SEC Filing | United Community Banks, Inc.

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the Quarterly Period Ended September 30, 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 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 70,863,730 shares outstanding as of October 31, 2016.

INDEX

PART I - Financial Information

Item 1.	Financial Statements.

	Consolidated Statement of Income (unaudited) for the Three and Nine Months Ended September 30, 2016 and 2015	3

	Consolidated Statement of Comprehensive Income (unaudited) for the Three and Nine Months Ended September 30, 2016 and 2015	4

	Consolidated Balance Sheet (unaudited) at September 30, 2016 and December 31, 2015	5

	Consolidated Statement of Changes in Shareholders’ Equity (unaudited) for the Nine Months Ended September 30, 2016 and 2015	6

	Consolidated Statement of Cash Flows (unaudited) for the Nine Months Ended September 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.	40

Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	62

Item 4.	Controls and Procedures.	62

PART II - Other Information

Item 1.	Legal Proceedings.	63
Item 1A.	Risk Factors.	63
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	63
Item 3.	Defaults Upon Senior Securities.	63
Item 4.	Mine Safety Disclosures.	63
Item 5.	Other Information.	63
Item 6.	Exhibits.	64

Part I – Financial Information

UNITED COMMUNITY BANKS, INC.

Consolidated Statement of Income (Unaudited)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
(in thousands, except per share data)	2016			2015			2016			2015

Interest revenue:
Loans, including fees	$	69,440		$	57,174		$	196,888		$	159,814
Investment securities, including tax exempt of $134, $177, $449 and $516		15,418			12,801			48,039			36,896
Deposits in banks and short-term investments		581			853			2,315			2,460
Total interest revenue		85,439			70,828			247,242			199,170

Interest expense:
Deposits:
NOW		452			337			1,381			1,079
Money market		1,347			981			3,661			2,460
Savings		43			25			102			71
Time		667			830			2,052			2,834
Total deposit interest expense		2,509			2,173			7,196			6,444
Short-term borrowings		98			99			278			279
Federal Home Loan Bank advances		1,015			461			2,731			1,307
Long-term debt		2,828			2,669			8,178			7,481
Total interest expense		6,450			5,402			18,383			15,511
Net interest revenue		78,989			65,426			228,859			183,659
Provision for credit losses		(300	)		700			(800	)		3,400
Net interest revenue after provision for credit losses		79,289			64,726			229,659			180,259

Fee revenue:
Service charges and fees		10,819			9,335			31,460			25,325
Mortgage loan and other related fees		6,039			3,840			13,776			10,302
Brokerage fees		1,199			1,200			3,369			3,983
Gains from sales of government guaranteed loans		2,479			1,646			6,517			4,281
Securities gains, net		261			325			922			1,877
Loss from prepayment of debt		-			(256	)		-			(1,294	)
Other		5,564			2,207			12,420			6,771
Total fee revenue		26,361			18,297			68,464			51,245
Total revenue		105,650			83,023			298,123			231,504

Operating expenses:
Salaries and employee benefits		36,478			29,342			103,112			83,749
Communications and equipment		4,919			3,963			13,602			10,538
Occupancy		5,132			4,013			14,393			10,706
Advertising and public relations		1,088			812			3,275			2,689
Postage, printing and supplies		1,451			1,049			4,029			2,980
Professional fees		3,160			2,668			9,049			6,844
FDIC assessments and other regulatory charges		1,412			1,136			4,453			3,643
Amortization of intangibles		1,119			714			3,116			1,403
Merger-related and other charges		3,152			5,744			6,981			8,917
Other		6,112			4,828			17,958			14,281
Total operating expenses		64,023			54,269			179,968			145,750
Net income before income taxes		41,627			28,754			118,155			85,754
Income tax expense		15,753			10,867			44,720			32,384
Net income		25,874			17,887			73,435			53,370
Preferred stock dividends and discount accretion		-			25			21			42
Net income available to common shareholders	$	25,874		$	17,862		$	73,414		$	53,328

Earnings per common share:
Basic	$	.36		$	.27		$	1.02		$	.84
Diluted		.36			.27			1.02			.84
Weighted average common shares outstanding:
Basic		71,556			66,294			71,992			63,297
Diluted		71,561			66,300			71,996			63,302

See accompanying notes to consolidated financial statements.

UNITED COMMUNITY BANKS, INC.

Consolidated Statement of Comprehensive Income (Unaudited)

(in thousands)	Three Months Ended September 30,									Nine Months Ended September 30,
2016	Before- tax Amount			Tax (Expense) Benefit			Net of Tax Amount			Before- tax Amount			Tax (Expense) Benefit			Net of Tax Amount

Net income	$	41,627		$	(15,753	)	$	25,874		$	118,155		$	(44,720	)	$	73,435
Other comprehensive income:
Unrealized gains on available-for-sale securities:
Unrealized holding gains arising during period		4,927			(1,927	)		3,000			37,990			(14,488	)		23,502
Reclassification adjustment for gains included in net income		(261	)		101			(160	)		(922	)		348			(574	)
Net unrealized gains		4,666			(1,826	)		2,840			37,068			(14,140	)		22,928
Amortization of losses included in net income on available-for-sale securities transferred to held-to-maturity		663			(237	)		426			1,601			(596	)		1,005
Amortization of losses included in net income on terminated derivative financial instruments that were previously accounted for as cash flow hedges		466			(181	)		285			1,426			(555	)		871
Amortization of prior service cost and actuarial losses included in net periodic pension cost for defined benefit pension plan		167			(65	)		102			501			(195	)		306

Total other comprehensive income		5,962			(2,309	)		3,653			40,596			(15,486	)		25,110

Comprehensive income	$	47,589		$	(18,062	)	$	29,527		$	158,751		$	(60,206	)	$	98,545

2015
Net income	$	28,754		$	(10,867	)	$	17,887		$	85,754		$	(32,384	)	$	53,370
Other comprehensive income:
Unrealized gains on available-for-sale securities:
Unrealized holding gains arising during the period		2,313			(870	)		1,443			5,426			(2,143	)		3,283
Reclassification adjustment for gains included in net income		(325	)		121			(204	)		(1,877	)		724			(1,153	)
Net unrealized gains		1,988			(749	)		1,239			3,549			(1,419	)		2,130
Amortization of losses included in net income on available-for-sale securities transferred to held-to-maturity		269			(99	)		170			1,041			(387	)		654
Amortization of losses included in net income on terminated derivative financial instruments that were previously accounted for as cash flow hedges		550			(214	)		336			1,430			(556	)		874
Unrealized losses on derivative financial instruments accounted for as cash flow hedges		-			-			-			(471	)		183			(288	)
Net cash flow hedge activity		550			(214	)		336			959			(373	)		586
Amortization of prior service cost and actuarial losses included in net periodic pension cost for defined benefit pension plan		159			(62	)		97			478			(186	)		292

Total other comprehensive income		2,966			(1,124	)		1,842			6,027			(2,365	)		3,662

Comprehensive income	$	31,720		$	(11,991	)	$	19,729		$	91,781		$	(34,749	)	$	57,032

See accompanying notes to consolidated financial statements.

UNITED COMMUNITY BANKS, INC.

Consolidated Balance Sheet (Unaudited)

	September 30,			December 31,
(in thousands, except share and per share data)	2016			2015

ASSETS
Cash and due from banks	$	94,744		$	86,912
Interest-bearing deposits in banks		131,415			153,451
Cash and cash equivalents		226,159			240,363
Securities available for sale		2,215,113			2,291,511
Securities held to maturity (fair value $357,550 and $371,658)		344,917			364,696
Mortgage loans held for sale (includes $279 and $0 at fair value)		30,814			24,231
Loans, net of unearned income		6,725,110			5,995,441
Less allowance for loan losses		(62,961	)		(68,448	)
Loans, net		6,662,149			5,926,993
Premises and equipment, net		189,302			178,165
Bank owned life insurance		123,129			105,493
Accrued interest receivable		26,494			25,786
Net deferred tax asset		156,408			197,613
Derivative financial instruments		25,463			20,082
Goodwill and other intangible assets		157,288			147,420
Other assets		140,379			94,075
Total assets	$	10,297,615		$	9,616,428
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits:
Demand	$	2,568,756		$	2,204,755
NOW		1,821,353			1,975,884
Money market		1,798,548			1,599,637
Savings		544,029			471,129
Time		1,349,543			1,282,803
Brokered		359,370			338,985
Total deposits		8,441,599			7,873,193
Short-term borrowings		35,050			16,640
Federal Home Loan Bank advances		449,407			430,125
Long-term debt		174,959			163,836
Derivative financial instruments		32,548			28,825
Accrued expenses and other liabilities		84,759			85,524
Total liabilities		9,218,322			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; 70,861,025 and 66,198,477 shares issued and outstanding		70,861			66,198
Common stock, non-voting, $1 par value; 26,000,000 shares authorized; 0 and 5,285,516 shares issued and outstanding		-			5,286
Common stock issuable; 520,014 and 458,953 shares		7,179			6,779
Capital surplus		1,274,909			1,286,361
Accumulated deficit		(273,314	)		(330,879	)
Accumulated other comprehensive loss		(342	)		(25,452	)
Total shareholders' equity		1,079,293			1,018,285
Total liabilities and shareholders' equity	$	10,297,615		$	9,616,428

See accompanying notes to consolidated financial statements.

UNITED COMMUNITY BANKS, INC.

Consolidated Statement of Changes in Shareholders' Equity (Unaudited)

For the Nine Months Ended September 30,

	Preferred																		Accumulated
	Stock						Non-Voting			Common									Other
(in thousands, except share and	Series			Common			Common			Stock			Capital			Accumulated			Comprehensive
per 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																	53,370						53,370
Other comprehensive income																				3,662			3,662
Common stock issued to dividend reinvestment plan and employee benefit plans (11,761 shares)					12									192									204
Conversion of non-voting common stock to voting (1,795,271 shares)					1,795			(1,795	)														-
Common and preferred stock issued for acquisition (11,058,515 common shares and 9,992 preferred shares)		9,992			11,059									203,092									224,143
Amortization of stock option and restricted stock awards														3,343									3,343
Vesting of restricted stock, net of shares surrendered to cover payroll taxes (118,672 shares issued, 106,935 shares deferred)					119						1,444			(3,009	)								(1,446	)
Deferred compensation plan, net, including dividend equivalents											274			(1	)								273
Shares issued from deferred compensation plan (23,613 shares)					23						(216	)		193									-
Common stock dividends ($.16 per share)																	(10,506	)					(10,506	)
Tax on restricted stock vesting														559			-						559
Preferred stock dividends: Series H																	(42	)					(42	)
Balance, September 30, 2015	$	9,992		$	63,186		$	8,286		$	6,670		$	1,284,877		$	(344,746	)	$	(15,128	)	$	1,013,137

Balance, December 31, 2015	$	9,992		$	66,198		$	5,286		$	6,779		$	1,286,361		$	(330,879	)	$	(25,452	)	$	1,018,285
Net income																	73,435						73,435
Other comprehensive income																				25,110			25,110
Redemption of Series H preferred stock (9,992 shares)		(9,992	)																				(9,992	)
Common stock issued to dividend reinvestment plan and employee benefit plans (15,844 shares)					16									254									270
Conversion of non-voting common stock to voting (5,285,516 shares)					5,286			(5,286	)														-
Amortization of stock option and restricted stock awards														3,257									3,257
Vesting of restricted stock, net of shares surrendered to cover payroll taxes (79,430 shares issued, 94,497 shares deferred)					79						1,384			(2,428	)								(965	)
Purchases of common stock (764,000 shares)					(764	)								(12,895	)								(13,659	)
Deferred compensation plan, net, including dividend equivalents											291												291
Shares issued from deferred compensation plan (45,758 shares)					46						(1,275	)		1,229									-
Common stock dividends ($.22 per share)																	(15,849	)					(15,849	)
Tax on restricted stock vesting														(869	)								(869	)
Preferred stock dividends: Series H																	(21	)					(21	)
Balance, September 30, 2016	$	-		$	70,861		$	-		$	7,179		$	1,274,909		$	(273,314	)	$	(342	)	$	1,079,293

See accompanying notes to consolidated financial statements.

UNITED COMMUNITY BANKS, INC.

Consolidated Statement of Cash Flows (Unaudited)

	Nine Months Ended
	September 30,
(in thousands)	2016			2015
Operating activities:
Net income	$	73,435		$	53,370
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion		22,612			16,788
(Release of) provision for credit losses		(800	)		3,400
Stock based compensation		3,257			3,343
Deferred income tax expense		45,308			28,495
Securities gains, net		(922	)		(1,877	)
Gains from sales of government guaranteed loans		(6,517	)		(4,281	)
Net gains on sale of other assets		(381	)		(437	)
Net gains and write downs on sales of other real estate owned		(59	)		(368	)
Loss on prepayment of borrowings		-			1,294
Changes in assets and liabilities:
Other assets and accrued interest receivable		(41,886	)		4,232
Accrued expenses and other liabilities		(2,753	)		4,191
Mortgage loans held for sale		(6,441	)		(5,562	)
Net cash provided by operating activities		84,853			102,588

Investing activities:
Investment securities held to maturity:
Proceeds from maturities and calls of securities held to maturity		49,968			57,721
Purchases of securities held to maturity		(20,656	)		-
Investment securities available for sale:
Proceeds from sales of securities available for sale		189,164			274,519
Proceeds from maturities and calls of securities available for sale		292,200			212,383
Purchases of securities available for sale		(308,800	)		(476,917	)
Net increase in loans		(453,541	)		(324,868	)
Funds paid to FDIC under loss sharing agreements		-			(1,198	)
Proceeds from sales of premises and equipment		5,038			2,127
Purchases of premises and equipment		(13,716	)		(7,191	)
Net cash received for acquisition		1,912			35,497
Proceeds from sale of other real estate		9,370			3,184
Net cash used in investing activities		(249,061	)		(224,743	)

Financing activities:
Net change in deposits		169,156			219,454
Net change in short-term borrowings		8,360			(16,238	)
Repayments of trust preferred securities		-			(48,521	)
Proceeds from FHLB advances		7,080,000			1,495,000
Repayments of FHLB advances		(7,074,000	)		(1,587,070	)
Proceeds from issuance of senior debt, net of issuance costs		-			84,141
Proceeds from issuance of common stock for dividend reinvestment and employee benefit plans		270			204
Retirement of preferred stock		(9,992	)		-
Purchase of common stock		(13,659	)		-
Cash dividends on common stock		(10,085	)		(10,506	)
Cash dividends on preferred stock		(46	)		(25	)
Net cash provided by financing activities		150,004			136,439

Net change in cash and cash equivalents		(14,204	)		14,284

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

Cash and cash equivalents at end of period	$	226,159		$	206,939

Supplemental disclosures of cash flow information:
Interest paid	$	25,815		$	16,567
Income taxes paid		3,431			3,453
Significant non-cash investing and financing transactions:
Unsettled government guaranteed loan sales		22,355			11,020
Unsettled purchases of securities available for sale		8,973			-
Transfers of loans to foreclosed properties		6,647			3,428
Acquisitions:
Assets acquired		450,958			1,736,203
Liabilities assumed		439,749			1,427,358
Net assets acquired		11,209			308,845
Common stock issued in acquisitions		-			214,151
Preferred stock issued in acquisitions		-			9,992

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 (“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 on 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.

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.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. This update provides guidance on the treatment of eight specific cash flow issues for which there was diversity in practice. For example, cash payments for debt prepayment should be classified as cash outflows for financing activities. Cash payments for contingent consideration after a business combination if made soon after the acquisition date should be classified as investing outflows, while similar payments not made soon after the acquisition date should be classified as financing outflows (up to the amount of the contingent consideration liability recognized at the acquisition date, including measurement period adjustments) or operating activities (for any excess). Cash proceeds from the settlement of insurance claims should be classified on the basis of the related insurance coverage, while proceeds from the settlement of bank owned life insurance should be classified as investing inflows. For public entities, this update is effective for fiscal years beginning after December 15, 2017. The adoption of this update is not expected to have a material impact on United’s consolidated financial statements.

Note 3 – Acquisitions

Acquisition of Tidelands Bancshares, Inc.

On July 1, 2016, United completed the acquisition of Tidelands Bancshares, Inc. (“Tidelands”) and its wholly-owned bank subsidiary Tidelands Bank. Tidelands operated seven branches in coastal South Carolina. In connection with the acquisition, United acquired $440 million of assets and assumed $440 million of liabilities. Under the terms of the merger agreement, Tidelands shareholders received cash equal to $0.52 per common share, or an aggregate of $2.22 million. Additionally, at closing, United redeemed all of Tidelands’ fixed-rate cumulative preferred stock that was issued to the United States Department of the Treasury (the “Treasury”) under the Treasury’s Capital Purchase Program, plus unpaid dividends, for $8.98 million in aggregate. The fair value of consideration paid exceeded the fair value of the identifiable assets and liabilities acquired and resulted in the establishment of goodwill in the amount of $10.7 million, representing the intangible value of Tidelands’ business and reputation within the market it served. None of the goodwill recognized is expected to be deductible for income tax purposes. United will amortize the related core deposit intangible of $1.57 million using the sum-of-the-years-digits method over five years, which represents the expected useful life of the asset.

As of the acquisition date, United assumed long-term debt obligations with an aggregate balance of $14.4 million and an aggregate fair value of $10.8 million related to Tidelands’ outstanding trust preferred securities and paid all amounts required to bring current the payment of interest (including deferred interest) on such trust preferred securities. The $8.25 million of debt related to Tidelands Statutory Trust I has a stated maturity date of March 30, 2036 and a rate equal to LIBOR plus 1.38%, which resets quarterly. The $6.19 million of debt related to Tidelands Statutory Trust II has a stated maturity date of June 30, 2038 and a rate equal to LIBOR plus 5.075%, which resets quarterly.

United’s operating results for the period ended September 30, 2016 include the operating results of the acquired assets and assumed liabilities for the period subsequent to the acquisition date of July 1, 2016.

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The purchased assets and assumed liabilities were recorded at their acquisition date fair values and are summarized in the table below (in thousands).

	As Recorded			Fair Value			As Recorded by
	by Tidelands			Adjustments ⁽¹⁾			United
Assets
Cash and cash equivalents	$	13,121		$	-		$	13,121
Securities		65,676			(155	)		65,521
Loans held for sale		139			3			142
Loans, net		317,938			(12,035	)		305,903
Premises and equipment, net		19,133			(7,944	)		11,189
Bank owned life insurance		16,917			-			16,917
Accrued interest receivable		1,086			(167	)		919
Net deferred tax asset		73			15,639			15,712
Core deposit intangible		-			1,570			1,570
Other real estate owned		9,881			(2,386	)		7,495
Other assets		1,920			(164	)		1,756
Total assets acquired	$	445,884		$	(5,639	)	$	440,245
Liabilities
Deposits	$	398,108		$	1,765		$	399,873
Repurchase agreements		10,000			155			10,155
Federal Home Loan Bank advances		13,000			354			13,354
Long-term debt		14,434			(3,668	)		10,766
Other liabilities		11,587			(5,986	)		5,601
Total liabilities assumed		447,129			(7,380	)		439,749
Excess of assets acquired over liabilities assumed	$	(1,245	)
Aggregate fair value adjustments				$	1,741
Total identifiable net assets							$	496
Consideration transferred
Cash paid to redeem common stock								2,224
Cash paid to redeem preferred stock issued under the Treasury's Capital Purchase Program								8,985
Total fair value of consideration transferred								11,209
Goodwill							$	10,713

⁽¹⁾Fair values are preliminary and are subject to refinement for a period not to exceed one year after the closing date of an acquisition as information relative to closing date fair values becomes available.

The following table presents additional information related to the acquired loan portfolio at the acquisition date (in thousands):

	July 1, 2016
Accounted for pursuant to ASC 310-30:
Contractually required principal and interest	$	50,660
Non-accretable difference		13,483
Cash flows expected to be collected		37,177
Accretable yield		2,113
Fair value	$	35,064

Excluded from ASC 310-30:
Fair value	$	270,839
Gross contractual amounts receivable		302,331
Estimate of contractual cash flows not expected to be collected		3,859

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

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 from Palmetto 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 from MoneyTree is included in United’s Annual Report on Form 10-K for the year ended December 31, 2015.

Pro forma information

The following table discloses the impact of the mergers with Tidelands, Palmetto and MoneyTree since their respective acquisition dates through September 30 of the year of acquisition. The table also presents certain pro forma information as if Tidelands had been acquired on January 1, 2015 and Palmetto and MoneyTree had been acquired on January 1, 2014. These results combine the historical results of the acquired entities with United’s consolidated statement of income and, while 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 in earlier years.

The following table presents the actual results and pro forma information for the periods indicated (in thousands). Merger-related costs of $2.93 million from the Tidelands acquisition have been excluded from the 2016 pro forma information presented below and included in the 2015 pro forma information below. Merger-related costs of $8.92 million from the Palmetto and MoneyTree acquisitions have been excluded from the 2015 pro forma information presented below.

	Three Months Ended September 30,				Nine Months Ended September 30,
	Revenue		Net Income		Revenue		Net Income

2016
Actual Tidelands results included in statement of income since acquisition date	$	3,988	$	658	$	3,988	$	658
Supplemental consolidated pro forma as if Tidelands had been acquired January 1, 2015		105,281		27,499		305,273		72,436

2015
Actual Palmetto results included in statement of income since acquisition date	$	4,382	$	1,659	$	4,382	$	1,659
Actual MoneyTree results included in statement of income since acquisition date		3,081		1,394		5,365		1,778
Supplemental consolidated pro forma as if Tidelands had been acquired January 1, 2015 and Palmetto and MoneyTree had been acquired January 1, 2014		95,385		20,805		284,799		63,190

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
September 30, 2016	Recognized Assets			the Balance Sheet			Net Asset Balance		Financial Instruments			Collateral Received			Net Amount

Repurchase agreements / reverse repurchase agreements	$	150,000		$	(150,000	)	$	-	$	-		$	-		$	-
Derivatives		25,463			-			25,463		(1,472	)		(3,307	)		20,684
Total	$	175,463		$	(150,000	)	$	25,463	$	(1,472	)	$	(3,307	)	$	20,684

Weighted average interest rate of reverse repurchase agreements		1.40	%

	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	$	150,000		$	(150,000	)	$	-	$	-		$	-		$	-
Derivatives		32,548			-			32,548		(1,472	)		(31,960	)		-
Total	$	182,548		$	(150,000	)	$	32,548	$	(1,472	)	$	(31,960	)	$	-

Weighted average interest rate of repurchase agreements		.50	%

	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 September 30, 2016, United recognized the right to reclaim cash collateral of $32.3 million and the obligation to return cash collateral of $3.31 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.

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 September 30, 2016	Continuous		Up to 30 Days		30 to 90 Days		91 to 110 days		Total

U.S. Treasuries	$	-	$	-	$	10,050	$	-	$	10,050
Mortgage-backed securities		-		50,000		100,000		-		150,000

Total	$	-	$	50,000	$	110,050	$	-	$	160,050

Gross amount of recognized liabilities for repurchase agreements in offsetting disclosure									$	150,000
Amounts related to agreements not included in offsetting disclosure									$	10,050

	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 September 30, 2016	Cost		Gains		Losses		Value

State and political subdivisions	$	57,911	$	3,545	$	61	$	61,395
Mortgage-backed securities ⁽¹⁾		287,006		9,267		118		296,155

Total	$	344,917	$	12,812	$	179	$	357,550

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

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 September 30, 2016	Cost		Gains		Losses		Value

U.S. Treasuries	$	140,500	$	4,374	$	-	$	144,874
U.S. Government agencies		20,205		268		18		20,455
State and political subdivisions		63,001		1,885		-		64,886
Mortgage-backed securities ⁽¹⁾		1,151,570		24,569		358		1,175,781
Corporate bonds		307,240		6,231		912		312,559
Asset-backed securities		495,286		2,728		2,581		495,433
Other		1,125		-		-		1,125

Total	$	2,178,927	$	40,055	$	3,869	$	2,215,113

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 $1.34 billion and $1.63 billion were pledged to secure public deposits, derivatives and other secured borrowings at September 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 September 30, 2016	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss

State and political subdivisions	$	18,332	$	61	$	-	$	-	$	18,332	$	61
Mortgage-backed securities		19,537		118		-		-		19,537		118
Total unrealized loss position	$	37,869	$	179	$	-	$	-	$	37,869	$	179

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 September 30, 2016	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss

U.S. Government agencies	$	1,017	$	18	$	-	$	-	$	1,017	$	18
Mortgage-backed securities		51,399		105		50,387		253		101,786		358
Corporate bonds		54,607		393		20,481		519		75,088		912
Asset-backed securities		14,885		380		159,336		2,201		174,221		2,581
Total unrealized loss position	$	121,908	$	896	$	230,204	$	2,973	$	352,112	$	3,869


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 September 30, 2016, there were 53 available-for-sale securities and seven 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 September 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 nine months ended September 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 nine months ended September 30, 2016 and 2015 (in thousands).

	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015

Proceeds from sales	$	100,867		$	137,702		$	189,164		$	274,519

Gross gains on sales	$	607		$	328		$	1,565		$	1,880
Gross losses on sales		(346	)		(3	)		(643	)		(3	)

Net gains on sales of securities	$	261		$	325		$	922		$	1,877

Income tax expense attributable to sales	$	101		$	121		$	348		$	724

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 September 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	$	65,957	$	67,453	$	-	$	-
5 to 10 years		74,543		77,421		-		-
		140,500		144,874		-		-

US Government agencies:
1 to 5 years		990		995		-		-
5 to 10 years		18,180		18,443		-		-
More than 10 years		1,035		1,017
		20,205		20,455		-		-

State and political subdivisions:
Within 1 year		1,252		1,263		4,012		4,077
1 to 5 years		31,964		32,790		12,860		13,681
5 to 10 years		23,673		24,516		22,152		24,774
More than 10 years		6,112		6,317		18,887		18,863
		63,001		64,886		57,911		61,395

Corporate bonds:
1 to 5 years		233,824		237,475		-		-
5 to 10 years		72,416		74,584		-		-
More than 10 years		1,000		500		-		-
		307,240		312,559		-		-

Asset-backed securities:
1 to 5 years		17,250		17,459		-		-
5 to 10 years		333,434		333,831		-		-
More than 10 years		144,602		144,143		-		-
		495,286		495,433		-		-

Other:
More than 10 years		1,125		1,125		-		-
		1,125		1,125		-		-

Total securities other than mortgage-backed securities:
Within 1 year		1,252		1,263		4,012		4,077
1 to 5 years		349,985		356,172		12,860		13,681
5 to 10 years		522,246		528,795		22,152		24,774
More than 10 years		153,874		153,102		18,887		18,863

Mortgage-backed securities		1,151,570		1,175,781		287,006		296,155

	$	2,178,927	$	2,215,113	$	344,917	$	357,550

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 6 – Loans and Allowance for Credit Losses

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

	September 30,			December 31,
	2016			2015

Owner occupied commercial real estate	$	1,512,185		$	1,493,966
Income producing commercial real estate		1,105,293			823,729
Commercial & industrial		994,350			785,417
Commercial construction		388,861			342,078
Total commercial		4,000,689			3,445,190
Residential mortgage		1,055,166			1,029,663
Home equity lines of credit		698,356			597,806
Residential construction		378,329			351,700
Consumer installment		126,468			115,111
Indirect auto		466,102			455,971

Total loans		6,725,110			5,995,441

Less allowance for loan losses		(62,961	)		(68,448	)

Loans, net	$	6,662,149		$	5,926,993

At September 30, 2016 and December 31, 2015, loans totaling $3.05 billion and $2.44 billion, respectively, were pledged as collateral to secure Federal Home Loan Bank advances and other contingent funding sources.

At September 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 $67.5 million and $95.3 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						Nine Months Ended
	September 30,						September 30,
	2016			2015			2016			2015
Balance at beginning of period	$	5,337		$	946		$	4,279		$	-
Additions due to acquisitions		2,113			4,834			2,113			5,863
Accretion		(1,116	)		(316	)		(3,058	)		(399	)
Reclassification from nonaccretable difference		1,455			-			2,908			-
Changes in expected cash flows that do not affect nonaccretable difference		362			-			1,909			-
Balance at end of period	$	8,151		$	5,464		$	8,151		$	5,464

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 September 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 $8.30 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 $11.8 million and $12.0 million, respectively, as of September 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.

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 September 30,	Beginning Balance		Charge- Offs			Recoveries		(Release) Provision			Ending Balance		Beginning Balance		Charge- Offs			Recoveries		(Release) Provision			Ending Balance

Owner occupied commercial real estate	$	14,432	$	(276	)	$	108	$	(207	)	$	14,057	$	16,339	$	(463	)	$	228	$	(495	)	$	15,609
Income producing commercial real estate		5,522		(201	)		44		1,587			6,952		8,200		(126	)		231		(532	)		7,773
Commercial & industrial		3,207		(850	)		398		689			3,444		4,728		(508	)		319		1,041			5,580
Commercial construction		8,938		(14	)		100		350			9,374		4,895		(80	)		21		1,659			6,495
Residential mortgage		15,662		(253	)		508		(179	)		15,738		19,052		(848	)		415		(1,880	)		16,739
Home equity lines of credit		5,318		(321	)		54		191			5,242		5,479		(413	)		120		1,119			6,305
Residential construction		9,005		(269	)		134		(2,990	)		5,880		9,337		(50	)		174		(1,078	)		8,383
Consumer installment		723		(426	)		190		183			670		688		(496	)		221		352			765
Indirect auto		1,446		(354	)		69		443			1,604		1,411		(175	)		13		164			1,413
Total allowance for loan losses		64,253		(2,964	)		1,605		67			62,961		70,129		(3,159	)		1,742		350			69,062
Allowance for unfunded commitments		2,369		-			-		(367	)		2,002		2,580		-			-		350			2,930
Total allowance for credit losses	$	66,622	$	(2,964	)	$	1,605	$	(300	)	$	64,963	$	72,709	$	(3,159	)	$	1,742	$	700		$	71,992

Nine Months Ended September 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	$	(1,288	)	$	251	$	(1,638	)	$	14,057	$	16,041	$	(1,194	)	$	317	$	445		$	15,609
Income producing commercial real estate		8,235		(544	)		199		(938	)		6,952		10,296		(448	)		588		(2,663	)		7,773
Commercial & industrial		4,442		(1,645	)		1,302		(655	)		3,444		3,255		(1,139	)		1,236		2,228			5,580
Commercial construction		5,583		(325	)		102		4,014			9,374		4,747		(249	)		72		1,925			6,495
Residential mortgage		17,232		(1,489	)		866		(871	)		15,738		20,311		(2,535	)		899		(1,936	)		16,739
Home equity lines of credit		6,042		(1,513	)		361		352			5,242		4,574		(834	)		160		2,405			6,305
Residential construction		7,961		(598	)		575		(2,058	)		5,880		10,603		(1,689	)		645		(1,176	)		8,383
Consumer installment		828		(1,295	)		625		512			670		731		(1,171	)		784		421			765
Indirect auto		1,393		(953	)		142		1,022			1,604		1,061		(433	)		34		751			1,413
Total allowance for loan losses		68,448		(9,650	)		4,423		(260	)		62,961		71,619		(9,692	)		4,735		2,400			69,062
Allowance for unfunded commitments		2,542		-			-		(540	)		2,002		1,930		-			-		1,000			2,930
Total allowance for credit losses	$	70,990	$	(9,650	)	$	4,423	$	(800	)	$	64,963	$	73,549	$	(9,692	)	$	4,735	$	3,400		$	71,992

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
	September 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	$	1,212	$	12,845	$	-	$	14,057	$	1,465	$	15,267	$	-	$	16,732
Income producing commercial real estate		714		6,238		-		6,952		961		7,274		-		8,235
Commercial & industrial		64		3,380		-		3,444		280		4,162		-		4,442
Commercial construction		42		9,303		29		9,374		13		5,570		-		5,583
Residential mortgage		3,613		12,124		1		15,738		3,885		13,347		-		17,232
Home equity lines of credit		3		5,231		8		5,242		6		6,036		-		6,042
Residential construction		139		5,736		5		5,880		174		7,787		-		7,961
Consumer installment		9		661		-		670		13		815		-		828
Indirect auto		-		1,604		-		1,604		-		1,393		-		1,393
Total allowance for loan losses		5,796		57,122		43		62,961		6,797		61,651		-		68,448
Allowance for unfunded commitments		-		2,002		-		2,002		-		2,542		-		2,542
Total allowance for credit losses	$	5,796	$	59,124	$	43	$	64,963	$	6,797	$	64,193	$	-	$	70,990

	Loans Outstanding
	September 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	$	34,319	$	1,459,218	$	18,648	$	1,512,185	$	38,268	$	1,442,024	$	13,674	$	1,493,966
Income producing commercial real estate		28,418		1,052,242		24,633		1,105,293		23,013		772,945		27,771		823,729
Commercial & industrial		2,515		990,788		1,047		994,350		3,339		781,423		655		785,417
Commercial construction		1,383		382,283		5,195		388,861		10,616		329,320		2,142		342,078
Residential mortgage		19,586		1,029,629		5,951		1,055,166		19,627		1,005,860		4,176		1,029,663
Home equity lines of credit		103		690,865		7,388		698,356		167		595,951		1,688		597,806
Residential construction		5,925		367,900		4,504		378,329		7,900		342,677		1,123		351,700
Consumer installment		285		126,012		171		126,468		329		114,741		41		115,111
Indirect auto		1,022		465,072		8		466,102		749		455,173		49		455,971
Total loans	$	93,556	$	6,564,009	$	67,545	$	6,725,110	$	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 had previously used eight quarters of historical loss experience look-back period to determine the loss factors to be used in the reserve calculation for loans evaluated in the aggregate. Beginning in the third quarter of 2016, management extended the look-back period to 17 quarters to better capture the full range of the loss cycle balanced with the availability of reliable historical data. The look-back period will be extended by one quarter each quarter going forward. Management weights each quarter in the look-back period equally to capture the full range of the cycle. Management believes the 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 weighted average length of time between the date a loan first exceeds 30 days past due and the date the loan is charged off.

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. 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).

	September 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	$	13,030	$	12,892	$	-	$	14,793	$	14,460	$	-
Income producing commercial real estate		17,144		16,963		-		13,044		12,827		-
Commercial & industrial		473		473		-		493		469		-
Commercial construction		-		-		-		-		-		-
Total commercial		30,647		30,328		-		28,330		27,756		-
Residential mortgage		692		689		-		791		791		-
Home equity lines of credit		-		-		-		-		-		-
Residential construction		1,439		1,388		-		3,731		3,429		-
Consumer installment		-		-		-		-		-		-
Indirect auto		1,022		1,022		-		749		749		-
Total with no related allowance recorded		33,800		33,427		-		33,601		32,725		-

With an allowance recorded:
Owner occupied commercial real estate		22,096		21,427		1,212		24,043		23,808		1,465
Income producing commercial real estate		11,503		11,455		714		10,281		10,186		961
Commercial & industrial		2,218		2,042		64		2,957		2,870		280
Commercial construction		1,478		1,383		42		10,787		10,616		13
Total commercial		37,295		36,307		2,032		48,068		47,480		2,719
Residential mortgage		19,426		18,897		3,613		19,346		18,836		3,885
Home equity lines of credit		103		103		3		167		167		6
Residential construction		5,209		4,537		139		4,854		4,471		174
Consumer installment		314		285		9		354		329		13
Indirect auto		-		-		-		-		-		-
Total with an allowance recorded		62,347		60,129		5,796		72,789		71,283		6,797
Total	$	96,147	$	93,556	$	5,796	$	106,390	$	104,008	$	6,797

Excluding PCI loans, there were no loans more than 90 days past due and still accruing interest at September 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 the loan’s recorded investment.

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 September 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 $262,000 for the three months ended September 30, 2016 and 2015 and $686,000 for the nine months ended September 30, 2016 and 2015.

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 September 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	$	33,387	$	414	$	414	$	37,840	$	484	$	523
Income producing commercial real estate		28,487		375		343		20,802		265		281
Commercial & industrial		2,553		33		33		4,637		43		77
Commercial construction		1,411		26		26		12,584		116		116
Total commercial		65,838		848		816		75,863		908		997
Residential mortgage		19,653		201		196		23,176		242		197
Home equity lines of credit		103		1		1		477		5		5
Residential construction		6,115		59		60		8,560		123		123
Consumer installment		291		5		6		242		5		4
Indirect auto		959		11		11		-		-		-
Total	$	92,959	$	1,125	$	1,090	$	108,318	$	1,283	$	1,326

Nine Months Ended September 30,

Owner occupied commercial real estate	$	31,648	$	1,223	$	1,249	$	37,605	$	1,413	$	1,491
Income producing commercial real estate		28,726		943		940		21,427		805		810
Commercial & industrial		2,614		99		95		4,627		126		202
Commercial construction		1,462		70		70		12,340		349		353
Total commercial		64,450		2,335		2,354		75,999		2,693		2,856
Residential mortgage		19,860		670		664		21,955		667		633
Home equity lines of credit		103		3		3		504		15		15
Residential construction		6,372		197		203		9,294		371		381
Consumer installment		303		17		18		185		11		10
Indirect auto		871		33		33		-		-		-
Total	$	91,959	$	3,255	$	3,275	$	107,937	$	3,757	$	3,895

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).

	September 30,		December 31,
	2016		2015

Owner occupied commercial real estate	$	6,454	$	7,036
Income producing commercial real estate		949		2,595
Commercial & industrial		1,079		892
Commercial construction		98		328
Total commercial		8,580		10,851
Residential mortgage		8,152		8,555
Home equity lines of credit		1,194		851
Residential construction		2,248		1,398
Consumer installment		98		175
Indirect auto		1,300		823
Total	$	21,572	$	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 September 30, 2016	30 - 59 Days		60 - 89 Days		> 90 Days		Total		Past Due		PCI Loans		Total

Owner occupied commercial real estate	$	2,975	$	1,279	$	2,291	$	6,545	$	1,486,992	$	18,648	$	1,512,185
Income producing commercial real estate		667		-		180		847		1,079,813		24,633		1,105,293
Commercial & industrial		678		681		475		1,834		991,469		1,047		994,350
Commercial construction		365		-		-		365		383,301		5,195		388,861
Total commercial		4,685		1,960		2,946		9,591		3,941,575		49,523		4,000,689
Residential mortgage		6,644		1,981		2,477		11,102		1,038,113		5,951		1,055,166
Home equity lines of credit		1,743		474		452		2,669		688,299		7,388		698,356
Residential construction		991		1,111		859		2,961		370,864		4,504		378,329
Consumer installment		648		43		8		699		125,598		171		126,468
Indirect auto		853		539		795		2,187		463,907		8		466,102
Total loans	$	15,564	$	6,108	$	7,537	$	29,209	$	6,628,356	$	67,545	$	6,725,110

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 September 30, 2016 and December 31, 2015, $5.18 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 $55,000 and $224,000 as of September 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.

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).

	September 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		54	$	26,050	$	25,560		54	$	32,544	$	32,058
Income producing commercial real estate		31		21,012		21,012		29		15,703		15,629
Commercial & industrial		20		1,961		1,882		26		2,955		2,870
Commercial construction		8		1,463		1,383		14		10,785		10,616
Total commercial		113		50,486		49,837		123		61,987		61,173
Residential mortgage		171		19,036		18,768		173		19,101		18,836
Home equity lines of credit		2		103		103		2		167		167
Residential construction		48		5,971		5,381		44		5,663		5,334
Consumer installment		19		306		285		22		348		329
Indirect auto		61		1,022		1,022		49		749		749
Total loans		414	$	76,924	$	75,396		413	$	88,015	$	86,588

Loans modified under the terms of a TDR during the three and nine months ended September 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 September 30,										New TDRs for the Nine Months Ended September 30,
			Pre- Modification Outstanding		Post- Modification Outstanding		Modified Within the Previous Twelve Months That Have Subsequently Defaulted during the Three Months Ended September 30,						Pre- Modification Outstanding		Post- Modification Outstanding		Modified Within the Previous Twelve Months That Have Subsequently Defaulted during the Nine Months Ended September 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		1	$	1,007	$	1,007		-	$	-		7	$	2,524	$	2,524		1	$	252
Income producing commercial real estate		-		-		-		-		-		-		-		-		-		-
Commercial & industrial		2		66		66		2		34		5		1,012		1,012		2		34
Commercial construction		-		-		-		-		-		-		-		-		-		-
Total commercial		3		1,073		1,073		2		34		12		3,536		3,536		3		286
Residential mortgage		7		862		807		-		-		25		3,465		3,371		1		85
Home equity lines of credit		-		-		-		-		-		1		38		38		-		-
Residential construction		2		272		272		-		-		8		766		711		-		-
Consumer installment		2		14		14		-		-		3		34		34		-		-
Indirect auto		8		226		226		-		-		26		699		699		-		-
Total loans		22	$	2,447	$	2,392		2	$	34		75	$	8,538	$	8,389		4	$	371

2015
Owner occupied commercial real estate		3	$	667	$	666		1	$	178		11	$	13,204	$	13,159		1	$	178
Income producing commercial real estate		-		-		-		-		-		3		310		310		-		-
Commercial & industrial		1		23		23		-		-		7		1,203		1,203		-		-
Commercial construction		-		-		-		-		-		1		233		233		-		-
Total commercial		4		690		689		1		178		22		14,950		14,905		1		178
Residential mortgage		10		939		939		-		-		33		3,060		3,060		-		-
Home equity lines of credit		-		-		-		-		-		1		83		74		-		-
Residential construction		1		347		347		-		-		3		510		486		-		-
Consumer installment		4		58		58		-		-		6		86		86		1		30
Indirect auto		-		-		-		-		-		-		-		-		-		-
Total loans		19	$	2,034	$	2,033		1	$	178		65	$	18,689	$	18,611		2	$	208

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 or are in bankruptcy 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).

							Doubtful /
As of September 30, 2016	Pass		Watch ⁽¹⁾		Substandard		Loss		Total

Owner occupied commercial real estate	$	1,443,160	$	19,613	$	30,764	$	-	$	1,493,537
Income producing commercial real estate		1,054,769		2,622		23,269		-		1,080,660
Commercial & industrial		978,008		5,007		10,288		-		993,303
Commercial construction		381,336		1,333		997		-		383,666
Total commercial		3,857,273		28,575		65,318		-		3,951,166
Residential mortgage		1,007,944		7,470		33,801		-		1,049,215
Home equity lines of credit		685,670		26		5,272		-		690,968
Residential construction		359,126		4,871		9,828		-		373,825
Consumer installment		125,540		-		757		-		126,297
Indirect auto		463,186		-		2,908		-		466,094
Total loans, excluding PCI loans	$	6,498,739	$	40,942	$	117,884	$	-	$	6,657,565

Owner occupied commercial real estate	$	2,211	$	3,379	$	13,058	$	-	$	18,648
Income producing commercial real estate		12,667		10,028		1,938		-		24,633
Commercial & industrial		92		117		838		-		1,047
Commercial construction		1,594		299		3,302		-		5,195
Total commercial		16,564		13,823		19,136		-		49,523
Residential mortgage		722		666		4,563		-		5,951
Home equity lines of credit		6,419		-		969		-		7,388
Residential construction		2,588		1,281		635		-		4,504
Consumer installment		168		-		3		-		171
Indirect auto		-		-		8		-		8
Total PCI loans	$	26,461	$	15,770	$	25,314	$	-	$	67,545

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.

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 September 30,

For the Nine Months
Ended September 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: