SEC Filing | United Community Banks, Inc.

View:

Download DOC

Download PDF

Download XLS

Download XBRL

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the Quarterly Period Ended March 31, 2016

☐ 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 ☒ NO ☐

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 ☒ NO ☐

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 ☒	Accelerated filer ☐

Non-accelerated filer ☐ (Do not check if a smaller reporting company)	Smaller Reporting Company ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

YES ☐ NO ☒

Common stock, par value $1 per share 70,305,168 shares voting and 1,258,792 shares non-voting outstanding as of May 2, 2016.

INDEX


PART I - Financial Information

	Item 1.	Financial Statements.

		Consolidated Statement of Income (unaudited) for the Three Months Ended March 31, 2016 and 2015	3

		Consolidated Statement of Comprehensive Income (unaudited) for the Three Months Ended March 31, 2016 and 2015	4

		Consolidated Balance Sheet (unaudited) at March 31, 2016 and December 31, 2015	5

		Consolidated Statement of Changes in Shareholders’ Equity (unaudited) for the Three Months Ended March 31, 2016 and 2015	6

		Consolidated Statement of Cash Flows (unaudited) for the Three Months Ended March 31, 2016 and 2015	7

		Notes to Consolidated Financial Statements	8

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	36

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	58

	Item 4.	Controls and Procedures.	59

PART II - Other Information

	Item 1.	Legal Proceedings.	59
	Item 1A.	Risk Factors.	59
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	59
	Item 3.	Defaults Upon Senior Securities.	59
	Item 4.	Mine Safety Disclosures.	59
	Item 5.	Other Information.	59
	Item 6.	Exhibits.	60

Part I – Financial Information

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


	Three Months Ended March 31,
(in thousands, except per share data)	2016			2015
Interest revenue:
Loans, including fees	$	63,976		$	49,664
Investment securities, including tax exempt of $166 and $158		15,788			12,058
Deposits in banks and short-term investments		957			812
Total interest revenue		80,721			62,534

Interest expense:
Deposits:
NOW		485			394
Money market		1,108			673
Savings		29			20
Time		642			1,109
Total deposit interest expense		2,264			2,196
Short-term borrowings		87			98
Federal Home Loan Bank advances		733			392
Long-term debt		2,685			2,606
Total interest expense		5,769			5,292
Net interest revenue		74,952			57,242
(Release of) provision for credit losses		(200	)		1,800
Net interest revenue after provision for credit losses		75,152			55,442

Fee revenue:
Service charges and fees		10,126			7,615
Mortgage loan and other related fees		3,289			2,755
Brokerage fees		1,053			1,551
Gains from sales of government guaranteed loans		1,237			1,141
Securities gains, net		379			1,539
Loss from prepayment of debt		-			(1,038	)
Other		2,522			2,119
Total fee revenue		18,606			15,682
Total revenue		93,758			71,124

Operating expenses:
Salaries and employee benefits		33,062			26,446
Communications and equipment		4,290			3,271
Occupancy		4,723			3,278
Advertising and public relations		864			750
Postage, printing and supplies		1,280			938
Professional fees		2,700			1,919
FDIC assessments and other regulatory charges		1,524			1,209
Amortization of intangibles		1,010			242
Merger-related and other charges		2,653			-
Other		5,779			5,008
Total operating expenses		57,885			43,061
Net income before income taxes		35,873			28,063
Income tax expense		13,578			10,393
Net income		22,295			17,670
Preferred stock dividends		21			-
Net income available to common shareholders	$	22,274		$	17,670

Earnings per common share:
Basic	$	.31		$	.29
Diluted		.31			.29
Weighted average common shares outstanding:
Basic		72,162			60,905
Diluted		72,166			60,909

See accompanying notes to consolidated financial statements.

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


	Three Months Ended March 31,
(in thousands)	2016									2015
	Before-tax Amount			Tax (Expense) Benefit			Net of Tax Amount			Before-tax Amount			Tax (Expense) Benefit			Net of Tax Amount

Net income	$	35,873		$	(13,578	)	$	22,295		$	28,063		$	(10,393	)	$	17,670
Other comprehensive income:
Unrealized gains on available-for-sale securities:
Unrealized holding gains arising during period		11,697			(4,455	)		7,242			13,989			(5,305	)		8,684
Reclassification adjustment for gains included in net income		(379	)		141			(238	)		(1,539	)		598			(941	)
Net unrealized gains		11,318			(4,314	)		7,004			12,450			(4,707	)		7,743
Amortization of losses included in net income on available-for-sale securities transferred to held-to-maturity		464			(181	)		283			484			(182	)		302
Amortization of losses included in net income on terminated derivative financial instruments that were previously accounted for as cash flow hedges		500			(195	)		305			425			(165	)		260
Unrealized losses on derivative financial instruments accounted for as cash flow hedges		-			-			-			(471	)		183			(288	)
Net cash flow hedge activity		500			(195	)		305			(46	)		18			(28	)
Amortization of prior service cost and actuarial losses included in net periodic pension cost for defined benefit pension plan		167			(65	)		102			159			(62	)		97
Net defined benefit pension plan activity		167			(65	)		102			159			(62	)		97
Total other comprehensive income		12,449			(4,755	)		7,694			13,047			(4,933	)		8,114
Comprehensive income	$	48,322		$	(18,333	)	$	29,989		$	41,110		$	(15,326	)	$	25,784

See accompanying notes to consolidated financial statements.

UNITED COMMUNITY BANKS, INC.
Consolidated Balance Sheet (Unaudited)


(in thousands, except share and per share data)	March 31, 2016			December 31, 2015

ASSETS
Cash and due from banks	$	93,821		$	86,912
Interest-bearing deposits in banks		88,995			153,451
Cash and cash equivalents		182,816			240,363
Securities available for sale		2,405,467			2,291,511
Securities held to maturity (fair value $363,092 and $371,658)		351,700			364,696
Mortgage loans held for sale		26,578			24,231
Loans, net of unearned income		6,106,189			5,995,441
Less allowance for loan losses		(66,310	)		(68,448	)
Loans, net		6,039,879			5,926,993
Premises and equipment, net		180,690			178,165
Bank owned life insurance		105,803			105,493
Accrued interest receivable		25,893			25,786
Net deferred tax asset		180,371			197,613
Derivative financial instruments		23,488			20,082
Goodwill and other intangible assets		146,409			147,420
Other assets		112,237			94,075
Total assets	$	9,781,331		$	9,616,428
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Deposits:
Demand	$	2,370,842		$	2,204,755
NOW		1,794,241			1,975,884
Money market		1,630,565			1,599,637
Savings		491,542			471,129
Time		1,233,647			1,282,803
Brokered		439,486			338,985
Total deposits		7,960,323			7,873,193
Repurchase agreements		-			16,640
Federal Home Loan Bank advances		510,125			430,125
Long-term debt		163,955			163,836
Derivative financial instruments		31,374			28,825
Accrued expenses and other liabilities		81,829			85,524
Total liabilities		8,747,606			8,598,143
Shareholders’ equity:
Preferred stock, $1 par value; 10,000,000 shares authorized; Series H; $1,000 stated value; 0 and 9,992 shares issued and outstanding		-			9,992
Common stock, $1 par value; 100,000,000 shares authorized; 66,258,777 and 66,198,477 shares issued and outstanding		66,259			66,198
Common stock, non-voting, $1 par value; 26,000,000 shares authorized; 5,285,516 and 5,285,516 shares issued and outstanding		5,286			5,286
Common stock issuable; 496,515 and 458,953 shares		6,700			6,779
Capital surplus		1,286,884			1,286,361
Accumulated deficit		(313,646	)		(330,879	)
Accumulated other comprehensive loss		(17,758	)		(25,452	)
Total shareholders’ equity		1,033,725			1,018,285
Total liabilities and shareholders’ equity	$	9,781,331		$	9,616,428

See accompanying notes to consolidated financial statements.

UNITED COMMUNITY BANKS, INC.

Consolidated Statement of Changes in Shareholders’ Equity (Unaudited)
For the Three Months Ended March 31,


(in thousands, except share and per share data)	Preferred Stock Series H			Common Stock		Non-Voting Common Stock		Common Stock Issuable			Capital Surplus			Accumulated Deficit			Accumulated Other Comprehensive Loss			Total

Balance, December 31, 2014	$	-		$	50,178	$	10,081	$	5,168		$	1,080,508		$	(387,568	)	$	(18,790	)	$	739,577
Net income															17,670						17,670
Other comprehensive income																		8,114			8,114
Common stock issued to dividend reinvestment plan and employee benefit plans (3,689 shares)					4							57									61
Amortization of stock option and restricted stock awards												991									991
Vesting of restricted stock, net of shares surrendered to cover payroll taxes (31,718 shares issued, 51,326 shares deferred)					32				759			(1,129	)								(338	)
Deferred compensation plan, net, including dividend equivalents									106												106
Shares issued from deferred compensation plan (14,063 shares)					14				(138	)		124									-
Common stock dividends ($.05 per share)															(3,035	)					(3,035	)
Tax on restricted stock vesting												559									559
Balance, March 31, 2015	$	-		$	50,228	$	10,081	$	5,895		$	1,081,110		$	(372,933	)	$	(10,676	)	$	763,705

Balance, December 31, 2015	$	9,992		$	66,198	$	5,286	$	6,779		$	1,286,361		$	(330,879	)	$	(25,452	)	$	1,018,285
Net income															22,295						22,295
Other comprehensive income																		7,694			7,694
Redemption of Series H preferred stock (9,992 shares)		(9,992	)																		(9,992	)
Common stock issued to dividend reinvestment plan and employee benefit plans (5,154 shares)					5							79									84
Amortization of stock option and restricted stock awards												918									918
Vesting of restricted stock, net of shares surrendered to cover payroll taxes (26,385 shares issued, 62,422 shares deferred)					27				912			(1,422	)								(483	)
Deferred compensation plan, net, including dividend equivalents									116												116
Shares issued from deferred compensation plan (28,761 shares)					29				(1,107	)		1,078									-
Common stock dividends ($.07 per share)															(5,041	)					(5,041	)
Tax on restricted stock vesting												(130	)								(130	)
Preferred stock dividends, Series H															(21	)					(21	)
Balance, March 31, 2016	$	-		$	66,259	$	5,286	$	6,700		$	1,286,884		$	(313,646	)	$	(17,758	)	$	1,033,725

See accompanying notes to consolidated financial statements.

UNITED COMMUNITY BANKS, INC.

Consolidated Statement of Cash Flows (Unaudited)


	Three Months Ended March 31,
(in thousands)	2016			2015
Operating activities:
Net income	$	22,295		$	17,670
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion		7,087			5,158
(Release of) provision for credit losses		(200	)		1,800
Stock based compensation		918			991
Deferred income tax expense		13,553			8,672
Securities gains, net		(379	)		(1,539	)
Gains from sales of government guaranteed loans		(1,237	)		(1,141	)
Net gains and write downs on sales of other real estate owned		(214	)		(81	)
Loss on prepayment of borrowings		-			1,038
Changes in assets and liabilities:
Other assets and accrued interest receivable		(34,039	)		7,106
Accrued expenses and other liabilities		(3,049	)		(11,342	)
Mortgage loans held for sale		(2,347	)		(1,986	)
Net cash provided by operating activities		2,388			26,346

Investing activities:
Investment securities held to maturity:
Proceeds from maturities and calls of securities held to maturity		14,207			16,144
Purchases of securities held to maturity		(1,000	)		-
Investment securities available for sale:
Proceeds from sales of securities available for sale		61,305			69,467
Proceeds from maturities and calls of securities available for sale		82,029			55,121
Purchases of securities available for sale		(246,666	)		(137,305	)
Net increase in loans		(101,828	)		(121,116	)
Funds paid to FDIC under loss sharing agreements		-			(1,198	)
Proceeds from sales of premises and equipment		29			-
Purchases of premises and equipment		(5,104	)		(1,768	)
Proceeds from sale of other real estate		1,524			1,408
Net cash used in investing activities		(195,504	)		(119,247	)

Financing activities:
Net change in deposits		87,204			111,419
Net change in short-term borrowings		(16,640	)		(6,540	)
Repayments of trust preferred securities		-			(15,998	)
Proceeds from FHLB advances		1,715,000			410,000
Repayments of FHLB advances		(1,635,000	)		(410,000	)
Retirement of preferred stock		(9,992	)		-
Proceeds from issuance of common stock for dividend reinvestment and employee benefit plans		84			61
Cash dividends on common stock		(5,041	)		(3,032	)
Cash dividends on preferred stock		(46	)		-
Net cash provided by financing activities		135,569			85,910

Net change in cash and cash equivalents		(57,547	)		(6,991	)

Cash and cash equivalents at beginning of period		240,363			192,655

Cash and cash equivalents at end of period	$	182,816		$	185,664

Supplemental disclosures of cash flow information:
Interest paid	$	7,407		$	6,334
Income taxes paid		2,013			1,800
Significant non-cash investing and financing transactions:
Unsettled government guaranteed loan purchases		18,068			-
Unsettled government guaranteed loan sales		6,774			3,671
Transfers of loans to foreclosed properties		1,590			459

See accompanying notes to consolidated financial statements.

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, 2015.

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 2015 amounts have been reclassified to conform to the 2016 presentation.

Note 2 –Accounting Standards Updates and Recently Adopted Standards

In April 2015, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2015-03, Interest – Imputation of Interest (Subtopic 835-30) Simplifying the Presentation of Debt Issuance Costs. To simplify presentation of debt issuance costs, the amendments in this update require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability consistent with debt discounts. The standard was effective January 1, 2016 and has been retrospectively reflected in the accompanying consolidated balance sheet, with a corresponding reclassification for December 31, 2015 between other assets for $9.68 million, brokered deposits for $7.90 million and long-term debt for $1.78 million.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). This update requires a lessee to recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election not to recognize lease assets and lease liabilities. For public entities, this update is effective for fiscal years beginning after December 15, 2018, with modified retrospective application to prior periods presented. Upon adoption, United will gross up its balance sheet by the present value of future minimum lease payments. Such payments amounted to $23.5 million at December 31, 2015.

In March 2016, the FASB issued ASU No. 2016-05, Derivatives and Hedging (Topic 815): Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships. This update clarifies that a change in the counterparty to a derivative instrument that has been designated as the hedging instrument under Topic 815 does not, in and of itself, require dedesignation of that hedging relationship provided that all other hedge accounting criteria continue to be met. For public entities, this update is effective for fiscal years beginning after December 15, 2016, with application on either a prospective or modified retrospective basis. The adoption of this update is not expected to have a material impact on United’s consolidated financial statements.

In March 2016, the FASB issued ASU No. 2016-06, Derivatives and Hedging (Topic 815): Contingent Put and Call Options in Debt Instruments. This update clarifies the requirements for assessing whether contingent call (put) options that can accelerate the payment of principal on debt instruments are clearly and closely related to their debt hosts. An entity performing the assessment under this update is required to assess the embedded call (put) options solely in accordance with a four-step decision sequence as outlined in the guidance. Consequently, when a call (put) option is contingently exercisable, an entity does not have to assess whether the event that triggers the ability to exercise a call (put) option is related to interest rates or credit risks. For public entities, this update is effective for fiscal years beginning after December 15, 2016, with application on a modified retrospective basis. The adoption of this update is not expected to have a material impact on United’s consolidated financial statements.

In March 2016, the FASB issued ASU No. 2016-07, Investments – Equity Method and Joint Ventures (Topic 323): Simplifying the Transition to the Equity Method of Accounting. This update eliminates the requirement that when an investment qualifies for use of the equity method as a result of an increase in the level of ownership interest or degree of influence, an investor must adjust the investment, results of operations, and retained earnings retroactively on a step-by-step basis as if the equity method had been in effect during all previous periods that the investment had been held. The amendments require that the equity method investor add the cost of acquiring the additional interest in the investee to the current basis of the investor’s previously held interest and adopt the equity method of accounting as of the date the investment becomes qualified for equity method accounting. Therefore, upon qualifying for the equity method of accounting, no retroactive adjustment of the investment is required. For public entities, this update is effective for fiscal years beginning after December 15, 2016, with application a prospective basis. The adoption of this update is not expected to have a material impact on United’s consolidated financial statements.

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements

In March 2016, the FASB issued ASU No. 2016-09, Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. This update simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The amendments require that excess tax benefits and deficiencies be recognized as income tax expense or benefit in the income statement and as an operating activity in the statement of cash flows. In addition, an entity can make a policy election to either estimate the number of awards that are expected to vest or account for forfeitures as they occur. The guidance modifies the threshold to qualify for equity classification to permit withholding up to the maximum statutory tax rate and clarifies that cash paid by an employer when directly withholding shares for tax-withholding purposes should be classified as a financing activity. For public entities, this update is effective for fiscal years beginning after December 15, 2016. The adoption of this update is not expected to have a material impact on United’s consolidated financial statements.

Note 3 – Balance Sheet Offsetting and Repurchase Agreements Accounted for as Secured Borrowings

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 the dates indicated (in thousands).


	Gross Amounts of			Gross Amounts Offset on					Gross Amounts not Offset in the Balance Sheet
March 31, 2016	Recognized Assets			the Balance Sheet			Net Asset Balance		Financial Instruments			Collateral Received			Net Amount

Repurchase agreements / reverse repurchase agreements	$	350,000		$	(350,000	)	$	-	$	-		$	-		$	-
Derivatives		23,488			-			23,488		(1,384	)		(4,845	)		17,259
Total	$	373,488		$	(350,000	)	$	23,488	$	(1,384	)	$	(4,845	)	$	17,259
Weighted average interest rate of reverse repurchase agreements		1.45	%


	Gross Amounts of			Gross Amounts Offset on			Net			Gross Amounts not Offset in the Balance Sheet
	Recognized Liabilities			the Balance Sheet			Liability Balance		Financial Instruments			Collateral Pledged			Net Amount

Repurchase agreements / reverse repurchase agreements	$	350,000		$	(350,000	)	$	-	$	-		$	-		$	-
Derivatives		31,374			-			31,374		(1,384	)		(28,998	)		992
Total	$	381,374		$	(350,000	)	$	31,374	$	(1,384	)	$	(28,998	)	$	992
Weighted average interest rate of repurchase agreements		.59	%


	Gross Amounts of			Gross Amounts Offset on					Gross Amounts not Offset in the Balance Sheet
December 31, 2015	Recognized Assets			the Balance Sheet			Net Asset Balance		Financial Instruments			Collateral Received			Net Amount

Repurchase agreements / reverse repurchase agreements	$	400,000		$	(400,000	)	$	-	$	-		$	-		$	-
Derivatives		20,082			-			20,082		(519	)		(3,729	)		15,834
Total	$	420,082		$	(400,000	)	$	20,082	$	(519	)	$	(3,729	)	$	15,834
Weighted average interest rate of reverse repurchase agreements		1.34	%


	Gross Amounts of			Gross Amounts Offset on			Net		Gross Amounts not Offset in the Balance Sheet
	Recognized Liabilities			the Balance Sheet			Liability Balance		Financial Instruments			Collateral Pledged			Net Amount

Repurchase agreements / reverse repurchase agreements	$	400,000		$	(400,000	)	$	-	$	-		$	-		$	-
Derivatives		28,825			-			28,825		(519	)		(30,917	)		-
Total	$	428,825		$	(400,000	)	$	28,825	$	(519	)	$	(30,917	)	$	-
Weighted average interest rate of repurchase agreements		.50	%

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements

At March 31, 2016, United recognized the right to reclaim cash collateral of $28.7 million and the obligation to return cash collateral of $4.37 million. At December 31, 2015, United recognized the right to reclaim cash collateral of $6.26 million and the obligation to return cash collateral of $3.73 million. The right to reclaim cash collateral and the obligation to return cash collateral were included in the consolidated balance sheet in other assets and other liabilities, respectively.

The following table presents additional detail regarding repurchase agreements accounted for as secured borrowings and the securities underlying these agreements as of the dates indicated (in thousands).


	Remaining Contractual Maturity of the Agreements
As of March 31, 2016	Overnight and Continuous		Up to 30 Days		30 to 90 Days		91 to 110 days		Total

U.S. Treasuries	$	-	$	-	$	50,000	$	50,000	$	100,000
Mortgage-backed securities		-		50,000		50,000		150,000		250,000
Total	$	-	$	50,000	$	100,000	$	200,000	$	350,000
Gross amount of recognized liabilities for repurchase agreements in offsetting disclosure									$	350,000
Amounts related to agreements not included in offsetting disclosure									$	-


	Remaining Contractual Maturity of the Agreements
As of December 31, 2015	Overnight and Continuous		Up to 30 Days		30 to 90 Days		91 to 110 days		Total

U.S. Treasuries	$	-	$	-	$	100,000	$	-	$	100,000
U.S. Government agencies		32		-		-		-		32
Mortgage-backed securities		16,608		25,000		175,000		100,000		316,608

Total	$	16,640	$	25,000	$	275,000	$	100,000	$	416,640
Gross amount of recognized liabilities for repurchase agreements in offsetting disclosure									$	400,000
Amounts related to agreements not included in offsetting disclosure									$	16,640

United is obligated to promptly transfer additional securities if the market value of the securities falls below the repurchase agreement price. United manages this risk by maintaining an unpledged securities portfolio that it believes is sufficient to cover a decline in the market value of the securities sold under agreements to repurchase.

Note 4 – Securities

The amortized cost basis, unrealized gains and losses and fair value of securities held-to-maturity as of the dates indicated are as follows (in thousands).

As of March 31, 2016	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value

State and political subdivisions	$	61,499	$	4,904	$	-	$	66,403
Mortgage-backed securities ⁽¹⁾		290,201		6,867		379		296,689
Total	$	351,700	$	11,771	$	379	$	363,092

As of December 31, 2015

State and political subdivisions	$	62,073	$	3,211	$	-	$	65,284
Mortgage-backed securities ⁽¹⁾		302,623		5,424		1,673		306,374
Total	$	364,696	$	8,635	$	1,673	$	371,658

⁽¹⁾ All are residential type mortgage-backed securities or U.S. government agency commercial mortgage backed securities.

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements

The cost basis, unrealized gains and losses, and fair value of securities available-for-sale as of the dates indicated are presented below (in thousands).


As of March 31, 2016	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
U.S. Treasuries	$	140,574	$	2,477	$	-	$	143,051
U.S. Government agencies		85,891		1,053		21		86,923
State and political subdivisions		73,361		781		2		74,140
Mortgage-backed securities ⁽¹⁾		1,253,173		17,511		3,349		1,267,335
Corporate bonds		308,064		1,920		1,522		308,462
Asset-backed securities		531,488		504		9,374		522,618
Other		2,938		-		-		2,938
Total	$	2,395,489	$	24,246	$	14,268	$	2,405,467

As of December 31, 2015

U.S. Treasuries	$	169,034	$	156	$	484	$	168,706
U.S. Government agencies		112,394		385		439		112,340
State and political subdivisions		56,265		461		458		56,268
Mortgage-backed securities ⁽¹⁾		1,108,206		12,077		7,165		1,113,118
Corporate bonds		308,102		933		3,009		306,026
Asset-backed securities		538,679		569		6,006		533,242
Other		1,811		-		-		1,811
Total	$	2,294,491	$	14,581	$	17,561	$	2,291,511

⁽¹⁾ All are residential type mortgage-backed securities or U.S. government agency commercial mortgage backed securities.

Securities with a carrying value of $1.36 billion and $1.63 billion were pledged to secure public deposits, derivatives and other secured borrowings at March 31, 2016 and December 31, 2015, respectively.

The following table summarizes held-to-maturity securities in an unrealized loss position as of the dates indicated (in thousands).


	Less than 12 Months				12 Months or More				Total
As of March 31, 2016	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
Mortgage-backed securities	$	52,172	$	175	$	12,889	$	204	$	65,061	$	379
Total unrealized loss position	$	52,172	$	175	$	12,889	$	204	$	65,061	$	379

As of December 31, 2015

Mortgage-backed securities	$	140,362	$	1,331	$	13,127	$	342	$	153,489	$	1,673
Total unrealized loss position	$	140,362	$	1,331	$	13,127	$	342	$	153,489	$	1,673

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements

The following table summarizes available-for-sale securities in an unrealized loss position as of the dates indicated (in thousands).


	Less than 12 Months				12 Months or More				Total
As of March 31, 2016	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
U.S. Treasuries	$	-	$	-	$	-	$	-	$	-	$	-
U.S. Government agencies		7,600		21		-		-		7,600		21
State and political subdivisions		1,664		2		-		-		1,664		2
Mortgage-backed securities		89,267		648		159,558		2,701		248,825		3,349
Corporate bonds		105,223		1,172		650		350		105,873		1,522
Asset-backed securities		379,984		9,106		4,805		268		384,789		9,374
Total unrealized loss position	$	583,738	$	10,949	$	165,013	$	3,319	$	748,751	$	14,268

As of December 31, 2015

U.S. Treasuries	$	126,066	$	484	$	-	$	-	$	126,066	$	484
U.S. Government agencies		74,189		439		-		-		74,189		439
State and political subdivisions		27,014		458		-		-		27,014		458
Mortgage-backed securities		274,005		2,580		173,254		4,585		447,259		7,165
Corporate bonds		221,337		2,759		750		250		222,087		3,009
Asset-backed securities		358,940		5,746		4,816		260		363,756		6,006
Total unrealized loss position	$	1,081,551	$	12,466	$	178,820	$	5,095	$	1,260,371	$	17,561

At March 31, 2016, there were 138 available-for-sale securities and 12 held-to-maturity securities that were in an unrealized loss position. United does not intend to sell nor believes it will be required to sell securities in an unrealized loss position prior to the recovery of their amortized cost basis. Unrealized losses at March 31, 2016 were primarily attributable to changes in interest rates and declining prices in the equity markets.

Management evaluates securities for other-than-temporary impairment on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. Consideration is given to the length of time and the extent to which the fair value has been less than cost, the financial condition and near-term prospects of the issuer, among other factors. In analyzing an issuer’s financial condition, management considers whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred, and industry analysts’ reports. No impairment charges were recognized during the three months ended March 31, 2016 or 2015.

Realized gains and losses are derived using the specific identification method for determining the cost of securities sold. The following table summarizes available-for-sale securities sales activity for the three months ended March 31, 2016 and 2015 (in thousands).

	Three Months Ended March 31,
	2016			2015

Proceeds from sales	$	61,305		$	69,467

Gross gains on sales	$	673		$	1,539
Gross losses on sales		(294	)		-

Net gains on sales of securities	$	379		$	1,539

Income tax expense attributable to sales	$	141		$	598

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements

The amortized cost and fair value of held-to-maturity and available-for-sale securities at March 31, 2016, by contractual maturity, are presented in the following table (in thousands).


	Available-for-Sale				Held-to-Maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value

US Treasuries:
1 to 5 years	$	66,071	$	66,859	$	-	$	-
5 to 10 years		74,503		76,192		-		-
		140,574		143,051		-		-

US Government agencies:
1 to 5 years		12,943		12,938		-		-
5 to 10 years		72,948		73,985		-		-
		85,891		86,923		-		-

State and political subdivisions:
Within 1 year		1,443		1,446		3,503		3,528
1 to 5 years		10,603		10,838		15,638		16,614
5 to 10 years		52,851		53,189		21,579		23,862
More than 10 years		8,464		8,667		20,779		22,399
		73,361		74,140		61,499		66,403

Corporate bonds:
1 to 5 years		223,383		223,309		-		-
5 to 10 years		52,286		53,259		-		-
More than 10 years		32,395		31,894		-		-
		308,064		308,462		-		-

Asset-backed securities:
1 to 5 years		24,284		24,356		-		-
5 to 10 years		264,883		259,436		-		-
More than 10 years		242,321		238,826		-		-
		531,488		522,618		-		-

Other:
More than 10 years		2,938		2,938		-		-
		2,938		2,938		-		-

Total securities other than mortgage-backed securities:
Within 1 year		1,443		1,446		3,503		3,528
1 to 5 years		337,284		338,300		15,638		16,614
5 to 10 years		517,471		516,061		21,579		23,862
More than 10 years		286,118		282,325		20,779		22,399

Mortgage-backed securities		1,253,173		1,267,335		290,201		296,689
	$	2,395,489	$	2,405,467	$	351,700	$	363,092

Expected maturities may differ from contractual maturities because issuers and borrowers may have the right to call or prepay obligations.

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements

Note 5 – Loans and Allowance for Credit Losses

Major classifications of loans are summarized as of the dates indicated as follows (in thousands).


	March 31, 2016			December 31, 2015

Owner occupied commercial real estate	$	1,434,152		$	1,493,966
Income producing commercial real estate		879,880			823,729
Commercial & industrial		854,794			785,417
Commercial construction		353,855			342,078
Total commercial		3,522,681			3,445,190
Residential mortgage		1,031,653			1,029,663
Home equity lines of credit		604,208			597,806
Residential construction		347,864			351,700
Consumer installment		125,303			115,111
Indirect auto		474,480			455,971
Total loans		6,106,189			5,995,441
Less allowance for loan losses		(66,310	)		(68,448	)
Loans, net	$	6,039,879		$	5,926,993

At March 31, 2016 and December 31, 2015, loans totaling $2.75 billion and $2.44 billion, respectively, were pledged as collateral to secure Federal Home Loan Bank advances and other contingent funding sources.

At March 31, 2016, the carrying value and outstanding balance of purchased credit impaired (“PCI”) loans accounted for under ASC 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality, were $43.9 million and $60.7 million, respectively. At December 31, 2015, the carrying value and outstanding balance of PCI loans were $51.3 million and $71.0 million, respectively. The following table presents changes in the value of the accretable yield for acquired loans accounted for under ASC 310-30 for the periods indicated (in thousands):


	Three Months Ended March 31,
	2016			2015

Balance at beginning of period	$	4,279		$	-
Accretion		(1,315	)		-
Reclassification from nonaccretable difference		646			-
Changes in expected cash flows that do not affect nonaccretable difference		534			-
Balance at end of period	$	4,144		$	-

In addition to the accretable yield on loans accounted for under ASC 310-30, the fair value adjustments on purchased loans outside the scope of ASC 310-30 are also accreted to interest income over the life of the loans. At March 31, 2016 and December 31, 2015, the remaining accretable fair value marks on loans acquired through a business combination and not accounted for under ASC 310-30 were $6.48 million and $7.03 million, respectively. In addition, indirect auto loans purchased at a premium outside of a business combination have a remaining premium of $12.7 million and $12.0 million, respectively, as of March 31, 2016 and December 31, 2015.

The allowance for loan losses represents management’s estimate of probable incurred losses in the loan portfolio as of the end of the period. The allowance for unfunded commitments is included in other liabilities in the consolidated balance sheet. Combined, the allowance for loan losses and allowance for unfunded commitments are referred to as the allowance for credit losses.

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements

The following table presents the balance and activity in the allowance for credit losses by portfolio segment for the periods indicated (in thousands).


Three Months Ended March 31, 2016	Beginning Balance		Charge- Offs			Recoveries		(Release) Provision			Ending Balance

Owner occupied commercial real estate	$	16,732	$	(402	)	$	97	$	437		$	16,864
Income producing commercial real estate		8,235		(222	)		11		(2,004	)		6,020
Commercial & industrial		4,442		(572	)		289		(1,006	)		3,153
Commercial construction		5,583		(287	)		-		3,642			8,938
Residential mortgage		17,232		(176	)		127		(2,978	)		14,205
Home equity lines of credit		6,042		(723	)		91		585			5,995
Residential construction		7,961		(59	)		163		969			9,034
Consumer installment		828		(479	)		206		218			773
Indirect auto		1,393		(233	)		31		137			1,328
Total allowance for loan losses		68,448		(3,153	)		1,015		-			66,310
Allowance for unfunded commitments		2,542		-			-		(200	)		2,342
Total allowance for credit losses	$	70,990	$	(3,153	)	$	1,015	$	(200	)	$	68,652


Three Months Ended March 31, 2015	Beginning Balance		Charge- Offs			Recoveries		(Release) Provision			Ending Balance

Owner occupied commercial real estate	$	16,041	$	(368	)	$	11	$	(732	)	$	14,952
Income producing commercial real estate		10,296		(248	)		7		(400	)		9,655
Commercial & industrial		3,255		(469	)		128		528			3,442
Commercial construction		4,747		(22	)		-		610			5,335
Residential mortgage		20,311		(578	)		162		243			20,138
Home equity lines of credit		4,574		(73	)		14		(194	)		4,321
Residential construction		10,603		(1,140	)		79		668			10,210
Consumer installment		731		(326	)		376		(68	)		713
Indirect auto		1,061		(128	)		13		295			1,241
Total allowance for loan losses		71,619		(3,352	)		790		950			70,007
Allowance for unfunded commitments		1,930		-			-		850			2,780
Total allowance for credit losses	$	73,549	$	(3,352	)	$	790	$	1,800		$	72,787

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements

The following table represents the recorded investment in loans by portfolio segment and the balance of the allowance for loan losses assigned to each segment based on the method of evaluating the loans for impairment as of the dates indicated (in thousands).

	Allowance for Loan Losses
	March 31, 2016								December 31, 2015
	Individually evaluated for impairment		Collectively evaluated for impairment		PCI		Ending Balance		Individually evaluated for impairment		Collectively evaluated for impairment		PCI		Ending Balance

Owner occupied commercial real estate	$	1,374	$	15,490	$	-	$	16,864	$	1,465	$	15,267	$	-	$	16,732
Income producing commercial real estate		401		5,619		-		6,020		961		7,274		-		8,235
Commercial & industrial		54		3,099		-		3,153		280		4,162		-		4,442
Commercial construction		34		8,904		-		8,938		13		5,570		-		5,583
Residential mortgage		1,850		12,347		8		14,205		3,885		13,347		-		17,232
Home equity lines of credit		1		5,994		-		5,995		6		6,036		-		6,042
Residential construction		98		8,936		-		9,034		174		7,787		-		7,961
Consumer installment		7		766		-		773		13		815		-		828
Indirect auto		-		1,328		-		1,328		-		1,393		-		1,393
Total allowance for loan losses		3,819		62,483		8		66,310		6,797		61,651		-		68,448
Allowance for unfunded commitments		-		2,342		-		2,342		-		2,542		-		2,542
Total allowance for credit losses	$	3,819	$	64,825	$	8	$	68,652	$	6,797	$	64,193	$	-	$	70,990

	Loans Outstanding
	March 31, 2016								December 31, 2015
	Individually evaluated for impairment		Collectively evaluated for impairment		PCI		Ending Balance		Individually evaluated for impairment		Collectively evaluated for impairment		PCI		Ending Balance

Owner occupied commercial real estate	$	31,231	$	1,393,537	$	9,384	$	1,434,152	$	38,268	$	1,442,024	$	13,674	$	1,493,966
Income producing commercial real estate		24,811		832,546		22,523		879,880		23,013		772,945		27,771		823,729
Commercial & industrial		2,366		850,994		1,434		854,794		3,339		781,423		655		785,417
Commercial construction		1,527		347,337		4,991		353,855		10,616		329,320		2,142		342,078
Residential mortgage		19,821		1,008,435		3,397		1,031,653		19,627		1,005,860		4,176		1,029,663
Home equity lines of credit		63		602,570		1,575		604,208		167		595,951		1,688		597,806
Residential construction		5,256		342,050		558		347,864		7,900		342,677		1,123		351,700
Consumer installment		331		124,961		11		125,303		329		114,741		41		115,111
Indirect auto		795		473,655		30		474,480		749		455,173		49		455,971
Total loans	$	86,201	$	5,976,085	$	43,903	$	6,106,189	$	104,008	$	5,840,114	$	51,319	$	5,995,441

Excluding loans accounted for under ASC 310-30, management individually evaluates all loans that are on nonaccrual with a balance of $500,000 or greater and all troubled debt restructurings (“TDRs”) for impairment. In addition, management reviews all accruing substandard loans greater than $2 million to determine if the loan is impaired. A loan is considered impaired when, based on current events and circumstances, it is probable that all amounts due according to the original contractual terms of the loan will not be collected. All TDRs are considered impaired regardless of accrual status. Impairment is measured based on the present value of expected future cash flows, discounted at the loan’s effective interest rate, the loan’s observable market price, or the fair value of the collateral if the loan is collateral dependent. For TDRs less than $500,000, impairment is estimated based on the average impairment of TDRs greater than $500,000 by loan category. For loan types that do not have TDRs greater than $500,000, the average impairment for all TDR loans is used to quantify the amount of required specific reserve. A specific reserve is established for impaired loans for the amount of calculated impairment. Interest payments received on impaired nonaccrual loans are applied as a reduction of the outstanding principal balance. For impaired loans not on nonaccrual status, interest is accrued according to the terms of the loan agreement. Loans are evaluated for impairment quarterly and specific reserves are established in the allowance for loan losses for any measured impairment.

Each quarter, management prepares an analysis of the allowance for credit losses to determine the appropriate balance that measures and quantifies the amount of probable incurred losses in the loan portfolio and unfunded loan commitments. The allowance is comprised of specific reserves on individually impaired loans, which are determined as described above, and general reserves which are determined based on historical loss experience as adjusted for current trends and economic conditions multiplied by a loss emergence period factor. Management uses eight quarters of historical loss experience to determine the loss factors to be used in the reserve calculation for loans evaluated in the aggregate. Eight quarters has been determined to be an appropriate time period as it is recent enough to be relevant to current conditions and covers a length of time sufficient to minimize distortions caused by nonrecurring and unusual activity that might otherwise influence a shorter time period. Beginning with the first quarter of 2015, management began applying equal weight to all eight quarters to capture the full range of the loss cycle. Management believes the current weightings are appropriate to measure the probable losses incurred within the loan portfolio.

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements

Management calculates the loss emergence period for each pool of loans based on the average length of time between the date a loan first exceeds 30 days past due and the date the loan is charged off.

On junior lien home equity loans, management has limited ability to monitor the delinquency status of the first lien unless the first lien is also held by United. As a result, management applies the weighted average historical loss factor for this category and appropriately adjusts it to reflect the increased risk of loss from these credits.

Management carefully reviews the resulting loss factors for each category of the loan portfolio and evaluates whether qualitative adjustments are necessary to take into consideration recent credit trends such as increases or decreases in past due, nonaccrual, criticized and classified loans, and other macro environmental factors such as changes in unemployment rates, lease vacancy rates and trends in property values and absorption rates.

Management believes that its method of determining the balance of the allowance for credit losses provides a reasonable and reliable basis for measuring and reporting losses that are incurred in the loan portfolio as of the reporting date.

When a loan officer determines that a loan is uncollectible, he or she is responsible for recommending that the loan be placed on nonaccrual status and charged off. Full or partial charge-offs may also be recommended by the Collections Department, the Special Assets Department, the Loss Mitigation Department and the Foreclosure/OREO Department. Nonaccrual real estate loans are generally charged down to 80% of the appraised value of the underlying collateral at the time they are placed on nonaccrual status in order to approximate fair value less costs to sell.

Commercial and consumer asset quality committees consisting of the Chief Credit Officer, Senior Risk Officers and Senior Credit Officers meet monthly to review charge-offs that have occurred during the previous month.

Generally, closed-end retail loans (installment and residential mortgage loans) past due 90 cumulative days are written down to their collateral value less estimated selling costs unless the loan is well secured and in process of collection (within the next 90 days). Open-end (revolving) unsecured retail loans which are past due 90 cumulative days from their contractual due date are generally charged-off.

The following table presents loans individually evaluated for impairment by class of loans as of the dates indicated (in thousands).

	March 31, 2016						December 31, 2015
	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated		Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated

With no related allowance recorded:
Owner occupied commercial real estate	$	8,794	$	8,136	$	-	$	14,793	$	14,460	$	-
Income producing commercial real estate		14,673		14,597		-		13,044		12,827		-
Commercial & industrial		-		-		-		493		469		-
Commercial construction		-		-		-		-		-		-
Total commercial		23,467		22,733		-		28,330		27,756		-
Residential mortgage		692		689		-		791		791		-
Home equity lines of credit		-		-		-		-		-		-
Residential construction		856		856		-		3,731		3,429		-
Consumer installment		-		-		-		-		-		-
Indirect auto		795		795		-		749		749		-
Total with no related allowance recorded		25,810		25,073		-		33,601		32,725		-

With an allowance recorded:
Owner occupied commercial real estate		23,619		23,095		1,374		24,043		23,808		1,465
Income producing commercial real estate		10,330		10,214		401		10,281		10,186		961
Commercial & industrial		2,451		2,366		54		2,957		2,870		280
Commercial construction		1,702		1,527		34		10,787		10,616		13
Total commercial		38,102		37,202		1,863		48,068		47,480		2,719
Residential mortgage		19,686		19,132		1,850		19,346		18,836		3,885
Home equity lines of credit		63		63		1		167		167		6
Residential construction		4,787		4,400		98		4,854		4,471		174
Consumer installment		359		331		7		354		329		13
Indirect auto		-		-		-		-		-		-
Total with an allowance recorded		62,997		61,128		3,819		72,789		71,283		6,797
Total	$	88,807	$	86,201	$	3,819	$	106,390	$	104,008	$	6,797

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements

Excluding PCI loans, there were no loans more than 90 days past due and still accruing interest at March 31, 2016 or December 31, 2015. Nonaccrual loans include both homogeneous loans that are collectively evaluated for impairment and individually evaluated impaired loans. United’s policy is to place loans on nonaccrual status when, in the opinion of management, the principal and interest on a loan is not likely to be repaid in full or when the loan becomes 90 days past due and is not well secured and in the process of collection. When a loan is classified on nonaccrual status, interest previously accrued but not collected is reversed against current interest revenue. Principal and interest payments received on a nonaccrual loan are applied to reduce outstanding principal.

PCI loans are considered past due or delinquent when the contractual principal or interest due in accordance with the terms of the loan agreement remains unpaid after the due date of the scheduled payment. However, these loans are considered to be performing, even though they may be contractually past due, as any non-payment of contractual principal or interest is considered in the periodic re-estimation of expected cash flows and is included in the resulting recognition of current period covered loan loss provision or future period yield adjustments. No PCI loans were classified as nonaccrual at March 31, 2016 or December 31, 2015 as the carrying value of the respective loan or pool of loans cash flows were considered estimable and probable of collection. Therefore, interest income, through accretion of the difference between the carrying value of the loans and the expected cash flows, is being recognized on all PCI loans.

The gross additional interest revenue that would have been earned if the loans classified as nonaccrual had performed in accordance with the original terms was approximately $254,000 and $260,000 for the three months ended March 31, 2016 and 2015, respectively. The gross additional interest revenue that would have been earned for the three months ended March 31, 2016 and 2015 had performing TDRs performed in accordance with the original terms is immaterial.

The average balances of impaired loans and income recognized on impaired loans while they were considered impaired are presented below for the periods indicated (in thousands).

	2016						2015
Three Months Ended March 31,	Average Balance		Interest Revenue Recognized During Impairment		Cash Basis Interest Revenue Received		Average Balance		Interest Revenue Recognized During Impairment		Cash Basis Interest Revenue Received
Owner occupied commercial real estate	$	31,502	$	430	$	447	$	36,989	$	460	$	459
Income producing commercial real estate		24,950		284		302		21,424		267		275
Commercial & industrial		2,446		31		27		4,023		38		37
Commercial construction		1,532		22		23		12,273		116		121
Total commercial		60,430		767		799		74,709		881		892
Residential mortgage		19,980		206		203		22,085		226		233
Home equity lines of credit		63		1		1		478		5		5
Residential construction		5,317		67		63		10,575		120		126
Consumer installment		341		6		7		153		3		3
Indirect auto		784		11		11		-		-		-
Total	$	86,915	$	1,058	$	1,084	$	108,000	$	1,235	$	1,259

The following table presents the recorded investment in nonaccrual loans by loan class as of the dates indicated (in thousands).

	March 31,		December 31,
	2016		2015

Owner occupied commercial real estate	$	6,775	$	7,036
Income producing commercial real estate		2,959		2,595
Commercial & industrial		978		892
Commercial construction		266		328
Total commercial		10,978		10,851
Residential mortgage		8,037		8,555
Home equity lines of credit		1,198		851
Residential construction		1,122		1,398
Consumer installment		211		175
Indirect auto		873		823
Total	$	22,419	$	22,653

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements

The following table presents the aging of the recorded investment in past due loans by class of loans as of the dates indicated (in thousands).


	Loans Past Due								Loans Not
As of March 31, 2016	30 - 59 Days		60 - 89 Days		> 90 Days		Total		Past Due		PCI Loans		Total
Owner occupied commercial real estate	$	2,849	$	815	$	2,692	$	6,356	$	1,418,412	$	9,384	$	1,434,152
Income producing commercial real estate		1,029		163		867		2,059		855,298		22,523		879,880
Commercial & industrial		623		234		456		1,313		852,047		1,434		854,794
Commercial construction		79		-		-		79		348,785		4,991		353,855
Total commercial		4,580		1,212		4,015		9,807		3,474,542		38,332		3,522,681
Residential mortgage		5,931		1,392		2,537		9,860		1,018,396		3,397		1,031,653
Home equity lines of credit		2,209		560		592		3,361		599,272		1,575		604,208
Residential construction		819		219		259		1,297		346,009		558		347,864
Consumer installment		531		58		43		632		124,660		11		125,303
Indirect auto		644		464		531		1,639		472,811		30		474,480
Total loans	$	14,714	$	3,905	$	7,977	$	26,596	$	6,035,690	$	43,903	$	6,106,189

As of December 31, 2015
Owner occupied commercial real estate	$	3,733	$	1,686	$	1,400	$	6,819	$	1,473,473	$	13,674	$	1,493,966
Income producing commercial real estate		204		1,030		621		1,855		794,103		27,771		823,729
Commercial & industrial		858		88		489		1,435		783,327		655		785,417
Commercial construction		159		-		76		235		339,701		2,142		342,078
Total commercial		4,954		2,804		2,586		10,344		3,390,604		44,242		3,445,190
Residential mortgage		5,111		1,338		3,544		9,993		1,015,494		4,176		1,029,663
Home equity lines of credit		1,118		188		287		1,593		594,525		1,688		597,806
Residential construction		2,180		239		344		2,763		347,814		1,123		351,700
Consumer installment		610		115		83		808		114,262		41		115,111
Indirect auto		611		311		561		1,483		454,439		49		455,971
Total loans	$	14,584	$	4,995	$	7,405	$	26,984	$	5,917,138	$	51,319	$	5,995,441

As of March 31, 2016 and December 31, 2015, $3.00 million and $6.37 million, respectively, of specific reserves were allocated to customers whose loan terms have been modified in TDRs. United committed to lend additional amounts totaling up to $148,000 and $224,000 as of March 31, 2016 and December 31, 2015, respectively, to customers with outstanding loans that are classified as TDRs.

The modification of the terms of the TDRs included one or a combination of the following: a reduction of the stated interest rate of the loan or an extension of the amortization period that would not otherwise be considered in the current market for new debt with similar risk characteristics; a restructuring of the borrower’s debt into an “A/B note structure” where the A note would fall within the borrower’s ability to pay and the remainder would be included in the B note; a mandated bankruptcy restructuring; or interest-only payment terms greater than 90 days where the borrower is unable to amortize the loan. Modified PCI loans are not accounted for as TDRs because they are not separated from the pools, and as such are not classified as impaired loans.

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements

The following table presents information on TDRs, including the number of loan contracts restructured and the pre- and post-modification recorded investment as of the dates indicated (dollars in thousands).


	March 31, 2016						December 31, 2015
	Number of Contracts		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment		Number of Contracts		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment

Owner occupied commercial real estate		56	$	28,076	$	27,291		54	$	32,544	$	32,058
Income producing commercial real estate		30		20,630		20,630		29		15,703		15,629
Commercial & industrial		24		2,289		2,209		26		2,955		2,870
Commercial construction		9		1,696		1,527		14		10,785		10,616
Total commercial		119		52,691		51,657		123		61,987		61,173
Residential mortgage		175		19,445		19,132		173		19,101		18,836
Home equity lines of credit		1		63		63		2		167		167
Residential construction		43		5,585		5,256		44		5,663		5,334
Consumer installment		22		352		331		22		348		329
Indirect auto		52		795		795		49		749		749
Total loans		412	$	78,931	$	77,234		413	$	88,015	$	86,588

Loans modified under the terms of a TDR during the three months ended March 31, 2016 and 2015 are presented in the table below. In addition, the following table presents loans modified under the terms of a TDR within the past 12 months that became 90 days or more delinquent since restructure (dollars in thousands).

	New TDRs						TDRs Modified Within the Past 12 Months That Have Subsequently Defaulted
Three months ended March 31, 2016	Number of Contracts		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment		Number of Contracts		Recorded Investment
Owner occupied commercial real estate		3	$	649	$	649		1	$	247
Income producing commercial real estate		-		-		-		-		-
Commercial & industrial		1		197		197		-		-
Commercial construction		-		-		-		-		-
Total commercial		4		846		846		1		247
Residential mortgage		7		799		763		-		-
Home equity lines of credit		-		-		-		-		-
Residential construction		1		66		66		-		-
Consumer installment		1		20		20		-		-
Indirect auto		-		-		-		-		-
Total loans		13	$	1,731	$	1,695		1	$	247

Three months ended March 31, 2015
Owner occupied commercial real estate		2	$	4,497	$	4,497		-	$	-
Income producing commercial real estate		2		255		255		-		-
Commercial & industrial		2		188		188		-		-
Commercial construction		-		-		-		-		-
Total commercial		6		4,940		4,940		-		-
Residential mortgage		15		1,598		1,598		-		-
Home equity lines of credit		-		-		-		-		-
Residential construction		-		-		-		-		-
Consumer installment		1		3		3		1		30
Indirect auto		-		-		-		-		-
Total loans		22	$	6,541	$	6,541		1	$	30

TDRs that subsequently default and are placed on nonaccrual are charged down to the fair value of the collateral consistent with United’s policy for nonaccrual loans.

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements

Risk Ratings

United categorizes commercial loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current industry and economic trends, among other factors. United analyzes loans individually by classifying the loans as to credit risk. This analysis is performed on a continual basis. United uses the following definitions for its risk ratings:

Watch. Loans in this category are presently protected from apparent loss; however, weaknesses exist that could cause future impairment, including the deterioration of financial ratios, past due status and questionable management capabilities. These loans require more than the ordinary amount of supervision. Collateral values generally afford adequate coverage, but may not be immediately marketable.

Substandard. These loans are inadequately protected by the current net worth and paying capacity of the obligor or by the collateral pledged. Specific and well-defined weaknesses exist that may include poor liquidity and deterioration of financial ratios. The loan may be past due and related deposit accounts experiencing overdrafts. There is the distinct possibility that United will sustain some loss if deficiencies are not corrected. If possible, immediate corrective action is taken.

Doubtful. Specific weaknesses characterized as Substandard that are severe enough to make collection in full highly questionable and improbable. There is no reliable secondary source of full repayment.

Loss. Loans categorized as Loss have the same characteristics as Doubtful; however, probability of loss is certain. Loans classified as Loss are charged off.

Consumer Purpose Loans. United applies a pass / fail grading system to all consumer purpose loans. Under the pass / fail grading system, consumer purpose loans that become past due 90 days are classified as “fail” and all other loans are classified as “pass”. For reporting purposes, consumer purpose loans classified as “fail” are reported in the substandard column and all other consumer purpose loans are reported in the “pass” column.

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass rated loans.

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements

Based on the most recent analysis performed, the risk category of loans by class of loans as of the dates indicated is as follows (in thousands).


As of March 31, 2016	Pass		Watch		Substandard		Doubtful / Loss		Total
Owner occupied commercial real estate	$	1,362,185	$	27,700	$	34,883	$	-	$	1,424,768
Income producing commercial real estate		830,360		6,997		20,000		-		857,357
Commercial & industrial		834,535		10,004		8,821		-		853,360
Commercial construction		343,618		4,049		1,197		-		348,864
Total commercial		3,370,698		48,750		64,901		-		3,484,349
Residential mortgage		985,272		5,415		37,569		-		1,028,256
Home equity lines of credit		596,641		25		5,967		-		602,633
Residential construction		335,814		3,736		7,756		-		347,306
Consumer installment		124,429		-		863		-		125,292
Indirect auto		472,094		-		2,356		-		474,450
Total loans, excluding PCI loans	$	5,884,948	$	57,926	$	119,412	$	-	$	6,062,286

Owner occupied commercial real estate	$	1,440	$	3,136	$	4,808	$	-	$	9,384
Income producing commercial real estate		3,848		5,732		12,943		-		22,523
Commercial & industrial		60		61		1,313		-		1,434
Commercial construction		1,671		2,924		396		-		4,991
Total commercial		7,019		11,853		19,460		-		38,332
Residential mortgage		-		382		3,015		-		3,397
Home equity lines of credit		217		-		1,358		-		1,575
Residential construction		321		33		204		-		558
Consumer installment		1		-		10		-		11
Indirect auto		-		-		30		-		30
Total PCI loans	$	7,558	$	12,268	$	24,077	$	-	$	43,903

As of December 31, 2015
Owner occupied commercial real estate	$	1,414,353	$	24,175	$	41,764	$	-	$	1,480,292
Income producing commercial real estate		771,792		4,151		20,015		-		795,958
Commercial & industrial		770,287		8,171		6,304		-		784,762
Commercial construction		335,571		3,069		1,296		-		339,936
Total commercial		3,292,003		39,566		69,379		-		3,400,948
Residential mortgage		985,109		5,070		35,308		-		1,025,487
Home equity lines of credit		589,749		24		6,345		-		596,118
Residential construction		335,341		3,813		11,423		-		350,577
Consumer installment		114,178		-		892		-		115,070
Indirect auto		453,935		-		1,987		-		455,922
Total loans, excluding PCI loans	$	5,770,315	$	48,473	$	125,334	$	-	$	5,944,122

Owner occupied commercial real estate	$	1,811	$	6,705	$	4,809	$	349	$	13,674
Income producing commercial real estate		9,378		5,766		12,627		-		27,771
Commercial & industrial		17		83		505		50		655
Commercial construction		1,698		6		438		-		2,142
Total commercial		12,904		12,560		18,379		399		44,242
Residential mortgage		-		410		3,766		-		4,176
Home equity lines of credit		214		-		1,474		-		1,688
Residential construction		345		39		227		512		1,123
Consumer installment		1		-		40		-		41
Indirect auto		-		-		49		-		49
Total PCI loans	$	13,464	$	13,009	$	23,935	$	911	$	51,319

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Note 6 – Reclassifications Out of Accumulated Other Comprehensive Income

The following table presents the details regarding amounts reclassified out of accumulated other comprehensive income for the periods indicated (in thousands).


Details about Accumulated Other	Amounts Reclassified from Accumulated Other Comprehensive Income For the three months ended March 31,						Affected Line Item in the Statement
Comprehensive Income Components	2016			2015			Where Net Income is Presented

Realized gains on available-for-sale securities:
	$	379		$	1,539		Securities gains, net
		(141	)		(598	)	Tax expense
	$	238		$	941		Net of tax

Amortization of losses included in net income on available-for-sale securities transferred to held to maturity:
	$	(464	)	$	(484	)	Investment securities interest revenue
		181			182		Tax benefit
	$	(283	)	$	(302	)	Net of tax

Gains included in net income on derivative financial instruments accounted for as cash flow hedges:
Amortization of losses on de-designated positions	$	(7	)	$	(48	)	Deposits in banks and short-term investments interest revenue
Amortization of losses on de-designated positions		(191	)		(119	)	Money market deposit interest expense
Amortization of losses on de-designated positions		(302	)		(258	)	Federal Home Loan Bank advances interest expense
		(500	)		(425	)	Total before tax
		195			165		Tax benefit
	$	(305	)	$	(260	)	Net of tax

Amortization of prior service cost and actuarial losses included in net periodic pension cost for defined benefit pension plan:
Prior service cost	$	(125	)	$	(91	)	Salaries and employee benefits expense
Actuarial losses		(42	)		(68	)	Salaries and employee benefits expense
		(167	)		(159	)	Total before tax
		65			62		Tax benefit
	$	(102	)	$	(97	)	Net of tax

Total reclassifications for the period	$	(452	)	$	282		Net of tax

Amounts shown above in parentheses reduce earnings

Note 7 – Earnings Per Share

United is required to report on the face of the consolidated statement of income, earnings per common share with and without the dilutive effects of potential common stock issuances from instruments such as options, convertible securities and warrants. Basic earnings per common share is based on the weighted average number of common shares outstanding during the period while the effects of potential common shares outstanding during the period are included in diluted earnings per common share.

During the three months ended March 31, 2016, United accrued dividends of $21,000 on its Series H preferred stock. The preferred stock dividends were subtracted from net income in order to arrive at net income available to common shareholders. During the three months ended March 31, 2015, United did not accrue any dividends on its preferred stock.

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The following table sets forth the computation of basic and diluted earnings per share for the periods indicated (in thousands, except per share data).


	Three Months Ended March 31,
	2016		2015

Net income available to common shareholders	$	22,274	$	17,670

Weighted average shares outstanding:
Basic		72,162		60,905
Effect of dilutive securities
Stock options		4		4
Diluted		72,166		60,909

Net income per common share:
Basic	$	.31	$	.29
Diluted	$	.31	$	.29

At March 31, 2016, United had the following potentially dilutive stock options and warrants outstanding: a warrant to purchase 219,909 shares of common stock at $61.40 per share; 235,771 shares of common stock issuable upon exercise of stock options granted to employees with a weighted average exercise price of $89.61; and 597,240 shares of common stock issuable upon completion of vesting of restricted stock unit awards.

At March 31, 2015, United had the following potentially dilutive stock options and warrants outstanding: a warrant to purchase 219,909 shares of common stock at $61.40 per share; 301,344 shares of common stock issuable upon exercise of stock options granted to employees with a weighted average exercise price of $93.01; and 773,304 shares of common stock issuable upon completion of vesting of restricted stock unit awards.

Note 8 – Derivatives and Hedging Activities

Risk Management Objective of Using Derivatives

United is exposed to certain risks arising from both its business operations and economic conditions. United principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. United manages interest rate risk primarily by managing the amount, sources, and duration of its investment securities portfolio and wholesale funding and through the use of derivative financial instruments. Specifically, United enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. Derivative financial instruments are used to manage differences in the amount, timing, and duration of known or expected cash receipts and its known or expected cash payments principally related to loans, investment securities, wholesale borrowings and deposits.

In conjunction with the FASB’s fair value measurement guidance, United made an accounting policy election to measure the credit risk of its derivative financial instruments that are subject to master netting agreements on a gross basis.

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The table below presents the fair value of United’s derivative financial instruments as of the dates indicated as well as their classification on the consolidated balance sheet (in thousands).


*Derivatives designated as hedging instruments under ASC 815*
		Fair Value
Interest Rate Products	Balance Sheet Location	March 31, 2016		December 31, 2015
Fair value hedge of brokered CD’s	Derivative assets	$	86	$	-
Fair value hedge of corporate bonds	Derivative assets		-		31
		$	86	$	31

Fair value hedge of brokered CD’s	Derivative liabilities	$	61	$	2,169
Fair value hedge of corporate bonds	Derivative liabilities		1,584		-
		$	1,645	$	2,169
*Derivatives not designated as hedging instruments under ASC 815*
		Fair Value
Interest Rate Products	Balance Sheet Location	March 31, 2016		December 31, 2015
Customer swap positions	Derivative assets	$	12,895	$	6,185
Dealer offsets to customer swap positions	Derivative assets		-		31
Mortgage banking - loan commitment	Derivative assets		188		188
Mortgage banking - forward sales commitment	Derivative assets		2		1
Bifurcated embedded derivatives	Derivative assets		3,727		9,230
Offsetting positions for de-designated cash flow hedges	Derivative assets		6,590		4,416
		$	23,402	$	20,051

Customer swap positions	Derivative liabilities	$	-	$	31
Dealer offsets to customer swap positions	Derivative liabilities		12,966		6,339
Mortgage banking - forward sales commitment	Derivative liabilities		22		22
Dealer offsets to bifurcated embedded derivatives	Derivative liabilities		10,151		15,794
De-designated cash flow hedges	Derivative liabilities		6,590		4,470
		$	29,729	$	26,656

Derivative contracts that are not accounted for as hedging instruments under ASC 815, Derivatives and Hedging, and are described as “customer derivatives,” are between United and certain commercial loan customers with offsetting positions to dealers under a back-to-back swap program. United also has three interest rate swap contracts that are not designated as hedging instruments but are economic hedges of market linked brokered certificates of deposit. The market linked brokered certificates of deposit contain embedded derivatives that are bifurcated from the host instruments and marked to market through earnings. The marks on the market linked swaps and the bifurcated embedded derivatives tend to move in opposite directions with changes in 90-day LIBOR and therefore provide an effective economic hedge.

In addition, United originates certain residential mortgage loans with the intention of selling these loans. Between the time United enters into an interest-rate lock commitment to originate a residential mortgage loan that is to be held for sale and the time the loan is funded and eventually sold, the Company is subject to the risk of variability in market prices. United also enters into forward sale agreements to mitigate risk and to protect the expected gain on the eventual loan sale. Most of this activity is on a matched basis, with a loan sale commitment hedging a specific loan. The commitments to originate residential mortgage loans and forward loan sales commitments are freestanding derivative instruments. The underlying loans are accounted for under the lower of cost or fair value method and are not reflected in the table above. Fair value adjustments on these derivative instruments are recorded within mortgage loan and other related fee income in the consolidated statement of income.

Cash Flow Hedges of Interest Rate Risk

At March 31, 2016 and December 31, 2015 United did not have any active cash flow hedges. Changes in United’s balance sheet composition and interest rate risk position made cash flow hedges no longer necessary as protection against rising interest rates and as a result, United de-designated its former cash flow hedges. The loss remaining in other comprehensive income on the de-designated swaps is being amortized into earnings over the original term of the swaps as the forecasted transactions that the swaps were originally designated to hedge are still expected to occur. United expects that $1.80 million will be reclassified as an increase to interest expense over the next twelve months related to these cash flow hedges.

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The table below presents the effect of United’s cash flow hedges on the consolidated statement of income for the periods indicated (in thousands).


	Amount of Gain (Loss) Recognized in Other Comprehensive Income on Derivative (Effective Portion)					Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into Income (Effective Portion)							Gain (Loss) Recognized in Income on Derivative (Ineffective Portion)
	2016		2015			Location	2016			2015			Location	2016		2015

Three Months Ended March 31,

Interest rate swaps	$	-	$	(471	)	Interest expense	$	(500	)	$	(425	)	Interest expense	$	-	$	(7	)

Fair Value Hedges of Interest Rate Risk

United is exposed to changes in the fair value of certain of its fixed-rate obligations due to changes in interest rates. United uses interest rate swaps to manage its exposure to changes in fair value on these instruments attributable to changes in interest rates. Interest rate swaps designated as fair value hedges of brokered deposits involve the receipt of fixed-rate amounts from a counterparty in exchange for United making variable rate payments over the life of the agreements without the exchange of the underlying notional amount. Interest rate swaps designated as fair value hedges of fixed-rate investments involve the receipt of variable-rate payments from a counterparty in exchange for United making fixed-rate payments over the life of the instrument without the exchange of the underlying notional amount. At March 31, 2016, United had nine interest rate swaps with an aggregate notional amount of $103 million that were designated as fair value hedges of interest rate risk and were pay-variable / receive-fixed swaps hedging the changes in the fair value of fixed-rate brokered time deposits resulting from changes in interest rates. Also at March 31, 2016, United had one interest rate swap with a notional of $30 million that was designated as a pay-fixed / receive variable fair value hedge of changes in the fair value of a fixed-rate corporate bond. At December 31, 2015, United had 13 interest rate swaps with an aggregate notional amount of $156 million that were designated as fair value hedges of interest rate risk. These contracts were pay-variable / receive-fixed swaps hedging changes in the fair value of fixed-rate brokered time deposits resulting from changes in interest rates. Also at December 31, 2015, United had one interest rate swap with a notional of $30 million that was designated as a pay-fixed / receive variable fair value hedge of changes in the fair value of a fixed-rate corporate bond.

For derivatives designated and that qualify as fair value hedges, the gain or loss on the derivative as well as the offsetting loss or gain on the hedged item attributable to the hedged risk are recognized in earnings. United includes the gain or loss on the hedged items in the same income statement line item as the offsetting loss or gain on the related derivatives. During the three months ended March 31, 2016 and 2015, United recognized net gains of $638,000 and net losses of $37,000, respectively, related to ineffectiveness in the fair value hedging relationships. United also recognized net reductions of interest expense of $790,000 and $1.14 million, respectively, for the three months ended March 31, 2016 and 2015 related to United’s fair value hedges of brokered time deposits, which includes net settlements on the derivatives. United recognized reductions of interest revenue on securities during the three months ended March 31, 2016 and 2015 of $129,000 and $74,000, respectively, related to United’s fair value hedges of corporate bonds.

The table below presents the effect of United’s derivatives in fair value hedging relationships on the consolidated statement of operations for the periods indicated (in thousands).


	Location of Gain	Amount of Gain (Loss)						Amount of Gain (Loss)
	(Loss) Recognized	Recognized in Income						Recognized in Income
	in Income on	on Derivative						on Hedged Item
	Derivative	2016			2015			2016			2015

Three Months Ended March 31,
Fair value hedges of brokered CD’s	Interest expense	$	2,551		$	2,370		$	(1,800	)	$	(2,405	)
Fair value hedges of corporate bonds	Interest revenue		(1,614	)		(345	)		1,501			343
		$	937		$	2,025		$	(299	)	$	(2,062	)

In certain cases, the estate of deceased brokered certificate of deposit holders may put the certificate of deposit back to the issuing bank at par upon the death of the holder. When these estate puts occur, a gain or loss is recognized for the difference between the fair value and the par amount of the deposits put back. The change in the fair value of brokered time deposits that are being hedged in fair value hedging relationships reported in the table above includes gains and losses from estate puts and such gains and losses are included in the amount of reported ineffectiveness gains or losses.

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Credit-Risk-Related Contingent Features

United manages its credit exposure on derivatives transactions by entering into a bilateral credit support agreement with each counterparty. The credit support agreements require collateralization of exposures beyond specified minimum threshold amounts. The details of these agreements, including the minimum thresholds, vary by counterparty. As of March 31, 2016, collateral totaling $29.0 million was pledged toward derivatives in a liability position.

United’s agreements with each of its derivative counterparties contain a provision where if either party defaults on any of its indebtedness, then it could also be declared in default on its derivative obligations. The agreements with derivatives counterparties also include provisions that if not met, could result in United being declared in default. United has agreements with certain of its derivative counterparties that contain a provision where if United fails to maintain its status as a well-capitalized institution or is subject to a prompt corrective action directive, the counterparty could terminate the derivative positions and United would be required to settle its obligations under the agreements.

Note 9 – Stock-Based Compensation

United has an equity compensation plan that allows for grants of incentive stock options, nonqualified stock options, restricted stock and restricted stock unit awards (also referred to as “nonvested stock” awards), stock awards, performance share awards or stock appreciation rights. Options granted under the plan can have an exercise price no less than the fair market value of the underlying stock at the date of grant. The general terms of the plan include a vesting period (usually four years) with an exercisable period not to exceed ten years. Certain options, restricted stock and restricted stock unit awards provide for accelerated vesting if there is a change in control (as defined in the plan). As of March 31, 2016, 255,000 additional awards could be granted under the plan. Through March 31, 2016, incentive stock options, nonqualified stock options, restricted stock and restricted stock unit awards, base salary stock grants and performance share awards have been granted under the plan.

The following table shows stock option activity for the first three months of 2016.


Options	Shares			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (Years)		Aggregate Intrinisic Value ($000)

Outstanding at December 31, 2015		241,493		$	89.92
Expired		(5,722	)		102.45
Outstanding at March 31, 2016		235,771			89.61		2.2	$	108

Exercisable at March 31, 2016		225,771			92.86		1.9		86