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 September 30, 2014
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
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UNITED COMMUNITY BANKS, INC.
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||
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(Exact name of registrant as specified in its charter)
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Georgia
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58-1807304
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(State of Incorporation)
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(I.R.S. Employer Identification No.)
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125 Highway 515 East
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||
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Blairsville, Georgia
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30512
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Address of Principal
Executive Offices |
(Zip Code)
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(706) 781-2265
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||
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(Telephone Number)
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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 x | Accelerated filer o |
| 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 50,172,042 shares voting and 10,080,787 shares non-voting outstanding as of October 31,
2014.
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INDEX
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||||
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3
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||||
|
4
|
||||
|
5
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||||
|
6
|
||||
|
7
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||||
|
8
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||||
|
42
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||||
|
66
|
||||
|
66
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||||
|
67
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||||
|
67
|
||||
|
67
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||||
|
67
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||||
|
67
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||||
|
67
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||||
| 68 | ||||
| 2 |
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UNITED COMMUNITY BANKS, INC.
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||||||||||||||||
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Three Months Ended
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Nine Months Ended
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|||||||||||||||
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September 30,
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September 30,
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|||||||||||||||
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(in thousands, except per share data)
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2014
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2013
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2014
|
2013
|
||||||||||||
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Interest revenue:
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||||||||||||||||
|
Loans, including fees
|
$ | 49,653 | $ | 50,162 | $ | 145,602 | $ | 151,827 | ||||||||
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Investment securities, including tax exempt of $177, $202, $558 and $624
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12,346 | 9,887 | 36,118 | 29,905 | ||||||||||||
|
Deposits in banks and short-term investments
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934 | 1,007 | 2,757 | 2,793 | ||||||||||||
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Total interest revenue
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62,933 | 61,056 | 184,477 | 184,525 | ||||||||||||
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Interest expense:
|
||||||||||||||||
|
Deposits:
|
||||||||||||||||
|
NOW
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365 | 413 | 1,216 | 1,286 | ||||||||||||
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Money market
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872 | 545 | 2,192 | 1,641 | ||||||||||||
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Savings
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20 | 37 | 61 | 109 | ||||||||||||
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Time
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1,721 | 2,630 | 5,510 | 8,871 | ||||||||||||
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Total deposit interest expense
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2,978 | 3,625 | 8,979 | 11,907 | ||||||||||||
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Short-term borrowings
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316 | 525 | 2,064 | 1,563 | ||||||||||||
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Federal Home Loan Bank advances
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435 | 16 | 573 | 65 | ||||||||||||
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Long-term debt
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2,642 | 3,003 | 7,914 | 8,331 | ||||||||||||
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Total interest expense
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6,371 | 7,169 | 19,530 | 21,866 | ||||||||||||
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Net interest revenue
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56,562 | 53,887 | 164,947 | 162,659 | ||||||||||||
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Provision for credit losses
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2,000 | 3,000 | 6,700 | 62,500 | ||||||||||||
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Net interest revenue after provision for credit losses
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54,562 | 50,887 | 158,247 | 100,159 | ||||||||||||
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Fee revenue:
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||||||||||||||||
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Service charges and fees
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8,202 | 8,456 | 24,627 | 23,831 | ||||||||||||
|
Mortgage loan and other related fees
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2,178 | 2,554 | 5,409 | 8,212 | ||||||||||||
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Brokerage fees
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1,209 | 1,274 | 3,631 | 3,104 | ||||||||||||
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Securities gains, net
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11 | — | 4,663 | 116 | ||||||||||||
|
Loss from prepayment of debt
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— | — | (4,446 | ) | — | |||||||||||
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Other
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2,812 | 1,941 | 6,847 | 7,816 | ||||||||||||
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Total fee revenue
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14,412 | 14,225 | 40,731 | 43,079 | ||||||||||||
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Total revenue
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68,974 | 65,112 | 198,978 | 143,238 | ||||||||||||
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Operating expenses:
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||||||||||||||||
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Salaries and employee benefits
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25,666 | 23,090 | 74,349 | 71,416 | ||||||||||||
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Communications and equipment
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3,094 | 3,305 | 9,370 | 9,819 | ||||||||||||
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Occupancy
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3,425 | 3,379 | 10,065 | 10,195 | ||||||||||||
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Advertising and public relations
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894 | 962 | 2,659 | 2,937 | ||||||||||||
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Postage, printing and supplies
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876 | 644 | 2,456 | 2,401 | ||||||||||||
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Professional fees
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2,274 | 2,650 | 5,873 | 7,515 | ||||||||||||
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Foreclosed property
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285 | 194 | 503 | 7,678 | ||||||||||||
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FDIC assessments and other regulatory charges
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1,131 | 2,405 | 3,909 | 7,415 | ||||||||||||
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Amortization of intangibles
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313 | 427 | 1,061 | 1,623 | ||||||||||||
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Other
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3,406 | 3,041 | 10,701 | 11,691 | ||||||||||||
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Total operating expenses
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41,364 | 40,097 | 120,946 | 132,690 | ||||||||||||
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Net income before income taxes
|
27,610 | 25,015 | 78,032 | 10,548 | ||||||||||||
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Income tax expense (benefit)
|
9,994 | 9,515 | 28,659 | (246,681 | ) | |||||||||||
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Net income
|
17,616 | 15,500 | 49,373 | 257,229 | ||||||||||||
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Preferred stock dividends and discount accretion
|
— | 3,059 | 439 | 9,166 | ||||||||||||
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Net income available to common shareholders
|
$ | 17,616 | $ | 12,441 | $ | 48,934 | $ | 248,063 | ||||||||
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Earnings per common share:
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||||||||||||||||
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Basic
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$ | .29 | $ | .21 | $ | .81 | $ | 4.24 | ||||||||
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Diluted
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.29 | .21 | .81 | 4.24 | ||||||||||||
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Weighted average common shares outstanding:
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||||||||||||||||
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Basic
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60,776 | 59,100 | 60,511 | 58,443 | ||||||||||||
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Diluted
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60,779 | 59,202 | 60,513 | 58,444 | ||||||||||||
See accompanying notes to consolidated financial statements.
| 3 |
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UNITED COMMUNITY BANKS, INC.
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(in thousands)
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Three Months Ended September 30,
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Nine Months Ended September 30,
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||||||||||||||||||||||
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2014
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Before-tax Amount
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Tax
(Expense) Benefit |
Net of Tax Amount
|
Before-tax Amount
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Tax
(Expense) Benefit |
Net of Tax Amount
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||||||||||||||||||
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Net income
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$ | 27,610 | $ | (9,994 | ) | $ | 17,616 | $ | 78,032 | $ | (28,659 | ) | $ | 49,373 | ||||||||||
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Other comprehensive income:
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||||||||||||||||||||||||
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Unrealized gains (losses) on available-for-sale securities:
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||||||||||||||||||||||||
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Unrealized holding gains (losses) arising during period
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(4,357 | ) | 1,626 | (2,731 | ) | 10,696 | (4,031 | ) | 6,665 | |||||||||||||||
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Reclassification adjustment for gains included in net income
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(11 | ) | 4 | (7 | ) | (4,663 | ) | 1,821 | (2,842 | ) | ||||||||||||||
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Net unrealized gains (losses)
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(4,368 | ) | 1,630 | (2,738 | ) | 6,033 | (2,210 | ) | 3,823 | |||||||||||||||
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Amortization of gains included in net income on available-for-sale securities transferred to held-to-maturity
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468 | (176 | ) | 292 | 1,207 | (453 | ) | 754 | ||||||||||||||||
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Net unrealized gains
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468 | (176 | ) | 292 | 1,207 | (453 | ) | 754 | ||||||||||||||||
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Amounts reclassified into net income on cash flow hedges
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711 | (277 | ) | 434 | 1,381 | (538 | ) | 843 | ||||||||||||||||
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Unrealized gains (losses) on derivative financial instruments accounted for as cash flow hedges
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412 | (160 | ) | 252 | (5,967 | ) | 2,322 | (3,645 | ) | |||||||||||||||
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Net unrealized gains (losses)
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1,123 | (437 | ) | 686 | (4,586 | ) | 1,784 | (2,802 | ) | |||||||||||||||
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Net actuarial gain on defined benefit pension plan
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— | — | — | 296 | (115 | ) | 181 | |||||||||||||||||
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Amortization of prior service cost and actuarial losses included in net periodic pension cost for defined benefit pension plan
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91 | (36 | ) | 55 | 274 | (107 | ) | 167 | ||||||||||||||||
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Net defined benefit pension plan activity
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91 | (36 | ) | 55 | 570 | (222 | ) | 348 | ||||||||||||||||
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Total other comprehensive income (loss)
|
(2,686 | ) | 981 | (1,705 | ) | 3,224 | (1,101 | ) | 2,123 | |||||||||||||||
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Comprehensive income
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$ | 24,924 | $ | (9,013 | ) | $ | 15,911 | $ | 81,256 | $ | (29,760 | ) | $ | 51,496 | ||||||||||
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2013
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||||||||||||||||||||||||
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Net income
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$ | 25,015 | $ | (9,515 | ) | $ | 15,500 | $ | 10,548 | $ | 246,681 | $ | 257,229 | |||||||||||
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Other comprehensive loss:
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||||||||||||||||||||||||
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Unrealized losses on available-for-sale securities:
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||||||||||||||||||||||||
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Unrealized holding losses arising during period
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(13,215 | ) | 4,971 | (8,244 | ) | (26,932 | ) | 10,148 | (16,784 | ) | ||||||||||||||
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Reclassification adjustment for gains included in net income
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— | — | — | (116 | ) | 45 | (71 | ) | ||||||||||||||||
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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
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— | — | — | — | (2,950 | ) | (2,950 | ) | ||||||||||||||||
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Net unrealized losses
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(13,215 | ) | 4,971 | (8,244 | ) | (27,048 | ) | 7,243 | (19,805 | ) | ||||||||||||||
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Amortization of gains included in net income on available-for-sale securities transferred to held-to-maturity
|
(214 | ) | 82 | (132 | ) | (804 | ) | 309 | (495 | ) | ||||||||||||||
|
Adjustment of valuation allowance for the change in deferred taxes arising from the amortization of gains included in net income on available-for-sale securities transferred to held-to-maturity and release of valuation allowance
|
— | — | — | — | 1,293 | 1,293 | ||||||||||||||||||
|
Net unrealized losses
|
(214 | ) | 82 | (132 | ) | (804 | ) | 1,602 | 798 | |||||||||||||||
|
Amounts reclassified into net income on cash flow hedges
|
(58 | ) | 23 | (35 | ) | (902 | ) | 351 | (551 | ) | ||||||||||||||
|
Unrealized gains on derivative financial instruments accounted for as cash flow hedges
|
(3,369 | ) | 1,321 | (2,048 | ) | 8,733 | (3,386 | ) | 5,347 | |||||||||||||||
|
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
|
— | — | — | — | 13,698 | 13,698 | ||||||||||||||||||
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Net unrealized (losses) gains
|
(3,427 | ) | 1,344 | (2,083 | ) | 7,831 | 10,663 | 18,494 | ||||||||||||||||
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Net actuarial loss on defined benefit pension plan
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— | — | — | (415 | ) | 161 | (254 | ) | ||||||||||||||||
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Amortization of prior service cost and actuarial losses included in net periodic pension cost for defined benefit pension plan
|
133 | (52 | ) | 81 | 398 | (155 | ) | 243 | ||||||||||||||||
|
Net defined benefit pension plan activity
|
133 | (52 | ) | 81 | (17 | ) | 6 | (11 | ) | |||||||||||||||
|
Total other comprehensive loss
|
(16,723 | ) | 6,345 | (10,378 | ) | (20,038 | ) | 19,514 | (524 | ) | ||||||||||||||
|
Comprehensive income
|
$ | 8,292 | $ | (3,170 | ) | $ | 5,122 | $ | (9,490 | ) | $ | 266,195 | $ | 256,705 | ||||||||||
See accompanying notes to consolidated financial statements.
| 4 |
|
UNITED COMMUNITY BANKS, INC.
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||||||||||||
|
September 30,
|
December 31,
|
September 30,
|
||||||||||
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(in thousands, except share and per share data)
|
2014
|
2013
|
2013
|
|||||||||
|
ASSETS
|
||||||||||||
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Cash and due from banks
|
$ | 75,268 | $ | 71,230 | $ | 70,986 | ||||||
|
Interest-bearing deposits in banks
|
117,399 | 119,669 | 131,147 | |||||||||
|
Short-term investments
|
23,397 | 37,999 | 62,000 | |||||||||
|
Cash and cash equivalents
|
216,064 | 228,898 | 264,133 | |||||||||
|
Securities available for sale
|
1,789,667 | 1,832,217 | 1,963,424 | |||||||||
|
Securities held to maturity (fair value $440,311, $485,585 and $214,651)
|
432,418 | 479,742 | 205,613 | |||||||||
|
Mortgage loans held for sale
|
20,004 | 10,319 | 11,987 | |||||||||
|
Loans, net of unearned income
|
4,568,886 | 4,329,266 | 4,267,067 | |||||||||
|
Less allowance for loan losses
|
(71,928 | ) | (76,762 | ) | (80,372 | ) | ||||||
|
Loans, net
|
4,496,958 | 4,252,504 | 4,186,695 | |||||||||
|
Assets covered by loss sharing agreements with the FDIC
|
3,253 | 22,882 | 31,207 | |||||||||
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Premises and equipment, net
|
160,454 | 163,589 | 165,993 | |||||||||
|
Bank owned life insurance
|
81,101 | 80,670 | 80,537 | |||||||||
|
Accrued interest receivable
|
19,908 | 19,598 | 18,199 | |||||||||
|
Goodwill and core deposit intangibles
|
3,910 | 3,480 | 3,888 | |||||||||
|
Foreclosed property
|
3,146 | 4,221 | 4,467 | |||||||||
|
Net deferred tax asset
|
224,734 | 258,518 | 269,784 | |||||||||
|
Derivative financial instruments
|
22,221 | 23,833 | 8,092 | |||||||||
|
Other assets
|
52,051 | 44,948 | 29,274 | |||||||||
|
Total assets
|
$ | 7,525,889 | $ | 7,425,419 | $ | 7,243,293 | ||||||
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
||||||||||||
|
Liabilities:
|
||||||||||||
|
Deposits:
|
||||||||||||
|
Demand
|
$ | 1,561,020 | $ | 1,388,512 | $ | 1,418,782 | ||||||
|
NOW
|
1,399,449 | 1,427,939 | 1,279,134 | |||||||||
|
Money market
|
1,281,526 | 1,227,575 | 1,197,495 | |||||||||
|
Savings
|
287,797 | 251,125 | 249,044 | |||||||||
|
Time:
|
||||||||||||
|
Less than $100,000
|
774,201 | 892,961 | 925,089 | |||||||||
|
Greater than $100,000
|
531,428 | 588,689 | 624,019 | |||||||||
|
Brokered
|
405,308 | 424,704 | 419,344 | |||||||||
|
Total deposits
|
6,240,729 | 6,201,505 | 6,112,907 | |||||||||
|
Short-term borrowings
|
6,001 | 53,241 | 53,769 | |||||||||
|
Federal Home Loan Bank advances
|
330,125 | 120,125 | 125 | |||||||||
|
Long-term debt
|
129,865 | 129,865 | 129,865 | |||||||||
|
Derivative financial instruments
|
36,171 | 46,232 | 37,269 | |||||||||
|
Unsettled securities purchases
|
— | 29,562 | 11,610 | |||||||||
|
Accrued expenses and other liabilities
|
46,573 | 49,174 | 45,531 | |||||||||
|
Total liabilities
|
6,789,464 | 6,629,704 | 6,391,076 | |||||||||
|
Shareholders’ equity:
|
||||||||||||
|
Preferred stock, $1 par value; 10,000,000 shares authorized;
|
||||||||||||
|
Series A; $10 stated value; 0, 0 and 21,700 shares issued and outstanding
|
— | — | 217 | |||||||||
|
Series B; $1,000 stated value; 0, 105,000 and 180,000 shares issued and outstanding
|
— | 105,000 | 179,714 | |||||||||
|
Series D; $1,000 stated value; 0, 16,613 and 16,613 shares issued and outstanding
|
— | 16,613 | 16,613 | |||||||||
|
Common stock, $1 par value; 100,000,000 shares authorized; 50,167,191, 46,243,345 and 45,222,839 shares issued and outstanding
|
50,167 | 46,243 | 45,223 | |||||||||
|
Common stock, non-voting, $1 par value; 26,000,000 shares authorized; 10,080,787, 13,188,206 and 14,189,006 shares issued and outstanding
|
10,081 | 13,188 | 14,189 | |||||||||
|
Common stock issuable; 354,961, 241,832 and 242,262 shares
|
5,116 | 3,930 | 3,979 | |||||||||
|
Capital surplus
|
1,091,555 | 1,078,676 | 1,077,536 | |||||||||
|
Accumulated deficit
|
(402,773 | ) | (448,091 | ) | (461,090 | ) | ||||||
|
Accumulated other comprehensive loss
|
(17,721 | ) | (19,844 | ) | (24,164 | ) | ||||||
|
Total shareholders’ equity
|
736,425 | 795,715 | 852,217 | |||||||||
|
Total liabilities and shareholders’ equity
|
$ | 7,525,889 | $ | 7,425,419 | $ | 7,243,293 | ||||||
See accompanying notes to consolidated financial statements.
| 5 |
UNITED COMMUNITY BANKS, INC.
Consolidated Statement of Changes in Shareholders’ Equity (Unaudited)
Consolidated Statement of Changes in Shareholders’ Equity (Unaudited)
For the Nine Months Ended September 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, 2012
|
$ | 217 | $ | 178,557 | $ | 16,613 | $ | 42,424 | $ | 15,317 | $ | 3,119 | $ | 1,057,951 | $ | (709,153 | ) | $ | (23,640 | ) | $ | 581,405 | ||||||||||||||||||
|
Net income
|
257,229 | 257,229 | ||||||||||||||||||||||||||||||||||||||
|
Other comprehensive income
|
(524 | ) | (524 | ) | ||||||||||||||||||||||||||||||||||||
|
Common stock issued to dividend reinvestment plan and employee benefit plans (49,830 shares)
|
50 | 532 | 582 | |||||||||||||||||||||||||||||||||||||
|
Conversion of non-voting common stock to voting (1,127,788 shares)
|
1,128 | (1,128 | ) | — | ||||||||||||||||||||||||||||||||||||
|
Warrant exercise (1,551,126 shares)
|
1,551 | 17,838 | 19,389 | |||||||||||||||||||||||||||||||||||||
|
Amortization of stock options and restricted stock awards
|
2,168 | 2,168 | ||||||||||||||||||||||||||||||||||||||
|
Vesting of restricted stock (51,995 shares issued, 115,664 shares deferred)
|
52 | 1,693 | (1,900 | ) | (155 | ) | ||||||||||||||||||||||||||||||||||
|
Deferred compensation plan, net, including dividend equivalents
|
132 | 132 | ||||||||||||||||||||||||||||||||||||||
|
Shares issued from deferred compensation plan (18,230 shares)
|
18 | (965 | ) | 947 | — | |||||||||||||||||||||||||||||||||||
|
Preferred stock dividends:
|
||||||||||||||||||||||||||||||||||||||||
|
Series A
|
(9 | ) | (9 | ) | ||||||||||||||||||||||||||||||||||||
|
Series B
|
1,157 | (7,907 | ) | (6,750 | ) | |||||||||||||||||||||||||||||||||||
|
Series D
|
(1,250 | ) | (1,250 | ) | ||||||||||||||||||||||||||||||||||||
|
Balance, September 30, 2013
|
$ | 217 | $ | 179,714 | $ | 16,613 | $ | 45,223 | $ | 14,189 | $ | 3,979 | $ | 1,077,536 | $ | (461,090 | ) | $ | (24,164 | ) | $ | 852,217 | ||||||||||||||||||
|
Balance, December 31, 2013
|
$ | — | $ | 105,000 | $ | 16,613 | $ | 46,243 | $ | 13,188 | $ | 3,930 | $ | 1,078,676 | $ | (448,091 | ) | $ | (19,844 | ) | $ | 795,715 | ||||||||||||||||||
|
Net income
|
49,373 | 49,373 | ||||||||||||||||||||||||||||||||||||||
|
Other comprehensive income
|
2,123 | 2,123 | ||||||||||||||||||||||||||||||||||||||
|
Redemption of Series B preferred stock (105,000 shares)
|
(105,000 | ) | (105,000 | ) | ||||||||||||||||||||||||||||||||||||
|
Redemption of Series D preferred stock (16,613 shares)
|
(16,613 | ) | (16,613 | ) | ||||||||||||||||||||||||||||||||||||
|
Cash dividends declared on common stock ($.06 per share)
|
(3,616 | ) | (3,616 | ) | ||||||||||||||||||||||||||||||||||||
|
Common stock issued at market (640,000 shares)
|
640 | 11,566 | 12,206 | |||||||||||||||||||||||||||||||||||||
|
Common stock issued to dividend reinvestment plan and to employee benefit plans (25,284 shares)
|
25 | 399 | 424 | |||||||||||||||||||||||||||||||||||||
|
Conversion of non-voting common stock to voting (3,107,419 shares)
|
3,107 | (3,107 | ) | — | ||||||||||||||||||||||||||||||||||||
|
Amortization of stock options and restricted stock awards
|
3,315 | 3,315 | ||||||||||||||||||||||||||||||||||||||
|
Vesting of restricted stock, net of shares surrendered to cover payroll taxes (137,920 shares issued, 115,609 shares deferred)
|
138 | 1,275 | (2,658 | ) | (1,245 | ) | ||||||||||||||||||||||||||||||||||
|
Deferred compensation plan, net, including dividend equivalents
|
182 | 182 | ||||||||||||||||||||||||||||||||||||||
|
Shares issued from deferred
compensation plan (13,223 shares) |
14 | (271 | ) | 257 | — | |||||||||||||||||||||||||||||||||||
|
Preferred stock dividends:
|
||||||||||||||||||||||||||||||||||||||||
|
Series B
|
(159 | ) | (159 | ) | ||||||||||||||||||||||||||||||||||||
|
Series D
|
(280 | ) | (280 | ) | ||||||||||||||||||||||||||||||||||||
|
Balance, September 30, 2014
|
$ | — | $ | — | $ | — | $ | 50,167 | $ | 10,081 | $ | 5,116 | $ | 1,091,555 | $ | (402,773 | ) | $ | (17,721 | ) | $ | 736,425 | ||||||||||||||||||
| 6 |
UNITED COMMUNITY BANKS, INC.
|
|
||||||||
|
Nine Months Ended
|
||||||||
|
September 30,
|
||||||||
|
(in thousands)
|
2014
|
2013
|
||||||
|
Operating activities:
|
||||||||
|
Net income
|
$ | 49,373 | $ | 257,229 | ||||
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
||||||||
|
Depreciation, amortization and accretion
|
15,098 | 20,847 | ||||||
|
Provision for credit losses
|
6,700 | 62,500 | ||||||
|
Stock based compensation
|
3,315 | 2,168 | ||||||
|
Deferred income tax expense (benefit)
|
28,112 | (250,054 | ) | |||||
|
Securities gains, net
|
(4,663 | ) | (116 | ) | ||||
|
Loss on prepayment of borrowings
|
4,446 | — | ||||||
|
Net (gains) losses on sales of foreclosed property
|
(518 | ) | 5,141 | |||||
|
Changes in assets and liabilities:
|
||||||||
|
Other assets and accrued interest receivable
|
(12,334 | ) | 16,225 | |||||
|
Accrued expenses and other liabilities
|
(16,813 | ) | 31,562 | |||||
|
Mortgage loans held for sale
|
(9,685 | ) | 16,834 | |||||
|
Net cash provided by operating activities
|
63,031 | 162,336 | ||||||
|
Investing activities:
|
||||||||
|
Investment securities held-to-maturity:
|
||||||||
|
Proceeds from maturities and calls
|
47,567 | 45,578 | ||||||
|
Purchases
|
(173 | ) | (8,481 | ) | ||||
|
Investment securities available-for-sale:
|
||||||||
|
Proceeds from sales
|
403,517 | 20,751 | ||||||
|
Proceeds from maturities and calls
|
176,423 | 399,304 | ||||||
|
Purchases
|
(552,025 | ) | (574,020 | ) | ||||
|
Net increase in loans
|
(220,061 | ) | (288,514 | ) | ||||
|
Proceeds from note sales
|
4,561 | 91,913 | ||||||
|
Cash paid for acquisition
|
(31,243 | ) | — | |||||
|
Funds collected from FDIC under loss sharing agreements
|
2,890 | 5,121 | ||||||
|
Proceeds from sales of premises and equipment
|
2,488 | 3,550 | ||||||
|
Purchases of premises and equipment
|
(3,260 | ) | (7,533 | ) | ||||
|
Proceeds from sale of other real estate
|
7,920 | 24,049 | ||||||
|
Net cash used in investing activities
|
(161,396 | ) | (288,282 | ) | ||||
|
Financing activities:
|
||||||||
|
Net change in deposits
|
39,224 | 160,767 | ||||||
|
Net change in short-term borrowings
|
(51,686 | ) | 1,195 | |||||
|
Proceeds from Federal Home Loan Bank advances
|
930,000 | 650,000 | ||||||
|
Repayment of Federal Home Loan Bank advances
|
(720,000 | ) | (690,000 | ) | ||||
|
Proceeds from issuance of senior debt
|
— | 40,000 | ||||||
|
Repayment of subordinated debentures
|
— | (35,000 | ) | |||||
|
Proceeds from issuance of common stock for dividend reinvestment and employee benefit plans
|
424 | 582 | ||||||
|
Retirement of preferred stock
|
(121,613 | ) | — | |||||
|
Issuance of common stock
|
12,206 | — | ||||||
|
Proceeds from warrant exercise
|
— | 19,389 | ||||||
|
Cash dividends on common stock
|
(1,810 | ) | — | |||||
|
Cash dividends on preferred stock
|
(1,214 | ) | (8,003 | ) | ||||
|
Net cash provided by financing activities
|
85,531 | 138,930 | ||||||
|
Net change in cash and cash equivalents
|
(12,834 | ) | 12,984 | |||||
|
Cash and cash equivalents at beginning of period
|
228,898 | 251,149 | ||||||
|
Cash and cash equivalents at end of period
|
$ | 216,064 | $ | 264,133 | ||||
|
Supplemental disclosures of cash flow information:
|
||||||||
|
Cash paid during the period for:
|
||||||||
|
Interest
|
$ | 20,598 | $ | 26,517 | ||||
|
Income taxes
|
2,497 | 2,361 | ||||||
|
Unsettled securities purchases
|
— | 11,610 | ||||||
|
Transfers of loans to foreclosed property
|
8,216 | 18,460 | ||||||
See accompanying notes to consolidated financial statements.
| 7 |
UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES
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, 2013.
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.
Reclassifications
Certain 2013 amounts have been reclassified to conform to the 2014 presentation. During the fourth quarter of 2013, United reclassified hedge ineffectiveness gains and losses from other fee revenue to net interest revenue. The impact of the reclassification has been reflected in all periods and was not material to any period.
Note 2 –Accounting Standards Updates and Recently Adopted Standards
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers. This ASU provides guidance on the recognition of revenue from contracts with customers. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This guidance is effective for public entities for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period, and will be applied retrospectively either to each prior reporting period or with a cumulative effect recognized at the date of initial application. United is in the process of evaluating this guidance, but its effect on United’s financial condition or results of operations is not expected to be material.
In June 2014, FASB issued ASU No. 2014-11, Repurchase-to-Maturity Transactions, Repurchase Financings and Disclosures. This ASU changes the accounting for repurchase-to-maturity transactions to secured borrowing accounting. For repurchase financing arrangements, the amendments require separate accounting for a transfer of a financial asset executed contemporaneously with a repurchase agreement with the same counterparty, which will result in secured borrowing accounting. The ASU also requires new disclosures for repurchase agreements, securities lending transactions and repurchase-to-maturity transactions. The Update is effective for the first interim or annual period beginning after December 15, 2014. United is currently evaluating the guidance’s impact on its financial position, results of operation and disclosures.
In June 2014, FASB issued ASU No. 2014-12, Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period. This ASU requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition and should not be reflected in estimating the grant-date fair value of the award. The standard is effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. This guidance is not expected to have a material impact on United’s financial position, results of operations or disclosures.
In August 2014, the FASB issued ASU No. 2014-13, Consolidation, Measuring the Financial Assets and the Financial Liabilities of a Consolidated Collateralized Financing Entity. This ASU addresses measurement differences in practice in both the initial consolidation and subsequent measurement of the financial assets and financial liabilities of a collateralized financing entity for a reporting entity that consolidates a collateralized financing entity. Collateralized financing entities include collateralized debt obligations (“CDOs”) and collateralized loan obligations (“CLOs”). This ASU becomes effective for public business entities for annual periods and interim periods within those annual periods, beginning after December 15, 2015. Although United holds CLOs in its investment securities portfolio, United is not required to consolidate any of the CLOs it currently holds. Therefore this ASU is not currently applicable to United.
In August 2014, the FASB issued ASU No. 2014-14, Receivables – Troubled Debt Restructurings by Creditors, Classification of Certain Government Guaranteed Mortgage Loans upon Foreclosure. This ASU addresses diversity in practice related to how creditors classify government-guaranteed mortgage loans, including Federal Housing Administration or U.S. Department of Veterans Affairs guaranteed loans upon foreclosure. The amendments in this ASU require that a mortgage loan be derecognized and that a separate other receivable be recognized upon foreclosure if the following conditions are met: 1) The loan has a government guarantee that is not separable from the loan before foreclosure, 2) At the time of foreclosure, the creditor has the intent to convey the real estate property to the guarantor and make a claim on the guarantee, and the creditor has the ability to recover under that claim, and 3) At the time of foreclosure, any amount of the claim that is determined on the basis of the fair value of the real estate is fixed. Upon foreclosure, the separate other receivable should be measured based on the amount of the loan balance (principal and interest) expected to be recovered from the guarantor. This guidance is not expected to have a material impact on United’s financial position, results of operations or disclosures.
| 8 |
UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
In November 2014, the FASB issued ASU No. 2014-16, Derivatives and Hedging – Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity. This ASU was issued to eliminate the use of different methods currently used in practice to account for hybrid financial instruments issued in the form of a share. The amendments in this ASU apply to all entities that are issuers of, or investors in, hybrid financial instruments that are issued in the form of a share. The amendments in this ASU are to be applied on a modified retrospective basis to existing hybrid financial instruments issued in the form of a share as of the beginning of the fiscal year for which the amendments are effective. Retrospective application is permitted to all relevant periods. The amendments in this ASU are effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption, including adoption in an interim period, is permitted. United is not an issuer of or an investor in hybrid financial instruments issued in the form of a share and therefore this ASU is not currently applicable to United.
Note 3 – Acquisition
On June 26, 2014, United completed the acquisition of substantially all of the assets of Business Carolina, Inc., a specialty Small Business Administration (“SBA”) / United States Department of Agriculture (“USDA”) lender headquartered in Columbia, South Carolina. On the closing date, United paid $31.2 million in cash for loans having a fair value on the purchase date of $24.8 million, accrued interest of $83,000, servicing rights with a fair value on the purchase date of $2.13 million, premises and equipment with a fair value on the purchase date of $2.60 million and goodwill in the amount of $1.49 million representing the premium paid over the fair value of the separately identifiable assets and liabilities acquired. United has not identified any material separately identifiable intangible assets resulting from the acquisition.
Note 4 – Balance Sheet Offsetting
United enters into reverse repurchase agreements in order to invest short-term funds. In addition, United enters into repurchase agreements and reverse repurchase agreements with the same counterparty in transactions commonly referred to as collateral swaps that are subject to master netting agreements under which the balances are netted in the balance sheet in accordance with ASC 210-20, Offsetting.
The following table presents a summary of amounts outstanding under reverse repurchase agreements and derivative financial instruments including those entered into in connection with the same counterparty under master netting agreements as of September 30, 2014, December 31, 2013 and September 30, 2013 (in thousands).
|
Gross
|
||||||||||||||||||||||||
|
Gross
|
Amounts
|
Gross Amounts not Offset
|
||||||||||||||||||||||
|
Amounts of
|
Offset on the
|
in the Balance Sheet | ||||||||||||||||||||||
|
Recognized
|
Balance
|
Net Asset
|
Financial
|
Collateral
|
||||||||||||||||||||
|
September 30, 2014
|
Assets
|
Sheet
|
Balance
|
Instruments
|
Received
|
Net Amount
|
||||||||||||||||||
|
Repurchase agreements / reverse repurchase agreements
|
$ | 392,000 | $ | (375,000 | ) | $ | 17,000 | $ | — | $ | (17,985 | ) | $ | — | ||||||||||
|
Derivatives
|
22,221 | — | 22,221 | (2,093 | ) | (3,427 | ) | 16,701 | ||||||||||||||||
|
Total
|
$ | 414,221 | $ | (375,000 | ) | $ | 39,221 | $ | (2,093 | ) | $ | (21,412 | ) | $ | 16,701 | |||||||||
|
Weighted average interest rate of reverse repurchase agreements
|
1.16 | % | ||||||||||||||||||||||
|
Gross
|
||||||||||||||||||||||||
|
Gross
|
Amounts
|
Gross Amounts not Offset
|
||||||||||||||||||||||
|
Amounts of
|
Offset on the
|
Net | in the Balance Sheet | |||||||||||||||||||||
|
Recognized
|
Balance
|
Liability
|
Financial
|
Collateral
|
||||||||||||||||||||
|
Liabilities
|
Sheet
|
Balance
|
Instruments
|
Pledged
|
Net Amount
|
|||||||||||||||||||
|
Repurchase agreements / reverse repurchase agreements
|
$ | 375,000 | $ | (375,000 | ) | $ | — | $ | — | $ | — | $ | — | |||||||||||
|
Derivatives
|
36,171 | — | 36,171 | (2,093 | ) | (38,195 | ) | — | ||||||||||||||||
|
Total
|
$ | 411,171 | $ | (375,000 | ) | $ | 36,171 | $ | (2,093 | ) | $ | (38,195 | ) | $ | — | |||||||||
|
Weighted average interest rate of repurchase agreements
|
.31 | % | ||||||||||||||||||||||
| 9 |
UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
|
Gross
|
||||||||||||||||||||||||
|
Gross
|
Amounts
|
Gross Amounts not Offset
|
||||||||||||||||||||||
|
Amounts of
|
Offset on the
|
in the Balance Sheet | ||||||||||||||||||||||
|
Recognized
|
Balance
|
Net Asset
|
Financial
|
Collateral
|
||||||||||||||||||||
|
December 31, 2013
|
Assets
|
Sheet
|
Balance
|
Instruments
|
Received
|
Net Amount
|
||||||||||||||||||
|
Repurchase agreements / reverse repurchase agreements
|
$ | 385,000 | $ | (350,000 | ) | $ | 35,000 | $ | — | $ | (38,982 | ) | $ | — | ||||||||||
|
Derivatives
|
23,833 | — | 23,833 | (4,378 | ) | (2,912 | ) | 16,543 | ||||||||||||||||
|
Total
|
$ | 408,833 | $ | (350,000 | ) | $ | 58,833 | $ | (4,378 | ) | $ | (41,894 | ) | $ | 16,543 | |||||||||
|
Weighted average interest rate of reverse repurchase agreements
|
1.09 | % | ||||||||||||||||||||||
|
Gross
|
||||||||||||||||||||||||
|
Gross
|
Amounts
|
|||||||||||||||||||||||