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, 2013
 
OR
 
o     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the Transition Period from ___________ to ___________
 
Commission file number 001-35095
 
UNITED COMMUNITY BANKS, INC.
(Exact name of registrant as specified in its charter)
 
 
Georgia
 
58-1807304
 
 
(State of Incorporation)
 
(I.R.S. Employer Identification No.)
 
 
 
125 Highway 515 East
     
 
Blairsville, Georgia
 
30512
 
 
Address of Principal
Executive Offices
 
(Zip Code)
 
 
  (706) 781-2265  
(Telephone Number)
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
 
YES x  NO o
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Date File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
 
YES x  NO o
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  See definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer o Accelerated filer x
   
Non-accelerated filer o (Do not check if a smaller reporting company) Smaller Reporting Company o
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
 
YES o  NO x
 
Common stock, par value $1 per share 43,363,414 shares voting and 14,474,810 shares non-voting outstanding as of July 31, 2013.
1
 

 

 
INDEX
       
PART I - Financial Information
 
   
  Item 1.
Financial Statements.
 
   
   
Consolidated Statement of Income (unaudited) for the Three and Six Months Ended  June 30, 2013 and 2012
3
   
   
Consolidated Statement of Comprehensive Income (unaudited) for the Three and Six Months Ended June 30, 2013 and 2012
4
       
   
Consolidated Balance Sheet (unaudited) at June 30, 2013, December 31, 2012 and June 30, 2012
5
   
   
Consolidated Statement of Changes in Shareholders’ Equity (unaudited) for the Six Months Ended June 30, 2013 and 2012
6
   
   
Consolidated Statement of Cash Flows (unaudited) for the Six Months Ended June 30, 2013 and 2012
7
   
   
Notes to Consolidated Financial Statements
8
   
  Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
37
   
  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.
62
  Item 3.
Defaults Upon Senior Securities.
62
  Item 4.
Mine Safety Disclosures.
62
  Item 5.
Other Information.
62
  Item 6.
Exhibits.
63
2
 

 

 
Part I – Financial Information
 
Item 1 – Financial Statements
                                 
UNITED COMMUNITY BANKS, INC.
                       
Consolidated Statement of Operations (Unaudited)
                       
   
Three Months Ended
   
Six Months Ended
 
   
June 30,
   
June 30,
 
(in thousands, except per share data)
 
2013
   
2012
   
2013
   
2012
 
Interest revenue:
                       
Loans, including fees
  $ 50,728     $ 54,178     $ 101,662     $ 109,937  
Investment securities, including tax exempt of $210, $262, $422 and $512
    9,681       11,062       19,646       24,066  
Deposits in banks and short-term investments
    916       1,096       1,786       2,108  
Total interest revenue
    61,325       66,336       123,094       136,111  
Interest expense:
                               
Deposits:
                               
NOW
    419       503       873       1,140  
Money market
    534       661       1,096       1,302  
Savings
    36       38       72       75  
Time
    2,924       5,073       6,150       11,232  
Total deposit interest expense
    3,913       6,275       8,191       13,749  
Short-term borrowings
    522       904       1,038       1,949  
Federal Home Loan Bank advances
    30       390       49       856  
Long-term debt
    2,666       2,375       5,328       4,747  
Total interest expense
    7,131       9,944       14,606       21,301  
Net interest revenue
    54,194       56,392       108,488       114,810  
Provision for loan losses
    48,500       18,000       59,500       33,000  
Net interest revenue after provision for loan losses
    5,694       38,392       48,988       81,810  
Fee revenue:
                               
Service charges and fees
    7,972       7,816       15,375       15,599  
Mortgage loan and other related fees
    3,003       2,322       5,658       4,421  
Brokerage fees
    1,063       809       1,830       1,622  
Securities gains, net
    -       6,490       116       7,047  
Loss from prepayment of debt
    -       (6,199 )     -       (6,681 )
Other
    4,274       1,629       6,159       6,238  
Total fee revenue
    16,312       12,867       29,138       28,246  
Total revenue
    22,006       51,259       78,126       110,056  
Operating expenses:
                               
Salaries and employee benefits
    24,734       24,297       48,326       49,522  
Communications and equipment
    3,468       3,211       6,514       6,366  
Occupancy
    3,449       3,539       6,816       7,310  
Advertising and public relations
    1,037       1,088       1,975       1,934  
Postage, printing and supplies
    894       916       1,757       1,895  
Professional fees
    2,499       1,952       4,865       3,927  
Foreclosed property
    5,151       1,851       7,484       5,676  
FDIC assessments and other regulatory charges
    2,505       2,545       5,010       5,055  
Amortization of intangibles
    491       730       1,196       1,462  
Other
    4,595       4,181       8,650       8,118  
Total operating expenses
    48,823       44,310       92,593       91,265  
Net (loss) income before income taxes
    (26,817 )     6,949       (14,467 )     18,791  
Income tax (benefit) expense
    (256,781 )     450       (256,196 )     764  
Net income
    229,964       6,499       241,729       18,027  
Preferred stock dividends and discount accretion
    3,055       3,032       6,107       6,062  
Net income available to common shareholders
  $ 226,909     $ 3,467     $ 235,622     $ 11,965  
Earnings per common share - basic / diluted
  $ 3.90     $ .06     $ 4.05     $ .21  
Weighted average common shares outstanding - basic / diluted
    58,141       57,840       58,111       57,803  
 
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,
 
2013
 
Before-
tax
Amount
   
Tax
(Expense)
Benefit
   
Net of Tax
Amount
   
Before-
tax
Amount
   
Tax
(Expense)
Benefit
   
Net of Tax
Amount
 
                                     
Net (loss) income
  $ (26,817 )   $ 256,781     $ 229,964     $ (14,467 )   $ 256,196     $ 241,729  
Other comprehensive income (loss):
                                               
Unrealized (losses) gains on available-for-sale securities:
                                               
Unrealized holding gains (losses) arising during period
    (15,358 )     5,798       (9,560 )     (13,717 )     5,177       (8,540 )
Reclassification adjustment for gains included in net income
    -       -       -       (116 )     45       (71 )
Adjustment of valuation allowance for the change in deferred taxes arising from unrealized gains and losses on available-for-sale securities and release of valuation allowance
    -       (3,526 )     (3,526 )     -       (2,950 )     (2,950 )
Net unrealized gains (losses)
    (15,358 )     2,272       (13,086 )     (13,833 )     2,272       (11,561 )
Amortization of gains included in net income on available-for-sale securities transferred to held-to-maturity
    (271 )     103       (168 )     (590 )     227       (363 )
Adjustment of valuation allowance for the change in deferred taxes arising from the amortization of gains included in net income (loss) on available-for-sale securities transferred to held-to-maturity and release of valuation allowance
    -       1,415       1,415       -       1,293       1,293  
Net unrealized losses
    (271 )     1,518       1,247       (590 )     1,520       930  
Amounts reclassified into net income on cash flow hedges
    (306 )     119       (187 )     (844 )     328       (516 )
Unrealized losses on derivative financial instruments accounted for as cash flow hedges
    11,672       (4,540 )     7,132       12,102       (4,707 )     7,395  
Adjustment of valuation allowance for the change in deferred taxes arising from unrealized gains and losses and amortization of gains included in net income on cash flow hedges and release of valuation allowance
    -       13,740       13,740       -       13,698       13,698  
Net unrealized losses
    11,366       9,319       20,685       11,258       9,319       20,577  
Net actuarial loss on defined benefit pension plan
    -       -       -       (415 )     161       (254 )
Amortization of prior service cost and actuarial losses included in net periodic pension cost for defined benefit pension plan
    133       (52 )     81       265       (103 )     162  
Adjustment of valuation allowance for the change in deferred taxes arising from reclassification of unamortized prior service cost and actuarial losses and amortization of prior service cost and actuarial losses and release of valuation allowance
    -       110       110       -       -       -  
Net defined benefit pension plan activity
    133       58       191       (150 )     58       (92 )
                                                 
     Total other comprehensive income (loss)
    (4,130 )     13,167       9,037       (3,315 )     13,169       9,854  
                                                 
     Comprehensive income
  $ (30,947 )   $ 269,948     $ 239,001     $ (17,782 )   $ 269,365     $ 251,583  
                                                 
2012
                                               
                                                 
Net (loss) income
  $ 6,949     $ (450 )   $ 6,499     $ 18,791     $ (764 )   $ 18,027  
Other comprehensive income (loss):
                                               
Unrealized (losses) gains on available-for-sale securities:
                                               
Unrealized holding gains (losses) arising during period
    4,264       (1,645 )     2,619       924       (277 )     647  
Reclassification adjustment for gains included in net income
    (6,490 )     2,425       (4,065 )     (7,047 )     2,631       (4,416 )
Valuation allowance for the change in deferred taxes arising from unrealized gains and losses on available-for-sale securities
    -       (780 )     (780 )     -       (2,354 )     (2,354 )
Net unrealized gains (losses)
    (2,226 )     -       (2,226 )     (6,123 )     -       (6,123 )
Amortization of gains included in net income on available-for-sale securities transferred to held-to-maturity
    (400 )     151       (249 )     (813 )     308       (505 )
Valuation allowance for the change in deferred taxes arising from the amortization of gains included in net income (loss) on available-for-sale securities transferred to held-to- maturity
    -       (151 )     (151 )     -       (308 )     (308 )
Net unrealized losses
    (400 )     -       (400 )     (813 )     -       (813 )
Amortization of gains included in net income on terminated derivative financial instruments that were previously accounted for as cash flow hedges
    (714 )     278       (436 )     (2,314 )     900       (1,414 )
Unrealized losses on derivative financial instruments accounted for as cash flow hedges
    (4,855 )     1,889       (2,966 )     (4,855 )     1,889       (2,966 )
Valuation allowance for the change in deferred taxes arising from unrealized gains and losses and amortization of gains included in net income on cash flow hedges
    -       (2,167 )     (2,167 )     -       (2,789 )     (2,789 )
Net unrealized losses
    (5,569 )     -       (5,569 )     (7,169 )     -       (7,169 )
Net actuarial loss on defined benefit pension plan
    -       -       -       -       -       -  
Amortization of prior service cost and actuarial losses included in net periodic pension cost for defined benefit pension plan
    154       (60 )     94       308       (120 )     188  
Valuation allowance for the change in deferred taxes arising from reclassification of unamortized prior service cost and actuarial losses and amortization of prior service cost and actuarial losses
            60       60               120       120  
Net defined benefit pension plan activity
    154       -       154       308       -       308  
                                                 
     Total other comprehensive income (loss)
    (8,041 )     -       (8,041 )     (13,797 )     -       (13,797 )
                                                 
     Comprehensive income
  $ (1,092 )   $ (450 )   $ (1,542 )   $ 4,994     $ (764 )   $ 4,230  
 
See accompanying notes to consolidated financial statements.
4
 

 

 
UNITED COMMUNITY BANKS, INC.
Consolidated Balance Sheet (Unaudited)
                       
   
June 30,
   
December 31,
   
June 30,
 
(in thousands, except share and per share data)
 
2013
   
2012
   
2012
 
 ASSETS
                 
   Cash and due from banks
  $ 62,564     $ 66,536     $ 50,596  
   Interest-bearing deposits in banks
    141,016       124,613       133,857  
   Short-term investments
    57,000       60,000       120,000  
       Cash and cash equivalents
    260,580       251,149       304,453  
   Securities available-for-sale
    1,937,264       1,834,593       1,701,583  
   Securities held-to-maturity (fair value $226,695, $261,131 and $299,791)
    214,947       244,184       282,750  
   Mortgage loans held for sale
    19,150       28,821       18,645  
   Loans, net of unearned income
    4,189,368       4,175,008       4,119,235  
        Less allowance for loan losses
    (81,845 )     (107,137 )     (112,705 )
               Loans, net
    4,107,523       4,067,871       4,006,530  
   Assets covered by loss sharing agreements with the FDIC
    35,675       47,467       65,914  
   Premises and equipment, net
    167,197       168,920       172,200  
   Bank owned life insurance
    82,276       81,867       81,265  
   Accrued interest receivable
    19,279       18,659       20,151  
   Goodwill and other intangible assets
    4,315       5,510       6,965  
   Foreclosed property
    3,936       18,264       30,421  
   Net deferred tax asset
    272,287       -       -  
   Unsettled securities sales
    -       5,763       -  
   Other assets
    38,206       29,191       46,229  
       Total assets
  $ 7,162,635     $ 6,802,259     $ 6,737,106  
 LIABILITIES AND SHAREHOLDERS EQUITY
                       
 Liabilities:
                       
   Deposits:
                       
        Demand
  $ 1,349,804     $ 1,252,605     $ 1,150,444  
        NOW
    1,225,664       1,316,453       1,196,507  
        Money market
    1,167,889       1,149,912       1,117,139  
        Savings
    247,821       227,308       219,077  
        Time:
                       
             Less than $100,000
    982,009       1,055,271       1,164,451  
             Greater than $100,000
    664,112       705,558       764,343  
        Brokered
    374,530       245,033       210,506  
                      Total deposits
    6,011,829       5,952,140       5,822,467  
    Short-term borrowings
    54,163       52,574       53,656  
    Federal Home Loan Bank advances
    70,125       40,125       125,125  
    Long-term debt
    124,845       124,805       120,265  
    Accrued expenses and other liabilities
    72,370       51,210       39,598  
         Total liabilities
    6,333,332       6,220,854       6,161,111  
                         
 Commitments and contingencies
                       
                         
 Shareholders equity:
                       
     Preferred stock, $1 par value; 10,000,000 shares authorized;
                       
          Series A; $10 stated value; 21,700 shares issued and outstanding
    217       217       217  
          Series B; $1,000 stated value; 180,000 shares issued and outstanding
    179,323       178,557       177,814  
          Series D; $1,000 stated value; 16,613 shares issued and outstanding
    16,613       16,613       16,613  
     Common stock, $1 par value; 100,000,000 shares authorized;
                       
         43,356,492, 42,423,870 and 41,726,509 shares issued and outstanding
    43,356       42,424       41,727  
     Common stock, non-voting, $1 par value; 30,000,000 shares authorized;
                       
       14,474,810, 15,316,794 and 15,914,209 shares issued and outstanding
    14,475       15,317       15,914  
     Common stock issuable; 271,215, 133,238 and 94,657 shares
    4,705       3,119       2,893  
     Capital surplus
    1,057,931       1,057,951       1,056,819  
     Accumulated deficit
    (473,531 )     (709,153 )     (718,896 )
     Accumulated other comprehensive loss
    (13,786 )     (23,640 )     (17,106 )
         Total shareholders equity
    829,303       581,405       575,995  
         Total liabilities and shareholders equity
  $ 7,162,635     $ 6,802,259     $ 6,737,106  
 
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,
 
                                                   
Accumulated
       
   
Preferred Stock
         
Non-Voting
   
Common
               
Other
       
(in thousands, except share
 
Series
   
Series
   
Series
   
Common
   
Common
   
Stock
   
Capital
   
Accumulated
   
Comprehensive
       
and per share data)   A     B     D    
Stock
   
Stock
   
Issuable
   
Surplus
   
Deficit
   
Income (Loss)
   
Total
 
                                                                   
Balance, December 31, 2011
  $ 217     $ 177,092     $ 16,613     $ 41,647     $ 15,914     $ 3,233     $ 1,054,940     $ (730,861 )   $ (3,309 )   $ 575,486  
Net loss
                                                            18,027               18,027  
Other comprehensive loss
                                                                    (13,797 )     (13,797 )
Common stock issued to
                                                                               
dividend reinvestment plan
                                                                               
and employee benefit plans
                                                                               
(60,982 shares)
                            61                       440                       501  
Amortization of stock options
                                                                               
and restricted stock awards
                                                    946                       946  
Vesting of restricted stock
                                                                               
(15,790 shares issued,
                                                                               
8,399 shares deferred)
                            16               (151 )     206                       71  
Deferred compensation plan,
                                                                               
net, including dividend
                                                                               
equivalents
                                            101                               101  
Shares issued from deferred
                                                                               
compensation plan
                                                                               
(2,637 shares)
                            3               (290 )     287                       -  
Preferred stock dividends:
                                                                               
Series A
                                                            (6 )             (6 )
Series B
            722                                               (5,222 )             (4,500 )
Series D
                                                            (834 )             (834 )
Balance, June 30, 2012
  $ 217     $ 177,814     $ 16,613     $ 41,727     $ 15,914     $ 2,893     $ 1,056,819     $ (718,896 )   $ (17,106 )   $ 575,995  
                                                                                 
Balance, December 31, 2012
  $ 217     $ 178,557     $ 16,613     $ 42,424     $ 15,317     $ 3,119     $ 1,057,951     $ (709,153 )   $ (23,640 )   $ 581,405  
Net income
                                                            241,729               241,729  
Other comprehensive income
                                                                    9,854       9,854  
Common stock issued to
                                                                               
dividend reinvestment
                                                                               
plan and to employee
                                                                               
benefit plans (35,667
                                                                               
shares)
                            35                       348                       383  
Conversion of non-voting
                                                                               
common stock to voting
                                                                               
(841,984 shares)
                            842       (842 )                                        
Amortization of stock options
                                                                               
and restricted stock awards
                                                    1,359                       1,359  
Vesting of restricted stock,
                                                                               
net of shares surrendered
                                                                               
to cover payroll taxes
                                                                               
(50,450 shares issued,
                                                                               
133,914 shares deferred)
                            50               1,934       (2,161 )                     (177 )
Deferred compensation plan,
                                                                               
net, including dividend
                                                                               
equivalents
                                            91                               91  
Shares issued from deferred
                                                                               
compensation plan
                                                                               
(4,521 shares)
                            5               (439 )     434                       -  
Preferred stock dividends:
                                                                               
Series A
                                                            (6 )             (6 )
Series B
            766                                               (5,266 )             (4,500 )
Series D
                                                            (835 )             (835 )
Balance, June 30, 2013
  $ 217     $ 179,323     $ 16,613     $ 43,356     $ 14,475     $ 4,705     $ 1,057,931     $ (473,531 )   $ (13,786 )   $ 829,303  
 
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)
 
2013
   
2012
 
Operating activities:
           
Net income
  $ 241,729     $ 18,027  
Adjustments to reconcile net income to net cash provided by operating activities:
         
Depreciation, amortization and accretion
    14,574       16,511  
Provision for loan losses
    59,500       33,000  
Stock based compensation
    1,359       946  
Deferred income tax benefit
    (258,987 )     -  
Securities gains, net
    (116 )     (7,047 )
Losses and write downs on sales of other real estate owned
    5,460       2,943  
Loss on prepayment of borrowings
    -       6,681  
Changes in assets and liabilities:
               
Other assets and accrued interest receivable
    12,872       22,783  
Accrued expenses and other liabilities
    19,487       (6,754 )
Mortgage loans held for sale
    9,671       5,236  
Net cash provided by operating activities
    105,549       92,326  
                 
Investing activities:
               
    Investment securities held-to-maturity:
               
    Proceeds from maturities and calls
    33,141       45,741  
    Purchases
    (4,993 )     -  
    Investment securities available-for-sale:
               
    Proceeds from sales
    15,751       371,103  
    Proceeds from maturities and calls
    260,967       289,985  
    Purchases
    (397,907 )     (580,652 )
    Net increase in loans
    (203,903 )     (58,765 )
    Proceeds from note sales
    91,913       -  
    Collections from FDIC under loss sharing agreements
    3,714       5,054  
    Proceeds from sales of premises and equipment
    1,547       664  
    Purchases of premises and equipment
    (4,488 )     (2,581 )
    Proceeds from sale of other real estate
    21,815       14,620  
Net cash (used in) provided by investing activities
    (182,443 )     85,169  
                 
Financing activities:
               
    Net change in deposits
    59,689       (275,516 )
    Net change in short-term borrowings
    1,589       (53,401 )
    Proceeds from Federal Home Loan Bank advances
    485,000       1,489,000  
    Settlement of Federal Home Loan Bank advances
    (455,000 )     (1,406,701 )
    Proceeds from issuance of common stock for dividend reinvestment and employee benefit plans
    383       501  
    Cash dividends on preferred stock
    (5,336 )     (5,341 )
Net cash provided by (used in) financing activities
    86,325       (251,458 )
Net change in cash and cash equivalents
    9,431       (73,963 )
    Cash and cash equivalents at beginning of period
    251,149       378,416  
Cash and cash equivalents at end of period
  $ 260,580     $ 304,453  
                 
Supplemental disclosures of cash flow information:
               
      Cash paid (received) during the period for:
               
Interest
  $ 16,768     $ 23,222  
Income taxes
    2,355       (27,105 )
      Unsettled securities purchases
    1,582       -  
      Transfers of loans to foreclosed property
    9,433       9,319  
                 
 
See accompanying notes to consolidated financial statements.
7
 

 

 
UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
 
Note 1 – Accounting Policies
 
The accounting and financial reporting policies of United Community Banks, Inc. (“United”) and its subsidiaries conform to accounting principles generally accepted in the United States of America (“GAAP”) and general banking industry practices.  The accompanying interim consolidated financial statements have not been audited.  All material intercompany balances and transactions have been eliminated.  A more detailed description of United’s accounting policies is included in its Annual Report on Form 10-K for the year ended December 31, 2012.
 
In management’s opinion, all accounting adjustments necessary to accurately reflect the financial position and results of operations on the accompanying financial statements have been made. These adjustments are normal and recurring accruals considered necessary for a fair and accurate presentation. The results for interim periods are not necessarily indicative of results for the full year or any other interim periods.
  
Certain 2012 amounts have been reclassified to conform to the 2013 presentation.  The 2012 reclassifications were not material to the financial statement presentation.
 
Note 2 –Accounting Standards Updates and Recently Adopted Standards
 
In January 2013, the FASB issued Accounting Standards Update No. 2013-01, Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities.  This ASU limits the scope of the new balance sheet offsetting disclosures to derivatives, repurchase agreements, and securities lending transactions to the extent that they are (1) offset in the financial statements or (2) subject to an enforceable master netting agreement.  The disclosure requirements were effective for annual reporting periods beginning on or after January 1, 2013 and interim periods within those annual periods.  This guidance did not have a material impact on United’s financial position or results of operations, and resulted in additional disclosures.
 
In February 2013, the FASB issued Accounting Standards Update No. 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income.  The amendments in this update require an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component and by the respective line items of net income. The standard was effective for fiscal years, and interim periods within those years, beginning after December 15, 2012.  This guidance did not have a material impact on United’s financial position or results of operations, and resulted in additional disclosures.
 
In July 2013, the FASB issued Accounting Standards Update No. 2013-10, Inclusion of the Fed Funds Effective Swap Rate (or Overnight Index Swap Rate) as a Benchmark Interest Rate for Hedge Accounting Purposes.  The amendments in this update permit the Fed Funds Effective Swap Rate (OIS) to be used as a benchmark interest rate for hedge accounting in addition to UST and LIBOR. The amendments also remove the restriction on using different benchmark rates for similar hedges. The standard is effective prospectively for qualifying new or re-designated hedging relationships entered into on or after July 17, 2013.  This guidance did not have a material impact on United’s financial position, results of operations or disclosures.
 
In July 2013, the FASB issued Accounting Standards Update No. 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward exists. This ASU provides explicit guidance on the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. The amendments in this update are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. Since United has both unrecognized tax benefits and net operating loss and tax credit carryforwards, this ASU could have an impact on United's financial position, results of operations or disclosures. United is currently in the process of quantifying this impact.
 
Note 3 – Offsetting Assets and Liabilities
 
United enters into reverse repurchase agreements in order to invest short-term funds.  In addition, United enters into repurchase agreements and reverse repurchase agreements with the same counterparty in transactions commonly referred to as collateral swaps that are subject to master netting agreements under which the balances are netted in the balance sheet in accordance with ASC 210-20, Offsetting.
 
United also enters into derivative transactions that are subject to master netting arrangements; however there were no offsetting positions at June 30, 2013, December 31, 2012 or June 30, 2012.
8
 

 

 
UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
 
The following table presents a summary of amounts outstanding under master netting agreements as of June 30, 2013 and December 31, 2012, and June 30, 2012 (in thousands).
                                                 
    Gross
Amounts of
Recognized
Assets
    Gross
Amounts
Offset on the
Balance
Sheet
         
 
Gross Amounts not Offset
in the Balance Sheet
       
 June 30, 2013
          Net Asset
Balance
   
 Financial Instruments
   
  Collateral Received
   
 Net Amount
 
                                     
 Repurchase agreements / reverse repurchase agreements
  $ 400,000     $ (350,000 )   $ 50,000     $ -     $ -     $ 50,000