XNAS:UCBI United Community Banks Inc Quarterly Report 10-Q Filing - 3/31/2012

Effective Date 3/31/2012

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Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-Q

 

 

 

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

For the Quarterly Period Ended March 31, 2012

OR

 

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

For the Transition Period from             to             

Commission file number 001-35095

 

 

UNITED COMMUNITY BANKS, INC.

(Exact name of registrant as specified in its charter)

 

 

 

Georgia   58-1807304
(State of Incorporation)  

(I.R.S. Employer

Identification No.)

 

125 Highway 515 East

Blairsville, Georgia

  30512
Address of Principal Executive Offices   (Zip Code)

(706) 781-2265

(Telephone Number)

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    YES  x    NO  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Date File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    YES  x    NO  ¨

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

 

Large accelerated filer   ¨    Accelerated filer   x
Non-accelerated filer   ¨  (Do not check if a smaller reporting company)    Smaller Reporting Company   ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    YES  ¨    NO  x

Common stock, par value $1 per share 57,613,842 shares outstanding as of April 30, 2012

 

 

 


Table of Contents

INDEX

 

PART I - Financial Information

  

Item 1. Financial Statements

  

Consolidated Statement of Operations (unaudited) for the Three Months Ended March  31, 2012 and 2011

     3   

Consolidated Statement of Comprehensive Income (Loss) (unaudited) for the Three Months Ended March  31, 2012 and 2011

     4   

Consolidated Balance Sheet at March 31, 2012 (unaudited), December  31, 2011 (audited) and March 31, 2011 (unaudited)

     5   

Consolidated Statement of Changes in Shareholders’ Equity (unaudited) for the Three Months Ended March 31, 2012 and 2011

     6   

Consolidated Statement of Cash Flows (unaudited) for the Three Months Ended March 31, 2012 and 2011

     7   

Notes to Consolidated Financial Statements

     8   

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

     28   

Item 3. Quantitative and Qualitative Disclosures About Market Risk

     51   

Item 4. Controls and Procedures

     51   

PART II - Other Information

  

Item 1. Legal Proceedings

     51   

Item 1A. Risk Factors

     51   

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

     51   

Item 3. Defaults Upon Senior Securities

     51   

Item 4. Mine Safety Disclosures

     51   

Item 5. Other Information

     51   

Item 6. Exhibits

     52   

 

2


Table of Contents

Part I – Financial Information

Item 1 – Financial Statements

UNITED COMMUNITY BANKS, INC.

Consolidated Statement of Operations (Unaudited)

 

     Three Months Ended  
     March 31,  

(in thousands, except per share data)

   2012     2011  

Interest revenue:

    

Loans, including fees

   $ 55,759      $ 61,107   

Investment securities, including tax exempt of $250 and $259

     13,004        13,604   

Federal funds sold, reverse repurchase agreements, commercial paper and deposits in banks

     1,012        819   
  

 

 

   

 

 

 

Total interest revenue

     69,775        75,530   
  

 

 

   

 

 

 

Interest expense:

    

Deposits:

    

NOW

     637        1,324   

Money market

     641        2,028   

Savings

     37        77   

Time

     6,159        11,732   
  

 

 

   

 

 

 

Total deposit interest expense

     7,474        15,161   

Federal funds purchased, repurchase agreements and other short-term borrowings

     1,045        1,042   

Federal Home Loan Bank advances

     466        590   

Long-term debt

     2,372        2,780   
  

 

 

   

 

 

 

Total interest expense

     11,357        19,573   
  

 

 

   

 

 

 

Net interest revenue

     58,418        55,957   

Provision for loan losses

     15,000        190,000   
  

 

 

   

 

 

 

Net interest revenue after provision for loan losses

     43,418        (134,043
  

 

 

   

 

 

 

Fee revenue:

    

Service charges and fees

     7,783        6,720   

Mortgage loan and other related fees

     2,099        1,494   

Brokerage fees

     813        677   

Securities gains, net

     557        55   

Loss from prepayment of debt

     (482     —     

Other

     4,609        2,892   
  

 

 

   

 

 

 

Total fee revenue

     15,379        11,838   
  

 

 

   

 

 

 

Total revenue

     58,797        (122,205
  

 

 

   

 

 

 

Operating expenses:

    

Salaries and employee benefits

     25,225        24,924   

Communications and equipment

     3,155        3,344   

Occupancy

     3,771        4,074   

Advertising and public relations

     846        978   

Postage, printing and supplies

     979        1,118   

Professional fees

     1,975        3,330   

Foreclosed property

     3,825        64,899   

FDIC assessments and other regulatory charges

     2,510        5,413   

Amortization of intangibles

     732        762   

Other

     3,937        6,429   
  

 

 

   

 

 

 

Total operating expenses

     46,955        115,271   
  

 

 

   

 

 

 

Net income (loss) before income taxes

     11,842        (237,476

Income tax expense (benefit)

     314        (140
  

 

 

   

 

 

 

Net income (loss)

     11,528        (237,336

Preferred stock dividends and discount accretion

     3,030        2,778   
  

 

 

   

 

 

 

Net income (loss) available to common shareholders

   $ 8,498      $ (240,114
  

 

 

   

 

 

 

Earnings (loss) per common share—Basic / Diluted

   $ .15      $ (13.00

Weighted average common shares outstanding—Basic / Diluted

     57,764        18,466   

See accompanying notes to consolidated financial statements.

 

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Table of Contents

UNITED COMMUNITY BANKS, INC.

Consolidated Statement of Comprehensive Income (Loss) (Unaudited)

 

     Three Months Ended  
     March 31,  

(in thousands)

   2012     2011  

Net income (loss)

   $ 11,528      $ (237,336

Other comprehensive loss:

    

Unrealized losses on available for sale securities:

    

Unrealized holding losses arising during period

     (3,340     (959

Reclassification adjustment for gains included in net income

     (557     (55

Amortization of gains included in net income (loss) on available for sale securities transferred to held to maturity

     (413     (663

Amortization of gains included in net income (loss) on derivative financial instruments accounted for as cash flow hedges

     (1,600     (4,223

Amortization of prior service cost and actuarial losses included in net periodic pension cost for defined benefit pension plans

     154        —     
  

 

 

   

 

 

 

Total other comprehensive loss

     (5,756     (5,900
  

 

 

   

 

 

 

Comprehensive income (loss)

   $ 5,772      $ (243,236
  

 

 

   

 

 

 

See accompanying notes to consolidated financial statements.

 

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Table of Contents

UNITED COMMUNITY BANKS, INC.

Consolidated Balance Sheet

 

     March 31,     December 31,     March 31,  
     2012     2011     2011  

(in thousands, except share and per share data)

   (unaudited)     (audited)     (unaudited)  

ASSETS

      

Cash and due from banks

   $ 53,147      $ 53,807      $ 153,891   

Interest-bearing deposits in banks

     139,439        139,609        465,656   

Federal funds sold, reverse repurchase agreements, commercial paper and short-term investments

     235,000        185,000        470,087   
  

 

 

   

 

 

   

 

 

 

Cash and cash equivalents

     427,586        378,416        1,089,634   

Securities available for sale

     1,898,815        1,790,047        1,638,494   

Securities held to maturity (fair value $318,490, $343,531 and $248,361)

     303,636        330,203        245,430   

Loans held for sale

     —          —          80,629   

Mortgage loans held for sale

     24,809        23,881        25,364   

Loans, net of unearned income

     4,127,566        4,109,614        4,194,372   

Less allowance for loan losses

     113,601        114,468        133,121   
  

 

 

   

 

 

   

 

 

 

Loans, net

     4,013,965        3,995,146        4,061,251   

Assets covered by loss sharing agreements with the FDIC

     72,854        78,145        125,789   

Premises and equipment, net

     174,419        175,088        179,143   

Bank owned life insurance

     80,956        80,599        79,777   

Accrued interest receivable

     20,292        20,693        21,687   

Intangible assets

     7,695        8,428        10,684   

Foreclosed property

     31,887        32,859        54,378   

Unsettled securities sales

     43,527        —          —     

Other assets

     73,252        69,915        97,228   
  

 

 

   

 

 

   

 

 

 

Total assets

   $ 7,173,693      $ 6,983,420      $ 7,709,488   
  

 

 

   

 

 

   

 

 

 

LIABILITIES AND SHAREHOLDERS' EQUITY

      

Liabilities:

      

Deposits:

      

Demand

   $ 1,101,757      $ 992,109      $ 864,708   

NOW

     1,389,016        1,509,896        1,320,136   

Money market

     1,123,734        1,038,778        967,938   

Savings

     214,150        199,007        193,591   

Time:

      

Less than $100,000

     1,207,479        1,332,394        1,576,505   

Greater than $100,000

     796,882        847,152        990,289   

Brokered

     167,521        178,647        684,581   
  

 

 

   

 

 

   

 

 

 

Total deposits

     6,000,539        6,097,983        6,597,748   

Federal funds purchased, repurchase agreements, and other short-term borrowings

     101,925        102,577        102,107   

Federal Home Loan Bank advances

     215,125        40,625        55,125   

Long-term debt

     120,245        120,225        150,166   

Unsettled securities purchases

     119,565        10,325        177,532   

Accrued expenses and other liabilities

     36,755        36,199        40,766   
  

 

 

   

 

 

   

 

 

 

Total liabilities

     6,594,154        6,407,934        7,123,444   
  

 

 

   

 

 

   

 

 

 

Shareholders’ equity:

      

Preferred stock, $1 par value; 10,000,000 shares authorized;

      

Series A; $10 stated value; 21,700 shares issued and outstanding

     217        217        217   

Series B; $1,000 stated value; 180,000 shares issued and outstanding

     177,451        177,092        176,049   

Series D; $1,000 stated value; 16,613 shares issued and outstanding

     16,613        16,613        16,613   

Series F; $1,000 stated value; 195,872 shares issued and outstanding

     —          —          195,872   

Series G; $1,000 stated value; 151,185 shares issued and outstanding

     —          —          151,185   

Common stock, $1 par value; 100,000,000 shares authorized; 41,688,647, 41,647,100 and 20,903,111 shares issued and outstanding

     41,689        41,647        20,903   

Common stock, non-voting, $1 par value; 30,000,000 shares authorized; 15,914,209 shares issued and outstanding

     15,914        15,914        —     

Common stock issuable; 90,126, 93,681 and 79,428 shares

     2,948        3,233        3,681   

Capital surplus

     1,056,135        1,054,940        738,963   

Accumulated deficit

     (722,363     (730,861     (732,390

Accumulated other comprehensive (loss) income

     (9,065     (3,309     14,951   
  

 

 

   

 

 

   

 

 

 

Total shareholders’ equity

     579,539        575,486        586,044   
  

 

 

   

 

 

   

 

 

 

Total liabilities and shareholders’ equity

   $ 7,173,693      $ 6,983,420      $ 7,709,488   
  

 

 

   

 

 

   

 

 

 

See accompanying notes to consolidated financial statements.

 

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Table of Contents

UNITED COMMUNITY BANKS, INC.

Consolidated Statement of Changes in Shareholders’ Equity (Unaudited)

For the Three Months Ended March 31,

 

                                                                Accumulated        
    Preferred Stock           Non-Voting     Common                 Other        

(in thousands, except share and
per share data)

  Series
A
    Series
B
    Series
D
    Series
F
    Series
G
    Common
Stock
    Common
Stock
    Stock
Issuable
    Capital
Surplus
    Accumulated
Deficit
    Comprehensive
Income (Loss)
    Total  

Balance, December 31, 2010

  $ 217      $ 175,711      $ —        $ —        $ —        $ 18,937      $ —        $ 3,894      $ 741,244      $ (492,276   $ 20,851      $ 468,578   

Net loss

                      (237,336       (237,336

Other comprehensive loss

                        (5,900     (5,900

Preferred for common equity exchange related to tax benefits preservation plan (1,551,126 common shares)

        16,613            (1,551         (15,062         —     

Common stock issued to dividend reinvestment plan and employee benefit plans (46,019 shares)

              46            329            375   

Common and preferred stock issued (3,467,699 common shares)

          195,872        151,185        3,468            12,004            362,529   

Amortization of stock options and restricted stock awards

                    549            549   

Vesting of restricted stock (1,419 shares issued, 6,382 shares deferred)

              1          54        (55         —     

Deferred compensation plan, net, including dividend equivalents

                  65              65   

Shares issued from deferred compensation plan (2,098 shares)

              2          (332     330            —     

Tax on option exercise and restricted stock vesting

                    (376         (376

Preferred stock dividends:

                       

Series A

                      (3       (3

Series B

      338                      (2,602       (2,264

Series D

                      (173       (173
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, March 31, 2011

  $ 217      $ 176,049      $ 16,613      $ 195,872      $ 151,185      $ 20,903      $ —        $ 3,681      $ 738,963      $ (732,390   $ 14,951      $ 586,044   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, December 31, 2011

  $ 217      $ 177,092      $ 16,613      $ —        $ —        $ 41,647      $ 15,914      $ 3,233      $ 1,054,940      $ (730,861   $ (3,309   $ 575,486   

Net income

                      11,528          11,528   

Other comprehensive loss

                        (5,756     (5,756

Common stock issued to dividend reinvestment plan and to employee benefit plans (35,648 shares)

              36            242            278   

Amortization of stock options and restricted stock awards

                    585            585   

Vesting of restricted stock (4,397 shares issued, 8,399 shares deferred)

              4          (151     187            40   

Deferred compensation plan, net, including dividend equivalents

                  49              49   

Shares issued from deferred compensation plan (1,502 shares)

              2          (183     181            —     

Preferred stock dividends:

                       

Series A

                      (3       (3

Series B

      359                      (2,608       (2,249

Series D

                      (419       (419
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, March 31, 2012

  $ 217      $ 177,451      $ 16,613      $ —        $ —        $ 41,689      $ 15,914      $ 2,948      $ 1,056,135      $ (722,363   $ (9,065   $ 579,539   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying notes to consolidated financial statements.

 

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Table of Contents

UNITED COMMUNITY BANKS, INC.

Consolidated Statement of Cash Flows (Unaudited)

 

     Three Months Ended  
     March 31,  

(in thousands)

   2012     2011  

Operating activities:

    

Net income (loss)

   $ 11,528      $ (237,336

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

    

Depreciation, amortization and accretion

     6,803        4,743   

Provision for loan losses

     15,000        190,000   

Stock based compensation

     585        549   

Securities gains, net

     (557     (55

Losses and write downs on sales of other real estate owned

     2,204        60,605   

Loss on prepayment of borrowings

     482        —     

Changes in assets and liabilities:

    

Other assets and accrued interest receivable

     (2,612     (4,770

Accrued expenses and other liabilities

     646        6,518   

Mortgage loans held for sale

     (928     10,544   
  

 

 

   

 

 

 

Net cash provided by operating activities

     33,151        30,798   
  

 

 

   

 

 

 

Investing activities:

    

Investment securities held to maturity:

    

Proceeds from maturities and calls

     25,653        21,116   

Purchases

     —          (1,500

Investment securities available for sale:

    

Proceeds from sales

     61,585        51,240   

Proceeds from maturities and calls

     142,236        116,175   

Purchases

     (253,229     (405,979

Net (increase) decrease in loans

     (41,418     93,949   

Funds collected from FDIC under loss sharing agreements

     2,568        9,299   

Proceeds from sales of premises and equipment

     14        160   

Purchases of premises and equipment

     (1,614     (3,604

Proceeds from sale of other real estate

     6,696        36,003   
  

 

 

   

 

 

 

Net cash used in investing activities

     (57,509     (83,141
  

 

 

   

 

 

 

Financing activities:

    

Net change in deposits

     (97,444     128,576   

Net change in federal funds purchased, repurchase agreements, and other short-term borrowings

     (652     1,040   

Proceeds from Federal Home Loan Bank advances

     499,000        —     

Settlement of Federal Home Loan Bank advances

     (324,982     —     

Proceeds from issuance of common stock for dividend reinvestment and employee benefit plans

     278        375   

Proceeds from issuance of common and preferred stock, net of offering costs

     —          362,529   

Cash dividends on preferred stock

     (2,672     —     
  

 

 

   

 

 

 

Net cash provided by financing activities

     73,528        492,520   
  

 

 

   

 

 

 

Net change in cash and cash equivalents

     49,170        440,177   

Cash and cash equivalents at beginning of period

     378,416        649,457   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 427,586      $ 1,089,634   
  

 

 

   

 

 

 

Supplemental disclosures of cash flow information:

    

Cash paid during the period for:

    

Interest

   $ 12,252      $ 17,936   

Income taxes

     1,026        1,287   

Unsettled securities sales

     43,527        —     

Unsettled securities purchases

     119,565        177,532   

See accompanying notes to consolidated financial statements.

 

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UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Note 1 – Accounting Policies

The accounting and financial reporting policies of United Community Banks, Inc. (“United”) and its subsidiaries conform to accounting principles generally accepted in the United States of America (“GAAP”) and general banking industry practices. The accompanying interim consolidated financial statements have not been audited. All material intercompany balances and transactions have been eliminated. A more detailed description of United’s accounting policies is included in its Annual Report on Form 10-K for the year ended December 31, 2011.

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.

Foreclosed property is initially recorded at fair value, less estimated costs to sell. If the fair value, less estimated costs to sell at the time of foreclosure, is less than the loan balance, the deficiency is charged against the allowance for loan losses. If the fair value, less cost to sell, of the foreclosed property decreases during the holding period, a valuation allowance is established with a charge to operating expenses. When the foreclosed property is sold, a gain or loss is recognized on the sale for the difference between the sales proceeds and the carrying amount of the property. Financed sales of foreclosed property are accounted for in accordance with the Financial Accounting Standards Board’s Accounting Standards Codification (“ASC”) 360-20, Real Estate Sales.

Note 2 – Accounting Standards Updates

In April 2012, the Financial Accounting Standards Board issued a proposed Accounting Standards Update to address the subsequent measurement of indemnification assets recognized as a result of a government assisted acquisition of a financial institution. The proposal requires an indemnification asset recognized as a result of a government assisted acquisition to be subsequently measured on the same basis as the indemnified item subject to the contractual limitations and amounts of the underlying contract. Comment letters on this proposed guidance are due by July 16, 2012. Because this standard is still in the proposal stage, the impact on United’s financial position, results of operations and disclosures has not been assessed.

Note 3 – Mergers and Acquisitions

On June 19, 2009, United Community Bank (“UCB” or the “Bank”) purchased substantially all the assets and assumed substantially all the liabilities of Southern Community Bank (“SCB”) from the Federal Deposit Insurance Corporation (“FDIC”), as Receiver of SCB. UCB and the FDIC entered loss sharing agreements regarding future losses incurred on loans and foreclosed loan collateral existing at June 19, 2009. Under the terms of the loss sharing agreements, the FDIC will absorb 80 percent of losses and share 80 percent of loss recoveries on the first $109 million of losses and, absorb 95 percent of losses and share in 95 percent of loss recoveries on losses exceeding $109 million. The term for loss sharing on 1-4 Family loans is ten years, while the term for loss sharing on all other loans is five years.

Under the loss sharing agreement, the portion of the losses expected to be indemnified by FDIC is considered an indemnification asset in accordance with ASC 805, Business Combinations. The indemnification asset, referred to as “estimated loss reimbursement from the FDIC” is included in the balance of “Assets covered by loss sharing agreements with the FDIC” on the Consolidated Balance Sheet. The indemnification asset was recognized at fair value, which was estimated at the acquisition date based on the terms of the loss sharing agreement. The indemnification asset is expected to be collected over a four-year average life. No valuation allowance was required.

Loans, foreclosed property and the estimated FDIC reimbursement resulting from the loss sharing agreements with the FDIC are reported as “assets covered by loss sharing agreements with the FDIC” in the consolidated balance sheet.

 

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UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

The table below shows the components of covered assets at March 31, 2012 (in thousands).

 

(in thousands)

   Purchased
Impaired
Loans
     Other
Purchased
Loans
     Other      Total  

Commercial (secured by real estate)

   $ —         $ 29,888       $ —         $ 29,888   

Commercial & industrial

     —           1,751         —           1,751   

Construction and land development

     546         7,896         —           8,442   

Residential mortgage

     145         6,797         —           6,942   

Consumer installment

     —           143         —           143   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total covered loans

     691         46,475         —           47,166   

Covered foreclosed property

     —           —           13,983         13,983   

Estimated loss reimbursement from the FDIC

     —           —           11,705         11,705   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total covered assets

   $ 691       $ 46,475       $ 25,688       $ 72,854   
  

 

 

    

 

 

    

 

 

    

 

 

 

Note 4 – Reverse Repurchase Agreements

United enters into reverse repurchase agreements in order to invest short-term funds. In addition, United enters into repurchase agreements and reverse repurchase agreements with the same counter party in transactions that are subject to master netting agreements under which the balances are netted in the balance sheet in accordance with ASC 210-20. The following table presents a summary of amounts outstanding under reverse repurchase agreements including those entered into in connection with repurchase agreements with the same counterparty under master netting agreements (in thousands).

 

     March 31, 2012  
     Reverse
Repurchase
Agreements
(Assets)
    Repurchase
Agreements
(Liabilities)
    Net Reported
Balance (Asset)
 

Amounts subject to master netting agreements

   $ 171,000      $ 171,000      $ —     

Other reverse repurchase agreements

     235,000        —          235,000   
  

 

 

   

 

 

   

 

 

 

Total

   $ 406,000      $ 171,000      $ 235,000   
  

 

 

   

 

 

   

 

 

 

Weighted average interest rate

     1.17     .32  

United did not have any outstanding reverse repurchase agreements at March 31, 2011.

Note 5 – Securities

Realized gains and losses are derived using the specific identification method for determining the cost of securities sold. The following table summarizes securities sales activity for the three months ended March 31, 2012 and 2011(in thousands).

 

     Three Months Ended
March 31,
 
     2012      2011  

Proceeds from sales

   $ 105,111       $ 51,240   
  

 

 

    

 

 

 

Gross gains on sales

   $ 557       $ 331   

Gross losses on sales

     —           (276
  

 

 

    

 

 

 

Net gains on sales of securities

   $ 557       $ 55   
  

 

 

    

 

 

 

 

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UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

Substantially all securities with a carrying value of $1.38 billion, $1.72 billion, and $1.83 billion were pledged to secure public deposits, FHLB advances and other secured borrowings at March 31, 2012, December 31, 2011 and March 31, 2011, respectively.

Securities are classified as held to maturity when management has the positive intent and ability to hold them until maturity. Securities held to maturity are carried at amortized cost. The amortized cost, gross unrealized gains and losses and fair value of securities held to maturity at March 31, 2012, December 31, 2011, and March 31, 2011 are as follows (in thousands).

 

            Gross      Gross         
     Amortized      Unrealized      Unrealized      Fair  
     Cost      Gains      Losses      Value  

As of March 31, 2012

           

State and political subdivisions

   $ 51,893         4,413         —         $ 56,306   

Mortgage-backed securities (1)

     251,743         10,441         —           262,184   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 303,636       $ 14,854       $ —         $ 318,490   
  

 

 

    

 

 

    

 

 

    

 

 

 

As of December 31, 2011

           

U.S. Government agencies

   $ 5,000       $ 6       $ —         $ 5,006   

State and political subdivisions

     51,903         4,058         13         55,948   

Mortgage-backed securities (1)

     273,300         9,619         342         282,577   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 330,203       $ 13,683       $ 355       $ 343,531   
  

 

 

    

 

 

    

 

 

    

 

 

 

As of March 31, 2011

           

U.S. Government agencies

   $ 4,989       $ 12       $ —         $ 5,001   

State and political subdivisions

     48,497         616         731         48,382   

Mortgage-backed securities (1)

     191,944         3,041         7         194,978   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 245,430       $ 3,669       $ 738       $ 248,361   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) 

All are residential type mortgage-backed securities

The cost basis, unrealized gains and losses, and fair value of securities available for sale at March 31, 2012, December 31, 2011 and March 31, 2011 are presented below (in thousands).

 

            Gross      Gross         
     Amortized      Unrealized      Unrealized      Fair  
     Cost      Gains      Losses      Value  

As of March 31, 2012

           

U.S. Government agencies

   $ 43,593       $ 286       $ 90       $ 43,789   

State and political subdivisions

     21,490         1,321         3         22,808   

Mortgage-backed securities (1)

     1,692,446         33,212         590         1,725,068   

Corporate bonds

     119,154         —           14,568         104,586   

Other

     2,564         —           —           2,564   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 1,879,247       $ 34,819       $ 15,251       $ 1,898,815   
  

 

 

    

 

 

    

 

 

    

 

 

 

As of December 31, 2011

           

U.S. Government agencies

   $ 43,592       $ 158       $ —         $ 43,750   

State and political subdivisions

     24,997         1,345         3         26,339   

Mortgage-backed securities (1)

     1,576,064         33,988         143         1,609,909   

Corporate bonds

     119,110         —           11,432         107,678   

Other

     2,371         —           —           2,371   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 1,766,134       $ 35,491       $ 11,578       $ 1,790,047   
  

 

 

    

 

 

    

 

 

    

 

 

 

As of March 31, 2011

           

U.S. Government agencies

   $ 94,966       $ 16       $ 1,204       $ 93,778   

State and political subdivisions

     26,870         983         20         27,833   

Mortgage-backed securities (1)

     1,388,702         27,617         1,474         1,414,845   

Corporate bonds

     100,956         150         1,520         99,586   

Other

     2,452         —           —           2,452   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 1,613,946       $ 28,766       $ 4,218       $ 1,638,494   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) 

All are residential type mortgage-backed securities

 

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UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

There were no held to maturity securities in an unrealized loss position at March 31, 2012. The following table summarizes held to maturity securities in an unrealized loss position as of December 31, 2011 and March 31, 2011 (in thousands).

 

     Less than 12 Months      12 Months or More      Total  
      Fair Value      Unrealized
Loss
     Fair Value      Unrealized
Loss
     Fair Value      Unrealized
Loss
 

As of December 31, 2011

                 

State and political subdivisions

   $ —         $ —         $ 363       $ 13       $ 363       $ 13   

Mortgage-backed securities

     10,967         342         —           —           10,967         342   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total unrealized loss position

   $ 10,967       $ 342       $ 363       $ 13       $ 11,330       $ 355   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

As of March 31, 2011

                 

State and political subdivisions

   $ 21,313       $ 731       $ —         $ —         $ 21,313       $ 731   

Mortgage-backed securities

     1,942         7         —           —           1,942         7   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total unrealized loss position

   $ 23,255       $ 738       $ —         $ —         $ 23,255       $ 738   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

The following table summarizes available for sale securities in an unrealized loss position as of March 31, 2012, December 31, 2011 and March 31, 2011 (in thousands).

 

     Less than 12 Months      12 Months or More      Total  
      Fair Value      Unrealized
Loss
     Fair Value      Unrealized
Loss
     Fair Value      Unrealized
Loss
 

As of March 31, 2012

                 

U.S. Government agencies

   $ 9,905       $ 90       $ —         $ —         $ 9,905       $ 90   

State and political subdivisions

     —           —           11         3         11         3   

Mortgage-backed securities

     405,039         574         21,067         16         426,106         590   

Corporate bonds

     35,306         2,872         69,230         11,696         104,536         14,568   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total unrealized loss position

   $ 450,250       $ 3,536       $ 90,308       $ 11,715       $ 540,558       $ 15,251   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

As of December 31, 2011

                 

State and political subdivisions

   $ —         $ —         $ 11       $ 3       $ 11       $ 3   

Mortgage-backed securities

     98,687         110         22,719         33         121,406         143   

Corporate bonds

     42,864         5,197         64,765         6,235         107,629         11,432   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total unrealized loss position

   $ 141,551       $ 5,307       $ 87,495       $ 6,271       $ 229,046       $ 11,578   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

As of March 31, 2011

                 

U.S. Government agencies

   $ 73,763       $ 1,204       $ —         $ —         $ 73,763       $ 1,204   

State and political subdivisions

     1,098         15         11         5         1,109         20   

Mortgage-backed securities

     292,379         1,474         —           —           292,379         1,474   

Corporate bonds

     79,386         1,520         —           —           79,386         1,520   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total unrealized loss position

   $ 446,626       $ 4,213       $ 11       $ 5       $ 446,637       $ 4,218   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

At March 31, 2012, there were 53 available for sale securities and no held to maturity securities that were in an unrealized loss position. United does not intend to sell nor believes it will be required to sell securities in an unrealized loss position prior to the recovery of its amortized cost basis. Unrealized losses at March 31, 2012 are primarily related to changes in interest rates, however the unrealized losses in corporate bonds also reflect downgrades in the underlying securities ratings. The bonds remain above investment grade and United does not consider them to be impaired. Unrealized losses at March 31, 2011 were primarily attributable to changes in interest rates.

Management evaluates securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. Consideration is given to the length of time and the extent to which the fair value has been less than cost, the financial condition and near-term prospects of the issuer, among other factors. In analyzing an issuer’s financial condition, management considers whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred, and industry analyst’s reports. No impairment charges were recognized during the first quarter of 2012 or 2011.

 

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UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

The amortized cost and fair value of available for sale and held to maturity securities at March 31, 2012, by contractual maturity, are presented in the following table (in thousands).

 

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

U.S. Government agencies:

           

5 to 10 years

   $ 34,995       $ 35,153       $ —         $ —     

More than 10 years

     8,598         8,636         —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 
     43,593         43,789         —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

State and political subdivisions:

           

Within 1 year

     1,600         1,608         —           —     

1 to 5 years

     14,121         14,966         4,813         5,132   

5 to 10 years

     4,921         5,317         23,667         25,896   

More than 10 years

     848         917         23,413         25,278   
  

 

 

    

 

 

    

 

 

    

 

 

 
     21,490         22,808         51,893         56,306   
  

 

 

    

 

 

    

 

 

    

 

 

 

Corporate bonds:

           

1 to 5 years

     18,594         17,668         —           —     

5 to 10 years

     99,560         86,618         —           —     

More than 10 years

     1,000         300         —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 
     119,154         104,586         —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Other:

           

More than 10 years

     2,564         2,564         —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 
     2,564         2,564         —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total securities other than mortgage-backed securities:

           

Within 1 year

     1,600         1,608         —           —     

1 to 5 years

     32,715         32,634         4,813         5,132   

5 to 10 years

     139,476         127,088         23,667         25,896   

More than 10 years

     13,010         12,417         23,413         25,278   

Mortgage-backed securities

     1,692,446         1,725,068         251,743         262,184   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 1,879,247       $ 1,898,815       $ 303,636       $ 318,490   
  

 

 

    

 

 

    

 

 

    

 

 

 

Maturities of mortgage-backed securities may differ from contractual maturities because borrowers have the right to call or prepay obligations with or without call or prepayment penalties.

 

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UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

Note 6 – Loans and Allowance for Loan Losses

Major classifications of loans as of March 31, 2012, December 31, 2011 and March 31, 2011, are summarized as follows (in thousands).

 

     March 31,      December 31,      March 31,  
     2012      2011      2011  

Commercial (secured by real estate)

   $ 1,843,207       $ 1,821,414       $ 1,692,154   

Commercial & industrial

     439,496         428,249         431,473   

Commercial construction

     167,122         164,155         213,177   
  

 

 

    

 

 

    

 

 

 

Total commercial

     2,449,825         2,413,818         2,336,804   

Residential mortgage

     1,131,248         1,134,902         1,186,531   

Residential construction

     435,375         448,391         549,618   

Consumer installment

     111,118         112,503         121,419   
  

 

 

    

 

 

    

 

 

 

Total loans

     4,127,566         4,109,614         4,194,372   

Less allowance for loan losses

     113,601         114,468         133,121   
  

 

 

    

 

 

    

 

 

 

Loans, net

   $ 4,013,965       $ 3,995,146       $ 4,061,251   
  

 

 

    

 

 

    

 

 

 

The Bank makes loans and extensions of credit to individuals and a variety of firms and corporations located primarily in counties in north Georgia, the Atlanta, Georgia metropolitan statistical area, the Gainesville, Georgia metropolitan statistical area, coastal Georgia, western North Carolina and east Tennessee. Although the Bank has a diversified loan portfolio, a substantial portion of the loan portfolio is collateralized by improved and unimproved real estate and is dependent upon the real estate market.

Changes in the allowance for loan losses for the three months ended March 31, 2012 and 2011 are summarized as follows (in thousands).

 

     Three Months Ended  
     March 31,  
     2012      2011  

Balance beginning of period

   $ 114,468       $ 174,695   

Provision for loan losses

     15,000         190,000   

Charge-offs:

     

Commercial (secured by real estate)

     3,928         48,707   

Commercial & industrial

     756         4,362   

Commercial construction

     364         49,715   

Residential mortgage

     5,767         36,676   

Residential construction

     5,629         92,255   

Consumer installment

     753         1,096   
  

 

 

    

 

 

 

Total loans charged-off

     17,197         232,811   
  

 

 

    

 

 

 

Recoveries:

     

Commercial (secured by real estate)

     231         100   

Commercial & industrial

     87         322   

Commercial construction

     30         —     

Residential mortgage

     392         293   

Residential construction

     315         117   

Consumer installment

     275         405   
  

 

 

    

 

 

 

Total recoveries

     1,330         1,237   
  

 

 

    

 

 

 

Net charge-offs

     15,867         231,574   
  

 

 

    

 

 

 

Balance end of period

   $ 113,601       $ 133,121   
  

 

 

    

 

 

 

At March 31, 2012, December 31, 2011 and March 31, 2011, loans with a carrying value of $1.58 billion, $1.52 billion and $857 million were pledged as collateral to secure FHLB advances and other contingent funding sources.

 

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Table of Contents

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

The following table presents the balance and activity in the allowance for loan losses by portfolio segment and the recorded investment in loans by portfolio segment based on impairment method as of March 31, 2012, December 31, 2011 and March 31, 2011 (in thousands).

 

    Commercial
(Secured by
Real Estate)
    Commercial
& Industrial
    Commercial
Construction
    Residential
Mortgage
    Residential
Construction
    Consumer
Installment
    Unallocated     Total  

Three Months Ended March 31, 2012

               

Allowance for loan losses:

               

Beginning balance

  $ 31,644      $ 5,681      $ 6,097      $ 29,076      $ 30,379      $ 2,124      $ 9,467      $ 114,468   

Charge-offs

    (3,928     (756     (364     (5,767     (5,629     (753     —          (17,197

Recoveries

    231        87        30        392        315        275        —          1,330   

Provision

    2,667        460        3,820        3,655        4,408        252        (262     15,000   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance

  $ 30,614      $ 5,472      $ 9,583      $ 27,356      $ 29,473      $ 1,898      $ 9,205      $ 113,601   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending allowance attributable to loans:

               

Individually evaluated for impairment

  $ 7,654      $ 1,122      $ 1,920      $ 2,254      $ 3,236      $ 63      $ —        $ 16,249   

Collectively evaluated for impairment

    22,960        4,350        7,663        25,102        26,237        1,835        9,205        97,352   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total ending allowance balance

  $ 30,614      $ 5,472      $ 9,583      $ 27,356      $ 29,473      $ 1,898      $ 9,205      $ 113,601   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loans:

               

Individually evaluated for impairment

  $ 117,999      $ 60,568      $ 46,549      $ 21,525      $ 47,048      $ 331      $ —        $ 294,020   

Collectively evaluated for impairment

    1,725,208        378,928        120,573        1,109,723        388,327        110,787        —          3,833,546   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total loans

  $ 1,843,207      $ 439,496      $ 167,122      $ 1,131,248      $ 435,375      $ 111,118      $ —        $ 4,127,566   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

December 31, 2011

               

Allowance for loan losses:

               

Ending allowance attributable to loans:

               

Individually evaluated for impairment

  $ 7,491      $ 1,117      $ 236      $ 2,234      $ 3,731      $ 16      $ —        $ 14,825   

Collectively evaluated for impairment

    24,153        4,564        5,861        26,842        26,648        2,108        9,467        99,643   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total ending allowance balance

  $ 31,644      $ 5,681      $ 6,097      $ 29,076      $ 30,379      $ 2,124      $ 9,467      $ 114,468   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loans:

               

Individually evaluated for impairment

  $ 107,831      $ 57,828      $ 26,245      $ 18,376      $ 46,687      $ 292      $ —        $ 257,259   

Collectively evaluated for impairment

    1,713,583        370,421        137,910        1,116,526        401,704        112,211        —          3,852,355   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total loans

  $ 1,821,414      $ 428,249      $ 164,155      $ 1,134,902      $ 448,391      $ 112,503      $ —        $ 4,109,614   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Three Months Ended March 31, 2011

               

Allowance for loan losses:

               

Beginning balance

  $ 31,191      $ 7,580      $ 6,780      $ 22,305      $ 92,571      $ 3,030      $ 11,238      $ 174,695   

Charge-offs

    (48,707     (4,362     (49,715     (36,676     (92,255     (1,096     —          (232,811

Recoveries

    100        322        —          293        117        405        —          1,237   

Provision

    37,675        4,047        48,916        39,207        62,087        217        (2,149     190,000   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance

  $ 20,259      $ 7,587      $ 5,981      $ 25,129      $ 62,520      $ 2,556      $ 9,089      $ 133,121   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending allowance attributable to loans:

               

Individually evaluated for impairment

  $ —        $ —        $ —        $ —        $ —        $ —        $ —        $ —     

Collectively evaluated for impairment

    20,259        7,587        5,981        25,129        62,520        2,556        9,089        133,121   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total ending allowance balance

  $ 20,259      $ 7,587      $ 5,981      $ 25,129      $ 62,520      $ 2,556      $ 9,089      $ 133,121   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loans:

               

Individually evaluated for impairment

  $ 17,154      $ —        $ 3,624      $ 5,157      $ 22,667      $ —        $ —        $ 48,602   

Collectively evaluated for impairment

    1,675,000        431,473        209,553        1,181,374        526,951        121,419        —          4,145,770   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total loans

  $ 1,692,154      $ 431,473      $ 213,177      $ 1,186,531      $ 549,618      $ 121,419      $ —        $ 4,194,372   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

United reviews all loans that are on nonaccrual with a balance of $500,000 or greater for impairment as well as accruing substandard relationships greater than $2 million and all troubled debt restructurings (“TDRs”). A loan is considered impaired when, based on current events and circumstances, it is probable that all amounts due, according to the contractual terms of the loan, will not be collected. All troubled debt restructurings are considered impaired regardless of accrual status. Impaired loans are measured based on the present value of expected future cash flows, discounted at the loan’s effective interest rate, at the loan’s observable market price, or the fair value of the collateral if the loan is collateral dependent. Interest payments received on impaired loans that are on nonaccrual status are applied as a reduction of the outstanding principal balance. For impaired loans not on nonaccrual status, interest is accrued according to the terms of the loan agreement. Impairment amounts are recorded quarterly and specific reserves are recorded in the allowance for loan losses.

In the first quarter of 2011, United’s Board of Directors adopted an accelerated problem asset disposition plan which included the bulk sale of $267 million in classified loans. Those loans were classified as held for sale at the end of the first quarter and were written down to the expected proceeds from the sale. The charge-offs on the loans transferred to held for sale in anticipation of the bulk loan sale, which closed on April 18, 2011, increased first quarter 2011 loan charge-offs by $186 million. The actual loss on the bulk loan sale at closing was less than the amount charged-off in the first quarter, resulting in a $7.27 million reduction of second quarter 2011 charge-offs.

 

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Table of Contents

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

The recorded investments in individually evaluated impaired loans at March 31, 2012, December 31, 2011 and March 31, 2011 were as follows (in thousands).

 

     March 31,      December 31,      March 31,  
     2012      2011      2011  

Period-end loans with no allocated allowance for loan losses

   $ 208,302       $ 188,509       $ 48,602   

Period-end loans with allocated allowance for loan losses

     85,718         68,750         —     
  

 

 

    

 

 

    

 

 

 

Total

   $ 294,020       $ 257,259       $ 48,602   
  

 

 

    

 

 

    

 

 

 

Amount of allowance for loan losses allocated

   $ 16,249       $ 14,825       $ —     

The increase in the amount of impaired loans is due to an increase in the number and balance of TDRs. The average balances of impaired loans and income recognized on impaired loans while they were considered impaired is presented below for the three months ended March 31, 2012 and March 31, 2011 (in thousands).

 

     Three Months Ended  
     March 31,  
     2012      2011  

Average balance of individually evaluated impaired loans during period

   $ 280,626       $ 95,163   

Interest income recognized during impairment

     2,267         —     

Cash-basis interest income recognized

     3,192         —     

The following table presents loans individually evaluated for impairment by class of loans as of March 31, 2012, December 31, 2011 and March 31, 2011 (in thousands).

 

    March 31, 2012     December 31, 2011     March 31, 2011  
    Unpaid
Principal
Balance
    Recorded
Investment
    Allowance
for Loan
Losses
Allocated
    Unpaid
Principal
Balance
    Recorded
Investment
    Allowance
for Loan
Losses
Allocated
    Unpaid
Principal
Balance
    Recorded
Investment
    Allowance
for Loan
Losses
Allocated
 

With no related allowance recorded:

                 

Commercial (secured by real estate)

  $ 91,399      $ 82,593      $ —        $ 82,887      $ 76,215      $ —        $ 27,811      $ 17,154      $ —     

Commercial & industrial

    81,896        56,896        —          77,628        52,628        —          —          —          —     

Commercial construction

    30,188        27,295        —          24,927        23,609        —          4,360        3,624        —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total commercial

    203,483        166,784        —          185,442        152,452        —          32,171        20,778        —     

Residential mortgage

    15,375        13,041        —          13,845        10,804        —          8,801        5,157        —     

Residential construction

    44,018        28,477        —          38,955        25,190        —          49,205        22,667        —     

Consumer installment

    —          —          —          63        63        —          —          —          —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total with no related allowance recorded

    262,876        208,302        —          238,305        188,509        —          90,177        48,602        —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

With an allowance recorded:

                 

Commercial (secured by real estate)

    36,536        35,406        7,654        31,806        31,616        7,491        —          —          —     

Commercial & industrial

    3,672        3,672        1,122        5,200        5,200        1,117        —          —          —     

Commercial construction

    20,056        19,254        1,920        2,636        2,636        236        —          —          —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total commercial

    60,264        58,332        10,696        39,642        39,452        8,844        —          —          —     

Residential mortgage

    9,255        8,484        2,254        7,642        7,572        2,234        —          —          —     

Residential construction

    19,235        18,571        3,236        21,629        21,497        3,731        —          —          —     

Consumer installment

    340        331        63        235        229        16        —          —          —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total with an allowance recorded

    89,094        85,718        16,249        69,148        68,750        14,825        —          —          —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 351,970      $ 294,020      $ 16,249      $ 307,453      $ 257,259      $ 14,825      $ 90,177      $ 48,602      $ —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

There were no loans more than 90 days past due and still accruing interest at March 31, 2012, December 31, 2011 or March 31, 2011. Nonaccrual loans at March 31, 2012, December 31, 2011 and March 31, 2011 were $130 million, $127 million and $83.8, respectively. Nonaccrual loans include both smaller balance homogeneous loans that are collectively evaluated for impairment and individually evaluated impaired loans with larger balances.

 

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UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

The following table presents the recorded investment (unpaid principal less amounts charged-off) in nonaccrual loans by loan class as of March 31, 2012, December 31, 2011 and March 31, 2011 (in thousands).

 

     Nonaccrual Loans  
     March 31,
2012
    December 31,
2011
    March 31,
2011
 

Commercial (secured by real estate)

   $ 26,081      $ 27,322      $ 20,648   

Commercial & industrial

     36,314        34,613        2,198   

Commercial construction

     23,319        16,655        3,701   
  

 

 

     

 

 

 

Total commercial

     85,714        78,590        26,547   

Residential mortgage

     18,741        22,358        23,711   

Residential construction

     24,341        25,523        32,038   

Consumer installment

     908        1,008        1,473   
  

 

 

     

 

 

 

Total

   $ 129,704      $ 127,479      $ 83,769   
  

 

 

     

 

 

 

Balance as a percentage of unpaid principal

     70.6     71.3     57.3

The following table presents the aging of the recorded investment in past due loans as of March 31, 2012, December 31, 2011 and March 31, 2011 by class of loans (in thousands).

 

     Loans Past Due      Loans Not         
     30 - 59 Days      60 - 89 Days      > 90 Days      Total      Past Due      Total  

As of March 31, 2012

                 

Commercial (secured by real estate)

   $ 6,777       $ 3,219       $ 14,461       $ 24,457       $ 1,818,750       $ 1,843,207   

Commercial & industrial

     1,930         244         2,905         5,079         434,417         439,496   

Commercial construction

     256         55         8,620         8,931         158,191         167,122   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total commercial

     8,963         3,518         25,986         38,467         2,411,358         2,449,825   

Residential mortgage

     14,540         5,223         9,103         28,866         1,102,382         1,131,248   

Residential construction

     7,462         1,584         11,201         20,247         415,128         435,375   

Consumer installment

     961         248         346         1,555         109,563         111,118   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total loans

   $ 31,926       $ 10,573       $ 46,636       $ 89,135       $ 4,038,431       $ 4,127,566   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

As of December 31, 2011

                 

Commercial (secured by real estate)

   $ 8,036       $ 4,182       $ 10,614       $ 22,832       $ 1,798,582       $ 1,821,414   

Commercial & industrial

     3,869         411         407         4,687         423,562         428,249   

Commercial construction

     166         —           1,128         1,294         162,861         164,155   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total commercial

     12,071         4,593         12,149         28,813         2,385,005         2,413,818   

Residential mortgage

     15,185         4,617         9,071         28,873         1,106,029         1,134,902   

Residential construction

     3,940         2,636         10,270         16,846         431,545         448,391   

Consumer installment

     1,534         308         430         2,272         110,231         112,503   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total loans

   $ 32,730       $ 12,154       $ 31,920       $ 76,804       $ 4,032,810       $ 4,109,614   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

As of March 31, 2011

                 

Commercial (secured by real estate)

   $ 11,522       $ 9,244       $ 9,659       $ 30,425       $ 1,661,729       $ 1,692,154   

Commercial & industrial

     1,485         854         876         3,215         428,258         431,473   

Commercial construction

     5,458         1,880         1,237         8,575         204,602         213,177   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total commercial

     18,465         11,978         11,772         42,215         2,294,589         2,336,804   

Residential mortgage

     16,439         6,658         10,789         33,886         1,152,645         1,186,531   

Residential construction

     13,349         9,514         13,405         36,268         513,350         549,618   

Consumer installment

     1,705         346         573         2,624         118,795         121,419   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total loans

   $ 49,958       $ 28,496       $ 36,539       $ 114,993       $ 4,079,379       $ 4,194,372   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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Table of Contents

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

As of March 31, 2012 and December 31, 2011, United has allocated $12.2 million and $8.65 million, respectively, of specific reserves to customers whose loan terms have been modified in troubled debt restructurings. There were no specific reserves established for loans considered to be troubled debt restructurings at March 31, 2011. United committed to lend additional amounts totaling up to $891,000, $1.12 million and $519,000 as of March 31, 2012, December 31, 2011 and March 31, 2011, respectively, to customers with outstanding loans that are classified as TDRs.

The modification of the terms of troubled debt restructurings included one or a combination of the following: a reduction of the stated interest rate of the loan; an extension of the maturity date or an extension of the amortization period at a stated rate lower than the current market rate for new debt with similar risk; or a permanent reduction of the principal amount.

The following table presents additional information on troubled debt restructurings including the number of loan contracts restructured and the pre and post modification recorded investment (dollars in thousands).

 

    March 31, 2012     December 31, 2011     March 31, 2011  
    Number
of
Contracts
    Pre-
Modification

Outstanding
Recorded
Investment
    Post-
Modification

Outstanding
Recorded
Investment
    Number
of
Contracts
    Pre-
Modification

Outstanding
Recorded
Investment
    Post-
Modification

Outstanding
Recorded
Investment
    Number
of
Contracts
    Pre-
Modification

Outstanding
Recorded
Investment
    Post-
Modification

Outstanding
Recorded
Investment
 

Commercial (sec by RE)

    92      $ 83,230      $ 79,844        74      $ 70,380      $ 69,054        29      $ 25,094      $ 22,211   

Commercial & industrial

    26        3,487        3,487        18        806        806        5        155        155   

Commercial construction

    16        35,184        34,066        11        18,053        18,053        6        9,622        9,622   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total commercial

    134        121,901        117,397        103        89,239        87,913        40        34,871        31,988   

Residential mortgage

    99        15,718        14,832        80        11,943        11,379        32        4,013        3,882   

Residential construction

    63        27,128        25,948        54        24,921        24,145        54        14,582        13,759   

Consumer installment

    40        340        330        34        298        293        7        122        117   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total loans

    336      $ 165,087      $ 158,507        271      $ 126,401      $ 123,730        133      $ 53,588      $ 49,746   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The following table presents new troubled debt restructurings during the three months ended March 31, 2012 and those troubled debt restructurings that have subsequently defaulted, which we define as 90 days or more past due (dollars in thousands).

 

    Number
of
Contracts
    Pre-
Modification

Outstanding
Recorded
Investment
    Post-
Modification

Outstanding
Recorded
Investment
    Troubled Debt
Restructurings Modified
Within the Previous
Twelve Months that Have
Subsequently Defaulted
During the Three Months
Ended March 31, 2012
 

New Troubled Debt

Restructurings for the Three

Months Ended March 31, 2012

        Number of
Contracts
    Recorded
Investment
 

Commercial (secured by real estate)

    24      $ 15,099      $ 13,741      $ —        $ —     

Commercial & industrial

    10        2,724        2,724        1        43   

Commercial construction

    7        20,781        20,781        2        4,174   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total commercial

    41        38,604        37,246        3        4,217   

Residential mortgage

    24        5,279        5,273        3        373   

Residential construction

    14        3,751        3,189        3        1,476   

Consumer installment

    7        60        55        —          —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total loans

    86      $ 47,694      $ 45,763        9      $ 6,066   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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Table of Contents

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

Risk Ratings

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

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

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

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.

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass rated loans. Loans listed as not rated are generally deposit account overdrafts or new loans that have not yet been assigned a grade.

As of March 31, 2012, December 31, 2011 and March 31, 2011, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows (in thousands).

 

    Pass     Watch     Substandard     Doubtful /
Loss
    Not Rated     Total  

As of March 31, 2012

           

Commercial (secured by real estate)

  $ 1,586,934      $ 96,352      $ 159,921      $ —        $ —        $ 1,843,207   

Commercial & industrial

    381,097        4,126        53,532        —          741        439,496   

Commercial construction

    99,825        20,722        46,575        —          —          167,122   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total commercial

    2,067,856        121,200        260,028        —          741        2,449,825   

Residential mortgage

    995,982        40,790        94,476        —          —          1,131,248   

Residential construction

    298,592        48,168        88,615        —          —          435,375   

Consumer installment

    106,124        1,476        3,518        —          —          111,118   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total loans

  $ 3,468,554      $ 211,634      $ 446,637      $ —        $ 741      $ 4,127,566   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

As of December 31, 2011

           

Commercial (secured by real estate)

  $ 1,561,204      $ 89,830      $ 170,380      $ —        $ —        $ 1,821,414   

Commercial & industrial

    369,343        7,630        50,366        —          910        428,249   

Commercial construction

    114,817        14,173        35,165        —          —          164,155   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total commercial

    2,045,364        111,633        255,911        —          910        2,413,818   

Residential mortgage

    993,779        42,323        98,800        —          —          1,134,902   

Residential construction

    312,527        38,386        97,478        —          —          448,391   

Consumer installment

    107,333        1,411        3,759        —          —          112,503