UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

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

 

For the Quarterly Period Ended June 30, 2016

 

OR

 

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

 

For the Transition Period from ___________ to ___________

 

Commission file number 001-35095

 

  UNITED COMMUNITY BANKS, INC.  
  (Exact name of registrant as specified in its charter)  

 

Georgia   58-1807304
(State of Incorporation)   (I.R.S. Employer Identification No.)

 

125 Highway 515 East    
Blairsville, Georgia   30512
Address of Principal Executive Offices   (Zip Code)

 

  (706) 781-2265  
  (Telephone Number)  

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

 

YES x  NO ¨

 

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 ¨

 

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 ¨
   
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 x

 

Common stock, par value $1 per share 70,820,500 shares voting and zero shares non-voting outstanding as of July 31, 2016.

 

 

 

 

 

 

 

INDEX

 

PART I - Financial Information    
         
  Item 1. Financial Statements.    
         
    Consolidated Statement of Income (unaudited) for the Three and Six Months Ended June 30, 2016 and 2015   3
         
    Consolidated Statement of Comprehensive Income (unaudited) for the Three and Six Months Ended June 30, 2016 and 2015   4
         
    Consolidated Balance Sheet (unaudited) at June 30, 2016 and December 31, 2015   5
         
    Consolidated Statement of Changes in Shareholders’ Equity (unaudited) for the Six Months Ended June 30, 2016 and 2015   6
         
    Consolidated Statement of Cash Flows (unaudited) for the Six Months Ended June 30, 2016 and 2015   7
         
    Notes to Consolidated Financial Statements   8
         
  Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.   38
         
  Item 3. Quantitative and Qualitative Disclosures About Market Risk.   60
         
  Item 4. Controls and Procedures.   60
         
PART II - Other Information    
         
  Item 1. Legal Proceedings.   61
  Item 1A. Risk Factors.   61
  Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.   61
  Item 3. Defaults Upon Senior Securities.   61
  Item 4. Mine Safety Disclosures.   61
  Item 5. Other Information.   61
  Item 6. Exhibits.   62

 

 2 

 

 

Part I – Financial Information

 

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

 

   Three Months Ended   Six Months Ended 
   June 30,   June 30, 
(in thousands, except per share data)  2016   2015   2016   2015 
                 
Interest revenue:                    
Loans, including fees  $63,472   $52,976   $127,448   $102,640 
Investment securities, including tax exempt of $149, $181, $315 and $339   16,833    12,037    32,621    24,095 
Deposits in banks and short-term investments   777    795    1,734    1,607 
Total interest revenue   81,082    65,808    161,803    128,342 
                     
Interest expense:                    
Deposits:                    
NOW   444    348    929    742 
Money market   1,206    806    2,314    1,479 
Savings   30    26    59    46 
Time   743    895    1,385    2,004 
Total deposit interest expense   2,423    2,075    4,687    4,271 
Short-term borrowings   93    82    180    180 
Federal Home Loan Bank advances   983    454    1,716    846 
Long-term debt   2,665    2,206    5,350    4,812 
Total interest expense   6,164    4,817    11,933    10,109 
Net interest revenue   74,918    60,991    149,870    118,233 
(Release of) provision for credit losses   (300)   900    (500)   2,700 
Net interest revenue after provision for credit losses   75,218    60,091    150,370    115,533 
                     
Fee revenue:                    
Service charges and fees   10,515    8,375    20,641    15,990 
Mortgage loan and other related fees   4,448    3,707    7,737    6,462 
Brokerage fees   1,117    1,232    2,170    2,783 
Gains from sales of government guaranteed loans   2,801    1,494    4,038    2,635 
Securities gains, net   282    13    661    1,552 
Loss from prepayment of debt   -    -    -    (1,038)
Other   4,334    2,445    6,856    4,564 
Total fee revenue   23,497    17,266    42,103    32,948 
Total revenue   98,715    77,357    192,473    148,481 
                     
Operating expenses:                    
Salaries and employee benefits   33,572    27,961    66,634    54,407 
Communications and equipment   4,393    3,304    8,683    6,575 
Occupancy   4,538    3,415    9,261    6,693 
Advertising and public relations   1,323    1,127    2,187    1,877 
Postage, printing and supplies   1,298    993    2,578    1,931 
Professional fees   3,189    2,257    5,889    4,176 
FDIC assessments and other regulatory charges   1,517    1,298    3,041    2,507 
Amortization of intangibles   987    447    1,997    689 
Merger-related and other charges   1,176    3,173    3,829    3,173 
Other   6,067    4,445    11,846    9,453 
Total operating expenses   58,060    48,420    115,945    91,481 
Net income before income taxes   40,655    28,937    76,528    57,000 
Income tax expense   15,389    11,124    28,967    21,517 
Net income   25,266    17,813    47,561    35,483 
Preferred stock dividends and discount accretion   -    17    21    17 
Net income available to common shareholders  $25,266   $17,796   $47,540   $35,466 
                     
Earnings per common share:                    
Basic  $.35   $.28   $.66   $.57 
Diluted   .35    .28    .66    .57 
Weighted average common shares outstanding:                    
Basic   72,202    62,549    72,187    61,730 
Diluted   72,207    62,553    72,191    61,734 

 

See accompanying notes to consolidated financial statements.

 

 3 

 

 

UNITED COMMUNITY BANKS, INC.

Consolidated Statement of Comprehensive Income (Unaudited)

 

 

(in thousands)  Three Months Ended June 30,   Six Months Ended June 30, 
2016  Before-tax
Amount
   Tax
(Expense)
Benefit
   Net of Tax
Amount
   Before-tax
Amount
   Tax
(Expense)
Benefit
   Net of Tax
Amount
 
                         
Net income  $40,655   $(15,389)  $25,266   $76,528   $(28,967)  $47,561 
Other comprehensive income:                              
Unrealized gains on available-for-sale securities:                              
Unrealized holding gains arising during period   21,366    (8,105)   13,261    33,063    (12,561)   20,502 
Reclassification adjustment for gains included in net income   (282)   106    (176)   (661)   247    (414)
Net unrealized gains   21,084    (7,999)   13,085    32,402    (12,314)   20,088 
Amortization of losses included in net income on available-for-sale securities transferred to held-to- maturity   473    (178)   295    938    (359)   579 
Amortization of losses included in net income on terminated derivative financial instruments that were previously accounted for as cash flow hedges   460    (179)   281    960    (374)   586 
Amortization of prior service cost and actuarial losses included in net periodic pension cost for defined benefit pension plan   167    (65)   102    334    (130)   204 
                               
Total other comprehensive income   22,184    (8,421)   13,763    34,634    (13,177)   21,457 
                               
Comprehensive income  $62,839   $(23,810)  $39,029   $111,162   $(42,144)  $69,018 
                               
2015                              
Net income  $28,937   $(11,124)  $17,813   $57,000   $(21,517)  $35,483 
Other comprehensive income:                              
Unrealized gains (losses) on available-for-sale securities:                              
Unrealized holding gains (losses) arising during the period   (10,875)   4,032    (6,843)   3,114    (1,273)   1,841 
Reclassification adjustment for gains included in net income   (13)   5    (8)   (1,552)   603    (949)
Net unrealized gains (losses)   (10,888)   4,037    (6,851)   1,562    (670)   892 
Amortization of losses included in net income on available-for-sale securities transferred to held-to- maturity   289    (105)   184    773    (287)   486 
Amortization of losses included in net income on terminated derivative financial instruments that were previously accounted for as cash flow hedges   455    (177)   278    880    (342)   538 
Unrealized losses on derivative financial instruments accounted for as cash flow hedges   -    -    -    (471)   183    (288)
Net cash flow hedge activity   455    (177)   278    409    (159)   250 
Amortization of prior service cost and actuarial losses included in net periodic pension cost for defined benefit pension plan   159    (62)   97    318    (124)   194 
                               
Total other comprehensive income (loss)   (9,985)   3,693    (6,292)   3,062    (1,240)   1,822 
                               
Comprehensive income  $18,952   $(7,431)  $11,521   $60,062   $(22,757)  $37,305 

 

See accompanying notes to consolidated financial statements.

 

 4 

 

 

UNITED COMMUNITY BANKS, INC.

Consolidated Balance Sheet (Unaudited)

 

 

   June 30,   December 31, 
(in thousands, except share and per share data)  2016   2015 
         
ASSETS          
Cash and due from banks  $107,606   $86,912 
Interest-bearing deposits in banks   100,036    153,451 
Cash and cash equivalents   207,642    240,363 
Securities available for sale   2,335,511    2,291,511 
Securities held to maturity (fair value $356,740 and $371,658)   341,951    364,696 
Mortgage loans held for sale   30,152    24,231 
Loans, net of unearned income   6,286,527    5,995,441 
Less allowance for loan losses   (64,253)   (68,448)
Loans, net   6,222,274    5,926,993 
Premises and equipment, net   181,349    178,165 
Bank owned life insurance   105,784    105,493 
Accrued interest receivable   25,879    25,786 
Net deferred tax asset   157,689    197,613 
Derivative financial instruments   26,880    20,082 
Goodwill and other intangible assets   146,124    147,420 
Other assets   147,238    94,075 
Total assets  $9,928,473   $9,616,428 
LIABILITIES AND SHAREHOLDERS' EQUITY          
Liabilities:          
Deposits:          
Demand  $2,386,857   $2,204,755 
NOW   1,730,313    1,975,884 
Money market   1,641,980    1,599,637 
Savings   502,134    471,129 
Time   1,183,943    1,282,803 
Brokered   412,267    338,985 
Total deposits   7,857,494    7,873,193 
Repurchase agreements   -    16,640 
Federal Home Loan Bank advances   735,125    430,125 
Long-term debt   164,066    163,836 
Derivative financial instruments   34,930    28,825 
Accrued expenses and other liabilities   77,121    85,524 
Total liabilities   8,868,736    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; 150,000,000 shares authorized;
69,863,008 and 66,198,477 shares issued and outstanding
   69,863    66,198 
Common stock, non-voting, $1 par value; 26,000,000 shares authorized;
1,258,792 and 5,285,516 shares issued and outstanding
   1,259    5,286 
Common stock issuable; 486,753 and 458,953 shares   6,651    6,779 
Capital surplus   1,279,383    1,286,361 
Accumulated deficit   (293,424)   (330,879)
Accumulated other comprehensive loss   (3,995)   (25,452)
Total shareholders' equity   1,059,737    1,018,285 
Total liabilities and shareholders' equity  $9,928,473   $9,616,428 

 

See accompanying notes to consolidated financial statements.

 

 5 

 

 

UNITED COMMUNITY BANKS, INC.

Consolidated Statement of Changes in Shareholders' Equity (Unaudited)

For the Six Months Ended June 30,

 

 

   Preferred                       Accumulated     
   Stock       Non-Voting   Common           Other     
(in thousands, except share and per  Series   Common   Common   Stock   Capital   Accumulated   Comprehensive     
share data)  H   Stock   Stock   Issuable   Surplus   Deficit   Income (Loss)   Total 
                                 
Balance, December 31, 2014  $-   $50,178   $10,081   $5,168   $1,080,508   $(387,568)  $(18,790)  $739,577 
Net income                            35,483         35,483 
Other comprehensive income                                 1,822    1,822 
Common stock issued to dividend reinvestment plan and employee benefit plans (7,661 shares)        8              122              130 
Conversion of non-voting common stock to voting (1,795,271 shares)        1,795    (1,795)                       - 
Common and preferred stock issued for acquisition (2,358,503 common shares and 9,992 preferred shares)   9,992    2,359              41,533              53,884 
Amortization of stock option and restricted stock awards                       2,178              2,178 
Vesting of restricted stock, net of shares surrendered to cover payroll taxes (60,698 shares issued, 59,685 shares deferred)        61         852    (1,294)             (381)
Deferred compensation plan, net, including dividend equivalents                  190    (1)             189 
Shares issued from deferred compensation plan (14,125 shares)        14         (139)   125              - 
Common stock dividends ($.10 per share)                            (6,192)        (6,192)
Tax on restricted stock vesting                       559              559 
Preferred stock dividends: Series H                            (17)        (17)
Balance, June 30, 2015  $9,992   $54,415   $8,286   $6,071   $1,123,730   $(358,294)  $(16,968)  $827,232 
                                         
Balance, December 31, 2015  $9,992   $66,198   $5,286   $6,779   $1,286,361   $(330,879)  $(25,452)  $1,018,285 
Net income                            47,561         47,561 
Other comprehensive income                                 21,457    21,457 
Redemption of Series H preferred stock (9,992 shares)   (9,992)                                 (9,992)
Common stock issued to dividend reinvestment plan and to employee benefit plans (10,360 shares)        10              164              174 
Conversion of non-voting common stock to voting common stock (4,026,724 shares)        4,027    (4,027)                       - 
Amortization of stock option and restricted stock awards                       1,826              1,826 
Vesting of restricted stock, net of shares surrendered to cover payroll taxes (41,909 shares issued, 65,011 shares deferred)        42         941    (1,585)             (602)
Purchases of common stock (460,000 shares)        (460)             (7,741)             (8,201)
Deferred compensation plan, net, including dividend equivalents                  204                   204 
Shares issued from deferred compensation plan (45,538 shares)        46         (1,273)   1,227              - 
Common stock dividends ($.14 per share)                            (10,085)        (10,085)
Tax on option exercise and restricted stock vesting                       (869)             (869)
Preferred stock dividends: Series H                            (21)        (21)
Balance, June 30, 2016  $-   $69,863   $1,259   $6,651   $1,279,383   $(293,424)  $(3,995)  $1,059,737 

 

See accompanying notes to consolidated financial statements.

 

 6 

 

 

UNITED COMMUNITY BANKS, INC.

Consolidated Statement of Cash Flows (Unaudited)

 

 

   Six Months Ended 
   June 30, 
(in thousands)  2016   2015 
Operating activities:          
Net income  $47,561   $35,483 
Adjustments to reconcile net income to net cash provided by operating activities:          
Depreciation, amortization and accretion   14,378    10,896 
(Release of) provision for credit losses   (500)   2,700 
Stock based compensation   1,826    2,178 
Deferred income tax expense   29,423    18,519 
Securities gains, net   (661)   (1,552)
Gains from sales of government guaranteed loans   (4,038)   (2,635)
Net gains on sale of other assets   (42)   (83)
Net gains and write downs on sales of other real estate owned   (328)   (143)
Loss on prepayment of borrowings   -    1,038 
Changes in assets and liabilities:          
Other assets and accrued interest receivable   (54,517)   12 
Accrued expenses and other liabilities   3,077    (2,997)
Mortgage loans held for sale   (5,921)   (6,924)
Net cash provided by operating activities   30,258    56,492 
           
Investing activities:          
Investment securities held to maturity:          
Proceeds from maturities and calls of securities held to maturity   30,374    35,538 
Purchases of securities held to maturity   (1,000)   - 
Investment securities available for sale:          
Proceeds from sales of securities available for sale   88,297    136,817 
Proceeds from maturities and calls of securities available for sale   199,086    134,521 
Purchases of securities available for sale   (308,799)   (312,357)
Net increase in loans   (313,917)   (264,702)
Funds paid to FDIC under loss sharing agreements   -    (1,198)
Proceeds from sales of premises and equipment   987    147 
Purchases of premises and equipment   (9,913)   (5,055)
Net cash received for acquisition   -    44,594 
Proceeds from sale of other real estate   2,817    1,434 
Net cash used in investing activities   (312,068)   (230,261)
           
Financing activities:          
Net change in deposits   (15,566)   111,681 
Net change in short-term borrowings   (16,640)   3,460 
Repayments of trust preferred securities   -    (15,998)
Proceeds from FHLB advances   4,720,000    1,060,000 
Repayments of FHLB advances   (4,415,000)   (967,070)
Proceeds from issuance of common stock for dividend reinvestment and employee benefit plans   174    130 
Retirement of preferred stock   (9,992)   - 
Purchase of common stock   (3,756)   - 
Cash dividends on common stock   (10,085)   (6,192)
Cash dividends on preferred stock   (46)   - 
Net cash provided by financing activities   249,089    186,011 
           
Net change in cash and cash equivalents   (32,721)   12,242 
           
Cash and cash equivalents at beginning of period   240,363    192,655 
           
Cash and cash equivalents at end of period  $207,642   $204,897 
           
Supplemental disclosures of cash flow information:          
Interest paid  $13,161   $10,993 
Income taxes paid   2,637    2,791 
Significant non-cash investing and financing transactions:          
Unsettled government guaranteed loan purchases   5,010    - 
Unsettled government guaranteed loan sales   22,614    6,013 
Unsettled purchases of common stock   4,445    - 
Transfers of loans to foreclosed properties   4,312    1,528 
Acquisitions:          
Assets acquired   -    474,009 
Liabilities assumed   -    409,426 
Net assets acquired   -    64,583 
Common stock issued in acquisitions   -    43,892 
Preferred stock issued in acquisitions   -    9,992 

 

See accompanying notes to consolidated financial statements.

 

 7 

 

 

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

Note 1 – Accounting Policies

 

The accounting and financial reporting policies of United Community Banks, Inc. (“United”) and its subsidiaries conform to accounting principles generally accepted in the United States (“GAAP”) and reporting guidelines of banking regulatory authorities and regulators. 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 statement. 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.

 

 8 

 

 

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.

 

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The new guidance replaces the incurred loss impairment methodology in current GAAP with an expected credit loss methodology and requires consideration of a broader range of information to determine credit loss estimates. Financial assets measured at amortized cost will be presented at the net amount expected to be collected by using an allowance for credit losses. Purchased credit impaired loans will receive an allowance account at the acquisition date that represents a component of the purchase price allocation. Credit losses relating to available-for-sale debt securities will be recorded through an allowance for credit losses, with such allowance limited to the amount by which fair value is below amortized cost. Application of this update will primarily be on a modified retrospective approach, although the guidance for debt securities for which an other-than-temporary impairment has been recognized before the effective date and for loans previously covered by ASC 310-30, Receivables – Loans and Debt Securities Acquired with Deteriorated Credit Quality will be applied on a prospective basis. For public entities, this update is effective for fiscal years beginning after December 15, 2019. United is currently evaluating the impact of this guidance on its consolidated financial statements.

 

Note 3 – Acquisitions

 

Acquisition of Palmetto Bancshares, Inc.

On September 1, 2015, United completed the acquisition of Palmetto Bancshares, Inc. (“Palmetto”) and its wholly-owned bank subsidiary The Palmetto Bank. Information related to the fair value of assets and liabilities acquired is included in United’s Annual Report on Form 10-K for the year ended December 31, 2015. During second quarter 2016, within the one year measurement period, United received additional information regarding the acquisition date fair values of premises and equipment and other real estate owned (“OREO”). As a result the provisional values assigned to the acquired premises and equipment and OREO have been adjusted to $17.0 million and $2.63 million, respectively, which represent a decrease of $640,000 and $497,000, respectively, from amounts previously disclosed. The tax effect of these adjustments was reflected as an increase to the deferred tax asset of $437,000, with the net amount of $700,000 reflected as an increase to goodwill.

 

Acquisition of MoneyTree Corporation

On May 1, 2015, United completed the acquisition of MoneyTree Corporation (“MoneyTree”) and its wholly-owned bank subsidiary, First National Bank. Information related to the fair value of assets and liabilities acquired is included in United’s Annual Report on Form 10-K for the year ended December 31, 2015. The following table presents the period of acquisition as comparative 2015 information. The table discloses the impact of the merger with MoneyTree from the acquisition date through June 30, 2015 and certain pro forma information as if MoneyTree had been acquired on January 1, 2014. These results combine the historical results of MoneyTree with United’s consolidated statement of income and, while certain adjustments were made for the estimated impact of certain fair value adjustments and other acquisition-related activity, they are not necessarily indicative of what would have occurred had the acquisition taken place on January 1, 2014.

 

Merger-related costs of $3.17 million from the acquisition have been excluded from the 2015 pro forma information presented below. Furthermore, no adjustments have been made to the pro forma information to eliminate MoneyTree’s pre-acquisition provision for loan losses or OREO write downs. The actual results and pro forma information were as follows (in thousands):

 

   Revenue   Net Income 
         
Actual MoneyTree from May 1, 2015 - June 30, 2015  $2,284   $384 
2015 supplemental consolidated pro forma from January 1, 2015 - June 30, 2015   153,322    38,294 

 

 9 

 

 

 

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

Note 4 – 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
     
June 30, 2016  Recognized
Assets
   the Balance
Sheet
   Net Asset
Balance
   Financial
Instruments
   Collateral
Received
   Net
Amount
 
                         
Repurchase agreements / reverse repurchase agreements  $300,000   $(300,000)  $-   $-   $-   $- 
Derivatives   26,880    -    26,880    (1,779)   (4,760)   20,341 
Total  $326,880   $(300,000)  $26,880   $(1,779)  $(4,760)  $20,341 
                               
Weighted average interest rate of reverse repurchase agreements   1.43%                         

 

   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  $300,000   $(300,000)  $-   $-   $-   $- 
Derivatives   34,930    -    34,930    (1,779)   (33,182)   - 
Total  $334,930   $(300,000)  $34,930   $(1,779)  $(33,182)  $- 
                               
Weighted average interest rate of repurchase agreements   .58%                         

 

   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%                         

 

At June 30, 2016, United recognized the right to reclaim cash collateral of $33.5 million and the obligation to return cash collateral of $4.76 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.

 

 10 

 

 

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

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 
   Overnight and                 
As of June 30, 2016  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    100,000    200,000 
                          
Total  $-   $50,000   $100,000   $150,000   $300,000 
                          
Gross amount of recognized liabilities for repurchase agreements in offsetting disclosure                      $300,000 
Amounts related to agreements not included in offsetting disclosure                      $- 

 

   Remaining Contractual Maturity of the Agreements 
   Overnight and                 
As of December 31, 2015  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 5 – 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).

 

       Gross   Gross     
   Amortized   Unrealized   Unrealized   Fair 
As of June 30, 2016  Cost   Gains   Losses   Value 
                 
State and political subdivisions  $61,547   $4,782   $1   $66,328 
Mortgage-backed securities (1)   280,404    10,014    6    290,412 
                     
Total  $341,951   $14,796   $7   $356,740 
                     
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.

 

 11 

 

 

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).

       Gross   Gross     
   Amortized   Unrealized   Unrealized   Fair 
As of June 30, 2016  Cost   Gains   Losses   Value 
                 
U.S. Treasuries  $140,537   $5,021   $-   $145,558 
U.S. Government agencies   38,659    726    -    39,385 
State and political subdivisions   68,962    2,145    -    71,107 
Mortgage-backed securities (1)   1,218,928    24,653    1,560    1,242,021 
Corporate bonds   307,653    4,631    1,161    311,123 
Asset-backed securities   527,852    1,484    4,144    525,192 
Other   1,125    -    -    1,125 
                     
Total  $2,303,716   $38,660   $6,865   $2,335,511 
                     
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 $1.31 billion and $1.63 billion were pledged to secure public deposits, derivatives and other secured borrowings at June 30, 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 June 30, 2016  Fair Value   Unrealized
Loss
   Fair Value   Unrealized
Loss
   Fair Value   Unrealized
Loss
  
                         
State and political subdivisions  $512   $1   $-   $-   $512   $1 
Mortgage-backed securities   -    -    1,406    6    1,406    6 
Total unrealized loss position  $512   $1   $1,406   $6   $1,918   $7 
                               
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 

 

 12 

 

 

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 June 30, 2016  Fair Value   Unrealized
Loss
   Fair Value   Unrealized
Loss
   Fair Value   Unrealized
Loss
 
                         
Mortgage-backed securities  $31,875   $124   $108,620   $1,436   $140,495   $1,560 
Corporate bonds   64,166    661    500    500    64,666    1,161 
Asset-backed securities   207,774    2,990    109,599    1,154    317,373    4,144 
Total unrealized loss position  $303,815   $3,775   $218,719   $3,090   $522,534   $6,865 
                               
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 June 30, 2016, there were 93 available-for-sale securities and 2 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 June 30, 2016 were primarily attributable to changes in interest rates and spread relationships.

 

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 or six months ended June 30, 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 and six months ended June 30, 2016 and 2015 (in thousands).

 

   Three Months Ended
June 30,
   Six Months Ended
June 30,
 
   2016   2015   2016   2015 
                 
Proceeds from sales  $26,992   $67,350   $88,297   $136,817 
                     
Gross gains on sales  $285   $13   $958   $1,552 
Gross losses on sales   (3)   -    (297)   - 
                     
Net gains on sales of securities  $282   $13   $661   $1,552 
                     
Income tax expense attributable to sales  $106   $5   $247   $603 

 

 13 

 

 

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 June 30, 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  $66,014   $67,801   $-   $- 
5 to 10 years   74,523    77,757    -    - 
    140,537    145,558    -    - 
                     
US Government agencies:                    
1 to 5 years   8,310    8,360    -    - 
5 to 10 years   30,349    31,025    -    - 
    38,659    39,385    -    - 
                     
State and political subdivisions:                    
Within 1 year   926    940    5,017    5,069 
1 to 5 years   9,589    9,838    14,170    15,109 
5 to 10 years   52,311    53,917    22,357    25,107 
More than 10 years   6,136    6,412    20,003    21,043 
    68,962    71,107    61,547    66,328 
                     
Corporate bonds:                    
1 to 5 years   223,094    224,777    -    - 
5 to 10 years   83,559    85,846    -    - 
More than 10 years   1,000    500    -    - 
    307,653    311,123    -    - 
                     
Asset-backed securities:                    
1 to 5 years   27,357    27,704    -    - 
5 to 10 years   304,376    302,060    -    - 
More than 10 years   196,119    195,428    -    - 
    527,852    525,192    -    - 
                     
Other:                    
More than 10 years   1,125    1,125    -    - 
    1,125    1,125    -    - 
                     
Total securities other than mortgage-backed securities:                    
Within 1 year   926    940    5,017    5,069 
1 to 5 years   334,364    338,480    14,170    15,109 
5 to 10 years   545,118    550,605    22,357    25,107 
More than 10 years   204,380    203,465    20,003    21,043 
                     
Mortgage-backed securities   1,218,928    1,242,021    280,404    290,412 
                     
   $2,303,716   $2,335,511   $341,951   $356,740 

 

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

 

 14 

 

 

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

Note 6 – Loans and Allowance for Credit Losses

 

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

 

   June 30,   December 31, 
   2016   2015 
         
Owner occupied commercial real estate  $1,450,075   $1,493,966 
Income producing commercial real estate   918,963    823,729 
Commercial & industrial   925,578    785,417 
Commercial construction   383,558    342,078 
Total commercial   3,678,174    3,445,190 
Residential mortgage   1,035,467    1,029,663 
Home equity lines of credit   622,804    597,806 
Residential construction   350,877    351,700 
Consumer installment   124,067    115,111 
Indirect auto   475,138    455,971 
           
Total loans   6,286,527    5,995,441 
           
Less allowance for loan losses   (64,253)   (68,448)
           
Loans, net  $6,222,274   $5,926,993 

 

At June 30, 2016 and December 31, 2015, loans totaling $2.88 billion and $2.44 billion, respectively, were pledged as collateral to secure Federal Home Loan Bank advances and other contingent funding sources.

 

At June 30, 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 $40.7 million and $56.3 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 PCI loans for the periods indicated (in thousands):

 

   Three Months Ended June 30,   Six Months Ended June 30, 
   2016   2015   2016   2015 
Balance at beginning of period  $4,144   $-   $4,279   $- 
Additions due to acquisitions   -    1,029    -    1,029 
Accretion   (626)   (83)   (1,942)   (83)
Reclassification from nonaccretable difference   806    -    1,453    - 
Changes in expected cash flows that do not affect nonaccretable difference   1,013    -    1,547    - 
Balance at end of period  $5,337   $946   $5,337   $946 

 

In addition to the accretable yield on PCI loans, the fair value adjustments on purchased loans outside the scope of ASC 310-30 are also accreted to interest revenue over the life of the loans. At June 30, 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 $6.00 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 $12.4 million and $12.0 million, respectively, as of June 30, 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.

 

 15 

 

 

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).

 

   2016   2015 
Three Months Ended June 30,  Beginning
Balance
   Charge-
Offs
   Recoveries   (Release)
Provision
   Ending
Balance
   Beginning
Balance
   Charge-
Offs
   Recoveries   (Release)
Provision
   Ending
Balance
 
                                         
Owner occupied commercial real estate  $16,864   $(610)  $46   $(1,868)  $14,432   $14,952   $(363)  $78   $1,672   $16,339 
Income producing commercial real estate   6,020    (121)   144    (521)   5,522    9,655    (74)   350    (1,731)   8,200 
Commercial & industrial   3,153    (223)   615    (338)   3,207    3,442    (162)   789    659    4,728 
Commercial construction   8,938    (24)   2    22    8,938    5,335    (147)   51    (344)   4,895 
Residential mortgage   14,205    (1,060)   231    2,286    15,662    20,138    (1,109)   322    (299)   19,052 
Home equity lines of credit   5,995    (469)   216    (424)   5,318    4,321    (348)   26    1,480    5,479 
Residential construction   9,034    (270)   278    (37)   9,005    10,210    (499)   392    (766)   9,337 
Consumer installment   773    (390)   229    111    723    713    (349)   187    137    688 
Indirect auto   1,328    (366)   42    442    1,446    1,241    (130)   8    292    1,411 
Total allowance for loan losses   66,310    (3,533)   1,803    (327)   64,253    70,007    (3,181)   2,203    1,100    70,129 
Allowance for unfunded commitments   2,342    -    -    27    2,369    2,780    -    -    (200)   2,580 
Total allowance for credit losses  $68,652   $(3,533)  $1,803   $(300)  $66,622   $72,787   $(3,181)  $2,203   $900   $72,709 

 

Six Months Ended June 30,  Beginning
Balance
   Charge-
Offs
   Recoveries   (Release)
Provision
   Ending
Balance
   Beginning
Balance
   Charge-
Offs
   Recoveries   (Release)
Provision
   Ending
Balance
 
                                                   
Owner occupied commercial real estate  $16,732   $(1,012)  $143   $(1,431)  $14,432   $16,041   $(731)  $89   $940   $16,339 
Income producing commercial real estate   8,235    (343)   155    (2,525)   5,522    10,296    (322)   357    (2,131)   8,200 
Commercial & industrial   4,442    (795)   904    (1,344)   3,207    3,255    (631)   917    1,187    4,728 
Commercial construction   5,583    (311)   2    3,664    8,938    4,747    (169)   51    266    4,895 
Residential mortgage   17,232    (1,236)   358    (692)   15,662    20,311    (1,687)   484    (56)   19,052 
Home equity lines of credit   6,042    (1,192)   307    161    5,318    4,574    (421)   40    1,286    5,479 
Residential construction   7,961    (329)   441    932    9,005    10,603    (1,639)   471    (98)   9,337 
Consumer installment   828    (869)   435    329    723    731    (675)   563    69    688 
Indirect auto   1,393    (599)   73    579    1,446    1,061    (258)   21    587    1,411 
Total allowance for loan losses   68,448    (6,686)   2,818    (327)   64,253    71,619    (6,533)   2,993    2,050    70,129 
Allowance for unfunded commitments   2,542    -    -    (173)   2,369    1,930    -    -    650    2,580 
Total allowance for credit losses  $70,990   $(6,686)  $2,818   $(500)  $66,622   $73,549   $(6,533)  $2,993   $2,700   $72,709 

 

 16 

 

 

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 
   June 30, 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  $1,444   $12,988   $-   $14,432   $1,465   $15,267   $-   $16,732 
Income producing commercial real estate   399    5,123    -    5,522    961    7,274    -    8,235 
Commercial & industrial   71    2,980    156    3,207    280    4,162    -    4,442 
Commercial construction   46    8,856    36    8,938    13    5,570    -    5,583 
Residential mortgage   3,944    11,639    79    15,662    3,885    13,347    -    17,232 
Home equity lines of credit   3    5,259    56    5,318    6    6,036    -    6,042 
Residential construction   141    8,857    7    9,005    174    7,787    -    7,961 
Consumer installment   9    714    -    723    13    815    -    828 
Indirect auto   -    1,446    -    1,446    -    1,393    -    1,393 
Total allowance for loan losses   6,057    57,862    334    64,253    6,797    61,651    -    68,448 
Allowance for unfunded commitments   -    2,369    -    2,369    -    2,542    -    2,542 
Total allowance for credit losses  $6,057   $60,231   $334   $66,622   $6,797   $64,193   $-   $70,990 

 

   Loans Outstanding 
   June 30, 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  $31,527   $1,410,209   $8,339   $1,450,075   $38,268   $1,442,024   $13,674   $1,493,966 
Income producing commercial real estate   23,647    873,916    21,400    918,963    23,013    772,945    27,771    823,729 
Commercial & industrial   2,771    921,657    1,150    925,578    3,339    781,423    655    785,417 
Commercial construction   1,865    376,745    4,948    383,558    10,616    329,320    2,142    342,078 
Residential mortgage   23,421    1,008,835    3,211    1,035,467    19,627    1,005,860    4,176    1,029,663 
Home equity lines of credit   101    621,525    1,178    622,804    167    595,951    1,688    597,806 
Residential construction   5,971    344,428    478    350,877    7,900    342,677    1,123    351,700 
Consumer installment   315    123,744    8    124,067    329    114,741    41    115,111 
Indirect auto   937    474,179    22    475,138    749    455,173    49    455,971 
Total loans  $90,555   $6,155,238   $40,734   $6,286,527   $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. 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 recorded investment in the loan. 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. Management believes the current weightings are appropriate to measure the probable losses incurred within the loan portfolio.

 

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.

 

 17 

 

 

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

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 fair value less costs to sell at the time they are placed on nonaccrual status.

 

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).

 

   June 30, 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  $8,083   $7,630   $-   $14,793   $14,460   $- 
Income producing commercial real estate   12,550    12,550    -    13,044    12,827    - 
Commercial & industrial   447    447    -    493    469    - 
Commercial construction   380    380    -    -    -    - 
Total commercial   21,460    21,007    -    28,330    27,756    - 
Residential mortgage   4,515    4,513    -    791    791    - 
Home equity lines of credit   -    -    -    -    -    - 
Residential construction   1,444    1,393    -    3,731    3,429    - 
Consumer installment   -    -    -    -    -    - 
Indirect auto   937    937    -    749    749    - 
Total with no related allowance recorded   28,356    27,850    -    33,601    32,725    - 
                               
With an allowance recorded:                              
Owner occupied commercial real estate   24,053    23,897    1,444    24,043    23,808    1,465 
Income producing commercial real estate   11,097    11,097    399    10,281    10,186    961 
Commercial & industrial   2,404    2,324    71    2,957    2,870    280 
Commercial construction   1,654    1,485    46    10,787    10,616    13 
Total commercial   39,208    38,803    1,960    48,068    47,480    2,719 
Residential mortgage   19,195    18,908    3,944    19,346    18,836    3,885 
Home equity lines of credit   101    101    3    167    167    6 
Residential construction   4,963    4,578    141    4,854    4,471    174 
Consumer installment   335    315    9    354    329    13 
Indirect auto   -    -    -    -    -    - 
Total with an allowance recorded   63,802    62,705    6,057    72,789    71,283    6,797 
Total  $92,158   $90,555   $6,057   $106,390   $104,008   $6,797 

 

Excluding PCI loans, there were no loans more than 90 days past due and still accruing interest at June 30, 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.

 

 18 

 

 

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

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. The accrual of interest is discontinued on PCI loans if management can no longer reliably estimate future cash flows on the loan. No PCI loans were classified as nonaccrual at June 30, 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 revenue, 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 $170,000 and $165,000 for the three months ended June 30, 2016 and 2015, respectively and $425,000 and $424,000 for the six months ended June 30, 2016 and 2015, respectively.

 

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 June 30,  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  $31,747   $379   $388   $37,985   $469   $509 
Income producing commercial real estate   23,768    284    295    22,055    273    253 
Commercial & industrial   2,706    35    35    5,221    45    89 
Commercial construction   1,872    22    21    12,164    117    116 
Total commercial   60,093    720    739    77,425    904    967 
Residential mortgage   23,631    263    265    20,604    200    203 
Home equity lines of credit   101    1    1    558    5    5 
Residential construction   6,152    71    80    8,748    128    132 
Consumer installment   320    6    5    161    3    3 
Indirect auto   867    11    11    -    -    - 
Total  $91,164   $1,072   $1,101   $107,496   $1,240   $1,310 
                               
Six Months Ended June 30,                              
                               
Owner occupied commercial real estate  $32,111   $809   $835   $37,487   $929   $968 
Income producing commercial real estate   23,857    568    597    21,740    540    529 
Commercial & industrial   2,771    66    62    4,622    83    125 
Commercial construction   1,881    44    44    12,219    233    237 
Total commercial   60,620    1,487    1,538    76,068    1,785    1,859 
Residential mortgage   23,778    469    468    21,345    425    436 
Home equity lines of credit   101    2    2    518    10    10 
Residential construction   6,254    138    143    9,662    248    258 
Consumer installment   327    12    12    157    6    6 
Indirect auto   830    22    22    -    -    - 
Total  $91,910   $2,130   $2,185   $107,750   $2,474   $2,569 

 

 19 

 

 

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

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

 

   June 30,   December 31, 
   2016   2015 
         
Owner occupied commercial real estate  $6,681   $7,036 
Income producing commercial real estate   1,017    2,595 
Commercial & industrial   949    892 
Commercial construction   199    328 
Total commercial   8,846    10,851 
Residential mortgage   8,667    8,555 
Home equity lines of credit   1,308    851 
Residential construction   1,578    1,398 
Consumer installment   137    175 
Indirect auto   812    823 
Total  $21,348   $22,653 

 

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 June 30, 2016  30 - 59 Days   60 - 89 Days   > 90 Days   Total   Past Due   PCI Loans   Total 
                             
Owner occupied commercial real estate  $1,432   $1,157   $2,167   $4,756   $1,436,980   $8,339   $1,450,075 
Income producing commercial real estate   321    892    192    1,405    896,158    21,400    918,963 
Commercial & industrial   2,695    45    448    3,188    921,240    1,150    925,578 
Commercial construction   107    -    131    238    378,372    4,948    383,558 
Total commercial   4,555    2,094    2,938    9,587    3,632,750    35,837    3,678,174 
Residential mortgage   5,579    1,563    3,155    10,297    1,021,959    3,211    1,035,467 
Home equity lines of credit   1,450    318    611    2,379    619,247    1,178    622,804 
Residential construction   786    926    389    2,101    348,298    478    350,877 
Consumer installment   386    208    25    619    123,440    8    124,067 
Indirect auto   803    243    389    1,435    473,681    22    475,138 
Total loans  $13,559   $5,352   $7,507   $26,418   $6,219,375   $40,734   $6,286,527 
                                    
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 June 30, 2016 and December 31, 2015, $5.40 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 $2,000 and $224,000 as of June 30, 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.

 

 20 

 

 

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).

 

   June 30, 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   $26,515   $26,025    54   $32,544   $32,058 
Income producing commercial real estate   30    20,713    20,713    29    15,703    15,629 
Commercial & industrial   21    2,248    2,169    26    2,955    2,870 
Commercial construction   8    1,654    1,485    14    10,785    10,616 
Total commercial   115    51,130    50,392    123    61,987    61,173 
Residential mortgage   179    19,743    19,468    173    19,101    18,836 
Home equity lines of credit   2    101    101    2    167    167 
Residential construction   47    5,812    5,427    44    5,663    5,334 
Consumer installment   19    335    315    22    348    329 
Indirect auto   56    937    937    49    749    749 
Total loans   418   $78,058   $76,640    413   $88,015   $86,588 

 

Loans modified under the terms of a TDR during the three and six months ended June 30, 2016 and 2015 are presented in the table below. In addition, the following table presents loans modified under the terms of a TDR that defaulted (became 90 days or more delinquent) during the periods presented and were initially restructured within one year prior to default (dollars in thousands).

 

   New TDRs for the Three Months Ended June 30,   New TDRs for the Six Months Ended June 30, 
               Modified Within the                Modified Within the  
               Previous Twelve Months               Previous Twelve Months 
       Pre-   Post-   That Have Subsequently        Pre-   Post-   That Have Subsequently 
       Modification   Modification   Defaulted during the       Modification   Modification   Defaulted during the 
      Outstanding   Outstanding   Three Months Ended June 30,      Outstanding   Outstanding   Six Months Ended June 30, 
2016  Number of
Contracts
   Recorded
Investment
   Recorded
Investment
   Number of
Contracts
   Recorded
Investment
   Number of
Contracts
   Recorded
Investment
   Recorded
Investment
   Number of
Contracts
   Recorded
Investment
 
                                         
Owner occupied commercial real estate   3   $867   $867    1   $252    6   $1,516   $1,516    2   $499 
Income producing commercial real estate   -    -    -    -    -    -    -    -    -    - 
Commercial & industrial   2    749    749    -    -    3    946    946    -    - 
Commercial construction   -    -    -    -    -    -    -    -    -    - 
Total commercial   5    1,616    1,616    1    252    9    2,462    2,462    2    499 
Residential mortgage   11    1,803    1,801    1    85    18    2,602    2,564    1    85 
Home equity lines of credit   1    38    38    -    -    1    38    38    -    - 
Residential construction   5    429    373    -    -    6    495    439    -    - 
Consumer installment   -    -    -    -    -    1    20    20    -    - 
Indirect auto   10    235    235    -    -    18    474    474    -    - 
Total loans   32   $4,121   $4,063    2   $337    53   $6,091   $5,997    3   $584 

 

               Modified Within the                Modified Within the 
               Previous Twelve Months               Previous Twelve Months 
       Pre-   Post-   That Have Subsequently        Pre-   Post-   That Have Subsequently 
       Modification   Modification   Defaulted during the       Modification   Modification   Defaulted during the 
       Outstanding   Outstanding   Three Months Ended June 30,       Outstanding   Outstanding   Six Months Ended June 30, 
2015  Number of
Contracts
   Recorded
Investment
   Recorded
Investment
   Number of
Contracts
   Recorded
Investment
   Number of
Contracts
   Recorded
Investment
   Recorded
Investment
   Number of
Contracts
   Recorded
Investment
 
Owner occupied commercial real estate   6   $8,040   $7,996    -   $-    8   $12,537   $12,493    -   $- 
Income producing commercial real estate   1    55    54    -    -    3    310    310    -    - 
Commercial & industrial   4    992    992    -    -    6    1,180    1,180    -    - 
Commercial construction   1    233    233    -    -    1    233    233    -    - 
     Total commercial   12    9,320    9,275    -    -    18    14,260    14,216    -    - 
Residential mortgage   8    523    523    -    -    23    2,121    2,121    -    - 
Home equity lines of credit   1    83    74    -    -    1    83    74    -    - 
Residential construction   2    163    139    -    -    2    163    139    -    - 
Consumer installment   1    25    25    -    -    2    28    28    1    30 
Indirect auto   -    -    -    -    -    -    -    -    -    - 
   Total loans   24   $10,114   $10,036    -   $-    46   $16,655   $16,578    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.

 

 21 

 

 

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.

 

 22 

 

 

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 June 30, 2016  Pass   Watch (1)   Substandard   Doubtful /
Loss
   Total 
                     
Owner occupied commercial real estate  $1,386,558   $19,766   $35,412   $-   $1,441,736 
Income producing commercial real estate   872,759    5,027    19,777    -    897,563 
Commercial & industrial   911,815    3,209    9,404    -    924,428 
Commercial construction   375,061    2,043    1,506    -    378,610 
Total commercial   3,546,193    30,045    66,099    -    3,642,337 
Residential mortgage   986,571    7,652    38,033    -    1,032,256 
Home equity lines of credit   615,840    21    5,765    -    621,626 
Residential construction   335,266    6,355    8,778    -    350,399 
Consumer installment   123,248    -    811    -    124,059 
Indirect auto   472,792    -    2,324    -    475,116 
Total loans, excluding PCI loans  $6,079,910   $44,073   $121,810   $-   $6,245,793 
                          
Owner occupied commercial real estate  $1,399   $2,842   $4,098   $-   $8,339 
Income producing commercial real estate   6,885    5,644    8,871    -    21,400 
Commercial & industrial   203    24    923    -    1,150 
Commercial construction   1,619    2,945    384    -    4,948 
Total commercial   10,106    11,455    14,276    -    35,837 
Residential mortgage   193    359    2,659    -    3,211 
Home equity lines of credit   205    -    973    -    1,178 
Residential construction   334    27    117    -    478 
Consumer installment   1    -    7    -    8 
Indirect auto   -    -    22    -    22 
Total PCI loans  $10,839   $11,841   $18,054   $-   $40,734 
                          
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 

 

(1) Residential mortgage loans and home equity loans reported in the watch column are generally commercial purpose loans secured by the borrower's residence.

 

 23 

 

 

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

Note 7 – 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).

 

   Amounts Reclassified from Accumulated Other
Comprehensive Income
    
Details about Accumulated Other  For the Three Months
Ended June 30,
   For the Six Months
Ended June 30,
   Affected Line Item in the Statement
Comprehensive Income Components  2016   2015   2016   2015   Where Net Income is Presented
                    
Realized gains on available-for-sale securities:                       
   $282   $13   $661   $1,552   Securities gains, net
    (106)   (5)   (247)   (603)  Tax expense
   $176   $8   $414   $949   Net of tax
                        
Amortization of losses included in net income on available-for-sale securities transferred to held to maturity:
   $(473)  $(289)  $(938)  $(773)  Investment securities interest revenue
    178    105    359    287   Tax benefit
   $(295)  $(184)  $(579)  $(486)  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  $-   $(30)  $(7)  $(78)  Deposits in banks and short-term investments interest revenue
Amortization of losses on de-designated positions   (151)   (146)   (342)   (265)  Money market deposit interest expense
Amortization of losses on de-designated positions   (309)   (279)   (611)   (537)  Federal Home Loan Bank advances interest expense
    (460)   (455)   (960)   (880)  Total before tax
    179    177    374    342   Tax benefit
   $(281)  $(278)  $(586)  $(538)  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)  $(250)  $(182)  Salaries and employee benefits expense
Actuarial losses   (42)   (68)   (84)   (136)  Salaries and employee benefits expense
    (167)   (159)   (334)   (318)  Total before tax
    65    62    130    124   Tax benefit
   $(102)  $(97)  $(204)  $(194)  Net of tax
Total reclassifications for the period  $(502)  $(551)  $(955)  $(269)  Net of tax
Amounts shown above in parentheses reduce earnings                       

 

Note 8 – 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 six months ended June 30, 2016, United accrued dividends of $21,000 on its Series H preferred stock. The Series H preferred stock was redeemed in the first quarter of 2016; accordingly, United did not accrue any dividends for the second quarter of 2016. The preferred stock dividends were subtracted from net income in order to arrive at net income available to common shareholders. During the three and six months ended June 30, 2015, United accrued dividends of $17,000 on its Series H preferred stock.

 

 24 

 

 

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   Six Months Ended 
   June 30,   June 30, 
   2016   2015   2016   2015 
                 
Net income available to common shareholders  $25,266   $17,796   $47,540   $35,466 
                     
Weighted average shares outstanding:                    
Basic   72,202    62,549    72,187    61,730 
Effect of dilutive securities                    
Stock options   5    4    4    4 
Diluted   72,207    62,553    72,191    61,734 
                     
Net income per common share:                    
Basic  $.35