SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

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

Date of Report (Date of earliest event reported):
October 24, 2006

United Community Banks, Inc.

(Exact name of registrant as specified in its charter)

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

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

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

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

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

o		Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o		Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o		Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o		Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240-13e-4(c))

 

 

Item 2.02 Results of Operation and Financial Condition

On October 24, 2006, United Community Banks, Inc. (the “Registrant”) issued a news release announcing its financial results for the third quarter ended September 30, 2006 (the “News Release”). The News Release, including financial schedules, is attached as Exhibit 99.1 to this report. In connection with issuing the News Release, on October 24, 2006 at 11:00 a.m. EST, the Registrant intends to hold a conference call/webcast to discuss the News Release.

Item 9.01 Financial Statements and Exhibits

	(a)		Financial statements: None
	(b)		Pro forma financial information: None
	(c)		Exhibits:

99.1

Press Release, dated October 24, 2006

SIGNATURES

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

Exhibit 99.1

For Immediate Release

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

UNITED COMMUNITY BANKS, INC. REPORTS
17 PERCENT GAIN IN DILUTED EARNINGS PER SHARE
FOR THIRD QUARTER 2006

HIGHLIGHTS:

•		Record Third Quarter Earnings       Diluted Earnings per Share of 42 cents – Up 17 Percent       Net Income of $17.4 Million – Up 22 Percent       Return on Tangible Equity of 17.29 Percent       Total Assets Rise to $6.5 Billion
•		Strong Loan and Deposit Growth and Rise in Net Interest Margin Drive Performance
•		25th Community Bank now open in Cleveland, Tennessee

BLAIRSVILLE, GA, October 24, 2006 – United Community Banks, Inc. (Nasdaq: UCBI), Georgia’s third-largest bank holding company, today announced record financial results for the third quarter of 2006. Compared with the third quarter of 2005, the company achieved a 14 percent increase in total revenue, a 22 percent rise in net income and a 17 percent gain in diluted earnings per share.

For the third quarter of 2006, net income was $17.4 million compared with $14.3 million a year earlier. Diluted earnings per share increased to 42 cents from 36 cents a year ago. Total revenue, on a taxable equivalent basis, was $72.8 million compared with $64.0 million for the third quarter of 2005. Return on tangible equity was 17.29 percent and return on assets was 1.09 percent, compared with 18.90 percent and 1.01 percent, respectively, a year ago.

“Our winning combination of seasoned bankers and attractive markets continues to produce strong business growth,” said Jimmy Tallent, president and chief executive officer of United Community Banks. “Loans increased $155 million during the third quarter, up 17 percent from a year ago, and helped drive the increase in net interest revenue. We funded our loan growth with customer deposits by more than two to one, adding $312 million this quarter. The strong growth pushed total assets to $6.5 billion, a 13 percent increase from a year ago while substantially lessening our use of wholesale borrowings. Our net interest margin was 4.30 percent, up 13 basis points from a year ago as rising short-term interest rates positively affected our slightly asset-sensitive balance sheet.”

For the first nine months of 2006, net income increased $8.9 million to $50.4 million, up 21 percent from $41.5 million for the first nine months of 2005. Diluted earnings per share of $1.22 increased 17 cents, or 16 percent, from $1.05 for the first nine months of 2005. Total revenue, on a taxable equivalent basis, was $211.4 million, up 17 percent from $180.7 million a year ago. Return on tangible equity was 17.54 percent and return on assets was 1.09 percent, compared with 19.30 percent and 1.03 percent, respectively, a year ago.

At September 30, 2006, total loans were $5.0 billion, up $711 million, or 17 percent, from a year ago. With the exception of $8 million in loans received through branch acquisitions during the quarter, all of the loan growth was organic. “Organic growth, with an uncompromising focus on sound credit quality, is at the core of our balanced growth strategy and is further supported by our focused de novo expansion,” Tallent said. “We find the right people and build around them. In the third quarter, we opened our 25th community bank, United Community Bank – Cleveland, which complements our existing franchise along the high-growth I-75 industrial corridor in east Tennessee. This new bank is led by President Mickey Torbett who is joined by nine other local veteran bankers. United now has a stronger foothold in this attractive market that is among Tennessee’s is leaders in number of manufacturing companies.”

“Also during the quarter, we opened a new banking office in Cumming, which is located in Forsyth County on the north side of metro Atlanta,” added Tallent. “We expanded our commercial loan office in Jasper, in Pickens County, to a full-service banking office. This commercial loan office was opened in the first quarter of 2006, along with a banking office in Savannah and Hall County, Georgia. We continue to look for opportunities to expand our franchise through de novo locations in both new and existing markets.”

Tallent continued, “Our balanced growth strategy also includes selective acquisitions. During the third quarter, we completed the acquisition of two banking offices in Sylva and Bryson City, North Carolina, expanding the customer base in those markets. Also, we announced an agreement to acquire Southern Bancorp, Inc., and its wholly owned subsidiary, Southern National Bank. Southern National Bank has two offices in Marietta and Canton, located in fast-growing Cobb and Cherokee counties on the northwest side of metro Atlanta.”

“With a strong management team and assets of $346 million, Southern National Bank significantly leverages our presence in these northwest metro Atlanta markets, especially Cherokee County,” Tallent said. “First, when the transaction is completed in the fourth quarter, it will provide us with the opportunity to form a new community bank in Cherokee County by adding their Canton office to our existing office in that county. Steve Holcomb, the current president of Southern National, will become the president of our 26^th community bank, United Community Bank – Cherokee. Holcomb and his team of 13 Cherokee County bankers’ have over 300 years of experience in that local community, where United’s deposit market share will improve from fifteenth to ninth. We have a great opportunity to significantly expand our franchise in Cherokee County over the next year and beyond. Second, it will allow us to add their downtown Marietta office to our four banking offices in Cobb County. This will strengthen our presence in Marietta and Cobb County, and increase our deposit market share from fourteenth to seventh,” added Tallent.

“In every one of our communities, the highest level of customer service continues to be our distinguishing characteristic,” Tallent said. “Our relentless focus on service has generated customer satisfaction scores that continue to exceed 90 percent, well above the comparable

industry average of 75 percent. This personal, caring brand of service is invaluable in building deposits through customer referrals while also maintaining and growing our long-term relationships with existing customers.”

For the third quarter, taxable equivalent net interest revenue of $64.4 million was up $9.4 million, or 17 percent, from the third quarter of 2005. Taxable equivalent net interest margin for the third quarter was 4.30 percent, compared with 4.17 percent a year ago. “Our balance sheet has remained slightly asset sensitive, which allowed us to benefit from the rise in interest rates as reflected in the expansion of our margin from a year ago,” Tallent said.

The third quarter provision for loan losses was $3.7 million, an increase of $300,000 from a year earlier, and equal to the second quarter of 2006. Annualized net charge-offs to average loans was 11 basis points for the third quarter, compared with nine basis points for the second quarter of 2006 and 13 basis points for the third quarter of 2005. At quarter-end, non-performing assets totaled $9.3 million compared with $8.8 million at the end of the second quarter of 2006 and $13.6 million a year ago. Non-performing assets as a percentage of total assets were 14 basis points at quarter-end, unchanged from the second quarter of 2006 and down from 24 basis points at September 30, 2005. “Strong credit quality, rooted with our guiding principle of securing loans with hard assets, is essential to our balanced growth strategy and overall success,” Tallent said.

Fee revenue of $12.1 million was down slightly from $12.4 million for the third quarter of 2005, primarily due to lower mortgage fees and losses from the sale of securities. Mortgage fees were down from a year ago due to a less favorable interest rate environment leading to lower refinancing activity. Also impacting fee revenue this quarter was a $290,000 charge for the prepayment of Federal Home Loan Bank advances that was part of our balance sheet management activities. Service charges and fees on deposit accounts increased $287,000 to $6.9 million, primarily due to growth in transactions and new accounts resulting from core deposit programs and higher ATM and debit card usage fees. Consulting fees and brokerage fees were each up more than $200,000 from a year ago reflecting growth in both businesses.

Operating expenses of $44.9 million increased $3.6 million, or 9 percent, from the third quarter of 2005. Salaries and employee benefit costs of $29.6 million increased $3.3 million, or 12 percent, from the third quarter of 2005 due to the increase in staff to support our expansion efforts and business growth. Communications and equipment expenses increased $379,000 to $3.9 million due to further investments and upgrades in technology equipment to support business growth and additional banking offices. Occupancy expense increased $202,000 to $2.9 million reflecting the increase in cost to operate additional banking offices added through de novo expansion. Advertising and public relations expense rose $199,000 to $1.9 million reflecting the costs of initiatives to raise core deposits and efforts to generate brand awareness in selected markets.

“We had a positive operating leverage of 5 percent this quarter,” Tallent said. “Also, our operating efficiency ratio of 58.4 percent was within our long-term efficiency goal of 58 to 60 percent. This reflects the continued strength of our existing franchise, strong revenue growth and disciplined expense controls, which more than offset the cost of reinvesting for the future through our de novo expansion efforts.”

“Our outlook for the fourth quarter of 2006 is for earnings per share growth slightly above our long-term goal of 12 to 15 percent. For 2007, our outlook for growth is within this range of 12 to 15 percent,” Tallent said. “We anticipate core loan growth for the fourth quarter and next year to be within a range of 10 to 12 percent. Our net interest margin has benefited from rising short-term interest rates; however, we expect that the margin through next year will continue to stabilize and possibly compress slightly from the third quarter level due to further price competition for deposits. This outlook assumes a stable economic environment and continued strong credit quality.”

“Our results for the first nine months of 2006 are leading toward another year of strong growth and superior operating performance,” Tallent concluded. “We are committed to excellent customer service while maintaining solid credit quality as we continue our efforts to build shareholder value through strong internal growth complemented by selective de novo and merger expansion.”

Conference Call

United Community Banks will hold a conference call on Tuesday, October 24, 2006, at 11 a.m. ET to discuss the contents of this news release, as well as business highlights for the quarter and the financial outlook for the remainder of 2006 and next year. The telephone number for the conference call is (800) 299-6183 and the pass code is “UCBI.” The conference call will also be available by web cast within the Investor Relations section of the company’s web site at www.ucbi.com.

About United Community Banks, Inc.

Headquartered in Blairsville, United Community Banks is the third-largest bank holding company in Georgia. United Community Banks has assets of $6.5 billion and operates 25 community banks with 96 banking offices located throughout north Georgia, metro Atlanta, coastal Georgia, western North Carolina and east Tennessee. The company specializes in providing personalized community banking services to individuals and small to mid-size businesses. United Community Banks also offers the convenience of 24-hour access through a network of ATMs, telephone and on-line banking. United Community Banks common stock is listed on the Nasdaq Global Select Market under the symbol UCBI. Additional information may be found at the company’s web site at www.ucbi.com.

Safe Harbor

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

(Tables Follow)

UNITED COMMUNITY BANKS, INC.
Selected Financial Information

																						Third
		2006												2005								Quarter				For the Nine								YTD
(in thousands, except per share		Third				Second				First				Fourth				Third				2006-2005				Months Ended								2006-2005
data; taxable equivalent)		Quarter				Quarter				Quarter				Quarter				Quarter				Change				2006				2005				Change
INCOME SUMMARY
Interest revenue		$	119,802			$	111,728			$	102,797			$	95,465			$	89,003							$	334,327			$	243,353
Interest expense			55,431				49,407				43,065				38,576				34,033								147,903				88,850
Net interest revenue			64,371				62,321				59,732				56,889				54,970				17	%			186,424				154,503				21	%
Provision for loan losses			3,700				3,700				3,500				3,500				3,400								10,900				8,600
Fee revenue			12,146				11,976				11,758				11,373				12,396				(2	)			35,880				34,775				3
Total revenue			72,817				70,597				67,990				64,762				63,966				14				211,404				180,678				17
Operating expenses			44,939				43,483				42,222				40,520				41,294				9				130,644				114,881				14
Income before taxes			27,878				27,114				25,768				24,242				22,672				23				80,760				65,797				23
Income taxes			10,465				10,185				9,729				9,012				8,374								30,379				24,285
Net income		$	17,413			$	16,929			$	16,039			$	15,230			$	14,298				22			$	50,381			$	41,512				21
PERFORMANCE MEASURES
Per common share:
Basic earnings		$	.43			$	.42			$	.40			$	.39			$	.37				16			$	1.25			$	1.08				16
Diluted earnings			.42				.41				.39				.38				.36				17				1.22				1.05				16
Cash dividends declared			.08				.08				.08				.07				.07				14				.24				.21				14
Book value			13.07				12.34				12.09				11.80				11.04				18				13.07				11.04				18
Tangible book value (2)			10.16				9.50				9.25				8.94				8.05				26				10.16				8.05				26
Key performance ratios:
Return on tangible equity (1)(2)(3)			17.29	%			17.68	%			17.66	%			18.20	%			18.90	%							17.54	%			19.30	%
Return on equity (1)(3)			13.22				13.41				13.25				13.30				13.42								13.29				13.51
Return on assets (3)			1.09				1.10				1.09				1.05				1.01								1.09				1.03
Net interest margin (3)			4.30				4.34				4.33				4.20				4.17								4.32				4.12
Efficiency ratio			58.44				58.53				59.06				58.80				61.16								58.67				60.64
Dividend payout ratio			18.60				19.05				20.00				17.95				18.92								19.20				19.44
Equity to assets			8.04				7.95				8.04				7.69				7.46								8.01				7.60
Tangible equity to assets (2)			6.35				6.22				6.24				5.82				5.53								6.27				5.57
ASSET QUALITY
Allowance for loan losses		$	60,901			$	58,508			$	55,850			$	53,595			$	51,888							$	60,901			$	51,888
Non-performing assets			9,347				8,805				8,367				12,995				13,565								9,347				13,565
Net charge-offs			1,307				1,042				1,245				1,793				1,385								3,594				3,908
Allowance for loan losses to loans			1.23	%			1.22	%			1.22	%			1.22	%			1.22	%							1.23	%			1.22	%
Non-performing assets to total assets			.14				.14				.14				.22				.24								.14				.24
Net charge-offs to average loans (3)			.11				.09				.11				.16				.13								.10				.13
AVERAGE BALANCES
Loans		$	4,865,886			$	4,690,196			$	4,505,494			$	4,328,613			$	4,169,170				17			$	4,688,512			$	3,970,937				18
Investment securities			1,029,981				1,039,707				1,038,683				1,004,966				1,008,687				2				1,036,092				983,889				5
Earning assets			5,942,710				5,758,697				5,574,712				5,383,096				5,239,195				13				5,760,055				5,016,702				15
Total assets			6,350,205				6,159,152				5,960,801				5,769,632				5,608,158				13				6,158,147				5,371,966				15
Deposits			5,085,168				4,842,389				4,613,810				4,354,275				4,078,437				25				4,848,849				3,884,733				25
Shareholders’ equity			510,791				489,821				478,960				443,746				418,459				22				493,307				408,399				21
Common shares outstanding:
Basic			40,223				40,156				40,088				39,084				38,345								40,156				38,272
Diluted			41,460				41,328				41,190				40,379				39,670								41,327				39,499
AT PERIOD END
Loans		$	4,965,365			$	4,810,277			$	4,584,155			$	4,398,286			$	4,254,051				17			$	4,965,365			$	4,254,051				17
Investment securities			980,273				974,524				983,846				990,687				945,922				4				980,273				945,922				4
Earning assets			6,012,987				5,862,614				5,633,381				5,470,718				5,302,532				13				6,012,987				5,302,532				13
Total assets			6,455,290				6,331,136				6,070,596				5,865,756				5,709,666				13				6,455,290				5,709,666				13
Deposits			5,309,219				4,976,650				4,748,438				4,477,600				4,196,369				27				5,309,219				4,196,369				27
Shareholders’ equity			526,734				496,297				485,414				472,686				424,000				24				526,734				424,000				24
Common shares outstanding			40,269				40,179				40,119				40,020				38,383								40,269				38,383

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

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
(in thousands, except per share data)		2006				2005				2006				2005
Interest revenue:
Loans, including fees		$	106,688			$	77,470			$	296,133			$	210,383
Investment securities:
Taxable			11,822				10,340				34,661				29,544
Tax exempt			474				520				1,497				1,573
Federal funds sold and deposits in banks			365				253				685				662
Total interest revenue			119,349				88,583				332,976				242,162
Interest expense:
Deposits:
Demand			10,255				5,187				26,398				13,093
Savings			226				223				680				565
Time			34,694				17,653				89,679				45,680
Total deposit interest expense			45,175				23,063				116,757				59,338
Federal funds purchased, repurchase agreements, & other short-term borrowings			2,254				1,651				5,814				3,723
Federal Home Loan Bank advances			5,828				7,181				18,837				19,403
Long-term debt			2,174				2,138				6,495				6,386
Total interest expense			55,431				34,033				147,903				88,850
Net interest revenue			63,918				54,550				185,073				153,312
Provision for loan losses			3,700				3,400				10,900				8,600
Net interest revenue after provision for loan losses			60,218				51,150				174,173				144,712
Fee revenue:
Service charges and fees			6,914				6,627				20,095				18,521
Mortgage loan and other related fees			1,928				2,367				5,149				5,592
Consulting fees			2,040				1,777				5,196				4,944
Brokerage fees			784				571				2,430				1,781
Securities losses, net			(382	)			(153	)			(385	)			(155	)
Other			862				1,207				3,395				4,092
Total fee revenue			12,146				12,396				35,880				34,775
Total revenue			72,364				63,546				210,053				179,487
Operating expenses:
Salaries and employee benefits			29,585				26,334				85,535				73,843
Communications and equipment			3,863				3,484				10,970				9,581
Occupancy			2,945				2,743				8,793				8,129
Advertising and public relations			1,882				1,683				5,718				4,745
Postage, printing and supplies			1,379				1,426				4,184				4,146
Professional fees			938				1,174				3,168				3,283
Amortization of intangibles			503				503				1,509				1,509
Other			3,844				3,947				10,767				9,645
Total operating expenses			44,939				41,294				130,644				114,881
Income before income taxes			27,425				22,252				79,409				64,606
Income taxes			10,012				7,954				29,028				23,094
Net income		$	17,413			$	14,298			$	50,381			$	41,512
Net income available to common shareholders		$	17,408			$	14,293			$	50,366			$	41,494
Earnings per common share:
Basic		$	0.43			$	0.37			$	1.25			$	1.08
Diluted			0.42				0.36				1.22				1.05
Dividends per common share			0.08				0.07				0.24				0.21
Weighted average common shares outstanding:
Basic			40,223				38,345				40,156				38,272
Diluted			41,460				39,670				41,327				39,499

UNITED COMMUNITY BANKS, INC.
Consolidated Balance Sheet

		September 30,				December 31,				September 30,
(in thousands, except share and per share data)		2006				2005				2005
		(unaudited)				(audited)				(unaudited)
ASSETS
Cash and due from banks		$	130,038			$	121,963			$	139,147
Interest-bearing deposits in banks			16,032				20,607				28,935
Cash and cash equivalents			146,070				142,570				168,082
Securities available for sale			980,273				990,687				945,922
Mortgage loans held for sale			21,522				22,335				28,539
Loans, net of unearned income			4,965,365				4,398,286				4,254,051
Less allowance for loan losses			60,901				53,595				51,888
Loans, net			4,904,464				4,344,691				4,202,163
Premises and equipment, net			129,217				112,887				109,468
Accrued interest receivable			47,336				37,197				36,108
Goodwill and other intangible assets			120,430				118,651				119,154
Other assets			105,978				96,738				100,230
Total assets		$	6,455,290			$	5,865,756			$	5,709,666
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Deposits:
Demand		$	666,891			$	602,525			$	637,296
Interest-bearing demand			1,340,985				1,264,947				1,180,125
Savings			167,531				175,453				175,864
Time:
Less than $100,000			1,523,843				1,218,277				1,118,102
Greater than $100,000			1,248,738				895,466				790,784
Brokered			361,231				320,932				294,198
Total deposits			5,309,219				4,477,600				4,196,369
Federal funds purchased, repurchase agreements, & other short-term borrowings			56,026				122,881				163,646
Federal Home Loan Bank advances			412,572				635,616				775,251
Long-term debt			111,869				111,869				111,869
Accrued expenses and other liabilities			38,870				45,104				38,531
Total liabilities			5,928,556				5,393,070				5,285,666
Shareholders’ equity:
Preferred stock, $1 par value; $10 stated value; 10,000,000 shares authorized; 32,200, 32,200 and 37,200 shares issued and outstanding			322				322				372
Common stock, $1 par value; 100,000,000 shares authorized; 40,268,604, 40,019,853 and 38,407,874 shares issued			40,269				40,020				38,408
Common stock issuable; 22,741 and 9,948 shares as of September 30, 2006 and December 31, 2005, respectively			638				271				—
Capital surplus			199,773				193,355				153,712
Retained earnings			291,281				250,563				238,144
Treasury stock; 24,449 shares as of September 30, 2005, at cost			—				—				(671	)
Accumulated other comprehensive loss			(5,549	)			(11,845	)			(5,965	)
Total shareholders’ equity			526,734				472,686				424,000
Total liabilities and shareholders’ equity		$	6,455,290			$	5,865,756			$	5,709,666

UNITED COMMUNITY BANKS, INC.
Average Consolidated Balance Sheets and Net Interest Analysis
For the Three Months Ended September 30,

		2006												2005
		Average								Avg.				Average								Avg.
(dollars in thousands, taxable equivalent)		Balance				Interest				Rate				Balance				Interest				Rate
Assets:
Interest-earning assets:
Loans, net of unearned income (1)(2)		$	4,865,886			$	106,559				8.69	%		$	4,169,170			$	77,112				7.34	%
Taxable securities (3)			984,189				11,822				4.80				960,513				10,340				4.31
Tax-exempt securities (1) (3)			45,792				780				6.81				48,174				856				7.10
Federal funds sold and other interest-earning assets			46,843				641				5.47				61,338				695				4.53
Total interest-earning assets			5,942,710				119,802				8.01				5,239,195				89,003				6.75
Non-interest-earning assets:
Allowance for loan losses			(60,606	)											(51,278	)
Cash and due from banks			116,004												108,784
Premises and equipment			125,423												106,347
Other assets (3)			226,674												205,110
Total assets		$	6,350,205											$	5,608,158
Liabilities and Shareholders’ Equity:
Interest-bearing liabilities:
Interest-bearing deposits:
Transaction accounts		$	1,311,042				10,255				3.10			$	1,164,563				5,187				1.77
Savings deposits			170,079				226				.53				175,833				223				.50
Time deposits less than $100,000			1,446,388				16,503				4.53				1,074,926				8,439				3.11
Time deposits greater than $100,000			1,162,207				14,382				4.91				736,217				6,779				3.65
Brokered deposits			340,301				3,809				4.44				307,531				2,435				3.14
Total interest-bearing deposits			4,430,017				45,175				4.05				3,459,070				23,063				2.65
Federal funds purchased & other borrowings			162,372				2,254				5.51				185,233				1,651				3.54
Federal Home Loan Bank advances			438,875				5,828				5.27				779,912				7,181				3.65
Long-term debt			111,869				2,174				7.71				111,869				2,138				7.58
Total borrowed funds			713,116				10,256				5.71				1,077,014				10,970				4.04
Total interest-bearing liabilities			5,143,133				55,431				4.28				4,536,084				34,033				2.98
Non-interest-bearing liabilities:
Non-interest-bearing deposits			655,151												619,367
Other liabilities			41,130												34,248
Total liabilities			5,839,414												5,189,699
Shareholders’ equity			510,791												418,459
Total liabilities and shareholders’ equity		$	6,350,205											$	5,608,158
Net interest revenue						$	64,371											$	54,970
Net interest-rate spread											3.73	%											3.77	%
Net interest margin (4)											4.30	%											4.17	%

UNITED COMMUNITY BANKS, INC.
Average Consolidated Balance Sheets and Net Interest Analysis
For the Nine Months Ended September 30,

		2006												2005
		Average								Avg.				Average								Avg.
(dollars in thousands, taxable equivalent)		Balance				Interest				Rate				Balance				Interest				Rate
Assets:
Interest-earning assets:
Loans, net of unearned income (1)(2)		$	4,688,512			$	295,778				8.43	%		$	3,970,937			$	209,378				7.05	%
Taxable securities (3)			988,504				34,661				4.68				934,691				29,544				4.21
Tax-exempt securities (1) (3)			47,588				2,463				6.90				49,198				2,589				7.02
Federal funds sold and other interest-earning assets			35,451				1,425				5.36				61,876				1,842				3.97
Total interest-earning assets			5,760,055				334,327				7.76				5,016,702				243,353				6.48
Non-interest-earning assets:
Allowance for loan losses			(57,716	)											(49,681	)
Cash and due from banks			122,603												98,615
Premises and equipment			120,664												104,079
Other assets (3)			212,541												202,251
Total assets		$	6,158,147											$	5,371,966
Liabilities and Shareholders’ Equity:
Interest-bearing liabilities:
Interest-bearing deposits:
Transaction accounts		$	1,280,101			$	26,398				2.76			$	1,116,573			$	13,093				1.57
Savings deposits			173,448				680				.52				175,302				565				.43
Time deposits less than $100,000			1,354,421				42,604				4.21				1,032,142				22,208				2.88
Time deposits greater than $100,000			1,068,376				36,938				4.62				663,751				16,663				3.36
Brokered deposits			327,877				10,137				4.13				322,028				6,809				2.83
Total interest-bearing deposits			4,204,223				116,757				3.71				3,309,796				59,338				2.40
Federal funds purchased & other borrowings			152,303				5,814				5.10				158,249				3,723				3.15
Federal Home Loan Bank advances			510,168				18,837				4.94				778,750				19,403				3.33
Long-term debt			111,868				6,495				7.76				111,868				6,386				7.63
Total borrowed funds			774,339				31,146				5.38				1,048,867				29,512				3.76
Total interest-bearing liabilities			4,978,562				147,903				3.97				4,358,663				88,850				2.73
Non-interest-bearing liabilities:
Non-interest-bearing deposits			644,626												574,937
Other liabilities			41,652												29,967
Total liabilities			5,664,840												4,963,567
Shareholders’ equity			493,307												408,399
Total liabilities and shareholders’ equity		$	6,158,147											$	5,371,966
Net interest revenue						$	186,424											$	154,503
Net interest-rate spread											3.79	%											3.75	%
Net interest margin (4)											4.32	%											4.12	%