UNITED COMMUNITY BANKS, INC.
Consolidated Statement of Changes in Shareholders’ Equity (Unaudited)
For the Three Months Ended March 31,
(in thousands, except share and per share data) Common Stock Common Stock Issuable Capital Surplus Accumulated Deficit Accumulated Other Comprehensive Income (Loss) Total
Balance, December 31, 2017 $ 77,580
$ 9,083
$ 1,451,814
$ (209,902 ) $ (25,241 ) $ 1,303,334
Net income 37,658
37,658
Other comprehensive loss (20,949 ) (20,949 )
Common stock issued to dividend
   reinvestment plan and employee benefit
   plans (5,204 shares)
5
139
144
Common stock issued for acquisition
   (1,443,987 shares)
1,444
44,302
45,746
Amortization of stock option and restricted
   stock awards
1,148
1,148
Vesting of restricted stock and exercise
   of stock options, net of shares surrendered to
   cover payroll taxes (48,310 shares issued,
   46,074 shares deferred)
48
850
(1,725 ) (827 )
Deferred compensation plan, net, including
  dividend equivalents
143
143
Shares issued from deferred compensation
   plan, net of shares surrendered to cover
   payroll taxes (45,558 shares)
46
(684 ) 629
(9 )
Common stock dividends ($0.12 per share) (9,633 ) (9,633 )
Balance, March 31, 2018 $ 79,123
$ 9,392
$ 1,496,307
$ (181,877 ) $ (46,190 ) $ 1,356,755

Balance, December 31, 2018 $ 79,234
$ 10,744
$ 1,499,584
$ (90,419 ) $ (41,589 ) $ 1,457,554
Net income 44,262
44,262
Other comprehensive income 25,594
25,594
Exercise of stock options (12,000 shares) 12
185
197
Common stock issued to dividend
   reinvestment plan and employee benefit
   plans (8,445 shares)
8
178
186
Amortization of restricted stock awards 1,985
1,985
Vesting of restricted stock, net of shares
   surrendered to cover payroll taxes (15,945
   shares issued, 19,450 shares deferred)
16
532
(865 ) (317 )
Purchases of common stock (305,052 shares) (305 ) (7,535 ) (7,840 )
Deferred compensation plan, net, including
   dividend equivalents
185
185
Shares issued from deferred compensation
   plan, net of shares surrendered to cover
   payroll taxes (70,044 shares)
70
(1,170 ) 868
(232 )
Common stock dividends ($0.16 per share) (12,867 ) (12,867 )
Adoption of new accounting standard (549 ) (549 )
Balance, March 31, 2019 $ 79,035
$ 10,291
$ 1,494,400
$ (59,573 ) $ (15,995 ) $ 1,508,158

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

	Three Months Ended March 31,
(in thousands, except per share data)	2020		2019
Interest revenue:
Loans, including fees	$	118,063	$	115,259
Investment securities, including tax exempt of $1,523 and $1,169	17,394		20,818
Deposits in banks and short-term investments	1,090		439
Total interest revenue	136,547		136,516

Interest expense:
Deposits	15,075		15,957
Short-term borrowings	1		161
Federal Home Loan Bank advances	1		1,422
Long-term debt	2,864		3,342
Total interest expense	17,941		20,882
Net interest revenue	118,606		115,634
Provision for credit losses	22,191		3,300
Net interest revenue after provision for credit losses	96,415		112,334

Noninterest income:
Service charges and fees	8,638		8,453
Mortgage loan gains and other related fees	8,310		3,748
Brokerage fees	1,640		1,337
Gains from sales of other loans, net	1,674		1,303
Securities losses, net	—		(267		)
Other	5,552		6,394
Total noninterest income	25,814		20,968
Total revenue	122,229		133,302

Noninterest expenses:
Salaries and employee benefits	51,358		47,503
Communications and equipment	5,946		5,788
Occupancy	5,714		5,584
Advertising and public relations	1,274		1,286
Postage, printing and supplies	1,670		1,586
Professional fees	4,097		3,161
Lending and loan servicing expense	2,293		2,334
Outside services - electronic banking	1,832		1,609
FDIC assessments and other regulatory charges	1,484		1,710
Amortization of intangibles	1,040		1,293
Merger-related and other charges	808		546
Other	4,022		3,684
Total noninterest expenses	81,538		76,084
Net income before income taxes	40,691		57,218
Income tax expense	8,807		12,956
Net income	$	31,884	$	44,262

Net income available to common shareholders	$	31,641	$	43,947

Net income per common share:
Basic	$	0.40	$	0.55
Diluted	0.40		0.55
Weighted average common shares outstanding:
Basic	79,340		79,807
Diluted	79,446		79,813

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

UNITED COMMUNITY BANKS, INC.
Consolidated Statements of Cash Flows (Unaudited)
Three Months Ended March 31,
(in thousands) 2019 2018
Operating activities:

Net income $ 44,262
$ 37,658
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion 6,373
10,487
Provision for credit losses 3,300
3,800
Stock based compensation 1,985
1,148
Deferred income tax expense 658
10,225
Securities losses, net 267
940
Gains from sales of SBA/USDA loans (1,303 ) (1,778 )
Net (gains) losses and write downs on sales of other real estate owned (45 ) 188
Changes in assets and liabilities:
Other assets and accrued interest receivable (6,206 ) (385 )
Accrued expenses and other liabilities (5,994 ) 1,371
Loans held for sale (7,406 ) 8,833
Net cash provided by operating activities 35,891
72,487

Investing activities:
Debt securities held to maturity:
Proceeds from maturities and calls of securities held to maturity 9,049
13,832
Purchases of securities held to maturity —
(4,781 )
Debt securities available for sale and equity securities:
Proceeds from sales of securities available for sale 178,604
113,961
Proceeds from maturities and calls of securities available for sale 60,779
85,331
Purchases of securities available for sale (34,729 ) (30,161 )
Net increase in loans (90,380 ) (79,404 )
Proceeds from sales of premises and equipment 105
195
Purchases of premises and equipment (11,686 ) (6,107 )
Net cash paid for acquisition —
(56,800 )
Proceeds from sale of other real estate 974
957
Net cash provided by investing activities 112,716
37,023

Financing activities:
Net change in deposits 117
186,089
Net change in short-term borrowings —
(264,923 )
Repayment of long-term debt (10,110 ) (12,309 )
Proceeds from FHLB advances 780,000
760,000
Repayment of FHLB advances (900,000 ) (830,000 )
Proceeds from issuance of subordinated debt, net of issuance costs —
98,188
Proceeds from issuance of common stock for dividend reinvestment and employee benefit plans 186
144
Proceeds from exercise of stock options 197
—
Cash paid for shares withheld to cover payroll taxes upon vesting of restricted stock (549 ) (836 )
Repurchase of common stock (7,342 ) —
Cash dividends on common stock (12,876 ) (7,885 )
Net cash used in financing activities (150,377 ) (71,532 )

Net change in cash and cash equivalents, including restricted cash (1,770 ) 37,978

Cash and cash equivalents, including restricted cash, at beginning of period 327,265
314,275

Cash and cash equivalents, including restricted cash, at end of period $ 325,495
$ 352,253

Supplemental disclosures of cash flow information:
Interest paid $ 22,963
$ 13,069
Income taxes paid 939
811
Significant non-cash investing and financing transactions:
Unsettled securities purchases —
4,790
Unsettled government guaranteed loan sales 13,934
14,240
Transfers of loans to foreclosed properties 751
625
Unsettled repurchases of common stock 498
—
Acquisitions:
Assets acquired —
480,679
Liabilities assumed —
350,433
Net assets acquired —
130,246
Common stock issued in acquisitions —
45,746

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

(in thousands)	Three Months Ended March 31,
	Before-tax Amount		Tax (Expense) Benefit			Net of Tax Amount
2020
Net income	$	40,691	$	(8,807	)	$	31,884
Other comprehensive income:
Unrealized gains on available-for-sale securities	13,685		(3,433		)	10,252
Amortization of losses included in net income on available-for-sale securities transferred to held-to-maturity	83		(20		)	63
Amortization of prior service cost and actuarial losses included in net periodic pension cost for defined benefit pension plan	214		(54		)	160
Total other comprehensive income	13,982		(3,507		)	10,475
Comprehensive income	$	54,673	$	(12,314	)	$	42,359

2019
Net income	$	57,218	$	(12,956	)	$	44,262
Other comprehensive income:
Unrealized gains on available-for-sale securities:
Unrealized holding gains arising during period	33,174		(8,049		)	25,125
Reclassification adjustment for losses included in net income	267		(68		)	199
Net unrealized gains	33,441		(8,117		)	25,324
Amortization of losses included in net income on available-for-sale securities transferred to held-to-maturity	84		(20		)	64
Amortization of losses included in net income on terminated derivative financial instruments that were previously accounted for as cash flow hedges	102		(26		)	76
Amortization of prior service cost and actuarial losses included in net periodic pension cost for defined benefit pension plan	174		(44		)	130
Total other comprehensive income	33,801		(8,207		)	25,594
Comprehensive income	$	91,019	$	(21,163	)	$	69,856

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

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

		Three Months Ended March 31,
	(in thousands, except share and per share data)	Common Stock			Common Stock Issuable			Capital Surplus			Retained Earnings (Accumulated Deficit)			Accumulated Other Comprehensive Income (Loss)			Total
	2020
	Balance at beginning of period	$	79,014		$	11,491		$	1,496,641		$	40,152		$	8,394		$	1,635,692
	Net income										31,884						31,884
	Other comprehensive income													10,475			10,475
	Common stock issued to dividend reinvestment plan and employee benefit plans (8,686 shares)	9						190									199
	Amortization of restricted stock awards							2,492									2,492
	Vesting of restricted stock, net of shares surrendered to cover payroll taxes (24,005 shares issued and 23,967 shares deferred)	24			665			(1,177		)							(488		)
	Purchases of common stock (826,482 shares)	(827		)				(19,955		)							(20,782		)
	Deferred compensation plan, net, including dividend equivalents				156												156
	Shares issued from deferred compensation plan, net of shares surrendered to cover payroll taxes (63,606 shares)	64			(1,778		)	528									(1,186		)
	Common stock dividends ($0.18 per share)										(14,301		)				(14,301		)
	Adoption of new accounting standard										(3,529		)				(3,529		)
	Balance, March 31, 2020	$	78,284		$	10,534		$	1,478,719		$	54,206		$	18,869		$	1,640,612

	2019
	Balance at beginning of period	$	79,234		$	10,744		$	1,499,584		$	(90,419	)	$	(41,589	)	$	1,457,554
	Net income										44,262						44,262
	Other comprehensive income													25,594			25,594
	Exercise of stock options (12,000 shares)	12						185									197
	Common stock issued to dividend reinvestment plan and employee benefit plans (8,445 shares)	8						178									186
	Amortization of restricted stock awards							1,985									1,985
	Vesting of restricted stock, net of shares surrendered to cover payroll taxes (15,945 shares issued, 19,450 shares deferred)	16			532			(865		)							(317		)
	Purchases of common stock (305,052)	(305		)				(7,535		)							(7,840		)
	Deferred compensation plan, net, including dividend equivalents				185												185
	Shares issued from deferred compensation plan, net of shares surrendered to cover payroll taxes (70,044 shares)	70			(1,170		)	868									(232		)
	Common stock dividends ($0.16 per share)										(12,867		)				(12,867		)
	Adoption of new accounting standard										(549		)				(549		)
	Balance, March 31, 2019	$	79,035		$	10,291		$	1,494,400		$	(59,573	)	$	(15,995	)	$	1,508,158

See accompanying notes to consolidated financial statements (unaudited).

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

	Three Months Ended March 31,
(in thousands)	2020			2019
Operating activities:
Net income	$	31,884		$	44,262
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion	1,894			6,373
Provision for credit losses	22,191			3,300
Stock based compensation	2,492			1,985
Deferred income tax expense	1,292			658
Securities losses, net	—			267
Gains from sales of other loans	(1,674		)	(1,303		)
Changes in assets and liabilities:
Other assets and accrued interest receivable	(45,851		)	(6,251		)
Accrued expenses and other liabilities	8,456			(5,994		)
Loans held for sale	(31,475		)	(7,406		)
Net cash (used in) provided by operating activities	(10,791		)	35,891

Investing activities:
Debt securities held-to-maturity:
Proceeds from maturities and calls	9,085			9,049
Purchases	(15,989		)	—
Debt securities available-for-sale and equity securities:
Proceeds from sales	1,000			178,604
Proceeds from maturities and calls	105,247			60,779
Purchases	(70,075		)	(34,729		)
Net increase in loans	(110,222		)	(90,380		)
Proceeds from sales of premises and equipment	102			105
Purchases of premises and equipment	(2,596		)	(11,686		)
Proceeds from sale of other real estate	63			974
Other investing activities, net	(1,600		)	—
Net cash (used in) provided by investing activities	(84,985		)	112,716

Financing activities:
Net increase in deposits	137,783			117
Repayment of long-term debt	—			(10,110		)
Proceeds from FHLB advances	5,000			780,000
Repayment of FHLB advances	(5,000		)	(900,000		)
Proceeds from issuance of common stock for dividend reinvestment and employee benefit plans	199			186
Proceeds from exercise of stock options	—			197
Cash paid for shares withheld to cover payroll taxes upon vesting of restricted stock	(1,674		)	(549		)
Repurchase of common stock	(20,782		)	(7,342		)
Cash dividends on common stock	(14,454		)	(12,876		)
Net cash provided by (used in) financing activities	101,072			(150,377		)

Net change in cash and cash equivalents, including restricted cash	5,296			(1,770		)

Cash and cash equivalents, including restricted cash, at beginning of period	515,206			327,265

Cash and cash equivalents, including restricted cash, at end of period	$	520,502		$	325,495

Supplemental disclosures of cash flow information:
Significant non-cash investing and financing transactions:
Unsettled government guaranteed loan sales	$	485		$	13,934
Transfers of loans to foreclosed properties	127			751
Unsettled repurchases of common stock	—			498

See accompanying notes to consolidated financial statements (unaudited).

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Note 1 – Accounting Policies

The accounting and financial reporting policies of United Community Banks, Inc. and its subsidiaries (collectively referred to herein as “United”) conform to accounting principles generally accepted in the United States (“GAAP”) and reporting guidelines of banking regulatory authorities and regulators. The accompanying interim consolidated financial statements have not been audited. All material intercompany balances and transactions have been eliminated. AIn addition to those items mentioned below, 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, ~~2018.~~2019 (the “2019 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 ~~statement.~~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 2019 10-K. Certain amounts reported in prior periods' consolidated financial statements have been reclassified to conform to the current presentation.

Debt Securities

Debt securities are classified as held-to-maturity and carried at amortized cost when management has the positive intent and ability to hold them to maturity. Debt securities are classified as available-for-sale when they might be sold before maturity. Securities available-for-sale are carried at fair value, with unrealized holding gains and losses reported in other comprehensive income, net of tax.

Interest income includes amortization of purchase premiums or discounts. Premiums and discounts on securities are generally amortized on the level-yield method without anticipating prepayments, except for mortgage-backed securities where prepayments are anticipated. Premiums on callable debt securities are amortized to their earliest call date. Gains and losses on sales are recorded on the trade date and determined using the specific identification method.

Transfers of securities between categories are recorded at fair value at the date of transfer. Unrealized holding gains or losses associated with transfers of securities from available-for-sale to held-to-maturity are included in the balance of accumulated other comprehensive income in the consolidated balance sheets. These unrealized holding gains or losses are amortized into income over the remaining life of the security as an adjustment to the yield in a manner consistent with the amortization or accretion of the original purchase premium or discount on the associated security.

A debt security is placed on nonaccrual status at the time any principal or interest payments become 90 days delinquent. Interest accrued but not received for a security placed on non-accrual is reversed against interest income.

Allowance for Credit Losses (“ACL”) - Held-to-Maturity Securities: Management measures expected credit losses on held-to-maturity debt securities on a collective basis by major security type. Accrued interest receivable on held-to-maturity debt securities totaled $1.07 million at March 31, 2020 and was excluded from the estimate of credit losses.

The estimate of expected credit losses considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts. Management classifies the held-to-maturity portfolio into the following major security types: State and political subdivisions, residential mortgage-backed, agency and commercial mortgage-backed, agency.

All of the residential and commercial mortgage-backed securities held by United are issued by U.S. government agencies. These securities are either explicitly or implicitly guaranteed by the U.S. government, are highly rated by major rating agencies and have a long history of no credit losses. The state and political subdivision securities are highly rated by major rating agencies. As a result, 0 ACL was recorded on the held-to-maturity portfolio at March 31, 2020.

ACL - Available-For-Sale Securities: For available-for-sale debt securities in an unrealized loss position, United first assesses whether it intends to sell, or it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security's amortized cost basis is written down to fair value through income. For debt securities available-for-sale that do not meet the aforementioned criteria, United evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an ACL is recorded for the credit loss, limited by the amount that the fair value

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

is less than the amortized cost basis. Any amount of unrealized loss that has not been recorded through an ACL is recognized in other comprehensive income.

Changes in the ACL are recorded as provision for (or reversal of) credit loss expense. Losses are charged against the ACL when management believes the uncollectibility of an available-for-sale security is confirmed or when either of the criteria regarding intent or requirement to sell is met. At March 31, 2020, there was 0 ACL related to the available-for-sale portfolio.

Accrued interest receivable on available-for-sale debt securities totaled $8.83 million at March 31, 2020 and was excluded from the estimate of credit losses.

Loans and Leases

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at amortized cost. Amortized cost is the principal balance outstanding, net of purchase premiums and discounts and deferred fees and costs. Accrued interest receivable related to loans totaled $21.2 million at March 31, 2020 and was reported in accrued interest receivable on the consolidated balance sheets. Interest income is accrued on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, are deferred and recognized in interest income using methods that approximate a level yield without anticipating prepayments.

The accrual of interest is discontinued when a loan becomes 90 days past due and is not well collateralized and in the process of collection, or when management believes, after considering economic and business conditions and collection efforts, that the principal or interest will not be collectible in the normal course of business. Past due status is based on contractual terms of the loan.

All interest accrued but not received for loans placed on nonaccrual is reversed against interest income. Interest received on such loans is accounted for on the cost-recovery method, until qualifying for return to accrual. Under the cost-recovery method, interest income is not recognized until the loan balance is reduced to zero. Loans are 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.

Equipment Financing Lease Receivables: Equipment financing lease receivables, which are classified as sales-type or direct financing leases, are recorded as the sum of the future minimum lease payments, initial deferred costs and estimated or contractual residual values less unearned income and security deposits. The determination of residual value is derived from a variety of sources including equipment valuation services, appraisals, and publicly available market data on recent sales transactions on similar equipment. The length of time until contract termination, the cyclical nature of equipment values and the limited marketplace for re-sale of certain leased assets are important variables considered in making this determination. Interest income, which is included in loan interest revenue in the consolidated statements of income, is recognized as earned using the effective interest method. Direct fees and costs associated with the origination of leases are deferred and included as a component of equipment financing receivables. Net deferred fees or costs are recognized as an adjustment to interest income over the contractual life of the lease using the effective interest method. These lease agreements may include options to renew and for the lessee to purchase the leased equipment at the end of the lease term. United excludes sales taxes from consideration in these lease contracts.

Purchased Credit Deteriorated (“PCD”) Loans: Upon adoption of Accounting Standards Codification (“ASC”) Topic 326, Financial Instruments - Credit Losses (“ASC 326”), loans that were designated as purchased credit impaired (“PCI”) loans under the previous accounting guidance were classified as PCD loans without reassessment.

In future acquisitions, United may purchase loans, some of which have experienced more than insignificant credit deterioration since origination. In those cases, United will consider internal loan grades, delinquency status and other relevant factors in assessing whether purchased loans are PCD. PCD loans are recorded at the amount paid. An initial ACL is determined using the same methodology as other loans held for investment, but with no impact to earnings. The initial ACL determined on a collective basis is allocated to individual loans. The sum of the loan's purchase price and ACL becomes its initial amortized cost basis. The difference between the initial amortized cost basis and the par value of the loan is a noncredit discount or premium, which is amortized into interest income over the life of the loan. Subsequent to initial recognition, PCD loans are subject to the same interest income recognition and impairment model as non-PCD loans, with changes to the ACL recorded through provision expense.

ACL - Loans

The ACL is a valuation account that is deducted from the loans' amortized cost basis to present the net amount expected to be collected on the loans. Loans are charged off against the ACL when management believes the uncollectibility of a loan balance is confirmed. Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off. Accrued interest receivable is excluded from the estimate of credit losses.

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Management determines the ACL balance using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. Historical credit behaviors along with model judgments provide the basis for the estimation of expected credit losses. Adjustments to modeled loss estimates may be made for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, delinquency level, or term as well as for changes in environmental conditions, such as changes in economic conditions, property values, or other relevant factors.

The ACL is measured on a collective basis when similar risk characteristics exist. United has identified the following portfolio segments and calculates the ACL for each using a discounted cash flow methodology at the loan level, with loss rates, prepayment assumptions and curtailment assumptions driven by each loan’s collateral type:

Owner occupied commercial real estate - Loans in this category are susceptible to business failure and general economic conditions.

Income producing commercial real estate - Common risks for this loan category are declines in general economic conditions, declines in real estate value, declines in occupancy rates, and lack of suitable alternative use for the property.

Commercial & industrial - Risks to this loan category include the inability to monitor the condition of the collateral which often consists of inventory, accounts receivable and other non-real estate assets. Equipment and inventory obsolescence can also pose a risk. Declines in general economic conditions and other events can cause cash flows to fall to levels insufficient to service debt.

Commercial construction - Risks common to commercial construction loans are cost overruns, changes in market demand for property, inadequate long-term financing arrangements and declines in real estate values.

Equipment financing - Risks associated with equipment financing are similar to those described for commercial and industrial loans, including general economic conditions, as well as appropriate lien priority on equipment, equipment obsolescence and the general mobility of the collateral.

Residential mortgage - Residential mortgage loans are susceptible to weakening general economic conditions, increases in unemployment rates and declining real estate values.

Home equity lines of credit - Risks common to home equity lines of credit are general economic conditions, including an increase in unemployment rates, and declining real estate values which reduce or eliminate the borrower’s home equity.

Residential construction - Residential construction loans are susceptible to the same risks as residential mortgage loans. Changes in market demand for property lead to longer marketing times resulting in higher carrying costs and declining values.

Consumer - Risks common to consumer direct loans include unemployment and changes in local economic conditions as well as the inability to monitor collateral consisting of personal property.

When management determines that foreclosure is probable or when the borrower is experiencing financial difficulty at the reporting date and repayment is expected to be provided substantially through the operation or sale of the collateral, expected credit losses are based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate.

When the discounted cash flow method is used to determine the ACL, management adjusts the effective interest rate used to discount expected cash flows to incorporate expected prepayments.

Determining the Contractual Term: Expected credit losses are estimated over the contractual term of the loans, adjusted for expected prepayments when appropriate. The contractual term excludes expected extensions, renewals, and modifications unless either of the following applies: management has a reasonable expectation at the reporting date that a troubled debt restructuring will be executed with an individual borrower or the extension or renewal options are included in the original or modified contract at the reporting date and are not unconditionally cancellable by United.

Troubled Debt Restructurings (“TDR”s): A loan for which the terms have been modified resulting in a more than insignificant concession, and for which the borrower is experiencing financial difficulties, is generally considered to be a TDR. The ACL on a TDR is measured using the same method as all other loans held for investment, except that the original interest rate is used to discount the expected cash flows, not the rate specified within the restructuring. As discussed in Note 2, certain modifications in the first quarter of 2020 were excluded from the TDR population based on relief provided by the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”).

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

ACL - Off-Balance Sheet Credit Exposures

Management estimates expected credit losses on commitments to extend credit over the contractual period in which United is exposed to credit risk on the underlying commitments. The ACL on off-balance sheet credit exposures is adjusted as a provision for credit loss expense. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life. The ACL is calculated using the same aggregate reserve rates calculated for the funded portion of loans at the portfolio level applied to the amount of commitments expected to fund.

Note 2 –Accounting Standards Updates and Recently Adopted Standards

~~Accounting Standards Updates~~

~~In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13,~~ ~~Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This guidance was further modified in November 2018 by ASU No. 2018-19,~~ ~~Codification Improvements to Topic~~On January 1, 2020, United adopted ASC 326 ~~Financial Instruments - Credit Losses.~~ ~~The new guidance replaces~~, which replaced the incurred loss impairment ~~methodology~~framework in ~~current~~prior GAAP with a current expected credit loss (“CECL”) ~~methodology~~framework, which requires an estimate of credit losses for the remaining estimated life of the financial asset using historical experience, current conditions, and ~~requires consideration of a broader range of information~~reasonable and supportable forecasts and generally applies to ~~determine~~financial assets measured at amortized cost, including loan receivables and held-to-maturity debt securities, and some off-balance sheet credit ~~loss estimates.~~exposures such as unfunded commitments to extend credit. Financial assets measured at amortized cost will be presented at the net amount expected to be collected by using an ~~allowance for credit losses. Purchased credit deteriorated~~ACL. PCD loans will receive an initial allowance ~~account~~ at the acquisition date that represents ~~a component~~an adjustment to the amortized cost basis of the ~~purchase price allocation.~~loan, with no impact to earnings. Credit losses relating to available-for-sale debt securities will be recorded through an ~~allowance for credit losses,~~ACL prospectively, with such allowance limited to the amount by which fair value is below amortized cost. Application of this update will primarily be on a modified retrospective approach, although the guidance for debt securities for which an other-than-temporary impairment has been recognized before the effective date and for loans previously covered by Accounting Standards Codification (“ASC”) 310-30, ~~Receivables – Loans and Debt Securities Acquired with Deteriorated Credit Quality~~ will be applied on a prospective basis. For public entities, this update is effective for fiscal years beginning after December 15, 2019. Upon adoption, United expects that the allowance for credit losses will be higher given the change to estimated losses for the estimated life of the financial asset; however, management is still in the process of determining the impact. During the first quarter 2019, management’s CECL steering committee continued the process of populating relevant data, building models and documenting processes and controls in preparation for adoption of Topic 326. During the remainder of 2019, management plans to run multiple parallel runs of the allowance model under the expected credit loss methodology, starting with a loan-focused parallel run using first quarter data. Management will incrementally widen the scope of model runs thereafter until a full CECL run is completed. During monthly steering committee meetings, management regularly reviews project status, gap remediation efforts and project priorities.

~~Recently Adopted Standards~~

~~In February 2016, the FASB issued ASU No. 2016-02,~~ ~~Leases (Topic 842). This guidance was further modified by ASU No. 2018-10,~~ ~~Codification Improvements to Topic 842 Leases, ASU No. 2018-11,~~ ~~Leases (Topic 842): Targeted Improvements, ASU No. 2018-20,~~ ~~Leases (Topic 842): Narrow-Scope Improvements for Lessors~~ ~~andASU No. 2019-01,~~ ~~Leases (Topic 842): Codification Improvements~~. These standards require a lessee to recognize in the consolidated balance sheet a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. United adopted ~~the standard on~~ASC 326 as of January 1, ~~2019~~2020 using the ~~optional transition method, which allowed for a~~ modified retrospective method ~~of adoption with a cumulative effect adjustment to shareholders’ equity without restating comparable periods. United also elected the relief package of practical expedients~~ for ~~which there is no requirement to reassess existence of~~loans, leases ~~their classification,~~ and initial direct costs as well as an exemption for short-term leases with a term of less than one year, whereby United does not recognize a lease liability or right-of-use asset on the consolidated balanceoff-balance sheet ~~but instead recognizes lease payments as an expense over the lease term as appropriate. The adoption~~credit exposures. Adoption of this guidance resulted in ~~recognition~~an $8.75 million increase in the ACL, comprised of ~~a right-of-use asset~~increases in the ACL for loans of ~~$23.8 million, a lease liability of $26.8~~$6.88 million and ~~a reduction~~the ACL for unfunded commitments of ~~shareholders’ equity~~$1.87 million, with $3.59 million of ~~$549,000,~~the increase reclassified from the amortized cost basis of PCD financial assets that were previously classified as PCI. The cumulative effect adjustment to retained earnings was $3.53 million, net of ~~tax, related~~tax. Calculated credit losses on held-to-maturity debt securities were not material and there was no impact to ~~its operating leases.~~the available-for-sale securities portfolio or other financial instruments. Results for reporting periods beginning after January 1, 2020 are presented under ASC 326 while prior period amounts continue to be reported in accordance with previously applicable GAAP (“Incurred Loss”).

The ACL for the majority of loans and leases was calculated using a discounted cash flow methodology applied at a loan level with a one-year reasonable and supportable forecast period and a two-year straight-line reversion period. In connection with the adoption, management has implemented changes to relevant systems, processes and controls where necessary. Model validation was completed during the fourth quarter of 2019 and implementation of the accounting, reporting and governance processes to comply with the new guidance was completed in the first quarter of 2020. United’s CECL allowance will fluctuate over time due to macroeconomic conditions and forecasts as well as the size and composition of the loan portfolios. Federal banking regulatory agencies have provided relief, which United has adopted, for the delay of the adverse capital impact of CECL at adoption and during the subsequent two-year period. This optional two-year delay is followed by an optional three-year transition period to phase out the aggregate amount of capital benefit provided during the initial two-year delay. Under the transition provision, the amount of aggregate capital benefit is phased out by 25% each year with the full impact of adoption completely recognized by the beginning of the sixth year.

United adopted ASC 326 using the prospective transition approach for PCD assets that were previously classified as PCI. In accordance with the standard, management did not reassess whether PCI assets met the criteria of PCD assets as of the date of adoption. As mentioned above, the amortized cost basis of the PCD assets was adjusted to reflect the addition of $3.59 million of the ACL. The remaining noncredit discount (based on the adjusted amortized cost basis) will be accreted into interest income at a rate that approximates the effective interest rate as of January 1, 2020.

With regard to PCD assets, because United elected to disaggregate the former PCI pools and no longer considers these pools to be the unit of account, contractually delinquent PCD loans will be reported as nonaccrual loans using the same criteria as other loans. Similarly, although management did not reassess whether modifications to individual acquired financial assets accounted for in pools were TDRs as of the date of adoption, PCD loans that are restructured and meet the definition of troubled debt restructurings after the adoption of CECL will be reported as such.

United elected not to measure an allowance for credit losses for accrued interest receivable and instead to reverse interest income on those loans that are 90 days past due, to exclude accrued interest receivable from the amortized cost basis of financial instruments subject to CECL and to separately state the balance of accrued interest receivable on the consolidated balance sheet. In addition, United ~~has equipment financing leases~~elected to adjust the discount rate used to calculate credit losses for expected prepayments and will include all changes in discounted cash flows as credit loss. United also elected to use, as a practical expedient, the fair value of collateral when determining the ACL for loans for which itrepayment is expected to be provided substantially through the lessor, which were previously accounted for as capital leases. Upon adoption of Topic 842, these leases were classified as direct financing leases, which required no significant change in accounting policyoperation or ~~treatment. These lease agreements may include options to renew and for the lessee to purchase the leased equipment at the end~~sale of the ~~lease term. As a lessor, United elected to exclude sales taxes from consideration in lease contracts. In~~collateral when the ~~opinion of management, the changes described above resulting from the adoption of the standard did not have a material impact on the consolidated~~borrower is experiencing financial ~~statements. See Notes 5 and 14 for additional information on direct financing leases and operating leases, respectively.~~difficulty (collateral-dependent loans).

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

On March 27, 2020, the CARES Act was signed into law. The CARES Act included a number of provisions that were applicable to United, including the following:


•	Accounting Relief for TDRs: The CARES Act provided that modifications for loans under certain forbearance conditions that were otherwise performing before the COVID-19 crisis will not be considered TDRs for regulatory reporting and GAAP.

•

Optional Delay and Regulatory Relief for CECL Implementation:The CARES Act stipulated that large SEC filers have the option of delaying the adoption of CECL from January 1, 2020 to the earlier of the end of the COVID-19 emergency period or December 31, 2020. Banks that were required to implement CECL by the end of 2020 were granted the option to defer any impact of CECL on regulatory capital for two years before beginning the original three-year regulatory phase-in period, for a total five-year phase-in period. Although United did not elect to delay the adoption of CECL, the Company did elect the five-year phase-in period for regulatory purposes, as discussed above.

Paycheck Protection Program (“PPP”): The CARES Act created the PPP through the Small Business Administration (“SBA”), which allowed United to lend money to small businesses to maintain employee payrolls through the crisis with guarantees from the SBA. Under this program, loan amounts may be forgiven if the borrower maintains employee payrolls or restores payrolls afterwards.

In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2020-03, Codification Improvements to Financial Instruments. This update clarified certain minor issues within the codification, including, among other things, debt securities disclosure for financial institutions and determination of the contractual term of a net investment in a lease. The standard was effective immediately, and did not have a material impact on the consolidated financial statements.

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This update provides expedients for contracts that are modified because of reference rate reform, including receivables, debt, leases, and certain derivatives. In addition, the update provides a one-time election to sell or transfer debt securities classified as held-to-maturity that reference a rate that is affected by reference rate reform. The update is effective as of March 12, 2020 through December 31, 2022. Adoption of this update did not have a material impact on the consolidated financial statements.

In April 2019, the FASB issued ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825 Financial Instruments. In addition to amending guidance related to the new CECL standard, this update clarifies certain aspects of hedge accounting and recognition and measurement of financial instruments. United adopted this update as of January 1, 2020, with no material impact on the consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. This update eliminates Step 2 from the goodwill impairment test, which required an entity to calculate the implied fair value of goodwill by valuing a reporting unit’s assets and liabilities using the same process that would be required to value assets and liabilities in a business combination. Instead, the amendments require that an entity perform its annual goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. United adopted this update as of January 1, 2020, with no material impact on the consolidated financial statements.

Note 3 – ~~Balance Sheet Offsetting and Repurchase Agreements Accounted for as Secured Borrowings~~

United enters into reverse repurchase agreements in order to invest short-term funds. In addition, United enters into repurchase agreements and reverse repurchase agreements with the same counterparty in transactions commonly referred to as collateral swaps that are subject to master netting agreements under which the balances are netted in the balance sheet in accordance with ASC 210-20, ~~Offsetting.~~

The following table presents a summary of amounts outstanding under reverse repurchase agreements, of which there were none as of March 31, 2019, and derivative financial instruments including those entered into in connection with the same counterparty under master netting agreements as of the dates indicated ~~(in thousands).~~

Gross Amounts of Recognized Assets Gross Amounts Offset on the Balance Sheet Gross Amounts not Offset in the Balance Sheet
March 31, 2019 Net Asset Balance
Financial
Instruments

Collateral
Received

Net
Amount
Derivatives $ 25,924
$ —
$ 25,924
$ (2,295 ) $ (1,797 ) $ 21,832
Total $ 25,924
$ —
$ 25,924
$ (2,295 ) $ (1,797 ) $ 21,832

Gross Amounts of Recognized Liabilities Gross Amounts Offset on the Balance Sheet Net Liability Balance
Gross Amounts not Offset
in the Balance Sheet

Financial
Instruments

Collateral
Pledged

Net
Amount
Derivatives $ 18,789
$ —
$ 18,789
$ (2,295 ) $ (11,870 ) $ 4,624
Total $ 18,789
$ —
$ 18,789
$ (2,295 ) $ (11,870 ) $ 4,624

Gross Amounts of Recognized Assets Gross Amounts Offset on the Balance Sheet
Gross Amounts not Offset
in the Balance Sheet

December 31, 2018 Net Asset Balance
Financial
Instruments

Collateral
Received

Net
Amount
Repurchase agreements / reverse repurchase agreements $ 50,000
$ (50,000 ) $ —
$ —
$ —
$ —
Derivatives 24,705
—
24,705
(973 ) (8,029 ) 15,703
Total $ 74,705
$ (50,000 ) $ 24,705
$ (973 ) $ (8,029 ) $ 15,703

Weighted average interest rate of reverse repurchase agreements 3.20 %

Gross Amounts of Recognized Liabilities Gross Amounts Offset on the Balance Sheet
Gross Amounts not Offset
in the Balance Sheet

Net Liability Balance
Financial
Instruments

Collateral
Pledged

Net
Amount
Repurchase agreements / reverse repurchase agreements $ 50,000
$ (50,000 ) $ —
$ —
$ —
$ —
Derivatives 26,433
—
26,433
(973 ) (16,126 ) 9,334
Total $ 76,433
$ (50,000 ) $ 26,433
$ (973 ) $ (16,126 ) $ 9,334

Weighted average interest rate of repurchase agreements 2.45 %

At March 31, 2019, United recognized the right to reclaim cash collateral of $11.9 million and the obligation to return cash collateral of $1.80 million. At December 31, 2018, United recognized the right to reclaim cash collateral of $16.1 million and the obligation to return cash collateral of $8.03 million. The right to reclaim cash collateral and the obligation to return cash collateral were included in the consolidated balance sheets in other assets and other liabilities, respectively.

~~UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements~~

~~The following table presents additional detail regarding repurchase agreements accounted for as secured borrowings and the securities underlying these agreements as of December 31, 2018~~ ~~(in thousands)~~.

Remaining Contractual Maturity of the Agreements
Overnight and Continuous Up to 30 Days 30 to 90 Days 91 to 110 days Total
Mortgage-backed securities $ —
$ —
$ 50,000
$ —
$ 50,000

Total $ —
$ —
$ 50,000
$ —
$ 50,000

Gross amount of recognized liabilities for repurchase agreements in offsetting disclosure
$ 50,000
Amounts related to agreements not included in offsetting disclosure

$ —

United is obligated to promptly transfer additional securities if the market value of the securities falls below the repurchase agreement price. United manages this risk by maintaining an unpledged securities portfolio that it believes is sufficient to cover a decline in the market value of the securities sold under agreements to repurchase.

~~Note 4 –~~ Securities

The amortized cost basis, unrealized gains and losses and fair value of debt securities held-to-maturity as of the dates indicated are as follows (in thousands).



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
As of March 31, 2020
State and political subdivisions	$	61,083	$	3,377	$	—	$	64,460
Residential mortgage-backed securities, Agency	145,793		4,711		14		150,490
Commercial mortgage-backed, Agency	83,528		3,170		53		86,645
Total	$	290,404	$	11,258	$	67	$	301,595

As of December 31, 2019
State and political subdivisions	$	45,479	$	1,574	$	9	$	47,044
Residential mortgage-backed securities, Agency	153,967		2,014		694		155,287
Commercial mortgage-backed, Agency	84,087		1,627		141		85,573
Total	$	283,533	$	5,215	$	844	$	287,904

Amortized
Cost
Gross Unrealized Gains Gross Unrealized Losses
Fair
Value
As of March 31, 2019

State and political subdivisions $ 65,519
$ 1,443
$ 456
$ 66,506
Residential mortgage-backed securities 170,980
1,078
2,532
169,526
Commercial mortgage-backed securities 28,830
323
68
29,085
Total $ 265,329
$ 2,844
$ 3,056
$ 265,117

As of December 31, 2018

State and political subdivisions $ 68,551
$ 952
$ 2,191
$ 67,312
Residential mortgage-backed securities 176,488
652
5,094
172,046
Commercial mortgage-backed securities 29,368
173
96
29,445
Total $ 274,407
$ 1,777
$ 7,381
$ 268,803

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

The cost basis, unrealized gains and losses, and fair value of debt securities available-for-sale as of the dates indicated are presented below (in thousands).



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
As of March 31, 2020
U.S. Treasuries	$	153,219	$	5,745	$	—	$	158,964
U.S. Government agencies	2,777		190		—		2,967
State and political subdivisions	214,191		13,507		17		227,681
Residential mortgage-backed securities, Agency	1,008,944		29,264		459		1,037,749
Residential mortgage-backed securities, Non-agency	260,638		2,095		2,891		259,842
Commercial mortgage-backed, Agency	261,836		5,982		29		267,789
Corporate bonds	191,070		665		950		190,785
Asset-backed securities	109,542		340		5,783		104,099
Total	$	2,202,217	$	57,788	$	10,129	$	2,249,876

As of December 31, 2019
U.S. Treasuries	$	152,990	$	1,628	$	—	$	154,618
U.S. Government agencies	2,848		188		1		3,035
State and political subdivisions	214,677		11,813		—		226,490
Residential mortgage-backed securities, Agency	1,030,948		12,022		726		1,042,244
Residential mortgage-backed securities, Non-agency	250,550		6,231		—		256,781
Commercial mortgage-backed, Agency	266,770		2,261		128		268,903
Commercial mortgage-backed, Non-agency	15,395		918		263		16,050
Corporate bonds	202,131		1,178		218		203,091
Asset-backed securities	104,298		743		1,672		103,369
Total	$	2,240,607	$	36,982	$	3,008	$	2,274,581

Amortized
Cost

Gross Unrealized
Gains

Gross Unrealized
Losses

Fair
Value
As of March 31, 2019

U.S. Treasuries $ 142,409
$ 22
$ 576
$ 141,855
U.S. Government agencies 4,812
292
3
5,101
State and political subdivisions 217,120
5,124
64
222,180
Residential mortgage-backed securities 1,414,612
9,222
9,749
1,414,085
Commercial mortgage-backed securities 345,198
432
2,291
343,339
Corporate bonds 200,471
506
301
200,676
Asset-backed securities 128,359
183
1,153
127,389
Total $ 2,452,981
$ 15,781
$ 14,137
$ 2,454,625

As of December 31, 2018

U.S. Treasuries $ 150,712
$ 767
$ 2,172
$ 149,307
U.S. Government agencies 25,493
335
275
25,553
State and political subdivisions 234,750
907
1,716
233,941
Residential mortgage-backed securities 1,464,380
3,428
21,898
1,445,910
Commercial mortgage-backed securities 399,663
187
7,933
391,917
Corporate bonds 200,582
502
1,921
199,163
Asset-backed securities 184,683
328
2,335
182,676
Total $ 2,660,263
$ 6,454
$ 38,250
$ 2,628,467

Securities with a carrying value of ~~$842~~$559 million and ~~$925~~$918 million were pledged, primarily to secure public deposits, ~~derivatives and other secured borrowings~~ at March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively.

The following table summarizes debt securities held-to-maturity in an unrealized loss position as of the dates indicated (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, 2020
Residential mortgage-backed securities, Agency	$	1,589	$	11	$	440	$	3	$	2,029	$	14
Commercial mortgage-backed, Agency	—		—		1,467		53		1,467		53
Total unrealized loss position	$	1,589	$	11	$	1,907	$	56	$	3,496	$	67

As of December 31, 2019
State and political subdivisions	$	10,117	$	9	$	—	$	—	$	10,117	$	9
Residential mortgage-backed securities, Agency	16,049		64		48,237		630		64,286		694
Commercial mortgage-backed, Agency	21,841		87		1,685		54		23,526		141
Total unrealized loss position	$	48,007	$	160	$	49,922	$	684	$	97,929	$	844

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, 2019

State and political subdivisions $ —
$ —
$ 22,356
$ 456
$ 22,356
$ 456
Residential mortgage-backed securities —
—
112,921
2,532
112,921
2,532
Commercial mortgage-backed securities —
—
4,095
68
4,095
68
Total unrealized loss position $ —
$ —
$ 139,372
$ 3,056
$ 139,372
$ 3,056

As of December 31, 2018

State and political subdivisions $ 7,062
$ 46
$ 34,146
$ 2,145
$ 41,208
$ 2,191
Residential mortgage-backed securities 6,579
61
136,376
5,033
142,955
5,094
Commercial mortgage-backed securities —
—
4,290
96
4,290
96
Total unrealized loss position $ 13,641
$ 107
$ 174,812
$ 7,274
$ 188,453
$ 7,381

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

The following table summarizes debt securities available-for-sale in an unrealized loss position as of the dates indicated (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, 2020
State and political subdivisions	$	15,009	$	17	$	—	$	—	$	15,009	$	17
Residential mortgage-backed securities, Agency	32,736		454		1,856		5		34,592		459
Residential mortgage-backed securities, Non-agency	151,965		2,891		—		—		151,965		2,891
Commercial mortgage-backed, Agency	8,655		29		—		—		8,655		29
Corporate bonds	94,040		950		—		—		94,040		950
Asset-backed securities	20,713		1,240		59,022		4,543		79,735		5,783
Total unrealized loss position	$	323,118	$	5,581	$	60,878	$	4,548	$	383,996	$	10,129

As of December 31, 2019
U.S. Government agencies	$	404	$	1	$	—	$	—	$	404	$	1
Residential mortgage-backed securities, Agency	228,611		576		18,294		150		246,905		726
Commercial mortgage-backed, Agency	—		—		33,517		128		33,517		128
Commercial mortgage-backed, Non-agency	—		—		4,864		263		4,864		263
Corporate bonds	19,742		216		998		2		20,740		218
Asset-backed securities	32,294		625		38,990		1,047		71,284		1,672
Total unrealized loss position	$	281,051	$	1,418	$	96,663	$	1,590	$	377,714	$	3,008

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, 2019

U.S. Treasuries $ —
$ —
$ 122,122
$ 576
$ 122,122
$ 576
U.S. Government agencies —
—
471
3
471
3
State and political subdivisions 415
1
18,186
63
18,601
64
Residential mortgage-backed securities 47,263
644
665,525
9,105
712,788
9,749
Commercial mortgage-backed securities —
—
237,883
2,291
237,883
2,291
Corporate bonds —
—
108,272
301
108,272
301
Asset-backed securities 71,224
720
17,825
433
89,049
1,153
Total unrealized loss position $ 118,902
$ 1,365
$ 1,170,284
$ 12,772
$ 1,289,186
$ 14,137

As of December 31, 2018

U.S. Treasuries $ —
$ —
$ 120,391
$ 2,172
$ 120,391
$ 2,172
U.S. Government agencies —
—
21,519
275
21,519
275
State and political subdivisions 15,160
28
133,500
1,688
148,660
1,716
Residential mortgage-backed securities 234,583
808
775,360
21,090
1,009,943
21,898
Commercial mortgage-backed securities 4,552
594
355,292
7,339
359,844
7,933
Corporate bonds —
—
117,296
1,921
117,296
1,921
Asset-backed securities 74,492
1,879
31,968
456
106,460
2,335
Total unrealized loss position $ 328,787
$ 3,309
$ 1,555,326
$ 34,941
$ 1,884,113
$ 38,250

At March 31, ~~2019,~~2020, there were ~~174~~58 debt securities available-for-sale and 566 debt securities held-to-maturity that were in an unrealized loss position. United does not intend to sell nor believes it will be required to sell securities in an unrealized loss position prior to the recovery of their amortized cost basis. Unrealized losses at March 31, ~~2019~~2020 were primarily attributable to ~~changes in interest rates.~~

~~Management evaluates securities for other-than-temporary impairment on a quarterly basis, and more frequently when economic or~~volatile market ~~concerns warrant such evaluation. Consideration is given to~~conditions resulting from uncertainty surrounding the ~~length of time and the extent to which the fair value has been less than cost, the financial condition and near-term prospects~~impact of the issuer, among other factors. In analyzing an issuer’s financial condition, management considers whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred, and industry analysts’ reports. NoCOVID-19 pandemic.

NaN impairment charges were recognized during the three months ended March 31, ~~2019~~2019. At adoption of CECL on January 1, 2020 and at March 31, 2020, calculated credit losses on held-to-maturity debt securities were not material due to the high credit quality of the portfolio, which included securities issued or ~~2018.~~guaranteed by U.S. Government agencies and high credit quality municipal securities. As a result, 0 ACL was recorded on the held-to-maturity portfolio at March 31, 2020. In addition, at March 31, 2020, there was 0 ACL related to the available-for-sale portfolio. See Note 1 for additional details on the adoption of CECL as it relates to the securities portfolio.

Realized gains and losses are derived using the specific identification method for determining the cost of securities sold. The following table summarizes available-for-sale securities sales activity for the three months ended March 31, 2020 and 2019 ~~and 2018~~ (in thousands).

Three Months Ended March 31,
2019 2018

Proceeds from sales $ 178,604
$ 113,961

Gross gains on sales $ 1,287
$ 417

Gross losses on sales (1,554 ) (1,357 )
Net losses on sales of securities $ (267 ) $ (940 )

Income tax benefit attributable to sales $ (68 ) $ (221 )



	Three Months Ended March 31,
	2020		2019
Proceeds from sales	$	1,000	$	178,604

Gross gains on sales	$	—	$	1,287
Gross losses on sales	—		(1,554		)
Net losses on sales of securities	$	—	$	(267	)

Income tax benefit attributable to sales	$	—	$	(68	)

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

The amortized cost and fair value of debt securities available-for-sale and held-to-maturity at March 31, ~~2019,~~2020, 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. Treasuries:
Within 1 year	$	29,967	$	30,035	$	—	$	—
1 to 5 years	123,252		128,929		—		—
	153,219		158,964		—		—

U.S. Government agencies:
1 to 5 years	354		358		—		—
More than 10 years	2,423		2,609		—		—
	2,777		2,967		—		—

State and political subdivisions:
Within 1 year	935		935		1,350		1,363
1 to 5 years	54,097		55,202		11,759		12,421
5 to 10 years	24,255		25,802		13,323		14,714
More than 10 years	134,904		145,742		34,651		35,962
	214,191		227,681		61,083		64,460

Corporate bonds:
Within 1 year	160,000		159,258		—		—
1 to 5 years	27,570		27,835		—		—
5 to 10 years	3,500		3,692		—		—
	191,070		190,785		—		—

Total securities other than asset-backed and mortgage-backed securities:
Within 1 year	190,902		190,228		1,350		1,363
1 to 5 years	205,273		212,324		11,759		12,421
5 to 10 years	27,755		29,494		13,323		14,714
More than 10 years	137,327		148,351		34,651		35,962

Asset-backed securities	109,542		104,099		—		—
Residential mortgage-backed securities	1,269,582		1,297,591		145,793		150,490
Commercial mortgage-backed securities	261,836		267,789		83,528		86,645
	$	2,202,217	$	2,249,876	$	290,404	$	301,595

Available-for-Sale Held-to-Maturity
Amortized Cost Fair Value Amortized Cost Fair Value
U.S. Treasuries:

1 to 5 years $ 142,409
$ 141,855
$ —
$ —
142,409
141,855
—
—

U.S. Government agencies:
1 to 5 years 474
471
—
—
More than 10 years 4,338
4,630
—
—
4,812
5,101
—
—

State and political subdivisions:
Within 1 year 500
502
3,250
3,262
1 to 5 years 36,058
36,060
11,567
12,024
5 to 10 years 35,888
36,743
7,753
8,423
More than 10 years 144,674
148,875
42,949
42,797
217,120
222,180
65,519
66,506

Corporate bonds:
Within 1 year 10,239
10,219
—
—
1 to 5 years 187,732
187,948
—
—
5 to 10 years 1,500
1,514
—
—
More than 10 years 1,000
995
—
—
200,471
200,676
—
—

Asset-backed securities:
1 to 5 years 2,121
2,107
—
—
More than 10 years 126,238
125,282
—
—
128,359
127,389
—
—

Total securities other than mortgage-backed securities:
Within 1 year 10,739
10,721
3,250
3,262
1 to 5 years 368,794
368,441
11,567
12,024
5 to 10 years 37,388
38,257
7,753
8,423
More than 10 years 276,250
279,782
42,949
42,797
Residential mortgage-backed securities 1,414,612
1,414,085
170,980
169,526
Commercial mortgage-backed securities 345,198
343,339
28,830
29,085
$ 2,452,981
$ 2,454,625
$ 265,329
$ 265,117

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

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Note 54 – 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).



	March 31, 2020			December 31, 2019
Owner occupied commercial real estate	$	1,702,984		$	1,720,227
Income producing commercial real estate	2,064,502			2,007,950
Commercial & industrial	1,310,112			1,220,657
Commercial construction	959,318			976,215
Equipment financing	760,952			744,544
Total commercial	6,797,868			6,669,593
Residential mortgage	1,127,988			1,117,616
Home equity lines of credit	668,382			660,675
Residential construction	215,996			236,437
Consumer	125,190			128,232
Total loans	8,935,424			8,812,553
Less allowance for credit losses - loans	(81,905		)	(62,089		)
Loans, net	$	8,853,519		$	8,750,464

March 31, 2019 December 31, 2018
Owner occupied commercial real estate $ 1,620,068
$ 1,647,904
Income producing commercial real estate 1,867,425
1,812,420
Commercial & industrial 1,283,865
1,278,347
Commercial construction 865,666
796,158
Equipment financing 605,984
564,614
Total commercial 6,243,008
6,099,443
Residential mortgage 1,063,840
1,049,232
Home equity lines of credit 683,771
694,010
Residential construction 200,708
211,011
Consumer direct 121,174
122,013
Indirect auto 180,753
207,692

Total loans 8,493,254
8,383,401

Less allowance for loan losses (61,642 ) (61,203 )

Loans, net $ 8,431,612
$ 8,322,198

At March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, loans totaling ~~$4.03~~$4.15 billion and ~~$3.98~~$4.06 billion, respectively, were pledged as collateral to secure ~~Federal Home Loan Bank advances, securitized notes payable and other~~ contingent funding sources.

During the first quarter of 2020 United sold $4.03 million of United States Small Business Administration / United States Department of Agriculture (“SBA/USDA”) guaranteed loans and $22.2 million of equipment financing receivables. During the first quarter of 2019, United sold $17.1 million of SBA/USDA guaranteed loans. The gains and losses on these loan sales were included in noninterest income on the consolidated statements of income.

At March 31, ~~2019, the carrying value~~2020 and ~~outstanding balance~~December 31, 2019, equipment financing assets included leases of ~~purchased credit impaired (“PCI”) loans accounted for under ASC 310-30,~~ ~~Loans and Debt Securities Acquired with Deteriorated Credit Quality, were $68.7~~$37.6 million and ~~$100~~$37.4 million, respectively. The components of the net investment in leases, which included both sales-type and direct financing, are presented below (in thousands).



	March 31, 2020			December 31, 2019
Minimum future lease payments receivable	$	39,725		$	39,709
Estimated residual value of leased equipment	3,575			3,631
Initial direct costs	788			842
Security deposits	(918		)	(989		)
Purchase accounting premium	238			273
Unearned income	(5,848		)	(6,088		)
Net investment in leases	$	37,560		$	37,378

Minimum future lease payments expected to be received from equipment financing lease contracts as of March 31, 2020 were as follows (in thousands):



Year
Remainder of 2020	$	11,653
2021	12,387
2022	8,683
2023	4,937
2024	1,700
Thereafter	365
Total	$	39,725

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

At December 31, ~~2018,~~2019, the carrying value and outstanding balance of PCI loans were ~~$74.4~~$58.6 million and ~~$109~~$83.1 million, respectively. The following table presents changes in the balance of the accretable yield for PCI loans for the ~~periods~~period indicated (in thousands):



	Three Months Ended March 31, 2019
Balance at beginning of period	$	26,868
Accretion	(4,813		)
Reclassification from nonaccretable difference	2,706
Changes in expected cash flows that do not affect nonaccretable difference	1,863
Balance at end of period	$	26,624

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 March 31, 2020(in thousands).



	Accruing
	Current Loans		Loans Past Due
	Current Loans		30 - 59 Days		60 - 89 Days		> 90 Days		Nonaccrual Loans		Total Loans
Owner occupied commercial real estate	$	1,686,758	$	4,364	$	1,457	$	—	$	10,405	$	1,702,984
Income producing commercial real estate	2,057,775		4,482		10		—		2,235		2,064,502
Commercial & industrial	1,304,689		2,004		250		—		3,169		1,310,112
Commercial construction	956,397		791		406		—		1,724		959,318
Equipment financing	753,741		4,019		753		—		2,439		760,952
Total commercial	6,759,360		15,660		2,876		—		19,972		6,797,868
Residential mortgage	1,110,031		4,882		617		—		12,458		1,127,988
Home equity lines of credit	661,857		3,223		292		—		3,010		668,382
Residential construction	214,568		836		52		—		540		215,996
Consumer	123,720		982		260		—		228		125,190
Total loans	$	8,869,536	$	25,583	$	4,097	$	—	$	36,208	$	8,935,424

The following table presents the aging of recorded investment in loans, including accruing and nonaccrual loans, as of December 31, 2019 (in thousands).

Three Months Ended March 31,
2019 2018
Balance at beginning of period $ 26,868
$ 17,686

Additions due to acquisitions —
1,830

Accretion (4,813 ) (2,546 )
Reclassification from nonaccretable difference 2,706
591

Changes in expected cash flows that do not affect nonaccretable difference 1,863
475

Balance at end of period $ 26,624
$ 18,036



	Loans Past Due - Accruing and Nonaccrual
	30 - 59 Days		60 - 89 Days		> 90 Days ⁽¹⁾		Total		Current Loans		PCI Loans		Total
Owner occupied commercial real estate	$	2,913	$	2,007	$	6,079	$	10,999	$	1,700,682	$	8,546	$	1,720,227
Income producing commercial real estate	562		706		401		1,669		1,979,053		27,228		2,007,950
Commercial & industrial	2,140		491		2,119		4,750		1,215,581		326		1,220,657
Commercial construction	1,867		557		96		2,520		966,833		6,862		976,215
Equipment financing	2,065		923		3,045		6,033		734,526		3,985		744,544
Total commercial	9,547		4,684		11,740		25,971		6,596,675		46,947		6,669,593
Residential mortgage	5,655		2,212		2,171		10,038		1,097,999		9,579		1,117,616
Home equity lines of credit	1,697		421		1,385		3,503		655,762		1,410		660,675
Residential construction	325		125		402		852		235,211		374		236,437
Consumer	668		181		27		876		127,020		336		128,232
Total loans	$	17,892	$	7,623	$	15,725	$	41,240	$	8,712,667	$	58,646	$	8,812,553

~~In addition to the accretable yield on~~⁽¹⁾Excluding PCI loans, ~~the fair value adjustments~~substantially all loans more than 90 days past due were on ~~purchased loans outside the scope of ASC 310-30 are also accreted to interest revenue over the life of the loans. At March 31, 2019 and~~nonaccrual status at December 31, 2018, the remaining accretable net fair value discount on loans acquired through a business combination and not accounted for under ASC 310-30 was $4.44 million and $4.31 million, respectively. At March 31, 2019, the net fair value discount of $4.44 million included a net premium on acquired equipment financing loans. In addition, indirect auto loans purchased at a premium outside of a business combination had a remaining premium of $3.03 million and $3.72 million, respectively, as of March 31, 2019 and December 31, 2018.

2019.

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

~~At March 31, 2019 and~~ ~~December 31, 2018, equipment financing assets included direct financing leases of $33.5 million and $30.4 million, respectively. The components of the net investment in leases are presented below~~ ~~(in thousands)~~.

March 31, 2019 December 31, 2018
Minimum future lease payments receivable $ 35,385
$ 31,915

Estimated residual value of leased equipment 3,791
3,593

Initial direct costs 856
827

Security deposits (1,173 ) (1,189 )
Purchase accounting premium 644
806

Unearned income (6,011 ) (5,568 )
Net investment in leases $ 33,492
$ 30,384

~~Minimum future lease payments expected to be received from lease contracts as of March 31, 2019 are as follows~~ ~~(in thousands)~~:

Year
Remainder of 2019 $ 10,384

2020 10,960

2021 7,156

2022 4,249

2023 2,046

Thereafter 590

Total $ 35,385

~~UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements~~

~~Allowance for Credit Losses and Loans Individually Evaluated for Impairment~~

The allowance for loan losses represents management’s estimate of probable incurred losses in the loan portfolio as of the end of the period. The allowance for unfunded commitments is included in other liabilities in the consolidated balance sheet. Combined, the allowance for loan losses and allowance for unfunded commitments are referred to as the allowance for credit losses.

The following table presents ~~the balance and activity in the allowance for credit losses~~nonaccrual loans by ~~portfolio segment~~loan class for the periods indicated (in thousands).



	CECL						Incurred Loss
	March 31, 2020						December 31, 2019
	Nonaccrual loans with no allowance		Nonaccrual loans with an allowance		Total Nonaccrual Loans		Nonaccrual Loans
Owner occupied commercial real estate	$	6,889	$	3,516	$	10,405	$	10,544
Income producing commercial real estate	1,039		1,196		2,235		1,996
Commercial & industrial	1,332		1,837		3,169		2,545
Commercial construction	1,235		489		1,724		2,277
Equipment financing	43		2,396		2,439		3,141
Total commercial	10,538		9,434		19,972		20,503
Residential mortgage	3,163		9,295		12,458		10,567
Home equity lines of credit	962		2,048		3,010		3,173
Residential construction	130		410		540		939
Consumer	8		220		228		159
Total	$	14,801	$	21,407	$	36,208	$	35,341

2019 2018
Three Months Ended March 31,
Beginning Balance Charge-Offs Recoveries (Release)Provision Ending Balance Beginning Balance Charge-Offs Recoveries (Release) Provision Ending Balance
Owner occupied commercial real estate $ 12,207
$ (5 ) $ 69
$ (397 ) $ 11,874
$ 14,776
$ (60 ) $ 103
$ (258 ) $ 14,561
Income producing commercial real estate 11,073
(197 ) 20
230
11,126
9,381
(657 ) 235
817
9,776
Commercial & industrial 4,802
(1,519 ) 163
1,449
4,895
3,971
(384 ) 389
99
4,075
Commercial construction 10,337
(69 ) 394
(387 ) 10,275
10,523
(363 ) 97
(223 ) 10,034
Equipment financing 5,452
(1,424 ) 143
2,060
6,231
—
(139 ) 97
2,333
2,291
Residential mortgage 8,295
(61 ) 48
63
8,345
10,097
(70 ) 123
71
10,221
Home equity lines of credit 4,752
(337 ) 122
260
4,797
5,177
(124 ) 35
(156 ) 4,932
Residential construction 2,433
(4 ) 26
(65 ) 2,390
2,729
—
64
251
3,044
Consumer direct 853
(547 ) 207
324
837
710
(651 ) 160
514
733
Indirect auto 999
(197 ) 38
32
872
1,550
(436 ) 80
224
1,418
Total allowance for loan losses 61,203
(4,360 ) 1,230
3,569
61,642
58,914
(2,884 ) 1,383
3,672
61,085
Allowance for unfunded commitments 3,410
—
—
(269 ) 3,141
2,312
—
—
128
2,440
Total allowance for credit losses $ 64,613
$ (4,360 ) $ 1,230
$ 3,300
$ 64,783
$ 61,226
$ (2,884 ) $ 1,383
$ 3,800
$ 63,525

The following tables represent the recorded investment in loans by portfolio segment and the balance of the allowance for loan losses assigned to each segment based on the method of evaluating the loans for impairment as of the dates indicated ~~(in thousands)~~.

Allowance for Credit Losses
March 31, 2019 December 31, 2018

Individually
evaluated
for
impairment

Collectively
evaluated for
impairment
PCI
Ending
Balance

Individually
evaluated
for
impairment

Collectively
evaluated for
impairment
PCI
Ending
Balance
Owner occupied commercial real estate $ 825
$ 10,894
$ 155
$ 11,874
$ 862
$ 11,328
$ 17
$ 12,207
Income producing commercial real estate 280
10,846
—
11,126
402
10,671
—
11,073
Commercial & industrial 36
4,855
4
4,895
32
4,761
9
4,802
Commercial construction 68
10,001
206
10,275
71
9,974
292
10,337
Equipment financing —
5,988
243
6,231
—
5,045
407
5,452
Residential mortgage 916
7,403
26
8,345
861
7,410
24
8,295
Home equity lines of credit 1
4,796
—
4,797
1
4,740
11
4,752
Residential construction 63
2,327
—
2,390
51
2,382
—
2,433
Consumer direct 5
832
—
837
6
847
—
853
Indirect auto 25
847
—
872
26
973
—
999
Total allowance for loan losses 2,219
58,789
634
61,642
2,312
58,131
760
61,203
Allowance for unfunded commitments —
3,141
—
3,141
—
3,410
—
3,410
Total allowance for credit losses $ 2,219
$ 61,930
$ 634
$ 64,783
$ 2,312
$ 61,541
$ 760
$ 64,613

~~UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements~~

Loans Outstanding
March 31, 2019 December 31, 2018

Individually
evaluated
for
impairment

Collectively
evaluated for
impairment
PCI
Ending
Balance

Individually
evaluated
for impairment

Collectively
evaluated for
impairment
PCI
Ending
Balance
Owner occupied commercial real estate $ 17,238
$ 1,594,226
$ 8,604
$ 1,620,068
$ 17,602
$ 1,620,450
$ 9,852
$ 1,647,904
Income producing commercial real estate 14,125
1,817,203
36,097
1,867,425
16,584
1,757,525
38,311
1,812,420
Commercial & industrial 1,701
1,281,823
341
1,283,865
1,621
1,276,318
408
1,278,347
Commercial construction 2,379
857,683
5,604
865,666
2,491
787,760
5,907
796,158
Equipment financing —
599,243
6,741
605,984
—
556,672
7,942
564,614
Residential mortgage 15,453
1,039,582
8,805
1,063,840
14,220
1,025,862
9,150
1,049,232
Home equity lines of credit 255
682,047
1,469
683,771
276
692,122
1,612
694,010
Residential construction 1,340
198,787
581
200,708
1,207
209,070
734
211,011
Consumer direct 199
120,499
476
121,174
211
121,269
533
122,013
Indirect auto 1,104
179,649
—
180,753
1,237
206,455
—
207,692
Total loans $ 53,794
$ 8,370,742
$ 68,718
$ 8,493,254
$ 55,449
$ 8,253,503
$ 74,449
$ 8,383,401

A loan is considered impaired when, based on current events and circumstances, it is probable that all amounts due according to the original contractual terms of the loan will not be collected. Management individually evaluates certain impaired loans, including all non-PCI relationships that are on nonaccrual with a balance of $500,000 or greater and all troubled debt restructurings (“TDRs”) regardless of accrual status, for impairment. Impairment is measured based on the present value of expected future cash flows, discounted at the loan’s effective interest rate, the loan’s observable market price, or the fair value of the collateral if the loan is collateral dependent. A specific reserve is established for impaired loans for the amount of calculated impairment, if any. Interest payments received on impaired nonaccrual loans are applied as a reduction of the recorded investment in the loan. For impaired loans not on nonaccrual status, interest is accrued according to the terms of the loan agreement. Loans are evaluated for impairment quarterly and specific reserves are established in the allowance for loan losses for any measured impairment.

Each quarter, management prepares an analysis of the allowance for credit losses to determine the appropriate balance that measures and quantifies the amount of probable incurred losses in the loan portfolio and unfunded loan commitments. The allowance is comprised of specific reserves on individually impaired loans, which are determined as described above, and general reserves which are determined based on historical loss experience as adjusted for current trends and economic conditions multiplied by a loss emergence period factor.

Management calculates the loss emergence period for each pool in the loan portfolio based on the weighted average length of time between the date a loan first exceeds 30 days past due and the date the loan is charged off.

On junior lien home equity loans, management has limited ability to monitor the delinquency status of the first lien unless the first lien is also held by United. As a result, management applies the weighted average historical loss factor for this category and appropriately adjusts it to reflect the increased risk of loss from these credits.

Management carefully reviews the resulting loss factors for each category of the loan portfolio and evaluates whether qualitative adjustments are necessary to take into consideration recent credit trends such as increases or decreases in past due, nonaccrual, criticized and classified loans, and other macro environmental factors such as changes in unemployment rates, employment rates, debt per capita, home price indices, and trends in real estate value indices.

Management believes that its method of determining the balance of the allowance for credit losses provides a reasonable and reliable basis for measuring and reporting losses that are incurred in the loan portfolio as of the reporting date.

When a loan officer determines that a loan is uncollectible, he or she is responsible for recommending that the loan be placed on nonaccrual status and evaluated for impairment, which, if necessary, could result in fully or partially charging off the loan or establishing a specific reserve. Full or partial charge-offs may also be recommended by the Collections Department, the Special Assets Department, the Loss Mitigation Department and the Foreclosure/OREO Department. Nonaccrual real estate loans are generally charged down to fair value of collateral less costs to sell at the time they are placed on nonaccrual status.

Commercial and consumer asset quality committees meet monthly to review charge-offs that have occurred during the previous month. Participants include the respective Chief Credit Officer, Senior Risk Officers and Senior Credit Officers.

~~UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements~~

Generally, closed-end retail loans (installment and residential mortgage loans) past due 90 cumulative days are written down to their collateral value less estimated selling costs. Open-end (revolving) unsecured retail loans which are past due 90 cumulative days from their contractual due date are generally charged-off.

~~The following table presents loans individually evaluated for impairment by class as of the dates indicated~~ ~~(in thousands)~~.

March 31, 2019 December 31, 2018
Unpaid Principal Balance Recorded Investment
Allowance
for Loan
Losses
Allocated
Unpaid Principal Balance
Recorded
Investment

Allowance
for Loan
Losses
Allocated
With no related allowance recorded:

Owner occupied commercial real estate $ 8,159
$ 6,089
$ —
$ 8,650
$ 6,546
$ —
Income producing commercial real estate 8,333
8,227
—
9,986
9,881
—
Commercial & industrial 522
360
—
525
370
—
Commercial construction 119
113
—
685
507
—
Equipment financing —
—
—
—
—
—
Total commercial 17,133
14,789
—
19,846
17,304
—
Residential mortgage 6,513
5,890
—
5,787
5,202
—
Home equity lines of credit 275
215
—
330
234
—
Residential construction 753
624
—
554
428
—
Consumer direct 15
15
—
�� 18
17
—
Indirect auto 142
130
—
294
292
—
Total with no related allowance recorded 24,831
21,663
—
26,829
23,477
—

With an allowance recorded:
Owner occupied commercial real estate 11,191
11,149
825
11,095
11,056
862
Income producing commercial real estate 6,166
5,898
280
6,968
6,703
402
Commercial & industrial 1,746
1,341
36
1,652
1,251
32
Commercial construction 2,503
2,266
68
2,130
1,984
71
Equipment financing —
—
—
—
—
—
Total commercial 21,606
20,654
1,209
21,845
20,994
1,367
Residential mortgage 9,713
9,563
916
9,169
9,018
861
Home equity lines of credit 43
40
1
45
42
1
Residential construction 727
716
63
791
779
51
Consumer direct 189
184
5
199
194
6
Indirect auto 975
974
25
946
945
26
Total with an allowance recorded 33,253
32,131
2,219
32,995
31,972
2,312
Total $ 58,084
$ 53,794
$ 2,219
$ 59,824
$ 55,449
$ 2,312

As of March 31, 2019 and December 31, 2018, $2.22 million and $2.31 million, respectively, of specific reserves were allocated to customers whose loan terms have been modified in TDRs. As of March 31, 2019 and December 31, 2018, there were no commitments to lend additional amounts to customers with outstanding loans that are classified as TDRs.

The modification of the TDR terms included one or a combination of the following: a reduction of the stated interest rate of the loan or an extension of the amortization period that would not otherwise be considered in the current market for new debt with similar risk characteristics; a restructuring of the borrower’s debt into an “A/B note structure” where the A note would fall within the borrower’s ability to pay and the remainder would be included in the B note; a mandated bankruptcy restructuring; or interest-only payment terms greater than 90 days where the borrower is unable to amortize the loan. Modified PCI loans are not accounted for as TDRs because they are not separated from the pools, and as such are not classified as impaired loans.

~~UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements~~

Loans modified under the terms of a TDR during the three months ended March 31, 2019 and 2018 are presented in the table below. In addition, the following table presents loans modified under the terms of a TDR that defaulted (became 90 days or more delinquent) during the periods presented and were initially restructured within one year prior to default ~~(dollars in thousands)~~.

New TDRs
Pre-modification Outstanding Recorded Investment Post-Modification Outstanding Recorded Investment by Type of Modification TDRs Modified Within the Previous Twelve Months That Have Subsequently Defaulted

Number of
Contracts

Rate
Reduction
Structure Other Total
Number of
Contracts

Recorded
Investment
Three Months Ended March 31, 2019
Owner occupied commercial real estate —
$ —
$ —
$ —
$ —
$ —
—
$ —
Income producing commercial real estate 1
169
—
169
—
169
—
—
Commercial & industrial 1
7
—
—
7
7
—
—
Commercial construction —
—
—
—
—
—
—
—
Equipment financing —
—
—
—
—
—
—
—
Total commercial 2
176
—
169
7
176
—
—
Residential mortgage 2
345
—
344
—
344
—
—
Home equity lines of credit —
—
—
—
—
—
—
—
Residential construction —
—
—
—
—
—
—
—
Consumer direct —
—
—
—
—
—
—
—
Indirect auto 6
66
—
—
57
57
—
—
Total loans 10
$ 587
$ —
$ 513
$ 64
$ 577
—
$ —

Three Months Ended March 31, 2018
Owner occupied commercial real estate 3
$ 994
$ —
$ 978
$ —
$ 978
2
$ 1,586
Income producing commercial real estate —
—
—
—
—
—
—
—
Commercial & industrial 1
81
—
5
—
5
—
—
Commercial construction —
—
—
—
—
—
—
—
Equipment financing —
—
—
—
—
—
—
—
Total commercial 4
1,075
—
983
—
983
2
1,586
Residential mortgage 2
340
—
340
—
340
—
—
Home equity lines of credit —
—
—
—
—
—
—
—
Residential construction —
—
—
—
—
—
—
—
Consumer direct —
—
—
—
—
—
—
—
Indirect auto —
—
—
—
—
—
—
—
Total loans 6
$ 1,415
$ —
$ 1,323
$ —
$ 1,323
2
$ 1,586

Collateral dependent TDRs that subsequently default or are placed on nonaccrual are charged down to the fair value of the collateral consistent with United’s policy for nonaccrual loans. Impairment on TDRs that are not collateral dependent continues to be measured based on discounted cash flows regardless of whether the loan has subsequently defaulted.

~~UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements~~

~~The average balances of impaired loans and income recognized on impaired loans while they were considered impaired are presented below for the periods indicated~~ ~~(in thousands)~~.

2019 2018
Three Months Ended March 31, Average Balance
Interest Revenue
Recognized During Impairment
Cash Basis Interest Revenue Received Average Balance Interest Revenue
Recognized During Impairment Cash Basis Interest Revenue Received
Owner occupied commercial real estate $ 17,410
$ 285
$ 284
$ 24,658
$ 245
$ 280
Income producing commercial real estate 14,237
193
207
16,433
210
235
Commercial & industrial 1,716
19
19
2,596
40
42
Commercial construction 2,402
34
33
3,936
51
52
Equipment financing —
—
—
—
—
—
Total commercial 35,765
531
543
47,623
546
609
Residential mortgage 15,502
168
174
14,993
149
150
Home equity lines of credit 258
4
3
344
4
4
Residential construction 1,408
24
23
1,590
24
24
Consumer direct 205
4
4
291
5
5
Indirect auto 1,190
14
14
1,378
18
18
Total $ 54,328
$ 745
$ 761
$ 66,219
$ 746
$ 810

~~Nonaccrual and Past Due Loans~~

Nonaccrual loans include both homogeneous loans that are collectively evaluated for impairment and individually evaluated impaired loans. United’s policy is to place loans on nonaccrual status when, in the opinion of management, the principal and interest on a loan is not likely to be repaid in full or when the loan becomes 90 days past due and is not well secured and in the process of collection. When a loan is classified on nonaccrual status, interest previously accrued but not collected is reversed against current interest revenue. Principal and interest payments received on a nonaccrual loan are generally applied to reduce the loan’s recorded investment.

PCI loans are considered past due or delinquent when the contractual principal or interest due in accordance with the terms of the loan agreement remains unpaid after the due date of the scheduled payment. However, these loans are considered to be performing, even though they may be contractually past due, as any non-payment of contractual principal or interest is considered in the periodic re-estimation of expected cash flows and is included in the resulting recognition of current period loan loss provision or future period yield adjustments. The accrual of interest is discontinued on PCI loans if management can no longer reliably estimate future cash flows on the loan or pool of loans. No PCI loans were classified as nonaccrual at March 31, 2019 or December 31, 2018 as the carrying value of the respective loan or pool of loans cash flows were considered estimable and probable of collection. Therefore, interest revenue, through accretion of the difference between the carrying value of the loans and the expected cash flows, is being recognized on all PCI loans.

The gross additional interest revenue that would have been earned if the loans classified as nonaccrual had performed in accordance with the original terms was approximately ~~$378,000~~$468,000 and ~~$342,000~~$378,000 for the three months ended March 31, ~~2019~~2020 and ~~2018,~~2019, respectively.

~~UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements~~

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

March 31, 2019 December 31, 2018
Owner occupied commercial real estate $ 7,030
$ 6,421

Income producing commercial real estate 1,276
1,160

Commercial & industrial 1,666
1,417

Commercial construction 473
605

Equipment financing 1,813
2,677

Total commercial 12,258
12,280

Residential mortgage 8,281
8,035

Home equity lines of credit 2,233
2,360

Residential construction 347
288

Consumer direct 47
89

Indirect auto 458
726

Total $ 23,624
$ 23,778

Excluding PCI loans, substantially all loans more than 90 days past due were on nonaccrual status at March 31, 2019 and December 31, 2018. The following table presents the aging of the recorded investment in past due loans by class of loans as of the dates indicated ~~(in thousands)~~.

Loans Past Due
As of March 31, 2019 30 - 59 Days 60 - 89 Days > 90 Days Total Loans Not Past Due PCI Loans Total
Owner occupied commercial real estate $ 4,644
$ 1,142
$ 3,328
$ 9,114
$ 1,602,350
$ 8,604
$ 1,620,068
Income producing commercial real estate 1,199
125
706
2,030
1,829,298
36,097
1,867,425
Commercial & industrial 2,649
790
937
4,376
1,279,148
341
1,283,865
Commercial construction 139
443
24
606
859,456
5,604
865,666
Equipment financing 1,809
894
1,722
4,425
594,818
6,741
605,984
Total commercial 10,440
3,394
6,717
20,551
6,165,070
57,387
6,243,008
Residential mortgage 4,862
1,511
1,292
7,665
1,047,370
8,805
1,063,840
Home equity lines of credit 2,355
634
528
3,517
678,785
1,469
683,771
Residential construction 574
132
154
860
199,267
581
200,708
Consumer direct 522
89
2
613
120,085
476
121,174
Indirect auto 711
185
416
1,312
179,441
—
180,753
Total loans $ 19,464
$ 5,945
$ 9,109
$ 34,518
$ 8,390,018
$ 68,718
$ 8,493,254

Loans Past Due
As of December 31, 2018 30 - 59 Days 60 - 89 Days > 90 Days Total Loans Not Past Due PCI Loans Total
Owner occupied commercial real estate $ 2,542
$ 2,897
$ 1,011
$ 6,450
$ 1,631,602
$ 9,852
$ 1,647,904
Income producing commercial real estate 1,624
291
301
2,216
1,771,893
38,311
1,812,420
Commercial & industrial 7,189
718
400
8,307
1,269,632
408
1,278,347
Commercial construction 267
—
68
335
789,916
5,907
796,158
Equipment financing 1,351
739
2,658
4,748
551,924
7,942
564,614
Total commercial 12,973
4,645
4,438
22,056
6,014,967
62,420
6,099,443
Residential mortgage 5,461
1,788
1,950
9,199
1,030,883
9,150
1,049,232
Home equity lines of credit 2,112
864
902
3,878
688,520
1,612
694,010
Residential construction 509
63
190
762
209,515
734
211,011
Consumer direct 600
82
21
703
120,777
533
122,013
Indirect auto 750
323
633
1,706
205,986
—
207,692
Total loans $ 22,405
$ 7,765
$ 8,134
$ 38,304
$ 8,270,648
$ 74,449
$ 8,383,401

~~UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements~~

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, credit documentation, public information, and current industry and economic trends, among other factors. United analyzes loans individually by classifying the loans as to credit risk. This analysis is performed on a continual basis. United uses the following definitions for its risk ratings:

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

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

Doubtful. Specific weaknesses characterized as Substandard that are severe enough to make collection in full highly questionable and improbable. There is no reliable secondary source of full repayment.

Loss. Loans categorized as Loss have the same characteristics as Doubtful; however, probability of loss is certain. Loans classified as Loss are charged off.

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

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass rated loans.

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Based on the most recent analysis performed, the amortized cost of loans by risk category by vintage year as of the date indicated is as follows (in thousands).



	As of March 31, 2020
	Term Loans by Origination Year												Revolvers		Revolvers converted to term loans		Total
	2020		2019		2018		2017		2016		Prior
Owner occupied commercial real estate:
Pass	$	108,385	$	402,541	$	271,646	$	236,178	$	222,321	$	287,441	$	60,479	$	28,008	$	1,616,999
Watch	4,602		8,706		4,166		11,315		7,869		4,634		842		70		42,204
Substandard	3,320		8,582		2,903		12,650		3,739		8,613		3,215		759		43,781
Total owner occupied commercial real estate	116,307		419,829		278,715		260,143		233,929		300,688		64,536		28,837		1,702,984
Income producing commercial real estate:
Pass	206,665		500,411		399,578		284,259		286,601		258,605		37,060		9,820		1,982,999
Watch	6,665		12,955		9,885		4,214		8,775		2,989		—		1,807		47,290
Substandard	10,632		13,890		2,662		4,117		228		2,577		—		107		34,213
Total income producing commercial real estate	223,962		527,256		412,125		292,590		295,604		264,171		37,060		11,734		2,064,502
Commercial & industrial
Pass	87,261		267,166		240,535		125,838		93,442		63,150		361,419		9,674		1,248,485
Watch	1,066		807		2,725		620		883		53		16,140		147		22,441
Substandard	44		9,345		1,554		2,340		2,726		1,606		20,796		775		39,186
Total commercial & industrial	88,371		277,318		244,814		128,798		97,051		64,809		398,355		10,596		1,310,112
Commercial construction
Pass	90,555		246,335		313,984		163,033		91,830		19,976		15,565		7,600		948,878
Watch	306		940		994		181		49		401		—		—		2,871
Substandard	1,205		2,609		550		387		950		438		—		1,430		7,569
Total commercial construction	92,066		249,884		315,528		163,601		92,829		20,815		15,565		9,030		959,318
Equipment financing:
Pass	124,870		353,441		187,366		67,279		21,377		3,510		—		—		757,843
Substandard	—		817		1,421		627		180		64		—		—		3,109
Total equipment financing	124,870		354,258		188,787		67,906		21,557		3,574		—		—		760,952
Residential mortgage:
Pass	86,068		251,157		188,207		164,654		134,189		279,723		11		8,009		1,112,018
Substandard	832		2,103		2,927		1,520		891		7,337		—		360		15,970
Total residential mortgage	86,900		253,260		191,134		166,174		135,080		287,060		11		8,369		1,127,988
Home equity lines of credit
Pass	—		—		—		—		—		—		645,874		18,111		663,985
Substandard	—		—		—		—		—		—		226		4,171		4,397
Total home equity lines of credit	—		—		—		—		—		—		646,100		22,282		668,382
Residential construction
Pass	34,849		137,032		13,603		5,911		5,171		18,480		—		162		215,208
Substandard	—		173		133		25		127		330		—		—		788
Total residential construction	34,849		137,205		13,736		5,936		5,298		18,810		—		162		215,996
Consumer
Pass	16,878		45,895		25,917		10,217		7,199		3,947		14,567		97		124,717
Watch	—		—		—		—		—		—		7		—		7
Substandard	26		71		82		74		69		52		91		1		466
Total consumer	16,904		45,966		25,999		10,291		7,268		3,999		14,665		98		125,190

Total loans
Pass	755,531		2,203,978		1,640,836		1,057,369		862,130		934,832		1,134,975		81,481		8,671,132
Watch	12,639		23,408		17,770		16,330		17,576		8,077		16,989		2,024		114,813
Substandard	16,059		37,590		12,232		21,740		8,910		21,017		24,328		7,603		149,479
Total loans	$	784,229	$	2,264,976	$	1,670,838	$	1,095,439	$	888,616	$	963,926	$	1,176,292	$	91,108	$	8,935,424

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Based on the most recent analysis performed, the risk category of loans by class of loans as of the ~~dates~~date indicated is as follows (in thousands).



	As of December 31, 2019
	Pass		Watch		Substandard		Doubtful / Loss		Total
Owner occupied commercial real estate	$	1,638,398	$	24,563	$	48,720	$	—	$	1,711,681
Income producing commercial real estate	1,914,524		40,676		25,522		—		1,980,722
Commercial & industrial	1,156,366		16,385		47,580		—		1,220,331
Commercial construction	960,251		2,298		6,804		—		969,353
Equipment financing	737,418		—		3,141		—		740,559
Total commercial	6,406,957		83,922		131,767		—		6,622,646
Residential mortgage	1,093,902		—		14,135		—		1,108,037
Home equity lines of credit	654,619		—		4,646		—		659,265
Residential construction	234,791		—		1,272		—		236,063
Consumer	127,507		8		381		—		127,896
Total loans, excluding PCI loans	8,517,776		83,930		152,201		—		8,753,907

Owner occupied commercial real estate	3,238		2,797		2,511		—		8,546
Income producing commercial real estate	19,648		6,305		1,275		—		27,228
Commercial & industrial	104		81		141		—		326
Commercial construction	3,628		590		2,644		—		6,862
Equipment financing	3,952		—		33		—		3,985
Total commercial	30,570		9,773		6,604		—		46,947
Residential mortgage	8,112		—		1,467		—		9,579
Home equity lines of credit	1,350		—		60		—		1,410
Residential construction	348		—		26		—		374
Consumer	303		—		33		—		336
Total PCI loans	40,683		9,773		8,190		—		58,646

Total loan portfolio	$	8,558,459	$	93,703	$	160,391	$	—	$	8,812,553

Pass Watch Substandard
Doubtful /
Loss
Total
As of March 31, 2019
Owner occupied commercial real estate $ 1,557,510
$ 17,511
$ 36,443
$ —
$ 1,611,464
Income producing commercial real estate 1,789,063
22,548
19,717
—
1,831,328
Commercial & industrial 1,253,268
7,517
22,739
—
1,283,524
Commercial construction 846,902
6,767
6,393
—
860,062
Equipment financing 597,430
—
1,813
—
599,243
Total commercial 6,044,173
54,343
87,105
—
6,185,621
Residential mortgage 1,043,447
—
11,588
—
1,055,035
Home equity lines of credit 678,578
—
3,724
—
682,302
Residential construction 199,570
—
557
—
200,127
Consumer direct 120,465
—
233
—
120,698
Indirect auto 178,740
—
2,013
—
180,753
Total loans, excluding PCI loans 8,264,973
54,343
105,220
—
8,424,536

Owner occupied commercial real estate 2,803
2,781
3,020
—
8,604
Income producing commercial real estate 23,872
11,389
836
—
36,097
Commercial & industrial 246
43
52
—
341
Commercial construction 3,340
165
2,099
—
5,604
Equipment financing 6,626
—
115
—
6,741
Total commercial 36,887
14,378
6,122
—
57,387
Residential mortgage 6,512
—
2,293
—
8,805
Home equity lines of credit 1,350
—
119
—
1,469
Residential construction 542
—
39
—
581
Consumer direct 440
—
36
—
476
Indirect auto —
—
—
—
—
Total PCI loans 45,731
14,378
8,609
—
68,718

Total loan portfolio $ 8,310,704
$ 68,721
$ 113,829
$ —
$ 8,493,254

As of December 31, 2018
Owner occupied commercial real estate $ 1,585,797
$ 16,651
$ 35,604
$ —
$ 1,638,052
Income producing commercial real estate 1,735,456
20,923
17,730
—
1,774,109
Commercial & industrial 1,247,206
8,430
22,303
—
1,277,939
Commercial construction 777,780
4,533
7,938
—
790,251
Equipment financing 553,995
—
2,677
—
556,672
Total commercial 5,900,234
50,537
86,252
—
6,037,023
Residential mortgage 1,028,660
—
11,422
—
1,040,082
Home equity lines of credit 688,493
—
3,905
—
692,398
Residential construction 209,744
—
533
—
210,277
Consumer direct 121,247
19
214
—
121,480
Indirect auto 205,632
—
2,060
—
207,692
Total loans, excluding PCI loans 8,154,010
50,556
104,386
—
8,308,952

Owner occupied commercial real estate 3,352
2,774
3,726
—
9,852
Income producing commercial real estate 23,430
13,403
1,478
—
38,311
Commercial & industrial 266
48
94
—
408
Commercial construction 3,503
188
2,216
—
5,907
Equipment financing 7,725
—
217
—
7,942
Total commercial 38,276
16,413
7,731
—
62,420
Residential mortgage 6,914
—
2,236
—
9,150
Home equity lines of credit 1,492
—
120
—
1,612
Residential construction 687
—
47
—
734
Consumer direct 493
—
40
—
533
Indirect auto —
—
—
—
—
Total PCI loans 47,862
16,413
10,174
—
74,449

Total loan portfolio $ 8,201,872
$ 66,969
$ 114,560
$ —
$ 8,383,401

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Troubled Debt Restructurings

As of March 31, 2020 and December 31, 2019, United had TDRs totaling $53.7 million and $54.2 million, respectively. United allocated $1.51 million and $2.51 million of allowance for TDRs as of March 31, 2020 and December 31, 2019, respectively. As of March 31, 2020 and December 31, 2019, there were 0 commitments to lend additional amounts to customers with outstanding loans that are classified as TDRs.

Loans modified under the terms of a TDR during the three months ended March 31, 2020 and 2019 are presented in the following table. In addition, the table presents loans modified under the terms of a TDR that defaulted (became 90 days or more delinquent) during the periods presented and were initially restructured within one year prior to default (dollars in thousands).



	New TDRs
		Pre-modification Outstanding Amortized Cost		Post-Modification Outstanding Amortized Cost by Type of Modification								TDRs Modified Within the Previous Twelve Months That Have Subsequently Defaulted
	Number of Contracts	Pre-modification Outstanding Amortized Cost		Rate Reduction		Structure		Other		Total		Number of Contracts	Amortized Cost
Three Months Ended March 31, 2020
Owner occupied commercial real estate	1	$	1,008	$	—	$	—	$	990	$	990	—	$	—
Income producing commercial real estate	3	235		—		67		165		232		—	—
Commercial & industrial	—	—		—		—		—		—		1	6
Commercial construction	—	—		—		—		—		—		—	—
Equipment financing	7	434		—		434		—		434		—	—
Total commercial	11	1,677		—		501		1,155		1,656		1	6
Residential mortgage	5	302		—		278		—		278		—	—
Home equity lines of credit	—	—		—		—		—		—		—	—
Residential construction	—	—		—		—		—		—		—	—
Consumer	2	11		—		—		11		11		1	3
Total loans	18	$	1,990	$	—	$	779	$	1,166	$	1,945	2	$	9

Three Months Ended March 31, 2019
Owner occupied commercial real estate	—	$	—	$	—	$	—	$	—	$	—	—	$	—
Income producing commercial real estate	1	169		—		169		—		169		—	—
Commercial & industrial	1	7		—		—		7		7		—	—
Commercial construction	—	—		—		—		—		—		—	—
Equipment financing	—	—		—		—		—		—		—	—
Total commercial	2	176		—		169		7		176		—	—
Residential mortgage	2	345		—		344		—		344		—	—
Home equity lines of credit	—	—		—		—		—		—		—	—
Residential construction	—	—		—		—		—		—		—	—
Consumer direct	—	—		—		—		—		—		—	—
Indirect auto	6	66		—		—		57		57		—	—
Total loans	10	$	587	$	—	$	513	$	64	$	577	—	$	—

As of March 31, 2020, United had granted short-term deferrals related to the COVID-19 crisis for $164 million of loans that were otherwise performing prior to modification. Pursuant to the CARES Act, these loans were not considered TDRs.

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Allowance for Credit Losses

Since the adoption of ASC 326, 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.

The following table presents the balance and activity in the ACL by portfolio segment for the periods indicated (in thousands).



	CECL																Incurred Loss
	2020																2019
Three Months Ended March 31,
	December 31, 2019 Balance		Adoption of CECL			January 1, 2020 Balance		Charge-Offs			Recoveries		(Release) Provision		Ending Balance		Beginning Balance		Charge- Offs			Recoveries		(Release) Provision			Ending Balance
Owner occupied commercial real estate	$	11,404	$	(1,616	)	$	9,788	$	(6	)	$	1,034	$	184	$	11,000	$	12,207	$	(5	)	$	69	$	(397	)	$	11,874
Income producing commercial real estate	12,306		(30		)	12,276		(411		)	141		4,578		16,584		11,073		(197		)	20		230			11,126
Commercial & industrial	5,266		4,012			9,278		(7,561		)	376		8,738		10,831		4,802		(1,519		)	163		1,449			4,895
Commercial construction	9,668		(2,583		)	7,085		—			141		2,330		9,556		10,337		(69		)	394		(387		)	10,275
Equipment financing	7,384		5,871			13,255		(1,863		)	356		2,990		14,738		5,452		(1,424		)	143		2,060			6,231
Residential mortgage	8,081		1,569			9,650		(284		)	275		1,422		11,063		8,295		(61		)	48		63			8,345
Home equity lines of credit	4,575		1,919			6,494		(20		)	103		310		6,887		4,752		(337		)	122		260			4,797
Residential construction	2,504		(1,771		)	733		(22		)	34		71		816		2,433		(4		)	26		(65		)	2,390
Consumer	901		(491		)	410		(638		)	231		427		430		853		(547		)	207		324			837
Indirect auto	—		—			—		—			—		—		—		999		(197		)	38		32			872
Total allowance for credit losses - loans	62,089		6,880			68,969		(10,805		)	2,691		21,050		81,905		61,203		(4,360		)	1,230		3,569			61,642
Allowance for unfunded commitments	3,458		1,871			5,329		—			—		1,141		6,470		3,410		—			—		(269		)	3,141
Total allowance for credit losses	$	65,547	$	8,751		$	74,298	$	(10,805	)	$	2,691	$	22,191	$	88,375	$	64,613	$	(4,360	)	$	1,230	$	3,300		$	64,783

As of March 31, 2020, United used a one-year reasonable and supportable forecast period. The changes in loss rates used as the basis for the estimate of credit losses during this period were modeled using historical data from peer banks and macroeconomic forecast data obtained from a third party vendor, which were then applied to United’s recent default experience as a starting point. At March 31, 2020, the forecast indicated that the markets in which United operates will experience a decline in economic conditions and an increase in the unemployment rate over the next year, primarily as a result of the COVID-19 pandemic. The increase in the ACL compared to January 1, 2020 was primarily attributable to the worsening trends in the forecast at March 31, 2020 compared to the forecast used at adoption, with the primary economic forecast driver being the change in the unemployment rate.

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 all collateral types excluding residential mortgage, United reverted to through-the-cycle average default rates using peer data from 2000 to 2017. For loans secured by residential mortgages, the peer data was adjusted for changes in lending practices designed to prevent the magnitude of losses observed during the mortgage crisis.

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Disaggregation of Incurred Loss Impairment Methodology

The following tables represent the recorded investment in loans by portfolio segment and the balance of the allowance assigned to each segment based on the method of evaluating the loans for impairment as of December 31, 2019 (in thousands).



	Loans Outstanding								Allowance for Credit Losses
	Individually evaluated for impairment		Collectively evaluated for impairment		PCI		Ending Balance		Individually evaluated for impairment		Collectively evaluated for impairment		PCI		Ending Balance
Owner occupied commercial real estate	$	19,233	$	1,692,448	$	8,546	$	1,720,227	$	816	$	10,483	$	105	$	11,404
Income producing commercial real estate	18,134		1,962,588		27,228		2,007,950		770		11,507		29		12,306
Commercial & industrial	1,449		1,218,882		326		1,220,657		21		5,193		52		5,266
Commercial construction	3,675		965,678		6,862		976,215		55		9,613		—		9,668
Equipment financing	1,027		739,532		3,985		744,544		—		7,240		144		7,384
Residential mortgage	15,991		1,092,046		9,579		1,117,616		782		7,296		3		8,081
Home equity lines of credit	992		658,273		1,410		660,675		16		4,541		18		4,575
Residential construction	1,256		234,807		374		236,437		47		2,456		1		2,504
Consumer	214		127,682		336		128,232		5		885		11		901
Total	$	61,971	$	8,691,936	$	58,646	$	8,812,553	2,512		59,214		363		62,089
Allowance for unfunded commitments									—		3,458		—		3,458
Total allowance for credit losses									$	2,512	$	62,672	$	363	$	65,547

The following table presents additional detail on loans individually evaluated for impairment under Incurred Loss by class as of December 31, 2019 (in thousands).



	December 31, 2019
	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated
With no related allowance recorded:
Owner occupied commercial real estate	$	9,527	$	8,118	$	—
Income producing commercial real estate	5,159		4,956		—
Commercial & industrial	1,144		890		—
Commercial construction	2,458		2,140		—
Equipment financing	1,027		1,027		—
Total commercial	19,315		17,131		—
Residential mortgage	7,362		6,436		—
Home equity lines of credit	1,116		861		—
Residential construction	731		626		—
Consumer	66		53		—
Total with no related allowance recorded	28,590		25,107		—

With an allowance recorded:
Owner occupied commercial real estate	11,136		11,115		816
Income producing commercial real estate	13,591		13,178		770
Commercial & industrial	559		559		21
Commercial construction	1,535		1,535		55
Equipment financing	—		—		—
Total commercial	26,821		26,387		1,662
Residential mortgage	9,624		9,555		782
Home equity lines of credit	146		131		16
Residential construction	643		630		47
Consumer	161		161		5
Total with an allowance recorded	37,395		36,864		2,512
Total	$	65,985	$	61,971	$	2,512

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

The average balances of impaired loans and income recognized on impaired loans while they were considered impaired under Incurred Loss are presented below for the period indicated (in thousands).



	Three Months Ended March 31, 2019
	Average Balance		Interest Revenue Recognized During Impairment		Cash Basis Interest Revenue Received
Owner occupied commercial real estate	$	17,410	$	285	$	284
Income producing commercial real estate	14,237		193		207
Commercial & industrial	1,716		19		19
Commercial construction	2,402		34		33
Equipment financing	—		—		—
Total commercial	35,765		531		543
Residential mortgage	15,502		168		174
Home equity lines of credit	258		4		3
Residential construction	1,408		24		23
Consumer	205		4		4
Indirect auto	1,190		14		14
Total	$	54,328	$	745	$	761

Note 65 – Reclassifications Out of Accumulated Other Comprehensive Income

The following table presents the details regarding amounts reclassified out of accumulated other comprehensive income for the periods indicated (in thousands).



Details about Accumulated Other Comprehensive Income Components	Three Months Ended March 31,						Affected Line Item in the Statement Where Net Income is Presented
	2020			2019
Realized losses on available-for-sale securities:
	$	—		$	(267	)	Securities losses, net
	—			68			Income tax benefit
	$	—		$	(199	)	Net of tax

Amortization of losses included in net income on available-for-sale securities transferred to held-to-maturity:
	$	(83	)	$	(84	)	Investment securities interest revenue
	20			20			Income tax benefit
	$	(63	)	$	(64	)	Net of tax

Amortization of losses included in net income on derivative financial instruments accounted for as cash flow hedges:
Amortization of losses on de-designated positions	$	—		$	(102	)	Deposit interest expense
	—			26			Income tax benefit
	$	—		$	(76	)	Net of tax

Reclassifications related to defined benefit pension plan activity:
Prior service cost	$	(133	)	$	(159	)	Salaries and employee benefits expense
Actuarial losses	(81		)	(15		)	Other expense
	(214		)	(174		)	Total before tax
	54			44			Income tax benefit
	$	(160	)	$	(130	)	Net of tax

Total reclassifications for the period	$	(223	)	$	(469	)	Net of tax

Details about Accumulated Other Comprehensive Income Components Three Months Ended March 31, Affected Line Item in the Statement Where Net Income is Presented
2019 2018
Realized losses on available-for-sale securities:
$ (267 ) $ (940 ) Securities losses, net
68
221
Income tax benefit
$ (199 ) $ (719 ) Net of tax

Amortization of losses included in net income on available-for-sale securities transferred to held-to-maturity:
$ (84 ) $ (222 ) Investment securities interest revenue
20
54
Income tax benefit
$ (64 ) $ (168 ) Net of tax

Amortization of losses included in net income on derivative financial instruments accounted for as cash flow hedges:
Amortization of losses on de-designated positions $ (102 ) $ (147 ) Money market deposit interest expense
26
38
Income tax benefit
$ (76 ) $ (109 ) Net of tax

Amortization of prior service cost and actuarial losses included in net periodic pension cost for defined benefit pension plan:
Prior service cost $ (159 ) $ (167 ) Salaries and employee benefits expense
Actuarial losses (15 ) —
Other expense
Actuarial losses —
(60 ) Salaries and employee benefits expense
(174 ) (227 ) Total before tax
44
58
Income tax benefit
$ (130 ) $ (169 ) Net of tax

Total reclassifications for the period $ (469 ) $ (1,165 ) Net of tax

Amounts shown above in parentheses reduce earnings.

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Note 76 – 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 March 31,
	2020			2019
Net income	$	31,884		$	44,262
Dividends and undistributed earnings allocated to unvested shares	(243		)	(315		)
Net income available to common shareholders	$	31,641		$	43,947

Weighted average shares outstanding:
Basic	79,340			79,807
Effect of dilutive securities
Stock options	—			3
Restricted stock units	106			3
Diluted	79,446			79,813

Net income per common share:
Basic	$	0.40		$	0.55
Diluted	$	0.40		$	0.55

Three Months Ended
March 31,
2019 2018
Net income $ 44,262
$ 37,658

Dividends and undistributed earnings allocated to unvested shares (315 ) (277 )
Net income available to common shareholders $ 43,947
$ 37,381

Weighted average shares outstanding:
Basic 79,807
79,205

Effect of dilutive securities
Stock options 3
10

Restricted stock units 3
—

Diluted 79,813
79,215

Net income per common share:
Basic $ 0.55
$ 0.47

Diluted $ 0.55
$ 0.47

At March 31, 2020, United excluded 1,000 potentially dilutive shares of common stock issuable upon exercise of stock options with a weighted average exercise price of $30.45 from the computation of diluted earnings per share because of their antidilutive effect.

At March 31, 2019, United excluded 31,812 potentially dilutive shares of common stock issuable upon exercise of stock options with a weighted average exercise price of $31.47 from the computation of diluted earnings per share because of their antidilutive effect.

At March 31, 2018, United had the following potentially dilutive stock options and warrants outstanding: a warrant to purchase 219,909 shares of common stock at $61.40 per share; 32,464 shares of common stock issuable upon exercise of stock options granted to employees with a weighted average exercise price of $31.50.

Note 87 – Derivatives and Hedging Activities

Risk Management Objective of Using Derivatives

United is exposed to certain risks arising from both its business operations and economic conditions. United principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. United manages interest rate risk through a combination of pricing and term structure of deposit product offerings, the amount and duration of its investment securities portfolio and wholesale funding and, to a lesser degree, through the use of derivative financial instruments. ~~Specifically,~~From time to time, United enters into derivative financial instruments to manage interest rate risk exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. Derivative financial instruments are used to manage differences in the amount, timing, and duration of known or expected cash receipts and known or expected cash payments principally related to loans, investment securities, wholesale borrowings and deposits.

~~In conjunction~~United has master netting agreements with the ~~FASB’s fair value measurement guidance, United made an accounting policy election~~derivatives dealers with which it does business, but has elected to ~~measure~~reflect gross assets and liabilities on the ~~credit risk of its derivative financial instruments that are subject to master netting arrangements on a gross basis.~~consolidated balance sheets.

~~UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements~~

United clears certain derivatives centrally through the Chicago Mercantile Exchange (“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.

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

The table below presents the fair value of derivative financial instruments as of the dates indicated as well as their classification on the consolidated balance sheets (in thousands):

~~Derivatives designated as hedging instruments under ASC 815~~



	March 31, 2020						December 31, 2019
	Derivative Asset			Derivative Liability			Derivative Asset			Derivative Liability
Derivatives designated as hedging instruments:
Fair value hedge of brokered time deposits	$	—		$	144		$	—		$	880
Total	$	—		$	144		$	—		$	880
Derivatives not designated as hedging instruments:
Customer derivative positions	$	74,793		$	33		$	27,277		$	446
Dealer offsets to customer derivative positions	33			20,318			394			6,425
Risk participations	—			28			—			12
Mortgage banking - loan commitment	7,361			—			1,970			—
Mortgage banking - forward sales commitment	481			4,281			98			86
Bifurcated embedded derivatives	—			538			5,268			—
Dealer offsets to bifurcated embedded derivatives	—			2,007			—			7,667
Total	$	82,668		$	27,205		$	35,007		$	14,636

Total derivatives	$	82,668		$	27,349		$	35,007		$	15,516

Total gross derivative instruments	$	82,668		$	27,349		$	35,007		$	15,516
Less: Amounts subject to master netting agreements	(50		)	(50		)	(401		)	(401		)
Less: Cash collateral received/pledged	—			(23,718		)	—			(14,933		)
Net amount	$	82,618		$	3,581		$	34,606		$	182

Interest Rate Products Balance Sheet Location March 31, 2019 December 31, 2018
Fair value hedge of brokered CDs Derivative liabilities $ 1,251
$ 1,682
$ 1,251
$ 1,682

~~Derivatives not designated as hedging instruments under ASC 815~~

Interest Rate Products Balance Sheet Location March 31, 2019 December 31, 2018
Customer derivative positions Derivative assets $ 12,658
$ 5,216
Dealer offsets to customer derivative positions Derivative assets 3,691
7,620
Mortgage banking - loan commitment Derivative assets 1,796
1,190
Mortgage banking - forward sales commitment Derivative assets 14
28
Bifurcated embedded derivatives Derivative assets 7,765
10,651
$ 25,924
$ 24,705

Customer derivative positions Derivative liabilities $ 4,118
$ 9,661
Dealer offsets to customer derivative positions Derivative liabilities 2,744
781
Risk participations Derivative liabilities 6
8
Mortgage banking - forward sales commitment Derivative liabilities 483
259
Dealer offsets to bifurcated embedded derivatives Derivative liabilities 10,187
13,339
De-designated hedges Derivative liabilities —
703
$ 17,538
$ 24,751

Customer derivative positions ~~are~~include swaps, caps, and corridors between United and certain commercial loan customers with offsetting positions to dealers under a back-to-back ~~swap/cap~~ 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~~3 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~~market-linked swaps and the bifurcated embedded derivatives tend to move in opposite directions with changes in 90-day London Interbank Offered Rate (“LIBOR”) and therefore provide an economic hedge.

To accommodate customers, United occasionally enters into credit risk participation agreements with counterparty banks to accept a portion of the credit risk related to interest rate swaps. This allows customers to execute an interest rate swap with one bank while allowing for the distribution of the credit risk among participating members. Credit risk participation agreements arise when United contracts with other financial institutions, as a guarantor, to share credit risk associated with certain interest rate swaps. These agreements provide for reimbursement of losses resulting from a third party default on the underlying swap. These transactions are typically executed in conjunction with a participation in a loan with the same customer. Collateral used to support the credit risk for the underlying lending relationship is also available to offset the risk of the credit risk participation.

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. United accounts for most newly originated mortgage loans at fair value pursuant to the fair value option, and these loans are not reflected in the table above. Fair value adjustments on these derivative instruments are recorded within mortgage loan gains and other related fee income in the consolidated statements of income.

~~UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements~~

Cash Flow Hedges of Interest Rate Risk

At March 31, ~~2019~~2020 and December 31, ~~2018~~2019 United did not have any active cash flow hedges. ~~Changes in balance sheet composition and interest rate risk position made cash flow hedges not currently necessary as protection against rising interest rates.~~ The loss remaining in other comprehensive income from prior hedges that ~~have~~had previously been de-designated iswas being amortized into earnings over the original term of the swaps as the forecasted transactions that the swaps were originally designated to hedge ~~are~~were still expected to occur. ~~Amortization~~During the second quarter of 2019, United amortized the ~~loss~~remaining balance of losses on ~~the de-designated hedges~~terminated hedging positions from other comprehensive income, which was the only effect of cash flow hedges on the consolidated statements of income for the three months ended March 31, ~~2019~~2020 and ~~2018.~~2019. See Note 65 for further detail. ~~United expects that $118,000 will be reclassified as an increase~~

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to ~~interest expense over the next twelve months related to these cash flow hedges.~~Consolidated Financial Statements (Unaudited)

Fair Value Hedges of Interest Rate Risk

United is exposed to changes in the fair value of certain of its fixed-rate obligations due to changes in interest rates. United uses interest rate ~~swaps~~derivatives to manage its exposure to changes in fair value on these instruments attributable to changes in interest rates. Interest rate swaps designated as fair value hedges of brokered deposits involve the receipt of fixed-rate amounts from a counterparty in exchange for United making variable rate payments over the life of the agreements without the exchange of the underlying notional amount. Interest rate swaps designated as fair value hedges of fixed-rate investments involve the receipt of variable-rate payments from a counterparty in exchange for United making fixed-rate payments over the life of the instrument without the exchange of the underlying notional amount. At March 31, 2019, United had four interest rate swaps with a notional amount of $38.0 million that were designated as fair value hedges of interest rate risk and were pay-variable / receive-fixed swaps hedging the changes in the fair value of fixed-rate brokered time deposits resulting from changes in interest rates. As of March 31, 2019, the hedged brokered time deposits, which were included in brokered deposits on the consolidated balance sheet, had a carrying value of $36.0 million, which included cumulative fair value hedging adjustments of $1.38 million. At December 31, 2018, United had four interest rate swaps with an aggregate notional amount of $39.0 million that were designated as fair value hedges of interest rate risk and were pay-variable / receive-fixed, hedging the changes in the fair value of fixed-rate brokered time deposits resulting from changes in 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 three months ended~~

At March 31, ~~2019,~~2020 and March 31, 2018, United recognized net losses of $11,000 and $79,000, respectively, related to ineffectiveness in the fair value hedging relationships. United also recognized a net increase in interest expense of $101,000 for the three months ended ~~March~~December 31, 2019, United had 3 and ~~a net increase in~~4, respectively, interest ~~expense~~rate swaps with an aggregate notional amount of ~~$14,000 for the three months ended March 31, 2018 related to~~$27.9 million and $37.9 million, respectively, that were designated as fair value hedges of fixed-rate brokered time ~~deposits, which includes net settlements on~~deposits. The swaps involved the ~~derivatives.~~receipt of fixed-rate amounts from a counterparty in exchange for United ~~recognized an increase in interest revenue on securities during~~making variable rate payments over the ~~three months ended March 31, 2018~~life of ~~$17,000 related to fair value hedges of corporate bonds which were terminated during~~ the ~~first quarter of 2018.~~agreements.

The table below presents the effect of derivatives in fair value hedging relationships on the consolidated statement of income for the periods indicated (in thousands).

Location of Gain
(Loss) Recognized
in Income on Derivative

Amount of Gain (Loss)
Recognized in Income
on Derivative

Amount of Gain (Loss)
Recognized in Income
on Hedged Item
2019 2018 2019 2018
Three Months Ended March 31,

Fair value hedges of brokered CDs Interest expense $ 451
$ (693 ) $ (462 ) $ 545
Fair value hedges of corporate bonds Interest revenue —
(336 ) —
405
$ 451
$ (1,029 ) $ (462 ) $ 950



	Interest expense - deposits
	Three Months Ended March 31,
	2020			2019
Total amounts presented in the consolidated statements of income	$	15,075		$	15,957

Gains (losses) on fair value hedging relationships:
Interest rate contracts:
Amounts related to interest settlements on derivatives	(75		)	(101		)
Recognized on derivatives	1,062			451
Recognized on hedged items	(982		)	(462		)
Net income (expense) recognized on fair value hedges	$	5		$	(112	)

In certain cases, the estate of deceased brokered certificate of deposit holders may put the certificate of deposit back to United at par upon the death of the holder. When these estate puts occur, a gain or loss is recognized for the difference between the fair value and the par amount of the deposits put back. The change in the fair value of brokered time deposits that are being hedged in fair value hedging relationships reported in the table above includes gains and losses from estate ~~puts~~puts.

The table below presents the carrying amount of hedged fixed-rate brokered time deposits and ~~such gains and losses are~~cumulative fair value hedging adjustments included in the carrying amount of ~~reported ineffectiveness gains or losses.~~

the hedged liability for the periods presented (in thousands).

~~UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES~~



	March 31, 2020						December 31, 2019
Balance Sheet Location	Carrying amount of Assets (Liabilities)			Hedge Accounting Basis Adjustment			Carrying amount of Assets (Liabilities)			Hedge Accounting Basis Adjustment
Deposits	$	(27,017	)	$	(324	)	$	(35,880	)	$	645

~~Notes to Consolidated Financial Statements~~

Derivatives Not Designated as Hedging Instruments ~~under ASC 815~~

The table below presents the gains and losses recognized in income on derivatives not designated as hedging instruments ~~under ASC 815~~ for the periods indicated (in thousands).



	Location of Gain (Loss) Recognized in Income on Derivative	Amount of Gain (Loss) Recognized in Income on Derivative
	Location of Gain (Loss) Recognized in Income on Derivative	2020			2019
Three Months Ended March 31,
Customer derivatives and dealer offsets	Other noninterest income	$	1,424		$	503
Bifurcated embedded derivatives and dealer offsets	Other noninterest income	(195		)	218
De-designated hedges	Other noninterest income	—			(193		)
Mortgage banking derivatives	Mortgage loan revenue	(829		)	(190		)
Risk participations	Other noninterest income	(17		)	2
		$	383		$	340

Location of Gain (Loss) Recognized in Income on Derivative Amount of Gain (Loss) Recognized in Income on Derivative
2019 2018
Three Months Ended March 31,

Customer derivatives and dealer offsets Other noninterest income $ 503
$ 772
Bifurcated embedded derivatives and dealer offsets Other noninterest income 218
370
Interest rate caps Other noninterest income —
276
De-designated hedges Other noninterest income (193 ) (67 )
Mortgage banking derivatives Mortgage loan revenue (190 ) 1,264
Risk participations Other noninterest income 2
(2 )
$ 340
$ 2,613

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

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. ~~As of March 31, 2019, collateral totaling $11.9 million was pledged toward derivatives in a liability position.~~

United’s agreements with each of its derivative counterparties ~~contain a provision where~~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 derivatives 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 ~~contain a provision where~~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 98 – Stock-Based Compensation

United has an equity compensation plan that allows for grants of incentive stock options, nonqualified stock options, restricted stock and restricted stock unit awards (also referred to as “nonvested stock” awards), stock awards, performance share awards or stock appreciation rights.various share-based compensation. Options granted under the plan have ~~had~~ an exercise price no less than the fair market value of the underlying stock at the date of grant. The general terms of the plan include a vesting period (usually four ~~years, although certain acquisition-related performance grants may have up to ten~~ years) with an exercisable period not to exceed ten years. Certain options ~~restricted stock~~ and restricted stock unit awards provide for accelerated vesting if there is a change in control (as defined in the ~~plan)~~plan document). ~~Through~~As of March 31, ~~2019, incentive stock options, nonqualified stock options, restricted stock and restricted stock unit~~2020, 1.30 million additional awards ~~base salary stock grants and performance share awards have been~~could be granted under the plan. ~~As of March 31, 2019, 1.53 million additional awards remained available for grant under the plan.~~

~~UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements~~

The following table shows stock option activity for the first three months of ~~2019.~~2020.



Options	Shares		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value ($000)
Outstanding at December 31, 2019	1,500		$	27.95
Expired	(500	)	22.95
Outstanding at March 31, 2020	1,000		30.45		0.04	$	—

Exercisable at March 31, 2020	1,000		30.45		0.04	—

Options Shares
Weighted-
Average
Exercise Price

Weighted-
Average
Remaining
Contractual
Term (Years)
Aggregate
Intrinsic
Value ($000)
Outstanding at December 31, 2018 47,139
$ 27.07

Exercised (12,000 ) 16.44

Cancelled/forfeited (504 ) 31.50

Expired (1,023 ) 29.45

Outstanding at March 31, 2019 33,612
30.72
0.4 $ 13

Exercisable at March 31, 2019 33,612
30.72
0.4 13

The fair value of each option is estimated on the date of grant using the Black-Scholes model. NoNaN stock options were granted during the three months ended March 31, ~~2019~~2020 and ~~2018.~~

2019. United recognized ~~$6,000 in~~0 compensation expense related to stock options during the three months ended March 31, ~~2018,~~2020 and ~~no compensation expense related to stock options in the same period of~~ 2019. The amount of compensation expense was determined based on the fair value of the options at the time of grant, multiplied by the number of options granted that were expected to vest, which was then amortized over the vesting period.

The table below presents restricted stock ~~units~~unit activity for the first three months of ~~2019.~~2020.



Restricted Stock Unit Awards	Shares		Weighted- Average Grant- Date Fair Value		Weighted- Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value ($000)
Outstanding at December 31, 2019	808,424		$	27.94
Granted	38,988		25.39
Vested	(64,912	)	27.83			$	1,870
Cancelled	(17,672	)	26.44
Outstanding at March 31, 2020	764,828		27.85		4.0	14,004

Restricted Stock Unit Awards Shares
Weighted-
Average Grant-
Date Fair Value

Weighted-
Average
Remaining
Contractual
Term (Years)
Aggregate
Intrinsic
Value ($000)
Outstanding at December 31, 2018 759,746
$ 27.66

Granted 37,994
25.67

Vested (46,628 ) 25.72
$ 1,322
Cancelled (14,284 ) 25.30

Outstanding at March 31, 2019 736,828
27.72
4.2 18,369

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 market 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 three months ended March 31, ~~2019~~2020 and ~~2018, compensation~~2019, expense of ~~$1.91~~$2.40 million and ~~$1.07~~$1.91 million, respectively, was recognized related to restricted stock unit and performance stock unit awards granted to United ~~employees.~~employees in salaries and employee benefits expense. In addition, for the three months ended March 31, 2020 and 2019, $93,000 and ~~2018,~~ $72,000, ~~and $68,000,~~ respectively, was recognized in other operating expense for restricted stock unit awards granted to members of United’s ~~board~~Board of ~~directors.~~Directors.

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

A deferred income tax benefit related to stock-based compensation expense ~~for options~~of $637,000 and ~~restricted stock of~~ $507,000 ~~and $296,000~~ was included in the determination of income tax expense for the three months ended March 31, ~~2019~~2020 and ~~2018,~~2019, respectively. As of March 31, ~~2019,~~2020, there was ~~$15.7~~$12.8 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~~2.3 years. As of March 31, ~~2019,~~2020, there was no0 unrecognized expense related to non-vested stock options granted under the plan.

Note 109 – Common Stock

In November of ~~2018,~~2019, United’s Board of Directors ~~approved~~authorized an ~~increase and extension~~expansion of the existing common stock repurchase plan ~~through~~to authorize the repurchase of its common stock up to $50 million. The program is scheduled to expire on the earlier of United’s repurchase of its common stock having an aggregate purchase price of $50 million or December 31, ~~2019.~~2020. Under the program, ~~up to $50 million~~shares may be repurchased ~~periodically~~ in the open market ~~transactions at prevailing market prices,~~or in privately negotiated transactions, ~~or by other means in accordance with federal securities laws. The actual timing, number and value of shares repurchased depends on a number of factors, including the~~from time to time, subject to market ~~price of United’s common stock, general market and economic conditions, and applicable legal requirements.~~conditions. During the three months ended March 31, 2020 and 2019, 826,482 and 305,052 shares, respectively, were repurchased under the program. ~~During the three months ended March 31, 2018, no shares were repurchased under the~~

~~UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements~~

~~program.~~ As of March 31, ~~2019,~~2020, United had remaining authorization to repurchase up to ~~$42.2~~$29.2 million of outstanding common stock under the program.

~~Note 11 – Income Taxes~~

The income tax provision for the three months ended March 31, 2019 and March 31, 2018 was $13.0 million and $10.7 million, respectively, which represents an effective tax rate of 22.6% and 22.2%, respectively.

At March 31, 2019 and December 31, 2018, United maintained a valuation allowance on its net deferred tax asset of $3.37 million. Management assesses the valuation allowance recorded against its net deferred tax asset at each reporting period. The determination of whether a valuation allowance for its net deferred tax asset is appropriate is subject to considerable judgment and requires an evaluation of all the positive and negative evidence.

The valuation allowance could fluctuate in future periods based on the assessment of the positive and negative evidence. Management’s conclusion at March 31, 2019 that it was more likely than not that the net deferred tax asset of $51.1 million will be realized is based upon management’s estimate of future taxable income. Management’s estimate of future taxable income is based on internal forecasts that consider historical performance, various internal estimates and assumptions, as well as certain external data all of which management believes to be reasonable although inherently subject to significant judgment. If actual results differ significantly from the current estimates of future taxable income, even if caused by adverse macro-economic conditions, the valuation allowance may need to be increased for some or all of the net deferred tax asset.

United is subject to income taxation in the United States and various state jurisdictions. United’s federal and state income tax returns are filed on a consolidated basis. Currently, no years for which United filed a federal income tax return are under examination by the IRS, and there are no state tax examinations currently in progress. United is no longer subject to income tax examinations from state and local income tax authorities for years before 2015. Although it is not possible to know the ultimate outcome of future examinations, management believes that the liability recorded for uncertain tax positions is appropriate. At March 31, 2019 and December 31, 2018, unrecognized income tax benefits totaled $3.39 million and $3.26 million, respectively.

Note 1210 – 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 ~~where~~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.

~~UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements~~

Investment Securities

Debt securities available-for-sale 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 mortgage-backed securities issued by government sponsored entities, municipal bonds, corporate debt securities and asset-backed 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.

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 (Level 2).

~~Loans~~

United does not record loans at fair value on a recurring basis. However, from time to time, a loan is considered impaired and an allowance for credit losses is established. Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are considered impaired. Once a loan is identified as individually impaired, management measures impairment based on the present value of expected future cash flows discounted at the loan’s effective interest rate, except that as a practical expedient, a creditor may measure impairment based on a loan’s observable market price, or the fair value of the collateral if repayment of the loan is dependent upon the sale of the underlying collateral.

Those impaired loans not requiring an allowance represent loans for which the fair value of the expected repayments or collateral exceed the recorded investments in such loans. In accordance with ASC 820, ~~Fair Value Measures and Disclosures~~, impaired loans where an allowance is established based on the fair value of collateral require classification in the fair value hierarchy. 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.

Derivative Financial Instruments

United uses ~~interest rate swaps and interest rate floors~~derivatives to manage ~~its~~ 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.

~~To comply with the provisions of ASC 820,~~ United incorporates credit valuation adjustments as necessary to appropriately reflect ~~both its own nonperformance risk and~~ 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 ~~mutual puts,~~ and guarantees.

Although management has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself and its counterparties. However, management had assessed the significance of the effect of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives. Derivatives classified as Level 3 included structured derivatives for which

~~UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements~~

broker quotes, used as a key valuation input, were not observable consistent with a Level 2 disclosure. The fair value of risk participations incorporates Level 3 inputs to evaluate the likelihood of customer default. The fair value of interest rate lock commitments, which is related to mortgage loan commitments, is categorized as Level 3 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 ~~this asset~~these assets at fair value. Given the nature of ~~the asset,~~these assets, the key valuation inputs are unobservable and management classifies ~~this asset~~these assets as Level 3.

~~Residential Mortgage Servicing Rights~~

~~United recognizes servicing rights upon the sale of residential mortgage loans sold with servicing retained. Management has elected~~

UNITED COMMUNITY BANKS, INC. AND SUBSIDIARIES

Notes to ~~carry this asset at fair value. Given the nature of the asset, the key valuation inputs are unobservable and management classifies this asset as Level 3.~~Consolidated Financial Statements (Unaudited)

~~Pension Plan Assets~~

~~For information on the fair value of pension plan assets, see Note 17 in the Annual Report on Form 10-K for the year ended December 31, 2018.~~

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).


March 31, 2019	Level 1		Level 2		Level 3		Total
March 31, 2020									Level 1		Level 2		Level 3		Total
Assets:
Debt securities available for sale:
Debt securities available-for-sale:
U.S. Treasuries	$	141,855	$	—	$	—	$	141,855	$	158,964	$	—	$	—	$	158,964
U.S. Government agencies	—		5,101		—		5,101		—		2,967		—		2,967
State and political subdivisions	—		222,180		—		222,180		—		227,681		—		227,681
Residential mortgage-backed securities	—		1,414,085		—		1,414,085		—		1,297,591		—		1,297,591
Commercial mortgage-backed securities	—		343,339		—		343,339		—		267,789		—		267,789
Corporate bonds	—		199,681		995		200,676		—		190,785		—		190,785
Asset-backed securities	—		127,389		—		127,389		—		104,099		—		104,099
Equity securities with readily available fair values	910		—		—		910		1,338		—		—		1,338
Mortgage loans held for sale	—		26,341		—		26,341		—		89,959		—		89,959
Deferred compensation plan assets	7,129		—		—		7,129		7,537		—		—		7,537
Servicing rights for SBA/USDA loans	—		—		7,401		7,401		—		—		6,290		6,290
Residential mortgage servicing rights	—		—		11,447		11,447		—		—		11,059		11,059
Derivative financial instruments	—		16,363		9,561		25,924		—		75,307		7,361		82,668
Total assets	$	149,894	$	2,354,479	$	29,404	$	2,533,777	$	167,839	$	2,256,178	$	24,710	$	2,448,727

Liabilities:
Deferred compensation plan liability	$	7,129	$	—	$	—	$	7,129	$	7,549	$	—	$	—	$	7,549
Derivative financial instruments	—		7,345		11,444		18,789		—		24,632		2,717		27,349
Total liabilities	$	7,129	$	7,345	$	11,444	$	25,918	$	7,549	$	24,632	$	2,717	$	34,898

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

~~Forward-looking Statements~~

~~This Form 10-Q contains forward-looking~~The following is a discussion of our financial condition at March 31, 2020 and December 31, 2019 and our results of operations for the three months ended March 31, 2020 and March 31, 2019. 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 ~~within~~and is intended to provide insight into our results of operations and financial condition. Unless the ~~meaning of Section 27A of~~context otherwise requires, the ~~Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”), about~~terms “we,” “our,” “us” or “United” refer to United Community Banks, Inc. and its direct and indirect subsidiaries, ~~(collectively referred~~including United Community Bank, which we sometimes refer to ~~herein~~ as ~~“United”). These forward-looking~~“the Bank,” “our bank subsidiary” or “our bank.” References to the “Holding Company” refer to United Community Banks, Inc. on an unconsolidated basis. The following discussion and analysis should be read along with our consolidated financial statements ~~are intended to be covered by the safe harbor for forward-looking statements provided by the Private Securities Litigation Reform Act~~and related notes included in Part I - Item 1 of ~~1995. Forward-looking statements are not statements of historical fact~~this Quarterly Report on Form 10-Q, “Cautionary Note Regarding Forward-Looking Statements” 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 the negative thereof or comparable terminology. 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 the future performance, operations, products and services of United. We caution our shareholders and other readers not to place undue reliance on such statements.

Forward-looking statements are subject to risks, uncertainties and assumptions that are difficult to predict with regard to timing, extent, likelihood and degree of occurrence, which could cause actual results to differ materially from anticipated results. Such risks, uncertainties and assumptions include, but are not limited to, the risk factors ~~set forth~~discussed in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2018~~2019 (the “2019 10-K”), as ~~well as~~supplemented by those discussed in Part II, Item 1A of this Quarterly Report on Form 10-Q, and the ~~following factors:~~other reports we have filed with the SEC after we filed the 2019 10-K.

~~the condition of the general business and economic environment, banking system and financial markets;~~

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

changes in the interest rate environment, including interest rate changes made by the Federal Reserve, 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;

~~our lack of geographic diversification and the success of the local economies in which we operate;~~

~~risks with respect to our ability to successfully expand and complete acquisitions and integrate businesses and operations that are acquired;~~

~~our ability to attract and retain key employees;~~

~~competition from financial institutions and other financial service providers including financial technology providers;~~

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

~~cybersecurity risks 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;~~

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

~~changes in the securities markets;~~

~~changes in the allowance for loan losses resulting from the adoption and implementation of the new Current Expected Credit Loss (“CECL”) methodology;~~

~~the costs and effects of litigation, examinations, investigations, or similar matters, or adverse facts and developments related thereto;~~

~~possible regulatory or judicial proceedings, board resolutions, informal memorandums of understanding or formal enforcement actions imposed by regulators;~~

~~the risk that our allowance for loan losses may not be sufficient to cover our actual loan losses; and~~

limitations on the ability of United Community Bank (the “Bank”) to pay dividends to United Community Banks, Inc. (the “Holding Company”), which could affect Holding Company liquidity, including the ability to pay dividends to shareholders or take other capital actions.

Additional information with respect to factors that may cause actual results to differ materially from those contemplated by such forward-looking statements may also be included in other reports that United files with the Securities and Exchange Commission (the “SEC”). United cautions that the foregoing list of factors is not exclusive and not to place undue reliance on forward-looking statements. United does not intend to update any forward-looking statement, whether written or oral, relating to the matters discussed in this Form 10-Q. The financial statements and information contained herein have not been reviewed, or confirmed for accuracy or relevance, by the Federal Deposit Insurance Corporation (the “FDIC”) or any other regulator.

Overview

The following discussion is intended to provide insight into the results of operations and financial condition of United and should be read in conjunction with the consolidated financial statements and accompanying notes.

The Holding Company is a bank holding company incorporated in the state of Georgia in 1987, which began operations in 1988 by acquiring the capital stock of the Bank, a Georgia state-chartered bank that opened in 1950. United offersWe offer a wide array of commercial and consumer banking services and investment advisory services through a ~~149 branch~~149-branch network throughout Georgia, South Carolina, North Carolina and Tennessee. We have grown organically as well as through strategic acquisitions. On May 1, 2019, we acquired First Madison Bank & Trust (“FMBT”), which operated four branches in the Athens-Clarke County, Georgia MSA. We acquired $245 million of assets and assumed $213 million of liabilities in the acquisition. Also, on March 9, 2020, we entered into a merger agreement through which we will acquire Three Shores Bancorporation, Inc. (“Three Shores”) including its wholly-owned subsidiary, Seaside National Bank & Trust (“Seaside”) headquartered in Orlando, Florida. Seaside is a premier commercial lender with a strong wealth management platform and operates a 14 branch network located in key Florida metropolitan markets. The merger is expected to be completed during the third quarter of 2020.

Recent Developments

During the first quarter of 2020, global financial markets experienced significant volatility resulting from the spread of a novel coronavirus known as COVID-19. In March of 2020, the World Health Organization declared COVID-19 a global pandemic and the United States declared a National Public Health Emergency. The COVID-19 pandemic has restricted the level of economic activity in our markets. In response to the pandemic, the governments of the states in which we have branches and of most other states have taken preventative or protective actions, such as imposing restrictions on travel and business operations, advising or requiring individuals to limit or forego time outside of their homes, and ordering temporary closures of businesses that have been deemed to be non-essential. These measures have dramatically increased unemployment in the United States and have negatively impacted many businesses, and thereby threatened the repayment ability of some of our borrowers.

To address the economic impact in the United States, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed into law on March 27, 2020. The CARES Act included a number of provisions that affected us, including accounting relief for troubled debt restructurings (“TDRs”) and relief for the effect of current expected credit losses accounting standard (“CECL”) implementation on regulatory capital. The CARES Act also established the Paycheck Protection Program (“PPP”) through the Small Business Administration (“SBA”), which allowed us to lend money to small businesses to maintain employee payrolls through the crisis with guarantees from the SBA. Under this program, loan amounts may be forgiven if the borrower maintains employee payrolls and meet certain other requirements.

In addition, the Federal Reserve took steps to bolster the economy by, among other things, reducing the federal funds rate and the discount-window borrowing rate to near zero.

In response to the pandemic, we have implemented protocols and processes to help protect our employees, customers and communities. These measures include:

Operating our branches under a drive-through model with appointment-only lobby service, leveraging our business continuity plans and capabilities that include critical operations teams being divided and dispersed to separate locations and, when possible, having employees work from home.

Offering assistance to our customers affected by the COVID-19 pandemic, which includes payment deferrals, waiving certain fees, suspending property foreclosures, and participating in the CARES Act and lending programs for businesses, including the SBA PPP.

Temporarily suspending common stock repurchases to maximize capital and liquidity resources.

In connection with reviewing our financial condition in light of the pandemic, we evaluated certain assets, including goodwill and other intangibles, for potential impairment. Based upon our review as of March 31, 2020, no impairments have been recorded. We have also elected to delay for two years the phase-in of the capital impact from our adoption of the new accounting standard on credit losses. For more information, see Capital Resources and Dividends.

We have implemented various consumer and commercial loan modification programs to provide our borrowers relief from the economic impacts of COVID-19. Based on guidance in the CARES Act, COVID-19 related modifications to loans that were current as of December 31, 2019 are exempt from TDR classification under accounting principles generally accepted in the United States of America (GAAP). In addition, the bank regulatory agencies issued interagency guidance stating that COVID-19 related short-term modifications (i.e., six months or less) granted to loans that were current as of the loan modification program implementation date are not TDRs. For more information, see Note 4 - Loans and Leases and Allowance for Credit Losses to the Consolidated Financial Statements.

Given the unprecedented uncertainty and rapidly evolving economic effects and social impacts of the COVID-19 pandemic, the future direct and indirect impact on our business, results of operations and financial condition are highly uncertain. Should current economic conditions persist or continue to deteriorate, we expect that this macroeconomic environment will have a continued adverse effect on our business and results of operations, which could include, but not be limited to: decreased demand for our products and services, protracted periods of lower interest rates, increased noninterest expenses, including operational losses, and increased credit losses due to deterioration in the financial condition of our consumer and commercial borrowers, including declining asset and collateral values, which may continue to increase our provision for credit losses and net charge-offs. For more information on how the risks related to COVID-19 may adversely affect our business, results of operations and financial condition, see Part II, Item 1A Risk Factors on page 58.

Financial Highlights

At March 31, ~~2019, United~~2020, we had total consolidated assets of ~~$12.5~~$13.1 billion, total loans of ~~$8.49~~$8.94 billion, total deposits of ~~$10.5~~$11.0 billion, and shareholders’ equity of ~~$1.51~~$1.64 billion. ~~United~~We reported net income of $31.9 million, or $0.40 per diluted share, for the first quarter of 2020, compared to net income of $44.3 million, or $0.55 per diluted share, for the first quarter of ~~2019, compared~~2019.

Net interest revenue increased to ~~net income of $37.7~~$119 million ~~or $0.47 per diluted share,~~ for the first quarter of ~~2018.~~

~~Net interest revenue increased~~2020, compared to $116 million for the first quarter of 2019, ~~compared to $103 million for the first quarter of 2018,~~ due to several factors including higher purchased loan ~~volume~~accretion, an improvement in the mix of interest-earning assets as growth in the loan portfolio replaced an intentionally shrinking investment portfolio, and ~~rising interest rates.~~a more favorable funding mix, which included a reduction in higher cost wholesale funding and an increase in noninterest-bearing deposits. The net interest margin ~~increased~~decreased to ~~4.10%~~4.07% for the three months ended March 31, ~~2019~~2020 from ~~3.80%~~4.10% for the same period in ~~2018~~2019 primarily due to the effect of ~~rising~~falling interest rates on floating rate loans and the inclusion of higher yielding equipment financing loans acquired from NLFC Holdings Corp. and its subsidiaries, collectively known as “Navitas”, for the full first quarter of 2019.our asset sensitive balance sheet.

The provision for credit losses was $22.2 million for the first quarter of 2020, compared to $3.30 million for the first quarter of 2019 ~~compared to $3.80 million for~~reflecting higher expected losses resulting primarily from the ~~first quarter~~COVID-19 pandemic, as well as the adoption of ~~2018.~~CECL and increased charge-offs. Net charge-offs for the first quarter of ~~2019~~2020 were ~~$3.13~~$8.11 million compared to ~~$1.50~~$3.13 million for the same period in ~~2018.~~ 2019 with the increase resulting primarily from one loan that had been substandard for several quarters.

As of March 31, ~~2019, United’s~~2020, our allowance for ~~loan~~credit losses (“ACL”) on loans was ~~$61.6~~$81.9 million, or ~~0.73%~~0.92% of loans, compared to ~~$61.2~~$62.1 million, or ~~0.73%~~0.70% of loans, at December 31, ~~2018, reflecting stable asset quality.~~2019. The higher allowance reflects the effect of adopting CECL, which increased the allowance by $6.88 million upon adoption, and a higher expectation of credit losses resulting from the COVID-19 pandemic. At March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, nonperforming assets of ~~$24.8~~$36.7 million and ~~$25.1~~$35.8 million, respectively, were ~~0.20%~~0.28% of total assets.

Noninterest income of ~~$21.0~~$25.8 million for the first quarter of ~~2019~~2020 was ~~down $1.43~~up $4.85 million, or 6%23%, from the first quarter of ~~2018.~~2019. The ~~decrease~~increase was primarily attributable to ~~the decrease~~an increase in mortgage ~~fees resulting from~~origination activity which resulted in a ~~decline~~$4.56 million increase in ~~the fair value of the~~ mortgage ~~servicing rights asset~~loan gains and related fees. We closed $388 million in mortgage loans in the first quarter of ~~2019.~~2020 compared with $180 million a year ago. This increase was partially offset by a decrease in other noninterest income, which was primarily a result of negative fair value marks on other investments during the first quarter of 2020.

For the first quarter of ~~2019,~~2020, noninterest expenses of ~~$76.1~~$81.5 million increased ~~$2.61~~$5.45 million ~~from~~compared to the same period of 2018. Decreases in professional fees, FDIC assessments and other regulatory charges, amortization of intangibles, and merger-related and other charges offset much of the impact of higher salaries and employee benefits, communications and equipment expenses and other noninterest expense. Nearly half of the2019. The increase was primarily attributable to increases in salaries and employee benefits and ~~approximately half of the increase in other expense were in our equipment finance business which we owned for only two of the three months of first quarter 2018. The rest of the increase~~professional fees. Increases in salaries and employee benefits ~~expense resulted from~~were driven by several factors, including higher mortgage commissions as a result of increased mortgage production, annual ~~merit~~merit-based salary increases anawarded during the second quarter of 2019, investments in new staff for key areas of the bank, and the inclusion of FMBT employees for the first quarter of 2020. The increase in ~~our 401(k) matching contribution, higher group medical insurance costs and higher incentives.~~professional fees from the first quarter of 2019 was primarily a result of unusually low professional fees during the first quarter of 2019 due to the timing of projects.

Critical Accounting Policies

~~The~~Our accounting and reporting policies ~~of United~~ are in accordance with accounting principles generally accepted in the United States (“GAAP”) and conform to general practices within the banking industry. ~~The more critical accounting and reporting policies include United’s accounting~~Except as described below, there have been no significant changes to the Critical Accounting Policies as described in our 2019 10-K.

Allowance for Credit Losses

Since the adoption of CECL on January 1, 2020, the allowance for credit losses represents management’s estimate of credit losses for the remaining estimated life of financial instruments, with particular applicability on our balance sheet to loans and unfunded loan commitments. Estimating the amount of the allowance for credit losses ~~fair value measurements,~~requires significant judgment and ~~income taxes, all of which involve~~ the use of estimates related to historical experience, current conditions, reasonable and supportable forecasts, and the value of collateral on collateral-dependent loans. The loan portfolio also represents the largest asset type on our consolidated balance sheet. Loan losses are charged against the allowance, while recoveries of amounts previously charged off are credited to the allowance. A provision for credit losses is charged to operations based on management’s periodic evaluation of the factors previously mentioned, as well as other pertinent factors.

There are many factors affecting the allowance for credit losses; some are quantitative while others require qualitative judgment. Although management believes its process for determining the allowance adequately considers all the potential factors that could potentially result in credit losses, the process includes subjective elements and is susceptible to significant ~~judgments to~~change. To the extent actual outcomes differ from management estimates, additional provision for credit losses could be ~~made by management. Different assumptions~~required that could adversely affect our earnings or financial position in future periods.

Additional information on the loan portfolio and allowance for credit losses can be found in the ~~application~~sections of ~~these policies could result in material changes in United’s consolidated financial position or consolidated results of operations. See~~Management’s Discussion and Analysis titled “Asset Quality and Risk Elements” ~~herein for~~and “Nonperforming Assets.” Note 1 to the consolidated financial statements includes additional ~~discussion of United’s~~information on accounting ~~methodologies~~policies related to the allowance for ~~loan~~credit losses.

~~GAAP~~Non-GAAP Reconciliation and Explanation

This Form 10-Q 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 “average tangible common equity to average ~~assets,” and “tangible common equity to risk-weighted~~ assets.” In addition, management presents non-GAAP operating performance measures, which exclude merger-related and other items that are not part of ~~United’s~~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,” “dividend payout ratio – operating” and “efficiency ratio – operating.” Management has 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 ~~United’s~~our Board of Directors each quarter. Management uses these non-GAAP measures because it believes they may provide useful supplemental information for evaluating

~~United’s~~ our operations and performance over periods of time, as well as in managing and evaluating ~~United’s~~our business and in discussions about ~~United’s~~our operations and performance. Management believes these non-GAAP measures may also provide users of ~~United’s~~our financial information with a meaningful measure for assessing ~~United’s~~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 and~~GAAP. In addition, because non-GAAP measures are not ~~necessarily comparable~~standardized, it may not be possible to compare our non-GAAP measures to other 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 Management’s Discussion and Analysis.

Results of Operations

~~United~~We reported net income and diluted earnings per common share of $31.9 million and $0.40, respectively, for the first quarter of 2020. This compared to net income and diluted earnings per common share of $44.3 million and $0.55, respectively, for the ~~first quarter of 2019. This compared to net income and diluted earnings per common share of $37.7 million and $0.47, respectively, for the~~ same period in ~~2018.~~2019.

~~United~~We reported ~~operating~~ net income - operating (non-GAAP) of ~~$44.8~~$32.5 million for the first quarter of ~~2019,~~2020, compared to ~~$39.7~~$44.8 million for the same period in ~~2018.~~2019. For the first quarter of 2020, net income - operating (non-GAAP) excludes merger-related, severance, and branch closure charges, which net of tax, totaled $626,000. For the first quarter of 2019, ~~operating~~ net income - operating (non-GAAP) excludes merger-related and other charges, which net of tax, totaled $567,000. ~~For the first quarter of 2018, operating net income excludes merger-related and branch closure charges of $2.02 million, net of tax.~~

UNITED COMMUNITY BANKS, INC.
Table 1 - Financial Highlights
Selected Financial Information
2019 2018 First Quarter 2019 - 2018 Change
(in thousands, except per share data) First Quarter Fourth Quarter Third Quarter Second Quarter First Quarter
INCOME SUMMARY
Interest revenue $ 136,516
$ 133,854
$ 128,721
$ 122,215
$ 115,290

Interest expense 20,882
18,975
16,611
13,739
12,005

Net interest revenue 115,634
114,879
112,110
108,476
103,285
12 %
Provision for credit losses 3,300
2,100
1,800
1,800
3,800
(13 )
Noninterest income 20,968
23,045
24,180
23,340
22,396
(6 )
Total revenue 133,302
135,824
134,490
130,016
121,881
9
Expenses 76,084
78,242
77,718
76,850
73,475
4
Income before income tax expense 57,218
57,582
56,772
53,166
48,406
18
Income tax expense 12,956
12,445
13,090
13,532
10,748
21
Net income 44,262
45,137
43,682
39,634
37,658
18
Merger-related and other charges 739
1,234
592
2,873
2,646

Income tax benefit of merger-related and other charges (172 ) (604 ) (141 ) (121 ) (628 )
Net income - operating ⁽¹⁾
$ 44,829
$ 45,767
$ 44,133
$ 42,386
$ 39,676
13

PERFORMANCE MEASURES
Per common share:
Diluted net income - GAAP $ 0.55
$ 0.56
$ 0.54
$ 0.49
$ 0.47
17
Diluted net income - operating ⁽¹⁾
0.56
0.57
0.55
0.53
0.50
12
Cash dividends declared 0.16
0.16
0.15
0.15
0.12
33
Book value 18.93
18.24
17.56
17.29
17.02
11
Tangible book value ⁽³⁾
14.93
14.24
13.54
13.25
12.96
15
Key performance ratios:
Return on common equity - GAAP ⁽²⁾⁽⁴⁾
11.85 % 12.08 % 11.96 % 11.20 % 11.11 %
Return on common equity - operating ^(1)(2)(4)
12.00
12.25
12.09
11.97
11.71

Return on tangible common equity - operating^(1)(2)(3)(4)
15.46
15.88
15.81
15.79
15.26

Return on assets - GAAP ⁽⁴⁾
1.44
1.43
1.41
1.30
1.26

Return on assets - operating ⁽¹⁾⁽⁴⁾
1.45
1.45
1.42
1.39
1.33

Dividend payout ratio - GAAP 29.09
28.57
27.78
30.61
25.53

Dividend payout ratio - operating ⁽¹⁾
28.57
28.07
27.27
28.30
24.00

Net interest margin (fully taxable equivalent) ⁽⁴⁾
4.10
3.97
3.95
3.90
3.80

Efficiency ratio - GAAP 55.32
56.73
56.82
57.94
57.83

Efficiency ratio - operating ⁽¹⁾
54.78
55.83
56.39
55.77
55.75

Average equity to average assets 11.82
11.35
11.33
11.21
11.03

Average tangible common equity to average assets ⁽³⁾
9.53
9.04
8.97
8.83
8.82

Tangible common equity to risk-weighted assets ⁽³⁾
12.48
12.00
11.61
11.36
11.19

ASSET QUALITY
Nonperforming loans $ 23,624
$ 23,778
$ 22,530
$ 21,817
$ 26,240
(10 )
Foreclosed properties 1,127
1,305
1,336
2,597
2,714
(58 )
Total nonperforming assets ("NPAs") 24,751
25,083
23,866
24,414
28,954
(15 )
Allowance for loan losses 61,642
61,203
60,940
61,071
61,085
1
Net charge-offs 3,130
1,787
1,466
1,359
1,501
109
Allowance for loan losses to loans 0.73 % 0.73 % 0.74 % 0.74 % 0.75 %
Net charge-offs to average loans ⁽⁴⁾
0.15
0.09
0.07
0.07
0.08

NPAs to loans and foreclosed properties 0.29
0.30
0.29
0.30
0.35

NPAs to total assets 0.20
0.20
0.19
0.20
0.24

AVERAGE BALANCES ($ in millions)

Loans $ 8,430
$ 8,306
$ 8,200
$ 8,177
$ 7,993
5
Investment securities 2,883
3,004
2,916
2,802
2,870
—
Earning assets 11,498
11,534
11,320
11,193
11,076
4
Total assets 12,509
12,505
12,302
12,213
12,111
3
Deposits 10,361
10,306
9,950
9,978
9,759
6
Shareholders’ equity 1,478
1,420
1,394
1,370
1,336
11
Common shares - basic (thousands) 79,807
79,884
79,806
79,753
79,205
1
Common shares - diluted (thousands) 79,813
79,890
79,818
79,755
79,215
1

AT PERIOD END ($ in millions)

Loans $ 8,493
$ 8,383
$ 8,226
$ 8,220
$ 8,184
4
Investment securities 2,720
2,903
2,873
2,834
2,731
—
Total assets 12,506
12,573
12,405
12,386
12,264
2
Deposits 10,534
10,535
10,229
9,966
9,993
5
Shareholders’ equity 1,508
1,458
1,402
1,379
1,357
11
Common shares outstanding (thousands) 79,035
79,234
79,202
79,138
79,123
—



UNITED COMMUNITY BANKS, INC.
Table 1 - Financial Highlights
Selected Financial Information
	2020			2019												1st Quarter 2020 - 2019 Change
(in thousands, except per share data)	First Quarter			Fourth Quarter			Third Quarter			Second Quarter			First Quarter			1st Quarter 2020 - 2019 Change
INCOME SUMMARY
Interest revenue	$	136,547		$	136,419		$	140,615		$	139,156		$	136,516
Interest expense	17,941			19,781			21,277			21,372			20,882
Net interest revenue	118,606			116,638			119,338			117,784			115,634			3	%
Provision for credit losses	22,191			3,500			3,100			3,250			3,300
Noninterest income	25,814			30,183			29,031			24,531			20,968			23
Total revenue	122,229			143,321			145,269			139,065			133,302			(8	)
Expenses	81,538			81,424			82,924			81,813			76,084			7
Income before income tax expense	40,691			61,897			62,345			57,252			57,218			(29	)
Income tax expense	8,807			12,885			13,983			13,167			12,956			(32	)
Net income	31,884			49,012			48,362			44,085			44,262			(28	)
Merger-related and other charges	808			(74		)	2,605			4,087			739
Income tax benefit of merger-related and other charges	(182		)	17			(600		)	(940		)	(172		)
Net income - operating ⁽¹⁾	$	32,510		$	48,955		$	50,367		$	47,232		$	44,829		(27	)

PERFORMANCE MEASURES
Per common share:
Diluted net income - GAAP	$	0.40		$	0.61		$	0.60		$	0.55		$	0.55		(27	)
Diluted net income - operating ⁽¹⁾	0.41			0.61			0.63			0.59			0.56			(27	)
Cash dividends declared	0.18			0.18			0.17			0.17			0.16			13
Book value	20.80			20.53			20.16			19.65			18.93			10
Tangible book value ⁽³⁾	16.52			16.28			15.90			15.38			14.93			11
Key performance ratios:
Return on common equity - GAAP ⁽²⁾⁽⁴⁾	7.85		%	12.07		%	12.16		%	11.45		%	11.85		%
Return on common equity - operating ^(1)(2)(4)	8.01			12.06			12.67			12.27			12.00
Return on tangible common equity - operating^(1)(2)(3)(4)	10.57			15.49			16.38			15.88			15.46
Return on assets - GAAP ⁽⁴⁾	0.99			1.50			1.51			1.40			1.44
Return on assets - operating ⁽¹⁾⁽⁴⁾	1.01			1.50			1.58			1.50			1.45
Dividend payout ratio - GAAP	45.00			29.51			28.33			30.91			29.09
Dividend payout ratio - operating ⁽¹⁾	43.90			29.51			26.98			28.81			28.57
Net interest margin (fully taxable equivalent) ⁽⁴⁾	4.07			3.93			4.12			4.12			4.10
Efficiency ratio - GAAP	56.15			54.87			55.64			57.28			55.32
Efficiency ratio - operating ⁽¹⁾	55.59			54.92			53.90			54.42			54.78
Equity to total assets	12.54			12.66			12.53			12.25			12.06
Tangible common equity to tangible assets ⁽³⁾	10.22			10.32			10.16			9.86			9.76

ASSET QUALITY
Nonperforming loans	$	36,208		$	35,341		$	30,832		$	26,597		$	23,624		53
Foreclosed properties	475			476			102			75			1,127			(58	)
Total nonperforming assets ("NPAs")	36,683			35,817			30,934			26,672			24,751			48
Allowance for credit losses - loans	81,905			62,089			62,514			62,204			61,642			33
Net charge-offs	8,114			3,925			2,723			2,438			3,130			159
Allowance for credit losses to loans	0.92		%	0.70		%	0.70		%	0.70		%	0.73		%
Net charge-offs to average loans ⁽⁴⁾	0.37			0.18			0.12			0.11			0.15
NPAs to loans and foreclosed properties	0.41			0.41			0.35			0.30			0.29
NPAs to total assets	0.28			0.28			0.24			0.21			0.20

AVERAGE BALANCES ($ in millions)
Loans	$	8,829		$	8,890		$	8,836		$	8,670		$	8,430		5
Investment securities	2,520			2,486			2,550			2,674			2,883			(13	)
Earning assets	11,798			11,832			11,568			11,534			11,498			3
Total assets	12,944			12,946			12,681			12,608			12,509			3
Deposits	10,915			10,924			10,531			10,493			10,361			5
Shareholders’ equity	1,653			1,623			1,588			1,531			1,478			12
Common shares - basic (thousands)	79,340			79,659			79,663			79,673			79,807			(1	)
Common shares - diluted (thousands)	79,446			79,669			79,667			79,678			79,813			—

AT PERIOD END ($ in millions)
Loans	$	8,935		$	8,813		$	8,903		$	8,838		$	8,493		5
Investment securities	2,540			2,559			2,515			2,620			2,720			(7	)
Total assets	13,086			12,916			12,809			12,779			12,506			5
Deposits	11,035			10,897			10,757			10,591			10,534			5
Shareholders’ equity	1,641			1,636			1,605			1,566			1,508			9
Common shares outstanding (thousands)	78,284			79,014			78,974			79,075			79,035			(1	)

⁽¹⁾ Excludes merger-related and other charges which includes termination of pension plan in the third quarter of 2019, executive retirement charges in the second quarter of 2019 and amortization of certain executive change of control benefits. ⁽²⁾ Net income ~~less preferred stock dividends,~~ divided by average realized common equity, which excludes accumulated other comprehensive income (loss). ⁽³⁾ Excludes effect of acquisition related intangibles and associated amortization. ⁽⁴⁾Annualized.

UNITED COMMUNITY BANKS, INC.
Table 1 (Continued) - Non-GAAP Performance Measures Reconciliation
Selected Financial Information
2019 2018
First Quarter Fourth Quarter Third Quarter Second Quarter First Quarter
(in thousands, except per share data)

Expense reconciliation

Expenses (GAAP) $ 76,084
$ 78,242
$ 77,718
$ 76,850
$ 73,475

Merger-related and other charges (739 ) (1,234 ) (592 ) (2,873 ) (2,646 )
Expenses - operating $ 75,345
$ 77,008
$ 77,126
$ 73,977
$ 70,829

Net income reconciliation
Net income (GAAP) $ 44,262
$ 45,137
$ 43,682
$ 39,634
$ 37,658

Merger-related and other charges 739
1,234
592
2,873
2,646

Income tax benefit of merger-related and other charges (172 ) (604 ) (141 ) (121 ) (628 )
Net income - operating $ 44,829
$ 45,767
$ 44,133
$ 42,386
$ 39,676

Diluted income per common share reconciliation
Diluted income per common share (GAAP) $ 0.55
$ 0.56
$ 0.54
$ 0.49
$ 0.47

Merger-related and other charges 0.01
0.01
0.01
0.04
0.03

Diluted income per common share - operating $ 0.56
$ 0.57
$ 0.55
$ 0.53
$ 0.50

Book value per common share reconciliation
Book value per common share (GAAP) $ 18.93
$ 18.24
$ 17.56
$ 17.29
$ 17.02

Effect of goodwill and other intangibles (4.00 ) (4.00 ) (4.02 ) (4.04 ) (4.06 )
Tangible book value per common share $ 14.93
$ 14.24
$ 13.54
$ 13.25
$ 12.96

Return on tangible common equity reconciliation
Return on common equity (GAAP) 11.85 % 12.08 % 11.96 % 11.20 % 11.11 %
Merger-related and other charges 0.15
0.17
0.13
0.77
0.60

Return on common equity - operating 12.00
12.25
12.09
11.97
11.71

Effect of goodwill and other intangibles 3.46
3.63
3.72
3.82
3.55

Return on tangible common equity - operating 15.46 % 15.88 % 15.81 % 15.79 % 15.26 %

Return on assets reconciliation
Return on assets (GAAP) 1.44 % 1.43 % 1.41 % 1.30 % 1.26 %
Merger-related and other charges 0.01
0.02
0.01
0.09
0.07

Return on assets - operating 1.45 % 1.45 % 1.42 % 1.39 % 1.33 %

Dividend payout ratio reconciliation
Dividend payout ratio (GAAP) 29.09 % 28.57 % 27.78 % 30.61 % 25.53 %
Merger-related and other charges (0.52 ) (0.50 ) (0.51 ) (2.31 ) (1.53 )
Dividend payout ratio - operating 28.57 % 28.07 % 27.27 % 28.30 % 24.00 %

Efficiency ratio reconciliation
Efficiency ratio (GAAP) 55.32 % 56.73 % 56.82 % 57.94 % 57.83 %
Merger-related and other charges (0.54 ) (0.90 ) (0.43 ) (2.17 ) (2.08 )
Efficiency ratio - operating 54.78 % 55.83 % 56.39 % 55.77 % 55.75 %

Average equity to assets reconciliation
Equity to average assets (GAAP) 11.82 % 11.35 % 11.33 % 11.21 % 11.03 %
Effect of goodwill and other intangibles (2.29 ) (2.31 ) (2.36 ) (2.38 ) (2.21 )
Average tangible common equity to average assets 9.53 % 9.04 % 8.97 % 8.83 % 8.82 %

Tangible common equity to risk-weighted assets reconciliation
Tier 1 capital ratio (Regulatory) 12.69 % 12.42 % 12.25 % 11.94 % 11.61 %
Effect of other comprehensive income (0.17 ) (0.44 ) (0.68 ) (0.57 ) (0.50 )
Effect of deferred tax limitation 0.22
0.28
0.30
0.33
0.42

Effect of trust preferred (0.26 ) (0.26 ) (0.26 ) (0.34 ) (0.34 )
Tangible common equity to risk-weighted assets 12.48 % 12.00 % 11.61 % 11.36 % 11.19 %



UNITED COMMUNITY BANKS, INC.
Table 1 (Continued) - Non-GAAP Performance Measures Reconciliation
Selected Financial Information
	2020			2019
	First Quarter			Fourth Quarter			Third Quarter			Second Quarter			First Quarter
(in thousands, except per share data)	First Quarter			Fourth Quarter			Third Quarter			Second Quarter			First Quarter

Expense reconciliation
Expenses (GAAP)	$	81,538		$	81,424		$	82,924		$	81,813		$	76,084
Merger-related and other charges	(808		)	74			(2,605		)	(4,087		)	(739		)
Expenses - operating	$	80,730		$	81,498		$	80,319		$	77,726		$	75,345

Net income reconciliation
Net income (GAAP)	$	31,884		$	49,012		$	48,362		$	44,085		$	44,262
Merger-related and other charges	808			(74		)	2,605			4,087			739
Income tax benefit of merger-related and other charges	(182		)	17			(600		)	(940		)	(172		)
Net income - operating	$	32,510		$	48,955		$	50,367		$	47,232		$	44,829

Diluted income per common share reconciliation
Diluted income per common share (GAAP)	$	0.40		$	0.61		$	0.60		$	0.55		$	0.55
Merger-related and other charges, net of tax	0.01			—			0.03			0.04			0.01
Diluted income per common share - operating	$	0.41		$	0.61		$	0.63		$	0.59		$	0.56

Book value per common share reconciliation
Book value per common share (GAAP)	$	20.80		$	20.53		$	20.16		$	19.65		$	18.93
Effect of goodwill and other intangibles	(4.28		)	(4.25		)	(4.26		)	(4.27		)	(4.00		)
Tangible book value per common share	$	16.52		$	16.28		$	15.90		$	15.38		$	14.93

Return on tangible common equity reconciliation
Return on common equity (GAAP)	7.85		%	12.07		%	12.16		%	11.45		%	11.85		%
Merger-related and other charges, net of tax	0.16			(0.01		)	0.51			0.82			0.15
Return on common equity - operating	8.01			12.06			12.67			12.27			12.00
Effect of goodwill and other intangibles	2.56			3.43			3.71			3.61			3.46
Return on tangible common equity - operating	10.57		%	15.49		%	16.38		%	15.88		%	15.46		%

Return on assets reconciliation
Return on assets (GAAP)	0.99		%	1.50		%	1.51		%	1.40		%	1.44		%
Merger-related and other charges, net of tax	0.02			—			0.07			0.10			0.01
Return on assets - operating	1.01		%	1.50		%	1.58		%	1.50		%	1.45		%

Dividend payout ratio reconciliation
Dividend payout ratio (GAAP)	45.00		%	29.51		%	28.33		%	30.91		%	29.09		%
Merger-related and other charges, net of tax	(1.10		)	—			(1.35		)	(2.10		)	(0.52		)
Dividend payout ratio - operating	43.90		%	29.51		%	26.98		%	28.81		%	28.57		%

Efficiency ratio reconciliation
Efficiency ratio (GAAP)	56.15		%	54.87		%	55.64		%	57.28		%	55.32		%
Merger-related and other charges	(0.56		)	0.05			(1.74		)	(2.86		)	(0.54		)
Efficiency ratio - operating	55.59		%	54.92		%	53.90		%	54.42		%	54.78		%

Tangible common equity to tangible assets reconciliation
Equity to total assets (GAAP)	12.54		%	12.66		%	12.53		%	12.25		%	12.06		%
Effect of goodwill and other intangibles	(2.32		)	(2.34		)	(2.37		)	(2.39		)	(2.30		)
Tangible common equity to tangible assets	10.22		%	10.32		%	10.16		%	9.86		%	9.76		%

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 generally 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.

Net interest revenue for the first ~~quarter~~quarters of 2020 and 2019 was $119 million and ~~2018 was~~ $116 million, ~~and $103 million,~~ respectively. ~~Taxable~~As set forth in the following tables, fully taxable equivalent net interest revenue for the first quarter of ~~2019~~2020 was ~~$116~~$119 million, representing an increase of ~~$12.6~~$3.10 million, or 3%, from the same period in ~~2018.~~2019. The net interest spread for the first quarters of 2020 and 2019 was 3.73%. The net interest margin for the first ~~quarter~~quarters of 2020 and 2019 ~~of 3.73%~~was 4.07% and 4.10%, ~~respectively, increased 15 basis points and 30 basis points, respectively, from the first quarter of 2018.~~respectively.

The following tables ~~show~~also indicate the relationship between interest revenue and expense and the average amounts of assets and liabilities for the periods indicated. As shown in the tables, both average ~~interest-earning~~ assets and ~~interest-bearing~~average liabilities for the three months ended March 31, ~~2019~~2020 increased compared to the same period of ~~2018.~~2019. The increase in average ~~interest-earning~~ assets was primarily ~~related to~~driven by the increase in average loans of ~~$437~~$399 million, or 5%, from the first quarter of ~~2018, and reflected both~~2019, which reflects organic growth and loans obtained through the ~~full-quarter effect~~acquisition of ~~equipment financing loans acquired from Navitas.~~FMBT, the combination of which more than offset the impact of the sale of the indirect auto portfolio on December 31, 2019. The increase in average loans was offset by an intentional decrease in average taxable securities. The increase in average assets for the three months ended March 31, 2020 was funded primarily through an increase in average customer deposits ~~compared to~~since the first quarter ~~2018~~ of ~~$373~~2019 of $980 million, of which ~~$99.0~~$333 million was noninterest-bearing.

The ~~increase~~decrease in the net interest margin and net interest spread was primarily attributable to the increase in yield on average loans, which increased 66 basis points from the first quarter of 2018. Nationally, the federal funds rate increased 75 basis points since March 31, 2018, and United’s loan yield reflected these rising interest rates, as well as higher yielding loans from Navitas. The increase in the average rate on interest-earning assets more than offset the increase in the average rate paid on interest-bearing liabilities of 45 basis points, which reflected a higher average rate on interest-bearing deposits as United increased deposit rates to retain and capture more deposit market share. Rates paid on core deposits lagged behind general increases in market rates. The increase in noninterest-bearing deposits also contributed to the improvement in the net interest margin forduring the three months ended March 31, 2020, was primarily attributable to the impact of falling interest rates on our asset sensitive balance sheet as loan yields fell faster than we could lower deposit rates. In March of 2020, the Federal Reserve’s Federal Open Market Committee (“FOMC”) lowered interest rates twice for a total reduction of 150 basis points in response to the COVID-19 pandemic, which was the most aggressive action taken by the FOMC since the financial crisis in 2008. This followed three other federal funds rate reductions since first quarter 2019 of 25 basis points each on July 31, September 18 and October 30. The impact of falling interest rates was partially offset by other factors including higher purchased loan accretion, improvement in the earning asset mix as growth in the loan portfolio replaced an intentionally shrinking investment portfolio, and a more favorable funding mix. Purchased loan accretion in the first quarter of 2020 was $7.61 million, which added 26 basis points to the net interest margin, compared with $3.17 million in the first quarter of 2019, which added 11 basis points to the net interest margin. In the first quarter of 2020, noninterest- bearing deposits funded 30% of our interest-earning assets compared with 28% in the first quarter of 2019. Since the first quarter of 2019, we substantially reduced our use of wholesale funding sources, with nearly all of our balance sheet funded with customer deposits as of March 31, 2020.

Table 2 - Average Consolidated Balance Sheets and Net Interest Analysis

For the Three Months Ended March 31,


	2019							2018							2020							2019
(dollars in thousands, fully taxable equivalent (FTE))	Average Balance			Interest		Average Rate		Average Balance			Interest		Average Rate		Average Balance			Interest		Average Rate		Average Balance			Interest		Average Rate
Assets:
Interest-earning assets:
Loans, net of unearned income (FTE) ⁽¹⁾⁽²⁾	$	8,429,976		$	115,347	5.55	%	$	7,993,339		$	96,389	4.89	%	$	8,828,880		$	117,796	5.37	%	$	8,429,976		$	115,347	5.55	%
Taxable securities⁽³⁾	2,712,995			19,649		2.90		2,722,977			17,323		2.54		2,357,635			15,871		2.69		2,712,995			19,649		2.90
Tax-exempt securities (FTE) ⁽¹⁾⁽³⁾	169,702			1,570		3.70		146,531			1,309		3.57		162,253			2,045		5.04		169,702			1,570		3.70
Federal funds sold and other interest-earning assets	185,623			618		1.33		213,055			698		1.31		448,775			1,632		1.46		185,623			618		1.33
Total interest-earning assets (FTE)	11,498,296			137,184		4.83		11,075,902			115,719		4.23		11,797,543			137,344		4.68		11,498,296			137,184		4.83

Noninterest-earning assets:
Allowance for loan losses	(61,784		)					(59,144		)
Allowance for credit losses															(69,777		)					(61,784		)
Cash and due from banks	123,801							160,486							128,254							123,801
Premises and equipment	216,611							216,723							219,243							216,611
Other assets ⁽³⁾	731,628							717,385							868,452							731,628
Total assets	$	12,508,552						$	12,111,352						$	12,943,715						$	12,508,552

Liabilities and Shareholders' Equity:
Interest-bearing liabilities:
Interest-bearing deposits:
NOW and interest-bearing demand(5)	$	2,208,816		3,536		0.65		$	2,083,703		1,113		0.22		$	2,412,733		2,978		0.50		$	2,286,619		3,609		0.64
Money market(5)	2,175,855			4,205		0.78		2,230,620			2,175		0.40		2,340,723			4,531		0.78		2,098,052			4,132		0.80
Savings	672,197			32		0.02		655,746			49		0.03		712,110			35		0.02		672,197			32		0.02
Time	1,627,584			5,336		1.33		1,535,216			2,241		0.59		1,841,552			7,250		1.58		1,627,584			5,336		1.33
Brokered time deposits	482,048			2,848		2.40		158,358			715		1.83		80,821			281		1.40		482,048			2,848		2.40
Total interest-bearing deposits	7,166,500			15,957		0.90		6,663,643			6,293		0.38		7,387,939			15,075		0.82		7,166,500			15,957		0.90
Federal funds purchased and other borrowings	21,549			161		3.03		78,732			300		1.55		396			1		1.02		21,549			161		3.03
Federal Home Loan Bank advances	223,945			1,422		2.58		511,727			2,124		1.68		165			1		2.44		223,945			1,422		2.58
Long-term debt	261,971			3,342		5.17		274,480			3,288		4.86		212,762			2,864		5.41		261,971			3,342		5.17
Total borrowed funds	507,465			4,925		3.94		864,939			5,712		2.68		213,323			2,866		5.40		507,465			4,925		3.94
Total interest-bearing liabilities	7,673,965			20,882		1.10		7,528,582			12,005		0.65		7,601,262			17,941		0.95		7,673,965			20,882		1.10

Noninterest-bearing liabilities:
Noninterest-bearing deposits	3,194,401							3,095,405							3,527,385							3,194,401
Other liabilities	162,213							150,955							162,187							162,213
Total liabilities	11,030,579							10,774,942							11,290,834							11,030,579
Shareholders' equity	1,477,973							1,336,410							1,652,881							1,477,973
Total liabilities and shareholders' equity	$	12,508,552						$	12,111,352						$	12,943,715						$	12,508,552

Net interest revenue (FTE)				$	116,302						$	103,714						$	119,403						$	116,302
Net interest-rate spread (FTE)						3.73	%						3.58	%						3.73	%						3.73	%
Net interest margin (FTE) ⁽⁴⁾						4.10	%						3.80	%						4.07	%						4.10	%


⁽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% ~~in 2019 and 2018,~~, 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 ~~where~~on which the accrual of interest has been discontinued and loans that are held for sale.


⁽³⁾	Securities ~~available for sale~~available-for-sale are shown at amortized cost. Pretax unrealized gains of $52.9 million in 2020 and unrealized losses of $25.9 million in 2019 ~~and $28.3 million in 2018~~ 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.


⁽⁵⁾	Reflects reclassification of certain sweep deposits from money market to NOW and interest bearing demand during the third quarter of 2019.

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 3 - Change in Interest Revenue and Expense on a Taxable Equivalent Basis

(in thousands)

Three Months Ended
March 31, 2019

Compared to 2018
Increase (Decrease) Due to Changes in

Volume Rate Total
Interest-earning assets:
Loans (FTE) $ 5,470
$ 13,488
$ 18,958

Taxable securities (64 ) 2,390
2,326

Tax-exempt securities (FTE) 213
48
261

Federal funds sold and other interest-earning assets (91 ) 11
(80 )
Total interest-earning assets (FTE) 5,528
15,937
21,465

Interest-bearing liabilities:
NOW and interest-bearing demand accounts 71
2,352
2,423

Money market accounts (55 ) 2,085
2,030

Savings deposits 1
(18 ) (17 )
Time deposits 143
2,952
3,095

Brokered deposits 1,853
280
2,133

Total interest-bearing deposits 2,013
7,651
9,664

Federal funds purchased & other borrowings (308 ) 169
(139 )
Federal Home Loan Bank advances (1,520 ) 818
(702 )
Long-term debt (154 ) 208
54

Total borrowed funds (1,982 ) 1,195
(787 )
Total interest-bearing liabilities 31
8,846
8,877

Increase in net interest revenue (FTE) $ 5,497
$ 7,091
$ 12,588



	Three Months Ended March 31, 2020
	Compared to 2019 Increase (Decrease) Due to Changes in
	Volume			Rate			Total
Interest-earning assets:
Loans (FTE)	$	5,369		$	(2,920	)	$	2,449
Taxable securities	(2,456		)	(1,322		)	(3,778		)
Tax-exempt securities (FTE)	(72		)	547			475
Federal funds sold and other interest-earning assets	948			66			1,014
Total interest-earning assets (FTE)	3,789			(3,629		)	160

Interest-bearing liabilities:
NOW and interest-bearing demand accounts ⁽¹⁾	190			(821		)	(631		)
Money market accounts ⁽¹⁾	471			(72		)	399
Savings deposits	2			1			3
Time deposits	757			1,157			1,914
Brokered deposits	(1,718		)	(849		)	(2,567		)
Total interest-bearing deposits	(298		)	(584		)	(882		)
Federal funds purchased & other borrowings	(96		)	(64		)	(160		)
Federal Home Loan Bank advances	(1,359		)	(62		)	(1,421		)
Long-term debt	(655		)	177			(478		)
Total borrowed funds	(2,110		)	51			(2,059		)
Total interest-bearing liabilities	(2,408		)	(533		)	(2,941		)

Increase in net interest revenue (FTE)	$	6,197		$	(3,096	)	$	3,101

⁽¹⁾ Reflects reclassification of certain sweep deposits from money market to NOW and interest bearing demand during the third quarter of 2019.

Provision for Credit Losses

~~The~~Prior to January 1, 2020, the provision for credit losses iswas based on ~~management’s evaluation~~the then-applicable incurred loss model and represented an estimate of probable incurred losses in the loan portfolio and unfunded ~~loan~~ commitments ~~and corresponding analysis~~at the end of each reporting period. Since the ~~allowance~~adoption of CECL on January 1, 2020, the provision for credit losses ~~at quarter-end. Provision~~represents management’s estimate of life of loan credit losses in the loan portfolio and unfunded loan commitments. The allowance for unfunded commitments, which is included in other liabilities in the consolidated balance sheets, represents expected losses on unfunded loan commitments that are expected to result in outstanding loan balances. Management’s estimate of credit losses under CECL is determined using a complex 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.

The provision for credit losses was ~~$3.30~~$22.2 million for the three months ended March 31, ~~2019,~~2020, compared to ~~$3.80~~$3.30 million for the same period in ~~2018. For the three months ended March 31, 2019, net loan charge-offs as an annualized percentage of average outstanding loans were 0.15% compared to 0.08% for the same period in 2018.~~2019. The amount of provision recorded in each period was the amount required such that the total ~~allowance for loan losses~~ACL reflected the appropriate balance as determined under the applicable accounting standards in effect at each balance sheet date. The increase in provision expense for the estimation of management, sufficient to cover incurred losses in the loan portfolio. In accordance with the accounting guidance for business combinations, there was no allowance for loan losses brought forward on loans acquired from Navitas on February 1, 2018. Atthree months ended March 31, ~~2018, United included~~2020 compared to the ~~performing non-impaired~~same period of 2019 was primarily a result of higher expected credit losses mostly resulting from the COVID-19 pandemic. Loan growth and increased charge-offs, as well as the change from the incurred loss model to CECL, also contributed to the higher provision for credit losses.

For the three months ended March 31, 2020, net loan charge-offs as an annualized percentage of average outstanding loans ~~acquired from Navitas~~were 0.37% compared to 0.15% for the same period in ~~its general allowance calculation~~2019.The increase in ~~order to reflect the necessary allowance for incurred losses, which increased provision expense by approximately $2.29 million for~~charge-offs in the first quarter of ~~2018. Provision expense for~~2020 was primarily the ~~first quarter of 2019 decreased $500,000 from the same period of last year, but remained relatively higher than historical periods as a~~ result of one large charge-off of a loan ~~growth and increased charge-offs. The increase in charge-offs was partly attributable to incorporating equipment financing loans into the loan portfolio~~that had been substandard for the full first quarter of 2019. Charge-offs from equipment financing loans totaled $1.42 million for the first quarter of 2019, which was in line with management’s expectations for this now-seasoned product line of higher yielding loans.several quarters.

The allowance for unfunded commitments represents probable incurred losses on unfunded loan commitments that are expected to result in outstanding loan balances. The allowance for unfunded loan commitments was established through the provision for credit losses.

Additional discussion on credit quality and the ~~allowance for loan losses~~ACL is included in the “Asset Quality and Risk Elements” ~~section of~~discussion elsewhere in this ~~report.~~document.

Noninterest income

The following table presents the components of noninterest income for the periods indicated.

Table 4 - Noninterest Income

(in thousands)

Three Months Ended
March 31, Change
2019 2018 Amount Percent
Overdraft fees $ 3,455
$ 3,652
$ (197 ) (5 )%
ATM and debit card fees 2,878
3,271
(393 ) (12 )
Other service charges and fees 2,120
2,002
118
6

Service charges and fees 8,453
8,925
(472 ) (5 )
Mortgage loan and related fees 3,748
5,359
(1,611 ) (30 )
Brokerage fees 1,337
872
465
53

Gains on sales of SBA/USDA loans 1,303
1,778
(475 ) (27 )
Customer derivatives 505
772
(267 ) (35 )
Securities losses, net (267 ) (940 ) 673

Other 5,889
5,630
259
5

Total noninterest income $ 20,968
$ 22,396
$ (1,428 ) (6 )



	Three Months Ended March 31,					Change
	2020		2019			Amount			Percent
Service charges and fees:
Overdraft fees	$	3,519	$	3,455		$	64		2	%
ATM and debit card fees	3,069		2,878			191			7
Other service charges and fees	2,050		2,120			(70		)	(3	)
Total service charges and fees	8,638		8,453			185			2
Mortgage loan gains and related fees	8,310		3,748			4,562			122
Brokerage fees	1,640		1,337			303			23
Gains on sales of other loans	1,674		1,303			371			28
Securities gains (losses), net	—		(267		)	267
Other noninterest income:
Bank owned life insurance	845		873			(28		)	(3	)
Customer derivatives	1,407		505			902			179
Other	3,300		5,016			(1,716		)	(34	)
Total other noninterest income	5,552		6,394			(842		)	(13	)
Total noninterest income	$	25,814	$	20,968		$	4,846		23

During the first quarter of 2020 noninterest income increased $4.85 million compared to the same period of 2019, primarily due to increases in mortgage loan gains and related fees, income from customer derivatives, brokerage fees, and gains on sales of other loans. These increases in income were partially offset by a decrease in other noninterest income.

Mortgage loan gains and related fees for the first quarter of 2020 increased $4.56 million from the same period of 2019, ~~decreased $1.61 million, or 30%, from~~reflecting an increase in demand for mortgage rate locks and mortgage closings due to a historically low interest rate environment. The decrease in mortgage rates was partially attributable to the 150 basis point decrease in the national federal funds rate during the first quarter of ~~2018.~~2020 in response to the COVID-19 pandemic. The ~~decrease~~increase in rate locks and closings was ~~primarily attributable to a decline in the~~partially offset by negative fair value ofadjustments on the mortgage servicing rights asset due to the decrease in mortgage interest rates that resulted in an acceleration of prepayments.

Mortgage rate locks during the first quarter of 2020 increased 157% to $801 million compared to $312 million in the first quarter of ~~2019, which was driven by a decrease in mortgage interest rates late in the quarter.~~2019. Mortgage production in the first quarter of ~~2019 decreased slightly~~2020 also significantly increased compared to the same period of ~~2018. United~~2019. We closed 1,470 mortgage loans totaling $388 million in the first quarter of 2020 compared to 763 mortgage loans totaling $180 million in the first quarter of ~~2019 compared with 799 mortgage loans totaling $191 million in the first quarter of 2018. United had $116~~2019. There were $219 million in home purchase mortgage originations in the first quarter of ~~2019,~~2020, which accounted for ~~65%~~56% of mortgage production volume, compared ~~with $104~~to $116 million, or ~~56%,~~65% of production volume for the same period a year ago.

Income from customer derivatives during the first quarter of 2020 increased $902,000 compared to the first quarter of 2019 due to increased demand for fixed rates during the current low rate environment.

Brokerage fees for the first quarter of ~~2019~~2020 increased ~~53%~~23% compared to the ~~first quarter 2018. This increase~~same period of 2019, which was ~~primarily attributable to lower brokerage fees~~a result of higher assets under management during the first quarter of ~~2018 reflecting downtime associated with transitioning to a new third-party broker dealer.~~2020.

~~United’s Small Business Administration~~During the first quarter of 2020, we realized net gains on the sale of other loans of $1.67 million, which included the sale of the guaranteed portion of SBA loans and ~~United States Department~~the sale of ~~Agriculture (“SBA/USDA”)~~certain equipment financing loans. During the first quarter of 2020, we sold $22.2 million of equipment financing loans, which resulted in gains of $1.26 million. Our SBA lending strategy includes selling a portion of the loan production each quarter. The amount of loans sold depends on ~~a number of~~several variables including the current lending environment and balance sheet management activities. ~~Beginning in the first quarter of 2019, United made a strategic decision to hold more of its government guaranteed loans in order to benefit from the stable yield on these lower-risk assets.~~ In the first quarter of 2020 and 2019, ~~and 2018, United~~we sold the guaranteed portion of loans in the amount of $4.03 million and $17.1 million, ~~and $22.2 million, respectively, which resulted in gains of $1.30 million and $1.78 million,~~ respectively.

Customer derivative fees relate primarily to interest rate swaps to commercial customers who desire fixed rate loans. United makes a floating rate loan to those customers and enters into an interest rate swap contract with the customer to swap the floating rate to a fixed rate. United then enters into an offsetting swap with a swap dealer with terms that mirror the customer swap. The fixed and variable legs of the customer and dealer swaps offset leaving United with the equivalent of a variable rate loan. During In the first quarter of ~~2019, fees on customer derivatives decreased from~~2020, unfavorable pricing for these loans driven by COVID-19 related market disruption led to our decision to hold more of our production in portfolio rather than sell to the ~~same period of last year reflecting the changing interest rate environment and customer preference.~~secondary market.

Other noninterest income for the first quarter of ~~2019 included a full quarter of fee revenue from Navitas resulting in a $422,000 increase~~2020 decreased from the same period of 2018. In the first quarter of 2018 United recognized net securities losses of $940,000. The securities losses were part of a larger balance sheet management strategy that included the cancellation of $289 million notional in interest rate caps as well as the partial cancellation of2019 primarily due to negative fair value adjustments on deferred compensation plan assets and other hedging instruments. The derivative cancellations resulted in gains of $1.16 million, which were included in other noninterest income. The securities losses and gains from derivative activities were mostly offsetting.investments.

Noninterest Expenses

The following table presents the components of noninterest expenses for the periods indicated.

Table 5 - Noninterest Expenses

(in thousands)

Three Months Ended
March 31, Change
2019 2018 Amount Percent
Salaries and employee benefits $ 47,503
$ 42,875
$ 4,628
11 %
Communications and equipment 5,788
4,632
1,156
25

Occupancy 5,584
5,613
(29 ) (1 )
Advertising and public relations 1,286
1,515
(229 ) (15 )
Postage, printing and supplies 1,586
1,637
(51 ) (3 )
Professional fees 3,161
4,044
(883 ) (22 )
FDIC assessments and other regulatory charges 1,710
2,476
(766 ) (31 )
Amortization of core deposit intangibles 1,100
1,306
(206 ) (16 )
Other 7,627
6,731
896
13

Total excluding merger-related and other charges 75,345
70,829
4,516
6

Merger-related and other charges 546
2,054
(1,508 )
Amortization of noncompete agreements 193
592
(399 )
Total noninterest expenses $ 76,084
$ 73,475
$ 2,609
4




	Three Months Ended March 31,				Change
	2020		2019		Amount			Percent
Salaries and employee benefits	$	51,358	$	47,503	$	3,855		8	%
Communications and equipment	5,946		5,788		158			3
Occupancy	5,714		5,584		130			2
Advertising and public relations	1,274		1,286		(12		)	(1	)
Postage, printing and supplies	1,670		1,586		84			5
Professional fees	4,097		3,161		936			30
Lending and loan servicing expense	2,293		2,334		(41		)	(2	)
Outside services - electronic banking	1,832		1,609		223			14
FDIC assessments and other regulatory charges	1,484		1,710		(226		)	(13	)
Amortization of core deposit intangibles	1,040		1,100		(60		)	(5	)
Other	4,022		3,684		338			9
Total excluding merger-related and other charges	80,730		75,345		5,385			7
Merger-related and other charges	808		546		262
Amortization of noncompete agreements	—		193		(193		)
Total noninterest expenses	$	81,538	$	76,084	$	5,454		7

Noninterest expenses ~~excluding merger-related and other charges~~ for the first quarter of ~~2019~~2020 totaled ~~$75.3~~$81.5 million, up 6%7% from the same period of ~~2018.~~2019. Increases in salaries and employee benefits, ~~communications~~professional fees, outside services-electronic banking and ~~equipment,~~merger-related and other ~~noninterest expense~~charges, partially offset by lower ~~professional fees and~~ FDIC assessments and other regulatory charges and amortization of noncompete agreements, accounted for much of the change in noninterest ~~expense for the periods presented.~~expense.

Salaries and employee benefits for the first quarter of ~~2019 were $47.5 million, up 11%~~2020 increased 8% from same period of ~~2018.~~2019. The increase was primarily ~~due~~attributable to higher mortgage commissions resulting from increased production, the inclusion of ~~Navitas~~FMBT employees for the ~~entire~~ first quarter of ~~2019 and additional stock compensation expense from~~2020, investments in new ~~restricted stock unit awards issued in the third quarter of 2018. The remainder~~staff for key areas of the ~~increase resulted from an increase in the 401(k) matching contribution, higher group medical insurance costs~~bank, and annual merit-based salary increases awarded induring the second quarter of ~~2018.~~2019. Full time equivalent headcount totaled 2,332 at March 31, 2020, up from 2,291 at March 31, 2019, up from 2,288 at March 31, 2018. Communications and equipment expense increased primarily due to to increases in software maintenance costs and additional software contracts. The increase in other noninterest expense was attributable to several factors including increased lending support costs resulting from loan growth, volume related increases in loan servicing costs, and increases related to usage and development of United’s internet banking tools.2019.

Professional fees ~~for~~are up compared to the first quarter of 2019 mostly due to timing of ~~$3.16 million decreased 22%~~projects, which made first quarter 2019 expenses unusually low. Outside services - electronic banking increased from ~~the same period of 2018. During~~ the first quarter of ~~2018, professional fees were higher primarily due to recent acquisitions~~2019 as a result of a steady increase in the use of our ATM network and ~~increased legal fees associated with loan growth.~~online banking platform over the past year. The decrease in FDIC assessments and other regulatory charges ~~for the three months ended March 31, 2019 decreased relative to the same period in 2018 primarily due~~is mostly attributable to a reduction in ~~United’s~~our FDIC assessment ~~rate.~~rate compared to the first quarter of 2019.

Merger-related and other charges for the three months ended March 31, 2019 decreased $1.51 million from the same period of 2018, due to reduced levels of merger-related activity during the period. Merger-related and other charges for the first quarter of 2018 of $2.05 million2020 consisted primarily of merger-related expenses associated with the acquisition of FMBT and the announced acquisition of Three Shores, which was announced in March of 2020, severance, ~~conversion costs,~~and branch closure ~~costs and legal and professional fees. Additionally, the~~costs.

The reduction of amortization of noncompete agreements was a result of the expiration of ~~certain of~~ these agreements since the first quarter of ~~2018.~~2019.

~~Income Taxes~~

The income tax provision for the three months ended March 31, 2019 was $13.0 million, which represents an effective tax rate of 22.6% for the period. The income tax provision for the three months ended March 31, 2018 was $10.7 million, which represents an effective tax rate of 22.2% for the period.

The valuation allowance could fluctuate in future periods based on the assessment of the positive and negative evidence. Management’s conclusion at March 31, 2019 that it was more likely than not that the net deferred tax asset of $51.1 million will be realized is based upon management’s estimate of future taxable income. Management’s estimate of future taxable income is based on internal forecasts that consider historical performance, various internal estimates and assumptions, as well as certain external data, all of which management believes to be reasonable although inherently subject to significant judgment. If actual results differ significantly from the current estimates of future taxable income, the valuation allowance may need to be increased for some or all of its net deferred tax asset.

Additional information regarding income taxes, including a reconciliation of the differences between the recorded income tax provision and the amount of income tax computed by applying the statutory federal income tax rate to income before income taxes, can be found in Note 16 to the consolidated financial statements filed with United’s Annual Report on Form 10-K for the year ended December 31, 2018.

Balance Sheet Review

Total assets at March 31, ~~2019~~2020 and December 31, ~~2018~~2019 were ~~$12.5~~$13.1 billion and ~~$12.6~~$12.9 billion, respectively. Average total assets for the first ~~quarter~~three months of ~~2019~~2020 were ~~$12.5~~$12.9 billion, up from ~~$12.1~~$12.5 billion infor the ~~first quarter~~ ~~2018~~same period of 2019.

As of March 31, 2020, approximately 75% of our loans are secured by real estate. The following table presents a summary of the loan portfolio.

Table 6 - Loans Outstanding

(in thousands)

March 31, 2019 December 31, 2018
By Loan Type
Owner occupied commercial real estate $ 1,620,068
$ 1,647,904

Income producing commercial real estate 1,867,425
1,812,420

Commercial & industrial 1,283,865
1,278,347

Commercial construction 865,666
796,158

Equipment financing 605,984
564,614

Total commercial 6,243,008
6,099,443

Residential mortgage 1,063,840
1,049,232

Home equity lines of credit 683,771
694,010

Residential construction 200,708
211,011

Consumer direct 121,174
122,013

Indirect auto 180,753
207,692

Total loans $ 8,493,254
$ 8,383,401

As a percentage of total loans:
Owner occupied commercial real estate 19 % 20 %
Income producing commercial real estate 22
22

Commercial & industrial 15
15

Commercial construction 11
9

Equipment financing 7
7

Total commercial 74
73

Residential mortgage 13
13

Home equity lines of credit 8
8

Residential construction 2
3

Consumer direct 1
1

Indirect auto 2
2

Total 100 % 100 %

By Geographic Location
North Georgia $ 970,072
$ 980,968

Atlanta MSA 1,523,406
1,506,990

North Carolina 1,074,024
1,071,790

Coastal Georgia 603,385
587,988

Gainesville MSA 242,984
246,715

East Tennessee 458,349
477,403

South Carolina 1,674,012
1,645,567

Commercial Banking Solutions 1,766,269
1,658,288

Indirect auto 180,753
207,692

Total loans $ 8,493,254
$ 8,383,401



	March 31, 2020			December 31, 2019
By Loan Type
Owner occupied commercial real estate	$	1,702,984		$	1,720,227
Income producing commercial real estate	2,064,502			2,007,950
Commercial & industrial	1,310,112			1,220,657
Commercial construction	959,318			976,215
Equipment financing	760,952			744,544
Total commercial	6,797,868			6,669,593
Residential mortgage	1,127,988			1,117,616
Home equity lines of credit	668,382			660,675
Residential construction	215,996			236,437
Consumer	125,190			128,232
Total loans	$	8,935,424		$	8,812,553

As a percentage of total loans:
Owner occupied commercial real estate	19		%	20		%
Income producing commercial real estate	23			23
Commercial & industrial	15			14
Commercial construction	11			11
Equipment financing	8			8
Total commercial	76			76
Residential mortgage	13			13
Home equity lines of credit	8			7
Residential construction	2			3
Consumer	1			1
Total	100		%	100		%

Substantially all of United’s loans are to customers located in the immediate market areas of its community banks in Georgia, South Carolina, North Carolina and Tennessee, including customers who have a seasonal residence in United’s market areas, or are generated by the Commercial Banking Solutions division that focuses on specific commercial loan businesses, such as equipment financing and SBA and franchise lending. Approximately 74% of United’s loans are secured by real estate. Total loans averaged $8.43 billion in the first quarter of 2019, compared with $7.99 billion in the first quarter of 2018, an increase of 5% due to organic growth and the inclusion of Navitas loans for the entire first quarter of 2019.

United’s home equity lines generally require the payment of interest only for a set period after origination. After this initial period, the outstanding balance begins amortizing and requires the payment of both principal and interest. At March 31, 2019 and December 31, 2018, the funded portion of home equity lines totaled $684 million and $694 million, respectively. Of the $684 million in balances outstanding at March 31, 2019, $405 million, or 59%, were secured by first liens. At March 31, 2019, 52% of the total available home equity lines were drawn upon.

United monitors the performance of its home equity loans and lines secured by second liens similar to other consumer loans and utilizes assumptions specific to these loans in determining the necessary allowance. United also receives notification when the first lien holder is in the process of foreclosure and upon that notification, management reviews current valuations to determine if any charge-offs are warranted and whether it is in United’s best interest to pay off the first lien creditor.

Asset Quality and Risk Elements

~~United manages~~We manage asset quality and ~~controls~~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. ~~United’s~~Our credit administration function is responsible for monitoring asset quality and Board of Directors approved portfolio concentration limits, establishing credit policies and procedures and enforcing the consistent application of these policies and ~~procedures among all lending units.~~procedures. Additional information on ~~the~~our credit administration function is included in Part I, Item 1 under the heading Lending Activities in ~~United’s Annual Report on Form 10-K for the year ended December 31, 2018.~~our 2019 10-K.

~~United classifies commercial performing~~We classify loans as “substandard” when there is a well-defined weakness or weaknesses that jeopardizes the repayment by the borrower and there is a distinct possibility that ~~United~~we could sustain some loss if the deficiency is not corrected. ~~United classifies consumer performing~~Performing substandard loans, ~~as “substandard” when the loan is in bankruptcy.~~

~~The table below presents performing classified~~which are substandard loans ~~for the last five quarters.~~that are still accruing interest, totaled $113 million and $125 million at March 31, 2020 and December 31, 2019, respectively.

~~Table 7 - Performing Classified Loans~~

~~(in thousands)~~

March 31, 2019 December 31, 2018 September 30, 2018 June 30, 2018 March 31, 2018
By Category

Owner occupied commercial real estate $ 32,433
$ 32,909
$ 38,601
$ 42,169
$ 42,096
Income producing commercial real estate 19,277
18,048
24,170
26,120
24,984
Commercial & industrial 21,125
20,980
21,509
17,820
11,003
Commercial construction 8,019
9,549
8,012
10,102
8,422
Equipment financing 115
217
274
820
414
Total commercial 80,969
81,703
92,566
97,031
86,919
Residential mortgage 5,600
5,623
13,582
14,970
14,824
Home equity 1,610
1,665
4,818
5,117
5,491
Residential construction 249
293
1,397
1,567
1,506
Consumer direct 222
165
416
498
1,142
Indirect auto 1,555
1,334
1,704
1,291
1,498
Total $ 90,205
$ 90,783
$ 114,483
$ 120,474
$ 111,380

By Market
North Georgia $ 17,066
$ 16,477
$ 23,540
$ 25,417
$ 26,243
Atlanta MSA 10,334
10,863
13,410
13,640
12,145
North Carolina 10,019
11,556
18,315
24,886
27,186
Coastal Georgia 2,790
2,730
3,214
3,550
3,075
Gainesville MSA 508
519
950
966
662
East Tennessee 9,396
8,543
11,783
12,737
12,402
South Carolina 28,481
26,277
28,533
22,841
26,800
Commercial Banking Solutions 10,056
12,484
13,034
15,146
1,369
Indirect auto 1,555
1,334
1,704
1,291
1,498
Total loans $ 90,205
$ 90,783
$ 114,483
$ 120,474
$ 111,380

~~Reviews~~We conduct reviews of classified performing and non-performing loans, TDRs, past due loans and ~~larger credits are conducted~~portfolio concentrations on a regular basis ~~and are designed~~ to identify risk migration and potential charges to the ~~allowance for loan losses.~~ACL. These ~~reviews are presented by the responsible lending officers or respective credit officer and specific action plans~~items are discussed ~~along with the financial strength~~in a series of ~~borrowers, the value of the applicable collateral, past loan loss experience, anticipated loan losses, changes in risk profile, the effect of prevailing economic conditions on the borrower~~meetings attended by Credit Risk Management leadership and ~~other factors specific to the borrower and its industry.~~leadership from various lending groups. In addition to the reviews mentioned above, ~~United also has~~ an ~~internal~~independent loan review team ~~which directly~~ reviews the portfolio ~~in conjunction with external loan review~~ to ensure ~~the objectivity~~consistent application of ~~the loan review process.~~risk rating policies and procedures.

The ~~following table presents a summary of the changes in the allowance for credit losses for the periods indicated.~~

~~Table 8 - Allowance for Credit Losses~~

~~(in thousands)~~

Three Months Ended
March 31,
2019 2018
Allowance for loan and lease losses at beginning of period $ 61,203
$ 58,914

Charge-offs:
Owner occupied commercial real estate 5
60

Income producing commercial real estate 197
657

Commercial & industrial 1,519
384

Commercial construction 69
363

Equipment financing 1,424
139

Residential mortgage 61
70

Home equity lines of credit 337
124

Residential construction 4
—

Consumer direct 547
651

Indirect auto 197
436

Total loans charged-off 4,360
2,884

Recoveries:
Owner occupied commercial real estate 69
103

Income producing commercial real estate 20
235

Commercial & industrial 163
389

Commercial construction 394
97

Equipment financing 143
97

Residential mortgage 48
123

Home equity lines of credit 122
35

Residential construction 26
64

Consumer direct 207
160

Indirect auto 38
80

Total recoveries 1,230
1,383

Net charge-offs 3,130
1,501

Provision for loan and lease losses 3,569
3,672

Allowance for loan and lease losses at end of period 61,642
61,085

Allowance for unfunded commitments at beginning of period 3,410
2,312

Provision for losses on unfunded commitments (269 ) 128

Allowance for unfunded commitments at end of period 3,141
2,440

Allowance for credit losses $ 64,783
$ 63,525

Total loans and leases:
At period-end $ 8,493,254
$ 8,184,249

Average 8,429,976
7,993,339

Allowance for loan and lease losses as a percentage of period-end loans and leases 0.73 % 0.75 %
As a percentage of average loans (annualized):
Net charge-offs 0.15
0.08

Provision for loan and lease losses 0.17
0.19

~~The provision for credit losses charged to earnings is based upon management’s judgment of the amount necessary to maintain the allowance~~ACL at a level appropriate to absorb probable incurred losses in the loan portfolio at the balance sheet date. The amount each quarter is dependent upon many factors, including growth and changes in the composition of the loan portfolio, net charge-offs, delinquencies,March 31, 2020 reflects management’s assessment of the life of loan portfolio quality, the value of collateral, and other macro-economic factors and trends. The evaluation of these factors is performed quarterly by management through an analysis of the appropriateness of the allowance for loan losses.

~~The allowance for~~expected credit losses, which includes a portion related to unfunded commitments, totaled $64.8 million at March 31, 2019, compared with $64.6 million at December 31, 2018. At March 31, 2019, the allowance for loan losses was $61.6 million, or 0.73% of loans, compared with $61.2 million, or 0.73% of total loans, at December 31, 2018.

~~Management believes that the allowance for credit losses at March 31, 2019 reflects the probable incurred~~ 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 management’s assessment of loan quality or collateral values ~~change~~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. In addition, bank regulatory authorities, as part of their periodic examination of the Bank, may require adjustments to the ~~allowance~~provision for credit losses in future periods if, in their opinion, the results of their review warrant such ~~adjustments.~~additions. See the “Critical Accounting Policies” section for additional information on the allowance for credit losses.

The total ACL, which includes a portion related to unfunded commitments, totaled $88.4 million at March 31, 2020, compared with $65.5 million at December 31, 2019. At March 31, 2020, the ACL for loans was $81.9 million, or 0.92% of loans, compared with $62.1 million, or 0.70% of total loans, at December 31, 2019. The adoption of CECL on January 1, 2020 added $6.88 million to the ACL for loans and $1.87 million to the reserve for unfunded commitments resulting in a total ACL of $74.3 million at the time of adoption. The increase since adoption primarily reflects higher expected credit losses resulting from the COVID-19 pandemic as well as the impact of first quarter loan growth.

~~Nonperforming Assets~~

The following table ~~below summarizes nonperforming assets (“NPAs”).~~presents a summary of the changes in the ACL for the periods indicated.

Table 97 - ~~Nonperforming Assets~~ACL

(in thousands)

March 31, 2019 December 31, 2018
Nonaccrual loans $ 23,624
$ 23,778
Foreclosed properties/other real estate owned ("OREO") 1,127
1,305
Total nonperforming assets $ 24,751
$ 25,083

Nonaccrual loans as a percentage of total loans and leases 0.28 % 0.28 %
Nonperforming assets as a percentage of total loans and OREO 0.29
0.30
Nonperforming assets as a percentage of total assets 0.20
0.20



	Three Months Ended March 31,
	2020			2019
ACL - loans, beginning of period	$	62,089		$	61,203
Adoption of CECL	6,880			—
ACL - loans, adjusted beginning balance	68,969			61,203
Charge-offs:
Owner occupied commercial real estate	6			5
Income producing commercial real estate	411			197
Commercial & industrial	7,561			1,519
Commercial construction	—			69
Equipment financing	1,863			1,424
Residential mortgage	284			61
Home equity lines of credit	20			337
Residential construction	22			4
Consumer direct	638			547
Indirect auto	—			197
Total loans charged-off	10,805			4,360
Recoveries:
Owner occupied commercial real estate	1,034			69
Income producing commercial real estate	141			20
Commercial & industrial	376			163
Commercial construction	141			394
Equipment financing	356			143
Residential mortgage	275			48
Home equity lines of credit	103			122
Residential construction	34			26
Consumer direct	231			207
Indirect auto	—			38
Total recoveries	2,691			1,230
Net charge-offs	8,114			3,130
Provision for credit losses - loans	21,050			3,569
ACL - loans, end of period	81,905			61,642

ACL - unfunded commitments, beginning of period	3,458			3,410
Adoption of CECL	1,871			—
ACL - unfunded commitments, adjusted beginning balance	5,329			3,410
Provision for credit losses - unfunded commitments	1,141			(269		)
ACL - unfunded commitments, end of period	6,470			3,141

Total ACL	$	88,375		$	64,783

Total loans:
At period-end	$	8,935,424		$	8,493,254
Average	8,828,880			8,429,976
ACL - loans, as a percentage of period-end loans	0.92		%	0.73		%
As a percentage of average loans (annualized):
Net charge-offs	0.37			0.15
Provision for credit losses - loans	0.96			0.17

~~United’s~~

Nonperforming Assets

Nonperforming assets (“NPAs”), which include nonaccrual loans and foreclosed properties, totaled $36.7 million at March 31, 2020, compared with $35.8 million at December 31, 2019. As a result of the adoption of CECL, because we elected to disaggregate the former Purchased Credit Impaired (“PCI”) pools and no longer consider the loan pool to be the unit of account, contractually delinquent Purchased Credit Deteriorated (“PCD”) loans are reported as nonaccrual loans using the same criteria as other loans.

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 ~~repaid in full~~collected or when the loan becomes 90 days past ~~due.~~due and is not well-collateralized or in the process of collection. When a loan is ~~classified~~placed on nonaccrual status, interest previously accrued but not collected is reversed against current interest revenue. ~~Principal and interest~~Interest payments received on a nonaccrual ~~loan~~loans are ~~generally~~ applied to reduce the loan’s ~~recorded investment.~~amortized cost. Loans are 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.

~~Purchased credit impaired (“PCI”)~~Generally, we do not commit to lend additional funds to customers whose loans are ~~considered~~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 or delinquent when the contractual principal or interest due in accordance with the terms of the loan agreement remains unpaid after the due date of the scheduled payment. However, these loans are considered as performing, even though they may be contractually past due, as any non-payment of contractual principal or interest is considered in the periodic re-estimation of expected cash flowsproperty taxes and is included in the resulting recognition of current period loan loss provision or future period yield adjustments. The accrual of interest is discontinued on PCI loans if management can no longer reliably estimate future cash flows on the loan. No PCI loans were classified as nonaccrual at March 31, 2019 or December 31, 2018 as the carrying value of the respective loan or pool of loans cash flows were considered estimable and probable of collection. Therefore, interest revenue, through accretion of the difference between the carrying value of the loans and the expected cash flows, is being recognized on all PCI loans.insurance coverage.

~~The following table summarizes nonperforming assets by category and market as of the dates indicated.~~

~~Table 10 - Nonperforming Assets by Category and Market~~

~~(in thousands)~~

March 31, 2019 December 31, 2018

Nonaccrual
Loans

Foreclosed
Properties

Total
NPAs

Nonaccrual
Loans

Foreclosed
Properties

Total
NPAs
BY CATEGORY

Owner occupied commercial real estate $ 7,030
$ 145
$ 7,175
$ 6,421
$ 170
$ 6,591
Income producing commercial real estate 1,276
—
1,276
1,160
—
1,160
Commercial & industrial 1,666
—
1,666
1,417
—
1,417
Commercial construction 473
421
894
605
421
1,026
Equipment financing 1,813
—
1,813
2,677
—
2,677
Total commercial 12,258
566
12,824
12,280
591
12,871
Residential mortgage 8,281
336
8,617
8,035
654
8,689
Home equity lines of credit 2,233
185
2,418
2,360
60
2,420
Residential construction 347
40
387
288
—
288
Consumer direct 47
—
47
89
—
89
Indirect auto 458
—
458
726
—
726
Total NPAs $ 23,624
$ 1,127
$ 24,751
$ 23,778
$ 1,305
$ 25,083

BY MARKET
North Georgia $ 5,848
$ 430
$ 6,278
$ 6,527
$ 286
$ 6,813
Atlanta MSA 1,951
—
1,951
1,578
—
1,578
North Carolina 3,464
484
3,948
3,259
743
4,002
Coastal Georgia 1,881
—
1,881
1,491
—
1,491
Gainesville MSA 187
—
187
479
—
479
East Tennessee 1,555
—
1,555
1,147
—
1,147
South Carolina 4,476
213
4,689
4,123
276
4,399
Commercial Banking Solutions 3,804
—
3,804
4,448
—
4,448
Indirect auto 458
—
458
726
—
726
Total NPAs $ 23,624
$ 1,127
$ 24,751
$ 23,778
$ 1,305
$ 25,083

At March 31, 2019 and December 31, 2018, United had $50.3 million and $52.4 million, respectively, in loans with terms that have been modified in troubled debt restructurings (“TDRs”). Included therein were $6.68 million and $7.09 million, respectively, of TDRs that were classified as nonaccrual and were included in nonperforming loans. The remaining TDRs with an aggregate balance of $43.7 million and $45.3 million, respectively, were performing according to their modified terms and are therefore not considered to be nonperforming assets.

At March 31, 2019 and December 31, 2018, there were $53.8 million and $55.4 million, respectively, of loans classified as impaired under the definition outlined in the Accounting Standards Codification, including TDRs which are by definition considered impaired. Included in impaired loans at March 31, 2019 and December 31, 2018 was $21.7 million and $23.5 million, respectively, that did not require specific reserves or had previously been charged down to net realizable value. The remaining balance of impaired loans at March 31, 2019 and December 31, 2018 of $32.1 million and $32.0 million, respectively, had specific reserves that totaled $2.22 million and $2.31 million, respectively. The average recorded investment in impaired loans for the first quarters of ~~2019~~ ~~and~~ ~~2018~~ was $54.3 million and $66.2 million, respectively. For the three months ended March 31, 2019, United recognized $745,000 in interest revenue on impaired loans compared to $746,000 for the same period of the prior year.

~~The table below summarizes activity in nonperforming assets for the periods indicated.~~

~~Table 11 - Activity in Nonperforming Assets~~

~~(in thousands)~~

First Quarter 2019 First Quarter 2018

Nonaccrual
Loans

Foreclosed
Properties

Total
NPAs

Nonaccrual
Loans

Foreclosed
Properties

Total
NPAs
Beginning Balance $ 23,778
$ 1,305
$ 25,083
$ 23,658
$ 3,234
$ 26,892
Acquisitions —
—
—
428
—
428
Loans placed on nonaccrual 6,759
—
6,759
7,463
—
7,463
Payments received (3,520 ) —
(3,520 ) (3,534 ) —
(3,534 )
Loan charge-offs (2,714 ) —
(2,714 ) (1,150 ) —
(1,150 )
Foreclosures (679 ) 751
72
(625 ) 625
—
Property sales —
(974 ) (974 ) —
(957 ) (957 )
Write downs —
(15 ) (15 ) —
(72 ) (72 )
Net gains (losses) on sales —
60
60
—
(116 ) (116 )
Ending Balance $ 23,624
$ 1,127
$ 24,751
$ 26,240
$ 2,714
$ 28,954

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 lesser of fair value, less estimated costs to sell, or the listed selling price, less the costs to sell, of the foreclosed property decreases during the holding period, a valuation allowance is established with a charge to foreclosed property expense. 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.

The table below summarizes NPAs.

Table 8 - NPAs

(in thousands)



	March 31, 2020			December 31, 2019
Nonaccrual loans:
Owner occupied commercial real estate	10,405			10,544
Income producing commercial real estate	2,235			1,996
Commercial & industrial	3,169			2,545
Commercial construction	1,724			2,277
Equipment financing	2,439			3,141
Total commercial	19,972			20,503
Residential mortgage	12,458			10,567
Home equity lines of credit	3,010			3,173
Residential construction	540			939
Consumer	228			159
Total nonaccrual loans	36,208			35,341
Foreclosed properties/other real estate owned ("OREO")	475			476
Total NPAs	$	36,683		$	35,817

Nonaccrual loans as a percentage of total loans	0.41		%	0.40		%
NPAs as a percentage of total loans and OREO	0.41			0.41
NPAs as a percentage of total assets	0.28			0.28

At March 31, 2020 and December 31, 2019, we had $53.7 million and $54.2 million, respectively, in loans with terms that have been modified in TDRs. Included therein were $8.36 million and $8.25 million, respectively, of TDRs that were classified as nonaccrual and were included in nonperforming loans. The remaining TDRs with an aggregate balance of $45.3 million and $46.0 million, respectively, were performing according to their modified terms and were therefore not considered to be nonperforming assets. As previously mentioned, the CARES Act granted temporary relief from TDR classification for certain loans restructured as a result of COVID-19 that were otherwise performing prior to the pandemic. We expect a significant amount of payment deferral requests from our borrowers in the second quarter of 2020 related to the economic disruption created by COVID-19, most of which will be exempt from TDR classification

in the short term. As of April 30, 2020, United had granted short-term deferrals on loans that were otherwise performing of approximately $1.40 billion, which included $164 million granted prior to March 31, 2020.

Investment Securities

The composition of the investment securities portfolio reflects ~~United’s~~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, including repurchase agreements.

At March 31, ~~2019~~2020 and December 31, ~~2018~~2019, ~~United~~we had debt securities held-to-maturity with a carrying amount of ~~$265~~$290 million and ~~$274~~$284 million, respectively, and debt securities available-for-sale totaling ~~$2.45~~$2.25 billion and ~~$2.63~~$2.27 billion, respectively. At March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, the securities portfolio represented approximately ~~22%~~19% and ~~23%~~20%, respectively, of total assets. ~~During the first quarter of 2019, management intentionally reduced securities and wholesale borrowings as part of a balance sheet deleveraging strategy.~~

The investment securities portfolio primarily consists of Treasury securities, U.S. government agency securities, U.S. government sponsored agency mortgage-backed securities, non-agency mortgage-backed securities, corporate securities, municipal securities and asset-backed securities. Mortgage-backed securities and asset-backed securities rely on the underlying pools of mortgage loans to provide a cash flow of principal and interest. The actual maturities of these securities will usually differ from contractual maturities because loans underlying the securities can prepay. Decreases in interest rates will generally cause an acceleration of prepayment levels. In a declining or prolonged low interest rate environment, ~~United~~we may not be able to reinvest the proceeds from these prepayments in assets that have comparable yields. In a rising rate environment, the opposite occurs - prepayments tend to slow and the weighted average life extends. This is referred to as extension risk which can lead to lower levels of liquidity due to the delay of cash receipts and can result in the holding of a below market yielding asset for a longer period of time. ~~United’s asset-backed securities include collateralized loan obligations and securities backed by student loans.~~

~~Management evaluates its~~In accordance with CECL, our held-to-maturity securities portfolio ~~each quarter~~was evaluated to ~~determine~~assess whether an ACL was required. We measure expected credit losses on held-to-maturity 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 adoption on January 1, 2020 and at March 31, 2020, calculated credit losses on held-to-maturity debt securities were not material due to the high credit quality of the portfolio, which included securities issued or guaranteed by U.S. Government agencies and high credit quality municipal securities. As a result, we did not record an ACL for held-to-maturity securities at adoption or at March 31, 2020.

For available-for-sale debt securities in an unrealized loss position, if ~~any~~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 ~~considered~~written down to fair value through income. Absent an intent or more than likely requirement to sell, 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 other ~~than temporarily impaired. In making this evaluation, management considers its ability and intent~~comprehensive income. At March 31, 2020, there was no ACL related to ~~hold securities to recover current market losses.~~the available-for-sale portfolio. Losses on ~~United’s~~ fixed income securities at March 31, ~~2019~~2020 primarily ~~reflect~~reflected volatile market conditions resulting from uncertainty surrounding the ~~effect of changes in interest rates. United did not recognize any other than temporary impairment losses on its investment securities during the three months ended March 31, 2019 or 2018.~~

At ~~March 31, 2019~~ ~~and December 31, 2018, 10% and 12%, respectively,~~impact of the ~~securities portfolio was invested in floating-rate securities.~~COVID-19 pandemic.

Goodwill and Other Intangibles

Goodwill represents the premium paid for acquired companies above the fair value of the assets acquired and liabilities assumed, including separately identifiable intangible assets. At March 31, 2020 and December 31, 2019, the net carrying value of goodwill was $327 million. Goodwill is not amortized but is assessed for impairment on an annual basis, or more often if events or circumstances indicate there may be impairment, referred to as a triggering event. Upon the occurrence of a triggering event, accounting guidance allows for an assessment of qualitative factors to determine whether it is more likely than not, or a greater than 50% likelihood, that the fair value of the entity is less than its carrying amount, including goodwill. When it is more likely than not that impairment has occurred, management is required to perform a quantitative analysis and, if necessary, adjust the carrying amount of goodwill by recording a goodwill impairment loss. During the first quarter of 2020, as a result of market concerns about the potential impact of COVID-19, our stock price declined such that it traded below book value for the latter part of the quarter. As a result of this triggering event, we have qualitatively assessed and concluded that there is not a greater than 50% likelihood that our fair value is less than our carrying amount as of March 31, 2020, given the short duration of change in macroeconomic conditions and excess of value as of the latest annual test performed as of September 30, 2019. We will continue to monitor and assess the impact of the pandemic on the our value and, should conditions be more severe and/or recovery extend for a longer period than currently anticipated, our assessment may change, which could necessitate the write-down or write-off of goodwill or other intangible assets.

Core deposit intangibles, representing the value of acquired deposit relationships, ~~and noncompete agreements~~ are amortizing intangible assets that are required to be tested for impairment only when events or circumstances indicate that impairment may exist. There were no events or circumstances that led ~~management~~us to believe that any impairment ~~exists in goodwill or other~~existed on core deposit intangible assets.

Deposits

~~Total customer~~Customer deposits ~~excluding brokered deposits, as~~are the primary source of ~~March 31, 2019 were $9.98 billion, compared to $9.85 billion at December 31, 2018. Total core transaction deposits (demand, NOW, money market and savings deposits, excluding public~~ funds ~~deposits)~~for the continued growth of ~~$7.09 billion at March 31, 2019 increased $135 million since December 31, 2018. Total customer time deposits increased $70.2 million. United’s~~our earning assets. Our high level of service, as evidenced by ~~its~~our strong customer satisfaction scores, has been instrumental in attracting and retaining customer deposit accounts. The following table sets forth the deposit composition for the periods indicated.

Table 9 - Deposits

(in thousands)



	March 31, 2020		December 31, 2019
Noninterest-bearing demand	$	3,624,806	$	3,477,979
NOW and interest-bearing demand	2,391,976		2,461,895
Money market and savings	3,009,261		2,937,095
Time	1,840,767		1,859,574
Total customer deposits	10,866,810		10,736,543
Brokered deposits	168,116		160,701
Total deposits	$	11,034,926	$	10,897,244

Borrowing Activities

The Bank is a shareholder in the Federal Home Loan Bank of Atlanta (“FHLB”). Through this affiliation, we have ability to obtain short and long-term sources of funds through FHLB secured advances, ~~totaled $40 million and $160 million, respectively, as~~ of which there were none outstanding at March 31, ~~2019~~2020 and December 31, ~~2018~~2019. United anticipates continued use of this short and long-term source of funds, although the decrease in the first quarter of 2019 was attributable to management’s strategy to deleverage the balance sheet by reducing securities and wholesale borrowings. At March 31, ~~2019~~2020 and December 31, ~~2018~~2019, ~~United also~~we had long-term debt outstanding of ~~$257~~$213 million, ~~and $267 million, respectively,~~ which includes senior debentures, subordinated debentures, and trust preferred ~~securities, and securitized notes payable.~~securities. Additional information regarding FHLB advances and long-term debt is provided in Notes 12 and 13, respectively, to the consolidated financial statements included in ~~United’s Annual Report on Form 10-K for the year ended December 31, 2018.~~our 2019 10-K.

Contractual Obligations

There have not been any material changes to ~~United’s~~our contractual obligations since December 31, ~~2018.~~2019.

Off-Balance Sheet Arrangements

~~United is~~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 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. ~~United uses~~We use the same credit underwriting procedures for making commitments, letters of credit and financial guarantees, as ~~it uses~~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. ~~United is~~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 2021 to the consolidated financial statements included in ~~United’s Annual Report on Form~~our 2019 10-K ~~for the year ended December 31, 2018~~ 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, primarily in United’s core community banking activities of extending loans and accepting deposits.~~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 ~~United’s~~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. ~~United limits its~~We limit our exposure to fluctuations in interest rates through policies established by ~~its~~our Asset/Liability Management Committee (“ALCO”) and approved by the Board of Directors. ALCO meets periodically and has responsibility for formulating and recommending asset/liability management policies to the Board of Directors, formulating and implementing strategies to improve balance sheet positioning and/or earnings, and reviewing ~~United’s~~ 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 ~~a number of~~several assumptions for each scenario, including loan and deposit re-pricing characteristics and the rate of prepayments. 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 to 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 cannot 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.

~~United’s~~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. ~~United’s~~Our policy limits the projected change in net interest revenue over the first 12 months to ~~a 5%~~an 8% decrease for each 100 basis point change in the increasing and decreasing rate ramp and shock scenarios. The following table presents ~~United’s~~our interest sensitivity position at the dates indicated. The change in simulation model results from December 31, 2018 to March 31, 2019 was primarily a result of a change in assumptions implemented in the first quarter of 2019, rather than a reflection of a significant change in balance sheet composition.

Table 1210 - Interest Sensitivity

Increase (Decrease) in Net Interest Revenue from Base Scenario at
March 31, 2019 December 31, 2018
Change in Rates Shock Ramp Shock Ramp
100 basis point increase 1.91 % 1.29 % (0.37 )% (0.81 )%
100 basis point decrease (3.45 ) (2.56 ) (2.89 ) (2.17 )



	Increase (Decrease) in Net Interest Revenue from Base Scenario at
	March 31, 2020				December 31, 2019
Change in Rates	Shock		Ramp		Shock		Ramp
100 basis point increase	3.60	%	2.63	%	2.91	%	2.22	%
100 basis point decrease	(2.02	)	(1.75	)	(4.86	)	(3.92	)

Interest rate sensitivity is a function of the ~~re-pricing~~repricing characteristics of the portfolio of assets and liabilities. These ~~re-pricing~~repricing characteristics are the time frames within which the interest-earning assets and interest-bearing liabilities are subject to change in interest rates either at replacement, ~~re-pricing~~repricing or maturity. Interest rate sensitivity management focuses on the maturity structure of assets and liabilities and their ~~re-pricing~~repricing characteristics during periods of changes in market interest rates. Effective interest rate sensitivity management seeks to ensure that both assets and liabilities respond to changes in interest rates on a net basis within an acceptable timeframe, thereby minimizing the potentially adverse effect of interest rate changes on net interest revenue.

~~United has~~We have discretion in the extent and timing of deposit ~~re-pricing~~repricing depending upon the competitive pressures in the markets in which ~~it operates.~~we operate. Changes in the mix of earning assets or supporting liabilities can either increase or decrease the net interest margin without affecting interest rate sensitivity. The interest rate spread between an asset and its supporting liability can vary significantly even when the timing of ~~re-pricing~~repricing for both the asset and the liability remains the same, due to the two instruments ~~re-pricing~~repricing according to different indices. This is commonly referred to as basis risk.

Derivative financial instruments are used to manage interest rate sensitivity. These contracts generally consist of interest rate swaps under which ~~United pays~~we pay a variable rate (or fixed rate, as the case may be) and ~~receives~~receive a fixed rate (or variable rate, as the case may be). In addition, investment securities and wholesale funding strategies are used to manage interest rate risk.

Derivative financial instruments that are designated as accounting hedges are classified as either cash flow or fair value hedges. The change in fair value of cash flow hedges is recognized in other comprehensive income. Fair value hedges recognize in earnings both the

effect of the change in the fair value of the derivative financial instrument and the offsetting effect of the change in fair value of the hedged asset or liability associated with the particular risk of that asset or liability being hedged. ~~United has~~We have other derivative financial instruments that are not designated as accounting hedges, but are used for interest rate risk management purposes and as effective economic hedges. Derivative financial instruments that are not accounted for as accounting hedges are marked to market through earnings.

From time to time, United will terminate hedging positions when conditions change and the position is no longer necessary to manage overall sensitivity to changes in interest rates. In those situations where the terminated contract was in an effective hedging relationship at the time of termination and the hedging relationship is expected to remain effective throughout the original term of the contract, the resulting gain or loss is amortized over the remaining life of the original contract. For swap contracts, the gain or loss is amortized over the remaining original contract term using the straight line method of amortization. United expects that $118,000 will be reclassified as an increase to interest expense from other comprehensive income over the next twelve months related to these terminated cash flow hedges.

~~United’s~~Our policy requires all non-customer ~~facing~~ derivative financial instruments be used only for asset/liability management through the hedging of specific transactions, positions or ~~positions,~~risks, and not for trading or speculative purposes. Management believes that the risk associated with using derivative financial instruments to mitigate interest rate risk sensitivity is appropriately monitored and controlled and will not have any material adverse effect on financial condition or results of operations. In order to mitigate potential credit risk, from time to time ~~United~~we may require the counterparties to derivative contracts to pledge cash and/or securities as collateral to cover the net exposure.

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, ~~it is the~~our primary goal ~~of United~~is to maintain a sufficient level of liquidity in all expected economic environments. To assist in determining the adequacy of ~~its~~our liquidity, ~~United performs~~we perform a variety of liquidity stress tests. ~~United maintains~~We maintain an unencumbered liquid asset reserve to help ensure ~~its~~our ability to meet ~~its~~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 Federal funds purchased, FHLB advances, and brokered ~~deposits and securities sold under agreements to repurchase.~~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 addition, because the Holding Company is a separate entity and apart from the Bank, it must provide for its own liquidity. ~~United’s holding company~~The Holding Company is responsible for the payment of dividends declared for its common 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 ~~source~~sources of its liquidity isare subsidiary service fees and dividends from the Bank, which are limited by applicable law and regulations. Holding Company liquidity is managed to a minimum of 15-months of positive cash flow after considering all of its liquidity needs over this period.

At March 31, ~~2019, United~~2020, we had sufficient qualifying collateral to ~~increase~~provide borrowing capacity for FHLB advances ~~by $1.20~~of $1.42 billion and Federal Reserve discount window borrowing capacity of ~~$1.56~~$1.49 billion, as well as unpledged investment securities of ~~$1.88~~$1.98 billion that could be used as collateral for additional borrowings. In addition to these wholesale sources, ~~United has~~we have the ability to attract retail deposits by competing more aggressively on pricing. In the second quarter of 2020, we expect to fund a significant amount of PPP loans, primarily by participating in the Paycheck Protection Program Lending Facility (“PPPLF”) announced by the Federal Reserve in April of 2020. Subsequent to quarter-end and through May 1, 2020, United had received SBA authorization for 11,256 PPP loans totaling $1.20 billion.

As disclosed in the consolidated statement of cash flows, net cash ~~provided by~~used in operating activities was ~~$35.9~~$10.8 million for the three months ended March 31, ~~2019.~~2020. Net income of ~~$44.3~~$31.9 million for the three-month period included non-cash expenses for the following: deferred income tax expense of ~~$658,000,~~$1.29 million, depreciation, amortization and accretion of ~~$6.37~~$1.89 million, provision expense of ~~$3.30~~$22.2 million and stock-based compensation expense of ~~$1.99~~$2.49 million. Uses of cash from operating activities included ~~a decrease in accrued expenses and other~~

~~liabilities of $5.99 million,~~ an increase in other assets and accrued interest receivable of ~~$6.21~~$45.9 million and an increase in loans held for sale of ~~$7.41~~$31.5 million, partially offset by an increase in accrued expenses and other liabilities of $8.46 million. Net cash ~~provided by~~used in investing activities of ~~$113~~$85.0 million ~~consisted primarily of proceeds from sales and maturities and calls~~included a $110 million net increase in loans, $70.1 million in purchases of debt securities ~~available for sale~~available-for-sale and equity securities, purchases of ~~$179~~debt securities held-to-maturity of $16.0 million, and ~~$60.8~~$2.60 million ~~respectively,~~in purchases of premises and equipment. These uses of cash were partially offset by $105 million in proceeds from maturities and calls of debt securities ~~held to maturity of $9.05 million. These sources of cash were offset by a $90.4 million net increase in loans, $34.7 million in purchases of debt securities available for sale~~available-for-sale and equity securities and ~~$11.7~~$9.09 million in ~~purchases~~proceeds from maturities and calls of ~~premises and equipment.~~debt securities held-to-maturity. Net cash ~~used in~~provided by financing activities of ~~$150~~$101 million consisted primarily of a net ~~decrease~~increase in ~~FHLB advances~~deposits of ~~$120~~$138 million, which was partially offset by the payment of cash dividends of ~~$12.9~~$14.5 million and ~~repayments~~the repurchases of ~~long-term debt~~our common stock of ~~$10.1~~$20.8 million. In the opinion of management, ~~United’s~~our liquidity position at March 31, ~~2019,~~2020, was sufficient to meet ~~its~~our expected cash flow requirements.

Capital Resources and Dividends

Shareholders’ equity at March 31, ~~2019~~2020 was ~~$1.51~~$1.64 billion, an increase of ~~$50.6~~$4.92 million from December 31, ~~2018~~2019 due to year-to-date earnings less dividends declared and an increase in the value of available-for-sale securities, partially offset by ~~$7.84~~$20.8 million in share repurchases. ~~Accumulated other comprehensive loss,~~

Through the CARES Act, federal banking regulatory agencies have provided relief, which ~~includes unrealized gains and losses on securities available-for-sale,~~we have adopted, for the ~~unrealized gains and losses on derivatives qualifying as cash flow hedges and unamortized prior service cost and actuarial gains and losses on United’s defined~~delay of the adverse capital impact of CECL for the two-year period after adoption. This optional two-year delay is followed by an optional three-year transition period to phase out the aggregate amount of capital benefit ~~pension plans,~~provided during the initial two-year delay. Under the transition provision, the amount of aggregate capital benefit is ~~excluded in~~phased out by 25% each year with the ~~calculation~~full impact of ~~regulatory capital adequacy ratios.~~adoption completely recognized by the beginning of the sixth year.

The following table shows ~~United’s~~ capital ratios, as calculated under applicable regulatory guidelines, at March 31, ~~2019~~2020 and December 31, ~~2018~~2019. As of March 31, ~~2019,~~2020, capital levels remained characterized as “well-capitalized” under the Basel III Capital Rules in effect at the time.

Additional information related to capital ratios, as calculated under regulatory guidelines, as of March 31, 2020 and December 31, 2019, is provided in Note 12 to the consolidated financial statements.

Table 1311 – Capital Ratios

(dollars in thousands)


	Basel III Guidelines				United Community Banks, Inc. (Consolidated)						United Community Bank												United Community Banks, Inc. (Consolidated)				United Community Bank
	Minimum ⁽¹⁾		Well Capitalized		March 31, 2019			December 31, 2018			March 31, 2019			December 31, 2018			Minimum		Well Capitalized		Minimum Capital Plus Capital Conservation Buffer		March 31, 2020		December 31, 2019		March 31, 2020		December 31, 2019
Risk-based ratios:
Common equity tier 1 capital	4.5	%	6.5	%	12.44		%	12.16		%	13.35		%	12.91		%	4.5	%	6.5	%	7.0	%	12.85	%	12.97	%	13.58	%	14.87	%
Tier 1 capital	6.0		8.0		12.69			12.42			13.35			12.91			6.0		8.0		8.5		13.09		13.21		13.58		14.87
Total capital	8.0		10.0		14.55			14.29			14.04			13.60			8.0		10.0		10.5		14.93		15.01		14.30		15.54
Leverage ratio	4.0		5.0		9.88			9.61			10.40			9.98			4.0		5.0		N/A		10.40		10.34		10.78		11.63

Common equity tier 1 capital					$	1,180,309		$	1,148,355		$	1,264,669		$	1,216,449
Tier 1 capital					1,204,559			1,172,605			1,264,669			1,216,449
Total capital					1,380,963			1,348,843			1,329,452			1,281,062
Risk-weighted assets					9,491,554			9,441,622			9,469,757			9,421,009
Average total assets					12,186,441			12,207,986			12,159,520			12,183,341

⁽¹⁾ ~~As of March 31, 2019 and December 31, 2018 the additional capital conservation buffer in effect was 2.50% and 1.87%, respectively.~~

United’s common stock trades on the Nasdaq Global Select Market under the symbol “UCBI.” Below is a quarterly schedule of high, low and closing stock prices and average daily volume for 2019 and 2018.

~~Table 14 - Stock Price Information~~

2019 2018
High Low Close
Avg Daily
Volume
High Low Close
Avg Daily
Volume
First quarter $ 29.79
$ 21.19
$ 24.93
507,207
$ 33.60
$ 27.73
$ 31.65
529,613
Second quarter

34.18
30.52
30.67
402,230
Third quarter

31.93
27.82
27.89
414,541
Fourth quarter 28.88
20.23
21.46
509,152

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 ~~United’s~~our ability to react to changes in interest rates, and by such reaction, reduce the inflationary effect on performance. ~~United has~~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.

Item 3. Quantitative and Qualitative Disclosure About Market Risk

~~There~~Except as set forth in the following sentence, which incorporates certain information by reference, there have been no material changes in ~~United’s~~our market risk as of March 31, ~~2019~~2020 from that presented in ~~the Annual Report on Form 10-K for the year ended December 31, 2018.~~our 2019 10-K. The interest rate sensitivity position at March 31, ~~2019~~2020 is included in Table 1210 in ~~management’s discussion~~Part I - Item 2 - “Management’s Discussion and ~~analysis~~Analysis of Financial Condition and Results of Operations” of this ~~report.~~Quarterly Report on Form 10-Q.

Item 4. Controls and Procedures

~~United’s~~(a) Disclosure Controls and Procedures. Under the supervision and with the participation of our management, including ~~the Chief Executive Officer~~our principal executive officer and ~~Chief Financial Officer, supervised and participated in~~principal financial officer, we conducted an evaluation of ~~United’s~~our disclosure controls and procedures (as such term is defined in Exchange Act Rule 13a-15(e)) as of March 31, ~~2019.~~2020. Based on, ~~and as of the date of~~ that evaluation, ~~United’s Chief Executive Officer~~our principal executive officer and ~~Chief Financial Officer have~~chief financial officer concluded that ~~the~~our disclosure controls and procedures were effective as of the end of the period covered by this report.

(b) Changes in ~~accumulating and communicating information to management, including the Chief Executive Officer and Chief~~Internal Control Over Financial Officer, as appropriate to allow timely decisions regarding required disclosures of that information under the SEC’s rules and forms and that the disclosure controls and procedures are designed to ensure that the information required to be disclosedReporting. No change in ~~reports that are filed or submitted by United under the~~our internal control over financial reporting (as such term is defined in Exchange Act Rule 13a-15(f)) occurred during the fiscal quarter ended March 31, 2020 that materially affected, or is ~~recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.~~reasonably likely to materially affect, our internal control over financial reporting.

~~There were no significant changes in the internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation.~~

Part II. ~~Other Information~~OTHER INFORMATION

Item 1. Legal Proceedings

In the ordinary course of ~~operations, United~~business, the Holding Company and the Bank are ~~defendants in~~parties to various legal proceedings. Additionally, in the ordinary course of business, ~~United~~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 ~~change in the~~effect upon our consolidated financial condition or results of ~~operations of United.~~operations.

Items 1A. Risk Factors

~~There have been no material changes from~~Investing in shares of our common stock involves certain risks, including those identified and described in Part I, Item 1A. of our 2019 10-K, as well as cautionary statements contained in this Quarterly Report on Form 10-Q, including those under the caption “Cautionary Note Regarding Forward-Looking Statements,” and risks and matters described elsewhere in this Quarterly Report on Form 10-Q and in our other filings with the SEC.

The Company is providing these additional risk factors to supplement the risk factors ~~previously disclosed~~contained in ~~United’s Annual Report~~Part I, Item 1A. of our 2019 10-K.

The COVID-19 pandemic has disrupted and adversely affected our business and results of operations, and the ultimate impacts of the pandemic on ~~Form~~our business, financial condition and results of operations will depend on future developments and other factors that are highly uncertain and will be impacted by the scope and duration of the pandemic and actions taken by governmental authorities in response to the pandemic.

The ongoing COVID-19 pandemic has caused and will continue to cause significant disruption in the international and United States economies and financial markets and has had an adverse effect on our business and results of operations. The spread of COVID-19 has caused illness, quarantines, cancellation of events and travel, business and school shutdowns, reduction in business activity and financial transactions, supply chain interruptions, and overall economic and financial market instability. In response to the COVID-19 pandemic, the governments of the states in which we have branches, and most other states, have taken preventative or protective actions, such as imposing restrictions on travel and business operations, advising or requiring individuals to limit or forego their time outside of their homes, and ordering temporary closures of businesses that have been deemed to be non-essential. These restrictions and other consequences of the pandemic have resulted in significant adverse effects for many different types of businesses, including, among others, those in the hospitality (including hotels and lodging) and restaurant industries, and have resulted in a significant number of layoffs and furloughs of employees nationwide and in the regions in which we operate.

The ultimate effects of the COVID-19 pandemic on the broader economy and the markets that we serve are not known, nor is the ultimate length of the restrictions described above and any accompanying effects. Moreover, the Federal Reserve has taken action to lower the Federal Funds rate, which may negatively affect our interest income and, therefore, earnings, financial condition, and results of operation. Additional impacts of the COVID-19 pandemic on our business could be widespread and material, and may include, or exacerbate, among other consequences, any of the risk factors described in the 2019 10-K or any of the following:

employees contracting COVID-19;

reductions in operating effectiveness as employees work from home;

a work stoppage, forced quarantine, or other interruption of our business;

unavailability of key personnel necessary to conduct our business activities;

effects on key employees, including operational management personnel and those charged with preparing, monitoring, and evaluating our financial reporting and internal controls;

increased cybersecurity risks as a result of many of our employees working remotely;

sustained closures of branch lobbies or the offices or businesses of our customers;

declines in demand for loans and other banking services and products;

reduced consumer spending due to job losses and other effects attributable to the COVID-19 pandemic;

unprecedented volatility in United States financial markets;

volatile performance of our investment securities portfolio;

decline in the credit quality of our loan portfolio resulting from the effects of the COVID-19 pandemic in our markets, leading to a need to increase the allowance for credit losses or loan losses, as applicable;

increases in the allowance for credit losses resulting from CECL, either alone or as affected by the impact of COVID-19;

declines in value of collateral for loans, including real estate collateral;

declines in the net worth and liquidity of borrowers and loan guarantors, impairing their ability to honor commitments to us, which may affect, among other things, the levels of non-performing assets, charge-offs, and provision expense; and

declines in demand resulting from businesses deemed to be “non-essential” by governments in the markets that we serve, and from both “non-essential” and “essential” businesses suffering adverse effects from reduced levels of economic activity.

These factors, together or in combination with other events or occurrences that may not yet be known or anticipated, may materially and adversely affect our business, financial condition, and results of operations.

The ongoing COVID-19 pandemic has resulted in meaningfully lower stock prices for many companies, as well as the trading prices for many other securities. The further spread of COVID-19, as well as ongoing or new governmental, regulatory, and private sector responses to the pandemic, may materially disrupt banking and other economic activity generally and in the areas in which we operate. This could result in further decline in demand for our banking products and services, and could negatively impact, among other things, our liquidity, regulatory capital, and our growth strategy. Any one or more of these developments could have a material adverse effect on our business, financial condition, and results of operations.

We are taking precautions to protect the safety and well-being of our employees and customers. However, if we experience a prolonged disruption in our employees’ ability to provide customer support and service, our business, financial condition, and results of operation could be materially and adversely affected. In addition, our financial performance generally, and in particular the ability of borrowers to pay interest and repay principal of outstanding loans, the value of collateral securing those loans, and the demand for loans and other products and services that we offer, is highly dependent upon the business environment in the primary markets in which we operate and in the United States as a whole. Unfavorable market conditions and uncertainty due to the coronavirus pandemic may result in a deterioration in the credit quality of borrowers, an increase in the number of loan delinquencies, defaults, and charge-offs, additional provisions for loan losses, adverse asset values of the collateral securing loans, and an overall material adverse effect on the quality of our loan portfolio. Moreover, the duration of the coronavirus pandemic and its corresponding impact on unfavorable and uncertain economic conditions is unknown and highly uncertain.

As a participating lender in the SBA Paycheck Protection Program (“PPP”), the Company and the Bank are subject to litigation risk regarding the Bank’s processing of loans for the ~~year ended December 31, 2018.~~ PPP, reputational risk, and risk that the SBA may not fund some or all PPP loan guaranties.

On March 27, 2020, President Trump signed the CARES Act, which included a $349 billion loan program administered through the SBA referred to as the PPP. The $349 billion in funds for the PPP was exhausted on April 16, 2020. On April 27, 2020, the program was reopened with an additional $310 billion approved by Congress. Under the PPP, small businesses and other entities and individuals can apply for loans from existing SBA lenders and other approved regulated lenders that enroll in the program, subject to detailed qualifications and eligibility criteria. The Bank is participating as a lender in the PPP. Under the PPP, we obtained SBA authorization for 11,256 loans for $1.20 billion in the aggregate through May 1, 2020.

Because of the short timeframe between the passing of the CARES Act and implementation of the PPP, some of the rules and guidance relating to PPP were issued after lenders began processing PPP applications. Also, there was and continues to be uncertainty in the laws, rules, and guidance relating to the PPP. Since the opening of the PPP, several banks have been subject to litigation regarding the procedures used in processing PPP applications. In addition, some banks and borrowers have received negative media attention associated with PPP loans. Although we monitored all PPP laws, regulations, and guidance and believe that we implemented all requirements upon issuance of such laws, regulations, and guidance, the Company and the Bank may be exposed to litigation risk and/or negative media attention regarding the processing of PPP applications, funding of PPP loans, and the future servicing and forgiveness of PPP loans. If any such litigation is filed against the Company or the Bank and is not resolved in a manner favorable to the Company or the Bank, it may result in significant financial liability or adversely affect the Company’s reputation. In addition, litigation can be costly, regardless of outcome. Any financial liability, litigation costs, or reputational damage caused by PPP related litigation or media attention could have a material adverse impact on our business, financial condition, and results of operations.

The Bank also has credit risk on PPP loans if the SBA determines that there is a deficiency in the manner in which any loans were originated, funded, or serviced by the Bank, including any issue with the eligibility of a borrower to receive a PPP loan. In the event of a loss resulting from a default on a PPP loan and a determination by the SBA that there was a deficiency in the manner in which the PPP loan was originated, funded, or serviced by the Bank, the SBA may deny its liability under the guaranty, reduce the amount of the guaranty, or, if the SBA has already paid under the guaranty, seek recovery of any loss related to the deficiency from the Bank.

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

The following table contains information ~~for shares repurchased~~regarding purchases of our common stock made during the ~~first~~ quarter ended March 31, 2020 by or on behalf of ~~2019.~~United or any “affiliated purchaser,” as defined by Rule 10b-18(a)(3) of the Exchange Act:

Issuer Purchases of Equity Securities

(Dollars in thousands, except for per share amounts)
Total
Number of
Shares
Purchased

Average
Price Paid
per Share

Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs

Maximum Number (or
Approximate Dollar
Value) of Shares that May
Yet Be Purchased Under
the Plans or Programs ⁽¹⁾
January 1, 2019 - January 31, 2019 95,000
$ 26.13
95,000
$ 47,518
February 1, 2019 - February 28, 2019 81,600
26.61
81,600
45,347
March 1, 2019 - March 31, 2019 128,452
24.80
128,452
42,160
Total 305,052
$ 25.70
305,052
$ 42,160



(Dollars in thousands, except for per share amounts)	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs ⁽¹⁾
January 1, 2020 - January 31, 2020	139,013	$	28.39	139,013	$	46,053
February 1, 2020 - February 29, 2020	282,469	27.47		282,469	38,294
March 1, 2020 - March 31, 2020	405,000	22.41		405,000	29,218
Total	826,482	$	25.14	826,482	$	29,218

⁽¹⁾In November ~~2018, United’s~~of 2019, our Board of Directors ~~approved~~authorized an ~~increase and extension of~~update to the existing common stock repurchase plan ~~authorizing~~to authorize the repurchase of its common stock up to $50 million. The program is scheduled to expire on the earlier of the repurchase of our common stock having an aggregate purchase price of $50 million ~~of repurchases through~~or December 31, ~~2019.~~2020. Under the program, ~~the~~ shares may be repurchased ~~periodically~~ in open market transactions ~~at prevailing market prices,~~or in privately negotiated transactions, from time to time, subject to market conditions. The approved share repurchase program does not obligate us to repurchase any dollar amount or ~~by other means in accordance with federal securities laws. The actual timing,~~ number of shares. Given the COVID-19 outbreak and ~~value of shares repurchased under~~its effects on the markets, the program ~~depends on a number of factors, including the market price of United’s common stock, general market and economic conditions, and applicable legal requirements.~~has been discontinued at this time.

~~Item 3. Defaults upon Senior Securities – None~~

~~Item 4. Mine Safety Disclosures – None~~

~~Item 5. Other Information – None~~

Item 6. Exhibits



Exhibit No.		Description
3.1		Restated Articles of Incorporation of United Community Banks, Inc., as amended (incorporated herein by reference to Exhibit 3.1 to United Community Banks, Inc.’s Quarterly Report on Form 10-Q for the period ended June 30, 2016, filed with the SEC on August 8, 2016).

~~31.1~~3.2		Amended and Restated Bylaws of United Community Banks, Inc., as amended (incorporated herein by reference to Exhibit 3.2 to United Community Banks, Inc.’s Quarterly Report on Form 10-Q for the period ended March 31, 2015, filed with the SEC on May 11, 2015).

10.1		Change of Control Severance Agreement dated February 28, 2020 by and between United Community Banks, Inc. and Melinda Davis Lux (not filed because substantially identical to Exhibit 10.11 to United Community Banks, Inc.’s Annual Report on Form 10-K, File No. 001-35095, filed with the SEC on February 27, 2020 and incorporated herein by reference). #

31.1		Certification by H. Lynn Harton, President and Chief Executive Officer of United Community Banks, Inc., pursuant to Exchange Act ~~Rules~~Rule 13a-14(a) ~~and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.~~.

31.2		Certification by Jefferson L. Harralson, Executive Vice President and Chief Financial Officer of United Community Banks, Inc., pursuant to Exchange Act ~~Rules~~Rule 13a-14(a) ~~and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.~~.

32		Certification of CEO and CFO pursuant to 18 U.S.C. Section ~~1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.~~1350.

~~101.INS~~101		~~XBRL Instance Document~~ Interactive data files for United Community Bank, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, 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 Condensed Consolidated Statements in Shareholders’ Equity (unaudited); (v) the Condensed Consolidated Statements of Cash Flows (unaudited); and (vi) the Notes to Condensed Consolidated Financial Statements (unaudited).

~~101.SCH~~104		The cover page from United Community Bank’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 (formatted in Inline XBRL ~~Taxonomy Extension Schema Document~~

~~101.CAL~~		~~XBRL Taxonomy Extension Calculation Linkbase Document~~

~~101.DEF~~		~~XBRL Taxonomy Extension Definition Linkbase Document~~

~~101.LAB~~		~~XBRL Taxonomy Extension Label Linkbase Document~~

~~101.PRE~~		~~XBRL Taxonomy Extension Presentation Linkbase Document~~and included in Exhibit 101)


#	Management contract or compensatory plan or arrangement.

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: May ~~8, 2019~~7, 2020

6261



		~~UNITED STATES~~ ~~SECURITIES AND EXCHANGE COMMISSION~~ ~~Washington, D.C. 20549~~

		~~FORM 10-Q~~

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



		~~For the Quarterly Period Ended March 31, 2019~~
		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~~



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



125 Highway 515 East
Blairsville	,	Georgia	30512
(Address of ~~Principal Executive Offices~~principal executive offices)			(Zip ~~Code)~~code)



Securities registered pursuant to Section 12(b) of the Act:
	~~(706) 781-2265~~
Title of Each Class	~~(Telephone Number)~~Trading Symbol(s)	Name of Each Exchange on Which Registered
Common stock, par value $1 per share	UCBI	Nasdaq Global Select Market



Large accelerated filerý	☒	Accelerated filer¨	☐
Non-accelerated filer¨	☐	Smaller reporting company¨	☐
		Emerging growth company¨	☐



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

~~Title of Each Class~~	~~Trading Symbol(s)~~	~~Name of Each Exchange on Which Registered~~
~~Common stock, par value $1 per share~~	~~UCBI~~	~~Nasdaq Global Select Market~~



PART I - Financial Information

	Item 1.	Financial Statements.

		~~Consolidated Statements of Income (unaudited) for the Three Months Ended March 31, 2019 and 2018~~	3

		~~Consolidated Statements of Comprehensive Income (unaudited) for the Three Months Ended March 31, 2019 and 2018~~	4

		Consolidated Balance Sheets (unaudited) at March 31, ~~2019~~2020 and December 31, ~~2018~~2019	5

		Consolidated Statements of ~~Changes in Shareholders’ Equity~~Income (unaudited) for the Three Months Ended March 31, ~~2019~~2020 and ~~2018~~2019	6

		Consolidated Statements of ~~Cash Flows~~Comprehensive Income (unaudited) for the Three Months Ended March 31, ~~2019~~2020 and ~~2018~~2019	7

		~~Notes to~~ Consolidated ~~Financial~~ Statements of Changes in Shareholders’ Equity (unaudited) for the Three Months Ended March 31, 2020 and 2019	8

		~~Item 2.~~Consolidated Statements of Cash Flows (unaudited) for the Three Months Ended March 31, 2020 and 2019	9

		Notes to Consolidated Financial Statements	10

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	38

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	5957

	Item 4.	Controls and Procedures.	5957

PART II - Other Information

	Item 1.	Legal Proceedings.	58
	Item 1A.	Risk Factors.	58
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	60
	Item ~~1A.~~6.	~~Risk Factors.~~Exhibits.	60
	~~Item 2.~~	~~Unregistered Sales of Equity Securities and Use of Proceeds.~~	60
	~~Item 3.~~	~~Defaults Upon Senior Securities.~~	60
	~~Item 4.~~	~~Mine Safety Disclosures.~~	60
	~~Item 5.~~	~~Other Information.~~	60
	~~Item 6.~~	~~Exhibits.~~	61



	Gross Amounts of Recognized Assets			Gross Amounts Offset on the Balance Sheet					Gross Amounts not Offset in the Balance Sheet
March 31, 2019	Gross Amounts of Recognized Assets			Gross Amounts Offset on the Balance Sheet			Net Asset Balance		Financial Instruments			Collateral Received			Net Amount
Derivatives	$	25,924		$	—		$	25,924	$	(2,295	)	$	(1,797	)	$	21,832
Total	$	25,924		$	—		$	25,924	$	(2,295	)	$	(1,797	)	$	21,832

	Gross Amounts of Recognized Liabilities			Gross Amounts Offset on the Balance Sheet			Net Liability Balance		Gross Amounts not Offset in the Balance Sheet
	Gross Amounts of Recognized Liabilities			Gross Amounts Offset on the Balance Sheet			Net Liability Balance		Financial Instruments			Collateral Pledged			Net Amount
Derivatives	$	18,789		$	—		$	18,789	$	(2,295	)	$	(11,870	)	$	4,624
Total	$	18,789		$	—		$	18,789	$	(2,295	)	$	(11,870	)	$	4,624

	Gross Amounts of Recognized Assets			Gross Amounts Offset on the Balance Sheet					Gross Amounts not Offset in the Balance Sheet
December 31, 2018	Gross Amounts of Recognized Assets			Gross Amounts Offset on the Balance Sheet			Net Asset Balance		Financial Instruments			Collateral Received			Net Amount
Repurchase agreements / reverse repurchase agreements	$	50,000		$	(50,000	)	$	—	$	—		$	—		$	—
Derivatives	24,705			—			24,705		(973		)	(8,029		)	15,703
Total	$	74,705		$	(50,000	)	$	24,705	$	(973	)	$	(8,029	)	$	15,703

Weighted average interest rate of reverse repurchase agreements	3.20		%

	Gross Amounts of Recognized Liabilities			Gross Amounts Offset on the Balance Sheet					Gross Amounts not Offset in the Balance Sheet
	Gross Amounts of Recognized Liabilities			Gross Amounts Offset on the Balance Sheet			Net Liability Balance		Financial Instruments			Collateral Pledged			Net Amount
Repurchase agreements / reverse repurchase agreements	$	50,000		$	(50,000	)	$	—	$	—		$	—		$	—
Derivatives	26,433			—			26,433		(973		)	(16,126		)	9,334
Total	$	76,433		$	(50,000	)	$	26,433	$	(973	)	$	(16,126	)	$	9,334

Weighted average interest rate of repurchase agreements	2.45		%



	Remaining Contractual Maturity of the Agreements
	Overnight and Continuous		Up to 30 Days		30 to 90 Days		91 to 110 days		Total
Mortgage-backed securities	$	—	$	—	$	50,000	$	—	$	50,000

Total	$	—	$	—	$	50,000	$	—	$	50,000

Gross amount of recognized liabilities for repurchase agreements in offsetting disclosure									$	50,000
Amounts related to agreements not included in offsetting disclosure									$	—



Year
Remainder of 2019	$	10,384
2020	10,960
2021	7,156
2022	4,249
2023	2,046
Thereafter	590
Total	$	35,385



	New TDRs
		Pre-modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment by Type of Modification								TDRs Modified Within the Previous Twelve Months That Have Subsequently Defaulted
	Number of Contracts	Pre-modification Outstanding Recorded Investment		Rate Reduction		Structure		Other		Total		Number of Contracts	Recorded Investment
Three Months Ended March 31, 2019
Owner occupied commercial real estate	—	$	—	$	—	$	—	$	—	$	—	—	$	—
Income producing commercial real estate	1	169		—		169		—		169		—	—
Commercial & industrial	1	7		—		—		7		7		—	—
Commercial construction	—	—		—		—		—		—		—	—
Equipment financing	—	—		—		—		—		—		—	—
Total commercial	2	176		—		169		7		176		—	—
Residential mortgage	2	345		—		344		—		344		—	—
Home equity lines of credit	—	—		—		—		—		—		—	—
Residential construction	—	—		—		—		—		—		—	—
Consumer direct	—	—		—		—		—		—		—	—
Indirect auto	6	66		—		—		57		57		—	—
Total loans	10	$	587	$	—	$	513	$	64	$	577	—	$	—

Three Months Ended March 31, 2018
Owner occupied commercial real estate	3	$	994	$	—	$	978	$	—	$	978	2	$	1,586
Income producing commercial real estate	—	—		—		—		—		—		—	—
Commercial & industrial	1	81		—		5		—		5		—	—
Commercial construction	—	—		—		—		—		—		—	—
Equipment financing	—	—		—		—		—		—		—	—
Total commercial	4	1,075		—		983		—		983		2	1,586
Residential mortgage	2	340		—		340		—		340		—	—
Home equity lines of credit	—	—		—		—		—		—		—	—
Residential construction	—	—		—		—		—		—		—	—
Consumer direct	—	—		—		—		—		—		—	—
Indirect auto	—	—		—		—		—		—		—	—
Total loans	6	$	1,415	$	—	$	1,323	$	—	$	1,323	2	$	1,586



	Loans Past Due
As of March 31, 2019	30 - 59 Days		60 - 89 Days		> 90 Days		Total		Loans Not Past Due		PCI Loans		Total
Owner occupied commercial real estate	$	4,644	$	1,142	$	3,328	$	9,114	$	1,602,350	$	8,604	$	1,620,068
Income producing commercial real estate	1,199		125		706		2,030		1,829,298		36,097		1,867,425
Commercial & industrial	2,649		790		937		4,376		1,279,148		341		1,283,865
Commercial construction	139		443		24		606		859,456		5,604		865,666
Equipment financing	1,809		894		1,722		4,425		594,818		6,741		605,984
Total commercial	10,440		3,394		6,717		20,551		6,165,070		57,387		6,243,008
Residential mortgage	4,862		1,511		1,292		7,665		1,047,370		8,805		1,063,840
Home equity lines of credit	2,355		634		528		3,517		678,785		1,469		683,771
Residential construction	574		132		154		860		199,267		581		200,708
Consumer direct	522		89		2		613		120,085		476		121,174
Indirect auto	711		185		416		1,312		179,441		—		180,753
Total loans	$	19,464	$	5,945	$	9,109	$	34,518	$	8,390,018	$	68,718	$	8,493,254



	Loans Past Due
As of December 31, 2018	30 - 59 Days		60 - 89 Days		> 90 Days		Total		Loans Not Past Due		PCI Loans		Total
Owner occupied commercial real estate	$	2,542	$	2,897	$	1,011	$	6,450	$	1,631,602	$	9,852	$	1,647,904
Income producing commercial real estate	1,624		291		301		2,216		1,771,893		38,311		1,812,420
Commercial & industrial	7,189		718		400		8,307		1,269,632		408		1,278,347
Commercial construction	267		—		68		335		789,916		5,907		796,158
Equipment financing	1,351		739		2,658		4,748		551,924		7,942		564,614
Total commercial	12,973		4,645		4,438		22,056		6,014,967		62,420		6,099,443
Residential mortgage	5,461		1,788		1,950		9,199		1,030,883		9,150		1,049,232
Home equity lines of credit	2,112		864		902		3,878		688,520		1,612		694,010
Residential construction	509		63		190		762		209,515		734		211,011
Consumer direct	600		82		21		703		120,777		533		122,013
Indirect auto	750		323		633		1,706		205,986		—		207,692
Total loans	$	22,405	$	7,765	$	8,134	$	38,304	$	8,270,648	$	74,449	$	8,383,401



Interest Rate Products	Balance Sheet Location	March 31, 2019		December 31, 2018
Fair value hedge of brokered CDs	Derivative liabilities	$	1,251	$	1,682
		$	1,251	$	1,682



	Location of Gain (Loss) Recognized in Income on Derivative	Amount of Gain (Loss) Recognized in Income on Derivative					Amount of Gain (Loss) Recognized in Income on Hedged Item
	Location of Gain (Loss) Recognized in Income on Derivative	2019		2018			2019			2018
Three Months Ended March 31,
Fair value hedges of brokered CDs	Interest expense	$	451	$	(693	)	$	(462	)	$	545
Fair value hedges of corporate bonds	Interest revenue	—		(336		)	—			405
		$	451	$	(1,029	)	$	(462	)	$	950



	Fair Value						Weighted Average
Level 3 Assets and Liabilities	March 31, 2020		December 31, 2019		Valuation Technique		March 31, 2020		December 31, 2019
Level 3 Assets and Liabilities	March 31, 2020		December 31, 2019		Valuation Technique	Unobservable Inputs	March 31, 2020		December 31, 2019
Servicing rights for SBA/USDA loans	$	6,290	$	6,794	Discounted cash flow	Discount rate	12.0	%	12.3	%
						Prepayment rate	17.1	%	16.5	%
Residential mortgage servicing rights	11,059		13,565		Discounted cash flow	Discount rate	10.0	%	10.0	%
						Prepayment rate	19.3	%	14.1	%
Corporate bonds	—		998		Indicative bid provided by a broker	Multiple factors, including but not limited to, current operations, financial condition, cash flows, and recently executed financing transactions related to the company	N/A		N/A
Derivative assets - mortgage	7,361		1,970		Internal model	Pull through rate	80.5	%	83.6	%
Derivative assets - other	—		5,268		Dealer priced	Dealer priced	N/A		N/A
Derivative liabilities - risk participations	28		12		Internal model	Probable exposure rate	0.15	%	0.36	%
						Probability of default rate	1.80	%	1.80	%
Derivative liabilities - other	2,689		8,547		Dealer priced	Dealer priced	N/A		N/A



			Fair Value Level
	Carrying Amount		Level 1		Level 2		Level 3		Total
March 31, 2020
Assets:
Securities held-to-maturity	$	290,404	$	—	$	301,595	$	—	$	301,595
Loans and leases, net	8,853,519		—		—		8,690,538		8,690,538

Liabilities:
Deposits	11,034,926		—		11,037,183		—		11,037,183
Long-term debt	212,849		—		—		213,940		213,940

December 31, 2019
Assets:
Securities held-to-maturity	$	283,533	$	—	$	287,904	$	—	$	287,904
Loans and leases, net	8,750,464		—		—		8,714,592		8,714,592

Liabilities:
Deposits	10,897,244		—		10,897,465		—		10,897,465
Long-term debt	212,664		—		—		217,665		217,665



	March 31, 2020		December 31, 2019
Financial instruments whose contract amounts represent credit risk:
Commitments to extend credit	$	2,079,644	$	2,126,275
Letters of credit	24,705		22,533



	Income Statement Location	Three Months Ended March 31, 2019
Operating lease cost	Occupancy expense	$	1,258
Variable lease cost	Occupancy expense	111
Short-term lease cost	Occupancy expense	19
Sublease income	Occupancy expense	(149		)
Net lease cost		$	1,239

Rental income from owned properties under operating leases	Other noninterest income	$	216

Operating cash flows from operating leases		$	1,348



Year
Remainder of 2019	$	3,627
2020	5,253
2021	4,983
2022	4,553
2023	3,979
Thereafter	5,092
Total	27,487
Less discount	(2,287		)
Present value of lease liability	$	25,200



	Three Months Ended March 31, 2019
	Compared to 2018 Increase (Decrease) Due to Changes in
	Volume			Rate			Total
Interest-earning assets:
Loans (FTE)	$	5,470		$	13,488		$	18,958
Taxable securities	(64		)	2,390			2,326
Tax-exempt securities (FTE)	213			48			261
Federal funds sold and other interest-earning assets	(91		)	11			(80		)
Total interest-earning assets (FTE)	5,528			15,937			21,465

Interest-bearing liabilities:
NOW and interest-bearing demand accounts	71			2,352			2,423
Money market accounts	(55		)	2,085			2,030
Savings deposits	1			(18		)	(17		)
Time deposits	143			2,952			3,095
Brokered deposits	1,853			280			2,133
Total interest-bearing deposits	2,013			7,651			9,664
Federal funds purchased & other borrowings	(308		)	169			(139		)
Federal Home Loan Bank advances	(1,520		)	818			(702		)
Long-term debt	(154		)	208			54
Total borrowed funds	(1,982		)	1,195			(787		)
Total interest-bearing liabilities	31			8,846			8,877

Increase in net interest revenue (FTE)	$	5,497		$	7,091		$	12,588



	March 31, 2019		December 31, 2018		September 30, 2018		June 30, 2018		March 31, 2018
By Category
Owner occupied commercial real estate	$	32,433	$	32,909	$	38,601	$	42,169	$	42,096
Income producing commercial real estate	19,277		18,048		24,170		26,120		24,984
Commercial & industrial	21,125		20,980		21,509		17,820		11,003
Commercial construction	8,019		9,549		8,012		10,102		8,422
Equipment financing	115		217		274		820		414
Total commercial	80,969		81,703		92,566		97,031		86,919
Residential mortgage	5,600		5,623		13,582		14,970		14,824
Home equity	1,610		1,665		4,818		5,117		5,491
Residential construction	249		293		1,397		1,567		1,506
Consumer direct	222		165		416		498		1,142
Indirect auto	1,555		1,334		1,704		1,291		1,498
Total	$	90,205	$	90,783	$	114,483	$	120,474	$	111,380

By Market
North Georgia	$	17,066	$	16,477	$	23,540	$	25,417	$	26,243
Atlanta MSA	10,334		10,863		13,410		13,640		12,145
North Carolina	10,019		11,556		18,315		24,886		27,186
Coastal Georgia	2,790		2,730		3,214		3,550		3,075
Gainesville MSA	508		519		950		966		662
East Tennessee	9,396		8,543		11,783		12,737		12,402
South Carolina	28,481		26,277		28,533		22,841		26,800
Commercial Banking Solutions	10,056		12,484		13,034		15,146		1,369
Indirect auto	1,555		1,334		1,704		1,291		1,498
Total loans	$	90,205	$	90,783	$	114,483	$	120,474	$	111,380



	First Quarter 2019									First Quarter 2018
	Nonaccrual Loans			Foreclosed Properties			Total NPAs			Nonaccrual Loans			Foreclosed Properties			Total NPAs
Beginning Balance	$	23,778		$	1,305		$	25,083		$	23,658		$	3,234		$	26,892
Acquisitions	—			—			—			428			—			428
Loans placed on nonaccrual	6,759			—			6,759			7,463			—			7,463
Payments received	(3,520		)	—			(3,520		)	(3,534		)	—			(3,534		)
Loan charge-offs	(2,714		)	—			(2,714		)	(1,150		)	—			(1,150		)
Foreclosures	(679		)	751			72			(625		)	625			—
Property sales	—			(974		)	(974		)	—			(957		)	(957		)
Write downs	—			(15		)	(15		)	—			(72		)	(72		)
Net gains (losses) on sales	—			60			60			—			(116		)	(116		)
Ending Balance	$	23,624		$	1,127		$	24,751		$	26,240		$	2,714		$	28,954



	2019							2018
	High		Low		Close		Avg Daily Volume	High		Low		Close		Avg Daily Volume
First quarter	$	29.79	$	21.19	$	24.93	507,207	$	33.60	$	27.73	$	31.65	529,613
Second quarter								34.18		30.52		30.67		402,230
Third quarter								31.93		27.82		27.89		414,541
Fourth quarter								28.88		20.23		21.46		509,152