United Community Banks, Inc.
UNITED COMMUNITY BANKS INC (Form: 10-Q, Received: 11/07/2013 16:35:57)



 UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
x      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the Quarterly Period Ended September 30, 2013
 
OR
 
o      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 x   NO o
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Date File required to be submitted and posted 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 and post such files).
 
YES x   NO o
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  See definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer  o
Accelerated filer x
   
Non-accelerated filer o (Do not check if a smaller reporting company)
Smaller Reporting Company o
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
 
YES o   NO x
 
Common stock, par value $1 per share 45,230,240 shares voting and 14,189,006 shares non-voting outstanding as of October 31, 2013.
 
 
 

 

 
INDEX
         
 
PART I - Financial Information
 
         
   
Item 1.
Financial Statements.
 
         
     
Consolidated Statement of Income (unaudited) for the Three and Nine Months Ended September 30, 2013 and 2012
3
         
     
Consolidated Statement of Comprehensive Income (unaudited) for the Three and Nine Months Ended September 30, 2013 and 2012
4
         
     
Consolidated Balance Sheet (unaudited) at September 30, 2013, December 31, 2012 and September 30, 2012
5
         
     
Consolidated Statement of Changes in Shareholders’ Equity (unaudited) for the Nine Months Ended September 30, 2013 and 2012
6
         
     
Consolidated Statement of Cash Flows (unaudited) for the Nine Months Ended September 30, 2013 and 2012
7
         
     
Notes to Consolidated Financial Statements
8
         
   
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
38
         
   
Item 3.
Quantitative and Qualitative Disclosures About Market Risk.
61
         
   
Item 4.
Controls and Procedures.
61
         
 
PART II - Other Information
 
         
   
Item 1.
Legal Proceedings.
62
   
Item 1A.
Risk Factors.
62
   
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds.
62
   
Item 3.
Defaults Upon Senior Securities.
62
   
Item 4.
Mine Safety Disclosures.
62
   
Item 5.
Other Information.
62
   
Item 6.
Exhibits.
63
 
2
 

 


Part I – Financial Information
 
Item 1 – Financial Statements

UNITED COMMUNITY BANKS, INC.
                       
Consolidated Statement of Income (Unaudited)
                       
   
Three Months Ended
   
Nine Months Ended
 
   
September 30,
   
September 30,
 
(in thousands, except per share data)
 
2013
   
2012
   
2013
   
2012
 
                         
Interest revenue:
                       
Loans, including fees
  $ 50,114     $ 53,868     $ 151,776     $ 163,805  
Investment securities, including tax exempt of $202, $225, $624 and $737
    9,872       10,706       29,518       34,772  
Deposits in banks and short-term investments
    1,007       985       2,793       3,093  
Total interest revenue
    60,993       65,559       184,087       201,670  
                                 
Interest expense:
                               
Deposits:
                               
NOW
    413       447       1,286       1,587  
Money market
    545       599       1,641       1,901  
Savings
    37       37       109       112  
Time
    2,486       4,612       8,636       15,844  
Total deposit interest expense
    3,481       5,695       11,672       19,444  
Short-term borrowings
    525       514       1,563       2,463  
Federal Home Loan Bank advances
    16       26       65       882  
Long-term debt
    3,003       2,372       8,331       7,119  
Total interest expense
    7,025       8,607       21,631       29,908  
Net interest revenue
    53,968       56,952       162,456       171,762  
Provision for loan losses
    3,000       15,500       62,500       48,500  
Net interest revenue after provision for loan losses
    50,968       41,452       99,956       123,262  
                                 
Fee revenue:
                               
Service charges and fees
    8,456       7,696       23,831       23,295  
Mortgage loan and other related fees
    2,554       2,800       8,212       7,221  
Brokerage fees
    1,274       709       3,104       2,331  
Securities gains, net
    -       -       116       7,047  
Loss from prepayment of debt
    -       -       -       (6,681 )
Other
    1,860       2,559       8,019       8,797  
Total fee revenue
    14,144       13,764       43,282       42,010  
Total revenue
    65,112       55,216       143,238       165,272  
                                 
Operating expenses:
                               
Salaries and employee benefits
    23,090       22,918       71,416       72,440  
Communications and equipment
    3,305       3,254       9,819       9,620  
Occupancy
    3,379       3,539       10,195       10,849  
Advertising and public relations
    962       934       2,937       2,868  
Postage, printing and supplies
    644       954       2,401       2,849  
Professional fees
    2,650       2,180       7,515       6,107  
Foreclosed property
    194       3,706       7,678       9,382  
FDIC assessments and other regulatory charges
    2,405       2,537       7,415       7,592  
Amortization of intangibles
    427       728       1,623       2,190  
Other
    3,041       4,033       11,691       12,151  
Total operating expenses
    40,097       44,783       132,690       136,048  
    Net income before income taxes
    25,015       10,433       10,548       29,224  
Income tax expense (benefit)
    9,515       (135 )     (246,681 )     629  
Net income
    15,500       10,568       257,229       28,595  
Preferred stock dividends and discount accretion
    3,059       3,041       9,166       9,103  
Net income available to common shareholders
  $ 12,441     $ 7,527     $ 248,063     $ 19,492  
                                 
Earnings per common share
                               
     Basic
  $ .21     $ .13     $ 4.24     $ .34  
     Diluted
    .21       .13       4.24       .34  
Weighted average common shares outstanding
                               
     Basic
    59,100       57,880       58,443       57,826  
     Diluted
    59,202       57,880       58,444       57,826  
 
See accompanying notes to consolidated financial statements.
 
3
 

 

 
UNITED COMMUNITY BANKS, INC.
                                   
Consolidated Statement of Comprehensive Income (Unaudited)
                         
(in thousands)
 
Three Months Ended September 30,
   
Nine Months Ended September 30,
 
2013
 
Before-
tax
Amount
   
Tax
(Expense)
Benefit
   
Net of Tax
Amount
   
Before-
tax
Amount
   
Tax
(Expense)
Benefit
   
Net of Tax
Amount
 
                                     
Net (loss) income
  $ 25,015     $ (9,515 )   $ 15,500     $ 10,548     $ 246,681     $ 257,229  
Other comprehensive income (loss):
                                               
Unrealized (losses) gains on available-for-sale securities:
                                               
Unrealized holding gains (losses) arising during period
    (13,215 )     4,971       (8,244 )     (26,932 )     10,148       (16,784 )
Reclassification adjustment for gains included in net income
    -       -       -       (116 )     45       (71 )
Adjustment of valuation allowance for the change in deferred taxes arising from unrealized gains and losses on available-for-sale securities and release of valuation allowance
    -       -       -       -       (2,950 )     (2,950 )
Net unrealized gains (losses)
    (13,215 )     4,971       (8,244 )     (27,048 )     7,243       (19,805 )
Amortization of gains included in net income on available-for-sale securities transferred to  held-to-maturity
    (214 )     82       (132 )     (804 )     309       (495 )
Adjustment of valuation allowance for the change in deferred taxes arising from the amortization of gains included in net income (loss) on available-for-sale securities transferred to held-to-maturity and release of valuation allowance
    -       -       -       -       1,293       1,293  
Net unrealized losses
    (214 )     82       (132 )     (804 )     1,602       798  
Amounts reclassified into net income on cash flow hedges
    (58 )     23       (35 )     (902 )     351       (551 )
Unrealized losses on derivative financial instruments accounted for as cash flow hedges
    (3,369 )     1,321       (2,048 )     8,733       (3,386 )     5,347  
Adjustment of valuation allowance for the change in deferred taxes arising from unrealized gains and losses and amortization of gains included in net income on cash flow hedges and release of valuation allowance
    -       -       -               13,698       13,698  
Net unrealized losses
    (3,427 )     1,344       (2,083 )     7,831       10,663       18,494  
Net actuarial loss on defined benefit pension plan
    -       -       -       (415 )     161       (254 )
Amortization of prior service cost and actuarial losses included in net periodic pension cost  for defined benefit pension plan
    133       (52 )     81       398       (155 )     243  
Net defined benefit pension plan activity
    133       (52 )     81       (17 )     6       (11 )
                                                 
     Total other comprehensive income (loss)
    (16,723 )     6,345       (10,378 )     (20,038 )     19,514       (524 )
                                                 
     Comprehensive income
  $ 8,292     $ (3,170 )   $ 5,122     $ (9,490 )   $ 266,195     $ 256,705  
                                                 
2012
                                               
                                                 
Net income
  $ 10,433     $ 135     $ 10,568     $ 29,224     $ (629 )   $ 28,595  
Other comprehensive income (loss):
                                               
Unrealized (losses) gains on available-for-sale securities:
                                               
Unrealized holding gains (losses) arising during period
    5,813       (2,139 )     3,674       6,737       (2,415 )     4,322  
Reclassification adjustment for gains included in net income
    -       -       -       (7,047 )     2,631       (4,416 )
Valuation allowance for the change in deferred taxes arising from unrealized gains and  losses on available-for-sale securities
    -       2,139       2,139       -       (216 )     (216 )
Net unrealized gains (losses)
    5,813       -       5,813       (310 )     -       (310 )
Amortization of gains included in net income on available-for-sale securities transferred to  held-to-maturity
    (499 )     189       (310 )     (1,312 )     497       (815 )
Valuation allowance for the change in deferred taxes arising from the amortization of gains included in net income (loss) on available-for-sale securities transferred to held-to- maturity
    -       (189 )     (189 )     -       (497 )     (497 )
Net unrealized losses
    (499 )     -       (499 )     (1,312 )     -       (1,312 )
Amortization of gains included in net income on terminated derivative financial instruments  that were previously accounted for as cash flow hedges
    (763 )     297       (466 )     (3,077 )     1,197       (1,880 )
Unrealized losses on derivative financial instruments accounted for as cash flow hedges
    (3,943 )     1,534       (2,409 )     (8,798 )     3,422       (5,376 )
Valuation allowance for the change in deferred taxes arising from unrealized gains and losses and amortization of gains included in net income on cash flow hedges
    -       (1,831 )     (1,831 )     -       (4,619 )     (4,619 )
Net unrealized losses
    (4,706 )     -       (4,706 )     (11,875 )     -       (11,875 )
Net actuarial loss on defined benefit pension plan
    -       -       -       -       -       -  
Amortization of prior service cost and actuarial losses included in net periodic pension cost  for defined benefit pension plan
    154       (60 )     94       462       (180 )     282  
Valuation allowance for the change in deferred taxes arising from reclassification of  unamortized prior service cost and actuarial losses and amortization of prior service cost and actuarial losses
    -       60       60       -       180       180  
Net defined benefit pension plan activity
    154       -       154       462       -       462  
                                                 
     Total other comprehensive income (loss)
    762       -       762       (13,035 )     -       (13,035 )
                                                 
     Comprehensive income
  $ 11,195     $ 135     $ 11,330     $ 16,189     $ (629 )   $ 15,560  
                                                 
See accompanying notes to consolidated financial statements.
 
 
4
 

 

 
UNITED COMMUNITY BANKS, INC.
                 
Consolidated Balance Sheet (Unaudited)
                 
   
September 30,
   
December 31,
   
September 30,
 
 (in thousands, except share and per share data)
 
2013
   
2012
   
2012
 
                   
 ASSETS
                 
   Cash and due from banks
  $ 70,986     $ 66,536     $ 57,270  
   Interest-bearing deposits in banks
    131,147       124,613       119,355  
   Short-term investments
    62,000       60,000       45,000  
       Cash and cash equivalents
    264,133       251,149       221,625  
   Securities available for sale
    1,963,424       1,834,593       1,761,994  
   Securities held to maturity (fair value $214,651, $261,131 and $281,336)
    205,613       244,184       262,648  
   Mortgage loans held for sale
    11,987       28,821       30,571  
   Loans, net of unearned income
    4,267,067       4,175,008       4,137,845  
        Less allowance for loan losses
    (80,372 )     (107,137 )     (107,642 )
               Loans, net
    4,186,695       4,067,871       4,030,203  
   Assets covered by loss sharing agreements with the FDIC
    31,207       47,467       53,070  
   Premises and equipment, net
    165,993       168,920       170,532  
   Bank owned life insurance
    80,537       81,867       81,574  
   Accrued interest receivable
    18,199       18,659       19,133  
   Other intangible assets
    3,888       5,510       6,237  
   Foreclosed property
    4,467       18,264       26,958  
   Net deferred tax asset
    269,784       -       -  
   Other assets
    37,366       34,954       34,690  
       Total assets
  $ 7,243,293     $ 6,802,259     $ 6,699,235  
 LIABILITIES AND SHAREHOLDERS' EQUITY
                       
 Liabilities:
                       
   Deposits:
                       
        Demand
  $ 1,418,782     $ 1,252,605     $ 1,210,703  
        NOW
    1,279,134       1,316,453       1,184,341  
        Money market
    1,197,495       1,149,912       1,126,312  
        Savings
    249,044       227,308       222,431  
        Time:
                       
             Less than $100,000
    925,089       1,055,271       1,123,672  
             Greater than $100,000
    624,019       705,558       731,766  
        Brokered
    419,344       245,033       223,474  
                      Total deposits
    6,112,907       5,952,140       5,822,699  
    Short-term borrowings
    53,769       52,574       53,243  
    Federal Home Loan Bank advances
    125       40,125       50,125  
    Long-term debt
    129,865       124,805       120,285  
    Unsettled securities purchases
    11,610       -       24,319  
    Accrued expenses and other liabilities
    82,800       51,210       43,309  
         Total liabilities
    6,391,076       6,220,854       6,113,980  
 Shareholders' equity:
                       
     Preferred stock, $1 par value; 10,000,000 shares authorized;
                       
          Series A; $10 stated value; 21,700 shares issued and outstanding
    217       217       217  
          Series B; $1,000 stated value; 180,000 shares issued and outstanding
    179,714       178,557       178,183  
          Series D; $1,000 stated value; 16,613 shares issued and outstanding
    16,613       16,613       16,613  
     Common stock, $1 par value; 100,000,000 shares authorized;
                       
         45,222,839, 42,423,870 and 42,393,319 shares issued and outstanding
    45,223       42,424       42,393  
     Common stock, non-voting, $1 par value; 30,000,000 shares authorized;
                       
         14,189,006, 15,316,794 and 15,316,794 shares issued and outstanding
    14,189       15,317       15,317  
     Common stock issuable; 242,262, 133,238 and 129,270 shares
    3,979       3,119       3,247  
     Capital surplus
    1,077,536       1,057,951       1,056,998  
     Accumulated deficit
    (461,090 )     (709,153 )     (711,369 )
     Accumulated other comprehensive loss
    (24,164 )     (23,640 )     (16,344 )
         Total shareholders' equity
    852,217       581,405       585,255  
         Total liabilities and shareholders' equity
  $ 7,243,293     $ 6,802,259     $ 6,699,235  
 
See accompanying notes to consolidated financial statements.
 
5
 

 

UNITED COMMUNITY BANKS, INC.
Consolidated Statement of Changes in Shareholders' Equity (Unaudited)
For the Nine Months Ended September 30,

                                                   
Accumulated
       
   
Preferred Stock
         
Non-Voting
   
Common
               
Other
       
(in thousands, except share  and per share data)  
Series
   
Series
   
Series
   
Common
   
Common
   
Stock
   
Capital
   
Accumulated
   
Comprehensive
       
    A       B       D    
Stock
   
Stock
   
Issuable
   
Surplus
   
Deficit
   
Income (Loss)
   
Total
 
Balance, December 31, 2011
  $ 217     $ 177,092     $ 16,613     $ 41,647     $ 15,914     $ 3,233     $ 1,054,940     $ (730,861 )   $ (3,309 )   $ 575,486  
Net income
                                                            28,595               28,595  
Other comprehensive loss
                                                                    (13,035 )     (13,035 )
Common stock issued to  dividend reinvestment plan and employee benefit plans (87,086 shares)
                            86                       616                       702  
Conversion of non-voting  common stock to voting common stock (597,415 shares)
                            597       (597 )                                     -  
Amortization of stock options  and restricted stock awards
                                                    1,412                       1,412  
Vesting of restricted stock  (59,081 shares issued, 36,673 shares deferred)
                            60               155       (257 )                     (42 )
Deferred compensation plan,  net, including dividend equivalents
                                            149                               149  
Shares issued from deferred  compensation plan (2,637 shares)
                            3               (290 )     287                       -  
Preferred stock dividends:
                                                                               
Series A
                                                            (9 )             (9 )
Series B
            1,091                                               (7,841 )             (6,750 )
Series D
                                                            (1,253 )             (1,253 )
Balance, September 30, 2012
  $ 217     $ 178,183     $ 16,613     $ 42,393     $ 15,317     $ 3,247     $ 1,056,998     $ (711,369 )   $ (16,344 )   $ 585,255  
Balance, December 31, 2012
  $ 217     $ 178,557     $ 16,613     $ 42,424     $ 15,317     $ 3,119     $ 1,057,951     $ (709,153 )   $ (23,640 )   $ 581,405  
Net income
                                                            257,229               257,229  
Other comprehensive income
                                                                    (524 )     (524 )
Common stock issued to  dividend reinvestment plan and to employee benefit plans (49,830 shares)
                            50                       532                       582  
Conversion of non-voting  common stock to voting (1,127,788 shares)
                            1,128       (1,128 )                                     -  
Warrant exercise  (1,551,126 shares)
                            1,551                       17,838                       19,389  
Amortization of stock options and restricted stock awards
                                                    2,168                       2,168  
Vesting of restricted stock,  net of shares surrendered to cover payroll taxes (51,995 shares issued, 115,664 shares deferred)
                            52               1,693       (1,900 )                     (155 )
Deferred compensation plan,  net, including dividend equivalents
                                            132                               132  
Shares issued from deferred compensation plan (18,230 shares)
                            18               (965 )     947                       -  
Preferred stock dividends:
                                                                               
Series A
                                                            (9 )             (9 )
Series B
            1,157                                               (7,907 )             (6,750 )
Series D
                                                            (1,250 )             (1,250 )
Balance, September 30, 2013
  $ 217     $ 179,714     $ 16,613     $ 45,223     $ 14,189     $ 3,979     $ 1,077,536     $ (461,090 )   $ (24,164 )   $ 852,217  
 
See accompanying notes to consolidated financial statements.
 
6
 

 

 
UNITED COMMUNITY BANKS, INC.
Consolidated Statement of Cash Flows (Unaudited)
       
   
Nine Months Ended
 
   
September 30,
 
(in thousands)
 
2013
   
2012
 
Operating activities:
           
Net income
  $ 257,229     $ 28,595  
Adjustments to reconcile net income to net cash provided by operating activities:
               
Depreciation, amortization and accretion
    20,847       24,478  
Provision for loan losses
    62,500       48,500  
Stock based compensation
    2,168       1,412  
Deferred income tax benefit
    (250,054 )     -  
Securities gains, net
    (116 )     (7,047 )
Losses and write downs on sales of other real estate owned
    5,141       5,687  
Loss on prepayment of borrowings
    -       6,681  
Changes in assets and liabilities:
               
Other assets and accrued interest receivable
    16,225       40,708  
Accrued expenses and other liabilities
    31,562       (3,108 )
Mortgage loans held for sale
    16,834       (6,690 )
Net cash provided by operating activities
    162,336       139,216  
                 
Investing activities:
               
Investment securities held-to-maturity:
               
Proceeds from maturities and calls
    45,578       65,040  
Purchases
    (8,481 )     -  
Investment securities available-for-sale:
               
Proceeds from sales
    20,751       371,103  
Proceeds from maturities and calls
    399,304       492,768  
Purchases
    (574,020 )     (818,048 )
Net increase in loans
    (288,514 )     (104,806 )
Proceeds from note sales
    91,913       -  
Collections from FDIC under loss sharing agreements
    5,121       7,301  
Proceeds from sales of premises and equipment
    3,550       667  
Purchases of premises and equipment
    (7,533 )     (3,231 )
Proceeds from sale of other real estate
    24,049       22,309  
Net cash (used in) provided by investing activities
    (288,282 )     33,103  
                 
Financing activities:
               
Net change in deposits
    160,767       (275,284 )
Net change in short-term borrowings
    1,195       (53,814 )
Proceeds from Federal Home Loan Bank advances
    650,000       1,629,000  
Settlement of Federal Home Loan Bank advances
    (690,000 )     (1,621,701 )
Proceeds from issuance of senior debt
    40,000       -  
Repayment of subordinated debentures
    (35,000 )     -  
Proceeds from issuance of common stock for dividend reinvestment and employee benefit plans
    582       702  
Proceeds from warrant exercise
    19,389       -  
Cash dividends on preferred stock
    (8,003 )     (8,013 )
Net cash provided by (used in) financing activities
    138,930       (329,110 )
Net change in cash and cash equivalents
    12,984       (156,791 )
Cash and cash equivalents at beginning of period
    251,149       378,416  
Cash and cash equivalents at end of period
  $ 264,133     $ 221,625  
                 
Supplemental disclosures of cash flow information:
               
Cash paid (received) during the period for:
               
Interest
  $ 26,517     $ 32,668  
Income taxes
    2,361       (27,103 )
Unsettled securities purchases
    11,610       24,319  
Transfers of loans to foreclosed property
    18,460       26,854  
 
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. (“United”) and its subsidiaries conform to accounting principles generally accepted in the United States of America (“GAAP”) and general banking industry practices.  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, 2012.
 
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 presentation. 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
 
In January 2013, the FASB issued Accounting Standards Update No. 2013-01, Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities.   This ASU limits the scope of the new balance sheet offsetting disclosures to derivatives, repurchase agreements, and securities lending transactions to the extent that they are (1) offset in the financial statements or (2) subject to an enforceable master netting agreement.  The disclosure requirements were effective for annual reporting periods beginning on or after January 1, 2013 and interim periods within those annual periods.  This guidance did not have a material impact on United’s financial position or results of operations, and resulted in additional disclosures.
 
In February 2013, the FASB issued Accounting Standards Update No. 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income .  The amendments in this update require an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component and by the respective line items of net income. The standard was effective for fiscal years, and interim periods within those years, beginning after December 15, 2012.  This guidance did not have a material impact on United’s financial position or results of operations, and resulted in additional disclosures.
 
In July 2013, the FASB issued Accounting Standards Update No. 2013-10, Inclusion of the Fed Funds Effective Swap Rate (or Overnight Index Swap Rate) as a Benchmark Interest Rate for Hedge Accounting Purposes.   The amendments in this update permit the Fed Funds Effective Swap Rate (OIS) to be used as a benchmark interest rate for hedge accounting in addition to UST and LIBOR. The amendments also remove the restriction on using different benchmark rates for similar hedges. The standard is effective prospectively for qualifying new or re-designated hedging relationships entered into on or after July 17, 2013.  This guidance did not have a material impact on United’s financial position, results of operations or disclosures.
 
In July 2013, the FASB issued Accounting Standards Update No. 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward exists.   This ASU provides explicit guidance on the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists.  The amendments in this update are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013.  Since United has both unrecognized tax benefits and net operating loss and tax credit carryforwards, this ASU could have an impact on United’s financial position, results of operations or disclosures; however, United does not expect the impact to be material to United’s financial position, results of operations or disclosures.
 
Note 3 – Offsetting Assets and Liabilities
 
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.
 
United also enters into derivative transactions that are subject to master netting arrangements; however there were no offsetting positions with the same counterparty at September 30, 2013, December 31, 2012 or September 30, 2012.
 
8
 

 

 
UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
 
The following table presents a summary of amounts outstanding under master netting agreements as of September 30, 2013 and December 31, 2012, and September 30, 2012 (in thousands) .

         
Gross
                         
   
Gross
   
Amounts
         
Gross Amounts not Offset
       
   
Amounts of
   
Offset on the
          in the Balance Sheet        
   
Recognized
   
Balance
   
Net Asset
   
Financial
   
Collateral
       
September 30, 2013
 
Assets
   
Sheet
   
Balance
   
Instruments
   
Received
   
Net Amount
 
                                     
Repurchase agreements / reverse repurchase agreements
  $ 405,000     $ (350,000 )   $ 55,000     $ -     $ -     $ 55,000  
Derivatives
    8,092       -       8,092       -       -       8,092  
Total
  $ 413,092     $ (350,000 )   $ 63,092     $ -     $ -     $ 63,092  
Weighted average interest rate of reverse repurchase agreements
    1.13 %                                        
                                               
           
Gross
                                 
   
Gross
   
Amounts
           
Gross Amounts not Offset
         
   
Amounts of
   
Offset on the
   
Net
    in the Balance Sheet          
   
Recognized
   
Balance
   
Liability
   
Financial
   
Collateral
         
   
Liabilities
   
Sheet
   
Balance
   
Instruments
   
Pledged
   
Net Amount
 
                                                 
Repurchase agreements / reverse repurchase agreements
  $ 350,000     $ (350,000 )   $ -     $ -     $ -     $ -  
Derivatives
    37,269       -       37,269       -       25,579       11,690  
Total
  $ 387,269     $ (350,000 )   $ 37,269     $ -     $ 25,579     $ 11,690  
Weighted average interest rate of repurchase agreements
    .28 %                                        
                                               
           
Gross
                                 
   
Gross
   
Amounts
           
Gross Amounts not Offset
         
   
Amounts of
   
Offset on the
            in the Balance Sheet          
   
Recognized