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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 June 30, 2023
OR
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from ___________ to ___________
Commission file number 001-35095
UNITED COMMUNITY BANKS, INC.
(Exact name of registrant as specified in its charter)
Georgia 58-1807304
(State of incorporation) (I.R.S. Employer Identification No.)
125 Highway 515 East 
Blairsville, Georgia
30512
(Address of principal executive offices)(Zip code)
(706) 781-2265
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading Symbol(s)Name of Each Exchange on Which Registered
Common stock, par value $1 per shareUCBINasdaq Global Select Market
Depositary shares, each representing 1/1000th interest in a share of
Series I Non-Cumulative Preferred Stock		UCBIONasdaq 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 118,853,361 shares of the registrant’s common stock, par value $1 per share, outstanding as of July 31, 2023.


UNITED COMMUNITY BANKS, INC.
FORM 10-Q
INDEX
 Item 1.Financial Statements 
  
    
  
    
  
  
    
    
  
    
 
    
 
    
 
    
    
 
 
 
 

2

Glossary of Defined Terms

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

TermDefinition
2022 10-K
United’s Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on February 24, 2023
ACLAllowance for credit losses
AFSAvailable-for-sale
ALCOAsset/Liability Management Committee
AOCIAccumulated other comprehensive income (loss)
ARRAlternative reference rate
ASUAccounting standards update
BankUnited Community Bank
BoardUnited Community Banks Inc., Board of Directors
BOLIBank-owned life insurance
CECLCurrent expected credit loss
CET1Common equity tier 1
CMEChicago Mercantile Exchange
CompanyUnited Community Banks Inc. (interchangeable with "United" below)
CVACredit valuation adjustment
FASBFinancial Accounting Standards Board
FDICFederal Deposit Insurance Corporation
FDMModification made to borrowers experiencing financial difficulty
Federal ReserveFederal Reserve System
First MiamiFirst Miami Bancorp, Inc. and its wholly-owned subsidiary, First National Bank of South Miami
FHLBFederal Home Loan Bank
FOMCFederal Reserve’s Federal Open Markets Committee
FTEFully taxable equivalent
GAAPAccounting principles generally accepted in the United States of America
GSEU.S. government-sponsored enterprise
HELOCHome equity lines of credit
Holding CompanyUnited Community Banks, Inc. on an unconsolidated basis
HTMHeld-to-maturity
LIBORLondon Interbank Offered Rate
LIHTCLow- income housing tax credit
MD&AManagement's Discussion and Analysis of Financial Condition and Results of Operations
MBSMortgage-backed securities
NOWNegotiable order of withdrawal
NPANonperforming asset
OCIOther comprehensive income (loss)
OREOOther real estate owned
PCDPurchased credit deteriorated
Progress
Progress Financial Corporation and its wholly-owned subsidiary, Progress Bank & Trust
Reliant
Reliant Bancorp, Inc. and its wholly-owned subsidiary, Reliant Bank
Report
Quarterly Report on Form 10-Q for the quarterly period ending June 30, 2023
SBAUnited States Small Business Administration
SECSecurities and Exchange Commission
SOFRSecured Overnight Financing Rate
TDRTroubled debt restructuring
U.S. TreasuryUnited States Department of the Treasury
UnitedUnited Community Banks, Inc. and its direct and indirect subsidiaries
USDAUnited States Department of Agriculture
VIEVariable interest entity
3

Cautionary Note Regarding Forward-looking Statements
 
This Report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are neither statements of historical or current fact nor are they assurances 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 include, but are not limited to the following:

•negative economic and political conditions that adversely affect the general economy, the banking sector, 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 NPAs, charge-offs and provision expense;
•changes in loan underwriting, credit review or loss policies associated with economic conditions, examination conclusions or regulatory developments;
•the potential effects of pandemics or public health conditions on the economic and business environments in which we operate;
•strategic, market, operational, liquidity and interest rate risks associated with our business;
•potential fluctuations or unanticipated changes in the interest rate environment, including interest rate changes made by the Federal Reserve, replacements of LIBOR and replacement or reform of other interest rate benchmarks, as well as 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;
•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 greater than anticipated adverse conditions 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 our ability to identify and complete future mergers or acquisitions as well as our ability to successfully expand and integrate those 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 or 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 affecting our business;
•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 its ability to pay dividends to shareholders or take other capital actions;
•the potential effects of events beyond our control that may have a destabilizing effect on financial markets and the economy, such as war or terrorist activities, the Russian invasion of Ukraine, disruptions in our customers’ supply chains, disruptions in transportation, essential utility outages or trade disputes and related tariffs; 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 2022 10-K (including the “Risk Factor” section of that report), 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 Report, which speaks only as of the date of its filing with the SEC, 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.

4

Part I. FINANCIAL INFORMATION
Item 1. Financial Statements

UNITED COMMUNITY BANKS, INC.
Consolidated Balance Sheets (Unaudited)
(in thousands, except share data)
June 30,
2023		December 31,
2022
ASSETS  
Cash and due from banks$267,075 $195,771 
Interest-bearing deposits in banks443,661 316,082 
Federal funds and other short-term investments— 135,000 
Cash and cash equivalents710,736 646,853 
Debt securities available-for-sale3,359,989 3,614,333 
Debt securities held-to-maturity (fair value $2,132,396 and $2,191,073, respectively)
2,553,835 2,613,648 
Loans held for sale 27,104 13,600 
Loans and leases held for investment17,394,845 15,334,627 
Less allowance for credit losses - loans and leases(190,705)(159,357)
Loans and leases, net17,204,140 15,175,270 
Premises and equipment, net353,317 298,456 
Bank owned life insurance342,966 299,297 
Goodwill and other intangible assets, net957,823 779,248 
Other assets610,287 568,179 
Total assets$26,120,197 $24,008,884 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Deposits:
Noninterest-bearing demand$6,970,668 $7,643,081 
Interest-bearing deposits15,281,320 12,233,426 
Total deposits22,251,988 19,876,507 
Short-term borrowings— 158,933 
Federal Home Loan Bank advances— 550,000 
Long-term debt324,754 324,663 
Accrued expenses and other liabilities437,864 398,107 
Total liabilities23,014,606 21,308,210 
Shareholders' equity:
Preferred stock, $1 par value: 10,000,000 shares authorized; 3,989 and 4,000 shares Series I issued and
  outstanding, respectively; $25,000 per share liquidation preference
96,165 96,422 
Common stock, $1 par value: 200,000,000 shares authorized,
  115,265,912 and 106,222,758 shares issued and outstanding, respectively
115,266 106,223 
Common stock issuable: 587,775 and 607,128 shares, respectively
12,228 12,307 
Capital surplus2,610,523 2,306,366 
Retained earnings577,316 508,844 
Accumulated other comprehensive loss(305,907)(329,488)
Total shareholders' equity3,105,591 2,700,674 
Total liabilities and shareholders' equity$26,120,197 $24,008,884 
 
See accompanying notes to consolidated financial statements (unaudited).
5

UNITED COMMUNITY BANKS, INC.
Consolidated Statements of Income (Unaudited)
(in thousands, except per share data)
Three Months Ended
June 30,		Six Months Ended
June 30,
2023202220232022
Interest revenue:  
Loans, including fees$250,484 $155,266 $486,915 $302,007 
Investment securities, including tax exempt of $1,731, $2,539, $3,841 and $5,194, respectively
41,060 30,425 81,046 54,090 
Deposits in banks and short-term investments4,231 1,687 7,301 2,340 
Total interest revenue295,775 187,378 575,262 358,437 
Interest expense:
Deposits89,217 4,302 147,078 7,433 
Short-term borrowings1,849 — 2,997 — 
Federal Home Loan Bank advances649 — 5,761 — 
Long-term debt3,774 4,173 7,670 8,309 
Total interest expense95,489 8,475 163,506 15,742 
Net interest revenue200,286 178,903 411,756 342,695 
Provision for credit losses22,753 5,604 44,536 28,690 
Net interest revenue after provision for credit losses177,533 173,299 367,220 314,005 
Noninterest income:
Service charges and fees9,777 10,005 18,476 19,075 
Mortgage loan gains and other related fees6,584 6,971 11,105 23,123 
Wealth management fees5,600 5,985 11,324 11,880 
Gains from sales of other loans, net2,305 3,800 4,221 6,998 
Lending and loan servicing fees2,978 1,586 6,994 4,572 
Securities gains (losses), net— 46 (1,644)(3,688)
Other9,143 5,065 16,120 10,471 
Total noninterest income36,387 33,458 66,596 72,431 
Total revenue213,920 206,757 433,816 386,436 
Noninterest expenses:
Salaries and employee benefits76,250 69,233 154,948 140,239 
Communications and equipment10,744 9,675 20,752 18,923 
Occupancy10,194 8,865 20,083 18,243 
Advertising and public relations2,314 2,300 4,663 3,788 
Postage, printing and supplies2,382 1,999 4,919 4,118 
Professional fees6,592 5,402 12,664 9,849 
Lending and loan servicing expense2,530 3,047 4,849 5,413 
Outside services - electronic banking2,660 2,947 6,085 5,470 
FDIC assessments and other regulatory charges4,142 2,267 8,143 4,440 
Amortization of intangibles3,421 1,736 6,949 3,529 
Merger-related and other charges3,645 7,143 12,276 16,159 
Other7,533 6,176 15,881 9,894 
Total noninterest expenses132,407 120,790 272,212 240,065 
Income before income taxes81,513 85,967 161,604 146,371 
Income tax expense18,225 19,125 36,016 31,510 
Net income$63,288 $66,842 $125,588 $114,861 
Net income available to common shareholders$61,227 $64,761 $121,470 $110,827 
Net income per common share:
Basic$0.53 $0.61 $1.05 $1.04 
Diluted0.53 0.61 1.05 1.04 
Weighted average common shares outstanding:
Basic115,774 106,610 115,614 106,580 
Diluted115,869 106,716 115,795 106,697 
See accompanying notes to consolidated financial statements (unaudited). 
6

UNITED COMMUNITY BANKS, INC.
Consolidated Statements of Comprehensive Income (Loss) (Unaudited)
(in thousands)
Three Months Ended June 30,Six Months Ended June 30,
Before-tax
Amount
Tax
(Expense)
Benefit
Net of Tax
Amount		Before-tax
Amount		Tax
(Expense)
Benefit		Net of Tax
Amount
2023
Net income$81,513 $(18,225)$63,288 $161,604 $(36,016)$125,588 
Other comprehensive income:
Unrealized gains (losses) on available-for-sale securities:
Unrealized holding gains (losses)(19,753)4,782 (14,971)23,526 (5,502)18,024 
Reclassification adjustment for losses included in net income— — — 1,644 (374)1,270 
Net unrealized gains (losses)(19,753)4,782 (14,971)25,170 (5,876)19,294 
Amortization of unrealized losses on held-to-maturity securities transferred from available-for-sale2,518 (604)1,914 5,486 (1,324)4,162 
Derivative instruments designated as cash flow hedges:
Unrealized holding gains on derivatives3,303 (843)2,460 2,101 (536)1,565 
Gains on derivative instruments realized in net income(1,234)315 (919)(2,056)525 (1,531)
Net cash flow hedge activity2,069 (528)1,541 45 (11)34 
Amortization of defined benefit pension plan net periodic pension cost components61 (15)46 122 (31)91 
Total other comprehensive income (loss)(15,105)3,635 (11,470)30,823 (7,242)23,581 
Comprehensive income$66,408 $(14,590)$51,818 $192,427 $(43,258)$149,169 
2022
Net income$85,967 $(19,125)$66,842 $146,371 $(31,510)$114,861 
Other comprehensive loss:
Unrealized losses on available-for-sale securities:
Unrealized holding losses(120,968)28,801 (92,167)(324,853)76,774 (248,079)
Reclassification of securities from available-for-sale to held-to-maturity30,041 (7,178)22,863 87,444 (20,770)66,674 
Reclassification adjustment for (gains) losses included in net income(46)11 (35)3,688 (979)2,709 
Net unrealized losses(90,973)21,634 (69,339)(233,721)55,025 (178,696)
Unrealized losses on held-to-maturity securities transferred from available-for-sale:
  Reclassification of unrealized losses(30,041)7,178 (22,863)(87,444)20,770 (66,674)
  Amortization of unrealized losses1,769 (422)1,347 1,769 (422)1,347 
Net activity(28,272)6,756 (21,516)(85,675)20,348 (65,327)
Derivative instruments designated as cash flow hedges:
Unrealized holding gains on derivatives2,412 (616)1,796 7,880 (2,013)5,867 
Losses on derivative instruments realized in net income106 (27)79 247 (63)184 
Net cash flow hedge activity2,518 (643)1,875 8,127 (2,076)6,051 
Amortization of defined benefit pension plan net periodic pension cost components171 (44)127 341 (87)254 
Total other comprehensive loss(116,556)27,703 (88,853)(310,928)73,210 (237,718)
Comprehensive loss$(30,589)$8,578 $(22,011)$(164,557)$41,700 $(122,857)

See accompanying notes to consolidated financial statements (unaudited).
7

UNITED COMMUNITY BANKS, INC.
Consolidated Statement of Changes in Shareholders’ Equity (Unaudited)
(in thousands except share data) 
Shares of Common StockPreferred StockCommon StockCommon Stock IssuableCapital SurplusRetained EarningsAccumulated
Other Comprehensive Income (Loss)		Total
Balance at March 31, 2022106,025,210 $96,422 $106,025 $11,311 $2,302,189 $354,409 $(175,341)$2,695,015 
Net income66,842 66,842 
Other comprehensive loss(88,853)(88,853)
Preferred stock dividends(1,719)(1,719)
Common stock dividends ($0.21 per share)
(22,562)(22,562)
Impact of equity-based compensation awards6,520 7 10 2,347 2,364 
Impact of other United sponsored equity plans2,230 2 127 72 201 
Balance at June 30, 2022106,033,960 $96,422 $106,034 $11,448 $2,304,608 $396,970 $(264,194)$2,651,288 
Balance at March 31, 2023115,151,566 $96,422 $115,152 $11,977 $2,606,403 $542,606 $(294,437)$3,078,123 
Net income63,288 63,288 
Other comprehensive loss(11,470)(11,470)
Preferred stock dividends(1,719)(1,719)
Common stock dividends ($0.23 per share)
(26,859)(26,859)
Purchases of preferred stock(257)35 (222)
Impact of equity-based compensation awards110,414 110 125 3,989 4,224 
Impact of other United sponsored equity plans3,932 4 126 96 226 
Balance at June 30, 2023115,265,912 $96,165 $115,266 $12,228 $2,610,523 $577,316 $(305,907)$3,105,591 
Balance at December 31, 202189,349,826 $96,422 $89,350 $11,288 $1,721,007 $330,654 $(26,476)$2,222,245 
Net income114,861 114,861 
Other comprehensive loss(237,718)(237,718)
Impact of acquisitions16,571,545 16,571 579,805 596,376 
Preferred stock dividends(3,438)(3,438)
Common stock dividends ($0.42 per share)
(45,107)(45,107)
Impact of equity-based compensation awards49,443 50 1,454 3,053 4,557 
Impact of other United sponsored equity plans63,146 63 (1,294)743 (488)
Balance at June 30, 2022106,033,960 $96,422 $106,034 $11,448 $2,304,608 $396,970 $(264,194)$2,651,288 
Balance at December 31, 2022106,222,758 $96,422 $106,223 $12,307 $2,306,366 $508,844 $(329,488)$2,700,674 
Net income125,588 125,588 
Other comprehensive income23,581 23,581 
Impact of acquisitions8,770,531 8,771 297,690 306,461 
Purchases of preferred stock(257)35 (222)
Preferred stock dividends(3,438)(3,438)
Common stock dividends ($0.46 per share)
(53,678)(53,678)
Impact of equity-based compensation awards232,302 232 623 5,889 6,744 
Impact of other United sponsored equity plans40,321 40 (702)543 (119)
Balance at June 30, 2023115,265,912 $96,165 $115,266 $12,228 $2,610,523 $577,316 $(305,907)$3,105,591 
See accompanying notes to consolidated financial statements (unaudited).
8

UNITED COMMUNITY BANKS, INC.
Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
Six Months Ended June 30,
20232022
Operating activities:  
Net income$125,588 $114,861 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion, net23,592 22,086 
Provision for credit losses44,536 28,690 
Stock based compensation4,790 4,861 
Deferred income tax expense5,599 4,361 
Securities losses, net1,644 3,688 
Gains from sales of other loans(4,221)(6,998)
Changes in assets and liabilities:
Other assets(2,962)6,317 
Accrued expenses and other liabilities(2,128)49,707 
Loans held for sale(11,417)119,837 
Net cash provided by operating activities185,021 347,410 
Investing activities:
Debt securities held-to-maturity:
Proceeds from maturities and calls63,602 90,576 
Purchases— (326,494)
Debt securities available-for-sale:
Proceeds from sales380,661 281,521 
Proceeds from maturities and calls179,586 336,511 
Purchases(186,810)(1,498,515)
Net increase in loans(618,464)(435,015)
Equity investments, outflows(122,923)(23,016)
Equity investments, inflows122,576 16,241 
Proceeds from sales of premises and equipment2,169 4,792 
Purchases of premises and equipment(43,809)(16,774)
Net cash received in acquisition57,101 35,243 
Other investing inflows2,846 1,226 
Net cash used in investing activities(163,465)(1,533,704)
Financing activities:
Net increase in deposits1,040,034 128,688 
Net decrease in short-term borrowings(299,951)— 
Proceeds from FHLB advances2,225,000 — 
Repayment of FHLB advances(2,870,000)— 
Cash dividends on common stock(50,493)(40,694)
Cash dividends on preferred stock(3,438)(3,438)
Other financing inflows3,116 473 
Other financing outflows(1,941)(1,538)
Net cash provided by financing activities42,327 83,491 
Net change in cash and cash equivalents63,883 (1,102,803)
Cash and cash equivalents, beginning of period646,853 2,318,510 
Cash and cash equivalents, end of period$710,736 $1,215,707 

See accompanying notes to consolidated financial statements (unaudited). 
9
UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)


Note 1 – Basis of Presentation and Updates to Significant Accounting Policies

Basis of Presentation 
United’s accounting and financial reporting policies conform to GAAP and reporting guidelines of banking regulatory authorities. 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 2022 10-K.
 
In management’s opinion, all accounting adjustments necessary to accurately reflect the financial position and results of operations on the accompanying financial statements have been made. These adjustments are normal and recurring accruals considered necessary for a fair and accurate presentation. The results for interim periods are not necessarily indicative of results for the full year or any other interim periods. The accompanying unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes appearing in United’s 2022 10-K.

Updates to Significant Accounting Policies
Effective January 1, 2023, United adopted ASU 2022-02, which updated the guidance on modifications to financing receivables by effectively replacing the concept of troubled debt restructurings with a new concept, loan modifications to borrowers experiencing financial difficulty. See Note 2 for further detail. Below summarizes the policy surrounding FDMs.

FDMs: A loan for which the terms have been modified as a result of the borrower experiencing financial difficulty is generally considered to be a FDM. Modified terms that result in a FDM include one or a combination of the following: a reduction of the stated interest rate of the loan, an extension of the term or amortization period, a more than insignificant payment delay or principal forgiveness. The ACL on FDMs is calculated using the same method as other loans held for investment.

Note 2 – Accounting Standards Updates and Recently Adopted Standards

Recently Adopted Standards
In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from contracts with Customers. The update requires that an acquiring entity apply the guidance from Revenue from Contracts with Customers (Topic 606) to recognize and measure contract assets and contract liabilities in a business combination, rather than fair value. Adoption of this update as of January 1, 2023 did not have a material impact on the consolidated financial statements.

In March 2022, the FASB issued ASU No. 2022-01, Derivatives and Hedging (Topic 815): Fair Value Hedging - Portfolio Layer Method. The update expands the current last-of-layer method to a portfolio layer method which allows multiple hedged layers of a single closed portfolio and non-prepayable financial assets. In addition, the update specifies that eligible hedging instruments may include spot-starting or forward-starting swaps and that the number of hedged layers corresponds with the number of hedges designated. Finally, the update provides additional guidance on the accounting for and disclosure of hedge basis adjustments. Adoption of this update as of January 1, 2023 did not have a material impact on the consolidated financial statements.

In March 2022, the FASB issued ASU No. 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures. The update eliminates the previous accounting guidance for TDRs by creditors, while enhancing disclosure requirements for certain loan refinancings and restructurings when a borrower is experiencing financial difficulty. The update also requires that an entity disclose current-period gross charge-offs by year of origination. United adopted this update using a modified retrospective transition method as of January 1, 2023. The quantitative impact of adoption related to the CECL calculation for FDMs was not material; thus, no corresponding cumulative effect adjustment to retained earnings was recorded.

Recently Issued Standards
In March 2022, the FASB issued ASU No 2023-02, Investments - Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method. The update broadens the application of the proportional amortization method to tax equity investments other than LIHTC, providing certain conditions are met. The election to apply the proportional amortization method must be made on a tax-credit-program by tax-credit-program basis rather than at the reporting entity level or to individual investments. The update also requires certain disclosures related to those investments for which the proportional amortization method has been applied. For public entities, this guidance is effective for fiscal years beginning after December 15, 2023. United does not expect the new guidance to have a material impact on the consolidated financial statements.


10
UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)

Note 3 – Supplemental Cash Flow Information

The supplemental schedule of significant non-cash investing and financing activities for the six months ended June 30, 2023 and 2022 is as follows (in thousands).
Six Months Ended June 30,
20232022
Significant non-cash investing and financing transactions:
Commitments to fund equity investments $11,093 $— 
Transfers of AFS securities to HTM securities— 1,288,982 
Acquisitions:
  Assets acquired1,903,930 3,254,173 
  Liabilities assumed1,597,022 2,657,173 
  Net assets acquired306,908 597,000 
  Common stock issued and options converted306,461 596,376 

11
UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)

Note 4 – Acquisitions

Acquisition of Progress
On January 3, 2023, United acquired all of the outstanding common stock of Progress in a stock transaction. Progress operated 13 offices primarily located in Alabama and the Florida Panhandle, which facilitated United’s growth into those markets. United’s operating results for the three and six months ended June 30, 2023 include the operating results of the acquired business for the period subsequent to the acquisition date of January 3, 2023.
 
The purchased assets and assumed liabilities were recorded at their acquisition date fair values and are summarized in the table below (dollars in thousands). 
Progress
Fair Value Recorded by United (1)
 January 3, 2023
Assets
Cash and cash equivalents$57,548 
Debt securities111,006 
Loans held for sale2,087 
Loans held for investment1,442,959 
Premises and equipment21,118 
Bank-owned life insurance40,723 
Core deposit intangible39,980 
Other assets42,965 
Total assets acquired1,758,386 
Liabilities
Deposits1,334,476 
Short-term borrowings141,017 
Federal Home Loan Bank advances95,000 
Other liabilities26,529 
Total liabilities assumed1,597,022 
Total identifiable net assets161,364 
Consideration transferred
Cash447 
Common stock issued (8,770,531 shares)
296,444 
Options converted10,017 
Total fair value of consideration transferred306,908 
Goodwill$145,544 

(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.

Goodwill represents the intangible value of Progress’ business and reputation within the markets it served and is not expected to be deductible for income tax purposes. The Progress core deposit intangible will be amortized over its expected useful life of 10 years using the sum-of-the-years-digits method.

12
UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)

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

January 3, 2023
PCD loans:
Par value$64,913 
ACL at acquisition(2,704)
Non-credit discount(150)
Purchase price$62,059 
Non-PCD loans:
Fair value$1,380,900 
Gross contractual amounts receivable1,626,243 
Estimate of contractual cash flows not expected to be collected9,287 

Pro forma information
 
The following table discloses the impact of the Progress acquisition since the date of acquisition. The table also presents certain pro forma information as if Progress had been acquired on January 1, 2022 and Reliant had been acquired on January 1, 2021. These results combine the historical results of the acquired entities with United’s consolidated statement of income. Adjustments were made for the estimated impact of certain fair value adjustments and other acquisition-related activity; however pro forma financial results presented are not necessarily indicative of what would have occurred had the acquisitions taken place in earlier years.
 
Merger-related costs related to the Progress acquisition for the three and six months ended June 30, 2023 of $2.29 million and $9.78 million, respectively, have been excluded from the pro forma information for those periods presented below and included in the three and six months ended June 30, 2022 pro forma information. Merger-related costs related to the Reliant acquisition for the three and six months ended June 30, 2022 of $5.46 million and $14.0 million, respectively, have been excluded from the pro forma information presented below. The actual results and pro forma information were as follows (in thousands):
 Three Months Ended
June 30,		Six Months Ended
June 30,
 RevenueNet IncomeRevenueNet Income
2023  
Actual Progress results included in statement of income since acquisition date$17,969 $3,288 $24,621 $5,098 
Supplemental consolidated pro forma as if Progress had been acquired January 1, 2022213,509 64,832 443,050 140,041 
2022
Actual Reliant results included in statement of income since acquisition date$29,172 $15,550 $43,086 $16,148 
Supplemental consolidated pro forma as if Progress had been acquired January 1, 2022 and Reliant had been acquired January 1, 2021 $225,984 $73,656 $430,853 $131,038 


13
UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)

Note 5 – Investment Securities

The amortized cost basis, unrealized gains and losses and fair value of HTM debt securities as of the dates indicated are as follows (in thousands).
Amortized
Cost		Gross Unrealized
Gains		Gross Unrealized
Losses		Fair
Value
As of June 30, 2023    
U.S. Treasuries$19,849 $— $2,354 $17,495 
U.S. Government agencies & GSEs99,779 — 17,112 82,667 
State and political subdivisions294,920 23 56,274 238,669 
Residential MBS, Agency & GSEs1,438,048 13 222,256 1,215,805 
Commercial MBS, Agency & GSEs686,239 — 120,831 565,408 
Supranational entities15,000 — 2,648 12,352 
Total$2,553,835 $36 $421,475 $2,132,396 
As of December 31, 2022
U.S. Treasuries$19,834 $— $2,417 $17,417 
U.S. Government agencies & GSEs99,679 — 18,169 81,510 
State and political subdivisions295,945 56 64,340 231,661 
Residential MBS, Agency & GSEs1,488,028 35 223,566 1,264,497 
Commercial MBS, Agency & GSEs695,162 — 111,586 583,576 
Supranational entities$15,000 $— $2,588 $12,412 
Total$2,613,648 $91 $422,666 $2,191,073 

The amortized cost basis, unrealized gains and losses, and fair value of AFS debt securities as of the dates indicated are presented below (in thousands). During the second quarter of 2023, United entered into fair value hedges on stated amounts of a closed portfolio of AFS debt securities using the portfolio layer method, which is further explained in Note 7.
Amortized
Cost		Gross Unrealized
Gains		Gross Unrealized
Losses		Fair
Value
As of June 30, 2023    
U.S. Treasuries$347,029 $34 $13,640 $333,423 
U.S. Government agencies & GSEs252,981 295 16,180 237,096 
State and political subdivisions183,201 — 22,100 161,101 
Residential MBS, Agency & GSEs1,445,528 — 158,964 1,286,564 
Residential MBS, Non-agency360,476 — 26,805 333,671 
Commercial MBS, Agency & GSEs669,625 — 81,276 588,349 
Commercial MBS, Non-agency31,097 — 1,008 30,089 
Corporate bonds218,886 60 22,210 196,736 
Asset-backed securities198,279 27 5,346 192,960 
Total3,707,102 416 347,529 3,359,989 
As of December 31, 2022
U.S. Treasuries$163,972 $— $14,620 $149,352 
U.S. Government agencies & GSEs266,347 463 16,694 250,116 
State and political subdivisions329,723 151 26,126 303,748 
Residential MBS, Agency & GSEs1,609,442 13 160,636 1,448,819 
Residential MBS, Non-agency374,535 — 27,873 346,662 
Commercial MBS, Agency & GSEs720,282 471 79,407 641,346 
Commercial MBS, Non-agency31,624 — 1,058 30,566 
Corporate bonds236,181 34 23,763 212,452 
Asset-backed securities239,220 — 7,948 231,272 
Total$3,971,326 $1,132 $358,125 $3,614,333 
 
14
UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)

Securities with a carrying value of $4.43 billion and $2.53 billion were pledged, primarily to secure public deposits and provide contingent liquidity through the Bank Term Funding Program at the Federal Reserve Bank, at June 30, 2023 and December 31, 2022, respectively.

The following table summarizes HTM debt securities in an unrealized loss position as of the dates indicated (in thousands).
 Less than 12 Months12 Months or MoreTotal
Fair ValueUnrealized
Loss		Fair ValueUnrealized
Loss		Fair ValueUnrealized
Loss
As of June 30, 2023      
U.S. Treasuries$— $— $17,495 $2,354 $17,495 $2,354 
U.S. Government agencies & GSEs— — 82,667 17,112 82,667 17,112 
State and political subdivisions22,629 220 211,786 56,054 234,415 56,274 
Residential MBS, Agency & GSEs55,552 3,332 1,158,955 218,924 1,214,507 222,256 
Commercial MBS, Agency & GSEs6,479 220 558,928 120,611 565,407 120,831 
Supranational entities— — 12,352 2,648 12,352 2,648 
Total unrealized loss position$84,660 $3,772 $2,042,183 $417,703 $2,126,843 $421,475 
As of December 31, 2022
U.S. Treasuries$17,417 $2,417 $— $— $17,417 $2,417 
U.S. Government agencies & GSEs10,687 1,813 70,823 16,356 81,510 18,169 
State and political subdivisions104,243 20,639 117,115 43,701 221,358 64,340 
Residential MBS, Agency & GSEs296,673 38,289 965,785 185,277 1,262,458 223,566 
Commercial MBS, Agency & GSEs176,848 24,497 406,728 87,089 583,576 111,586 
Supranational entities12,412 2,588 — — 12,412 2,588 
Total unrealized loss position$618,280 $90,243 $1,560,451 $332,423 $2,178,731 $422,666 
 
The following table summarizes AFS debt securities in an unrealized loss position as of the dates indicated (in thousands).
 Less than 12 Months12 Months or MoreTotal
Fair ValueUnrealized
Loss		Fair ValueUnrealized
Loss		Fair ValueUnrealized
Loss
As of June 30, 2023      
U.S. Treasuries$49,170 $16 $150,685 $13,624 $199,855 $13,640 
U.S. Government agencies & GSEs64,447 509 127,787 15,671 192,234 16,180 
State and political subdivisions552 33 160,549 22,067 161,101 22,100 
Residential MBS, Agency & GSEs219,050 11,928 1,067,514 147,036 1,286,564 158,964 
Residential MBS, Non-agency8,618 320 325,053 26,485 333,671 26,805 
Commercial MBS, Agency & GSEs102,718 6,058 485,631 75,218 588,349 81,276 
Commercial MBS, Non-agency— — 30,089 1,008 30,089 1,008 
Corporate bonds8,746 879 186,121 21,331 194,867 22,210 
Asset-backed securities14,302 102 172,093 5,244 186,395 5,346 
Total unrealized loss position$467,603 $19,845 $2,705,522 $327,684 $3,173,125 $347,529 
As of December 31, 2022
U.S. Treasuries$49,259 $724 $100,093 $13,896 $149,352 $14,620 
U.S. Government agencies & GSEs93,015 2,124 108,093 14,570 201,108 16,694 
State and political subdivisions207,749 9,906 62,606 16,220 270,355 26,126 
Residential MBS, Agency & GSEs1,049,648 102,852 392,288 57,784 1,441,936 160,636 
Residential MBS, Non-agency338,399 27,095 8,263 778 346,662 27,873 
Commercial MBS, Agency & GSEs288,787 17,304 332,088 62,103 620,875 79,407 
Commercial MBS, Non-agency30,566 1,058 — — 30,566 1,058 
Corporate bonds83,010 7,776 127,603 15,987 210,613 23,763 
Asset-backed securities97,705 2,664 133,567 5,284 231,272 7,948 
Total unrealized loss position$2,238,138 $171,503 $1,264,601 $186,622 $3,502,739 $358,125 
 
15
UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)

At June 30, 2023, there were 678 AFS debt securities and 325 HTM debt securities that were in an unrealized loss position. United does not intend to sell nor does it believe it will be required to sell securities in an unrealized loss position prior to the recovery of their amortized cost basis. Unrealized losses at June 30, 2023 were primarily attributable to changes in interest rates.

At June 30, 2023 and December 31, 2022, estimated credit losses and, thus, the related ACL on HTM debt securities were de minimis due to the high credit quality of the portfolio, which included securities issued or guaranteed by U.S. Government agencies, GSEs, high credit quality municipalities and supranational entities. As a result, no ACL was recorded on the HTM portfolio at June 30, 2023 or December 31, 2022. In addition, based on the assessments performed at June 30, 2023 and December 31, 2022, there was no ACL required related to the AFS portfolio.

The following table presents accrued interest receivable for the periods indicated on HTM and AFS debt securities (in thousands), which was excluded from the estimate of credit losses.
Accrued Interest Receivable
June 30, 2023December 31, 2022
HTM$6,098 $7,234 
AFS11,859 15,281 

The amortized cost and fair value of AFS and HTM debt securities at June 30, 2023, by contractual maturity, are presented in the following table (in thousands). Expected maturities may differ from contractual maturities because issuers and borrowers may have the right to call or prepay obligations. 
 AFSHTM
 Amortized CostFair ValueAmortized CostFair Value
Within 1 year:
U.S. Treasuries$232,932 $232,830 $— $— 
U.S. Government agencies & GSEs338 331 — — 
State and political subdivisions2,027 1,955 1,200 1,194 
Corporate bonds5,177 5,014 — — 
240,474 240,130 1,200 1,194 
1 to 5 years:
U.S. Treasuries114,097 100,593 19,849 17,495 
U.S. Government agencies & GSEs39,403 35,781 — — 
State and political subdivisions15,948 14,904 28,575 26,505 
Corporate bonds156,810 142,227 — — 
326,258 293,505 48,424 44,000 
5 to 10 years:
U.S. Government agencies & GSEs71,084 63,053 73,352 61,460 
State and political subdivisions59,659 49,693 37,257 31,827 
Corporate bonds56,097 48,643 — — 
Supranational entities— — 15,000 12,352 
186,840 161,389 125,609 105,639 
More than 10 years:
U.S. Government agencies & GSEs142,156 137,931 26,427 21,207 
State and political subdivisions105,567 94,549 227,888 179,143 
Corporate bonds802 852 — — 
248,525 233,332 254,315 200,350 
Debt securities not due at a single maturity date:
Asset-backed securities198,279 192,960 — — 
Residential MBS1,806,004 1,620,235 1,438,048 1,215,805 
Commercial MBS700,722 618,438 686,239 565,408 
2,705,005 2,431,633 2,124,287 1,781,213 
Total$3,707,102 $3,359,989 $2,553,835 $2,132,396 

16
UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)

Realized gains and losses are derived using the specific identification method for determining the cost of securities sold. The following table summarizes AFS securities sales activity for the three and six months ended June 30, 2023 and 2022 (in thousands).

 Three Months Ended
June 30,		Six Months Ended
June 30,
 2023202220232022
Proceeds from sales$— $73,112 $380,661 $281,521 
Gross realized gains$— $46 $1,373 $1,009 
Gross realized losses— — (3,017)(4,697)
Securities gains (losses), net$— $46 $(1,644)$(3,688)
Income tax expense (benefit) attributable to sales$— $11 $(374)$(979)

Note 6 – Loans and Leases and Allowance for Credit Losses
 
Major classifications of the loan and lease portfolio (collectively referred to as the “loan portfolio” or “loans”) are summarized as of the dates indicated as follows (in thousands).
June 30, 2023December 31, 2022
Owner occupied commercial real estate$3,110,612 $2,734,666 
Income producing commercial real estate3,669,746 3,261,626 
Commercial & industrial2,550,191 2,252,322 
Commercial construction1,739,208 1,597,848 
Equipment financing1,510,326 1,374,251 
Total commercial12,580,083 11,220,713 
Residential mortgage2,905,293 2,355,061 
HELOC926,409 850,269 
Residential construction463,278 442,553 
Manufactured housing339,969 316,741 
Consumer179,813 149,290 
Total loans17,394,845 15,334,627 
Less allowance for credit losses - loans(190,705)(159,357)
Loans, net$17,204,140 $15,175,270 

Accrued interest receivable related to loans totaled $58.0 million and $52.0 million at June 30, 2023 and December 31, 2022, respectively, and was reported in other assets on the consolidated balance sheets. Accrued interest receivable was excluded from the estimate of credit losses.

At June 30, 2023 and December 31, 2022, the loan portfolio was subject to blanket pledges on certain qualifying loan types with the FHLB and FRB to secure contingent funding sources.

The following table presents the amortized cost of loans held for investment that were sold in the periods indicated (in thousands). The gains on these loan sales were included in noninterest income on the consolidated statements of income.
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
Guaranteed portion of SBA/USDA loans$22,072 $39,119 $43,842 $67,462 
Equipment financing receivables20,571 20,541 39,274 43,977 
Total$42,643 $59,660 $83,116 $111,439 
  
17
UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)

At June 30, 2023 and December 31, 2022, equipment financing receivables included leases of $59.8 million and $46.0 million, respectively. The components of the net investment in leases, which included both sales-type and direct financing, are presented below (in thousands).
 June 30, 2023December 31, 2022
Minimum future lease payments receivable$65,275 $49,723 
Estimated residual value of leased equipment3,670 2,804 
Initial direct costs1,131 767 
Security deposits(442)(429)
Unearned income(9,788)(6,877)
Net investment in leases$59,846 $45,988 

Minimum future lease payments expected to be received from equipment financing lease contracts as of June 30, 2023 were as follows (in thousands): 
Year 
Remainder of 2023$11,352 
202419,503 
202515,648 
202610,910 
20276,564 
Thereafter1,298 
Total$65,275 

18
UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)

Nonaccrual and Past Due Loans
The following table presents the aging of the amortized cost basis in loans by aging category and accrual status as of the dates indicated (in thousands). Past due status is based on contractual terms of the loan. The accrual of interest is generally discontinued when a loan becomes 90 days past due.
 Accruing
Current LoansLoans Past Due
30 - 59 Days60 - 89 Days> 90 DaysNonaccrual LoansTotal Loans
As of June 30, 2023
Owner occupied commercial real estate$3,105,295 $1,842 $4 $— $3,471 $3,110,612 
Income producing commercial real estate3,636,300 790 114 — 32,542 3,669,746 
Commercial & industrial2,517,176 1,532 660 — 30,823 2,550,191 
Commercial construction1,738,394 664 35 — 115 1,739,208 
Equipment financing1,494,296 4,087 2,954 — 8,989 1,510,326 
Total commercial12,491,461 8,915 3,767 — 75,940 12,580,083 
Residential mortgage2,889,244 3,408 1,222 — 11,419 2,905,293 
HELOC921,413 2,077 142 — 2,777 926,409 
Residential construction460,627 967 2 — 1,682 463,278 
Manufactured housing320,342 7,311 1,534 — 10,782 339,969 
Consumer178,646 1,063 85 — 19 179,813 
Total loans$17,261,733 $23,741 $6,752 $— $102,619 $17,394,845 
As of December 31, 2022
Owner occupied commercial real estate$2,731,574 $1,522 $1,047 $— $523 $2,734,666 
Income producing commercial real estate3,257,232 468 41 — 3,885 3,261,626 
Commercial & industrial2,234,284 3,288 274 6 14,470 2,252,322 
Commercial construction1,597,268 447 — — 133 1,597,848 
Equipment financing1,362,622 4,285 1,906 — 5,438 1,374,251 
Total commercial11,182,980 10,010 3,268 6 24,449 11,220,713 
Residential mortgage2,342,196 1,939 7 — 10,919 2,355,061 
HELOC844,888 2,709 784 — 1,888 850,269 
Residential construction441,673 20 455 — 405 442,553 
Manufactured housing302,386 6,913 924 — 6,518 316,741 
Consumer148,943 237 48 9 53 149,290 
Total loans$15,263,066 $21,828 $5,486 $15 $44,232 $15,334,627 

The following table presents nonaccrual loans held for investment by loan class for the periods indicated (in thousands). 
Nonaccrual Loans
 June 30, 2023December 31, 2022
With no allowanceWith an allowanceTotalWith no allowanceWith an allowanceTotal
Owner occupied commercial real estate$2,507 $964 $3,471 $276 $247 $523 
Income producing commercial real estate32,470 72 32,542 3,798 87 3,885 
Commercial & industrial28,665 2,158 30,823 13,917 553 14,470 
Commercial construction51 64 115 69 64 133 
Equipment financing56 8,933 8,989 85 5,353 5,438 
Total commercial63,749 12,191 75,940 18,145 6,304 24,449 
Residential mortgage1,959 9,460 11,419 2,159 8,760 10,919 
HELOC325 2,452 2,777 430 1,458 1,888 
Residential construction328 1,354 1,682 311 94 405 
Manufactured housing— 10,782 10,782 — 6,518 6,518 
Consumer3 16 19 3 50 53 
Total$66,364 $36,255 $102,619 $21,048 $23,184 $44,232 
19
UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)


Risk Ratings 
United categorizes commercial loans, with the exception of equipment financing receivables, into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, 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:

Pass. Loans in this category are considered to have a low probability of default and do not meet the criteria of the risk categories below.

Special Mention. 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.
 
Equipment Financing Receivables and Consumer Purpose Loans. United applies a pass / fail grading system to all equipment financing receivables and consumer purpose loans. Under this system, loans that are on nonaccrual status, become past due 90 days, or are in bankruptcy and 30 or more days past due are classified as “fail” and all other loans are classified as “pass”. For reporting purposes, loans in these categories that are classified as “fail” are reported as substandard and all other loans are reported as pass.

20
UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)

The following tables present the risk category of term loans and, for 2023, gross charge-offs by vintage year, which is the year of origination or most recent renewal, as of the date indicated (in thousands).
Term Loans by Origination YearRevolversRevolvers converted to term loansTotal
As of June 30, 202320232022202120202019Prior
Owner occupied commercial real estate:
Pass$359,037 $683,426 $650,179 $613,901 $214,542 $372,915 $114,607 $18,740 $3,027,347 
Special Mention1,626 5,675 6,968 6,764 8,612 5,260 3,855 268 39,028 
Substandard3,465 8,345 9,095 7,600 3,310 9,471 210 2,741 44,237 
Total owner occupied commercial real estate$364,128 $697,446 $666,242 $628,265 $226,464 $387,646 $118,672 $21,749 $3,110,612 
Current period gross charge-offs$— $— $— $— $— $207 $— $— $207 
Income producing commercial real estate:
Pass$306,457 $828,657 $750,600 $763,295 $271,098 $414,954 $52,883 $5,706 $3,393,650 
Special Mention58,790 22,100 21,311 14,353 31,383 4,974 — — 152,911 
Substandard22,314 33,196 998 17,216 17,664 31,738 — 59 123,185 
Total income producing commercial real estate$387,561 $883,953 $772,909 $794,864 $320,145 $451,666 $52,883 $5,765 $3,669,746 
Current period gross charge-offs$— $3,033 $— $— $— $1,781 $— $— $4,814 
Commercial & industrial
Pass$391,898 $545,473 $366,189 $159,719 $121,611 $184,837 $600,042 $15,490 $2,385,259 
Special Mention209 478 4,385 476 88 855 18,596 181 25,268 
Substandard21,254 9,594 38,922 13,813 4,264 2,718 46,124 2,975 139,664 
Total commercial & industrial$413,361 $555,545 $409,496 $174,008 $125,963 $188,410 $664,762 $18,646 $2,550,191 
Current period gross charge-offs$1,330 $1,132 $— $444 $198 $41 $— $1,506 $4,651 
Commercial construction
Pass$347,916 $660,378 $383,957 $192,245 $58,733 $31,262 $56,057 $1,077 $1,731,625 
Special Mention58 135 28 52 — — — — 273 
Substandard194 4,541 35 2,199 1 100 — 240 7,310 
Total commercial construction$348,168 $665,054 $384,020 $194,496 $58,734 $31,362 $56,057 $1,317 $1,739,208 
Current period gross charge-offs$— $— $— $— $— $— $— $— $— 
Equipment financing:
Pass$422,344 $589,302 $299,127 $117,201 $61,859 $9,413 $— $— $1,499,246 
Substandard842 4,497 3,575 1,109 974 83 — — 11,080 
Total equipment financing$423,186 $593,799 $302,702 $118,310 $62,833 $9,496 $— $— $1,510,326 
Current period gross charge-offs$— $3,129 $3,086 $895 $389 $280 $— $— $7,779 
Residential mortgage:
Pass$446,768 $988,186 $758,310 $337,356 $90,331 $266,705 $477 $3,516 $2,891,649 
Substandard214 1,505 1,680 912 1,648 7,499 — 186 13,644 
Total residential mortgage$446,982 $989,691 $759,990 $338,268 $91,979 $274,204 $477 $3,702 $2,905,293 
Current period gross charge-offs$— $23 $— $— $— $22 $— $— $45 
Home equity lines of credit
Pass$— $— $— $— $— $— $897,097 $26,231 $923,328 
Substandard— — — — — — — 3,081 3,081 
Total home equity lines of credit$— $— $— $— $— $— $897,097 $29,312 $926,409 
Current period gross charge-offs$— $— $— $— $— $— $— $145 $145 
Residential construction
Pass$174,579 $239,543 $32,086 $6,143 $1,417 $7,349 $— $31 $461,148 
Substandard224 1,324 430 — 18 134 — — 2,130 
Total residential construction$174,803 $240,867 $32,516 $6,143 $1,435 $7,483 $— $31 $463,278 
Current period gross charge-offs$— $637 $— $— $— $— $— $— $637 
Manufactured housing
Pass$35,151 $74,072 $52,438 $46,466 $33,278 $86,573 $— $— $327,978 
Substandard260 3,304 2,109 1,702 1,090 3,526 — — 11,991 
Total consumer$35,411 $77,376 $54,547 $48,168 $34,368 $90,099 $— $— $339,969 
Current period gross charge-offs$3 $434 $201 $268 $105 $263 $— $— $1,274 
Consumer
Pass$57,267 $53,898 $25,280 $12,381 $2,263 $1,977 $26,518 $119 $179,703 
Substandard— 1 60 28 — 21 — — 110 
Total consumer$57,267 $53,899 $25,340 $12,409 $2,263 $1,998 $26,518 $119 $179,813 
Current period gross charge-offs$1,838 $103 $62 $24 $13 $1 $2 $101 $2,144 

21
UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)

Term LoansRevolversRevolvers converted to term loansTotal
As of December 31, 202220222021202020192018Prior
Pass
Owner occupied commercial real estate$669,451 $671,395 $611,900 $204,990 $127,738 $253,890 $114,975 $5,779 $2,660,118 
Income producing commercial real estate812,804 753,936 733,946 248,259 171,108 255,485 50,026 9,953 3,035,517 
Commercial & industrial535,594 388,851 186,292 134,789 119,547 71,503 670,161 15,880 2,122,617 
Commercial construction732,147 391,963 256,087 78,778 11,977 19,973 70,819 1,433 1,563,177 
Equipment financing714,044 374,030 162,463 93,690 22,753 1,214 — — 1,368,194 
Total commercial3,464,040 2,580,175 1,950,688 760,506 453,123 602,065 905,981 33,045 10,749,623 
Residential mortgage894,960 742,821 329,762 91,300 55,785 223,846 8 3,133 2,341,615 
HELOC— — — — — — 824,153 23,948 848,101 
Residential construction344,443 82,289 4,478 1,742 1,545 7,549 — 31 442,077 
Manufactured housing78,097 54,976 48,908 34,836 31,060 61,148 — — 309,025 
Consumer71,899 29,322 15,406 3,987 1,837 588 25,963 126 149,128 
4,853,439 3,489,583 2,349,242 892,371 543,350 895,196 1,756,105 60,283 14,839,569 
Special Mention
Owner occupied commercial real estate4,236 8,036 4,641 10,299 1,232 11,596 3,875 279 44,194 
Income producing commercial real estate41,423 1,137 44,802 32,821 21,647 50 805 — 142,685 
Commercial & industrial1,695 21,745 2,686 1,047 1,244 167 10,449 309 39,342 
Commercial construction850 33 1,640 13,237 4,891 28 — — 20,679 
Equipment financing— — — — — — — — — 
Total commercial48,204 30,951 53,769 57,404 29,014 11,841 15,129 588 246,900 
Residential mortgage— — — — — — — — — 
HELOC— — — — — — — — — 
Residential construction— — — — — — — — — 
Manufactured housing— — — — — — — — — 
Consumer— — — — — — — — — 
48,204 30,951 53,769 57,404 29,014 11,841 15,129 588 246,900 
Substandard
Owner occupied commercial real estate9,835 77 2,873 4,490 1,204 8,055 209 3,611 30,354 
Income producing commercial real estate52,384 1,357 1,867 4,180 13,209 10,365 — 62 83,424 
Commercial & industrial10,431 19,477 3,880 4,557 11,019 1,189 39,333 477 90,363 
Commercial construction133 — 45 2 3,876 9,693 — 243 13,992 
Equipment financing1,625 2,160 1,303 705 236 28 — — 6,057 
Total commercial74,408 23,071 9,968 13,934 29,544 29,330 39,542 4,393 224,190 
Residential mortgage1,195 964 1,364 1,836 2,589 5,296 — 202 13,446 
HELOC— — — — — — 93 2,075 2,168 
Residential construction32 268 — 20 3 153 — — 476 
Manufactured housing1,130 1,267 1,427 990 1,188 1,714 — — 7,716 
Consumer20 77 34 1 25 4 1 — 162 
76,785 25,647 12,793 16,781 33,349 36,497 39,636 6,670 248,158 
Total$4,978,428 $3,546,181 $2,415,804 $966,556 $605,713 $943,534 $1,810,870 $67,541 $15,334,627 

22
UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)

Modifications to Borrowers Experiencing Financial Difficulty
The period end amortized cost of loans modified under the terms of a FDM during the six months ended June 30, 2023 are presented in the following table (in thousands).
 New FDMs
 Post-Modification Amortized Cost by Type of Modification
ExtensionPayment DelayRate Reduction & ExtensionTotal% of Total Class of Receivable
Six Months Ended June 30, 2023
Income producing commercial real estate$38,138 $— $21,202 $59,340 1.6 %
Commercial & industrial2,718 29,517 — 32,235 1.3 
Equipment financing8,069 — — 8,069 0.5 
Residential mortgage57 — 630 687 — 
Manufactured housing— — 259 259 0.1 
Total loans$48,982 $29,517 $22,091 $100,590 0.6 

Extensions for equipment financing FDMs typically consist of one or more three-month extensions beyond the original maturity date. For the remainder of extension FDMs occurring during the first six months of 2023, the weighted average extension granted was approximately eight months.

Commercial and industrial payment delay FDMs include $22.7 million of loans in bankruptcy status. Excluding bankruptcy status loans, the remainder of FDMs in this category had a weighted average payment delay of approximately three months.

During the six months ended June 30, 2023, FDMs categorized as rate reduction and extensions in the income producing commercial real estate category resulted in a decrease in weighted average interest rate of 57 basis points and extended the weighted average maturity by 3 years. Residential mortgage and manufactured housing FDMs resulted in a decrease in weighted average interest rate of 576 basis points and extended the weighted average maturity by 15 years.

There have been no FDMs modified during 2023 that have subsequently defaulted under modified loan terms.

Allowance for Credit Losses
The ACL for loans represents management’s estimate of life of loan credit losses in the portfolio as of the end of the period. The ACL related to unfunded commitments is included in other liabilities in the consolidated balance sheet.

At both June 30, 2023 and December 31, 2022, United used a one-year reasonable and supportable forecast period. Expected credit losses were estimated using a regression model for each segment based on historical data from peer banks combined with a third party vendor’s baseline economic forecast to predict the change in credit losses. These estimates were then combined with a starting value that was based on United’s recent charge-off experience to produce an expected default rate, with the results subject to a floor. In the case of residential construction, commercial construction and multifamily loans (included in income producing commercial real estate), the expected default rate was adjusted by a model overlay based on expectations of future performance. For the second quarter of 2023, management applied qualitative factors to the model output for the residential mortgage, residential construction and income producing commercial real estate portfolios to account for observable differences in national economic trends reflected in the economic forecast that are not being observed at the same level of severity within United’s geographic footprint.

For periods beyond the reasonable and supportable forecast period of one year, United reverted to historical credit loss information on a straight line basis over two years. For most collateral types, United reverted to through-the-cycle average default rates using peer data from 2000 to 2017. For loans secured by residential mortgages and manufactured housing, the peer data was adjusted for changes in lending practices designed to mitigate the magnitude of losses observed during the 2008 mortgage crisis.
23
UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)

The following table presents the balance and activity in the ACL by portfolio segment for the periods indicated (in thousands).
Three Months Ended June 30,
20232022
Beginning BalanceCharge-OffsRecoveries(Release) ProvisionEnding BalanceBeginning BalanceCharge-OffsRecoveries(Release) ProvisionEnding Balance
Owner occupied commercial real estate$20,831 $— $205 $752 $21,788 $15,945 $— $1,496 $(667)$16,774 
Income producing commercial real estate33,607 (2,033)849 6,352 38,775 33,539 — 116 (371)33,284 
Commercial & industrial28,312 (3,753)1,007 4,290 29,856 18,386 (1,011)1,313 (421)18,267 
Commercial construction22,073 — 105 98 22,276 13,782 — 144 2,136 16,062 
Equipment financing26,195 (3,752)1,215 4,946 28,604 19,264 (1,709)802 52 18,409 
Residential mortgage24,082 (26)69 1,306 25,431 14,964 — 51 2,020 17,035 
HELOC10,337 (24)83 213 10,609 7,128 — 346 13 7,487 
Residential construction2,043 (637)14 2,026 3,446 1,929 — 76 81 2,086 
Manufactured housing8,424 (620)— 1,400 9,204 7,083 (135)— (334)6,614 
Consumer630 (1,327)226 1,187 716 785 (728)308 542 907 
ACL - loans176,534 (12,172)3,773 22,570 190,705 132,805 (3,583)4,652 3,051 136,925 
ACL - unfunded commitments21,389 — — 183 21,572 13,564 — — 2,553 16,117 
Total ACL$197,923 $(12,172)$3,773 $22,753 $212,277 $146,369 $(3,583)$4,652 $5,604 $153,042 
Six Months Ended June 30,
20232022
Beginning Balance
Initial ACL - PCD loans (1)
Charge-OffsRecoveries(Release) ProvisionEnding BalanceBeginning
Balance
Initial ACL - PCD loans (1)
Charge-
Offs		Recoveries(Release)
Provision		Ending
Balance
Owner occupied commercial real estate$19,834 $181 $(207)$322 $1,658 $21,788 $14,282 $266 $— $1,541 $685 $16,774 
Income producing commercial real estate32,082 307 (4,814)1,324 9,876 38,775 24,156 4,366 — 406 4,356 33,284 
Commercial & industrial23,504 1,358 (4,651)1,680 7,965 29,856 16,592 2,337 (4,605)1,978 1,965 18,267 
Commercial construction20,120 39 — 142 1,975 22,276 9,956 2,857 (41)558 2,732 16,062 
Equipment financing23,395 — (7,779)1,867 11,121 28,604 16,290 — (2,657)1,483 3,293 18,409 
Residential mortgage20,809 157 (45)175 4,335 25,431 12,390 385 (53)201 4,112 17,035 
HELOC8,707 534 (145)171 1,342 10,609 6,568 60 (9)436 432 7,487 
Residential construction2,049 124 (637)29 1,881 3,446 1,847 1 — 99 139 2,086 
Manufactured housing8,098 — (1,274)26 2,354 9,204 — 2,438 (308)9 4,475 6,614 
Consumer759 4 (2,144)477 1,620 716 451 27 (1,534)587 1,376 907 
ACL - loans159,357 2,704 (21,696)6,213 44,127 190,705 102,532 12,737 (9,207)7,298 23,565 136,925 
ACL - unfunded commitments21,163 — — — 409 21,572 10,992 — — — 5,125 16,117 
Total ACL$180,520 $2,704 $(21,696)$6,213 $44,536 $212,277 $113,524 $12,737 $(9,207)$7,298 $28,690 $153,042 
(1) Represents the initial ACL related to PCD loans acquired in the Progress and Reliant transactions during the six months ended June 30, 2023 and 2022, respectively.
24
UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)

Note 7 – Derivatives and Hedging Activities

The table below presents the fair value of derivative financial instruments, which are included in other assets and other liabilities on the consolidated balance sheet, as of the dates indicated (in thousands):
June 30, 2023December 31, 2022
Notional Amount (1)
Fair ValueNotional AmountFair Value
Derivative AssetDerivative LiabilityDerivative AssetDerivative Liability
Derivatives designated as hedging instruments:
Cash flow hedge of subordinated debt$100,000 $16,261 $— $100,000 $16,191 $— 
Cash flow hedge of trust preferred securities40,000 — — 20,000 — — 
Fair value hedge of AFS debt securities 677,473 — — — — — 
Total817,473 16,261 — 120,000 16,191 — 
Derivatives not designated as hedging instruments:
Customer derivative positions2,034,468 874 91,307 1,097,578 341 86,358 
Dealer offsets to customer derivative positions1,803,106 29,360 901 1,097,578 22,393 274 
Risk participations130,392 — 22 88,586 15 1 
Mortgage banking - loan commitment48,090 991 2 19,685 394 — 
Mortgage banking - forward sales commitment100,140 383 14 49,750 198 71 
Bifurcated embedded derivatives51,935 10,881 — 51,935 11,104 — 
Dealer offsets to bifurcated embedded derivatives51,935 — 12,540 51,935 — 12,839 
Total4,220,066 42,489 104,786 2,457,047 34,445 99,543 
Total derivatives$5,037,539 $58,750 $104,786 $2,577,047 $50,636 $99,543 
Total gross derivative instruments$58,750 $104,786 $50,636 $99,543 
Less: Amounts subject to master netting agreements(916)(916)(346)(346)
Less: Cash collateral received/pledged(46,248)(12,801)(38,386)(13,089)
Net amount$11,586 $91,069 $11,904 $86,108 
(1) At June 30, 2023, LIBOR-based customer derivative positions and derivatives cleared centrally through the CME included both a short-dated contract and a long-dated contract to facilitate the transition from LIBOR to SOFR. The short-dated contracts mature at the first reset date after June 30, 2023.

United clears certain derivatives centrally through the CME. CME rules legally characterize variation margin payments for centrally cleared derivatives as settlements of the derivatives’ exposure rather than as collateral. As a result, the variation margin payment and the related derivative instruments are considered a single unit of account for accounting purposes. Variation margin, as determined by the CME, is settled daily. As a result, derivative contracts that clear through the CME have an estimated fair value of zero.

Hedging Derivatives

Cash Flow Hedges of Interest Rate Risk 
United enters into cash flow hedges to mitigate exposure to the variability of future cash flows or other forecasted transactions. As of June 30, 2023 and December 31, 2022, United utilized interest rate caps and swaps to hedge the variability of cash flows due to changes in interest rates on certain of its variable-rate subordinated debt and trust preferred securities. United considers these derivatives to be highly effective at achieving offsetting changes in cash flows attributable to changes in interest rates. Therefore, changes in the fair value of these derivative instruments are recognized in OCI. Gains and losses related to changes in fair value are reclassified into earnings in the periods the hedged forecasted transactions occur. Losses representing amortization of the premium recorded on cash flow hedges, which is a component excluded from the assessment of effectiveness, are recognized in earnings on a straight-line basis in the same caption as the hedged item over the term of the hedge. Over the next twelve months, United expects to reclassify $5.55 million of gains from AOCI into earnings related to these agreements.

Fair Value Hedges of Interest Rate Risk 
United is exposed to changes in the fair value of certain of its fixed-rate investments and obligations due to changes in interest rates. United uses interest rate derivatives to manage its exposure to changes in fair value on these instruments attributable to changes in
25
UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)

interest rates. For derivatives designated and that qualify as fair value hedges, the gain or loss on the derivative as well as the offsetting loss or gain on the hedged item attributable to the hedged risk are recognized in earnings. United includes the gain or loss on the hedged items in the same income statement line item as the offsetting loss or gain on the related derivatives. During the second quarter of 2023, United entered into fair value hedges on stated amounts of closed portfolios of AFS debt securities using the portfolio layer method.

The table below presents the effect of derivatives in hedging relationships, all of which are interest rate contracts, on net interest income for the periods indicated (in thousands). 
Affected Income Statement Line ItemThree Months Ended June 30,Six Months Ended June 30,
2023202220232022
Fair value hedges:
Brokered time deposits:
Net income recognizedInterest expense- deposits$— $— $— $28 
AFS securities:
Recognized on derivative interest settlements$2,310 $— $2,310 $— 
Recognized on derivatives13,889 — 13,889 — 
Recognized on hedged items(15,289)— (15,289)— 
Net income recognizedInterest revenue- investment securities$910 $— $910 $— 
Cash flow hedges:
Long-term debt (1)
Interest expense- long term debt$1,234 $(106)$2,056 $(247)
 (1) Includes premium amortization expense excluded from the assessment of hedge effectiveness of $112,000 and $118,000 for the three months ended June 30, 2023 and 2022, respectively, and $229,000 and $234,000 for the six months ended June 30, 2023 and 2022, respectively.

The table below presents the carrying amount of hedged AFS debt securities and cumulative fair value hedging adjustments included in the carrying amount of the hedged asset for the periods presented (in thousands). All fair value hedges of AFS debt securities at June 30, 2023 were designated under the the portfolio layer method. At June 30, 2023, the aggregate designated hedged items using the portfolio layer method had a notional amount of $677 million.

June 30, 2023
Balance Sheet Location
Amortized Cost(1)
Hedge Accounting Basis Adjustment
Debt securities AFS $804,658 $(15,289)
(1) Excludes cumulative hedge accounting basis adjustment.

Derivatives Not Designated as Hedging Instruments 
Customer derivative positions include swaps, caps, and collars between United and certain commercial loan customers with offsetting positions to dealers under a back-to-back program. In addition, United occasionally enters into credit risk participation agreements with counterparty banks to accept or transfer a portion of the credit risk related to interest rate swaps. The agreements, which are typically executed in conjunction with a participation in a loan with the same customer, allow customers to execute an interest rate swap with one bank while allowing for the distribution of the credit risk among participating members.

United also has three interest rate swap contracts that are not designated as hedging instruments but are economic hedges of market-linked brokered certificates of deposit. The market-linked brokered certificates of deposit contain embedded derivatives that are bifurcated from the host instruments and are marked to market through earnings. The fair value marks on the market-linked swaps and the bifurcated embedded derivatives tend to move in opposite directions and therefore provide an economic hedge.
  
In addition, United originates certain residential mortgage loans with the intention of selling these loans. Between the time United enters into an interest-rate lock commitment to originate a residential mortgage loan that is to be held for sale and the time the loan is funded and eventually sold, United is subject to the risk of variability in market prices. United enters into forward sale agreements to mitigate risk and to protect the expected gain on the eventual loan sale. The commitments to originate residential mortgage loans and forward loan sales commitments are freestanding derivative instruments. Fair value adjustments on these derivative instruments are recorded within mortgage loan gains and other related fee income in the consolidated statements of income. 

26
UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)

The table below presents the gains and losses recognized in income on derivatives not designated as hedging instruments for the periods indicated (in thousands). 
Location of Gain (Loss) Recognized in Income on DerivativesAmount of Gain (Loss) Recognized in Income on Derivatives
Three Months Ended
June 30,		Six Months Ended
June 30,
 2023202220232022
Customer derivatives and dealer offsets Other noninterest income$545 $445 $912 $1,214 
Bifurcated embedded derivatives and dealer offsetsOther noninterest income(474)85 (1,007)198 
Mortgage banking derivativesMortgage loan revenue174 2,616 1,401 7,250 
Risk participationsOther noninterest income154 93 142 94 
  $399 $3,239 $1,448 $8,756 
 
Credit-Risk-Related Contingent Features 
United manages its credit exposure on derivatives transactions by entering into a bilateral credit support agreement with each non-customer counterparty. The credit support agreements require collateralization of exposures beyond specified minimum threshold amounts. The details of these agreements, including the minimum thresholds, vary by counterparty.
 
United’s agreements with each of its derivative counterparties provide that if either party defaults on any of its indebtedness, then it could also be declared in default on its derivative obligations. The agreements with derivative counterparties also include provisions that if not met, could result in United being declared in default. United has agreements with certain of its derivative counterparties that provide that if United fails to maintain its status as a well-capitalized institution or is subject to a prompt corrective action directive, the counterparty could terminate the derivative positions and United would be required to settle its obligations under the agreements. Derivatives that are centrally cleared do not have credit-risk-related features that would require additional collateral if United’s credit rating were downgraded.
 
Note 8 – Goodwill and Other Intangible Assets
 
The carrying amount of goodwill and other intangible assets as of the dates indicated is summarized below (in thousands).  
June 30, 2023December 31, 2022
Core deposit intangible$86,880 $46,900 
Less: accumulated amortization(32,665)(26,112)
Net core deposit intangible54,215 20,788 
Customer relationship intangible8,400 8,400 
Less: accumulated amortization(1,510)(1,114)
Net customer relationship intangible6,890 7,286 
Total intangibles subject to amortization, net (1)
61,105 28,074 
Goodwill896,718 751,174 
Total goodwill and other intangible assets, net$957,823 $779,248 
(1) As intangible assets become fully amortized, they are excluded from balances presented.
During the first quarter of 2023, as a result of the Progress acquisition, United recorded a core deposit intangible of $40.0 million. See Note 4 for further detail.

The following is a summary of changes in the carrying amounts of goodwill (in thousands): 
Three Months Ended
June 30,		Six Months Ended
June 30,
2023202220232022
Balance, beginning of period (1)
$896,718 $751,174 $751,174 $452,007 
Acquisitions— — 145,544 299,167 
Balance, end of period (1)
$896,718 $751,174 $896,718 $751,174 
(1) Goodwill balances are shown net of accumulated impairment losses of $306 million incurred prior to 2022.

27
UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)

The estimated aggregate amortization expense for future periods for finite lived intangibles is as follows (in thousands):
Remainder of 2023$6,521 
202411,791 
202510,031 
20268,491 
20276,950 
Thereafter17,321 
Total$61,105 

Note 9 – Preferred Stock

In May 2023, United’s Board of Directors approved a preferred stock repurchase program, authorizing United to repurchase up to $25.0 million of its outstanding Series I Non-Cumulative Preferred Stock directly or through the repurchase of depositary shares representing 1/1000th of a share of Series I Non-Cumulative Preferred Stock. The program is scheduled to expire on the earlier of the repurchase of preferred stock having an aggregate purchase price of $25.0 million or December 31, 2023. During the three and six months ended June 30, 2023, 10,668 depositary shares were repurchased. As of June 30, 2023, United had remaining authorization to repurchase up to $24.8 million of outstanding preferred stock under the program.

Note 10 – Assets and Liabilities Measured at Fair Value
Fair value measurements are determined based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, United uses a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy). United has processes in place to review the significant valuation inputs and to reassess how the instruments are classified in the valuation framework.
Fair Value Hierarchy
Level 1 Valuation is based upon quoted prices (unadjusted) in active markets for identical assets or liabilities that United has the ability to access.
Level 2 Valuation is based upon quoted prices for similar assets and liabilities in active markets, as well as inputs that are observable for the asset or liability (other than quoted prices), such as interest rates, foreign exchange rates, and yield curves that are observable at commonly quoted intervals.
Level 3 Valuation is generated from model-based techniques that use at least one significant assumption based on unobservable inputs for the asset or liability, which are typically based on an entity’s own assumptions, as there is little, if any, related market activity.
In instances when the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.
The following is a description of the valuation methodologies used for assets and liabilities recorded at fair value.

Investment Securities
AFS debt securities and equity securities with readily determinable fair values are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted prices, if available. If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security’s credit rating, prepayment assumptions and other factors such as credit loss assumptions. Level 1 securities include those traded on an active exchange, such as the New York Stock Exchange, U.S. Treasury securities that are traded by dealers or brokers in active over-the-counter markets and money market funds. Level 2 securities include MBS issued by GSEs, municipal bonds, corporate debt securities, asset-backed securities and supranational entity securities and are valued based on observable inputs that include: quoted market prices for similar assets, quoted market prices that are not in an active market, or other inputs that are observable in the market and can be corroborated by observable market data for substantially the full term of the securities. Securities classified as Level 3 include those traded in less liquid markets and are valued based on estimates obtained from broker-dealers that are not directly observable or models which incorporate unobservable inputs.
 
28
UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)

Deferred Compensation Plan Assets and Liabilities
Included in other assets in the consolidated balance sheet are assets related to employee deferred compensation plans. The assets associated with these plans are invested in mutual funds and classified as Level 1. Deferred compensation liabilities, also classified as Level 1, are carried at the fair value of the obligation to the employee, which mirrors the fair value of the invested assets and is included in other liabilities in the consolidated balance sheet.
 
Mortgage Loans Held for Sale
United has elected the fair value option for most of its newly originated mortgage loans held for sale in order to reduce certain timing differences and better match changes in fair values of the loans with changes in the value of derivative instruments used to economically hedge them. The fair value of mortgage loans held for sale is determined using quoted prices for a similar asset, adjusted for specific attributes of that loan, and are classified as Level 2. As of December 31, 2022, United had certain mortgage loans held for sale that were acquired from Reliant for which the fair value option was not elected; these loans were carried at the lower of aggregate cost or fair value. These loans were subsequently sold during the first half of 2023.
 
Derivative Financial Instruments
United uses derivatives to manage interest rate risk. The valuation of these instruments is typically determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities. The fair values of interest rate swaps are determined using the market standard methodology of netting the discounted future fixed cash receipts and the discounted expected variable cash payments. The variable cash payments are based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves. United also uses best effort and mandatory delivery forward loan sale commitments to hedge risk in its mortgage lending business.
 
United incorporates CVAs as necessary to appropriately reflect the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, United has considered the effect of netting and any applicable credit enhancements, such as collateral postings, thresholds and guarantees.
 
Management has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy. However, the CVAs associated with these derivatives utilize Level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by itself and its counterparties. Generally, management’s assessment of the significance of the CVAs has indicated that they are not a significant input to the overall valuation of the derivatives. In cases when management’s assessment indicates that the CVA is a significant input, the related derivative is disclosed as a Level 3 value.

Other derivatives classified as Level 3 include structured derivatives for which broker quotes, used as a key valuation input, were not observable. Risk participation agreements are classified as Level 3 instruments due to the incorporation of significant Level 3 inputs used to evaluate the probability of funding and the likelihood of customer default. Interest rate lock commitments, which relate to mortgage loan commitments, are categorized as Level 3 instruments as the fair value of these instruments is based on unobservable inputs for commitments that United does not expect to fund.
 
Servicing Rights for Residential and SBA/USDA Loans
United recognizes servicing rights upon the sale of residential and SBA/USDA loans sold with servicing retained. Management has elected to carry these assets at fair value. Given the nature of these assets, the key valuation inputs are unobservable and management classifies these assets as Level 3.

29
UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)

Assets and Liabilities Measured at Fair Value on a Recurring Basis
The table below presents United’s assets and liabilities measured at fair value on a recurring basis as of the dates indicated, aggregated by the level in the fair value hierarchy within which those measurements fall (in thousands).
June 30, 2023Level 1Level 2Level 3Total
Assets:    
AFS debt securities:    
U.S. Treasuries$333,423 $— $— $333,423 
U.S. Government agencies & GSEs— 237,096 — 237,096 
State and political subdivisions— 161,101 — 161,101 
Residential MBS— 1,620,235 — 1,620,235 
Commercial MBS— 618,438 — 618,438 
Corporate bonds— 194,553 2,183 196,736 
Asset-backed securities— 192,960 — 192,960 
Equity securities with readily determinable fair values10,651 1,532 — 12,183 
Mortgage loans held for sale— 27,104 — 27,104 
Deferred compensation plan assets11,728 — — 11,728 
Servicing rights for SBA/USDA loans— — 6,148 6,148 
Residential mortgage servicing rights— — 37,194 37,194 
Derivative financial instruments— 46,878 11,872 58,750 
Total assets$355,802 $3,099,897 $57,397 $3,513,096 
Liabilities:
Deferred compensation plan liability$11,766 $— $— $11,766 
Derivative financial instruments— 92,222 12,564 104,786 
Total liabilities$11,766 $92,222 $12,564 $116,552 

December 31, 2022Level 1Level 2Level 3Total
Assets:    
AFS debt securities:    
U.S. Treasuries$149,352 $— $— $149,352 
U.S. Government agencies & GSEs— 250,116 — 250,116 
State and political subdivisions— 303,748 — 303,748 
Residential MBS— 1,795,481 — 1,795,481 
Commercial MBS— 671,912 — 671,912 
Corporate bonds— 210,240 2,212 212,452 
Asset-backed securities— 231,272 — 231,272 
Equity securities with readily determinable fair values12,278 1,359 — 13,637 
Mortgage loans held for sale— 11,794 — 11,794 
Deferred compensation plan assets11,436 — — 11,436 
Servicing rights for SBA/USDA loans— — 5,188 5,188 
Residential mortgage servicing rights— — 36,559 36,559 
Derivative financial instruments— 39,123 11,513 50,636 
Total assets$173,066 $3,515,045 $55,472 $3,743,583 
Liabilities:
Deferred compensation plan liability$11,460 $— $— $11,460 
Derivative financial instruments— 86,703 12,840 99,543 
Total liabilities$11,460 $86,703 $12,840 $111,003 
 
30
UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)

The following table shows a reconciliation of the beginning and ending balances for the periods indicated for assets measured at fair value on a recurring basis using significant unobservable inputs that are classified as Level 3 values (in thousands).
20232022
Derivative
Assets		Derivative
Liabilities		SBA/USDA loan servicing rightsResidential mortgage servicing rightsCorporate BondsDerivative
Assets		Derivative
Liabilities		SBA/USDA loan servicing rightsResidential mortgage servicing rightsCorporate Bonds
Three Months Ended June 30,        
Beginning balance$11,348 $11,195 $6,289 $36,081 $2,227 $7,902 $8,531 $6,962 $32,641 $2,332 
Additions— 167 464 848 — — 99 800 1,723 — 
Sales and settlements— — (231)(496)— — (1)(408)(638)— 
Fair value adjustments included in OCI— — — — (44)— — — — (45)
Fair value adjustments included in earnings524 1,202 (374)761 — 2,297 2,166 (1,187)1,405 — 
Ending balance$11,872 $12,564 $6,148 $37,194 $2,183 $10,199 $10,795 $6,167 $35,131 $2,287 
Six Months Ended June 30,
Beginning balance$11,513 $12,840 $5,188 $36,559 $2,212 $6,758 $5,048 $6,513 $25,161 $2,395 
Business combinations— — 95 — — — — — — — 
Additions— 170 924 1,480 — — 99 1,388 3,890 — 
Transfers from Level 3— — — — — (290)— — — — 
Sales and settlements(11)— (451)(948)— — (1)(637)(1,314)— 
Fair value adjustments included in OCI— — — — (29)— — — — (108)
Fair value adjustments included in earnings370 (446)392 103 — 3,731 5,649 (1,097)7,394 — 
Ending balance$11,872 $12,564 $6,148 $37,194 $2,183 $10,199 $10,795 $6,167 $35,131 $2,287 

The following table presents quantitative information about significant Level 3 inputs for fair value on a recurring basis as of the dates indicated. 
Level 3 Assets and LiabilitiesValuation TechniqueSignificant Unobservable InputsJune 30, 2023December 31, 2022
RangeWeighted AverageRangeWeighted Average
SBA/USDA loan servicing rightsDiscounted cash flowDiscount rate
8.0% - 25.0%
13.2 %
11.9% - 25.0%
17.5 %
Prepayment rate
 0.4 - 35.4
16.9 
0.0 - 35.4
16.4 
Residential mortgage servicing rightsDiscounted cash flowDiscount rate
9.5 - 11.5
9.5 
9.5 - 11.5
9.5 
Prepayment rate
7.0 - 29.5
7.7 
7.0 - 31.2
7.5 
Corporate bondsDiscounted cash flowDiscount rate
6.6 - 7.2
6.9 
6.1 - 6.4
6.3 
Derivative assets - mortgageInternal modelPull through rate
60.0 - 100
89.4 
26.5 - 100
90.7 
Derivative assets and liabilities - otherDealer pricedDealer pricedN/AN/AN/AN/A
 
Fair Value Option
United generally records mortgage loans held for sale at fair value under the fair value option. Interest income on these loans is calculated based on the note rate of the loan and is recorded in interest revenue. In connection with the Reliant acquisition, United acquired mortgage loans held for sale accounted for under the lower of cost or fair value method. These loans are separately disclosed under the heading “Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis” within this footnote. The following tables present the fair value and outstanding principal balance of loans accounted for under the fair value option, as well as the gain or loss recognized from the change in fair value for the periods indicated (in thousands).
Mortgage Loans Held for Sale
June 30, 2023December 31, 2022
Outstanding principal balance$26,520 $11,473 
Fair value27,104 11,794 
31
UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)


Gain (Loss) from Change in Fair Value on Mortgage Loans Held for Sale
LocationThree Months Ended
June 30,		Six Months Ended
June 30,
2023202220232022
 Mortgage loan gains and other related fees$33 $163 $264 $(1,011)

Changes in fair value were mostly offset by hedging activities. An immaterial portion of these amounts was attributable to changes in instrument-specific credit risk.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
United may be required, from time to time, to measure certain assets at fair value on a nonrecurring basis. These adjustments to fair value usually result from the application of the lower of the amortized cost or fair value accounting or write-downs of individual assets due to impairment. The following table presents the fair value hierarchy and carrying value of assets that were still held as of June 30, 2023 and December 31, 2022, for which a nonrecurring fair value adjustment was recorded during the year-to-date periods presented (in thousands).
 Level 1Level 2Level 3Total
June 30, 2023    
Loans held for investment$— $— $31,148 $31,148 
December 31, 2022
Loans held for investment$— $— $7,808 $7,808 
Mortgage loans held for sale— — 1,806 1,806 

Mortgage loans held for sale that were acquired from Reliant were subject to a nonrecurring fair value adjustment resulting from the application of the lower of the amortized cost or fair value accounting. As of December 31, 2022, these loans were classified as nonrecurring Level 3 because the valuation of these loans was based on indicative bids provided by a broker, not corroborated by market transactions. These loans were subsequently sold during the first half of 2023.

Loans held for investment that are reported above as being measured at fair value on a nonrecurring basis are generally impaired loans that have either been partially charged off or have specific reserves assigned to them. Nonaccrual loans that are collateral dependent are generally written down to net realizable value, which reflects fair value less the estimated costs to sell. Specific reserves that are established based on appraised value of collateral are considered nonrecurring fair value adjustments as well. When the fair value of the collateral is based on an observable market price or a current appraised value, United records the impaired loan as nonrecurring Level 2. When an appraised value is not available or management determines the fair value of the collateral is further impaired below the appraised value and there is no observable market price, United records the impaired loan as nonrecurring Level 3.

Assets and Liabilities Not Measured at Fair Value  
For financial instruments that have quoted market prices, those quotes are used to determine fair value. Financial instruments that have no defined maturity, have a remaining maturity of 180 days or less, or reprice frequently to a market rate, are assumed to have a fair value that approximates reported book value, after taking into consideration any applicable credit risk. If no market quotes are available, financial instruments are valued by discounting the expected cash flows using an estimated current market interest rate for the financial instrument. For off-balance sheet derivative instruments, fair value is estimated as the amount that United would receive or pay to terminate the contracts at the reporting date, taking into account the current unrealized gains or losses on open contracts.
 
Cash and cash equivalents and repurchase agreements have short maturities and therefore the carrying value approximates fair value. Due to the short-term settlement of accrued interest receivable and payable, the carrying amount closely approximates fair value.
 
Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect the premium or discount on any particular financial instrument that could result from the sale of United’s entire holdings. All estimates are inherently subjective in nature. Changes in assumptions could significantly affect the estimates.
 
Fair value estimates are based on existing on and off-balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. Significant assets and liabilities that are not considered financial instruments include the mortgage banking operation, brokerage network, deferred income
32
UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)

taxes, premises and equipment and goodwill. In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in the estimates.
 
Off-balance sheet instruments (commitments to extend credit and standby letters of credit) for which draws can be reasonably predicted are generally short-term in maturity and are priced at variable rates. Therefore, the estimated fair value associated with these instruments is immaterial.

The carrying amount and fair values as of the dates indicated for other financial instruments that are not measured at fair value on a recurring basis are as follows (in thousands).
 Fair Value Level
Carrying AmountLevel 1Level 2Level 3Total
June 30, 2023     
Assets:     
HTM debt securities$2,553,835 $17,495 $2,114,901 $— $2,132,396 
Loans and leases, net17,204,140 — — 16,591,141 16,591,141 
Liabilities:
Deposits22,251,988 — 22,245,777 — 22,245,777 
Long-term debt324,754 — — 304,481 304,481 
December 31, 2022
Assets:
HTM debt securities$2,613,648 $17,417 $2,173,656 $— $2,191,073 
Loans and leases, net15,175,270 — — 14,609,239 14,609,239 
Liabilities:
Deposits19,876,507 — 19,863,380 — 19,863,380 
FHLB advances550,000 — — 549,913 549,913 
Long-term debt324,663 — — 313,380 313,380 
 
33
UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)

Note 11 – Stock-Based Compensation
 
United has an equity compensation plan that allows for grants of various share-based compensation. The general terms of the plan include a vesting period (usually four years) with an exercisable period not to exceed ten years. Certain options and restricted stock unit awards provide for accelerated vesting if there is a change in control (as defined in the plan document). As of June 30, 2023, 2.51 million additional awards could be granted under the plan.
 
The table below presents restricted stock unit and option activity for the six months ended June 30, 2023.
Restricted Stock Unit AwardsOptions
SharesWeighted-
Average Grant-
Date Fair Value		Aggregate
Intrinsic
Value ($000)		SharesWeighted-
Average Exercise Price		Weighted-
Average
Remaining
Contractual
Term (Years)		Aggregate
Intrinsic
Value ($000)
Outstanding at December 31, 2022778,686 $28.28 40,338 $11.88 
Granted292,631 30.33 643,298 20.91 
Released / Exercised(121,277)27.18 $3,855 (164,864)17.96 $1,584 
Cancelled(27,980)28.51 (4,620)25.97 
Outstanding at June 30, 2023922,060 29.07 23,042 514,152 21.10 5.62,082 
Vested / Exercisable at June 30, 2023— — 514,152 21.10 5.62,082 
Options granted in 2023 reflect fully vested options assumed in the Progress acquisition, with the weighted average exercise price of Progress’ fully vested converted options determined pursuant to the purchase agreement. The value of the Progress options was determined using a Black-Scholes model and was included in the purchase price for the acquisition. No compensation expense relating to options was included in earnings for the six months ended June 30, 2023 and 2022.
 
Compensation expense for restricted stock units and performance stock units without market conditions is based on the market value of United’s common stock on the date of grant. Compensation expense for performance stock units with market conditions is based on the grant date per share fair value, which was estimated using the Monte Carlo Simulation valuation model. United recognizes the impact of forfeitures as they occur. The value of restricted stock unit and performance stock unit awards is amortized into expense over the service period.

For the six months ended June 30, 2023 and 2022, expense of $4.46 million and $4.62 million, respectively, was recognized related to restricted stock unit and performance stock unit awards granted to United employees, which was included in salaries and employee benefits expense. In addition, for the six months ended June 30, 2023 and 2022, $331,000 and $238,000, respectively, was recognized in other expense for restricted stock unit awards granted to members of United’s Board of Directors.

A deferred income tax benefit related to stock-based compensation expense of $1.22 million and $1.24 million was included in the determination of income tax expense for the six months ended June 30, 2023 and 2022, respectively. As of June 30, 2023, there was $20.2 million of unrecognized expense related to non-vested restricted stock unit and performance stock unit awards granted under the plan. That cost is expected to be recognized over a weighted-average period of 2.4 years.


34
UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)

Note 12 – Reclassifications Out of AOCI

The following table presents the details regarding amounts reclassified out of AOCI for the periods indicated (in thousands). Amounts shown in parentheses reduce earnings.
Details about AOCI ComponentsThree Months Ended
June 30,		Six Months Ended
June 30,		Affected Line Item in the Statement Where Net Income is Presented
2023202220232022
Realized losses on AFS securities:
$— $46 $(1,644)$(3,688)Securities gains (losses), net
 — (11)374 979 Income tax (expense) benefit
 $— $35 $(1,270)$(2,709)Net of tax
Amortization of unrealized losses on HTM securities transferred from AFS:
 $(2,518)$(1,769)$(5,486)$(1,769)Investment securities interest revenue
 604 422 1,324 422 Income tax benefit
 $(1,914)$(1,347)$(4,162)$(1,347)Net of tax
Reclassifications related to derivative instruments accounted for as cash flow hedges:
Interest rate contracts$1,234 $(106)$2,056 $(247)Long-term debt interest expense
 (315)27 (525)63 Income tax (expense) benefit
 $919 $(79)$1,531 $(184)Net of tax
Amortization of defined benefit pension plan net periodic pension cost components:
Prior service cost$(61)$(93)$(122)$(185)Salaries and employee benefits expense
Actuarial losses— (78)— (156)Other expense
 (61)(171)(122)(341)Total before tax
 15 44 31 87 Income tax benefit
 $(46)$(127)$(91)$(254)Net of tax
Total reclassifications for the period$(1,041)$(1,518)$(3,992)$(4,494)Net of tax

35
UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)

Note 13 – Earnings Per Share
 
The following table sets forth the computation of basic and diluted earnings per share for the periods indicated (in thousands, except per share data).
Three Months Ended
June 30,		Six Months Ended
June 30,
 2023202220232022
Net income$63,288 $66,842 $125,588 $114,861 
Dividends on preferred stock(1,719)(1,719)(3,438)(3,438)
Earnings allocated to participating securities(342)(362)(680)(596)
Net income available to common shareholders$61,227 $64,761 $121,470 $110,827 
Weighted average shares outstanding:
Basic115,774 106,610 115,614 106,580 
Effect of dilutive securities:
Stock options95 36 166 41 
Restricted stock units— 70 15 76 
Diluted115,869 106,716 115,795 106,697 
Net income per common share:
Basic$0.53 $0.61 $1.05 $1.04 
Diluted$0.53 $0.61 $1.05 $1.04 
 
At June 30, 2023, United excluded from the above analysis 78,412 potentially dilutive shares of common stock issuable upon exercise of stock options because of their antidilutive effect. At June 30, 2022, United had no potentially dilutive instruments outstanding that were not included in the above analysis.

Note 14 – Regulatory Matters

As of June 30, 2023, United and the Bank were categorized as well-capitalized under the regulatory requirements in effect at that time. To be categorized as well-capitalized, United and the Bank must have exceeded the well-capitalized guideline ratios in effect at the time, as set forth in the table below, and have met certain other requirements. Management believes that United and the Bank exceeded all well-capitalized requirements at June 30, 2023, and there have been no conditions or events since quarter-end that would change the status of well-capitalized.

Regulatory capital ratios at June 30, 2023 and December 31, 2022, along with the minimum amounts required for capital adequacy purposes and to be well-capitalized under regulatory requirements in effect at such times, are presented below for United and the Bank (dollars in thousands):
United Community Banks, Inc.
(Consolidated)		United Community Bank
Minimum (1)
Well-
Capitalized		June 30,
2023		December 31,
2022		June 30,
2023		December 31,
2022
Risk-based ratios:
CET1 capital4.5 %6.5 %12.19 %12.26 %12.42 %12.83 %
Tier 1 capital6.0 8.0 12.69 12.81 12.42 12.83 
Total capital8.0 10.0 14.57 14.79 13.39 13.70 
Leverage ratio4.0 5.0 9.79 9.69 9.56 9.69 
CET1 capital$2,366,637 $2,164,211 $2,400,649 $2,255,337 
Tier 1 capital2,462,802 2,260,633 2,400,649 2,255,337 
Total capital2,827,580 2,610,216 2,589,591 2,408,895 
Risk-weighted assets19,409,980 17,648,573 19,335,994 17,583,347 
Average total assets for the leverage ratio25,160,884 23,322,018 25,120,784 23,285,253 
(1) As of June 30, 2023 and December 31, 2022 the additional capital conservation buffer in effect was 2.50%

36
UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)

Note 15 – Commitments and Contingencies
 
United is party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and letters of credit. These instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the balance sheet. The contract amounts of these instruments reflect the extent of involvement United has in particular classes of financial instruments. The exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and letters of credit written is represented by the contractual amount of these instruments. United uses the same credit policies in making commitments and conditional obligations as it uses for underwriting on-balance sheet instruments. In most cases, collateral or other security is required to support financial instruments with credit risk.
 
The following table summarizes the contractual amount of off-balance sheet instruments as of the dates indicated (in thousands).
June 30, 2023December 31, 2022
Financial instruments whose contract amounts represent credit risk:  
Commitments to extend credit$4,755,317 $4,683,790 
Letters of credit55,652 46,896 

United, in the normal course of business, is subject to various pending and threatened lawsuits in which claims for monetary damages are asserted. Although it is not possible to predict the outcome of these lawsuits, or the range of any possible loss, management, after consultation with legal counsel, does not anticipate that the ultimate aggregate liability, if any, arising from these lawsuits will have a material adverse effect on United’s financial position or results of operations.

Tax Credit and Certain Equity Investments
United invests in certain LIHTC partnerships throughout its market area as a means of supporting local communities, as well as in entities that promote renewable energy sources. United receives tax credits related to these investments. For certain of the investments, United provides financing during the construction and development phase of the related projects and/or permanent financing upon completion of the project. United has concluded that these partnerships are VIEs of which it is not the primary beneficiary because it does not have the power to direct the activities that most significantly impact the VIEs' financial performance and, therefore, is not required to consolidate these VIEs. United's maximum potential exposure to losses relative to investments in these VIEs is generally limited to the sum of the outstanding investment balance, any future funding commitments and the balance of any related loans to the entity. Loans to these entities are underwritten in substantially the same manner as other loans and are generally secured.

United also has investments in and future funding commitments related to fintech fund limited partnerships, other community development entities and certain other equity method investments. United has concluded that these partnerships are VIEs of which it is not the primary beneficiary because it does not have the power to direct the activities that most significantly impact the VIEs' financial performance and, therefore, is not required to consolidate these VIEs. The risk exposure relating to such commitments is generally limited to the amount invested by United and any future funding commitments.

The following table summarizes, as of the dates indicated, tax credit and certain equity method investments (in thousands):

Balance Sheet LocationJune 30, 2023December 31, 2022
Investments in LIHTC:
Carrying amountOther assets$52,112 $50,054 
Amount of future funding commitments included in carrying amountOther liabilities15,292 18,090 
Renewable energy investments:
Carrying amountOther assets39,737 19,617 
Amount of future funding commitments included in carrying amountOther liabilities20,360 18,781 
Fintech funds and certain other equity method investments:
Carrying amountOther assets32,722 27,569 
Amount of future funding commitments included in carrying amountOther liabilities470 470 
Amount of future funding commitments not included in carrying amountN/A26,568 23,690 
 
37
UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)

Note 16 - Subsequent Events
Acquisition of First Miami
Subsequent to quarter-end, on July 1, 2023, United acquired all of the outstanding common stock of First Miami in a stock transaction. First Miami is headquartered in South Miami, Florida, and operates three offices in the Miami metropolitan area. As of June 30, 2023, First Miami had total assets of $992 million, total loans of $618 million, and total deposits of $836 million. In addition to traditional banking products, First Miami offers private banking, trust and wealth management with approximately $308 million in assets under administration as of June 30, 2023.
First Miami shareholders received 3.5 million shares of United common stock valued at $87.7 million. The acquisition will be accounted for as a business combination. Due to the timing of the acquisition, United is currently in the process of completing the purchase accounting and has not made all of the remaining required disclosures, such as the fair value of assets acquired and supplemental pro forma information, which will be disclosed in subsequent filings.
Preferred Share Repurchases
Subsequent to quarter-end through August 3, 2023, United repurchased 167,322 depositary shares of preferred stock totaling $3.45 million through its preferred stock repurchase program. As of August 3, 2023, United had remaining authorization to repurchase up to $21.3 million of outstanding preferred stock under the program.
38

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

The following is a discussion of our financial condition at June 30, 2023 and December 31, 2022 and our results of operations for the three and six months ended June 30, 2023 and 2022. The purpose of this discussion is to focus on information about our financial condition and results of operations which is not otherwise apparent from our consolidated financial statements and is intended to provide insight into our results of operations and financial condition. The following discussion and analysis should be read along with our consolidated financial statements and related notes included in Part I - Item 1 of this Report, “Cautionary Note Regarding Forward-Looking Statements” and the risk factors discussed in our 2022 10-K and referenced in Part II, Item 1.A. of this Report, and the other reports we have filed with the SEC after we filed the 2022 10-K.

Unless the context otherwise requires, the terms “we,” “our,” “us” refer to United on a consolidated basis.
 
Overview
 
We offer a wide array of commercial and consumer banking services and investment advisory services primarily through a 209 branch network throughout Georgia, South Carolina, North Carolina, Tennessee, Florida and Alabama. We have grown organically as well as through strategic acquisitions. At June 30, 2023, we had consolidated total assets of $26.1 billion and 3,064 full-time equivalent employees.

Recent Developments

Mergers and Acquisitions
On January 3, 2023, we completed the acquisition of Progress, which operated 13 offices primarily located in Alabama and the Florida Panhandle. We acquired $1.90 billion of assets and assumed $1.60 billion of liabilities in the acquisition, which included $1.44 billion in loans and $1.33 billion in deposits. Progress results are included in the consolidated financial statements beginning on the acquisition date.
Subsequent to the current reporting period, on July 1, 2023, we completed the acquisition of First Miami, which was headquartered in South Miami, Florida and operated 3 offices in the Miami metropolitan area. As of June 30, 2023, First Miami had total assets of $992 million, total loans of $618 million, and total deposits of $836 million. In addition to traditional banking products, First Miami offers private banking, trust and wealth management with approximately $308 million in assets under administration as of June 30, 2023. The financial statement impact of the First Miami acquisition will be reflected in our consolidated financial statements starting in the third quarter of 2023.
Discontinuance of LIBOR
In preparation for the discontinuance of LIBOR effective immediately after June 30, 2023, our new adjustable rate loan production has been originated with an ARR, such as SOFR. However, LIBOR continues to remain the reference rate in a significant number of our outstanding debt securities, loans, derivatives and long-term debt, and in certain other assets and liabilities. Effective with the first rate reset with a reference date after June 30, 2023, these instruments will convert to an ARR, such as SOFR.
Results of Operations
We reported net income and diluted earnings per common share of $63.3 million and $0.53, respectively, for the second quarter of 2023 compared to $66.8 million and $0.61, respectively, for the same period in 2022. Operating net income (non-GAAP), which excludes merger-related and other charges, was $66.1 million for the second quarter of 2023, compared to $72.4 million for the same period in 2022. The decrease in net income resulted primarily from higher expenses and an increase in provision for credit losses partly offset by higher net interest revenue and noninterest income.

Net interest revenue increased to $200 million for the second quarter of 2023, compared to $179 million for the second quarter of 2022. The increase in interest revenue was provided by loan growth, including loans acquired from Progress, and higher interest rates earned on our average loan and securities portfolios. The increase in interest revenue was partially offset by increases in interest expense resulting from higher rates paid on deposits, a less favorable deposit mix and utilization of wholesale borrowings, which are more costly than customer deposits. Our net interest spread decreased 61 basis points to 2.47%, reflecting a steeper increase in rates paid on deposits compared to that of loans since the second quarter of 2022. However, loan growth more than offset the impact of the rising deposit rates on our net interest margin, which increased to 3.37% for the second quarter of 2023 compared to 3.19% for the same period of last year.

We recorded a provision for credit losses of $22.8 million for the second quarter of 2023, compared to a provision of $5.60 million for the second quarter of 2022. The provision expense recorded in the second quarter of 2023 resulted from loan growth, current period
39

net charge offs of $8.40 million and a less favorable current economic forecast for the commercial real estate price index compared to that as of the prior quarter-end.

Noninterest income of $36.4 million for the second quarter of 2023 was up $2.93 million, or 9%, from the second quarter of 2022. The increase was driven by unrealized gains on other investments compared to losses in the same period of 2022, a more favorable negative fair value adjustment on our SBA loan servicing asset and a gain on sale of a commercial insurance book of business of $1.59 million. These increases were partially offset by a decrease in gains on sales of other loans as we sold fewer loans compared to the same period of 2022.

For the second quarter of 2023, noninterest expenses of $132 million increased $11.6 million, or 10%, compared to the same period of 2022. The increase was primarily attributable to a $7.02 million increase in salaries and employee benefits, mostly driven by the addition of Progress employees. Other contributors to the increase included increases in FDIC assessment expense and amortization of intangibles, which was driven by the addition of the Progress core deposit intangible.

For the six months ended June 30, 2023 and 2022, we reported net income of $126 million and $115 million, respectively, and diluted earnings per common share of $1.05 and $1.04, respectively. Operating net income (non-GAAP) for the six months ended June 30, 2023 and 2022 was $135 million and $127 million, respectively, which excludes merger-related and other charges for both periods. Net interest revenue and net interest margin for the six months ended June 30, 2023 were $412 million and 3.49%, respectively, compared to $343 million and 3.08%, respectively, for the same period in 2022. In addition to the factors affecting the second quarter of 2023, results of operations for the six months ended June 30, 2023 include a reduction in mortgage loan gains and other related fees of $12.0 million driven by a decrease in demand resulting from the rising interest rate environment. In addition, provision expense for the six months ended June 30, 2023 and 2022 included initial provisions for credit losses on non-PCD loans and unfunded commitments acquired from Progress and Reliant of $10.4 million and $18.3 million, respectively.

Results for the second quarter and first six months of 2023 are discussed in further detail throughout the following sections of MD&A.

Critical Accounting Estimates
 
In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and revenues and expenses for the period. Our accounting and reporting estimates are in accordance with GAAP and conform to general practices within the banking industry. Estimates that are susceptible to significant changes include accounting for the ACL and fair value measurements, both of which require significant judgments by management. Actual results could differ significantly from those estimates. Also, different assumptions in the application of these accounting estimates could result in material changes in our consolidated financial position or consolidated results of operations. Our critical accounting estimates are discussed in MD&A in our 2022 10-K.

Non-GAAP Reconciliation and Explanation

This Report contains financial information determined by methods other than in accordance with GAAP. Such non-GAAP financial information includes the following measures: “tangible book value per common share,” and “tangible common equity to tangible assets.” In addition, management presents non-GAAP operating performance measures, which exclude merger-related and other items that are not part of our ongoing business operations. Operating performance measures include “expenses – operating,” “net income – operating,” “diluted income per common share – operating,” “return on common equity – operating,” “return on tangible common equity – operating,” “return on assets – operating” and “efficiency ratio – operating.” We have developed internal policies and procedures to accurately capture and account for merger-related and other charges and those charges are reviewed with the Audit Committee of our Board each quarter. We use these non-GAAP measures because we believe they provide useful supplemental information for evaluating our operations and performance over periods of time, as well as in managing and evaluating our business and in discussions about our operations and performance. We believe these non-GAAP measures may also provide users of our financial information with a meaningful measure for assessing our financial results and credit trends, as well as a comparison to financial results for prior periods. Nevertheless, non-GAAP measures have inherent limitations, are not required to be uniformly applied and are not audited. These non-GAAP measures should be viewed in addition to, and not as an alternative to or substitute for, measures determined in accordance with GAAP. In addition, because non-GAAP measures are not standardized, it may not be possible to compare our non-GAAP measures to similarly titled measures used by other companies. To the extent applicable, reconciliations of these non-GAAP measures to the most directly comparable measures as reported in accordance with GAAP are included in Table 1 of MD&A.
40

UNITED COMMUNITY BANKS, INC.
Table 1 - Financial Highlights
 (in thousands, except per share data)
20232022
Second Quarter
2023 - 2022 Change
For the Six Months Ended June 30,YTD Change
Second Quarter
First Quarter
Fourth Quarter
Third Quarter
Second Quarter
20232022
INCOME SUMMARY 
Interest revenue$295,775 $279,487 $240,831 $213,887 $187,378 $575,262 $358,437 
Interest expense95,489 68,017 30,943 14,113 8,475 163,506 15,742 
Net interest revenue200,286 211,470 209,888 199,774 178,903 12 %411,756 342,695 20 %
Provision for credit losses22,753 21,783 19,831 15,392 5,604 44,536 28,690 
Noninterest income36,387 30,209 33,354 31,922 33,458 9 66,596 72,431 (8)
Total revenue213,920 219,896 223,411 216,304 206,757 3 433,816 386,436 12 
Noninterest expenses132,407 139,805 117,329 112,755 120,790 10 272,212 240,065 13 
Income before income tax expense81,513 80,091 106,082 103,549 85,967 (5)161,604 146,371 10 
Income tax expense18,225 17,791 24,632 22,388 19,125 (5)36,016 31,510 14 
Net income63,288 62,300 81,450 81,161 66,842 (5)125,588 114,861 9 
Merger-related and other charges3,645 8,631 1,470 1,746 7,143 12,276 16,159 
Income tax benefit of merger-related and other charges(820)(1,955)(323)(385)(1,575)(2,775)(3,538)
Net income - operating (1)
$66,113 $68,976 $82,597 $82,522 $72,410 (9)$135,089 $127,482 6 
PERFORMANCE MEASURES
Per common share:
Diluted net income - GAAP$0.53 $0.52 $0.74 $0.74 $0.61 (13)$1.05 $1.04 1 
Diluted net income - operating (1)
0.55 0.58 0.75 0.75 0.66 (17)1.13 1.16 (3)
Cash dividends declared0.23 0.23 0.22 0.22 0.21 10 0.46 0.42 10 
Book value25.98 25.76 24.38 23.78 23.96 8 25.98 23.96 8 
Tangible book value (3)
17.83 17.59 17.13 16.52 16.68 7 17.83 16.68 7 
Key performance ratios:
Return on common equity - GAAP (2)(4)
7.47 %7.34 %10.86 %11.02 %9.31 %7.41 %8.07 %
Return on common equity - operating (1)(2)(4)
7.82 8.15 11.01 11.21 10.10 7.98 8.98 
Return on tangible common equity - operating (1)(2)(3)(4)
11.35 11.63 15.20 15.60 14.20 11.49 12.62 
Return on assets - GAAP (4)
0.95 0.95 1.33 1.32 1.08 0.95 0.93 
Return on assets - operating (1)(4)
1.00 1.06 1.35 1.34 1.17 1.03 1.03 
Net interest margin (FTE) (4)
3.37 3.61 3.76 3.57 3.19 3.49 3.08 
Efficiency ratio - GAAP55.71 57.20 47.95 48.41 56.58 56.46 57.00 
Efficiency ratio - operating (1)
54.17 53.67 47.35 47.66 53.23 53.92 53.16 
Equity to total assets11.89 11.90 11.25 11.12 10.95 11.89 10.95 
Tangible common equity to tangible assets (3)
8.21 8.17 7.88 7.70 7.59 8.21 7.59 
ASSET QUALITY
NPAs$103,737 $73,403 $44,281 $35,511 $34,428 201 $103,737 $34,428 201 
ACL - loans190,705 176,534 159,357 148,502 136,925 39 190,705 136,925 39 
Net charge-offs (recoveries)8,399 7,084 6,611 1,134 (1,069)15,483 1,909 
ACL - loans to loans1.10 %1.03 %1.04 %1.00 %0.94 %1.10 %0.94 %
Net charge-offs (recoveries) to average loans (4)
0.20 0.17 0.17 0.03 (0.03)0.18 0.03 
NPAs to total assets0.40 0.28 0.18 0.15 0.14 0.40 0.14 
AT PERIOD END ($ in millions)
Loans$17,395 $17,125 $15,335 $14,882 $14,541 20 $17,395 $14,541 20 
Investment securities5,914 5,915 6,228 6,539 6,683 (12)5,914 6,683 (12)
Total assets26,120 25,872 24,009 23,688 24,213 8 26,120 24,213 8 
Deposits22,252 22,005 19,877 20,321 20,873 7 22,252 20,873 7 
Shareholders’ equity3,106 3,078 2,701 2,635 2,651 17 3,106 2,651 17 
Common shares outstanding (thousands)115,266 115,152 106,223 106,163 106,034 9 115,266 106,034 9 
(1) Excludes merger-related and other charges. (2) Net income less preferred stock dividends, divided by average realized common equity, which excludes AOCI. (3) Excludes effect of acquisition related intangibles and associated amortization. (4) Annualized.
41


UNITED COMMUNITY BANKS, INC.
Table 1 (Continued) - Financial Highlights
Non-GAAP Performance Measures Reconciliation
(in thousands, except per share data)
 20232022For the Six Months Ended June 30,
Second Quarter
First Quarter
Fourth Quarter
Third Quarter
Second Quarter
20232022
Noninterest expense reconciliation     
Noninterest expenses (GAAP)$132,407 $139,805 $117,329 $112,755 $120,790 $272,212 $240,065 
Merger-related and other charges(3,645)(8,631)(1,470)(1,746)(7,143)(12,276)(16,159)
Noninterest expenses - operating$128,762 $131,174 $115,859 $111,009 $113,647 $259,936 $223,906 
Net income reconciliation
Net income (GAAP)$63,288 $62,300 $81,450 $81,161 $66,842 $125,588 $114,861 
Merger-related and other charges3,645 8,631 1,470 1,746 7,143 12,276 16,159 
Income tax benefit of merger-related and other charges(820)(1,955)(323)(385)(1,575)(2,775)(3,538)
Net income - operating$66,113 $68,976 $82,597 $82,522 $72,410 $135,089 $127,482 
Diluted income per common share reconciliation
Diluted income per common share (GAAP)$0.53 $0.52 $0.74 $0.74 $0.61 $1.05 $1.04 
Merger-related and other charges, net of tax0.02 0.06 0.01 0.01 0.05 0.08 0.12 
Diluted income per common share - operating$0.55 $0.58 $0.75 $0.75 $0.66 $1.13 $1.16 
Book value per common share reconciliation
Book value per common share (GAAP)$25.98 $25.76 $24.38 $23.78 $23.96 $25.98 $23.96 
Effect of goodwill and other intangibles(8.15)(8.17)(7.25)(7.26)(7.28)(8.15)(7.28)
Tangible book value per common share$17.83 $17.59 $17.13 $16.52 $16.68 $17.83 $16.68 
Return on tangible common equity reconciliation
Return on common equity (GAAP)7.47 %7.34 %10.86 %11.02 %9.31 %7.41 %8.07 %
Merger-related and other charges, net of tax0.35 0.81 0.15 0.19 0.79 0.57 0.91 
Return on common equity - operating7.82 8.15 11.01 11.21 10.10 7.98 8.98 
Effect of goodwill and other intangibles3.53 3.48 4.19 4.39 4.10 3.51 3.64 
Return on tangible common equity - operating11.35 %11.63 %15.20 %15.60 %14.20 %11.49 %12.62 %
Return on assets reconciliation
Return on assets (GAAP)0.95 %0.95 %1.33 %1.32 %1.08 %0.95 %0.93 %
Merger-related and other charges, net of tax0.05 0.11 0.02 0.02 0.09 0.08 0.10 
Return on assets - operating1.00 %1.06 %1.35 %1.34 %1.17 %1.03 %1.03 %
Efficiency ratio reconciliation
Efficiency ratio (GAAP)55.71 %57.20 %47.95 %48.41 %56.58 %56.46 %57.00 %
Merger-related and other charges(1.54)(3.53)(0.60)(0.75)(3.35)(2.54)(3.84)
Efficiency ratio - operating54.17 %53.67 %47.35 %47.66 %53.23 %53.92 %53.16 %
Tangible common equity to tangible assets reconciliation
Equity to total assets (GAAP)11.89 %11.90 %11.25 %11.12 %10.95 %11.89 %10.95 %
Effect of goodwill and other intangibles(3.31)(3.36)(2.97)(3.01)(2.96)(3.31)(2.96)
Effect of preferred equity(0.37)(0.37)(0.40)(0.41)(0.40)(0.37)(0.40)
Tangible common equity to tangible assets8.21 %8.17 %7.88 %7.70 %7.59 %8.21 %7.59 %
42

Net Interest Revenue

Net interest revenue, which is the difference between the interest earned on assets and the interest paid on deposits and borrowed funds, is the single largest component of total revenue. Management seeks to optimize this revenue while balancing interest rate, credit and liquidity risks. The banking industry uses two ratios to measure the relative profitability of net interest revenue. The net interest spread measures the difference between the average yield on interest-earning assets and the average rate paid on interest-bearing liabilities. The interest rate spread eliminates the effect of noninterest-bearing deposits and gives a direct perspective on the effect of market interest rate movements. The net interest margin is an indication of the profitability of a company’s balance sheet and is defined as net interest revenue as a percent of average total interest-earning assets, which includes the positive effect of funding a portion of interest-earning assets with noninterest-bearing deposits and stockholders’ equity.

The following discussion provides additional details on the average balances and net interest revenue for the periods presented. The tables that follow indicate the relationship between interest revenue and expense and the average amounts of assets and liabilities, which provides further insight into net interest spread and net interest margin for the periods indicated.

For the quarter:

FTE net interest revenue for the second quarter of 2023 was $201 million, representing an increase of $21.2 million, or 12%, from the same period in 2022. The increase was primarily driven by the $2.78 billion increase in average loans provided by the addition of the Progress loan portfolio in the first quarter as well as organic growth. As a result, loan interest revenue increased $95.3 million compared to the second quarter of 2022, which included a $1.06 million increase in purchased loan accretion and reflects interest revenue on approximately $1.44 billion in loans from the Progress acquisition and higher interest rates. The FOMC raised the targeted federal funds rate a total of 500 basis points beginning in March 2022 through the second quarter of 2023. Rising interest rates lifted the yield on the loan portfolio by 152 basis points to 5.85% in the second quarter of 2023 compared with the same period a year ago. Additionally, the increase in yield earned on the securities portfolio, partially offset by a decrease in the average balance of the portfolio, contributed $10.4 million in additional FTE interest revenue compared to the same period of last year.

Interest expense for the second quarter of 2023 increased $87.0 million compared to the same quarter of 2022. The increase is mostly attributable to the 229 basis point increase in rates paid on average deposits as a result of the rising interest rate environment and a deposit mix more heavily comprised of more costly time deposits. In addition, the daily average balance of interest-bearing deposits increased by $1.97 billion, which includes approximately $907 million of interest-bearing deposits received in the acquisition of Progress. We also utilized FHLB advances and repurchase agreements to fund loan growth during the second quarter of 2023, with a total daily average balance of $196 million resulting in additional interest expense of $2.50 million compared with $66,000 of daily average balances outstanding in the second quarter of 2022. We also saw attrition in our noninterest-bearing deposit balances as rising interest rates offered customers more attractive alternatives.

Our net interest spread decreased 61 basis points to 2.47%, reflecting a steeper increase in rates paid on deposits compared to that of loans during the second quarter of 2023. However, loan growth combined with the increase in rates earned on loans more than offset the impact of the rising deposit rates on our net interest margin, which increased to 3.37% for the second quarter of 2023 compared to 3.19% for the same period of last year.

For the six months ended:

FTE net interest revenue for the first six months of 2023 was $414 million, representing a 20% increase from the first six months of 2022, which was primarily driven by the same factors impacting the quarter. During the first six months of 2023, our net interest spread decreased 32 basis points and our net interest margin increased by 41 basis points compared to the same period of 2022.


43

Table 2 - Average Consolidated Balance Sheets and Net Interest Analysis
For the Three Months Ended June 30,
(dollars in thousands, (FTE))
 20232022
Average BalanceInterestAverage RateAverage BalanceInterestAverage Rate
Assets:      
Interest-earning assets:      
Loans, net of unearned income (FTE) (1)(2)
$17,166,129 $250,472 5.85 %$14,382,324 $155,184 4.33 %
Taxable securities (3)
5,956,193 39,329 2.64 6,436,992 27,886 1.73 
Tax-exempt securities (FTE) (1)(3)
369,364 2,323 2.52 490,659 3,410 2.78 
Federal funds sold and other interest-earning assets461,022 4,658 4.05 1,302,935 2,066 0.64 
Total interest-earning assets (FTE)23,952,708 296,782 4.97 22,612,910 188,546 3.34 
Noninterest-earning assets:
Allowance for credit losses(181,769)(135,392)
Cash and due from banks251,691 203,291 
Premises and equipment345,771 286,417 
Other assets (3)
1,500,827 1,286,107 
Total assets$25,869,228 $24,253,333 
Liabilities and Shareholders' Equity:
Interest-bearing liabilities:
Interest-bearing deposits:
NOW and interest-bearing demand$4,879,591 27,597 2.27 $4,561,162 2,163 0.19 
Money market5,197,789 33,480 2.58 5,019,420 1,515 0.12 
Savings1,306,394 702 0.22 1,496,414 87 0.02 
Time2,976,482 22,471 3.03 1,671,632 491 0.12 
Brokered time deposits423,536 4,967 4.70 65,081 46 0.28 
Total interest-bearing deposits14,783,792 89,217 2.42 12,813,709 4,302 0.13 
Federal funds purchased and other borrowings145,233 1,849 5.11 66 — — 
Federal Home Loan Bank advances50,989 649 5.11 — — — 
Long-term debt324,740 3,774 4.66 324,301 4,173 5.16 
Total borrowed funds520,962 6,272 4.83 324,367 4,173 5.16 
Total interest-bearing liabilities15,304,754 95,489 2.50 13,138,076 8,475 0.26 
Noninterest-bearing liabilities:
Noninterest-bearing deposits7,072,760 8,025,947 
Other liabilities385,324 397,890 
Total liabilities22,762,838 21,561,913 
Shareholders' equity3,106,390 2,691,420 
Total liabilities and shareholders' equity$25,869,228 $24,253,333 
Net interest revenue (FTE) $201,293 $180,071 
Net interest-rate spread (FTE)  2.47 %3.08 %
Net interest margin (FTE) (4)
  3.37 %3.19 %
 
(1)Interest revenue on tax-exempt securities and loans has been increased to reflect comparable interest on taxable securities and loans. The rate used was 26%, reflecting the statutory federal income tax rate and the federal tax adjusted state income tax rate.
(2)Included in the average balance of loans outstanding are loans on which the accrual of interest has been discontinued and loans that are held for sale.
(3)Unrealized losses on securities, including those related to the transfer from AFS to HTM, have been reclassified to other assets. Pretax unrealized losses of $389 million and $271 million in 2023 and 2022, respectively, are included in other assets for purposes of this presentation.
(4)Net interest margin is taxable equivalent net interest revenue divided by average interest-earning assets.


44

Table 3 - Average Consolidated Balance Sheets and Net Interest Analysis
For the Six Months Ended June 30,
(dollars in thousands, (FTE))
 20232022
Average BalanceInterestAverage RateAverage BalanceInterestAverage Rate
Assets:      
Interest-earning assets:      
Loans, net of unearned income (FTE) (1)(2)
$17,032,493 $487,002 5.77 %$14,308,585 $301,821 4.25 %
Taxable securities (3)
6,007,471 77,205 2.57 6,142,723 48,896 1.59 
Tax-exempt securities (FTE) (1)(3)
395,827 5,157 2.61 500,750 6,976 2.79 
Federal funds sold and other interest-earning assets466,642 8,010 3.46 1,604,995 3,086 0.39 
Total interest-earning assets (FTE)23,902,433 577,374 4.87 22,557,053 360,779 3.22 
Non-interest-earning assets:
Allowance for loan losses(174,716)(124,384)
Cash and due from banks261,397 184,751 
Premises and equipment337,499 281,842 
Other assets (3)
1,492,926 1,329,359 
Total assets$25,819,539 $24,228,621 
Liabilities and Shareholders' Equity:
Interest-bearing liabilities:
Interest-bearing deposits:
NOW and interest-bearing demand$4,690,798 45,196 1.94 $4,613,838 3,632 0.16 
Money market5,210,457 58,546 2.27 5,064,866 2,527 0.10 
Savings1,361,357 1,240 0.18 1,466,812 159 0.02 
Time2,664,269 34,784 2.63 1,715,022 1,025 0.12 
Brokered time deposits316,470 7,312 4.66 72,048 90 0.25 
Total interest-bearing deposits14,243,351 147,078 2.08 12,932,586 7,433 0.12 
Federal funds purchased and other borrowings126,697 2,997 4.77 337 — — 
Federal Home Loan Bank advances250,912 5,761 4.63 — — — 
Long-term debt324,721 7,670 4.76 321,663 8,309 5.21 
Total borrowed funds702,330 16,428 4.72 322,000 8,309 5.20 
Total interest-bearing liabilities14,945,681 163,506 2.21 13,254,586 15,742 0.24 
Noninterest-bearing liabilities:
Noninterest-bearing deposits7,383,575 7,847,284 
Other liabilities371,422 388,162 
Total liabilities22,700,678 21,490,032 
Shareholders' equity3,118,861 2,738,589 
Total liabilities and shareholders' equity$25,819,539 $24,228,621 
Net interest revenue (FTE)$413,868 $345,037 
Net interest-rate spread (FTE)2.66 %2.98 %
Net interest margin (FTE) (4)
3.49 %3.08 %
 
(1)Interest revenue on tax-exempt securities and loans has been increased to reflect comparable interest on taxable securities and loans. The rate used was 26%, reflecting the statutory federal income tax rate and the federal tax adjusted state income tax rate.
(2)Included in the average balance of loans outstanding are loans on which the accrual of interest has been discontinued and loans that are held for sale.
(3)Unrealized gains and losses, including those related to the transfer from AFS to HTM, have been reclassified to other assets. Pretax unrealized losses of $404 million in 2023 and $175 million in 2022, respectively, are included in other assets for purposes of this presentation.
(4)Net interest margin is taxable equivalent net-interest revenue divided by average interest-earning assets.



45

The following table shows the relative effect on net interest revenue for changes in the average outstanding amounts (volume) of interest-earning assets and interest-bearing liabilities and the rates earned and paid on such assets and liabilities (rate). Variances resulting from a combination of changes in rate and volume are allocated in proportion to the absolute dollar amounts of the change in each category.
 
Table 4 - Change in Interest Revenue and Expense on a Taxable Equivalent Basis
(in thousands)
Three Months Ended June 30, 2023Six Months Ended June 30, 2023
Compared to 2022 Increase (Decrease) Due to Changes in
 VolumeRateTotalVolumeRateTotal
Interest-earning assets:
Loans (FTE)$33,789 $61,499 $95,288 $64,581 $120,600 $185,181 
Taxable securities(2,219)13,662 11,443 (1,099)29,408 28,309 
Tax-exempt securities (FTE)(785)(302)(1,087)(1,389)(430)(1,819)
Federal funds sold and other interest-earning assets(2,112)4,704 2,592 (3,647)8,571 4,924 
Total interest-earning assets (FTE)28,673 79,563 108,236 58,446 158,149 216,595 
Interest-bearing liabilities:
NOW and interest-bearing demand accounts161 25,273 25,434 62 41,502 41,564 
Money market accounts56 31,909 31,965 75 55,944 56,019 
Savings deposits(12)627 615 (12)1,093 1,081 
Time deposits673 21,307 21,980 873 32,886 33,759 
Brokered deposits1,285 3,636 4,921 1,173 6,049 7,222 
Total interest-bearing deposits2,163 82,752 84,915 2,171 137,474 139,645 
Federal funds purchased & other borrowings1,849 — 1,849 2,997 — 2,997 
FHLB advances649 — 649 5,761 — 5,761 
Long-term debt6 (405)(399)78 (717)(639)
Total borrowed funds2,504 (405)2,099 8,836 (717)8,119 
Total interest-bearing liabilities4,667 82,347 87,014 11,007 136,757 147,764 
Increase in net interest revenue (FTE)$24,006 $(2,784)$21,222 $47,439 $21,392 $68,831 


Provision for Credit Losses

The ACL represents management’s estimate of life of loan credit losses in the loan portfolio and unfunded loan commitments. Management’s estimate of credit losses under CECL is determined using a model that relies on reasonable and supportable forecasts and historical loss information to determine the balance of the ACL and resulting provision for credit losses.

We recorded a provision for credit losses of $22.8 million and $44.5 million for the three and six months ended June 30, 2023, compared to $5.60 million and $28.7 million for the same periods of 2022. The amount of provision recorded in each period was the amount required such that the total ACL reflected the appropriate balance as determined by management reflecting expected life of loan losses. The provision recorded for the first six months of 2023 included the initial provision for credit losses on Progress non-PCD loans and unfunded commitments of $8.80 million and $1.65 million, respectively. The provision for credit losses for the first six months of 2022 included the initial provision for credit losses on Reliant non-PCD loans and unfunded commitments of $15.2 million and $3.12 million, respectively. The increase in provision expense for the three and six months ended June 30, 2023 reflects organic loan growth, a weaker economic forecast and higher net charge-offs relative to the same periods of 2022.

Additional discussion on credit quality and the ACL is included in the “Asset Quality and Risk Elements” section of MD&A in this Report.

46

Noninterest income
 
The following table presents the components of noninterest income for the periods indicated.
Table 5 - Noninterest Income
(in thousands)
 Three Months Ended
June 30,		ChangeSix Months Ended
June 30,		Change
 20232022AmountPercent20232022AmountPercent
Overdraft fees$2,764 $2,844 $(80)(3)%$5,256 $5,260 $(4)— %
ATM and debit card fees3,937 4,190 (253)(6)7,712 8,181 (469)(6)
Other service charges and fees3,076 2,971 105 4 5,508 5,634 (126)(2)
Total service charges and fees9,777 10,005 (228)(2)18,476 19,075 (599)(3)
Mortgage loan gains and related fees6,584 6,971 (387)(6)11,105 23,123 (12,018)(52)
Wealth management fees5,600 5,985 (385)(6)11,324 11,880 (556)(5)
Gains on sales of other loans2,305 3,800 (1,495)(39)4,221 6,998 (2,777)(40)
Lending and loan servicing fees2,978 1,586 1,392 88 6,994 4,572 2,422 53 
Securities gains (losses), net— 46 (46)(1,644)(3,688)2,044 
Other noninterest income:
Customer derivatives802 534 268 50 1,157 1,320 (163)(12)
Other investment gains (losses)1,090 (1,342)2,432 2,154 (1,841)3,995 
BOLI1,681 1,884 (203)(11)3,296 3,221 75 2 
Treasury management income1,147 899 248 28 2,251 1,717 534 31 
Other4,423 3,090 1,333 43 7,262 6,054 1,208 20 
Total other noninterest income9,143 5,065 4,078 81 16,120 10,471 5,649 54 
Total noninterest income$36,387 $33,458 $2,929 9 $66,596 $72,431 $(5,835)(8)

Service charges and fees for the three and six months ended June 30, 2023 decreased compared to the same periods of 2022 as a result of the elimination of a returned item fee effective July 1, 2022, the impact of which is reflected in overdraft fees for the 2023 periods presented.

Mortgage loan gains and related fees consist primarily of fees earned on originations, secondary market gains on sales, derivative hedging gains and losses and fair value adjustments to our mortgage loans held for sale and mortgage servicing rights asset. The change in mortgage income is strongly tied to the interest rate environment and industry conditions. We recognize the majority of income on mortgages when customers enter into mortgage rate lock commitments, making our rate lock volume a significant driver of mortgage gains in any given period.

The decrease in mortgage loan gains and related fees in the first six months of 2023 was primarily a result of the decrease in mortgage refinance and mortgage rate lock demand compared to same period of 2022, as shown in the following table. In addition, during the first six months of 2023, we recorded an $836,000 negative fair value adjustment, including decay, to the mortgage servicing rights asset, compared to a $6.08 million positive fair value adjustment, including decay, during the first six months of 2022.

47

Table 6 - Selected Mortgage Metrics
(dollars in thousands)
Three Months Ended June 30,Six Months Ended June 30,
20232022% Change20232022% Change
Mortgage rate locks$304,774 $597,305 (49)%$639,471 $1,354,653 (53)%
# of mortgage rate locks899 1,486 (40)1,8223,409(47)
Mortgage loans sold$141,745 $159,897 (11)$221,024 $367,049 (40)
# of mortgage loans sold482645(25)7771,433(46)
Mortgage loans originated:
Purchases$232,735 $394,307 (41)$425,428 $707,819 (40)
Refinances30,627 104,150 (71)62,479 252,595 (75)
Total$263,362 $498,457 (47)$487,907 $960,414 (49)
# of mortgage loans originated738 1,200 (39)1,355 2,402 (44)

Our SBA/USDA lending strategy includes selling a portion of the loan production each quarter. The amount of loans sold depends on several variables including the current lending environment and balance sheet management activities. From time to time, we also sell certain equipment financing receivables. The following table presents loans sold and the corresponding gains or losses recognized on the sale for the periods indicated.

Table 7 - Other Loan Sales
(in thousands)
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
Loans SoldGainLoans SoldGainLoans SoldGainLoans SoldGain
Guaranteed portion of SBA/USDA loans$22,072 $1,567 $39,119 $3,107 $43,842 $3,090 $67,462 $5,573 
Equipment financing receivables20,571 738 20,541 693 39,274 1,131 43,977 1,425 
Total$42,643 $2,305 $59,660 $3,800 $83,116 $4,221 $111,439 $6,998 

Lending and loan servicing fees for the three and six months ended June 30, 2023 increased compared to the same periods of 2022 as result of more favorable fair market value adjustments on our SBA loan servicing asset. During the second quarter and first six months of 2023, we recorded negative fair value adjustments of $605,000 and $60,000, respectively, compared to $1.50 million and $1.64 million, respectively, for the same periods of 2022.

During the six months ended June 30, 2023 and 2022, we sold certain securities, which resulted in net securities losses. During 2023, proceeds from sales were used to fund loan growth and repay FHLB advances. During 2022, we strategically reinvested in higher-yielding securities.

The change in other noninterest income for the three and six months ended June 30, 2023 compared to the same periods of 2022 was primarily driven by the following factors:
•We recorded net unrealized gains on other investments, primarily driven by equity method income from limited partnership investments and unrealized gains on deferred compensation plan assets compared to net unrealized losses during the same periods of 2022. Other investment income for three and six months ended June 30, 2023 was partially offset by unrealized losses on equity securities.
•The increase in other income was primarily driven by the gain on sale of a commercial insurance book of business of $1.59 million.

48

Noninterest Expenses 

The following table presents the components of noninterest expenses for the periods indicated. 
Table 8 - Noninterest Expenses
(in thousands)
 Three Months Ended
June 30,		ChangeSix Months Ended
June 30,		Change
 20232022AmountPercent20232022AmountPercent
Salaries and employee benefits$76,250 $69,233 $7,017 10 %$154,948 $140,239 $14,709 10 %
Communications and equipment10,744 9,675 1,069 11 20,752 18,923 1,829 10 
Occupancy10,194 8,865 1,329 15 20,083 18,243 1,840 10 
Advertising and public relations2,314 2,300 14 1 4,663 3,788 875 23 
Postage, printing and supplies2,382 1,999 383 19 4,919 4,118 801 19 
Professional fees6,592 5,402 1,190 22 12,664 9,849 2,815 29 
Lending and loan servicing expense2,530 3,047 (517)(17)4,849 5,413 (564)(10)
Outside services - electronic banking2,660 2,947 (287)(10)6,085 5,470 615 11 
FDIC assessments and other regulatory charges4,142 2,267 1,875 83 8,143 4,440 3,703 83 
Amortization of intangibles3,421 1,736 1,685 97 6,949 3,529 3,420 97 
Other7,533 6,176 1,357 22 15,881 9,894 5,987 61 
Total excluding merger-related and other charges128,762 113,647 15,115 13 259,936 223,906 36,030 16 
Merger-related and other charges3,645 7,143 (3,498)12,276 16,159 (3,883)
Total noninterest expenses$132,407 $120,790 $11,617 10 $272,212 $240,065 $32,147 13 

The increase in salaries and employee benefits for the second quarter and first six months of 2023 compared to the same periods of 2022 was primarily driven by the addition of Progress employees. The increase also reflects our annual merit-based salary increases awarded at the beginning of the second quarter of 2023. These increases were partially offset by a reduction in commissions expense primarily due to reduced mortgage production volume. Full-time equivalent headcount totaled 3,064 at June 30, 2023, up from 2,822 at June 30, 2022, which represents a 9% increase.

Communications and equipment expense increased primarily due to incremental software contract costs and the growth in our network with the addition of recent acquisitions.

The increase in occupancy costs for the second quarter and first six months of 2023 compared to the same periods of 2022 was mostly attributable to the additional operating lease costs associated with Progress.

The increase in FDIC assessments and other regulatory charges was primarily attributable to the 2 basis point assessment rate increase that went into effect for all banks on January 1, 2023, as well as an increased assessment base driven by higher average total assets partly resulting from the Progress acquisition.

Amortization of intangibles increased with the additional customer deposit intangibles recorded as a result of the Progress acquisition.

Increases in other noninterest expense were mostly attributable to higher professional services fees, internet banking charges, fraud losses and travel expenses,

Merger-related and other charges for the second quarter and first six months of 2023 were primarily related to the acquisition of Progress.

Balance Sheet Review
 
Total assets at June 30, 2023 and December 31, 2022 were $26.1 billion and $24.0 billion, respectively. Total liabilities at June 30, 2023 and December 31, 2022 were $23.0 billion and $21.3 billion, respectively. Shareholders’ equity totaled $3.11 billion and $2.70 billion at June 30, 2023 and December 31, 2022, respectively.

49

Loans

Our loan portfolio is our largest category of interest-earning assets. The following table presents a summary of the loan portfolio by loan type as of June 30, 2023, of which approximately 74% was secured by real estate.

Table 9 - Loan Portfolio Composition
As of June 30, 2023
267
Asset Quality and Risk Elements
 
We manage asset quality and control credit risk through review and oversight of the loan portfolio as well as adherence to policies designed to promote sound underwriting and loan monitoring practices. Our credit risk management function is responsible for monitoring asset quality and Board approved portfolio concentration limits, establishing credit policies and procedures and enforcing the consistent application of these policies and procedures.
 
We conduct reviews of special mention and substandard performing and non-performing loans, past due loans and portfolio concentrations on a regular basis to identify risk migration and potential charges to the ACL. These items are discussed in a series of meetings attended by credit risk management leadership and leadership from various lending groups. In addition to the reviews mentioned above, an independent loan review team reviews the portfolio to ensure consistent application of risk rating policies and procedures.

The ACL reflects our assessment of the life of loan expected credit losses in the loan portfolio and unfunded loan commitments. This assessment involves uncertainty and judgment and is subject to change in future periods. The amount of any changes could be significant if our assessment of loan quality or collateral values changes substantially with respect to one or more loan relationships or portfolios. The allocation of the ACL is based on reasonable and supportable forecasts, historical data, subjective judgment and estimates and therefore, is not necessarily indicative of the specific amounts or loan categories in which charge-offs may ultimately occur. See the Critical Accounting Estimates section of MD&A in our 2022 10-K for additional information on the ACL.

50

Table 10 - Allocation of ACL
(in thousands)
June 30, 2023December 31, 2022
ACL% of loans in each category to total loansACL% of loans in each category to total loans
Owner occupied commercial real estate$21,788 18 $19,834 18 
Income producing commercial real estate38,775 21 32,082 21 
Commercial & industrial29,856 15 23,504 15 
Commercial construction22,276 10 20,120 10 
Equipment financing28,604 8 23,395 9 
Total commercial141,299 72 118,935 73 
Residential mortgage25,431 17 20,809 15 
HELOC10,609 5 8,707 6 
Residential construction3,446 3 2,049 3 
Manufactured housing9,204 2 8,098 2 
Consumer716 1 759 1 
Total ACL - loans190,705 100 159,357 100 
ACL - unfunded commitments21,572 21,163 
Total ACL$212,277 $180,520 
ACL - loans as a percentage of total loans1.10 %1.04 %
ACL - loans as a percentage of nonaccrual loans186 360 

The increase in the ACL since December 31, 2022 was partially driven by the acquisition of Progress, which added $13.2 million to the ACL as of the acquisition date. Of this amount, $2.70 million was reclassified from the amortized cost basis of PCD loans, $8.80 million was recorded as provision for loan losses on acquired non-PCD loan balances and $1.65 million was recorded as provision for unfunded commitments on the acquired balance of unfunded commitments. See Provision for Credit Losses discussion within this MD&A for further information.

51

The following table presents a summary of net charge-offs to average loans for the periods indicated.
Table 11 - Net Charge-offs to Average Loans
(in thousands)
 Three Months Ended
June 30,		Six Months Ended
June 30,
 2023202220232022
Net charge-offs (recoveries)
Owner occupied commercial real estate$(205)$(1,496)$(115)$(1,541)
Income producing commercial real estate1,184(116)3,490(406)
Commercial & industrial2,746(302)2,9712,627
Commercial construction(105)(144)(142)(517)
Equipment financing2,5379075,9121,174
Residential mortgage(43)(51)(130)(148)
HELOC(59)(346)(26)(427)
Residential construction623(76)608(99)
Manufactured housing6201351,248299
Consumer1,1014201,667947
Total net charge-offs (recoveries)$8,399$(1,069)$15,483$1,909
Average loans
Owner occupied commercial real estate$3,108,945$2,650,947$3,084,012$2,635,052
Income producing commercial real estate3,620,8093,290,2173,599,4643,300,737
Commercial & industrial2,482,4142,287,2092,463,1052,310,017
Commercial construction1,762,9841,493,3511,767,4371,476,983
Equipment financing1,470,5241,175,5261,469,5371,155,168
Residential mortgage2,814,9801,905,1312,738,0901,862,223
HELOC923,217786,866925,001780,509
Residential construction475,225373,732480,924373,333
Manufactured housing331,332276,918333,034271,231
Consumer175,699142,427171,889143,332
Total average loans$17,166,129$14,382,324$17,032,493$14,308,585
Net charge-offs to average loans (1)
Owner occupied commercial real estate(0.03)%(0.23)%(0.01)%(0.12)%
Income producing commercial real estate0.13 (0.01)0.20 (0.02)
Commercial & industrial0.44 (0.05)0.24 0.23 
Commercial construction(0.02)(0.04)(0.02)(0.07)
Equipment financing0.69 0.31 0.81 0.20 
Residential mortgage(0.01)(0.01)(0.01)(0.02)
HELOC(0.03)(0.18)(0.01)(0.11)
Residential construction0.53 (0.08)0.25 (0.05)
Manufactured housing0.75 0.20 0.76 0.22 
Consumer2.51 1.18 1.96 1.33 
Total0.20 (0.03)0.18 0.03 
(1) Annualized.

52

Nonperforming Assets

The table below summarizes NPAs for the periods indicated. NPAs include nonaccrual loans, OREO and repossessed assets. The increase in nonaccrual loans since December 31, 2022 is primarily driven by a small number of large commercial loans that moved to nonaccrual status and an increase in nonaccrual manufactured housing loans during the first half of 2023, which contributed to $59.0 million and $6.62 million of the increase, respectively. These additions were partially offset by reductions in nonaccrual loans resulting from repayments, payoffs, charge-offs as well as loans returning to accrual status.

Table 12 - NPAs
(in thousands)
June 30,
2023		December 31,
2022
Nonaccrual loans102,619 44,232 
OREO and repossessed assets1,118 49 
Total NPAs$103,737 $44,281 
Nonaccrual loans as a percentage of total loans0.59 %0.29 %
NPAs as a percentage of total assets0.40 0.18 

Our policy is to place loans on nonaccrual status when, in the opinion of management, the full principal and interest on a loan is not likely to be collected or when the loan becomes 90 days past due. A loan may continue on accrual after 90 days with senior management approval if it is well collateralized and in the process of collection. When a loan is placed on nonaccrual status, interest previously accrued but not collected is reversed against current interest revenue. Interest payments received on nonaccrual loans are applied to reduce the loan’s amortized cost. Loans are generally returned to accrual status when all the principal and interest amounts contractually due are brought current, there is a sustained period of repayment performance and future payments are reasonably assured.
 
Generally, we do not commit to lend additional funds to customers whose loans are on nonaccrual status, although in certain isolated cases, we execute forbearance agreements whereby we agree to continue to fund construction loans to completion or other lines of credit as long as the borrower meets the conditions of the forbearance agreement. We may also fund other amounts necessary to protect collateral such as amounts to pay past due property taxes and insurance coverage.

Investment Securities

The composition of the investment securities portfolio reflects our investment strategy of maintaining an appropriate level of liquidity while providing a relatively stable source of revenue. The investment securities portfolio also provides a balance to interest rate risk and credit risk in other categories of the balance sheet while providing a vehicle for the investment of available funds, furnishing liquidity, and supplying securities to pledge as required collateral for certain deposits and borrowings.

Table 13 - Investment Securities
(in thousands)
June 30, 2023December 31, 2022
Carrying Value% of portfolioCarrying Value% of portfolio$ Change
AFS$3,359,989 57 %$3,614,333 58 %$(254,344)
HTM2,553,835 43 2,613,648 42 (59,813)
Total investment securities$5,913,824 $6,227,981 $(314,157)
Investment securities as a % of total assets23 %26 %






53


Table 14 - Investment Securities Portfolio Composition
As of June 30, 2023
(in thousands)
549755824019
In the first quarter of 2023, we sold $381 million in AFS securities, including approximately $111 million in securities received through the Progress acquisition, primarily for the purpose of providing liquidity to fund loan growth.
During the second quarter of 2023, we entered into a fair value hedge on a portion of our AFS securities portfolio in order to mitigate the impact of any potential future unrealized losses on our tangible common equity. The notional value of the securities hedged totaled $677 million as of June 30, 2023. Gains and losses related to the hedge and hedged item are reflected in investment securities income. During the second quarter of 2023, we recorded net gains on the hedge and hedged item of $910,000. See Note 7 to the financial statements for further detail.
At June 30, 2023, HTM debt securities had a fair value of $2.13 billion, indicating net unrealized losses of $421 million. Additional unrealized losses on HTM debt securities of $72.9 million (pre-tax) were included in AOCI as a result of the transfer of AFS debt securities to HTM in 2022. Unrealized losses were primarily attributable to changes in interest rates.
In accordance with CECL, our HTM debt securities portfolio is evaluated quarterly to assess whether an ACL is required. We measure expected credit losses on HTM debt securities on a collective basis by major security type. The estimate of expected credit losses considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts. At June 30, 2023 and December 31, 2022, calculated credit losses on HTM debt securities were de minimis due to the high credit quality of the portfolio, which included securities issued or guaranteed by U.S. Government agencies, GSEs, high credit quality municipalities and supranational entities. As a result, no ACL for HTM debt securities was recorded.
For AFS debt securities in an unrealized loss position, if we intend to sell, or if it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis, the security's amortized cost basis is written down to fair value through income. Absent circumstances when an AFS security would be sold, we evaluate whether the decline in fair value has resulted from credit losses or other factors. The evaluation considers factors such as the extent to which fair value is less than amortized cost, changes to the security’s rating, and adverse conditions specific to the security. If the evaluation indicates a credit loss exists, an ACL may be recorded, with such allowance limited to the amount by which fair value is below amortized cost. Any impairment unrelated to credit factors is recognized in OCI. At June 30, 2023 and December 31, 2022, there was no ACL related to the AFS debt securities portfolio. Unrealized losses at June 30, 2023 and December 31, 2022 primarily reflected the effect of changes in interest rates.
54

Goodwill and Other Intangible Assets

Goodwill represents the premium paid for acquired companies above the net fair value of the assets acquired and liabilities assumed, including separately identifiable intangible assets. Management evaluates goodwill annually, or more frequently if necessary, to determine if any impairment exists. At June 30, 2023 and December 31, 2022, the net carrying amount of goodwill was $897 million and $751 million, respectively.

We also have core deposit and customer relationship intangible assets, representing the value of acquired deposit and customer relationships, respectively, which are amortizing intangible assets. Amortizing intangible assets are required to be tested for impairment only when events or circumstances indicate that impairment may exist.

In connection with the acquisition of Progress in the first quarter of 2023, we recorded goodwill and a core deposit intangible of $146 million and $40.0 million, respectively. See Note 4 to the financial statements for further information about the Progress acquisition.

Deposits

Customer deposits are the primary source of funds for the continued growth of our earning assets. Our high level of service, as evidenced by our strong customer satisfaction scores, has been instrumental in attracting and retaining customer deposit accounts. The increase in deposits since December 31, 2022 was mostly driven by the deposits assumed in the Progress transaction, although we also generated organic growth by increasing the rates offered on deposits to remain competitive in the market in the midst of the rising rate environment. As of June 30, 2023, we had approximately $8.21 billion of uninsured deposits, of which $2.29 billion was collateralized by investment securities.

Table 15 - Deposits
(in thousands)
June 30, 2023December 31, 2022
Noninterest-bearing demand$6,970,668 $7,643,081 
NOW and interest-bearing demand5,076,371 4,350,878 
Money market and savings6,297,803 5,967,017 
Time3,265,230 1,781,482 
Total customer deposits21,610,072 19,742,458 
Brokered deposits641,916 134,049 
Total deposits$22,251,988 $19,876,507 

Borrowing Activities

At both June 30, 2023 and December 31, 2022, we had long-term debt outstanding of $325 million, which includes senior debentures, subordinated debentures, and trust preferred securities. Also at December 31, 2022, we had short-term borrowings outstanding of $159 million, which was mostly comprised of repurchase agreements, and we had $550 million of FHLB advances outstanding. There were no short-term borrowings or FHLB advances outstanding at June 30, 2023. We began using these short-term funding sources in mid 2022 due to balance attrition in our deposit accounts and our need to fund loan growth. The decrease since December 31, 2022 is a result of the sale of investment securities noted above and growth in customer and brokered deposits which allowed us to fund loan growth and repay short-term borrowings.

Contractual Obligations
 
There have not been any material changes to our contractual obligations since December 31, 2022.
 
Off-Balance Sheet Arrangements
 
We are a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of customers. These financial instruments include commitments to extend credit, letters of credit and financial guarantees.
 
A commitment to extend credit is an agreement to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Letters of credit and financial guarantees are conditional commitments issued to guarantee a customer’s performance to a third party
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and have essentially the same credit risk as extending loan facilities to customers. Those commitments are primarily issued to local businesses.
 
The exposure to credit loss in the event of nonperformance by the other party to the commitments to extend credit, letters of credit and financial guarantees is represented by the contractual amount of these instruments. We use the same credit underwriting procedures for making commitments, letters of credit and financial guarantees, as we use for underwriting on-balance sheet instruments. Management evaluates each customer’s creditworthiness on a case-by-case basis and the amount of the collateral, if deemed necessary, is based on the credit evaluation. Collateral held varies, but may include unimproved and improved real estate, certificates of deposit, personal property or other acceptable collateral.
 
All of these instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the balance sheet. The total amount of these instruments does not necessarily represent future cash requirements because a significant portion of these instruments expire without being used. We are not involved in off-balance sheet contractual relationships, other than those disclosed in this Report, that could result in liquidity needs or other commitments, or that could significantly affect earnings. See Note 23 to the consolidated financial statements included in our 2022 10-K and Note 15 to the consolidated financial statements in this Report for additional information on off-balance sheet arrangements.

Interest Rate Sensitivity Management

The absolute level and volatility of interest rates can have a significant effect on profitability. The objective of interest rate risk management is to identify and manage the sensitivity of net interest revenue to changing interest rates, consistent with our overall financial goals. Based on economic conditions, asset quality and various other considerations, management establishes tolerance ranges for interest rate sensitivity and manages within these ranges. 

Net interest revenue and the fair value of financial instruments are influenced by changes in the level of interest rates. We limit our exposure to fluctuations in interest rates through policies established by our ALCO and approved by the Board. The ALCO meets periodically and has responsibility for formulating and recommending asset/liability management policies to the Board, formulating and implementing strategies to improve balance sheet positioning and/or earnings, and reviewing interest rate sensitivity. 

One of the tools management uses to estimate and manage the sensitivity of net interest revenue to changes in interest rates is an asset/liability simulation model. Resulting estimates are based upon multiple assumptions for each scenario, including loan and deposit re-pricing characteristics and the rate of prepayments. The ALCO periodically reviews the assumptions for reasonableness based on historical data and future expectations; however, actual net interest revenue may differ from model results. The primary objective of the simulation model is to measure the potential change in net interest revenue over time using multiple interest rate scenarios. The base scenario assumes rates remain flat and is the scenario to which all others are compared, in order to measure the change in net interest revenue. Policy limits are based on immediate rate shock scenarios, as well as gradually rising and falling rate scenarios, which are all compared to the base scenario. Our assumptions include floors such that market rates and discount rates do not go below zero. Other scenarios analyzed may include delayed rate shocks, yield curve steepening or flattening, or other variations in rate movements. While the primary policy scenarios focus on a 12-month time frame, longer time horizons are also modeled. 

Our policy is based on the 12-month impact on net interest revenue of interest rate shocks and ramps that increase from 100 to 400 basis points or decrease 100 to 200 basis points from the base scenario. In the shock scenarios, rates immediately change the full amount at the scenario onset. In the ramp scenarios, rates change by 25 basis points per month. Our policy limits the projected change in net interest revenue over the first 12 months to an 8% decrease for each 100 basis point change in the increasing and decreasing rate ramp and shock scenarios. The following table presents our interest sensitivity position at the dates indicated.

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Table 16 - Interest Sensitivity
(in thousands)
 Increase (Decrease) in Net Interest Revenue from Base Scenario at
 June 30, 2023December 31, 2022
Change in RatesShockRampShockRamp
200 basis point increase1.56 %(0.30)%6.97 %4.33 %
100 basis point increase0.82 0.02 3.53 2.85 
100 basis point decrease(1.14)(0.43)(3.78)(3.12)
200 basis point decrease(3.79)(0.77)(8.39)(5.07)
The current environment is marked by the most rapid rate increases in decades, which, in part, is making non-bank products, such as U.S. Treasuries and institutional money market funds, more attractive to our deposit customers. For this and other reasons, the banking industry’s deposit base has been shrinking since the first half of 2022. This industry-wide outflow of deposits has increased price competition for bank deposits. As such, industry deposit betas, including ours, have been increasing at a faster pace relative to the last rising rate cycle. Our cumulative total deposit beta for the current rising rate cycle increased to 32% in the second quarter of 2023. Our cumulative total deposit beta in the last upward rate cycle from November 2015 to July 2019 was 22%.
Our interest sensitivity model includes significant key assumptions which may change over time. Although our model generally assumes no change in deposit portfolio size or composition, we have included an assumption for the runoff of surge deposits since 2021. In the second quarter of 2023, in response to the rapid rate increases mentioned above, we increased the beta assumption in our model. The modeled total deposit beta, which is measured as the change in our overall deposit rate as a percentage of the change in the targeted federal funds rate, was 37%. A higher total deposit beta assumption generally indicates a less asset sensitive balance sheet and lowers the expected increase in net interest revenue in the increasing rate scenarios.

Liquidity Management 
Liquidity is defined as the ability to convert assets into cash or cash equivalents without significant loss and to raise additional funds by increasing liabilities. Liquidity management involves maintaining the ability to meet the daily cash flow requirements of customers, both depositors and borrowers. The primary objective is to ensure that sufficient funding is available, at a reasonable cost, to meet ongoing operational cash needs and to take advantage of revenue producing opportunities as they arise. While the desired level of liquidity will vary depending upon a variety of factors, our primary goal is to maintain a sufficient level of liquidity in all expected economic environments. To assist in determining the adequacy of our liquidity, we perform a variety of liquidity stress tests. We maintain an unencumbered liquid asset reserve to help ensure our ability to meet our obligations under normal conditions for at least a 12-month period and under severely adverse liquidity conditions for a minimum of 30 days.
An important part of the Bank’s liquidity resides in the asset portion of the balance sheet, which provides liquidity primarily through loan interest and principal repayments and the maturities and sales of securities, as well as the ability to use these assets as collateral for borrowings on a secured basis.
The Bank’s main source of liquidity is customer interest-bearing and noninterest-bearing deposit accounts. Liquidity is also available from wholesale funding sources consisting primarily of repurchase agreements, Federal funds purchased, FHLB advances, and brokered deposits. These sources of liquidity are generally short-term in nature and are used as necessary to fund asset growth and meet other short-term liquidity needs. In response to recent bank failures, we have focused on maximizing the amount of securities and loans available as collateral for contingent liquidity sources as well as reevaluated the assumptions in our liquidity stress test, particularly as it relates to deposit duration.
At June 30, 2023, we had sufficient qualifying collateral to provide borrowing capacity for FHLB advances of $1.75 billion, Federal Reserve discount window borrowing capacity of $2.70 billion and Federal Reserve bank term funding program capacity of $2.26 billion. We also had unpledged investment securities of $1.49 billion that could be used as collateral for additional borrowings. In addition, we believe we have the ability to attract retail deposits by competing more aggressively on pricing.
In addition, because the Holding Company is a separate entity and apart from the Bank, it must provide for its own liquidity. The Holding Company is responsible for the payment of dividends declared for its common and preferred shareholders, and interest and principal on any outstanding debt or trust preferred securities. The Holding Company currently has internal capital resources to meet these obligations. While the Holding Company has access to the capital markets and maintains a line of credit as a contingent funding source, the ultimate sources of its liquidity are subsidiary service fees and dividends from the Bank, which are limited by applicable law and regulations. A South Carolina state-chartered bank is permitted to pay a dividend of up to 100% of its current year earnings
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without requesting approval of the South Carolina Board of Financial Institutions, provided certain conditions are met. Holding Company liquidity is managed to a minimum of 15-months of anticipated cash expenditures after considering all of its liquidity needs over this period.
Significant uses and sources of cash during the six months ended June 30, 2023 are as follows. See the consolidated statement of cash flows for further detail.
•Net cash provided by operating activities of $185 million reflects net income of $126 million adjusted for non-cash transactions, partly offset by changes in loans held for sale and other assets and liabilities. Significant non-cash transactions for the period included a $44.5 million provision for credit losses and net depreciation, amortization, and accretion of $23.6 million.
•Net cash used in investing activities of $163 million primarily consisted of a net increase in loans of $618 million and purchases of AFS securities and equity investments totaling $310 million. These uses of cash were partially offset by proceeds from securities sales, maturities and calls of $624 million and equity investment inflows of $123 million.
•Net cash provided by financing activities of $42.3 million was driven by a net increase in deposits of $1.04 billion, partially offset by net repayments of FHLB advances of $645 million, a net decrease in short-term borrowings of $300 million, and dividends on common and preferred stock of $53.9 million.
In the opinion of management, our liquidity position at June 30, 2023 was sufficient to meet our expected cash flow requirements for the foreseeable future.
Capital Resources and Dividends
 
Shareholders’ equity at June 30, 2023 was $3.11 billion, an increase of $405 million from December 31, 2022 primarily due to equity issued in the Progress acquisition, year-to-date earnings and unrealized gains on AFS securities, partially offset by dividends declared on common and preferred stock.

The following table shows capital ratios, as calculated under applicable regulatory guidelines, at June 30, 2023 and December 31, 2022. As of June 30, 2023, capital levels remained characterized as “well-capitalized” under regulatory requirements in effect at the time. Additional information related to capital ratios is provided in Note 14 to the consolidated financial statements.

Table 17 - Capital Ratios
United Community Banks, Inc.
(Consolidated)		United Community Bank
MinimumWell-
Capitalized		Minimum Capital Plus Capital Conservation BufferJune 30,
2023		December 31,
2022		June 30,
2023		December 31,
2022
Risk-based ratios:
CET1 capital4.5 %6.5 %7.0 %12.19 %12.26 %12.42 %12.83 %
Tier 1 capital6.0 8.0 8.5 12.69 12.81 12.42 12.83 
Total capital8.0 10.0 10.5 14.57 14.79 13.39 13.70 
Leverage ratio4.0 5.0 N/A9.79 9.69 9.56 9.69 

Effect of Inflation and Changing Prices
 
A bank’s asset and liability structure is substantially different from that of an industrial firm in that primarily all assets and liabilities of a bank are monetary in nature with relatively little investment in fixed assets or inventories. Inflation has an important effect on the growth of total assets and the resulting need to increase equity capital at higher than normal rates in order to maintain an appropriate equity to assets ratio.
 
Management believes the effect of inflation on financial results depends on our ability to react to changes in interest rates, and by such reaction, reduce the inflationary effect on performance. We have an asset/liability management program to manage interest rate sensitivity. In addition, periodic reviews of banking services and products are conducted to adjust pricing in view of current and expected costs.

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Item 3.    Quantitative and Qualitative Disclosure About Market Risk
 
There have been no material changes in our market risk as of June 30, 2023 from that presented in our 2022 10-K. Our interest rate sensitivity position at June 30, 2023 is set forth in Table 16 in MD&A of this Report and incorporated herein by this reference.
 
Item 4.    Controls and Procedures

    (a) Disclosure Controls and Procedures. Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures (as such term is defined in Exchange Act Rule 13a-15(e)) as of June 30, 2023. Based on that evaluation, our principal executive officer and chief financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Report.

    (b) Changes in Internal Control Over Financial Reporting. No change in our internal control over financial reporting (as such term is defined in Exchange Act Rule 13a-15(f)) occurred during the fiscal quarter ended June 30, 2023 that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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Part II. OTHER INFORMATION 

Item 1. Legal Proceedings
 
In the ordinary course of business, the Holding Company and the Bank are parties to various legal proceedings. Additionally, in the ordinary course of business, the Holding Company and the Bank are subject to regulatory examinations and investigations. Based on our current knowledge and advice of counsel, in the opinion of management there is no such pending or threatened legal matter which would result in a material adverse effect upon our consolidated financial condition or results of operations.

Items 1A. Risk Factors

Except with respect to the additional risk factors related to the First Miami acquisition, which are set forth on pages 22 through 24 of the prospectus filed with the SEC on April 24, 2023 pursuant to Securities Act Rule 424(b)(3) (and incorporated herein by this reference), there have been no material changes to the risk factors previously disclosed in the 2022 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities
The following table contains information regarding purchases of our preferred stock made during the quarter ended June 30, 2023 by or on behalf of United or any “affiliated purchaser,” as defined by Rule 10b-18(a)(3) of the Exchange Act:

(Dollars in thousands, except for per share amounts)Total Number of Depositary Shares
Purchased		Average
Price Paid
per Depositary Share		Total Number of
Depositary Shares Purchased
as Part of Publicly
Announced Plans
or Programs
Approximate Dollar
Value of Shares that May
Yet Be Purchased Under
the Plans or Programs (1)
April 1, 2023 - April 30, 2023
— $— — $— 
May 1, 2023 - May 31, 2023
— — — 25,000 
June 1, 2023 - June 30, 2023
10,668 20.85 10,668 24,778 
Total10,668 $20.85 10,668 
 
(1) In May 2023, United’s Board authorized a preferred stock repurchase program to permit the repurchase of up to $25 million of its preferred stock. The program is scheduled to expire on the earlier of the repurchase of our preferred stock having an aggregate purchase price of $25 million or December 31, 2023. Under the program, shares may be repurchased in open market transactions or in privately negotiated transactions, from time to time, subject to market conditions, including transactions outside the safe harbor provided by Exchange Act Rule 10b-18 (but nevertheless adhering to Rule 10-b-18’s requirements). The preferred stock repurchase program may be modified, suspended or discontinued at any time at the Company’s discretion without prior notice, and does not commit the Company to repurchase shares of its preferred stock or depositary shares. The actual number and value of the shares to be purchased will be determined by the Company at its discretion, and will depend on a number of factors including the performance of the price of the depositary shares, market conditions, the availability of alternative investment opportunities and other factors the Company deems appropriate.
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Item 6. Exhibits

(d)     Exhibits. See Exhibit Index below.

EXHIBIT INDEX
Exhibit No. Description
 
 
 
101
Interactive data files for United Community Bank, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2023, formatted in Inline XBRL: (i) the Consolidated Balance Sheets (unaudited); (ii) the Consolidated Statements of Income (unaudited); (iii) the Consolidated Statements of Comprehensive Income (unaudited); (iv) the Consolidated Statements of Changes in Shareholders’ Equity (unaudited); (v) the Consolidated Statements of Cash Flows (unaudited); and (vi) the Notes to Consolidated Financial Statements (unaudited).
104
The cover page from United Community Bank’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2023 (formatted in Inline XBRL and included in Exhibit 101)


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Signatures
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 UNITED COMMUNITY BANKS, INC.
  
 /s/ H. Lynn Harton
 H. Lynn Harton
 President and Chief Executive Officer
 (Principal Executive Officer)
  
 /s/ Jefferson L. Harralson
 Jefferson L. Harralson
 Executive Vice President and Chief Financial Officer
 (Principal Financial Officer)
  
 /s/ Alan H. Kumler
 Alan H. Kumler
 Senior Vice President and Chief Accounting Officer
 (Principal Accounting Officer)
  
 Date: August 4, 2023
 

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Document

Exhibit 31.1
 
I, H. Lynn Harton, certify that:
 
1. I have reviewed this quarterly report on Form 10-Q of United Community Banks, Inc. (the “Registrant”);
 
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a - 15(f) and 15d - 15(f)) for the registrant and have:
 
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
 
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
 
Date: August 4, 2023
 /s/ H. Lynn Harton
H. Lynn Harton
  President and Chief Executive Officer of the Registrant
 
 


Document

Exhibit 31.2
 
I, Jefferson L. Harralson, certify that:
 
1. I have reviewed this quarterly report on Form 10-Q of United Community Banks, Inc. (the “Registrant”);
 
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a - 15(f) and 15d - 15(f)) for the registrant and have:
 
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
 
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. 
 
Date: August 4, 2023
 /s/ Jefferson L. Harralson
  Jefferson L. Harralson
  Executive Vice President and Chief Financial Officer of the Registrant


Document

Exhibit 32
 
CERTIFICATIONS PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
 
In connection with the Quarterly Report of United Community Banks, Inc. (“United”) on Form 10-Q for the period ending June 30, 2023 filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned officers of United certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
 
(1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of United.
 /s/ H. Lynn Harton
 Name: H. Lynn Harton
 Title:President and Chief Executive Officer
Date:August 4, 2023
  
 /s/ Jefferson L. Harralson
 Name: Jefferson L. Harralson
 Title:Executive Vice President and Chief Financial Officer
 Date:August 4, 2023