SEC Filing | United Community Banks, Inc.

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ucbi-20210331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒

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

For the Quarterly Period Ended March 31, 2021

☐

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

(Registrant’s telephone number, including area code)


Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common stock, par value $1 per share	UCBI	Nasdaq Global Select Market
Depositary shares, each representing 1/1000th interest in a share of Series I Non-Cumulative Preferred Stock	UCBIO	Nasdaq Global Select Market

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

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Date File required to be submitted 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 such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

Yes ☐ No ☒

There were 86,778,590 shares of the registrant’s common stock, par value $1 per share, outstanding as of April 30, 2021.

UNITED COMMUNITY BANKS, INC.

FORM 10-Q

INDEX


		Glossary of Defined Terms	3
		Forward Looking Statements	4
PART I - Financial Information
	Item 1.	Financial Statements.

		Consolidated Balance Sheets (unaudited) at March 31, 2021 and December 31, 2020	5

		Consolidated Statements of Income (unaudited) for the Three Months Ended March 31, 2021 and 2020	6

		Consolidated Statements of Comprehensive Income (unaudited) for the Three Months Ended March 31, 2021 and 2020	7

		Consolidated Statements of Changes in Shareholders’ Equity (unaudited) for the Three Months Ended March 31, 2021 and 2020	8

		Consolidated Statements of Cash Flows (unaudited) for the Three Months Ended March 31, 2021 and 2020	9

		Notes to Consolidated Financial Statements	10

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	32

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	50

	Item 4.	Controls and Procedures.	50

PART II - Other Information

	Item 1.	Legal Proceedings.	51
	Item 1A.	Risk Factors.	51




	Item 6.	Exhibits.	51

Glossary of Defined Terms

The following terms may be used throughout this report, including the consolidated financial statements and related notes.


Term						Definition
2020 10-K						Annual Report on Form 10-K for the year ended December 31, 2020
ACL						Allowance for credit losses
AFS						Available-for-sale
ALCO						Asset/Liability Management Committee
AOCI						Accumulated other comprehensive income (loss)


ASU						Accounting standards update
Bank						United Community Bank
Board						United Community Banks Inc., Board of Directors
BOLI						Bank-owned life insurance
CARES Act						Coronavirus Aid, Relief, and Economic Security Act
CECL						Current expected credit loss model
CET1						Common equity tier 1
CME						Chicago Mercantile Exchange
Company						United Community Banks Incorporated (interchangeable with "United" below)
CVA						Credit valuation adjustments
FASB						Financial Accounting Standards Board
FDIC						Federal Deposit Insurance Corporation
Federal Reserve						Federal Reserve System
FHLB						Federal Home Loan Bank

FTE						Fully taxable equivalent
GAAP						Accounting principles generally accepted in the United States of America
GSE						U.S. government-sponsored enterprise
HELOC						Home equity lines of credit
Holding Company						United Community Banks, Inc. on an unconsolidated basis
HTM						Held-to-maturity
LIBOR						London Interbank Offered Rate

MD&A						Management's Discussion and Analysis of Financial Condition and Results of Operations
MBS						Mortgage-backed securities
NOW						Negotiable order of withdrawal
NPA						Nonperforming asset
OCI						Other comprehensive income (loss)
PCD						Purchased credit deteriorated loans
PPP						Paycheck Protection Program
Report						Quarterly Report on Form 10-Q
SBA						United States Small Business Administration
Seaside						Seaside National Bank & Trust
SEC						Securities and Exchange Commission

TDR						Troubled debt restructuring

Three Shores						Three Shores Bancorporation, Inc.
U.S. Treasury						United States Department of the Treasury
United						United Community Banks, Inc. and its direct and indirect subsidiaries
USDA						United States Department of Agriculture

Cautionary Note Regarding Forward-looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are neither statements of historical fact nor assurance of future performance and generally can be identified by the use of forward-looking terminology such as “believes”, “expects”, “may”, “will”, “could”, “should”, “projects”, “plans”, “goal”, “targets”, “potential”, “estimates”, “pro forma”, “seeks”, “intends”, or “anticipates”, or similar expressions. Forward-looking statements include discussions of strategy, financial projections, guidance and estimates (including their underlying assumptions), statements regarding plans, objectives, expectations or consequences of various transactions or events, and statements about our future performance, operations, products and services, and should be viewed with caution.

Because forward-looking statements relate to the future, they are subject to known and unknown risks, uncertainties, assumptions, and changes in circumstances, many of which are beyond our control, and that are difficult to predict as to timing, extent, likelihood and degree of occurrence, and that could cause actual results to differ materially from the results implied or anticipated by the statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements, in addition to those referenced in Part II, Item 1A of this Report - “Risk Factors” - include, but are not limited to the following:

•negative economic and political conditions that adversely affect the general economy, housing prices, the real estate market, the job market, consumer confidence, the financial condition of our borrowers and consumer spending habits, which may affect, among other things, the levels of non-performing assets, charge-offs and provision expense;

•changes in loan underwriting, credit review or loss policies associated with economic conditions, examination conclusions or regulatory developments, either as they currently exist or as they may be affected by conditions associated with the COVID-19 pandemic;

•the COVID-19 pandemic and its continuing effects on the economic and business environments in which we operate;

•strategic, market, operational, liquidity and interest rate risks associated with our business;

•continuation of historically low interest rates coupled with other potential fluctuations or unanticipated changes in the interest rate environment, including interest rate changes made by the Federal Reserve, the discontinuation of LIBOR as an interest rate benchmark, and cash flow reassessments, may reduce net interest margin and/or the volumes and values of loans made or held as well as the value of other financial assets;

•our lack of geographic diversification and any unanticipated or greater than anticipated adverse conditions in the national or local economies in which we operate;

•our loan concentration in industries or sectors that may experience unanticipated or anticipated adverse conditions greater than other industries or sectors in the national or local economies in which we operate;

•the risks of expansion into new geographic or product markets;

•risks with respect to future mergers or acquisitions, including our ability to successfully expand and complete acquisitions and integrate businesses and operations that we acquire;

•our ability to attract and retain key employees;

•competition from financial institutions and other financial service providers, including non-bank financial technology providers, and our ability to attract customers from other financial institutions;

•losses due to fraudulent and negligent conduct of our customers, third party service providers or employees;

•cybersecurity risks and the vulnerability of our network and online banking portals, and the systems of parties with whom we contract, to unauthorized access, computer viruses, phishing schemes, spam attacks, human error, natural disasters, power loss and other security breaches that could adversely affect our business and financial performance or reputation;

•our reliance on third parties to provide key components of our business infrastructure and services required to operate our business;

•the risk that we may be required to make substantial expenditures to keep pace with regulatory initiatives and the rapid technological changes in the financial services market;

•the availability of and access to capital;

•legislative, regulatory or accounting changes that may adversely affect us;

•volatility in the ACL resulting from the CECL methodology, either alone or as that may be affected by conditions arising out of the COVID-19 pandemic;

•adverse results (including judgments, costs, fines, reputational harm, inability to obtain necessary approvals and/or other negative effects) from current or future litigation, regulatory proceedings, examinations, investigations, or similar matters, or developments related thereto;

•any matter that would cause us to conclude that there was impairment of any asset, including intangible assets, such as goodwill;

•limitations on our ability to declare and pay dividends and other distributions from the Bank to the Holding Company, which could affect Holding Company liquidity, including the ability to pay dividends to shareholders or undertake other capital initiatives, such as share repurchases; and

•other risks and uncertainties disclosed in documents filed or furnished by us with or to the SEC, any of which could cause actual results to differ materially from future results expressed, implied or otherwise anticipated by such forward-looking statements.

We caution readers that the foregoing list of factors is not exclusive, is not necessarily in order of importance and readers should not place undue reliance on forward-looking statements. Additional factors that may cause actual results to differ materially from those contemplated by any forward-looking statements also may be found in our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K filed with the SEC and available at the SEC’s website at http://www.sec.gov. We do not intend to and, except as required by law, hereby disclaim any obligation to update or revise any forward-looking statement contained in this Form 10-Q, which speaks only as of the date hereof, whether as a result of new information, future events, or otherwise. The financial statements and information contained herein have not been reviewed, or confirmed for accuracy or relevance, by the FDIC or any other regulator.

Part I. FINANCIAL INFORMATION

Item 1. Financial Statements


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


(in thousands, except share data)	March 31, 2021		December 31, 2020
ASSETS
Cash and due from banks	$	126,164	$	148,896
Interest-bearing deposits in banks	1,207,949		1,459,723
Cash and cash equivalents	1,334,113		1,608,619
Debt securities available-for-sale	3,744,280		3,224,721
Debt securities held-to-maturity (fair value $586,828 and $437,193, respectively)	587,696		420,361
Loans held for sale at fair value	164,979		105,433
Loans and leases held for investment	11,678,544		11,370,815
Less allowance for credit losses - loans and leases	(126,866)		(137,010)
Loans and leases, net	11,551,678		11,233,805
Premises and equipment, net	216,752		218,489
Bank owned life insurance	202,817		201,969
Accrued interest receivable	46,278		47,672
Net deferred tax asset	39,338		38,411
Derivative financial instruments	63,897		86,666
Goodwill and other intangible assets, net	380,838		381,823
Other assets	224,242		226,405
Total assets	$	18,556,908	$	17,794,374
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Deposits:
Noninterest-bearing demand	$	6,058,439	$	5,390,291



Interest-bearing deposits	9,934,781		9,842,067


Total deposits	15,993,220		15,232,358


Long-term debt	311,591		326,956
Derivative financial instruments	33,455		29,003
Accrued expenses and other liabilities	187,558		198,527
Total liabilities	16,525,824		15,786,844
Shareholders' equity:
Preferred stock, $1 par value: 10,000,000 shares authorized; Series I, $25,000 per share liquidation preference; 4,000 shares issued and outstanding	96,422		96,422
Common stock, $1 par value: 150,000,000 shares authorized; 86,776,508 and 86,675,279 shares issued and outstanding, respectively	86,777		86,675
Common stock issuable: 565,904 and 600,834 shares, respectively	10,485		10,855
Capital surplus	1,640,583		1,638,999
Retained earnings	192,185		136,869
Accumulated other comprehensive income	4,632		37,710
Total shareholders' equity	2,031,084		2,007,530
Total liabilities and shareholders' equity	$	18,556,908	$	17,794,374

See accompanying notes to consolidated financial statements (unaudited).


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


	Three Months Ended March 31,
(in thousands, except per share data)		2021		2020

Interest revenue:
Loans, including fees		$	125,726	$	118,063
Investment securities, including tax exempt of $2,150 and $1,523, respectively		15,448		17,394
Deposits in banks and short-term investments		368		1,090
Total interest revenue		141,542		136,547

Interest expense:






Deposits		5,219		15,075
Short-term borrowings		—		1
Federal Home Loan Bank advances		2		1
Long-term debt		4,257		2,864
Total interest expense		9,478		17,941
Net interest revenue		132,064		118,606
(Release of) provision for credit losses		(12,281)		22,191
Net interest revenue after provision for credit losses		144,345		96,415

Noninterest income:
Service charges and fees		7,570		8,638
Mortgage loan gains and other related fees		22,572		8,310
Wealth management fees		3,505		1,640
Gains from sales of other loans, net		1,030		1,674

Other		10,028		5,552
Total noninterest income		44,705		25,814
Total revenue		189,050		122,229

Noninterest expenses:
Salaries and employee benefits		60,585		51,358
Communications and equipment		7,203		5,946
Occupancy		6,956		5,714
Advertising and public relations		1,199		1,274
Postage, printing and supplies		1,822		1,670
Professional fees		4,234		4,097
Lending and loan servicing expense		2,877		2,293
Outside services - electronic banking		2,218		1,832
FDIC assessments and other regulatory charges		1,896		1,484
Amortization of intangibles		985		1,040
Merger-related and other charges		1,543		808
Other		3,676		4,022
Total noninterest expenses		95,194		81,538
Net income before income taxes		93,856		40,691
Income tax expense		20,150		8,807
Net income		$	73,706	$	31,884

Net income available to common shareholders		$	71,525	$	31,641

Net income per common share:
Basic		$	0.82	$	0.40
Diluted		0.82		0.40
Weighted average common shares outstanding:
Basic		87,322		79,340
Diluted		87,466		79,446

See accompanying notes to consolidated financial statements (unaudited).


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


(in thousands)	Three Months Ended March 31,
		Before-tax Amount		Tax (Expense) Benefit		Net of Tax Amount
2021
Net income		$	93,856	$	(20,150)	$	73,706
Other comprehensive income:

Unrealized losses on available-for-sale securities		(50,235)		12,550		(37,685)



Derivative instruments designated as cash flow hedges:
Unrealized holding gains on derivatives arising during the period		5,783		(1,477)		4,306
Reclassification of losses on derivative instruments realized in net income		144		(37)		107
Net cash flow hedge activity		5,927		(1,514)		4,413


Amortization of prior service cost and actuarial losses included in net periodic pension cost for defined benefit pension plan		261		(67)		194


Total other comprehensive loss		(44,047)		10,969		(33,078)
Comprehensive income		$	49,809	$	(9,181)	$	40,628

2020
Net income		$	40,691	$	(8,807)	$	31,884
Other comprehensive income:

Unrealized gains on available-for-sale securities		13,685		(3,433)		10,252


Amortization of losses included in net income on available-for-sale securities transferred to held-to-maturity		83		(20)		63





Amortization of prior service cost and actuarial losses included in net periodic pension cost for defined benefit pension plan		214		(54)		160


Total other comprehensive income		13,982		(3,507)		10,475
Comprehensive income		$	54,673	$	(12,314)	$	42,359

See accompanying notes to consolidated financial statements (unaudited).


UNITED COMMUNITY BANKS, INC.
Consolidated Statement of Changes in Shareholders’ Equity (Unaudited)
(in thousands except share data)


	Shares of Common Stock	Preferred Stock		Common Stock		Common Stock Issuable		Capital Surplus		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total

Balance at December 31, 2020	86,675,279	$	96,422	$	86,675	$	10,855	$	1,638,999	$	136,869	$	37,710	$	2,007,530
Net income										73,706				73,706
Other comprehensive loss												(33,078)		(33,078)

Preferred stock dividends										(1,719)				(1,719)
Common stock dividends ($0.19 per share)										(16,671)				(16,671)

Impact of equity-based compensation awards	35,170			36		576		404						1,016
Impact of other United sponsored equity plans	66,059			66		(946)		1,180						300
Balance at March 31, 2021	86,776,508	$	96,422	$	86,777	$	10,485	$	1,640,583	$	192,185	$	4,632	$	2,031,084

Balance at December 31, 2019	79,013,729	$	—	$	79,014	$	11,491	$	1,496,641	$	40,152	$	8,394	$	1,635,692
Net income										31,884				31,884
Other comprehensive income												10,475		10,475
Purchases of common stock	(826,482)			(827)				(19,955)						(20,782)
Common stock dividends ($0.18 per share)										(14,301)				(14,301)
Impact of equity-based compensation awards	24,005			24		665		1,315						2,004
Impact of other United sponsored equity plans	72,292			73		(1,622)		718						(831)
Adoption of new accounting standard										(3,529)				(3,529)
Balance at March 31, 2020	78,283,544	$	—	$	78,284	$	10,534	$	1,478,719	$	54,206	$	18,869	$	1,640,612

See accompanying notes to consolidated financial statements (unaudited).


UNITED COMMUNITY BANKS, INC.
Consolidated Statements of Cash Flows (Unaudited)


	Three Months Ended March 31,
(in thousands)	2021		2020
Operating activities:
Net income	$	73,706	$	31,884
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation, amortization and accretion, net	(681)		1,894
(Release of) provision for credit losses	(12,281)		22,191
Stock based compensation	1,507		2,492
Deferred income tax expense	9,172		1,292

Gains from sales of other loans, net	(1,030)		(1,674)

Changes in assets and liabilities:
Other assets and accrued interest receivable	15,165		(45,851)
Accrued expenses and other liabilities	8,652		8,456
Loans held for sale	(59,546)		(31,475)
Net cash provided by (used in) operating activities