchases of common stock
 
498

 

Acquisitions:
 
 
 
 
Assets acquired
 

 
480,679

Liabilities assumed
 

 
350,433

Net assets acquired
 

 
130,246

Common stock issued in acquisitions
 

 
45,746

See accompanying notes to consolidated financial statements. 

7

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements



Note 1 – Accounting Policies
 
The accounting and financial reporting policies of United Community Banks, Inc. and its subsidiaries (collectively referred to herein as “United”) conform to accounting principles generally accepted in the United States (“GAAP”) and reporting guidelines of banking regulatory authorities and regulators. The accompanying interim consolidated financial statements have not been audited. All material intercompany balances and transactions have been eliminated. A more detailed description of United’s accounting policies is included in its Annual Report on Form 10-K for the year ended December 31, 2018.
 
In management’s opinion, all accounting adjustments necessary to accurately reflect the financial position and results of operations on the accompanying financial statements have been made. These adjustments are normal and recurring accruals considered necessary for a fair and accurate statement. The results for interim periods are not necessarily indicative of results for the full year or any other interim periods.

Note 2 –Accounting Standards Updates and Recently Adopted Standards
 
Accounting Standards Updates
 
In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This guidance was further modified in November 2018 by ASU No. 2018-19, Codification Improvements to Topic 326, Financial Instruments - Credit Losses. The new guidance replaces the incurred loss impairment methodology in current GAAP with a current expected credit loss (“CECL”) methodology and requires consideration of a broader range of information to determine credit loss estimates. Financial assets measured at amortized cost will be presented at the net amount expected to be collected by using an allowance for credit losses. Purchased credit deteriorated loans will receive an allowance account at the acquisition date that represents a component of the purchase price allocation. Credit losses relating to available-for-sale debt securities will be recorded through an allowance for credit losses, with such allowance limited to the amount by which fair value is below amortized cost. Application of this update will primarily be on a modified retrospective approach, although the guidance for debt securities for which an other-than-temporary impairment has been recognized before the effective date and for loans previously covered by Accounting Standards Codification (“ASC”) 310-30, Receivables – Loans and Debt Securities Acquired with Deteriorated Credit Quality will be applied on a prospective basis. For public entities, this update is effective for fiscal years beginning after December 15, 2019. Upon adoption, United expects that the allowance for credit losses will be higher given the change to estimated losses for the estimated life of the financial asset; however, management is still in the process of determining the impact. During the first quarter 2019, management’s CECL steering committee continued the process of populating relevant data, building models and documenting processes and controls in preparation for adoption of Topic 326. During the remainder of 2019, management plans to run multiple parallel runs of the allowance model under the expected credit loss methodology, starting with a loan-focused parallel run using first quarter data. Management will incrementally widen the scope of model runs thereafter until a full CECL run is completed. During monthly steering committee meetings, management regularly reviews project status, gap remediation efforts and project priorities.

Recently Adopted Standards

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). This guidance was further modified by ASU No. 2018-10, Codification Improvements to Topic 842 Leases, ASU No. 2018-11, Leases (Topic 842): Targeted Improvements, ASU No. 2018-20, Leases (Topic 842): Narrow-Scope Improvements for Lessors and ASU No. 2019-01, Leases (Topic 842): Codification Improvements. These standards require a lessee to recognize in the consolidated balance sheet a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. United adopted the standard on January 1, 2019 using the optional transition method, which allowed for a modified retrospective method of adoption with a cumulative effect adjustment to shareholders’ equity without restating comparable periods. United also elected the relief package of practical expedients for which there is no requirement to reassess existence of leases, their classification, and initial direct costs as well as an exemption for short-term leases with a term of less than one year, whereby United does not recognize a lease liability or right-of-use asset on the consolidated balance sheet but instead recognizes lease payments as an expense over the lease term as appropriate. The adoption of this guidance resulted in recognition of a right-of-use asset of $23.8 million, a lease liability of $26.8 million and a reduction of shareholders’ equity of $549,000, net of tax, related to its operating leases. In addition, United has equipment financing leases for which it is the lessor, which were previously accounted for as capital leases. Upon adoption of Topic 842, these leases were classified as direct financing leases, which required no significant change in accounting policy or treatment. These lease agreements may include options to renew and for the lessee to purchase the leased equipment at the end of the lease term. As a lessor, United elected to exclude sales taxes from consideration in lease contracts. In the opinion of management, the changes described above resulting from the adoption of the standard did not have a material impact on the consolidated financial statements. See Notes 5 and 14 for additional information on direct financing leases and operating leases, respectively.

8

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements


 
Note 3 – Balance Sheet Offsetting and Repurchase Agreements Accounted for as Secured Borrowings

United enters into reverse repurchase agreements in order to invest short-term funds. In addition, United enters into repurchase agreements and reverse repurchase agreements with the same counterparty in transactions commonly referred to as collateral swaps that are subject to master netting agreements under which the balances are netted in the balance sheet in accordance with ASC 210-20, Offsetting.

The following table presents a summary of amounts outstanding under reverse repurchase agreements, of which there were none as of March 31, 2019, and derivative financial instruments including those entered into in connection with the same counterparty under master netting agreements as of the dates indicated (in thousands).
 
 
Gross Amounts of Recognized Assets
 
Gross Amounts Offset on the Balance Sheet
 
 
 
Gross Amounts not Offset in the Balance Sheet
 
 
March 31, 2019
 
 
 
Net Asset Balance
 
Financial
Instruments
 
Collateral
Received
 
Net
Amount
Derivatives
 
$
25,924

 
$

 
$
25,924

 
$
(2,295
)
 
$
(1,797
)
 
$
21,832

Total
 
$
25,924

 
$

 
$
25,924

 
$
(2,295
)
 
$
(1,797
)
 
$
21,832

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross Amounts of Recognized Liabilities
 
Gross Amounts Offset on the Balance Sheet
 
Net Liability Balance
 
Gross Amounts not Offset
in the Balance Sheet
 
 
 
 
 
 
 
Financial
Instruments
 
Collateral
Pledged
 
Net
Amount
Derivatives
 
$
18,789

 
$

 
$
18,789

 
$
(2,295
)
 
$
(11,870
)
 
$
4,624

Total
 
$
18,789

 
$

 
$
18,789

 
$
(2,295
)
 
$
(11,870
)
 
$
4,624

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross Amounts of Recognized Assets
 
Gross Amounts Offset on the Balance Sheet
 
 
 
Gross Amounts not Offset
in the Balance Sheet
 
 
December 31, 2018
 
 
 
Net Asset Balance
 
Financial
Instruments
 
Collateral
Received
 
Net
Amount
Repurchase agreements / reverse repurchase agreements
 
$
50,000

 
$
(50,000
)
 
$

 
$

 
$

 
$

Derivatives
 
24,705

 

 
24,705

 
(973
)
 
(8,029
)
 
15,703

Total
 
$
74,705

 
$
(50,000
)
 
$
24,705

 
$
(973
)
 
$
(8,029
)
 
$
15,703

 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average interest rate of reverse repurchase agreements
 
3.20
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross Amounts of Recognized Liabilities
 
Gross Amounts Offset on the Balance Sheet
 
 
 
Gross Amounts not Offset
in the Balance Sheet
 
 
 
 
 
 
Net Liability Balance
 
Financial
Instruments
 
Collateral
Pledged
 
Net
Amount
Repurchase agreements / reverse repurchase agreements
 
$
50,000

 
$
(50,000
)
 
$

 
$

 
$

 
$

Derivatives
 
26,433

 

 
26,433

 
(973
)
 
(16,126
)
 
9,334

Total
 
$
76,433

 
$
(50,000
)
 
$
26,433

 
$
(973
)
 
$
(16,126
)
 
$
9,334

 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average interest rate of repurchase agreements
 
2.45
%
 
 
 
 
 
 
 
 
 
 
  
At March 31, 2019, United recognized the right to reclaim cash collateral of $11.9 million and the obligation to return cash collateral of $1.80 million. At December 31, 2018, United recognized the right to reclaim cash collateral of $16.1 million and the obligation to return cash collateral of $8.03 million. The right to reclaim cash collateral and the obligation to return cash collateral were included in the consolidated balance sheets in other assets and other liabilities, respectively.

9

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements


The following table presents additional detail regarding repurchase agreements accounted for as secured borrowings and the securities underlying these agreements as of December 31, 2018 (in thousands).
 
 
Remaining Contractual Maturity of the Agreements
 
 
Overnight and Continuous
 
Up to 30 Days
 
30 to 90 Days
 
91 to 110 days
 
Total
Mortgage-backed securities
 
$

 
$

 
$
50,000

 
$

 
$
50,000

 
 
 
 
 
 
 
 
 
 
 
Total
 
$

 
$

 
$
50,000

 
$

 
$
50,000

 
 
 
 
 
 
 
 
 
 
 
Gross amount of recognized liabilities for repurchase agreements in offsetting disclosure
 
 

 
$
50,000

Amounts related to agreements not included in offsetting disclosure
 
 

 
 

 
$

 
United is obligated to promptly transfer additional securities if the market value of the securities falls below the repurchase agreement price. United manages this risk by maintaining an unpledged securities portfolio that it believes is sufficient to cover a decline in the market value of the securities sold under agreements to repurchase.
 
Note 4 – Securities

The amortized cost basis, unrealized gains and losses and fair value of debt securities held-to-maturity as of the dates indicated are as follows (in thousands).
 
Amortized
Cost
 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
Fair
Value
As of March 31, 2019
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
State and political subdivisions
$
65,519

 
$
1,443

 
$
456

 
$
66,506

Residential mortgage-backed securities
170,980

 
1,078

 
2,532

 
169,526

Commercial mortgage-backed securities
28,830

 
323

 
68

 
29,085

Total
$
265,329

 
$
2,844

 
$
3,056

 
$
265,117

 
 
 
 
 
 
 
 
As of December 31, 2018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
State and political subdivisions
$
68,551

 
$
952

 
$
2,191

 
$
67,312

Residential mortgage-backed securities
176,488

 
652

 
5,094

 
172,046

Commercial mortgage-backed securities
29,368

 
173

 
96

 
29,445

Total
$
274,407

 
$
1,777

 
$
7,381

 
$
268,803



10

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements



The cost basis, unrealized gains and losses, and fair value of debt securities available-for-sale as of the dates indicated are presented below (in thousands).
 
Amortized
Cost
 
Gross Unrealized
Gains
 
Gross Unrealized
Losses
 
Fair
Value
As of March 31, 2019
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasuries
$
142,409

 
$
22

 
$
576

 
$
141,855

U.S. Government agencies
4,812

 
292

 
3

 
5,101

State and political subdivisions
217,120

 
5,124

 
64

 
222,180

Residential mortgage-backed securities
1,414,612

 
9,222

 
9,749

 
1,414,085

Commercial mortgage-backed securities
345,198

 
432

 
2,291

 
343,339

Corporate bonds
200,471

 
506

 
301

 
200,676

Asset-backed securities
128,359

 
183

 
1,153

 
127,389

Total
$
2,452,981

 
$
15,781

 
$
14,137

 
$
2,454,625

 
 
 
 
 
 
 
 
As of December 31, 2018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasuries
$
150,712

 
$
767

 
$
2,172

 
$
149,307

U.S. Government agencies
25,493

 
335

 
275

 
25,553

State and political subdivisions
234,750

 
907

 
1,716

 
233,941

Residential mortgage-backed securities
1,464,380

 
3,428

 
21,898

 
1,445,910

Commercial mortgage-backed securities
399,663

 
187

 
7,933

 
391,917

Corporate bonds
200,582

 
502

 
1,921

 
199,163

Asset-backed securities
184,683

 
328

 
2,335

 
182,676

Total
$
2,660,263

 
$
6,454

 
$
38,250

 
$
2,628,467

 
Securities with a carrying value of $842 million and $925 million were pledged to secure public deposits, derivatives and other secured borrowings at March 31, 2019 and December 31, 2018, respectively.

 The following table summarizes debt securities held-to-maturity in an unrealized loss position as of the dates indicated (in thousands).
 
Less than 12 Months
 
12 Months or More
 
Total
 
Fair Value
 
Unrealized
Loss
 
Fair Value
 
Unrealized
Loss
 
Fair Value
 
Unrealized
Loss
As of March 31, 2019
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
State and political subdivisions
$

 
$

 
$
22,356

 
$
456

 
$
22,356

 
$
456

Residential mortgage-backed securities

 

 
112,921

 
2,532

 
112,921

 
2,532

Commercial mortgage-backed securities

 

 
4,095

 
68

 
4,095

 
68

Total unrealized loss position
$

 
$

 
$
139,372

 
$
3,056

 
$
139,372

 
$
3,056

 
 
 
 
 
 
 
 
 
 
 
 
As of December 31, 2018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
State and political subdivisions
$
7,062

 
$
46

 
$
34,146

 
$
2,145

 
$
41,208

 
$
2,191

Residential mortgage-backed securities
6,579

 
61

 
136,376

 
5,033

 
142,955

 
5,094

Commercial mortgage-backed securities

 

 
4,290

 
96

 
4,290

 
96

Total unrealized loss position
$
13,641

 
$
107

 
$
174,812

 
$
7,274

 
$
188,453

 
$
7,381

 

11

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements


The following table summarizes debt securities available-for-sale in an unrealized loss position as of the dates indicated (in thousands).
 
Less than 12 Months
 
12 Months or More
 
Total
 
Fair Value
 
Unrealized
Loss
 
Fair Value
 
Unrealized
Loss
 
Fair Value
 
Unrealized
Loss
As of March 31, 2019
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasuries
$

 
$

 
$
122,122

 
$
576

 
$
122,122

 
$
576

U.S. Government agencies

 

 
471

 
3

 
471

 
3

State and political subdivisions
415

 
1

 
18,186

 
63

 
18,601

 
64

Residential mortgage-backed securities
47,263

 
644

 
665,525

 
9,105

 
712,788

 
9,749

Commercial mortgage-backed securities

 

 
237,883

 
2,291

 
237,883

 
2,291

Corporate bonds

 

 
108,272

 
301

 
108,272

 
301

Asset-backed securities
71,224

 
720

 
17,825

 
433

 
89,049

 
1,153

Total unrealized loss position
$
118,902

 
$
1,365

 
$
1,170,284

 
$
12,772

 
$
1,289,186

 
$
14,137

 
 
 
 
 
 
 
 
 
 
 
 
As of December 31, 2018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasuries
$

 
$

 
$
120,391

 
$
2,172

 
$
120,391

 
$
2,172

U.S. Government agencies

 

 
21,519

 
275

 
21,519

 
275

State and political subdivisions
15,160

 
28

 
133,500

 
1,688

 
148,660

 
1,716

Residential mortgage-backed securities
234,583

 
808

 
775,360

 
21,090

 
1,009,943

 
21,898

Commercial mortgage-backed securities
4,552

 
594

 
355,292

 
7,339

 
359,844

 
7,933

Corporate bonds

 

 
117,296

 
1,921

 
117,296

 
1,921

Asset-backed securities
74,492

 
1,879

 
31,968

 
456

 
106,460

 
2,335

Total unrealized loss position
$
328,787

 
$
3,309

 
$
1,555,326

 
$
34,941

 
$
1,884,113

 
$
38,250

 
At March 31, 2019, there were 174 debt securities available-for-sale and 56 debt securities held-to-maturity that were in an unrealized loss position. United does not intend to sell nor believes it will be required to sell securities in an unrealized loss position prior to the recovery of their amortized cost basis. Unrealized losses at March 31, 2019 were primarily attributable to changes in interest rates.
 
Management evaluates securities for other-than-temporary impairment on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. Consideration is given to the length of time and the extent to which the fair value has been less than cost, the financial condition and near-term prospects of the issuer, among other factors. In analyzing an issuer’s financial condition, management considers whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred, and industry analysts’ reports. No impairment charges were recognized during the three months ended March 31, 2019 or 2018.
 
Realized gains and losses are derived using the specific identification method for determining the cost of securities sold. The following table summarizes available-for-sale securities sales activity for the three months ended March 31, 2019 and 2018 (in thousands)
 
 
Three Months Ended March 31,
 
 
 
2019
 
2018
 
 
 
 
 
 
 
 
Proceeds from sales
$
178,604

 
$
113,961

 
 
 
 
 
 
 
 
Gross gains on sales
$
1,287

 
$
417

 
 
Gross losses on sales
(1,554
)
 
(1,357
)
 
 
Net losses on sales of securities
$
(267
)
 
$
(940
)
 
 
 
 
 
 
 
 
Income tax benefit attributable to sales
$
(68
)
 
$
(221
)
 
 


12

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements


The amortized cost and fair value of debt securities available-for-sale and held-to-maturity at March 31, 2019, by contractual maturity, are presented in the following table (in thousands)
 
Available-for-Sale
 
Held-to-Maturity
 
Amortized Cost
 
Fair Value
 
Amortized Cost
 
Fair Value
U.S. Treasuries:
 

 
 

 
 

 
 

1 to 5 years
$
142,409

 
$
141,855

 
$

 
$

 
142,409

 
141,855

 

 

 
 
 
 
 
 
 
 
U.S. Government agencies:
 
 
 
 
 
 
 
1 to 5 years
474

 
471

 

 

More than 10 years
4,338

 
4,630

 

 

 
4,812

 
5,101

 

 

 
 
 
 
 
 
 
 
State and political subdivisions:
 
 
 
 
 
 
 
Within 1 year
500

 
502

 
3,250

 
3,262

1 to 5 years
36,058

 
36,060

 
11,567

 
12,024

5 to 10 years
35,888

 
36,743

 
7,753

 
8,423

More than 10 years
144,674

 
148,875

 
42,949

 
42,797

 
217,120

 
222,180

 
65,519

 
66,506

 
 
 
 
 
 
 
 
Corporate bonds:
 
 
 
 
 
 
 
Within 1 year
10,239

 
10,219

 

 

1 to 5 years
187,732

 
187,948

 

 

5 to 10 years
1,500

 
1,514

 

 

More than 10 years
1,000

 
995

 

 

 
200,471

 
200,676

 

 

 
 
 
 
 
 
 
 
Asset-backed securities:
 
 
 
 
 
 
 
1 to 5 years
2,121

 
2,107

 

 

More than 10 years
126,238

 
125,282

 

 

 
128,359

 
127,389

 

 

 
 
 
 
 
 
 
 
Total securities other than mortgage-backed securities:
 
 
 
 
 
 
 
Within 1 year
10,739

 
10,721

 
3,250

 
3,262

1 to 5 years
368,794

 
368,441

 
11,567

 
12,024

5 to 10 years
37,388

 
38,257

 
7,753

 
8,423

More than 10 years
276,250

 
279,782

 
42,949

 
42,797

Residential mortgage-backed securities
1,414,612

 
1,414,085

 
170,980

 
169,526

Commercial mortgage-backed securities
345,198

 
343,339

 
28,830

 
29,085

 
$
2,452,981

 
$
2,454,625

 
$
265,329

 
$
265,117


Expected maturities may differ from contractual maturities because issuers and borrowers may have the right to call or prepay obligations.

13

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements


Note 5 – Loans and Leases and Allowance for Credit Losses
 
Major classifications of the loan and lease portfolio (collectively referred to as the “loan portfolio” or “loans”) are summarized as of the dates indicated as follows (in thousands).
 
March 31, 2019
 
December 31, 2018
Owner occupied commercial real estate
$
1,620,068