United Community Banks, Inc.
UNITED COMMUNITY BANKS INC (Form: 10-Q, Received: 08/08/2016 15:29:39)

 

 

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 June 30, 2016

 

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 x   NO ¨

 

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 ¨

 

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 x Accelerated filer ¨
   
Non-accelerated filer ¨ (Do not check if a smaller reporting company) Smaller Reporting Company ¨

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

 

YES ¨   NO x

 

Common stock, par value $1 per share 70,820,500 shares voting and zero shares non-voting outstanding as of July 31, 2016.

 

 

 

 

 

 

 

INDEX

 

PART I - Financial Information    
         
  Item 1. Financial Statements.    
         
    Consolidated Statement of Income (unaudited) for the Three and Six Months Ended June 30, 2016 and 2015   3
         
    Consolidated Statement of Comprehensive Income (unaudited) for the Three and Six Months Ended June 30, 2016 and 2015   4
         
    Consolidated Balance Sheet (unaudited) at June 30, 2016 and December 31, 2015   5
         
    Consolidated Statement of Changes in Shareholders’ Equity (unaudited) for the Six Months Ended June 30, 2016 and 2015   6
         
    Consolidated Statement of Cash Flows (unaudited) for the Six Months Ended June 30, 2016 and 2015   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.   60
         
  Item 4. Controls and Procedures.   60
         
PART II - Other Information    
         
  Item 1. Legal Proceedings.   61
  Item 1A. Risk Factors.   61
  Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.   61
  Item 3. Defaults Upon Senior Securities.   61
  Item 4. Mine Safety Disclosures.   61
  Item 5. Other Information.   61
  Item 6. Exhibits.   62

 

  2  

 

 

Part I – Financial Information

 

UNITED COMMUNITY BANKS, INC.
Consolidated Statement of Income (Unaudited)

 

    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
(in thousands, except per share data)   2016     2015     2016     2015  
                         
Interest revenue:                                
Loans, including fees   $ 63,472     $ 52,976     $ 127,448     $ 102,640  
Investment securities, including tax exempt of $149, $181, $315 and $339     16,833       12,037       32,621       24,095  
Deposits in banks and short-term investments     777       795       1,734       1,607  
Total interest revenue     81,082       65,808       161,803       128,342  
                                 
Interest expense:                                
Deposits:                                
NOW     444       348       929       742  
Money market     1,206       806       2,314       1,479  
Savings     30       26       59       46  
Time     743       895       1,385       2,004  
Total deposit interest expense     2,423       2,075       4,687       4,271  
Short-term borrowings     93       82       180       180  
Federal Home Loan Bank advances     983       454       1,716       846  
Long-term debt     2,665       2,206       5,350       4,812  
Total interest expense     6,164       4,817       11,933       10,109  
Net interest revenue     74,918       60,991       149,870       118,233  
(Release of) provision for credit losses     (300 )     900       (500 )     2,700  
Net interest revenue after provision for credit losses     75,218       60,091       150,370       115,533  
                                 
Fee revenue:                                
Service charges and fees     10,515       8,375       20,641       15,990  
Mortgage loan and other related fees     4,448       3,707       7,737       6,462  
Brokerage fees     1,117       1,232       2,170       2,783  
Gains from sales of government guaranteed loans     2,801       1,494       4,038       2,635  
Securities gains, net     282       13       661       1,552  
Loss from prepayment of debt     -       -       -       (1,038 )
Other     4,334       2,445       6,856       4,564  
Total fee revenue     23,497       17,266       42,103       32,948  
Total revenue     98,715       77,357       192,473       148,481  
                                 
Operating expenses:                                
Salaries and employee benefits     33,572       27,961       66,634       54,407  
Communications and equipment     4,393       3,304       8,683       6,575  
Occupancy     4,538       3,415       9,261       6,693  
Advertising and public relations     1,323       1,127       2,187       1,877  
Postage, printing and supplies     1,298       993       2,578       1,931  
Professional fees     3,189       2,257       5,889       4,176  
FDIC assessments and other regulatory charges     1,517       1,298       3,041       2,507  
Amortization of intangibles     987       447       1,997       689  
Merger-related and other charges     1,176       3,173       3,829       3,173  
Other     6,067       4,445       11,846       9,453  
Total operating expenses     58,060       48,420       115,945       91,481  
Net income before income taxes     40,655       28,937       76,528       57,000  
Income tax expense     15,389       11,124       28,967       21,517  
Net income     25,266       17,813       47,561       35,483  
Preferred stock dividends and discount accretion     -       17       21       17  
Net income available to common shareholders   $ 25,266     $ 17,796     $ 47,540     $ 35,466  
                                 
Earnings per common share:                                
Basic   $ .35     $ .28     $ .66     $ .57  
Diluted     .35       .28       .66       .57  
Weighted average common shares outstanding:                                
Basic     72,202       62,549       72,187       61,730  
Diluted     72,207       62,553       72,191       61,734  

 

See accompanying notes to consolidated financial statements.

 

  3  

 

 

UNITED COMMUNITY BANKS, INC.

Consolidated Statement of Comprehensive Income (Unaudited)

 

 

(in thousands)   Three Months Ended June 30,     Six Months Ended June 30,  
2016   Before-tax
Amount
    Tax
(Expense)
Benefit
    Net of Tax
Amount
    Before-tax
Amount
    Tax
(Expense)
Benefit
    Net of Tax
Amount
 
                                     
Net income   $ 40,655     $ (15,389 )   $ 25,266     $ 76,528     $ (28,967 )   $ 47,561  
Other comprehensive income:                                                
Unrealized gains on available-for-sale securities:                                                
Unrealized holding gains arising during period     21,366       (8,105 )     13,261       33,063       (12,561 )     20,502  
Reclassification adjustment for gains included in net income     (282 )     106       (176 )     (661 )     247       (414 )
Net unrealized gains     21,084       (7,999 )     13,085       32,402       (12,314 )     20,088  
Amortization of losses included in net income on available-for-sale securities transferred to held-to- maturity     473       (178 )     295       938       (359 )     579  
Amortization of losses included in net income on terminated derivative financial instruments that were previously accounted for as cash flow hedges     460       (179 )     281       960       (374 )     586  
Amortization of prior service cost and actuarial losses included in net periodic pension cost for defined benefit pension plan     167       (65 )     102       334       (130 )     204  
                                                 
Total other comprehensive income     22,184       (8,421 )     13,763       34,634       (13,177 )     21,457  
                                                 
Comprehensive income   $ 62,839     $ (23,810 )   $ 39,029     $ 111,162     $ (42,144 )   $ 69,018  
                                                 
2015                                                
Net income   $ 28,937     $ (11,124 )   $ 17,813     $ 57,000     $ (21,517 )   $ 35,483  
Other comprehensive income:                                                
Unrealized gains (losses) on available-for-sale securities:                                                
Unrealized holding gains (losses) arising during the period     (10,875 )     4,032       (6,843 )     3,114       (1,273 )     1,841  
Reclassification adjustment for gains included in net income     (13 )     5       (8 )     (1,552 )     603       (949 )
Net unrealized gains (losses)     (10,888 )     4,037       (6,851 )     1,562       (670 )     892  
Amortization of losses included in net income on available-for-sale securities transferred to held-to- maturity     289       (105 )     184       773       (287 )     486  
Amortization of losses included in net income on terminated derivative financial instruments that were previously accounted for as cash flow hedges     455       (177 )     278       880       (342 )     538  
Unrealized losses on derivative financial instruments accounted for as cash flow hedges     -       -       -       (471 )     183       (288 )
Net cash flow hedge activity     455       (177 )     278       409       (159 )     250  
Amortization of prior service cost and actuarial losses included in net periodic pension cost for defined benefit pension plan     159       (62 )     97       318       (124 )     194  
                                                 
Total other comprehensive income (loss)     (9,985 )     3,693       (6,292 )     3,062       (1,240 )     1,822  
                                                 
Comprehensive income   $ 18,952     $ (7,431 )   $ 11,521     $ 60,062     $ (22,757 )   $ 37,305  

 

See accompanying notes to consolidated financial statements.

 

  4  

 

 

UNITED COMMUNITY BANKS, INC.

Consolidated Balance Sheet (Unaudited)

 

 

    June 30,     December 31,  
(in thousands, except share and per share data)   2016     2015  
             
ASSETS                
Cash and due from banks   $ 107,606     $ 86,912  
Interest-bearing deposits in banks     100,036       153,451  
Cash and cash equivalents     207,642       240,363  
Securities available for sale     2,335,511       2,291,511  
Securities held to maturity (fair value $356,740 and $371,658)     341,951       364,696  
Mortgage loans held for sale     30,152       24,231  
Loans, net of unearned income     6,286,527       5,995,441  
Less allowance for loan losses     (64,253 )     (68,448 )
Loans, net     6,222,274       5,926,993  
Premises and equipment, net     181,349       178,165  
Bank owned life insurance     105,784       105,493  
Accrued interest receivable     25,879       25,786  
Net deferred tax asset     157,689       197,613  
Derivative financial instruments     26,880       20,082  
Goodwill and other intangible assets     146,124       147,420  
Other assets     147,238       94,075  
Total assets   $ 9,928,473     $ 9,616,428  
LIABILITIES AND SHAREHOLDERS' EQUITY                
Liabilities:                
Deposits:                
Demand   $ 2,386,857     $ 2,204,755  
NOW     1,730,313       1,975,884  
Money market     1,641,980       1,599,637  
Savings     502,134       471,129  
Time     1,183,943       1,282,803  
Brokered     412,267       338,985  
Total deposits     7,857,494       7,873,193  
Repurchase agreements     -       16,640  
Federal Home Loan Bank advances     735,125       430,125  
Long-term debt     164,066       163,836  
Derivative financial instruments     34,930       28,825  
Accrued expenses and other liabilities     77,121       85,524  
Total liabilities     8,868,736       8,598,143  
Shareholders' equity:                
Preferred stock, $1 par value; 10,000,000 shares authorized;
Series H; $1,000 stated value; 0 and 9,992 shares issued and outstanding
    -       9,992  
Common stock, $1 par value; 150,000,000 shares authorized;
69,863,008 and 66,198,477 shares issued and outstanding
    69,863       66,198  
Common stock, non-voting, $1 par value; 26,000,000 shares authorized;
1,258,792 and 5,285,516 shares issued and outstanding
    1,259       5,286  
Common stock issuable; 486,753 and 458,953 shares     6,651       6,779  
Capital surplus     1,279,383       1,286,361  
Accumulated deficit     (293,424 )     (330,879 )
Accumulated other comprehensive loss     (3,995 )     (25,452 )
Total shareholders' equity     1,059,737       1,018,285  
Total liabilities and shareholders' equity   $ 9,928,473     $ 9,616,428  

 

See accompanying notes to consolidated financial statements.

 

  5  

 

 

UNITED COMMUNITY BANKS, INC.

Consolidated Statement of Changes in Shareholders' Equity (Unaudited)

For the Six Months Ended June 30,

 

 

    Preferred                                   Accumulated        
    Stock           Non-Voting     Common                 Other        
(in thousands, except share and per   Series     Common     Common     Stock     Capital     Accumulated     Comprehensive        
share data)   H     Stock     Stock     Issuable     Surplus     Deficit     Income (Loss)     Total  
                                                 
Balance, December 31, 2014   $ -     $ 50,178     $ 10,081     $ 5,168     $ 1,080,508     $ (387,568 )   $ (18,790 )   $ 739,577  
Net income                                             35,483               35,483  
Other comprehensive income                                                     1,822       1,822  
Common stock issued to dividend reinvestment plan and employee benefit plans (7,661 shares)             8                       122                       130  
Conversion of non-voting common stock to voting (1,795,271 shares)             1,795       (1,795 )                                     -  
Common and preferred stock issued for acquisition (2,358,503 common shares and 9,992 preferred shares)     9,992       2,359                       41,533                       53,884  
Amortization of stock option and restricted stock awards                                     2,178                       2,178  
Vesting of restricted stock, net of shares surrendered to cover payroll taxes (60,698 shares issued, 59,685 shares deferred)             61               852       (1,294 )                     (381 )
Deferred compensation plan, net, including dividend equivalents                             190       (1 )                     189  
Shares issued from deferred compensation plan (14,125 shares)             14               (139 )     125                       -  
Common stock dividends ($.10 per share)                                             (6,192 )             (6,192 )
Tax on restricted stock vesting                                     559                       559  
Preferred stock dividends: Series H                                             (17 )             (17 )
Balance, June 30, 2015   $ 9,992     $ 54,415     $ 8,286     $ 6,071     $ 1,123,730     $ (358,294 )   $ (16,968 )   $ 827,232  
                                                                 
Balance, December 31, 2015   $ 9,992     $ 66,198     $ 5,286     $ 6,779     $ 1,286,361     $ (330,879 )   $ (25,452 )   $ 1,018,285  
Net income                                             47,561               47,561  
Other comprehensive income                                                     21,457       21,457  
Redemption of Series H preferred stock (9,992 shares)     (9,992 )                                                     (9,992 )
Common stock issued to dividend reinvestment plan and to employee benefit plans (10,360 shares)             10                       164                       174  
Conversion of non-voting common stock to voting common stock (4,026,724 shares)             4,027       (4,027 )                                     -  
Amortization of stock option and restricted stock awards                                     1,826                       1,826  
Vesting of restricted stock, net of shares surrendered to cover payroll taxes (41,909 shares issued, 65,011 shares deferred)             42               941       (1,585 )                     (602 )
Purchases of common stock (460,000 shares)             (460 )                     (7,741 )                     (8,201 )
Deferred compensation plan, net, including dividend equivalents                             204                               204  
Shares issued from deferred compensation plan (45,538 shares)             46               (1,273 )     1,227                       -  
Common stock dividends ($.14 per share)                                             (10,085 )             (10,085 )
Tax on option exercise and restricted stock vesting                                     (869 )                     (869 )
Preferred stock dividends: Series H                                             (21 )             (21 )
Balance, June 30, 2016   $ -     $ 69,863     $ 1,259     $ 6,651     $ 1,279,383     $ (293,424 )   $ (3,995 )   $ 1,059,737  

 

See accompanying notes to consolidated financial statements.

 

  6  

 

 

UNITED COMMUNITY BANKS, INC.

Consolidated Statement of Cash Flows (Unaudited)

 

 

    Six Months Ended  
    June 30,  
(in thousands)   2016     2015  
Operating activities:                
Net income   $ 47,561     $ 35,483  
Adjustments to reconcile net income to net cash provided by operating activities:                
Depreciation, amortization and accretion     14,378       10,896  
(Release of) provision for credit losses     (500 )     2,700  
Stock based compensation     1,826       2,178  
Deferred income tax expense     29,423       18,519  
Securities gains, net     (661 )     (1,552 )
Gains from sales of government guaranteed loans     (4,038 )     (2,635 )
Net gains on sale of other assets     (42 )     (83 )
Net gains and write downs on sales of other real estate owned     (328 )     (143 )
Loss on prepayment of borrowings     -       1,038  
Changes in assets and liabilities:                
Other assets and accrued interest receivable     (54,517 )     12  
Accrued expenses and other liabilities     3,077       (2,997 )
Mortgage loans held for sale     (5,921 )     (6,924 )
Net cash provided by operating activities     30,258       56,492  
                 
Investing activities:                
Investment securities held to maturity:                
Proceeds from maturities and calls of securities held to maturity     30,374       35,538  
Purchases of securities held to maturity     (1,000 )     -  
Investment securities available for sale:                
Proceeds from sales of securities available for sale     88,297       136,817  
Proceeds from maturities and calls of securities available for sale     199,086       134,521  
Purchases of securities available for sale     (308,799 )     (312,357 )
Net increase in loans     (313,917 )     (264,702 )
Funds paid to FDIC under loss sharing agreements     -       (1,198 )
Proceeds from sales of premises and equipment     987       147  
Purchases of premises and equipment     (9,913 )     (5,055 )
Net cash received for acquisition     -       44,594  
Proceeds from sale of other real estate     2,817       1,434  
Net cash used in investing activities     (312,068 )     (230,261 )
                 
Financing activities:                
Net change in deposits     (15,566 )     111,681  
Net change in short-term borrowings     (16,640 )     3,460  
Repayments of trust preferred securities     -       (15,998 )
Proceeds from FHLB advances     4,720,000       1,060,000  
Repayments of FHLB advances     (4,415,000 )     (967,070 )
Proceeds from issuance of common stock for dividend reinvestment and employee benefit plans     174       130  
Retirement of preferred stock     (9,992 )     -  
Purchase of common stock     (3,756 )     -  
Cash dividends on common stock     (10,085 )     (6,192 )
Cash dividends on preferred stock     (46 )     -  
Net cash provided by financing activities     249,089       186,011  
                 
Net change in cash and cash equivalents     (32,721 )     12,242  
                 
Cash and cash equivalents at beginning of period     240,363       192,655  
                 
Cash and cash equivalents at end of period   $ 207,642     $ 204,897  
                 
Supplemental disclosures of cash flow information:                
Interest paid   $ 13,161     $ 10,993  
Income taxes paid     2,637       2,791  
Significant non-cash investing and financing transactions:                
Unsettled government guaranteed loan purchases     5,010       -  
Unsettled government guaranteed loan sales     22,614       6,013  
Unsettled purchases of common stock     4,445       -  
Transfers of loans to foreclosed properties     4,312       1,528  
Acquisitions:                
Assets acquired     -       474,009  
Liabilities assumed     -       409,426  
Net assets acquired     -       64,583  
Common stock issued in acquisitions     -       43,892  
Preferred stock issued in acquisitions     -       9,992  

 

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 (“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, 2015.

 

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.

 

Certain 2015 amounts have been reclassified to conform to the 2016 presentation.

 

Note 2 –Accounting Standards Updates and Recently Adopted Standards

 

In April 2015, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2015-03, Interest – Imputation of Interest (Subtopic 835-30) Simplifying the Presentation of Debt Issuance Costs . To simplify presentation of debt issuance costs, the amendments in this update require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability consistent with debt discounts.  The standard was effective January 1, 2016 and has been retrospectively reflected in the accompanying consolidated balance sheet, with a corresponding reclassification for December 31, 2015 between other assets for $9.68 million, brokered deposits for $7.90 million and long-term debt for $1.78 million.

 

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) . This update requires a lessee to recognize in the statement of financial position 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. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election not to recognize lease assets and lease liabilities. For public entities, this update is effective for fiscal years beginning after December 15, 2018, with modified retrospective application to prior periods presented. Upon adoption, United will gross up its balance sheet by the present value of future minimum lease payments. Such payments amounted to $23.5 million at December 31, 2015.

 

In March 2016, the FASB issued ASU No. 2016-05, Derivatives and Hedging (Topic 815): Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships . This update clarifies that a change in the counterparty to a derivative instrument that has been designated as the hedging instrument under Topic 815 does not, in and of itself, require dedesignation of that hedging relationship provided that all other hedge accounting criteria continue to be met. For public entities, this update is effective for fiscal years beginning after December 15, 2016, with application on either a prospective or modified retrospective basis. The adoption of this update is not expected to have a material impact on United’s consolidated financial statements.

 

In March 2016, the FASB issued ASU No. 2016-06, Derivatives and Hedging (Topic 815): Contingent Put and Call Options in Debt Instruments . This update clarifies the requirements for assessing whether contingent call (put) options that can accelerate the payment of principal on debt instruments are clearly and closely related to their debt hosts. An entity performing the assessment under this update is required to assess the embedded call (put) options solely in accordance with a four-step decision sequence as outlined in the guidance. Consequently, when a call (put) option is contingently exercisable, an entity does not have to assess whether the event that triggers the ability to exercise a call (put) option is related to interest rates or credit risks. For public entities, this update is effective for fiscal years beginning after December 15, 2016, with application on a modified retrospective basis. The adoption of this update is not expected to have a material impact on United’s consolidated financial statements.

 

In March 2016, the FASB issued ASU No. 2016-07, Investments – Equity Method and Joint Ventures (Topic 323): Simplifying the Transition to the Equity Method of Accounting . This update eliminates the requirement that when an investment qualifies for use of the equity method as a result of an increase in the level of ownership interest or degree of influence, an investor must adjust the investment, results of operations, and retained earnings retroactively on a step-by-step basis as if the equity method had been in effect during all previous periods that the investment had been held. The amendments require that the equity method investor add the cost of acquiring the additional interest in the investee to the current basis of the investor’s previously held interest and adopt the equity method of accounting as of the date the investment becomes qualified for equity method accounting. Therefore, upon qualifying for the equity method of accounting, no retroactive adjustment of the investment is required. For public entities, this update is effective for fiscal years beginning after December 15, 2016, with application a prospective basis. The adoption of this update is not expected to have a material impact on United’s consolidated financial statements.

 

  8  

 

 

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

In March 2016, the FASB issued ASU No. 2016-09, Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting . This update simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The amendments require that excess tax benefits and deficiencies be recognized as income tax expense or benefit in the income statement and as an operating activity in the statement of cash flows. In addition, an entity can make a policy election to either estimate the number of awards that are expected to vest or account for forfeitures as they occur. The guidance modifies the threshold to qualify for equity classification to permit withholding up to the maximum statutory tax rate and clarifies that cash paid by an employer when directly withholding shares for tax-withholding purposes should be classified as a financing activity. For public entities, this update is effective for fiscal years beginning after December 15, 2016. The adoption of this update is not expected to have a material impact on United’s consolidated financial statements.

 

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments . The new guidance replaces the incurred loss impairment methodology in current GAAP with an expected credit loss 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 impaired 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 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. United is currently evaluating the impact of this guidance on its consolidated financial statements.

 

Note 3 – Acquisitions

 

Acquisition of Palmetto Bancshares, Inc.

On September 1, 2015, United completed the acquisition of Palmetto Bancshares, Inc. (“Palmetto”) and its wholly-owned bank subsidiary The Palmetto Bank. Information related to the fair value of assets and liabilities acquired is included in United’s Annual Report on Form 10-K for the year ended December 31, 2015. During second quarter 2016, within the one year measurement period, United received additional information regarding the acquisition date fair values of premises and equipment and other real estate owned (“OREO”). As a result the provisional values assigned to the acquired premises and equipment and OREO have been adjusted to $17.0 million and $2.63 million, respectively, which represent a decrease of $640,000 and $497,000, respectively, from amounts previously disclosed. The tax effect of these adjustments was reflected as an increase to the deferred tax asset of $437,000, with the net amount of $700,000 reflected as an increase to goodwill.

 

Acquisition of MoneyTree Corporation

On May 1, 2015, United completed the acquisition of MoneyTree Corporation (“MoneyTree”) and its wholly-owned bank subsidiary, First National Bank. Information related to the fair value of assets and liabilities acquired is included in United’s Annual Report on Form 10-K for the year ended December 31, 2015. The following table presents the period of acquisition as comparative 2015 information. The table discloses the impact of the merger with MoneyTree from the acquisition date through June 30, 2015 and certain pro forma information as if MoneyTree had been acquired on January 1, 2014. These results combine the historical results of MoneyTree with United’s consolidated statement of income and, while certain adjustments were made for the estimated impact of certain fair value adjustments and other acquisition-related activity, they are not necessarily indicative of what would have occurred had the acquisition taken place on January 1, 2014.

 

Merger-related costs of $3.17 million from the acquisition have been excluded from the 2015 pro forma information presented below. Furthermore, no adjustments have been made to the pro forma information to eliminate MoneyTree’s pre-acquisition provision for loan losses or OREO write downs. The actual results and pro forma information were as follows (in thousands) :

 

    Revenue     Net Income  
             
Actual MoneyTree from May 1, 2015 - June 30, 2015   $ 2,284     $ 384  
2015 supplemental consolidated pro forma from January 1, 2015 - June 30, 2015     153,322       38,294  

 

  9  

 

 

 

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

Note 4 – 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 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
    Gross
Amounts
Offset on
          Gross Amounts not Offset
in the Balance Sheet
       
June 30, 2016   Recognized
Assets
    the Balance
Sheet
    Net Asset
Balance
    Financial
Instruments
    Collateral
Received
    Net
Amount
 
                                     
Repurchase agreements / reverse repurchase agreements   $ 300,000     $ (300,000 )   $ -     $ -     $ -     $ -  
Derivatives     26,880       -       26,880       (1,779 )     (4,760 )     20,341  
Total   $ 326,880     $ (300,000 )   $ 26,880     $ (1,779 )   $ (4,760 )   $ 20,341  
                                                 
Weighted average interest rate of reverse repurchase agreements     1.43 %                                        

 

    Gross
Amounts of
    Gross
Amounts
Offset on
    Net     Gross Amounts not Offset
 in the Balance Sheet
       
    Recognized
Liabilities
    the Balance
Sheet
    Liability
Balance
    Financial
Instruments
    Collateral
Pledged
    Net
Amount
 
                                     
Repurchase agreements / reverse repurchase agreements   $ 300,000     $ (300,000 )   $ -     $ -     $ -     $ -  
Derivatives     34,930       -       34,930       (1,779 )     (33,182 )     -  
Total   $ 334,930     $ (300,000 )   $ 34,930     $ (1,779 )   $ (33,182 )   $ -  
                                                 
Weighted average interest rate of repurchase agreements     .58 %                                        

 

    Gross
Amounts of
    Gross
Amounts
Offset on
          Gross Amounts not Offset
 in the Balance Sheet
       
December 31, 2015   Recognized
Assets
    the Balance
Sheet
    Net Asset
Balance
    Financial
Instruments
    Collateral
Received
    Net
Amount
 
                                     
Repurchase agreements / reverse repurchase agreements   $ 400,000     $ (400,000 )   $ -     $ -     $ -     $ -  
Derivatives     20,082       -       20,082       (519 )     (3,729 )     15,834  
Total   $ 420,082     $ (400,000 )   $ 20,082     $ (519 )   $ (3,729 )   $ 15,834  
                                                 
 Weighted average interest rate of reverse repurchase agreements     1.34 %                                        

 

    Gross
Amounts of
    Gross
Amounts
Offset on
    Net     Gross Amounts not Offset 
in the Balance Sheet
       
    Recognized
Liabilities
    the Balance
Sheet
    Liability
Balance
    Financial
Instruments
    Collateral
Pledged
    Net
Amount
 
                                     
Repurchase agreements / reverse repurchase agreements   $ 400,000     $ (400,000 )   $ -     $ -     $ -     $ -  
Derivatives     28,825       -       28,825       (519 )     (30,917 )     -  
Total   $ 428,825     $ (400,000 )   $ 28,825     $ (519 )   $ (30,917 )   $ -  
                                                 
Weighted average interest rate of repurchase agreements     .50 %                                        

 

At June 30, 2016, United recognized the right to reclaim cash collateral of $33.5 million and the obligation to return cash collateral of $4.76 million. At December 31, 2015, United recognized the right to reclaim cash collateral of $6.26 million and the obligation to return cash collateral of $3.73 million. The right to reclaim cash collateral and the obligation to return cash collateral were included in the consolidated balance sheet in other assets and other liabilities, respectively.

 

  10  

 

 

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 the dates indicated (in thousands) .

 

    Remaining Contractual Maturity of the Agreements  
    Overnight and                          
As of June 30, 2016   Continuous     Up to 30 Days     30 to 90 Days     91 to 110 days     Total  
                               
U.S. Treasuries   $ -     $ -     $ 50,000     $ 50,000     $ 100,000  
Mortgage-backed securities     -       50,000       50,000       100,000       200,000  
                                         
Total   $ -     $ 50,000     $ 100,000     $ 150,000     $ 300,000  
                                         
Gross amount of recognized liabilities for repurchase agreements in offsetting disclosure                                   $ 300,000  
Amounts related to agreements not included in offsetting disclosure                                   $ -  

 

    Remaining Contractual Maturity of the Agreements  
    Overnight and                          
As of December 31, 2015   Continuous     Up to 30 Days     30 to 90 Days     91 to 110 days     Total  
                               
U.S. Treasuries   $ -     $ -     $ 100,000     $ -     $ 100,000  
U.S. Government agencies     32       -       -       -       32  
Mortgage-backed securities     16,608       25,000       175,000       100,000       316,608  
                                         
Total   $ 16,640     $ 25,000     $ 275,000     $ 100,000     $ 416,640  
                                         
Gross amount of recognized liabilities for repurchase agreements in offsetting disclosure                                   $ 400,000  
Amounts related to agreements not included in offsetting disclosure                                   $ 16,640  

 

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 5 – Securities

 

The amortized cost basis, unrealized gains and losses and fair value of securities held-to-maturity as of the dates indicated are as follows (in thousands) .

 

          Gross     Gross        
    Amortized     Unrealized     Unrealized     Fair  
As of June 30, 2016   Cost     Gains     Losses     Value  
                         
State and political subdivisions   $ 61,547     $ 4,782     $ 1     $ 66,328  
Mortgage-backed securities (1)     280,404       10,014       6       290,412  
                                 
Total   $ 341,951     $ 14,796     $ 7     $ 356,740  
                                 
As of December 31, 2015                                
                                 
State and political subdivisions   $ 62,073     $ 3,211     $ -     $ 65,284  
Mortgage-backed securities (1)     302,623       5,424       1,673       306,374  
                                 
Total   $ 364,696     $ 8,635     $ 1,673     $ 371,658  

 

(1) All are residential type mortgage-backed securities or U.S. government agency commercial mortgage backed securities.

 

  11  

 

 

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

The cost basis, unrealized gains and losses, and fair value of securities available-for-sale as of the dates indicated are presented below (in thousands) .

          Gross     Gross        
    Amortized     Unrealized     Unrealized     Fair  
As of June 30, 2016   Cost     Gains     Losses     Value  
                         
U.S. Treasuries   $ 140,537     $ 5,021     $ -     $ 145,558  
U.S. Government agencies     38,659       726       -       39,385  
State and political subdivisions     68,962       2,145       -       71,107  
Mortgage-backed securities (1)     1,218,928       24,653       1,560       1,242,021  
Corporate bonds     307,653       4,631       1,161       311,123  
Asset-backed securities     527,852       1,484       4,144       525,192  
Other     1,125       -       -       1,125  
                                 
Total   $ 2,303,716     $ 38,660     $ 6,865     $ 2,335,511  
                                 
As of December 31, 2015                                
                                 
U.S. Treasuries   $ 169,034     $ 156     $ 484     $ 168,706  
U.S. Government agencies     112,394       385       439       112,340  
State and political subdivisions     56,265       461       458       56,268  
Mortgage-backed securities (1)     1,108,206       12,077       7,165       1,113,118  
Corporate bonds     308,102       933       3,009       306,026  
Asset-backed securities     538,679       569       6,006       533,242  
Other     1,811       -       -       1,811  
                                 
Total   $ 2,294,491     $ 14,581     $ 17,561     $ 2,291,511  

 

(1) All are residential type mortgage-backed securities or U.S. government agency commercial mortgage backed securities.

 

Securities with a carrying value of $1.31 billion and $1.63 billion were pledged to secure public deposits, derivatives and other secured borrowings at June 30, 2016 and December 31, 2015, respectively.

 

The following table summarizes held-to-maturity securities in an unrealized loss position as of the dates indicated ( in thousands) .

 

    Less than 12 Months     12 Months or More     Total
As of June 30, 2016   Fair Value     Unrealized
Loss
    Fair Value     Unrealized
Loss
    Fair Value     Unrealized
Loss
   
                                     
State and political subdivisions   $ 512     $ 1     $ -     $ -     $ 512     $ 1  
Mortgage-backed securities     -       -       1,406       6       1,406       6  
Total unrealized loss position   $ 512     $ 1     $ 1,406     $ 6     $ 1,918     $ 7  
                                                 
As of December 31, 2015                                                
                                                 
Mortgage-backed securities   $ 140,362     $ 1,331     $ 13,127     $ 342     $ 153,489     $ 1,673  
Total unrealized loss position   $ 140,362     $ 1,331     $ 13,127     $ 342     $ 153,489     $ 1,673  

 

  12  

 

 

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

The following table summarizes available-for-sale securities in an unrealized loss position as of the dates indicated (in thousands) .

 

    Less than 12 Months     12 Months or More     Total  
As of June 30, 2016   Fair Value     Unrealized
Loss
    Fair Value     Unrealized
Loss
    Fair Value     Unrealized
Loss
 
                                     
Mortgage-backed securities   $ 31,875     $ 124     $ 108,620     $ 1,436     $ 140,495     $ 1,560  
Corporate bonds     64,166       661       500       500       64,666       1,161  
Asset-backed securities     207,774       2,990       109,599       1,154       317,373       4,144  
Total unrealized loss position   $ 303,815     $ 3,775     $ 218,719     $ 3,090     $ 522,534     $ 6,865  
                                                 
As of December 31, 2015                                                
                                                 
U.S. Treasuries   $ 126,066     $ 484     $ -     $ -     $ 126,066     $ 484  
U.S. Government agencies     74,189       439       -       -       74,189       439  
State and political subdivisions     27,014       458       -       -       27,014       458  
Mortgage-backed securities     274,005       2,580       173,254       4,585       447,259       7,165  
Corporate bonds     221,337       2,759       750       250       222,087       3,009  
Asset-backed securities     358,940       5,746       4,816       260       363,756       6,006  
Total unrealized loss position   $ 1,081,551     $ 12,466     $ 178,820     $ 5,095     $ 1,260,371     $ 17,561  

 

At June 30, 2016, there were 93 available-for-sale securities and 2 held-to-maturity securities 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 June 30, 2016 were primarily attributable to changes in interest rates and spread relationships.

 

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 or six months ended June 30, 2016 or 2015.

 

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 and six months ended June 30, 2016 and 2015 (in thousands) .

 

    Three Months Ended
June 30,
    Six Months Ended
June 30,
 
    2016     2015     2016     2015  
                         
Proceeds from sales   $ 26,992     $ 67,350     $ 88,297     $ 136,817  
                                 
Gross gains on sales   $ 285     $ 13     $ 958     $ 1,552  
Gross losses on sales     (3 )     -       (297 )     -  
                                 
Net gains on sales of securities   $ 282     $ 13     $ 661     $ 1,552  
                                 
Income tax expense attributable to sales   $ 106     $ 5     $ 247     $ 603  

 

  13  

 

 

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

The amortized cost and fair value of held-to-maturity and available-for-sale securities at June 30, 2016, 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  
                         
US Treasuries:                                
1 to 5 years   $ 66,014     $ 67,801     $ -     $ -  
5 to 10 years     74,523       77,757       -       -  
      140,537       145,558       -       -  
                                 
US Government agencies:                                
1 to 5 years     8,310       8,360       -       -  
5 to 10 years     30,349       31,025       -       -  
      38,659       39,385       -       -  
                                 
State and political subdivisions:                                
Within 1 year     926       940       5,017       5,069  
1 to 5 years     9,589       9,838       14,170       15,109  
5 to 10 years     52,311       53,917       22,357       25,107  
More than 10 years     6,136       6,412       20,003       21,043  
      68,962       71,107       61,547       66,328  
                                 
Corporate bonds:                                
1 to 5 years     223,094       224,777       -       -  
5 to 10 years     83,559       85,846       -       -  
More than 10 years     1,000       500       -       -  
      307,653       311,123       -       -  
                                 
Asset-backed securities:                                
1 to 5 years     27,357       27,704       -       -  
5 to 10 years     304,376       302,060       -       -  
More than 10 years     196,119       195,428       -       -  
      527,852       525,192       -       -  
                                 
Other:                                
More than 10 years     1,125       1,125       -       -  
      1,125       1,125       -       -  
                                 
Total securities other than mortgage-backed securities:                                
Within 1 year     926       940       5,017       5,069  
1 to 5 years     334,364       338,480       14,170       15,109  
5 to 10 years     545,118       550,605       22,357       25,107  
More than 10 years     204,380       203,465       20,003       21,043  
                                 
Mortgage-backed securities     1,218,928       1,242,021       280,404       290,412  
                                 
    $ 2,303,716     $ 2,335,511     $ 341,951     $ 356,740  

 

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

 

  14  

 

 

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

Note 6 – Loans and Allowance for Credit Losses

 

Major classifications of loans are summarized as of the dates indicated as follows (in thousands) .

 

    June 30,     December 31,  
    2016     2015  
             
Owner occupied commercial real estate   $ 1,450,075     $ 1,493,966  
Income producing commercial real estate     918,963       823,729  
Commercial & industrial     925,578       785,417  
Commercial construction     383,558       342,078  
Total commercial     3,678,174       3,445,190  
Residential mortgage     1,035,467       1,029,663  
Home equity lines of credit     622,804       597,806  
Residential construction     350,877       351,700  
Consumer installment     124,067       115,111  
Indirect auto     475,138       455,971  
                 
Total loans     6,286,527       5,995,441  
                 
Less allowance for loan losses     (64,253 )     (68,448 )
                 
Loans, net   $ 6,222,274     $ 5,926,993  

 

At June 30, 2016 and December 31, 2015, loans totaling $2.88 billion and $2.44 billion, respectively, were pledged as collateral to secure Federal Home Loan Bank advances and other contingent funding sources.

 

At June 30, 2016, the carrying value and outstanding balance of purchased credit impaired (“PCI”) loans accounted for under ASC 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality , were $40.7 million and $56.3 million, respectively. At December 31, 2015, the carrying value and outstanding balance of PCI loans were $51.3 million and $71.0 million, respectively. The following table presents changes in the value of the accretable yield for PCI loans for the periods indicated (in thousands) :

 

    Three Months Ended June 30,     Six Months Ended June 30,  
    2016     2015     2016     2015  
Balance at beginning of period   $ 4,144     $ -     $ 4,279     $ -  
Additions due to acquisitions     -       1,029       -       1,029  
Accretion     (626 )     (83 )     (1,942 )     (83 )
Reclassification from nonaccretable difference     806       -       1,453       -  
Changes in expected cash flows that do not affect nonaccretable difference     1,013       -       1,547       -  
Balance at end of period   $ 5,337     $ 946     $ 5,337     $ 946  

 

In addition to the accretable yield on PCI loans, the fair value adjustments on purchased loans outside the scope of ASC 310-30 are also accreted to interest revenue over the life of the loans. At June 30, 2016 and December 31, 2015, the remaining accretable fair value marks on loans acquired through a business combination and not accounted for under ASC 310-30 were $6.00 million and $7.03 million, respectively. In addition, indirect auto loans purchased at a premium outside of a business combination have a remaining premium of $12.4 million and $12.0 million, respectively, as of June 30, 2016 and December 31, 2015.

 

The allowance for loan losses represents management’s estimate of probable incurred losses in the loan portfolio as of the end of the period. The allowance for unfunded commitments is included in other liabilities in the consolidated balance sheet. Combined, the allowance for loan losses and allowance for unfunded commitments are referred to as the allowance for credit losses.

 

  15  

 

 

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

The following table presents the balance and activity in the allowance for credit losses by portfolio segment for the periods indicated (in thousands) .

 

    2016     2015  
Three Months Ended June 30,   Beginning
Balance
    Charge-
Offs
    Recoveries     (Release)
Provision
    Ending
Balance
    Beginning
Balance
    Charge-
Offs
    Recoveries     (Release)
Provision
    Ending
Balance
 
                                                             
Owner occupied commercial real estate   $ 16,864     $ (610 )   $ 46     $ (1,868 )   $ 14,432     $ 14,952     $ (363 )   $ 78     $ 1,672     $ 16,339  
Income producing commercial real estate     6,020       (121 )     144       (521 )     5,522       9,655       (74 )     350       (1,731 )     8,200  
Commercial & industrial     3,153       (223 )     615       (338 )     3,207       3,442       (162 )     789       659       4,728  
Commercial construction     8,938       (24 )     2       22       8,938       5,335       (147 )     51       (344 )     4,895  
Residential mortgage     14,205       (1,060 )     231       2,286       15,662       20,138       (1,109 )     322       (299 )     19,052  
Home equity lines of credit     5,995       (469 )     216       (424 )     5,318       4,321       (348 )     26       1,480       5,479  
Residential construction     9,034       (270 )     278       (37 )     9,005       10,210       (499 )     392       (766 )     9,337  
Consumer installment     773       (390 )     229       111       723       713       (349 )     187       137       688  
Indirect auto     1,328       (366 )     42       442       1,446       1,241       (130 )     8       292       1,411  
Total allowance for loan losses     66,310       (3,533 )     1,803       (327 )     64,253       70,007       (3,181 )     2,203       1,100       70,129  
Allowance for unfunded commitments     2,342       -       -       27       2,369       2,780       -       -       (200 )     2,580  
Total allowance for credit losses   $ 68,652     $ (3,533 )   $ 1,803     $ (300 )   $ 66,622     $ 72,787     $ (3,181 )   $ 2,203     $ 900     $ 72,709  

 

Six Months Ended June 30,   Beginning
Balance
    Charge-
Offs
    Recoveries     (Release)
Provision
    Ending
Balance
    Beginning
Balance
    Charge-
Offs
    Recoveries     (Release)
Provision
    Ending
Balance
 
                                                                                 
Owner occupied commercial real estate   $ 16,732     $ (1,012 )   $ 143     $ (1,431 )   $ 14,432     $ 16,041     $ (731 )   $ 89     $ 940     $ 16,339  
Income producing commercial real estate     8,235       (343 )     155       (2,525 )     5,522       10,296       (322 )     357       (2,131 )     8,200  
Commercial & industrial     4,442       (795 )     904       (1,344 )     3,207       3,255       (631 )     917       1,187       4,728  
Commercial construction     5,583       (311 )     2       3,664       8,938       4,747       (169 )     51       266       4,895  
Residential mortgage     17,232       (1,236 )     358       (692 )     15,662       20,311       (1,687 )     484       (56 )     19,052  
Home equity lines of credit     6,042       (1,192 )     307       161       5,318       4,574       (421 )     40       1,286       5,479  
Residential construction     7,961       (329 )     441       932       9,005       10,603       (1,639 )     471       (98 )     9,337  
Consumer installment     828       (869 )     435       329       723       731       (675 )     563       69       688  
Indirect auto     1,393       (599 )     73       579       1,446       1,061       (258 )     21       587       1,411  
Total allowance for loan losses     68,448       (6,686 )     2,818       (327 )     64,253       71,619       (6,533 )     2,993       2,050       70,129  
Allowance for unfunded commitments     2,542       -       -       (173 )     2,369       1,930       -       -       650       2,580  
Total allowance for credit losses   $ 70,990     $ (6,686 )   $ 2,818     $ (500 )   $ 66,622     $ 73,549     $ (6,533 )   $ 2,993     $ 2,700     $ 72,709  

 

  16  

 

 

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

The following table represents the recorded investment in loans by portfolio segment and the balance of the allowance for loan losses assigned to each segment based on the method of evaluating the loans for impairment as of the dates indicated (in thousands) .

 

    Allowance for Loan Losses  
    June 30, 2016     December 31, 2015  
    Individually
evaluated for
impairment
    Collectively
evaluated for
impairment
    PCI     Ending
Balance
    Individually
evaluated for
impairment
    Collectively
evaluated for
impairment
    PCI     Ending
Balance
 
                                                 
Owner occupied commercial real estate   $ 1,444     $ 12,988     $ -     $ 14,432     $ 1,465     $ 15,267     $ -     $ 16,732  
Income producing commercial real estate     399       5,123       -       5,522       961       7,274       -       8,235  
Commercial & industrial     71       2,980       156       3,207       280       4,162       -       4,442  
Commercial construction     46       8,856       36       8,938       13       5,570       -       5,583  
Residential mortgage     3,944       11,639       79       15,662       3,885       13,347       -       17,232  
Home equity lines of credit     3       5,259       56       5,318       6       6,036       -       6,042  
Residential construction     141       8,857       7       9,005       174       7,787       -       7,961  
Consumer installment     9       714       -       723       13       815       -       828  
Indirect auto     -       1,446       -       1,446       -       1,393       -       1,393  
Total allowance for loan losses     6,057       57,862       334       64,253       6,797       61,651       -       68,448  
Allowance for unfunded commitments     -       2,369       -       2,369       -       2,542       -       2,542  
Total allowance for credit losses   $ 6,057     $ 60,231     $ 334     $ 66,622     $ 6,797     $ 64,193     $ -     $ 70,990  

 

    Loans Outstanding  
    June 30, 2016     December 31, 2015  
    Individually
evaluated for
impairment
    Collectively
evaluated for
impairment
    PCI     Ending
Balance
    Individually
evaluated for
impairment
    Collectively
evaluated for
impairment
    PCI     Ending
Balance
 
                                                 
Owner occupied commercial real estate   $ 31,527     $ 1,410,209     $ 8,339     $ 1,450,075     $ 38,268     $ 1,442,024     $ 13,674     $ 1,493,966  
Income producing commercial real estate     23,647       873,916       21,400       918,963       23,013       772,945       27,771       823,729  
Commercial & industrial     2,771       921,657       1,150       925,578       3,339       781,423       655       785,417  
Commercial construction     1,865       376,745       4,948       383,558       10,616       329,320       2,142       342,078  
Residential mortgage     23,421       1,008,835       3,211       1,035,467       19,627       1,005,860       4,176       1,029,663  
Home equity lines of credit     101       621,525       1,178       622,804       167       595,951       1,688       597,806  
Residential construction     5,971       344,428       478       350,877       7,900       342,677       1,123       351,700  
Consumer installment     315       123,744       8       124,067       329       114,741       41       115,111  
Indirect auto     937       474,179       22       475,138       749       455,173       49       455,971  
Total loans   $ 90,555     $ 6,155,238     $ 40,734     $ 6,286,527     $ 104,008     $ 5,840,114     $ 51,319     $ 5,995,441  

 

Excluding loans accounted for under ASC 310-30, management individually evaluates all loans that are on nonaccrual with a balance of $500,000 or greater and all troubled debt restructurings (“TDRs”) for impairment. In addition, management reviews all accruing substandard loans greater than $2 million to determine if the loan is impaired. A loan is considered impaired when, based on current events and circumstances, it is probable that all amounts due according to the original contractual terms of the loan will not be collected. All TDRs are considered impaired regardless of accrual status. Impairment is measured based on the present value of expected future cash flows, discounted at the loan’s effective interest rate, the loan’s observable market price, or the fair value of the collateral if the loan is collateral dependent. A specific reserve is established for impaired loans for the amount of calculated impairment. Interest payments received on impaired nonaccrual loans are applied as a reduction of the recorded investment in the loan. For impaired loans not on nonaccrual status, interest is accrued according to the terms of the loan agreement. Loans are evaluated for impairment quarterly and specific reserves are established in the allowance for loan losses for any measured impairment.

 

Each quarter, management prepares an analysis of the allowance for credit losses to determine the appropriate balance that measures and quantifies the amount of probable incurred losses in the loan portfolio and unfunded loan commitments. The allowance is comprised of specific reserves on individually impaired loans, which are determined as described above, and general reserves which are determined based on historical loss experience as adjusted for current trends and economic conditions multiplied by a loss emergence period factor. Management uses eight quarters of historical loss experience to determine the loss factors to be used in the reserve calculation for loans evaluated in the aggregate. Eight quarters has been determined to be an appropriate time period as it is recent enough to be relevant to current conditions and covers a length of time sufficient to minimize distortions caused by nonrecurring and unusual activity that might otherwise influence a shorter time period. Management believes the current weightings are appropriate to measure the probable losses incurred within the loan portfolio.

 

Management calculates the loss emergence period for each pool of loans based on the average length of time between the date a loan first exceeds 30 days past due and the date the loan is charged off.

 

  17  

 

 

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

On junior lien home equity loans, management has limited ability to monitor the delinquency status of the first lien unless the first lien is also held by United. As a result, management applies the weighted average historical loss factor for this category and appropriately adjusts it to reflect the increased risk of loss from these credits.

 

Management carefully reviews the resulting loss factors for each category of the loan portfolio and evaluates whether qualitative adjustments are necessary to take into consideration recent credit trends such as increases or decreases in past due, nonaccrual, criticized and classified loans, and other macro environmental factors such as changes in unemployment rates, lease vacancy rates and trends in property values and absorption rates.

 

Management believes that its method of determining the balance of the allowance for credit losses provides a reasonable and reliable basis for measuring and reporting losses that are incurred in the loan portfolio as of the reporting date.

 

When a loan officer determines that a loan is uncollectible, he or she is responsible for recommending that the loan be placed on nonaccrual status and charged off. Full or partial charge-offs may also be recommended by the Collections Department, the Special Assets Department, the Loss Mitigation Department and the Foreclosure/OREO Department. Nonaccrual real estate loans are generally charged down to fair value less costs to sell at the time they are placed on nonaccrual status.

 

Commercial and consumer asset quality committees consisting of the Chief Credit Officer, Senior Risk Officers and Senior Credit Officers meet monthly to review charge-offs that have occurred during the previous month.

 

Generally, closed-end retail loans (installment and residential mortgage loans) past due 90 cumulative days are written down to their collateral value less estimated selling costs unless the loan is well secured and in process of collection (within the next 90 days). Open-end (revolving) unsecured retail loans which are past due 90 cumulative days from their contractual due date are generally charged-off.

 

The following table presents loans individually evaluated for impairment by class of loans as of the dates indicated (in thousands) .

 

    June 30, 2016     December 31, 2015  
    Unpaid
Principal
Balance
    Recorded
Investment
    Allowance
for Loan
Losses
Allocated
    Unpaid
Principal
Balance
    Recorded
Investment
    Allowance
for Loan
Losses
Allocated
 
                                     
With no related allowance recorded:                                                
Owner occupied commercial real estate   $ 8,083     $ 7,630     $ -     $ 14,793     $ 14,460     $ -  
Income producing commercial real estate     12,550       12,550       -       13,044       12,827       -  
Commercial & industrial     447       447       -       493       469       -  
Commercial construction     380       380       -       -       -       -  
Total commercial     21,460       21,007       -       28,330       27,756       -  
Residential mortgage     4,515       4,513       -       791       791       -  
Home equity lines of credit     -       -       -       -       -       -  
Residential construction     1,444       1,393       -       3,731       3,429       -  
Consumer installment     -       -       -       -       -       -  
Indirect auto     937       937       -       749       749       -  
Total with no related allowance recorded     28,356       27,850       -       33,601       32,725       -  
                                                 
With an allowance recorded:                                                
Owner occupied commercial real estate     24,053       23,897       1,444       24,043       23,808       1,465  
Income producing commercial real estate     11,097       11,097       399       10,281       10,186       961  
Commercial & industrial     2,404       2,324       71       2,957       2,870       280  
Commercial construction     1,654       1,485       46       10,787       10,616       13  
Total commercial     39,208       38,803       1,960       48,068       47,480       2,719  
Residential mortgage     19,195       18,908       3,944       19,346       18,836       3,885  
Home equity lines of credit     101       101       3       167       167       6  
Residential construction     4,963       4,578       141       4,854       4,471       174  
Consumer installment     335       315       9       354       329       13  
Indirect auto     -       -       -       -       -       -  
Total with an allowance recorded     63,802       62,705       6,057       72,789       71,283       6,797  
Total   $ 92,158     $ 90,555     $ 6,057     $ 106,390     $ 104,008     $ 6,797  

 

Excluding PCI loans, there were no loans more than 90 days past due and still accruing interest at June 30, 2016 or December 31, 2015. Nonaccrual loans include both homogeneous loans that are collectively evaluated for impairment and individually evaluated impaired loans. United’s policy is to place loans on nonaccrual status when, in the opinion of management, the principal and interest on a loan is not likely to be repaid in full or when the loan becomes 90 days past due and is not well secured and in the process of collection. When a loan is classified on nonaccrual status, interest previously accrued but not collected is reversed against current interest revenue. Principal and interest payments received on a nonaccrual loan are applied to reduce outstanding principal.

 

  18  

 

 

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

PCI loans are considered past due or delinquent when the contractual principal or interest due in accordance with the terms of the loan agreement remains unpaid after the due date of the scheduled payment. However, these loans are considered to be performing, even though they may be contractually past due, as any non-payment of contractual principal or interest is considered in the periodic re-estimation of expected cash flows and is included in the resulting recognition of current period covered loan loss provision or future period yield adjustments. The accrual of interest is discontinued on PCI loans if management can no longer reliably estimate future cash flows on the loan. No PCI loans were classified as nonaccrual at June 30, 2016 or December 31, 2015 as the carrying value of the respective loan or pool of loans cash flows were considered estimable and probable of collection. Therefore, interest revenue, through accretion of the difference between the carrying value of the loans and the expected cash flows, is being recognized on all PCI loans.

 

The gross additional interest revenue that would have been earned if the loans classified as nonaccrual had performed in accordance with the original terms was approximately $170,000 and $165,000 for the three months ended June 30, 2016 and 2015, respectively and $425,000 and $424,000 for the six months ended June 30, 2016 and 2015, respectively.

 

The average balances of impaired loans and income recognized on impaired loans while they were considered impaired are presented below for the periods indicated (in thousands) .

 

    2016     2015  
Three Months Ended June 30,   Average
Balance
    Interest
Revenue
Recognized
During
Impairment
    Cash Basis
Interest
Revenue
Received
    Average
Balance
    Interest
Revenue
Recognized
During
Impairment
    Cash Basis
Interest
Revenue
Received
 
                                     
Owner occupied commercial real estate   $ 31,747     $ 379     $ 388     $ 37,985     $ 469     $ 509  
Income producing commercial real estate     23,768       284       295       22,055       273       253  
Commercial & industrial     2,706       35       35       5,221       45       89  
Commercial construction     1,872       22       21       12,164       117       116  
Total commercial     60,093       720       739       77,425       904       967  
Residential mortgage     23,631       263       265       20,604       200       203  
Home equity lines of credit     101       1       1       558       5       5  
Residential construction     6,152       71       80       8,748       128       132  
Consumer installment     320       6       5       161       3       3  
Indirect auto     867       11       11       -       -       -  
Total   $ 91,164     $ 1,072     $ 1,101     $ 107,496     $ 1,240     $ 1,310  
                                                 
Six Months Ended June 30,                                                
                                                 
Owner occupied commercial real estate   $ 32,111     $ 809     $ 835     $ 37,487     $ 929     $ 968  
Income producing commercial real estate     23,857       568       597       21,740       540       529  
Commercial & industrial     2,771       66       62       4,622       83       125  
Commercial construction     1,881       44       44       12,219       233       237  
Total commercial     60,620       1,487       1,538       76,068       1,785       1,859  
Residential mortgage     23,778       469       468       21,345       425       436  
Home equity lines of credit     101       2       2       518       10       10  
Residential construction     6,254       138       143       9,662       248       258  
Consumer installment     327       12       12       157       6       6  
Indirect auto     830       22       22       -       -       -  
Total   $ 91,910     $ 2,130     $ 2,185     $ 107,750     $ 2,474     $ 2,569  

 

  19  

 

 

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

The following table presents the recorded investment in nonaccrual loans by loan class as of the dates indicated (in thousands) .

 

    June 30,     December 31,  
    2016     2015  
             
Owner occupied commercial real estate   $ 6,681     $ 7,036  
Income producing commercial real estate     1,017       2,595  
Commercial & industrial     949       892  
Commercial construction     199       328  
Total commercial     8,846       10,851  
Residential mortgage     8,667       8,555  
Home equity lines of credit     1,308       851  
Residential construction     1,578       1,398  
Consumer installment     137       175  
Indirect auto     812       823  
Total   $ 21,348     $ 22,653  

 

The following table presents the aging of the recorded investment in past due loans by class of loans as of the dates indicated (in thousands) .

 

    Loans Past Due     Loans Not              
As of June 30, 2016   30 - 59 Days     60 - 89 Days     > 90 Days     Total     Past Due     PCI Loans     Total  
                                           
Owner occupied commercial real estate   $ 1,432     $ 1,157     $ 2,167     $ 4,756     $ 1,436,980     $ 8,339     $ 1,450,075  
Income producing commercial real estate     321       892       192       1,405       896,158       21,400       918,963  
Commercial & industrial     2,695       45       448       3,188       921,240       1,150       925,578  
Commercial construction     107       -       131       238       378,372       4,948       383,558  
Total commercial     4,555       2,094       2,938       9,587       3,632,750       35,837       3,678,174  
Residential mortgage     5,579       1,563       3,155       10,297       1,021,959       3,211       1,035,467  
Home equity lines of credit     1,450       318       611       2,379       619,247       1,178       622,804  
Residential construction     786       926       389       2,101       348,298       478       350,877  
Consumer installment     386       208       25       619       123,440       8       124,067  
Indirect auto     803       243       389       1,435       473,681       22       475,138  
Total loans   $ 13,559     $ 5,352     $ 7,507     $ 26,418     $ 6,219,375     $ 40,734     $ 6,286,527  
                                                         
As of December 31, 2015                                                        
                                                         
Owner occupied commercial real estate   $ 3,733     $ 1,686     $ 1,400     $ 6,819     $ 1,473,473     $ 13,674     $ 1,493,966  
Income producing commercial real estate     204       1,030       621       1,855       794,103       27,771       823,729  
Commercial & industrial     858       88       489       1,435       783,327       655       785,417  
Commercial construction     159       -       76       235       339,701       2,142       342,078  
Total commercial     4,954       2,804       2,586       10,344       3,390,604       44,242       3,445,190  
Residential mortgage     5,111       1,338       3,544       9,993       1,015,494       4,176       1,029,663  
Home equity lines of credit     1,118       188       287       1,593       594,525       1,688       597,806  
Residential construction     2,180       239       344       2,763       347,814       1,123       351,700  
Consumer installment     610       115       83       808       114,262       41       115,111  
Indirect auto     611       311       561       1,483       454,439       49       455,971  
Total loans   $ 14,584     $ 4,995     $ 7,405     $ 26,984     $ 5,917,138     $ 51,319     $ 5,995,441  

 

As of June 30, 2016 and December 31, 2015, $5.40 million and $6.37 million, respectively, of specific reserves were allocated to customers whose loan terms have been modified in TDRs. United committed to lend additional amounts totaling up to $2,000 and $224,000 as of June 30, 2016 and December 31, 2015, respectively, to customers with outstanding loans that are classified as TDRs.

 

The modification of the terms of the TDRs included one or a combination of the following: a reduction of the stated interest rate of the loan or an extension of the amortization period that would not otherwise be considered in the current market for new debt with similar risk characteristics; a restructuring of the borrower’s debt into an “A/B note structure” where the A note would fall within the borrower’s ability to pay and the remainder would be included in the B note; a mandated bankruptcy restructuring; or interest-only payment terms greater than 90 days where the borrower is unable to amortize the loan. Modified PCI loans are not accounted for as TDRs because they are not separated from the pools, and as such are not classified as impaired loans.

 

  20  

 

 

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

The following table presents information on TDRs, including the number of loan contracts restructured and the pre- and post-modification recorded investment as of the dates indicated (dollars in thousands) .

 

    June 30, 2016     December 31, 2015  
    Number of
Contracts
    Pre-
Modification
Outstanding
Recorded
Investment
    Post-
Modification
Outstanding
Recorded
Investment
    Number of
Contracts
    Pre-
Modification
Outstanding
Recorded
Investment
    Post-
Modification
Outstanding
Recorded
Investment
 
Owner occupied commercial real estate     56     $ 26,515     $ 26,025       54     $ 32,544     $ 32,058  
Income producing commercial real estate     30       20,713       20,713       29       15,703       15,629  
Commercial & industrial     21       2,248       2,169       26       2,955       2,870  
Commercial construction     8       1,654       1,485       14       10,785       10,616  
Total commercial     115       51,130       50,392       123       61,987       61,173  
Residential mortgage     179       19,743       19,468       173       19,101       18,836  
Home equity lines of credit     2       101       101       2       167       167  
Residential construction     47       5,812       5,427       44       5,663       5,334  
Consumer installment     19       335       315       22       348       329  
Indirect auto     56       937       937       49       749       749  
Total loans     418     $ 78,058     $ 76,640       413     $ 88,015     $ 86,588  

 

Loans modified under the terms of a TDR during the three and six months ended June 30, 2016 and 2015 are presented in the table below. In addition, the following table presents loans modified under the terms of a TDR that defaulted (became 90 days or more delinquent) during the periods presented and were initially restructured within one year prior to default (dollars in thousands) .

 

    New TDRs for the Three Months Ended June 30,     New TDRs for the Six Months Ended June 30,  
                      Modified Within the                        Modified Within the    
                      Previous   Twelve Months                       Previous   Twelve Months  
          Pre-     Post-     That Have Subsequently           Pre-     Post-     That Have Subsequently  
          Modification     Modification     Defaulted during the           Modification     Modification     Defaulted during the  
        Outstanding     Outstanding     Three Months Ended June 30,         Outstanding     Outstanding     Six Months Ended June 30,  
2016   Number of
Contracts
    Recorded
Investment
    Recorded
Investment
    Number of
Contracts
    Recorded
Investment
    Number of
Contracts
    Recorded
Investment
    Recorded
Investment
    Number of
Contracts
    Recorded
Investment
 
                                                             
Owner occupied commercial real estate     3     $ 867     $ 867       1     $ 252       6     $ 1,516     $ 1,516       2     $ 499  
Income producing commercial real estate     -       -       -       -       -       -       -       -       -       -  
Commercial & industrial     2       749       749       -       -       3       946       946       -       -  
Commercial construction     -       -       -       -       -       -       -       -       -       -  
Total commercial     5       1,616       1,616       1       252       9       2,462       2,462       2       499  
Residential mortgage     11       1,803       1,801       1       85       18       2,602       2,564       1       85  
Home equity lines of credit     1       38       38       -       -       1       38       38       -       -  
Residential construction     5       429       373       -       -       6       495       439       -       -  
Consumer installment     -       -       -       -       -       1       20       20       -       -  
Indirect auto     10       235       235       -       -       18       474       474       -       -  
Total loans     32     $ 4,121     $ 4,063       2     $ 337       53     $ 6,091     $ 5,997       3     $ 584  

 

                      Modified Within the                        Modified Within the  
                      Previous   Twelve Months                       Previous   Twelve Months  
          Pre-     Post-     That Have Subsequently           Pre-     Post-     That Have Subsequently  
          Modification     Modification     Defaulted during the           Modification     Modification     Defaulted during the  
          Outstanding     Outstanding     Three Months Ended June 30,           Outstanding     Outstanding     Six Months Ended June 30,  
2015   Number of
Contracts
    Recorded
Investment
    Recorded
Investment
    Number of
Contracts
    Recorded
Investment
    Number of
Contracts
    Recorded
Investment
    Recorded
Investment
    Number of
Contracts
    Recorded
Investment
 
Owner occupied commercial real estate     6     $ 8,040     $ 7,996       -     $ -       8     $ 12,537     $ 12,493       -     $ -  
Income producing commercial real estate     1       55       54       -       -       3       310       310       -       -  
Commercial & industrial     4       992       992       -       -       6       1,180       1,180       -       -  
Commercial construction     1       233       233       -       -       1       233       233       -       -  
     Total commercial     12       9,320       9,275       -       -       18       14,260       14,216       -       -  
Residential mortgage     8       523       523       -       -       23       2,121       2,121       -       -  
Home equity lines of credit     1       83       74       -       -       1       83       74       -       -  
Residential construction     2       163       139       -       -       2       163       139       -       -  
Consumer installment     1       25       25       -       -       2       28       28       1       30  
Indirect auto     -       -       -       -       -       -       -       -       -       -  
   Total loans     24     $ 10,114     $ 10,036       -     $ -       46     $ 16,655     $ 16,578       1     $ 30  

 

TDRs that subsequently default and are placed on nonaccrual are charged down to the fair value of the collateral consistent with United’s policy for nonaccrual loans.

 

  21  

 

 

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

Risk Ratings

 

United categorizes commercial loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current industry and economic trends, among other factors. United analyzes loans individually by classifying the loans as to credit risk. This analysis is performed on a continual basis. United uses the following definitions for its risk ratings:

 

Watch. Loans in this category are presently protected from apparent loss; however, weaknesses exist that could cause future impairment, including the deterioration of financial ratios, past due status and questionable management capabilities. These loans require more than the ordinary amount of supervision. Collateral values generally afford adequate coverage, but may not be immediately marketable.

 

Substandard. These loans are inadequately protected by the current net worth and paying capacity of the obligor or by the collateral pledged. Specific and well-defined weaknesses exist that may include poor liquidity and deterioration of financial ratios. The loan may be past due and related deposit accounts experiencing overdrafts. There is the distinct possibility that United will sustain some loss if deficiencies are not corrected. If possible, immediate corrective action is taken.

 

Doubtful. Specific weaknesses characterized as Substandard that are severe enough to make collection in full highly questionable and improbable. There is no reliable secondary source of full repayment.

 

Loss. Loans categorized as Loss have the same characteristics as Doubtful; however, probability of loss is certain. Loans classified as Loss are charged off.

 

Consumer Purpose Loans. United applies a pass / fail grading system to all consumer purpose loans. Under the pass / fail grading system, consumer purpose loans that become past due 90 days are classified as “fail” and all other loans are classified as “pass”. For reporting purposes, consumer purpose loans classified as “fail” are reported in the substandard column and all other consumer purpose loans are reported in the “pass” column.

 

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass rated loans.

 

  22  

 

 

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

Based on the most recent analysis performed, the risk category of loans by class of loans as of the dates indicated is as follows (in thousands) .

 

As of June 30, 2016   Pass     Watch (1)     Substandard     Doubtful /
Loss
    Total  
                               
Owner occupied commercial real estate   $ 1,386,558     $ 19,766     $ 35,412     $ -     $ 1,441,736  
Income producing commercial real estate     872,759       5,027       19,777       -       897,563  
Commercial & industrial     911,815       3,209       9,404       -       924,428  
Commercial construction     375,061       2,043       1,506       -       378,610  
Total commercial     3,546,193       30,045       66,099       -       3,642,337  
Residential mortgage     986,571       7,652       38,033       -       1,032,256  
Home equity lines of credit     615,840       21       5,765       -       621,626  
Residential construction     335,266       6,355       8,778       -       350,399  
Consumer installment     123,248       -       811       -       124,059  
Indirect auto     472,792       -       2,324       -       475,116  
Total loans, excluding PCI loans   $ 6,079,910     $ 44,073     $ 121,810     $ -     $ 6,245,793  
                                         
Owner occupied commercial real estate   $ 1,399     $ 2,842     $ 4,098     $ -     $ 8,339  
Income producing commercial real estate     6,885       5,644       8,871       -       21,400  
Commercial & industrial     203       24       923       -       1,150  
Commercial construction     1,619       2,945       384       -       4,948  
Total commercial     10,106       11,455       14,276       -       35,837  
Residential mortgage     193       359       2,659       -       3,211  
Home equity lines of credit     205       -       973       -       1,178  
Residential construction     334       27       117       -       478  
Consumer installment     1       -       7       -       8  
Indirect auto     -       -       22       -       22  
Total PCI loans   $ 10,839     $ 11,841     $ 18,054     $ -     $ 40,734  
                                         
As of December 31, 2015                                        
                                         
Owner occupied commercial real estate   $ 1,414,353     $ 24,175     $ 41,764     $ -     $ 1,480,292  
Income producing commercial real estate     771,792       4,151       20,015       -       795,958  
Commercial & industrial     770,287       8,171       6,304       -       784,762  
Commercial construction     335,571       3,069       1,296       -       339,936  
Total commercial     3,292,003       39,566       69,379       -       3,400,948  
Residential mortgage     985,109       5,070       35,308       -       1,025,487  
Home equity lines of credit     589,749       24       6,345       -       596,118  
Residential construction     335,341       3,813       11,423       -       350,577  
Consumer installment     114,178       -       892       -       115,070  
Indirect auto     453,935       -       1,987       -       455,922  
Total loans, excluding PCI loans   $ 5,770,315     $ 48,473     $ 125,334     $ -     $ 5,944,122  
                                         
Owner occupied commercial real estate   $ </