(706) 745-2151   
(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 [ ]

Common stock, par value $1 per share: 10,231,440 shares
outstanding as of August 11, 2000

The accounting and financial reporting policies of United Community Banks, Inc. ("United") and its subsidiaries conform to generally accepted accounting principles and general banking industry practices. The consolidated financial statements have not been audited and all material intercompany balances and transactions have been eliminated. A more detailed description of United's accounting policies is included in the 1999 annual report filed on Form 10-K.

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 considered normal and recurring accruals considered necessary for a fair and accurate presentation. The results for interim periods are not necessarily indicative of results for the full year or any other interim periods.

Note 2 - Recent Developments

On May 8, 2000, United initiated a public offering of between 350,000 and 450,000 shares of common stock at a price of $38.00 per share. As of June 30, 2000 a total of $13.7 million representing 361,266 shares of common stock was issued and reflected in the unaudited consolidated balance sheet. On August 4, 2000, the stock offering was closed and an additional $2.0 million of common stock issued. United used the net proceeds of the offering to provide capital for its subsidiary banks and for general corporate purposes, including the reduction of parent company debt.

In July, 2000, United formed a wholly owned Delaware statutory business trust, United Community Capital Trust II ("United Trust II"), which issued $10 million of guaranteed preferred beneficial interests in United's junior subordinated deferrable interest debentures. These debentures qualify as Tier 1 capital under Federal Reserve Board guidelines. All of the common securities of United Trust are owned by United. The proceeds from the issuance of the Common Securities and the Trust Preferred Securities were used by United Trust to purchase $10.3 million of junior subordinated debentures of United which carry a fixed interest rate of 11.295%. The proceeds received by United from the sale of the junior subordinated debentures were used to prepay line of credit borrowings of approximately $10.6 million. The debentures represent the sole asset of United Trust II. The debentures and related income statement effects are eliminated in United's financial statements.

The Trust Preferred Securities accrue and pay distributions semiannually at a fixed rate of 11.295% per annum of the stated liquidation value of $1,000 per capital security. United has entered into contractual arrangements which, taken collectively, fully and unconditionally guarantee payment of: (i) accrued and unpaid distributions required to be paid on the Trust Preferred Securities; (ii) the redemption price with respect to any Trust Preferred Securities called for redemption by United Trust II, and (iii) payments due upon a voluntary or involuntary dissolution, winding up or liquidation of United Trust II.

The Capital Trust Preferred Securities are mandatorily redeemable upon maturity of the debentures on July 19, 2030, or upon earlier redemption as provided in the indenture. United has the right to redeem the debentures purchased by United Trust II in whole or in part, on or after July 19, 2010. As specified in the indenture if the debenture are redeemed prior to maturity, the redemption price will be the principal amount, any other accrued or unpaid interest, plus a premium ranging from 2.824% in 2010 to 0.565% in 2014.

On July 26, 2000, United completed its merger with North Point Bancshares, Inc. ("North Point"), a single-bank holding company based in Dawsonville, Georgia, in exchange for 958,211 shares of United common stock. This merger will be accounted for as a pooling of interests. At June 30, 2000, North Point had $119 million of total assets, $109 million of total liabilities and $10 million of total stockholders' equity.

On July 26, 2000, United completed its merger with Independent Bancshares, Inc. ("Independent"), a single-bank holding company based in Powder Springs, Georgia, in exchange for 870,595 shares of United common stock. This merger will be accounted for as a pooling of interests. At June 30, 2000, Independent had $153 million of total assets, $139 million of total liabilities and $14 million of total stockholders' equity.

          This discussion contains forward-looking statements under the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties. Although United believes that the assumptions underlying the forward-looking statements contained in the discussion are reasonable, any of the assumptions could be inaccurate, and therefore, no assurance can be made that any of the forward-looking statements included in this discussion will be accurate. Factors that could cause actual results to differ from results discussed in forward-looking statements include, but are not limited to: economic conditions (both generally and in the markets where United operates); competition from other providers of financial services offered by United; government regulation and legislation; changes in interest rates; material unforeseen changes in the financial stability and liquidity of United's credit customers; and other risks detailed in United's filings with the Securities and Exchange Commission, all of which are difficult to predict and which may be beyond the control of United. United undertakes no obligation to revise forward-looking statements to reflect events or changes after the date of this discussion or to reflect the occurrence of unanticipated events.

Overview

          United Community Banks, Inc. ("United") is a bank holding company registered under the Bank Holding Company Act of 1956. As of June 30, 2000, United had eight commercial bank subsidiaries that operate primarily in north Georgia and western North Carolina (the "Banks") that have a total of 35 banking offices. Total assets at June 30, 2000 were $2.2 billion, compared with $2.1 billion at December 31, 1999, an increase of 9.5% on an annualized basis.

          Subsequent to June 30, 2000, United completed its mergers with North Point Bancshares, Inc "North Point") and Independent Bancshares, Inc. ("Independent") as described in the Recent Developments section below. With the completion of these mergers, United will operate 10 commercial bank subsidiaries with a total of 42 banking offices.

Recent Developments

          On May 8, 2000, United initiated a public offering of between 350,000 and 450,000 shares of common stock at a price of $38.00 per share. As of June 30, 2000 a total of $13.7 million representing 361,266 shares of common stock was issued and reflected in the unaudited consolidated balance sheet. On August 4, 2000, the stock offering was closed and an additional $2.0 million of common stock issued. United used the net proceeds of the offering to provide capital for its subsidiary banks and for general corporate purposes, including the reduction of parent company debt.

          On May 15, 2000, United opened a full-service banking office in Summerville, Georgia. This banking office is a branch of United's 1^st Floyd Bank subsidiary, and is operating under the trade name of "Peoples First Community Bank."

          Additionally, July 26, 2000, United completed its merger with North Point Bancshares, Inc. ("North Point"), a single-bank holding company based in Dawsonville, Georgia, in exchange for 958,211 shares of United common stock. This merger will be accounted for as a pooling of interests. At June 30, 2000, North Point had $119 million of total assets, $109 million of total liabilities and $10 million of total stockholders' equity.

          On July 26, 2000, United completed its merger with Independent Bancshares, Inc. ("Independent"), a single-bank holding company based in Powder Springs, Georgia, in exchange for 870,595 shares of United common stock. This merger will be accounted for as a pooling of interests. At June 30, 2000, Independent had $153 million of total assets, $139 million of total liabilities and $14 million of total stockholders' equity.

          In July, 2000, United formed a wholly owned Delaware statutory business trust, United Community Capital Trust II ("United Trust II"), which issued $10 million of guaranteed preferred beneficial interests in United's junior subordinated deferrable interest debentures. These debentures qualify as Tier 1 capital under Federal Reserve Board guidelines. All of the common securities of United Trust are owned by United. The proceeds from the issuance of the Common Securities and the Trust Preferred Securities were used by United Trust to purchase $10.3 million of junior subordinated debentures of United which carry a fixed interest rate of 11.295%. The proceeds received by United from the sale of the junior subordinated debentures were used to prepay line of credit borrowings of approximately $10.6 million. The debentures represent the sole asset of United Trust II. The debentures and related income statement effects are eliminated in United's financial statements.

          The Trust Preferred Securities accrue and pay distributions semiannually at a fixed rate of 11.295% per annum of the stated liquidation value of $1,000 per capital security. United has entered into contractual arrangements which, taken collectively, fully and unconditionally guarantee payment of: (i) accrued and unpaid distributions required to be paid on the Trust Preferred Securities; (ii) the redemption price with respect to any Trust Preferred Securities called for redemption by United Trust II, and (iii) payments due upon a voluntary or involuntary dissolution, winding up or liquidation of United Trust II.

          The Capital Trust Preferred Securities are mandatorily redeemable upon maturity of the debentures on July 19, 2030, or upon earlier redemption as provided in the indenture. United has the right to redeem the debentures purchased by United Trust II in whole or in part, on or after July 19, 2010. As specified in the indenture if the debenture are redeemed prior to maturity, the redemption price will be the principal amount, any other accrued or unpaid interest, plus a premium ranging from 2.824% in 2010 to 0.565% in 2014.

          For the six months ended June 30, 2000, United reported net income of $8.0 million, or $.98 per diluted share, compared to $6.8 million, or $.83 per diluted share, for the same period in 1999. The first six months' results for 2000 provided an annualized return on average assets and average stockholders' equity of .74% and 16.42%, respectively, compared to .78% and 14.39%, respectively, for the same period in 1999. Net income for the six months ended June 30, 2000 increased 18.2% compared to the same period in 1999.

          The following table summarizes the components of income and expense for the first six months of 2000 and 1999 and the changes in those components for the periods presented.

Net Interest Income

          Net interest income is the largest source of United's operating income. Net interest income was $39.3 million for the six months ended June 30, 2000, an increase of 21% over the comparable period in 1999. The increase in net interest income for the first six months of 2000 is primarily attributable to increases in outstanding average interest bearing assets (both loans and securities) over the comparable prior year period.

          The increase in average outstanding securities is primarily the result of United's leverage program that was initiated during the fourth quarter of 1998. The leverage program was designed to make optimal utilization of United's capital by using borrowed funds to purchase additional securities. The leverage borrowings are principally advances from the Federal Home Loan Bank "FHLB" that are secured by mortgage loans and other investment securities. The securities purchased under the leverage program are primarily mortgage-backed pass-through and other mortgage-backed securities, including collateralized mortgage obligations. At June 30, 2000, United had approximately $157 million of earning assets and corresponding borrowings in the leverage program.

          For the six months ended June 30, 2000, the net interest margin (net interest income as a percentage of average interest earning assets) on a tax-equivalent basis was 3.97%, 20 basis points less than the comparable prior year period. The compression of the margin is primarily due to continued general competitive pressures on loan and deposit pricing and the effect of the leverage program described above. Although the average prime rate for the first six months of 2000 was 122 basis points higher than the same period in 2000, the average loan yield increased by 10 basis points.

          In January 2000, United implemented a strategic initiative designed to improve key financial performance as measured by earnings per share growth, return on average assets and return on average stockholders' equity. A key component of this plan was to address the compression of the net interest margin, which declined by 62 basis points during 1999 as compared with the prior year. United tax equivalent net interest margin for the three months ended June 30, 2000 was 4.08%, an increase of 23 basis points over the first quarter and 36 basis points over fourth quarter 1999.

          The following table shows the relative impact of changes in average balances of interest earning assets and interest bearing liabilities, and interest rates earned (on a fully-tax equivalent basis) and paid by United on those assets and liabilities for the six month periods ended June 30, 2000 and 1999.

The following table shows the relative impact on net interest income of changes in the average outstanding balances (volume) of earning assets and interest bearing liabilities and the rates earned and paid by United on such assets and liabilities. Variances resulting from a combination of changes in rate and volume are allocated in proportion to the absolute dollar amounts of the change in each category.

          The provision for loan losses was $3.3 million, or .46% of average loans on an annualized basis, for the six months ended June 30, 2000, compared with $2.0 million, or .34% of average loans, for the same period in 1999. Net loan charge-offs for the first six months of 2000 were $943 thousand, or .13% of average loans on an annualized basis, compared to $435 thousand, or .08% of average loans on an annualized basis, for the same period in 1999. The provision for loan losses and allowance for loan losses reflect management's consideration of the various risks in the loan portfolio. Additional discussion of loan quality and the allowance for loan loss in provided in the Asset Quality discussion section of this report.

Non-interest Income

          Non-interest income for the six months ended June 30, 2000, was $5.8 million, an increase of $709 thousand, or 14%, over the comparable 1999 period. Service charges on deposit accounts, which represent the largest component of non-interest income, totaled $3.1 million for the first six months of 2000, an increase of $679 thousand, or 28%, compared to the same period in 1999. This increase is primarily attributed to an increase in the number of transaction deposit accounts and the related transaction volume.

          Mortgage banking revenue for the first six months of 2000 decreased by $321 thousand, or 37%, compared with the same period in 1999. This decrease is primarily attributable to increased mortgage loan interest rates and the corresponding decline in demand for mortgage refinance loans.

          Other non-interest income totaled $2.2 million for the six months ended June 30, 2000, an increase of $397 thousand, or 23%, compared to the same period in 1999. The following table summarizes the components of other non-interest income for the first six months of 2000 and 1999 and the changes in those components for the periods presented:

          The growth in trust and brokerage revenue is primarily attributable to an increase in the number of retail brokerage sale representatives and an increase in the amount of trust assets under management. The improvement in ATM fees is attributable to an increase in the number of ATM machines in service and an increase in the surcharge fee charged to non-customers implemented in February 1999. The increase in bank-owned life insurance revenue is a result of the growth of the underlying insurance policies' cash value since the first quarter of 1999 and corresponding increase in policy appreciation earnings.

          The decrease in credit life insurance is primarily attributable to slower loan growth during the first quarter of 2000 at United's consumer finance company subsidiaries. During the first six months of 2000 such outstanding loans declined by $1.8 million, compared with an increase of $4.3 million during the same period in 1999.

          Gains on the sale of loans recorded during the first six months of 2000 were 80% lower than the same period in 1999. The second quarter 1999 results reflect a one-time gain of approximately $45 thousand on the sale of SBA loans.

Non-interest Expense

          For the six months ended June 30, 2000, non-interest expense totaled $30.0 million, an increase of $4.7 million, or 18.7%, from the same period in 1999.

          Salary and employee benefit expense, which represents the single largest component of non-interest expense, increased by $2.6 million, or 18%, compared with the same period in 1999. This increase is primarily attributable staff additions made to accommodate the growth of United's customer base, including staff obtained with the acquisition of Adairsville Bancshares, Inc. ("Adairsville") effective April 1, 1999; general merit increases awarded annually in April each year; and, an increase in the cost of group health insurance coverage.

          Occupancy and equipment expense for the first six months of 2000 totaled $5.2 million, an increase of $976 thousand, or 23%, over the same period in 1999. This increase is primarily attributable to the opening of new bank offices in three markets and the acquisition of Adairsville.

          Other non-interest expense for the six months ended June 30, 2000 was $8.0 million, an increase of 17% over the same period in 1999. This increase in primarily attributable to increases in stationary and supply expense and communications expense due to the increase in the number of bank offices and the growth of existing offices. Amortization expense for intangible assets, which is included in other non-interest expense, increased by $104 thousand during the first six months of 2000 compared with the same period in 1999 as a result of purchase acquisition of Adairsville.

          The efficiency ratio, which is a measure of operating expenses excluding one-time expenses as a percentage of operating revenues excluding one-time gains, was 66.5% for the six months ended June 30, 2000, a 94 basis point improvement compared with the same period in 1999.

Income Taxes

          Income tax expense increased by $308 thousand, or 9%, during the first six months of 2000 as compared to the same period in 1999. The effective tax rate (income tax expense as a percentage of pre-tax net income) for the six months ended June 30, 2000, was 32.0%, compared to 33.8% for comparable 1999 period.

Investment Securities

          Average securities for the first six months of 2000 were $553 million, an increase of $100 million, or 22%, over the comparable 1999 period. As of June 30, 2000, United had $157 million of securities and borrowings related to the leverage program, compared with $164 million at year-end 1999 and $152 million at June 30, 1999. Management does not expect to increase the level of securities and related borrowings in the leverage program during the remainder of 2000.

Loans

          United experienced annualized loan growth of 14% for the six-month period ended June 30, 2000. Total loans, net of unearned income, totaled $1.5 billion at June 30, 2000, compared to $1.4 billion at December 31, 1999. The loan growth experienced during the first six months of 2000 is attributed to continued robust economic conditions in United's market areas and corresponding strong demand for loans. Average loans for the six months ended June 30, 2000, were $1.4 billion compared to $1.1 billion for the comparable 1999 period, representing an increase of $343 million, or 31%. The average tax-equivalent yield on loans (including mortgage loans held for sale) for the six months ended June 30, 2000 was 9.83%, compared to 9.73% for the same period in 1999.

Asset Quality

          Non-performing assets, which include non-accrual loans, loans past-due 90 days or more and still accruing interest and other real estate owned totaled $5.0 million at June 30, 2000, compared to $2.4 million at December 31, 1999. Total non-performing loans at June 30, 2000, increased by $2.5 million over the year-end 1999 level. Non-performing loans at June 30, 2000, consisted primarily of loans secured by real estate that are generally well secured and in the process of collection. Other real estate owned at June 30, 2000 totaled $629 thousand, compared to $541 thousand at December 31, 1999, and was comprised of seven properties.

          Management classifies loans as non-accrual when principal or interest is 90 days or more past due and the loan is not sufficiently collateralized and in the process of collection. Once a loan is classified as non-accrual, it cannot be reclassified as an accruing loan until all principal and interest payments are brought current and the prospects for future payments in accordance with the loan agreement appear relatively certain. Foreclosed properties held as other real estate owned are recorded at the lower of United's recorded investment in the loan or market value of the property less expected selling costs.

          The following table presents information about United's non-performing assets, including asset quality ratios.