UNITED STATES
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

United Community Banks, Inc.

(Exact name of registrant as specified in its charter)

Georgia		No. 001-35095		No. 58-180-7304
(State or other jurisdiction of incorporation)		(Commission File Number)		(IRS Employer Identification No.)

125 Highway 515 East, P.O. Box 398 Blairsville, Georgia		30512
(Address of principal executive offices)		(Zip Code)

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

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 April 28, 2011, United Community Banks, Inc. (the “Registrant”) issued a news release announcing its financial results for the quarter ended March 31, 2011 (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 April 28, 2011 at 11:00 a.m. EST, the Registrant intends to hold a conference call/webcast to discuss the News Release. In addition to the News Release, during the conference call the Registrant intends to discuss certain financial information contained in the March 31, 2011 Investor Presentation (the “Investor Presentation”) which will be posted to the Registrant’s website. The Investor Presentation is attached as Exhibit 99.2 to this report.

The presentation of the Registrant’s financial results included operating performance measures and core earnings measures, which are measures of performance determined by methods other than in accordance with generally accepted accounting principles, or GAAP. Management included non-GAAP operating performance and core earnings measures because it believes they are useful for evaluating the Registrant’s operations and performance over periods of time, and uses operating performance and core earnings measures in managing and evaluating the Registrant’s business and intends to refer to them in discussions about the Registrant’s operations and performance. Operating performance measures for the fourth quarter of 2010 exclude the effects of an $11.75 million pre-tax partial recovery of a 2007 fraud loss and third quarter 2010 operating performance measures exclude the effects of a $210.6 million non-cash goodwill impairment charge. These items have been excluded from operating performance measures because management believes that the items are non-recurring in nature and do not reflect overall trends in the Registrant’s earnings. Additionally, core earnings measures exclude credit related costs such as the provision for loan losses, certain expenses and charges related to United’s 2011 asset disposition plans in the first quarter of 2011, the loss from sale of nonperforming assets to Fletcher International in the second quarter of 2010 and foreclosed property expense, securities gains and losses, income taxes and other items of a non-recurring nature. Core earnings are useful in evaluating the underlying earnings performance trends of the Registrant. Management believes these non-GAAP performance measures may provide users of the Registrant’s financial information with a meaningful measure for assessing the Registrant’s financial results and comparing those financial results to prior periods.

Operating performance and core earnings measures should be viewed in addition to, and not as an alternative or substitute for, the Registrant’s performance measures determined in accordance with GAAP, and is not necessarily comparable to non-GAAP performance measures that may be presented by other companies.

Item 9.01		Financial Statements and Exhibits

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

	99.1		Press Release, dated April 28, 2011
	99.2		Investor Presentation, First Quarter 2011

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) 781-2266
Rex_Schuette@ucbi.com

UNITED COMMUNITY BANKS, INC. REPORTS
NET OPERATING LOSS OF $142.5 MILLION FOR FIRST QUARTER 2011

	•		Completed strategically significant $380 million private equity offering
	•		Executed major elements of our asset disposition plan to de-risk balance sheet:

	•		completed $267 million bulk loan sale on April 18
	•		sold $77.5 million in loans and foreclosed properties
	•		aggressively wrote down foreclosed properties to 30 percent of unpaid principal balance

	•		Nonperforming assets down 57 percent from prior quarter and at lowest level in three years
	•		Allowance for loan losses remains strong at 3.17 percent of loans
	•		Core transaction deposits up 13 percent on an annualized basis

BLAIRSVILLE, GA — April 28, 2011 — United Community Banks, Inc. (NASDAQ: UCBI) today reported a net operating loss from continuing operations of $142.5 million, or $1.57 per diluted share, for the first quarter of 2011. The higher net operating loss reflects the board of directors’ decision to adopt an aggressive asset disposition plan to quickly sell and write down problem assets following United’s private equity offering.

“The asset disposition plan includes bulk sales of classified loans, as well as aggressive write-downs of foreclosed properties to levels significantly less than the appraised values in order to accelerate their sales,” stated Jimmy Tallent, president and chief executive officer. “The completion of the $380 million offering and the execution of our asset disposition plan are key accomplishments toward our goal of achieving sustained profitability beginning in the second quarter of 2011.”

The accelerated disposition of classified loans through bulk sales and transfers to foreclosed properties represented $211.1 million of the $231.6 million in net charge-offs for the first quarter. The bulk loan sale included performing substandard loans of $166.1 million and nonperforming loans of $100.5 million. These classified loans were written down in the first quarter to the expected sales proceeds of $80.6 million, resulting in loan charge-offs of $186.0 million. The bulk loan sale transaction was completed on April 18, 2011.

Additionally, United sold $20.9 million in other classified loans and transferred $32.6 million in nonperforming loans to foreclosed properties during the first quarter resulting in additional loan charge-offs of $25.1 million. Remaining net charge-offs of $20.5 million for the quarter were due to the inflow of nonperforming loans and other activities. These actions reduced nonperforming loans to $83.8 million at quarter-end, down from $179.1 million at the end of the fourth quarter of 2010 and from $280.8 million a year ago.

“The first quarter provision for loan losses and net charge-offs — $190 million and $231.6 million, respectively — are significantly higher than prior quarters and reflect the execution of our asset disposition plan,” said Tallent. “We reduced the allowance for loan losses to $133.1 million, or 3.17 percent of loans — which remains at a prudent and conservative level.”

Execution of the asset disposition plan also included the sale of $56.6 million in foreclosed properties during the first quarter at a loss of $12.0 million, and a $48.6 million write-down of remaining foreclosed properties to accelerate their dispositions. At March 31, 2011, foreclosed properties were $54.4 million and were written down well below appraised values to 30 percent of their original unpaid principal balance.

Total non-performing assets were $138 million at quarter-end, compared with $321 million at December 31, 2010 and $417 million at March 31, 2010; reflecting the lowest level since March 31, 2008.

“We made tremendous progress during the first quarter toward our goal of returning to profitability,” stated Jimmy Tallent. “With classified assets at a more manageable level, we can turn our focus toward other activities. The economy and the real estate market remain weak so we will move forward cautiously, but with a renewed sense of optimism. I am excited about the opportunities that lie ahead for us.”

Total loans were $4.2 billion at quarter-end, down $410 million from the prior quarter- end and down $798 million from a year ago, reflecting the higher level of net charge-offs resulting from the transfer of the bulk sale loans to the loans held-for-sale category. Residential construction loans were $550 million, or 13 percent of total loans, down $145 million from the prior quarter-end and down $410 million from a year ago. The decline during the first quarter was partially offset by $52.6 million in new customer loans, primarily commercial and small business lending in north Georgia and metropolitan Atlanta.

Taxable equivalent net interest revenue of $56.4 million was $4.9 million lower than the first quarter of 2010, primarily due to the $574 million reduction in average loan balances. Also contributing to lower net interest revenue in the first quarter was the reversal of $2.0 million in interest on performing classified loans that were included in the bulk sale transaction. The net interest margin was 3.30 percent for the first quarter of 2011, down 19 basis points from a year ago and down 28 basis points from the fourth quarter of 2010. Interest reversals on the performing classified loans that were included in the bulk loan sale accounted for 11 basis points of the decrease. In addition, maintenance of higher levels of liquidity further lowered first quarter net interest margin by 49 basis points. This compares to 30 basis points in the fourth quarter of 2010 and 18 basis points for the first quarter of 2010.

Tallent credited United bankers for their focus on servicing customers and growing the franchise while management worked out the capital transaction and asset disposition plan. “We grew core transaction deposits in the first quarter by $89 million, or 13 percent on an annualized basis,” Tallent said. “This was due in part to a core deposit marketing initiative that we launched in 2009 and that focuses on our strong customer service culture. I have been extremely pleased with the impact it has had on deposit growth and cross-selling activities this past year. Core transaction deposits are the lifeblood of this company, and this was their ninth consecutive quarter of growth. Since the beginning of 2009, we have grown core transaction deposits by $638 million, and that is nothing short of phenomenal.”

Operating fee revenue was $11.8 million in the first quarter of 2011, compared to $11.7 million a year ago. Service charges and fees were $6.7 million, down $727,000 from a year ago, due primarily to lower overdraft fees resulting from recent regulatory changes that required customers to provide consent before using overdraft services. Other fee revenue of $2.9 million reflected an increase of $780,000 from a year ago due to the acceleration of deferred gains relating to the ineffectiveness of terminated cash flow hedges on certain prime-based loans.

First quarter operating expenses were $115.3 million, up $60.5 million from a year ago. The increase was due primarily to the asset disposition plan, the $60.6 million of write-downs and losses on foreclosed properties, and the $3.6 million in associated costs for property taxes and professional fees related to the bulk loan sale and private equity offering. Excluding these costs from both periods, operating expenses for the first quarter totaled $51.1 million compared to $46.7 million a year ago. Salary and benefit costs totaled $24.9 million and increased $564,000 from last year due primarily to higher health insurance costs. Professional fees of $3.3 million were $1.4 million higher than a year ago, reflecting the $1.0 million for transaction costs in the first quarter of 2011 and higher credit-related workout costs. FDIC assessments and other regulatory charges of $5.4 million reflected an increase of $1.8 million from a year ago as a result of a higher deposit insurance assessment rate and an increase in the level of insured deposits. Other operating expenses of $6.4 million were $2.5 million more than a year ago due to the $2.6 million of property taxes incurred this quarter in connection with the bulk loan sale transaction.

Foreclosed property costs for the first quarter of 2011 were $64.9 million as compared to $10.8 million a year ago. For 2011, these costs included $60.6 million for write-downs and losses on sales and $4.3 million for maintenance and other foreclosed property costs. For 2010, write-downs and losses on sales were $8.1 million while maintenance costs were $2.7 million. Included in write-downs and losses for the first quarter of 2011 were $48.6 million of mark-downs on foreclosed properties to expedite sales and $12.0 million of losses related to the $56.6 million in sales of foreclosed properties during the first quarter.

The effective tax rate for the first quarter of 2011 was 40 percent, equal to the first quarter of 2010. The effective tax rate for the balance of 2011 is expected to return to a normal range of 35 to 36 percent; however, this rate could vary significantly depending on the level of earnings.

As of March 31, 2011, the capital ratios for United were as follows: Tier 1 Risk Based of 7.8 percent; Tier 1 Leverage of 5.1 percent; and, Total Risk Based of 15.6 percent. The quarterly average tangible equity-to-assets ratio was 8.7 percent and the tangible common equity-to-assets ratio was 5.5 percent. The holding company regulatory capital ratios reflect limitations on the inclusion of certain capital elements in Tier 1 Capital which resulted in the exclusion of a significant portion of the cumulative preferred stock issued in the private equity offering. Upon shareholder approval, which is expected at our shareholders meeting in June, the new cumulative preferred stock will convert to common stock and will be fully included in Tier 1 Capital. Assuming conversion of the cumulative preferred stock, United’s pro forma capital ratios as of March 31, 2011 would have been as follows: Tier 1 Risk Based of 13.2 percent; Tier 1 Leverage of 8.5 percent; Total Risk Based of 15.7 percent; and, tangible common equity-to-assets of 6.3 percent.

“The first quarter of 2011 marks a significant and dramatic turning point,” Tallent said. “We’re heading into the remainder of 2011 with strong capital and a healthy, de-risked balance sheet. The weak economy and high unemployment remain, but opportunities are beginning to surpass challenges, and that is something we have not been able to say in quite some time.”

Conference Call

United Community Banks will hold a conference call today, Thursday, April 28, 2011, at 11 a.m. ET to discuss the contents of this news release and to share business highlights for the quarter. To access the call, dial (877) 380-5665 and use the password ‘56062275.’ The conference call also will be webcast and can be accessed by selecting ‘Calendar of Events’ within the Investor Relations section of the company’s website 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 $8.0 billion and operates 27 community banks with 106 banking offices throughout north Georgia, the Atlanta region, 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 United’s 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 anticipated in such statements. Any such statements are based on current expectations and involve a number of risks and uncertainties. For a discussion of some factors that may cause such forward-looking statements to differ materially from actual results, please refer to the section entitled “Risk Factors” of United Community Banks, Inc.’s annual report filed on Form 10-K with the Securities and Exchange Commission. Forward-looking statements speak only as of the date they are made, and we undertake no obligation to update or revise forward-looking statements.

# # #

UNITED COMMUNITY BANKS, INC.
Financial Highlights
Selected Financial Information

																						First
		2011				2010																Quarter
(in thousands, except per share		First				Fourth				Third				Second				First				2011-2010
data; taxable equivalent)		Quarter				Quarter				Quarter				Quarter				Quarter				Change
INCOME SUMMARY
Interest revenue		$	75,965			$	81,215			$	84,360			$	87,699			$	89,849
Interest expense			19,573				21,083				24,346				26,072				28,570
Net interest revenue			56,392				60,132				60,014				61,627				61,279				(8)	%
Operating provision for loan losses (1)			190,000				47,750				50,500				61,500				75,000
Operating fee revenue (2)			11,838				12,442				12,861				11,579				11,666				1
Total operating revenue (1)(2)			(121,770	)			24,824				22,375				11,706				(2,055	)
Operating expenses (3)			115,271				64,918				64,906				58,308				54,820				110
Loss on sale of nonperforming assets			—				—				—				45,349				—
Operating loss from continuing operations before taxes			(237,041	)			(40,094	)			(42,531	)			(91,951	)			(56,875	)			(317	)
Operating income tax benefit			(94,555	)			(16,520	)			(16,706	)			(32,419	)			(22,417	)
Net operating loss from continuing operations (1)(2)(3)			(142,486	)			(23,574	)			(25,825	)			(59,532	)			(34,458	)			(314	)
Noncash goodwill impairment charges			—				—				(210,590	)			—				—
Partial reversal of fraud loss provision, net of tax expense			—				7,179				—				—				—
Loss from discontinued operations			—				—				—				—				(101	)
Gain from sale of subsidiary, net of income taxes and selling costs			—				—				—				—				1,266
Net loss			(142,486	)			(16,395	)			(236,415	)			(59,532	)			(33,293	)			(328	)
Preferred dividends and discount accretion			2,778				2,586				2,581				2,577				2,572
Net loss available to common shareholders		$	(145,264	)		$	(18,981	)		$	(238,996	)		$	(62,109	)		$	(35,865	)
PERFORMANCE MEASURES
Per common share:
Diluted operating loss from continuing operations (1)(2)(3)		$	(1.57	)		$	(.28	)		$	(.30	)		$	(.66	)		$	(.39	)			(303	)
Diluted loss from continuing operations			(1.57	)			(.20	)			(2.52	)			(.66	)			(.39	)			(303	)
Diluted loss			(1.57	)			(.20	)			(2.52	)			(.66	)			(.38	)			(313	)
Book value			2.96				4.84				5.14				7.71				7.95				(63	)
Tangible book value (5)			2.89				4.76				5.05				5.39				5.62				(49	)
Key performance ratios:
Return on equity (4)(6)			(147.11)	%			(17.16)	%			(148.04)	%			(35.89)	%			(20.10)	%
Return on assets (6)			(7.61	)			(.89	)			(12.47	)			(3.10	)			(1.70	)
Net interest margin (6)			3.30				3.58				3.57				3.60				3.49
Operating efficiency ratio from continuing operations (2)(3)			169.08				89.45				89.38				141.60				75.22
Equity to assets			8.82				8.85				11.37				11.84				11.90
Tangible equity to assets (5)			8.73				8.75				9.19				9.26				9.39
Tangible common equity to assets (5)			5.51				6.35				6.78				6.91				7.13
Tangible common equity to risk-weighted assets (5)			6.40				9.05				9.60				9.97				10.03
ASSET QUALITY *
Non-performing loans		$	83,769			$	179,094			$	217,766			$	224,335			$	280,802
Foreclosed properties			54,378				142,208				129,964				123,910				136,275
Total non-performing assets (NPAs)			138,147				321,302				347,730				348,245				417,077
Allowance for loan losses			133,121				174,695				174,613				174,111				173,934
Operating net charge-offs (1)			231,574				47,668				49,998				61,323				56,668
Allowance for loan losses to loans			3.17	%			3.79	%			3.67	%			3.57	%			3.48	%
Operating net charge-offs to average loans (1)(6)			20.71				4.03				4.12				4.98				4.51
NPAs to loans and foreclosed properties			3.25				6.77				7.11				6.97				8.13
NPAs to total assets			1.73				4.32				4.96				4.55				5.32
AVERAGE BALANCES ($ in millions)
Loans		$	4,599			$	4,768			$	4,896			$	5,011			$	5,173				(11	)
Investment securities			1,625				1,354				1,411				1,532				1,518				7
Earning assets			6,902				6,680				6,676				6,854				7,085				(3	)
Total assets			7,595				7,338				7,522				7,704				7,946				(4	)
Deposits			6,560				6,294				6,257				6,375				6,570				—
Shareholders’ equity			670				649				855				912				945				(29	)
Common shares — basic (thousands)			92,330				94,918				94,679				94,524				94,390
Common shares — diluted (thousands)			92,330				94,918				94,679				94,524				94,390
AT PERIOD END ($ in millions)
Loans *		$	4,194			$	4,604			$	4,760			$	4,873			$	4,992				(16	)
Investment securities			1,884				1,490				1,310				1,488				1,527				23
Total assets			7,974				7,443				7,013				7,652				7,837				2
Deposits			6,598				6,469				5,999				6,330				6,488				2
Shareholders’ equity			850				636				662				904				926				(8	)
Common shares outstanding (thousands)			104,516				94,685				94,433				94,281				94,176

UNITED COMMUNITY BANKS, INC.
Operating Earnings to GAAP Earnings Reconciliation
Selected Financial Information

		2011				2010
(in thousands, except per share		First				Fourth				Third				Second				First
data; taxable equivalent)		Quarter				Quarter				Quarter				Quarter				Quarter
Interest revenue reconciliation
Interest revenue — taxable equivalent		$	75,965			$	81,215			$	84,360			$	87,699			$	89,849
Taxable equivalent adjustment			(435	)			(497	)			(511	)			(500	)			(493	)
Interest revenue (GAAP)		$	75,530			$	80,718			$	83,849			$	87,199			$	89,356
Net interest revenue reconciliation
Net interest revenue — taxable equivalent		$	56,392			$	60,132			$	60,014			$	61,627			$	61,279
Taxable equivalent adjustment			(435	)			(497	)			(511	)			(500	)			(493	)
Net interest revenue (GAAP)		$	55,957			$	59,635			$	59,503			$	61,127			$	60,786
Provision for loan losses reconciliation
Operating provision for loan losses		$	190,000			$	47,750			$	50,500			$	61,500			$	75,000
Partial reversal of special fraud-related provision for loan loss			—				(11,750	)			—				—				—
Provision for loan losses (GAAP)		$	190,000			$	36,000			$	50,500			$	61,500			$	75,000
Total revenue reconciliation
Total operating revenue		$	(121,770	)		$	24,824			$	22,375			$	11,706			$	(2,055	)
Taxable equivalent adjustment			(435	)			(497	)			(511	)			(500	)			(493	)
Partial reversal of special fraud-related provision for loan loss			—				11,750				—				—				—
Total revenue (GAAP)		$	(122,205	)		$	36,077			$	21,864			$	11,206			$	(2,548	)
Expense reconciliation
Operating expense		$	115,271			$	64,918			$	64,906			$	103,657			$	54,820
Noncash goodwill impairment charge			—				—				210,590				—				—
Operating expense (GAAP)		$	115,271			$	64,918			$	275,496			$	103,657			$	54,820
Loss from continuing operations before taxes reconciliation
Operating loss from continuing operations before taxes		$	(237,041	)		$	(40,094	)		$	(42,531	)		$	(91,951	)		$	(56,875	)
Taxable equivalent adjustment			(435	)			(497	)			(511	)			(500	)			(493	)
Noncash goodwill impairment charge			—				—				(210,590	)			—				—
Partial reversal of special fraud-related provision for loan loss			—				11,750				—				—				—
Loss from continuing operations before taxes (GAAP)		$	(237,476	)		$	(28,841	)		$	(253,632	)		$	(92,451	)		$	(57,368	)
Income tax benefit reconciliation
Operating income tax benefit		$	(94,555	)		$	(16,520	)		$	(16,706	)		$	(32,419	)		$	(22,417	)
Taxable equivalent adjustment			(435	)			(497	)			(511	)			(500	)			(493	)
Partial reversal of special fraud-related provision for loan loss			—				4,571				—				—				—
Income tax benefit (GAAP)		$	(94,990	)		$	(12,446	)		$	(17,217	)		$	(32,919	)		$	(22,910	)
Diluted loss from continuing operations per common share reconciliation
Diluted operating loss from continuing operations per common share		$	(1.57	)		$	(.28	)		$	(.30	)		$	(.66	)		$	(.39	)
Noncash goodwill impairment charge			—				—				(2.22	)			—				—
Partial reversal of special fraud-related provision for loan loss			—				.08				—				—				—
Diluted loss from continuing operations per common share (GAAP)		$	(1.57	)		$	(.20	)		$	(2.52	)		$	(.66	)		$	(.39	)
Book value per common share reconciliation
Tangible book value per common share		$	2.89			$	4.76			$	5.05			$	5.39			$	5.62
Effect of goodwill and other intangibles			.07				.08				.09				2.32				2.33
Book value per common share (GAAP)		$	2.96			$	4.84			$	5.14			$	7.71			$	7.95
Efficiency ratio from continuing operations reconciliation
Operating efficiency ratio from continuing operations			169.08	%			89.45	%			89.38	%			141.60	%			75.22	%
Noncash goodwill impairment charge			—				—				290.00				—				—
Efficiency ratio from continuing operations (GAAP)			169.08	%			89.45	%			379.38	%			141.60	%			75.22	%
Average equity to assets reconciliation
Tangible common equity to assets			5.51	%			6.35	%			6.78	%			6.91	%			7.13	%
Effect of preferred equity			3.22				2.40				2.41				2.35				2.26
Tangible equity to assets			8.73				8.75				9.19				9.26				9.39
Effect of goodwill and other intangibles			.09				.10				2.18				2.58				2.51
Equity to assets (GAAP)			8.82	%			8.85	%			11.37	%			11.84	%			11.90	%
Actual tangible common equity to risk-weighted assets reconciliation
Tangible common equity to risk-weighted assets			6.40	%			9.05	%			9.60	%			9.97	%			10.03	%
Effect of other comprehensive income			(.58	)			(.62	)			(.81	)			(.87	)			(.85	)
Effect of deferred tax limitation			(5.10	)			(3.34	)			(2.94	)			(2.47	)			(1.75	)
Effect of trust preferred			1.12				1.06				1.06				1.03				1.00
Effect of preferred equity			5.97				3.52				3.51				3.41				3.29
Tier I capital ratio (Regulatory)			7.81	%			9.67	%			10.42	%			11.07	%			11.72	%
Net charge-offs reconciliation
Operating net charge-offs		$	231,574			$	47,668			$	49,998			$	61,323			$	56,668
Subsequent partial recovery of fraud-related charge-off			—				(11,750	)			—				—				—
Net charge-offs (GAAP)		$	231,574			$	35,918			$	49,998			$	61,323			$	56,668
Net charge-offs to average loans reconciliation
Operating net charge-offs to average loans			20.71	%			4.03	%			4.12	%			4.98	%			4.51	%
Subsequent partial recovery of fraud-related charge-off			—				(1.00	)			—				—				—
Net charge-offs to average loans (GAAP)			20.71	%			3.03	%			4.12	%			4.98	%			4.51	%

UNITED COMMUNITY BANKS, INC.
Financial Highlights
Loan Portfolio Composition at Period-End ⁽¹⁾

		2011				2010																Linked				Year over
		First				Fourth				Third				Second				First				Quarter				Year
(in millions)		Quarter				Quarter				Quarter				Quarter				Quarter				Change				Change
LOANS BY CATEGORY
Commercial (sec. by RE)		$	1,692			$	1,761			$	1,781			$	1,780			$	1,765			$	(69	)		$	(73	)
Commercial construction			213				297				310				342				357				(84	)			(144	)
Commercial & industrial			431				441				456				441				381				(10	)			50
Total commercial			2,336				2,499				2,547				2,563				2,503				(163	)			(167	)
Residential construction			550				695				764				820				960				(145	)			(410	)
Residential mortgage			1,187				1,279				1,316				1,356				1,390				(92	)			(203	)
Consumer / installment			121				131				133				134				139				(10	)			(18	)
Total loans		$	4,194			$	4,604			$	4,760			$	4,873			$	4,992				(410	)			(798	)
LOANS BY MARKET
Atlanta MSA		$	1,179			$	1,310			$	1,365			$	1,373			$	1,404				(131	)			(225	)
Gainesville MSA			282				312				316				343				372				(30	)			(90	)
North Georgia			1,531				1,689				1,755				1,808				1,814				(158	)			(283	)
Western North Carolina			640				702				719				738				756				(62	)			(116	)
Coastal Georgia			312				335				345				356				388				(23	)			(76	)
East Tennessee			250				256				260				255				258				(6	)			(8	)
Total loans		$	4,194			$	4,604			$	4,760			$	4,873			$	4,992				(410	)			(798	)
RESIDENTIAL CONSTRUCTION
Dirt loans
Acquisition & development		$	116			$	174			$	190			$	214			$	290				(58	)			(174	)
Land loans			69				99				104				110				124				(30	)			(55	)
Lot loans			228				275				303				311				321				(47	)			(93	)
Total			413				548				597				635				735				(135	)			(322	)
House loans
Spec			88				97				109				125				153				(9	)			(65	)
Sold			49				50				58				60				72				(1	)			(23	)
Total			137				147				167				185				225				(10	)			(88	)
Total residential construction		$	550			$	695			$	764			$	820			$	960				(145	)			(410	)
RESIDENTIAL CONSTRUCTION — ATLANTA MSA
Dirt loans
Acquisition & development		$	22			$	30			$	34			$	40			$	66				(8	)			(44	)
Land loans			19				23				27				32				43				(4	)			(24	)
Lot loans			24				32				45				39				47				(8	)			(23	)
Total			65				85				106				111				156				(20	)			(91	)
House loans
Spec			34				38				42				48				58				(4	)			(24	)
Sold			11				10				11				10				14				1				(3	)
Total			45				48				53				58				72				(3	)			(27	)
Total residential construction		$	110			$	133			$	159			$	169			$	228				(23	)			(118	)

UNITED COMMUNITY BANKS, INC.
Financial Highlights
Credit Quality ⁽¹⁾

		First Quarter 2011(2)												Fourth Quarter 2010												Third Quarter 2010
		Non-performing				Foreclosed				Total				Non-performing				Foreclosed				Total				Non-performing				Foreclosed				Total
(in thousands)		Loans				Properties				NPAs				Loans				Properties				NPAs				Loans				Properties				NPAs
NPAs BY CATEGORY
Commercial (sec. by RE)		$	20,648			$	7,886			$	28,534			$	44,927			$	23,659			$	68,586			$	53,646			$	14,838			$	68,484
Commercial construction			3,701				11,568				15,269				21,374				17,808				39,182				17,279				15,125				32,404
Commercial & industrial			2,198				—				2,198				5,611				—				5,611				7,670				—				7,670
Total commercial			26,547				19,454				46,001				71,912				41,467				113,379				78,595				29,963				108,558
Residential construction			32,038				25,807				57,845				54,505				78,231				132,736				79,321				73,206				152,527
Residential mortgage			23,711				9,117				32,828				51,083				22,510				73,593				58,107				26,795				84,902
Consumer / installment			1,473				—				1,473				1,594				—				1,594				1,743				—				1,743
Total NPAs		$	83,769			$	54,378			$	138,147			$	179,094			$	142,208			$	321,302			$	217,766			$	129,964			$	347,730
Balance as a % of Unpaid Principal			57.3	%			30.3	%			42.4	%			67.2	%			64.4	%			65.9	%			70.0	%			65.9	%			68.4	%
NPAs BY MARKET
Atlanta MSA		$	21,501			$	16,913			$	38,414			$	48,289			$	41,154			$	89,443			$	65,304			$	32,785			$	98,089
Gainesville MSA			4,332				2,157				6,489				5,171				9,273				14,444				11,905				5,685				17,590
North Georgia			30,214				23,094				53,308				83,551				66,211				149,762				92,295				67,439				159,734
Western North Carolina			18,849				7,802				26,651				25,832				11,553				37,385				31,545				11,559				43,104
Coastal Georgia			5,847				3,781				9,628				11,145				11,901				23,046				10,611				10,951				21,562
East Tennessee			3,026				631				3,657				5,106				2,116				7,222				6,106				1,545				7,651
Total NPAs		$	83,769			$	54,378			$	138,147			$	179,094			$	142,208			$	321,302			$	217,766			$	129,964			$	347,730
NPA ACTIVITY Beginning Balance		$	179,094			$	142,208			$	321,302			$	217,766			$	129,964			$	347,730			$	224,335			$	123,910			$	348,245
Loans placed on non-accrual			54,730				—				54,730				81,023				—				81,023				119,783				—				119,783
Payments received			(3,550	)			—				(3,550	)			(7,250	)			—				(7,250	)			(11,469	)			—				(11,469	)
Loan charge-offs			(43,969	)			—				(43,969	)			(47,913	)			—				(47,913	)			(52,647	)			—				(52,647	)
Foreclosures			(17,052	)			17,052				—				(61,432	)			61,432				—				(59,844	)			59,844				—
Capitalized costs			—				270				270				—				170				170				—				601				601
Note / property sales			(11,400	)			(44,547	)			(55,947	)			(3,100	)			(33,509	)			(36,609	)			(2,392	)			(40,203	)			(42,595	)
Loans held for sale			(74,084	)			—				(74,084	)			—				—				—				—				—				—
Write downs			—				(48,585	)			(48,585	)			—				(8,031	)			(8,031	)			—				(7,051	)			(7,051	)
Net losses on sales			—				(12,020	)			(12,020	)			—				(7,818	)			(7,818	)			—				(7,137	)			(7,137	)
Ending Balance		$	83,769			$	54,378			$	138,147			$	179,094			$	142,208			$	321,302			$	217,766			$	129,964			$	347,730